Chelsea FC: Releasing Funds from Sale
Baroness Neville-Rolfe Excerpts(2 days, 1 hour ago)
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Lord Pitt-Watson (Lab)
We fully agree with that position, but, as I have said, it would be ill advised for the Government to publicly discuss any potential future strategy.
Baroness Neville-Rolfe (Con)
My Lords, more than four years after the sale of Chelsea Football Club, these funds remain frozen, no doubt accruing interest, while the humanitarian need in Ukraine continues to grow, as we have heard. I am keen to know why the delay is so long. Is this partly related to a tax dispute, given the huge increase in value of the club during Mr Abramovich’s tenure?
High Streets Strategy: Business Rates
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Lord Pitt-Watson (Lab)
I spent quite a lot of time trying to learn about rates, but I did not have a briefing on recording studios. I am more than happy to write to my noble friend. Perhaps he could write to me on the points that he was raising with my noble friend Lord Livermore, and I can then catch up on where that is getting up to, as I do not have an answer for him right now.
Baroness Neville-Rolfe (Con)
My Lords, this Question recognises the parlous state of many high streets, due in large part to taxes of all kinds, including national insurance contributions and business rates, and indeed the impact of the higher minimum wages and increased energy costs and parking charges. Will the Government now see sense and reduce the burden of taxes and regulation that they have imposed? We all care about our high streets.
Lord Pitt-Watson (Lab)
I can only reiterate what was in the Budget: pubs and venues have 20% off, other rates are frozen in real terms and, most specifically, 70,000 high street venues will now no longer be liable for rates. That is a very substantial incentive, I hope, for the rebuilding of high streets, together with the wider high streets strategy.
Interest Rates
Baroness Neville-Rolfe Excerpts(3 days, 1 hour ago)
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Baroness Neville-Rolfe
To ask His Majesty’s Government what assessment they have made of the recent rise in interest rates and the effect of this on economic growth, inflation and on their borrowing costs.
The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)
This is an important Question. Last week, the independent Monetary Policy Committee increased the Bank rate in response to the high inflation that was driven by the conflict in the Middle East. I should point out, however, that the Office for Budget Responsibility noted that higher rates would weigh on activity and increased borrowing costs, contributing, in the projection that we saw with the Budget, to the slowing of growth next year. Of course, higher rates should reduce inflationary pressure, which is itself essential for longer-term growth.
Baroness Neville-Rolfe (Con)
What does the Minister say to the millions of people whose mortgages will have become more expensive as a result of this rise and, more than likely, further rises in UK interest rates?
Lord Pitt-Watson (Lab)
It is a difficult question. We are living in uncertain times and things are difficult for people on mortgages. It will be different depending on the type of mortgage you have: is it a fixed-rate mortgage or a variable-rate mortgage? If it is a fixed-rate mortgage, you might be very pleased, when your mortgage is renewed, that we are getting medium-term inflation down, but I understand that it is more difficult for interest-only mortgages. I finish by saying that the Bank rate in May 2022 was 1%, but by August 2023 it was 5.25%—a 4.25 percentage point increase. I am sure that people who were on the Front Bench in those days will also be able to help answer the noble Baroness’s question.
Fortifying the Fiscal Framework (Economic Affairs Committee Report)
Baroness Neville-Rolfe Excerpts(1 week, 3 days ago)
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Baroness Neville-Rolfe (Con)
My Lords, I thank the Economic Affairs Committee for producing this excellent report and the noble Lord, Lord Liddle, for his enjoyable and historically-focused introduction. As he said, we are lucky to have two Permanent Secretaries, the noble Lords, Lord Burns and Lord Macpherson, speaking in the debate. I also want to pay tribute to the noble Lord, Lord Wood of Anfield, for his work in chairing the committee and congratulate him on the positive start he has made as FCDO Minister. I look forward to the Minister’s response to the interesting points made by my noble friend Lord Redwood on different macroeconomic targets, 2% inflation and 2% growth, and on the quirks that he identified in national insurance funding and the ownership of bonds by the Bank of England, a theme that was also picked up the noble Lord, Lord Sikka.
His Majesty’s Opposition broadly support the report’s conclusions. This debate is exceptionally timely coming, as it does, in the immediate aftermath of an unsatisfactory Budget. Let us quickly come to the essence of the matter, which is to be found in the final paragraph of the report’s summary:
“On current tax and spending settings, the UK is on a path to unsustainable debt levels”.
There we have it, starkly put. Noble Lords may ask if the position has been affected by the recent Budget? The answer is “not much”. This Budget can only be described as a missed opportunity. However, since the necessary decisions have been put off—yet again—the position has deteriorated somewhat since the Committee’s report was drafted.
In short, the recent Budget presented 108 tinkerings to the Commons, while probably the most pressing and ominous shadow facing us as a country went unaddressed. When the markets decide, as at some unknown time they will do, that enough is enough and the prospect of debt being repaid eventually has become too small to countenance, 10-year plans and other gimmicks will not cut the mustard. Very unpleasant things will happen. Just look at the experience of another Healey, Denis, Lord Healey, in 1976.
With the level of national debt close to 100% of GDP, a responsible Government would be planning to move as quickly as possible to a position of surplus, not making up excuses for doing nothing about it. My noble friend Lord Howell of Guildford quoted the £3 trillion debt figure on this point, which was echoed by the noble Lord, Lord Londesborough, who said it had trebled over the last 15 years.
I turn to two lesser, but still important, matters. The first is the committee’s conclusion, echoed in discussion, that the current debt rules can be gamed. As noble Lords will know, the existing rule requires debt to fall as a proportion of GDP only in the final year of a rolling forecast, meaning that debt can rise substantially in the preceding years, while the Government continue to promise a reduction. As the forecast period moves forward, this may never materialise. In other words, a Government can comply with their fiscal rules year after year, even as the national debt continues to rise. The committee recommended an additional debt target, requiring debt in the third year of the forecast to be lower than in the first. This is an interesting and sensible proposal that warrants serious consideration, as the noble Lord, Lord Razzall, said.
The Government have rejected this recommendation. I would be grateful if the Minister could explain why. How do the Government consider that the present debt rule provides a meaningful guarantee of fiscal discipline, when it is possible to meet that rule without achieving a genuine reduction in debt over the forecast period? The current system is satisfied if you predict a fall, rather than measuring one that has actually taken place, resulting in an upward spiral. Is that the Government’s plan? I add that the OBR is unlikely to go along with that indefinitely. I agree that Jonathan Haskel will be a respected new chair, and I am sure we all miss his father, Lord Haskel.
