Electricity Bills: VAT Removal

Baroness Neville-Rolfe Excerpts

Thursday 23rd July 2026 Lords Chamber

[Lord Wilson of Sedgefield (Lab)]

We know the issues around VAT in Northern Ireland, for example on electricity bills. The Northern Ireland Executive will receive comparable funding to enable them to support NI households with the cost of living. We have taken into consideration all the issues around the Windsor Framework, and we will continue to help the people most in need who live in Northern Ireland.

[Baroness Neville-Rolfe (Con)]

My Lords, I, too, send my best wishes to the noble Lords, Lord Livermore and Lord Stockwood. I welcome the appointment of the noble Lord, Lord Pitt-Watson, and look forward to the more constructive approach favoured by the new Prime Minister. With 10-year yields above 5%, political and international instability is already increasing borrowing costs and placing the sustainability of the public finances under serious strain. Does the Minister recognise that unfunded spending commitments cannot simply be floated in the press or on podcasts without consequences? Markets react, investment and growth are discouraged, and working people ultimately pay the price, with increases in the cost of living.

[Lord Wilson of Sedgefield (Lab)]

I echo the noble Baroness’s comments about my noble friend Lord Pitt-Watson, who will be the new Minister, taking over imminently—after this Question, I hope. The Government are well aware of the international situation we have in the Middle East and Ukraine; we know about the issues that we face. I do not believe the announcements being made are unfunded; we are finding the money to face up to the problems that ordinary people around the country are facing. I repeat the facts again: £9.4 billion of unfunded pay awards and £2.6 billion of new unfunded policy announcements by the last Government. What we are doing pales into insignificance compared to the debt they left the country in.

National Savings (Remediation Scheme) Regulations 2026

Baroness Neville-Rolfe Excerpts

Wednesday 22nd July 2026 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That this House regrets that the National Savings (Remediation Scheme) Regulations 2026 were introduced only after a prolonged delay affecting up to 37,500 bereavement claims; and that failures by National Savings and Investments have given rise to a substantial liability for the taxpayer.

Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[Baroness Neville-Rolfe (Con)]

My Lords, this instrument provides National Savings & Investments with the legal powers it needs to establish a compensation scheme and to return money that should have been paid to the estates of deceased customers, in some cases many years ago. That remediation must now proceed as quickly and comprehensively as possible.

However, it would be wrong to allow this negative resolution instrument to pass without formally noting the harm that has been caused and the serious failures that have surrounded this entire saga. It is significant that the Secondary Legislation Scrutiny Committee drew the regulations to the attention of the House because they raise significant public policy issues and because Ministers have not answered important questions. Moreover, the Commons Statement of 26 March on the problems at NS&I was not repeated in our House because we had broken for Easter.

I add that this is not the only problem we have heard about in relation to probate. There were terrible delays, especially during Covid—sometimes of years—and I have personal experience of lost submissions to the probate office.

As recently as 6 July, we debated my noble friend Lord Mackinlay’s amendment to force financial institutions, which would include NS&I, to use the IHT423 scheme to allow executors to source funds to pay inheritance tax in advance of the unrealistic six-month deadline for probate and to avoid the punitive rate of interest: 4% above base rate, so that is 7.75% at present. All this makes you weep for the poor bereaved already going through an emotional upheaval.

The wording of my regret Motion is intended to highlight two matters: first, the prolonged delay that has affected tens of thousands of bereavement claims, and, secondly, the substantial financial consequences arising from the failures of National Savings & Investments. I also have a number of questions for the Minister, and the responses may provide reassurance. I recognise that some of the failures to which I will refer will have occurred under Conservative Administrations and, indeed, previous Labour Administrations. This is not only an administrative or a technical problem; it has had a profound human impact. Bereaved families were entitled to receive the savings of their deceased relatives but, through no fault of their own, were denied access to that money.

The search process used by NS&I when handling bereavement claims did not always identify every product held by the deceased customer. As a result, estates were repaid only part of what they were owed. The Pensions Minister said on 19 May that around 34,000 estates may have been affected, with a total value of some £367 million. I hope the Minister will tell us how many estates are now believed to have been affected, how much money remains outstanding and how confident the Government are that they have identified the full scale of the problem.

Behind these large numbers are individual families and executors who suffered real distress. Some bereaved relatives have spent years trying to recover what belongs to them, facing uncertainty and obstruction. As a government-backed savings institution serving more than 24 million people, the fundamental attraction of NS&I products is their security and the fact that the savings are backed by the Government. When NS&I fails to locate customers’ holdings, fails to unite estates with their money and leaves families pursuing claims for years, trust in that important institution is damaged.

I hope the Minister can tell us when the Government first became aware of the full scale of a problem affecting tens of thousands of families, why action was not taken sooner and whether there were earlier warning signs within NS&I that were missed or not escalated. For how long had the defective search process been operating before the failure was identified? I believe that some cases date back as far as 2008. Why did internal and external audit and Treasury oversight fail to identify this earlier? Were there letters from MPs that should have woken Ministers up to the problems facing such a vulnerable group? The departure of the former chief executive, Dax Harkins, and the appointment of Sir Jim Harra, with his long-standing experience at HMRC, are welcome and are clear indications that the Government recognise the seriousness of what occurred.

Turning to the substance of the regulations, we welcome the decision that NS&I will act proactively. However, there is also the important question of funding. The money held in these accounts plainly belongs to the estates. Returning that principal sum is not a new cost to the taxpayer; it is the repayment of money that should never have been withheld. However, compensation, additional interest, professional fees and the administrative costs of identifying and contacting affected estates represent additional expenditure. The Treasury was unable to give the Secondary Legislation Scrutiny Committee an assurance that no further support from the public purse would be required. So I ask a simple question: will NS&I funds need to be increased to meet the extra burden or not? Can the Minister tell us now what the cost of compensation, additional interest, professional fees and the operation of the scheme will be? Will these costs be met entirely from NS&I’s existing budget? If additional funding is required, will Parliament be informed promptly and transparently by the Treasury?

The Government have said that NS&I aims to complete the remediation process during the first half of 2027 and will publish quarterly progress reports. That commitment is welcome, but those updates must contain meaningful, detailed information. The House should also be told what happens if the target of completion in the first half of 2027 is missed. Who will be accountable and what external oversight will there be of the scheme?

In conclusion, these regulations are necessary. Those relying most on NS&I products tend to be those who are less sophisticated financially than perhaps in other ways. In short, the vulnerable have been those most affected. This is an unhappy situation. Hundreds of millions of pounds were not reunited with the estates entitled to receive them. Some bereaved relatives were forced to struggle with NS&I for years and incurred costs simply to recover their family’s own money. We will allow the instrument to pass because delaying remediation would only compound that harm. However, we cannot allow it to pass without demanding accountability and transparency and extracting an undertaking that the Government keep on top of delivery of this vital remediation scheme. I very much look forward to hearing from the Minister, and I beg to move.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I am grateful to the noble Baroness, Lady Kramer, for her support and to the Minister for his helpful response. I do not think he answered my question about when the first signs of this scandal first emerged—for example, in MPs’ correspondence. I recognise that that is a difficult question to answer, but I am grateful for the regular reports that he has promised.

I do not wish to delay the establishment of the remediation scheme for vulnerable and bereaved families, which I obviously support. The money belongs to the affected estates, as the Minister said, and must now be returned, together with appropriate compensation and interest. It would therefore not be appropriate to divide the House. The important thing is to proceed with the mediation as quickly and comprehensively as possible. I beg leave to withdraw the Motion.

Motion withdrawn.

Financial Services and Markets Bill [HL]

Baroness Neville-Rolfe Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

Debate on whether Clause 39 should stand part of the Bill.

[Baroness Neville-Rolfe (Con)]

My Lords, our amendments in this group concern the future of the bank ring-fencing regime. I will start by setting out clearly the position that we have reached as the Official Opposition. Through our diagnostic work, we have found a consensus that the bank ring-fencing regime is no longer fit for purpose. It adds costs to banks and their customers and it has been superseded by other rules since its introduction. A regulatory regime should not be preserved simply because it exists. It must continue to justify itself against present-day risks, tools and costs. In our view, the ring-fencing regime no longer does so. The next Conservative Government would repeal the post-global financial crisis ring-fencing regime, bringing the United Kingdom more closely into line with other international jurisdictions. Amendment 160A reflects that policy.

It is worth reminding ourselves what ring-fencing is. The regime was created through the Financial Services (Banking Reform) Act 2013, which amended FSMA 2000. The implementing regulations and orders came into effect in 2019, more than 10 years after the onset of the global financial crisis. At its core, ring-fencing is the structural separation of certain retail banking activities from activities normally conducted by international wholesale investment banks. In practice, that means a separate legal entity, with restrictions on what it can do and how it can interact with the rest of the banking group. Retail and small business deposit-taking is placed inside the ring-fence, while certain other activities must be conducted outside it.

The regime was introduced for serious reasons. The Parliamentary Commission on Banking Standards, convened after the financial crisis, identified three broad objectives: to make it easier to deal with failing banks without taxpayer-funded solvency support; to insulate vital banking services used by households and SMEs from problems elsewhere in the financial system; and to curtail implicit government guarantees, thereby reducing risks to public finances and incentives for excessive risk-taking.

Since ring-fencing was designed, the wider regulatory landscape has changed profoundly. We now have a much more developed resolution regime. We have recovery and resolution planning. We have operational continuity arrangements in resolution. We have stronger capital and liquidity requirements. We have the leverage ratio, the liquidity coverage ratio and the net stable funding ratio. The Bank of England, the PRA and the FPC have a broad toolkit for reducing the risk of bank failure and dealing with failure if it occurs. Moreover, we have sounder management of banks as a result of the senior management regime.

That is precisely the point that we wish to highlight in our amendment. The risks that ring-fencing was designed to address are now addressed through other more modern, more targeted and more internationally coherent tools. The 2022 Independent Panel on Ring-fencing and Proprietary Trading, chaired by Sir Keith Skeoch, reported that the regime has an annual cost to the UK banking sector of around £1.5 billion, which comes from running multiple separate legal entities, duplicating governance systems and raising the cost of capital and lending conducted by non-ring-fenced bodies. This is because large retail deposits inside the ring-fence cannot be used as sources of finance elsewhere in a group to support lending and investment. That review also found that the reduction in the implicit government guarantee and progress in ending “too big to fail” were not attributable to ring-fencing but instead to the development of the UK resolution regime. Ring-fencing is therefore a good example of a broader problem in financial services regulation: rules that are introduced in response to a crisis which then remain in place long after the conditions that justified the change.

We are now left with two regimes that are not aligned in the way that they aim to address “too big to fail”. That adds complexity, cost and burden. It also risks making the United Kingdom less competitive than jurisdictions that rely on resolution, prudential supervision and capital frameworks, rather than structural separation of this kind. Clauses 39 and 40 show that the Government recognise that there is a problem. They seek to make changes to the ring-fencing regime and give the PRA more flexibility over ring-fencing arrangements, but in our view these reforms do not go far enough.

Amendment 160A would repeal Part 9B of FSMA and the core statutory ring-fencing provisions introduced after the financial crisis. It would require the Treasury, the PRA, the FCA and the Bank of England to take the necessary steps to unwind the related rules and guidance. It would require an orderly transition, with attention paid to financial stability, continuity of core banking services and the competitiveness of the United Kingdom. Consumer savings would continue to be protected. Banks would continue to be subject to prudential supervision. Resolution planning would remain in place.

This reform matters for competitiveness. Other major financial centres do not operate a UK-style ring-fencing regime. If UK banks are required to carry costs and structural constraints that their international competitors do not face, that affects the cost and availability of finance. It affects the ability of banks to deploy capital efficiently and it affects the attractiveness of the UK as a place to operate and invest in. It also matters for customers. Regulations that increase costs without delivering commensurate benefit feed through into pricing, service innovation and lending capacity.

If the Government believe that ring-fencing remains necessary, will the Minister explain precisely what financial stability objective it now achieves that is not already achieved through the resolution regime and other prudential rules? Ring-fencing was created in response to a particular crisis at a particular moment for reasons that were understandable at the time. But regulation must evolve. It must be reviewed against current conditions. It must be removed when it no longer serves its intended purpose.

Finally, I would add that whatever changes are made, it is right to have a proper process of consultation with business and stakeholders and a follow-up report to Parliament. That is the purpose of my Amendments 159 and 174.

[Lord Pitt-Watson (Lab)]

My Lords, if I may respond to that, I had thought until recently that what we were debating was a response to the Skeoch commission established by the last Government, but we have new amendments now, it seems—Amendment 160A and the abandonment of clauses—that are really throwing ring-fencing out. I guess that they are tabled in response to a speech by the leader of the Conservative Party, Kemi Badenoch—a speech underpinned by a policy document from her party. That speech, the policy document and this amendment are not asking to think things through further from the Skeoch report: they have made their minds up. Kemi Badenoch announced that a future Conservative Government will end ring-fencing—definitive end of discussion. That, I believe, would be a bad idea. So did the review by Keith Skeoch, who was commissioned by the Conservative Government to opine on this and whose recommendations we are now trying to take forward.

Worse still, the evidence for Mrs Badenoch’s statement is based on really questionable claims, numbers and Mickey Mouse logic. For example, the claim was that the Skeoch report reckoned that the cost of ring-fencing was £1.5 billion. In fact, the report notes that that figure was presented to the review and that

“it has not been possible to draw a strong conclusion based on aggregating these costs”.

The report recognises that there are some costs to ring-fencing, but notes that that was expected and acknowledged by the Independent Commission on Banking, which said that that would not be a cost to the economy, but rather

“a consequence of returning risk to where it should be—with bank investors, not taxpayers—and so would reflect the aim of removing government support and risk to public finances”.

The policy paper has a Mickey Mouse logic that costs should be placed on the taxpayer, when they should be paid by the banks and the investors in the banks.

We should of course be in favour of reviewing the ring-fencing regime to be sure that it is properly doing its job. This is what Skeoch did and, now, if this Bill follows that report, I ask the Minister to ensure that we are careful with definitions in the implementation. For example, we should ensure that, within the growth allowance, the definitions are very carefully drawn up. We do not in future want the taxpayer subsidising proprietary trading—what many refer to as “casino capitalism”.

