Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023

Lord Livermore Excerpts

Wednesday 6th December 2023 Grand Committee

[Lord Livermore (Lab)]

My Lords, we also support these regulations. I would like to ask the Minister a couple of questions. First, on how the FCA’s significantly expanded remit will be delivered in practice, can she set out what the Government are doing to ensure the FCA’s greater powers are accompanied by greater accountability? Can she also tell us what steps the Government are taking to ensure that the additional FCA requirements on payment firms and EMIs are proportionate, and explain how the Government will ensure that these requirements do not hamper innovation in the UK’s payment sector?

Secondly, as is often the case with financial services regulation, there seems to have been a significant gap between the consultation, which took place in December 2020 and January 2021—three years ago—and the statutory instrument being brought forward. Can the Minister tell us the reason for this delay?

Finally, I note there is a requirement for this new regime to be evaluated after two years, with a decision then made on whether the regulations should continue to have effect. Can the Minister set out the criteria by which the regime will be evaluated? I thank her in advance for her answers to these questions.

[Baroness Vere of Norbiton (Con)]

My Lords, I can hear much flapping of papers behind me, so I have no doubt that I will not be able to answer all the questions in full, but I will do my best. I am grateful to the noble Lord, Lord Livermore, for giving me advance sight of some of his questions, which was very helpful. The noble Baroness, Lady Kramer, mentioned that she might ask me a few questions. None of them were difficult—well, one of them was a little difficult, but we will give it a go.

I thank all noble Lords for their consideration of this draft instrument. It is all about taking an established regime and ensuring that it operates everywhere that it should across the United Kingdom by applying to all organisations in Northern Ireland and to limited liability partnerships in Scotland.

Both noble Lords mentioned the timing and why the Government were unable to bring forward all the regulations at the same time. We took the opportunity to bring through the England and Wales regime before the regulations being debated today because it was slightly easier to do so and we wanted to get the regime in place as soon as possible, having done the consultation. There are some quite significant differences in insolvency law. We therefore took a little extra time carefully to consider the legislation before applying this to Scotland and Northern Ireland. In doing so, we worked extensively with the devolved Administrations in both those areas. There was no sort of tension or opposition, and the rules underpinning this regime will have to be set out by those Administrations in due course anyway.

Herein is the slightly tricker question from the noble Baroness, Lady Kramer, which is her “hard bar” question. I will certainly write. One observation I have about these sorts of payment systems is that consumers tend to be much more actively engaged in them. I would have thought it would be slightly easier to get in contact with them because it is a much more immediate system. However, I will definitely write and set out exactly what we are doing to achieve the balance that she rightly set out. It is not our intention to cut anybody off; it is our intention to get money to consumers as soon as possible because, as we know, time costs money and, unfortunately, delays mean that consumers sometimes get back less than they would otherwise.

Turning to the points raised by the noble Lord, Lord Livermore, about the FCA’s greater powers, accompanied by greater accountability, these regulations directly affect only firms that have entered the insolvency process. They have no effect on firms in normal circumstances. It is also worth stressing that the special administration regime is ultimately a process led by an insolvency practitioner and administrator, not by the FCA. However, the FCA does have a role to play in the regime, including a power to direct an insolvency practitioner, but this power can be used only subject to a number of objectives being met.

More broadly, the Government are committed to the operational independence of the financial services regulator, but increased responsibility for the regulators must be balanced with clear accountability, appropriate democratic input and transparent oversight. I am sure the noble Lord is aware that during the passage of the Financial Services and Markets Act 2023, we included a package of measures to increase the accountability of the regulators, including the FCA, to Parliament when exercising their regulatory powers.

On the proportionality of the FCA requirements, the Financial Services and Markets Act 2000 requires the regulators to take into account eight regulatory principles when discharging their functions, including making rules. The second of these is the principle that restrictions should be proportionate to the benefits that are expected from the imposition of that restriction.

The noble Lord made a good point about whether the requirement would hamper innovation. Clearly, this is an area where innovation has been significant in recent times. The payments are essential to the UK economy but are also a major source of the UK’s competitive growth, at the heart of our financial services sector. In July, the Government commissioned an independent review into the future of payments and specifically asked how to catalyse innovation in UK payment systems.

The regulations being discussed today are all about protecting consumers. Our view is that they will strengthen confidence in the sector by improving customer and market outcomes. In addition to the independent review, the Financial Services and Markets Act 2023 includes a new secondary objective for the FCA to facilitate growth and competitiveness. The Government are taking this through across all sectors to achieve that balance between growth and competitiveness and effective and robust regulation.

I think I may have covered the gap between the consultation and this SI. It is all about the differences in law and just taking the opportunity to bring it in as soon as we could, at least for England and Wales. We brought that in during 2021, which is not bad after a consultation which ended in January 2021, so that is a minor pat on the back. I accept that we would have loved to have brought it in at the same time, but a significant amount of additional work needed to happen.

On the review of the regulations and the criteria to evaluate them, under the Banking Act the Treasury is required to conduct a review of this regime. This is due for completion in 2025 and will be an independent review covering whether the regime is meeting insolvency regulation objectives and whether the regulations should continue to have effect. As ever, once completed a copy of the review will be laid before Parliament. We will set out further details of the review in due course.