I agree with the noble Viscount, Lord Chandos, that the long list of changes in the fiscal rules in Appendix 4 is unsettling. I remember presenting a similar annexe for our Built Environment Committee report on demand for housing, but that listed the large number of Housing Ministers that there had been. These long lists are worrying.
A further risk arises from the growing use of public financial institutions. Under the Government’s chosen debt measure, borrowing can appear less burdensome where it creates a corresponding financial asset. Ministers must ensure that PuFins, such as the British Business Bank, do not become a means of moving borrowing outside the effective constraint of the fiscal rules, while leaving the public exposed to the risk of future losses.
My second point concerns the so-called fiscal headroom. The current Budget rule requires receipts to cover day-to-day public spending, with a deficit of no more than 0.5% of GDP permitted in 2029-30. Once that year becomes the third year of the forecast, the current Budget must be forecast to be in surplus in the third year of the rolling forecast period. Fiscal headroom is the estimated margin by which the Government are forecast to meet that rule. It is intended to provide some protection against adverse changes in the economy, higher spending, lower tax receipts and the ordinary uncertainty inherent in forecasting. Of course, if there were a serious plan to reduce the deficit over time this would be of less importance—but, for now, it is important. Following the Budget, the Government now have just £15 billion of headroom, down from £24 billion in the spring forecast and contrary to the recommendation in paragraph 40 of the report, which the noble Lord, Lord Razzall, also supported.
Indeed, the OBR estimates that the Government have only a 56% probability of meeting that rule, which I find extraordinary. We face a time of considerable economic and geopolitical uncertainty, while the Government have left themselves with a margin for error which could be eliminated by a relatively modest deterioration in the forecast. The OBR has noted, for example, that a 1 percentage point change in gilt yields and bank rate expectations across the forecast could change medium-term borrowing by approximately £16 billion. That single risk is greater than the Government’s entire £15 billion margin against the current Budget rule.
Further, the Government’s forecast assumes that the extraordinary post-pandemic growth in health-related benefit caseloads will moderate significantly. The OBR forecasts that annual spending on health and disability benefits will nevertheless rise from £86 billion in 2025-26 to £120 billion in 2031-32, an increase of almost £35 billion under its central forecast. However, if incapacity and disability caseloads continued to rise at their post-pandemic rates, the OBR estimates that welfare spending in 2031-32 would be approximately £25 billion higher than in its central forecast. That additional expenditure is for one year alone. The fact is that just one assumption in one department could eliminate the headroom the Chancellor has left himself.
Nor is welfare the only area of concern. We have growing commitments to defence, considerable pressures across our health and social care systems, and a prison and justice system that requires substantial investment to meet its existing obligations. These are not some remote or unforeseeable possibility. That, to me, is the central problem. If our fiscal rules can be breached by the continuation of existing spending trends, an ordinary forecasting revision or a relatively modest economic shock, what confidence can we have that those rules are being met today?
This brings me to the wider economic picture presented in the Budget. The OBR forecasts real growth of just 1.2% this year and 1% next year, with no real earnings growth in 2027 or 2028. This is too low. I agree with the noble Lord, Lord Liddle, that we need a simpler tax and welfare system and need to do more on public sector productivity. However, I do not agree that we should reopen Brexit, ushering in years of more uncertainty for business and citizens.
The situation is worrying. May I give noble Lords one or two more figures? Borrowing remains at approximately £133 billion this financial year, debt is expected to reach around 97% of GDP, and the tax burden is forecast to reach a record 38.6% of GDP, as we heard from the noble Lord, Lord Bilimoria. Meanwhile, the cost of servicing government debt has risen from £39 billion in 2019-20 to £109 billion in 2025-26 and is forecast to reach £160 billion, which is 4.2% of GDP, by 2031-32.
These are enormous sums increasingly being spent on servicing debt. They are burdens on our children, grandchildren and later generations. That is a reason, indeed, for a greater focus on the OBR’s annual risks and sustainability report, as recommended by the committee. The noble Lords, Lord Liddle and Lord Bilimoria, drew our attention to the enormous figure for the 2070s if markets were to allow that, and the noble Baroness, Lady Wolf of Dulwich, and the noble Lord, Lord Macpherson, rightly praised this annual report by the OBR. I very much agree that this should be given a higher profile.
Despite the historically high level of taxation, as I said earlier, the Budget contains no plan to reduce the deficit. That is why I welcome the committee’s emphasis on the long-term sustainability of the public finances, rather than simply considering the Government’s compliance with an arbitrary target in a particular year. Fiscal rules matter, independent forecasting matters, and the credibility of our public finances matters enormously—not simply to financial markets but to every household and business.
We all know why the Government are not dealing properly with this huge challenge: their Back-Benchers will not face up to the actions necessary to do so. As the committee has effectively demonstrated, meeting the rules on paper is no substitute for achieving those objectives in practice. I fear that the Budget has illustrated precisely the weaknesses which this excellent report identifies. We will return to that in our debate next week—by then, I will have seen the Keynes play mentioned by my noble friend Lord Howell of Guildford.
Binance Security Breach: Consumer Exposure and Interim Safeguards
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Lord Pitt-Watson (Lab)
I would be very happy to meet, but I wonder whether there is a misunderstanding here. Binance, which is the institution that has been hacked, is not authorised in the UK. It is not registered in the UK; it is a foreign entity. While I am sure that there will be lessons to be learned from the issues that the noble Lord is talking about, what happened with Binance did not happen under any registration in the UK.
Baroness Neville-Rolfe (Con)
My Lords, this incident shows that society as a whole faces very serious risks from cyber crime and that lessons need to be learned, as the Minister has said. I know that the Minister is concerned about financial education. Will he use his influence to ensure that the prevention of fraud in all its aspects, including cyber crime, plays a full part in plans to improve financial education?
Lord Pitt-Watson (Lab)
I would be more than happy to do that, and to do it jointly with the noble Baroness.
