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House of Commons Hansard
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Commons Chamber
01 February 2016
Volume 605

House of Commons

Monday 1 February 2016

The House met at half-past Two o’clock

Prayers

[Mr Speaker in the Chair]

Oral Answers to Questions

WORK AND PENSIONS

The Secretary of State was asked

State Pension Eligibility

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1. What support his Department has made available to women born in the 1950s who are affected by recent changes in the age at which they become eligible for the state pension. [903344]

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2. What support his Department has made available to women born in the 1950s who are affected by recent changes in the age at which they become eligible for the state pension. [903345]

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7. What support his Department has made available to women born in the 1950s who are affected by recent changes in the age at which they become eligible for the state pension. [903350]

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10. What recent representations he has received on the pension arrangements of women aged between 60 and 65. [903354]

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14. If his Department will make an assessment of the merits of options for transitional protection for women who will adversely be affected by the acceleration of increases in the state pension age. [903358]

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Working-age benefits are available for those who have not yet reached state pension age. A concession of £1.1 billion was made, and 81% of those affected will see a delay of one year or less. For the rest, the delay will be no more than 18 months. There are no plans for further transitional arrangements.

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In 2005, the Pensions Commission said that

“a policy of significant notice of any increase (e.g. at least 15 years) should be possible”,

to mitigate the impact of any such changes. I would argue that the start of that 15-year process should be the beginning of the changes in 2010. In effect, the retirement age for women will be 63 from April this year, so will the Department look again at smoothing out to 2025 the increase in pensionable age for women aged 63 to 66?

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The equalisation measures of the Pensions Act 2011 were introduced, and the matter was expedited, to ensure that we covered for the fact that there had to be a sustainable pensions budget. It is also important to remember that people are living a lot longer. We have to take that into account, which is why we had to accelerate the issue.

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The Minister speaks often of equality, but his Department’s policies clearly have a disproportionate impact on so many women in this country. Not only are women born in the 1950s unequally affected by the pension plans, but many women will also lose out under the new single-tier pension rules. Should not the Government act now to allow people to opt to have a year treated as a qualifying year if, by including the income from two or more jobs, that person’s earnings are at least equal to the earnings factor for that year?

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I remind the hon. Lady of the record issues we have achieved for female employees. We now have record female employment, at a rate of 69.1%, and there are more than 1 million more women in work since 2010. The number of older women in work is at a record high, with more than 100,000 more than last year. The people to whom the hon. Lady refers are all benefiting from the measures I have mentioned.

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I hope the Minister will answer my question, given that he ignored the one asked by my colleague. Will he apologise formally for the utter shambles his Department has made of communicating the changes to the acceleration phase, as raised by Women Against State Pension Inequality, and for the inaccurate communication to pensioners regarding national insurance contributions? We learned over the weekend that the Government Gateway website is still showing that the pensionable age for women is 60. How does the Minister expect the House—and, indeed, the public—to have confidence in his Department’s ability, given that it has failed so spectacularly to communicate and to deliver fairness?

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The issue to which the hon. Gentleman refers is isolated and he should regard it as such. The matter has been corrected. It is about time that he took on board all the other arguments that have been raging about this particular issue, rather than a solitary, individual mistake on a website, which has been corrected.

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I fully accept that we are talking about huge sums of money. I was here in 1995 when we first announced the changes, but will my hon. Friend consider whether the Government have taken appropriate action in communicating to women these significant changes so that they can prepare for their retirement? Have the changes been clearly advertised on the Government websites?

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The initial changes were made in 1995. Until 2010, when the coalition Government came to office, there had been at least 10 Labour Pensions Ministers, one of whom held the position twice, and they made absolutely no effort in terms of communication. I want to put it on the record that, as far as the Pensions Act 2011 is concerned, more than 5 million people were written to, including the women affected, using the addresses we had from HMRC. For those who want more information, it is available on the Government website.

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Many of the women whom we are talking about are caring for elderly parents or young grandchildren. Many have been working since they were 15 years old, and very few of them have significant pension savings. Will the Minister give those women some hope and look at transitional arrangements, such as allowing women who are affected to draw their pension credit early to help them through this difficult time?

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A concession was made in 2011. On Second Reading, the Secretary of State said that he would go away and consider matters. He did so, and when he came back he made a concession worth £1.1 billion and reduced the two-year extension to 18 months. In the case of 18 months, 81% of women affected will have to work no more than 12 months.

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More than 2.6 million women will be hit by this change, more than 5,000 of them in the Minister’s constituency. The least they deserve is to be given the facts to allow an honest debate. We know that the Government considered £3 billion-worth of transitional protection but allocated only £1 billion, as the Minister outlined. In the spirit of an open and honest debate, will the Minister release to the House details of all the options for transitional protection that the Government have considered?

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Perhaps an apology should come from the hon. Lady about the fact that there was no element of communication when her people were in power for 13 years. Let us not forget—[Interruption.] Precisely! The hon. Lady mentions 1995; she will recall that within two years there was a Labour Government, who were around for 13 years. As I have said, there was no communication from any of the 10 Pensions Ministers. As far as the transitional arrangements are concerned, I responded to the hon. Member for Leeds West (Rachel Reeves) that a concession worth £1 billion was made, and the time period was reduced.

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I am not sure that it helps these ladies, some of whom are in very difficult circumstances, for both Front-Bench teams to trade insults. Although everybody accepts that there should be equalisation, I want to mention the case of a widow who came to see me on Friday, who has worked hard all her life but has no occupational pension. Because she paid into the state earnings-related pension scheme, she says that she will lose up to £55,000. That is a real blow for her, because she has little in the way of savings. Is there no way in which we could look at further transitional concessions, or perhaps a cap, so that we could help some of these disadvantaged ladies?

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My hon. Friend is absolutely right that we need to discuss the matter in a measured way, but that means that we need to look at it in a broad context. A whole lot of other benefits are available to the women who may be affected—for example, jobseeker’s allowance, employment and support allowance, income support, carer’s allowance and personal independence payment.

Let us not forget that pensions will be uprated. There is the triple lock, and the simplified new state pension will be introduced in April. Pension freedom allows those who have a pension some flexibility. There has been a permanent increase in cold weather payments. Winter fuel payment has been protected, and more than 12 million pensioners benefited from it last year. As far as female employment is concerned, I have mentioned a number of benefits that we have brought in for female employees. It is important that we look at things in a broad context, rather than simply looking at people in the narrow confines that Members prefer to debate in this Chamber.

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No one could accuse the Minister of excluding from his answer any matter that might in any way, at any time or to any degree be judged to be material, and we are grateful to him.

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The Minister talks about life expectancy, but he is not giving us the full picture. Life expectancy for women fell in 2012-13, and Salford has some of the worst life expectancy figures in the country. Female life expectancy in one ward in my constituency is only 72 years, and healthy life expectancy is only 54. Why should 1950s-born women in Salford carry the burden of the equalisation of the state pension age given that working until 66 is clearly going to be difficult for them? Those women need transitional arrangements.

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The general trend for longevity is increasing. The new state pension will ensure that 650,000 women will receive £8 extra a week. Women live longer and, in the longer run, they will benefit a lot more.

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Although I appreciate that emotions are high on both sides, it is important to ask why, in 13 years of government, the Labour party did nothing to address the issue, especially since they knew that women were living longer. Does the Minister agree that a triple-lock single flat-rate pension would be much fairer to women than the old system?

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Absolutely. Such a pension will be much fairer. When such passionate comments come up at oral questions and in the various debates we are having on this issue, it is worth remembering that not one party—neither the Scottish National party nor the Labour party—put such a measure in its manifesto. That is because simply to reverse the 2011 measures would cost over £30 billion, and it would cost countless billions more to reverse the change made in 1995. Those parties should be mindful of the fact that the issue was in not in either of their manifestos.

Private Sector Jobs

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3. What assessment he has made of trends in the level of private sector jobs. [903346]

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12. What assessment he has made of trends in the level of private sector jobs. [903356]

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A record 26 million people are working in the private sector, up over 500,000 in the past year and by 2.7 million since 2010.

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Will the Secretary of State join me in welcoming the fact that the unemployment rate in my constituency has fallen by 48% since 2010? Does he agree that the roll-out of universal credit, which came to my constituency on 25 January, is a further fundamental part of our welfare reforms to make sure that everyone can benefit from work?

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My hon. Friend is right that universal credit provides the support and incentives that people need to get back into work. Evidence released a few weeks ago shows that universal credit claimants are more likely to have been in employment, spent a longer time in employment, done more job-search activity and earned more than those on jobseeker’s allowance. It is also important to note that, as part of the national roll-out, universal credit has now been rolled out across the whole county of Kent, which includes my hon. Friend’s constituency.

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I very much welcome the fact that youth unemployment has halved in South Suffolk in the past 12 months and that long-term unemployment is down by over a third. Does my right hon. Friend agree that we cannot be complacent, and that there is an important role for community initiatives? Such an initiative is In2BK2, run by Kingfisher HR in Long Melford in South Suffolk, which takes local small business volunteers to help even more young people and the long-term unemployed back into work.

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I commend my hon. Friend for working for such organisations, about which he has spoken to me in the past. A huge amount of progress has taken place in this area, as he maintains. It is worth noting that, as a result of what we have been doing with the reforms and in working with organisations such as the one he mentions, the youth claimant count is at its lowest level since the mid-1970s, the number of those unemployed is down nearly 300,000 since 2010 and, most importantly, the unemployment rate for those not in education is 5.8%—pretty near the lowest it has ever been. We will carry on trying to get this right, but this is good evidence that welfare reform is working.

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On 1 November 2011, the Secretary of State issued a press release saying that

“the Universal Credit IT programme is…progressing well with 30% of the new technology required to deliver it now complete”.

Will the Secretary of State tell the House what proportion of universal credit IT has now been completed?

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The roll-out of IT across the country is nearly complete. The roll-out nationally will be complete before April, as I said to the right hon. Gentleman last time he asked exactly the same question. It is always good to have old questions: the old ones are always the best. The roll-out is progressing well. As he knows, he has an invitation to come and visit the final digital development, which will start to roll all the other benefits into universal credit in May.

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23. In Worcester, unemployment overall is down two thirds and youth unemployment is down three quarters since it peaked under the previous Labour Government. How can we go further and achieve the Prime Minister’s aim of eliminating youth unemployment over the long term, and what role can apprenticeships play in delivering that goal? [903368]

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There are two elements. The first is that, as my hon. Friend knows, we have introduced a work experience programme, which has been hugely successful in getting young people back into work. When we came into office, people could take work experience through a jobcentre for only two weeks, but we have now increased that to two months—or three months for people who get the chance to have an apprenticeship. Over 50% of those who do work experience have gone back to work.

My hon. Friend is absolutely right that the huge increase in apprenticeships we are now planning will reskill our young people and ensure that the work they do is high skilled, high value and well paid.

Life Chances Strategy

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4. What contribution his Department plans to make to the strategy announced by the Prime Minister in January 2016 to ensure that people from all parts of society have equal life chances. [903347]

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11. What contribution his Department plans to make to the strategy announced by the Prime Minister in January 2016 to ensure that people from all parts of society have equal life chances. [903355]

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My Department is leading the development of the life chances strategy. The strategy marks our commitment to transforming children’s lives by tackling the root causes of poverty—worklessness, poor educational attainment, family breakdown, problem debt and addiction.

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Improving life chances is very important in my constituency, given the high levels of deprivation, which are often linked to ill health. What more can the Department do to help people stay in work when they experience ill health, rather than dropping out and having to engage with the benefits system?

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I commend my hon. Friend on the huge amount of work that he does so tirelessly in his constituency, which I have seen at first hand when visiting projects with him. He is a huge champion for those who have difficulties getting back into work. As he knows, we have introduced the “Fit for Work” programme, which helps employees facing long-term sickness to get back into work sooner and helps employers to get people assessed properly, rather than allowing them to fall away and have difficulties, so that occupational health can look at them as well as their having a health assessment. That will introduce a new way of looking at people to keep them in work because, as the Department of Health now agrees, work is part of a health treatment and should not be seen as separate. The White Paper that I will bring forward shortly will talk about that.

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Does my right hon. Friend agree that family stability is hugely important to life chances? Will he update the House on what his Department is doing to strengthen family and relationship support services?

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I fully agree with my hon. Friend. In the last Parliament, the Department did a huge amount to get better advice and support for those who are thinking about breaking up. We invested over £30 million in relationship support over the last Parliament, which meant that about 160,000 people had access to preventive support. As the Prime Minister announced recently, we are doubling the funding available over the next five years to £70 million. The life chances strategy includes the important aim of strengthening and stabilising family life.

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I welcome the Secretary of State’s approach on this issue. Given that he has taught the House the fundamental point that life chances for most children are determined before they are five, will he bring forward a debate in Government time on how the policy of life chances is developing so that the views of Members can be taken into account before the Government publish the White Paper in the spring or summer?

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I will certainly look at that request. The door is open to the Chairman of the Select Committee on Work and Pensions. He has had a huge part to play. One of his recommendations, which is quite legitimate, is that we look at how we incorporate early years into the life chances measures. We are looking at that and would be happy to discuss it further with him.

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22. There is increasing inequality across society for those who are disabled and need access to aids and adaptations. Those who can afford to buy them are fine, but there is a postcode lottery of availability. Is it not unfair, therefore, to look at aids and adaptations in assessments for the personal independence payment? Will the Secretary of State withdraw them from the PIP assessment? [903367]

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I say to the hon. Lady, whom I respect enormously, that we are consulting on what changes are necessary to aids and adaptations to ensure that the support, which was always bound into the personal independence payment, gets to those who need it most. That is the critical point. All of us should want to ensure that people get the support they need for the things they need most to get by. The door is always open to her, as it always has been, and I would be happy to discuss this matter further in light of the consultation.

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My right hon. Friend will be aware of the index published by the Social Mobility and Child Poverty Commission over the weekend and will share my concern that children growing up in the Norwich City Council area have some of the lowest chances of doing well in life. Does he agree that we should have the highest possible ambition for Norwich children? What does he suggest could be done locally to target that?

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A huge amount can be done locally. Universal support, which is now part of universal credit, is being trialled with a lot of councils to look at the families with the greatest difficulties. It involves councils in getting financial support to those families and in helping them to sort out drug and alcohol abuse. As they receive the special payments, we expect councils to work with us to ensure that their problems are put right, rather than ignored and left to one side.

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The Department is responsible for providing support to some people who, sadly, are at the end of their lives and have a prognosis of six months or less to live. Will the Minister update the House on progress to remove the 28-day waiting rule for terminally ill people who are transferring from the disability living allowance to the personal independence payment?

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May I write to the hon. Gentleman about that? We are considering that issue but have not quite made a decision, so I will provide a full answer in due course.

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My hon. Friend the Member for Bridgend (Mrs Moon) is right. Poverty affects people’s life chances, and disabled people are twice as likely to be living in poverty as the non-disabled population. We know from the Government’s own figures that disabled people on incapacity benefit or the employment and support allowance are between two and six times more likely to die than the population as a whole. As my hon. Friend said, the recent consultation to review eligibility for the personal independence payment, just two years after it was introduced, will mean even more cuts for disabled people. That comes on top of the proposed cuts to ESA, the work-related activity group, and the £23.8 billion that has been taken from disabled people as part of the Welfare Reform Act 2012. With 5.1 million disabled people living in poverty, what is the Government’s estimate of how many more disabled people will be living in poverty as a result of those measures?

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Even though we have created a new benefit—I believe that PIP is a better benefit than the DLA, and it is far better for those with mental health problems, as many charities and support groups have admitted—we must constantly keep it under review to ensure that the money allocated for it goes to those who need it most. As the hon. Lady knows, a recent court case widened the whole element of aids and adaptations, which would mean that fewer people got the kind of money that they needed. We believe that the personal independence payment is far better, and that it will deliver exactly what we expect to those who need it most. Our job is to support those who need it. The Government that the hon. Lady was part of did absolutely nothing to sort out the mess of the disability living allowance in the whole time they were in power.

Single-tier Pension

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5. What estimate he has made of the number of people who will receive a lower state pension under the single-tier pension. [903348]

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Provided that people have at least 10 national insurance qualifying years, they will not receive a lower pension under the new state pension based on their own national insurance contributions than they would have already built up under the current system.

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The truth is that under the Government’s new pension system, substantial numbers of pensioners will lose money. Why did the Government turn their face against the obvious solution, which is to move to a much higher basic state pension, backed up by a compulsory state earnings-related scheme for all, with defined benefits?

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It is important that the hon. Gentleman appreciates that the new state pension is based on national insurance contributions. He will be aware that for many years many people have contracted out, and a small portion of their national insurance has gone towards a work pension or a private pension. If they add the new state pension to their other pension, which was paid for by national insurance contributions, they will find that in many cases they will be better off than they would be under the new state pension, which is £155.65.

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Will not the new state pension remove injustices that have persisted for far too long, benefiting women and low earners especially?

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Absolutely. As of April this year, with a new state pension and the triple lock, people will be £1,000 better off than they would have been under the old system whereby pensions were uprated. The triple lock will benefit people by £1,000 by April this year.

Under-occupancy Penalty

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6. What evaluation his Department has made of the effect of the under-occupancy penalty. [903349]

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The number of people subject to a reduction owing to under occupancy has been reduced by 18% since the introduction of this policy, and has already saved the taxpayer £1 billion. We will therefore be maintaining this policy, and will continue to protect vulnerable claimants who require additional support through discretionary housing payments.

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London is by no means the region worst affected by the bedroom tax, but even so, just one in four people affected in my constituency have been able to downsize in the three years since the policy came in. The Government’s own research indicates that three-quarters of those hit by the bedroom tax have had to cut back on food, and 46% have had to cut back on heating. What steps will the Minister take to ensure that those who are unable to downsize their homes are not left cold and hungry?

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First of all, the £870 million discretionary housing payments fund has been set aside for this Parliament. The one in four looking to downsize will be welcome news to the 241,000 families in overcrowded accommodation and the 1.7 million on the housing waiting list.

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What guidance is being made available to local authorities on the use of discretionary housing payments so that we can make sure that in exceptional cases, such as when homes have been adapted for disability, they can benefit from the additional money that has been made available?

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I thank my hon. Friend for raising that point, which goes to the very heart of it: it provides the flexibility to allow local authorities to work with organisations such as the police, social services and medical professionals. The Local Government Association recently said:

“Councils can bring local services together in a way central government will never be able to in order to ensure no-one falls through the cracks.”

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Last week’s Court of Appeal ruling that the bedroom tax discriminates against disabled people comes hard on the heels of a ruling in November that the inclusion of carer’s allowance in the benefits cap also discriminates against disabled people. The Government have been forced into a climbdown on carer’s allowance. Why will they not do the same on the bedroom tax and end discrimination against disabled people?

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In fact, it was about whether it is possible to find such exemptions or whether discretionary housing payments give the right flexibility. What we do not want to do is create an artificial line that some people will then just fall beneath and not be able to get support. The £870 million gives the flexibility to work with different agencies. Let us remember: the 1.7 million people on the housing waiting list and the 241,000 families in overcrowded accommodation welcome any moves to help to free up those valuable family homes.

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That really is just sophistry. The UN Committee on the Rights of Persons with Disabilities is currently investigating the UK for grave and systematic violations of the UN convention on disability rights. Ministers should be thoroughly ashamed that the UK is the first country to face such an investigation. Does the Minister agree that scrapping the bedroom tax is actually the best thing the Government could do to bring their policy into line with articles 9 and 20 of the convention, which ensure accessibility for disabled people, including access to housing, an adequate standard of living and social protection?

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We are very proud of our record and refute the allegations of that investigation. I absolutely will not abandon the 241,000 families in overcrowded accommodation and the 1.7 million on the housing waiting list. They want us to do this and we will carry on doing it.

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Does my hon. Friend agree that one effect of this policy is that it saves taxpayers about £500 million a year, and that it is incumbent on those who suggest reversing the policy to explain where they would find that money?

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Over the course of this Parliament, it will deliver a saving of £2.5 billion. I suspect that we will be waiting a very long time to get an alternative from those on the Opposition Benches.

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In the light of last week’s Court of Appeal ruling, will the Minister tell us how many victims of domestic violence the bedroom tax currently discriminates against and what it would cost to exempt them?

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I do not believe it does discriminate. Discretionary housing payments are there to make sure that nobody falls under an artificial line. As a Government, we have trebled the support for victims of domestic abuse to £40 million, a measure I think people on all sides of the House welcome.

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That is a curious answer, given that the Court of Appeal said that it did discriminate against those victims and that the Government admitted that they discriminated against those victims. I am sure the Minister knows the answer to my question: it is 280 victims of domestic violence and it would cost about £200,000 to exempt them. If he will not tell me that, will he tell me instead how much it will cost him to try to defeat those victims in the Supreme Court? Is it more or less than the cost of exempting them?

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This is about doing the right thing and having the flexibility so that people do not fall beneath an artificial line. If this is so wrong, why did Labour Members not introduce this when they brought in the measures for the private sector? It is right to make sure that those who need the support—the vulnerable in society—are given the right support.

Pensioners’ Incomes

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8. What steps he plans to take to maintain the level of pensioners’ incomes during this Parliament. [903351]

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The Government will triple lock the basic and new state pension, top up income to a guaranteed minimum level for the poorest pensioners, and protect benefits for older people, including free eye tests, NHS prescriptions, bus passes, television licences for those aged 75 and over, and winter fuel payments.

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Given that 28% of my constituents are over 65, compared with a national average of 17%, the Minister’s answer is welcome news indeed. What steps are the Government taking to ensure that pensioners claim all their state entitlement?

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My hon. Friend makes a good point. I can assure him that the Government use a wide range of channels. On pension credit, we believe that one of the best ways to reach people is through community partners, and we provide a web-based pension credit toolkit containing a range of resources to encourage take-up among pensioners. Information and leaflets on other benefits are also available from the Department’s offices, advice agencies and local authorities, as well as some post offices and doctors surgeries. Information about all benefits and how they may be claimed is readily available on the gov.uk website.

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A triple lock of nothing is still nothing. The women of the Women Against State Pension Inequality campaign have been done an injustice by this Conservative Government. We also know that a group of women from 1956 will miss out on the new state pension benefits too. What has the Minister got against women from the 1950s?

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The hon. Gentleman has a problem understanding, so I will say this very slowly: as a consequence of the triple lock, which means an increase in line with whichever is highest out of inflation, earnings and 2.5%, when the new state pension comes into place in April, pensioners will get £1,000 a year more than under the old system. As he should remember, Gordon Brown insulted pensioners with a 75p rise, so we will take no lectures from the Opposition on who really cares about pensioners.

Universal Credit Work Allowance

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9. What assessment he has made of the effect on the income of working households of changes to the universal credit work allowance. [903353]

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The changes to universal credit work allowances form part of a broader package of measures, including the introduction of the new national living wage, the increase in the personal tax allowance and the enhanced package of childcare support. Importantly, the single taper rate of 65% ensures that the benefits of work are clear and that support is withdrawn at a predictable and consistent rate, unlike under the existing tax credits arrangement.

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The Government were forced into a climbdown over tax credit cuts, but it was only a temporary reprieve, because cuts to the working allowance mean that 2.5 million families will be £1,600 per year worse off by 2020. How can the Secretary of State say that he is making work pay, when low-paid working families are paying the price for his cuts?

