Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Monday 14th July 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, the Government have committed to achieving clean power by 2030 and the contracts for difference—CfD—scheme will play a key role in achieving that ambition. The clean power action plan, published in December last year, outlined several key reforms to the CfD scheme ahead of allocation round 7 opening this August. Following a robust public consultation process, we published our consultation response, which set out that legislative changes are needed to enable the Government to reach clean power 2030 and enable a fair price for consumers.

The draft SI will enable changes to the allocation process to ensure that our clean power 2030 ambitions are met and that consumers pay a fair price. It amends the Contracts for Difference (Allocation) Regulations 2014 budget publication process and the information that the Secretary of State will have access to during the allocation round. With access to anonymised bids and by changing the budget publication process, the Secretary of State will be able to set budgets for CfDs that maximise good value capacity deployment for clean power 2030 and avoid the outcome seen in allocation round 6, where an unspent budget for fixed-bottom offshore wind meant that a potential opportunity to secure additional projects at a good price was lost.

These amendments mean that the Government can bring forward renewable capacity that represents value for money, which will benefit consumers by moving the country away from volatile fossil fuel prices. The instrument also amends regulations to enable the costs of the clean industry bonus to be included in the Ofgem price cap. There needs to be a specific provision in the relevant regulations that allows the CIB to be counted as a specific bill cost as part of wider CfD costs. This is a technical change; the rest of the CIB regulations are already in place. It will ensure that the price cap captures all the relevant factors that might impact on it.

These draft regulations represent an important step in ensuring that we achieve clean power 2030 and protect bill payers now and into the future. They make the necessary amendments to enable the CfDs to adapt as we head towards clean power 2030. This will enable us to maximise renewables deployment at a fair cost to consumers. I beg to move.

[Lord Frost (Con)]

My Lords, I declare an interest as an unpaid director of the campaign group Net Zero Watch. I think the Secretary of State for Energy is at the moment giving a Statement in the Commons on the state of the climate and energy in which he promised—or, at least, briefed—that there would be some radical truth telling. It may be useful to do a bit of that ourselves in this discussion. In particular, there are two areas of concern before I come on to the detail of this instrument.

First, the Government’s policy is based on the incorrect belief that renewables are cheaper than gas. There are different figures out there, of course, but independent commentators show that if you include all the subsidy costs, grid balancing costs and capacity market costs, onshore wind is about twice as expensive per megawatt hour as gas, offshore wind is two and a half times as expensive, and floating offshore is three times as expensive. Even solar, which is perhaps the most of viable of any of these renewables, is 50% more expensive. That is the first incorrect belief.

The second incorrect belief is that prices will go down rather than up, which has been very well debated recently. According to data from the International Energy Agency, Britain had, as is well known, the most expensive industrial and domestic energy prices in 2023. The data for 2024, in so far as we have it, shows that we have the most expensive industrial energy prices in Europe, and now only the fourth most expensive domestic energy prices. However, gas prices are about average for Europe, which strongly suggests that, contrary to everything that is said, gas prices are not driving the high costs. In fact, it is the subsidy, the balancing costs, the capacity market and the inflated capital costs—all of which, by the way, the OBR predicts will increase rather than decrease over the next few years. All those are driving higher prices.

The Government have to pretend to believe the things that I just outlined; I do not know whether they really believe them, but they certainly have to pretend to. The problem is that doing so makes it difficult to run a proper renewables policy, and that is why AR6—allocation round 6—was such a fiasco. As the Explanatory Memorandum says, AR6 constituted a

“budget underspend for offshore wind”.

Alternatively put, renewables producers would not supply at the prices that were offered, so there was an underspend. If renewables are as cheap as the Government say they are, why should that be the case?

Therefore, the Government badly need AR7 to be a success. They need this vast expansion of renewables, whatever the cost, if they are to decarbonise by 2030. But developers are getting cold feet; we saw it in AR6, and we have seen the cancellation of projects since then. Hence this statutory instrument is a different approach. It is very complex and obfuscatory, in the way we have come to expect, and there are many technicalities, but the core of it, as various commentators have set out, is that instead of setting a budget and seeing what capacity the Government can get for the money, they are setting a capacity ambition, seeing what bids come in and then seeing what they have to pay to get that capacity. That is why the Secretary of State needs this anonymised data early and why they need to delay publishing the budget until all this has been assessed. The Government hope that no one will notice what is going on if it is done in this technical way in the statutory instrument, but I am afraid it is a scandal, because we will see prices and budgets go up, and we will not get a proper explanation for it.

I have two other points to make on the instrument. The consultation on it, which the Minister referred to and described as “robust”, involved developers, electricity traders—I quote the Explanatory Memorandum—

“businesses operating in the offshore wind sector”

and “environmental groups”. Those, of course, are all producers. What about actual businesses that have to use energy or electricity and have to deal with the increased energy costs and complexity that come as a result? We know what the consequence is and we know why they did not consult them. It is because they know that prices will go up. We know that because, in the industrial strategy announced a couple of weeks ago, the Government have had to pick sectors and subsidise their energy costs to make their operations viable.