Defence Sector Banking Services: Environmental, Social and Governance Rules
Baroness Neville-Rolfe Excerpts(2 weeks, 4 days ago)
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Lord Pitt-Watson (Lab)
Again, I am in desperate agreement with the noble Lord. The first communication they are going to receive is from their regulator, the Financial Conduct Authority—I have it here—which is going to be clear that there are no sustainability requirements that prevent companies serving defence firms. When they serve defence firms, they should consider the risks associated with them, but they should do that proportionately and consistently across all the companies they are funding. If this FCA action does not work, I am sure I will have another round of Questions in a few months’ time.
Baroness Neville-Rolfe (Con)
My Lords, like others, I have been appalled by this long-standing problem with finding bank accounts, especially for the small and innovative defence companies that we really need at the current time. On 8 June, the FCA said:
“Our sustainability rules do not prevent investment in or finance for defence companies”.
I am not sure what today’s welcome announcement changes, because banks continue to have their own ESG-style exclusions—and I know ESG is an area in which the Minister is an expert. So, can he undertake to sort that out as well?
Lord Pitt-Watson (Lab)
I think that is also covered in the FCA letter. One can overdo how significant ESG disclosures and regimes have been in preventing investment in defence. At one time, that was an issue, and there has been some concern among supporters of allowing ESG investment, along with some reform. My co-author, Stephen Davis, of Harvard Law School, is among those who has campaigned on this. I note that RUSI agrees that ESG disclosure regimes generally do not prevent investment in defence, and the push now being given by the FCA is the right next step for us to take to ensure that defence companies are treated in exactly the same way as any other companies seeking finance.
Cash and Card Payments: Reduction in Availability
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Lord Pitt-Watson (Lab)
On this question of resilience, yes we are. For example, there is a project with Mastercard to support point-of-sale terminals from 2027 if the system failed, so that the system would still work. There is also a multi-year campaign on preparedness more generally—on the notion of what backups there are if, for example, our payment systems and ATMs failed. Again, that is work in progress, as is the Mastercard project, because it is not here yet.
Baroness Neville-Rolfe (Con)
My Lords, the truth is that not everyone is sophisticated financially, and those who are not tend to use cash, especially the elderly. There is a lot of concern in the House, given the increasing drift away from cash—for example, in car parks. Will the Government take steps to ensure that those who use cash can play a full part in the life of our nation, and actually get on with this?
Lord Pitt-Watson (Lab)
That is a good question. We are on top of the availability of cash through the banking system, but it is the case that acceptance of cash is voluntary, whether it is a car park, a retailer or the rest of it. That issue is under observation, rather than something on which there are direct plans. I point out that the other way that one can deal with this is to make sure that people have a way to pay by card. For example, the reduction of people who do not have bank accounts—from about 1.2 million to 900,000 over the past four years—is positive progress, but the noble Baroness makes a good point.
Government Debt
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Baroness Neville-Rolfe
To ask His Majesty’s Government what plans they have to reduce the £110 billion annual interest bill for servicing Government debt.
The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)
My Lords, this Question about the Government’s interest bill is a really good one: £1 in every £10 of government money is now spent paying interest. There are three elements causing this. One is the overall level of borrowing, and consistent, disciplined fiscal rules that are kept to are, we believe, the right answer. There is also the growth in global interest rates, for example following quantitative easing. We are also living in an extremely uncertain world, particularly in the Persian Gulf. The third element is the premium that the UK now pays over the G7 average—a premium that has been apparent since September 2022. Again, the best remedy for that is sustained fiscal discipline, including respecting the independence of the Bank of England in particular and, of course, the Office for Budget Responsibility.
Baroness Neville-Rolfe (Con)
My Lords, as most of us agreed in my noble friend Lord Bridges of Headley’s debate last week, we need to be honest about the trade-offs that we face, given the sheer scale of our national debt and the moron premium on our gilts, which the Minister mentioned. I believe that the only way to avoid a financial crisis is to reduce spending. Does the Minister agree?
Lord Pitt-Watson (Lab)
Overall fiscal discipline is the central question. Discipline is really important. The noble Baroness mentioned the moron premium. I do not know whether all noble Lords understand what that term refers to: it was a slight by an economist describing the behaviour of the team responsible for the September 2022 mini-Budget. To give a sense of the cost, it is £15 billion a year. I think we have learned lessons from that. When I spoke in the debate last week, speakers from across the House agreed that fiscal discipline, independent oversight and not moving the goalposts were critical. The balance of spending on tax might be something on which we disagree, but on fiscal discipline we agree entirely.
Financial Services and Markets Bill [HL]
Baroness Neville-Rolfe ExcerptsTuesday 15th September 2026
(1 month, 4 weeks ago)
Lords ChamberRead Full debate Financial Services and Markets Bill [HL] 2026-27 View all Financial Services and Markets Bill [HL] 2026-27 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 53-I Marshalled list for Third Reading - (14 Sep 2026)
Baroness Kramer (LD)
My Lords, my colleagues and noble friends Lady Sheehan and Lady Northover spoke eloquently on these issues on Report. If this amendment is pressed and the others are moved by the Government, we will support them.
Baroness Neville-Rolfe (Con)
My Lords, as this is Third Reading, I want to start by extending my warm thanks to the Minister and his team for their work on the Bill. I welcome the movement that the Government have shown on several of the issues that we have raised during the passage of this 137-page Bill, which in general we support.
Chief among them is proportionality, which will continue to apply to the regulators in the exercise of their day-to-day functions. That change reflects concerns on all sides of the House; my hope is that it will help to reduce the burden on SMEs, so I thank the Minister for this. I also welcome the movement we have seen on the important issue of financial education and look forward to engaging on that. It is becoming ever more important, whether you are a pupil, a student applying for a loan, or an adult managing your finances or thinking about retirement.
However, there remain important issues which the Government have not yet addressed sufficiently. Among them are the Henry VIII powers in Clause 3 and Clause 50 and the first use of the extensive new powers in the Bill. I understand the Government intend to reintroduce Clause 3 at a later stage in the Bill’s passage with further detail, and that is welcome, but it does not detract from the fundamental point at issue. One of Parliament’s principal functions is to scrutinise government legislation, and we simply cannot do so properly when Bills confer broad powers without setting out clearly how they are to be used.
A digital asset strategy to support faster action to stop further loss of digital entrepreneurs and less aggressive use of Section 166 are two areas where we believe the Government should go further, because we have heard consistent concerns from industry.