Badenoch suggests that her reforms would release £450 billion in capital—another number from nowhere. I know that the noble Baroness, Lady Neville-Rolfe, will not have a lot of time to sum up, but I would be grateful if she might write afterwards on how these numbers have been derived and what reduction in bank equity capital they assume. If these numbers do not stack up, that pulls the rug from under the policy document and the speech that was made by the leader of the Conservative Party.

The policy paper suggests that we should abandon the Financial Ombudsman Service. In this industry, which represents 8% of GDP but attracts 42% of corporate fines, Mrs Badenoch has decided that the front-line institution that protects consumers should be abolished. We could say that this does not matter and that Kemi Badenoch is unlikely any time soon to be Prime Minister, but it should matter to us. As the noble Baroness, Lady Noakes, has pointed out, there is considerable expertise in financial services across all parties in the House. Although we have differences, we are united, I hope, in trying to set a framework for the industry that allows it better to serve its purpose: to serve the outside world; to help get money from point A, where it is, to point B, where it is needed; to keep our money safe; to help us transact; and to help us share risk.

If the Opposition Benches feel mandated to follow the policy documented last month, we have a problem. I could not find a single reference in that document to any input from any consumer group anywhere. It felt like a lobbyist document from the City, but I have talked to at least one lobbyist who said “No, it goes way further than we would ever suggest”.

--- Later in debate ---

[The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)]

My Lords, I have enjoyed this exchange of views today. As the noble Lord, Lord Vaux, pointed out, it is refreshing and a little unsettling to find myself in the middle ground in a debate.

Before I turn to the specific amendments and stand part notices, it may be helpful if I briefly set out the Government’s approach to ring-fencing. The Government remain committed to retaining the ring-fencing regime as an important safeguard for financial stability and depositor protection. As the Chancellor set out in her 2025 Mansion House speech, the Government will uphold the regime while delivering meaningful reforms that support growth. Following a review undertaken by the Bank of England, and consistent with the conclusions of the independent Skeoch review, we concluded that aspects of the framework have become unnecessarily rigid and duplicative over time. The measures in the Bill address those issues by making the regime more flexible and proportionate while preserving its core protections.

I turn first to the question of whether Clause 39 should stand part of the Bill. Clause 39 addresses a key conclusion of both the Government’s review of ring-fencing and the Skeoch review: too much operational detail is fixed in legislation, meaning that even relatively minor and technical updates can require legislative amendment. Clause 39 therefore allows HMT, by order, to provide for certain detailed aspects of the excluded activities and prohibitions framework to be specified in the PRA rules, rather than in legislation. This will make the framework more flexible and responsive as market practice, prudential standards and firms’ business models evolve.

Importantly, the clause does not remove parliamentary oversight. Any future delegation would require secondary legislation and be subject to parliamentary scrutiny and approval. This allows the regime to evolve alongside market developments while ensuring that Parliament retains control of the overall framework. Where functions are delegated, the PRA will be subject to the same statutory tests and considerations as currently apply to the Treasury. The clause therefore preserves the existing safeguards while allowing detailed provisions to be updated more efficiently over time.

I now turn to the Clause 40 stand part notice, which was tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Tunnicliffe. Clause 40 makes the ring-fencing regime more flexible and better aligned with the wider prudential and resolution framework. Since ring-fencing was introduced, those frameworks have evolved significantly and, in some areas, they now provide protections that overlap with ring-fencing rules. The clause reduces unnecessary duplication and helps the regime operate more coherently alongside the wider framework.

Some noble Lords have suggested that developments in resolution remove the need for wider ring-fencing altogether. I am afraid that I cannot agree. Ring-fencing and resolution perform different but complementary functions. Ring-fencing seeks to reduce risks and improve resilience before a firm gets into difficulty, while resolution provides the tools to manage failure if it occurs. Ring-fencing also complements resolution by creating simpler and more self-contained banking structures, which can support resolvability and make an orderly resolution easier to execute if a firm fails.

These resolution powers have been tested in practice, demonstrating that the framework can be used effectively. For example, the Bank of England used its resolution powers in relation to Silicon Valley Bank UK in 2023, facilitating its sale to HSBC without disruption to customers or the use of public funds. The independent review led by Sir Keith Skeoch concluded that ring-fencing has contributed towards the resilience of retail banks, while recommending reforms to improve its flexibility and align it more closely with the wider prudential and resolution framework. Clause 40 gives effect to that approach.

I turn to Amendments 159 and 174, which would require a further consultation and assessment before Clauses 39 and 40 could be commenced. I agree that it is important that proper procedures are followed. When exercising the powers in Clause 39, HMT will follow the better regulation guidance on consultation, and further legislation will be subject to parliamentary debate. The PRA is required by FSMA to consult and conduct cost-benefit analysis on most rule changes. So, in my view, the best point for detailed consultation and impact assessment is when specific changes are proposed.

Amendment 160A, tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Howard of Rising, would repeal the ring-fencing regime in its entirety and require the Government and regulators to make arrangements for an orderly transition to a non-ring-fenced banking system. I am afraid I cannot agree with this. The ring-fencing regime was introduced following the global financial crisis in response to the recommendations of the Independent Commission on Banking. The commission concluded that separating core retail banking services from riskier activities would help protect the continuity of essential banking services and reduce the risk that taxpayers would be exposed to the costs of a bank failure. The Government’s view is that those objectives remain as relevant today as they were after the financial crisis. Ring-fencing continues to play an important role in supporting financial stability and protecting depositors by helping ensure that essential banking services remain resilient in times of stress. The Skeoch review recommended retaining the regime for now but reforming the regime, just as we are doing.

Several noble Lords highlighted the cost of ring-fencing. It is true that the regime results in costs, but those costs must be weighed against the benefits of a safer banking system, stronger deposit protection and a reduced risk for taxpayers. As I set out when speaking to Clause 40, the Government do not accept that developments in the resolution framework remove the need for ring-fencing. Ring-fencing and resolution perform different but complementary functions, and the Government remain of the view that both continue to play an important role in supporting financial stability. Our objective is therefore reform, not abolition, retaining ring-fencing’s core protections while ensuring that the regime remains effective, proportionate and, importantly, fit for the future.

Alongside the changes in the Bill, the Government are taking forward further reforms intended to support lending, investment and growth while maintaining financial stability. This includes a new growth allowance that will unlock significant additional financing for UK businesses and infrastructure. I assure my noble friend Lord Pitt-Watson that this will be subject to careful consultation.

This has been a genuinely fascinating debate. There has been a range of views, and I hope the Committee will agree that the Bill strikes the right balance between these different positions. For those reasons, I ask that Clauses 39 and 40 stand part of the Bill and respectfully ask the noble Baroness to withdraw her opposition to Clause 39.

[Baroness Neville-Rolfe (Con)]

I am grateful to noble Lords who have contributed to this lively debate, and to the Minister for his response. I am grateful for the support I have received, particularly for my Amendments 159 and 174 and, from some of my noble friends, for Amendments 160A. While I agree with the noble Lord, Lord Pitt-Watson, that this House is admirably expert, he tried to politicise the discussion in a way that I regret. I set out clearly why I think that ring-fencing should go. I want to be absolutely clear that our amendment is not about weakening financial stability or compromising the safety of firms. It is about looking forward, not backwards, as the noble Baroness, Lady Kramer, has done, and recognising that the financial stability framework has changed significantly since ring-fencing was first proposed and introduced. As my noble friend Lord Massey of Hampstead argued, we now have a much more developed resolution regime, stronger prudential supervision, capital and liquidity requirements, recovery and resolution planning, and operational continuity rules. They support financial services and consumers right across the country, as the noble Lord, Lord Pitt-Watson, rightly pointed out.

I am also going to quote from the Skeoch review, as I am winding:

“It was acknowledged at the outset that the regime would impose direct costs on the banks in setting up new structures and operating within the regime. Based on banks’ submissions, implementing the ring-fencing regime had a one-off cost for the industry of c. £2.9 billion, which has already been incurred, and has an annual aggregate ongoing cost of £1.5 billion”.


My noble friend Lady Noakes said that she thought that was a reasonable figure, and I think that is not something we are disagreeing on, which is good. She also said that the risk to the taxpayer is now much lower. The £450 billion figure came from UK Finance in its response to the FPC and the PRA’s capital assessment in April this year. That figure relates to the changes in capital requirements reform, which we have already debated.

I am very grateful to the Minister for his comments, including his reference to this new growth feature, which I will have a look at. But I remain concerned that the Government’s approach, while moving in the right direction, is too limited. Clauses 39 and 40 suggest that the Government accept that there is a problem with the current regime, but their answer is to adjust it rather than to ask the more fundamental question of whether it is still needed, following international practice, which has been quoted. In our view, ring-fencing has been superseded. It imposes real costs on banks, customers and the wider economy; it affects competitiveness, capital efficiency and lending; and it places the UK at a disadvantage compared with other international jurisdictions.

My noble friend Lord Massey of Hampstead rightly said that we will discuss the FOS on a later amendment, and he rightly referred to the risk-aversion problem in the sector, which I recall was a theme of the excellent report by our committee, now chaired by my noble friend Lady Noakes.

We will reflect carefully on what the Minister said, but my approach is a measured one, putting any unwinding in the hands of the Treasury and other stakeholders. But the central problem remains: if we are serious about growth, competitiveness and reducing unnecessary regulatory burden, ring-fencing cannot be exempt from scrutiny. Of course we must learn from the past and look after the consumers, but their savings would continue to be protected, and resolution and prudential supervision have changed our financial services framework since the financial crisis. For now, we have had a good debate, and I beg leave to withdraw my opposition to Clause 39 standing part.

Clause 39 agreed.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

163: After Clause 46, insert the following new Clause—
“Review of tokenisation in UK wholesale financial markets(1) Within 12 months of the day on which this Act is passed, the Treasury must lay before Parliament a report on the development of tokenisation in UK wholesale financial markets.(2) A report under subsection (1) must consider, in particular—(a) the extent to which the existing legal and regulatory framework supports the safe adoption of tokenisation in UK wholesale financial markets;(b) the extent to which current arrangements provide sufficient legal certainty in relation to the issuance, holding, transfer and settlement of tokenised financial assets;(c) the prudential treatment of tokenised assets and the extent to which such treatment is consistent with equivalent non-tokenised assets, where the underlying risks are equivalent;(d) the availability and suitability of settlement arrangements for tokenised financial market transactions;(e) the progress of the Digital Securities Sandbox and the extent to which it is expected to support the development of any permanent regulatory framework;(f) barriers to interoperability between tokenised and non-tokenised market infrastructure, and between different tokenised market infrastructure arrangements;(g) the effect of the current framework on innovation, investment and the international competitiveness of UK financial markets;(h) any further legislative or regulatory changes which the Treasury considers may be required.(3) In preparing a report under subsection (1), the Treasury must consult—(a) the Bank of England;(b) the Prudential Regulation Authority;(c) the Financial Conduct Authority;(d) such other persons as the Treasury considers appropriate.(4) The Treasury must publish the report.”Member’s explanatory statement
This probing amendment would require the Treasury to review the framework for tokenisation in UK wholesale financial markets, including legal certainty, prudential treatment, settlement arrangements and barriers to innovation and competitiveness.

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak also to Amendment 164 and thank my noble friend Lord Ranger of Northwood for his very interesting amendments. This is a really important group. It is clear that digital assets are becoming an accelerating part of our financial and economic landscape, yet the Government, for all their warm words and the work done by the FCA, still lack a clear digital asset strategy. More than one in 10 UK adults now owns a digital asset. Sovereign bonds issued on blockchains, digital settlement systems and collateral, tokenised assets and new payment technologies are all developing fast. They are part of the future of financial services. With financial services changing at extraordinary speed, we have to ask ourselves whether the regulatory framework being created is fit for the future.

We raised this point at Second Reading and we return to it today. This is an area where we see a real risk of regulatory grey zones. Firms are innovating, consumers are participating, institutions are exploring tokenisation and market infrastructure providers are looking at distributed ledger technology. Yet, too often, the answer from the UK regulatory system is uncertain, fragmented or slow. Major banks, asset managers and market infrastructure providers are now exploring tokenised bonds, tokenised funds, digital collateral, digital repo markets and blockchain-based settlement systems. These products are increasingly part of the future of wholesale finance.

--- Later in debate ---

[Lord Stockwood (Lab)]

My Lords, I thank the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham, Lord Ranger of Northwood and Lord Holmes of Richmond, for these amendments and their contributions to this debate. It is an important discussion of how technology and finance will play an increasingly important role in global markets. I declare that I have been personally trading cryptocurrency since 2017; none of the gains have gone towards political donations—I think it is worth mentioning that at the moment.

Taken together, these amendments seek to support the UK’s focus on innovation, competitiveness and consumer protection in digital asset markets. The Government strongly support the digitisation of financial markets and share many of the objectives that noble Lords have set out today. However, before we turn to the detail of the amendments, it is important to recognise that the UK already has a comprehensive programme of work in train to support the development of digital assets and a tokenised market.

First, on the registry framework for crypto assets, the Government have legislated to establish a framework coming into force on 25 October 2027. This will bring a wide range of crypto asset activities within the registry perimeter, providing the legal certainty and consumer protections that noble Lords rightly identify as essential.

Secondly, I can assure noble Lords that we have a strategy on wholesale market digitisation and tokenisation and an expert to drive it forward within the sector. The Government published the Wholesale Financial Markets Digital Strategy last year, setting out an ambitious plan for government, regulators and the industry to support digitisation of the UK wholesale financial markets. As part of this work, the Government have appointed Chris Woolard CBE as the Wholesale Digital Markets Champion to provide market leadership and co-ordinate industry efforts on tokenisation. The champion has already established a cross-sectoral task force and will report to the Chancellor this year and next on progress on how the UK can further advance the adoption of distributed ledger technology in wholesale markets.

Thirdly, on payments, the National Payments Vision sets out our ambition for a world-leading payments ecosystem delivered on next-generation technology. The Government are working with regulators and industry to renew retail payments infrastructure and ensure that the regulatory framework keeps pace with innovation in digital settlement assets. There is clearly more to do in a fast-moving environment, but the Government see the opportunity and are moving to take advantage of it.