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I disagree with the hon. Lady. An independent study has already shown that with universal credit people get into work faster, stay in work longer and progress faster in earnings. She cannot take this in isolation, however; it is worth remembering that the national minimum wage is rising to some £9, and that under universal credit women will get 85% of their childcare costs, instead of 70%. There will be free childcare for poorer people with two-year-olds, and childcare support for people with three and four-year-olds. The total package is hugely beneficial to people who want to work, which is why, as we get more people back to work, our record will only improve. That compares with the last Government’s shocking record: one in five households with nobody in work.

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It is good to see that the Secretary of State has screwed up the courage to come back to the Dispatch Box to answer some questions.

According to the Government’s own advisers, some working families in this country will be £210 a week worse off as a result of cuts to universal credit. That means that someone on the minimum wage working full time will have to work an extra 30 hours a week to make up the difference. The Chancellor of the Exchequer claims that the Conservative party is the party of work. Did he forget to mention there would be 70 hours a week of it for the lowest-paid?

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I do not need any lessons on courage from the hon. Gentleman. What takes no courage is to sit there with a leader who talks about getting into bed with all sorts of extremists. I find that takes no courage whatever. [Interruption.] I note that the shadow Secretary of State is shouting, but he has already declared his interest in being the leader of the Labour party when the current leader fails.

The reality is very simple. Even under tax credits right now—this is why the figures of the hon. Member for Torfaen (Nick Thomas-Symonds) do not add up—when circumstances change, people actually have lower payments. The difference between us and the Labour party when in government is that we have cash-protected people through transitional protection so that when they move off tax credits on to universal credit, they will suffer no loss.

Women in Employment

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13. What progress he has made on increasing the number of women in employment. [903357]

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Supported by this Government’s reforms of welfare and the equalisation of the state pension age, there are now more women in work than ever before, with an increase of over 1 million since 2010.

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It is absolutely vital that after women have had children, they have the option to go back to work if they want to. What steps is the Minister taking to ensure that her Department encourages that?

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My hon. and learned Friend is absolutely right. In encouraging more women back into work, this Government are committed to increasing and providing more childcare places. In fact, I look forward to when we this week announce the early adopters of the new 30-hour childcare policy. I think it fair to say that alongside the increase in the national living wage and the increases in the personal allowance, there is more support for women to get back to work and to work longer hours.

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20. Does the Minister agree that there is a special category of women—women on the autistic spectrum —who find it very difficult to get into employment? With the right kind of support, however, they can make a valuable contribution to our economy. Will the Minister look at Ambitious about Autism, which is launching an employability initiative for people with autism, and give it some support? [903365]

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Of course the hon. Gentleman is absolutely right. We are working with that organisation. I have been in touch with the National Autistic Society, too, to discuss what more we can do to work with employers and find more employment engagement for people on the spectrum. The hon. Gentleman is also right to highlight the need for more support for women with autism—and that is exactly what this Government are committed to do.

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Increasing the number of women in employment is a key goal for this Government. Many good things are happening, but one thing going on in my Gloucester constituency highlights that more needs to be done—helping women on employment and support allowance back into employment. In that context, will the Minister join me in thanking a partnership called Forwards, which, led by the county council and in tandem with organisations such as Pluss, is making a huge difference to the lives of individuals who are now coming into work for the first time?

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I thank my hon. Friend for making that point and for his observations from his own constituency. He is right to say that more support can always be provided for women on ESA, but also for people in general on it. That is why this Government are committed to the reforms that we have outlined. Importantly, we are committed to working in partnership with other organisations, including charitable organisations—as well as local authorities—such as the one my hon. Friend mentioned from his own constituency.

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What is the Minister doing to help women on zero-hour contracts to get tax credits?

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The most important and significant thing we have done as a Government in respect of zero-hours contracts is to abolish the exclusivity clauses, which the hon. Gentleman’s party, when in government, did absolutely nothing about.

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More and more people, particularly women, are taking on caring responsibilities. I thank the Minister for meeting me and Carers’ Resource from my constituency about this particular issue. Does she agree that it is important for employers to have more carer-friendly employment practices and that we need to do more to encourage that to happen in order to get the best for those people? Will the Government ensure that they do something to recognise the success of those employers who are carer friendly?

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My hon. Friend is absolutely right. It was with great pleasure that I met Carers’ Resource from his constituency. Earlier today I discussed how we can support and work collectively with that organisation to support more women with caring responsibilities to get employment and also to work with employers to do more to support getting people into work—carers in particular. I look forward to working with my hon. Friend and Carers’ Resource to see what more we can do to pilot more initiatives locally.

Workless Households

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15. What progress his Department has made in reducing the number of workless households. [903359]

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21. What progress his Department has made on reducing the number of workless households. [903366]

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The number of workless households is now at its lowest-ever level, having fallen by over 680,000 since 2010.

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I welcome that encouraging figure, which means that fewer children are growing up in workless households. Does my right hon. Friend agree that, while ensuring that every family includes a member in work is the best way out of poverty, it also offers a great role model to any children in the household, increasing family stability and thus giving children the stability and security they need to have the best possible life chances?

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I do agree with my hon. Friend. We know that unemployment is one of the causes of family breakdown. Having a family member in work helps to create strong and stable families, which are crucial to giving children the best possible start in life. It is therefore very welcome that the number of workless households in the east midlands—a huge part of which my hon. Friend represents—has fallen by 68,000 since we came to power. I remind my hon. Friend and the House that, notwithstanding all the nonsense that we hear from Labour Members, some 2.5 million children were growing up in workless households when they left office. That is not much of a record.

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Will my right hon. Friend join me in welcoming the fact that the number of workless households in the south-east has fallen by more than 50,000 since 2010? Does he share my dismay that Labour Members are still set against welfare reform, and want a high tax, high spending economy to take us back to the pre-2010 days?

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My hon. Friend’s question is a strong endorsement of the reforms that have reduced the number of workless households in the south-east by such a large number. Since 2010, the claimant count in Crawley has fallen by 60%, and the youth claimant count has fallen by 75%. Getting people into work clearly has a huge effect. However, my hon. Friend should not be too unkind to the Opposition. I know that many Labour Members who are not now on the Front Bench think that they should be engaging with us on welfare reform, but their new leadership does not believe in that; it believes only in opposition.

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What assessment has the Department made of the barriers that prevent members of households with disabilities from accessing work, and what steps will the Secretary of State take to address them?

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We are increasing the number of advisers in jobcentres, and we are giving advisers much better training. A huge amount of money—more than £100 million—is being invested in training them to look at a wider perspective and a bigger picture, so that they can help those who have difficulties to get into work and support them when they are in work.

It is also important to note that universal credit opens the door to a much better package of support and care, because the advisers do not leave these people. When people receive tax credits they see no one, but from now on, when they go into work, they will be able to come back and see the same adviser. If they have a problem, they will be able to pick up the phone.

This is a hugely positive step, and I congratulate the hon. Lady on her question.

Topical Questions

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T1. If he will make a statement on his departmental responsibilities. [903334]

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We are trialling a new feature of the access to work scheme From today we shall be testing the use of personal budgets, which will allow disabled people who have received grants to decide exactly how and when the money can best be used to support their individual needs. That gives them more choice and more control over the support they receive to help them to start work, to stay in work, or even to start a business.

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Last week the bedroom tax was declared unlawful in the Court of Appeal because it discriminated against domestic violence victims and disabled children. However, the Government are set to spend more on appealing against the decision than they would spend on abiding by the ruling. Surely the Secretary of State agrees that that means poor value for the taxpayer, and that this despicable and discredited policy needs to go.

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The hon. Lady ought to check her lines before making statements like that. The truth is that that is not what the Court of Appeal said last week. The debate in the Court of Appeal was about whether we should isolate individual groups and rule them out of the benefit system, or leave it to local authorities to handle the matter with extra money. We believe that, with the extra money that we are giving them for discretionary housing payments, local authorities are quite capable of allowing people to stay when they think that that is necessary, without limitation.

What I really wonder about—and this applies to the Front Bench as well—is the fact that Labour Members never, ever talk about those whom they left in overcrowded homes, on waiting lists, and unable to get decent homes. It was they who introduced this policy; we have merely followed through.

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T2. Can the Secretary of State give me some indication of when he will publish the draft regulations on housing benefits for 18 to 21-year-olds? Will he also look sympathetically at exempting from those regulations those who cannot live safely in their neighbourhood where their family home is because of sexual abuse, gang-related activity or overcrowded housing? [903336]

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We will publish the draft regulations shortly, although the Welfare Reform and Work Bill has to be passed first. I am very happy to discuss those elements. Of course, there are always exemptions for those who are most in need, and I am very happy to discuss that matter with my hon. Friend if he would like to come and see me.

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Last week, the Government were significantly defeated in the House of Lords over their plans to cut the benefits of sick and disabled people. More than half the people in the work-related activity group have a mental health condition. They face barriers getting into work as a result of their condition as well as stigma from employers. Will the Secretary of State now accept how utterly unfair and ineffective this proposed cut is, and abandon it?

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No one will lose out as a result of the changes we are making to employment and support allowance. Importantly, that means that there will be no cash losers. I think it is worth my reflecting on the point that the Secretary of State made, which is that this Government are focused on supporting those on ESA in a way that the previous Labour Government did not when they introduced the work capability assessment. That is why we have kept the WCA under review. We will announce the publication of a White Paper in the spring that will look into further reforms.

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T4. As the chairman of the all-party parliamentary group on multiple sclerosis, may I ask the Minister to join me in applauding the excellent work of the Multiple Sclerosis Society in supporting people with MS? Will he tell us how his Department is supporting people with MS to get into work or to keep their jobs after a diagnosis of MS? [903338]

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I join my hon. Friend in paying tribute to the fantastic work of the Multiple Sclerosis Society. Only two weeks ago, I was at the Swindon branch’s 50th anniversary. The society has a huge number of volunteers across the country who are making a difference. Its work toolkit stands out as an example of best practice, both for employers and employees, and I am keen for that to be highlighted and for that best practice to be shared among other organisations.

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The Minister’s latest proposals to change the way in which personal independence payments are assessed will be a further blow to disabled people, who have been among the hardest hit by the UK Government’s austerity measures. I know from my constituents who are experiencing lengthy delays that the assessment process is not yet working. Will the Minister abandon these latest proposals, which will narrow disabled people’s eligibility for benefits, and instead focus on getting this part of the process right rather than adding complex changes that will reduce the support available to disabled people?

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We are doing ongoing work with disability groups and user groups following the Paul Gray review, which flagged this as an area, and we are determined to get a clear and consistent policy as we analyse those consultation responses. The length of time for an assessment has fallen by three quarters since June 2014. It is now down to five weeks for an assessment, and 11 weeks median end to end. That has been a settled position for quite some time now.

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T5. Jobs fairs are an effective way for local employers to promote their apprenticeships, which are a key element of this Government’s long-term economic plan. Will the Minister join me in congratulating local Havant businesses Fasset, Barratt Homes and Lockheed Martin on supporting my jobs fair later this month? [903339]

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I thank my hon. Friend for making this point about the great work that is taking place in his constituency. I absolutely endorse his commitment to holding apprenticeship and jobs fairs, because they are the gateway to new jobs and employment opportunities for many young people. I commend him for the work that he is doing.

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T7. May I ask the Minister to speed up the review process for benefit claimants who have been sanctioned or whose claims are being investigated? Over the Christmas period, a number of my constituents, despite having done everything right, ended up having to borrow money to get through that period because of delays. In some cases, this has happened after the Christmas period as well. [903342]

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None of that should actually happen. There are now loans available immediately, so if someone has been sanctioned they are immediately told about hardship loans, which are advertised inside jobcentres. Delay times have fallen to their lowest level ever; they are far lower than they were under the previous Government. If the hon. Gentleman has an individual case in mind, he should write to us immediately or give us a call and we will help to solve the matter straight away.

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T6. Will my right hon. Friend congratulate Tame Plastics and other manufacturing firms in Tamworth that are creating new jobs and apprenticeships? What can he do in areas of low unemployment to turn jobcentres into recruitment agencies for more and better-skilled roles? [903341]

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My hon. Friend is absolutely right in what he says. There is no doubt that a great deal of work is being done with Jobcentre Plus to support local firms such as Tame Plastics, not only in recruiting new employees but in supporting the skills base that important companies such as this need in his constituency.

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T8. Last week, the Government suffered another embarrassing defeat in the House of Lords on the proposals to cut ESA WRAG support by £30, which would leave many disabled people in a very difficult financial position. Despite what has been said earlier today, will the Secretary of State now re-examine the arguments put forward by the Scottish National party? Will he categorically give a commitment today that no one will lose out on this critical financial support? [903343]

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Let me remind the hon. Lady of my earlier comments, when I said that no one currently on ESA will lose out as a result of the changes. Importantly, too, our Government are focused on supporting individuals who have health conditions and are on ESA, which is why those in need would automatically go to the support group.

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A jobcentre’s role is especially important for those who do not have the necessary support at home. Does my right hon. Friend agree that in addition to the youth obligation, there should be an obligation on jobcentres to offer more specialist support?

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My hon. Friend raises an important point: jobcentres have a significant role to play in providing support to young people. That is why we have just started a pilot that takes Jobcentre Plus, with employers, into school to act as a gateway to provide new employment, work experience and work placement opportunities. He has also made the point that the new youth obligation focuses on ensuring that young people are either earning or learning, and do not end up trapped in the benefits system, which is exactly what happened under the previous Labour Government.

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We have already heard that the Department has changes afoot in relation to benefits for people with disabilities, not least with the narrowing of the personal independence payment. Are Ministers hoping to extend that to Northern Ireland as well, using the direct rule powers that exist until the end of this calendar year?

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We have no plans to do that, but I am happy to see the hon. Gentleman if he wishes to encourage us.

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Following on from the comments about the ESA WRAG changes and the Lords having passed the matter back to us, I welcome the opportunity to look at this again and am excited to see the content of the White Paper. Can the Minister give us any feel at all about the cost recognition for claimants in the future? This is not just about support; it is also about the additional costs that they face to live.

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I thank my hon. Friend for the point she raises and her question, and I come back to the comments I made earlier. Importantly, the changes we are making, particularly through the Welfare Reform and Work Bill, show that we are committed to transforming people’s lives by supporting more people with disabilities who face barriers to work. This also means an increase in funding support for those with health conditions and disabilities of almost 15%, and we will bring that forward in the new work and health programme.

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Will the Minister agree to look at the case of my constituent Mr Beet, who has home dialysis three times a week but is also trying hard to keep his job to support his family? He has been turned down for PIP twice. Does she feel, as I do, that if a person is having dialysis, they are eminently suitable to receive PIP?

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I would be very happy to look at this case with the hon. Lady to see what support we can provide her constituent. She makes an important point, which is that he wants to work and therefore should be supported to stay in employment, too.

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I look forward to welcoming my hon. Friend the Minister for Disabled People to North Devon next month for a Disability Confident event. Does he agree that these are very important events, not only for people with disabilities, to bring them closer to the world of work, but for employers, who do not realise what untapped talent there is?

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I thank my hon. Friend for that. I am particularly excited about going to visit his constituency to support his excellent Disability Confident event, and I pay tribute to the other 48 MPs who came into our drop-in event last week and have committed to hold their own events in their constituencies.

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Does the Secretary of State believe that the two-child policy and the rape clause are consistent with his Government’s obligations under the UN convention on the rights of the child?

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I am quite convinced that the proposals that we bring forward will make it absolutely certain that all those who suffer rape will not be put upon in any way by this proposal.

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What steps are the Government taking to ensure that all employees are fully informed of the new auto-enrolment pensions?

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I can assure my hon. Friend that the Government are working closely with the pensions regulator to ensure that small employees in particular are informed of the new auto-enrolment changes. Online facilities are easy and simple to use for many people. Offline facilities such as leaflets and so on are also made as easy as possible.

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The Government have agreed to remove the 28-day waiting rule for terminally ill people who are transferring from DLA to PIP, but for those who are unable to afford to travel to loved ones, or who are worried about bills in their final weeks, it cannot come soon enough. Will the Minister update us on progress?

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I pay tribute to the hon. Members for Sheffield Central (Paul Blomfield) and for Bermondsey and Old Southwark (Neil Coyle) and my hon. Friend the Member for Beverley and Holderness (Graham Stuart) for their tenacious and constructive work in this area, which I am delighted to support in full. Subject to the will of Parliament, we intend to make and lay new regulations and, as set out by the Secretary of State, we will write shortly to update Members on that timetable.

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Will Department for Work and Pensions Ministers hold discussions quite urgently with civil service and Treasury Ministers about the Conservative manifesto commitment to cap very large redundancy payments? Are they aware of serious concerns that, by including early retirement awards in the capping scheme, we may penalise long-serving but low-paid public employees by a measure rightly intended to limit undeserved golden goodbyes to the very highly paid?

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As my hon. Friend knows, that is really a matter for the Treasury, but I am very happy to undertake such discussions. If he would like to add his extra information on this, I would be very happy to take it.

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Half of those receiving employment and support allowance in Scotland qualify through a mental health problem. A report from the Scottish Association for Mental Health, which has a base in my constituency at Redhall Walled Garden, has found that people who are placed in the work-related activity group report “inappropriate expectations” being put on them, making their mental illness worse. Does the Minister agree that that will be exacerbated by the Government’s proposed changes?

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With respect, I say to the hon. Lady that she is wrong. This Government are investing more than any previous Government in providing financial support and in piloting new projects to make sure that those who have mental health challenges and problems are given the right kind of support. We should make the distinction here that this is about not just financial support but the wider support that they get through DWP and the networks and in the community to help them get into work.

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I welcome the news that nine out of 10 businesses that started with new enterprise allowance support survived for more than 12 months. Will the Minister update us on what further progress there has been in the Government’s efforts to support jobseekers who are looking to start up their own businesses?

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I thank my hon. Friend for highlighting the great work and the results of the NEA, which has been an outstanding scheme, supporting more and more people to get into work and start up their own businesses. There is more support going through our Jobcentre Plus network to mentor, help and engage with those individuals who want to start up their own businesses. We have more reviews coming, but the whole House can join me in commending this programme for its success and for how it has enabled people to get on in life and start up their own businesses and become successful.

NHS Trusts: Finances

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(Urgent Question): To ask the Secretary of State for Health if he will make a statement on what steps are being taken to improve the financial position of NHS trusts.

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The House will know that in 2014, the NHS itself set out its plans for the next five years, which included a front-loaded funding requirement of £8 billion. As our economy is strong, this Government have been able to honour that request and will be funding it in full, including a down payment of £2 billion in this financial year ahead of the spending review period.

Next year, there will be an increase of £3.8 billion and taken together, we shall, therefore, be providing £10 billion towards the NHS “Five Year Forward View”. Within that context, there are a number of hospital trusts that are running a financial deficit, in large part because of the need to staff wards safely after what was learned in the aftermath of the scandal of Mid Staffs.

It is also the case that the best hospitals have begun to transform along the lines required by the NHS “Five Year Forward View”, but some have not. This has made the management of their finances all the more difficult. NHS Improvement expects that NHS hospital trusts will report an overall deficit for the current financial year, 2015-16. Savings achieved in the rest of the NHS have ensured that this overall deficit will be offset, so that the system as a whole will achieve financial balance.

For the next financial year, NHS Improvement will continue to work with trusts to ensure that they improve their financial position. To help them in this endeavour, the Department has introduced tough controls on the costs of staff agencies, a cap on consultancy contracts, and central procurement rules as proposed by Lord Carter in his review on improving hospital efficiency.

The House should know that the savings identified by Lord Carter come, in total, to £5 billion a year by 2020. The chief executive of NHS Improvement, Jim Mackey, is confident that taken together, these measures will enable hospital trusts to recover a sustainable financial position next year.

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I am afraid the Minister seems to be in a state of denial. He claims that the settlement secured by the Department of Health in the spending review will sort the financial pressures that hospitals are under, but either he does not understand the scale of the problem or he simply has his head in the sand.

In the past few weeks it has become abundantly clear that hospitals across the country are buckling under the strain of providing healthcare with an inadequate budget. Four out of five hospitals are now predicting a deficit. Monitor is reportedly assembling teams of management consultants to dispatch to up to 25 trusts in need of turnaround, and now we learn that, along with the Trust Development Authority, it has written to every hospital asking it to take urgent steps to regain control of its budget, including

“headcount reduction, additional to the current plan”.

Was the Minister or the Secretary of State aware that this letter had been sent? Did it receive ministerial approval? How many hospitals have subsequently had meetings to discuss headcount reductions? How many job cuts have been agreed as a result of these meetings? On the one hand the Care Quality Commission is telling hospitals they are unsafe, and on the other, Monitor is telling them to cut staff. So which one is it, Minister? What proportion of these so-called headcount reductions will involve clinically trained staff?

On Saturday the King’s Fund said:

“Three years on from Robert Francis’s report into Mid Staffs, which emphasises that safe staffing was the key to maintaining quality of care, the financial meltdown in the NHS now means that the policy is being abandoned for hospitals that have run out of money.”

Will the Minister now accept that his Government’s financial mismanagement of the NHS has made it impossible for some hospitals to provide safe patient care? Is it not the case that this Government have fundamentally lost control of NHS finances? Is it not clear that the only way Ministers are going make their planned £22 billion worth of efficiency savings will be to cut staff, cut pay and close services? I say to the Minister that it is time to stop the NHS doublespeak and just come clean.

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The hon. Lady started by claiming that the Secretary of State and I were in a state of denial. Were she to look at the outcomes of the NHS this year compared with the last year that her party was in power, she might consider that the performance of the NHS has improved beyond measure. We have 1.9 million more accident and emergency attendances, 1.3 million more operations, 7.8 million more outpatient appointments and 4.7 million more diagnostic tests. This is an NHS that is performing more procedures, helping more patients and doing more for the people of this country than at any time since its foundation. I would therefore gently suggest that those in denial are her party and her. The service is working hard to try to deliver better patient care in a challenging environment.

The hon. Lady asked a number of subsequent questions about staffing levels and letters sent out by NHS Improvement, and I will endeavour to answer each in turn. She asked about the settlement the Treasury has reached with the NHS, and I would point out that that is precisely the settlement that the NHS itself asked for and that the Labour party refused to endorse at the last election.

The hon. Lady’s second question—or statement—related to the fact that there are teams of management consultants. That allows me to remind her that the numbers of management consultants have been cut considerably—by the previous Government and by this one—in contrast to what happened under the Labour Government, who increased the numbers of managers in the 13 years they were in power. We will make no apology for the fact that NHS Improvement and its constituent bodies are working hard with some of the most challenged providers to help to turn them round and to try to address the issues of efficiency and quality they all have. Is the hon. Lady somehow suggesting that they should not be doing that? Should they not be going round hospitals trying to help those that are not able to control their own finances? Should they not be doing what is needed to try to improve the quality of the care those hospitals provide? If that is her suggestion, it is a quite remarkable one, and one that should be more widely shared with the people she seeks to represent.