Turning to the amendments, I deeply regret the amendments the Government are introducing today on climate change. This represents a serious U-turn by the Government. Their original proposal was to move these considerations into five-year strategies. The existing requirements they dispensed with are largely superfluous and burdensome. There is little evidence that today’s amendments to restore them make any meaningful contribution, either to reducing climate change or to protecting the environment. At a time when businesses are already facing considerable pressure, and when our wider economic circumstances demand an unrelenting focus on growth, competitiveness and investment, imposing further needless regulatory burdens is the wrong direction of travel.
I would also suggest that, for an economy as dependent as ours on international investment, these amendments send entirely the wrong signal. We should be demonstrating to investors overseas that the UK is a predictable and attractive market. Instead, they reinforce the perception that doing business here means ever more regulation, additional cost and greater complexity for no clear practical benefit. At Second Reading, the then-Minister, the noble Lord, Lord Stockwood, who I am glad to see in his place, said that the purpose of the Bill was to
“modernise how the sector is regulated”
and
“enable it to grow”.—[Official Report, 8/6/26; col. 1146.]
These amendments seem to run directly contrary to that objective. I am deeply disappointed that the Government have abandoned that principle so quickly and with so little resistance. We on these Benches have been consistent in our opposition to this duty, which we have made clear in the House and in discussions with the Minister. I shall seek to divide the House when the amendments are called.
Lord Pitt-Watson (Lab)
My Lords, I think there is wide agreement that finance is essential for the running of our economy and that we want the British finance industry to be as successful as possible. I think that few of us would think that climate finance was not one of the most important areas to which the industry needs to contribute. I think all of us would feel proud that our country, particularly London, is rated as the number one centre of green finance in the world.
I understand the noble Baroness, Lady Neville-Rolfe, wanting to minimise regulation and thinking that this might be superfluous, but I note that climate is everywhere in the financial world. Why? It is because you are managing other people’s money. How does a fund manager, possibly with millions of people’s savings, think about appropriate investment? If you are responsible for the stewardship of a company, what is the sensible line to take in making sure it is as profitable as it can be but without risking the sustainability of the world? If you are an investment banker and somebody is issuing a bond, is it fair for it to be a green bond? Are you thinking about the reporting on the Stock Exchange? Should you have taken into account that the carbon assets you have will need to be written off and you will need to have a fund and tell your investors about that? Are you interested in impact investment? We were talking a lot about deforestation. How is it that we manage to get private money into deforestation? The noble Baroness, Lady Hayman, talked about insurance. Even in operations, look at the sort of thing that Bloomberg has done; all its electricity is now zero carbon. There is lots of stuff, and the UK is a leader. It is a growing area, and we should be proud of that.
Does regulation make a difference to this? That is a good question. If you were to look at the UK’s regulation on this and compare it with that of the United States—London versus New York—you would be in no doubt which was the better for promoting green finance. Frankly, I do not know of many financiers who would say that the United States now has more predictable regulation than we have in the United Kingdom. You could say that the regulator is already doing enough. Although I cannot respond to the noble Baroness, Lady Bennett, by having a national conversation, I did organise the FCA to do a drop-in to talk to noble Lords about what it was doing in this area. Every noble Lord I talked to afterwards thought that it would be a mistake to withdraw the “have regard” and that therefore this amendment was the right thing to do.
Whether noble Lords believe in the importance of climate and environmental issues or whether they want to be sure that Britain maintains its USP in this critical area of finance, I urge them to vote for these amendments.
Baroness Neville-Rolfe (Con)
My Lords, I close by acknowledging the considerable degree of cross-party support and engagement that has underpinned most of our discussions on the Bill. I thank the Minister and his officials for their work, as well as the noble Lord, Lord Stockwood, for guiding the Bill through Second Reading and Report. I also thank the noble Lord, Lord Wilson, for his support. I agree with the Minister that the Bill has benefited from its passage through the House in major ways.
I am particularly grateful to the noble Baronesses, Lady Kramer and Lady Bowles, and the noble Lords, Lord Sharkey and Lord Vaux, for the constructive way in which they have worked with us on a number of shared priorities. Across the House, we have identified a number of targeted and largely non-partisan areas in which the Bill could be improved. Serious concerns have been raised, and serious, well-intentioned proposals have been brought forward in response; I hope that they will be progressed by the Government.
I also thank my noble friends Lady Noakes and Lord Bridges of Headley for the deeply constructive approach they have taken to the important question of accountability and oversight. I strongly urge the Government to continue working with my noble friends on this issue. As I am sure the Minister recognises, they have approached it throughout in the interests of good governance and effective parliamentary scrutiny and with the support of the excellent Financial Services Regulation Committee.
My noble friends Lord Ashcombe, Lord Ranger of Northwood, Lord Holmes of Richmond, Lord Massey of Hampstead, Lord Howard of Rising, Lord Mackinlay, Lord Hunt of Wirral and Lady Lawlor have all made important and valuable contributions to our discussions, and I am grateful for their work in raising important matters with the Minister.
This is, in many respects, a model of how your Lordships’ House can work at its best: identifying genuine concerns, drawing on expertise from across the House, and working constructively to make legislation more effective, more accountable and better. I hope the Government will take forward the amendments passed and suggestions made as the Bill progresses. Most of all, I thank my noble friends Lord Altrincham and Lord Reay and our team of officials for their support on this complex Bill. Their experience and expertise in this area have been invaluable.
Financial Services and Markets Bill [HL]
Baroness Neville-Rolfe ExcerptsWednesday 9th September 2026
(2 months ago)
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Baroness Bennett of Manor Castle (GP)
My Lords, I rise with great pleasure to follow all the speakers thus far in this group and to support all these amendments. I have not attached my name specifically to any of them—some of the most prominent are fully subscribed and I wanted to leave space for the breadth of that subscription, noting in particular Amendment 90, which has also been signed by the noble Baroness, Lady Coffey, who is not currently in her place.
I want to take a second to reflect on the point where we are at now with the Bill overall. What we have before us is essentially the same Bill that was introduced under a different Prime Minister and a different Chancellor. I remain astonished that the approach to competitiveness and deregulation that was directed by Rachel Reeves is now being continued, although after hearing the new Chancellor’s speech two days ago, I am somewhat less surprised.