Autumn Statement 2023

Lord Livermore Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I join others in welcoming the noble Baroness to her new role. It is a privilege to take part in today’s debate, and a pleasure to hear contributions from so many eminent and expert noble Lords.

All of us here have benefited from the intervening week between the Autumn Statement and today’s debate, allowing us to consider in greater detail the Green Book and the Office for Budget Responsibility’s report, as well as analysis from other independent forecasters. What has become clear is the extraordinary difference between the story told to us by the Chancellor and the reality revealed to us by the numbers themselves.

The Chancellor told us the economy had turned a corner but in reality, growth was downgraded—revised down next year, the year after and the year after that. The Chancellor told us inflation had fallen, but he omitted to mention that the inflation forecast has actually been increased every single year for the next three years. The Chancellor told us that debt will be lower. What he did not tell us was that debt will actually now be 28% higher than when this Government came to power 13 years ago and is set to surpass £3 trillion for the first time ever. The Chancellor told us that take-home pay is going up, but he did not reveal that real household disposable income is set to fall next year, or that we are now seeing the biggest ever fall in living standards since records began. Of course, the Chancellor also told us he was cutting taxes, when in reality the tax burden will now rise every single year for the next five years, making this the biggest tax-raising Parliament ever, with the tax burden now set to reach its highest ever level.

Increasing growth is clearly the biggest economic challenge our country faces, with the Governor of the Bank of England warning since the Autumn Statement that the current economic outlook is the worst he has ever seen. It is therefore no surprise that many noble Lords mentioned growth in their contributions to this debate, including my noble friend Lord Eatwell in his excellent opening speech, and the noble Lords, Lord Macpherson of Earl’s Court, Lord Willetts, Lord Dobbs, Lord O’Neill of Gatley, Lord Londesborough, Lord Leigh of Hurley, and Lord Desai, and the noble Baronesses, Lady Noakes and Lady Lea. The UK’s growth record over the past 13 years has been poor. We have languished in the bottom third of OECD countries, with 27 OECD economies growing faster than us since 2010. Looking ahead, over the next two years no fewer than 177 countries are forecast by the IMF to grow faster than the UK. For this year and next, we will be 35th out of 38 OECD countries for growth.

Against this backdrop, we were told to expect an Autumn Statement for growth, and several noble Lords have mentioned the Chancellor’s 110 measures for growth. Yet, the Office for Budget Responsibility, having seen those measures, actually downgraded its growth forecast in each of the next three years. The economy is now forecast to be £40 billion smaller by 2027 than the Chancellor expected as recently as March. The latest outturn figures for GDP show that there was no growth at all in the third quarter of this year. Growth in 2024 is now forecast to be just 0.7%—more than halved from the 1.8% predicted in the Budget. The Bank of England’s view is that even this is too optimistic. Its latest forecast shows no growth at all in any of the next three years: no growth this year, next year or in 2025. Restoring growth to Britain must be our priority, and Labour has set out a plan to deliver that mission. Indeed, many of the Chancellor’s announcements last week were simply pale imitations of measures we have already set out.

As my noble friend Lord Davies of Brixton mentioned, the Chancellor spoke about unlocking capital by reforming pensions. However, Labour has already announced that we would go further, encouraging investment in British start-up and scale-up firms. On planning, the Government are simply attempting to follow Labour’s lead on how to encourage communities to host grid infrastructure, and on speeding up planning decisions. We also welcome the Chancellor’s announcing permanent full expensing—another measure we have been calling for. However, that does not make up for the years of uncertainty businesses have faced. How many billions of pounds of investment has our economy missed out on because of the Government’s delay?

Several noble Lords focused on inflation, including the noble Lord, Lord Howell of Guildford, the noble Baroness, Lady Lawlor, and the noble Baroness, Lady Goldie, in her very enjoyable speech. In the Autumn Statement, the Chancellor tried to suggest that the cost of living crisis is now behind us. In reality, the inflation forecast was actually increased by the OBR in every single year of the forecast period, and consumer prices in 2027-28 are now set to be 7% higher than previously expected in March. Inflation is still more than double the Bank of England’s target rate, and the Bank now expects inflation to stay above target throughout next year, with interest rates remaining at their current levels for “an extended period”. Indeed, on Monday of this week, the Governor of the Bank of England warned that interest rates will not be cut “in the foreseeable future”.

Interest rates have now risen 14 times to a 15-year high of 5.25%, while the average two-year fixed-rate mortgage at one point rose from 2.6% to over 6%. As a result, those re-mortgaging since July have seen their mortgage payments rise by an average of £220 a month. Some 1.6 million families have seen their mortgage deals end this year; next year, a further 1.5 million families will face a similar fate.

Therefore, the outlook for living standards remains truly bleak. It is of course welcome that the Chancellor has accepted this year’s recommendation of the Low Pay Commission on the minimum wage, but real wages are set to fall this year and real average weekly earnings are now set to remain below their 2008 level until 2028—a shocking two full decades of pay stagnation. According to the Resolution Foundation, this Parliament is now on track to be the first ever in which real household incomes fall, and we are now seeing the biggest ever fall in living standards since records began.