The hon. Lady talked about the letter sent out by NHS Improvement. Yes, the Department was aware of it, as it was aware of the letter sent out the same day by Professor Sir Mike Richards, of the Care Quality Commission, addressing the issues of quality that need to be tackled across the service. I know that this is news to Opposition Members, but there are not separate parts of the NHS issuing separate diktats. The letters issued on staffing and other issues in the last few months have been co-signed by Professor Sir Mike Richards, the chief inspector of hospitals, by Dr Mike Durkin, the director of safety at NHS England, by Jim Mackey, the chief executive of NHS Improvement, and by Simon Stevens, the chief executive of NHS England. This is one system addressing the particular problems that are evident in some challenged providers and making sure that those providers level up to the best. If the hon. Lady is not convinced of that, she should look at the co-signatories of those letters to see how they correspond one with the other.

The hon. Lady asked about the line in one of the letters about reductions in headcount. I point her to the reductions in the headcount of administrators that the Government have achieved over the past five years. We have managed to reduce the number of administrators in the NHS by 24,000, while increasing the number of clinicians by 16,000. Would the hon. Lady, while not promising the money to the NHS that it has asked for, ask it to maintain the same level of administrators in the years ahead, or would she back NHS Improvement’s plan to find efficiencies across the NHS, precisely so that the money that is spent on administrators can be spent better—on clinicians, on increasing the number of clinicians and on directing resources to the frontline? I know the hon. Lady is earnest in what she says about the NHS, but I cannot believe that she is really riding out in defence of increasing spend on back office at the expense of the frontline.

The hon. Lady asked about safe staffing ratios. She made a number of statements that, in retrospect, she might feel were somewhat irresponsible. The reason for that is that the letter issued about safe staffing in October last year, which built on advice given by the National Institute for Health and Care Excellence, was co-signed by Professor Sir Mike Richards, the chief inspector of hospitals, and by NHS Improvement and its two constituent bodies. It was a co-signed letter because quality and efficiency are two sides of the same coin. Those hospitals that are providing the highest quality of care in this country tend to be those that are also in control of their finances. Likewise, those that are struggling with quality tend to be those that cannot control their finances. If the hon. Lady were to suggest that, somehow, there is a binary distinction between the two—that there is a choice to be made between quality and efficiency—I would gently say to her that she is about a decade behind all current thinking on how a successful health service is run. It is about making sure that quality and efficiency go hand in hand, and the very best hospitals can achieve both.

In all this, the hon. Lady should avoid falling into the trap that her predecessor so often did of assuming that that there is some kind of trade-off between quality and efficiency, and also attempting a pretty low-level politicising of the NHS—an approach that was roundly rejected at the last election. I ask her to consider the counterfactual—that were she standing at this Dispatch Box now, having won the last election, she would not have had the £8 billion to invest in the NHS that we have managed to have, and she would not therefore be able to assure the public of continued improvements in the number of patients treated, an increased number of operations, GP numbers in excess of 5,000, which we have promised to deliver by 2020, record numbers of A&E admittances, and record numbers of out-patient appointments. She would have been able to promise none of that. That is why Conservative Members are proud to reaffirm that we are the true party of the NHS.

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We all welcome the front-loading of the NHS settlement, and want to congratulate NHS staff on the extraordinary efforts they are putting in to improve quality, alongside coping with rising demand. If NHS Improvement is tasking management consultants to come in and advise trusts on turning around financial problems, will the Minister also task it with looking specifically at issues of social care and how the interrelation between underfunding of social care impacts on the health economies of local trusts, and with looking at improvement and prevention, because prevention was also noted by Simon Stevens to be unfinished business from the spending review?

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My hon. Friend will be aware of the increase in the better care fund that this Government have introduced and the 2% precept on council tax bills that will deliver increases for social care. She will also be aware that “Five Year Forward View” is a holistic understanding of the healthcare system that includes transformation of the NHS and social care towards that point. That is why we are proud to fund “Five Year Forward View” in the manner that Simon Stevens requested —front-loaded, with £3.8 billion in the next year. The manner of that bottom-up integration over the next few years will ensure that the challenge around social care that my hon. Friend identifies will be addressed in years to come.

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With almost 80% of trusts running a deficit, I am not sure that we can say that it is just failing hospitals that are having problems. The Government talk about giving £10 billion upfront, but £2.2 billion of that is already written off in the deficit, and usually budgets are ascribed across the Department of Health, whereas Public Health England and Health Education England are losing money. With the £3 billion that is being clawed back from the areas that are not specifically under NHS England, it is actually £4.5 billion, not £8 billion, that is being put in. “Five Year Forward View” identified public health and prevention as crucial. The Government have a plan to recruit 5,000 extra GPs, but I am not sure how that can be done without Health Education England. The one thing that has so far been shown in evidence to impact on unnecessary deaths is a good, strong ratio of registered nurses to patients, so it is important that we look at how that will be funded. If trusts are not allowed agency or immigrant nurses, how are they going to do this? Why do we not get the National Institute for Health and Care Excellence to finish the piece of work on safe nursing levels throughout hospitals?

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I thank the hon. Lady, who asked some salient questions that I will address. She asked about the deficits across the system. It is true that there are some particularly challenged providers where the heaviest deficits fall, and they account for the larger part of the accumulated deficit, but it has been a very challenging time across the system, not only because of the demographic challenges facing the NHS that have got worse in every year of this and the previous Parliaments, but because of the effect of the excessive charges of agencies levied after the increase in staffing levels in the wake of Mid Staffs. To seek to address that area, which makes up the majority of the cost of the deficit, we have brought in the controls not only on agency spend—on locums—but on very high salaries and on consultancy spend. Taken together, that will make a significant difference to hospital trust finances.

The hon. Lady talked about public health. We accept that that is a very important part of achieving “Five Year Forward View”. That is why, over the course of this Parliament, we will invest £16 billion in public health across England, to ensure that we can achieve the kind of transformation that she wishes to see.

On GP recruitment, we intend to have 5,000 additional GPs by the end of this Parliament. I am glad to say that Health Education England is so far meeting its targets in filling those training places. I congratulate its chief executive, Professor Ian Cumming, on the work he has done in that regard.

The hon. Lady mentioned safe staffing and the NICE guidelines. During the process of NICE looking at safe staffing levels, it became clear, as the chief nurse identified, that we need to look more broadly at team staffing levels, not just at individual positions on wards. I think that the hon. Lady in particular will understand that. That is why the chief nurse and Dr Mike Durkin were commissioned together to look at and build on the advice of NICE. The safe staffing guidance, which will be released in the next few months, will show a broader and more complex understanding of staffing levels, which I know the hon. Lady will appreciate from her time on the wards.

I want to be clear that that staffing guidance will be signed off only once it has the approval of NICE, Professor Sir Mike Richards, the Care Quality Commission and Dr Mike Durkin, the head of safety and quality at NHS England. It will require their imprimatur.

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Our experience in Staffordshire is that it takes a medium to long-term plan to put things right. I pay tribute to the work of the staff at the Stafford County hospital and the Royal Stoke University hospital. Will the Minister assure me that any measures put in place, both in Staffordshire and across the country, will take a long-term view and not be driven by the need to cut costs within a financial year? A five-year plan, at the very least, is vital.

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I could not agree more with my hon. Friend. It is important to take a long-term view. That is something that has bedevilled the NHS under all kinds of Administrations since its creation. For the first time, it has a five-year forward view, which means that it can begin to transform properly. The very best trusts in the country, such as that in Northumbria, previously run by Jim Mackey, have been able to do that. We want to bring that kind of excellence to hospitals across England, to ensure that they provide the sustainable staffing and quality levels that my hon. Friend is beginning to see at Mid Staffs after the long-term view taken by that hospital.

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Devon NHS had no deficit in 2010 when we had a Labour Government. It now has the worst deficit in England. What assurances can the Minister give my constituents in Exeter and those elsewhere in Devon that services and waiting times will not deteriorate even further?

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I thank the right hon. Gentleman for his co-operation and help in trying to form the future of the NHS in Devon. This will work only if there is a cross-party effort, and the same is true of the national level. We have particular, urgent problems in Devon, and that means that the deficit will increase unless we take significant local action. That action needs to be led by local clinicians, and I am very glad that they are talking constructively. My job and that of the right hon. Gentleman is to provide support in the coming months so that we can have one plan that we can then implement.

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Let me give the Minister an example from my constituency of how some of the challenges are affecting patients. My local hospital of Whipps Cross ended up downgrading the nursing bands in an attempt to save money. As a result, it now has a big crisis in staff morale, the CQC has intervened because of the quality of care, and it has a massive agency bill. Moreover, Whipps Cross University hospital is part of Barts Health NHS Trust, which has the largest private finance initiative deal in the country. It is due to pay back £7 billion on a £1 billion loan, and last year alone it paid out £148 million—half of which was interest—on its PFI deal. What is the Minister doing to help trusts renegotiate such costs and tackle these legal loan sharks of the public sector?

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To ask about PFIs signed by the previous Government is a brave line of attack. I have held a number of meetings about Barts with the hon. Lady’s colleagues, and I completely understand the difficulty that she and they—and, indeed, the trust—find themselves in. I had a meeting about Barts this morning. I also had two last week, and I shall be having a further two this week and next week, precisely because I want to see the transformation she needs in her area. I am very happy to discuss that in greater detail with her. In fact, I will convene a meeting of local MPs in the near future.

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The Government rightly front-loaded the extra money that the NHS called for in the “Five Year Forward View”, but it is vital that that money is used to drive transformation, such as the productivity improvement that is needed and the shift of care out of hospitals. Will my hon. Friend assure me that the money will go not just to plug deficits, but to change the way in which services are delivered?

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My hon. Friend is entirely right and speaks from experience. That is why, as part of the spending review settlement, £1.8 billion was set aside as a transformation fund. The principle behind the transformation fund is that the money will go to those trusts that are beginning to show transformation in the way they are running not only their finances, but their whole operations. That is for the betterment of patients as a whole. We have to see transformation; otherwise money will be wasted, as it has been in years previously.

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What help and assistance can the Minister give to the ambulance service in Leicester? On Sunday 24 January, 10 of the 25 ambulances that serve the whole of Leicestershire were parked outside A&E at the Royal Infirmary, trying to hand over patients to the staff. On 856 occasions in the last year, ambulances had to wait between two and four hours to hand over those patients. In Leicester we need not more consultants, but a better system of management.

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The right hon. Gentleman raises an issue that has been severe in Leicester, and I am aware of it. I am happy to have a separate meeting with him to discuss the matter and what is being done about it. Across the country, however, we are seeing a rather better performance this winter than last. That is because of the extraordinary amount of planning done by the NHS, and because we are getting better at dealing with the extraordinary pressures that are placed on the NHS in winter. In Leicester, there has been a particular issue. I am aware of it, and I reassure him that it will be fixed in time for next year.

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I welcome this urgent question, because clinical and patient decision making in Calderdale and Huddersfield NHS Foundation Trust is being dictated by a catastrophic PFI deal signed in 1998, under which Halifax hospital, which cost £64 million, will eventually cost the taxpayer £773 million. That has led to a proposal to close A&E at Huddersfield royal infirmary. Will the Minister please launch an urgent review into these catastrophic PFI deals? I look forward to exploring the matter further with him in my Westminster Hall debate tomorrow afternoon.

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My hon. Friend should know that that review is already taking place in the Department of Health. We are looking again at the PFI deals that were signed by a previous Administration, who went around the country claiming to be building new hospitals without telling people that they had all been put on the credit card and that the bill would be paid by future generations and, in part, by the NHS itself. That is a great shame, and it has created a great deal of uncertainty for many trusts. I know that my hon. Friend has specific issues in Huddersfield, and we will answer them tomorrow in Westminster Hall.

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Will the Minister make it very clear whether he accepts the view of Simon Stevens that if there is a funding gap in social care, which is projected to be the case in 2020 and before, it will simply increase the deficit in the NHS; and that the funding of social care remains “unfinished business”? Does he accept that case?

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I accept the case for the “Five Year Forward View”. Simon Stevens was very clear that the relationship between social care and the NHS needs to be transformed. That called for an additional £8 billion into the NHS, which we have provided, and it required additional money for social care. We have provided that in the better care fund and the council tax precept.

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West Hertfordshire Hospitals NHS Trust has been struggling for a very long time. For five of the 12 years from 1998 to 2010, it registered a deficit, which peaked at £27 million in 2005-06. It is struggling because of a backlog of repairs and maintenance to its elderly estate, through a lack of investment from the previous Labour Government. What more can be done to help hospital trusts that are struggling with a massive backlog of ongoing maintenance?

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My hon. Friend is entirely right. I went to Watford a few weeks ago, and the buildings are in a poor state of repair. They do not enable clinicians to provide the high standards of care that they all aspire to; in many cases, it is difficult to do so. West Herts trust requires additional capital expenditure. I have talked with the trust about how it might realise that, and I am discussing that in the Department at the moment.

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I was contacted earlier today by a constituent. She had a scan last Tuesday, and the following day she was told that she required an urgent referral to a gynaecologist within two weeks and that she would be provided with an appointment within 48 hours. That did not happen. This morning, I was told by the NHS that no appointments were available anywhere, and that it had no idea when one would be available. My constituent is frantic.

In an earlier response, the Minister mentioned outcomes and increased numbers of appointments, but the reality of the NHS in 2016, for my constituent and millions like her, is that no funding or staffing is available not just for routine appointments, but for urgent appointments related to cancer. What will the Minister do for my constituent, and how quickly will he get a grip to ensure that appropriate funding is provided for the NHS?

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During the course of the last Parliament and the beginning of this one, we have moved from being one of the worst performers on cancer outcomes in Europe to a position roughly midway in the table. We have done that through making rapid improvements in the work we do with people suffering from cancer. There is a lot more to do, but the money is flowing in and improvements to outcomes are being made. However, if there are individual cases, I will of course look at them, as I know will the Under-Secretary of State for Health, my hon. Friend the Member for Battersea (Jane Ellison), who has responsibility for cancer services. I am happy to take this on as a personal case.

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During the past decade, under the previous Labour Government, the healthcare trusts that serve Crawley constituency had chronic deficits, and services such as A&E and maternity were closed at Crawley hospital. Services are now returning to that location. Will the Minister confirm that this Government will invest £10 billion in our NHS over the course of this Parliament, and will he say by how much the NHS is being cut in Wales, where Labour is in control?

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I can confirm that the amount of money available to the NHS will increase by £10 billion over the course of this Parliament. However, this is not just about an infusion of money; it is about concentrating on quality and efficiency across the service. In Wales, not only has money been cut, but there has not been such a concentration on quality and efficiency, which is why outcomes are so much worse in Wales than they are in England.

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The hospital in Cambridge that serves my constituency, Addenbrooke’s, is one of the trusts with the most challenging deficits. Today, it is urging people not to attend accident and emergency, which it explains by saying that it is seeing more and more frail, elderly patients. At the same time, the Conservatives in Cambridgeshire are refusing to levy the 2% that the Chancellor has offered them. We have a crisis in social care and health funding in Cambridgeshire. How can it possibly help hard-pressed staff at Addenbrooke’s to hear the instruction that numbers should be cut? Will the Minister assure me, patients and staff in Cambridgeshire that that diktat will be withdrawn?

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No. I cannot assure the hon. Gentleman that we will stop trying to find efficiencies across the NHS. The important thing is to make sure that we channel money right to the frontline, which means doing so in his hospital, as in others. It will sometimes mean finding efficiencies in individual trusts and commissioning groups, and making sure that the money is rediverted. I should say to the hon. Gentleman that the problems at Addenbrooke’s go much further than A&E. The hospital is in special measures and there is much to put right. I am confident that that will be managed, under the stewardship of the new chief executive, who has proven himself to be excellent.

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Will my hon. Friend the Minister thank the Secretary of State for supporting calls for extra investment in Burnley general hospital? The additional £15.6 million committed last year for a phase 8 development at Burnley general will create a state-of-the-art ophthalmology unit and allow the hospital to centralise all out-patients in one location. Following the new £9 million urgent care centre, this is the latest boost for our local hospital, which lost its accident and emergency department and other key services under the previous Labour Government.

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The reality, as my hon. Friend recounts in relation to his own constituency, is that satisfaction in the NHS is at near-record levels, and that dissatisfaction in the NHS is at record lows. We rank No. 1 in the Commonwealth Fund rankings of hospital and health systems across the world. Far from the picture painted by Opposition Members, the fact is that people feel the NHS is getting better. There is increasing proof that the NHS is safe in the hands of the Conservative party, and it will continue to be so for the next five years.

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The health economy in north Lincolnshire has been severely challenged for a number of years. When I meet the chief executive and others from the North Lincolnshire and Goole NHS Hospitals Foundation Trust, I get the impression that they are trying run up a finance escalator that is flying down towards them. What can the Government do to help in these circumstances?

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I recognise the problems that the hon. Gentleman has identified at Northern Lincolnshire and Goole Hospitals NHS Foundation Trust and in north Lincolnshire. NHS Improvement is looking at them in detail at the moment. I hope that by working with the trust’s existing management, we will see an improvement over the next year. That is the point of what NHS Improvement is trying to do. I reassure the hon. Gentleman that if Jim Mackey produces the kind of results that he produced in his own hospital trust, his constituents will see NHS outcomes of a quality that has so far eluded them.

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I had the great displeasure of seeing at first hand the catastrophe that was NHS Connecting for Health under the last Labour Administration. It was therefore a bit rich of Labour Front Benchers to table this urgent question. Does my hon. Friend agree that this Government have introduced a strong regulatory regime and that joint investigations by NHS Improvement, the Care Quality Commission and Monitor will prevent future contractual failures?

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I can give my hon. Friend that reassurance. Every Monday when I meet leading officials in the NHS, the people in the room are from the Care Quality Commission, NHS Improvement and NHS England. We make joint decisions. That is important because the system has to work as one. If the different parts pull in different places, we will not provide the solutions that we need. That is what has happened throughout the history of the NHS. For the first time, we have a system-wide response to the challenges facing the health service.

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The CQC is downgrading trusts such as York Teaching Hospital NHS Foundation Trust owing to the national NHS staffing crisis. In addition, the trust will have an £11 million deficit for the first time at the end of this year. What risk assessment did the Minister make in respect of patient safety before the Government agreed to endorse NHS Improvement’s letter that advises trusts to cut headcount?

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The hon. Lady is wrong. The CQC is not downgrading any trusts. It provides a very important function in the NHS that did not exist before, which is to give open and transparent accounts of how good the quality is in individual trusts. For the first time, patients can see whether their trust is safe, well led and effective. That means that there can be a proper and solid response where there are failings. In too many parts of the NHS, there is not the level of quality that other parts deliver. The CQC shines a light on where we need to improve. Our job, as part of the system with NHS Improvement, is to make those areas measure up.

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My trust in Hull is predicting a deficit of £21.9 million by the end of the financial year. Following a CQC report a few years ago that criticised the staffing levels in Hull, a huge amount of effort has gone into increasing the staffing levels, but that has come at a cost, especially given the premium that is paid for medical staff. Will the Minister reassure my constituents that we will not return to the staffing levels that the CQC criticised in the past when dealing with the deficit of nearly £21.9 million?

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I can give the hon. Lady that reassurance. When I was in Hull a few months ago, I had a fantastic series of conversations with clinicians—not just those who are leading the hospital, but those on the frontline in the wards—about how to address the staffing challenges in Hull and east Yorkshire. It is tailored responses to the problems in individual localities that will provide the quality of service in Hull that she wants for her constituents. I am committed, as are the staff in Hull, to ensuring that she sees it.

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Will the Minister join me in visiting my local clinical commissioning group, trust and social services? The reason I ask is that St Helens and Knowsley Teaching Hospitals NHS Trust has just been rated “good” in four of the five areas and “outstanding” in care. The chief executive is managing Southport hospital to help there in the interim. She previously helped Warrington out of its problems. We have no problem with our chief executive and our staff are outstanding and work hard. However, we are having to recruit nurses from Spain. There is a wonderful working relationship between the CCG, the hospitals and adult social care, with lots of pooling going on. Nevertheless, Whiston faces a £7 million deficit and that is not down to the PFI tariff. [Interruption.] Sorry, Mr Speaker, I will come to the question. Will the Minister please join me for a constructive discussion with those people to see what is happening on the frontline?

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I know that the Under-Secretary of State for Public Health was in Whiston last year. I was in Manchester a few weeks ago, and I plan to go back there and to the north-west in the next few weeks. I will be doing a regional tour, and I would very much like to meet the hon. Lady and talk to her trust’s chief executive. She raises an interesting point, which is that chief executives in many trusts across the NHS are of exceptional quality. It is often easy to knock managers in the NHS, but there are some fantastic managers, and I am sure that her constituency has one.

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I say to the Minister in all friendliness that I hope the region is aware of his upcoming tour. It sounds a most exciting prospect.

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Will the Minister think carefully about what has happened up and down the country? Health trusts such as mine in Calderdale and Huddersfield have run successfully for many years, but recently—I think this is something to do with the destabilisation of clinical commissioning groups—many problems have entered into the general life of those trusts. In Huddersfield we do not want the closure of A&E in our hospital, or the closure of the main hospital and its replacement by a much smaller one. Will the Minister look carefully and forensically at what has happened in the Huddersfield and Calderdale area? It is not just the whipping boy of the unfortunate independent financial arrangement that was negotiated under John Major but signed under Tony Blair.

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The hon. Gentleman is an experienced Member of Parliament and, as he will know, there was a time when reorganisations and changes in the structure of the NHS, and the way that hospitals were disposed, was very much decided in Whitehall. That changed as a result of the Health and Social Care Act 2012, and such changes are now led by clinicians. The changes to which he alludes—which we will discuss tomorrow in Westminster Hall—are led by local clinicians, and ultimately the Secretary of State must defer to their opinion. An independent reconfiguration panel judges those changes, and so far the Secretary of State has always concluded that the panel and local clinicians have been correct. That is the right thing to do. In this case I hope and expect that we will do the same, but I will look carefully at the hon. Gentleman’s concerns, and ensure that I take them on board and relay them back to the CCG.

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At Pennine Acute Hospitals NHS Trust, which serves my constituency, A& E attendances are at a record high, and this weekend the local paper carried the headline “Stay away from A&E unless it’s life or death.” The trust is predicting a deficit of £29 million by the end of the financial year, and although staff work hard in difficult circumstances, does the Minister truly believe that that is an example of a successfully run NHS?

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There are many examples of success in the NHS, and hospitals, CCGs and community health organisations are delivering exceptional care within existing budgets. We must ensure that we spread that practice and approach to care across the NHS. Some parts of the NHS are not doing that, but with our ability to level up and “universalise the best”, as Bevan coined it, we will ensure that everyone gets the level of care that those in the best areas of the NHS already receive.

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Last week Imperial College Healthcare NHS Trust reported a £25 million deficit, and announced a non-clinical vacancy freeze on top of 10% vacancy rates, and above-target use of agency staff. Its solution was to pay its chief executive £350,000 last year to oversee the downsizing of the major local hospital, Charing Cross. What is that other than a short-sighted and dangerous attempt to undermine the NHS?

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Given the hon. Gentleman’s record of statements given to his constituents, whether on housing or hospitals, I would prefer very much comments from the clinicians running Imperial College NHS Healthcare Trust, than I do his own comments about this.

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On the one hand, the Secretary of State is suggesting that he wants a seven-day-a-week NHS, which I presume is not an empty slogan, and on the other hand Ministers are calling for headcount reductions. That suggests that we are asking fewer people in the NHS to work longer hours. Does the Minister share my concern that that is a recipe for staff overstretch and increased pressure on staff, and therefore potentially for greater failings for patients?