I will particularly reflect on all the environmental measures here, and we still have before us essentially the same Bill as under the previous Government. I note that our current Prime Minister supported the fossil fuel treaty in June 2025, when he was Mayor of Manchester, and that, when running for the Labour leadership in 2015, he said:
“Labour under my leadership will never turn our back on … our duty to tackle climate change”.
All these amendments are therefore putting the Bill back on the track that it should be on—a track that the Government are apparently signed up to.
I will focus very briefly on Amendment 90 and the forest risk commodities. As with pretty well everyone who has already spoken, I think we remember the long wrestle to get not the strong thing we were looking for but at least the promise of Schedule 17 into the Environment Act 2021. There is a real problem here in terms of members of the public. They heard and saw that fight and saw the law put down by the Government, and they expect it to be delivered. Yet, five years later, we still do not have that provision.
After listening very carefully to the noble Baroness, Lady Young of Old Scone, I have a constructive suggestion. The timetable coming from Defra suggested that, within 12 to 18 months, we will finally see the delivery of what was promised in 2021. I am sure the Minister will say that he cannot accept Amendment 90. However, it would be very positive if, perhaps at Third Reading, the Government could table an amendment committing to these regulations in, say, 18 months’ time, which would be a minor adaptation to the amendment put down by the noble Baroness, Lady Sheehan, and others. The noble Baroness, Lady Young, has that promise and pledge in a letter; let us go a little further and put it in the Bill.
Baroness Neville-Rolfe (Con)
My Lords, we have a lot to cover today, so I will be brief.
We do not believe that imposing additional reporting duties, transition plan requirements and regulatory processes on financial services firms is the right way to address the concerns that have been addressed in these amendments this evening. One of the merits of the Bill is the way it cuts out needless and repetitive operational requirements on financial services firms and regulators and instead introduces a more effective approach based on five-year strategies. As we heard on Monday, stakeholders’ views will be sought in the course of establishing those strategies. Of course, climate change and environmental objectives already remain an important statutory regulatory principle, intended to contribute to the UK’s net-zero target under the Climate Change Act and to the environmental targets established under the Environment Act.
However, requiring banks, other financial institutions and the regulators themselves to fill in forms, tick boxes and produce more and more reports about climate change will not have a meaningful effect on global temperatures; it will simply add costs. We need a regulatory environment which supports growth, enterprise and investment. That means cutting down on the red tape and extra requirements that are putting our international competitiveness at risk. These amendments would add a further layer of process and obligation without a sufficiently clear demonstration that the burdens would advance the environmental objectives being pursued.
This is a time when we should be seeking to streamline regulations and be careful about new requirements, however well-intentioned, because of the need to get the economic growth that we lack. These amendments risk taking us a step backwards, so we cannot support them and will be voting against them if noble Lords press them to a vote.
The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)
My Lords, I am grateful to the noble Baronesses for these amendments and for the wider debate on sustainable finance and adapting to climate change. These amendments address a number of important issues: climate transition planning, tackling deforestation, how the regulators consider climate risk and the products commonly known as green mortgages. As several noble Lords have argued today, both climate-related and nature-related risks can have significant implications for the economy, for financial markets and their ability to deliver for customers, and for long-term prosperity.
As many noble Lords may know, it is a topic close to my heart, including through my past chairing of the United Nations Environment Programme’s Finance Initiative at the Paris climate talks. UNEPFI is a voluntary organisation of more than 500 financial organisations from the North and the South, with funds of more than £100 trillion under management. It has established some of the world’s foremost sustainability frameworks for finance, including involvement with the REDD+ project, reducing emissions from deforestation in degradation, which I believe is now preserving many millions of square miles of forest.
I share the underlying objectives behind these amendments. The question before us is, therefore, not whether action is needed but how best to deliver that action in a way that is effective, proportionate and aligned with the wider framework we are putting in place.
Let me come to Amendments 34 and 55, which raise important points regarding how the regulators consider and report on climate and environment-related issues. I have spoken to the noble Baroness, Lady Hayman, and members of Peers for the Planet throughout the week on this important issue. I also hosted a drop-in session for Peers with the FCA. During that session, I heard a number of concerns about the absence of climate and environmental targets have-regard operating at a day-to-day level, and I have, of course, heard the issues raised in this debate today.
While I still believe that there is significant value in streamlining the regulators’ have-regards, I appreciate that it is important that the regulators continue to focus on the vital issue of the sector’s contribution to climate change at a day-to-day level, and I appreciate the importance of regular reporting on this issue to aid parliamentary scrutiny. While I cannot do anything today, I am prepared to return to this issue at Third Reading and would be prepared and undertake to table amendments to Clause 17 that would require the PRA and FCA to continue to consider their existing climate change and environmental targets have-regard at a day-to-day level and to maintain appropriate notification and reporting requirements.
Amendments 34 and 55 introduce a new have-regard and reporting requirement on climate-related financial stability issues. I therefore ask the noble Baronesses, Lady Northover and Lady Hayman, not to press Amendments 34 and 55 on that basis, and I will return at Third Reading with the amendments I have described.
Amendment 65 concerns transition plan requirements. The Government remain committed to this area. We consulted in 2025 on options for implementing transition plan requirements and are considering responses alongside wider work on sustainability and corporate reporting reform. In February, we finalised the UK sustainability reporting standards for voluntary use. The FCA has also consulted on aligning listed company disclosure requirements with these standards. The FCA aims to publish final rules this autumn with requirements expected to take effect from January 2027. This amendment would place a statutory timetable on an area where policy development remains under active consideration across government. We believe in the importance of finalising this work before imposing an arbitrary road map.
On Amendments 90 and 97A, I recognise the strength of feeling on deforestation and agree that urgent action is needed. I am therefore pleased to report that this work is moving forward. As the noble Baroness, Lady Young, said, Defra has confirmed that they will consult later this year on Great Britain’s approach to tackling deforestation in domestic supply chains and the next steps for the forest risk commodities regime. My officials have spoken to Defra, which has confirmed that it plans to consult during the autumn and that legislation will be delivered in 2027. The responsibility for enforcing the regime will be determined by Defra when it designs the regulations.
