Category: Economy

  • Jeremy Hunt – 2023 Mansion House Speech

    Jeremy Hunt – 2023 Mansion House Speech

    The speech made by Jeremy Hunt, the Chancellor of the Exchequer, at the Mansion House in London on 10 July 2023.

    My Lord Mayor, Governor, Ladies and Gentlemen – it is an honour to be with you at the Mansion House tonight.

    While some may be distracted by events in Windsor, we all know that Walbrook is the place to be this evening.

    Thank you to the City of London Corporation for hosting us so generously. It is a privilege to follow the Lord Mayor’s excellent address and to give my first Mansion House speech as Chancellor.

    Tonight, I want to talk about long term reforms to our competitiveness, but let me start with the immediate challenge of tackling inflation.

    Following the pandemic and energy shock, like other countries, the UK faces difficult challenges.

    It has shown itself more resilient than many predicted, but that resilience is itself one of the reasons for higher inflation.

    In a cost-of-living crisis, that leads to great concern for many families who see the cost of their weekly food shop or the price of petrol go up.

    But with the levers of fiscal and monetary policy, wholesale food and energy prices falling and a government that has made the battle against inflation its number one priority, there is nothing insurmountable in the current situation.

    Let me be clear again tonight. Working with the Bank, we will do what is necessary for as long as necessary to tackle inflation persistence and bring it back to the 2% target.

    Delivering sound money is our number one focus. That means taking responsible decisions on public finances, including public sector pay, because more borrowing is itself inflationary.

    It means recognising that bringing down inflation puts more money into people’s pockets than any tax cut.

    And it means recognising that there can be no sustainable growth without eliminating the inflation that deters investment and erodes consumer confidence.

    Tackling inflation therefore unlocks the Prime Minister’s two other economic priorities – growing our economy and reducing debt – but because it is a prerequisite for both, it must come first.

    As we tackle inflation, we must always remember our responsibilities to those struggling the most, so I am therefore grateful to our banks and mortgage lenders for their help in developing last month’s Mortgage Charter.

    I agree with the Governor that margin recovery benefits no one if it feeds inflation.

    And I will continue to work with regulators to make sure the needs of families are prioritised in a tough period.

    This evening, though, I want to look further ahead.

    I want to lay out our plans to enable our financial services sector to increase returns for pensioners, improve outcomes for investors and unlock capital for our growth businesses.

    We start from a position of strength.

    The financial and related professional services industry employs over 2.5 million people. Although two thirds of them are outside the South-East, it has made London the world’s second largest financial centre and one of the most dynamic cities on the planet.

    It generates more than £100 billion in tax revenue, paying for half the cost of running the NHS.

    A strong City needs a successful economy, and a strong economy needs a successful City.

    Recent challenges have led to some lose hope and even peddling a declinist narrative.

    They are profoundly wrong.

    I am proud that since 2010, we have one million more businesses and one million fewer unemployed.

    And we’ve grown faster than France, Italy, Japan or Germany.

    In the last decade we have become Europe’s largest life science sector, Europe’s largest technology sector, its biggest film and TV sector and its second largest clean energy sector.

    But as we emerge from our current challenges, the Prime Minister and I have big ambitions for the British economy.

    We want to be the world’s next Silicon Valley and a science superpower, embracing new technologies like AI in a way that brings together the skills of our financiers, entrepreneurs and scientists to make our country a force for good in the world.

    That means making sure our financial services sector, traditionally so nimble and agile, has the right architecture to provide the best possible security for investors as well as capital for businesses, and the best talent right here in the UK to make that happen.

    The structures put in place after the financial crisis have served us well and financial stability will always be our top priority.

    But we can further improve the functioning of capital markets, so this evening I set out the government’s Mansion House reforms.

    They build on the Edinburgh Reforms I announced in December and the vision for financial services which the now Prime Minister spoke about here in 2021 of an open, sustainable, innovative and globally competitive sector.

    Firstly, I am announcing a series of measures to boost returns and improve outcomes for pension fund holders whilst increasing funding liquidity for high-growth companies.

    Second, I will set out ways to incentivise companies to start and grow in the UK by strengthening our position as a listings destination.

    And finally, we will reform and simplify our financial services rulebook to ensure we have the most growth-friendly regulation possible without compromising our commitment to stability.

    Pensions

    I begin with pensions.

    The UK has the largest pension market in Europe, worth over £2.5 trillion. It plays a critical role in providing safe retirement income as part of the social contract between generations.

    Government policy, such as autoenrollment, has strengthened it but so too has confidence in the expertise of our financial institutions to manage investments wisely.

    However, currently we have a perverse situation in which UK institutional investors are not investing as much in UK high-growth companies as their international counterparts.

    At the same time on their current trajectory, some defined contribution schemes may not provide the returns their pension fund holders expect or need.

    Whilst many defined benefit funds are in surplus, their returns are lower than some international peers and some are still underfunded.

    So alongside our outstanding Economic Secretary Andrew Griffith and brilliant Pensions Minister Laura Trott I have engaged with some of our largest pension schemes, insurers, asset managers and experts to put together tonight’s Mansion House reforms. I am also immensely grateful to Sir Jon Symonds and Sir Steve Webb for their advice on how to construct this package. And I’m also very grateful to Gwyneth Nurse and her brilliant team in the Treasury. Gwyneth is of course the real Chancellor as we Official Chancellors come and go.

    Tonight I lay out the direction of travel. Sometimes consultations will be necessary, but all final decisions will be made ahead of the Autumn Statement later this year.

    And as we make those decisions, I will be guided by three golden rules.

    Firstly everything we do we will seek to secure the best possible outcomes for pension savers, with any changes to investment structures putting their needs first and foremost.

    Secondly we will always prioritise a strong and diversified gilt market. It will be an evolutionary not revolutionary change to our pensions market. Those who invest in our gilts are helping to fund vital public services and any changes must recognise the important role they play.

    The third golden rule is that the decisions we take must always strengthen the UK’s competitive position as a leading financial centre able to fund, through the wealth it creates, our precious public services.

    I start with Defined Contribution pension schemes, which in the UK now invest under 1% in unlisted equity, compared to between 5 and 6% in Australia.

    Today I am pleased to announce that the Lord Mayor and I joined the CEOs of many of our largest DC pension schemes – namely Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pension, M&G & Mercer – for the formal signing of the “Mansion House Compact”.

    The Compact – which is a great personal triumph for the Lord Mayor – commits these DC funds, which represent around two-thirds of the UK’s entire DC workplace market, to the objective of allocating at least 5% of their default funds to unlisted equities by 2030.

    If the rest of the UK’s DC market follows suit, this could unlock up to £50 billion of investment into high growth companies by that time.

    Secondly, we know funds can only optimise returns from a balanced portfolio if they have the scale to do so. We will therefore facilitate a programme of DC consolidation, to ensure that funds are able to maintain a diverse portfolio of bonds, equity and unlisted assets and deliver the best possible returns for savers.

    Tomorrow, the Department for Work and Pensions will publish its joint consultation response with the Pensions Regulator and the FCA on the Value For Money framework, clarifying that investment decisions should be made on the basis of long-term returns and not simply cost.

    Pension schemes which are not achieving the best possible outcome for their members will face being wound up by the Pensions Regulator. We will also set out a roadmap to encourage Collective DC funds, a new type of pension fund which we believe holds great promise for the future.

    Third, we need to ensure that all schemes have access to a wide range of investment vehicles that enable them to invest quickly and effectively in unlisted high growth companies.

    We have launched the LIFTS competition, and will consider closely the bids that have already started to come in for up to £250 million of government support.

    Alongside that, we will explore the case for government to play a greater role in establishing investment vehicles, building on the skills and expertise of the British Business Bank’s commercial arm which has helped to mobilise £15bn of capital into over 20,000 companies.

    Ahead of Autumn Statement, we will test options to open those investment opportunities in high-growth companies to pension funds as a way of crowding in more investment.

    I now move on to Defined Benefit schemes which number over 5000 and operate under a different regulatory regime. Their landscape is also too fragmented.

    I recognise the important role played by insurers offering buy-out schemes, which will continue to be an essential part of the way we improve security for pension members in this market.

    But in addition, we will set out our plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new scaled-up way of managing DB liabilities.

    Having engaged closely with a range of experts, we will launch a call for evidence tomorrow on the role of the PPF and the part DB schemes play in productive investment – whilst always being mindful of the second golden rule to protect the sound functioning and effectiveness of the gilt market.

    Fifth, we will look at the culture of investment decisions and improve the understanding of pension trustees’ fiduciary duty across both DB and DC schemes. DWP and HMT will jointly launch a call for evidence to explore how we can overcome barriers and ensure a focus on good saver outcomes.