My second point is about the security risk of all this. We all saw what happened in Iberia a couple of months ago as a result of excessive reliance on renewables. The Government say that they are investing in nuclear, gas and, to the extent they can, storage, but, of course, none of this will be ready by 2030.

I shall finish with three questions. First, can the Minister tell us how much the Government expect to spend on the AR7 budget? If prices are falling, why will it not be less than AR6? Can he tell us how much consumer prices are expected to fall as a result of the constant fall, as we are supposed to believe, in the cost of renewables? Secondly, if they did not consult consumers of electricity on this SI and the new methodology, can they commit to doing so in future on similar instruments? Thirdly, can the Government tell us how they expect to fill the gap in production that renewables create before the new gas, nuclear and storage come online well after 2030?

--- Later in debate ---

[The Earl of Effingham (Con)]

My Lords, I thank the Minister for setting out the purpose of this instrument. These regulations make what may be described as technical adjustments to the CfD regime. However, in practice, they signal significant changes to the principles that underpin the scheme’s operation: transparency, predictability and fairness. The CfD mechanism has been a cornerstone of our low-carbon transition, driving record levels of renewable deployment, while securing value for consumers. That credibility depends on its rules being clear, impartial and competitively neutral.

This instrument makes three changes that in His Majesty’s loyal Opposition’s view merit particular scrutiny. First, as highlighted by my noble friend Lord Frost, it allows the Secretary of State to view anonymised bid data before finalising the budget for an allocation round. This breaks the long-standing principle that all participants bid on a level playing field based on pre-published terms. Ministerial discretion inserted into the process after seeing how the market has responded risks undermining confidence in the integrity of the auction.

Secondly, as also flagged by my noble friend Lord Frost, by delaying the publication of the final budget until after that review, the Government will have the ability to shape outcomes post hoc. However well-intentioned, that is potentially a slippery slope. It introduces uncertainty, opens the doors to perceived political interference and may ultimately deter long-term investors who value predictable rules-based frameworks.

Thirdly, the decision to reclassify the costs of the sustainable industry reward so that they are now recovered through Ofgem’s price cap means that these costs will be passed directly on to consumers. At a time when the cost of living is rising and households are under pressure, the perception is that a stealth measure introduced without full parliamentary scrutiny or a fully transparent impact assessment should not be made. What safeguards will be put in place to ensure that this new discretion over budgets does not distort the process or erode trust among participants? Has the department undertaken any modelling of how these changes might affect bidding behaviour, strike prices or project delivery timelines? What assurances can be given to consumers that the inclusion of new costs in the price cap calculation will not place additional upward pressure on their energy bills?

In conclusion, although these changes may be framed as flexible and technical, they represent a shift in the balance of power from an impartial auction model to one in which Ministers can influence the outcome after bids have been seen. That raises fundamental questions about fairness, efficiency and consumer protection. We urge the Minister to explain why such discretion is necessary and how its use will be accountable to Parliament.

[Lord Wilson of Sedgefield (Lab)]

My Lords, I thank noble Lords again for a good debate, with some incisive observations made by noble Lords opposite. This Government are steadfastly committed to deploying renewables in order to achieve our ambition for clean power by 2030 and to protect bill payers both now and in future. The instrument under discussion today will enable us to adapt CfDs so that they can support the delivery of our ambition for clean power by 2030 at the lowest cost to consumers.

Having said that, let me respond to the questions posed by the noble Lord, Lord Frost. In an unstable world, the only ways both to guarantee our energy security and to protect bill payers permanently are to keep energy bills down for good and to speed up the transition away from fossil fuels towards home-grown, clean energy. During periods when wholesale electricity prices are higher than the fixed CfD strike price awarded, generators pay the difference back into the scheme, which can help reduce energy bills. This happened when wholesale electricity prices spiked during the energy bill crisis of 2022-23; over that winter, CfD payments reduced the amount needed to fund government energy support schemes by around £18 for a typical household. The budget underspend that has been referred to is a result of the allocation—

--- Later in debate ---

[Lord Wilson of Sedgefield (Lab)]

To continue with my response to the noble Lord, Lord Frost, on the budget underspend referred to as a result of the allocation round process, budgets had previously been set without knowing how much capacity can be procured, creating uncertainty around the renewables capacity and the price at which it can be secured. These reforms respond to that challenge. The parameters for allocation round 7 will be published in the coming weeks. As part of our consultation process, we engaged with consumer groups to ensure we obtained a wide range of views on the impact of these changes.

The noble Lord mentioned that the Secretary of State is giving a Statement today. I also draw the noble Lord’s attention to a speech the Secretary of State gave at the recent Global Offshore Wind conference, where he noted the importance of securing fair prices for consumers through AR7 and beyond.

To answer the points from the noble Earl, Lord Russell, to ensure value for money, we have consulted on several reforms for AR7 so that competitive tension is maintained. The response to this consultation will be published soon. We will also publish our auction parameters in the coming weeks, which will aim to ensure consumers get the most value from this round. We will review the specific policy after the conclusion of AR7 and inform stakeholders of our use of these powers for future allocation rounds.