We share the objective of progress being made as quickly as possible. However, a six-month statutory deadline risks prioritising speed over effectiveness. The Government believe the better approach is to ensure that any resulting regime is robust, proportionate and capable of decoupling supply chains from global deforestation. The Government have already committed, through the Financial Services and Markets Act 2023, to review the regulatory framework for tackling deforestation-linked finance within nine months of Defra’s legislation on domestic supply chains. Furthermore, the principle that I committed to reapply today to day-to-day activities also explicitly covers consideration of environmental targets in the Environment Act 2021, so this will remain part of the regulators’ day-to-day work.
On Amendment 91, the Government support high-quality green mortgage products that can help households to finance energy efficiency improvements and improve resilience to climate-related risks. However, the amendment risks duplicating efforts by regulators, departments and existing frameworks. FCA rules already require clear disclosure and the FCA is considering disclosure further through its mortgage rule review. The Green Home Finance Strategic Partnership also has a dedicated working group focused on consumer protection and standards. With over 90 green mortgage products now available compared with fewer than 10 in 2019, the Government consider that imposing a statutory timetable would be premature while policy and the market continue to develop. The current approach provides the flexibility to develop clear, proportionate standards while maintaining consumer protections.
In conclusion, the Government support the objectives that sit behind these amendments. We have listened to the House and will, at Third Reading, table amendments to Clause 17 requiring the PRA and FCA to continue to consider that their existing climate change and environmental targets have regard at a day-to-day level and to maintain appropriate notification and reporting requirements. More broadly, we support credible transition planning. We support action to address deforestation and forest risk commodities, and we support the development of high-quality green mortgages. The Government are already taking forward substantial work in these areas and will continue to do so in a co-ordinated and proportionate way. I therefore ask the noble Baroness to withdraw the amendment.
Baroness Kramer (LD)
My Lords, fairly early on in Committee I said to the noble Lord, Lord Stockwood, who was then in charge of bringing the Bill through, that, when a common opinion was held by the noble Baroness, Lady Noakes, the noble Lord, Lord Vaux, and my noble friend Lady Bowles, he ought to listen. Those are the three real experts that we have in the House on markets, regulation and the financial services industry, and all of them set aside political ideology when they come forward with recommendations. They look to the common good and to good functioning, both for markets and for consumers. So I am very glad that on proportionality—which of all the issues was the most serious in the downgrading of principles, quite frankly—that the Minister is now amending that.
I am also appreciative that there is going to be movement on climate change because, as colleagues have said, this is a crisis that is on our doorstep. We have no choice but to act, and it means we need to focus all our strengths on dealing with that crisis. I am very conscious of the impact of financial stability and how it crept up on us, because we only looked at it through a very narrow lens instead of looking across the piece and recognising how holistic and interconnected so many issues are.
I have Amendment 67 in this group. I have to confess that it is an odd place for this amendment, and I shall deal with it briefly. Amendment 67 arose because a number of banks have been refusing to take small businesses and SMEs generally in the defence industry as their customers, usually because they are concerned about reputational risk. That has made it very difficult for those SMEs to raise credit, and it is seriously undermining the UK’s plans to build up its defence forces, which I think we all agree is not acceptable. Some Members may not be aware that the most innovative defence firms are SMEs. It is not just about the big players—the SMEs are critical, particularly at a time when so much is changing in the strategic and defence sector. These small SMEs already face high regulatory hurdles, and they often face slow procurement processes when they work with the Ministry of Defence. The absolutely killer blow is then not to be able to finance the projects, no matter the quality of the contract that they have.
The FCA has said its rules present no obstacle to lending to SMEs and considers that to be a green light, but that is not having very much impact. My amendment essentially attempts to put some welly behind the FCA in dealing with these issues. It would require it to conduct and publish a review at least once every three years, including identifying any barriers. I would have thought that a report like that might get the Government going as well. I know that the Government are aware of the problem, but I emphasise that knowing about it is not enough; they actually need to act and change minds.
Baroness Neville-Rolfe (Con)
My Lords, we welcome the Government’s decision to retain proportionality as an express statutory consideration for both the FCA and the PRA when they exercise their general functions. This responds to productive discussions in and outside Committee, for which I thank the Minister and indeed the noble Lord, Lord Stockwood, who I am delighted to welcome back to the discussion of the Bill, and I thank him for his efforts to improve it. I also thank my noble friend Lady Noakes, the noble Baroness, Lady Bowles, and the noble Lord, Lord Vaux, for their constructive and flexible approach to the substantial problems on these clauses.
Time and again, one of the concerns we hear from business is that regulation can be disproportionate to the risk it is intended to address. That is particularly true for the small and medium-sized firms that we rely on so heavily for competition, innovation and economic growth, right across this country. The proportionality changes help to address this and we will not therefore be pressing our Amendment 62 on SMEs to a vote—even though it is my favourite amendment and I have the support of the noble Lord, Lord Vaux. The noble Baroness, Lady Kramer, is right to focus on lending to small defence companies as well.
The requirement for the FCA and PRA to explain in their annual reports how they have taken these proportionality principles into account, alongside the requirements relating to consultation and parliamentary committees, creates an important mechanism through which Parliament can examine whether the principle is actually being applied in practice, with concrete examples, as the noble Baroness, Lady Bowles, suggested. This is important because the ultimate test of these amendments will not simply be whether “proportionality” appears in statute. It will be whether firms see a genuine difference in the way regulation is developed and applied, particularly by the regulators. We hope that the Government’s amendments will prove to be a meaningful mechanism through which regulation can become easier to comply with, less costly and ultimately more successful in achieving the objectives that Parliament has set for the regulators—of course, the proof will be in their implementation.
The Government have listened to concerns raised during the passage of the Bill and we support the amendments that the Minister has tabled in response. This is good House of Lords practice. Like my noble friend Lady Noakes, I do not intend to pursue the other amendments today.
Lord Pitt-Watson (Lab)
My Lords, I thank noble Lords for this debate. I hope it demonstrates that the Government have listened carefully to the arguments made by noble Lords during Committee and recognise the strength of feeling and the logic around addressing Clause 17. In Committee, noble Lords made it clear that they had concerns with that clause, which removes the requirement to consider regulatory principles each time they exercise a general function in favour of considering them just at a strategic level. These points were made particularly strongly with regard to proportionality; in response, we have tabled Amendments 37 and 43 in my name. These amendments will ensure that the two proportionality regulatory principles will continue to apply to the regulators’ day-to-day actions.
