King’s Speech

Baroness Kramer Excerpts

Thursday 14th May 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, my noble friend Lord Fox has had to leave, as the cold lurgy got him; undoubtedly, it will now get me over the weekend. The core point of his speech—the significance of and need for ambitious and strong leadership now—is almost the central point of the debate we have had today. I hope that the Government are going to take that on board. The impact of the turbulence we face domestically and overseas on the cost of living for ordinary people is really quite devastating. The Government have to deliver bold action in response. I am not sure that this King’s Speech meets that test.

I say to the Government: stop pussyfooting in the European partnership Bill and seize the opportunity. The noble Lord, Lord Livermore, has talked in the past about the 6% to 8% scarring of the economy in 2025. I have seen the numbers and I am with him, but I will leave him to argue that case with the Conservatives, who do not appear to have taken note of them.

I also want to point to the speech made by my noble friend Lord Strasburger, who talked about the specific damage done to one of our most important industries—the creative industry—by Brexit. I could bring industry after industry before this House to make exactly the same case. To those who think that Brexit has not been a huge damage, I say: go out and speak to industry after industry. I defy anyone to continue to make that statement.

[Lord Lilley (Con)]

My Lords, does the noble Baroness speak to the NFU, which does not want to rejoin Europe because it believes that the divergences from EU rules since Brexit have benefited it enormously? Doing away with those divergences would cost £600 million to £800 million a year just for PPPs, and £500 million a year for fisheries.

[Baroness Kramer (LD)]

We may be speaking to the people at the NFU, but I suggest that the noble Lord go out and start speaking to individual farmers. He will find that the agricultural sector has been really badly hit by the processes that we have been through. It also underscores the inadequacy of trying to fill this just with trade agreements. I listened to a lot of the ideas that came from the Conservative Benches; if you added them together, you would be lucky to get 1% to 2% growth, even if you were able to implement them in a positive way. That does not anywhere near offset the 6% to 8% damage. Again, I will leave the Minister to continue with that argument.

This is an important time to be much more ambitious on the European front. Of course I support youth mobility schemes, the recognition of professional qualifications and the reduction of red tape, but this is the time when we need to be going for a bespoke customs union and building the trust, as well as building the British economy, that will enable us to be on a trajectory towards the single market and eventually to rejoining. If I look at just the customs union, I think it is widely accepted now that the impact of that would put £25 billion more into the UK economy every year. That money could bring some relief to our debt numbers, could help us deal with the need for additional investment in defence and could in turn help struggling people.

Missing from the King’s Speech is action to turn around the sad trajectory of small businesses. I applaud the late payments Bill, but I say to the Government that it is time to grasp the nettle and completely revise business rates to keep small businesses viable, and it is time to force the energy companies to offer competitive pricing to small businesses. I do not know what is holding the Government back from referring that industry to the CMA because it is clearly not offering competitive options to small business, and we are paying a huge price for that. A scheme for apprentices is very important, but it is meaningless if we keep losing small businesses because they are the ones that can take on apprentices and they are often the only real source of jobs in our most deprived communities.

What about access to finance for small businesses? The British Business Bank has made a commitment to support community development banks and financial institutions, which is laudable, but the Government have given it pennies to work with. A sector that can lend at best £150 million in the UK lends more than $300 billion in the US; it is the complete backbone to small business and provides the secure foundation for its economy. Will the new legislation allow the National Wealth Fund to step into that space and let us properly grow the community development investment financing sector?

These Benches will scrutinise very carefully the enhancing financial services Bill. It has not been much discussed today but I notice that, in their briefing, the Government—this counters other messages that we heard from the Conservative Benches—finally recognise that the financial sector has suffered quite severely because of Brexit and has been stagnant while other areas have been growing. It is salami slice by salami slice. The EU is building capacity in financial services across a network of cities, often in partnership with British firms. People talk fluently now of Lloyd’s of Brussels, LCH has replaced the term London Clearing House, and LCH Paris is becoming a major force. This will become far worse if in June 2028 the EU decides to limit its grant of equivalent status to UK central counterparties. The risk is not just that we lose trillions in derivatives clearing business but that the financial operations that collocate with CCPs could make that call to collocate elsewhere. Neither the EU Bill nor the financial services Bill seems to deal with any of this.

The enhancing financial services Bill intends to enable credit unions to expand. We have called for that for some time and it should help with financial inclusion, but we need a more far-reaching strategy, including clarification of the future of banking hubs. Consolidation of the PSR and the FCA can be successful if it is done with care, but I am much more concerned about plans to scrap much of the certification regime that sets the standard for senior management recruiting and accountability in the banking world. Before the certification requirements were brought in, senior bankers simply hired their friends. I was shocked, in going around to HR department after HR department, to discover that they did not even require CVs or check references if someone was referred by a senior banker within their own organisation. That accounts for a lot of the failures that we have had to deal with historically.

I also suggest that the Members here who question the importance of the certification regime look at the evidence that the Parliamentary Commission on Banking Standards got from senior bankers. The changes I can see to the certification regime weaken individual responsibility and return to the concept of collective responsibility. It was on that basis that bankers were shocked that they should have been expected to call out any kinds of concerns or failure in management, or carry the can for what went wrong. This is an industry that genuinely needs good regulation. I do not care if it is streamlined—that is always an advantage—but we have to recognise the importance of regulating this industry.

I am equally concerned about changes to ring-fencing. The co-mingling of retail and investment banking was a major factor in the 2007-08 crisis. The free money from retail deposits fuelled casino-type investment. Retail banking dropped credit standards, mis-sold products such as PPI, and switched to short-term funding. If anyone thinks that reducing the ring-fence will help the financing of small businesses, think again. The major banks have restructured their operations and staffing in ways that make cash-flow lending impossible except to large clients.

I cannot see how this Bill tackles risks outside the recognised institutions. I have been truly concerned with the Government’s love fest with private credit, which we saw during the passage of the Pension Schemes Bill. Private markets play an important role in financing productive investment, but these markets, which now exceed $18 trillion, as Sarah Breeden, Deputy Governor of the Bank of England, said,

“have not yet been tested, at that scale and complexity, by a broad-based macroeconomic shock in a higher-rate environment”.

There is little transparency, underwriting standards are weak, the loans are sliced and diced, and liquidity is very limited. Private credit is now deeply wound into the banks, insurance companies and pension funds through lending arrangements. Interconnection matters. Add in potential bubbles in tech and AI valuations, and the play by hedge funds now in the gilts markets, and it becomes evident that risk has not gone from the financial sector, it has simply taken a new shape. This Bill is a chance to make sure our regulators have the powers and capacity to respond. I am afraid there is a current complacency and that is very dangerous.

This Bill is also an opportunity to urgently address the issues of digital currency, both fiat and stablecoin. Too many powers have been switched from Parliament to the regulators. Digital is not just a variation on plumbing. Should sterling stablecoin be redeemable at par, for example? What quality of assets is required to back it? I suggest not gold and bitcoin. Who controls the exchanges that can shut off transactions at will? At the international level, what happens to UK monetary sovereignty when future cross-border trade is dominated by dollar and renminbi stablecoin? These issues are above the pay grade of the FCA and the Bank of England, and need to come to Parliament.

We will support the expansion of the sandbox in the regulating for growth Bill, but my noble friend Lord Clement-Jones will, I think, speak extensively on the risk of getting on a deregulation bandwagon without looking extremely carefully, particularly as we are dealing with AI. We saw the damage that has been done by the failure to regulate social media early enough—a price paid by vulnerable people and by many of our youngsters. This is not to be repeated in AI, so again, beware the worship of a deregulation programme.

We will also look closely at the highways financing Bill to make sure that the RAB funding is not a way to burden ordinary people with funding costs that the capital markets have rejected. It has a place, but we have to be careful with it.

My noble friend Lord Fox has detailed our support, but with care, for nationalising the steel industry as we try to sort out its role. There is a need for a long-term strategy to underpin that process.

I thank my noble friend Lord Stoneham for focusing on housing, which is an issue that has not been extensively debated today but which absolutely underpins the future of our economy. I also thank him for his focus on the industrial strategy.

We will work hard to ensure that the competition reform Bill ensures an independent CMA with teeth. This should not be a proposal to weaken the CMA; it should be a proposal to strengthen it in very changing times.

However, none of this, frankly, is enough. Our work is going to be to put together a programme of much greater ambition—ambition that can be managed without excessive risk but that takes real care and real energy.

Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Baroness Kramer Excerpts

Wednesday 11th March 2026 Grand Committee

[Baroness Kramer (LD)]

My Lords, I come from a different perspective from many of the people who have spoken today, because I am approaching this debate from the perspective of spending nearly two years on the Parliamentary Commission on Banking Standards following the financial crash of 2008, which was due to credit and derivative manipulation, much of it either deliberate or, frankly, due to people casting a blind eye. That was at the same time as the Libor scandal, which probably took away from creditors across the world something in excess of a quadrillion dollars through 10 years of consistent lying to the setting of the benchmark, and, frankly, at a time when mis-selling to individuals was on an industrial scale.

I quote from the final report from that committee:

“Policy-makers in most areas of supervision and regulation need to work out what is best for the UK, not the lowest common denominator of what can most easily be agreed internationally. There is nothing inherently optimal about an international level playing field in regulation. There may be significant benefits to the UK as a financial centre from demonstrating that it can establish and adhere to standards significantly above the international minimum”.