Turning specifically to Amendments 163 to 164A, these relate to the Government’s overall strategy for digital assets and engagement with industry. I agree that, as I said, the underlying objective has already been taken forward through the wholesale financial digital market strategy and the work of the Wholesale Digital Markets Champion. There are also a number of existing mechanisms via which the regulators engage with industry on the subject of digital assets and the wider strategy—whether that be joint Bank of England and FCA engagement with firms experimenting with new technologies in the digital security sandbox, or the recent Bank of England and FCA call for input on tokenisation, which is seeking views on opportunities and risks associated with the wider use of tokenisation in financial markets. I do not think that we need to push such engagement with industry on a statutory footing when it is something that regulators are already prioritising.

Amendments 164B and 164C seek reviews of banking access and consumer redress for digital asset firms. On banking access, the Government recognise the difficulties that some firms have encountered and we are engaged with the sector on those matters. While such decisions are commercial in nature, we also expect businesses to be treated fairly. Under the crypto asset regulatory regime, firms will need to be licensed by the FCA to provide relevant crypto asset services. We would not expect such licensed firms to be subject to the restrictions by banking service providers simply because of the sectors they belong to.

On consumer redress, the Government agree that consumers should have clarity about the protections available to them. However, the existing FSMA framework and the regulated activities orders are deliberately flexible. When new activities are brought within regulation, the relevant regulatory protections, including complaints handling and access to the Financial Ombudsman Service, can be considered as part of the process.

I therefore agree with the underlying objectives of these amendments but I think that the existing strategy and ongoing work provide the most effective route forward. I am a strong believer in the need to digitise financial markets, and I am confident in the actions that the Government are taking with this agenda, which is a key strategic priority for the UK. If I have missed any questions in my response, I will be happy to follow up and write. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Neville-Rolfe (Con)]

My Lords, I am very grateful to my noble friends Lord Ranger of Northwood and Lord Holmes of Richmond for their support and the amendments that they have tabled on this important topic of digital assets.

I am very glad to hear of the Woolard review of tokenisation and the progress on crypto assets. I hope that the Minister is right about that solving the debanking issue—we will see. However, I am slightly disappointed in his response, because I know that he comes from a sector where digital progress has underlined success. I think that the industry lacks the clarity it needs. That is what it has been telling us. Firms need to know what the Government’s overall strategy is and how the different regulators will work together—I am sure there are some good examples. There is also the question of what definitions will apply to digital assets, along with how the UK intends to remain competitive internationally. There has been a lot of progress around the world.

Therefore, the points that we have raised and those put forward by my noble friend Lord Ranger need to be addressed. I was very struck by the way that he has travelled the world in his international search for success and growth in digital assets. Listening to him, I believe that we can learn from what both Rishi Sunak and the current Government have done together to get behind AI. I also agree with the noble Baroness, Lady Kramer, that we can learn from the successes on fintech—which I remember being involved with probably nearly a decade ago.

If the UK wants to be a leader on tokenisation and digital assets, we need a clear strategy. We need a joined-up and proportionate regulatory approach and a framework that supports innovation, while—most important of all—protecting consumers. I think that we will want to return to this issue on Report. Progress is being made, but we would like to see a little more ambition. However, for now, I beg leave to withdraw my amendment.

Amendment 163 withdrawn.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

167: After Clause 47, insert the following new Clause—
“Duty to promote public understanding of financial services and financial capabilityThe FCA must take such steps as it considers appropriate to promote public understanding of—(a) financial services and markets,(b) personal financial management,(c) saving, borrowing and long-term financial resilience,(d) financial decision-making and financial risk, and(e) pensions.”Member’s explanatory statement
This amendment would give the FCA a statutory duty to promote public understanding of financial services and financial capability, and to report annually on the steps it has taken, the groups most at risk of poor financial literacy or exclusion, and the contribution of improved financial capability to consumer resilience, competition and economic growth.

[Baroness Neville-Rolfe (Con)]

My Lords, in moving Amendment 167, I am grateful for the support of my noble friend Lord Altrincham and the noble Baroness, Lady Altmann.

Financial education is incredibly important, but it is unusually weak in the UK compared to, for example, Finland, the Netherlands, Singapore and Australia. The Times rightly has a campaign to improve it. Rishi Sunak has spent time and effort since leaving office trying to do so, citing how much better people do in life if they understand inflation, the magic of compound interest and the importance of diversifying risk. Financial education is an issue on which I have campaigned for a very long time, notably in my 2022 review of the state pension age. I believe it is central to how people live their lives, make decisions, protect themselves and participate responsibly in the economy. It helps them to make sensible decisions about borrowing, mortgages, insurance and pensions, to avoid scams and financial harm, and to understand basic financial and economic statistics. This is a mission that I hope noble Lords of all political perspectives can support.

Amendment 167 would give the FCA a new statutory duty to promote public understanding of financial services and financial capability. For example, it could produce succinct basic explanatory material on concepts such as compound interest, basic banking, and portfolio and asset diversification. The amendment would require the FCA to report annually on the actions it has taken to improve financial capability, the groups most at risk of poor financial literacy, the groups most vulnerable to financial exclusion, and how improved financial capability contributes to consumer resilience, competition and economic growth.

The reason this matters is that the FCA’s current objectives focus on consumer protection, market integrity, competition, and growth and competitiveness. There is not currently a primary statutory duty on the FCA to improve financial capability across society. Better-informed consumers are less vulnerable to fraud and more likely to save, plan for retirement, compare products, switch providers and exercise choice. That supports not only individual resilience but competition and growth. Poor financial literacy often falls hardest on those who are already vulnerable or excluded. If people do not understand the financial system then they are less able to access it, less able to challenge poor treatment, less able to avoid expensive mistakes and less able to make decisions which improve their long-term security.

One problem is that financial education provision is scattered and variable in quality. There are many good initiatives, some even by the private sector, as I remember from the work done by Tesco Bank in Scotland, but they are not joined up. The curriculum has been improved slightly, although mainly through citizenship and maths, with some schools doing very good work but others being less effective. As recent debates on student loans have shown, this is something that we really need to grasp. We ask 17 and 18 year-olds to make significant financial decisions with long-term consequences, yet we do not ensure that they are equipped with the skills and knowledge needed to make the decisions well.

Many teachers find financial education difficult, and, like people from all walks of life, they are not aware enough of it in their own lives, let alone skilled enough to teach the basics well. They need support, resources and confidence. Financial education needs to be included in teacher training and linked to university teaching. I echo the difficulties of the noble Lord, Lord Carlile, with the scope of the Bill, since an amendment I tabled on the subject was rejected.

The truth is we need a step change at every level. My amendment does not ask the FCA to replace schools, teachers, parents, charities, or the Money and Pensions Service—although that service is too divorced from most financial transactions to do a good job. Our amendment would impose a duty on the FCA to recognise that improving financial capability should be part of its mission, and would require it to report properly each year on what it is doing. That could have a catalytic effect.

I welcome Amendment 170, in the name of my noble friend Lord Holmes of Richmond, which would require the FCA to work with the Money and Pensions Service to produce a national financial education strategy. That is complementary to my amendment.

There is a strong case for a more joined-up national approach. Financial education should not be a patchwork of disconnected initiatives. We need a coherent strategy, covering budgeting, saving, investment literacy, pensions, debt, fraud prevention, digital finance and support for vulnerable groups. I was glad to have a positive response on this issue from the noble Lord, Lord Livermore, to a recent Question, and would be very grateful if the Minister could respond to our pleas. Better financial education could be a key pillar of consumer protection. This is an area where a legacy is waiting to be created. I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, it is an absolute pleasure to follow my noble friend Lady Neville-Rolfe. I support her Amendment 167, which, as she rightly identifies, has many common themes with my Amendment 170.

I have been working on financial education and financial capability for a long time. As my noble friend rightly identifies, and as we have mentioned in other groups, the need for a coherent cross-society, cross-economy financial education and financial capability strategy, covering every stage of life, could barely be more needed than it is today.

There are two pernicious forces striding our streets, walking hand in hand: financial exclusion and digital exclusion, one often causing and compounding the other. Becky Francis’s review found that it was absolutely key to have financial education and capability within the curriculum, but it is about how that naturally touches on digital capability, media literacy and capability, and AI literacy and capability. These threads all come together, and can do so a positive, additive fashion if they are seen as positive, and are personalised and focused on the individual at every stage of her or his life, to enable all of us to make choices and to be included. With so much in society going digital—to be fair, not much in the Bill is going digital, but that is perhaps an outlier—financial exclusion for want of financial education and capability could dramatically increase and exacerbate the exclusion already felt by those at the most extreme end of our society.

Education is not just about what happens with the curriculum; it is a matter for our regulator. Through that, when it is a primary concern for the regulator, it gives it a sharpness of focus, putting it right at the centre for the regulator responsible for our financial services. It works with the Government’s stated aims in other areas. If the Government constantly state that they want to take a domain-specific approach, a financial education and capability, together with a domain-specific approach, will mean that the FCA will bring in money advice and a pension service alongside that.

I add to this to ensure that financial education and capability go beyond traditional products. When one considers how many young people are engaging with and investing in—in some senses, I put quotes around “investing in”—crypto, it is clear that the financial education and capability need to cover all the financial products, instruments and assets that are currently out there and being used and traded, not least by young people, who need to be enabled, empowered and given the capability and capacity to choose which products they want to engage with in a meaningful and capable fashion.

Amendment 171 is a different matter. It is a very specific amendment on SME right of action with the FCA—a right of action that is currently not available to SMEs. One can see at first blush why this is the case, because there is a clear distinction between a private person and an SME. The difficulty is, as currently set out in Section 138D of FSMA on the definition of a private person, that a private person and an SME are, in reality, characters that represent a principle and policy that sit underneath them. That is what the amendment is all about. The principle being set out is the assumption that a private person is always in need of a right of action because of their circumstances, which an SME is not.

This is beguilingly appealing at first blush, but entirely wrong in being a coherent strategy that includes everyone. The reason is that it inevitably tends to the mean: the average private person on the famous omnibus or the average SME with levels of understanding, support and financial wherewithal. But that does not cut it. That should never have cut it, and it does not cut it for current situations, because, on the one hand, it is clearly entirely possible and a reality that thousands of small and micro entities out there do not have these assumed resources, capabilities and capacities. On the other hand, there are millions of private persons who are far more capable and economically sophisticated than these small and micro entities.

This amendment is specific, clear and coherent: it is to extend that right of action to small and micro entities. I am not suggesting that the drafting is perfect; there may need to be de minimis levels put in, or a clearer definition of what small and micro entities are. But again, if the Government want growth and to back our businesses, not least our small and micro businesses, it is a question of coherence, clarity and fairness. SMEs should have a right of action when it comes to the FCA. This should not be limited just to private persons, as currently set out. I look forward to the Minister’s response and I beg to move.

--- Later in debate ---

[Lord Stockwood (Lab)]

My Lords, I am grateful to noble Peers for raising the important issues of financial education and the right of action for SMEs. On financial education, Amendment 167 would place a statutory duty on the FCA to promote financial capability, and Amendment 170 would require the FCA to publish a national financial education strategy. I am clearly supportive of the motivation, but I do not believe that new statutory duties on the FCA are the right way to achieve it.

The noble Baroness has already mentioned some of the good work that is being done by the Government on financial capability as part of their financial inclusion strategy, such as the work the Department for Education is doing in schools. The Government are also taking steps to improve financial education for adults. For example, we have announced the expansion of the Money Guiders programme, which is run by the Money and Pensions Service. This helps front-line workers, such as nurses and social workers, to have conversations about money with those they support. Fair4All Finance is also deploying £50 million funded by dormant assets in England to support financial capability initiatives. I assure the noble Baroness that the Money and Pensions Service already has a statutory function to develop and co-ordinate a national strategy to improve financial capability and education, as set out in the Financial Guidance and Claims Act 2018, and the FCA also carries out substantial work in this space. Helping consumers navigate their financial lives is already one of the FCA’s four priorities for 2025 to 2030.

Amendment 171 relates to SMEs and would significantly extend private rights of action. The Financial Services and Markets Act 2000 already draws a clear and deliberate distinction between general private law claims available to all parties, including SMEs, and the specific statutory right of action under Section 138D, which is limited to “private persons”—generally individuals and persons not acting in the course of a business. That reflects Parliament’s long-standing judgment that FCA rules are primarily regulatory and supervisory standards, rather than offering a comprehensive basis for civil liability for all market participants. SMEs can and do bring claims under contract, misrepresentation, negligence and other established causes of action.

I understand why the noble Lord is motivated to extend the right of action to SMEs for regulatory breaches. Historically, SMEs were often left with little option outside litigation, and I agree that those firms have fewer resources to seek redress. This was deliberately addressed in 2019 with the significant expansion of the Financial Ombudsman, which is now accessible to 99% of the UK’s small businesses.

I hope I have gone some way to reassuring noble Lords on the action the Government are taking on these important issues, and I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Neville-Rolfe (Con)]

My Lords, I am grateful to all noble Lords who have contributed to this important debate, and to the Minister for his response. I commend the remarks of my noble friend Lord Holmes of Richmond and the work that he has done on financial education, and I support his complementary amendment on that subject. This has been a useful discussion, because it is an area that deserves a great deal of attention. There is clearly broad agreement that financial education is too important to be left to a patchwork of uneven provision.

