Credit Card Invoices

Baroness Vere of Norbiton Excerpts

Tuesday 26th March 2024 Lords Chamber

[Lord Hodgson of Astley Abbotts]

To ask His Majesty’s Government what plans they have, if any, to require credit card issuers to provide a full description of goods or services provided on their customer invoices.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, while issuers are not obliged to provide full a description of goods or services, there is existing legislation governing customer transactions. This requires customers to be given a statement of their transactions at least monthly. Under the rules, providers must include a reference to help the customer to identify the transaction, and, where appropriate, information relating to the payee.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am very grateful to my noble friend for that Answer, and also for allowing me to brief her on what I felt was the problem, but I am afraid her Answer does not satisfy me at all. How many Members of your Lordships’ House when they receive their credit card slip find transactions which they simply cannot recognise at all, for £5, £10 or maybe £15? How many times do noble Lords go on the fraud line and find, after quarter of an hour sitting there, that they have to put the phone down because they can go no further? Would the Government not agree this must be an incitement of low-level but quite extensive fraud, which is likely to get worse as we do more tap-and-go transactions and less in cash? Would it not be a good idea if it was a requirement to put on the credit card entry the name of the customer, the postcode that they operate from and a two or three-word description of the product or service provided?

[Baroness Vere of Norbiton (Con)]

My Lords, payments are governed by the Payment Services Regulations. The Government published a call for evidence in January 2023 to test whether the regulations are meeting their aims. The Government did not receive any evidence that would imply that more specificity would be helpful, either for customers or in terms of tackling fraud. However, I say to my noble friend—and I appreciate him raising this issue—that, as part of the smarter regulatory framework, firm-facing requirements will be repealed and replaced by rules from the FCA. Of course, this may be something that we can take forward in the future.

[Lord Livermore (Lab)]

My Lords, we discussed last week concerns that the new generation of touch-screen card readers lack essential accessibility features needed by blind and partially sighted people. Looking into this further, it seems that these readers can also come with other issues, whereby if they are not correctly configured, the only description of transactions that appears on statements is the name of the machine manufacturer rather than the retailer you shopped with. Can the Minister see a case for steps to ensure payment devices are correctly configured, so that transactions can be more easily traced?

[Baroness Vere of Norbiton (Con)]

I agree with the noble Lord that those payment machines should be correctly configured. When customers realise that there is a problem, they must raise it with the bank, which will then be able to take further action. It is the case that if there is any suspicion of fraud—whether using a credit card or a debit card—the customer can get their funds back.

[Lord Fox (LD)]

My Lords, we are rightly discussing regulations for credit cards and consumer credit, but an increasing amount of consumer credit is coming from the buy now, pay later app sector, which is unregulated. Does the Minister understand how lopsided that is? It is time that the Government looked into regulating buy now, pay later, so that people have equal safety on both sides of the consumer credit barrier.

[Baroness Vere of Norbiton (Con)]

The Government are considering responses to a recent consultation on draft legislation for buy now, pay later. The Government believe that any regulation of this area must be proportionate, because buy now, pay later can be very useful to a large number of people. There are existing protections in the Consumer Rights Act, and the FCA has powers over the terms and conditions of the buy now, pay later contracts.

[Lord Holmes of Richmond (Con)]

My Lords, I declare my financial services interests as set out in the register. Does my noble friend agree that, whether paying with a credit card or a debit card, one should be able to do so in an accessible manner? That will happen only if all financial services products and card payment machines are designed with inclusion in mind right from the outset.

[Baroness Vere of Norbiton (Con)]

I am grateful to my noble friend for raising this issue again. As I mentioned last time, there is now a consumer duty, which is a very important underpinning for financial services providers, which have a duty of care for their customers. That came into effect on 31 July 2023, and the Government and the FCA will monitor the effectiveness of the consumer duty as it beds in.

[Lord Dobbs (Con)]

Does my noble friend agree that the Government have a lot more to do, in the spirt of full disclosure, in explaining the cost of Covid and the lockdown? The latest estimate is that it has already cost over £400 billion. With all the excess deaths and, in particular, mental health issues we are now experiencing, that cost will grow. Would it not be sensible to explain far more fully to everybody in this country the costs to them? That means that there would be no more magic money tree and that the Treasury’s pre-Budget leaks would be much more realistic. Furthermore, we would be much better placed to decide, if there were to be another epidemic, what we should be doing.

[Baroness Vere of Norbiton (Con)]

My noble friend is quite right. He may have heard some of the explanation I gave in the debate on the Spring Budget on why we had to take the decisions that we did. Noble Lords will all recall that the Government stepped in to provide furlough for nearly 11 million people to save their jobs and protected nearly 500,000 businesses. It was essential that we did that at the time, but it came at a cost to our economy and society, which must be repaid at some stage.

[Lord Blunkett (Lab)]

My Lords, last week I invited the noble Baroness to dinner, if we could find a restaurant with an accessible payment device. That evening, I went to a restaurant that had purchased a cover that made the device accessible. I have been in correspondence with the Minister since and am very grateful for her interest. Could we not simply make all providers offer that service, rather than restaurants having to buy it in?

[Baroness Vere of Norbiton (Con)]

I am interested to know if that is the restaurant that the noble Lord intends to take me to. I have been in correspondence with him since last week. We will work very closely with UK Finance as its finishes off its accessibility forums to understand what more can be done to ensure that payment devices are accessible.

HMRC Self-assessment Helpline

Baroness Vere of Norbiton Excerpts

Tuesday 26th March 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, on Tuesday 19 March, HMRC announced that it would close its self-assessment helpline for half the year. The very next day, following a U-turn by the Chancellor, HMRC announced that this closure would not go ahead. When was any Treasury Minister first informed by HMRC of its decision to close the helpline? Reports of the Chancellor’s U-turn referred to a “pause”—what criteria will be used to decide whether, and when, HMRC will proceed with its planned closure of the helpline?

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, I do not have the details of who was told at what stage, but even though HMRC is a non-ministerial department and has a close relationship with the Ministers with oversight of HMRC, operational decisions are taken by HMRC’s management. The decision on the helpline followed two trials last year, the evaluations for which were published, showing that closing access to those helplines for certain people had no adverse effects at all. A commitment has been made that the helplines will remain open over the year ahead, but we are focused on listening to feedback and ensuring that as many people as possible can make the transition to online services, which have a far higher customer satisfaction rate than the phone lines.

[Baroness Kramer (LD)]

My Lords, it is not just this particular shambles: HMRC’s own surveys, which you can read in its annual reports, show that customer service has pretty much collapsed within that departmental agency. Its leadership has failed to recognise that the huge shift to self-employment, contract work and gig work has pushed swathes of ordinary people into a tax minefield. I ask that the Government provide HMRC with more resources to deal with this issue, but will they also tackle the culture at HMRC, which, at the top, remains focused on compliance through aggressive enforcement rather than through proper customer service and support? Most people want to pay the right tax; they just do not know what it is or how to do it.

[Baroness Vere of Norbiton (Con)]

I do not fully recognise the picture that the noble Baroness paints. Over the course of this Parliament, the amount of funding provided to HMRC has increased from £4.3 billion in 2019-20 to £5.2 billion in 2024-25, and the overall customer satisfaction across phone, web chat and online is 79.2% versus a target of 80%. However, I recognise that there are certain elements within the HMRC offer where taxpayers need to get a better service. That includes answering correspondence for some of the more complex and hard-to-reach people: the vulnerable and the digitally excluded. That is exactly why, quite frankly, we need to move resources from taxpayers who can and should use online and ensure that those resources can be targeted at those areas where customer service is not as good as it should be. That is what we intend to do.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend accept that the large reduction in the number of people in this country who are self-employed is a direct consequence of the Government’s introduction of IR35 legislation, which has led to huge confusion among the self-employed? Many people are giving up—just ask any taxi driver in London. Does she really think that the Inland Revenue, or HMRC as it is now, can provide a proper service with so many of its people working from home?

[Baroness Vere of Norbiton (Con)]

Obviously, it is up to the individual to ensure that they pay the right tax at the right time. HMRC intends to make that as easy as possible, but for some more complex situations it is right that individuals get tax advice. People working for HMRC can work from home two days a week. They use the same systems as they do in the office, and they are held to the same standard that they would experience when they are in the office.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, the media reports yesterday said that people who are unable to get online will still get assistance from staff during office hours, although it is not immediately clear how that will work. Given that more than 12 million people are required to complete self-assessment forms every year, maybe the Minister could advise your Lordships’ House about the discussions that have taken place with HMRC to facilitate all the people requiring self-assessment, particularly those who do not have online access and who need, by law, to complete such forms.

[Baroness Vere of Norbiton (Con)]

I am incredibly happy to do that. Of the self-assessment tax returns that were submitted on time, 97% were done online, so just 3% were not. HMRC has an entire focus on the 120,000 people who are vulnerable or digitally excluded. It is those people whom HMRC wishes to target its resources on. Some 3 million calls were received last year, which took 500 full-time equivalents an entire year to answer. Those calls were people phoning up to ask how to change their password, how to get their tax code, or what their national insurance number was. That can be done online. Those who can access the online services really must do.

[Lord Brownlow of Shurlock Row (Con)]

My Lords, I pay tribute to my noble friend Lord Cormack. What a privilege it was, along with others from your Lordships’ House and the other place, to be at his funeral yesterday in Lincoln Cathedral.

Is my noble friend the Minister satisfied and content with the advice given by the current board of HMRC? I declare my interest of having worked on a private sector board with a current member of the HMRC board.

[Baroness Vere of Norbiton (Con)]

The HMRC board as currently constituted is advisory. I know that my colleague the Financial Secretary to the Treasury is taking a keen interest in the strategy and its operationalisation within the HMRC. I expect that we will see some improvement shortly.