In taking evidence from those involved in causing the crash and knowingly manipulating Libor, it was consistently apparent that outperforming international competitors and generating higher profits were the two core motives, and these motives look very much like the secondary international competitiveness and growth objective.

In that context, the work of the Financial Services Regulation Committee is crucial, especially as, post-Brexit, the Conservative Government chose to transfer virtually all meaningful control of the financial sectors to the regulators by embedding that control in regulation and guidance, neither of which can be amended by Parliament. I am a strong supporter of the FSRC but I want to make sure that it understands where and why all this began.

The report that we have received reflects ongoing tensions between financial stability and an industry and some politicians who want the leash off. I completely understand the frustration with undue complexity and uncertainty of regulation—that helps no one. I also understand the need to reflect the different characteristics of different entities in regulation, and some of the discussion around MREL has addressed that. I am convinced that parts of our regulators are often slow to respond. I want to make the point that regulation is not cast in stone, but improving and customising regulation should not be a shorthand for deregulation.

I read in evidence to the FSRC that deregulation is the industry agenda—and the tool for its attack is the secondary objective.

Let us look at the risk that has been reintroduced into the financial system under the secondary objective rubric. I will give a few examples, as did the noble Lord, Lord Altrincham: the PRA’s easing of bank capital requirements; the undermining of the ring-fencing regime—there is a consultation in place but undoubtedly this will be a consequence; removal of the bankers’ bonus cap; significant limiting of the senior managers and certification regime—I am especially exercised by the removal of individual accountability; the reduction in the risk margin for insurance companies and the expansion of matching adjustment eligibility to cover highly illiquid assets; and the Mansion House Accord to put 10% of the pensions of low-income people and workers into high-risk, illiquid assets without their consent. With these changes, we see the industry, and this includes the banks, release its animal spirits—exactly what everybody wanted—and they have galloped, at quite some speed, into the private equity markets, often with little understanding of the assets.

There have been numerous red flags. On 6 March, BlackRock finally limited redemption of private credit funds as outflows continued to swell. Today, JP Morgan is marking down the loan portfolios of private credit groups. Most of this happened before the Iran war. It will accelerate with the Iran war, and in a way, which is incredibly sad, one of the side effects—perhaps we ought to regard it as beneficial but I do not want a war to create this—is that it may burst a bubble before it gets even more out of control.

While I can see the return to a much-increased level of risk, I cannot see the return to growth in either the financial sector or the broader economy. That is what is supposed to follow—you deregulate, the growth comes —but I cannot find that growth. We gave away our utter dominance of the European financial sector with Brexit, not in one step but salami slice by salami slice. The effect is somewhat masked because people always compare us with individual financial centres across the EU, which is of course functioning as a network of multiple financial centres, so we do not see how our competitive position has diminished very significantly. I am truly anxious that in June 2028 the EU will reduce its recognition of UK central counterparties because by then it will have achieved much of its own clearing capacity, and so much high-level finance co-locates with CCPs. You cannot deregulate your way out of a fundamental issue like that.

Frankly, we cannot deal with our biggest problems through deregulation. Financing scale-ups will not happen because we have made some kind of regulatory change to financial institutions; the problem we are dealing with here is one of huge market failure. In a sense, this picks up a point made by the noble Lord, Lord Eatwell. There is no point kidding ourselves that we can fuss with regulation and deliver the money that is needed for scale-up.

Neither do any of the rule changes suggest that we can cure our other fundamental problem: our lack of a layer of community banks, which were once the Captain Mainwarings of this world—the backbone of finance for local, small businesses. I do not mean those which intend to be unicorns but those which want to grow just a little faster than organically, which are the backbone of our local communities and economy. Dealing with these market failures goes way beyond fiddling with the risk weightings of banks’ capital holdings. That is regulatory intervention already.

The noble Lord, Lord Eatwell, mentioned that added to banking licences could be a requirement that banks fund some money for VCs. I have long argued—it has never got anywhere—that we ought to attach to banking licences a requirement that major banks fund people who can deliver that community banking profile. Exactly that happened in the United States under the Community Reinvestment Act, which has grown a community sector that, today, is the complete backbone of small businesses and the US economy. When I last looked at that sector, which was zero in 1970, it had something in excess of $300 billion in loan assets to small businesses. It is absolutely critical and it has been used by US Presidents to make sure that the US was able to survive two major economic crises.

The report asserts that

“regulators have made progress in advancing the secondary objective”.

I can see where they have advanced the objective of deregulation, but I cannot see the growth. We are pulling on a lever to create growth that does not really work. Professor Kern Alexander said to the FSRC:

“The gap we have is that, in many countries where they have been using secondary objectives for 25 or 30 years, there is no policy conclusion about whether they work, how they are applied or how the secondary objectives are defined”.


Of course it is right that Parliament and the FSRC scrutinise and question the regulators on their performance but, if we think that the answer to growth in the real economy is deregulation, we are looking in the wrong place. Its impact is marginal at best; when it is handled badly, it is a recipe for a cycle of crises. Regulation is a financial stability and anti-abuse tool. When we seek growth, as we should, we need to find other, real levers: investment, skills and productivity—to name but three.

Crown Estate: Wales

Baroness Kramer Excerpts

Monday 9th March 2026 Lords Chamber

[Lord Wilson of Sedgefield (Lab)]

We have a very good relationship with the Crown Estate and work very closely with the Welsh Government. We will be appointing a commissioner to the Crown Estate to ensure that we have someone there who is prepared to look consciously at all the issues that affect Wales. We want to see a Welsh economy that is growing. One way of doing that is through investing in green industries, which I would have thought the noble Baroness would welcome.

[Baroness Kramer (LD)]

My Lords, to pick up the point made by the noble Lord, Lord Wigley, is the Minister aware that people in Wales are convinced, following conversations with the Crown Estate, that the overwhelming majority of new skilled jobs created by offshore in the Celtic Sea will go to outsiders, not to people in Wales, and that the supply chain will use a few Welsh companies but primarily suppliers from outside Wales? Therefore, can he talk to us about what the Government are doing to build the supply chain and the skills in Wales and to make sure that Welsh companies have a definite percentage of the new business and opportunities that are on offer?

[Lord Wilson of Sedgefield (Lab)]

The Crown Estate and the Government are particularly concerned about ensuring that we have investment in local supply chains, and we are going along with that in whatever we are doing. For example, as I have said, this £50 million is going to be invested in the supply chain accelerator. We are going to ensure that some of the money that will be generated from offshore wind goes into local communities. We are well aware of the issues, but we need to focus on the fact that we are heading in the right direction as far as green energy development is concerned.

National Insurance Contributions (Employer Pensions Contributions) Bill

Baroness Kramer Excerpts

Report stage
Thursday 5th March 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

I thought I said in my earlier remarks that there will be a marginal effect: I accept that, although we do not actually know what that marginal effect will be. It is all hypothetical at the moment. One thing we do not know from the OBR figures is quite what the reaction will be and how people will adjust their behaviour between now and when this comes in.

I accept the noble Baroness’s point but, as I say, nobody likes paying tax and nobody wants to pay more tax. If you ask people whether they want to pay more tax they say no, but it has to fit in with the Government’s overall financial strategy.

Of course, only some people gain an advantage from salary sacrifice. Many private employers just do not offer it. The number is increasing all the time, which is part of the problem because it is increasing the cost. Nobody in the public sector benefits from salary sacrifice. We can, and will, have an interesting debate about public service pensions, but noble Lords should understand that it is unequal that people in the private sector can take advantage of salary sacrifice but people in the public sector cannot.

[Baroness Kramer (LD)]

My Lords, I thought it might be best to combine standing as a winder and talking for a few moments to the two amendments in this group that are in my name. I start by thanking the noble Baroness, Lady Neville-Rolfe, who made an incredibly powerful speech to introduce the whole series of amendments in this group. I thank her for signing my two amendments, Amendments 12 and 26. Amendment 26 is the Northern Ireland parallel to Amendment 12, so we need not treat it separately. I also thank the noble Lords, Lord Altrincham and Lord Londesborough, for signing my amendments. The noble Lord, Lord de Clifford, would also have signed them had space been permitted on the Marshalled List.

I also talked very extensively, both at Second Reading and in Committee, and I will try to discipline myself not to repeat those comments, particularly because speaker after speaker has so fully described the issues that are at stake. I find myself in complete disagreement with the noble Lord, Lord Davies of Brixton, which does not happen very often, but I think that the Government will recognise that, for a whole series of political leanings around the House, there is very common ground on this issue.

My Amendment 12, as others have described, would lift that limit on salary sacrifice contributions subject to NICs relief to £5,000 a year. I discussed in detail in Committee why I talked to various people and came to that number, but the key point I want to emphasise—others have made it, but let me make it again—is that it would strongly benefit younger people and quite low earners. We are looking primarily at the second decile of earners, who are probably on their first or second pay rise. They are still low earners and still living a life much more akin to that of a student. They are sharing accommodation and do not yet have mortgages, children or families. Many have, very responsibly, with the nudge that is given by this tax relief, been encouraged to start seriously saving for pensions, well in excess of that £2,000 benchmark that the Government propose.