The centrepiece of the Autumn Statement was of course the Chancellor’s claim to be cutting taxes. Several noble Lords spoke about the Chancellor’s tax plans, including my noble friends Lord Howarth of Newport and Lord Sikka, the noble Lords, Lord Macpherson of Earl’s Court, Lord Tugendhat, Lord Northbrook, Lord Balfe, Lord Horam and Lord Desai, and the noble Baronesses, Lady Noakes, Lady Featherstone and Lady Meacher. The reality of this Autumn Statement is that the tax burden now rises every single year for the next five years, rising to its highest ever level and making this the biggest tax-raising Parliament ever.

We on this side have argued that taxes on working people are too high and that we want them to be lower. We opposed the manifesto-breaking increase in national insurance that the Prime Minister tried to implement last year when he was Chancellor. Going into this Autumn Statement, the Government had already put in place 25 tax rises, amounting to £90 billion. That is the equivalent of a 10p increase in national insurance. So, while welcome, the 2p cut does not remotely compensate for the tax increases already announced. Indeed, the Resolution Foundation has calculated that, even after the measures announced by the Chancellor, households will still be £1,900 worse off.

As several noble Lords have observed, greater than expected fiscal drag also means that nearly 4 million more people will pay income tax, and 3 million more people will pay the higher rate. The combined effect is an average tax rise of £1,200 per household. According to Paul Johnson from the Institute for Fiscal Studies, the cut in national insurance rates

“pales into … insignificance alongside the long-term increase in personal taxes created by the six year freeze in allowances and thresholds”.

The IFS has calculated that—extraordinarily—almost every single person in the UK liable for income tax or national insurance will now be paying higher taxes overall. As a result, the tax burden will now reach 37.7% of GDP by the end of the forecast period, an increase equivalent to an extra £4,300 in tax for every household. This was not an Autumn Statement that cut taxes.

The reality of this Autumn Statement is very different from the story presented to us last week by the Chancellor. Despite the picture he tried to paint, the reality is that the economy is just as weak, if not weaker, after this Autumn Statement than it was before. The Government cannot undo the damage done over 13 years, because their economic approach simply is not working.

Growth was low before this Autumn Statement; it is even lower now. Living standards were falling before this Autumn Statement; they are now seeing the biggest fall on record. Taxes were high before this Autumn Statement; they are now set to be the highest in history. Far from turning a corner, as the Chancellor claimed, the economy is stuck with low growth and high taxes, and working people are still worse off.

Destitution: Low Median Wage

Lord Livermore Excerpts

Thursday 23rd November 2023 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I absolutely agree with my noble friend. It is an absolute turning point. It is about the long-term decisions that have to be made, and that is about investing not only in businesses but also in our people. From a business perspective, the full expensing has been widely welcomed across the economy. It will add an extra £3 billion of new investment. We already have the lowest corporation tax in the G7 and now, with full expensing, that will bring in the investments that my noble friend Lord Johnson really needs to see.

[Lord Livermore (Lab)]

My Lords, I join others in again welcoming the noble Baroness to her new role. Yesterday’s Autumn Statement saw growth down and inflation up every year for the next three years, debt rising every year for the next three years and the tax burden rising every year for the next five years, making this the biggest tax raising Parliament ever. Even after yesterday’s announcements, households are £1,900 worse off. Against this backdrop, what advice does the Minister have for the 11 million people with barely any savings as they now try to withstand the biggest ever fall in living standards since records began?

[Baroness Vere of Norbiton (Con)]

Yesterday did bring out some very important statistics, as indeed has the entire year. The noble Lord will know that, in terms of growth, it is true that the forecasts have been revised down. However, the actual assessment of the size of the economy has been revised up; indeed, it has been revised up by 2%, which is an enormous amount—that is the equivalent of the aerospace industry. On inflation, the OBR was absolutely clear that the discretionary fiscal policy measures introduced in the Autumn Statement do not have a material impact on the path of inflation. We have already halved inflation and by 2025 it will be at 2%. On tax, the noble Lord may have forgotten, but this Government intervened enormously during Covid, including £400 billion to support lives and livelihoods and, in our support for cost of living, £100 billion to support households through some very difficult economic shocks. Those things have to be paid for, but the things we introduced yesterday in terms of tax brought down the tax burden by 0.7%.

Resolution of Central Counterparties (Modified Application of Corporate Law and Consequential Amendments) Regulations 2023

Lord Livermore Excerpts

Monday 20th November 2023 Grand Committee

[Baroness Kramer (LD)]

My Lords, when the original legislation that sits behind all this was debated in the House—for many hours—I remember a conversation afterwards with one of the clerks, who had sat through nearly all of the proceedings. The clerk said to me, “I have sat in this House for years and have been through many debates of all kinds, but this is the first time I have sat through a debate and not understood a single word of the entire discussion”. I am feeling some brotherhood with that clerk at the moment. I remember the past, but I have to admit that I still find utterly daunting the complexity of CCPs and the various pieces of legislation.