[The Earl of Clancarty (CB)]

My Lords, I thank the Minister very much for helping to facilitate the meeting on A1 forms that parliamentarians had with the Financial Secretary to the Treasury, but a specific concern of users was very much the lack of a helpline, so what I am hearing at the moment is concerning.

[Baroness Vere of Norbiton (Con)]

The helplines that would have closed relate to VAT and PAYE and self-assessment. HMRC is putting in various digital solutions to ensure that people can access A1 forms as quickly as possible and, as with all other forms of tax, accessing online is quicker, can be more convenient and certainly offers the best value for money for the taxpayer.

[Lord Watts (Lab)]

My Lords, is it not the case that the people who carried out this assessment are the same people who have been failing the public for many years? Who carried that assessment out? Does the Minister understand that many people who try to contact the tax office do so after they have failed to get through or get any answers from the online service?

[Baroness Vere of Norbiton (Con)]

I accept that that can be the case. There is a digital assistant in the first instance, which is like a chatbot which can help with very simple inquiries; then it goes on to web chat; and then if the person on the other end of the web chat says that they cannot help, of course one is then able to phone HMRC. HMRC monitors all its channels for levels of confidence, levels of access, emotional state, mental health capability, comprehension and disability, and those people are referred to the extra support service team.

[Baroness Altmann (Con)]

My Lords, will my noble friend consider the increasing number of pensioners being dragged into the tax net as the tax threshold is frozen and the state pension has increased significantly? Many more will go into the tax zone and many will have never filled out a tax return in their life and have no idea that they are in line to pay tax. Yet, when they get a demand and a potential penalty, they will have nobody to phone; many of them will be unable to get online, and increasingly all it takes is a state pension plus a small extra income for them to come over the limit. Will the department consider some special measures to help those pensioners who are never going to get online? I would be grateful if the Minister would take that back to the department.

[Baroness Vere of Norbiton (Con)]

I accept that some pensioners will not be online but the vast majority are and will be able to access HMRC’s services. As I said previously, HMRC is trying to focus its resources on precisely the people that the noble Baroness is concerned about—those who are digitally excluded, whether they be pensioners or not, and those who are more vulnerable, again whether they be pensioners or not.

Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024

Baroness Vere of Norbiton Excerpts

Tuesday 26th March 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, these draft regulations make use of a provision in the Financial Services and Markets Act 2000 to enable the Prudential Regulation Authority to disapply or modify its rules for individual firms.

The ability of a regulator to flex the application of its rules for individual firms has been a long-standing feature of our approach to regulating financial services. This is a useful regulatory tool that can enable a regulator to take account of a firm’s specific circumstances in order to ensure that rules are applied in ways that achieve the best regulatory outcome. This flexibility has long been supported by regulators and the financial services industry.

Since it was introduced more than 20 years ago, the Financial Services and Markets Act 2000, known as FSMA, has included such a tool. Section 138A of FSMA enables either the Prudential Regulation Authority or the Financial Conduct Authority to disapply or modify its rules for an individual firm. Under Section 138A, the PRA or the FCA can disapply or modify a rule if a firm requests it or if the regulator has the consent of the firm.

As part of the work to adapt our regulatory regime for the UK’s new position outside the EU, this tool was reviewed. It was concluded that, while useful, Section 138A was not as effective as it could be. This is because it contains the test, which must be met before a regulator can permit a firm to disapply or modify rules, that the rules in question must be

“unduly burdensome or would not achieve the purpose for which the rules were made”.

This requirement does not always allow for rules to be flexed, even where appropriate disapplication or modification of rules would provide a better regulatory outcome.

The Government addressed this by introducing a new ability for regulators to flex their rules in a wider range of circumstances. This was legislated for through the Financial Services and Markets Act 2023 and is now set out in Section 138BA of FSMA. Under Section 138BA, the Treasury may specify regulator rules made under FSMA, which the relevant regulator can then permit a firm to disapply or modify. As with the existing rule-flexing tool in FSMA, a regulator can permit a firm to disapply or modify rules under Section 138BA only if the firm requests this or consents.

These regulations exercise, for the first time, the power approved by Parliament at Section 138BA of FSMA. The regulations do two things. First, they enable the PRA to permit a firm to disapply or modify any PRA rule in accordance with Section 138BA except for conduct rules and threshold conditions rules, which FSMA excludes from the scope of Section 138BA. After careful consideration, the Government have concluded that the PRA should have the ability to permit a firm to disapply or modify any PRA rule. This is because flexibility in the application of rules is particularly important for banks, large investment firms and insurers that are regulated by the PRA. These complex institutions, with highly specialised business models, often require a highly tailored approach to ensure that they are appropriately regulated.

Secondly, these regulations apply certain procedural safeguards to the PRA’s decisions under Section 138BA. When the PRA refuses a firm’s application or imposes conditions on a firm’s permission to disapply or modify rules, the PRA must issue a notice explaining its decision. When a permission to disapply or modify rules is given, the PRA must publish a decision notice so that it is public knowledge that a particular firm is subject to a tailored regulatory requirement. The regulations provide for an exception where the PRA is satisfied that publication is unnecessary or inappropriate, taking into account certain specified matters, for example whether publication would be detrimental to the stability of the UK financial system. If an affected firm is aggrieved by a PRA decision, it may appeal by referring the decision to the Upper Tribunal, which is the part of the Courts & Tribunals Service responsible for hearing appeals against decisions made by various public sector bodies, including the PRA and the FCA.

These regulations make use of an important regulatory tool recently approved by Parliament in FSMA 2023. They provide the PRA with a level of flexibility needed to ensure that the application of prudential rules to banks, large investment firms and insurers can be flexed, where appropriate, to ensure that regulation of these large and complex firms remains effective. They also ensure that the PRA, when taking these decisions, is appropriately accountable and transparent. I beg to move.

[Lord Sharkey (LD)]

My Lords, the Explanatory Memorandum and de minimis impact assessment for this SI contain a number of vague assertions. Nowhere is there to be found a plain English statement of the benefit brought about this SI, except in the vaguest and most general terms. In essence, as the Minister has explained, this SI does one important thing: it removes the two conditions, of which one must be fulfilled, for the PRA to allow modification or disapplication of the rules for individual firms.

This power to allow the modification or disapplication is, as the Minister has said, contained in Section 138A of FSMA. The two conditions to be granted a waiver are that the rule or rules in question are “unduly burdensome” and/or

“would not achieve the purpose for which the rules were made”.

The PRA appears to be the sole judge of whether either or both of these conditions may apply. There is no definition of “unduly burdensome” and no specified mechanism for deciding whether the rules are fit for purpose or not. The Explanatory Memorandum seems to suggest that such rulings may be challenged in the Upper Tribunal. Is there a body of case law from Upper Tribunal hearings that helps with the definition of “unduly burdensome” and how “fit for purpose” may be established?

Currently, waivers may be granted only if either of the two conditions applies, and the PRA appears to have discretion over whether they do or do not. This SI changes that; it inserts an additional and unconditional waiver mechanism which allows the PRA, as the Minister has said, practically unfettered discretion to modify or disapply rules for individual firms as it sees fit. What justification is there for allowing this unfettered discretion? What is really wrong with the current arrangements?

The EM and the IA both have a go at answering those questions. In paragraph 5.4, the EM states that

“section 138A of FSMA … does not, by itself, provide sufficient flexibility for a truly agile regulatory regime … This requirement”—

by which it means the two conditions—

“does not always allow for rules to be flexed, even where appropriate disapplication or modification of rules would provide a better regulatory outcome”.

The EM does not give any examples to show how dropping the two conditions may help in practice, and nor does it explain how a better regulatory outcome may be defined or by whom—I guess that that is the PRA again, at its absolute discretion.

The impact assessment tries to give a concrete example in the matching adjustment regime, widely criticised as being not fit for purpose and, therefore, a fairly obvious candidate for disapplication or, more likely, modification under the existing rules. This shows the weakness in the impact assessment’s case, which says rather limply:

“Without this SI, the PRA would find it much more difficult to allow firms to continue to use beneficial provisions like the Matching Adjustment”.


So it is clearly not impossible—it is simply saying that it is really difficult. Why is it much more difficult? Could the Minister explain the point about a possible difficulty in dealing with the matching adjustment using Section 138A rather than this new SI? Can she give perhaps more concrete examples of the dangers avoided in or the benefits arising from dropping the two existing FSMA conditions?

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I am grateful to the Minister for introducing this SI, which delivers on one of the aims of the smarter regulatory framework, in that it will allow the Prudential Regulation Authority to disapply or modify the rules in the Financial Services and Markets Act in response to changing market conditions or emerging risks, and to facilitate innovation. We supported the principle behind this SI during the passage of the Act last year; as such, I have just a few questions.

First, can the Minister confirm how many times the existing power under Section 138A of FSMA has been used by the regulator in each of the past three years? Is there a forecast for how many times the new procedure is expected to be used in each of the next three years?

Secondly, the Explanatory Memorandum accompanying the SI notes that PRA decisions under this new mechanism will be challengeable in the Upper Tribunal, as the Minister noted. Is there any estimate of the potential caseload that may result from this new system? Can she confirm how long the Upper Tribunal is likely to take to determine challenges, and at what cost to applicants?

Thirdly, can the Minister confirm that, in considering an application to flex the rules, the regulator will remain bound by its objectives around financial and market stability? Finally, the impact assessment accompanying the SI talks of familiarisation costs for businesses. Are there any similar resourcing implications for the PRA? Are any additional positions needed at the regulator to deal with potential additional workload?

I am grateful to the Minister in advance for her answers. I take this opportunity to wish her and the noble Lord, Lord Sharkey, a happy Easter.

[Baroness Vere of Norbiton (Con)]

My Lords, I too wish all noble Lords a very happy Easter—there is one more day to go, I believe. I am grateful to both noble Lords for their contributions to this short debate. I have the answers to nearly but not quite all of their questions. I am disappointed in myself, but never mind; we will keep going.