The Minister cited the Money and Pensions Service, which I think is based in the DWP. To date, I have not been terribly impressed by the speed or breadth of the education that it provides. It is not only individual groups that I am worried about. We could get an enormous improvement in growth and performance if financial education were spread much more widely, but I should be happy, if it could be arranged, to talk to the service to understand what it is doing before we get to Report. It may be that some of the plans it has are dealing with this wider problem.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

172A: After Clause 47, insert the following new Clause—
“Reform of financial services dispute resolution(1) The Treasury must, within the period of 12 months beginning with the day on which this Act is passed, publish draft legislation containing provision—(a) replacing the ombudsman scheme established under Part XVI of the Financial Services and Markets Act 2000 with a scheme to be known as the Financial Adjudication Service;(b) removing the requirement in section 228(2) of that Act that complaints be determined by reference to what is fair and reasonable in all the circumstances of the case; (c) requiring complaints within the compulsory jurisdiction of the Financial Adjudication Service to be determined by reference to such statutory requirements as may be specified.(d) providing free access to the Financial Adjudication Service for complainants;(e) providing that the expenses of the Financial Adjudication Service are met by levies or fees imposed on regulated persons;(f) providing that determinations of the Financial Adjudication Service are binding on both parties unless appealed as described in subsection (2);(g) making such amendments to Part XVI and Schedule 17 of the Financial Services and Markets Act 2000, and any other enactment, as the Treasury considers necessary for the purposes of that provision.(2) Draft legislation published under subsection (1) must propose the establishment of a chamber of the First-tier Tribunal to be known as the Financial Services Chamber to hear appeals against determinations by the Financial Adjudication Service and make decisions which are binding on the Financial Adjudication Service unless and until overturned on appeal.”Member's explanatory statement
This amendment would require the Treasury to publish draft legislation to replace the Financial Ombudsman Service with a Financial Adjudication Service and to establish a Financial Services Chamber of the First-tier Tribunal to determine appeals according to law, to provide speed, expertise and high settlement rates.

[Baroness Neville-Rolfe (Con)]

My Lords, Amendment 172A is in my name and that of my noble friend Lord Altrincham. It would require the Treasury to publish draft legislation to replace the Financial Ombudsman Service with a new financial adjudication service, and to create a dedicated financial services chamber within the First-tier Tribunal. This is a significant amendment but also a serious and necessary one. As noted earlier, it follows the policy announcement made by the leader of my party, Kemi Badenoch, at TheCityUK’s conference last month.

The amendment reflects a wider concern about the way in which the Financial Ombudsman has evolved, and about the need for a consumer redress system that is fast, expert, accessible and legally certain. A little bit of history: the Financial Ombudsman Service was created to provide a low-cost and informal alternative to the courts. That purpose remains important. Consumers and SMEs need an effective way of resolving disputes with financial firms. Going directly to court can be expensive, intimidating and slow. There must, of course, be a route to redress that is accessible and free to use.

However, the FOS has moved far beyond a simple dispute-resolution function. It now operates in many respects as a quasi-regulator. Its decisions can set expectations for firms, shape market behaviour and influence the way in which FCA rules are understood. Yet it does not receive the same scrutiny as regulators such as the FCA, nor does it produce binding legal precedent in the way that a court or tribunal would. That creates a serious problem of legal uncertainty.

At the heart of this issue is the “fair and reasonable” test. The ombudsman is required to decide complaints, not simply according to law, but according to what it considers fair and reasonable in all the circumstances. That gives the FOS a broad discretion. It means that firms can comply with the law, the FCA rulebook and their contractual obligations but still be found against on the basis that the ombudsman takes a different view of what is fair and reasonable. That is not a stable foundation for a predictable regulatory system and that has been recognised, I am glad to say, by the Government but they are not going far enough.

Courts have confirmed that the FOS must take account of the relevant law but is free to depart from it. Firms do not know whether compliance with the FCA’s rules will be enough. They do not know whether the FOS will go further than those rules or whether an individual determination will be treated as an indication of wider expectations. That uncertainly drives gold-plating and overcompliance.

One example that has been raised with us concerns packaged bank accounts and the consumer duty. The concern is that the FOS may take the view that providers should look at whether a customer has used any of the benefits of a packaged bank account in the previous year and, if not, prompt them that this might not be the right account for them. That goes far beyond current FCA guidance.

The wider point is that if the FCA believes that its rules need to change, it should amend them prospectively. If Parliament believes that the statutory framework needs to change, it should legislate. We should not have a system in which major changes in practical standards emerge through a redress body applying a broad fairness jurisdiction.

There is also a serious performance issue, which we have touched on before. The FOS is under significant strain. The backlog has become very large and timeliness targets have been missed. The FOS is now being used as an instrument of mass redress when it was not designed to operate as a quasi-court, a quasi-regulator and a quasi-mass claims mechanism.

Our proposal is to reform the architecture. The financial adjudication service would retain the benefits of a specialist and accessible adjudication system. It would be designed to provide speed, expertise and high settlement rates. Consumers and SMEs would continue to have a route to redress without the cost and complexity of ordinary litigation. The key difference is that decisions would be made according to law. The “fair and reasonable” test would be removed. The new service would apply statute, FCA rules, contractual obligations and legal principles. Where the law is unclear, that uncertainty should be resolved through proper legal determination, not discretionary case-by-case judgment.

Where a dispute required appeal or authoritative determination, it would go to a dedicated financial services chamber of the First-tier Tribunal. That would create binding precedent. It would fill the gap that currently exists between the FOS and the courts, where the only meaningful challenge to an FOS decision is judicial review. Judicial review is not a proper merits appeal. It requires firms to show that the decision was not merely wrong but unlawful or irrational. In practice, this means that FOS decisions are rarely challenged.

A tribunal system would be different. It would allow principles to be determined clearly, openly and according to law. Over time, that would create a body of precedent that would help firms, consumers, advisers and regulators to understand what the rules mean in practice.

That is the point of our amendment. It is not about removing redress but about making redress clearer, faster, more expert and more legally certain. Nor is it about weakening consumer protection. Consumers benefit from certainty too. They benefit when firms understand their obligations, when decisions are consistent, when disputes are resolved quickly and when similar cases are treated in similar ways. This amendment therefore asks the Government to publish draft legislation for a new model. It would not require every operational detail to be settled in the Bill today. It asks the Treasury to come forward with the legislative architecture needed to move from an ombudsman model based on broad discretion to an adjudication and tribunal model based on law.

The purpose of the amendment is to begin a serious conversation about the future architecture of financial redress. We need a system that is accessible for consumers, fair to SMEs, predictable for firms and capable of generating clarity over time. The current model sadly no longer does that. It is too uncertain and discretionary. A financial adjudication service, backed by a dedicated financial services chamber of the First-tier Tribunal, would preserve access to redress while restoring legal certainty. That is the balance that we should seek to strike. I beg to move.

[Baroness Kramer (LD)]

I have one question for the noble Baroness, as my noble friend Lord Sharkey will speak for us on this. What will the cost be to the individual of going to the tribunal system? I am conscious that an individual needs to raise between £40,000 and £50,000 to get to preliminary hearing at the employment tribunal. Is that the kind of number that she has in mind?

--- Later in debate ---

[Lord Stockwood]

I do not have it to hand. My apologies, I will bring it to the noble Lord. We are confident that the changes will improve trust and confidence that the FOS acts fairly and impartially, while ensuring that decisions are closely aligned with the high standards of conduct and consumer protection set by the FCA where relevant.

The right approach is this careful, targeted reform that preserves the core strengths and benefits of the FOS model—quick, informal and accessible dispute resolution—while delivering the necessary changes to improve the overall operation of the framework. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords who have contributed to this debate. I also thank the Minister for his response.

I recognise the concern that replacing the Financial Ombudsman Service with a financial adjudication service could make redress more formal, more logistic or less accessible. I understand that concern, but it is not the intention of our amendment. I say this also in response to the noble Baroness, Lady Kramer. The purpose of our amendment is to retain a specialist, accessible and free-to-use route for consumers and SMEs while ensuring that decisions are made clearly, consistently and according to the law.

Clearly there will be set-up costs. However, the Treasury could advise on that because part of our proposal is to require the Treasury to look at the issue and publish draft legislation for a new model. I agree with the noble Lord, Lord Sharkey, that parliamentary scrutiny would be important. There are also other questions that he addressed that the Treasury could answer. Indeed, some of the points that he made also apply to the proposal from the Government for the FOS. Like the noble Lord, Lord Sharkey, I would very much appreciate replies on those points before we get to Report, so that we can make sure that we understand what the Government are proposing properly.

I remain concerned that the Government’s approach does not go far enough. Recalibrating the existing model may improve some aspects of the system but it does not solve the fundamental problem, as I tried to explain at length. Firms and consumers still lack a body of binding precedent that explains what the rules mean and how they will be applied. Consumers would gain from extra certainty. They benefit when firms know what is required of them, when similar cases are treated consistently, and, above all, when disputes are resolved promptly and predictably; I know that from other parts of the consumer market. A system that is unclear and overstretched does not serve consumers well.

We will consider carefully what the Minister has said and look at any follow-up material but, for now, I beg leave to withdraw my amendment.

Amendment 172A withdrawn.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

172D: After Clause 47, insert the following new Clause—
“Review of regulatory causes of debanking(1) Within 12 months of the day on which this Act is passed, the Treasury must lay before Parliament a report reviewing the extent to which individuals, businesses, charities and other organisations have been refused access to banking services, had banking services terminated, or had the use of banking services materially restricted as a result of regulatory requirements, regulatory uncertainty or risk aversion arising from the operation of the regulatory framework.(2) A report under subsection (1) must consider, in particular—(a) the scale and nature of debanking in the United Kingdom;(b) the categories of individuals, businesses, charities and other organisations most affected by debanking;(c) the sectors, industries or lawful activities most affected by debanking;(d) the extent to which debanking decisions are attributable, wholly or partly, to—(i) anti-money laundering requirements,(ii) counter-terrorist financing requirements,(iii) sanctions compliance,(iv) financial crime prevention requirements,(v) regulatory reporting, monitoring or due diligence obligations,(vi) regulatory guidance or supervisory expectations,(vii) fear of regulatory enforcement or supervisory criticism,(viii) uncertainty or confusion as to the proper interpretation of regulatory requirements, or(ix) the cumulative cost or burden of regulatory compliance.(3) In preparing the report under subsection (1), the Treasury must seek evidence from, and consult—(a) the Financial Conduct Authority;(b) the Prudential Regulation Authority;(c) the Financial Ombudsman;(d) relevant financial institutions;(e) persons who have been refused banking services, had banking services terminated, or had such services materially restricted;(f) politically exposed persons, their family members and known close associates;(g) persons appearing to the Treasury to represent the interests of politically exposed persons, their family members and known close associates;(h) persons representing firms operating in the defence sector or sectors connected with national security;(i) persons representing charities, voluntary organisations and civil society organisations;(j) persons representing small and medium-sized enterprises, start-ups and new market entrants;(k) persons with expertise in anti-money laundering, counter-terrorist financing, sanctions compliance and financial crime regulation;(l) such other persons as the Treasury considers appropriate.(4) The Treasury must publish the report.”Member’s explanatory statement
This new clause would require the Treasury to review whether debanking has occurred as a result of excessive regulation, regulatory uncertainty, confusion, supervisory expectations, enforcement risk or risk aversion arising from the operation of the regulatory framework. The review would identify the sectors and customer groups most affected, including politically exposed persons and their families, defence firms, charities, SMEs and other affected persons.

[Baroness Neville-Rolfe (Con)]

My Lords, in moving this amendment in my name and that of my noble friend Lord Altrincham, I shall speak also to Amendments 172E and 172F.

Amendment 172D probes on debanking. It would require the Treasury to carry out a review into whether individuals, businesses and organisations are being denied, having restricted access or losing access to banking services as a result of the way in which the UK’s financial regulatory framework operates. The core issue is this: the regulatory environment we have at the moment, and the way in which it is constituted, can mean that people, firms and organisations are denied access to banking services. Without access to a bank account, payment services or basic financial infrastructure, people and businesses are severely constrained in their ability to trade, to invest, to employ, to grow and to participate fully in the economy. The amendment asks the Treasury to examine whether debanking is taking place because of excessive regulation, uncertainty, regulatory confusion, supervisory expectations, enforcement risk or general risk aversion.

We have heard concerns from a number of sectors that they are, in effect, playing it safe. They are not necessarily closing accounts because there is a clear requirement to do so; they are doing so because the regulatory environment has become so complex and uncertain that the safest option is to avoid certain customers and sectors altogether. This matters for SMEs. A small business that cannot obtain or retain banking services may be unable to trade properly, receive payments, manage cash flow or invest. It matters for charities, particularly those operating internationally or in complex environments. It matters for defence firms, which may face additional scrutiny because of export controls, sanction concerns or reputational sensitivity, even where their activities are lawful and important to national security. It matters for politically exposed persons and their families; I am sure that many noble Lords will have experienced this. As we have discussed in relation to digital assets, it also matters for innovative firms that are trying to build new products and services but cannot access the banking or payment infrastructure they need.

My amendment therefore underpins our broader calls throughout the Bill for simplification, streamlining and clarity. I appreciate that the regulators have done some work on this, such as a new requirement to provide notice before closing an account and the recent FCA reviews of account closures. The amendment therefore asks the Government to look at how the regulatory landscape interacts with this work, as well as what other steps can be taken to address this problem more effectively.

I turn to Amendments 172E and 172F, which are probing amendments on the protection of sensitive commercial information and the ending of the compensation cap for senior managers under the Employment Rights Act. They were born of a conversation with my noble friend Lord Howard of Rising; I thank him for his insight. The financial services sector depends heavily on confidential and proprietary information. Firms hold business plans, client data, pricing information, trading strategies, algorithms, models, methodologies, internal systems and processes. Such information, as I know well from my business career, represents a major part of a firm’s competitive advantage. These amendments are designed to probe the Government’s position on the protection of that information, including the continued ability of employers in the financial services sector to use non-compete clauses, which can be an important mechanism for protecting commercially sensitive information.

I know that the Government have issued a working paper on options for the reform of these clauses in employment contracts. However, I want today to explain that their use in financial institutions and firms is crucial. I would welcome clarification from the Minister that no provision in the Employment Rights Act will prevent employers in the financial services sector using appropriate and proportionate non-compete clauses. It is important not only for individual firms but for the integrity and competitiveness of the UK financial services market. We have heard that the change could lead some firms to close up in London.

Finally, I turn to Amendment 172F, which is designed to probe the Government on the impact of changes to the rules for senior managers and, in particular, the wider implications of the removal of the compensation cap. The Bill reforms the statutory regime governing the recruitment, approval, mobility and accountability of people working at authorised firms. The Government have, in their Explanatory Notes, identified slow senior hiring and internal mobility as barriers to operational agility.