As these people move on in their lives and acquire children and mortgages, their pension savings drop. Those very early savings that then have a chance to accrue over a working lifetime are very significant in the end result to the quality of pension that they receive. That is why we took an approach that we thought would, in a very simple way, enable this group of people to continue with that incredibly positive behaviour.

In this group, I will certainly support the amendments that the noble Baroness, Lady Neville-Rolfe, will choose to move. I want to make particular reference to the amendment from the noble Lord, Lord Leigh, on student loans. It is absolutely essential. The Government have recognised—at least, this is what I understood from the Minister’s responses in Committee and at Second Reading—that the Bill quite unintentionally puts serious additional costs on to graduates. I find it absolutely ridiculous that, having recognised that there is an unintentional impact and that it is problematic, the Government are not correcting it in this Bill. As far as I can understand, they are waiting for some future piece of legislation to make that change.

[Lord Davies of Brixton (Lab)]

May I just press the noble Baroness on the point she made about serious additional costs? Would she care to quantify what those serious additional costs are?

[Baroness Kramer (LD)]

Let me refer back to the example I gave in Committee. The noble Lord will be aware, on that additional contribution, that the graduates are paying the 8% additional in NICs but, on top of that, because it pulls them into scope of having to make repayments at the margin, the impact is 17%. It has a huge impact on graduates who are now just beginning to reach the level where they would have anticipated they would start to repay, and they suddenly hit this really serious spike. I think he has seen the numbers that some of the people have sent to us, and the Chartered Institute of Taxation could help him with those numbers if he wants to look at them. The Government, I think, recognise that problem but my answer is to fix it.

[Lord Fuller (Con)]

I think what the noble Baroness has just explained is that for those people with the greatest earnings potential, which our nation needs, there is an arbitrary cap on aspiration. There is a point which is just not worth going past. That is not just damaging for them, their families and their futures; it is also bad for the economy. That, I say to the noble Lord, Lord Davies of Brixton, is where the prejudice lies: it is on the individual, but the whole of society suffers by having the cliff edge effect that the noble Baroness is referring to.

[Baroness Kramer (LD)]

On this issue of students, I really think this is unintentional, taking the Minister and others at their words. That is why accepting the amendment from the noble Lord, Lord Leigh, and correcting the issue now is something that I consider to be very important.

As I said, there is no need for me to keep speaking. I have made it clear that I will support quite a number of the other amendments in this group if they are moved, because collectively they address a fundamental problem. I appreciate all the comments that have been made in support of the amendments in my name.

[Lord Londesborough (CB)]

My Lords, I support broadly all the amendments in this group, but specifically Amendments 12 and 26 in the name of the noble Baroness, Lady Kramer, to which I added my name. I will be genuinely brief. These amendments, by raising the cap to £5,000 per annum, would address a core problem in the Bill: the limiting or deterring of the so-called moderate earners we have heard about from contributing sufficiently to their pension pots, which, as we already know, are nowhere near sufficient for the vast majority to fund their retirements. We are talking about retirement periods of 25 to 30 years if demographic trends continue. As we have heard, this includes many in the early stages of their working lives who need to get into the habit of contributing to pensions at the formative stages of their careers.

I remind the House of a stat that came out in Committee. On average, our current workforce will outlive their pension savings by eight to nine years, and this funding gap is widening year by year. Clause 1 is, in effect, raiding pensions to keep the Treasury within its fiscal rules in three years’ time. It is another crude example of kicking the can down the road, leaving another generation to sort out another widening deficit.

I was interested to hear the comments from the noble Lords, Lord Leigh and Lord Ashcombe. They raised some pertinent questions over the revenue-raising forecasts. I also fear that the Treasury has wildly underestimated the level of accelerated salary sacrifice over the next three years in the run-up to these measures. I have witnessed a number of business plans in companies that I am involved in; I should, of course, declare my interests as set out in the register.

To conclude, I fully endorse the excellent opening comments from the noble Baroness, Lady Neville-Rolfe, and the comments we just heard from the noble Baroness, Lady Kramer. I encourage your Lordships to support their amendments should they decide to test the opinion of the House.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am very grateful to all noble Lords who have contributed to this first group of amendments. I turn first to Amendments 1 and 17 in the names of the noble Baronesses, Lady Neville-Rolfe and Lady Altmann, and the noble Lord, Lord Altrincham, which seek to exempt basic rate taxpayers from the Bill. As the noble Baroness, Lady Neville-Rolfe, noted, the vast majority—74%—of basic rate taxpayers using salary sacrifice will be unaffected by the changes in this Bill. Specifically, three-quarters of those earning up to £50,270 and using salary sacrifice will be entirely protected, and that rises to 95% when looking at those earning £30,000 or less who use this mechanism to save into their pensions. The minority of basic rate taxpayers with contributions above £2,000 will continue to benefit from employee national insurance relief worth £160 a year in addition to the full income tax relief they receive on their pension contributions. Half of those basic rate taxpayers contributing above £2,000 will face an additional national insurance contribution liability of less than £50 a year.

Exempting basic rate taxpayers would also be exceptionally difficult to operate in practice and would add considerable additional administrative burden on to employers. That is because, unlike income tax, national insurance does not operate on an annual aggregated basis, nor does it determine liability by reference to an individual’s final tax position. An individual cannot be confirmed as a basic rate taxpayer until their full income position is reconciled at the end of the tax year, taking account of potentially multiple employments and other sources of income. To apply a tax band-based exemption, employers would be required to undertake year-end reconciliations across employments and account for other sources of income as well that sit wholly outside the design of the national insurance contributions system. This would represent a fundamental departure from established payroll processes, imposing significant complexity, cost and risk on to employers and payroll providers.

Amendments 16 and 29, in the names of the noble Baronesses, Lady Neville-Rolfe, Lady Kramer and Lady Altmann, and the noble Lord, Lord Altrincham, seek exemptions for small and medium-sized enterprises, charities and social enterprises. Exempting small and medium-sized enterprises and charities in the way proposed by the amendment would add considerable complexity to the tax system and would not be proportionate to the limited impact this policy is expected to have on those businesses. The changes in this Bill primarily affect larger employers, which are significantly more likely to operate salary sacrifice arrangements and to have employees contributing above the £2,000 cap.

Small businesses are significantly less likely to offer salary sacrifice than larger businesses. Only 28% of employees in SMEs use salary sacrifice for pension contributions, compared to 39% in larger firms. When it comes to contributions above the £2,000 cap, the difference is even clearer. Only 10% of employees in SMEs make pension contributions through salary sacrifice that exceed the value of the cap, compared to 18% of employees of larger firms. This underlines that the largest benefits from uncapped salary sacrifice are concentrated in bigger firms, not smaller firms.

In practice, the changes in this Bill will level the playing field between small businesses and their larger competitors, ensuring that the national insurance contribution advantages of salary sacrifice are not disproportionately concentrated among employees in big firms. More widely, the Government recognise the importance of supporting small businesses and charities alike.

This leads me to Amendments 7 and 23 in the names of the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham. These amendments seek clarity on the basis on which the Government consider certain employed earners to be higher earners for the purposes of the national insurance charge and how the contributions limit reflects that assessment. The Explanatory Notes for this Bill set out clearly that the Government’s objective is to limit the national insurance contributions relief available to higher earners on employer pension contributions made through salary sacrifice, while protecting lower-earning pension savers. These changes are about fairness and consistency across the labour market.

Additionally, groups who are most likely to be undersaving for retirement, such as those on the national minimum wage and the UK’s 4.4 million self-employed workers are completely excluded from using salary sacrifice altogether. The cap we are introducing through this Bill will protect the majority of basic rate taxpayers using salary sacrifice and ensure that the cost of national insurance relief on pension salary sacrifice is put on a fiscally sustainable footing.

I now turn to Amendments 5 and 21 tabled by the noble Lord, Lord Leigh of Hurley, and the noble Baronesses, Lady Altmann and Lady Kramer, which seek to exempt salary sacrifice pension contributions over the £2,000 limit from being included in the definition of earnings used to calculate student loan repayments for employees. Student loan repayments are calculated using the same earnings base as class 1 national insurance contributions. As a result, salary sacrifice currently reduces both national insurance contributions and the earnings used to calculate student loan repayments. Any change in student loan repayments arising from this measure is a mechanical consequence of restoring those earnings to the national insurance contributions base. It is not a change to student loan policy itself; rather, it flows from levelling the playing field between those who are able to use salary sacrifice arrangements to reduce their earnings for national insurance contributions and those who are not. Of those employees making pension contributions through salary sacrifice, younger people are far more likely to be protected by the £2,000 cap than those above the age of 30. Some 76% of those in their 20s—

[Baroness Kramer (LD)]

Can I just get some clarification? The Minister is making me believe now that I must have misunderstood previous comments. Is he saying that he will not be, or there is not an anticipation he will be, bringing in legislation to remove that impact on student loan repayments? I had understood—and I could have been totally wrong, but I think others have understood as well—that that was what the Government intended.

[Lord Livermore (Lab)]

I am afraid I do not know what led the noble Baroness to believe that. That is not in any way my intention at this point.