    And finally, government must lead by example, so we will consult on accelerating the consolidation of Local Government Pension Scheme assets, with a deadline of March 2025 for all LGPS funds to transfer their assets into local government pension pools and ensure greater transparency on investments.

    To make sure we are delivering the maximum benefits of scale, we will invite views on barriers to achieving better investment returns across the LGPS as well as setting a direction that each asset pool should exceed £50 billion of assets.

    We will also consult on an ambition to double the existing local government pension scheme allocations in private equity to 10%, which could unlock a further £25 billion by 2030.

    Today’s announcements could have a real and significant impact on people across the country.

    For an average earner who starts saving at 18, these measures could increase the size of their pension pot by 12% over their career – that’s worth over £1,000 more a year in retirement.

    At the same time this package has the potential to unlock an additional £75 billion of financing for growth by 2030, finally addressing the shortage of scale up capital holding back so many of our most promising companies.

    Increasing borrowing through £28 billion a year of unfunded spending commitments, as some are suggesting, would entrench inflation and push up interest rates.

    These reforms, conversely, unlock capital from the private sector delivering growth not by subsidy, but by increasing support for entrepreneurs and investors who take risks to create long term value.

    Listings

    I now move onto listings. The UK has the largest stock market in Europe and in 2021 attracted the most global IPOs of any stock market outside the US.

    But between 1997 and 2019, there was a 44% decline in the number of domestic listed companies in the UK, part of a wider trend across western markets, with the US and France seeing even steeper falls.

    I want the world’s fastest growing companies to grow and list right here, making LSE not just Europe’s NASDAQ but much more. As David Schwimmer and Julia Hoggett say, we want it to be the global capital for capital.

    So today we are publishing draft legislation on prospectus reforms, delivering another milestone of Lord Hill’s UK Listing Review. This will create a more effective regime than its EU predecessor, giving companies the flexibility to raise larger sums from investors more quickly.

    The government welcomes Rachel Kent’s excellent Investment Research Review published today and has accepted all recommendations made to it. We therefore welcome the FCA’s commitment to start immediate engagement with the market to inform any rule changes on removing the requirement to unbundle research costs by the first half of next year. This will ensure we are better able to fund quality research into the new Silicon Valley sectors.

    Last week, we abolished protectionist rules inherited from our time in the EU such as the Share Trading Obligation and Double Volume Cap so UK businesses can now access the best and most liquid markets anywhere in the world.

    And, in a highly innovative step which represents a global first, we will establish a pioneering new “intermittent trading venue” that will improve private companies access to capital markets before they publicly list. This will be up and running before the end of 2024, and put the UK at the forefront of capital market innovation.

    Smart regulation

    Finally, behind all those plans must sit a financial services sector ready to innovate faster with regulators willing to support them as they do.

    We have one of the most robust regulatory regimes and some of the best regulators in the world. Brexit gives us the autonomy to put their skills to even better use as we seek to become leaders in the industries of the future.

    So I am delighted that we have just last month passed into law the landmark Financial Services and Markets Act, which will ensure our regulators have an appropriate focus on growth and competitiveness alongside their wider responsibilities.

    The Act also unlocks wholesale reform of our approach to regulation and today I can announce that we are commencing repeal of almost 100 pieces of unnecessary retained EU law, further simplifying our rulebook whilst retaining our high regulatory standards.

    Alongside this, last month I was delighted to sign the new UK-EU financial services Memorandum of Understanding as we build a new relationship with our European partners.

    We are working closely with the Bank of England to reflect on lessons from recent events to ensure the UK has the best possible arrangements in place to improve continuity of access to deposits when a bank fails even if it is not a systemically important one.

    And I want to make sure we remain at the forefront of payments technology. So I am launching an independent review into the future of payments – led by Joe Garner – to help deliver the next generation of world class retail payments, including looking at mobile payments.

    We are laying new legislation to give regulators the powers they need to reform rules on innovative payments and fintech services, and, together with the Bank of England, we are exploring potential designs for the digital pound should we decide to introduce it.

    Conclusion

    My Lord Mayor, Governor, Ladies and Gentlemen.

    Pension industry and listings reforms, backed by smart regulation, to unlock better returns for savers and more growth capital for businesses.

    That is what today’s Mansion House reforms deliver.

    British growth driven by British financial firepower, providing higher living standards and better funded public services.

    With cooperation between government, regulators and business closer than ever…

    … we will deliver not just more competitive financial services but a more innovative economy.

    More money for savers.

    More funding for our high-growth companies.

    And more investment to grow our economy.

    That is the vision I have set out today – let’s deliver it together.

    Thank you.

  • Jeremy Hunt – 2023 Speech to the Centre for Policy Studies

    Jeremy Hunt – 2023 Speech to the Centre for Policy Studies

    The speech made by Jeremy Hunt, the Chancellor of the Exchequer, on 12 June 2023.

    Introduction

    It is a pleasure to be with you this evening and a privilege to deliver this speech for an organisation founded 49 years ago.

    Over that time the CPS can be proud of the profound impact it has had on the way we think about freedom and enterprise.

    And I am delighted – as Chancellor – that even though you will soon reach the ripe old age of 50, there is absolutely no prospect of you taking early retirement, something impossible to imagine under the energetic leadership of Lord Spencer and Rob Colvile.

    Today, I want to talk about one of the government’s five priorities – growing our economy – which alongside reducing inflation and bringing down debt, is central to our economic mission.

    Because just as when the CPS was founded, it is growth that will prove declinists wrong, unleash prosperity through enterprise and give families confidence in their prospects.

    Rob himself pointed this out in his excellent essay, “the morality of growth” when he said:

    “If there is one thing that we all need to do – it is to remind people ceaselessly of the importance of growth.”

    Productivity and growth

    Growth is critical for many reasons.

    It is the way we increase people’s living standards.

    It is the way we increase opportunity with high wage, high skilled jobs based on the innovation that will define this century.

    And it is the way we make sure our private sector is not strangled by an ever-expanding state.

    According to the OBR’s long-term forecasts for the public finances from the end of this decade, our economy’s long term trend growth rate is 1.6% but public spending – even excluding debt interest – will grow by 2% a year.

    So every year, the OBR’s projections suggest that the size of our state will be growing by nearly half a percent more than the size of the economy.

    Now we are not the only ones facing this dilemma. OECD projections say Germany, Italy and Japan will have even lower growth over the next 25 years, with France about the same and the US only marginally ahead. Many of those countries have even steeper demographic challenges than we face and all face pressure to increase the burden on taxpayers.

    You don’t need brilliant Treasury analysts to tell you the consequence of a state growing faster than the economy: higher borrowing, higher taxes or a combination of the two.

    The OBR’s analysis suggests that without any action, the result of these demographic pressures could be a public sector debt of 217% of GDP by 2071, more than double the current proportion.

    I think it is wrong – morally and economically – to pass on that level of debt to future generations.

    Others might look to tax as the solution to this problem.

    But to keep up with projected spending pressures that would mean increasing annual tax revenues by £200 billion by 2071 in today’s money, or to think of it more simply at least doubling the basic rate of income tax and main rate of employee National Insurance.

    I reject that prospect, because that is the path to socialism: less freedom, less enterprise and less prosperity.

    But to borrow an extra £28 billion would have exactly the same impact.

    Higher inflation would lead to higher interest rates and higher debt repayments.

    Rachel Reeves herself said such an approach would spook the markets.

    It would be an illusory dash for growth which would increase the burden on taxpayers, shake confidence in the UK and pass on unsustainable debt to future generations.

    So we need to find a smarter way out of the challenge faced by so many advanced economies.

    Tackling inflation relentlessly must be the immediate priority. High growth needs businesses and investment and consumer confidence, none of those are possible with inflation.

    High growth needs low inflation.

    But tackling inflation is the starting point not the end point.

    Higher living standards means growth in GDP per head, not just growth in GDP. That means growth driven by increases in productivity.

    If we were as productive as Germany, our GDP per head would be £6,000 higher per annum. If it reached US levels, it would be £8,000 a year higher.

    In my Bloomberg speech in January I identified the four pillars necessary to achieve productivity-rich growth. I called them the four ‘E’s: Education, Enterprise, Employment and Everywhere. Education, so we tap into people’s talents by investing more in skills; building an Enterprise economy by reducing the burden of tax and regulation; removing the barriers to Employment so businesses can recruit; and spreading growth Everywhere so all parts of the country are levelled up.

    Now the productivity challenge applies to both the public and the private sector.