In the Government’s own analysis of the Employment Rights Act, they accept that high-paying sectors may be affected by the removal of the compensation cap. However, some in the financial services sector have told us that the removal could affect decisions on the future of UK operations because of the risk of enormous million-pound or million-dollar payouts to those who have highly paid roles. Indeed, an article in the Financial Times last month reported that firms were seeking urgent legal advice on how to prepare for the changes. This amendment therefore raises a financial services competitiveness and regulatory agility issue that is properly connected to the Bill; we believe that it is vital that the Government consider this issue as a part of financial services policy.

I would be grateful if the Minister could address three points. First, what assessment have the Government made of the sectors and groups most affected by the loss of access to banking services? Would a review not be useful? This amendment looks backwards. Secondly, can the Minister clarify the Government’s position on the continued use of proportionate non-compete clauses in financial services, where they are necessary to protect commercially sensitive information? Thirdly, will the Government assess the effect of changes to the rules on the employment of highly paid senior managers, and consider changing the rules in the interests of growth and competitiveness? Those are the rules that relate to compensation. Both amendments look forward, and the Minister should be concerned. I beg to move.

--- Later in debate ---

[Lord Stockwood (Lab)]

My Lords, this is the final group before Committee stage is completed. I am grateful for the discussions so far, not just on this group of amendments but on each of the more than 220 amendments we have discussed over the past three weeks. I appreciate the insights and wisdom shared by everyone in the six sessions. As someone relatively new to the House, I come away from this stage of the Bill’s journey with renewed faith and belief in the importance of scrutiny in the House of Lords. I thank noble Lords.

These amendments propose that the Treasury conducts reviews into a range of important issues in financial services. I will first speak to Amendment 172D, which would require HM Treasury to undertake a review into the scale and nature of debanking in the UK. The Government recognise the serious impact the loss of access to those services can have, but there is already a significant amount of work under way. Parliament has legislated to ensure that domestic politically exposed persons and their family members and close associates are treated in a more proportionate manner under the anti-money laundering framework. The FCA has also undertaken significant work on account access, account closures and debanking as required by Parliament. The FCA has collected evidence to understand where account closures and refusals are occurring and why, and has undertaken further work better to understand the reasons behind account closures and refusals.

I am not sure that regulation is a principal driver of debanking. Decisions to refuse, restrict or terminate banking services may arise for a range of reasons, including commercial decisions, firms’ assessments of risk, legal obligations and financial crime concerns. The FCA has emphasised that when accounts are closed or denied, providers must adhere to their consumer duty obligations. They include ensuring that all communication with customers is clear and easy to understand. The Government have also legislated to address concerns around account closures. This includes ensuring that providers give customers at least 90 days’ instead of two months’ notice before terminating payment services and provide a sufficiently detailed explanation of their decision and signpost appropriate complaints routes.

The Government have also taken steps to reduce the impact of anti-money laundering rules on legitimate customers through recent changes to the money laundering regulations. This included measures to make customer due diligence requirements more proportionate and effective while maintaining robust protections against economic crime.

Amendment 172E would require the Treasury to conduct a review into whether financial services firms have adequate means to protect commercially sensitive information. Confidentiality and the protection of commercially sensitive information is vital to the strength of the UK’s financial sector, and the Government take the importance of this matter very seriously. Without robust protection of commercially sensitive information, investors lose confidence, consumers are at risk and the reputation of the sector is degraded.

The FCA and the PRA have rules and expectations that address the protection of commercially sensitive information by firms. However, I am afraid that I am not an expert in the Employment Rights Act and the contracts that were mentioned are not within the scope of the Bill. While I am aware that I am giving Charles Dickens a run for his money in the number of letters I have suggested I will write, I will write to the noble Baroness on the Government’s position on this as well.

Amendment 172F concerns the effectiveness and operation of the senior managers regime. The Bill already introduces reforms intended to make the regime operate more proportionately, while preserving the accountability standards which are central to it. As I mentioned on Monday, the changes will help deliver the ambition of the Government and the regulators to reduce burdens from this regime by 50%; the reforms to this regime alone are expected to reduce administrative burdens on the sector by almost £600 million over the next 10 years. The detailed operation of the reformed framework will be taken forward by the regulators through their rules, subject to their statutory consultation requirements.

In those circumstances, the Government’s view is that the right course is to allow those reforms to be developed, implemented and monitored through the existing framework. The Government will also continue to engage closely with the regulators as they implement these changes, to ensure that the regime is more proportionate in its approach.

I will write on the compensation cap for senior managers, which the noble Baroness also mentioned, as this is a matter of employment law. I thank her for raising that issue. For those reasons, I ask the noble Baroness to withdraw her amendment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank my noble friends Lord Howard of Rising and Lady Lawlor for their support, and the Minister for his response. These amendments have raised three distinct but connected issues: problems with access to banking services, protection of commercially sensitive information, and the ability of financial services firms to recruit, retain and deploy talent in the UK under the new Employment Rights Act. I hope the Government will reflect further on these issues before Report and provide more concrete evidence on what has been happening on debanking to those who have been involved in Committee. The Minister made some encouraging remarks, but some data would be useful. I very much look forward to his letter on the points that I have raised about the impact of the Employment Rights Act.

As the last speaker, I also thank all those who have been involved in the Committee. We have completed it on time and with great good humour, in general. I look forward to Report and, for now, beg leave to withdraw my amendment.

Amendment 172D withdrawn.

Declining Birth Rates

Baroness Neville-Rolfe Excerpts

Thursday 4th June 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I congratulate the noble Baroness, Lady Nargund, on securing her first QSD, and on her perceptive comments after a lifetime devoted to reproductive medicine. I thank all noble Lords who have spoken. I was particularly struck when the right reverend Prelate the Bishop of Chelmsford reminded us that children are a blessing; and by the emphasis of the noble Baroness, Lady Finlay, on the elderly avoiding falls, which is a very good example of preventive healthcare.

The collapse in the birth rate is not a new issue, but it is an increasingly urgent one. As we have heard, the number of babies born per woman fell to 1.39 in 2025, down from 1.9 in 2010 and well below the 2.1 needed to replace the existing population. The ONS projects that over the decade to mid-2034 there will be around 450,000 more deaths than births in the UK.

It is a trend replicated in other developed countries, with Japan and Korea worst affected. I have spent time in both countries, and they are well aware of the problem. I remember addressing a large room of women working at the then Tesco operation in Korea. At the end, the male CEO emerged at the back to thank me profusely. Inappropriately, he added that Korea would not be facing the difficulties it was if mothers there had taken a leaf out of my book and given birth to four boys.

The UK is moving from a model in which population growth came from a combination of such births and some migration to one in which future growth is expected to depend on migration. That is a profound shift. I am going to focus on three of the challenges.

With the steep fall in the birth rate, there will be fewer children entering our nurseries and schools. This could mean smaller class sizes and an improvement in teaching, but I fear that with pupil funding per head, it will mean that more schools have to close, forcing some very difficult choices on the authorities, especially in rural areas. But there should be cost savings, which should be banked, even if we would prefer that they did not arise.

The lower birth rate will also mean fewer people entering the labour market in years to come. Falling birth rates affect both the number of people who need public services and the number available to provide them. That is critical in sectors such as health and social care, where pressures are already acute, as we have heard. This matters because our economy urgently needs sustained growth. Yet demographic change is pushing us in the opposite direction towards greater demand for public services and a smaller working-age population. The answer is that people must stay in work for longer, as many of us have done in Parliament, and that means raising the state pension age, except perhaps for those who have had particularly physically taxing jobs, as I suggested in my report for DWP on the subject in 2022.

Another challenge is the cost of an ageing population to the public purse. The OBR has warned that on our current trajectory the long-term pressure of ageing and related spending could push borrowing and debt to absurd levels. But the markets will not let that happen, so we have to develop a response. State pension spending is projected to rise from around 5% of GDP today to 7.7% by the early 2070s. At the same time, an older population will mean rising demand for health and social care. The state is therefore being squeezed from both directions—higher spending on one side and a smaller tax base relative to the retired population on the other. That is why declining birth rates are not simply a social trend or a private matter for families; they are central to the fiscal sustainability of the country.

What can be done? I believe the matter should be addressed with real seriousness. This is not an undergraduate debate; it is the future of the country. Government policies across the board will need adjustment, as we have heard. That means taxation, childcare, fertility treatment, social and welfare rules, technology, and what we teach our children in our schools. First, can the Minister set out whether the Government have a cross-departmental strategy for responding to the UK’s persistently low fertility with a view to changing the situation over time? Secondly, what assessment have the Government made of the long-term fiscal consequences of the demographic shift, particularly for pensions and for health and social care? This is a vital topic affecting our country into the distant future. We need answers to this problem, and quickly. I hope the outlines of a way forward will emerge from today’s important debate.

El Niño: Impact

Baroness Neville-Rolfe Excerpts

Tuesday 19th May 2026 Lords Chamber

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Baroness raises an important point that I was not aware of. I will speak to officials and come back to her.

[Baroness Neville-Rolfe (Con)]

My Lords, the weather is, of course, borderless. What contingent planning have His Majesty’s Government undertaken to mitigate the combined impact of potential shortages of essential supplies—including fertiliser, which is so important to British farmers—that might arise from the conflict in the Gulf and from a possible super El Niño event in 2026?

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Baroness is right that each crisis moment is different and that we need to ensure that we have strong foundations, which I believe we do as a country in our resilience planning. COBRA is a very effective co-ordinating tool to make sure that we know that we are on top of all those challenges and that we can make assessments as and when required in this space.

Money Laundering and Terrorist Financing (Amendment) Regulations 2026

Baroness Neville-Rolfe Excerpts

Monday 18th May 2026 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank the Minister for his expansive introduction to this SI. I wish to express concern about two elements of it: the change in the transactions and the change in the rules on trusts.

This all comes at a moment when the OECD and the Financial Action Task Force are pushing every major jurisdiction in the direction of having more transparency, more openness and more recording. It weakens the UK’s stance when we ask other countries to tighten their own procedures. Both the OECD and the FATF have been pushing countries to make registers of beneficial ownership more complete and more accessible. The message that is being sent is, “We need to widen the net”.

Of course, historically, the UK has held itself up as a leader in this area, however hard it might have been to justify that claim. One of my questions for the Minister is: how does this measure align with the Government’s 2025 anti-corruption strategy, which is supposedly aimed at driving dirty money out of the UK and strengthening national security?

I note that, in December, the City of London Police was awarded an extra £15 million to expand its anti-corruption efforts. The Justice Secretary then said that the UK

“will no longer be a haven for dirty money and dictators’ laundered assets”

and promised action to tackle “professional enablers”— the lawyers, bankers and estate agents who we know have been at the heart of some very murky, shall we say, transactions. As the Justice Secretary said at the time, all too often, the trail of dirty money “leads back” to London; he also noted that that is

“exploited by those Kremlin-linked elites who enable Putin’s aggression”.

I come to my two specific points. The greatest area of concern that I can identify—the Minister alluded to this—is the jurisdictions under enhanced monitoring. The SI replaces high-risk third countries with FATF “call for action” countries in the enhanced due diligence trigger. Therefore, we are picking up only countries that are blacklisted now: North Korea, Iran and Myanmar. Previously, the regulations that applied to so-called grey list countries, which called for increased monitoring, included the UAE, South Africa, Turkey, Nigeria and the Philippines.

UK firms transacting with counterparts in those jurisdictions will no longer be automatically required to imply the enhanced due diligence. This seems to place a great deal of trust in UK companies that do not have a great record; I cross-reference back to what the Justice Secretary said in December about dirty money flowing into London. So, in effect, this SI represents a substantial retreat at exactly the moment when we are supposed to be cracking down on illicit finance.

My second area of detailed concern is the register provisions. New paragraph 23A of Schedule 3A to the 2017 regulations will create the first-ever general sized-based exemption from the trust register. If a trust holds no UK land, has under £2,000 in current assets, has never held more than £10,000 over its lifetime and earns under £5,000 a year, it never has to register.

This anti-abuse rule stops only a single settler, but does not allow for the situation where a wealthy family spreads a pot across a spouse, parents, adult children and who knows who else with each acting as a settler. Regulation 25(3) removes stamp duty reserve tax as a registration trigger, quietly pulling share-owning trusts that would otherwise have appeared on the register out of the scope of the register.

For those who might be listening, stamp duty reserve tax is a 0.5% tax when you buy UK shares electronically, so if a trust buys £100,000 worth of UK shares, it pays £500 in SDRT. It is a tiny tax and a tiny tax liability, but at the moment that triggers the registration. There are express trusts that have to register because of what they are, but there are also a large number of trusts that have to register only because of this provision. Trusts that own UK-listed shares are exactly the kind of structure where transparency matters to cleaning up the dirty money and I think to the general public as well. They are how anonymous foreign money often holds stocks in UK companies. The current position means that any trust active in the UK equity market at any scale has been caught, regardless of where it is based or who set it up, so removing it punches a hole in the net specifically to oversee shareholding trusts. I would like to hear some more from the Minister on how the Government see this deregulation as being any kind of positive when we are trying to crack down on the flows of dirty money that the Government acknowledge are flooding into London.

[Baroness Neville-Rolfe (Con)]

My Lords, these regulations introduce a number of changes following the Government’s 2022 review and the 2024 consultation. I thank the Minister for his clear introduction and for emphasising the important principle of getting things right first time, which partly explains why these reforms have taken time to come in. Some of the changes appear to be sensible. Refining due diligence requirements so that enhanced due diligence applies to unusually complex transactions rather than all complex transactions seems a proportionate step. Likewise, reforming the trust registration service to close identified gaps, while creating an exemption for low-value, low-risk trusts, appears to strike a reasonable balance between maintaining safeguards and reducing unnecessary burdens. To that extent, His Majesty’s Opposition welcome the direction of travel.

However, these regulations also raise a wider and very important question about whether the current anti-money laundering regime is operating as effectively, proportionately and fairly as it should. It is right—indeed, it is essential—that we are robust in tackling money laundering, terrorist finance and financial crime, but it is also essential that the system does not impose excessive costs, drive firms into defensive behaviour or leave innocent customers and legitimate businesses without access to banking services.

The purpose of anti-money laundering regulation is, of course, to prevent crime, but there is growing evidence that the regime can also have a serious unintended consequence, and customers who have done nothing wrong are nevertheless finding themselves excluded from banking services because they are deemed too costly, too complex or too risky to serve. The IEA’s 2024 report, Debanked, argues that under the current regime certain categories of customer may present a higher initial risk profile, but that the cost of establishing whether they are, in fact, engaged in criminal activity can exceed the value of their business to the bank. The result is that some accounts are closed pre-emptively.