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If the hon. Gentleman had not mischaracterised the situation, he might have been able to ask a more coherent question. The fact is that NHS Improvement was looking for what savings could be made in back-office functions in hospitals so that that money could be recycled into the frontline. All I can say to him is that under this party the number of clinicians has increased by 16,000 since 2010. That is a record of which we are proud and on which we will continue to build over the next few years.

Bank of England and Financial Services Bill [Lords]

[Relevant documents: Oral evidence taken before the Treasury Committee on 9 September and 20 and 22 October 2015, on the Bank of England Bill, HC445.]

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I must inform the House that I have selected the amendment in the name of the Leader of the Opposition.

Second Reading

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I beg to move, That the Bill be now read a Second time.

Following the financial crisis, the Government fundamentally reformed the UK’s system of financial regulation, replacing the failed tripartite system with a set of regulators with clear responsibilities and objectives. We have also taken concerted action to improve conduct across the banking sector, and to deal with the abuses and unacceptable behaviour of the past. The Bank of England has rightly been put back in charge of financial stability, and the Financial Conduct Authority is a watchdog protecting consumers from sharp practices and making sure bankers comply with the rules. Quite rightly, the powers and governance of those important organisations are reviewed closely and the Bill makes some modest changes to them.

The Bill has three main aims. The first is to further strengthen the governance, transparency and accountability of the Bank of England so as to put it in the best possible position to fulfil its vital role in delivering monetary and financial stability. It allows the National Audit Office into the Bank for the first time in its centuries-old history. The second aim is to build on concerted action the Government have already taken to drive up standards in financial services by extending the senior managers and certification regime across the sector, including a tough new duty of responsibility for senior managers. The third aim is to support the creation of a secondary market for annuities, protecting consumers by extending the remit of the Pension Wise guidance service and introducing a requirement which, in effect, ensures that certain individuals who are seeking to sell their annuities have received appropriate financial advice.

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Does the hon. Lady agree that one of the real problems in the culture of banking, which we all want to get right, is the role of auditors? Auditors should have been there, should have spotted the dangers and should have blown the whistle, but they did not. Is it not the case that the Bill still does not address the accountancy profession and auditors?

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The hon. Gentleman is right to highlight the importance of auditors. Others in this place will consider the role of auditors in the crash, but I think what he will welcome in the Bill is the fact that the National Audit Office, for the first time, will have the ability to do value-for-money studies within the Bank of England.

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Following on from my hon. Friend’s intervention, does the Minister not agree that one of the fundamental problems with auditors is that they are always employed, effectively, by the managers of banks or companies when they should be representing shareholders? If they want their contracts renewed, time and again private auditors provide a soft option for managers so they get the contract next time. As she says, the great thing about the National Audit Office is that it is independent and in the public sector.

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The hon. Gentleman is absolutely correct that the Bill focuses specifically on the role of the National Audit Office, one independent arm of government, and the Bank of England, another independent agency. The Bill does not particularly focus on the role of auditors in private companies, but I am sure other parts of Parliament will consider that in this Session.

I turn first to the reforms that the Bill will make to the Bank of England. It introduces evolutionary changes to its governance, transparency and accountability to put it on the best possible footing to discharge its expanded responsibilities. These changes complement those taken by the Bank itself as part of its “One Mission, One Bank” strategic plan. The Prudential Regulation Authority will stop being a subsidiary of the Bank and instead be run by a committee of the Bank; another deputy governor will be able to join the court, the Bank’s governing body; and the Treasury will be able to send a remit letter to the Prudential Regulation Committee.

To strengthen the Bank’s transparency and accountability to Parliament and the public, we will give the National Audit Office the power to conduct value-for-money studies. Following debates in the other place and with the NAO and the Bank, we have made sure that that important change is implemented in a way that protects the independence of the Bank’s policy-making functions and of the NAO.

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I welcome the fact that the NAO will be looking at the Bank, but it will need extra resources to do that big job. Will the Minister guarantee that the extra people employed will represent the shareholders—us and the people we represent—and will not simply come from the banking sector and be soft on banks?

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The hon. Gentleman rightly points out the importance of the NAO’s having the right resources. I have not had any representations about this particular move, but I am sure it will make its feelings known, should it require those resources.

The Bill also makes changes to the court. We will simplify and strengthen the governance of the Bank by transferring to the whole court the powers previously given to the oversight committee to oversee the Bank’s performance. Following discussions in the other place, to help guard against group-think, we have amended the Bill so that a majority of non-executive directors on the court will still be able to initiate reviews of the Bank’s performance without needing to secure the agreement of the whole court.

We will integrate prudential regulation more fully into the Bank by ending the PRA’s status as a subsidiary of the Bank. The PRA board will be replaced by a new Prudential Regulatory Committee with sole responsibility within the Bank for the PRA’s functions. That is modelled on the Monetary Policy Committee and the Financial Policy Committee. We will make these changes while still protecting the PRA’s operational independence, and we will continue to ensure transparency on the amounts raised by the levy and what the Bank spends in relation to its functions as the prudential regulator.

In order to strengthen governance and make the structures of the Bank more consistent, the Bill harmonises the legislation underpinning the Bank’s three policy committees: the MPC, the FPC and the proposed PRC. It moves the MPC to a schedule of at least eight meetings a year, from the current 12, and updates requirements for the timing of MPC publications, implementing the remaining recommendations of the Warsh review, entitled “Transparency and the Bank of England’s Monetary Policy Committee” and published in 2014.

Alongside these changes, the Bill builds on the existing arrangements and the strong working relationship between the Bank and the Treasury by updating the formal framework for how the Bank and the Treasury should engage with each other on the public funds risks and the financial stability risks of firm failure. These changes will improve co-ordination while maintaining the existing clear and separate roles of the Bank and the Treasury in the event of a crisis.

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I am slightly concerned that the Bill moves us towards a system of less tension and a cosier relationship between the Bank and the Treasury. That would worry me and other Members. Is it true? I always thought that that tension was healthy.

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The hon. Gentleman is right to highlight the importance of the Bank’s operational independence, which Gordon Brown introduced in 1997—it was his greatest legacy to our country—but he will note that his colleagues’ motion calls for a stronger role for both the Treasury and Parliament and arguably for less independence for the Bank. It is popularly known as the people’s quantitative easing, and I hope that the hon. Gentleman will not support his Front-Bench team on the reasoned amendment.

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Following the point made by my hon. Friend the Member for Huddersfield (Mr Sheerman), it would be even more worrying if there were a cosy relationship between the NAO and the Treasury. The NAO should be responsible to this House, and the Treasury should not be able to get its tentacles on the NAO.

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The hon. Gentleman is right to recognise that the NAO is completely independent of the Treasury. Although I have a nominal role on the Public Accounts Committee, the NAO is rightly accountable to Parliament.

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I very much welcome the move to turn the PRA into the PRC on a par with the MPC and the FPC. Does the Minister not have any anxiety, however, that that leaves the FCA, the consumer protection conduct of business element, out on a limb, with a different status from the other three committees?

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The hon. Gentleman is right to highlight the fact that the FCA is set up completely differently. However, I stress that the similarity lies in the operational independence. When it comes to the FCA, the Treasury is obviously able to appoint the chief executive and the board, but the operational decisions are for the FCA board, as we have made clear in recent weeks.

Let me move on to the second element of the Bill, which will make changes to the senior managers and certification regime. As hon. Members will know, the Government are committed to driving up standards of conduct across the financial sector, and to tackling the abuses and unacceptable behaviour of the past. That is why the Government are replacing the discredited approved persons regime with a much more robust new system, the senior managers regime, legislated for by the previous Government in the Financial Services (Banking Reform) Act 2013.

I find it quite extraordinary that, in the amendment they have tabled, Opposition Members have seen fit to claim that

“the Bill reduces regulation of financial services”.

This Bill is a vital opportunity to remove what the Parliamentary Commission on Banking Standards described as the “complex and confused mess” of the approved persons regime for 60,000 financial services firms, all insurers, FCA-regulated investment firms and all consumer credit firms, and to replace it with the more targeted and robust senior managers and certification regime.

Let me set out the benefits of the new regime; perhaps the Opposition will then reconsider their position. The approved persons regime is a relatively broad, unfocused regime in which all individuals who were considered to hold significant influence functions in the firm, or who dealt with customers would be subject to the regulators’ pre-approval in a tick-box exercise. Crucially, clarity of responsibilities at the top of firms was woefully inadequate. Firms could pass the buck for ensuring the fitness and propriety of their staff to the regulators, and the regulators could take enforcement action only against the individuals they had pre-approved.

The senior managers and certification regime tackles those problems head on. First, it focuses regulatory pre-approval on senior managers, the key decision makers at the top of firms. It enhances the accountability of these individuals through statements of responsibilities, documents that give clarity on which senior manager is responsible for each area of the firm’s business, and through the proposed statutory duty of responsibility that requires senior managers to take reasonable steps to prevent breaches of regulations in their areas of responsibility.

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Does the Minister agree that the senior managers regime will cut through the accountability far more, as the Parliamentary Commission on Banking Standards discovered? The regulatory regime at the time had the effect of forcing senior managers to create ignorance of what was going on within their institutions. The Bill will now absolutely reverse that, so that senior managers must know what is going on within their institutions so that they can take responsibility for infringements of the rules.

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My hon. Friend, who was a distinguished member of the Parliamentary Commission on Banking Standards, is right to say that the commission highlighted the fact that the approved persons regime made it very difficult to pin down responsibility. The new regime, with its duty of responsibility clearly articulated —every organisation will have that set out when managers are first appointed and on an annual basis thereafter—is a much stronger regime. It also delivers more flexibility in the regulators’ enforcement powers, enabling them to impose high standards of conduct through rules applying to individuals, including those whom they have not approved. The expansion of the new regime to all authorised financial services firms will enhance personal responsibility for senior managers, as well as providing a more effective and proportionate means of raising the standards of conduct of key staff more broadly.

Given the improvements that the senior managers and certification regime with the statutory duty of responsibility delivers in terms of senior accountability, the reverse burden of proof is simply not necessary. In extending the new regime to all authorised financial services firms, it is important to consider whether, under these new circumstances, the application of the reverse burden of proof to any or all firms is appropriate. Most of the firms to which the regime will now apply are small, and it simply would not be proportionate to apply it to those firms. By retaining it for the banking sector alone, we would raise serious questions of fairness and competition.

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Can the Minister explain what has happened in the two and a half years since the 2013 Act was passed—essentially, by a Conservative Government—to change the reverse burden of proof?

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As the hon. Gentleman knows, the measures in the 2013 Act are due to come into force on 7 March this year. The position in relation to the reverse burden of proof is becoming increasingly clear. Andrew Bailey said in his evidence to the Treasury Committee, of which the hon. Gentleman is a member:

“I support the change, because what the change does is it turns the process round and puts the judgment back on to us”

—that is, the regulator.

“I would rather it does that than have us heading down this tick-box regime with legal questions around it over human rights.

I do not want to come back or have one of my successors come back to you in the future and have to say, ‘I am sorry; we could not use this regime in the way that was intended, because it was always a bit doubtful that we could make it stick’. It is far better we come at this point to you and say, ‘I do not think this has a sufficient probability of being effective’.”

I could supply further quotations, from members of the Parliamentary Commission on Banking Standards in the other place, but I must make fairly rapid progress now.

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Will the Minister give way on that point?

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I will give way to the Chair of the Select Committee on that point.

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It surprised a number of members of the Committee when both the Prudential Regulation Authority and the Financial Conduct Authority told us that they supported the removal of the reverse burden of proof. I think that many of us would be in a different place had they not given that evidence.

The Minister has just placed great emphasis on the need for the senior managers and certification regime. Has she asked the regulators for a report on progress in its implementation? If so, will she tell us what it said and put it in the public domain? I have to say, on the basis of what we have heard, that progress is inadequate.

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I appreciate my right hon. Friend’s contribution, because he has been examining the issue for longer than most. He will know of the points that were made about this topic in the other place. The regime is due to come into force on 7 March 2016, which is pretty soon. The rolling out of the implementation will focus on the larger organisations first, but the Committee and, I am sure, the Treasury will want it to apply in particular to the large, systemically important firms by 7 March.

The third element of the Bill relates to the extension of the important new freedoms that the Government are granting to allow people to take control of their retirement savings. It will help to ensure that consumers who will be able to sell their annuity incomes through the secondary market in annuities are sufficiently supported. There are two key measures. The first will extend the Pension Wise guidance to those who, from April 2017, will be eligible to sell their annuity incomes through the secondary market in annuities. That will include the offer of guidance to those who have a right to an income under the annuity, such as any dependants and beneficiaries as well as the primary annuity holder.

The second measure will require the FCA to make rules to ensure that specified firms check that individuals with annuities above a threshold value have received appropriate financial advice. On 19 January, the Chancellor set out the Government’s intention to legislate to place a new duty on the FCA to cap excessive early exit charges. I should like to take this opportunity to announce that that new duty will be introduced as a Government amendment in Committee.

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The Minister has used the words “guidance” and “advice” almost interchangeably in her last few sentences. Many of us across the House are concerned that it is advice that will be required, particularly by those with rather modest annuities. Can she give a guarantee that what is being offered is advice and not merely guidance?

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The hon. Gentleman is absolutely right to highlight that semantic distinction. His constituents and mine want help; they do not know whether they are asking for regulated advice or guidance. He will also be aware that we have carried out a consultation—the financial advice market review—which closed in December. We are now studying the responses to that consultation with a view to seeing whether the current distinction is linguistically, and indeed legally, appropriate. He will hear more on this interesting topic in due course.

The Bill also makes a number of smaller changes. We are legislating to give the Treasury the power to make recommendations to the PRA and the FCA about aspects of the Government’s economic policy. Those will be non-binding remit letters. We are also allowing the Treasury to make regulations implementing a more competitive framework for insurance-linked securities business. That will help to preserve London’s position as a centre for specialist insurance and reinsurance. Following debates in the other place, we are also making a change that will support our ambitions for a diverse financial sector by putting consideration of mutuality and other types of business organisation into both regulators’ guiding principles. There will also be changes within an existing banking group to authorise a bank to issue banknotes in Scotland and Northern Ireland.

Illegal moneylenders prey on the most vulnerable people in society, causing their victims immense misery. That is why we will act now in the Bill to ensure that illegal moneylending teams have the funding they need to continue to protect consumers and prosecute loan sharks. We will introduce an amendment in Committee to give the Treasury a power to provide financial assistance to persons involved in taking action against illegal moneylending. The amendment will also give a power that allows the FCA to collect a levy from consumer credit firms in order to fund their financial assistance.

In conclusion, the measures that I have outlined today build on reforms to financial regulation and contribute to the Government’s commitment to deliver a new settlement for financial services. I see that the hon. Member for Hayes and Harlington (John McDonnell) is now on the Opposition Front Bench. By indicating that they do not support the Bill, the Opposition have put themselves on the wrong side of the argument on a range of sensible measures. By voting against the Bill, they will be voting against stronger governance and transparency in the Bank of England and in particular against making the Bank more accountable to Parliament and the public by giving the National Audit Office the power to conduct value-for-money studies of the Bank. They will be voting against extending the benefits of greater accountability for the senior managers and certification regime to all authorised financial services firms.

By voting against the Bill, the Opposition will be voting against ensuring that consumers who can sell their annuity income through the new secondary market have access to Pension Wise guidance and, where appropriate, take financial advice to support their decision. As well as that, they will be voting against proposals to place new duties on the FCA to cap early exit charges for those eligible to access the pension freedoms and to ensure that illegal moneylending teams have the funding they need to continue to protect consumers and prosecute loan sharks. The Labour party has been wrong on financial services regulation in the past and it is wrong again today. I commend the Bill to the House.

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I beg to move an amendment, to leave out from “That” to the end of the Question and add

“this House, whilst noting improvements made to the Bill in the House of Lords, declines to give the Bank of England and Financial Services Bill [Lords] a Second Reading because the Bill fails to increase oversight and accountability of the work of the Bank of England, because the Bill reduces regulation of financial services and because the Bill removes the reverse burden of proof with regard to personal responsibility in the Senior Managers and Certification Regime which was introduced following the cross-party Parliamentary Commission on Banking Standards and enacted in the Financial Services (Banking Reform) Act 2013; and considers that there is no evidence base to justify the removal of the reverse burden of proof which has not yet been implemented.”

The regulation of financial services has been discussed at length and legislated upon in this House since the financial crash, with the Financial Services Act 2012 and the Financial Services (Banking Reform) Act 2013 being passed, and this Bill now being brought to this House. The Bill is made up of two parts: first, amendments to the structures of the Bank of England; and, secondly, regulation of financial services. We believe that the Bank of England should carry out its work in the most efficient way possible, with transparency and accountability in its decision making, serving the interests of the people who have sent us here to represent them. We also believe that senior bankers and others in the financial sector should be effectively and appropriately regulated, in order to deliver a banking culture that is free from the systematic greed and reckless risk-taking that precipitated a bankers’ crisis of historic proportions in 2008.

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Is it not the case that Labour rescued the banks in 2008 and that now the Conservatives are selling off RBS shares at a loss to the taxpayer?

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I thank my hon. Friend for her intervention, and she is correct. It shows what disregard the Chancellor has for the taxpayers’ coffers and the public purse—he is also showing that in his numerous meetings with Google and their shoddy outcome. Financial stability and the effective regulation of our banking and wider financial services industry are vital in ensuring that the sector serves the interests of the whole economy, does not hurt ordinary people or small and medium-sized businesses, and delivers vital investment that our country needs for long-term growth. Getting the balance of regulation right is an important task for any Government, one that Governments around the world have failed to fulfil in the past decade. It is a task that has been attempted since the bankers’ crisis of 2008, but today the Government are threatening to set back this task.

The context of the Bill is vital to understanding our concerns, and the reasonable concerns and demands of the public. We are eight years on from the economic crisis—the bankers’ crisis, which brought the financial services sector and the country to its knees. Banks that were too big to fail were bailed out by the state.

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The hon. Gentleman was not here then, so he can form a dispassionate view. What has he learnt about the mistakes the regulators made under Labour, when we saw all those excesses that he is now talking about?

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I thank the right hon. Gentleman for his intervention. At the time, Conservative Members were calling for even lighter regulation, but what is clear, and what I will illustrate, is that Labour Members have learnt the lessons of the banking crisis but that this Bill shows they have not been learnt by Conservative Members. Eight years on, bankers’ behaviour and bankers’ bonuses remain in the news. Court cases and institutional fines continue, with hundreds of millions of pounds-worth of fines issued, yet still only one person is in prison, despite all the damage done. Despite a series of commissions and reviews, there remains too little evidence that the lessons of the bankers’ crisis have been learnt. We should all know that the public remain angry at what a number of top bankers did to our economy and our society.

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My hon. Friend is making an excellent speech and I strongly agree with it. Was it not astonishing that before 2008 those in the private banking sector did not appear to spot the crisis that was coming? They were too busy making money hand over fist for themselves.

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I thank my hon. Friend, who has extensive experience in these matters, for that. Troublingly, the people who now say there is no risk of a financial crisis ever again were the very same people in the very same sector who were saying before 2008 that everything was fine and there was no risk of disaster at the time. Sadly, how wrong they were! Despite what the bankers did to our economy and our society, about which there was entirely justified anger among the population, the Chancellor has cunningly turned the bankers’ crisis into a crisis of public spending, and has adopted a policy of spending cuts to vital services to which there seems to be no end in sight. In looking at this Bill, it appears that the Chancellor believes that he can now turn back the clock in the banking and financial sector.

Under this Chancellor, things are going in the wrong direction. For example, he sold off shares in the Royal Bank of Scotland at a very significant loss to the taxpayer; he appointed Angela Knight, who was head of the British Bankers Association during the financial crisis and who defended the top bankers during the crisis, to head up the Office of Tax Simplification in the Treasury; and he decided he could do without the continued services of the respected chief executive of the Financial Conduct Authority, Martin Wheatley. I am sure that he is delighted with the new appointment, as we have been told by the Minister that Mr Wheatley’s successor is fine with the abolition of the reverse burden of proof. I wonder whether Martin Wheatley, who departed prematurely, would have said the same.

The FCA’s planned public review into banking culture has now been cancelled, and its investigation into the promotion of tax evasion by HSBC has been brought to a premature conclusion. I know that we will be hearing more about the FCA in another debate this evening.

The Bank of England and Financial Services Bill was originally drafted, according to the Chancellor at a Treasury Committee meeting, to make changes to the Bank of England’s structure. One important concern is that it includes a major change to the regulation of senior bankers, undoing a key measure taken after the bankers’ crisis to change senior bankers’ conduct and to deliver transparency and accountability to financial decision making. I am talking about the presumption of responsibility—or the so-called reverse burden of proof.

We welcome the extension of the senior managers regime to senior managers across all regulated financial firms, but we do not accept the Government’s case for ending the presumption of responsibility for the top managers in banking.

The presumption of responsibility, as currently set out, applies to senior managers. It means that, to avoid being found guilty of misconduct when there has been a regulatory contravention in an area for which they are responsible, they will have to prove that they took reasonable steps to prevent that contravention. This Bill removes that onus on senior bankers. The onus is entirely reasonable, proportionate and, as bitter experience tells the British people, entirely necessary. Misconduct and misdemeanours in financial services are not merely a tale from history. In 2015, for example, the FCA had to fine firms more than £900 million. There was also a LIBOR scandal, foreign exchange fines and the mis-selling of payment protection insurance to the value of up to £33 billion.

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At the conclusion of her speech, the Minister indicated that by voting against the Second Reading of this Bill Members would be putting the public at risk from further bank abuses. Does the hon. Gentleman not agree that, by voting against this Bill and getting it changed so that the reverse burden of proof is put back in place, we are safeguarding against the abuses of the past?

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I thank the hon. Gentleman for putting that necessary point so powerfully. People outside this place will be shocked to hear that, as a result of this Bill, senior bankers in the top firms will have less guards on their personal responsibility.

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rose

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I do wish to make some progress. [Hon. Members: “Give way!”] I will give way.

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I thank the hon. Gentleman for giving way. Further to that point, the measures that he seems to object to so much are in clause 22. Why is he voting against Second Reading when there are many other excellent measures to which he presumably does not object?

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It may be that others can explain to the Minister the real purpose of a reasoned amendment in these circumstances. I think our action is entirely right.

The presumption of responsibility is so reasonable and necessary that the policy was introduced with cross-party support. That should not be forgotten. It was originally proposed by the Parliamentary Commission on Banking Standards, led by the Conservative right hon. Member for Chichester (Mr Tyrie) and Labour’s Lord McFall of Alcluith, and it was the Liberal Democrat Lord Newby, a Minister in the Conservative-Liberal Democrat coalition, who moved its introduction into law. I have to echo a point previously made by the hon. Member for East Lothian (George Kerevan), sitting on the SNP Front Bench, that it was passed as recently as December 2013, and the presumption of responsibility has yet to come into effect. It was meant to come into effect in March this year, and it remains untested. We must remember that this was a safeguard brought in by the very same Chancellor who is now seeking to scrap it.