I have been digging through my memory and am trying to understand whether these SIs are essentially tidying-up measures designed to give more flexibility to the Bank of England—in its role as the resolution authority—in somewhat changed circumstances, and measures to increase its efficiency. I ask the Minister: is there anything in here to which she would draw our attention as representing a more fundamental change? I admit that I cannot find it, but I thought I should ask the question, given the narrowness of my understanding of this complexity.

As I remember, the resolution of the insolvency of a CCP was structured using a waterfall of liability. First, equity and the CCP came into use, and, after that, if necessary, so did a default fund, to which the clearing members had contributed. My colleague, my noble friend Lord Sharkey, and I pushed on this question, because it seemed apparent to us that the combination of equity and a default fund could work if, say, one clearing member collapsed, or perhaps even two. But, if the collapse were systemic, very quickly only the taxpayer would have the resource to step in. The taxpayer would need to do so immediately to prevent chaos in the financial sector nationally and, probably, globally. The Minister will be aware that virtually all CCPs around the globe essentially have common ownership and, in many ways, need to be looked at almost as a network, rather than a series of individual operations—certainly when one thinks about resolution.

So we asked the then Minister—I believe it was the noble Lord, Lord Sassoon—to clarify why members should not be forced to make bigger contributions in the case of insolvency, above and beyond equity and the default fund, because, obviously, sitting behind CCPs are huge banking institutions and, in other cases, oil companies. As I remember, we were told that, if faced with additional liability, those who operate or participate in the CCPs would choose to use exchanges outside, rather than inside, the UK. So, do these additional SIs empower the Bank of England to require members to make additional cash contributions? I am somewhat concerned that the negative SI—which we are not debating today but which sits with these, as the Minister rightly said—and its cash call powers might have that possibility. I am not saying that I am opposed to that, but I just wonder whether the Minister can do anything to help me understand it and whether there are therefore any implications for the attractiveness of the UK as a location for clearing.

The Minister kindly assured all of us that assets held in the CCPs as margin—collateral, in effect—are fully protected, and there are no implications for netting or off-set. I think I have understood that correctly. But, in a dynamic situation, there must be some adjustment to netting and off-set because, if there is an insolvency, changes in value take place on a moment-by-moment basis. Is there a way to encapsulate how that piece of it works? I am concerned about saying that there are absolutely no implications for netting and off-set, when it is very hard to see that there would not be in an insolvency situation.

I just want to confirm again with the Minister that the “no creditor worse off” safeguard is still fully robust and whether the SIs—the negative and the positive together—weaken it in any way. Is the taxpayer liability, as the ultimate backstop, changed at all by these SIs? Are there, therefore, any implications for public sector net debt? In other words, regarding this liability to act as the rescuer of last resort—it is implicit in CCPs because we are looking at a “too big to fail” situation if we have systemic insolvency—are there any accounting implications for the national debt? Is there any possibility that these changes would drive towards putting the liability on the books?

The notional value of outstanding over-the-counter derivates, which represent the largest body cleared through CCPs, exceeds $600 trillion at any point in time. What is now LCH—I still call it the London Clearing House—dominates that market. A third of that business reflects the clearance of euro-based derivatives under an equivalence granted by the European Commission for UK clearing houses. However, that will last only until June 2025. I know that the City and the Treasury are convinced that the EU will extend that equivalence grant out of necessity, but if it does not, the implications for the City of London will be huge. This is not a time for complacency. I ask again: are there any competitive issues to which we should be alerted in these SIs and which may have consequences for either the EU grant of equivalence or our dealing with the consequences if that grant is not given?

[Lord Livermore (Lab)]

My Lords, I begin by warmly welcoming the Minister to her new role. I very much look forward to working with her in the months ahead.

[Baroness Kramer (LD)]

May I offer my apologies for not having welcomed the Minister to her role? We talk to each other across the House so often that I hardly realised a change had happened; I apologise.

[Lord Livermore (Lab)]

As the Explanatory Memoranda accompanying these two SIs note, the current CCP regime was implemented around a decade ago, in part as a response to the global financial crisis. The Financial Services and Markets Act 2023 has introduced an expanded CCP resolution regime, with that Act giving the Bank of England, as the UK’s resolution authority, what the Government call

“an expanded toolkit to mitigate the risk and impact of a CCP failure and the subsequent risks to financial stability and public funds.”

Preserving market stability is of paramount importance. The UK’s financial services industry plays a vital role in boosting economic growth and delivering skilled jobs in every part of the UK. Almost 2.5 million people are employed in financial services, with two-thirds of those jobs based outside London, and the sector contributes more than £170 billion a year to GDP.

The City of London is one of only two global financial capitals and is at the very heart of the international monetary system. The UK’s reputation and success as a leading international financial centre depends on high standards of regulation as well as a stable and independent regulatory regime. Much of what is being implemented by these two SIs is a carryover between the old and new CCP regimes. Paragraph 3 of the impact assessment outlines that, if these steps were not taken, it

“would mean that there is no protection in place to ensure that the Bank’s powers do not disrupt normal market procedure.”

We therefore fully support both these SIs.