The same report also estimates that compliance with anti-money laundering regulations costs UK banks £34 billion a year. That is a very significant burden and one that is ultimately borne by consumers and businesses. That is a huge multiple of the £178 million of savings in compliance costs which I think the Minister mentioned. To put it into context, the sums spent on some of the enforcement agencies are also relatively small. Nearly £100 million is spent on the Serious Fraud Office and £195 million on the Insolvency Service. Police funding, because police are very important in money laundering, costs nearly £20 billion, but that includes the excellent efforts of the City of London Police in this area, which were mentioned by the noble Baroness, Lady Bennett.

What assessment have the Government made of the impact of the current AML regime on access to banking services? Are the considerable costs—the £34 billion I mentioned—imposed by this regime being matched by clear evidence of a proportionate reduction in financial crime, drawing on the resources I have described? Will the Government consider a broader review not merely of whether the system is functioning according to its own internal processes but whether it is delivering the right outcomes in the real world and whether the enforcement regime is fit for purpose? The Minister has mentioned the economic crime plan.

I turn to the issue of complexity. An anti-money laundering and sanctions regime must be clear if it is to be effective. I know this from my experience of trying to enforce the law in the business area. Professional advisers and regulated entities struggle to understand their obligations. If this happens, the result will naturally be worse enforcement. I was slightly concerned to hear that the Solicitors Regulation Authority has described the UK sanctions regime as “complex and challenging”. That should give us pause for thought. If professionals whose work depends on understanding and applying the law find the regime difficult to navigate, we should not be surprised when banks and firms respond by taking the safest possible course—even when that means withdrawing services from customers who may pose no real risk.

Can the Minister confirm whether organisations such as the SRA were consulted before these regulations were laid? Can he explain whether the regulations will materially reduce the complexity in the system? Do the Government intend to bring forward wider reforms to make the regime easier to understand, easier to apply and therefore more effective in achieving its core purpose and preventing financial crime?

Finally, I turn to redress. The consequences of debanking can be severe. A person or business whose account is closed may be left unable to receive payments, pay staff, meet obligations or even operate normally. Yet the process for challenging these decisions can be slow, opaque and deeply frustrating. In 2024, the APPG on Fair Business Banking published a report which found that thousands of customers were being debanked each month, often as a result of financial, regulatory and reputational pressures on banks. Shortly afterwards, the Treasury Committee published data showing that debanking-related complaints to the Financial Ombudsman Service had risen by 44% from 2023. These figures should concern us as they suggest a more systemic problem.

There are also particular groups that appear to be disproportionately affected: individuals with links to higher-risk jurisdictions, politically exposed persons such as ourselves, small businesses, charities and organisations with international connections—at a time when we are trying to encourage overseas investment. A further group the Government should examine closely is defence companies. A survey by ADS, the trade body representing 1,500 small defence companies, found that nearly three-quarters had struggled to access basic banking services, with respondents citing reputational concerns as a key factor behind that trend. I think I will return to this subject when we come to debate the financial services Bill.

These groups are not necessarily illegitimate customers yet, in practice, they seem to be treated, with the way in which the current regime operates, as though they are inherently suspect. Given the Government’s stated priorities of driving economic growth and increasing defence spending, this is surely an issue to which the Minister should be paying close attention. What consideration have the Government given to the impact of the AML regime on these groups? What steps are being taken to ensure that banks do not respond to regulatory pressure by simply excluding legitimate customers? Does the Minister accept that, if increasing numbers of affected customers are turning to the Financial Ombudsman Service, there is a strong case for looking at not just individual complaints but the structure of the regime itself? I asked that question at the beginning of my remarks.

--- Later in debate ---

[Lord Wilson of Sedgefield (Lab)]

First, this is not a weakening of the regulation but a balanced approach that we take in this whole area. I will set out the arguments in greater form for the noble Baroness and write to her with the specifics.

[Baroness Neville-Rolfe (Con)]

I come back to the issue of debanking. The Minister said some very useful things. This is debanking. We talked about defence companies and I look forward to hearing the results of that active engagement. I have talked in the APPG to individual defence companies that have had difficulties in this respect and we need to be supporting our defence companies, especially the innovative ones, given the change in the nature of weapons and so on at this difficult time.

The banks are required to offer basic banking and give 90 days’ notice if they want to close an account. When you are given notice of the closing of an account, you then have to go to another bank and go through the whole system of being approved by it. I have tried to set up a new bank account at Metro to complement my account with one of the major four banks. Frankly, I gave up. Once you are in the system, it is absolutely fine. My bank knows about me: I have been banking there for years. But, if you try to go to a new bank, it is quite complicated: a lot of questions are asked and you give up.

This all links to what the Minister is trying to do, which is to make it easier for citizens who do not necessarily have a good credit record to have a bank account, because it is important for them to be able to operate an account, save, have a card and so on. I wanted to emphasise that point and say that the Government’s work is important. If more progress is made in that area, I should be very interested to hear about it.

[Lord Wilson of Sedgefield (Lab)]

In response to the noble Baroness, there is the 90 days’ notice and the access to basic bank accounts, et cetera. There is ongoing work in this area. I can write to her and let her know exactly where we are up to in all of this, so she will have some awareness of where the Government intend to go.

King’s Speech

Baroness Neville-Rolfe Excerpts

Thursday 14th May 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I thank everyone who has taken part in today’s debate. I thank the Minister, the noble Baroness, Lady Anderson, for her crisp and helpful summary of the new legislative programme at the beginning of the day.

The most important economic aim for the UK is to achieve increased growth rates, as the Government initially—long ago in 2024—insisted was their priority. There is nothing in the gracious Speech which suggests that this is still the major objective. Two per cent growth, which we achieved over the 200 years or so to 2008, would make all the difference to our prospects. It is unfortunate, indeed depressing, that the Government have, in reality, given up on any real attempt to achieve such results. The Government have made much of this morning’s better news about the first three months of 2026. Let us see if this is sustained, given the political turmoil of the last few weeks, sadly continuing today. As my noble friend Lady Penn said, the half measures and lack of vision are representative of this Government’s unpopular incremental approach.

We have set out in detail what needs to be done in our Alternative King’s Speech, a much more exciting policy programme than the Government’s. In particular, we must ease the pressures that are holding back ambition, enterprise and small businesses, and which are costing jobs: extra national insurance contributions and business rates are two of the clearest examples. We must stop sending the message that success, investment and wealth creation are things to be punished. Lower tax thresholds, VAT on school fees, the extension of inheritance tax, higher stamp duty—all introduced by the present Government—and repeated talk of a wealth tax all risk driving away the very people, capital and confidence that our economy needs.

We have a Government who are not facing up to what needs to be done, and the bond markets are reflecting that. The UK rate has hit 5.1%, which is above that in Greece at 3.6%, and indeed that in all major economies. This is a higher level and a bigger premium than during the time of Liz Truss, to which Ministers are prone to refer so scornfully. In the trade, this is known as a moron premium. That might seem an unkind description of the Government Front Bench, who are ultimately responsible for these matters, but the facts stand out clearly.

The Government have been going in the wrong direction from the start by imposing higher taxes on business and individuals alike, and more and more regulation on everyone, while making no sustained effort to deal with welfare reform, as we have heard, and allowing a welfare bill which has increased by £18 billion this year to £333 billion, with overall welfare spending projected to reach £409.6 billion in 2030-31. They will not do what is needed because they are frightened of their own Back-Benchers. I fear we did not get enough done on welfare when we were in government, but the need for economies is much clearer now. Yet nothing has been done, and there is nothing in the King’s Speech.

This failure is behind Kemi Badenoch’s proposal in the Alternative King’s Speech for a welfare reform Bill. This would restrict eligibility for PIP, provide face-to-face—not online—assessment, reform sick notes, reinstate the two-child benefit limit under universal credit and prevent those who are not British citizens accessing so much welfare. These are the strong, necessary reforms that the present Administration are, sadly, incapable of making.

I turn now to the debate on the specific proposals in the King’s Speech. Although it has been the major focus of the debate, I do not plan to go into detail on the European partnership Bill, as my noble friend Lady Finn dealt with that well in her powerful and lively introduction. We have had important interventions from a number of my noble friends. My noble friends Lord Redwood and Lord Lilley analysed the pattern of growth and the balance of trade with the EU, especially in goods. From his perspective as a member of our respected European Affairs Committee, my noble friend Lord Jackson of Peterborough pointed out that, to gain privileges in the EU, the UK will have to pay and be subject in part to the fiat of the ECJ. He and my noble friend Lord Kirkhope emphasised the vital importance of ongoing—I stress that word—parliamentary scrutiny, and my noble friend Lady McIntosh of Pickering rightly asked about the future of the border target operating model.

I add that the cost of the EU reset will be greater than the benefits, especially with the negotiations being led by the Prime Minister. He does not seem able to engage with the EU without giving things away—12 years with the French and the Spanish plundering our waters rather than the originally envisaged five years, and free access for young people, more of whom will want to come here than the reverse. The EU should be paying us. Even our growth in AI and gene-editing could be at risk from dynamic alignment, as the noble Lord, Lord Frost, and my noble friend Lord Moynihan of Chelsea pointed out in two precautionary speeches. Moreover, our vital trade agreements with Australia, Japan, India and Canada, the CPTPP, and with the US, especially on pharmaceuticals where good work has been done, could come under pressure as dynamic alignment pushes into new parts of the acquis. Noble Lords can see that we on these Benches do not share the starry-eyed optimism of some speakers on the EU reset.

There is still no progress on the overdue defence investment plan. In a decisive contribution, the noble Lord, Lord Robertson of Port Ellen, pointed out that there seemed to be a passage missing from the King’s Speech on the additional funds needed to acquire the hard power we need to deter current and future threats. Indeed, my noble friend Lord Bridges of Headley pointed out in an excellent speech that security comes with growth and fragile public services are a real security issue. You cannot spend more on defence if your debt-servicing costs are soaring.

I now focus on three other areas: employment, regulation and productivity, and the high price of energy and its industrial impact. The prospects for employment are disturbing. Unemployment is at 4.9%, and a terrifying 15.8% among 19 to 24 year-olds. As we heard from my noble friend Lord Kempsell, that is above the rates in Spain and Greece. Moreover, the ITEM Club reports this week that it forecasts 163,000 further lay-offs this year. The truth is that the incentive to work has weakened as benefits have risen, and the combination of the Employment Rights Act, NICs and hefty minimum wage increases has made hiring risky and expensive for employers, especially in the vital entry-level jobs for our young people, as my noble friend Lord Kempsell said. AI is changing the marketplace at record speed, which means that flexibility is more important than ever, yet we are moving away from that.

This is also an example of the growing blight of regulation, an area of concern for many noble Lords today, including my noble friends Lord Johnson of Lainston and Lord Fuller. There is increasing evidence that excessive regulation acts as a drag on productivity, deterring investment, slowing decision-making and making it harder for businesses to grow. It is particularly difficult for SMEs, as we have heard from the right reverend Prelate the Bishop with Newcastle and the noble Baroness, Lady Kramer—we often agree on issues relating to small business. I know the Minister shares, at least in part, my concern about this regulatory area. I note the Government’s announcement of an enhancing financial services Bill, a competition reform Bill, and a regulating for growth Bill. It appears that the Government might finally have begun to recognise the scale of the problem. However, like my noble friend Lord Johnson, we are not convinced and we will examine the proposals very carefully as they come forward.

The Civil Service has expanded significantly, with costs in pay, unfunded pensions, and support costs. The shift to the public sector reduces productivity, as output per head is lower than in the private sector. It is government’s job to get a grip of this. Unfortunately, there is little sign of that grip in the gracious Speech. There is no sign of tackling the size of the Civil Service or productivity-sapping practices such as working from home. The gracious Speech promised proposals to strengthen its delivery, accountability, innovation and productivity. Perhaps the Minister will kindly explain what that will mean and whether there will be legislation on any of this.

Above all, as many have said, we have a severe problem with energy prices and energy regulation, which is set to get worse with the proposed EU reset. Cheap, reliable energy is essential to competitiveness. We cannot be ideological about something so fundamental to living standards and to the capacity for economic growth. We need to open up the North Sea, rather than leave it to Norway to take advantage of it. The Government’s energy independence Bill is going in completely the wrong direction, ruling out licences for new oil and gas fields. If the Government want to make energy more affordable and accessible, why do they continue to refuse to utilise the energy resources that we have at home?

State intervention to subsidise bills is not the answer to this problem when we have the resources to increase domestic supply in the North Sea. As my noble friend Lord Lilley pointed out, we have crushed our major goods exporting sectors and we cannot export what we cannot produce. The Government make much of their net-zero policies, but I put it to them that, if you end up with the highest energy prices in the developed world, their policy will not be the object of admiration that the Government so often claim but an example of self-harm.

My noble friend Lord Hunt of Wirral reminded us of the lack of a credible plan for making British Steel competitive, which he rightly described as a daily call on the taxpayer for a business that Ministers cannot guarantee will be viable. This, the electric vehicle mandate and high energy prices are together having a devastating effect on the cost of goods, especially vehicles.

My noble friend Lord Sharpe of Epsom highlighted how little the gracious Speech does for SMEs, which are already facing an exceptionally difficult environment. Not least there is the new holiday tax on top of higher NICs and business rates, the compliance burden, energy costs, planning restrictions and, I would add, horrific delays in the tribunals that will police the mistaken Employment Rights Act, costing business at least £5 billion. As my noble friend Lord Horam said, so many of the Government’s measures are anti-growth and anti-business—once the backbone of Britain.

In conclusion, the central question before us is whether this legislative programme meets the scale of the economic challenge facing our country. I am afraid that it does not. Britain does not need more reviews, more strategies, more consultations, more regulation or more ministerial powers. It needs growth. It needs a Government prepared to take the difficult decisions that growth requires: to reduce the burden of tax, to cut back needless regulation, to make work pay, to restore incentives, to bring welfare spending under control and to ensure that British industry has access to energy that is affordable, reliable and secure.