In answer to the noble Earl, Lord Effingham, key parameters such delivery years and strike prices will be published before the opening of the allocation round. Developers will still have the key information they need to submit their minimum viable bid. We will be publishing how we intend to use these powers for AR7 in the forthcoming government response, alongside other measures to drive value for money.

The playing field remains level. The auction will remain entirely impartial, and bids seen will be entirely anonymous. This allows current powers to revise the budget to be used in a targeted and careful manner, with specific consideration given to the cost to consumers.

On the noble Earl’s point about transparency, this proposal has been subject to a full consultation in which the Government engaged with consumer groups, developers and other key stakeholders. We also published our impact assessment for these regulations in May alongside our response. The key considerations for the CfD are set out in the Energy Act. They will still be to ensure that costs to consumers are minimised, that we have security of supply and that we decarbonise the electricity system.

The draft regulations before the Committee today will enable the Government to achieve clean power by 2030 at a fair cost to consumers.

Motion agreed.

Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Thursday 5th June 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025.

Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, the regulations being introduced today will remove the time limit on a temporary exemption which pension funds currently have from clearing standardised over-the-counter derivatives contracts, such as interest rate swaps, through a central counterparty. This means that the exemption will continue indefinitely, ending the need for the Government to renew it every two years if we conclude that this is necessary. The draft regulations will help UK pensioners by supporting pension funds’ ability to invest in assets which generate returns for their benefit. Maintaining the exemption is also in line with the Government’s priorities to increase productive investment by pension funds to support economic growth.

Central counterparties, or CCPs, are a type of financial market infrastructure used by firms to reduce risks when trading on financial markets. They sit between the buyers and sellers of financial instruments, providing assurance that contractual obligations will be fulfilled. They do this by collecting collateral, known as margin, from all their users that can be used to cover any shortfall if a default occurs. The process of transacting through a CCP is known as clearing. In 2009, G20 countries agreed that certain standard derivatives contracts should be cleared through CCPs to help reduce risks in the financial system. In the EU, this was implemented through legislation and is known as the clearing obligation. At the time, it was decided that pension funds should be exempted from this obligation. This was because of the particular challenges that pension funds would face in meeting CCP margin requirements.

CCPs require variation margin, collateral which covers price movements on derivatives contracts, to be posted in cash. Pension funds do not usually hold large cash reserves, as they invest the large majority of their resources in assets, such as gilts and corporate bonds, to provide returns for pension holders. This means that meeting the requirement to post variation margin in cash can be more difficult for pension funds to meet than for other firms. Requiring them to clear their derivatives could cause them to increase their cash holdings, reducing their investment in other assets and their ability to generate returns for future pensioners. The UK assimilated the clearing obligation and this exemption in UK domestic law through the European Union (Withdrawal) Act 2018. The exemption was initially designed as a temporary measure, but it has since been extended several times. The Government currently need to lay secondary legislation every two years if we conclude that it is necessary to extend the exemption.

The Government extended the exemption most recently in June 2023 and noted that it would be desirable to put in place a long-term policy approach to remove the need for future temporary extensions. That is what these draft regulations seek to achieve. The Treasury has since conducted a review of the exemption, working closely with the UK financial services regulators. The review also gathered input from industry stakeholders through a call for evidence which was launched in November 2023. The review found that requiring pension funds to clear derivatives could potentially bring financial stability benefits, such as reducing counterparty risk, and could enhance resilience to shocks by increasing pension funds’ cash buffers.

However, the review also identified concerns from some market participants that removing the exemption could increase pressure on the liquidity management of pension funds, particularly under stressed market conditions, which could increase financial stability risk. The review also found strong evidence that pension funds would need to hold more cash and reduce investment in more productive assets if the exemption were removed. This could reduce their returns, potentially impacting the retirement benefits of future pensioners. This would be inconsistent with the objectives of the Government’s wider growth reforms—including the pensions investment review, the final report of which was published last week, which seeks to unlock productive investment by pension funds to support economic growth.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for bringing this important debate before the Grand Committee today. While technical in nature, the debate strikes at the very heart of our pensions system. It concerns the management of risk, the generation of returns for pension schemes and the financial security of our country. Derivatives play a crucial role in the operation of pension funds. They allow for efficient exposure to asset classes without necessitating the purchase of the underlying assets. They enable tactical asset allocation decisions to be executed more swiftly and cost-effectively than physical rebalancing and, through leverage, they offer the ability to increase market exposure without tying up significant amounts of capital. I know all of this from my experience as a trustee of the Tesco pension fund some years ago. Above all, derivatives are essential because pension funds face long-term liabilities that are highly sensitive to changes in interest rates, to inflation and to currency fluctuations.

These instruments are vital in managing such risks, especially in an uncertain and volatile world. Interest rate swaps hedge against fluctuations in interest rates that affect the valuation of liabilities. Inflation swaps protect against unexpected shifts in inflation, which is especially relevant where pensions are index-linked. Currency forwards and options manage foreign exchange risk where assets or liabilities are denominated in non-sterling currencies. It is the management of risk more than anything else that justifies their inclusion in the portfolio strategies of pension funds and, as the noble Lord, Lord Davies of Brixton, said, the level of risk is materially increased by this regulation. He also rightly referred to the Pension Schemes Bill, which has only just been published. I am afraid that due to other commitments, I have not yet had time to study it.