As I was saying, 76% of those in their 20s who use salary sacrifice are protected by the cap, compared to half of those aged 30 and above. The Government do not believe that this Bill is the appropriate vehicle through which to amend the basis of student loan repayments—

--- Later in debate ---

[Lord Freyberg (CB)]

My Lords, as mentioned in the previous group, the creative industries are defined by workers holding multiple short-term contracts with different employers across a single year. The central question that this group addresses, and which has been repeated several times today, is one that was put to the Minister in Committee and remains unanswered: is the £2,000 contributions limit £2,000 per person across all employments, or £2,000 per employment? The Minister was asked precisely this question in Committee by the noble Lord, Lord Mackinlay of Richborough, who has repeated it today. The Minister’s answer was:

“That intention will be set out in the regulations once we have fully consulted relevant employers”.—[Official Report, 24/2/26; col. GC 365.]


I have no doubt that that consultation will be thorough, but for workers planning their finances now, and employers designing payroll systems well before 2029, that leaves a gap that the Bill itself should fill. Amendments 6 and 22 would fill it: the limit would apply in relation to each employment.

Even with that resolved, a second problem remains. As we have heard from the noble Lords, Lord Fuller and Lord Ashcombe, when a worker moves between employers mid-year, no mechanism exists for tracking what has already been sacrificed or reporting it to the next employer. Amendments 36 and 39 would address this by making commencement conditional on the Government first publishing guidance that answers both those questions.

There is a further complication that has not been addressed by debates in either House. Many creative workers are engaged by the BBC under schedule D terms as self-employed contractors with no access to salary sacrifice. However, under the off-payroll rules that have applied to public sector bodies since 2017, the BBC must assess whether each such engagement is “employment in substance”. Where the BBC concludes that an engagement is employment in substance, the worker is deemed an employee for NIC purposes, yet they have no actual contract to vary. Salary sacrifice requires a varying employment contract; deemed employment, created by statute, is not a contract. The worker acquires the NIC liability of employment without access to its benefits. That same worker may also be genuinely self-employed with one employer and employed in an ordinary sense with another all in the same year, with no framework in the Bill to accommodate any of it.

These amendments would not change the policy or the 2029 commencement date. They would ensure that, when the Act comes into force, the people it affects know how much it applies to them. I will therefore be supporting all four amendments.

[Baroness Kramer (LD)]

My Lords, I will slightly anticipate the noble Baroness, Lady Rolfe, moving Amendments 9, 10, 24 and 25, which would require affirmative resolution for key elements of the Bill. Frankly, I do not think I have ever seen a Bill for which affirmative action was more required. In the other amendments, which have been brought forward so eloquently from across this House, we have some flavour of the extraordinary complexity.

I suspect that decision-makers at the top of the Government thought that this was something really simple, and that they were just going to put a cap on, with the rest being relatively easy to manage. However, the actual management of this is a complete nightmare. I cannot believe that a Bill that has been through the House of Commons already is on Report in the House of Lords, and yet we still do not know if the cap is going to apply to each employee or to each employment—which, to my mind, is two different Bills.

I completely agree with the noble Lord, Lord Leigh. I can see the nightmare of people wondering, “If I say this sentence, will I be caught by operational remuneration? Do I have to pretend, wink, or make sure I do not put anything down in an email?” We should not be putting people into situations where they have to try to work out how they handle this whole range of arrangements. The noble Lord, Lord Freyberg, knowing the creative industry so well, has thrown further complication into this. I very much suspect that the Government had absolutely no idea of the mare’s nest they were getting themselves involved with. I wish these issues had been teased out before this point.

The response brought forward by the noble Baroness, Lady Neville-Rolfe, of at least having affirmative resolution gives us some possibility of trying to scrutinise what has happened. This is an extraordinary situation. We do not know the core character of this Bill, so we will be dependent on those working through the affirmative resolutions to decide how on earth they will deal with what will turn out to be the form that eventually comes before us.

[Baroness Neville-Rolfe (Con)]

My Lords, I begin by thanking noble Lords with amendments in this group—my noble friends Lord Fuller, Lord Mackinlay and Lord Leigh and the noble Baroness, Lady Altmann—for their proposals, and for their forensic questions on the detail of the schemes and on any guidance that the Government might issue to minimise errors and problems.

There are numerous shortcomings in the Bill around operational detail and how everything will apply in practice. The reality is that we have very little clarity on how the Bill will work. It is designed to apply to a very narrow and limited set of employment and remunerative circumstances, and anyone who falls outside that definition has to wait for regulations, which will not be subject to the affirmative procedure.

We have no clarity on how the policy will apply to people working in numerous jobs. Is the cap per employment or per person? If it is per person, it will be very difficult to administer. We also need to know where responsibility for enforcement lies. There is no clarity about people with fluctuating remuneration: will they be penalised for saving during higher income periods because they hit the cap in some years and have no income to pay into pensions in others? What about anyone who has an unconventional pattern of remuneration for their job or jobs? How will it work for them? We have heard already that the arrangements for student loans are unclear, even after recent discussion, and we heard from my noble friend Lord Mackinlay about GDPR and from the noble Lord, Lord Freyberg, about the off-payroll rules. That is quite a lot of detail that has to be worked out.

My amendments in this group would help to deal with that by ensuring that all regulations would be subject to the affirmative resolution procedure, aside from those designed to increase the cap—that would be positive if it goes up, and you would not need to have an affirmative resolution because it would be beneficial. I am very grateful to the noble Baroness, Lady Kramer, and my noble friend Lord Ashcombe for their understanding and their vocal support for having this extra scrutiny.

When the regulations are developed, they will apply the cap to thousands of people and businesses who will be drawn into complications for the first time. My proposals would not impose a cost on the Exchequer or undermine what the Government are trying to do; they would simply ensure that, when the Treasury comes up with an answer to the questions that have been raised today, we will get a meaningful chance to debate and scrutinise the answers, as we are doing with the Bill at the moment. The Government really should have put the detail in the Bill but, in the absence of that, my amendments would ensure that we retain as much oversight as possible as the detail comes through. I can think of no reason why the Minister would not adopt the affirmative resolution if he cares about oversight, due process and the scrutiny of a policy which will affects millions of people. There are 7.7 million people using salary sacrifice and Amendment 9 should be an obvious amendment to support.

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Moved by

[Baroness Kramer]

8: Clause 1, page 2, line 14, at end insert—
“(6DA) Before making regulations under this section, the Secretary of State must lay before Parliament a statement confirming that the requirements in section 1(3) of the National Insurance Contributions (Employer Pensions Contributions) Act 2026 have been complied with.”Member's explanatory statement
This amendment, connected with another in the name of Baroness Kramer, creates a number of criteria by which the Secretary of State has to abide, before enacting the provisions in subsection (6A).

[Baroness Kramer (LD)]

My Lords, this group has just two amendments: Amendments 8 and 11. While the former is just a paver for the latter, it is apparently required for Amendment 11 to go into the Bill. I make it clear that I am speaking in order to get the contents of my speech on the record; I do not intend to press either amendment, even though I think they are important.

It has been clear from the debate so far that the Bill fails to provide Parliament with the information it needs to assess the legislation. I am very glad that we have now passed the language on affirmative resolution. I also thank the Minister for giving us clarity now on how the cap operates: it is per employment rather than per employee. That is hugely important clarification.

Throughout the debates on the Bill, there has been confusion over the numbers and consequences. To get greater clarification, my former colleague and pensions expert, Sir Steve Webb, submitted an FoI request to obtain the numbers that can explain the conclusions of the Budget Red Book of November 2025 and the OBR’s supplementary analysis of 2026 as it refers to the impact of the Bill. Sir Steve’s request was answered in part, but key requests were refused. Therefore, I am trying to capture those requests in Amendment 11.

The amendment seeks the estimates used by HMRC of the number of basic rate taxpayers using salary sacrifice arrangements above £2,000; a similar disclosure for higher and additional rate taxpayers; the expected number of employers expected to reduce their pension contributions in each group; and the contribution to the revenue numbers in the Red Book from increases in employers’ NICs—and, separately, employees’ NICs—as a consequence of the Bill. With that information, we can make a reasonable judgment of the impact of the Bill on workers, employers and pensions, and get a grip on the likelihood of the revenue outcomes forecast in the Red Book, which at present look exceedingly doubtful, as others have said.

Sir Steve was not denied the disclosures he requested because they do not exist—quite the opposite. HMRC said in its letter to him, “We can confirm that HMRC holds the information you have requested. The reason for the denial is to protect the integrity of the policy-making process and to prevent disclosures that would undermine this process”. Apparently, transparency

“needs to be weighed against the public interest in avoiding the disclosure of information which may inhibit the decision-making process”.

The information—noble Lords have heard me list it—is not commercially sensitive; it does not deal with state secrets. We are not looking for transcripts on advice but simply for basic numbers that any person would require to assess the Bill. I begin to think that, if the numbers were shown the light of day, the policy might collapse. I greatly fear that we really should be aware of them, and I want to be sure that no regulation can be put in place until Parliament has seen and scrutinised this information. I very much hope that the affirmative action resolution we passed a few moments ago will help us do that.

This is simply a statement to the Government: they need to give Parliament the information and numbers it needs to assess a piece of legislation properly. Scrutiny is meant to be our job, and we cannot scrutinise if the appropriate numbers are not provided. I beg to move.