That is why the Official Opposition will scrutinise this programme relentlessly. Where the Government bring forward measures that genuinely improve competitiveness, simplify regulation, support business and increase growth, we will engage constructively. But, where they add new burdens, duck difficult choices, weaken our competitiveness or pretend that process is a substitute for reform, we will oppose them. We are in a mess, and this programme will not solve our problems.

Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Baroness Neville-Rolfe Excerpts

Wednesday 11th March 2026 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I thank my noble friend Lady Noakes for her typically clear and telling introduction as the new chair of the committee, my noble friend Lord Forsyth of Drumlean—now our distinguished Lord Speaker and the masterful previous chair—and other members and the staff of the Financial Services Regulation Committee for their work. The committee has done a great job; it tackled a very important question, which hangs over one of the great problems we face at the moment: the sluggishness of economic growth since the financial crisis, exacerbated by the present Government’s actions on employment, tax and energy.

How did we get here? We got here by a predictable overreaction to the financial crisis of 2008 and by the failure of many to recognise that regulation itself has a cost, particularly in compliance. The more of it there is, the greater the cost.

Moreover, the costs of regulatory failure, which the noble Baroness, Lady Bennett of Manor Castle, concentrated on, are more obvious than the costs of regulatory overreach. The former leads to people losing money in criminal or near-criminal enterprises, while the latter leads to lost opportunities and competitiveness, and is much less visible. The noble Baroness, Lady Moyo, gave a telling example from her experience of Barclays’ departure from its international businesses, and the noble Lord, Lord Eatwell, described the shift of fintech finance to US venture capital.

The performance of the UK financial sector since the financial crisis suggests that excess caution may be even more costly over time. It is likely that the country has paid a high price over the last 15 years for overregulation of the financial sector, so let us hope that my noble friend Lord Hill of Oareford is right in saying that the secondary objective is improving things. It was introduced by the last Government, and I am grateful to my noble friend Lord Johnson for helping us to make it a reality. The noble Baroness, Lady Kramer, came from a different perspective, but there is quite a lot of common ground on things like complexity, uncertainty and the lack of parliamentary scrutiny, and the fact of absent growth.

That brings me on to the role of the FCA, the PRA and the Financial Ombudsman. The report makes uncomfortable reading for these organisations. The truth is that, while the first job of a regulator is to protect consumers, that is insufficient. If they act as a break on innovation and growth, as they appear to have done, their net contribution to national life is much reduced and could even be negative.

The problems identified in the report are numerous, and the committee has done well to cover so many, although perhaps it would have had even more impact with a shorter report. I commend the then Minister Emma Reynolds MP, now transported to higher things, for the five-point summary of objectives in her letter to my noble friend Lord Forsyth of 2 September. However, she missed out two essential objectives for UK growth: reducing regulation, bureaucracy and the attendant compliance costs, and improving and prioritising financial education.

Because of the length of the report, I shall limit myself to three areas. I begin with the regulatory culture. What emerges clearly from the report is the existence of a damaging “culture of risk aversion” within the UK financial regulators. I note that the findings of the Fingleton report on nuclear regulation were very similar. We have identified a pernicious trend.

The noble Lord, Lord Kestenbaum, provided some telling examples, showing the need for culture transformation and mentioning the concerning difference in candour between private and public hearings—a point also picked up by my noble friend Lord Johnson of Lainston.

In the years since the financial crisis, the regulatory framework has increasingly tilted towards the prevention of risk at almost any cost. While the intention behind this shift is understandable, the report suggests that it has had significant consequences for how regulation operates in practice. That culture of caution has shaped regulatory behaviours in ways that translate into tangible duties and processes for firms.

Firms describe being inundated with extensive information requests from regulators. Regulators themselves are said to adopt highly cautious approaches to approvals and supervisory decisions. Perhaps most concerningly, the report suggests that the environment has begun to erode trust between regulators and the firms that they supervise. The noble Lord, Lord Pitt-Watson, introduced a wonderful new concept of building a Jenga tower of regulation. He reminded us of the cost of regulatory whack-a-mole and the huge difficulty in opening a bank account in the UK; I have also had experience of this. All of this creates a relationship that is defensive rather than collaborative. Something needs to be done.

The second area that I will therefore address is complexity. The complexity of the regulatory system has developed as a result of the broader culture. It is telling that financial services represent such a large component of GDP—9%, or more if you add legal and other related services—but, as we have heard, their contribution to output and productivity growth has fallen behind the rest of the economy. This growth-sapping complexity has to change.

We have spoken about the “twin peaks” system covering the FCA and the PRA, but there are many other bodies, all with their own acronyms, forming the regulatory landscape that firms have to navigate. We have the Financial Ombudsman Service, the Financial Services Compensation Scheme, the Competition and Markets Authority, the Payment Systems Regulator, the Information Commissioner’s Office and the Financial Reporting Council. All these organisations constantly try to prove the need for their existence, so the report’s finding that there is extensive regulatory overlap is not a surprise.

This is in stark contrast to the helpful concierge service operated in Singapore, which my noble friend Lord Lilley referenced and which my noble friend Lord Johnson has enjoyed. My noble friend Lord Lilley also told us how US banks were freer than UK banks to increase their lending to the real economy. We heard from my noble friend Lord Altrincham that the CEO of Marsh McLennan UK said that UK regulation is the “most expensive” in his wide experience—that was worrying. This has had a marked effect on firms already operating in the UK, which are required to direct capital away from productive investment into filling out forms, sifting through regulations, communicating to these organisations and so on. They are also worried about getting the blame for failure, as my noble friend Lord Lilley emphasised.

The other effect, which is harder to measure, is the chilling effect that this has had on international investment in the UK. Firms operating around the world take one look at the web of regulations and take their business elsewhere. The economy grew by just 0.1% in the final quarter of 2025, and across the whole of 2025 it expanded by 1.3%. The OBR has lowered its 2026 growth forecast to an anaemic 1.1%, as the noble Baroness, Lady Moyo, said. To say that this is growth in any meaningful sense is laughable. Growth must be an important priority for regulators, and the report provides the Government with some useful suggestions: reduce regulatory overlap, strive properly to understand the burden regulation imposes on business and perhaps help them, improve the spread of authorisation processes, and provide simpler rules for smaller domestic banks. My noble friend Lady Noakes was right to point out that the Basel rules applied across the UK are aimed at international banks, so small and medium-sized banks have a hard time here. I know this because I served as a director of Secure Trust Bank, and I therefore welcome the cut in tier 1 capital in December last year from 14% to 13%—that is a good development.

My third area is financial literacy and education. The committee expresses real concern about the chronically low levels of financial literacy and numeracy among adults in the UK. The consequences of this are far-reaching. Too many people lack confidence in financial markets. Many shy away from investing and, as a result, savings often remain concentrated in low-yield products. That means that neither they as savers nor our wider economy benefit from the sort of capital that could be unlocked if people were more confident in investing their money. Traditional advice is often too expensive, and guidance is not always available. Those who stand to gain the most from it are frequently the least able to obtain it and indeed are fearful of financial products—the noble Baroness, Lady Bennett, and I come together on this recommendation, albeit from different perspectives. If we are serious about building a stronger investment culture, financial education cannot begin when people first open a pension or savings account. It must begin in our primary schools. By embedding financial literacy in schools and universities, we can equip future generations with the confidence they need to invest wisely.

There seems to be a degree of agreement that the mandation powers in the Pension Schemes Bill, which could be used from 2030, will have a chilling effect. They could harm growth and deter investment, especially from overseas. As the Official Opposition, we believe that that should be abandoned when the Bill comes to Report next week.

I have a number of questions for the Minister, which go beyond the excellent questions from my noble friend Lady Noakes and the noble Lord, Lord Eatwell, although I am less sure about his idea of a new kind of mandation in respect of venture capital—or indeed about the version of the noble Baroness, Lady Kramer, which would be the mandation of a community element. That would mean new rules and new additions to the Jenga tower.

My questions to the Minister are the following. First, it is encouraging to note that the Government appear to acknowledge that regulation of the financial sector has gone too far. Will the Government continue to press for change in the direction advised by the committee? Secondly, will the PRA be asked to consider setting bank capital requirements for SME banks in a more proportionate way, rather than slavishly following Basel III? Thirdly, what concrete steps will the Government take to improve the competitiveness of the City of London, compared to centres such as New York, Milan and Singapore? Fourthly, will the Government think again about benchmarking—perhaps even a one-off benchmarking report—to look at our performance against our competitors overseas? The noble Lord, Lord Vaux, talked about that. It may be difficult, but it must be done, given that competitiveness is a key part of the secondary objective.

The UK faces a real and pressing challenge when it comes to economic growth. Growth, we are told, will be the central pillar of this Government’s economic strategy in the years ahead, and I have welcomed that on many occasions. Although their achievements so far have been disappointing, I encourage them not to give up but to try harder, especially in the financial services sector, which has contributed so much to growth historically. I very much hope that the Government will look carefully at the suggestions contained in this powerful report, and at the further suggestions made today, as they develop their fiscal and economic strategy.

Crown Estate: Wales

Baroness Neville-Rolfe Excerpts

Monday 9th March 2026 Lords Chamber

[Lord Wilson of Sedgefield (Lab)]

My noble friend is absolutely right that we need to think about energy security. One thing that is coming out of what is happening, tragically, in the Middle East at the moment is that, because oil and gas prices are set internationally, this impacts on every country’s economy. That is why we need to invest in the green economy, in nuclear, in wind turbines and in solar—so that we become independent. When issues such as this happen and when there are shocks to the international energy markets, we do our best to ensure that we are insulated from them.

[Baroness Neville-Rolfe (Con)]

My Lords, in my ministerial experience, the Crown Estate arrangements, in fact, worked pretty well. The Minister will be glad to hear that. But the more important question for the Minister today is: would Welsh households not have been helped by lower bills if Labour had not gone down the dangerous road of banning North Sea oil and gas? That looks even more irresponsible, with oil prices spiking because of the war in the Middle East.

[Lord Wilson of Sedgefield (Lab)]

Just to repeat my response to the previous question, we have to make sure that we are independent of these problems that we are facing. Rather than relying on fossil fuel, the prices of which are set internationally, we need to have home-grown green energy to ensure that we can resist these problems. I just want to point out one or two things about how we are helping people in Wales. We are cutting household energy bills, saving the average household £150. We have helped over 160,000 people with the minimum wage. We have increased pensions by 4.8%, and we have increased benefits for people out of work by 3.8%. The 700,000 pensioners in Wales are going to be better off because of this Government.

National Insurance Contributions (Employer Pensions Contributions) Bill

Baroness Neville-Rolfe Excerpts

Report stage
Thursday 5th March 2026 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

1: Clause 1, page 1, line 10, after “tax” insert “at the higher or additional rate”
Member’s explanatory statement
This amendment would exempt basic rate taxpayers in England, Wales and Scotland from the £2,000 cap.

[Baroness Neville-Rolfe (Con)]

My Lords, I am pleased to be opening our deliberations on Report by speaking to a powerful group of amendments tabled by not only the Opposition but noble Lords from across the Chamber. This group in many respects shows the scale and breadth of the concerns that are held by noble Lords with respect to this Bill.

My first amendments in this group seek to exempt basic rate taxpayers from this policy. I am grateful to noble Lords from across the House who supported Amendment 1 in Committee and who recognise the seriousness of the issue that it seeks to address. This Bill is a mistaken Bill. It will limit incentives to save into pensions and reduce pensions adequacy. In our lively Committee discussions, Peers with business and tax experience and knowledge of pensions and payroll exposed its failings. The responses from the noble Lord, Lord Livermore, did not allay our concerns. On the contrary, they reinforced them.

The Government have been clear in the Bill’s Explanatory Notes and in Statements made in this House and the other place that this policy is intended to target higher earners. That is the stated purpose and the political justification, but it is not the reality. The Society of Pension Professionals has told us that around one-quarter of those who use salary sacrifice and who will be caught by these changes are basic rate taxpayers. When this was put to the Minister, he did not dispute it. In fact, he went further. He told us that around 74% of basic rate taxpayers currently using salary sacrifice will be protected by the £2,000 cap. That is the current position and, as far as I know, does not allow for wage inflation in the period before the measure takes effect. That could increase the number of basic rate taxpayers who are affected.

The new arrangements take effect in 2029-30, conveniently helping the Government with £4.7 billion of revenue to satisfy their fiscal rules in that crucial year. However, the Minister’s exclamation means that 26% of basic rate taxpayers will not be protected. More than one in four basic rate taxpayers using salary sacrifice will be hit. The Minister also acknowledged that some people earning under £30,000 would be affected. Let us pause on that. This is a policy presented as targeting high earners, yet it will impact workers earning under £30,000. Surely that is, by the Treasury’s own admission, a fundamental contradiction between rhetoric and reality. For a basic rate taxpayer, the 8% national insurance charge represents two-fifths of the value of their income tax relief. In practical terms, the marginal cost of this policy is four times higher for a lower-paid worker than for someone on a higher income. That is a very different definition of a progressive tax. The lower your income, the greater the relative blow.

Our amendment offers the Government a straightforward way out. By exempting basic rate taxpayers from the cap, we would align the policy with its stated objective. If the aim is to target higher earners, let us do precisely that. Let us not drag lower and middle earners into a measure that they were repeatedly told would not affect them. Lower savings today mean lower retirement incomes tomorrow, and lower retirement incomes tomorrow mean greater reliance on the state. That is neither fiscally prudent nor socially responsible.

This is closely related to another of my amendments in the group, Amendment 7, which would require that regulations made under Clauses 1 and 2 should explain the basis on which the Treasury considers certain employed earners to be higher earners for the purposes of the national insurance charge and how the contribution limit reflects that assessment in Great Britain and Northern Ireland. This amendment, which we also tabled in Committee, received a wholly inadequate response. I asked the Minister who in the Government’s view were higher earners. I asked for a number. Was it people on £50,000 a year or £60,000 a year? The Minister refused to give one. Indeed, he did not engage with the point at all. Remember, some basic rate taxpayers will be affected by this policy. They are not higher earners. The Government should be honest about that.