    If we increase our productivity growth in the public sector by 0.5% a year, we stabilise the proportion of GDP consumed by the state by closing the gap between anticipated growth and anticipated spending up to 2050.[1]

    And if we replicate that productivity growth in the private sector we start to increase living standards as well.

    That would mean a boost not just to GDP, but GDP per capita. It would mean increasing tax revenues without increasing tax rates.

    And it would put us on a sustainable path to lower taxes.

    It is also the route through which union reforms, privatisations and support for competition delivered lasting growth and productivity.

    Public sector productivity

    Let’s start with the public sector. It is the sector over which governments have the most direct control – and that matters because, excluding benefit system transfers, it accounts for about 20% of our national output.

    The long-term pressures, whether an ageing population or the need for stronger armed forces, won’t change.

    But the way we meet those pressures can change. We can be much, much more efficient.

    We start, I am afraid to say from a low base. Public sector output is 5.7% lower than pre-pandemic compared to private sector output which is 1.3% higher.

    What does that tell you? Our innovators, job creators, entrepreneurs and risk takers have bounced back but the public sector is still feelings the effects of a once-in-a-lifetime pandemic.

    But now, with that pandemic behind us, we need a renewed focus on public sector reform.

    Patricia Hewitt’s review into how we significantly reduce the number of top down-targets in the NHS made a series of recommendations to help empower local leaders, something I am pleased the NHS has already started to take forward.

    A recent review by the National Police Chiefs’ Council (NPCC) has already identified that 443,000 officer hours are spent filling in forms and dealing with unnecessary administrative tasks.

    And it was recently highlighted that 10,000 public sector workers are focused predominantly on equality, diversity and inclusion initiatives, with nearly 800 of those in local councils alone.

    Breaking down barriers for disadvantaged groups should be everyone’s responsibility not something you tick a box to achieve at further cost to taxpayers.

    So I have asked John Glen, the Chief Secretary to the Treasury, to lead a major public sector productivity programme across all government departments which we will report on in the Autumn.

    He will assess how we can increase public sector productivity growth, both in the short and long term, and look at what it would take to deliver that additional 0.5% every year that would stop the state growing ever bigger as a proportion of our output.

    We also need to be better at measuring productivity.

    The UK is one of the few countries to include public sector output measures as well as input data in its productivity statistics, which is a good start. But we can still do better.

    Crime, for example, is down approximately 50% since 2010, great achievement. That excluded fraud and computer misuse (which wasn’t measured then.) But it barely makes a dent on their policing productivity figures because our productivity figures don’t capture crime outcomes.

    Likewise on defence we measure what we spend, but not how safe that makes us.

    And where we do measure outputs and the quality of delivery, mainly in the NHS, we count the number of hospital treatments but not the value of preventative care, even though that saves lives and reduces cost.

    So I have asked the National Statistician to review how we can improve the way we measure public sector productivity which he has agreed to do.

    I want this to be the most ambitious public sector productivity review ever undertaken by a government, with the Treasury acting as an enabler of reform. So we will spend time getting this right.

    But if we do, the rewards are clear.

    More innovation in the NHS, building on the success, for example, of the new surgical hubs that reduce waiting times and will give us 1 million extra procedures by 2024-25.

    More innovation in our education system, building on the success of places like Oak Academy which has helped deliver over 150 million online classes.

    And more innovation across our public services by harnessing the potential of AI to boost public sector productivity, building on cutting edge initiatives like the NHS AI lab and the Foundational Model Taskforce.

    More innovation. Better public services. Less pressure on the public purse. A growth mindset that delivers more for less not just more for more.

    Private sector productivity

    Nor will we limit our ambitions to public sector productivity. When it comes to the private sector we can only enable reform rather than direct it, but we will play our part.

    That’s why in my Bloomberg speech I announced the four pillars of our productivity plan: Education, Enterprise, Employment and Everywhere.

    On education we have a huge skills programme in place already, including an expansion of apprenticeships, T levels and boot camps. Sir Michael Barber is advising me and the Education Secretary of where we need to go even further on the implementation of our reform programme.

    For an enterprise economy we need more business investment, so we introduced full expensing of capital allowances in the budget, long championed by the CPS and making us the only major European country to do so. We are following this up by looking closely at the way our pension funds operate to consider avenues for reform.

    On employment we know businesses need to be able to recruit the labour they need. So in the budget we set out one of the most comprehensive ever plans to address labour shortages including cutting the cost of childcare by up to 60% for many families and abolishing the lifetime allowance on pensions.

    Finally to make sure we level up the benefits of growth to everywhere in the UK, we are launching 12 investment zones in left-behind areas, mini-Canary Wharfs which will bring clusters of fastest growing industries to areas where they are most needed.

    It has long been thought that emerging economies should be investment-led but advanced economies consumption-led. But if we are to emerge from the low growth trap facing Western economies we should re-examine that orthodoxy because increasing investment is one of the biggest ways we can raise productivity in both the public and private sectors.

    Conclusion

    So I finish where I started: meeting Rob’s challenge to explain to the country why growth is so important.

    Growth gives hope to young people about their prospects.

    It gives security to older people about the public services they need.

    It gives reassurance to taxpayers about the burden they are being asked to bear.

    But it needs productivity. A relentless focus on efficiency and innovation across both the public and private sectors.

    A dynamic, high growth future is ours for the taking – and productivity will be at the heart of it.

    Thank you.

  • Jeremy Hunt – 2023 Comments at the IMF Article IV Press Conference

    Jeremy Hunt – 2023 Comments at the IMF Article IV Press Conference

    The comments made by Jeremy Hunt, the Chancellor of the Exchequer, on 23 May 2023.

    Intro

    Thank you, Kristalina, for being here today. It’s a pleasure to welcome you to London for the first in-person Article IV mission since 2018.

    I welcome the publication of your statement today, which provides a timely, independent assessment of the UK economy from the IMF.

    The backdrop for your visit is one of challenge and opportunity.

    Since the Fund’s last assessment of the UK economy in February 2022, our world and our economy has been challenged fundamentally by Putin’s illegal war in Ukraine, and the whole continent is feeling the knock-on effects.

    And so since becoming Chancellor, my central mission has been to restore macroeconomic stability and deliver our priorities to halve inflation, grow our economy and get debt falling.

    Today, the IMF’s assessment shows that we are on the right track.

    Macroeconomic Outlook

    Their report forecasts growth of 0.4% in 2023 – a 0.7 percentage point upgrade versus their April forecast.

    That is even higher than the Bank of England’s forecast – published last week – for 0.25% growth in 2023.

    The IMF say that we have acted decisively to fight inflation, which will “substantially” reduce to around 5% by the end of the year.

    And the IMF say that our approach to fiscal policy will help to significantly reduce the deficit over the forecast – by 3% of GDP between 22/23 and 27/28.

    Together, these forecasts demonstrate that we are on the right path, but the job is not done yet.

    Growth Measures

    Growing our economy is one of this government’s top priorities.

    I was pleased to see that the IMF agree with the need for “ambitious evidence-based structural reforms” to support growth because that is exactly what we are delivering.

    At Spring Budget, I announced measures to grow the economy focusing around four key areas – Employment, Education, Enterprise, and Everywhere.

    The OBR judged these policies – including a major expansion of childcare support – will result in 110,000 more individuals in the labour market by 2027-28, directly increasing employment by 0.3% and GDP by 0.2%.

    The OBR also say that full expensing would boost business investment by almost 3.5% in 2024-25 and 2025-26.

    Today the IMF say that the supply-side measures in the Budget “should have a positive effect on medium-term growth” and we will continue this work in the months ahead.

    Fiscal Policy

    But despite this positive news, I know that high inflation and energy prices – issues shared internationally – remain key challenges.

    People are worried about the cost of living, which is why I announced the extension of the Energy Price Guarantee in the Spring; why we are delivering cost of living payments to more than 7 million households; and why we are freezing fuel duty to keep more money in people’s pockets.

    Like the government, the IMF recognise inflation is a major challenge for the UK economy and affirm that we are taking the right strategy to support the Bank of England in their efforts to combat inflation.

    And I know the IMF agree that we have among the best macroeconomic institutions and frameworks anywhere in the world to respond to these challenges.

    Reducing Uncertainty and Promoting Long-term Growth

    Finally, I am pleased the IMF have recognised our work to reduce uncertainty for households and businesses in the face of some of the biggest challenges we face.

    That includes agreeing the Windsor Framework which the IMF say will “favourably impact business investment” …

    … setting the conditions for long-term growth, with world-leading ambitions and legal frameworks for our net-zero goals…

    … and ensuring that our banking sector remains well capitalised and resilient to shocks.