Since the European Market Infrastructure Regulation was introduced in 2012, pension funds have been granted an exemption from the central clearing obligation, recognising their unique challenge in meeting margin requirements as central counterparties. Pension funds operate on a long-term, illiquid investment model, and this fundamentally mismatches the short-term, high-frequency liquidity demands of CCPs, particularly under stressed market conditions.

Will the Minister outline the contingency plans in place should the absence of mandatory clearing suddenly appear to increase the risk of counterparty defaults?

I have to say that the exemption from these insurance-type arrangements of a CCP carries its own risks. The Government bear a heavy responsibility to maintain confidence in a financial system upon which livelihoods depend. The government review mentioned by the Minister concluded that removing the exemption could impair the ability of pension funds to invest in productive assets. That must be weighed carefully against the imperative of effective risk management. Can the Minister clarify how bilateral arrangements will be monitored for resilience, given that derivatives are no longer subject to central clearing? He talked about keeping this under review, which I think was helpful.

Our financial markets are deeply embedded in the global system. Can the Minister explain how this move aligns with international financial regulatory frameworks and, indeed, with the EU and US, which have slightly different rules from the UK? Furthermore, has the Minister assessed the potential reputational impact on the UK’s standing in international markets, particularly in the context of post-G20 commitments to mandatory central clearing, which the Minister referred to? Finally, will the Minister publish the underlying risk analysis or cost benefit assessment that supports the decisions to go for an indefinite extension period? Without such transparency, it is difficult to understand how the Government have reached their conclusion and indeed why they have chosen this policy path.

The current impact assessment states that the measure

“mitigates the risk of disruption to the market”

that might occur if pension funds were required to restructure their investment strategies “at short notice”. This would be ahead of the exemptions expiring, which happens to be 18 June—the week after next. However, this is a narrow, short-term cost analysis. I am interested in the wider picture of longer-term cost versus the benefits of alternative systems, so I very much look forward to the Minister’s response on whether he is willing to publish his cost-benefit assessment or, perhaps, to say bit more about the detail.

I urge the Minister to engage deeply with the concerns raised and to provide reassurance that the Government’s decision rests on a sound and transparent evidential foundation. We are dealing with an important subject and a risk that, as I am sure we all agree, needs to be properly managed in the interests of UK plc.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness, Lady Neville-Rolfe, and my noble friend Lord Davies of Brixton for their contributions and questions. First, to answer them both, one thing that the Government are after is growth, obviously, but the other thing is financial stability; both of their contributions referred to that. This is a key priority for the Government. However, the evidence on whether removing the exemption would generate direct financial stability benefits was mixed. For example, some responses to the call for evidence noted that removing the exemption could make stress events worse by increasing liquidity pressures on pension funds. In contrast, the Government found strong evidence that pension funds would need to hold more cash and reduce investment in productive assets if the exemption were removed.

On the other issues, such as how the underlying risk will change and how we will keep that under review, the statutory instrument provides long-term clarity for market participants, which is very important in terms of the policy position. This will help with long-term planning of investment strategies by pension funds to meet their future liabilities. As I have noted, the Government will keep this policy under review in co-ordination with the UK regulatory authorities. If there are changes to market dynamics or wider government reforms that have a material impact on the value of mandatory central clearing for pension funds, the Government may reassess this issue.

On the increased burden on pension funds, this policy maintains the status quo. Removing the exemption would have placed more strain on pension funds. This gives assurance to the pension markets around the long-term consistency in our policy approach.

Finally, on the international market, our market is different from those of the EU and the United States as far as pensions are concerned. The response to the call for evidence indicated that the UK defined benefit market is structurally different from that of other jurisdictions, such as the US and the European Union, so it is appropriate that we take a different decision on this issue. The Government are committed to maintaining our high standards of regulation and financial services, including adhering to relevant international standards, where appropriate. In the US, pension schemes tend to be of shorter duration. There is also a larger and more diverse corporate bond market, which can be used for hedging; this means that the derivatives are used less there than they are in the UK.

I hope that these answers are what noble Lords are looking for.

[Baroness Neville-Rolfe (Con)]

That is very helpful—particularly on the international side. One does need to look at this in an international context; nowadays, we are so aware of the ups and downs of global markets. However, the Minister did not answer the question about the impact assessment. It may be that he does not have an answer today, but this is something that I am often concerned about because I think that good cost-benefit analysis is vital to good government. I made the point that the cost-benefit analysis that we got was a rather short-term thing; it would be very helpful to have a response on that.

[Lord Wilson of Sedgefield (Lab)]

Basically, what we are doing is maintaining the status quo. Things have been like this for several years now; we are just ensuring that the status quo continues into the future. We will review it if we need to, such as if the dynamics in the market change, but what we are offering is consistency for the industry. That is an important aspect of this statutory instrument.

Motion agreed.

Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Thursday 5th June 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, financial services fulfil a vital role for people and businesses across the UK and the Government are committed to ensuring high standards of customer protection. These regulations form part of this commitment by strengthening protections for customers, including consumers, businesses and charities, when their bank accounts or other payment services are terminated by their provider.

While decisions to terminate services are generally commercial decisions, customers must be treated fairly. Noble Lords will be aware that concerns have been raised in this area over recent years. This has included concerns about services being terminated on the basis of customers’ lawful beliefs and political opinions. The Government are clear that customers should not see services terminated due to lawful freedom of expression. There are already laws that prohibit providers discriminating against UK consumers on these grounds. However, in other areas existing legislation does not always provide appropriate protection and is not sufficiently clear.

Currently, payments legislation contains no obligation on providers to explain why they are terminating payment services, making it difficult for customers to understand the reasons for terminations, rectify issues or know whether to bring a complaint against their provider’s decision. Furthermore, the current requirement that providers must give customers at least two months’ notice does not always provide customers sufficient time to manage the impacts of a termination and, where needed, find an alternative provider. These regulations make changes to address these issues.

Specifically, the regulations will amend the Payment Services Regulations 2017 to require providers to give customers a longer notice period of at least 90 days before terminating a payment services contract and a sufficiently detailed and specific explanation so the customer understands why it is being terminated. Providers must also advise the customer of how to complain to their provider and of any right they have to complain to the Financial Ombudsman Service. The regulations also clarify ambiguities in legislation to ensure that these new protections are applied consistently. There are some exceptions to the new requirements, mainly so that providers can continue to meet other legal requirements.

Lastly, the regulations make equivalent changes to the Payment Accounts Regulations 2015 so that people who apply for and use basic bank accounts will benefit from the new rules. These changes will increase transparency for customers, ensuring that they understand providers’ decisions and have more time and information to make a complaint or find an alternative provider. The changes will take effect from 28 April 2026 and apply to the termination of payment services contracts that are concluded for an indefinite period and entered into on or after that date.

I know that the Secondary Legislation Scrutiny Committee raised this measure as an instrument of interest in its 25th report, published on 15 May. I am grateful for the consideration the Committee has given this legislation, and I shall respond to the points it raised.

First, the Government acknowledge that there have been concerns about customers being debanked on the basis of their lawful beliefs and political opinions, and that this formed part of what initially led to a review of legislation in this area. Since coming into office, this Government have taken a fresh look at the issue from a broader perspective. As I said earlier, providers are already prohibited from discriminating against UK consumers based on their lawful beliefs and political opinions, but there are shortcomings in wider legislation that governs how providers terminate payment services contracts. The Government are therefore taking a wider approach to strengthen legislation and to enhance fairness and transparency for all customers more generally.

Secondly, regarding the length of the 90-day notice period and the implementation period for the instrument, the Government’s approach is based on extensive engagement. We have sought to balance strengthening the protections for customers with minimising the burdens on firms.

In conclusion, these regulations would make important changes to ensure that customers are treated fairly, while respecting providers’ rights to make commercial decisions. I hope that the Grand Committee will endorse these reforms. I look forward to the debate and beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I welcome the opportunity to speak on this statutory instrument in this brief debate. We note that these regulations build on previous legislation and arise from a consultation that began under the previous Conservative Government in July 2023.

I agree with the Minister that the extension of the minimum notice period for contract termination from two months to 90 days is a prudent and welcome measure. Even more significant is the requirement for payment service providers to provide detailed and specific reasons for termination, thereby enhancing transparency and fairness and discouraging needless debanking; we all saw the unfortunate effect of Coutts’ closure of Nigel Farage’s account. Additionally, informing customers of their right to complain to the Financial Ombudsman Service is a useful safeguard.

I have two problems with these regulations. First, I am concerned by the wide-ranging exemptions to the new rules—“exceptions” is probably the right word. These include the anti-money laundering requirements and the suspicion of serious crime, as well as the possible commission of a public order or harassment offence. These are substantial exceptions that could be the subject of unfair debanking, with the accused unable to know what it is claimed he or she has done wrong. I therefore welcome the change in the threshold from “reasonable belief” to “reasonable grounds to suspect” for serious crime exceptions following consultation, but I wonder whether this is enough.

I should add that small and medium-sized businesses are not exempted from the new requirements. What targeted support or guidance will be provided to help these providers manage the increased compliance burden? These measures could cause problems for businesses already under pressure from NICs and the prospect of new regulation. We all want fairness but the net cost to businesses is £6.4 million a year, by the normally prudent Treasury estimates. This means a net present value of minus £55.4 million.

In the light of this, how do the Government plan to monitor and evaluate these regulations over time to ensure that the extended notice periods and disclosure obligations generally lead to better outcomes for consumers, rather than creating additional administrative burdens for the suppliers of financial services? Can the Government also clarify how conflicts between these termination requirements and other legal obligations on payment service providers will be managed, especially where other laws might take precedence? What mechanisms will be in place to resolve such conflicts fairly and transparently?