However, I want to ask the Minister a number of questions. First, an issue frequently raised with this type of SI is the sheer breadth of legislation that it tends to amend and the difficulty that those in the sector may face in familiarising themselves with all the changes once they have taken effect. The first of the SIs we are debating today makes a long list of changes to corporate law to ensure that the new Schedule 11 CCP regime will function effectively. The second SI somehow manages to be even more technical; it deals with partial property transfers and the writing down of liabilities, needed to ensure that they do not disrupt the new system’s operation. I ask the Minister, therefore, how interested parties will be, or have been, notified of the contents of these instruments, and when the guidance referenced in paragraph 11.1 of both Explanatory Memoranda will be laid. Will that guidance be laid before Parliament, or at least sent to the relevant parliamentary committees?

Authorised Push Payment Fraud Performance Report

Lord Livermore Excerpts

Tuesday 14th November 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I believe that an alternative route forward is already in train: the mandatory reimbursement requirement, which will apply across all payment service providers. As I said, there is currently a voluntary approach in place; a mandatory approach will ensure a much more consistent response for consumers when it is introduced next year.

[Lord Livermore (Lab)]

My Lords, the latest data from the Payment Systems Regulator shows that instances of payment card and remote banking fraud have fallen by 9% and 29% respectively, driven by greater use of much stronger customer authentication interventions. However, use of such initiatives varies markedly across the financial services sector. Does the Minister believe there is a case for stronger guidance on how digital banking platforms should make use of such technology?

[Baroness Penn (Con)]

The noble Lord is absolutely right that we need to use a range of tools to respond to fraud taking place through banking. The regulator does have the powers in place to ensure that payment services firms are taking the appropriate action, not just on reimbursement but to prevent the fraud in the first place.

Alternative Investment Fund Managers Regulations 2013

Lord Livermore Excerpts

Monday 13th November 2023 Lords Chamber

[Baroness Penn (Con)]

I reassure my noble friend that the FCA is indeed engaged in this issue, as are the Government. There are many problems with inherited EU financial services rules and we have set out a programme of work to look at how we can repeal them and replace them with UK-appropriate measures. These include the PRIIPs rules, which affect this issue, and the Government have set out our plans to repeal these measures and replace them with FCA rules, as soon as possible.

[Lord Livermore (Lab)]

My Lords, the primary duty of the FCA is to deliver stability, but the noble Baroness, Lady Altmann, raising this issue today is not the first time that concerns have been raised about apparent instability in certain markets. Does the Minister remain satisfied that the FCA has the tools and expertise it needs to uphold its duties, and is she confident that it has the capacity to meet its growing workload?

[Baroness Penn (Con)]

My Lords, I do remain satisfied and I believe that the Financial Services and Markets Act, which passed through this House earlier this year, updates the tools and framework for the FCA to do its job, now that we have left the EU.

King’s Speech

Lord Livermore Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the King’s Speech promised to “strengthen our economy” and

“put the country on a better path”.

Such measures would indeed be welcome. The country is ready for change. Britain desperately needs national renewal, with a serious plan for growth. Yet, in reality, the King’s Speech delivered nothing of the kind. Just as with today’s reshuffle, it merely brought back more of the same.

Just as today’s reshuffle has seen the return of a man the Prime Minister himself described as part of a “record of failure”, the King’s Speech saw a continuation of a failed approach that has led to 13 years of national decline; no change from an economic model that has failed over 13 years to give working people the security and opportunity they deserve; 13 years of failure that began with the Cameron-era austerity that missed all its targets, then gave us a Brexit that broke all its promises—followed, inevitably, by a mini-Budget that gambled with people’s livelihoods, undermined our financial institutions, sent government bonds plunging and pushed the pension market to the brink of collapse; 13 years of chaos and instability that have left Britain weaker, and working people paying the price.

The Resolution Foundation has calculated that never in living memory have Britain’s families got so much poorer over the course of one Parliament, with typical working-age household incomes set to be 4% lower in 2024 than at the start of this Parliament in 2019.

Many of those families are home owners, who worked hard, saved for a deposit and have taken pride in having somewhere to call their own. But the security that that should bring, has, for many, turned to dread, as they receive letters from their lender telling them their bills are going up by hundreds of pounds a month. Interest rates have now risen 14 times to a 15-year high of 5.25%, while the average two-year fixed-rate mortgage rose from 2.6% to 6%. As a result, average mortgage holders have paid £2,900 more this year—8.3% of their disposable income. Some 1.4 million people will lose a staggering 20% of their disposable income.

The Government may well this week meet their own self-imposed target to halve inflation from the levels they allowed it to rise to. But, as for the actual inflation target, the Bank of England now expects inflation to stay above target throughout next year, with interest rates remaining at their current levels for—I quote—“an extended period”.

We have falling incomes, persistently high inflation, higher food and energy bills, rising mortgages and, if that were not bad enough, the highest tax burden for 70 years. There have been 25 tax rises since this Government came to power in 2010. Taxes are now £120 billion higher every year, equivalent to £4,000 more in tax every year for every household. Why is tax so high? Because growth is so low. UK GDP is still 5.2% short of its pre-pandemic trend, a far worse performance than either the United States or the euro area. At the start of this year, the Prime Minister promised to get the economy growing again, but we are now going backwards—from low growth to no growth. The latest GDP figures show that there was no growth at all in the third quarter of this year. The Bank of England’s latest forecast now shows no growth at all in any of the next three years—no growth this year, next year or in 2025. As a result, growth next year is now set to be the lowest in the entire G7.