I would like to go back to first principles. This was raised by the noble Lord, Lord Livermore, and to a certain extent by the noble Lord, Lord Sharkey. The PRA is governed by its core objectives, which are set out in law. There are two primary statutory objectives for the PRA: a general objective to promote the safety and soundness of PRA-authorised firms and an insurance objective to contribute to securing an appropriate degree of protection for those who are, or may become, insurance policyholders. Underlying that, FSMA also sets out two secondary statutory objectives for the PRA on effective competition, aligning to international standards and promoting growth in competitiveness. That is our starting point; that is the PRA’s job, per se. In taking a decision to disapply and modify rules, it must do so in that context.

The noble Lord, Lord Livermore, asked how many times Section 138A has been used in the last three years. I do not know, but I will write on that and explain what has happened to date. I will also write about the caseload and what we expect for the timeline in court. I do not anticipate that it will be enormous. With much of this regulatory behaviour, where there are disputes regulators will try to mediate wherever possible.

Turning to why the PRA would decide to disapply or modify rules, it is about getting greater flexibility to allow the system to work more effectively within the statutory objectives set out in FSMA. The provision does not direct a regulator as to how it should decide, because these are independent regulators. When this part of FSMA 2023 was debated, it attracted no debate at all, so I had therefore expected that noble Lords were very much onside with the powers we had given to the PRA, or potentially to the PRA, via this statutory instrument. It will be for the relevant regulator, in this case the PRA, to set out its policy for the disapplication or modification of rules. Noble Lords may have seen that it has already started to do this.

This goes back to the issue of transparency and ensuring that the public, and of course the industry too, are aware of what is going on. A whole series of industry consultations takes place whenever the use of 138BA is anticipated. Not only was the Section 138BA issue subject to consultations in 2020 and 2021, when we were developing and finalising our approach to the smarter regulatory framework, but, more recently, and more specifically, the PRA issued consultations on statements of policy. What happens is that the PRA says, “Okay, this is what we’re going to do. We’re going to put out a statement of policy”—for example, it has done it on Solvency II matching adjustments. The industry will then contribute to that, and it will go on to use whatever rules and regulations it now feels the industry agrees is appropriate.

So far, I think there have been two specific consultations and also a more general consultation by the PRA, basically saying, “Every time we do this, we will put out a statement of policy. Industry, do you think this is the right approach and the right thing to do?” So, I believe there is quite a lot of information being published around this. Obviously, it is not only for the industry to scrutinise that; it will be for others to scrutinise it as well, to ensure that we are not exposing our economy to detriment or, indeed, impacting our financial stability. That all seems fairly appropriate, straightforward and transparent.

The noble Lord, Lord Sharkey, asked about the Solvency II matching adjustment. It is our view, and I believe the view of the PRA, that it would not have been possible under 138A, because one of those two conditions would have had to have been met, and one could potentially say that it has not been. Is it unduly burdensome? I am not sure that it is, because it is more of an adjustment that annuity providers can use to secure more proportionate capital requirements. That is not a burdensome or non-burdensome issue; it is just that there is an opportunity to release capital by taking a sensible regulatory decision around matching.

The same goes for models as well. For example, in certain circumstances it may be the case that an institution’s model is better than the standard model that one tries to apply to the whole industry. If it can reassure the regulator that the model is robust, then, again, those might be the sorts of elements that one can put in to firm-specific changes to regulation. However, I fear that this will be returned to by the PRA over the coming years as we deal with assimilated law.

During the passage of FSMA 2023, we did say that we wanted agile regulators that are able to regulate and to change things according to risk. In this case, that will be by an individual organisation. But, as we go through and look at all the assimilated law that we dealt with under FSMA, some of it will then be able to fall away, because provision is available under 138BA that will be able to fill the regulatory gap that was previously occupied by that specific piece of regulation, but was then switched over to PRA rules and the way that it then chooses to put those into place. Again, this was the approach that was agreed during the passage of FSMA.

Sadly, I do not have anything on the PRA’s resources. I suspect that it has been gearing up for this for quite a long time; as I said, it has already started getting to work on consulting. Obviously, without the powers, it is unable to issue any firm-specific disapplications or modifications, but I will certainly write to the noble Lord if I get anything further on this matter. I have a few things to write on.

[Lord Sharkey (LD)]

I thank the Minister for her explanations. I have two or three points to make.

First, I am still rather puzzled about the matching adjustment, for two reasons. As the Minister will know, there is quite a lot of criticism of the matching adjustment. There is a sense in which it would be, I would have thought, relatively easy to categorise it as not quite fit for purpose; that is why I am puzzled that Section 138A had not been, or would not be used in the case of matching adjustments. Also, the de minimis assessment says that

“the PRA would find it much more difficult”;

it does not actually say that it would be impossible using Section 138A. If the Minister is going to write to us, perhaps she might expand on this point a little.

Secondly, I am curious about the body of case law from the Upper Tribunal. It would be interesting to know whether there is such a body and whether we can learn anything from it.

My third point is to do with publication. As I understand it, the current waivers issued by the PRA and the FCA are published in some detail. I was asking for some kind of commitment. Under new Section 138BA, the waivers will be published, I assume, but will they be published saying what the problem is, why this course of action has been chosen, what benefits are expected to arise, why the powers in Section 138A of FSMA were not seen as appropriate and why new Section 138BA was necessary? When the Minister writes, perhaps she might say something about this.

[Baroness Vere of Norbiton (Con)]

I can feel officials sending me things but I will write, because the noble Lord has asked some very good questions. We will write him a nice letter with some good explanations.

[Lord Sharkey (LD)]

I end by wishing the Minister a happy Easter.

[Baroness Vere of Norbiton (Con)]

Happy Easter.

Motion agreed.

Supply and Appropriation (Anticipation and Adjustments) Bill

Baroness Vere of Norbiton Excerpts

2nd reading & 3rd reading & Committee negatived
Tuesday 19th March 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That the Bill be now read a second time.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

Electronic Payment Devices

Baroness Vere of Norbiton Excerpts

Tuesday 19th March 2024 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, the Government are unequivocally supportive of all efforts by the financial services industry, the card machine operators and charities such as the Royal National Institute for the Blind to make card machines fully accessible for those with visual impairments. In November 2023, UK Finance published a list of vendors which produce approved devices, to assist merchants with purchasing a device that is sufficiently accessible.

[Lord Blunkett (Lab)]

My Lords, someone with low or no vision can access a smartphone because there is a Siri or voice-over function, and you can have several goes if you hit the wrong buttons the first time. If you are spending over £100 in hospitality and you are faced with a flat screen and you get it wrong, you lose access to your card. The providers are pretending that there is accessibility when there are markings down the left-hand side of a flatscreen. It is a major challenge for those without sight. It is, in my view, in complete breach of the Equality Act 2010. The providers do not provide the necessary covers that can be available to make at least a stab—I mean literally a stab—at hitting the right buttons, and it is time we acted.

[Baroness Vere of Norbiton (Con)]

I recognise the issues raised by the noble Lord, and the financial services industry also recognises these challenges. As I have already said, UK Finance publishes a list of vendors, recognising that it is not just financial services companies that use these machines; it may be the merchants themselves. This builds on work by UK Finance and the RNIB in publishing accessibility guidance, which only happened in 2022. Today, the third in a series of three forums is happening involving UK financial services groups and charities, and each of the three forums is focusing on specific interventions—whether it be technology or training to help improve the accessibility of all sorts of banking services.

[Lord Holmes of Richmond (Con)]

My Lords, I declare my financial services interest as set out in the register, and I congratulate my friend, the noble Lord, Lord Blunkett, on his timely Question. There are two issues involved here: access to, and the accessibility of, financial services and products. Both have serious impacts, if not got right, not just for the blind and visually impaired but for all people in our communities. For example, bank notes have never been more accessible, and yet have never been more difficult to access. What further conversations will the Government have with UK Finance and with all financial services organisations to ensure that there is both access to and accessibility of all financial services and products? Without this work, the Government cannot really stand up any claims to financial inclusion.

[Baroness Vere of Norbiton (Con)]

My noble friend raises a wide suite of issues. Underpinning all the work the financial services industry is doing is the Financial Conduct Authority, which is responsible for regulating the sector. Principle 6 of its principles for business says that the sector must take particular care in the treatment of vulnerable customers. The FCA is reviewing the needs of vulnerable customers and may update its guidance shortly.

[Baroness Kramer (LD)]

My Lords, the Minister and other noble Lords have mentioned the FCA, and I would like to continue that conversation. When we left the EU, the credit card companies seized the opportunity of the loss of regulation to increase credit card interchange fees in the UK fivefold—a Brexit dividend for the card companies of some £200 million a year, the cost of which effectively falls on the consumer. Why have neither the Government nor the FCA as regulator acted to reverse what could be called the Brexit penalty?

[Baroness Vere of Norbiton (Con)]

I am grateful to the noble Baroness for her question. Unfortunately, it goes slightly beyond my briefing today, but I will write.

[Lord Livermore (Lab)]

My Lords, I pay tribute to my noble friend Lord Blunkett and the noble Lord, Lord Holmes of Richmond, for their work to improve accessibility in financial services for blind and partially sighted people. As ever more transactions become cashless, every customer must have confidence in the payment systems used. Can the Minister outline what, if any, regulations assist for the manufacturers and providers of touch-screen payment devices? Why does regulation not seem to have kept pace with this move towards touch-screen technology?

[Baroness Vere of Norbiton (Con)]

Regulations that were introduced at any particular point in time have become out of date very quickly. Underpinning the work we are doing is the Equality Act 2010. The whole point about having an independent regulator in the FCA is that its rules can change quickly. The FCA issues guidance which sets out how financial services organisations need to ensure that people with disabilities, who may be more vulnerable, get the support they need. That is better than regulation: having the FCA as an independent regulator is more agile than having straight government regulation.