[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to the amendment tabled by the noble Baroness, Lady Kramer. It would be helpful if the Minister could explain a little more about what the Government believe the intention and the outcome of this policy will be. He did not answer my question earlier on why there is a rush to get this measure through Parliament so fast. Have the Government quantified the extra employer costs of the higher 15% national insurance contributions from the employer, and the 8% or 2% extra national insurance contribution per member, and quantified it in money terms and in what it will mean for pension provision and future pensioner poverty?

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The Office of Budget Responsibility published its economic and fiscal outlook, which provides the OBR’s independent scrutiny of the Government’s policy costings. The OBR published a supplementary forecast note, which provided additional information that it received prior to last year’s Budget to further increase the transparency of this measure. Taken together, these publications already provide an appropriate and comprehensive assessment of the distributional impacts.

[Baroness Kramer (LD)]

My Lords, we have important votes ahead of us, so I beg leave to withdraw.

Amendment 8 withdrawn.

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Moved by

[Baroness Kramer]

12: Clause 1, page 2, line 26, leave out “£2,000” and insert “£5,000”
Member's explanatory statement
This amendment changes the initial contributions limit to £5,000 in Great Britain.

[Baroness Kramer (LD)]

I wish to test the opinion of the House.

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Moved by

[Baroness Kramer]

26: Clause 2, page 3, line 39, leave out “£2,000” and insert “£5,000”
Member's explanatory statement
This amendment changes the initial contributions limit to £5,000 in Northern Ireland.

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[Lord Londesborough (CB)]

My Lords, I support Amendment 31 in the name of the noble Baroness, Lady Neville-Rolfe, to which I have added my name. I also add my vocal support for Amendment 32 from the noble Baroness, Lady Kramer, which I should have added my name to but did not. Both amendments concern the impact on SMEs. I am more concerned about the “S” part of that acronym, because medium-sized businesses with payrolls of over 100 staff are a lot better equipped to deal with the provisions of the Bill. I heard the Minister saying that only 10% of this group apply for salary sacrifice, which is a glass-half-empty argument. It is precisely because of that that we should be very concerned about the 90% who are missing out entirely on salary sacrifice.

When we go back to Amendment 31 and look at the impact, the employment data this year for SMEs is utterly dire—on vacancies, payroll and employment, part-time and full-time. I will not go through all the data, but I remind your Lordships that only 10 days ago, the Federation of Small Businesses wrote a letter to the Chancellor of the Exchequer warning that one-third of its members are planning either to shut down their business this year or to reduce their headcount, and that should send a real chill down the spine. I simply do not believe that the Government understand what it is to develop and foster a thriving SME ecosphere, on which, at the bottom of the pyramid, our economic growth utterly depends. I therefore throw my support behind these two amendments.

[Baroness Kramer (LD)]

My Lords, Amendment 32 is in my name. I realise that Amendment 31 is a broader amendment, and I have no objection to it whatever. It was written in response to a particular issue identified by the Federation of Small Businesses, which is that small businesses that use salary sacrifice regard it as one of the perks they can offer, in a very competitive market, for particular skill sets. Churn is a major problem for small businesses, so to be able to keep people and keep them happy really matters. It is tough for a small business, particularly when it is looking for a person with highly desirable skills, to compete against big businesses, which can offer perks of many different kinds. They may not offer salary sacrifice to the same degree, but they can offer other kinds of perks and advantages.

I am very concerned about the competitive impact on small businesses. I strongly agree with the noble Lord, Lord Londesborough, that this group is the foundation of our economy and its condition currently leaves us worried. At a time of a big push for growth, many of the unicorns will fall into a sector where they are in a battle for skills against large existing companies. My Amendment 32 would review within 12 months the impact very specifically on SME recruitment and retention. I hope the Government will pay serious attention to this area.

[Lord Livermore (Lab)]

My Lords, Amendments 31, 32 and 33, tabled by the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, would require a review of the legislation’s impact on small and medium-sized enterprises, charities and social enterprises. As set out earlier, the Government agree on the importance of transparency, and a number of documents have already been published which set out the impact of this measure. As I said on Amendments 16 and 29, the Government fully recognise the importance of supporting small businesses and charities alike. In practice, the changes in the Bill primarily affect larger employers, who are significantly more likely to operate salary sacrifice arrangements and to have employees contributing above the £2,000 cap.

Charities and their donors benefit from a wide range of reliefs and exemptions across multiple taxes, including VAT, inheritance tax, stamp duties and gift aid. Ahead of the cap taking effect, the Government will continue to work closely with employers, payroll providers and other stakeholders, including representatives of the charity sector, to ensure that changes are implemented in a clear and proportionate way for organisations of all sizes that operate salary sacrifice arrangements. In light of the position I have set out, I hope that the noble Baronesses will feel able not to press their amendments.

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[Lord Freyberg (CB)]

My Lords, I support Amendment 35 in the name of the noble Baroness, Lady Altmann, which would require the Government to commission an independent review within 12 months of passing the Act, covering a comprehensive range of impacts. Among the items it would have to consider are, explicitly, “workers with multiple jobs”, and

“workers who change jobs during any tax year and have made pension salary sacrificed contributions”.

Those two categories define the working life of a freelance creative. The Government’s answer throughout the Bill has been that these questions will be resolved in regulations. Amendment 35 would at a minimum ensure that Parliament sees independent evidence of whether that resolution has worked in practice.

Amendment 40, also in the name of the noble Baroness, Lady Altmann, would go further and make commencement conditional on a review of the Act’s practical feasibility. Given the complexity we have heard about and that I have described for workers with mixed employment statuses, including those engaged by the BBC under off-payroll rules while simultaneously working for other employers, that is not an excessive precaution. Therefore, I support both these amendments.

[Baroness Kramer (LD)]

My Lords, I shall be exceedingly brief. The amendment proposed by the noble Lord, Lord Ashcombe, is, quite frankly, genius. We have all had a struggle trying to get our hands on information that is scattered in so many different places, and I am fairly sure that if this was put with a secret ballot to civil servants they would all sign up because they struggle as well. It makes it very difficult when new policy comes through to try to work out what on earth the consequentials are, what numbers to look at, how to weigh these issues and how to understand distribution of impact, so I support his amendment.

This is such a complex Bill. When the instructions went down to put the Bill in place, I am sure there was absolutely no sense of the complexity that was going to be entangled in it. Amendment 38 in my name was triggered particularly by the OBR publication, again in response to an FoI, Costing of charging NICs on salary-sacrificed pension contributions, which was a supplemental analysis. The word “uncertainty” appeared in so many parts of it that we began to have a sense that no one could have huge confidence in the final numbers that were appearing, and it was very honest of the OBR to make it clear that there were vast uncertainties underpinning large parts of this work.



Very much like the noble Lord, Lord Leigh, I still do not think that we have bottomed out the problem with optional remuneration arrangements. It is easy to assume that we can distinguish between a negotiation where we are choosing between cash and a pension and having a negotiation that involves cash and a pension. But can we claim that the two are not related to each other, so that we do not get trapped by OpRa? There is a lot in here, and a review is the least we should do to make sure that we have a grip on these things and that Parliament gets to see it when it is still in a position to make some decisions.

[Lord Altrincham (Con)]

I thank the Minister for his usual courtesy in hosting the debate. The amendments in this group all underscore another substantial shortcoming in how the Bill has been approached: its effects and impacts have not been properly assessed in advance. I suspect that the Minister does not have the information on how the Bill will affect pensions saving adequacy, which I highlight in my Amendment 37, and how it will affect employer costs, pensions adequacy and workers’ take-home pay, which the noble Baroness, Lady Altmann, raises in her amendment.

These are serious questions. As was noted in Committee, if the Treasury had done better work in preparation for the Bill, it would already be able to give us the answers to the questions that these amendments raise. These are the questions that businesses, employers, savers and industry are asking. As my noble friend Lord Ashcombe highlighted, the information must be in an easily accessible format in a single place, because it will be relevant to more than just policymakers and parliamentarians: businesses and employers will be trying to understand what all this means for them, as well as employees saving for their pensions, who will be trying to understand how they could be affected.

My amendment raises the question of pensions adequacy. People are not saving enough for their pensions and the Government are worsening incentives to do so with the Bill. The Minister should consent to a review of this matter before the Bill comes into force. The Government must make sure that they know the facts, so that we can ensure that they do not inflict unintended harms. As a point of good governance, the Minister should accept this and the other amendments in this group.

Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025

Baroness Kramer Excerpts

Wednesday 28th January 2026 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this debate on these regulations in Grand Committee. In doing so, I declare my interests, as set out in the register: as non-executive director of Avalanche (BVI) Inc and the Avalanche Foundation, a layer 1 blockchain protocol; and as adviser to Simmons and Simmons LLP.

I thank the Minister for the way that he introduced these regulations. They are a good thing and people have had time to consider them. They set out the Government’s position and ambition when it comes to crypto assets. We should all welcome this; there is an extraordinary opportunity for the UK when it comes to crypto assets, broader digital assets, tokenisation and broader allied technologies. We could take a stat from any of the main consultancies; all we need to know is that this is material to the UK economy and measurable in the billions.