There was also a rich debate in Committee about the different facets of proportionality and the factors that regulators should consider. Here, again, the Government have listened. Amendment 44 makes changes to the existing principles to explicitly include that the regulators should recognise the differing abilities of firms to engage and comply with regulation owing to their size—a point raised by both the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Vaux. This means that regulators will need to consider the specific impact of their proposals on SMEs.
It was also clear that a number of noble Lords had concerns about the possible effects of Clause 17 on Parliament’s ability to effectively scrutinise the regulators. In response, Amendments 40 and 46 to 50 will ensure that existing reporting requirements on the proportionality regulatory principles will remain in place, including as part of the consultation on annual reports. The Government are therefore retaining the majority of existing transparency and reporting requirements, including through panel reports, consultation requirements and annual reports.
Baroness Neville-Rolfe (Con)
My Lords, this is an important and forward-looking group of amendments, covering open finance, digital market infrastructure and the future of digital assets. I am very grateful to my noble friend Lord Holmes of Richmond for his amendments, and for explaining the scale of the digital tide and the AI wave and the lack of specific signals in the Bill on these opportunities.
I will focus my remarks on Amendment 88, standing in my name and those of my noble friend Lord Altrincham and the noble Baroness, Lady Kramer, who I thank for her support. We debated these issues in Committee, but the central concern remains. Digital assets are becoming an accelerating part of our financial and economic landscape, yet policy is still developing too often issue by issue, product by product and regulator by regulator.
What is missing is a comprehensive strategy. This matters. Industry is telling us that the most basic building blocks of a comprehensive regulatory regime, such as legal definitions, do not exist. This uncertainty is translating into a lack of confidence, which is driving wealth creators away.
Amendment 88 asks the Treasury to step back and set out a coherent strategy for the regulation and development of digital assets and related financial market infrastructure in the UK. It asks the Treasury to establish its objectives, consult properly with industry and other interested parties, and explain how the different strands of policy fit together. This can build on the work of the Bank of England and of Chris Woolard, the new Wholesale Digital Markets Champion at the Treasury. We are most grateful for yesterday’s briefing, at which Chris set out his forthcoming plans for another report due to be published next year.
The opportunity for the UK is considerable. We have the legal system, deep capital markets and an extensive professional services ecosystem, but firms need to know which regulator is responsible for which part of the system, what rules will apply, how different regimes will interact, and how quickly decisions will be made. We are seeing the effects of current ambiguity in reports of firms wishing to offer digital asset products being debanked, a point to which my amendment refers.
Other financial centres are moving rapidly to establish their own frameworks for digital assets and tokenised markets, as my noble friend Lord Ranger explained from his position of great expertise. If businesses conclude that another jurisdiction offers greater regulatory certainty or a clearer strategic direction, they can quickly go elsewhere.
Amendment 88 therefore offers the Government an opportunity to bring those different strands together. The work of Chris Woolard is welcome, but our amendment encompasses a wider range of concerns raised with us. I hope the Government will engage with the amendment, but if I am not satisfied with the Minister’s response I will seek to test the opinion of the House.
Lord Pitt-Watson (Lab)
My Lords, I thank the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord Altrincham and Lord Holmes, for their amendments relating to the adoption of technology in the financial services sector and for their contributions to this debate. Technological change is already having a significant impact on the sector and there are huge opportunities for the UK alongside risks to be managed.
Amendment 71 seeks to require the FCA to create and maintain a framework for open finance. However, the Government already have powers to create a framework for open finance under the Data (Use and Access) Act 2025. Parliament has therefore already legislated here, and that legislation includes the power to require the FCA to regulate for open finance and includes appropriate safeguards and scrutiny. The Treasury also confirmed at Mansion House in July 2026 its commitment to open finance and said it will consult on open finance next year.
Amendments 88 and 89 are both focused on digitalisation. Amendment 88 seeks to support the UK’s approach to digital assets by requiring the Government to publish a digital assets strategy. It sets out a number of important issues that such a strategy should consider. Amendment 89 similarly seeks to support digitalisation by requiring the Government to make regulations establishing an issuer digitalisation council, composed of representatives from issuers, intermediaries, the FCA, the PRA, the Bank of England and the Treasury.
As noted in the debate in Committee, the Government strongly support digital assets and see them as a key strategic priority. As such, the Government have been very active on this agenda and have a comprehensive strategy to drive forward the digitalisation of wholesale markets through the wholesale financial markets digital strategy published in July 2025. The Government have been taking forward the actions of the strategy at speed. There has been progress even since this issue was debated in Committee.
Chris Woolard CBE published his first report as the Government’s Wholesale Digital Markets Champion in July, setting out a comprehensive cross-sector approach to digital assets. The Economic Secretary to the Treasury and I hosted a drop-in session with Mr Woolard here in Parliament just yesterday so that Members of your Lordships’ House could hear more about his agenda. I think those noble Lords who were there would agree that we should be impressed by the scope and comprehensiveness of the work he is doing.
Mr Woolard outlined not one workstream but nine taskforce action groups that are taking forward the industry road map, including an action group focused on the primary issuance of digital securities, and with an initial focus on delivering an end-to-end use case. These groups and the overarching orchestration group represent a huge amount of work, expertise and industry input that Chris is leading. They include the industry, a strategy and 50 companies, to be joined by the head of Europe from BlackRock and the London Stock Exchange. It is absolutely great work, as the noble Lord, Lord Holmes, said.
At that meeting, Chris Woolard was asked whether there was any need for further primary legislation. I think that the noble Lord, Lord Ranger, was at the meeting and can confirm that he said that right now, he did not think there was. He could also confirm that I said that, should there be that need, I and the Economic Secretary to the Treasury would be listening to that. There will be a real threat to UK competitiveness if we fail to act in this area, and a considerable opportunity if we get it right. I hope that the opportunity to engage Mr Woolard prior to this debate gave insight into the vast amount of constructive work that is already taking place to make sure that this happens.
There are many other actions being taken to support this work, such as the Bank of England and the Financial Conduct Authority’s call for input on tokenisation, which closed in July. They intend to publish a further road map in the autumn. In noble Lords’ speeches, I heard that they want momentum and a strategy involving industry. That is what is happening right now. The Government also highlighted progress on the digital securities sandbox, the digital gilt instrument, in Committee.