    Final Remarks

    We are working hard every day to grow our economy and deliver on this government’s priorities, and the IMF today show we are doing just that.

    Thank you, Kristalina, to you and your team for your work.

    I will now hand over to you.

  • Andrew Griffith – 2023 Speech to the Innovate Finance Global Summit

    Andrew Griffith – 2023 Speech to the Innovate Finance Global Summit

    The speech made by Andrew Griffith, the Economic Secretary to the Treasury, on 17 April 2023.

    Good morning, everyone.

    Let me start by thanking Innovate Finance for inviting me and for organising such a fantastic conference.

    As ever, you really are kicking off UK Fintech Week in style.

    And it’s wonderful to be in this beautiful space – Guildhall – a venue constructed in the fifteenth century. It is a reminder of the proud and storied history of the financial services industry in this country.

    As Economic Secretary, my objective is to ensure that the UK is the most innovative, most international and most business-friendly economy anywhere in the world.

    I want the UK to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.

    And as we chart our way forward with the ability of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.

    That is certainly the objective that the Chancellor, the Prime Minister and I all share for the sector.

    Innovation – all of you in the dynamic fintech community – has a huge role to play.

    Bank accounts, payment services, the ability to borrow, save into a pension or other investments, buying insurance, or the provision of tools to understand finances better or to shop around offer enormous benefits to their users.

    They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our old age or they can shield us from some of the adverse events that life can throw at us.

    Whilst I am proud to have many large and longstanding firms in the sector, it is rare that legacy firms have the ability to innovate at the pace required to make the most of changing technologies and keep us internationally competitive.

    Our Fin Tech community is vital for the economy in improving productivity, creating choice, and reaching into new under-served segments of the market.

    Which is why I am glad that as a location for Fin Techs to base themselves, on many fronts the UK is leading the way.

    Indeed, the sector continues to go from strength to strength.

    Data from Fintech Labs shows that almost half of Europe’s fintech unicorns are based here in the UK.

    And Innovate Finance found that last year, the sector attracted more investment than the next thirteen European countries combined.

    Our own commitment to supporting UK fintech is reflected in the actions we took, working with the Bank of England, to facilitate the private sector sale of the UK arm of Silicon Valley Bank to HSBC last month.

    I know many of you in this room were directly affected by the collapse of SVB and I am glad that we were able to act decisively to secure an outcome which protected your capital and ensured continuity of banking services.

    Throughout that intense period, I and other Ministers were accessible and constantly communicating with the sector.

    Government isn’t perfect but I hope that when the chips were down we demonstrated the benefits of being a sovereign nation with the agility to make its own decisions fast.

    But that is just the start.

    Our belief in this sector is also evident in the proactive steps we are taking to ensure that you continue to thrive in the years ahead.

    Importantly, the Government will reflect on the submissions to the Payment Services Call for Evidence and introduce an agile regulatory framework for payments and e-money that promotes growth and supports an internationally competitive payments sector.

    We’re also fostering innovation by making the UK a safe jurisdiction for cryptoasset activity.

    We set out plans in our wide-ranging consultation published in February, and we want to pro-actively support the use of distributed leger technology and tokenisation where it makes sense.

    At the same time, I was pleased to launch the Treasury’s joint consultation with the Bank of England, on how to move forwards with a sovereign or central bank digital pound.

    Private wholesale digital currencies are likely to come to market first and we are already creating the legislation to enable those which are fiat backed and used for settlement in the current Financial Services Bill going through Parliament right now.

    And we have the upcoming Financial Market Infrastructure Sandbox, which will help industry adopt and scale digital solutions that could radically change the way markets operate. That will be up and running this year.

    CFIT

    One of the most important steps we have taken to support financial innovation over the past two years has been implementing Ron Kalifa’s fintech review.

    Since being appointed, I have upped the pace of delivery and a few weeks ago we launched the new Centre for Finance, Innovation, and Technology – CFIT – in Leeds, a city where fintech adds £710 million to the local economy.

    CFIT is backed by £5 million of Treasury seed funding, along with an additional £500,000 from our partners at the City of London Corporation.

    It’s central task is to bring together industry players – entrepreneurs, policymakers, investors, and academics – into coalitions to address some of the trickiest challenges facing the sector.

    I am delighted to announce today that CFIT’s first coalition will look at Open Finance and how unlocking financial data can benefit SMEs and consumers.

    Everyone in this room understands how data can radically empower individuals and businesses alike.

    McKinsey estimate that opening up financial data could boost UK GDP by a useful 1.5% by 2030 so CFIT has my full support as they go after that opportunity.

    Open Banking

    Open finance would obviously be the next development beyond the existing Open Banking ecosystem, which is one of the most dynamic and exciting anywhere in the world.

    There are over 7 million regular active users of Open Banking in the UK and over a billion successful API calls every month. It’s spawned thousands of new businesses and products.

    Those who are close to it, know that this is a key moment for the Open Banking regulatory regime.

    We’ve done a lot of work over the last year through the Joint Regulatory Oversight Committee to set out the next steps to ensure Open Banking continues to go from strength to strength.

    This morning, the Committee set out its recommendations, with a vision of a data sharing market which is competitive and scalable for the long term.

    To achieve this, we will move Open Banking on to a sustainable regulatory framework, which the Government intends to develop through the Data Protection and Digital Identity Bill which has its second reading in Parliament today.

    Open Banking will also transition to a new entity, with a broad-based, equitable funding model and high standards of corporate governance. Today we set out how we plan to get this transition started this year.

    But we can’t spend all our time and energy on governance models.

    So we also set out an ambitious roadmap of actions for the next few years, again starting immediately. By Q3 this year, there will be tangible progress across the board, on key themes such as mitigating the risks of financial crime and promoting new services, including variable recurring payments.

    Let me be clear as I know some folk have been worried: this will be the year of delivery on the next generation of Open Banking.

    Our plan is ambitious but achievable, and I am committed to maintaining our country’s leadership in this field. We won’t rest on our laurels, and I want to encourage all of you to work with me to build on the success that Open Banking has been so far.

    Artificial Intelligence

    If data is one limb that has the potential to transform the financial services sector, the application of artificial intelligence is the other.

    Although there are already many deployments and uses in the financial sector, my belief is that we are barely getting started.

    AI can help firms to identify and prevent fraudulent transactions, detecting suspicious patterns in real time.

    By analysing data on market trends, customer behaviour, and other factors, AI algorithms can identify potential risks and provide recommendations for risk mitigation strategies.

    It can help investment managers to make more informed decisions, driving better returns for savers.

    And AI can power new customer service features, such as chatbots, which can deliver personalised support quickly and efficiently.

    This technology has immense potential to transform the financial services sector.

    And that is why the Government recently published its White Paper on AI which details our plans to make the UK the most trusted and pro-innovation system for AI governance in the world.

    This builds on our recent £900 million investment to build an exascale supercomputer and to establish a new AI Research Resource. These will provide significant compute capacity that many in this room may wish to take advantage of.

    Launch of the UK Fintech Census

    But even as we support the fintech community here in the UK, it is vital that we help our firms to expand internationally.

    That’s why my final announcement today is the launch of the UK Fintech Census, in collaboration with the City of London Corporation and Innovate Finance.

    It is designed to tailor our support for you as we make the most of the UK’s access to international markets.

    When you think about it, no other country on earth combines a seat on the Permanent Council of the UN with membership of NATO and AUKUS, a trade deal with the EU, accession to the Comprehensive and Progressive Trans-Pacific Partnership and being a founder member of the Commonwealth.

    The Census aims to help you make the most of these opportunities by seeking your feedback on three simple points:

    What international markets do you want to break into?

    What are the main challenges that you face?; and

    What further support and services would you like to see?

    The Census opens today and will run for five weeks, aiming to reach all 2,500 fintechs in the UK.

    And, in order to make it a useful and actionable data set, we will repeat the Census annually.

    Conclusion

    In conclusion, ladies and gentlemen I hope you are as excited about the opportunities as I am for you.

    UK fintech is in a great place today.

    But it’s our job, as a Government, to ensure that that success continues and we reach new heights… a mission to which, I assure you, we are utterly committed.

    I am a do-er by nature: I have worked in disruptive businesses for most of my life and I want to deliver concrete actions that help this sector to thrive.

    You’re already effective at telling us what you think – and I challenge myself and the team on a daily basis what more we can do to help.

    So please let’s keep working well together so that at next year’s Global Summit – and many more to follow – we’ll all be able to look back on many more fantastic years for UK fintech.

    Thank you very much.