What does this statutory instrument do to help us towards that objective? First, we should probably take a moment to slay two myths that dog this area and the broader technology space. The first is that you can have either regulation or innovation, not both. I believe that the Government’s approach to crypto assets and broader digital assets proves that it is possible to regulate in a way that enables innovation, proper regulation and the necessary consumer protection. We saw similar approaches with the fintech regulatory sandbox in 2016, the market intervention from the CMA with open banking and, decades ago, the approach that the UK Government took to the mobile telephony sector. We know how to do what I describe as right-sized regulation.

The second myth is that we cannot possibly legislate in time for these new technologies and financial instruments. If we look at just two recent examples—the Electronic Trade Documents Act and the Property (Digital Assets etc) Act—we can see clear, focused, specific legislation passed in good time that is already having a positive impact on our economy and businesses and for individuals right across the UK.

It should also be noted that we are not behind the curve when we compare other jurisdictions. Certainly the GENIUS Act in the United States has perhaps had more column inches and broadcast minutes devoted to it but, when we consider the timeline for the implementation of that Act and look at what is currently happening with MiCA in the EU, the UK should not feel behind the curve in any sense.

I welcome these regulations, but with one significant caveat—one wrinkle that I believe needs to be addressed. It is simply that the regulations as currently drafted roll together stablecoins and other crypto assets. For example, unbacked bitcoin is treated in the same way as fiat-backed stablecoin. I cannot believe that this is the intention of the Government in drafting these regulations, because unbacked bitcoin and fiat-backed stablecoin operate in very different ways and have extraordinarily different purposes. Crucially, the difference can be set out just in understanding the difference between something that is backed and something that is completely unbacked. Bitcoin could largely be considered a speculative investment; stablecoin is more of a payment methodology—money, if you will. I ask the Minister whether that is the intention of the regulations, whether that follows from the stated policy around crypto assets and stablecoins and whether a change to the regulations is not required at this stage to perfect what I would argue is a significant problem.

I do not believe it can be right that fiat-backed stablecoins are treated as investments—they are not investments. If they are, there is a clear and present threat to the burgeoning stablecoin industry in the UK, which, if these regulations go through, may be stifled before it has had time to even get thoroughly under way. To be clear, stablecoins and other potential payment methods, such as central bank digital currencies, are the cash leg to these new digital markets and digital economy. If we stifle that at this stage, we will be killing off all those broader possibilities from such digital markets.

Take, for example, somebody who wished to use fiat-backed stablecoins to make a payment, engage in FX, or be involved in a money market fund. They would be using a fiat-backed stablecoin rather than fiat itself. Can it be right that the regulations as currently drafted would treat that person differently just by dint of them using fiat-backed stablecoin rather than cash? It would necessitate FCA licensing, so an increased regulatory burden for doing largely the same thing, and, in reality, that licence would not be sought—the industry would simply choose not to use that stablecoin methodology, and thus it would be killed off at that stage.

I believe a solution exists, and it is relatively straightforward at this stage: to exclude qualifying stablecoins from the definition of qualifying crypto assets. It would not be problematic. It would fit very well with Deputy Governor Sarah Breeden’s speech on a multi-money universe. Consumer protection would be unaffected, because of the issuing provisions already set out. The safeguarding duties would kick in and have a positive impact. I do not believe any changes would be needed to the staking provisions. Crucially, it would leave policy in the correct place to enable stablecoins to be integrated into the upcoming overhaul of payment regulations. I argue that payment regulations is the correct place for stablecoins, as they are, in essence, money. Another solution could be to look at how the current definitions are set out around dealing and arranging. It is more complex, but equally doable. Two options exist to setting right this wrinkle in the regulations.

It is not that this is a minor drafting point. There will be clear, present and immediate harm to our industry and economy if the regulations are passed in their current form. This is not just a matter of theory. We can see this already in the EU, where the double regulation of stablecoins—MTS in that jurisdiction—is currently causing harm, hampering the development of that industry across the EU, and is already subject to review. We can avoid that issue before it becomes a problem if we make this change to the regulations.

The policy note that accompanied the regulations when they were first set out said that this is a draft SI and should not be considered final. Does the Minister agree that that continues to be the situation and that we can make these changes to the regulations? There is a great deal at stake for the UK here. This is such an important piece of the UK’s global aspiration when it comes to crypto assets, digital assets, tokenisation, and the whole digital market and economy transformation that we all want to bring about for the benefit of the citizen and the consumer, companies and our country. The opportunity exists. We cannot allow it to founder for want of this simple change.

The Government’s growth agenda can be effectively enabled through stablecoins and broader digital assets. Similarly, does the Minister agree that there is a real opportunity for the effective and efficient offshoring of government debt through the effective deployment of stablecoins? It is a real opportunity for the UK economy. If you want a use case to prove this point, just look at how USDC is currently operating.

At stake is a growth matter and a global economic matter. This is a way to effectively change how government debt is treated in a material way for the economy. More broadly, in considering the whole issue around crypto and digital assets, having even greater clarity from the Government, beyond growth and innovation, and making a clear statement as to what we want as the UK—what position we want to play when it comes to cryptocurrencies, assets, digital assets and stablecoins, sharpening the arrowhead of the Government’s mission—would be incredibly helpful across this industry. We have an extraordinary opportunity that we can take only if we make the changes to these regulations.

Will the Minister agree to meet me and other industry colleagues, potentially with the Economic Secretary to the Treasury, to discuss how we can perfect these regulations to be the positive, clear and consistent regulatory landscape that will enable industry and consumers to have the best experience and the most economically improving approach to crypto assets, stablecoins and digital assets in the UK? I look forward to the Minister’s response.

[Baroness Kramer (LD)]

My Lords, I confess that, when tried to work my way through this statutory instrument, I felt incredibly inadequate. I cannot pretend super expertise on crypto assets and stable coins. Most of the information that comes my way is, frankly, from the industry lobbying for the maximum amount of scope, along with assurances that this is just a much more efficient plumbing of the payment system—nothing troubling here, just an opportunity to enhance the economy.

I realise that a regulatory framework is necessary, as crypto has become mainstream and is no longer fringe. While I do not oppose the SI, I retain quite a degree of uncertainty. I start by picking up the issue of stablecoin. I know Chris, or the noble Lord, Lord Holmes, really well—I apologise for almost forgetting his name; I have moments of holes in the brain that I suspect come with age—but I question the assertion that stablecoin is essentially just fiat currency in another form. I know some of the stablecoin companies such as Tether argue that basically one Tether equals $1 in the form of treasuries. I am also clear that much of this is opaque. Those who I understand see the accounts of some of these firms say that, if stablecoins were really only matched one to one with a fiat currency, their earnings would be no more than the return you would get—if it was, for example, a dollar stablecoin—on US treasuries. That does not square with the earnings that they either report or promote as part of their future. There is certainly something opaque about stablecoin. We are much safer if we continue to regard this as a subset of crypto and look at it carefully before we give it any specialist position.

I understand the need for these regulations, but I am terribly conscious that the Government’s thinking in shaping all this has been much impacted by its membership of the joint UK-US Transatlantic Task Force for Markets of the Future. That has been guided and driven by the Trump Administration’s desire to use financial instruments as a means of extraterritorial control. We see this most obviously with trade tariffs—that is where Trump’s main speeches are and those are the instruments that he talks about. I understand that anybody who was at Davos and spent five minutes with US Treasury Secretary Bessent would have quickly understood that crypto and stablecoin are indeed instruments that, in the same way, offer great potential to advance US economic interests globally and for forms of what I think Mark Carney would probably have called financial coercion.

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The noble Baroness, Lady Kramer, specifically asked what the Government think about stablecoins. The Government consider that stablecoins have the potential to play a significant role in both retail and wholesale payments. We are already seeing the benefits that stablecoins can provide in cross-border payments, reducing costs and improving efficiency. The Government also recognise that unlocking the full transformative potential for digital assets and blockchain technologies requires payments that interact with them directly, and stablecoins can play an important role in achieving this. It is therefore important for the UK to harness these opportunities in the promotion of the ongoing competitiveness of UK financial services, while it ensures the robust protection of consumers. We believe that they can go hand and hand—we can be innovative, promote growth and look after consumers.

[Baroness Kramer (LD)]

My issue on this is related but slightly different. If we are dependent on dollar stablecoin for international trade, which is the direction of travel, and the US Government decide that they do not like either a policy that we have or a piece of trade, they can, through the companies that sit behind that stablecoin, in effect shut us down and cut us out. That is a very different set of circumstances from those in which we live today, where they might want to do that, but they cannot. They may try to make banks act in the way that they want, but they would have a far more challenging job in doing that. I am just concerned that that thinking is not embedded in the way that we are structuring this and doing the regulation. That is my concern. I see the plumbing advantages of stablecoin, but I worry about where the power levers are set. I cannot see that this addresses any of that.

[Lord Wilson of Sedgefield (Lab)]

That is a very important question about monetary sovereignty. While most stablecoins today are US-denominated—I think about 99%—and issued overseas, this instrument lays the groundwork for a thriving ecosystem, including UK- issued pound-denominated stablecoins. The Government are considering the regulators’ proposals on stablecoin-backed assets that include UK government debt. The Treasury will assess the fiscal implications and benefits of stablecoins in this context, and I think the Treasury is well aware of the noble Baroness’s concerns. It is something that we take very seriously, and we will probably hear more about that as time goes on.