[Lord Watts (Lab)]

My Lords, the Government’s regulators fail to protect the public. Virtually every regulator is failing to do its duty, while the Government stand by and do nothing. We need a regulator for the regulators.

[Baroness Vere of Norbiton (Con)]

My Lords, I am not entirely sure that I am here to speak for all regulators. However, the consumer duty was introduced, whereby the FCA must ensure that the financial services sector is delivering good outcomes to prevent harm. That was introduced only in July 2023 and will take a little while to bed in. We will monitor the outcomes of that consumer duty to ensure that it is having the impact on disabled and other vulnerable customers that we need to see.

[Lord Blunkett (Lab)]

My Lords, I would like to invite the Minister out to dinner, and I promise to pay if there is a flat screen that I can access.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

Now that is a first at the Dispatch Box—I have been invited on to buses and trains but never out to dinner. I do not know what to say to that, but I will try to find a restaurant that has an appropriate touch screen and I would be happy to continue the conversation.

[Lord Holmes of Richmond (Con)]

My Lords, does my noble friend agree that, if the concept of “inclusive by design” was thoroughly understood, we would never have had these inaccessible touch-screen devices? Will she go back to the department and ensure that HM Treasury works to ensure that all financial services and products are inclusive designed at every stage?

[Baroness Vere of Norbiton (Con)]

I agree with my noble friend. That is something that the FCA should take from this, and it needs to feed back into the work that we know that EY, in conjunction with UK Finance, is doing on accessibility at the moment. If they are not talking about “inclusive by design”, then I think they are going wrong.

[Lord Mackenzie of Framwellgate (Non-Afl)]

My Lords, is the Minister aware that, on one of her rare visits to London, my wife had her credit card stolen? I monitored the use of the card and did not report it to the police because the thief was spending less than she was.

[Baroness Vere of Norbiton (Con)]

One should always report these matters to the police.

National Insurance Contributions (Reduction in Rates) (No. 2) Bill

Baroness Vere of Norbiton Excerpts

2nd reading
Monday 18th March 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That the Bill be now read a second time.

Bill read a second time and committed to a Committee of the Whole House.

Spring Budget 2024

Baroness Vere of Norbiton Excerpts

Monday 18th March 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That this House takes note of the Spring Budget 2024.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, it is a pleasure to open this double-header in your Lordships’ House. It is an opportunity to discuss and debate the measures brought forth by the Chancellor in the Spring Budget and to consider the National Insurance Contributions (Reduction in Rates) (No. 2) Bill, or the NICs Bill.

I start by taking this opportunity to welcome my noble friend Lord Kempsell to your Lordships’ House. He brings much experience and expertise, and I very much look forward to hearing his maiden speech today. But, before I delve into the measures announced in the Spring Budget, I shall first touch on the wider economic context.

In recent times, the UK economy has felt the impacts of a financial crisis, a pandemic and an energy shock, caused by the war in Europe. Yet, despite the most challenging economic headwinds in modern history, since 2010, growth in the UK has been higher than in every other large European economy. Unemployment has halved, absolute poverty has gone down and there are 800 more people in jobs for every single day that this Government have been in office.

The Government remain steadfast in their support for the independent Monetary Policy Committee at the Bank of England in its action to bring down inflation. Supported by the MPC’s actions and the Government’s fiscal policy, inflation has fallen significantly from its peak and is forecast to return to the 2% target in the coming months. Because of the progress we have made—because we are delivering the Prime Minister’s economic priorities—we can now help families not only with temporary cost of living support but with permanent cuts in taxation. We do this because lower tax means higher growth, and higher growth means more opportunity, more prosperity and more funding for public services.

With the pandemic behind us, we must once again build up our resilience to future shocks. That means bringing down borrowing so that we can start to reduce our debt. The OBR has confirmed that, based on the measures announced at the Spring Budget, debt will fall in every year of the forecast to 94.3% of GDP by 2028-29. Underlying debt, which excludes Bank of England debt, will be at 91.7% of GDP in 2024-25, according to the OBR, rising slightly before falling to 92.9% in 2028-29. The Government will have final-year headroom of £8.9 billion against the fiscal rule to have debt falling in the fifth year of the forecast. Our underlying debt is therefore on track to fall as a share of GDP, meeting our fiscal rule. We also meet our second fiscal rule, for public sector borrowing to be below 3% of GDP, three years early.

This is a budget for long-term growth. The ONS reported last week that GDP rose by 0.2% in January, and the OBR expects the economy to grow by 0.8% this year and 1.9% next year. We have well and truly turned a corner. Since 2010, we have grown faster than Germany, France or Italy—the three largest European economies—and, according to the IMF, we will grow faster than all three of them cumulatively in the next five years. That means we must stick to our plan of more investment, more jobs, better public services and lower taxes.

I turn first to investment. At the Autumn Statement, the Chancellor announced that the Government would introduce permanent full expensing, a £10 billion tax cut for businesses that gives the UK the most attractive investment tax regime of any large European or G7 country. At Spring Budget, we went further by announcing that the Government will soon publish draft legislation for full expensing to apply to leased assets, a change that we will bring in as soon as it is affordable.

This Government are on the side of small businesses, the backbone of our economy. As well as the business rates support and work on prompt payments announced in the autumn, the Government will provide £200 million of funding to extend the recovery loan scheme as it transitions to the growth guarantee scheme, helping 11,000 SMEs to access the finance they need. The Government will also reduce the administrative and financial impact of VAT by increasing the VAT threshold from £85,000 to £90,000 from 1 April. This is the first increase in seven years. It will bring tens of thousands of businesses out of paying VAT altogether and encourage many more to invest and grow.

Turning now to the Chancellor’s growth industries, these sectors remain a key focus of the Spring Budget. For clean energy, we will allocate up to £120 million more to the green industries growth accelerator to build supply chains for new technology. For advanced manufacturing, we have announced over £270 million of joint government and industry investment into innovative new automotive and aerospace R&D projects. For artificial intelligence, we will invest up to £100 million over the next five years in the Turing Institute, our national institute for AI and data science. We recognise that the benefits of tomorrow’s technology rely on investing today.

For life sciences, we will support research by medical charities with an additional £45 million. This will go into a wide range of diseases, including dementia, cancer and epilepsy, and, because of the Government’s support in this sector, AstraZeneca has announced plans to invest £650 million in the UK. Finally, for creative industries, we are making permanent the 45% and 40% rates of tax relief for theatres, orchestras and museums and galleries, and will be introducing a tax credit for UK independent films.

Turning to public services, in 2010 schools in the UK were behind Germany, France and Sweden in the OECD’s PISA education rankings for reading and maths. Now, we are ahead of them. Burglaries and violent crime have halved over the last 14 years and we have invested in 20,000 more police officers. Our Armed Forces remain the most professional and best funded in Europe, with defence spending already more than 2% of GDP. Overall spending on public services has gone up since 2010 and, in the case of the NHS, by over a third in real terms. However, the best way to improve public services is not always more money or more people; we also need to run them more efficiently. That is why the Chancellor has announced a landmark public sector productivity plan that restarts public service reform and changes the Treasury’s traditional approach to public spending.

Ahead of the pandemic, between 2010 and 2019, productivity in the public sector was increasing by just under 1% a year. However, today, public sector productivity is estimated to be 5.9% below pre-pandemic levels. If we can return to pre-pandemic productivity levels, the OBR states that this could save the equivalent of £20 billion.

This Government can deliver these efficiency savings. The cornerstone of our public sector productivity programme is comprehensive investment in the NHS to transform its technology, upgrading it for the years ahead. That is why the Government are providing £6 billion of additional funding to the NHS, including funding to cover the productivity plan in full.

When it comes to taxes, the Government have consistently maintained that those with the broadest shoulders should contribute a little more. That is why the Government will abolish the current complicated tax system for non-doms, getting rid of the outdated concept of domicile and the remittance basis in the tax system, and replace it with a modern, simpler and fairer residence-based system. From April 2025, individuals who opt into the new residence regime will not pay UK tax on foreign income and gains for their first four years of UK tax residence. This is a simpler, more modern regime and is highly competitive with other similar residence regimes in Europe. But after four years, those who continue to live in the UK will pay the same tax as other UK residents.

To ensure that these changes are introduced in a careful and responsible way, we will put in place transitional arrangements for individuals who are affected by these changes. This will include a two-year temporary repatriation facility from April 2025, whereby individuals can bring their foreign income and gains that accrued while they were taxed on the remittance basis to the UK, at a 12% tax rate, so that it can be invested here. This transitional arrangement will attract an additional £15 billion of foreign funds to the UK and generate more than £1 billion of extra tax. Overall, abolishing non-dom status will raise £2.7 billion a year by the end of the forecast period.

Touching further on tax measures, to discourage non-smokers from taking up vaping, we will introduce an excise duty on vaping products from October 2026. To maintain the financial incentive to choose vaping over smoking, we will also make an additional one-off increase in tobacco duty alongside introducing the vaping products duty. We are also making a one-off adjustment to rates of air passenger duty on non-economy flights only, to account for high inflation in recent years. Perhaps most importantly, we are providing HMRC with the resources it needs to ensure that everyone pays the tax they owe; this will lead to an increase in revenue collected of over £4.5 billion across the forecast period.

The Government will use this increased revenue to help cut taxes on working families, including those who rely on child benefit. Child benefit helps with the additional costs associated with having children and, when it works, it is good for children, good for parents and good for the economy. However, the current system is confusing and unfair. That is why the Chancellor has announced a consultation on moving the high-income child benefit charge to a household-based system, to be introduced in April 2026. In the meantime, the Government will introduce two changes to make the current system fairer. First, from this April, the high-income child benefit charge threshold will be raised from £50,000 to £60,000. Secondly, we will raise the top of the taper at which it is withdrawn to £80,000. This means that no one earning under £60,000 will pay the charge, taking 170,000 families out of paying it altogether. According to the OBR, this change will see an increase in hours among those already working, equivalent to around 10,000 more people entering the workforce.

