Financial Reporting Council (Miscellaneous Provisions) Order 2021

Lord Davies of Brixton Excerpts

Thursday 18th March 2021 Grand Committee

[Lord Davies of Brixton (Lab) [V]]

My Lords, I declare my interest as a fellow of the Institute and Faculty of Actuaries, which in some areas is subject to regulation by the FRC. I thank the Minister for his detailed introduction. To a certain extent he has shot my fox. I was intrigued as to the conjunction of these two events—the publication of the White Paper and the statutory instrument today—and he has made it absolutely plain that it was not a coincidence. It was a coincidence to me but, clearly, it was part of a deeper plan, and I feel that it might have been better if those who like myself were coming from outside to the issue had understood that beforehand. My contribution might have been a bit more effective. But still, it is right and proper that the Government should do what they can to implement proposals in this area, and I support the regulations.

Could the Minister say a little more about the timing of the process? It is happening now, but it is happening to an organisation that is on its way out. We are to have the new audit, reporting and governance authority which the Government say will have these clearly defined roles, one of which is to protect and promote the interests of investors, other users of corporate reporting and the wider public interest. How do those things tie together? Could we have a few brief remarks about that?

There are three substantive parts to the order. First, there is the public sector equality duty, which obviously is something that we agree with. The issue of why it was not done before comes to mind, but we shall pass over that. The second leg of the instrument is the extension of the freedom of information requirements. Obviously, that is to be welcomed as well. However, the Minister seemed to imply that all the relevant statutory functions of the FRC and its successor will be subject to the requirements, but all we have is a list—and when we are given a list I always wonder what is not on it. Is there any way for the Minister to explain what has not been included and, if it has not been included, why it has not been? If it is all there, that is fine, but an assurance that that is the case would be welcome.

I just want to say a bit more about the third leg, which is the obligation to follow the principles in Section 21 of the Legislative and Regulatory Reform Act 2006 and under Section 22 to follow a code of practice. I want to highlight the key part. In fact, Section 21 is very brief and pretty vague; it says that the principles are that

“regulatory activities should be carried out in a way which is transparent, accountable, proportionate and consistent”.

Well, yes, of course they should. It then says that

“regulatory activities should be targeted only at cases in which action is needed”.

But if you put the converse to those principles, you are left a bit in the air. Are there really people out there keen to apply regulatory activities to cases where action is not needed? It is a statement of the obvious.

We have to turn to the Regulators’ Code for a bit more substance. This puts a bit more meat on the bones of the principles. It is interesting to see that the regulators’ purpose is supposed to be:

“to regulate for the protection of the vulnerable, the environment, social or other objective.”

That is just one of the principles in the code, and those are fairly lofty objectives.

The code also says:

“When designing and reviewing policies, operational procedures and practice, regulators should consider how they might support or enable economic growth for compliant businesses and other regulated entities, for example, by considering how they can best … understand and minimise negative economic impacts of their regulatory activities”.


It also says that there should be

“simple and straightforward ways to engage with those they regulate”.

That is all fine and dandy, but this is what the Regulators’ Code says at the end, on the final page, about monitoring the effectiveness of the code:

“The Government will monitor published policies and standards of regulators subject to the Regulators’ Code, and will challenge regulators where there is evidence that policies and standards are not in line with the Code or not followed.”


I suppose that, to an extent, the White Paper is a reflection of the Government’s intention, but I think that the word “monitor” implies something more regular and consistent. So the one big question I am raising today is this: do the Government actually have a system for monitoring all the work of all the regulators subject to the code? There are a lot of them—I understand that—but what is the Government’s approach to monitoring their activities? How can we avoid the situation that we have with the FRC, whereby things got to a pretty pass before action was taken? Maybe a more consistent, measured and regular approach to enforcing the code would be appropriate.

National Minimum Wage (Amendment) Regulations 2021

Lord Davies of Brixton Excerpts

Monday 1st March 2021 Lords Chamber

[Lord Davies of Brixton (Lab) [V]]

My Lords, there is always a pensions angle. The minimum wage is now a settled part of the employment landscape, but so is auto-enrolment into a qualifying pension scheme. So far, they have been developed in isolation from each other, which is a pity. There is nothing material in the most recent report from the Low Pay Commission about pension provision. This must be wrong. Surely we can all agree, first, that pension provision is essential for all workers and, secondly, that pensions are part of pay, so the provision of a decent pension should be part of the minimum wage. If someone works all their life on the minimum wage but ends up with an inadequate pension, they have not really received what I think should be the minimum wage.

Let us make a rough estimate of what a minimum wage earner might get from auto-enrolment. The annual wage of someone on the proposed standard rate, making a reasonable assumption about their weekly hours, would be about £15,000. They would therefore qualify for auto-enrolment, as the threshold is more than £10,000. The contribution that would go into their pension pot would be 8% of their pay that is in excess of the lower earnings limit, which next year is £6,240. That works out at almost exactly £700.

It should be noted at this point that this is not a contribution of 8%, because the offset is only 4.7% of pay. There is unanimous agreement among those who know anything about pensions that this simply is not enough, even with the new state pension. It means that with a 45-year working lifetime, the contributions put into a member’s pot will total less than £32,000. They will, of course, have the money invested, but current risk-free interest rates are zero, and someone with this level of income should not really be putting their money into risky investments, even if it sometimes offers the chance of higher benefits. With a fund of £32,000 you would get a pension of only some £1,600 per year. It is simply not enough. I ask that in future, the Low Pay Commission and the Government have pensions in mind as future pay, as well as pay in the pocket.

Uber: Supreme Court Ruling

Lord Davies of Brixton Excerpts

Monday 1st March 2021 Lords Chamber

[Lord Callanan (Con)]

The noble Lord has put the case very well. The Supreme Court’s decision is, of course, final. Uber will have to comply with that judgment, as everybody else has to comply with court rulings.

[Lord Davies of Brixton (Lab) [V]]

My Lords, I want to follow up the issue raised by my noble friend Lord Monks of the implications of this judgment for pension provision. Including these people within the aegis of automatic enrolment throws up a series of practical problems. There is the question of whether back pay will be pensionable. These workers tend, by their very nature, to have widely fluctuating emoluments, which again creates problems. Will the Government be undertaking a study of the implications of this judgment for pension provision, particularly under automatic enrolment?

[Lord Callanan (Con)]

The noble Lord makes a good point. Of course, pension entitlement is based on employment status, age and income. It is a complex area of law and we will, of course, look very closely at the judgment.

Workers’ Rights

Lord Davies of Brixton Excerpts

Tuesday 26th January 2021 Lords Chamber

[Lord Callanan (Con)]

In our manifesto we promised that we would enhance workers’ rights where it was appropriate to do so, and we stick by that commitment. I think the noble Lord makes some important points.

[Lord Davies of Brixton (Lab) [V]]

My Lords, we are suffering the worst pandemic for a century. Now as much as ever the employment rights of workers who keep the economy going need to be protected. Will the Minister condemn employers who take advantage of the situation and tactics such as fire-and-hire, and commit the Government to a review of such pernicious practices?

[Lord Callanan (Con)]

I understand that ACAS is currently conducting a review and, of course, the Government will listen carefully to any recommendations it makes. We want to provide support to employees at such a time, but we also need to recognise the very difficult time that many businesses and companies are going through at this unprecedented time during the pandemic.