  • Andrew Griffith – 2023 Speech to the Lord Mayor’s Financial Literacy and Inclusion Summit

    Andrew Griffith – 2023 Speech to the Lord Mayor’s Financial Literacy and Inclusion Summit

    The speech made by Andrew Griffith, the Economic Secretary to the Treasury, at the Mansion House in London on 12 April 2023.

    Good afternoon and thank you Lee for that introduction.

    It’s good to be here today to discuss this vitally important topic – and thank you Lord Mayor for everything you have done in a short number of months.

    On this and on other aspects of our financial services you have been banging the drum for the City of London so loudly that I’m sure it has left our competitor countries ears ringing.

    Not that, of course, we want that.

    But we do live in a globally competitive world, and, frankly, I want us to come out on top.

    Like you, I want us to be the most innovative, most international and most business-friendly economy anywhere in the world.

    I want us to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.

    And as we chart our way forward in these uncertain times but with the agility of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.

    That is certainly the objective that I, the Chancellor and the Prime Minister all share for the sector.

    Your theme today is Financial Literacy and Inclusion. How we ensure that financial services deliver for everyone.

    Bank accounts, the ability to borrow, a pension, savings, insurance, or the use of financial technology offer enormous benefits to their users.

    They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our longevity or infirmity or they can shield us from some of the adverse events that life can throw at us.

    So, it is important that we do everything possible to ensure no one is excluded – whether through lack of understanding or lack of access – from financial products which could help them succeed in life.

    We can only do this by working together. You know that. It is why we are all here today.

    But let me address myself particularly to the role of government and what specifically we can do to support financial inclusion.

    I believe there are four things.

    First, we can intervene directly to help those who do end up excluded in some way.

    Second, when legislating, we can design regulations that are proportionate. Regulations that are mindful of the very real potential unintended consequences for financial inclusion.

    Third, we can support financial literacy.

    And fourth, we can create the environment in which innovators can bring forward new products that overcome financial exclusion.

    Let me take each in turn.

    On the first, I would humbly say that, although there is always more to do, this government is doing more than any of its predecessors.

    We are continuing to maintain record levels of funding towards free-to-client debt advice provision in England via the Money and Pensions Advice Service bringing their budget this year to £93 million.

    We have legislated so that every single person in this country must be able to open a fee-free bank account if they wish to.

    There are more than 7 million of these accounts open today and something we should all be proud of is that more than 70,000 Ukrainian refugees in the UK have been helped to open one of these accounts over the last year.

    Meanwhile, the Age Agreement, signed by the Treasury, the ABI and BIBA, helps older consumers who struggle to access motor and travel insurance by signposting them to appropriate insurers.

    Originally signed in 2012, I’m pleased to say it will be renewed this year to continue supporting older consumers.

    One of the largest interventions we have made is to support affordable credit.

    We’ve given £100 million of dormant assets funding to Fair4All Finance to support their work on financial inclusion, on top of a further £45 million of dormant assets funding to the organisation to address the cost of living.

    We’ve even provided Fair4All Finance with £3.8m of funding to pilot an entirely No-interest Loans Scheme.

    And this isn’t the only work being delivered through dormant assets. DCMS recently consulted on another tranche of dormant assets funding, worth an estimated £738 million over time.

    In its response, the government confirmed that youth, financial inclusion and social investment would continue as causes under the scheme.

    As the Minister responsible for financial capability, I look forward to working with DCMS in exploring how building financial education and capability can be supported in the future as an additional aspect within the financial inclusion cause.

    Finally, at the recent Budget, we extended the Help to Save scheme by another 18 months to 2025.

    We will shortly be consulting on how we can simplify to make it even better and reach more people.

    So as with Covid or energy bills, we won’t hesitate to help the most vulnerable – but most people don’t want a handout or a special product from the government.

    They want to be able to access to same products with the same features and benefits as everyone else.

    And that brings me to my second point about government’s role. Which is that as legislators, we must be careful when making regulations that they are proportionate.

    It is too easy to have well intentioned regulations which potentially increase financial exclusion.

    Examples could be client onboarding requirements which push the cost of advice out of reach for many who would benefit or mandatory affordability tests that actually reduce access to credit for some of those needing it the most.

    It’s something that my officials and I are very conscious of.

    It is why it is so important that you do respond to our consultations and it why every piece of legislation has a Regulatory Impact Assessment which is independently scrutinised.

    Perhaps a good example of where I hope we are getting it right is on Credit Unions.

    Ever since the 18th century, mutual societies have helped meet the needs of local communities.

    Given their distinct business models, credit unions face a less onerous set of regulations than non-mutual retail banks.

    For example, credit unions have exemptions from the requirements of the Consumer Credit Act 1974, which enables them to offer credit at affordable rates to their members who might otherwise be excluded from credit.

    To help further the growth and sustainability of credit unions in Great Britain, the government is bringing forward amendments to the Credit Unions Act 1979.

    For example, credit unions will be able to offer products such as car finance and distribute insurance to their members for the first time.

    It’s a good example of proportionate regulation – or deregulation – being used to improve inclusion.

    On financial literacy, I know that you heard earlier from Sam at National Numeracy who deliver programmes to support the millions of people who have low confidence with numbers.

    I’m looking forward to supporting their National Numeracy Day on the 17 May and I am delighted that they are part of the Lord Mayor’s Appeal this year.

    There couldn’t be a more important issue for all of us.

    It is terribly concerning to hear the statistic that around 8 million adults in England only have the numeracy skills of a primary school child.

    We know lack of numeracy is a barrier to using financial products and it is one of the main reasons why people get into problem debt.

    The Prime Minister has been clear that numeracy is a personal mission for him too. At the start of this year, he said:

    “One of the biggest changes in mindset we need in education today is to reimagine our approach to numeracy.

    “In a world where data is everywhere and statistics underpin every job, our children’s jobs will require more analytical skills than ever before.

    “Letting our children out into the world without those skills, is letting our children down.”

    He laid out the path to introducing maths education up until the age of 18 by the end of the next Parliament.

    Many of us are worried about the growth of a compensation culture impacting the sector. It’s a growing cost and has the potential to hold us back competitively.

    Tackling some of the practices of claims management firms is one part of the solution.

    But improving the level of financial literacy and an understanding of risk by the consumer can only help us return to greater role for ‘caveat emptor’.

    There’s one final role for government. And that’s creating an environment which fosters innovation. Light touch regulation, a culture of supporting risk takers or simply regulatory sandboxes that are open for business.

    The whole UK fintech sector is a great success story, with around 2,500 firms supporting tens of thousands of skilled jobs across the country.

    In 2022, the sector attracted $12.5 billion of investment. This means that fintechs in the UK attracted more funding than those in any other country bar the US.

    Much of what they do delivers for the financially excluded. For example, through new payments options or new tools and apps helping individuals manage their budgets or better understand their finances.

    Artificial Intelligence offers huge possibilities for inclusion.

    Alternative credit scoring to develop more accurate credit profiles for currently underserved groups.

    Micro insurance to deliver low cost coverage;

    And better fraud prevention as sadly fraud often hits the least resilient the hardest.

    Let me finish with a specific example.

    Access to cash is a topical subject bringing together many of the themes I’ve spoken about.

    Nobody in this room needs reminding that as a society, we are moving increasingly from cash to electronic payments – with non-cash transactions now accounting for around 85% of UK payments.

    Nor is it just the young: 8 out of 10 people of retirement age are using contactless card technology at least once a month.

    The trend has benefits in convenience, security and for the environment.

    However, we will not leave behind rural communities, the elderly or those who use cash as a way to manage their personal finances.

    That is why, for the first time since the ancient Celts began minting coins in the British Isles, this year will see communities benefit from a right of access to cash, enshrined in law via the Financial Services and Markets Bill currently going through Parliament.

    The right will cover not just withdrawals but also the ability to make cash deposits, something that is particularly important to small businesses.

    Their continued ability to accept cash depends upon knowing they can deposit it safely. Putting this in statute is a huge step forward.

    We have already made legislative changes to support cashback without a purchase. That turns every single corner and high street shop into a potential source of free cash withdrawal.

    So, we won’t hesitate to legislate where necessary, but we delude ourselves if we believe that is the whole answer.

    Like the trend away from the horse pulled carriage or domestic coal fires, we cannot hold back change for all time.

    As I said before, innovation has a huge role to play.

    So, I pay tribute to UK Finance, their member banks, LINK and the Cash Access group who have come up with a whole series of innovations to help the vulnerable. Community cash machines, shared banking hubs and more.

    ‘Tap and go’ technology for charities can eliminate the jeopardy from losing the old collection tins and even yield higher donations.