The Government strongly believe in the need to digitalise financial markets, and I hope that the measures the Government are taking forward and the further updates that noble Lords received from Chris Woolard, as wholesale digital markets champion, show that the Government are working with the sector and the regulators to deliver a strategic approach to digitalisation—
Baroness Neville-Rolfe
“Digital assets strategy(1) Within 12 months of the day on which this Act is passed, the Treasury must prepare, publish and consult on a strategy for the regulation and development of digital assets and related digital financial market infrastructure in the United Kingdom.(2) A strategy under subsection (1) must consider, in particular—(a) the Government’s approach to the regulation of digital assets, including cryptoassets, qualifying stablecoins, Central Bank Digital Currencies, tokenised securities and other digital and tokenised financial assets,(b) the practical operation of digital asset businesses and activities under current legal, regulatory and market conditions in the United Kingdom,(c) the extent to which firms carrying on, or seeking to carry on, digital asset activities in the United Kingdom are able to obtain and maintain appropriate access to banking, payment and settlement services,(d) the risks to competition, innovation and lawful market participation arising from the withdrawal or denial of such services, including where this is done on a blanket or insufficiently risk-sensitive basis,(e) developments in the law, regulation and supervisory practice of other jurisdictions so far as relevant to the safe regulation of new asset classes and digital financial market infrastructure, including digital currency exchanges,(f) the interaction between the regulation of digital assets and the development of related regimes and initiatives, including in relation to tokenisation, stablecoins, digital settlement assets and other digital payment or settlement arrangements relevant to financial markets,(g) the implications of the current and proposed framework for consumer protection, market integrity, financial stability and the international competitiveness of the United Kingdom, and(h) any legislative or regulatory changes which the Treasury considers may be required.(3) In preparing a strategy under subsection (1), the Treasury must consult—(a) the Bank of England,(b) the Prudential Regulation Authority,(c) the Financial Conduct Authority,(d) representatives from industry forums, and(e) such other persons as the Treasury considers appropriate.”Member’s explanatory statement
This amendment seeks to require the Treasury to prepare and consult on a strategy for digital assets, including regulation, tokenisation, practical operating conditions, access to banking and payment services, and international regulatory developments.
Baroness Neville-Rolfe (Con)
Amendment 88 addresses a simple problem: digital assets are developing rapidly, but UK policy remains fragmented and uncertain relative to international competitors. Despite the good work being done by Chris Woolard and the Bank of England, I beg leave to test the opinion of the House on my amendment.
Baroness Neville-Rolfe
“Use of powersThe Treasury must publish and lay before Parliament a report setting out how the powers conferred by the following provisions are expected to be used—(a) section 1;(b) Schedule 1;(c) section 13;(d) Schedule 2;(e) section 14;(f) section 37;(g) section 46.”Member's explanatory statement
This amendment and others in the name of Baroness Neville-Rolfe would require the Treasury to provide Parliament with information on the intended use of certain significant delegated powers before bringing them into force for the first time, including powers relating to consumer credit, payment systems regulation, anti-money laundering supervision, overseas recognition regimes and cryptoassets.
Baroness Neville-Rolfe (Con)
Amendment 93 and its consequentials are intended as a compromise with the Government. I do not feel that the Government have fully engaged with the practical proposal that we put forward on Monday, and I therefore wish to test the opinion of the House on Amendment 93.
Baroness Neville-Rolfe
Baroness Neville-Rolfe (Con)
My Lords, Amendment 98 would remove Clause 50, thus returning us to the broad principle that we raised in our discussions on Clause 3, which led to a majority of 81 in a vote on its deletion. Clause 50 will allow the Treasury to amend or repeal primary legislation without introducing another Bill, which is another Henry VIII power. We need clarity from the Minister about how the Government envisage the power will be used. Our concern is that it goes further than technical housekeeping, as the text of the clause gives Ministers a broad and potentially permanent power to amend or repeal primary legislation, including devolved legislation, without the full scrutiny afforded to a Bill. I am grateful for the support of the noble Baroness, Lady Bowles. In the absence of a satisfactory reply, I am minded to test the opinion of the House.
Baroness Bowles of Berkhamsted (LD)
My Lords, I have signed this amendment because there are bad things in this Bill and I do not want any more of them.
Lord Pitt-Watson (Lab)
My Lords, Amendment 98 would remove the consequential power contained in Clause 50. The Government understand the concern that delegated powers should be used appropriately and should not become a vehicle for making substantive policy changes without parliamentary scrutiny. Indeed, I think that, on Monday, in response to issues to do with Henry VIII powers, I gave some sympathy to that argument. However, the power in Clause 50 is not a power to introduce new policy, nor is it a power to revisit the policy that Parliament will have approved by passage of the Bill; it is a narrow, regulation-making power limited to dealing with matters that arise as a consequence of the provision that Parliament has already approved within the Bill.
It is common and often necessary for legislation of this scale and complexity to require consequential adjustments elsewhere on the statute book, so that provisions operate as intended. Without such a power, relatively minor or technical changes would require further primary legislation, creating unnecessary delay and complexity. For these reasons, the Government do not believe that removing this clause would improve the Bill. I would also note that this was not a point raised by the Delegated Powers Committee about the Bill.
Finally, I assure the noble Baroness that parliamentary committees will of course be able to call the Government to appear in front of them and account for the use of consequential power or, indeed, any other power in the Bill. I therefore ask the noble Baroness to withdraw this amendment.
Baroness Neville-Rolfe (Con)
My Lords, the fact is that Clause 50 gives Ministers a broad and potentially permanent power to amend or appeal primary legislation, including devolved legislation, without the full scrutiny afforded to a Bill. Unlike other Bills, this is a Bill with many new, unspecified powers, so I seek to test the opinion of the House.
Baroness Neville-Rolfe
“(1) The following provisions cannot come into force until the requirement set out in section (Use of powers) has been met—(a) section 1;(b) Schedule 1;(c) section 13;(d) Schedule 2;(e) section 14;(f) section 37;(g) section 46.”Member’s explanatory statement
This amendment and others in the name of Baroness Neville-Rolfe would require the Treasury to provide Parliament with information on the intended use of certain significant delegated powers before bringing them into force for the first time, including powers relating to consumer credit, payment systems regulation, anti-money laundering supervision, overseas recognition regimes and cryptoassets.