Secondly, the main problem for consumers of payment services is not being able to secure a bank account at all. I know this from my own family’s experience of being denied banking, reducing the scope for moving to a different, more competitive bank. This is on grounds such as being a publicly exposed person, which is our experience; selling arms, which it seems wrong to exclude given our growing defence needs; or ungrounded fear by the provider of money laundering. What is the Government’s position on this difficult area of securing a bank account?

I look forward to the Minister’s response and to continued engagement with the Government and regulators to ensure that these important reforms deliver tangible and lasting benefits for payment service users.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness for her speech and those questions. These are important regulations which clarify the situation we have lived under over the last few years, as far as this issue is concerned.

On the several points and questions she has raised, I will answer the last one first, which was about access to banking services. The Government recognise the vital role that financial services provide; that is why we have introduced these new rules. The Government are focused on account closures as a priority. We continue to monitor wider access to bank account provision but recognise this is largely a commercial matter. Some 120 banking hubs have opened; another 200-plus will be opened in the next few years. That is not the limit or the target; it could go beyond that, but it depends on what LINK, which provide them, wants to do. It is, obviously, an ongoing issue. We want to ensure everybody has access to them.

On the new requirements that the noble Baroness suggested, there are important public policy reasons for the exemptions, which are necessary to enable payment service providers to continue to discharge other legal obligations or manage complex scenarios—for example, in relation to financial crime.

On the question of whether we will publish guidance, the Financial Conduct Authority, as the relevant regulator, will update the guidance to reflect the legislative changes. The Government have worked closely with industry, law enforcement and regulatory partners to ensure that expectations of payment service providers are clear.

With that, I think I have covered all the questions. I conclude by saying that the Government are committed to ensuring high standards of customer protection and financial inclusion across the financial services sector. These regulations make important changes but address long-standing concerns about protection given to customers when their bank accounts or other payment services are terminated by their providers. This increased amount of notice and transparency will make it easier for customers to understand and manage the impact of their provider’s decisions, and to make a complaint or find an alternative provider where necessary. The changes will help deliver fairer outcomes and support the Government’s ambitions to deliver for working people. I hope the Committee will join me in supporting the regulations.

[Baroness Neville-Rolfe (Con)]

My Lords, I was a little disappointed about the response on two points. One is on this business of small and medium-sized businesses. The Minister rightly referred to the FCA as the body that is responsible for guidance. It is supposed to care about small businesses and growth, following the letter that the Chancellor wrote to them. The Minister mentioned that there are more small and new businesses in the pipeline; that is good news. Small business spectacles are important, both for financial service providers and, indeed, for unfortunate customers who are trying to get bank accounts.

That was the second point: perhaps it was not possible as I did not give notice of the question, which is not the subject of these regulations, but he did not inform us as to what the latest is on helping people to open a bank account. His objective is the same as mine: to make sure that everybody can do that. He may know from discussion with other parliamentarians that the publicly exposed person issue has been a big one, and there are other issues. I would be interested to be referred to an update on how we are getting on on getting people to open bank accounts. It is important, in societies, for people to have bank accounts and not to be excluded. It is a great pity that it is so difficult, if you are a publicly exposed person, to move banks. That seems unfortunate.

[Lord Wilson of Sedgefield (Lab)]

I think these regulations help clarify all that. As far as small and medium-sized businesses are concerned, the Treasury Select Committee published figures in 2024 on the termination of business accounts in 2023. They were sourced from eight UK banks. The Treasury estimates that, on average, around 64% of business accounts were terminated due to suspicious activity or financial crime, due diligence or fraud, 10% were terminated because of dormancy and less than 1% for political exposure or other issues. We can all amplify the politically exposed people, and we know it is important, but the vast majority of closures and issues that we have are with financial crime and due diligence.

On the other question, we all want everyone who wants to have a bank account to have one. The decision to provide banking services is generally a commercial one by providers. I have already mentioned that 120 to 150, I think, banking hubs have been opened already, and a lot more will be opened. It is not a target. Once we get there, we can probably open more, but that has to be in consultation with the industry. The Government want to ensure that customers are treated fairly when providers decide to withdraw those services. We are focused on account terminations as a priority, given the material impact that a loss of banking services could have on a business already in operation. More widely, the Government continue to monitor evidence in relation to accessing banking services and welcome the FCA’s work in this area.

[Baroness Neville-Rolfe (Con)]

My Lords, I am reassured. It is good to have the figure for politically exposed debanking of 1%, although the significance depends on the total figure for the number of cases. It is more about when people are trying to get bank accounts. I think that the Farage event has led to a degree of understanding that it is important not to debank people who are already customers. What I think is less well understood is how when people who are, for example, politically exposed try to get a bank account, they have difficulties. I hope the regulators such as the FCA think about this because we want to try to make sure that people can have proper bank accounts. If there is any more material on that side of things, I give notice that I would be very interested in it, though I appreciate that I sprung this question on the Minister today although it is not the subject of the regulations.

[Lord Wilson of Sedgefield (Lab)]

I think increasing the time period from 60 days to 90 days and banks now having to write to the customer to say, “These are the reasons why we have this issue with your bank account” and, where it is appropriate and where they can, having to say that they can refer it to the ombudsman all helps. Obviously, this will be kept under review, but I think it is an important improvement on where we were in previous regulations.

