Asked by
To ask Her Majesty’s Government what assessment they have made of
the recommendations in the Kalifa Review of UK Fintech, published
on 26 February.
(Con)
My Lords, I beg leave to ask the Question standing in my name on
the Order Paper and declare my interests as set out in the
register.
The Minister of State, Cabinet Office and the Treasury ()
(Con)
My Lords, the Government welcome the Kalifa Review of UK Fintech.
The Chancellor recently set out the Government’s response at UK
FinTech Week. This includes plans to take forward a regulatory
scale box for growing firms; government support for an
industry-led centre for finance, innovation and technology;
improvements to tech visas to attract global talent; and plans to
make the UK a more attractive location for public listings.
(Con)
My Lords, fintech has a critical role to play in our Covid
recovery, in enabling financial inclusion and in levelling up,
not least through the nations’ and regions’ fintech clusters.
Does my noble friend the Minister agree? What is the Government’s
plan to make these criticalities a reality?
(Con)
My Lords, the Government recognise the importance of fintech in
our economy. Indeed, that needs to flow through to the
curriculum; we have extended the number of pupils studying
computer science at A-level, for example. In the Cabinet Office,
in my role overseeing the Government Digital Service I pushed
that out to Bristol and Manchester to engage much more closely
with FE and HE in those cities. My noble friend is absolutely
right; continual focus on this is needed.
(GP) [V]
My Lords, the Chancellor of the Exchequer said at the UK FinTech
Week conference that the Government would
“push the boundaries of digital finance”.
Does the Minister acknowledge the risk that, in cheerleading the
latest technology, the Government will fail to count the costs of
runaway financial innovation: both the obvious environmental
costs—Bitcoin climate emissions are equivalent to those of the
whole nation of Norway—and the dangers to the security of our
real economy and lives? This was the world experience of 2007 and
2008, which they risk forgetting.
(Con)
The Government absolutely recognise the risk of a financially
weak system. We learned important lessons 12 years ago and they
are very much part of our institutional memory.
(Con)
My Lords, I refer to my interests as set out in the register. Has
the Treasury given any consideration to the specific
recommendation to amend the EIS, SEIS and VCT rules to make it
easier to attract investment into these start-ups and to retain
the tax reliefs when the business models evolve into more
regulated activities? This would cost the Treasury very little
but unlock a potentially substantial amount of capital.
(Con)
My noble friend raises important points. These matters are always
under discussion in the Treasury, although it is important to
stress that there is a large amount of capital out there to
support early-stage businesses. We see that in the valuations
these businesses are achieving, even at an early stage. However,
we will keep it under review.
(CB)
My Lords, while it is encouraging to see the Chancellor’s
commitment to the scale-up visa scheme, what are the Government
doing to ensure that our education system is updated to bring in
financial, digital and business skills to encourage the next
generation of entrepreneurs and innovators?
(Con)
My Lords, as I touched on in answer to an earlier question, we
absolutely recognise how important is to get our young people
enthused by this industry of the future. I referred to computer
science, and we are certainly looking at increasing the number of
maths teachers so that children can be more enthused at an early
age. I hope to meet the Israeli ambassador shortly in order to
understand more about Israel’s Magshimim programme, which gets 14
year-olds involved in a career in cybersecurity.
(Lab) [V]
My Lords, this is an important report, laying down the way to go
in this area, but what I find lacking is consideration of how it
will affect the consumer of financial services. It is important
not to fall into stereotypes, but there is a real problem with
the digital exclusion of some consumers across all sections of
our society. Will the Minister assure the House that, hand in
hand with the development of financial technology, consideration
will be given to ensuring the widest possible sharing of the
benefits by consumers?
(Con)
The noble Lord is right: we do not want to see citizens excluded
from the digital world into which we are heading, and that matter
is under continual consideration. It is also worth stressing
that, as a country, we are very much innovators and our consumers
are keen for the sort of products that are coming out. For
example, 2.5 million UK consumers and businesses now use open
banking-enabled products; indeed, we were the first country to
develop open banking standards, in 2018.
(LD) [V]
Scale-up for our fintech sector requires access to international
markets. The Government overlooked this in Brexit negotiations
and equivalence from the EU now looks unattainable. Fintech is
problematic in trade negotiations with the US because the UK
industry risks being swamped. How will this Government deliver
access for fintech to major and key international markets?
(Con)
My Lords, the Department for International Trade has just
announced two initiatives which I hope will help to address the
noble Baroness’s concerns: a new fintech cohort within the DIT
Export Academy initiative to provide bespoke one-to-one advice to
eligible UK fintechs that are ready to scale into key markets,
and a DIT-led fintech champions scheme to promote UK fintech
overseas and support UK fintechs to grow internationally through
mentoring and peer-to-peer learning.
(Con)
My Lords, fintech has much to offer. I am pleased that, when I
was on the board, Transport for London united its huge customer
base with the banks to introduce and deliver contactless payment
to this country—well ahead of the United States, it should be
said. However, finance remains a risky business. Does my noble
friend agree that we should not be led astray by the glitz of the
new, that the underlying financial transactions are broadly what
they always were, and that the financial risks, particular and
systemic, remain essentially the same?
(Con)
My noble friend is right that finance is an inherently risky
business; my great-plus-three grandfather and his two brothers
founded Close Brothers, so risk is certainly in my genes. That is
one reason why we are introducing the sandbox concept, whereby
this technology can be tested in a safe environment without
exposing the economy to any risk.
(Lab) [V]
My Lords, in the Chancellor’s recent Written Statement on
fintech, he speaks of a “scale-up visa stream” allowing
qualification for a fast-track visa without the need for
sponsorship or third-party endorsement. What criteria was used to
select fintech for this fast track, and where else in the economy
is it envisaged that scale-up visas will be introduced?
(Con)
My Lords, these concepts are still being designed and I will be
very happy to update the noble Lord when more information is
available. However, the key emphasis of scale-up is to attract
global talent and boost the fintech workforce, so it will be
focused on the skills these people can offer our country.
(CB) [V]
The CBI, of which I am president, welcomes the recommendations
set out in my friend Ron Kalifa’s fintech review to ensure the
UK’s position as the best place in the world to start and grow
fintech business. Do the Government agree that having a
proportionate, innovation-friendly regulatory framework will help
support economic growth, facilitate access to global markets and
enhance competition? Do they also agree with the review’s
recommendation that a centre for finance, innovation and
technology be created?
(Con)
My Lords, we are certainly keen to support the creation of a
centre for finance, innovation and technology. In UK FinTech Week
the Chancellor announced his support for the industry, and we
certainly recognise a private sector-led centre for finance,
innovation and technology’s potential as an accelerator of
fintech sector growth. This can be achieved through research,
thought leadership and working with regional fintech hubs and
national fintech bodies. The Government are committed to working
with industry to make this a reality.
(Con)
My Lords, as we have just heard, the Government welcomed the
recommendations of the Kalifa review, which has diagnosed the
ingredients, including the EIS, that have led to the UK economy
blossoming over the last decade, especially the SME sector. I
have been chairman of the EIS Association during this time. The
UK is recognised as the best place to start and scale up a
business. What aspects of the findings of the Kalifa report do
the Government view as the most important?
(Con)
I gave noble Lords a sense of the key findings in my opening
answer, but there are several others that I can make my noble
friend aware of: for example, a task force led by the Treasury
and the Bank of England to co-ordinate exploration of a potential
UK central bank digital currency, and a new Bank of England
account type that will allow innovative financial market
infrastructures to provide enhanced wholesale payments and
settlements. There are also the DIT initiatives that I mentioned
earlier.