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The presumption of responsibility has not gone. The senior managers regime absolutely includes the presumption of responsibility for everybody in these institutions. The hon. Gentleman may have had a number of conversations with some of the banks being affected by this, as I have, and I served on the banking commission that brought in the reverse burden of proof. What is interesting is that the banks are now complaining bitterly that the reverse burden of proof has now been reversed, because that managed to be a tick-box operation and they now have a much more onerous responsibility for management than they ever had before. This is a far stronger measure for ensuring probity for the managers of banks than the reverse burden of proof.

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I thank the hon. Gentleman, who is experienced in these matters, for his intervention, but every time we have received correspondence from, and listened to, bankers on this matter, they seem desperate for the reverse burden of proof to be scrapped. They say how dreadful it would be, how it was totally unjustified and that business as usual is fine—that we can just return to things with no risk of a repeat of the financial crisis of 2008. Unfortunately, I believe they were wrong, but we need to remember that this presumption of responsibility, or the reverse burden of proof, was a safeguard brought in by the very same Chancellor who is now seeking to scrap it.

In 2013 the Chancellor said he had

“called for a thorough and intensive investigation into how to improve standards in the banking system and the PCBS has delivered. I am pleased to say that the government will implement its main recommendations.”

Of course one of its main recommendations was this presumption of responsibility.

On that occasion, the Chancellor was not alone. This was his Bill and Conservative Members backed it. Indeed, the right hon. Member for Tunbridge Wells (Greg Clark), then Financial Secretary to the Treasury, clearly explained that his Government were introducing new rules to promote higher standards for all bank staff and were reversing the burden of proof so that bank bosses are held accountable for breaches within their areas of responsibility.

The Conservative Member for Macclesfield (David Rutley) was briefly on the Treasury Committee, and he said:

“It is critical to bringing about the individual accountability that many of us want to see across our financial services sector, with the tough senior persons regime, reversing the burden of proof and criminal sanctions for reckless misconduct. All those steps are vital”.—[Official Report, 9 July 2013; Vol. 566, c. 261.]

His party colleague, the hon. Member for North East Cambridgeshire (Stephen Barclay), said:

“I do not think there can be any doubt about the merits of reversing the burden of proof…The Government’s announcement that they will reverse the burden of proof is extremely welcome.”—[Official Report, 8 July 2013; Vol. 566, c. 119.]

I could go on, but instead I ask this question: what has changed? What, or who, has so dramatically changed the mind of the Chancellor? At the Treasury Committee in October the hon. Member for Wyre Forest (Mark Garnier) put the question many of us are thinking when he asked the Chancellor whether the proposed scrapping of the presumption of responsibility was “largely as a result of lobbying by the banks, which has the flavour of getting stronger.”

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My hon. Friend is making an interesting argument in a powerful speech. Does he agree that the Chancellor had said he had not met the banks in the lead-up to the general election, but apparently he has met bankers on five separate occasions since the general election—presumably to discuss the contents of this Bill? Is he concerned, as I am, that the Chancellor might be the victim of Stockholm syndrome and has become a prisoner of the bankers and their financial interests?

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Of course it is correct that the Chancellor meets senior bankers, but what concerns me and many people outside this place is that the Chancellor appears to be acting in their interests alone.

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Following comments made to the media by Robert Jenkins, a member of the Bank’s Financial Policy Committee, that the regulators and their political masters were captured by banking leaders in the run-up to the meltdown, is my hon. Friend concerned that the Bill shows that the Government are still being captured by banking leaders?

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My hon. Friend hits upon an important point. The role of a City Minister, a shadow City Minister and of the Government is not to represent the interests of the City to the population, but to fulfil their democratic function. A Government are not there to take orders from the City of London. Yes, we must listen to the City of London and value its contribution, but we are not its political representatives on earth.

On the Chancellor’s change of mind, the Chair of the Treasury Committee put it well when he asked his Chancellor a very reasonable question: “Why did you not wait for the regime to come into force to enable an assessment of it, how it works, before implementing this further change?” That was an extremely serious question. The change is based on no evidence, which is the worst kind of change.

Banks are having to put significant effort into identifying and establishing new procedures to meet the requirements of the 2013 Act, which received cross-party support in Parliament. The issues were already abundantly clear then, but now the Conservative Government have performed a dramatic U-turn and are not willing even to test the procedures that they initially supported. It is rare for an important measure to be abolished before it has even been introduced.

How will the public feel when they learn that the Chancellor is scrapping a duty on senior managers in banks—a duty that was welcomed as necessary on a cross-party basis—before it has even been implemented? The public’s deep concern about the behaviour of some senior bankers should extend to the Chancellor, who, it appears, is doing the bankers’ bidding, not the bidding of the British people. Do not the Chancellor and the Government understand the widespread anger of the public and their mistrust of the banking system? The public are right to remember that, because of the bankers’ behaviour, people whom this House is meant to represent lost their homes and their jobs. We should never forget that it was the bankers’ crisis that caused the deficit that this Government have relied upon as their justification for their political choice to cut our public services, cut funding to our local authorities, cut the incomes of working people and cut support for the most vulnerable people in our communities.

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The hon. Gentleman is being generous with his time. I am sorry to be a pedant, but in 2005 there was a £43 billion budget deficit. There was a deficit long before the banking crisis, and there was a structural deficit that the banking crisis brought out.

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I appreciate the hon. Gentleman’s pedantry. With respect, he makes a point that does not bear too much political scrutiny. The global financial crash caused the huge increase in the deficit and stalled the economy. It also gave the Government the opportunity to carry out their long-harboured ideological desire, decades old, to cut public services and wither away the state.

The Bill comes to us from the other place, where there was considerable debate at every stage. The Bill has changed, following a number of amendments proposed by the Government. In our reasoned amendment, we recognise those changes as improvements, and they are welcome, but the Bill has not changed significantly enough. As I mentioned, the Bill is in two parts, and on the first part—on the Bank of England’s structures—we recognise that the Government have made some positive movement, although it is insufficient. We recognise that they have moved on aspects of the oversight powers of the Bank’s court of directors, but the directors’ forum for discussion—the oversight committee—remains abolished.

We also recognise that the Government have moved on the proposed power of veto for the Bank’s court of directors over National Audit Office investigations, but the memorandum of understanding referred to in the Bill remains under negotiation and unpublished. On other aspects, in the House of Lords, there was no agreement. I wrote to the Chancellor asking that the memorandum of understanding be presented to this House during the passage of the Bill. I am glad to say that the Economic Secretary responded, explaining that it is not yet complete and is subject to ongoing discussions between the Bank and the National Audit Office. She explained that she will write to the Governor of the Bank of England and the Comptroller and Auditor General at the National Audit Office to see whether they will be in a position to share the draft memorandum of understanding during the passage of the Bill. In such an important matter, it can only be right for the House to have sight of that crucial memorandum of understanding. Any other approach would be a cause for concern.

The Bill replaces the Prudential Regulation Authority with a new Prudential Regulation Committee. Peers on both sides—including Government peers—expressed concern that that represented a downgrading and threatened a loss of independence.

As I have discussed at length, the Bill also replaces the presumption of responsibility with a duty of responsibility. Opposition peers challenged that on Report, and the Government’s measure scraped through by only 200 votes to 198. If I believe what I am told by the Minister, scrapping the presumption of responsibility is entirely uncontroversial and entirely reasonable. Unfortunately, that is not the case, and the issue gives us particular cause for concern in the wider context of the Chancellor’s new settlement with financial services.

We need a healthy and effective banking sector that is appropriately regulated, that serves the interests of the whole economy, that does not hurt ordinary people or small and medium-sized businesses, and that delivers the vital investment our country needs for long-term growth. The Conservative Government climbdown on the presumption of responsibility, which they previously supported, will hinder, not help, the fulfilment of those ambitions. Personal responsibility is vital for the operation of our regulatory systems. The Chancellor’s policy U-turn reduces exactly the personal responsibility that the Parliamentary Commission on Banking Standards recommended in its 500-page report. Scrapping a key measure before it has even had the chance to be tested makes no sense—unless, of course, the Chancellor is just following bankers’ orders. The startling and precipitous scrapping of a widely welcomed measure shows that there is a very real risk of failing to learn the lessons of the bankers’ crisis.

Our concerns go much wider than the presumption of responsibility, to the role of the Governor, the work of the FCA and the programme of selling off, for example, Royal Bank of Scotland shares at a loss to the taxpayer. The Chancellor’s whole approach says, “Let’s get back to business as usual.” However, it was the bankers’ business as usual that brought Britain to the brink; it was the bankers’ business as usual that caused the deficit. Returning to business as usual will make another financial crisis even more likely, with disastrous consequences for those we are meant to represent in this place, and that—to clear up any confusion on the part of the Minister—is why we are asking the Government in our reasoned amendment to think again today.

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Order. Before I call the Chairman of the Select Committee, may I remind Members that there are 12 Members wishing to speak in the debate, and that there is an important Backbench Business Committee debate to follow, so if everybody restricts themselves to 10 minutes, including interventions, everybody will get in, and we will have plenty of time for the Back-Bench debate. To set an example, I call the Chairman of the Treasury Committee, Andrew Tyrie.

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I fear that I may disappoint you slightly in that regard, Madam Deputy Speaker, but I will do my very best—unless you were giving an instruction from the Chair.

First, I want to find a point of agreement. I strongly agree that there is still widespread mistrust of the banks. A great deal of damage has been done, and it is agreed that there is a lot more work to do to sort it out, but there is a lot more work for the banks to do as well, to demonstrate that they are worthy of trust. The recent conduct scandals and the IT failures are just two examples of how much further we have to go.

Rather than talk in great detail about each clause of the Bill, I thought it might be helpful to take advantage of this Second Reading debate to say something more generally about the progress we have made on regulation. Last time a banking Bill was brought before Parliament—in 2012—it legislated for the ring fence. On behalf of the Treasury Committee, I asked the Government to think again, describing the Bill as “defective”, with parts of it being “virtually useless”. They listened to what the Committee said and changed the Bill, and adequate electrification of the ring fence is now part of the legislation.

This time, there is no need for a fundamental rethink. This Bill goes very much in the right direction. It brings the Bank of England more up to date as an institution, and in doing so it should greatly improve the scope for making it accountable to Parliament and the public. In 2011, the Committee published a report on these matters, and a high proportion of the proposals in this Bill originate or have roots in that report.

This is the sixth piece of legislation the House has been asked to look at in response to the financial crisis. As I said, before examining the specific measures, it is helpful to keep all this in perspective. Banking supervision has been rethought and fundamentally reconstructed three times in the past 30 years—that is a heck of a lot in a historical perspective. The Bank of England initially resisted most of these changes. First, it resisted the creation of the Board of Banking Supervision in the wake of Johnson Matthey. Then, in 1998, it complained that it had not been consulted about the creation of the new supervisory body, the Financial Services Authority. On that occasion, perhaps it was right. Gordon Brown’s creation of the FSA separated banking supervision from central banking and brought in a new “light touch” approach to supervision embodied in the principle, “We’ll make some clear rules, and if you comply with them we won’t interfere.” That all sounded very reasonable, but it left far too much scope for irresponsible buccaneers to pursue reckless business strategies, sometimes egged on by myopic shareholders.

At the same time, the Bank decided to define its role much more narrowly and concentrate on its new responsibility for monetary policy. In doing so, it was seduced by the benign economic conditions at the time, which it called “the great moderation”. Just as bad, it was reassured by the audited but nevertheless misleading and, in some cases, useless accounts of the big banks. The Treasury Committee is trying to do something about inadequate auditing right now. The Bank neglected its financial stability responsibilities right through the period up until 2007, and it failed to rise to the challenge when liquidity seized up in that year.

Perhaps worst of all, the statutory responsibilities of the FSA and the Bank created a large supervisory gap. Nobody paid enough attention to the banking system as a whole, even when it was known, for example, that the banks were becoming excessively reliant on wholesale deposits for funding. In principle, the gap was to be filled by the so-called tripartite, backed by a memorandum of understanding. In practice, the tripartite was considered an irrelevant backwater by all three parties involved, and we later learned that the heads of the three bodies never met prior to the crisis. Parliament was largely asleep on the job; we were all looking through a glass darkly. Some raised voices of concern, including Vince Cable, who is no longer a Member, and, on several occasions, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). For what it is worth, I argued vigorously that the tripartite was an accident waiting to happen and that the Government were neglecting systemic risk. Those were all partial warnings; there was nobody with a comprehensive picture.

The multiple failures of 2007-08 were not just the result of bad supervisory arrangements aggravated by a complacent Government and a sleepy Parliament. Nearly everybody who had responsibility in the field failed—and to some degree, in my view, they are still failing—including directors, managers, credit risk analysts and auditors. Shareholder discipline, in particular, was and is still lacking.

Limited liability brings a limited sense of responsibility, but it implies an unlimited liability for taxpayers, and the bail-outs have added to moral hazard. They have made it essential that the objectives and organisation of banking supervision be fundamentally rethought. Hence we have got to where we are now—twin peaks. Put crudely, supervision is back with the banks, and the FCA is responsible for conduct. Twin peaks, and particularly ring-fencing with electrification, is and remains an experiment. Experiments need particular care, and that means a particular responsibility for Parliament to keep an eye on it.

A number of issues already present themselves for attention. For example, it is becoming clear that prudential risk management is about not just adequate capital on the balance sheet, but proper conduct of business. The shocking treatment meted out to customers has triggered massive fines. UK banks have paid about £30 billion in fines in redress since 2009. In theory, those fines should be enough to wake up even the sleepiest shareholder, but so far they have not done so, or certainly not enough. The systemic implications of conduct risk also make it essential that the Bank of England and the FCA be better co-ordinated than they were in the days of the calamitous tripartite. Parliament needs to keep a close eye on that.

Most important of all, the Bank has huge new powers, some of which are enhanced by the Bill. How it runs itself can no longer be left to the Bank; it is a matter of considerable public importance. That is why the Treasury Committee has been pressing for years that the Bank should abandon the style of governance that Alistair Darling memorably characterised, whether fairly or not, as the

“court of The Sun King.”

It needs a modern board, one fit for the 21st century.

That is where the Bill comes in: it does a good deal of the statutory heavy lifting required to enable a modern board to be created. Its main effect is to rationalise the demarcation between the Bank court and the Bank executives, which previously contained some curious anomalies that were created after 2007-08 by on-the-hoof policy making by both Governments.

The Prudential Regulation Authority will no longer be a subsidiary of the Bank, but part of the Bank. The Financial Policy Committee will no longer be a sub-committee of court, and the oversight of the executive will be the responsibility of the court itself, rather than a sub-committee. Even though it was not called a sub-committee, it was, in fact, a sub-committee, and a weaker committee than the court.

The Bill also provides for the appointment of another deputy governor. I would say in passing that, over the 300 years that the Bank has been around, it has managed to rub along quite well with one deputy governor. In 1998, it acquired a second one, then the Financial Services Act 2012 gave it a third, and now we are told that it needs a fourth. I just wonder how many this old lady really needs.

It is greatly to the credit of the current Governor and deputy governors that they have grasped the importance of being required to explain themselves in greater depth before Parliament. The Bank’s initial resistance to the Treasury Committee’s 2011 proposals, now embodied in the Bill, have largely evaporated. It has grasped the fact that with accountability can come enhanced authority. Far from weakening the Bank’s effectiveness, scrutiny and explanation can enhance it.

The Bill also provides for the Comptroller and Auditor General to have, for the first time, a role in the audit of the Bank’s accounts. That sounds sensible at first blush, and it was an easy win for the Chancellor on Budget day, but I think it flatters to deceive and we certainly should not expect too much of it. The National Audit Office lacks the expertise to do that kind of work, and I think it is already trying to rectify that by hiring some people, so there is an extra public expenditure cost involved.

I am sure the NAO can learn the skills, but there is a bigger risk: it is essential that the Comptroller and Auditor General should not be induced, whether by accident or design, to bring pressure on the Bank in a way that could adversely affect the decision making of the three policy making committees, or their funding. That is not an idle concern. After 1997, I am told, with the changes that had been made and the transfer of supervision to the FSA, the Bank was encouraged by the Treasury to save money. Foolishly, the Bank cut back the amount that it spent on financial stability, and lost some of its institutional experience of financial crashes—high-quality people—as a result. An idea that might have looked like good value for money at the time turned out, in retrospect, to be a big mistake. I hope that the NAO treads carefully, strong value-for-money man though I am.

There is a risk that the over-mighty Governor problem will be reinforced by the removal of the PRA’s subsidiary status. The independence of the PRA—or the Prudential Regulation Committee, as it will now be—is essential. A single point of systemic risk, in the Governor, has been created and will remain. Parliament will need to keep alert to protect the PRA’s independence.

On that score, I believe that more transparency could help. I have a proposal off my own bat, not on behalf of the Committee; I have not yet discussed it with Committee colleagues. The PRA could consider making more of its rulings available, not only to the managers of companies affected but to shareholders—they are the people who are supposed to be responsible for these companies’ affairs. That would mean making that information public. At the same time, it would reveal, and provide an opportunity to challenge, the PRA’s reasons for its rulings. I have said that that should be considered; there is a lot more to think through before it can be done.

In the meantime, the PRA appears to be accepting a related and more modest proposal from the Treasury Committee, which relates to banking competition. It is well known that challenger banks, which are new in the market, can be impeded by onerous capital requirements. A few weeks ago, I wrote to the chief executive of the PRA to suggest that the average of capital requirements of established banks be published, together with the average of capital requirements of challengers, so that a comparison could be made between the two. I am pleased to say that the PRA is looking into that.

At the heart of the Bill is the strengthening of the court. A strong board is needed to ensure that the policy committees are doing what they should be doing, and it will need to be forthcoming when the Treasury Committee asks for technical and other support for our scrutiny work. When we need information, reports and, occasionally, investigations, we will expect the court to be co-operative.

Before I sum up, I will raise one relatively minor issue that has not been touched on. The court, despite our request, has not been renamed the board of the Bank of England. That is a mistake. What is in a name? I am a strong supporter of most traditions, except when they get in the way of good outcomes, and this one is on the cusp, at best. Perhaps the Chancellor, who likes 18th-century history, has been too swept up in 18th-century court politics and cannot bear to lose the name, but I think that it is time it went.

With six relatively new pieces of legislation to implement, some time should pass to allow their effectiveness to be established. A lot of legwork will be required from supervisors and regulators to implement them all. A couple of quick examples will suffice. First, regulators have not reached the point where they can allow a bank to fail, and they have told us as much in evidence. What does that mean? It means that the taxpayer could still be at risk. Secondly, several banks still seem too big to manage. That poses a threat to financial stability and increases the risk of misconduct. The proposals of the banking commission were designed to address that problem directly. Detailed implementation towards certification, in particular, has been pretty sluggish so far. I am concerned that the Minister is not pressing more vigorously to make sure that certification and the senior managers regime will be fully implemented and to time.

I would like to end with a broad observation. With all this legislation, we are making some huge demands on the Bank and the FCA, and we may be close to the point of regulatory and supervisory overload. By that, I mean that the Government and Parliament could be raising expectations of what they can achieve to a point where they will never be perceived to have succeeded. We need to ask just how much national regulation can achieve in an open financial world. The truth is: perhaps not that much, and certainly less than many people think. We probably cannot stop the next financial crisis. The best we can hope for is to delay it, to reduce its impact by developing somewhat stronger institutions, including financial institutions, and to give us a better prospect that regulators are a bit more alert and prepared than they were in 2007-08.

In the long run, competition must take more of the regulatory strain. In markets for most products and services, customers can vote with their feet and barriers to market entry are tolerably low. Businesses with weak balance sheets or poor customer standards go to the wall. Neither of those is yet the case in banking. We are a long way from the point where competition can be a full substitute even for conduct regulation in banks, and the contagion risk inherent in the banking system would make supervisory withdrawal and reliance on market disciplines even more hazardous. Until competition is much stronger and market discipline more of a restraint, there will be no substitute for a strong and sometimes interventionist Bank of England and an effective conduct regulator.

Overall, although with some weaknesses, the Bill takes a step in the right direction—the direction of strengthening that framework—which is why I will vote for it on Second Reading.

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Order. Let us see whether the SNP spokesperson can give us a better definition of what constitutes 10 minutes. I call George Kerevan.

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I will try to do so, Madam Deputy Speaker.

It is always a great pleasure to follow the right hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee. Ninety-nine times out of 100, I would bow to his wise words. Indeed, his repository of knowledge often leads me to think that he should be one of the regulators, rather than sitting on the Back Benches in Parliament. However, in this instance, it pains me that I cannot follow him or the hon. Member for Wyre Forest (Mark Garnier).

I will try to get the right hon. Member for Chichester to understand why those of us on the Opposition Benches cannot accept the Bill as it stands. Fundamentally, it is about the shift away from the reverse burden of proof. Given the backlog of distrust on the banking system and given that the reverse burden of proof was put into legislation and is just about to come into operation in March, to shift away from it now will only make the public less likely to accept what is going on and to make them fear that the banks are being let off the hook yet again. I would say to him and the Minister that it would have been much better to let the legislation run for a few years to see how it worked in practice.

The right hon. Member for Chichester gave us a very good reason for saying that, after so much legislation, it was perhaps time to pause while we made sure that it works in practice. However, his argument can be turned against him, because we are changing legislation at the last moment, after we passed it two years ago, but not implemented it. We should do that: we should see how the reverse burden of proof works. That is why I support the hon. Member for Leeds East (Richard Burgon) in opposing the Bill as it stands.

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Does the hon. Gentleman accept that one piece of evidence about why the reverse burden of proof would have been an effective brake on the excesses of the banks is the fact that bankers themselves are not keen on it? They knew that it would be an effective tool and were fearful of it.

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I am trying to avoid pointing the finger and drawing inferences. What I will do, in agreeing with the hon. Gentleman, is to quote the right hon. Member for Chichester. I hope he will forgive me for doing so. When the LIBOR scandal emerged in 2014, after the Banking Commission, he said:

“As time passes, the pressure for reform will weaken”—

it is, is it not?—

“The old system failed disastrously…Maintaining or resuscitating parts of the failed system, whether at the behest of bank lobbying or for the convenience of regulators, must not be permitted to happen.”

I think we are getting both: we are getting bank lobbying, but we are also getting the regulators wanting a quiet time.

The hon. Member for Wyre Forest made a reasonable point. He said that by extending the senior managers and certification regime, the Bill will place in law a very detailed duty of responsibility on senior bankers to take all reasonable steps to prevent wrongdoing. However, at the same time, it will place the onus on the regulators to prove that that responsibility was discharged. Suddenly, it gives the regulators a job—

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And no resource.

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Absolutely.

As the right hon. Member for Chichester pointed out, time after time when there have been regulatory failures, the regulators have been implicated. I therefore do not want to return to a situation in which it is up to the regulators to prove that something has gone wrong in the new regulatory regime, when they are partly responsible for it. I want the onus to fall on the bankers themselves.

It is worth looking more forensically at the reasons against the presumption of the reverse burden of proof. Andrew Bailey has argued that there is a worry that when the next crisis comes along, senior bankers will rush off to the European Court and claim that their rights under the European convention on human rights are being taken away because of the reverse burden of proof. That is rubbish.