    With the right controls, payment cards could help those with carers or in care. We have the popular ‘Go Henry’ cards for parents – why not ‘Go Harold’ or ‘Go Hilda’ for the elderly?

    Earlier this year, together with the City of London Corporation, we launched a new government-seed funded national hub – the Centre for Finance, Innovation and Technology.

    They are operationally independent, but I did put to Charlotte and Ez when we last met that financial inclusion was a big agenda that would be worth their consideration.

    Let me conclude Ladies and Gentlemen by restating my commitment to work with you all on this agenda.

    Thank you, Lord Mayor and the City of London Corporation for bringing us all together today.

    The UK is immensely fortunate to have the great financial services sector that it does.

    But part of growing sustainably and reaching our full potential is making sure that we include everyone and that is why the work of everyone here today is so important.

    Thank you.

  • Andrew Griffith – 2023 Speech at the Funds Congress

    Andrew Griffith – 2023 Speech at the Funds Congress

    The speech made by Andrew Griffith, the Economic Secretary to the Treasury, in London on 30 March 2023.

    Introduction

    Thank you, John. As a former public company CFO, it’s certainly a relief to know that you’re introducing rather than interrogating me today.

    And thank you to everyone here at the Funds Congress for having me this morning.

    I was, of course, delighted to be asked to speak at London’s largest asset management conference.

    And even better that I can be with you today in person, given this is the first time Funds Congress has met physically since 2020.

    What a lot has changed since then. But what hasn’t changed is the vital importance the asset management industry holds for the UK and the global economy.

    An engine for UK growth and long-term economic prosperity. A world leader in portfolio management and sustainable finance. The second largest asset management centre in the world with a market share higher than France, Germany and Switzerland combined. And an innovative spirit coupled with a diversity of expertise unrivalled anywhere to boot.

    Growth: The role of the asset management

    Before I come on to what we can achieve together, let us consider where we are today.

    A major source of high value jobs in the UK – employing 42,000 people directly and supporting many tens of thousands in adjacent services.

    A unique lynchpin of the UK financial services ecosystem, existing at the heart of many concentric circles of value in the industry across the UK.

    But more importantly, the performance that you deliver to help lift up the standard of living of millions, tens of millions are benefitting today as they save for a pension through auto-enrolment.

    You generate close to 1% of the UK’s GDP.

    And 3.6% of total UK service exports.

    But that data doesn’t do justice to your impact today, let alone what we could achieve.

    And while we have the legacy to lead in this space, we can’t be complacent.

    Productive Finance

    As the Chancellor outlined in his Bloomberg Growth speech, we want the UK to be among the most prosperous countries in Europe.

    We want to spur economic growth.

    And we have a plan to get there.

    I want to pay particular attention to the role of enterprise.

    Within this, I want to highlight reward for risk, access to capital and smarter regulation.

    Because enterprises need funding, just as all our long-term priorities do.

    It’s why we’ve been working hard to better facilitate investment in long-term assets that will be a crucial ingredient in the UK’s economic success over the years ahead.

    Because we all know that there are global and domestic priorities we need to tackle. It’s why we’re a leader in green finance, it’s why we are working to level up, it’s why we want to be the next Silicon Valley – but these priorities need to be funded.

    Currently, the UK has the fourth largest pensions market in the world.

    If we can unlock just a fraction of Defined Contribution pensions schemes’ capital for investment into productive finance assets, ordinary pension savers could retire with more security and money to enjoy.

    And simultaneously, we would increase the supply of private finance for innovative companies, and productive assets.

    When talking about productive UK assets I mean infrastructure, I mean growth, I mean venture capital.

    It’s why the launch of the Long-Term Asset Fund – or LTAF – is such an important step in unleashing long-term investment.

    At the beginning of December, I spoke about how, together, we have created the LTAF to help unlock access to long-term illiquid assets.

    Our conclusion is that it will lead to a significant boost to the productive capacity of the UK economy – including much-needed infrastructure and decarbonisation products.

    Because we know that client demand for illiquid investments is increasing. So it’s welcome that additional work such as the Productive Finance Working Group’s guides to illiquid investments is helping to set direction for DC pension schemes.

    And I’m excited to hear of firms that are formally submitting their LTAF applications to the FCA.

    It may sound like a niche, technical area to get animated over. But it’s far from it. It has the power to be transformative for our sector, the economy and society as a whole.

    Funds Regime

    The work on LTAFs is best understood alongside the wider work to review the UK’s funds regime.

    Here our ambition is to further build on the UK’s world-leading position in asset management by making the UK a much more attractive place for funds to domicile.

    And by ensuring the investors can access a suitably wide range of fund vehicles, so they can pursue the exciting investment strategies of tomorrow from the UK.

    With your support and expertise we will continue striving to make this a reality. We will make the taxation of funds more efficient. We will expand the range of investment products available in the UK. And we will facilitate the kind of innovation which helps investors and the wider economy.

    Global Opportunities

    My responsibility is to ensure the UK financial services industry is the very best that it can be.

    On making sure we have agile and effective regulation.

    The Edinburgh Reforms take forward the government’s ambition for the UK to be the world’s most innovative, open and competitive global financial centre.

    To drive growth and competitiveness in this crucial sector, while retaining our commitment to high international standards.

    The Chancellor has committed to move rapidly to review retained EU law over the next year to identify reforms which have the greatest potential to unlock growth in key areas, including in financial services.

    The Edinburgh Reforms themselves, of course, do not directly impact many of you here today. But what they show is our direction of travel: to use our new freedoms to tailor regulation to our industries and untether parts of our economy that have been held back.

    To what end? To becoming the most innovative, productive, well-oiled financial services sector in the world that delivers for communities across all four nations of the UK.

    I want to harness your strengths, unlocking institutional investment so that we can channel money to where it can do the most good: infrastructure, technology and innovation, the journey to net zero.

    I want our country to be the best country in the world for businesses to invest, grow and flourish.

    And I need your help in directing ever-more investment to these cutting edge-firms and long-term priorities.

    On the subject of long-term priorities, could anything be more important than our country’s security?

    It is my view that our security and freedom might just rely on our willingness to invest in defence over the long-term. So, I ask, as a sector, are we undervaluing defence and if so, what can each of us do about it?

    FSM Bill

    And the truth is we need to think long-term. We live in a globally competitive landscape. Our competitors are not taking a break.

    Our Financial Services and Markets Bill, therefore, has competitiveness baked into it, aiming to enhance the UK’s position as a global leader in financial services.

    The Bill introduces secondary statutory objectives for the PRA and the FCA to provide for a greater focus on growth and international competitiveness.

    Technology

    If we are to realise that ambition, we need to also ensure that UK financial services are at the forefront of technological advancements. To unlock the untapped potential new technology can bring to every town and city, and to grow the economy.

    It’s already enabling us to embrace green finance – on which we want to lead the world – and exploit the great opportunities provided by AI, Quantum Computing.

    And the asset management industry has the unique capability to harness the opportunities of innovative technologies, and one development I’d like to highlight is on digital assets – those made possible by the rise in blockchain technology.

    We are establishing a framework for regulating cryptoassets and stablecoins.

    This includes ensuring that the Treasury has the powers to regulate cryptoassets within the existing financial services framework which could cover those relating to the trading and investment of cryptoassets.

    Just last week, we published a consultation setting out comprehensive proposals for regulating the sector.

    At the end of last year, we made regulations to expand the Investment Manager Exemption tax rules to include transactions in cryptoassets, to remove disincentives to UK fund managers investing on behalf of overseas investors from including cryptoassets in their portfolios.

    This will provide greater tax certainty for UK fund managers and foreign investors and put the UK at the forefront of the developing global cryptoasset fund management sector.

    Sustainable Investments

    Finally, I cannot speak about the global context without acknowledging ESG and the importance of sustainable investment.

    I want the UK to be the best place in the world for sustainable finance and we have taken world-leading action to green the financial system.

    London was recently ranked as the world’s leading hub for sustainable finance for the third consecutive time.

    And I’m very proud that so many asset managers are signatories to the Financial Reporting Council’s Stewardship Code and members of the Net Zero Asset Managers Initiative – reflecting the importance the Government places on responsible and productive stewardship of capital.

    Conclusion

    I’ll end by repeating my thanks to you all for having me at the Funds Congress.

    It’s an exciting time for asset management and we’re depending on this trusted industry to invest in the future of the UK.

    I know we will work closely as we continue to promote growth and enable a competitive, thriving financial services sector. Thank you.