This is not the only support the Government are providing to families. At the Budget, the Chancellor announced a six-month extension to the household support fund, meaning that vulnerable households will benefit from its support until September 2024. In addition, alcohol duty will remain frozen until February 2025. The Chancellor will also maintain the 5p cut in fuel duty and freeze it for a further 12 months, saving the average car driver £50 next year and bringing total savings since the 5p cut was introduced to around £250.

Because of the progress we have made in bringing down inflation, because of the additional investment that is now flowing into the economy, because we have a plan for better and more efficient public services, and because we have asked those with the broadest shoulders to pay a bit more, this Government are once again able to reduce taxes. From 6 April, the main rate of employee national insurance will be cut by another 2p, from 10% to 8%, and the main rate of self-employed national insurance will be cut from 8% to 6%.

That brings me to the NICs Bill before your Lordships’ House today. It has two measures. The first is the reduction of the main rate of employee class 1 NICs, announced by the Chancellor at the Spring Budget. This cut builds on the changes to NICs made at Autumn Statement, and we will once again support working people by reducing the main rate of employee class 1 NICs by 2 percentage points, to 8%, on earnings between £12,570 and £50,270, from 6 April 2024. This will cut taxes for over 27 million employees.

Secondly, the NICs Bill contains a further reduction in the main rate of class 4 NICs for the self-employed. The Chancellor announced at the Autumn Statement that the main rate of class 4 would be reduced from 9% to 8% from 6 April. With the introduction of this Bill, we are cutting the class 4 main rate further, by 2 percentage points, from 8% to 6%, from April 2024. As a result of the cuts to class 4 NICs at the Spring Budget, an average self-employed person on £28,000 will see a total saving of £310 in 2024-25. Combined with the cuts from the Autumn Statement, including abolishing the requirement to pay class 2 NICs, this will save an average self-employed person £650 a year. Together with the Autumn Statement cuts, this is an overall tax cut worth over £20 billion per year—the largest ever cut to employee and self-employed national insurance.

The Government are committed to tax cuts that reward and incentivise work, and which will grow the economy in a sustainable way while ensuring that inflation remains under control. These measures will not only benefit those already in work. According to the OBR, the NICs cuts announced at the Spring Budget will increase total hours worked by the equivalent of almost 100,000 full-time workers by 2028-29.

The Government are supporting not just working people. This April, pensioners will benefit from an 8.5% increase in the state pension, on top of the 10.1% increase from last year. The full yearly amount of the basic state pension is £3,700 higher, in cash terms, than it was in 2010. I am sure that all noble Lords across the House will welcome these measures.

I have outlined only some of the measures announced by the Chancellor in his Spring Budget and have touched briefly on the details of the NICs Bill, but there is certainly much more to cover. During the debate on the Autumn Statement, I listened very carefully to many noble Lords as they encouraged the Government to spend more or to make other costly changes. I noted in my closing remarks that few noble Lords set out how they planned to pay for their proposed changes. This Spring Budget is carefully balanced to focus on growth, and it is prudent, given the economic headwinds we have faced, and which have impacted our growth and level of debt. But we have now turned a corner.

As the noble Lord, Lord Macpherson, said this weekend:

“It’s very easy to get depressed about the British economy but the plain fact is that it generally grows … There is more money in people’s pockets, the worst of the energy crisis is behind us. If anything I would expect the economy to outperform expectations for the rest of this year”.


I would, too. I beg to move.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

My Lords, it is a pleasure to close today’s debate on the Spring Budget and the Second Reading of the NICs Bill. As anticipated, it has been a spirited debate with very thoughtful contributions from all Benches. I am particularly grateful for the support of noble Lords on the Benches behind me—or some of them, anyway.

In particular, I welcomed the contribution from my noble friend Lord Kempsell. His maiden speech was excellent, and I appreciate his nerdy focus on the evaluation of public spending; there cannot be enough nerds in your Lordships’ House. The Evaluation Task Force of which he spoke has already proved very useful in thinking about the evaluation evidence we use at the heart of all government decisions. It was used during the spring 2021 spending review, and I am sure it will continue to be key in future decision-making.

I was very much hoping that the noble Lord, Lord Livermore, would respond to the challenge from the noble Baroness, Lady Bennett, and set out how the Labour plan—I call it a plan but that might be stretching it—is different from the well thought-through plans of this Conservative Government. Once again, sadly, it was not forthcoming.

The noble Lord, Lord Livermore, bemoaned the fact that mortgages are high—I am not sure he understands why interest rates are high; it is to bring down inflation—and he was concerned about prices going up in the shops. I am sure he recognises that wholesale prices going down in the shops across the board is actually a very bad thing, but I will leave that there. I will say that when the Chancellor delivered this Spring Budget the markets were stable, there were warm words all round, and I think it was the sort of Budget that we needed.

It is worth reflecting on growth, which many noble Lords have talked about. Many noble Lords have reflected that the performance recently demonstrates that the economy has turned a corner, and that reflects the decisions that this Government have taken. I think the doldrums narrative and some of the words being used by the Opposition are not landing any more because they do not quite reflect what is going on in reality. My advice would be to find some slightly different wording there.

We know that our economy suffered, like other economies. My noble friend Lord Tugendhat talked about the similar internal factors and wider externalities that impacted many other economies. We also know that the combined impact of the Autumn Statement and the Spring Budget will provide a permanent 0.7% increase in the level of potential output by the end of the forecast.

There are many factors that go into GDP per capita. This Government are going to focus on how we can improve our GDP per capita, and I will come on to that in due course, but it is important that we look at wider factors as well. For example, real incomes have been growing stronger than expected this year. Real wages are now higher than pre-pandemic levels and have risen for the past seven months. The OBR now expects living standards, as measured by real household disposable income per person, to grow by 0.8% in 2023-24 and to continue to grow in all financial years over the forecast horizon. I hope the noble Lord, Lord Sikka, will at least welcome that, if almost nothing else that I have to say today.

My noble friend Lady Lawlor noted the impact of migration, as did a number of noble Lords. We are clear that migration must always benefit the UK. The UK has experienced unprecedented levels of migration since the Covid pandemic, which is why we have introduced our five-point plan. We need to think about the extent to which we support our important public services such as health, social care and education but to balance that by ensuring that we attract the best and the brightest. Highly skilled migrants contribute highly to the UK’s tech sector: 49% of the UK’s fastest- growing businesses and nine of the UK’s 14 unicorns have at least one foreign-born co-founder.

To come back to the issue of increasing the number of people contributing to the GDP of our nation, the question of getting the inactive back to work was raised by my noble friends Lord Lamont and Lord Tugendhat and the noble Lord, Lord Skidelsky. It is really important that we encourage these people back to work. That is why in the 2023 Autumn Statement the Government announced a new back to work plan, worth more than £2.5 billion, to expand employment support for the long-term sick and disabled—that includes people who have poor mental health—as well as support for the long-term unemployed. This built on a £7 billion employment package previously announced in the 2023 Spring Budget. We recognise that there is a problem that needs to be fixed. I recognise that there is probably not one silver bullet but, my word, if we can make some inroads into getting those people back into meaningful employment, that really will be a game-changer.

On inflation, I think all noble Lords will agree about the work of the Monetary Policy Committee at the Bank of England in keeping interest rates high in order to reduce inflation, which sadly has a knock-on impact on mortgage rates. We welcome the OBR’s forecast for where we think inflation is going to be. I listened with interest to the contribution from my noble friend Lady Lawlor. I will read with interest the recommendations of the economic committee that she mentioned, and the Treasury will respond as appropriate.

On the point raised by the noble Lord, Lord Skidelsky, the impact of the disruption in the Red Sea is included in the OBR forecast, which shows an increase in inflation of about 0.2% in the central case.

I will briefly go back to the issue of government debt and why we are in the situation we are in. Sometimes I refer to the unprecedented challenges of the Covid pandemic and the energy crisis spawned out of the war in Ukraine. Let us go back to the pandemic. I was a Minister throughout the whole of the pandemic, and I saw vast quantities of money propping up our economy, our society and our health system. We often talk about the furlough scheme that protected nearly 12 million jobs. That was enormous, but we do not always think about the £2 billion culture recovery fund that we put in place. Public transport systems were my old patch, and I think I managed to spend part of the £12.8 billion that we put into that. The health service got an extra £81 billion of ring-fenced Covid funding, while £5 billion went towards academic recovery.

That all needs to be remembered when noble Lords turn around and criticise what has had to happen in the forecasts for our tax rates. It has to be repaid. Next time I am closing one of these debates, because it might be quite interesting, I might go through Hansard so that my speech can literally just quote all the times when various noble Lords on the Opposition Benches wanted us to spend even more or shut things down for even longer. In those two circumstances, we would be in a much worse situation than we are now.

We emerged from the pandemic quicker than many other similar nations, but I accept that it has meant we have had to make some difficult choices on tax. We have made those choices, and now we are able to make other choices that improve the situation on tax. Let us be absolutely clear, to quote the noble Lord, Lord Livermore: the cumulative impact of the tax changes over the last four fiscal events reduces the tax burden by 0.6% from what it would otherwise have been. I think that is completely clear—super clear. I absolutely accept that the tax burden is too high, that it is going up and that there are massive underlying reasons why the tax burden is as it is. I also know that many noble Lords opposite would have had us in an even worse position had we listened to them.

We have had to take a fair approach to repairing the public finances. It is the case that we have asked everyone to contribute a little more through keeping tax thresholds fixed. It is also the case that if one enters a new tax threshold, one is earning more money; one does not get there by accident. As we know, wages are going up faster than inflation, and therefore in real terms you would be earning more money.