Amendment 7 seeks to ensure that when regulations are forthcoming—and there are a lot of them provided for in the Bill as it stands—the Treasury will do the right thing and explain how the regulations meet the policy intent of affecting only higher earners. It would not impose costs on the Treasury or affect how the policy works but would ensure that we get an explanation of how lower and medium-income workers are to be protected. That is the Government’s stated aim. If the Minister is confident that regulations will meet the Government’s own test, he should accept this amendment.

The final one of my amendments to which I wish to speak, Amendment 29, concerns SMEs and charities. Throughout the passage of this Bill, and in debates far beyond it, many of us have warned about the cumulative burden this Government are placing on smaller employers. Think about the Employment Rights Act, the minimum wage hikes, the spiralling business rates, U-turns and uncertainty, compliance and regulatory costs and, indeed, the previous NICs hike. The list goes on. Each item is a policy that damages small and medium-sized enterprises in our country. They include family firms, start-ups, local manufacturers, high-street shops, care providers and charity and community employers. They often do not have in-house tax teams or compliance departments. They do not have margins that allow them quietly to absorb new fiscal shocks. Many do not offer salary sacrifice, but some do and more may do so now that it is more in the public consciousness thanks to this change.

My amendment simply says that, where the employers are a small or medium-sized enterprise, or a charity or a social enterprise, the provisions of this clause should not apply. If the Government’s intent is to truly address behaviours concentrated in large corporates then they should have no difficulty accepting that smaller employers ought to be shielded.

--- Later in debate ---

[Lord Livermore (Lab)]

I am grateful to the noble Lord. I think the position remains the same, though.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords who contributed to this debate. I welcome the noble Lord, Lord Freyberg, to the fray and thank the Minister for his responses. He did not respond to the question raised by my noble friend Lord Ashcombe, the noble Lord, Lord de Clifford, the noble Baroness, Lady Altmann, and me about who high earners are and why those in the £40,000 to £50,000 band should pay 8% not 2%—four times higher. Indeed, why has the £2,000 limit been chosen in the first place?

On SMEs, on which I will also divide the House later, I think the lower incidence of the use of salary sacrifice actually makes the case for not imposing the complexities and administration of salary sacrifice on SMEs and charities. I will leave my noble friend Lord Leigh to wind up on student loans.

I am afraid that we on these Benches are unconvinced that the Government are meeting their policy objective of protecting workers on lower and medium incomes. As my noble friend Lord Leigh said, we are not sure that the Government are even going to raise the desired revenue. The Bill obviously hits those on lower and medium incomes and the protections are not in the Bill, which would ensure that the Government’s own policy objective is achieved. What is the hurry? I would like to test the opinion of the House on exempting basic rate taxpayers from the £2,000 cap.

--- Later in debate ---

[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.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have spoken in this debate. I will begin by addressing Amendments 6, 22, 36 and 39, tabled by the noble Lords, Lord Mackinlay of Richborough, Lord Fuller, Lord Leigh of Hurley and Lord de Clifford, and the noble Baronesses, Lady Altmann and Lady Kramer, which seek clarity on the operation of the cap. I listened carefully to the requests made in Committee and again today to provide further reassurance to employers, payroll providers and individuals. Having put noble Lords’ concerns to officials in HMRC and the Treasury, I am pleased to confirm to your Lordships’ House that the cap will operate in line with other limits and thresholds within the national insurance regime. That is, the £2,000 cap will apply to each employment an individual undertakes.

To be clear, each employment will be treated separately for the purposes of the contributions limit for national insurance contributions. Any individual who has more than one employment and who sacrifices salary in more than one of those jobs will be able to do so independently in each case. Only 2% of those using salary sacrifice for their pensions have more than one job, and not everyone in this small group can or will use salary sacrifice in both their jobs. None the less, the approach I am confirming today provides clarity, aligns with the existing principles of the national insurance regime, and avoids the operational and administrative risks and burdens that could arise from attempting to operate a single cap across multiple employments. I confirm that this will be set out in legislation in subsequent regulations. The Government will also continue to engage with employers, payroll providers and other stakeholders to work through the detail of the policy ahead of its implementation.

I turn to Amendments 2 and 3 and the corresponding Northern Ireland Amendments 18 and 19 from the noble Lord, Lord Fuller, which each seek to introduce a carryover mechanism for any unused amounts of the cap allowance, including for those with fluctuating earnings.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

9: Clause 1, page 2, line 19, leave out from “4(6A)” to end of line 21
Member's explanatory statement
This amendment and others in the name of Baroness Neville-Rolfe would make most regulations subject to the affirmative procedure, except those solely increasing the contributions limit. They ensure parliamentary scrutiny of the policy’s operation, particularly in relation to people with irregular earnings, multiple jobs or atypical remuneration patterns.

[Baroness Neville-Rolfe]

My Lords, I beg leave to test the opinion of the House.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

10: Clause 1, page 2, line 21, at end insert—
“(b) after subsection (1), insert—“(1A) Subsection (1) does not apply to regulations under section 4(6A) which make provision only for increasing the amount of the contributions limit for a tax year.””Member's explanatory statement
This amendment and others in the name of Baroness Neville-Rolfe would make most regulations subject to the affirmative procedure, except those solely increasing the contributions limit. They ensure parliamentary scrutiny of the policy’s operation, particularly in relation to people with irregular earnings, multiple jobs or atypical remuneration patterns.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

16: Clause 1, page 2, line 27, at end insert—
“(5) The amendments made by this section do not apply where the employer—(a) is a small or medium-sized enterprise, or(b) is a charity or social enterprise which meets the conditions in subsection (6).(6) The conditions are that—(a) the employer meets the definition of a small or medium-sized enterprise in section 465 of the Companies Act 2006 (companies qualifying as medium-sized: general), and(b) the employment is carried out wholly or mainly for the purposes of that charity or social enterprise.(7) In this section—“charity” has the meaning given by section 1 of the Charities Act 2011; “social enterprise” means an undertaking which—(a) has as its primary purpose the achievement of social or environmental objectives, and(b) principally reinvests its profits for those purposes;“small or medium-sized enterprise” has the meaning given by section 465 of the Companies Act 2006.”Member’s explanatory statement
This amendment exempts small and medium-sized enterprises, and small and medium-sized charities and social enterprises, from the provisions of the Bill in Great Britain.

[Baroness Neville-Rolfe (Con)]

My Lords, I wish to test the opinion of the House on this amendment relating to SMEs and charities.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

17: Clause 2, page 2, line 38, after “tax” insert “at the higher or additional rate”
Member's explanatory statement
This amendment would exempt basic rate taxpayers in Northern Ireland from the £2,000 cap.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

24: Clause 2, page 3, line 31, leave out from “4(6A) to “shall” in line 32
Member's explanatory statement
This amendment and others in the name of Baroness Neville-Rolfe would make most regulations subject to the affirmative procedure, except those solely increasing the contributions limit. They ensure parliamentary scrutiny of the policy’s operation, particularly in relation to people with irregular earnings, multiple jobs or atypical remuneration patterns.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

29: Clause 2, page 3, line 41, at end insert—
“(5) The amendments made by this section do not apply where the employer— (a) is a small or medium-sized enterprise, or(b) is a charity or social enterprise which meets the conditions in subsection (6).(6) The conditions are that—(a) the employer meets the definition of a small or medium-sized enterprise in section 465 of the Companies Act 2006 (companies qualifying as medium-sized: general), and(b) the employment is carried out wholly or mainly for the purposes of that charity or social enterprise.(7) In this section—“charity” has the meaning given by section 1 of the Charities Act 2011;“social enterprise” means an undertaking which—(a) has as its primary purpose the achievement of social or environmental objectives, and(b) principally reinvests its profits for those purposes;“small or medium-sized enterprise” has the meaning given by section 465 of the Companies Act 2006.”Member's explanatory statement
This amendment exempts small and medium-sized enterprises, and small and medium-sized charities and social enterprises, from the provisions of the Bill in Northern Ireland.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

31: After Clause 2, insert the following new Clause—
“Review of impact on small and medium-sized enterprises(1) The Secretary of State must, within 12 months of the passing of this Act, lay before Parliament an independent report assessing the impact of the provisions of this Act relating to employer National Insurance contributions on small and medium-sized enterprises, including social enterprises in Great Britain and Northern Ireland.(2) The report under subsection (1) must, in particular, assess the impact on—(a) administrative and compliance costs arising from changes to payroll, pension and benefits administration,(b) the complexity of operating salary sacrifice and workplace pension arrangements,(c) the operability of these changes for those in receipt of irregular remuneration, those with seasonal working patterns or those with multiple employments(d) employment costs, and(e) the ability of small and medium-sized enterprises to attract, retain and reward staff.(3) The report under subsection (1) must assess the impact of this Act in the context of the cumulative impact of changes to employer National Insurance contributions affecting small and medium-sized enterprises since July 2024.”Member's explanatory statement
This amendment requires the Treasury to commission and lay before Parliament an independent review of the impact of the Act’s employer National Insurance provisions on small and medium-sized enterprises and social enterprises, including administrative complexity and employment costs, and in the context of the cumulative effect of recent changes to employer National Insurance contributions.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, Amendment 31 is in my name and that of my noble friend Lord Altrincham. I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord Londesborough, for putting their names to it. I will also speak to Amendment 33 in the name of the noble Baroness, Lady Sater, a charity professional in the best meaning of the word. She is very sorry not to be here today. Her amendment is in the same spirit as ours, and she is right that the impact on charities is very important and should be kept under review.

His Majesty’s Official Opposition will continue to be a voice for small and medium-sized enterprises. We have heard, time and time again, from small businesses about the weight of burden that this Government continue to pile upon them—tax after tax, regulation after regulation. The Minister did not even answer my question at Question Time this morning about whether he would consider options for exempting SMEs from the burden of regulation. This amendment presents such an opportunity for the Government and would demonstrate that they listen; to show that they take seriously the mountains of complexity heaped upon small businesses and small social enterprises; and to provide some measure of relief and some acknowledgement publicly that these cumulative pressures cannot be ignored indefinitely.

The Minister suggested in Committee that only some 10% of employees in small and medium-sized enterprises have pension contributions through salary sacrifice that exceed the proposed cap. That may well be the case today, but with public awareness, more SMEs may introduce it. We on these Benches would like to see that figure grow, as saving for a pension is one of the most desirable and cost-effective methods of saving, as I am always explaining to the next generation. Salary sacrifice is also one of the few tools available to a small employer competing against a large corporation for talent and productive workers.

An independent review over a year would allow us all to consider the impact of the changes on SMEs and charities. I beg to move.

[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to Amendment 31, and I support Amendments 32 and 33. All these amendments seek to help the Government to recognise that there is a serious impact if this Bill goes through as currently proposed, particularly on employers in smaller and medium-sized companies. I believe that the Minister confirmed that some 99% of employers in auto-enrolment are SMEs. The costs of complying with pension auto-enrolment have already been significant. Some of those employers have been advised that it is a “no-brainer” for them to use salary sacrifice as a way of mitigating some of the extra costs involved in having to provide pensions for their staff who want to stay in them.

We have imposed these extra costs on employers already; some employers have been good enough to put in more than the auto-enrolment minimum. What this Bill would do is to pile extra costs on to them, because if they are using salary sacrifice, they will have to renegotiate employment contracts, change payroll software systems, change the information that they give to their workforce about their pension arrangements and answer lots of questions that are bound to arise as a result of any of the changes that are proposed.

It should therefore be incumbent on the Government—indeed, it is quite astonishing that this was not already done before we got the legislation—that there is a proper, independent review of the costs imposed on smaller and medium-sized employers as a direct result of this legislation. That should inform the way in which the legislation is implemented, so that we try to do whatever we can to avoid the kind of problems that we have seen, where there are implications for employment levels, salary levels and indeed for pension investment and provision as an unintended consequence of perhaps well-meaning legislation, or legislation designed to hit an entirely different target, that is potentially going to fall on both employers and their workforces. We have seen that the extra national insurance costs have had an impact on employment levels already. I ask the Minister again: what is the rush in getting this legislation on to the statute books before we know its implications and what it will mean in practice for the corporate sector? First, can the noble Lord explain the rush and, secondly, consider putting this on hold until the full implications are better understood?

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I thank noble Lords for their contributions to this debate, which is an important one, and I am grateful to those who spoke in support. We heard from the noble Lord, Lord Freyberg, about the positive implications for the creative sector, and of course my noble friend Lord Leigh, who is very much in touch with trade representative bodies and charities, supported the amendment. The noble Lord, Lord Londesborough, raised again the question of data, which we were talking about at Question Time, and his concerns about the demise of SMEs under the burden of red tape.

Finally, I strongly support the noble Baroness, Lady Kramer, and the Federation of Small Businesses, which is such a useful source of information, on the need to be able to keep employees happy and to retain them. The same is true in charities and social enterprises, as I am sure my noble friend Lady Sater would say if she had been able to be with us today.

The case for a comprehensive and independent impact assessment of this legislation on small and medium-sized enterprises and social enterprises could not be clearer, nor, I am afraid to say, could the Government’s failure to undertake one. We have heard today of the depth and breadth of concern, and that is why we have voted and agreed on an exemption for SMEs and charities. But there is a risk that this will be rejected in the other place, in which case this review will be even more important.

Although some documents have been published, as the Minister said, the Office for Budget Responsibility’s own analysis points to significant uncertainty surrounding the effect of these measures. That uncertainty is not a reason for the Government to look away; it is precisely the reason that they must look more closely. When the OBR itself signals uncertainty, the duty falls on the Government to acknowledge what they do not yet know and to commit to finding it.

That brings me to an important matter which the Minister may want to comment on or follow up, perhaps in the next group. The Government announced last year a commitment to reduce the administrative burden on business by 25%. I remember welcoming that announcement. It was not a quiet aspiration buried in a footnote; it was a public commitment made with fanfare. Yet if the Government’s answer whenever we ask about the administrative impact of a specific policy is simply that such an impact cannot be measured, one must ask how precisely the Government intend to meet that target.

I fear there are only two conclusions. Either the Government have a means of measuring administrative impact, which they have chosen, curiously, not to deploy on this occasion, in which case they should do so, or the commitment to reduce the burden on business by a quarter was an empty promise from the outset.

But we have had a good debate today, and time is getting on. In the circumstances, I beg leave to withdraw my amendment.

Amendment 31 withdrawn.