The Parliamentary Commission was perhaps a little unwise to use the phrase “the reverse burden of proof”, even though we all use it and I use it. We are not talking about criminal law and making people guilty until proven innocent. We are talking about infractions in banking if, say, a banking crisis takes place. The legislation that the Government are trying to change would make it an infraction to be responsible for an activity in which wrongdoing took place, rather than for committing the wrongdoing itself. To give a flippant example, if it is a criminal offence to be in charge of a bawdy house, the prosecution needs to prove only that somebody was in charge of that house of ill repute, not that they were selling their own body. It would be no defence that they thought the bawdy house was a nunnery.

The reverse burden of proof regime makes managers responsible for the activity in their banks. When a disaster takes place, it is up to them to prove that they failed to stop it happening, rather than, as has always been the case, it being up to the regulators to find the solution and explain what happened, which means that everyone hides behind collective responsibility.

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The hon. Gentleman is making an extraordinarily intelligent speech, but he has just hit on the key point. It is possible for bankers to provide a tick-box operation, which their lawyers have advised them on, to prove that they have undertaken every possible measure to prevent such action. It is therefore very easy for them to get around the reverse burden of proof legislation. The point behind reversing that legislation, which was given by Andrew Bailey and by the Governor of the Bank of England and some of the Bank’s lawyers, is that there cannot be a tick-box operation to show that they have complied with the rules because they involve a much more esoteric way of running the bank. It is therefore much more difficult for bankers to escape the rules if something does go wrong.

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I respect the logic of the hon. Gentleman’s argument. Sadly, we will never get a chance to see the legislation that he voted for in the last Parliament put into practice and to watch it fail. I look forward to his contribution—he will have time to make it if I hurry up—and to finding out why he has changed his mind.

I am interested in Mr Bailey’s tick-box argument, which is that if we reverse the burden of proof, senior bank officials will hold endless seminars with those on the trading floor, explaining to them why doing the sort of things that happened in the LIBOR scandal is wrong. When the inevitable crisis happens, they will come with list of who they spoke to—they told the traders that this should not happen, but it did.

It is not enough to have lots of meetings; we must change the culture of the banks. It is also important to remember—I hope the Minister remembers this—the title of the Parliamentary Commission’s report on banking standards: “Changing banking for good”. There are a lot of good things in the Bill, but it does not change banking for good. It is half a loaf, and I am afraid that another half loaf will lead us more quickly to yet another banking crisis for which nobody is responsible. Ultimately, we need responsibility.

In conclusion, we are being offered a duty of responsibility versus a presumption of responsibility. Once upon a time, there was a convention: when a ship sank, the captain went down with the ship, whether it was his fault or not. It was presumed that it was his fault no matter what happened, because he was in charge of the ship. What happens these days is that the ship goes down, the captain gets into the first lifeboat, and he turns up at the inquiry to say—to use a Scottish term—“It wisnae me; I did my best”. Once upon a time Ministers also resigned when something went wrong. We should return to a situation where if there is a banking crisis the captain goes down with the ship, and we assume that he will do that, whether it was his fault or not, because he or she was in charge and leading the bank. If we do not change that culture, we will go on having banking crises ad nauseam.

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I will be neither as discursive nor as time-consuming as my right hon. Friend the Member for Chichester (Mr Tyrie), but he made some important points. Even before 2008, banking was one of the most highly regulated industries. Although I agree that ideally we need to move towards a much more competitive world in the banking sphere, it is also worth reflecting that one reason why we have not had a great upsurge of challenger banks is because—at least in the retail banking sector—the banking world is insufficiently profitable to make it worth while for such competitors to come through. One reason for that is because there is ever more regulation and compliance in the retail world. It is therefore perhaps predictable that the furore surrounding this Bill has been concentrated on the role in the institutional architecture of the Financial Conduct Authority, and the changes that have already been referred to regarding the Government’s original proposals on the senior managers’ regime.

As the MP for the City of London, I have had my ear to the ground over 15 years as Governments—Labour, the coalition, and now Conservative—have grappled with devising a framework of regulation and compliance, in particular one that was fit for purpose in the aftermath of the financial crisis of 2008. We should all accept that that is not easy work and, in making such changes, it is important not to undermine our global competitive advantage in financial services—again, that was alluded to by my right hon. Friend the Member for Chichester, who pointed out that the most effective regulatory framework will probably have an international nature, rather than one specific to the UK.

We should all be much poorer if regulation is designed simply to punish banks and bankers. By the same token, sensible voices from the City of London—there are more than might be appreciated by certain elements on the Opposition Benches—fully recognise that the British public need to see the risk of future bail-outs kept to a minimum. For all the talk of maintaining free markets and global capital flows, the sheer importance of the financial system to the economy as a whole means that there will continue to be some form of implicit guarantee from taxpayers in the event of a future financial crash. The price to be exacted by the public for that guarantee is rigorous regulation and watchful compliance, as well as the ongoing banking levy that has been introduced and is, I think, here to stay.

As the Minister will recall, I must confess that I have consistently argued against the reversal of the burden of proof, which had been proposed as a key element of the senior managers regime. I am pleased that we have not implemented what was going to come into place on 7 March. I should therefore rightly pay fulsome tribute to the Treasury for rowing back from this draconian and potentially unenforceable measure. Likewise, I am pleased that the Government have fiercely resisted attempts in the other place to resist that.

There was already plentiful evidence that senior executives of global banks were thinking twice about relocating, or indeed continuing to be based, here in the United Kingdom. The notion of a criminal liability being levied on management for actions committed by junior bank staff who were perhaps working even in another jurisdiction, and such liability being regarded by the courts essentially as strict, risked leading to an exodus of senior management from London. Indeed, it has been my understanding that the senior managers regime, as originally proposed, was the single biggest consideration in the ongoing deliberations by HSBC and Barclays that they might headquarter outside the UK—more important than concerns over the bank levy, bonus caps, remuneration caps and the whole ring-fencing agenda.

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Is the right hon. Gentleman essentially saying that, from his knowledge, the Treasury was blackmailed into changing the proposed legislation?

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I am not suggesting that for one minute, but we need to make legislation that is effective and enforceable. I think there were human rights implications about having a reverse burden of proof. If we are going to try to encourage a banking and professional services industry that is worth its salt here in the UK, we need to ensure we do not put it under burdensome regulations that apply here in the UK but not across the globe.

I agree very much with the Chancellor’s decision not to renew the contract of the first chief executive officer of the Financial Conduct Authority, Martin Wheatley. The concern went beyond the well-publicised leak over pensions policy, which saw £3 billion wiped off insurance company shares. In truth, Mr Wheatley had lost the confidence and, more importantly, the respect of many leading figures in the City. I suspect some Opposition Members would regard that as a badge of honour, but frankly for an industry regulator to let it be known that he regarded those working in the financial services industry as inherently dishonest is not the way to win hearts and minds. To be quoted as saying he would

“shoot first and ask questions later”

in championing customers against the banking fraternity may have played to the gallery, but it was not sensible regulation.

I am unconvinced that that superficially robust approach ever truly benefited customers. I commend my hon. Friend the Member for Aberconwy (Guto Bebb) for securing a Backbench Business debate later today on the failure, thus far, of the FCA to secure fair redress for victims of financial mis-selling of interest rate hedging products. I have constituents—I am sure all Members do—who are still waiting for redress from the mis-selling of such products in 2007. They now find themselves out of time, under the six-year rule, to initiate legal proceedings because the Financial Services Authority advised them to rely instead on its own processes and the FCA subsequently failed to devise a satisfactory structure for compensation.

I was pleased to see last week that the respected head of the Prudential Regulation Authority, Andrew Bailey, was appointed as Mr Wheatley’s successor. I know from my own dealings with him that he is no soft touch. I trust that his experience and his reputation for fairness, not only at the PRA but at the Bank of England, will restore credibility to this vital part of the regulatory infrastructure. The breadth of his experience should hopefully ensure that he is able to take a comprehensive view of the financial system that avoids some of the mistakes of the discredited tripartite system of oversight. Going forward, I believe City regulators—and central bank governors, for that matter—would perhaps do well to give careful consideration to the famous advice one is given on joining the Whips Office: why say one word when none will do? I fully endorse the clauses of the Bill that recalibrate the duties of the FCA. I hope the Government are now able to convince an admittedly sceptical public and a very wary financial services community that in its new iteration the FCA will achieve more—much more—of what was intended when it was set up.

It was fair of the hon. Member for Leeds East (Richard Burgon) to point out that the other place had made changes to regulation, but I am not sure it went far enough. I still think there is the risk of a virtually untrammelled power being given to the Governor to appoint or remove deputy governors. Granted, such appointments and dismissals would necessitate a statutory instrument procedure in the House, but such a process would not pass muster as good corporate governance of a FTSE 250 company, so why, in view of the Bank’s extensive powers, should it be tolerated here? This is not simply an academic concern. We are potentially enabling a Governor to pack his board with worthies happy to do his bidding and thereby outweigh the influence of the Bank’s independent directors.

As Mark Carney begins the second half of his term, we have seen in the past week the swooning of the financial press over Mario Draghi’s decisive actions as President of the European Central Bank. This cult of the central banker is nothing new—it goes back to the 1920s and the greater control central banks had in the aftermath of world war one—but I have long been sceptical about the practicality, or even the desirability, of fully fledged Bank of England independence. In the final analysis, strategic economic decision making must lie with elected politicians operating within financially responsible Ministries. The composition of the Bank should neither be nor, more importantly, appear to be the plaything of the Governor.

In wholeheartedly supporting the Bill, I trust that the Minister will give some thought to those genuine governance concerns as it makes its way through the House.

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I shall stick to your request that we keep to 10 minutes, Madam Deputy Speaker, not least because I hope to catch your eye in the second debate. I will therefore not speak about the FCA now, although it would be relevant.

I reiterate what can now be called the East Lothian question: if the ship goes down, should the captain not go down with it? I thank the constituent of mine who last night sent me the link to the footage of the session of the Treasury Committee in 2009 at which a Mr Andy Hornby and Mr Fred Goodwin gave evidence. Nothing could encapsulate the East Lothian question more profoundly than that hearing, their performance and their escape from real responsibility for their failures in office. The reverse burden of proof change and the dropping of the FCA’s culture review are two sides of the same coin.

The Chancellor’s actions are consistent with what he has done and said in the past. The House should remember that, speaking about regulation in 2007, one year before the crisis, he cited Ireland as an example of why there should be less regulation and greater deregulation of precisely the authorities we are talking about now. We saw in Ireland what would have happened here had we followed his advice, but we are a much bigger economy, so it would have been far worse for our people. History is not repeating itself; ideology is repeating itself.

I note some interesting clauses in the Bill. It is hard to disagree with the reduction in the number of MPC meetings from 12 to eight. There have been more than 80 since the last decision to change anything. One can begin to question, therefore, not whether there is group-think, but whether that body needs to put quite as much effort, month after month, year after year, into making no decision at all, and whether we need to put quite as much effort into scrutinising, month in, month out, its inability or unwillingness to make a decision—or perhaps even its correctness in making no decision. It shows how we are missing the point.

Some bigger things are not in the Bill. Transparency is missing at every level in the Bill. When it comes to it, there is no transparency. Minor improvements are proposed, but the workings of the Bank of England and the financial sector and its regulation remain in great secrecy. That is a fundamental problem.

In the past, I have proposed that there should be differential risk, particularly in retail banking. If I wish to speculate my money away with an Icelandic bank, the bookies or anybody else, I should be allowed and not be stopped from doing so, but I should not expect the taxpayer to pick up the tab if things go wrong. We have the principle with premium bonds, but we have not expanded that into the mutual sector, for example. There should undoubtedly be a lower interest rate. There should be absolute guarantees. We have failed to look at differentiating the risk for the consumer. That will come back to haunt us.

Lip service is paid to competition, with the Chancellor and the Treasury wanting again to dominate the FCA. Under clause 18, they want to be able to tell the FCA what it should be doing. What is missing from the bigger picture is competition. There are competition objectives, but it is the same old banks. In fact, it is far worse, as it is not just the same old banks—the building society sector has largely disappeared from the retail sector compared with 10, 20 or 30 years ago. I am certain that, if the old-style Halifax building society were resurrected, many of my constituents would wish to put their money there, as I did all my life, and as my mother, all my family and many people in the north did.

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Is the hon. Gentleman able to answer my earlier point? If we have ever-more rigorous regulation and ever-more onerous compliance, with even the new challenger banks having to pay a large bank levy immediately, will that not provide a massive disincentive to the sort of competition that many want to see in the banking system? I am not saying it is an easy issue to resolve. We all want competition, but how will that happen in the banking sector if it is so heavily regulated—now and in the future?

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I have said many times in the past and repeat it briefly now that there should be a differential in the risk for retail banking.

We know what is going on here. The Chancellor has a problem—his accounts do not add up. I confidently predict that he will not get the surpluses he wants, as we will find out with the OBR report at the time of the Budget. He is therefore desperate to sell off the shares in Lloyds and RBS. That is what is going on. That is why all this is happening. That is why he wants a new settlement with the banks. He wants to maximise the price in order to create the surplus that he has created in his head and in his Budget for all of us. That is what is going on politically.

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rose

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I shall end now; there is plenty of opportunity to join the debate.

We have heard about Google in the past week, but we have not heard enough about the bank take. We keep being told that the banks are the engine of the British economy. Well, they are certainly not the engine of tax receipts because most of them are not paying tax. We see that with the overseas banks. We know that seven out of the biggest 10 investment and commercial banks are paying zero tax. We see Lloyds paying zero UK corporation tax. We see Citigroup paying zero UK corporation tax and Credit Suisse paying zero. We see HSBC paying £160 million out of its £11.3 billion worldwide profits. That is all the tax they are paying. Perhaps the example that sums up the problem the most is Goldman Sachs, which generated £2 billion in UK profits last year, but what tax has it paid on that? It is less than it pays to the individual partners—so less to the state and the Exchequer for the defence of the realm, the health service, broadband, the infrastructure, education and the welfare state. It paid less than it paid to one individual—a measly £27 million.

That is not good enough. That is what this Bill is missing. I look forward to contributing further.

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I, too, will be brief, as I wish to catch the eye of the occupant of the Chair during the next debate.

I am pleased to be able to support a Bill that, in my view, takes our regulatory system in the right direction. However, the Bill does not deal only with the Bank of England. It also contains clauses relating to related personal finance matters, and I want to focus on those.

Last week, I met colleagues in the cross-party debt management working group to discuss the growing problem of consumer debt, which currently stands at 142% of overall household income. I believe that the Bill provides an opportunity to effect what would be a small legislative tweak to bring about an urgently needed change in the sector. The Minister gave me some hope that she was thinking along the same lines when, towards the end of her speech, she spoke of taking more action on behalf of consumers, but we shall have to see what happens in Committee.

Debt management is becoming an increasingly inefficient industry, and consumers are getting a bad deal more often. Some debt management schemes charge the debtor, while others are free to the debtor and charge the creditors. The quality of service offered by debt advisers varies greatly, as do the costs. As we know, most people, when they reach the point of desperation and realise that they have a problem and need help, do not sit down and research the sector in depth for 24 hours, but opt for the first helper who crosses their path. If it turns out to be a provider whom they must pay, that is often because they do not know that free help is available.

Free debt management plans, such as those offered by organisations such as PayPlan and Christians Against Poverty, may not be the solution for everyone, but their availability to those who can and want to repay their debts is important, and is becoming increasingly threatened. “Fairshare operators” such as those whom I have just mentioned have arrangements with creditors providing voluntary contributions that allow services to be provided for consumers without charge. Fairshare revenue, which is paid as a percentage of the debt repayments, has reduced as a consequence of a fall in consumers’ average disposable income, which has restricted the capacity to take on more economically viable cases. Those operators will ultimately have to reduce the number of new cases that they take on as funding become increasingly unsustainable.

Unless we correct the position, consumers who get themselves into difficulty will inevitably need to increase their use of providers who charge high fees for the same service, which may amount to up to half the debt repayment. If the plan provides for someone to pay £70 a month, a further £35 may have to be paid to the debt management plan company rather than reducing the debt. That significantly increases both the time and the cost involved in solving the problem. One solution would be the introduction of a new system—as the Minister knows, a small amendment has been tabled to this effect, which could perhaps be considered in Committee —whereby all debt advice operators must offer a sustainable debt management plan that is free to the consumer and funded by creditors at a lower cost than is the case at present.

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It is vital that we tackle the debt advice and lending industries. We have a fantastic “buddy” in Sheffield called Sheffield Money, which is trying to do just that. However, the Office for Budget Responsibility has estimated that the measures in last year’s Budget will increase unsecured individual lending by £40 billion by 2020. Does the hon. Gentleman share my concern about that?

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Regardless of the amount by which personal lending increases, what is important is the availability of help for those who get themselves into difficulty, and we may see an increase in the number of people in difficulty if interest rates rise towards the end of the year. I know that that would cause pain to a great many of our constituents, so it is important to get the system right now.

With a supportive FCA framework already in place, a fairly minor amendment to the Bill could effectively set a fee structure that would activate the provision of free debt management plans by authorised firms. I hope that my Front-Bench colleagues agree that action is needed soon, and that the Bill represents a timely vehicle for the necessary change.

I believe this to be a truly cross-party issue, and that the Bill needs to be amended to give people in debt more security and access to free, high-quality plans that help them to manage their finances. If interest rates do go up any time soon, the debt management sector may be called on to give even more support than it provides now, and this is therefore a good time to strengthen the system.

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Diolch, Madam Deputy Speaker.

I want to concentrate on four main themes: the issuing of Welsh-specific banknotes, the accountability of the central bank to Wales and her people, the name of the central bank, and the remit of the bank when it comes to setting interest rates.

The Bill aims to provide some flexibility in relation to who can issue sterling banknotes in Scotland and Northern Ireland. Currency issued by banks in Northern Ireland and Scotland is legal, and can be used throughout the United Kingdom. Among the many historic anomalies between Welsh nationhood and the nationhoods of our neighbours is the fact that Wales remains the only nation that is prohibited from producing its own distinctive banknotes. The Royal Mint does produce Welsh-specific coins, so my proposals raise no major issue of principle.

Like other parts of the UK, Wales was once awash with small banks covering relatively small geographical areas which were allowed to issue their own banknotes. The Bank Charter Act 1844 brought an end to Welsh banknotes, and, indeed, to provincial banknotes in England, but that did not apply to Ireland or Scotland. Four banks in Northern Ireland and three in Scotland have the authority to issue their own banknotes provided that they are backed by Bank of England notes.

Plaid Cymru is proposing today that Lloyds Banking Group, which holds the rights to the Bank of Wales brand and which is in part publicly owned—a share is, of course, owned by Welsh taxpayers—should be given the right to issue Welsh banknotes in the same way as is permitted for the three clearing banks in Scotland and the four in Northern Ireland. I believe that such an outcome would give a welcome boost to the Welsh national character, and the recognition of Wales as an equal nation and an economic entity.

In Northern Ireland, Bank of Ireland, Danske Bank—formerly known as Northern Bank—First Trust Bank and Ulster Bank notes are used to celebrate the recognition of individuals such as J.B. Dunlop, Harry Ferguson, Sir S.C Davidson and James Martin, while also celebrating architectural splendour such as that of Belfast City Hall. In Scotland, the Bank of Scotland, Clydesdale Bank and Royal Bank of Scotland are entitled to issue banknotes. They pay tribute to the fantastic bridges of their country, and recognise the contribution of people like Sir Walter Scott and Robbie Burns.

The question that naturally rises, therefore, is this: why can we not similarly issue banknotes in Wales to recognise our historic landmarks such as Castell Carreg Cennen, in my constituency, Pont Menai and Yr Wyddfa, and our historic greats such as Owain Glyndwr, who was nominated the seventh most important person of the last millennium by The Times, David Lloyd George, the originator of the welfare state, Aneurin Bevan, the architect of the NHS, and Gwynfor Evans, the first Plaid Member of Parliament and the father of modern Wales?

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Does the hon. Gentleman accept that the downside of having our own banknotes in Northern Ireland is that anyone who tries to pass them on in England is looked on as some kind of conman?

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I am always grateful for interventions from my great friend, who speaks with a huge knowledge of financial matters. Those notes are legal tender and a legal currency, and I think that we need to move forward. The issue was raised with me on television today. The fact is that Scottish and Northern Ireland banknotes can be legally used anywhere in the United Kingdom.

Before I was distracted, I was making the case for some people who might be pictured on Welsh banknotes. A notable case could also be made for what is arguably the most famous Welsh painting of all: “Salem”, painted by Sydney Curnow Vosper in 1908. His painting of Sian Owen aged 71 at Capel Salem, a Baptist Chapel at Pentre Gwynfryn in the north of my country, is a national icon, much as Constable’s “The Hay Wain” is in England.

Notes that are currently used in Wales recognise people including Elizabeth Fry, Charles Darwin, Adam Smith, Matthew Boulton and James Watt. Previous notes have portrayed Charles Dickens, Sir Edward Elgar, Michael Faraday, Sir John Houblon, Sir Isaac Newton, Florence Nightingale, William Shakespeare, George Stephenson, the first Duke of Wellington, and Sir Christopher Wren: all great people, but none, to my knowledge, with any direct link to my country. Many pounds from many Welsh people have contributed to the UK over many years, from the industrial revolution through to the bank bail-outs, and I deem it entirely appropriate that Wales’s contribution and standing within the sterling zone should be recognised. That would put right what appears to be a clear injustice. I pay tribute to the work of my colleague Steffan Lewis on this issue, and I look forward to seeing him take his place in the National Assembly after the elections in May.

On the issue of accountability to my country and to the other devolved Governments, I want to put forward proposals in the spirit of the so-called partnership of equals, as it was labelled by the Prime Minister and the Unionist campaign during the recent Scottish independence referendum. The British state is rapidly changing as power and responsibility flow from Westminster to the devolved countries, although the pace is perhaps not as quick as someone like me would want. It is undeniable that the UK is now a vastly different place from the one it was 20 years ago. Central to recent developments has been the increasing fiscal devolution to Scotland, Northern Ireland and even Wales. The Scotland Act 2012 fully devolves income tax, and Northern Ireland has recently been awarded full powers over corporation tax. Wales, as always, is in the slow lane, but even we will soon have an income tax sharing arrangement, if the draft Wales Bill reaches the statute book.

Measures relating to major fiscal levers are flowing from the Treasury in London to the devolved countries. This increases the political accountability of the devolved Governments to their respective electorates and, critically, incentivises those Governments to boost economic performance in order to invest in public services. The co-ordination of monetary and fiscal policy is vital in any economic policy. I understand that the central bank is politically independent, but there is obvious co-ordination between the Treasury and the central bank. Similar protocols and links need to be developed with the Welsh, Scottish and Northern Irish Exchequers. The national Parliaments should nominate a member to serve on the Monetary Policy Committee to ensure that those involved in the interest rate setting process have an understanding of economic conditions and events in Wales, Scotland and Northern Ireland. All MPC members are currently either bank staff or nominated by the Treasury. My proposal should also apply to the Financial Policy Committee and the soon-to-be-implemented Prudential Regulation Committee, which will be created by the Bill.