Motion agreed.

Devolved Authorities: Use of Resources

Lord Wilson of Sedgefield Excerpts

Wednesday 23rd April 2025 Lords Chamber

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

The UK Government primarily use the Barnett formula to calculate the devolved Governments’ block grant funding. This funding is not ring-fenced, given the devolved Governments’ full flexibility to allocate it across devolved areas according to their own priorities and local circumstances. The devolved Governments are accountable to their parliamentary legislatures and, ultimately, their voters for their decisions. The recent settlement is 20% more funding than equivalent UK government spending in other areas of the UK. These settlements are the largest in real terms since devolution, totalling £86 billion. This Government are securing Britain’s future through the plan for change, which is delivering security and renewal by kick-starting economic growth to put more money into working people’s pockets and the NHS and to secure our borders.

[Lord Foulkes of Cumnock (Lab Co-op)]

I am grateful to the Minister for a helpful response, but is he aware that the Supreme Court case on the definition of gender is just the latest of 10 court cases which the SNP Scottish Government have taken there, costing over £7 billion? Surely something can be done to make sure that they spend UK taxpayers’ money on things such as the city growth deals and replacing the Grenfell-style cladding on the 5,000 premises in Scotland where people’s lives are still in danger.

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for that question. I want to focus on the big issue that is confronting this country—whether it is Ireland, Scotland, Wales or England—which is growth. My noble friend pointed out that the city region and growth deals are funded by the UK Government. The Scottish Government are receiving £119 million in 2025-26 for city and growth deals. The Government confirmed at the Autumn Budget that investment in the Argyll and Bute growth deal will continue to be available and will be supported by a rigorous value-for-money assessment as part of the review. The £25 million Argyll and Bute growth deal was signed in March 2025. There are other elements to growth in Scotland: one of the main ones is that GB Energy will be based in Aberdeen.

[Lord Wigley (PC)]

My Lords, I welcome the statement made by the Minister that it is indeed for the devolved authorities to spend the money that they receive in accordance with their own priorities. He mentioned the Barnett formula; will he admit that whereas it may be working very well for Scotland, it is not working well for Wales, and it certainly needs to be reconsidered? Will the Government please address that?

[Lord Wilson of Sedgefield (Lab)]

Because of the Barnett formula, Wales receives 15% more than the average for the rest of the UK. We also need to point out some of the advantages of the Welsh and UK Governments working together. Under the AI opportunities action plan, Vantage Data Centers, which is working to build one of Europe’s largest data centre campuses in Wales, announced plans to invest £12 billion, providing 11,000 jobs across Wales. There are also expected benefits in direct payments for 150,000 workers in Wales through the minimum wage rise. There are 2.1 million people in Wales who will benefit from the extension of the 5p cut in fuel duty.

[Lord Forsyth of Drumlean (Con)]

My Lords, will the noble Lord—I appreciate he is new to his post—take time to read the Select Committee of this House’s report on the Barnett formula? From that he will find that Wales is indeed badly treated, and no Government have actually done anything about it. On the main point of the Question, which is the right of devolved Administrations to spend the money that is allocated to them under the formula as they choose, that is an important part of devolution, which the noble Lord was very keen on. Had it not been for that, the Scottish Government would not have been able to waste tens of millions of pounds on ferries that do not work—money which would otherwise have been spent on the health service.

[Lord Wilson of Sedgefield (Lab)]

The Barnett formula does succeed in delivering for our nations around the country. It is fair to say also that the settlement this year is the largest that has been delivered since devolution.

[Lord Bruce of Bennachie (LD)]

My Lords, since the establishment of the Scottish Parliament, the proportion of income raised from taxes on Scottish citizens has risen from under 10% to around 40%. The Scottish Finance and Public Administration Committee has agreed that accountability and scrutiny need to be improved. I suggest that it might be to great mutual benefit if the Public Accounts Committee in the Commons and the Constitution Committee in this House reach out to relevant committees in the Scottish Parliament and the other devolved assemblies to see how they can improve financial scrutiny and accountability across all our parliaments, because none of it is as good as it should be.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question. I think there is nothing wrong and probably everything right with parliaments across the UK working together to deliver better for their citizens. I think that is probably a welcome suggestion.

[Lord Inglewood (CB)]

My Lords, following the question asked by the noble Lord, Lord Wigley, about Wales being short-changed by the Barnett formula, is it not also the case that the north of England is in the same way?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question because it gives me the opportunity to talk about the excellent work that the Labour Mayor of the North East is doing, in the form of Kim McGuinness. At the centre of her project for the north-east are growth, delivering better public services and ensuring that the growth that happens in this country and our region where I belong is there for all the people. I lived through the 1980s. I know what happened to areas such as the Durham coalfield. Now that the region is united to speak up as one, that can be only for the benefit of all the people who live there.