We have now decided that the best way to grow the economy, while ensuring that inflation is kept under control, is to reward those in work. When I first heard about taxing people twice on work, it took me a little while to get it but then I thought, “Oh my goodness, that’s absolutely true”. I have been in this game for quite a long time but I had not thought about the fact that if you are a worker, you get charged tax twice. It is right that we make the tax system fairer and simpler and reward hard work in the UK. I welcome the comments from the noble Lord, Lord Macpherson, and my noble friend Lord Lamont that we are right to focus on NICS versus income tax. I tried to follow the noble Lord, Lord Davies, but I think he was calling for a large income tax rise for unearned income so I did not go down that route.

Many noble Lords have said, “This is terrible, it is an unfunded tax cut”. I am sorry. Political parties, Governments and all sorts of people state their ambition, their vision, all the time. That is simply what the Government are doing. We want to end the unfairness whereby if you get your income from a job, you pay two types of tax—NICs and income tax—but if you get it from another source, you pay only one. Therefore, it is perfectly reasonable for us to set out a long-term ambition to abolish employee and self-employed NICs entirely and end this unfairness that sits within the tax system. It is also perfectly reasonable for us to say that we will not do this overnight; it can be done only in a fiscally responsible way and when it can be achieved without compromising high-quality public services. I do not understand why that is difficult to grasp.

On the comments of the noble Baroness, Lady Lister, I recognise that some people may be concerned that this will have an impact on state pensions or contributory benefits, and would like to reassure her that it does not. We believe in the contributive principle; cutting NICs does not affect anyone’s entitlement to the state pension or contributory benefits, nor does it impact decisions on funding for the NHS. The fact that the money still goes into the national insurance fund is a bit of smoke and mirrors; as all noble Lords know, the Treasury retains the ability to top up the fund. It is not a requirement that the two go hand in hand; reducing employees’ national insurance does not mean that contributory benefits change. That is the way it is.

I appreciated the comments by the noble Lord, Lord Sikka, on the taxes on nuts. I agree that sometimes it can be a little confusing but, having been in the VAT game as a finance director, I know that systems can cope with these sorts of things. VAT has been designed as a broad-based tax on consumption; where there are exceptions to the standard case, they are strictly limited to legal and fiscal considerations. It is widely viewed as quite an economically efficient and non-distortive way of raising revenue.

I very much welcomed the insights from my noble friend Lord Leigh on VAT and VAT evasion. I will take his comments back to the Treasury and HMRC, and as I think he suspects, I will be writing.

The noble Baroness, Lady Lister, spoke of the high-income child benefit charge. I understand where she is coming from and that she would like to abolish it completely. I suspect that that will probably not be on the table at this time. I also recognise the challenge that she raised. Changing from a principle to ensure that we remove an unfairness can sometimes be okay. That is why we are consulting on how that removal will take place, and I think it will be a very interesting consultation.

To continue on the tax theme, my noble friend Lord Northbrook asked about tax-free shopping. The Government’s latest estimate for the cost of a new worldwide scheme based on 2022 costings is around £2.5 billion a year. The Government are grateful to the OBR for its review of the original costing of removing tax-free shopping. We are considering the OBR’s findings, alongside industry representations and broader data, so I encourage industry to bring forward as many data points as it can and we will consider them alongside the OBR’s findings.

My noble friend Lord Northbrook also talked about inheritance tax. The Budget was very much focused on reducing taxes on work, so we were not able to make changes to inheritance tax at this time.

I listened to my noble friend Lord Young on multiple dwellings relief, and we will engage very closely with stakeholders to make sure that it does not have any unforeseen impacts. I will raise the issue with the department and ensure that we will do what we can.

I welcomed the welcome of my noble friend Lord Leigh for the changes to non-doms. I agree that these changes are pragmatic and achieve the right balance between ensuring that those who are resident in the UK pay tax in the UK and encouraging those with high wealth to come to the UK and invest their funds. That was the balance that we were keen to achieve; we believe that introducing a new residence-based regime brings the UK into line with other countries with similar schemes, such as France, Spain and Italy, and makes us more competitive than places such as Germany and the US that do not have those schemes. The detail of the operation of the scheme will become clear in due course after consultation. I recognise that there is uncertainty around the costing: the OBR has certified the costing as reasonable and central, but as with any of these costings, some will include more uncertainty than others. My noble friend Lord Northbrook questioned its attractiveness, but as I said previously, I think we have got the level of attractiveness right versus other places.

On public spending, I shall not repeat the oft-quoted government lines about where we are. Of course, we recognise the need for good public services; we have committed to grow departmental spending 1% on average in real terms beyond 2024-25. The noble Baroness, Lady Kramer, asked for a plan. As she knows, the plan will be set out in due course, and I will write further if I can. We believe that productivity must be part of the plan. It is an unfortunate feature of modern politics that the extent to which one is perceived to care about one public service or another is measured by how many millions, hundreds of millions or billions one is seen to be spending on them. In the private sector, that would be regarded as completely and utterly nonsensical. Nobody in the private sector would increase inputs and expect outputs to come flooding out. It does not guarantee the right outcomes. We need to take stock of this. It is vital that we change our attitude by becoming relentlessly focused on outcomes and not only inputs, because it is only by providing better public services that we can provide better value for money for the taxpayer.

Many noble Lords mentioned the NHS productivity plan. I commit that we will hold the NHS leadership’s feet to the fire on this—it will be accountable for delivering the plan and its savings. There is a further £800 million going into other public services, including special free schools, police technology, children’s homes, the justice system and the DWP. The leadership will be accountable for delivering the savings that it says it can get.

My noble friends Lady Goldie and Lord Tugendhat and the noble Lords, Lord Macpherson and Lord Lee, all mentioned defence spending, and as the daughter of an Army officer, I too have a lot of interest in it. I appreciate all the comments on our Armed Forces and defence spending more broadly. We recognise that we need our forces to be ready and resilient. We remain committed to increasing defence spending to 2.5% of GDP as soon as conditions allow. The Prime Minister has been clear that the target and the path for getting to that 2.5% will be set out at the next spending review. I will write to the right reverend Prelate on official development assistance.

On the household support fund, I shall take back the comments of the noble Baroness, Lady Lister. I note too the comments of my noble friend Lord Young but will say that the household support fund is just one of the many interventions that we can make to protect the most vulnerable.

I will write to various noble Lords on local government funding. There have been pressures and the Government have stepped up to try to relieve them. There has also been some pretty poor decision-making in some local government areas, and the consequences of those sometimes come through the system.

I will write to the noble Lord, Lord Bird, on social housing and to the noble Lord, Lord Sikka, on reducing poverty because I want to spend a couple of minutes on infrastructure investment, which was mentioned by my noble friend Lord Howell. Infrastructure was also mentioned by my noble friend Lady Moyo, who focused on effective public and private infrastructure.

We absolutely recognise that high-quality infrastructure is crucial for delivering economic growth, productivity and competitiveness. I welcome the comments from my noble friend Lord Horam on investment across the UK. What we potentially do not talk enough about, because it is not a new thing, is that we are spending £600 billion on public sector investment over the next five years. That is enormous but we do not talk about it because there is a plan and it is all just going ahead, but it is possibly worth reminding noble Lords that this money continues to be spent. That is exactly where we are putting our money. We are also speeding up the planning system for significant infrastructure projects and looking at grid reforms, which will be critical, particularly for the green economy.

The UK has attracted the third-highest amount of greenfield foreign direct investment since 2010. It is about £500 billion, behind only China and the US. Indeed, in that time we have attracted more greenfield FDI than Germany and France combined. We can attract FDI and my noble friend Lord Harrington’s review identifies how the Government can go further. We are taking that review very seriously.

Allied to that, we have to think about how we are going to not only unlock the money in our pensions but improve the functioning of our capital markets. My noble friend Lady Moyo asked for specific plans and I will write to her with those, because a number of esteemed experts within the City of London have written good reports for us. These build on the Edinburgh reforms and the Mansion House reforms, which the Chancellor has already announced.

I will write to the noble Baroness, Lady Bowles, on investment companies. I do not have much of an update yet, but I promise her that I am pushing it as much as I can.

The noble Lord, Lord Lee, mentioned the NatWest shares for schools. It is right that financial literacy is supported at a young age. The Chancellor set out in his recent letter that there would be really significant delivery challenges with gifting NatWest shares. I am not entirely sure it is the right solution to a problem that the noble Lord probably recognises is there, but the Government are very committed to ensuring that financial literacy is absolutely key.

I will write to the noble Lord, Lord Macpherson, about the NatWest retail sale; I apologise for not getting to that. I will also write to the noble Baroness, Lady Sheehan, on the green economy because I have quite a lot to say on that, particularly on the green finance strategy and how to align the financial system to investment in the green economy, which is critical.

I say to my noble friend Lord Young that the Chancellor made it clear at his TSC appearance last week that there were some unintentional leaks in the lead-up to the Budget. It is disappointing that, for not only this fiscal event but the last few fiscal events, it has been very difficult to keep a lid on measures.

I have absolutely overrun and I will send a letter but, to conclude: this Spring Budget is one more step in the Chancellor’s clear plan to put us on a path to economic growth. The NICs Bill, also the subject of the debate in your Lordships’ House this evening, ensures that working people can feel the benefit of a tax cut as soon as possible.

Motion agreed.

International Women’s Day

Baroness Vere of Norbiton Excerpts

Friday 8th March 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That this House takes note of International Women’s Day and the steps taken to promote the economic inclusion of women.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, I am delighted that the noble Baroness, Lady Casey of Blackstock, has chosen this debate in which to make her maiden speech. She has worked tirelessly over the last 30 years in an extraordinary career dedicated to public service and helping others; she is truly a worthy addition to your Lordships’ House. I am sure that all noble Lords look forward with great interest to what she has to say.