After 13 years, the Government’s economic approach simply is not working, but where is their plan to fix it? So much of this King’s Speech is either insubstantial or trivial, when what we needed was a credible plan for growth. We needed a modern industrial strategy to show that we are serious about securing the jobs of the future. We needed an employment Bill, time and again promised but which once again failed to materialise. We needed a planning Bill to cut red tape and get Britain building. We needed a Bill to give British business the skilled workforce to succeed. What we got was a transport agenda 85% of whose projects were re-announcements, and an oil and gas Bill that everyone in the energy sector knows is a political gimmick. Despite Britain being the worst-hit country in western Europe during the energy crisis, even the Energy Secretary admits that the Bill will not take a single penny off anyone’s energy bills.

Increasing growth is clearly the biggest economic challenge our country faces. In government, and in our first King’s Speech, Labour’s defining economic mission will be to restore growth to Britain, with good jobs and productivity growth in every part of our country. Our plan to deliver that mission is built on three pillars. First, we will rebuild our economy on the rock of stability and fiscal responsibility, so that we can withstand shocks in an insecure world and families and businesses have the certainty to plan ahead. That means we need strong, robust and respected economic institutions. The last Labour Government gave operational independence to the Bank of England, and we will protect that independence. The next Labour Government will strengthen the Office for Budget Responsibility. We will guarantee in law that any Government making significant, permanent tax and spending changes will be subject to an independent forecast by the OBR, and we will provide greater certainty by committing to holding a single annual Budget by the end of each November, giving businesses and families four months to plan for the new tax year.

Together, these changes will be put to Parliament as a new charter of Budget responsibility, introducing a new fiscal lock on Britain’s economic institutions, strengthening our stability and our security. We will also introduce new fiscal rules. We will not borrow to fund day-to-day spending and we will reduce national debt as a share of GDP. Again, these rules will be put to Parliament to agree. With a Labour Government, fiscal responsibility will be embedded in the Budget process. Never again will a Prime Minister or Chancellor be allowed to repeat the mistakes of the Liz Truss Budget. Never again can we allow a repeat of the devastation that Budget brought to family finances, or allow a plan to be pushed through that is uncosted, unscrutinised and wholly detached from economic reality.

The second pillar of our plan for growth is to unlock billions of pounds of private sector investment into British industries. Investment is the lifeblood of a growing economy. It is investment that allows businesses to expand, create jobs and compete internationally so that new plants, factories and research can come to Britain. Yet today, business investment in the UK is at rock bottom. Among 30 OECD countries, Britain is currently 27th for private sector investment as a share of GDP. In government, we will seek to restore investment, as a share of the economy, to its level under the last Labour Government, bringing us back in line with our international peers.

The Government simply stepping back, looking only to business, is not the route to success. As our competitors understand, there is a role for the Government in energising and derisking investment into new and growing industries, so we will provide catalytic investment through a new national wealth fund to unlock billions of pounds more in private sector investment, delivering new gigafactories, clean steel plants and renewable-ready ports across Britain.

This new wealth fund will be set a target so that, for every pound of investment the Government put in, we will leverage in three times as much investment from the private sector. To further spur investment, a Labour King’s Speech will get Britain building the homes and infrastructure of the future, with a reformed planning system to remove the barriers to investing in new industries. We will introduce a modern industrial strategy to accelerate the building of critical infrastructure in energy, roads, rail and housing, and our energy independence Bill will create “GB Energy”, harnessing homegrown renewable power, so that we can cut energy bills, create jobs, tackle the climate crisis and give Britain back its energy security.

Our final pillar to restore growth is to give working people the skills and opportunities they need to succeed. To make work pay, we will introduce a genuine living wage. To ensure that the workforce can meet local skills needs, we will transform the further education system, with specialist technical colleges delivering tailored courses designed with local businesses, and we will turn the failed apprenticeship levy into a new growth and skills levy to give businesses the flexibility they are asking for to train their workforce and deliver growth.

Measures to restore stability, to boost investment, to get Britain building, to cut energy bills and to secure for Britain the industries of the future: this is a positive Labour agenda offering a decade of national renewal in place of 13 years of national decline. What a contrast this is to a King’s Speech from a Government who are out of ideas and out of time, and who have given up on governing; a King’s Speech that shows that a very clear choice now faces the British people—a continuation of 13 years of chaos and insecurity, or a changed Labour Party now ready to change Britain.

Home Office: ODA-funded Support

Lord Livermore Excerpts

Tuesday 5th September 2023 Lords Chamber

[Baroness Penn (Con)]

I will happily take the noble Lord’s point and make it to my noble friend and the government department. In addressing the point that maybe he was making, as I said, the Illegal Migration Act represents a vital step forward in the Government’s plans to tackle illegal migration. I reassure noble Lords that we will continue to report all ODA, consistent with OECD and DAC rules, and we will continue in our commitment to spending 0.5% until we can return to 0.7% when fiscal circumstances align. We keep all our ODA spending forecasts under review to deliver that, and will be closely looking at the evolution of eligible asylum spending as the Illegal Migration Act is implemented.