The Government are committed to ensuring that the UK remains an open and connected financial centre, as we need to be in a globalised economy, and to upholding its commitment to international regulatory standards. We are working with the transatlantic taskforce on all these issues to enhance US-UK collaboration. We are aware of the issues that the noble Lord raised on capital markets, and the taskforce will explore options for short to medium-term collaboration on digital assets, additional opportunities for wholesale digital markets innovation and ways to improve links between our capital markets to enhance the growth and competitiveness of both UK and US markets.

On the specific quote used by the noble Baroness, Lady Kramer—

“same risk, same regulatory outcome”—

we think that this instrument allows the FCA, as the regulator, to set appropriate and detailed rules addressing market risks. We therefore do not believe that we have the same regulations as always for the risks.

Noble Lords asked whether there is a problem with the anti-money laundering requirements and whether this instrument goes far enough to look after consumers. To be clear, the Government are not weakening the anti-money laundering requirements; for example, they will continue to apply to crypto asset firms exactly as they do today. This legislation goes further by introducing a robust financial service regulatory regime that will require all firms offering crypto asset services, either in the UK or for UK consumers, to be authorised and regulated by the FCA and to comply with comprehensive conduct and prudential rules.

It is fair to say, I think, that this SI goes a long way to help to protect consumers. The creation of a register of authorised crypto asset firms will make it easier for consumers to identify legitimate firms. The requirement for those firms to comply with the comprehensive conduct regime will reduce the risk of poorly run firms and bad practice resulting in consumer harm. By defining and prohibiting market abuse—as well as placing an obligation on firms to put systems in place to prevent, detect and disrupt such abuse—this instrument will improve the integrity of crypto asset markets and lead to better consumer protection.

Also, the regime will leave the UK well-placed. There was a question about what Europe is doing as well. We continue to co-operate internationally with our partners, including the EU; we also continue to watch the development of the digital euro with great interest.

Both noble Baronesses asked about parliamentary scrutiny, in essence. We believe that this instrument sets out a clear regulatory framework that will ensure that the Government’s aims and objectives for the sector are reflected in the regulations’ final rules. Giving the FCA flexibility on the detail of the regime will allow it to respond nimbly to developments in this fast-evolving sector; that said, Parliament will be able to hold the regulator and government to account on an ongoing basis using the regime, once it is live, through normal means such as requiring attendance at Select Committees. Also, should it become apparent that the regime is not working as intended, the Government will have the option to return to Parliament and amend the framework under which the FCA operates.

Someone asked what the impact on small businesses will be. The impact assessment published alongside the instrument sets out the impact that the Government expect the regime to have on all businesses, including small businesses. The FCA has existing duties to consider the most appropriate way of implementing this regime.

I hope to get through all noble Lords’ questions. As far as our people know, in terms of what is regulated, firms authorised for the new crypto asset activities will appear on the FCA register in the same way as firms authorised for traditional financial services activities.

As far as payments are concerned, I think stablecoin was mentioned. Government work is under way in order to take forward broader work to modernise assimilated law on payments, including to ensure that the UK’s payments regime is fit for tokenised payments such as stablecoin. That work is ongoing.

We all know about the opportunities for cryptocurrency. We cannot disinvent it. We have to make sure that it works for the British economy and the British people; and that people are protected. This SI lays down a framework so that consumers can be protected.

I turn to the two final questions. The Government are committed to making the UK a world-leading destination for digital assets. Our regulatory regime has been developed through extensive engagement with industry and international partners, ensuring it is both internationally competitive and aligned with global standards. This legislation will support UK growth by giving crypto asset firms the regulatory certainty needed to invest here and drive innovation in our financial services sector. So, in answer to the question of the noble Baroness, Lady Neville-Rolfe, we do not think that this is too restrictive.

Finally, on financial education, which we are all keen to see in our schools and broader society, the Government want people to have the confidence and skills they need to manage their money. The Money and Pensions Service, an arm’s-length body of government, provides free, impartial guidance to consumers at every stage of their financial lives. More widely, the Government are taking steps to improve financial education. In November, we set out our plans for all school children in England to receive financial education. This reflects the Government’s wider commitment to financial literacy and building a population better able to make informed decisions about financial products.

I hope I have hit all the questions. If I have not done so, we will go through Hansard and get back to noble Lords about what perhaps we have missed out.

Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025

Baroness Kramer Excerpts

Monday 8th December 2025 Grand Committee

[Lord Jones (Lab)]

My Lords, surely these instruments must be welcomed, and surely we all want a smarter regulatory framework. I thank the Minister for his helpful and concise outlining of the regulations and the order. There is a lot of business ahead and time is of the essence, so my brevity is guaranteed.

One can only welcome the policy context as stated at paragraph 5 of the helpful Explanatory Memorandum. Can my noble friend the Minister or his department say what the Prudential Regulation Authority is? In particular, can he perhaps give some detail on how big it is and who sits on it? Who chairs it and, on the presumption that the chair is full-time or part-time, is he or she salaried and how much are they paid? Are all the PRA membership paid or are they voluntary? How often does the PRA meet? The department may not give answers now but if not, might the Minister reply by letter?

[Baroness Kramer (LD)]

My Lords, I will take these two statutory instruments in the order in which they are on the Order Paper, which is the reverse of the Minister’s discussion. That is not a criticism; it is just to explain where I am starting from.

The first of these two SIs removes the current assimilated law on capital requirements for banks, building societies and investment firms and replaces it with rules to be set solely by the regulator—in this case, the PRA. In effect, it removes the control of capital requirements from any intervention by Parliament. As always, I want to register my concern that an issue of fundamental importance to the financial stability of the country is, in effect, being removed from any meaningful parliamentary oversight or action.

The regulators may be experts, but they got it terribly wrong in the 2000s by misunderstanding CDOs, which triggered the financial crash of 2007-08, and by not recognising the precarious state of liquidity or lack thereof in many of the big banks, which worsened the crisis. They also turned a blind eye to the manipulation of Libor benchmarks, which damaged the UK’s reputation for integrity in financial services in ways that are still with us today—never mind, frankly, the financial damage to so many clients across the globe. Recently, the PRA has been permitting an erosion of capital requirements, almost certainly to fit with the Government’s agenda for short-term growth, rather than being based on any evidence of risk reduction, which I have looked for and cannot find.

I sat on the Parliamentary Commission on Banking Standards that examined the 2007-08 crash for nearly two years. We predicted that amnesia about how risk actually works would set in. I note that the banks are using the new leeway provided by looser capital requirements to leverage private equity funds, even though they cannot assess the risks embedded in those funds, which are, by definition, not transparent. However, of course, we recognise that those funds pay the banks’ substantial fees. It is all so predictable.

The second SI makes provision for environmental, societal and governance ratings, as related to investments, to be set in the rulebook of the FCA. Once again, what is properly a policy decision will escape parliamentary oversight and intervention. Clear rules will be welcomed by investors, but this is a contentious area. Is nuclear included? Is carbon capture and storage included? Is defence green? I am not answering those questions; I am saying that those questions naturally arise. In the Commons debate on this SI, the Conservatives basically reflected a Trumpian view of oil and gas investments—the “burn, baby, burn” view. Is that the view the FCA will follow, or will the Minister say to me, as I think he must, “That’s not up to Parliament; it’s up to the FCA”? The investment market is an international one and, frankly, investors care much less about what the rules are and much more about whether they are globally consistent. How will the FCA rules sit with the new anti-green US approach? The EU has a new ESG framework, which comes into effect in 2026. How will the UK rules sit with that? How will the UK’s overseas recognition regime work—the Minister referred to it—and what will be its parameters and consequences?

Surely, Parliament should have more of a view than just being one of the many consultees, which seems to be the current position. I continue to be very concerned about the direction of travel away from legislation, with debate, oversight and parliamentary responsibility, to rulebooks in the sole control of the regulators.

Barnett Formula: Wales

Baroness Kramer Excerpts

Wednesday 12th November 2025 Lords Chamber

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for that question. I like to think that all the avenues of approach he has mentioned will be looked at and discussed at the ministerial meeting at the beginning of next year. It is also important to point out that there is direct funding to Wales, which includes 160,000 workers in Wales who have benefited from a direct pay rise due to the increase in the minimum wage and the national living wage.

[Baroness Kramer (LD)]

My Lords, each of the four nations operates a different and independent NHS computer system, which means that doctors struggle to get information on cross-border patients in England and Wales. Will the Government now recognise the seriousness of this issue and adapt the Barnett formula, which stands in the way of providing the funding to remedy this situation?

[Lord Wilson of Sedgefield (Lab)]

The noble Baroness raises a very important issue, and I hope it is something that the ministerial meeting at the beginning of next year will look at. I like to think that all aspects of the Barnett formula, including the issues that the noble Baroness has raised, will be looked at in the round, because obviously we want to see efficiency in all our public departments.

Public/Private Partnerships: Shares

Baroness Kramer Excerpts

Monday 3rd November 2025 Lords Chamber

[Lord Wilson of Sedgefield (Lab)]

I agree with the noble Lord and accept his point of view. There have been a lot of benefits from public/private partnerships in the past—they have invested in many schools and hospitals, where pupils and patients have benefited—but we need to look at how we reform public/private partnerships and make them fit for the future. Obviously, the National Infrastructure and Service Transformation Authority, which was set up in 2020, has a great part to play in that.