It gives me great pleasure to open this year’s International Women’s Day debate. This day is celebrated all over the world in different ways, and I am pleased that we are recognising it in your Lordships’ House today. International Women’s Day is an opportunity to reflect on the vital contribution that women make across different spheres—political, cultural, social and economic—while also recognising that work still needs to be done to ensure the safety, security, equality and empowerment of women around the world.

The theme of today’s International Women’s Day is “Inspire Inclusion”. Inclusion is not about women being present—being in the room. How often are women in the room, but, frankly, not really expected to speak? Inclusion should mean women actually feeling able to express an opinion, playing a key part in the decision-making process at all levels of an organisation, government and across society. It means women—more women—becoming leaders. Yet, globally, women continue to be excluded from any level of the labour market, and when they are employed, they work longer hours for less pay—on average 20% less, in fact. Women represent only 30% of entrepreneurs and receive just 4% of financing. There is still much to be done for women’s inclusion, real inclusion, to be fully realised.

I turn first to international policy and aid. The UK has long been a global champion of women’s rights, and many Members of your Lordships’ House have been and continue to be at the forefront of that work; I look forward to their contributions today. Women’s rights are most under threat when they live in a country at war. We have witnessed that in Ukraine, where Russia’s illegal invasion has led to millions of families being displaced and a sharp rise in poverty. My thoughts are with the millions of women and girls who have suffered in the two years and two weeks since that conflict began. The UK continues to stand with Ukraine. The fiscal support the UK is providing contributes to maintaining public services, and our humanitarian funding protects the needs of the most vulnerable, including women and girls—for example, by supporting survivors of gender-based violence. Conflicts such as these throw into sharp relief the importance of legislation that facilitates the economic and social inclusion of women, both domestically and worldwide.

We continue to uphold our International Development (Gender Equality) Act, which sets out a legal requirement to consider gender equality in how we provide official development assistance. We continue to look at ways we can go further to prioritise women and girls in our international work. To set out an agenda that puts women and girls centre stage, we published the international women and girls strategy in March last year and the international development White Paper in November. As set out in the White Paper, our target in the UK is for at least 80% of the Foreign, Commonwealth and Development Office’s bilateral aid programmes to have a focus on gender equality by 2030.

The White Paper also announced a new global campaign for women’s economic empowerment, which will drive forward global efforts to ensure that every woman has the equal right to decent work, the freedom of safe work of her choice and the resources to reach her potential. A key part of that is integrating gender equality into our economic diplomacy, which means leading by example to create meaningful jobs for women and identifying evidence-based solutions to expand women’s voices.

A strategy that focuses on women and girls has many benefits. The evidence shows that investing in women and breaking down the barriers they face accelerates international development. That is why British International Investment, the UK’s development finance institution, continues to champion “gender-smart investing” and why it has pledged that 25% of its new investments in the period 2022-26 will focus on supporting women’s economic empowerment. In Bangladesh, for example, BII is providing a $52 million loan for the construction of a greenfield manufacturing facility, which will support new business growth in the manufacturing sector. The loan is expected to create 1,000 jobs, and 50% of these will be held by women.

Building on this, the SheTrades Commonwealth programme helps to provide women-led businesses with various elements of support, including technical assistance, networking and support from specialised business support organisations. With UK funding, SheTrades Outlook is a unique global online platform that tracks and compares countries’ progress on trade and gender equality, sharing good practice and lessons learned and promoting women’s economic empowerment.

Ideally, different policy goals must work in tandem. Later this month we are hosting a dialogue at Wilton Park on “Building Women’s Economic Empowerment into Climate Transitions”, which will bring together key actors—academics, civil society, multilateral institutions, the Government and the private sector—to explore how we can build women’s economic empowerment into the green growth agenda. The UK Government will continue to use the full weight of our diplomatic and development offer to put women and girls, in all their diversity, at the heart of everything we do.

Turning now to the domestic front and gender equality in the UK, it is encouraging to see that the gender pay gap across UK employees fell in 2022 to 14.3%, a fall of 3% over the past three years. Transparency is a key tool in tackling the gender pay gap. Back in 2017, some seven years ago, the Government introduced regulations requiring large employers to publish the differences in average salaries and bonuses for men and women. It happens to be the first piece of legislation that I took through your Lordships’ House.

These regulations have been effective, motivating employers to scrutinise their approach and improve equality in the workplace. But a key driver of the gender pay gap is lower levels of female participation in the workforce, accounting for around half the gap, which widens in the 20 years after the first child in a family is born. We know that high childcare costs present a real challenge for many women when weighing up whether or when to go back to work, and how many hours they can work when they have young children to look after.

We are dealing with this head-on through the Government’s tax-free childcare scheme for working parents. For every £8 that parents pay into their childcare accounts, the Government will add £2, up to a maximum of £2,000 in top-up per year. This applies to each child up to the age of 11. For children with disabilities, the maximum amount of government top-up is £4,000, until the child is 16.

Building on this, at the Spring Budget last year, the Government announced the biggest ever investment in childcare in England by providing eligible working parents with 30 hours of free childcare per week for 38 weeks per year. Parents can access this from when the child is nine months old until they begin school. This expansion in early years entitlement is worth an estimated £1.7 billion in the financial year 2024-25. As a result, we expect that 1.5 million mothers will increase the hours they work by 2027-28 and that around 60,000 more will enter the employment sector. At the Spring Budget this week, we confirmed that the Government are guaranteeing the hourly rate paid to childcare providers to deliver the free hours offer, which will give childcare providers the confidence to invest in expansion.

Alongside support with childcare, workplaces must offer their employees flexibility in how and when they work. Flexibility benefits women and men, but we must recognise that women still bear more of the childcare workload and face particular challenges in balancing their professional aspirations with family responsibilities. But it does not have to be this way. If we embrace adaptability in working arrangements, dismantle the rigid structures that have historically hindered women’s career progression and, in turn, offer an environment where talent, not time spent in the office sitting at a desk, is the currency of value, it will have a transformative effect on women’s inclusion.

That is why this Government have introduced the right to request flexible working from day one of an individual’s employment. This will come into force on 6 April this year and will bring around 2.6 million additional employees in scope of this entitlement. We have also passed the Employment Relations (Flexible Working) Act, which includes measures that support people who wish to discuss flexible working arrangements with their employer. These discussions are important, as we know that the extent to which flexible working is suitable will depend on both the individual’s and the business’s circumstances, so we want employers and employees to come to the arrangement that works for both parties. This will benefit fathers as well as mothers, giving them the opportunity to do their part in the home; and, more broadly, flexible working can lead to more diverse leadership, the development of innovative service and products, and more resilient organisations.

Further, we are committed to supporting pregnant women and new parents who wish to participate in the labour market. So, the Protection from Redundancy (Pregnancy and Family Leave) Act 2023 extends the existing redundancy protections that currently apply to those on maternity leave, adoption leave or shared parental leave. From 6 April, these protections will also cover the period of pregnancy and a period of time after that. This means that employers are obliged to offer a suitable alternative vacancy where one is available, giving women on maternity leave or who have recently returned from maternity leave priority over other employees who are also at risk of redundancy. This same protection applies to parents taking adoption leave or shared parental leave.

Additionally, the Government announced new measures in Wednesday’s Spring Budget to help parents balance work with looking after their children. From April, the Government will raise the threshold for the high income child benefit charge—HICBC—to £60,000, taking 170,000 families out of paying this tax charge. The Government are also raising the top of the taper at which child benefit is withdrawn to £80,000. This will reduce the marginal tax rate, which will improve people’s incentives to continue working or take up more hours. The OBR estimates that, as a result, those already working will increase their hours by a total equivalent to around 10,000 full-time individuals by 2028-29.

Beyond difficulties in entering the labour market, women can also find it more challenging to reach leadership levels in the organisations that they are part of. In 2016 the Treasury launched the Women in Finance Charter to improve female representation at senior levels with a view to improving the productivity, innovation and competitiveness of the financial services sector. More than 400 firms, employing more than 1.3 million people across the financial services sector, have signed up to the commitments of the charter, from global banks to credit unions, from leading insurance companies to new start-ups. The first wave of signatories to the charter started out with an average level of senior representation of 27%. Today, the signatory base has grown substantially and the average level of senior representation stands at 35%.

The charter’s five-year review found that the average proportion of women on UK executive committees had increased from 14% in 2016 to 22% in 2021, while the proportion of women on UK boards had increased from 23% to 32%. The increase for executive committees is nearly 60% and for boards it is nearly 40%. Average representation on boards and executive committees was higher for firms that had signed the charter— 50% higher for executive committees and 40% for boards. It is really encouraging to see that charter being emulated in other sectors, including aviation and maritime; in other countries, such as Norway, Luxembourg and Ireland; and across diversity strands, such as in the Black Talent Charter. I look forward to the charter’s next annual review report, which will be published later this month.

There is still quite a lot of work to do to continue our progress towards true gender equality and inclusion. In implementing these domestic policies and through our international leadership in putting women centre stage, the UK Government have demonstrated our unwavering commitment to women and girls around the world. I am very pleased to open this debate in your Lordships’ House, and I beg to move.

Alternative Investment Fund Designation Bill [HL]

Baroness Vere of Norbiton Excerpts

2nd reading
Friday 1st March 2024 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, I, too, congratulate my noble friend Lady Altmann both on securing this important Second Reading debate on her Bill and on her excellent contribution setting out the challenges that she hopes to fix. I am grateful to her for her engagement on this issue; I hope that it will continue as we continue our work in this area. I am also extremely grateful for all the contributions made in your Lordships’ House today. I note that there was violent agreement that something must be done; I hope to set out the Government’s plans to do this, but I will ensure that my colleague, the Economic Secretary to the Treasury, has a look at Hansard because it is important that he understands the breadth of feeling and some of the important issues that were raised.

As noble Lords have heard, this Bill would amend the Alternative Investment Fund Managers Regulations to remove listed investment companies, also known as investment trusts, from scope. It would also make amendments to other assimilated law, formerly retained EU law, in order to make changes to cost disclosure requirements for listed investment companies.