     

  • Miriam Cates – 2023 Speech on the Budget

    Miriam Cates – 2023 Speech on the Budget

    The speech made by Miriam Cates, the Conservative MP for Penistone and Stocksbridge, in the House of Commons on 20 March 2023.

    I am delighted that the Chancellor has set aside £4 billion to help families with young children. I am less delighted with how he is choosing to spend it. I am referring to the massive expansion of the 30-hour childcare scheme to include babies from the age of nine months. The stated aim of this policy is to get parents back into work and to grow the economy, but unfortunately it will probably fail on both counts. It will not get parents back into work, and the evidence of that comes from the current 30-hour offer for three and four-year-olds, which has had limited success, with only 40% of eligible families using their full entitlement. That is not surprising, because it is not free and it is inflexible, being restricted to only 38 weeks a year and between 9 am and 3 pm—not many jobs fit those requirements.

    Polling shows that a great many parents would understandably prefer to look after their children themselves. A recent IFS study showed that free childcare does not have a significant impact on parents’ childcare and work decisions. If these are the problems with the three to four-year-old offer, they will be even more acute with the nine months to two years offer. We are also forgetting that families in this country keep so little of what they earn that it is often not worth going back to work even if the childcare is cheaper.

    The Treasury and others keep repeating the mantra that British parents face the highest childcare costs in the western world. That is not actually true. The absolute costs of childcare in the UK are similar to those in other countries. The problem is that British families’ childcare costs are a higher proportion of families’ net income than in comparable countries. So the problem is not the childcare costs; it is the low net income. That is the result of taking so much money off parents in tax, in comparison with other countries, combined with meagre child benefits, also in comparison with other countries.

    The root of this problem is our unique individual taxation system, which does not recognise households with children and results in British families paying three, four, five, or even 10 times the amount of tax as families in other countries. It particularly penalises single-earner households or households with a large difference in earnings between the two partners. Under this policy, for example, a mother might return to work because the childcare costs are now reduced. She might earn a £20,000 gross salary, out of which she has to pay taxation, national insurance, pension contributions, student loan repayments and travel costs, while her universal credit and childcare top-ups could be withdrawn. Out of her gross salary of a little under £1,700 a month, she will be lucky to keep £290. That is an effective tax rate of nearly 80%. Some people will return to work for that, but many will not because of what they are losing in time with their children, so I do not expect take-up to be high.

    Will this policy grow the economy? It might increase GDP if more people return to the employment market, but what does it mean in real terms for real people’s lives? Will GDP per capita grow? I think that is highly unlikely, because when mothers return to work it creates more low-paying jobs in childcare and elderly care—important but low-paying jobs—which increases the gender pay gap. This has happened in Denmark, for example, which has three times the gender pay gap that we have here in the UK.

    I do not believe the policy will see mums flooding back to work and I do not think it will grow the economy in meaningful terms, but even if I am wrong, I still believe it is the wrong policy because it is the wrong policy for children. What is best for baby in the early years? The bond between mother and child is probably the strongest human relationship there is. This is not just a soppy feeling; it is a highly evolved survival mechanism, and strong attachment in the early years pays dividends in later life. There are many great people in the childcare sector, but no one replaces mummy.

    It is heartbreaking when mothers feel they have no choice but to leave their babies in childcare from a very young age because of the financial imperative. Yes, there is a cost of living problem, and many women want to work for all sorts of reasons and should absolutely be supported to do so, but the issue for many families is not the cost of childcare per se, any more than it is the cost of food or energy; it is the inability to live on one income when children are young. This is what separates many women from their children: not choice, but tragic necessity.

    The Treasury thinks the answer to our financial challenges is to send more mothers to work. I think the answer is to support all families in the early years to give parents a choice. We have £4 billion for this new policy and £4 billion for existing policies, so why not use this to fund a move to household taxation and to increase child benefits? Why not spend that £6,500 a year per child in a different way, to give parents the choice of how they spend it, perhaps on formal childcare, on informal childcare or on spending fewer hours in the workplace?

    Elite feminism might say that motherhood is drudgery and inferior to paid work outside the home, but that is only true if we believe that status and meaning derive principally from our salary and status in the workplace. “I wish I’d spent more time in the office instead of with my small children”, said no one on their deathbed ever. Those making these policies think of women with high-flying, highly paid careers, and of course those women should be supported to stay in work and maintain their careers, but that is not most women. Most women have jobs, not careers. As Dan Hitchens wrote in UnHerd last week, those advocating for these policies

    “assume that taking your little one to Wriggle and Rhyme at the public library is an unutterable burden, whereas stacking shelves or updating spreadsheets is a liberation of the human spirit.”

    It is fundamentally un-Conservative to spend £4 billion separating parents from their babies in the pursuit of marginal gains to GDP. We offer tax breaks and incentives to reduce costs for companies investing in the economy. Why not offer the same to families nurturing the source of our future economic success? I commend the amount of money being spent on the early years, but please can it be used to offer parents a choice and babies the best start in life?

  • Emma Hardy – 2023 Speech on the Budget

    Emma Hardy – 2023 Speech on the Budget

    The speech made by Emma Hardy, the Labour MP for Kingston upon Hull West and Hessle, in the House of Commons on 20 March 2023.

    It is good to see you back, Madam Deputy Speaker.

    This Budget has been described as being “slightly better” than the previous Prime Minister’s Budget, which crashed the economy. At least during the delivery of this Budget statement we were not watching on our phones as the pound plummeted, but what a low bar to reach above. Nothing says “clutching at straws” like the staged cheering of a “pothole fund”, whose very existence tells us that routine road maintenance has been starved of funds—another example of the managed decline that we have seen after 13 long years of Conservative rule.

    This Budget is weak and unambitious. It is a sticking plaster, an attempt to fix mistakes that consecutive Conservative chancellors have made, and it does nothing to address the real problems that people face. What does it give us? We find ourselves facing the biggest drop in living standards on record. The average French family is now a tenth richer and the average German family a fifth richer than their British counterparts. Wages are now lower in real terms than they were 13 years ago. This stalling wage growth has left British workers £11,000 a year worse off. Taxes as a share of GDP are at a 30-year high, which is the equivalent of every household paying £4,600 more tax each year than in 2019-20. The OECD has said that the UK economy is the weakest in the G7. The only other country that is set to have a lower rate of growth and more contraction of its economy is Russia.

    Why is this? The Government want to point to international factors such as covid and Ukraine, but those factors do not explain away the unique situation that the UK is facing. Yes, the Conservatives’ Brexit deal has had an impact, but these roots go far deeper. The roots of our economic difficulties go back to austerity in 2010, and the utter chaos and dysfunction at the heart of Government since 2016. The British people are literally paying the price for the internal wars within the Conservative party. Let us be honest: the Conservative party has no strategy and no plan to grow our economy, because the Conservative party no longer knows who it is or what it stands for. We are seeing that again this week as the soap opera continues, and the headlines about what the former Prime Minister did hit the newspapers instead of a real analysis of what is happening to the cost of living crisis.

    We see another example when we look at the Conservatives’ desperate attempt to form an economic plan. In January 2020 the Department for Business, Energy and Industrial Strategy introduced an industrial strategy that promised five foundations of productivity. That lasted only a year. In the spring of 2021 the Budget abolished the industrial strategy and replaced it with “Build Back Better: our plan for growth”, which contained three core pillars of growth. That lasted less than a year. In February 2022 the Chancellor—now the Prime Minister—abolished the pillars and the foundations, and introduced three priorities for growth. That lasted seven months. In September 2022 the Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), left out the pillars, foundations and priorities in favour of a growth plan—the less said about that, the better. It lasted four months. In January 2023 the new Chancellor brought back the pillars, but managed to increase their number from three to four. So far, that has lasted three months. What an utter farce! No wonder business investment is the lowest in the G7. There have been five plans for growth in one Parliament, and as a result of this incompetence GDP has fallen by 0.2%.

    Who are the winners? As usual, the richest 1% gain from a Conservative Budget via the changes to pensions, at a cost of £.1 billion for the rest of the taxpayers. As for the ludicrous claim that this is all about helping the doctors, I gently suggest that if the Government want to help the doctors and get more of them back working for the NHS, they should go and talk to the junior doctors who are currently on strike.

    Who are the other winners? Let us have a look at those. Research and development “claim farms” are exploiting the low level of scrutiny of tax reliefs. R&D relief is the largest co-operative tax relief, predicted to cost more than £9 billion by 2026-27. A recent report from the charity TaxWatch revealed that highly profitable finance companies are claiming millions in relief. Boundary-pushing is rife. Fraud and error in R&D totalled more than £1.1 billion in the last three years, and our HMRC is too under-resourced even to look at it properly. The Government were prepared to chase people who were accidentally overpaid in benefits and pensions more than companies that were exploiting the system.