[Lord Livermore (Lab)]

My Lords, we are all familiar with the Government’s decision to purchase the “Bibby Stockholm” barge and to move asylum seekers on to it even though it was not fit for habitation. Can the Minister confirm whether that purchase was made, in whole or in part, using any ODA funds? Does she consider that purchase to represent good value for money, and are any other such purchases planned?

[Baroness Penn (Con)]

I reassure the noble Lord that all spending is done in line with DAC rules, and I can report back to him on the specific point about that spending. However, when it comes to looking at accommodation solutions for asylum seekers, we are driven by looking at what represents good value for money for the taxpayer. Accommodating asylum seekers in hotels is absolutely not good value for money, and we will continue to look at different solutions to help to accommodate those to whom we have an obligation.

Bank Accounts

Lord Livermore Excerpts

Wednesday 19th July 2023 Lords Chamber

[Baroness Penn (Con)]

FCDO colleagues have not raised this with me but if there is an issue, I will be more than happy to sit down with other departments and discuss what we can do about it.

[Lord Livermore (Lab)]

My Lords, access to financial services should of course never be determined by a person’s political views, but just as those with assets of £1 million should not unduly be denied a bank account with Coutts & Co., so those with substantially less should not be denied access to basic banking services. Yet the Financial Conduct Authority estimates that more than 1 million people in the UK have no bank account and one in four people will experience financial exclusion at least once in their lives. The Government recently overturned Labour’s amendment to the Financial Services and Markets Act to require the FCA to have regard to financial inclusion. Do the Government now regret that decision?

[Baroness Penn (Con)]

My Lords, I absolutely agree about the importance of financial inclusion, and we have seen significant progress on that issue in recent years, including through establishing provision of basic bank accounts. That means that anyone in society, whatever their means, has the right to access banking, and we will continue to promote access through our work on financial inclusion.

Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023

Lord Livermore Excerpts

Wednesday 12th July 2023 Grand Committee

[Baroness Kramer (LD)]

My Lords, I confess that usually when I speak on a statutory instrument I am trying to look for why it really should have been in primary legislation, not secondary. In this case, this strikes me as a genuine SI. It is almost a moment of great excitement.

I am very happy to say that these Benches support this measure, which, as the Minister says, enable trading standards to investigate more effectively illicit tobacco sales by small operators and retail outlets and to refer evidence of contraventions to HMRC for action, with potential penalties up to £10,000. We know from past surveys that some 18% of tobacco sales have been illegal. That leads me on to a series of questions to the Minister for further clarification.

At this time of cost of living pressures, some people will be tempted to buy cheaper, illegal or illicit cigarettes. I ask the Minister: is illicit activity increasing now at this time of increasing cost of living pressures, or are we continuing to see a diminution? I would be interested to know what the impact is and whether there has been any significant change that requires aggressive action.

When will the relevant guidance for businesses be published? I do not believe that is available yet. Indeed, when will the sanctions be implemented? Perhaps the Minister could give us some sense of the timetable. There is also no statutory review clause, so how will we know how effective these new powers are? If the powers are granted but are generally not used, I think the Minister knows that potential offenders will feel doubly empowered by new rules that then turn out to have no teeth, so it seriously matters that we track this. When we are tracking, will there be any measures to let us estimate the deterrence effect of the measure? That is probably one of its most important aspects.

Behind illegal sales by small and local outlets there is sometimes just a very small-scale operation, but at times it is very much linked to organised crime on a major scale. How is that link going to be investigated as trading standards becomes more engaged in this process?

The sale of tobacco to children is obviously a serious concern to all of us. Are outlets engaged in underage sales to be a particular target? Will there be any prioritisation, as far as the Minister is aware? Will enforcement involvement include the sale of non-compliant tobacco, blunts and shisha, which have sometimes been seen as a way to manoeuvre around the rules in the recent past?

The tobacco industry has a history of offering to help, or provide intelligence to, local trading standards. I have to say that civic society groups that are attempting to decrease smoking tend to view that with deep suspicion as a conflict of interest, designed to basically push tobacco sales from the illicit side but into legal purchasing rather than discouraging purchasing as a whole, and to improve the industry’s general standing and reputation. I wonder how that is going to be handled.

Does this measure also impact on non-compliant sales of e-cigarettes and vapes? We know these products are increasingly being targeted at non-smokers and youngsters, even though we have little information at the moment on what the effects are of the long-term usage of e-cigarettes and vapes.

The Government have a target to make the country free of tobacco smoking by 2030, and we support their goal of achieving a smoke-free generation. Smoking, as the Minister has said, remains a leading cause of premature death and is related to many severe and chronic illnesses and damages lives, as well as being a drain on the NHS. However, the pace of decline in smoking that followed the 2007 ban on smoking in English pubs and clubs has dwindled. How much is this measure expected to focus on reducing overall smoking? I confess that there is always a slight suspicion when HMRC is involved that the focus will be more on increasing revenues to HMRC than on reducing the overall activity—in this case, just moving it from the illicit arena into the legal arena.