Political scrutiny of monetary policy remains the preserve of Westminster despite increasing fiscal decision making at devolved levels. Although we are not privy to the meetings between Treasury Ministers and the Governor and his senior team, we can safely assume that those meetings are frequent. On top of that, in regard to parliamentary scrutiny, the Governor and his team meet the Treasury Select Committee here at Westminster at least five times a year. Considering the fiscal powers that have been devolved or are in the process of being devolved, I would hope that the central bank agrees that it is in its interests to strengthen relations with the devolved Governments and Parliaments. I am not aware of any formal structures for meetings between the Governor and Ministers of the devolved Governments. In the interest of mutual respect, those structures need to be formalised.

In addition, I strongly believe that the Governor should attend a meeting of the relevant economic committee of the devolved Parliaments at least once a year. Evidence sessions of that sort would be vital in helping political parties in the devolved Administrations to formulate their own fiscal policy and would recognise the reality that fiscal and economic policy is no longer the sole preserve of Westminster when it comes to Wales, Scotland and Northern Ireland.

A further issue is the name of the central bank, currently named the Bank of England. It is a contentious issue for me as a proud Welshman that the central bank that decides monetary policy in my country is named after another country. The Bank of England was created in 1694 before the present British state was constructed. Wales was annexed in 1536, Scotland in 1707 and Ireland in 1801. The central bank was therefore created to serve a political entity that consisted only of Wales and England. If the British state is a partnership of equals, all its institutions must reflect that reality, including perhaps the most important institution underpinning its financial system: the central bank. If it would be helpful to the Minister, I have a suggestion, which is to rename the Bank of England the “Sterling Central Bank”. This would reflect the fiscal and political reality we live in, and it would show that those in this place genuinely believe in the respect agenda and a partnership of equals.

I am very interested in the emerging debate on changing the remit of the MPC in regard to setting interest rates. The MPC is specifically charged with keeping an inflation target of 2%. Other central banks such as the US Federal Reserve have a dual mandate which goes beyond price stability. In 1977, the US Congress amended the 1913 Federal Reserve Act and mandated the central bank to achieve long-term moderate interest rates and, critically, maximum employment, in addition to reaching inflation targets. As the Bill progresses, I hope to return to these themes in more detail. I would also be more than happy to support the amendments tabled by Labour and the SNP when it comes to the vote.

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I am pleased to speak in support of this important Bill, which delivers a new settlement for the financial services sector—a vital sector of the UK economy—by strengthening the Bank of England and the regulatory regime governing individuals working in the sector. In particular, the Bill deserves support because it puts the Bank of England at the centre of a new regulatory system that will give it new powers, more responsibilities and better procedures. It will also strengthen the Bank’s governance, transparency and accountability and increase the accountability of staff working in our important financial services sector.

When the idea of a Bank of England first emerged after William and Mary came to the throne in 1688, the public finances were in disarray, the system of money and credit was weak and our financial markets were on the verge of collapse. Things were not much better 320 years later, however, under a Labour Government, who oversaw a banking system that had become too concentrated, took too many risks, and acted against taxpayers’ interests. It was under the discredited tripartite system that people such as Fred Goodwin were allowed to receive huge bonuses while running their banks into the ground.

Today our financial services sector is much stronger, and it requires the up-to-date effective governance and regulation that the Bill proposes. According to TheCityUK trade body, the financial services sector employs 7% of the UK workforce—two-thirds of whom are outside London—and accounts for 12% of our GDP. It is absolutely right that this Bill should support a growing and moral financial services sector.

I support clause 1, which will make the deputy governor for markets and banking a member of the Bank of England’s court. Following the expansion of the Bank’s responsibilities through the Financial Services Act 2012, a fourth deputy governor, with responsibility for markets and banking, was appointed and given responsibility for reshaping the Bank’s balance sheet. This important role, currently filled by Dame Minouche Shafik, does not have statutory membership of the court. Clause 1 will rectify that situation and ensure equal status for the fourth deputy governor. It will also give the Government the necessary flexibility to update the membership of the court, the Financial Policy Committee, the MPC and the new Prudential Regulation Committee. This will ensure flexibility to meet future need, and that the court is fit for purpose.

When the Bank opened for business in 1694 in temporary accommodation in the Mercers Hall in Cheapside, it had a staff of 17 clerks and two gatekeepers. Today its personnel is much wider, and none are more important than the members of the court. That is why I welcome the reforms in clause 1. It will update the powers of the court and increase its flexibility to ensure that new expertise is added when necessary. These are practical powers and they deserve the support of the entire House. I also welcome the reforms to the Oversight Committee, the Financial Policy Committee and the Monetary Policy Committee that my right hon. Friend the Member for Chichester (Mr Tyrie), who is no longer in his place, articulately outlined.

A key element of the Bill is the transformation of the Prudential Regulatory Authority into the Prudential Regulation Committee. As Members will know, the PRA is responsible for the supervision of around 1,700 banks, building societies, credit unions and major investment firms. The transition will result in the PRA, a subsidiary of the Bank of England, becoming the PRC, a committee of the Bank. This will ensure that it is fully integrated into the Bank’s work while retaining its operational independence. This measure deserves the support of all hon. Members—[Interruption.]including those on the Opposition Front Bench. This will continue the process of building a unified institution, which will allow the new authority to focus more closely on its policy work, rather than thinking about back-office issues such as IT procurement.

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Is there anything in the Bill that the hon. Gentleman does not like?

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I am sure that the hon. Gentleman will agree that the proposals support the Governor’s “one mission, one bank” strategy, which entails supervision being conducted in a more effective and efficient way, as befits an institution of our modern global economy. The new arrangements come with important safeguards. For example, the statutory objectives of the PRA will remain undiminished; the name and the brand will remain unchanged; and its reputation for tough regulation will remain undimmed.

On financial services, the Minister mentioned earlier that one of the least attractive elements of Labour’s financial crisis was that no one at the top of the main financial services institutions faced formal punishment from the regulators or the courts. There appeared to be no link between the actions of those at the top and the fate of the institutions that they led. One of the FCA’s reports stated that

“individual accountability was often unclear or confused”.

The Bill strengthens and clarifies the individual accountability of those working in our systemically important financial services sector. I also believe that these reforms will embed a new culture within the sector, rather than simply reshaping the legal and regulatory framework.

Before I entered this House, I had the privilege of working with TheCityUK and a number of others working in the financial services sector on writing a report entitled the “Next Generation Vision for Financial Services”. It asked that our financial services sector be a part of society, not apart from society. I am pleased that the reforms set out in this Bill, in the clauses that I mentioned, will help our sector to get closer to the vision we articulated.

I particularly welcome the extension of the senior managers certification regime to all regulated firms, not just to deposit takers. The expansion of the regime to all financial services firms and all staff will enhance the culture of personal responsibility for senior managers, while, we hope, increasing the accountability of other staff who work in our financial services sector. It will also ensure that as the sector expands the regulation and the laws governing its operation increase to match the scope and size of the industry. Many firms beyond the banking sector, from investment firms and insurers to those involved in the so-called “shadow banking” sector, can pose a threat to financial stability, and it is therefore right to include them in this new regime.

In conclusion, the growth of the financial services sector, in both size and complexity, the globalisation of our economy and Labour’s financial crisis mean that the governance, functions and powers of the Bank of England need to be updated. So, too, does the regime that governs the individuals who work within our financial services sector. This Bill achieves both goals, ensuring a Bank of England that is fit for purpose: an effective central bank in a growing 21st century economy sitting at the heart of the world’s most successful financial services industry. The Bill deserves the support of the whole House.

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I am pleased to be able to contribute to this debate and to follow the hon. Member for Havant (Mr Mak), who gave a Panglossian view of the City and the Bill. When I first read this Bill, I thought it was disappointing, but the more carefully I looked, the worse I thought it became. Of course it contains some good steps, but one thing we see here is the Tory Government circling their wagons to protect their friends and funders in the City. The Bill gives us no hope of introducing the separation between retail and investment banking that we so obviously needed after the crash and for which many, including Professor John Kay of Oxford University, Martin Wolf of the Financial Times and the former Tory Chancellor Lord Lawson, are still calling.

The main flaws in the Bill are on transparency at the Bank and the responsibility of senior managers across the sector. In the Treasury Committee, I questioned both the Chancellor and the Governor about the original draft of the Bill, which allowed the court, on an ad-hoc basis, to determine the scope of audits by the Comptroller and Auditor General. I am therefore pleased to see the redrafting of clause 11, which clarifies what the policy carve-outs will be, but I do not believe that is enough. First, we were promised a memorandum of understanding, agreed between the CAG and the Bank of England. Where is it? This House must see the memorandum before we pass this legislation. The Government are treating the House with the same disdain they do when they put substantial measures into statutory instruments and do not share those with the House either. Why have the Government brought the Bill back to this House before the memorandum of understanding has been drafted? The answer is obvious: it is because the senior managers regime comes into force in March and so the Government are desperate to get Royal Assent before that happens. I am not sure that CAG access will be enough. The Bank of England is independent in its existing judgments with respect to monetary, financial and prudential matters, and that is how it should be, but it is also democratically accountable. I believe citizens will be able to exercise their democratic rights only if we make the Bank subject to the Freedom of Information Act. Let me set out why.

When Treasury Ministers announced the RBS sale last summer, they waved about a letter from the Governor endorsing the sale. Writing this letter was not part of the Governor’s role on monetary, financial and prudential policy; it was an intervention in Government policy, at the Chancellor’s request, on the issue of a share sale. I asked the Governor whether he considered this letter to be policy, and he said it was. I asked him whether he would share the analysis that underlay the letter, but he refused, point blank, to do so. This is what he said:

“It is a policy judgment. I was asked as Governor by the Chancellor for a judgment with respect to the potential sale…as you know, and the terms of the question are outlined in the letter. I was asked as Governor; it was not a question of the FPC or the PRA Board. It was not a question in terms of safety and soundness but in terms of the overall impact. I consulted with the Deputy Governor for Prudential Regulation and the CEO of the PRA, Mr Bailey; and did analysis in the team.”

He continued:

“The analysis rested on the supervisory judgments, the input of the stress test and then the broader perspective of an institution that had been stabilised”.

He went on to say that

“the overlap between the commercially confidential information that we obtain as part of the discharge of our supervisory responsibilities of the PRA and the analytic is perfect”.

It is, however, very far from perfect—it is a raggedy hotch-potch.

The letter the Governor wrote roamed far beyond these matters. It said:

“it is in the public interest for the government to begin now to return RBS to private ownership...a phased return of RBS to private ownership would promote financial stability, a more competitive banking sector, and the interests of the wider economy.”

No information has been shared with any of us as to how this sale promotes a more competitive banking sector—it does not—or what the benefits will be to the wider economy. I still live in hope that when the CAG undertakes his audit of the RBS sale he will see this analysis, but I believe we need a structural reform: the application of the Freedom of Information Act to the Bank of England. This Bill should be the vehicle for that change.

Let me now turn to the issue of personal responsibility and the catastrophic capitulation of Ministers to their friends and funders, the banks. At first blush, the extension of the new senior managers regime for banks and building societies to all authorised persons in all financial institutions looks like a good thing, but unfortunately the quid pro quo is the significant weakening in the way this will operate. Instead of senior managers having to show that they took reasonable steps to prevent regulatory breaches, as recommended by the Parliamentary Commission on Banking Standards, ably chaired by the right hon. Member for Chichester (Mr Tyrie), the burden will be on the regulator to show that the senior manager failed to do that. As Lord Eatwell pointed out in an excellent speech in the other place, the only reason put forward by Ministers for this change is to deal with what they have described as “an excessive regulatory burden” and “costs” on firms. As he said, the Bill will result in less documentation; less awareness on the part of bankers of their responsibilities; and less examination of the relationship between the risks they take and the responsibilities they have.

The Government continue to believe it is acceptable for banks to privatise their profits and socialise their losses. Let us never forget the cost to all of us—to the British taxpayer: the £133 billion we had to stump up to save the banks. The banks continue to benefit from an implicit taxpayer subsidy, including to their risky investment activities, undertaken, as Lord Lawson said on Second Reading, “just for themselves”. But they continue also to whinge at the Government about the costs of documentation which would fall to them.

Ministers should also take note of the fact that a regime where the managers must show that they have taken reasonable steps is what applies in road traffic legislation, health and safety at work legislation, the Bribery Act 2010, legislation on terrorism, the Misuse of Drugs Act 1971, the Trade Marks Act 1994, the Criminal Justice Act 1988 and the Official Secrets Act. What, we want to know, is so special about bankers?

Another argument put forward by a series of lawyers in the other place is that this approach fundamentally is unfair and outwith the traditions of English law. As Lord Pannick said, the regime, as proposed by the Parliamentary Commission on Banking Standards, requires “strong justification”. What is the justification here? He said that he did “not understand it”.

Apart from the £133 billion bill and crashing the entire economies of the OECD, there is quite a lot to be said for what has gone wrong. Perhaps if those in the other place had constituents, they would understand that the appalling austerity now being wreaked on our constituents, especially disabled people, is something to which some of us must respond, “Never again”. If the £133 billion cost to British taxpayers is not enough justification, what about the fact that none of the senior bankers has taken responsibility or been punished for their criminally selfish and irresponsible behaviour?

In other words, what we see is yet another decision by this Chancellor of the Exchequer and this Government to put party interest before the national interest. After hours of hearings and work in the previous Parliament by the Parliamentary Commission on Banking Standards, the Chancellor was lobbied by his friends and funders in the City and he has let them off the hook again.

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It is a bit rich for the Opposition to be talking about this as if it were some sort of a party political issue. [Interruption.] Let me explain why I said that. Everybody shares the frustration at what happened in the lead-up to the banking crisis, but we cannot get away from the fact that the Labour party played a large part in it. Even though the regulation and the powers were there, the practices were not pursued assiduously enough, which put financial stability at risk.

Financial stability is crucial. This is not really about bankers’ bonuses; it is about the fact that ordinary people suffer the most when finance fails. I must say that I have some sympathy with what the hon. Member for Bishop Auckland (Helen Goodman) said about the separation between retail banking and investment banking. When I left university, I joined the training course at the SG Warburg group. Lord Roll, a very wise old man, gave us a lecture about all of the things that had gone wrong throughout the 1930s and so on. He said that whenever the separation between retail banking and investment banking is weakened, there will be a problem, and that has really stuck with me. We must look at ways in which we can introduce more competition and put that separation back, so that there is not such a burden on regulators to use their powers. None the less, for the time being, this Bill is a useful step.

I wish to deal with this Bill in two sections. The first is to do with regulation, and the second governance. The proposed regime for senior managers is good. I do not agree with Opposition Members who say that it is a reduction in the power of the regulations. The thing about financial services is that they are ongoing. If things go wrong, a manager has a duty not just to their clients and to the system generally, but all the way along. The beauty of the measures before us is that that duty of responsibility will have to be proved, all the time, by each manager to their regulators. Importantly, that duty applies to any breach and to any manager. What was proposed previously was effectively a two-tier system: firms with a potential prudential impact would have to comply with the legislation while those in investment funds would not. That is incredibly important, especially in the modern world in which we now operate and especially since the financial crash. As banks have had to build up their capital and have been less willing to lend, a large burden of the lending and credit business has fallen on to investment funds. Under the old legislation, those aspects would not have been covered.

I am a bit concerned that the Prudential Regulation Authority—or the Prudential Regulation Committee as it becomes—does not regulate some of these investment firms that do have a potential systemic impact on the markets. I would prefer that it took a much more active look at such firms, especially the credit and derivative funds, which quite often operate with a large degree of leverage. Because of the volatility in oil prices, we have seen some of the lower grade credits in America, particularly of oil firms and gas firms, really suffering. Yields have blown out. Regulators in America, who do not want to highlight the problem, are saying to the banks, “Don’t mark these to market”. The Minister should look at that issue, because I fear there are some firms in London that are involved in similar business, and that poses a risk for us as we go forward.

Bringing the PRA in-house is a good thing. When the retail and investment banks are together, as they are now, we really need the PRA, or the PRC as it will become, to have the sharpest teeth possible and the best people working in it. The less time that it has to focus on the corporate governance of a separate company or institution, the better.

Also coming in-house will be the people who work for the authority. Let us face it, there can be a revolving door in this industry as most of the jobs in regulation do not pay as much as those in the financial markets that they have to regulate. What we want are the people with the best brains and the most application, because they have to see a way of having a lucrative career in the Bank of England, which is a great success. It will be much better to keep regulation within the Bank, rather than outside it.

Other developments on the governance front are useful, especially the oversight and tightening up of the Monetary Policy Committee. I have quite a lot of sympathy with what was said by my right hon. Friend the Member for Cities of London and Westminster (Mark Field). We do need to take a very active role in looking at what the Bank of England does and does not do. That is especially true at the moment when we are seeing bank balance sheets around the world dramatically expanded in a very experimental way. Recently, we have seen the European Central Bank and the Bank of Japan both going full tilt at the windmills of trying to create inflation. The jury is very much out on that policy. We must not forget that our own MPC made a terrible mistake back in 2005 by cutting interest rates at exactly the wrong time, which sent exactly the wrong signal to the housing markets and to the banks. It was done at a time when the creation of money was racing away. We need to be all over this in this place, both on the regulatory front and on looking at what happens in monetary policy decisions. None the less, this Bill is a first step and I commend it to the House.

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One disadvantage of being called late in the debate is that I always find myself completely rewriting what I thought was an excellent speech. I feel that I must reflect on some of the earlier contributions. I noted that, in her opening remarks, the Minister said that the Financial Conduct Authority would deal with things such as sharp practices. She talked about the importance of dealing with “groupthink”. The right hon. Member for Chichester (Mr Tyrie) talked about the importance of re-establishing trust in the proper conduct of business. The hon. Member for Leeds East (Richard Burgon) talked about his concerns about the public view of the behaviour of banks. These, and other, contributions make the case for the fundamental importance of what we are all trying to address: an issue of culture. That issue of culture cannot be wholly satisfied through changes in structure or regulation alone.

I was intrigued to hear my hon. Friend the Member for East Lothian (George Kerevan) come up with the East Lothian answer, as I shall call it from now on, which I think bears some repetition: getting people who lead great institutions to be like captains of a ship. What was it that characterised them? They took responsibility; they acted with high ethical standards; they were equipped not only technically, but culturally to lead and accept the highest of standards. If we could reinstitute that in many of our institutions today, there would be much less demand for some of the detailed regulation and structures we find ourselves having to deal with. I would like to deal with some of the issues of culture, because many of the technical matters have been well rehearsed in the debate so far.

Like many Members on the Opposition Benches, I have been concerned about the willingness of the Government to remove the reverse burden of proof for senior managers before it has even been tested. Without it, we could—I am not saying would—perpetuate a culture of failing to accept responsibility under the cloak of a form of collective responsibility that favours the consensus of the guilty over the scrutiny of behaviour. Culture is fundamentally important to understanding the crash of 2008.

What I do mean by culture? To me, it is about the way in which groups of people solve problems and reconcile dilemmas. It involves unconscious, taken-for-granted beliefs—their perceptions, thoughts and feelings that forge the values and behaviours within their organisations. It has been argued by many researchers that about 70% of all major organisational crises are a function of culture. That is why I have great sympathy with the Minister who is trying to deal with predominantly a cultural failure through mere regulation and changes to organisation alone.

I am sure many would argue with me that failures of culture were part and parcel of the failures at Enron, Northern Rock, Lehman Brothers, RBS and HBOS. In these cases, among other cultural problems they faced precisely the cultural problem the Minister mentioned in her opening remarks: the problem of groupthink at the highest levels.

One aspect of groupthink is present when groups are unwilling to listen to critical voices, preferring the easy comfort of a blind consensus born of common bonds. A classic example was, of course, found in HBOS, where it is widely recognised that the risk manager, Paul Moore, was sacked for raising concerns about the company’s strategy. He told the Treasury Committee in 2008 how he had predicted that the bank’s practices could “lead to disaster”. He informed the bank’s board of his concerns, but was sacked by Sir James Crosby, the bank’s former chief executive, deputy chairman of the Financial Services Authority and adviser to the then Prime Minister Gordon Brown. It tells us lots that someone who acted in such way should have reached such heady heights.

In his evidence, Mr Moore told MPs anyone whose eyes were not blinded by “money, power and pride” would have realised problems were mounting for HBOS and the other high street banks. Since his dismissal Mr Moore has been shunned by the financial community, to its shame. As Professor Andrew Kakabadse has recently put it, the cultural problem occurs when

“management intimately know what is happening and even know what to do to stem an oncoming catastrophe but are too emotionally paralysed to act. And this often because the boss does not want to hear bad news.”

Perhaps it has best been most eloquently, if somewhat brutally, summed up by the hon. Member for Huddersfield (Mr Sheerman) who has been quoted as saying in a review of Paul Moore’s recent book that he exposed

“the rottenness, deceit, and corruption of the malign gang that took over a successful British bank and drove it to ruin in a few short years. This gang has never been properly held to account or been brought to justice whilst Paul Moore...has never been compensated for his sacrifice.”

That is the rub of it: a lack of being held to account, a lack of effective external scrutiny, and to this day a lack of a fundamental inquiry into the culture and goings-on at these major institutions. That is a failure, and a failure upon which we address regulation and structural changes on shifting sands.

There have been other cultural failings, too—indeed too many to recite here—but they include sacrificing rigorous analysis for group harmony; making decisions as a cabal without any external critique; dealing with complex decisions in an overly intuitive manner with a prejudice in favour of an easy consensus; and a willingness to be led by strong directive individuals.

One of the fundamental concerns, which everybody in some way alluded to but we still remain to grapple with, is how and when we are going to fully understand the nature of the cultural crisis that afflicted our institutions. That is something we await to address.

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It is a pleasure to speak in this Second Reading debate.

I was reminded this weekend in my constituency that my constituent, Thomas Smith of Newark, became the first provincial banker when he founded the very first bank outside London, in Nottingham in 1658, called Smith’s Bank. It later expanded to a branch in Newark and one in Retford in the constituency of my neighbour the hon. Member for Bassetlaw (John Mann). Several of Thomas Smith’s illustrious ancestors became Governors of the Bank of England, and so those of us who know these geeky facts about Nottinghamshire, including the hon. Gentleman, thought it was fitting that Mark Carney chose to make his first speech as Governor of the Bank of England in Nottingham, and to declare our city and county as the bellwether for the British economy.

In that speech in 2013, which I listened to, Mr Carney committed us all, and particularly the Bank of England, to using all of the tools available to the Bank to secure a sustainable economy for all parts of the country, particularly the regions of the UK. This Bill, in reasonable and modest ways, helps us to refine and improve the toolbox that is in the hands of the Governor of the Bank of England.

From knowing a few people working at the Bank of England or who have worked there in recent years, while I would say it is a good institution of which we should all be proud as members of the United Kingdom, it would be fair to say it has been somewhat inward-looking. If one were being critical, one would say its culture has been stuffy and overly theoretical, and it moves quite slowly, to say the least—although that is not always a bad thing, of course.

I think Mark Carney, as a younger, dynamic Governor, has made a real impact in tackling these cultural concerns when that was appropriate. If I could make any suggestion from my experience and those of acquaintances who have worked at the Bank, it is that it should continue to do as he has tried to do, which is recruit more people with practical experience of life in the financial services sector and the corporate world—those who have worked in banks, law firms or elsewhere, who can provide an essential counterbalance to those who are perhaps overly theoretical and not so practical. With a proper court or governing body—a board as my right hon. Friend the Member for Chichester (Mr Tyrie) rightly said it should be described—this larger and more powerful organisation, enhanced by the structural changes of this Bill, can operate in a much more modern and dynamic way than its predecessor.