    This Budget is a continuation of the pattern of managed decline, and it makes me so angry that our brilliant country is being let down in this way. It is a Budget from a tired, fractious, divided and desperate Government, focused so much on the enemies within and not enough on the real struggles that people out there are facing. It is a Budget with nothing to say on social care, NHS waiting lists or the millions without access to NHS dentists. It is a Budget that fails to learn the lessons of the past, with the only growth we see being in claim farms in R&D relief and in the very richest in society. Our country can be and will be so much better than this when we consign these farcical plans for pillars, foundations and priorities to the past and get in a new Labour Government who will put working people first.

  • Bob Seely – 2023 Speech on the Budget

    Bob Seely – 2023 Speech on the Budget

    The speech made by Bob Seely, the Conservative MP for the Isle of Wight, in the House of Commons on 20 March 2023.

    It is great to see you in the Chair, Madam Deputy Speaker.

    Like my hon. Friend the Member for Hazel Grove (Mr Wragg), I will be ultra-parochial: I am going to talk specifically about the funding model in my constituency in relation to public services, and what the Treasury says or does not say about it. The issue, which I will bring up in my Prime Minister’s question on Wednesday and in my meeting with the relevant Minister in the next couple of weeks, is the funding of public services on the Isle of Wight.

    Isle of Wight Council is the only island authority in the United Kingdom that does not receive a permanent, consistent uplift in its funding that reflects the additional cost of providing services on an island separated by sea from the mainland and without a fixed link. The “Fair funding review” of 2017, which was signed off by the current Prime Minister when he was in a different job, made clear that it recognised the additional costs associated with providing Government services on the Isle of Wight. It set those costs at a fairly high level, estimating them to be the equivalent of an extra 35 miles for ferry passengers on foot and about 70 miles—the distance from London to Peterborough—for those travelling in a car or lorry.

    Since 1989, there have been six major studies of the impact of separation by sea on fair funding and public services on the Island. I shall refer briefly to two of them, the University of Portsmouth model of 2016 and a study commissioned last year by the Government, working with me, to examine the funding settlement for the Island. The University of Portsmouth, in an excellent study for which I thank its academics, confirmed that three separate economic factors were at play in making the provision of local services on the Island more expensive. The first was the lack of spill-over of public goods between the mainland and the Island, the second was the so-called Island premium—the higher prices charged by suppliers on the Island as opposed to the mainland—and the third was the additional costs to the Island that result from physical and perceived dislocation.

    Two years ago, backing up and building on that report, the Government—at my request—spent about £50,000 on commissioning LG Futures, a respected local government think-tank, to review the evidence for the “additional costs” argument in relation to the provision of public services on the Island. The Government worked through with the council and me the parameters of what the review—which they had committed to and commissioned—would be investigating. It confirmed the accuracy of every relevant study of the funding of public services on the Island: it confirmed that it cost more to deliver public services there, for the reasons outlined by the University of Portsmouth.

    In many ways I am delighted by what has been happening in the past few years, and I want Ministers to hear that. We have had a much better deal from the Government in recent years. Since I became the Member of Parliament for the Island, we have got more than £120 million of additional Government funding, including about £48 million for St Mary’s Hospital—and that does not include the £10 million for the new diagnostics centre, which is wonderful news. We have received £50 million to upgrade the railway and the Ryde railway pier. The work on the pier is under way, as is the work at St Mary’s. We have got £20 million for Isle of Wight College, and £6 million to support shipbuilding in East Cowes. All that provides much better life opportunities and life chances for Islanders, which are what I am here to try to deliver.

    However, when it comes to the provision of local government services via Isle of Wight Council, we are lagging behind other islands in the UK, and our need—which has been confirmed by all coherent and responsible academic research into the Island—backs up our argument. I shall be meeting the relevant Minister in the next couple of weeks to discuss that, because the Government have, I am delighted to say, reopened the case for looking at Isle of Wight funding. The Secretary of State for Levelling Up, Housing and Communities will come to the Island in May to talk to the Islands Forum, which I helped to establish along with others, including council leaders in Orkney and, I believe, Wales. I also hope to talk to the Prime Minister about the issue in due course.

    I ask Ministers, including those at the Department for Levelling Up, Housing and Communities and the Treasury, to look at a fair funding formula for the Island, because this is one of the outstanding issues that have still not been resolved in our efforts to secure a better deal. We have gone a long way towards delivering that better deal for health, shipbuilding, transport and Isle of Wight College, but a fairer funding settlement that takes account of the fact that the Isle of Wight is an island is still eluding us. I should be extremely grateful if Ministers could work with me on that to solve the issue this year.

  • Robert Syms – 2023 Speech on the Budget

    Robert Syms – 2023 Speech on the Budget

    The speech made by Sir Robert Syms, the Conservative MP for Poole, in the House of Commons on 20 March 2023.

    I draw attention to my entry in the Register of Members’ Financial Interests. I am in the parliamentary pension fund and I may be affected by the lifetime allowance changes.

    Listening to the debate today, one would be forgiven for forgetting the fact that we had the worst public health emergency for 100 years, in which the Government had to take actions to lock the economy down. I had my disagreements with my right hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson), but you cannot say his motives were bad. He was trying to save lives and to get through a pandemic. We did not know whether the disease was going to be deadly, mild or what. That cost a lot of money and had a big impact on many businesses. If several million people are sent to sit at home for months on end while the Bank of England is printing money, it should not be a surprise if, at the end of that, inflation is high and living standards are under some challenge. The only people who could be surprised about the fact that the last 12 or 18 months have been difficult economically are those who did not think that there would be any consequences to lockdown. There were consequences. We are getting through them and things are improving, but that means there have to be some tough and difficult decisions on issues such as tax.

    On the Government Benches, sometimes we do not like to put up taxes, but sometimes it is necessary. If we look at what the Government have done, we see that they have a plan, which is working. Between now and the next general election, there will probably be five statements or Budgets. We are at stage 2, so there are another three to go. In November, there were predictions of a recession—quite a big recession, actually—in the early part of this year, a rise in unemployment and a black hole in public spending. They have all sort of disappeared, which means the Government have stabilised the situation.

    The Government have been trying to ensure that more people can get back into the labour force, with changes to childcare. They have protected a lot of capital budgets through their decisions, and their main objective in the Budget is to keep the economy growing. I understand why people quote the International Monetary Fund, but its predictions, which are always educated guesses, were produced before the German economy went into a recession at the end of last year. At the moment, neither the French nor the German economy is performing as well as the British economy.

    The truth of the matter is that we have a spike in inflation, which should come down quite rapidly this year. There will be a crossover point, somewhere around May, June or July, at which inflation will fall below the rate of pay increases. We will then start to have an increase in living standards from this summer onwards, and some of the squeezes that families are facing will be reversed. If the public finances improve as we grow, I hope that my right hon. Friends on the Treasury Bench will be able to cut taxation. There is a lot to be said for the Budget, which is one further step in the direction of sensible economics and nursing our economy and our public and individual finances back to health, so I support what the Prime Minister and the Chancellor are doing.

    I was pleased by what my hon. Friend the Member for Ynys Môn (Virginia Crosbie) said about nuclear, particularly small modular. It is very important that we get on with that because, as always, we need a balanced range with not just renewables and gas but nuclear power.

    I am generally pleased with what the Budget has done: I think that the outlook has measurably improved. We can still see some fragility in the world economy, certainly when we look at Switzerland or the United States, so we have to take a cautious approach, but I am sure that if we do so and nurse the economy back to health, our nation will be rather the better for it in 12 or 18 months’ time.

    I say to the Opposition: if we are right, we will beat you, and if you are right, you will beat us. I keep hearing about these 13 years of misery, but we won an election in 2015, we won an election in 2017 and we won an election in 2019. We may well win the election in 2024, but it will really be determined by whether the Treasury team get it right. My view is that they probably are getting it right; the Opposition’s difficulty is that they have to sit there and watch us getting it right. I think it is going to be an interesting 18 months.

    The hospitality sector in Bournemouth and Poole thinks that VAT is too high. The Isan Thai restaurant in Poole and the Lakeside restaurant in Poole would like to see it reduced when we can afford it, not least because many restaurants do not pay VAT on food, so the real rate of VAT at 20%, when they do not have many offsets, is quite a painful thing to pay. I told them that I would raise that point in this debate.

    I think we are going in the right direction. I think we will see an improvement as we go through the year, and it will fundamentally change the politics of our country.