The press release issued by HM Treasury on 11 July 2001.

Small businesses and other enterprises in disadvantaged communities will find it easier to attract funding from banks and individual investors following consultation on proposals to develop a Community Investment Tax Credit (CITC), Financial Secretary Paul Boateng said today.

Commenting on the Government’s initial response to consultation on the CITC proposals announced in Budget 2001, Mr Boateng said :

“Businesses developing in disadvantaged communities need to be able to draw on the widest possible range of suitable funding. The response to our consultation shows clear, widespread support for our proposals for a Community Investment Tax Credit as a means to encourage investment in these businesses. We are strongly minded to introduce CITC as planned to help them.

We have listened carefully to the views of those involved and decided that it would be right to extend the benefit of our CITC proposals to help businesses to raise money from individuals and banks, and not restrict them to investment from corporate and equity investment sources.

This will increase the options for the access to new capital vital to help reinvigorate some of our poorest communities.”

The Budget CITC proposal aims to stimulate business activity in disadvantaged communities through a tax incentive to encourage private investment in both commercial and not-for-profit enterprises. It is proposed that qualifying investments, made through qualifying Community Development Financial Institutions (CDFIs), will attract tax credits worth 25%, spread evenly over five years. Today’s announcement in a speech by Mr Boateng to a CDFI conference in Birmingham, will extend the initial proposals by:

– allowing individual investors to benefit from CITC.

– allowing both debt and equity investments to attract CITC.

These measures will encourage individuals to invest through either loans or taking shares in CDFIs rather than through equity alone, and enable CDFIs to raise loan capital for developing businesses in their areas from banks and other lenders as well as by issuing shares.

Together they will give CDFIs greater flexibility in raising capital for enterprises in their communities.

The press release issued by HM Treasury on 9 July 2001.

Better consumer services in banking and other financial services are the focus of a Government commissioned report published today.

Responding to the DeAnne Julius led review of banking services codes, Economic Secretary Ruth Kelly said:

“The report contains a number of useful recommendations directed at significantly improving competition and increasing the levels of customer service in banking services.

“We are therefore asking the bodies to whom the recommendations are directed to respond to these proposals.  We look forward to the industry responding positively to the challenges that have been set.”

DeAnne Julius said:

“While we found that there is much to commend about the current system of self-regulation through voluntary codes, we believe there are several areas where more should be done to help bank customers and sharpen competition.

“Our Group developed its recommendations after an extensive consultation process.  We believe the recommendations would help the market for banking services work more effectively and thereby deliver greater consumer benefits.”

The Banking Services Consumer Codes Review Group has set out twelve recommendations to improve the benefits to consumers from the industries’ voluntary codes of conduct.  The recommendations include:

•  measures to make account switching easier
•  improve information provided to customers
•  strengthen the processes for drawing up codes
•  more information on code compliance

The Government is asking those to whom the recommendations are directed to respond to the report by 30 September.

The press release issued by HM Treasury on 2 July 2001.

Gas and electricity, water, rail and telecommunications regulators have prepared individual action plans to implement the recommendations of an independent efficiency review published earlier this year. The key recommendations have been accepted, and each regulator has taken steps to implement priority recommendations. They will update industry and consumer representatives on further progress over the coming months.

Chief Secretary Andrew Smith commented:

“The independent report concluded that the UK Regulators are professionally run organizations. The regulators positive response to this report will led to further improvements in UK regulatory standards.

Implementation of their action plans will increase transparency in budget setting, lead to better assessment of the costs and benefits of major projects, spread best practice, and help the regulators recruit and retain quality staff.”

The key elements of the improvements are:

• Increased transparency in budget setting;
• more effective stakeholder involvement ahead of publication of draft annual plans;
• draft annual plans to include more detailed cost information including identifying all projects over £250k;
• policy and support costs identified separately wherever possible;
• better impact assessment of costs and benefits of major projects;
• annual publication of each regulator’s medium-term strategy. (Oftel which will review its medium term strategy as part of its preparatory work on Ofcom);
• developing the most appropriate form of regulatory impact assessment;
• post-implementation value for money reviews of major projects.

Retaining skills and expertise:

• regulators to pay more competitive rates to recruit and retain key staff; and, in return:
• regulators will continue to look for efficiency savings particularly in consultancy and support services.

Spreading best practice:

• better profile for joint working initiatives;
• more systematic identification and sharing of best practice;
• regulators to agree a consistent set of support service activity indicators with the eventual aim of publication.

The press release issued by HM Treasury on 31 August 2001.

INDEPENDENT INQUIRY INTO EQUITABLE LIFE

An independent inquiry into Equitable Life, to be headed by Lord Penrose, was announced today by Ruth Kelly, Economic Secretary to the Treasury.

The Inquiry will examine the circumstances leading to the current situation at Equitable Life and identify any lessons to be learned for the conduct, administration and regulation of life assurance. The Inquiry will report to Treasury Ministers.

Announcing the Inquiry, Ruth Kelly said

“The Government has considered carefully the concerns of policyholders and representative bodies including the Select Committee of the House of Commons.  Equitable Life raises important issues which deserve consideration by a full independent inquiry. We are announcing today that we have asked Lord Penrose to conduct an independent inquiry into Equitable Life and to consider what lessons can be drawn for the conduct, administration and regulation of the life assurance business. It is important that lessons are learnt from what has happened – this Inquiry will allow us to do that.

The Inquiry is being established on a non-statutory basis.  We hope everyone concerned will feel able to cooperate fully and frankly.  However, the Government will, if necessary, establish a statutory basis for the Inquiry.

Equitable Life is currently preparing proposals for a compromise deal which we understand are likely to be put to policyholders in the coming weeks.  In announcing the Inquiry now, rather than waiting until Parliament resumes at a time when policyholders would be considering the compromise deal, the Government is keen to ensure that there is no confusion between the Inquiry and the compromise deal.

The Inquiry will look into the circumstances leading to the current situation of the Equitable.  It will not comment or offer advice on the merits of any compromise deal proposed to Equitable Life policyholders; nor will it review past judicial decisions in relation to Equitable or pre-judge future decisions properly taken by the courts.

A review is currently being carried out by the FSA into the FSA’s role in the period from 1 January 1999 until the Equitable closed to new business in December 2000.  The Government looks forward to receiving that review.  However, the Government believes it is now in the public interest to have a wider, independent review that can look back as far as is necessary.  The Government expects the FSA review to be an important input into the Lord Penrose Inquiry.  The Government has said that the FSA review will be published.  The actual timing will need to be considered in the light of the timetable for Lord Penrose’s inquiry.

The Inquiry will take some time to complete and we want Lord Penrose to start work without unnecessary delay.”

Lord Penrose said:

“I am pleased to have been asked to lead this Inquiry. I believe it will cover some important and complex issues and I am looking forward to tackling the work ahead.”

Letter from Ruth Kelly, Economic Secretary to the Treasury, to Lord Penrose

Rt Hon Lord Penrose
Equitable Life Inquiry
Room 35a/G
Government Offices
Great George Street
Parliament Street
London SW1P 3AG

31 August 2001

Dear Lord Penrose

I am grateful to you for agreeing to conduct an Inquiry into the circumstances giving rise to the current situation at the Equitable Life Assurance Society. You will be aware of the public concern about this. It is in light of this general concern that the Government has decided to launch this Inquiry at this time.

The terms of reference for the Inquiry are:

to enquire into the circumstances leading to the current situation of the Equitable Life Assurance Society, taking account of relevant life market background; to identify any lessons to be learnt for the conduct, administration and regulation of life assurance business; and to give a report thereon to Treasury Ministers.

Within these terms of reference set out above, questions of how the Inquiry should be conducted, and what matters in particular should be examined, will be a matter for you.

However, for the avoidance of doubt, I should make clear that we are not asking you to review the decisions taken by the courts in litigation relating to the Equitable Life’s situation, in particular the decision of the House of Lords in Equitable Life Assurance Society v Hyman. That would clearly be inappropriate. It would be equally inappropriate to seek to resolve issues which ought to be dealt with by the ordinary courts in the event of a dispute which cannot be resolved otherwise.

Your Inquiry will look at circumstances which go back many years, even decades, up to today’s date.  Its purpose is to provide an authoritative account of the circumstances and to draw lessons for the future on the conduct, administration and regulation of life assurance business. It is important that these lessons are identified and learnt. The purpose of the Inquiry is not therefore, and could not be, to offer guidance to policy-holders of the Equitable Life on what course of action they might now pursue. In particular, it is not the function of your Inquiry to offer advice in relation to the Equitable’s arrangements with the Halifax plc, or on the scheme the Board of Equitable Life envisage consulting their members on shortly.  Particularly when looking at the recent past, I know you will be mindful of the fact that the Equitable is an ongoing business, which the Inquiry should not disrupt.

The Inquiry is a non-statutory Inquiry, so you will not have powers to compel the production of information or require the attendance of witnesses. We hope that everyone concerned will feel able to co-operate fully and frankly. However, if it proves necessary we  will consider putting the Inquiry on a statutory basis.

Much or all of the evidence will be private and confidential, some of which will be covered by restrictions on disclosure under UK and EC law. Because of this, we envisage that the Inquiry will generally be conducted in private, although you may consider it appropriate to hold some sessions in public.

Once again, thank you for agreeing to conduct this inquiry on behalf of the Treasury. The Treasury will co-operate fully with your Inquiry, which will have appropriate support, and will ensure that you are enabled to carry it out without undue impediment.

I look forward to reading your report.

RUTH KELLY MP

The press release issued by HM Treasury on 22 August 2001.

Ruth Kelly, Economic Secretary to the Treasury, today announced UK Government recognition of Nasdaq LIFFE, LLC Futures Exchange, which meets the criteria laid down in the Financial Services Act 1986.

Welcoming the decision Ruth Kelly said:

“I am pleased that Nasdaq LIFFE, LLC Futures Exchange has satisfied the criteria in the Financial Services Act and look forward to it opening for business in the UK. Today’s decision is further recognition of London’s status as a leading international financial centre.

UK investors can now directly trade on the  US Exchange using screens based in London. The advantages include wider choice and greater convenience, and demonstrates that London is both a competitive and efficient place in which to do investment business.”

The press release issued by HM Treasury on 9 August 2001.

PROMISE OF FREE MUSEUMS MOVES CLOSER

The Government’s commitment to making Britain’s national museums and galleries free for everyone moved a step closer today as the Treasury published the list of bodies which will benefit from the VAT refund scheme announced in the March Budget.

The museums and galleries featured on the list will receive VAT refunds when they allow the public free admission to their permanent collections, removing the VAT incentive for them to charge for entry. They include the British Museum, the National Gallery, the Natural History Museum, the Imperial War Museum, the National Portrait Gallery, Tate Britain, Tate Modern, the British Library, the Victoria & Albert Museum, the Royal Armouries, the Museum of Science and Industry in Manchester, and the National Museums and Galleries of Scotland, Wales and Northern Ireland.

Tessa Jowell, the Secretary of State for Culture, said:

“Free access to our national museums and galleries is one of the 25 steps to a better Britain that the Government has promised to deliver. As part of our commitment to strengthen the role of the arts in our national life, we want everyone to be able to enjoy the great collections in our national museums and galleries for free.”

Financial Secretary to the Treasury, Paul Boateng, said:

“This much sought after VAT reform is central to making free entry a reality, and the undertakings received from the national museums and galleries concerned will deliver this no later than December 1st.”

DETAIL

1.      Organisations whose activities are undertaken for no charge are not considered to be ?in business? for VAT purposes, and any VAT they incur in relation to these activities cannot therefore be recovered. For many national museums and galleries, VAT has previously created an incentive for them to charge for admissions so that they can recover the VAT which they incur on the things that they buy.

2.      Under the new scheme announced in the Budget and legislated for in the subsequent Finance Bill, all those main national museums and galleries that allow free admissions will be refunded the VAT they incur on their purchases, removing the incentive for them to charge.

3.      Since the Budget, the Department for Culture, Media and Sport, the Ministry of Defence and the Devolved Administrations have been in consultation with the national museums and galleries they sponsor to ensure that they take advantage of the new VAT scheme, and – where necessary – move over to free admission.

4.      The Treasury has today laid before Parliament an Order listing the national museums and galleries which will be able to benefit from the scheme. This includes both those bodies which do not currently charge and those which plan to move to free admissions.

5.         The scheme covers more than 24 different groups of museums and galleries, spread over more than 50 different sites, more than half of which are located outside London and the South East. The full list of eligible bodies is below.

6.      Eligible museums and galleries which do not currently charge will be able to recover the VAT they have incurred from 1 April 2001 onwards. Other eligible museums and galleries will recover the VAT they incur from the date that they move to free admissions.

7.      The Government’s pre-election manifesto, Ambitions for Britain, said it was “committed to reform the VAT system” to ensure that the main national museums and galleries were made “free for everyone from December”. “Free access to national museums and galleries” was also one of the “25 steps to a better Britain” promised in the manifesto.

8.      The list of eligible groups of museums and galleries is below:

The British Museum

The Imperial War Museum (London and Manchester)

The National Gallery

The National Portrait Gallery

The Natural History Museum

The British Library (public exhibitions, etc.)

The Wallace Collection

The Manchester Museum of Science and Industry

Sir John Soane’s Museum

The Museum of London

The Science Museum, including:

The National Museum of Photography, Film and Television;

The National Railway Museum; and

The National Coal Mining Museum.

The Tate Galleries (Tate Britain, Tate Modern and Tate Liverpool)

The Victoria and Albert Museums, including:

The Museum of Childhood; and

The National Museum of Performing Arts

The National Maritime Museum

The National Museums and Galleries on Merseyside

The Geffrye Museum

The Horniman Museum

The Royal Armouries

The National Army Museum

The Hendon Royal Air Force Museum

The National Museums and Galleries of Northern Ireland

The National Museums and Galleries of Wales

The National Museums of Scotland

The National Galleries of Scotland

The press release issued by HM Treasury on 3 August 2001.

Banking payment services will become more competitive under proposals announced by the Treasury today. The Office of Fair Trading (OFT) will become the regulator of the systems by which debit card, credit card, cheque and other payments are made.

The Government believes that more competition between banks and others involved in making and receiving payments will lead to lower charges for consumers.  As well as ensuring clearer pricing, the OFT will be seeking better access to payment systems for banks and other financial services providers.  The Government also hopes the new regime will lead payment service providers to better manage and develop their systems.

Announcing the publication of Competition in Payment Systems: A Response to Consultation, the Chief Secretary to the Treasury, Andrew Smith said:

“In publishing our revised proposals for taking forward the Cruickshank report’s recommendations on payment systems, I can confirm that we intend to introduce a new competition regime for the payment systems industry.

“Systems for delivering payment services such as credit cards, cheques and direct debits affect every user of the banking system, whether personal customers or businesses.  This Government is determined to put in place means to encourage competition in these services in the interests of all users.”

The press release issued by HM Treasury on 19 September 2001.

NEW EUROPEAN CLEARING HOUSE TO BE IN LONDON

The Treasury has given a new European clearing house leave to locate in London. European Central Counterparty Limited (EuroCCP) will clear for the new pan-European Nasdaq Europe market.  Economic Secretary Ruth Kelly has given leave for EuroCCP to be recognised as a clearing house.

Ruth Kelly said:

“I welcome the addition of EuroCCP to the list of UK Recognised Clearing Houses.  The decision to set up EuroCCP in London is a clear vote of confidence in our financial regulatory system and in London as a place to do business.”

The press release issued by HM Treasury on 31 October 2001.

The Financial Action Task Force (FATF) today agreed tough new Special Recommendations to combat the financing of terrorism.  The recommendations – which include criminalizing the financing of terrorism, powers to freeze and confiscate terrorist assets, obligatory reporting requirements on financial institutions, and reports on implementation of promised action – should ensure that all member countries introduce regulation as comprehensive as that in place in the UK.

The Chancellor of the Exchequer, Rt Hon Gordon Brown MP, commenting on the agreement said:

“I welcome today’s agreement by the FATF to adopt new standards against terrorist financing. I am pleased to say that the UK already complies with all of them – one of the very few countries to do so.

It is essential that every country adopts and implements these standards as soon as possible and certainly by the FATF deadline of 30 June 2002. The UK is ready to share its experience in fighting the financing of terrorism with other countries and to provide technical assistance, as necessary.

Those who finance terror are as guilty as those who commit it. We are determined to ensure that just as there is no safe haven for terrorists there is no safe hiding place for their funds.”