The Government share my noble friend Lady Altmann’s drive to champion the investment company sector and ensure that the UK’s capital markets continue both to thrive and to drive forward our economy. It is true that, over the past two years, there have been relatively few initial public offerings globally; the UK has not been immune to those trends. This market turbulence has also impacted the investment company sector, in which the UK is undoubtedly a world leader. However, London continues to be Europe’s leading hub for investment; it raised more capital in 2023 than Frankfurt and Amsterdam combined.

The Government are committed to building on the UK’s strong foundations in this area by taking forward, through the smarter regulatory framework, ambitious reforms to streamline the regulatory rulebook, boost investment into UK markets and improve the competitiveness of the UK as a listing destination.

Investment companies are a wonderful British—more specifically, Scottish, according to the noble Lord, Lord Macpherson; he is right—invention dating back more than 150 years. The way in which they have become such a backbone of our investment economy is quite incredible. I assure all noble Lords that the Government are committed to supporting this very important sector.

However, I must express some reservations about my noble friend Lady Altmann’s Bill, although we recognise the rationale behind its being brought forward. I will first address the amendments that would exclude listed investment companies from the Alternative Investment Fund Managers Regulations, or AIFMR. Amending the scope of these regulations could have a significant impact. It would not be appropriate for the Government to change the regulatory perimeter using this Private Member’s Bill in isolation, without proper and appropriate consultation and further consideration.

As part of building a smarter regulatory framework for financial services, the Government are already carefully considering how to make AIFMR more streamlined and more tailored to UK markets. The Government recognise the concerns about regulatory inefficiencies for listed investment companies under AIFMR. However, we are also conscious that some investment companies value being regulated financial services providers; at this point, I note the warnings put forward by my noble friend Lord Hannan.

Given the spectrum of views on this issue, it is vital that the Government provide an opportunity for all impacted stakeholders to comment. It is for this reason—this is the first time that it will be publicly known, I think—that the Government will consult in the next quarter on how the UK should approach AIFMR. This will, I believe, fulfil my noble friend Lady McIntosh’s requirement for some consultation. Obviously, we want to do this as speedily as possible, but we need to get information from the industry, the investment companies sector and beyond about how to take it forward. Once we have that, we should be able to move fairly rapidly.

We know that only through careful consultation and consideration can we provide listed investment companies with the longer-term certainty of an appropriate regulatory framework. I agree with the noble Lord, Lord Macpherson: sometimes, it is really important to get these things right. Although some people often criticise the Treasury for taking too long and being—dare I say this as a Treasury Minister? I am not sure—a bit staid and sober, we have to get things right.

[Baroness Kramer (LD)]

I have a question for the Minister. With much of this gold-plating, I am not sure that the regulator consulted on implementing it. Why would it then have to consult on removing it?

[Baroness Vere of Norbiton (Con)]

I will come on to gold-plating. I am not entirely sure that everybody is in alignment on whether or not this regulation is implemented, but consultation is just good government. I do not see us making substantial changes to the regulatory scope on the basis of having not done it before we are not going to do it now. We need to get it right, but we absolutely support the investment company sector and want to get on with this. That is why I am so grateful to my noble friend Lady Altmann for bringing this forward, allowing us to have a conversation in the Treasury and beyond.

I turn to the second element: cost disclosures. My noble friend Lady Altmann has rightly identified that EU-derived legislation is not currently fit for purpose, as many other noble Lords, the Government and the Financial Conduct Authority would agree. The packaged retail and insurance-based investment products regulations, commonly and more easily known as PRIIPs, were originally meant to provide more transparent and standardised disclosure for retail investors across the European Union. Noble Lords are well aware that there are many problems with the EU PRIIPs regulation. It is prescriptive, misleading to retail investors and prioritises comparability over a wide range of financial products at the expense of consumer understanding.

That is why, as part of the Edinburgh reforms, the Chancellor announced that, as a priority, the Government would reform PRIIPs. We have already made significant progress on delivering this commitment. Most recently, at the Autumn Statement last year, the Government published a draft statutory instrument to replace PRIIPs with a new framework tailored to UK markets.

We understand industry’s concerns regarding broader legislation that prescribes firms to calculate their costs as they are required to do so now, and so the Government and the regulator have not stopped there. At the same Autumn Statement, the Government announced that they would bring forward the repeal of relevant cost disclosure provisions in the markets in financial instruments directive, or MiFID, alongside the replacement of PRIIPs.

Many noble Lords have mentioned that the FCA has published the forbearance statement, and some feel that it has not gone far enough. I will ensure that the FCA is made aware of the debates that noble Lords have had today. There has been significant criticism, which it will no doubt be interested in, and some suggestions of how it might be able to go forward.

I hope that this brief summary has provided sufficient reassurance to my noble friend Lady Altmann, and to all noble Lords, that the Government are treating this as a priority. We have a comprehensive plan to alleviate the harms faced by the investment company sector, but are committed to making sure that we get it right for the long term, to ensure that 150 years already gone by becomes another 150 years in the future.

I have mentioned consultation, so I will move on from that to cover some points raised in the debate on timelines. I accept that, for many noble Lords, and indeed Ministers, it is never fast enough. This was mentioned by my noble friend Lord Hannan and the noble Lord, Lord Macpherson. We are delivering a very ambitious programme to build the smarter regulatory framework for financial services. At Mansion House, the Government removed almost 100 pieces of unnecessary EU legislation from the statute book, and now we are looking at wider reforms—those mentioned in the debate today and others, including Solvency II—that will deliver the biggest potential benefits.

I note that my noble friend Lord Hannan would have liked us to go through things in a different way. The Treasury is very much focused on looking at where we can have the biggest and quickest potential benefits to economic growth. We are conducting a phased approach to bringing in this change of regulation because we must also ensure that the system and different financial sectors can cope with this change in legislation.

I note the invitation from the noble Lord, Lord Macpherson, to make commitments from the Dispatch Box on certain matters. I am not able to do so just yet—maybe soon.

There is debate around gold-plating. I hope that that will all be laid to rest as we are able to reform this and ensure that we have the right framework going forward.

My noble friend Lady Altmann mentioned investment companies being removed from platforms. We note and recognise the frustration that some investment companies feel at having been removed from investment platforms. I reassure her that, although this is a commercial decision, the Government and the FCA are well aware of this issue and are carefully considering what options are available. Ditto in the use of the EMT, the MiFID template. This is a voluntary template, but we understand that it may not be providing the best information to retail investors at the current time.

Many noble Lords have noted the competitiveness of the UK capital markets. That is what underpins the smarter regulatory framework. Despite recent challenges, the UK has many vibrant and dynamic capital markets, and they remain some of the deepest and strongest globally. However, we cannot rest on any laurels; we have to keep moving forward in this area. That is why the Government are delivering on my noble friend Lord Hill’s listings review, the wholesale markets review, and the Chancellor’s Edinburgh and Mansion House reforms.

The noble Lord, Lord Davies, mentioned the FCA’s activities and scrutiny of the regulator’s role. My noble friend Lord Reay mentioned the FCA’s D&I work, as did the noble Baroness, Lady Kramer. Parliament does have scrutiny over the FCA and many other regulators. Assimilated law is being replaced, in line with the UK’s domestic model of regulation. This means that the UK’s independent financial services regulators will generally set the detailed provisions in their rulebooks, instead of firms being required to follow EU law. This approach was following two consultations and it received broad support across the sector. Parliament debated this approach during the passage of the Financial Services and Markets Act 2023, and it secured parliamentary support then.

The Government recognise the importance of effective parliamentary scrutiny of the regulators, including their approach to rule-making and other activities that they may choose to undertake. That is why FiSMA 2023 introduced additional mechanisms to strengthen Parliament’s existing ability to scrutinise the regulators’ work, including requirements for the regulators to notify parliamentary committees, such as the new Financial Services Regulation Committee, of their consultations and to explain, when publishing final rules, how representations by parliamentary committees have been considered. I warmly welcome the formation of that committee. It will be hugely helpful, and it is quite right and proper that independent regulators are held to account by Parliament.

I will write with a few further comments on the investment in the UK capital markets by UK pension funds and on a few other issues which have arisen and need a fuller response. For the time being, I am very grateful to my noble friend Lady Altmann and many other noble Lords for their continued championing of the investment company sector.

[Baroness Bowles of Berkhamsted (LD)]

I am sure that my interruption is unwelcome, for which I apologise, but it is quite important. Further consultations have been measured and, as my noble friend Lady Kramer pointed out, the aspects of PRIIPs and MiFID where there has been gold-plating that is causing these problems were never consulted upon. It is within the gift of the FCA to make changes.

These cost disclosure issues have featured massively already in two consultations from the Treasury on PRIIPs and in evidence that was submitted to the Treasury last summer, after my own attempt to amend FiSMA 2023. On these discrete issues, legislation does not need to be amended; what the FCA is doing needs to be amended. Support has been heard from these Benches and the Labour Benches for the Government taking more intrusive action. Has that message been received or are we still bogged down in officialdom and consultations? That is what we want to know.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

As I set out in my closing remarks, the consultation is for AIFMR. It is not related to the other issues that the noble Baroness has raised, because, as she says, they have already been consulted on. That element of it is under consideration by the Economic Secretary to the Treasury. There may be more news fairly shortly.

I am grateful to all noble Lords who highlighted the substantial challenges faced by this uniquely British, nay Scottish, asset. I am also grateful that the noble Baroness brought her concerns to the Government’s attention. I hope I have reassured noble Lords directly that the Government take this issue very seriously, that we are working at pace on finding a resolution and that I will ensure that all Ministers and regulators are aware of the strength of feeling in your Lordships’ House. I hope to have further news in due course.

Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024

Baroness Vere of Norbiton Excerpts

Tuesday 27th February 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024.

Motion agreed.