If the Minister could add a little more enlightenment, we on these Benches are happy to support the statutory instrument.

[Lord Livermore (Lab)]

My Lords, we support this measure. I shall reiterate a couple of facts mentioned by the Minister. Smoking is the biggest cause of preventable death in the UK. It accounts for some 76,000 deaths each year, with half of all smokers dying of a smoking-related illness. It is estimated that smoking costs NHS England over £2.5 billion every year. Alongside high-level policy, such as the smoking ban introduced by the last Labour Government in the Health Act 2006, evidence suggests that high duty rates have had a positive impact by reducing the number of people who start smoking and increasing the numbers seeking to cut down and quit.

With 21% of cigarettes sold in the UK currently illicit, clearly the illegal trade in tobacco products undermines these important contributions to public health. It deprives the Exchequer of vital revenue and reduces the deterrent effect of high duty rates. We therefore support harsher penalties for those who seek to avoid paying such duties and commensurate powers for trading standards to tackle those who procure, supply and distribute illegal tobacco and profit from the illegal trade.

I would like to ask the Minister three questions. First, she mentioned that the combined application of fines, powers to seize illicit products and the new sanctions is designed to have a deterrent effect on retail outlets and street-level distributors. This point was also made by the noble Baroness, Lady Kramer. Are there any plans to communicate these powers to potential offenders so that the deterrent effect might be enhanced? Secondly, where illicit product is sold through retail outlets, what data exists on whether the owner of a retail outlet is aware of such sales versus illicit sales carried out surreptitiously by an employee, and therefore whether enforcement measures are always correctly targeted? Finally, what communication, co-operation and co-ordination exists between HMRC and the Border Force to tackle the supply of illicit product at source?

[Baroness Penn (Con)]

My Lords, I thank both noble Lords for their contribution to this short debate. I am afraid that the speed of our debate might mean that I will need to write to them regarding some of their questions. I will address the ones I can.

The noble Baroness, Lady Kramer, asked whether the cost of living pressures have caused an increase in the illicit market. My understanding is that there has been a negligible increase in it. Some smokers are switching, for example, to hand-rolling tobacco from ready-made cigarettes to save money. That is the kind of behaviour shift we are seeing.

As for when we will be implementing the provisions provided for in the two statutory instruments, trading standards will start work on 20 July when the tobacco tracking and security SI commences.

Regarding the types of tobacco that will be covered, I can say that the tobacco track and trace system applies to only cigarettes and hand-rolling tobacco, but this makes up approximately 97% of the tobacco market. The system and the penalties are intended to be extended to other tobacco products, such as cigars, cigarillos and shisha, but that will be from May 2024. There is a plan to extend over the remaining market.

Both the noble Baroness, Lady Kramer, and the noble Lord, Lord Livermore, asked about the deterrent effect. We should see a decrease in the current tax gap for tobacco duty. We anticipate that we will see an increase in compliance activities undertaken by trading standards. The visibility of businesses selling illicit products being penalised will have the deterrent effect that both noble Lords asked about.

Tackling this issue at the smaller scale, where trading standards visits premises—the noble Baroness, Lady Kramer, also talked about links to more organised crime—will continue to be a focus. Activity in that area is driven by HMRC, which is the delivery partner, rather than trading standards.

The noble Baroness asked whether outlets engaged in underage sales will be targeted under this measure. My understanding is that, in each local area, trading standards looks at the priorities for targeting enforcement activity. It has powers when it comes to underage sales. The effect of this SI is to ensure that trading standards can make use of the enforcement mechanisms under track and trace, in addition to its powers on underage sales, plain packaging and other consumer issues. The priorities for trading standards visits are set locally, rather than nationally.

The noble Baroness, Lady Kramer, asked about e-cigarettes and vapes. Track and trace does not apply to them but, as she may be aware, we have a call for evidence open at the moment that focuses particularly on the use of vapes among underage consumers or children, which will look at that issue more closely.

On the question of the public health benefits of this measure versus revenue protection, they are mutually reinforcing. Illicit tobacco can have health implications, because it is not subject to the same health and safety regulations as legitimate products. It has been found to contain arsenic, mould and rat droppings, for example, so that issue is at play. The availability and affordability of tobacco products also impacts on smoking rates, which is why the duty that we have in place helps to reinforce our strategy to stop smoking. Making sure that people do not engage in the illicit market also reinforces that strategy.

I will not pretend that protecting the duty owed to the UK Government is not an important objective for HMRC; it is one that we continue to support. However, it mutually reinforces the wider ambition for England to become smoke-free by 2030. As I said, the Department of Health and Social Care announced a package of measures to cut smoking rates, acknowledging that we need to go further in this space. They include expanding access to new treatments, rolling out a national incentive scheme to help pregnant women quit, and using a new approach to health warnings.

I am conscious that I have not answered all noble Lords’ questions, but I undertake to follow up in writing. There is broad support for the SI, but I am sure that the answers to those additional points will help your Lordships to understand how it will have the impact that we all hope it will have. I therefore commend this instrument to the Committee.