[Baroness Kramer (LD)]

My Lords, first, we on these Benches join in the commiserations with the noble Lord, Lord Livermore. Does the Minister agree that for a successful PPP, in addition to the key point made by the noble Lord, Lord Forsyth, not only is an educated public sector negotiator is required but clearly defined projects that will not undergo variances, and financing, in essence, set out up front and not used as a back-end bargaining tool? Does he agree that these and the other lessons that we learned before mean that there are relatively few projects that will meet the criteria for a public/private partnership?

[Lord Wilson of Sedgefield (Lab)]

We will look at public/private partnerships in the future. We are looking at them in a limited way for neighbourhood health centres, for example, and public estate decontamination projects, but we need certainty over future funding, which is why we have committed over the next decade at least £725 billion of investment in infrastructure so that we can ensure growth.

Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025

Baroness Kramer Excerpts

Wednesday 3rd September 2025 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank the Minister for outlining what he identified as a very technical and detailed set of two instruments. I came into the Committee not sure whether I was going to speak or not. I listened very carefully to the Minister’s tone and, as I was doing that, I was looking at the Bank of England’s financial stability report from July 2025. It said that uncertainty around the global outlook has intensified. It says of financial markets that they have been highly volatile. Weakness in non-bank finance can amplify risk. It says of UK households and businesses that, overall, they continue to be resilient. I am not quite sure that that, particularly the last one on households, reflects the experience that many people who are listening to this Committee have—if they are very bored this afternoon. None the less, there we are.

Some of the things that the Minister said in the introduction concerned me slightly. One of them started with “widely supported by industry”. We are hopefully thinking about the national interest rather than just the interests of the financial sector and, perhaps, the wilder reaches of the financial sector. It was described as essential for companies operating these core businesses. We are talking about complex financial instrument derivatives here. From the words of the Minister, it is clear that the Government are heading in the same direction as the previous Government.

Of course, not just the apparent complexion of the Government but the global situation has changed tremendously, so I have one question for the Minister. Are the Government keeping under constant review the foundational conditions in which the financial sector is operating and ensuring that everything they do is not increasing the level of risks that the financial sector presents to the security of us all?

[Baroness Kramer (LD)]

My Lords, I recognise that these two statutory instruments deal with technical measures and in and of themselves have limited impact. They are essentially a tidy-up of the text to reflect broader changes made since Brexit to the financial regulatory system. The FSMA 2023 SI transfers to the PRA responsibility for setting the capital buffers that banks are required to hold in addition to minimum capital requirements. The PRA is a strong regulator, but it has taken a series of measures to move in the direction of lighter touch, motivated by its competitiveness and growth objective. I have spoken before about my concern that the PRA, for example, is increasingly willing to turn a blind eye to the illiquidity of assets. When powers are transferred to the PRA, as they are by this SI, a significant measure of transparency, accountability and parliamentary oversight disappears. Capital buffers are critical to the stability of the banking system, and I remain concerned when parliamentary oversight in this key area is significantly weakened, as it is by the measures that both surround and are then captured by this SI.

The second statutory instrument deals with the markets in financial instruments and again affects a transfer of power and responsibility, this time to both the FCA and the PRA. Once again, it is a move to a less transparent and less accountable system. The rules can now be changed, presumably in line with the smarter regulatory framework that the Government have put forward, and they both allow divergence from the EU and a lighter-touch approach. Divergence has its own risk, as it has implications for cross-border business, and Parliament will not have a voice any more than as a significant consultee. Frankly, experience suggests that the regulators look at Parliament’s views in these consultations and treat them as relatively irrelevant compared to the views of industry.

I note that the Minister described the regulators as expert, independent regulators. He would have used exactly that same phrasing before the 2007 crash, and we still live with the repercussions of that crash. Blind trust in the regulator is exceedingly inadvisable. I have tried in previous speeches to list some of the erosions of protections that were introduced after the crash. They include: the competitiveness and growth objective for regulators; the changing to matching adjustment; insolvency UK; significantly increasing the illiquidity of the insurance sector; the removal of the cap on bankers’ bonuses; the permanent permission for pension funds to transact derivatives without using central counterparties, thereby avoiding putting in place margin collateral, which puts them seriously at risk in any kind of financial volatility in unstable times; the watering down of the senior managers’ regime, which is key to accountability; the weakening of the financial ombudsman; the pressure on pension funds to invest in high-risk, illiquid assets; and the uncertainty that now exists around bank ring-fencing.

That is a partial list of the erosions that I have been able to pick up, and I am sure that, if the Government sat down and thought about it, they could come up with a far longer list and perhaps even suggest that this was a huge positive. But it is notable that Parliament will have no further say, now that these SIs have gone through, any more than just an ordinary consultee, in a further erosion of these various protections. Frankly, while Parliament will get reports that will allow it to look at the impact, that will be very much in retrospect, which I suggest is very late in the day.

I repeat a request that I have made before for the Government to publish a compendium of the changes that have been made that increase risk in the financial sector and a look at those risk implications. My view is that, without that degree of transparency, Parliament cannot do its proper job.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for his clear explanation of these statutory instruments and the noble Baroness, Lady Kramer, for her gloss on that.

Today we are considering the instrument on capital buffers as well as the Markets in Financial Instruments (Miscellaneous Amendments) Regulations. While each is described as largely technical, both help to shape the future of our financial regulatory framework. Obviously we on these Benches are happy to consider them together and to raise some questions about how they link to the Government’s wider ambitions for stability, innovation and growth.

We recognise that both instruments form part of the wider process of revoking retained EU law and restating and embedding that in the smarter regulatory framework under the Financial Services and Markets Act 2023. It is important that our regime is clear and coherent and reflects the institutional responsibilities of the regulators, whether the Prudential Regulation Authority, the Bank of England’s Financial Policy Committee or the Financial Conduct Authority.

For me, the most important current issue for the financial regulators is whether they are really adjusting their rules, their outlook and their culture to pursue growth and competitiveness, as they were recently required to do. Is the Minister in a position to assure us that the PRA and FCA have taken vigorous action to meet the Government’s requests and instructions on this vital point? I recall that the Chancellor wrote to them last autumn. What were the key demands, and what did they do in reply? What are the opportunities for growth, bearing in mind the current challenges outlined by the noble Baronesses, Lady Bennett and Lady Kramer? Although I do not agree with all that they said, I think it is important to debate that.

I have a few other questions. On capital buffers, while the instrument is described as technical, it involves substantive changes in transferring responsibility for buffers, such as the capital conservation buffer and the global systemically important institutions buffer, to the PRA. Can the Minister clarify how the Government will ensure sufficient parliamentary oversight of these crucial prudential tools, now that they will be set directly by the regulator? As the noble Baroness, Lady Kramer, said, it is now a less transparent system, so Parliament needs a strong voice in the post-EU world.

Of course, capital buffers are at the heart of keeping our financial system stable. We learned in painful ways during the financial crisis what happens when banks lack the resilience that they need in times of stress. The framework we have now is well established, but risks are evolving all the time. Can the Minister share the Government’s view on whether today’s capital requirements are still fit for purpose, particularly in the light of the growing challenges from shadow banking, digital assets and climate-related exposures?

We note that the second instrument retains certain key definitions from the MiFID organisational regulation, while paving the way, as the Minister said, for the revocation of firm-facing provisions. The intention is to allow the FCA and the PRA to take forward responsibility for detailed rules, tailoring them more closely to the needs of the UK market. The Minister has explained the rationale for that, but I ask him to expand on how these changes will not only safeguard market integrity and, I think he said, prevent the gaps that might arise—but encourage innovation and investment and growth, which I think we all agree that we need if the economy is to move forward positively.

What steps will the Treasury take to ensure that regulators’ rule-making in this area is aligned with the broader ambition of using financial services as a driver of economic prosperity, the point I addressed earlier?

Child Trust Fund Accounts

Baroness Kramer Excerpts

Wednesday 19th March 2025 Lords Chamber

[Lord Wilson of Sedgefield (Lab)]

We know that there are real difficulties with this, and cross-departmental activities are taking place to try to resolve the problem. I understand from the courts that the Government are committed to bearing down on the outstanding caseload left by the previous Government, and the challenges we face in doing so are significant. As a crucial first step, we are funding another 108,500 sitting days in the courts this financial year, which is the highest level we have had for a decade.

[Baroness Kramer (LD)]

My Lords, in cases where a parent or guardian were unable to set up an account for their child, the Government opened a savings account on the child’s behalf. Can the Minister give me an assurance that all these children, for whom HMRC must have both contact details and legal authority, have been reached and are not part of the group who are unaware of the funds they have available?

[Lord Wilson of Sedgefield (Lab)]

All young people who have trust funds are contacted at the age of 17, and those who do not respond will be continually contacted. Secondly, the funds available to them will be available for ever or until, potentially, things change; but at the moment, there is no reason why that should happen. Those funds will be there for as long as they need to be, before they are drawn down by the child. The one thing to remember is the funds not having been accessed does not mean that the person who can access them does not know they are there.