I was pleased to hear that Andrew Bailey had been appointed to the FCA, and others have already welcomed that. From my very limited interactions with him, and when he came to Parliament last week to address the all-party parliamentary group on corporate governance, of which I am an officer, I found him to be clever, practical, down to earth, affable, but willing to speak frankly when necessary. He clearly possesses a deep and broad knowledge of the financial services sector, all of which suggests that this has the making of a good appointment. He appears to have done a good job of taking over and improving prudential regulation at the Prudential Regulation Authority.

Having worked as a commercial lawyer, dealing routinely with the old FCA, I know that that organisation and some of its personnel were in a very poor state before these moves, and morale was extremely low. It is still a struggle to recruit and retain the best talent, as my hon. Friend the Member for Yeovil (Marcus Fysh) wisely said, when the rewards are usually, if not always, less than those on the frontline elsewhere in the financial services sector. It is essential that we give all the tools necessary to Andrew Bailey and others to enable them to recruit more talented individuals. It seems, as my hon. Friend said, a wise step in that direction to bring the PRA within the Bank of England because that is inevitably a more attractive institution to work for, be part of and have on one’s CV than any other, perhaps lesser, regulator.

Although the Bill is not revolutionary in content, it continues the work and takes a series of very sensible steps forward. Some have argued today and elsewhere in the press that we should go much further in changing the Bank of England or even re-imagining the role of a central bank in the 21st century. I would caution that the Bank has been subject to a great deal of change in recent years. Although I do not have the exact figures to hand, I imagine, for example, that a staff of around 2,000 has already increased to 3,500 or thereabouts. The challenge of integration—of building a large integrated organisation and of ensuring quality, because quality and standards are ultimately all that matter—is very great, and we should be careful not to give our regulators too much to contend with.

The formalisation of the PRA’s position as part of the Bank therefore seems sensible. It always seemed rather strange that it was merely a subsidiary of the Bank. I did note, and I am sure the Minister and the Treasury have already seen this and decided it makes sense, that whereas previous legislation had deliberately kept the supervisory role then exercised by the FSA separate from the resolution role, the new landscape brings them together. In other words, it used to be believed by the sector and by the Government that it was more appropriate that the organisation supervising a bank should be different from that tasked with resolving whatever problems or mess it got itself into. Presumably the view is that this is no longer necessary, and of course the Bank is capable of handling both sides of the coin.

The proposal in the Bill to provide the Treasury with more information seems logical. After all, whereas the Bank of England provides temporary liquidity and support to a bank in crisis, it is the Treasury and taxpayers who ultimately step in and pick up the tab. These measures are all part of the Government’s laudable efforts to ensure that banks are properly supervised and, to the extent possible, are too big to fail.

The value for money component, which many other Members have mentioned, is welcome. As the Bank becomes more powerful and significantly larger with the advent of the PRA, so it is appropriate that it is open to greater scrutiny. Questions of freedom of information and others will no doubt arise if the Bank’s powers continue to increase.

The Bank of England’s accounts have always seemed to me to be extremely difficult to understand. It always seems to make a profit. I have always been suspicious of that—as a former partner at a law firm once said to me, of course the Bank of England can print its own money!

On the wider questions of openness and governance, I would like to see a greater part of the governance of the Bank drawn from the regions of the UK, not for superficial reasons, but—rather like my opening example of the long-gone world of Thomas and Abel Smith and the Governors of the Bank of England who began their careers in Newark—so that there are experienced voices at the heart of our central bank with direct knowledge of the regional economies, particularly Scotland and Wales.

Finally, on the senior managers regime, a great deal has been said here and, clearly, agreement will not be reached across the House. The position in the Bill seems fair and workable as it continues to put the right pressure on senior managers to be named and to take direct personal responsibility. I am not interested in grandstanding. I am looking for what will have the greatest effect on our financial services sector. The vast majority of my constituents—almost all, I would venture—have never heard of this regime. What they have heard of and what they are expecting of their Member of Parliament is to ensure that there is a financial services sector that is stable, secure and resilient. I believe the Bill is the best way to deliver it.

I welcome the change which the Bill introduces to the pensions regime. Although this aspect has barely been touched on in the debate, the pensions guidance service, Pension Wise, can in future be more widely applied to those looking to take advantage of the great opportunity that was achieved in the previous Parliament to use their annuities in whichever way they see fit. We must not allow one of the great developments in pension reform and other Treasury policies from the previous Parliament to be sullied by mis-selling. One can easily imagine mistakes being made by constituents who, by their own admission, are not always as financially literate as they would wish. This could be, as wiser souls have said, the next great mis-selling scandal.

Although Citizens Advice, which was initially given the difficult task of providing support for members of the public on their pensions, is a superb organisation and I praise those in my constituency who are involved in it, any additional support that we can give through Pension Wise to ensure that our constituents make the right decisions for them at a crucial juncture in their financial lives must be welcomed.

In conclusion, the Bill contains a range of modest and reasonable proposals to further the Government’s aim to provide a stable and resilient financial services sector to secure a successful economy for the United Kingdom. I cannot for the life of me imagine why other Members would vote against it tonight.

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Thank you, Madam Deputy Speaker. I shall try to compensate for some of the earlier speeches that went a little beyond your guidance.

It is seven years since the most devastating financial crash of our lifetime. Since the crash, regulations have rightly been updated by the Chancellor and Treasury Ministers. They have put responsibility and accountability at the heart of the UK’s financial system. Because of the Government’s long-term economic plan, banking in the UK is now far more robust, but it is clearly not invincible. I shall support the Bill this evening so that we can build on that progress, continuing all the valuable work that the Treasury has done so far and improving on the status quo, strengthening the way the Bank of England is governed, increasing accountability in the financial services sector, and extending the role of the Pension Wise advice service, which I know is used and valued by many of my constituents.

The Bank of England has been a cornerstone of global finance since 1694. Its structures and governance must adapt to the needs of the 21st century so that it can continue as such. Some of the Bank’s historic practices have not been in line with current international standards, but the Bill helps to redress the balance. Strengthening the role of the Bank of England’s court of directors will enable the Bank to function with an effective and modern unitary board, a more effective structure to allow the Bank to deliver on its vital regulatory and policy roles.

To most of our constituents, the key role of the Bank of England, other than issuing bank notes in England, is to set interest rates. The Monetary Policy Committee currently meets 12 times a year but, as we have heard, a single month is rarely long enough to properly review, consider and change a macro-economic assessment, so moving the MPC to eight meetings a year would have many desirable outcomes. Most obviously, policy making at that level requires time for reflection, which a longer period between meetings would allow. Such a sensible change will merely bring the Bank of England into line with other central banks, such as the Federal Reserve and the European Central Bank. Allowing the results of votes and the reasoning behind them to be published alongside decisions over interest rates will open up that opaque process, granting access to the MPC’s thinking.

The crash of 2007-08 highlighted the irresponsible behaviour of some individuals working in the financial services industry. Thankfully, the days to which my hon. Friend the Member for Havant (Mr Mak) referred, when the Labour party allowed people such as Fred Goodwin to take huge bonuses while allowing their banks to freefall, are behind us.

The senior managers and certification regime legislated for by the coalition will come into force in March. However, although the existing legislation will apply to banks, building societies, credit unions and PRA-regulated investment firms, it will not extend to other authorised financial services firms. Expanding the regime’s scope will help to create a fairer, more consistent, more effective and more rigorous regime for all authorised financial services firms.

The Government have already made revolutionary changes to improve and support the pensions system. Allowing our constituents to access their pension pots—their annuities—without being penalised for doing so has given people more flexibility and more choice over how they spend their own money. As a result of those changes, the Pension Wise scheme was introduced following the 2014 Budget. Expanding the service’s scope will mean that more people receive impartial, high-quality financial advice and guidance, which will allow them to discuss their new options.

I encourage all hon. Members to join me this evening in voting in support of a Bill that will bring the Bank of England and financial services into the 21st century—a Bill to allow transparency and accountability to reign in the financial sector.

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It is a pleasure to follow a fellow black country MP—my almost near neighbour, the hon. Member for Dudley South (Mike Wood).

I will be brief, as I have been exhorted to be. The Opposition welcome the improvements made to the Bill in the other place. We also welcome the Government’s preparedness to listen. There are some good things in the Bill. We give a partial welcome to the change allowing the National Audit Office to do investigations into value for money, although it is a pity that it will not be allowed to look at whether the Bank of England’s goals were achieved—not at whether there should have been goals, because that is not the NAO’s role, but at whether the Bank’s goals were achieved. That should be part of the NAO’s remit.

We welcome the extension of the scope of the senior managers and certification regime. We broadly welcome the changes on the enforceability of credit agreements and the regulation of what are called “transformer vehicles”, which are devices for risk mitigation—a kind of reinsurance. We very much welcome the extension of the Pension Wise guidance service, and the Bank of England’s increased duty to provide information to the Treasury is also welcome. We also welcome banks being authorised to issue notes in Scotland and Northern Ireland if their sister banks operate there.

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Would my hon. Friend also welcome something for which some of us have been campaigning for the last 24 years? Twenty-four years ago, the Bank of Credit and Commerce International —the sixth-largest private bank in the world—closed and the Bingham report was commissioned to look at the supervision of the Bank of England and at its powers. However, one part of the report has not been published over the last 24 years—the confidential second part. Does my hon. Friend think it should now be published?

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I agree with my right hon. Friend. Many of his constituents in Leicester, and mine in Wolverhampton, were adversely affected by BCCI’s collapse, and unless we publish that material, we will not learn from it.

There have been considerable problems. As the right hon. Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee, put it at the Report stage of the Financial Services (Banking Reform) Bill in 2013 in this very Chamber:

“The crisis of standards and trust in banking—and it is a crisis—is multi-faceted, and so are the necessary remedies…In a nutshell, boards were negligent and the system of regulation was found seriously wanting the first time it was tested.”—[Official Report, 8 July 2013; Vol. 566, c. 76.]

That was absolutely right. Sadly, that is still the situation now. There have been too few prosecutions. It bemuses me, as a lawyer, why the authorities cannot use section 16 of the Theft Act 1968, on obtaining pecuniary advantage by deception, rather than going off on jaunts unsuccessfully looking at conspiracy charges, which are much more difficult to prove.

There has been a series of post-2008 crash infractions by banking institutions. Since 2013, the new Financial Conduct Authority, which replaced the old Financial Services Authority, has dished out fines to firms large and small totalling almost £3 billion. That includes big fines to Barclays, Lloyds, RBS and HSBC. Banks such as Standard Chartered have been paying big fines in the States. That is for wrongdoing that took place after the crash in 2008, so some of these people simply do not learn. Today, according to the BBC, Barclays and Credit Suisse have been fined a total of $154 million by US regulators for their American dark pool trading operations. Those may have begun before 2008, but the wrongdoing continued until well after, so these people sometimes do not learn.

There are problems with the Bill. The test should be whether regulation will lead to better or worse compliance. Quite a lot of today’s debate has been about the reverse burden of proof, and that is important, but we want a strict regime to encourage compliance. However, that is not going to happen if we get rid of the reverse burden of proof. The question is, will this change make prosecutions easier or harder? It will make them harder. Will it make compliance more or less likely? My hunch is that abolishing the reverse burden of proof will make it less likely, but we do not know, because the Government are rushing to get this change made before the SM&CR comes in on 7 March—it is a good acronym, but I would pronounce it “smacker”, because that is what we should have.

We have had some indecision by the Chancellor of the Exchequer over the years. Back in July 2013, in the Government response to the report by the Parliamentary Commission on Banking Standards—this is still on the Government website—he said:

“Cultural reform in the banking sector marks the next step in the government’s plan to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth.”

However, if the Bill is passed unchanged, it will take us backwards.

If we look at what the FCA is doing, it appears to have had pressure put on it. In its business plan for 2015-16—for this very year—its chair, John Griffith-Jones, said:

“In our last Risk Outlook we identified the seven most important forward-looking areas of focus in our view…Poor culture and controls continue to concern us, notwithstanding the efforts being made by firms to improve both.”

He wanted to look at the culture in the banking sector and the financial services sector, but that now appears to have gone out the window.

On the reverse burden of proof, I say with all due respect that, as far as I know—I stand to be corrected—the chief executive-designate of the Financial Conduct Authority, Dr Bailey, is not a lawyer. However, he is pronouncing on legal matters. In a letter from Lord Bridges of Headley, a Parliamentary Secretary in the Cabinet Office, he is quoted as saying:

“The introduction of the ‘duty of responsibility’ in place of the ‘presumption’ makes little difference to the substance of the new regime. Once introduced, it will be for the regulators (rather than the senior manager) to prove that reasonable steps to prevent regulatory breaches were not taken. This change is one of process, not substance”.

I have to say to Dr Bailey that, as a lawyer, I profoundly disagree. I know what the burden of proof is in civil cases, and I know what the burden of proof is in criminal cases. I know what the concept of strict liability is, and I know what the reverse burden of proof is. The reverse burden of proof is not as bad as strict liability, and my hon. Friend the Member for Bishop Auckland (Helen Goodman) mentioned that. We have strict liability for things such as the Health and Safety at Work etc. Act 1974—one of the Acts under which I made my living before I entered this place.

We want the Government to tighten the regime, not loosen it, as this Bill will if passed unaltered. Some of the proponents of the Bill seem to think, or certainly did think, that regulation of banking was too tight before the crash in 2008. In March 2005, the Centre for Policy Studies published a report called “The Leviathan is still at large” in which it called for, among other things,

“an industry with responsible senior management, ensuring that consumer protection is provided through market forces and competitive brands jealous of their reputations, and where risk-taking is not viewed as dangerous but as commendable”.

It also recommended

“an industry where competition abroad and competitiveness at home are not hampered by the costs and burden of being regulated, or by the costs (and conflicts) of educating consumers, or of policing and prosecuting money-laundering and financial crime.”

Before I came to the House this evening, I looked up the definition of a phrase with which hon. Members will be well familiar, “the reverse ferret”, which is

“a sudden reversal in an organisation’s editorial line on a certain issue. Generally, this will involve no acknowledgement of the previous position.”

It came from Kelvin MacKenzie when he was at The Sun. Well, tonight we have a double reverse ferret; I do not know what that is called. The report by the Centre for Policy Studies, published in March 2005, before the world crash, had 10 authors; it was a co-operative effort. Two of those authors are now Treasury Ministers; they were not MPs at the time. One of them is the Economic Secretary to the Treasury, who has been addressing the House tonight, and the other is the Financial Secretary to the Treasury. Before 2005, they were saying, “Labour’s got regulation too tight”, while many of us on the Labour Benches were saying, “Labour’s got regulation too loose”. To my great sadness, I was right and my own Government were wrong, but this Government are making it worse. They tightened things up with the reverse burden of proof, and so on, in 2013, and two years later, before it came into force, untested, they said it was to be done away with under this Bill. That is a double reverse ferret, and it is not acceptable.

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With the leave of the House, Mr Deputy Speaker, I would like to speak for a second time.

I commend the fact that we have had a wide range of speeches, with 12 by Back Benchers from, I am pleased to say, almost across the country. We heard from my right hon. Friends the Members for Chichester (Mr Tyrie) and for Cities of London and Westminster (Mark Field), the hon. Members for East Lothian (George Kerevan) and for Bassetlaw (John Mann), my hon. Friend the Member for South West Devon (Mr Streeter), the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), my hon. Friend the Member for Havant (Mr Mak), the hon. Member for Bishop Auckland (Helen Goodman), my hon. Friend the Member for Yeovil (Marcus Fysh), the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin), and my hon. Friends the Members for Newark (Robert Jenrick) and for Dudley South (Mike Wood). I will deal with some of the questions they asked later.

This has been a very revealing debate. We have just heard the hon. Member for Wolverhampton South West (Rob Marris) say that he is not satisfied with the creation of the system of regulation that was rightly criticised in 2005 and resulted in the financial crash on Labour’s watch. In fact, Labour Members, by declining to give this Bill a Second Reading tonight, are showing once again that they would be a risk to the livelihoods of everyone, most especially the poorest and the oldest, if they were ever to return to power, because their shadow Chancellor opposes giving a Second Reading to this entirely sensible Bill due to his opposition to the independence of the Bank of England—Gordon Brown’s best decision. His reasoned amendment says that

“the Bill fails to increase oversight and accountability of the work of the Bank of England”.

I thought it might be interesting to see exactly what the shadow Chancellor means by that. In 2012, he said:

“In the first week of a Labour Government democratic control of the major economic decisions would be restored by ending the Bank of England’s control over interest rates and bringing the nationalised and subsidised banks under direct control”.

That is what his reasoned amendment implies. In setting up his review of monetary policy, he said:

“Perhaps we should be even bolder, creating a national investment bank and using newly printed money to fund it.”

He does not need me to criticise that as a terrible idea that would cause inflation—he should look no further than his predecessor as shadow Chancellor, the hon. Member for Nottingham East (Chris Leslie), who said:

“Printing money and ending Bank of England independence would push up inflation, lending rates, squeeze out money for schools and hospitals and mean spending more on debt servicing. Higher inflation and a higher cost of living would hit those on the lowest incomes, the poorest people who couldn’t afford those goods and services.”

That is the reality of the Opposition’s economic policies with regard to the Bank of England. Inflation is a tax on the poorest, and they would hit the poorest hard.

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rose

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Does the hon. Lady agree with that policy?

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Surely the hon. Lady knows that it is the current Chancellor who has printed, as she puts it, £175 billion of money, and in doing so has increased the wealth of the top 5% in this country by £185,000 each.

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I do worry about the hon. Lady sometimes, because she is again criticising the decisions of the independent Bank of England.

That is before we get to the Opposition’s other policies, such as bringing back secondary picketing, banning dividends, and nationalising businesses without compensation. Even Danny Blanchflower, the head of the independent review that the shadow Chancellor has set up to look at the remit of the Bank of England—

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It is David Blanchflower!

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Danny is what he seems to like to go by. He said in a recent article for the New Statesman:

“We are in search of good ideas…the new Labour Party still doesn’t have many economic policies to speak of...The new Labour leaders are not economists and are going to have to learn fast.”

This debate shows that they have not learned anything.

While the SNP’s reasons for opposing the Bill’s Second Reading show some common ground with Labour’s, the SNP is at the other end of the spectrum in thinking that the Bill fails to provide sufficient independence from direct political interference for the Bank of England. They cannot both be right; indeed, they are both wrong. The Bill strikes the right balance on operational independence at the Bank of England and the FCA, and scrutiny by the people in the form of the Treasury Committee and the elected Government.

I will now address some of the points raised in the debate. I noticed that the hon. Member for Leeds East (Richard Burgon) did not point out that we now have the toughest rules on bankers’ pay of any major financial centre and that we have brought in new criminal offences in terms of financial crime, and that he did not welcome the fact that we are widening the duty of responsibility to the whole of the financial services sector. He asked one reasonable question, which was about the memorandum of understanding between the BOE and the NAO. He knows that I have written to the Governor and to the Comptroller and Auditor General, Sir Amyas Morse, and they will endeavour to try to publish the memorandum during the course of the Bill’s passage through the House.

My right hon. Friend the Member for Chichester, who made a superb, sweeping masterclass of a speech on the history of financial regulation, came up with some interesting suggestions about making PRA rulings public. Obviously that would involve some issues of commercial sensitivity in some of the things that it deals with. He said that he wanted to rename the court “the board of the Bank of England”. He pointed out, quite rightly, that the concept of “too big to fail” is still in the banking system, not least in that the Government continue to own large chunks of it. He mentioned the timetable, and emphasised competition, which is very important.

The hon. Member for East Lothian, in an erudite speech, pointed out that responsibility is what we need, and we believe that we are delivering it through the duty of responsibility. He rightly highlighted the importance of changing the culture. I like his analogy with the captain of the ship, and we believe that setting out the responsibilities of senior managers achieves that balance.

My right hon. Friend the Member for Cities of London and Westminster spoke up for his constituency. He mentioned a problem with interest rate swap claims running out of time, which I would like to take up with him on a separate occasion, if I may. I want to clarify that the power to appoint deputy governors is not the Governor’s alone; it is actually an appointment of the Queen, with the consent of the Chancellor.[Official Report, 4 February 2016, Vol. 605, c. 7MC.]

The hon. Member for Bassetlaw, who is not in his place, wants more transparency and competition. I gently point out to him—perhaps he will read this in Hansard—that the building society sector has welcomed the fact that the reverse burden of proof is no longer in the Bill.

My hon. Friend the Member for South West Devon made an excellent point about debt management, and I share his enthusiasm for free debt advice and organisations such as PayPlan, Christians Against Poverty, StepChange and, of course, Citizens Advice. I am keen to hear more detail from him about what more we can do to make sure that, as the FCA takes on responsibility for debt management, the fee structure works well for consumers.

The hon. Member for Carmarthen East and Dinefwr mentioned Welsh bank notes, which is an interesting idea, and proposed a sterling central bank. He will, of course, be aware that the North and South Wales Bank was bought by Midland Bank in 1908 and lost the ability to issue Welsh bank notes.

My hon. Friend the Member for Havant made a wide-ranging and supportive speech, but the hon. Member for Bishop Auckland and I are never going to see eye to eye on this Bill. On the sale of the Royal Bank of Scotland, how can she think that it is not in the wider interests of the economy for the Government not to own it? She is the one complaining about socialising losses, so she should be congratulating the Government on having started on the sale of RBS last August.

My hon. Friend the Member for Yeovil made a very good speech about competition and systemic risks. He is right that the investment firms and their systemic risk must be addressed by the regime. So far, eight investment firms have been identified as important in that regard.

The hon. Member for Kirkcaldy and Cowdenbeath made a very good speech about the importance of culture. We agree with him on that.

My hon. Friend the Member for Newark made a Nottinghamshire-based speech about the bellwether for the British economy. He made some excellent points. I reassure him that supervision and resolution will continue to be operationally separate under different deputy governors at the Bank of England. I also endorse his point about the regions. He will be pleased to know that Mr Andrew Bailey is, in fact, from Leicester, which is another important bellwether for the British economy. I was also glad to hear my hon. Friend make supportive comments about Pension Wise.

My hon. Friend the Member for Dudley South said how popular Pension Wise is in his area, and the hon. Member for Wolverhampton South West has clearly done his legal research.

In conclusion, the Bill brings National Audit Office scrutiny into the Bank of England for the first time. It protects its independence on decisions and extends a duty of responsibility, via the senior managers and certification regime, to change the culture of financial services firms. It brings extra help for consumers in the secondary annuity market and in capping exit charges, and ensures that the most vulnerable in society are protected from illegal loan sharks.

All those excellent measures will be lost if the Opposition have their way and tonight’s Second Reading is opposed. We cannot take irresponsible risks with financial regulation, which is what the Labour party wants to do. This is a good and sensible Bill, and I urge right hon. and hon. Members to back its Second Reading.

Question put, That the amendment be made.

Division 179

1 February 2016

The House divided:

Ayes: 252
Noes: 289

Question accordingly negatived.

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Question put, That the Bill be now read a Second time.

Division 180

1 February 2016

The House divided:

Ayes: 292
Noes: 257

Question accordingly agreed to.

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Bill read a Second time.

Bank of England and Financial Services Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Bank of England and Financial Services Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee</