— Labour peer criticizes own party’s efforts on DWP snooping bill.
— Hunt and Martin Lewis at odds over budget leaks.
— Insurers finally extend flammable cladding home cover.
Happy Thursday! We’re all so close to the end of the week but there are still plenty of financial services goodies to get through first.
Grab some popcorn dear readers as we have the latest on Jeremy Hunt and Martin Lewis being at odds over who told who what before the spring budget. Beyond the delicious drama, U.K. money managers have slammed MMF reforms, Labour has been criticized by one of its own over the DWP snooping bill and insurers have finally extended cover to homeowners with flammable cladding. Get stuck in.
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LABOUR LORD CRITICIZES LABOUR MPS FOR “SOGGY” SNOOPING EFFORT: A member of the House of Lords has described Labour’s efforts to raise awareness of a controversial bill which would give the government sweeping new powers to access bank account details in the name of cracking down on benefits fraud as “soggy.”
Possible protections: The Labour peer, who spoke to MFS U.K. on the condition of anonymity, said the party had an important role to highlight concerns about a Conservative Party provision in the Data Protection and Digital Information Bill which would allow the DWP to request details from banks on anyone they believe might be committing benefit fraud. The peer said amendments are being considered in the Lords, which would not do away with the measure altogether but would put in place limitations, for example protecting state pensions or putting in restrictions on what data could be requested.
Loved by none: The bill is unpopular with the banking industry, as we reported on Tuesday, which don’t want to be seen as the “policeman” of the benefit system because of their role in passing on customer data. But while the Lords have been vocal on the issues raised by the draft law, MPs appear to be taking a more cautious approach. MFS U.K. understands the Labour Party is concerned about being attacked in the media for not being tough enough on benefit fraud.
Commons bound: In less than a week, the bill will be in the amendment stage in the Lords. After that, it will return to the House of Commons, where its success or failure depends on the Labour Party. If Labour makes a lot of noise, particularly on the bill’s most controversial aspects, its success is less certain. But it seems they haven’t been making the necessary noise to raise attention in the public domain.
No thanks: Others are making a din, however. A petition from privacy campaigner Big Brother Watch to “stop the government from spying on all of our bank accounts” has reached over 110,000 signatures. MFS U.K. likes to think our story has spread awareness of the topic, but we’re not arrogant or anything.
Cross support: Removing the controversial clause would likely have some cross-party support. David Davis, a Conservative MP and a big supporter of data privacy issues, told an event on Wednesday that he hopes the Commons “makes considerable allowance for time to debate the changes [the Lords] undertake.”
EBF and S&P Global Market Intelligence “Navigating the Green Asset Ratio (GAR): What can it tell us about the sustainability performance of banks?” event, London, 2 p.m.
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TROUBLE IN PARADISE: Founder of MoneySavingExpert Martin Lewis was beaming after the spring budget when Jeremy Hunt announced he would reform the High Income Child Benefit Charge. Lewis went as far as posting on Twitter/X to say that the chancellor “tipped him off” on the changes before the budget, claiming that Hunt told him the reform was “due in large to MSE/my shows campaigning.”
Awk: But when Hunt was asked by Treasury Committee chair Harriett Baldwin on Wednesday if he tipped off Lewis, he flat out denied this happened, adding that he hadn’t seen Lewis’ social media comments. Lewis also claimed on the same platform that Hunt told him he wouldn’t be going ahead with changes to the Lifetime ISA, and that the chancellor apparently told him that he wants to “do more than remove the penalty. I want to reform LISAs.” The chancellor wasn’t asked about this claim in the committee, and Lewis has since posted a clarification here. Grab your popcorn.
Speaking of housing … Hunt was widely tipped to introduce a package of measures to help homebuyers at last week’s budget, but they didn’t make the cut. However, he told the committee that he wants to help first-time buyers “at a future fiscal event,” so potentially lock in some changes pre-election.
Leaky: Many of the policies in the spring budget were leaked to journos well before they were announced. Hunt also denied that his staff had briefed journalists on any of the policy details beforehand. Funny, that.
Hunt said: “It has become very difficult partly because journalists call up people in the Treasury and say ‘I’m going to run this story unless you give me a flat denial that this is going to be in the budget,’ and we don’t want to say anything that’s not true to journalists.” MFS U.K. can neither confirm nor flatly deny we made such calls in the run-up to the budget.
WRONG PARLIAMENT: In an email to Tory MPs post-budget, Hunt wrote that he’d “like to end the unfairness where people in work are paying twice on their earnings” — i.e. scrapping employees’ National Insurance (which would cost around £40-50 billion) — and that if the party sticks with his plan they can “make progress towards that goal in the next parliament.”
But when pushed on the timeline by MPs … Hunt walked back on that claim by admitting that abolishing NI “won’t happen in one parliament, but it’s a long-term ambition.” Okay then.
PENSIONS PLEASE: The Treasury announced long-term pension reforms before the budget, including value-for-money benchmarks and plans to make schemes publish where their members’ cash is invested.
Regulators on board: Hunt told the committee that he wants British pension schemes to move towards an Australian model, where schemes are far larger, richer and invest around 10 percent in local stocks. Furthermore, the chancellor said that he believes the pensions regulator, FCA and PRA are “supportive” of the plans.
UK MONEY MANAGERS SLAM MMF REFORMS: U.K. fund managers have blasted the City watchdog’s plans to strengthen money market funds — describing them as “not justified” and potentially “damaging.”
EU-U.K. split: In its response to the Financial Conduct Authority’s consultation, the Investment Association said the U.K.’s decision to push ahead with reforms to boost the funds’ easy-to-sell assets would create “divergence” with the EU and challenges for investors.
Recap: Most sterling money market funds are based in the EU — but authorities on the Continent won’t move as fast as the U.K. in hiking liquidity requirements, despite concerns from the Bank of England about the funds’ ability to withstand a sudden shock.
Lack of supply: The IA, which represents money managers with assets worth £8.8 trillion, warned that there are limited sterling assets on hand to meet the requirements — which would increase daily and weekly liquidity requirements to 15 and 50 percent, respectively.
“It is not clear that there will be sufficient supply available to meet this demand, especially at quarter and year ends,” the fund industry lobby said, warning the changes could increase rather than decrease stress in financial markets.
CLADDING INSURANCE, HOW MANY YEARS LATER? The U.K. insurance industry on Wednesday announced plans to extend the insurance available to homeowners in buildings affected by flammable cladding. After the tragedy at Grenfell Tower in 2017, people who own apartments in blocks of flats with similar cladding have struggled to access insurance or have to pay eye-watering prices — due to the increased risk of a fire taking hold.
Almost seven years later, the reinsurance industry will launch a solution on April 1 called the “fire safety reinsurance facility,” which is intended to be available for three-to-five years while urgent work takes place to make buildings safer. It’s been put together by broker McGill and Partners with support from the Association of British Insurers and the British Insurance Brokers’ Association.
How does it work? Insurers Allianz, Aviva, Axa, RSA and Zurich will enter buildings they currently insure, but are waiting for works, into the facility. With that pool of assets, reinsurers led by Swiss Re will take on some of the risks, enabling insurers to expand the amount of buildings that can benefit from the cover.
Who will benefit? Insurers have clubbed together to insure risky buildings, so the new facility should make that expensive coverage cheaper. But where there’s only one insurer, it might not make much difference — although the hope is it will help bring prices down overall.
Over to the government? Insurers said that government financial support for the facility would have a more immediate impact, as would a cut to the Insurance Premium Tax on affected buildings.
“The industry has been determined in its efforts to support leaseholders, but it cannot solve the issue alone,” said Mervyn Skeet, ABI director of general insurance. “Establishing the Facility is a significant step forward, but Government intervention and swifter remediation is still the only long-term solution.”
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FCA DEFENDED BY HM TREASURY AT HEARING: House of Lords peer Baroness Charlotte Vere, also a parliamentary secretary at the Treasury, defended the Financial Conduct Authority yesterday at a Home Affairs Committee hearing on fraud, after the regulator was criticized by MPs for failing to take action against lenders.
Unhappy surprise: Tim Loughton, a Conservative MP on the committee, attacked the FCA’s record on fraud prevention and the continued ability of criminals to set up bank accounts with false information without the regulator cracking down on lenders: “The surprise of this committee was that the reach of the FCA, which is a large organization, seems to be very limited in an area which has the largest single responsibility for crime in the UK.”
Content: Baroness Vere jumped to its defense, telling the committee she is “content that the FCA is an effective regulator.” But Vere had a word for the FCA, saying “I hope that the FCA took that message away and I hope that they are very, very clear about what they’ve got to do for the big retail banks.”
PENSIONS REGULATOR STAFF CALL OFF STRIKE: A strike has been suspended after the U.K. pensions regulator agreed to enter into “meaningful negotiations” with the staff members’ union. The Pensions Regulator (TPR) said it is committed to securing funding for a 4.5 percent pay increase, as recommended by government guidance on civil service pay. TPR said it would engage in “meaningful consultation” with meetings to take place “very soon” with the Public and Commercial Services Union, which represents the regulator’s employees. The strike action was due to restart Wednesday (after 50 days of strike action since 2023 have already happened) and continue into next week. Around 20 percent of staff have been taking industrial action.
SME DEMAND FOR FINANCE RETURNING: The demand for finance among small and medium-sized businesses is returning, albeit slowly, according to figures released yesterday by UK Finance. The last quarter of 2023 was the first quarter not to see a decline in lending to SMEs since the second quarter of 2022. As a testament to the slowly improving economic mood, Q4 also saw a rise in the volume of loan and overdraft approvals for SMEs. But difficulties remain: 2023 was the third consecutive year for a decline in gross lending to SMEs.
Sunak moves to block foreign state takeover of Telegraph, writes the Financial Times.
Virgin Money bond drew big bids as Nationwide deal nears, writes Bloomberg.
Moody’s latest to move headquarters from Canary Wharf, also in the FT.
Thanks to: Fiona Maxwell and Izabella Kaminska.
**A message from Nationwide: Fraud is the most prevalent crime in the UK, costing victims £12.8 billion in 2021-22, and more needs to be done to protect consumers from fraud and scams. Nationwide is calling for the creation of a central “hub” that brings together multiple industries – from big tech and social media to telecoms and financial services – alongside government and law enforcement to share data and collaborate to tackle fraud. We believe there should a cross-industry solution, with liability for costs of reimbursement sitting across all organisations in the “fraud chain” including social media platforms. Find out more.**