[Baroness Neville-Rolfe (Con)]

My Lords, achieving value for money ought to be a priority for any Government, whether national, regional or local, especially a Government committed to growth. So I come back to the point mentioned by the noble Lord, Lord Foulkes of Cumnock: do the Government consider that the SNP Scottish Government’s actions on trans rights represented a good use of taxpayers’ money?

[Lord Wilson of Sedgefield (Lab)]

I appreciate the question that the noble Baroness has asked, but I think that the one thing that should focus our minds, besides the outcome of what the Supreme Court said, is what the Scottish Government should do, and we all should be doing, in the best interests of all the Scottish people. That must be to secure growth to make sure that the support that we have for our cities, our people and the NHS is for all the people in Scotland. It would be great to see the Scottish Government and the UK Government work closely together to ensure that that happens.

[Lord Jones of Penybont (Lab)]

My Lords, as the former head of a devolved Government, at a time when co-operation between Governments across this island was rare and when a UK Government towards the end of their life became very fond of imposition through the UK Subsidy Control Act and the UK Internal Market Act, I welcome the new relationship between London and Cardiff. With that in mind, will the Minister outline what the UK Government are doing, working with the Welsh Government, to deliver for the people of Wales?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question. I have already mentioned some of the things that the Labour Government have done, but two areas that might be of interest to the House are what is happening in Port Talbot, and the electric arc furnaces. In the Autumn Budget 2024, the UK Government confirmed £80 million funding for the Port Talbot transition board. The funding will support local businesses that are heavily reliant on Tata Steel, and their primary customers. On 11 September last year, this Government announced that they had agreed an improved deal with Tata Steel towards the transformation of Port Talbot steelworks. This improved deal secures 5,000 jobs, ensures that workers have enhanced support during the transition period and delivers a 1.5% reduction in the UK’s greenhouse emissions.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I run a charity in Scotland, and if somebody gave me £119 million, I would be expected to account for how I spent that money. So, going back to the Question asked by the noble Lord, Lord Foulkes, can the Government do anything that does not interfere with how the devolved Administrations choose to spend their money but requires them to report transparently on what it is they have spent it on?

[Lord Wilson of Sedgefield (Lab)]

The UK Government and the Scottish Government need to work closely together on this issue. Obviously, we cannot get involved in how devolved Barnett money is being used, but there is ring-fenced money that has been allocated to Scotland, I think somewhere in the region of £119 million, and we need to ensure that it is spent properly, at the appropriate time, and gives value for money.

Child Trust Fund Accounts

Lord Wilson of Sedgefield Excerpts

Wednesday 19th March 2025 Lords Chamber

[Lord Blunkett (Lab)]

I beg leave to ask the Question standing in my name and offer a very warm welcome to my noble friend, who is making his first appearance at the Dispatch Box.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

I thank my noble friend. The Government have extensive engagements with providers, industry and other stakeholders. HMRC is an active participant in the industry-led Child Trust Fund Maturity Working Group, which meets quarterly and discusses how individuals can be encouraged to claim their matured funds, and any issues the industry is facing. Treasury officials have also recently met with industry stakeholders to discuss issues relating to child trust fund access.

[Lord Blunkett (Lab)]

I thank my noble friend and realise that it is really difficult answering for the Treasury these days. We have had a very successful, but in one way fruitless, effort across this House. We have been supporting many charities, including Support SEND Kids, and Andrew Turner’s campaign—he is in the Chamber today. I thank everybody for that. Some 780,000 accounts have not yet been accessed, and in up to 80,000 of those cases, the young people are said to have incapacity. Somehow, we have to unlock these accounts, and we have to stop the Court of Protection blocking this. We have to ensure that financial institutions that are not playing the game do so. In the end, we need the support of the Department of Justice, the Department of Work and Pensions and the Treasury. My noble friend is new, and he can come at this fresh: give them a good kick for us, will you?

[Lord Wilson of Sedgefield (Lab)]

The Government are committed to reuniting all young adults with their child trust funds. HMRC has worked closely with child trust fund providers to encourage young people to track down their accounts. It has also issued a range of communications, including social media posts, and engaged influencers, who have greater visibility amongst young adults, and it continues to explore additional ways of communication. A free HMRC online tracking facility is also available. At the moment, the number of unclaimed matured accounts stands at 670,00.

[Lord Young of Cookham (Con)]

My Lords, the Department for Work and Pensions has a streamlined process by which parents of a child with disability can access funds from the DWP—funds far higher than the average £3,000 in a trust fund account. Why cannot that process be used, instead of the cumbersome Court of Protection process?

[Lord Wilson of Sedgefield (Lab)]

We know that there are real difficulties with this, and cross-departmental activities are taking place to try to resolve the problem. I understand from the courts that the Government are committed to bearing down on the outstanding caseload left by the previous Government, and the challenges we face in doing so are significant. As a crucial first step, we are funding another 108,500 sitting days in the courts this financial year, which is the highest level we have had for a decade.

[Baroness Kramer (LD)]

My Lords, in cases where a parent or guardian were unable to set up an account for their child, the Government opened a savings account on the child’s behalf. Can the Minister give me an assurance that all these children, for whom HMRC must have both contact details and legal authority, have been reached and are not part of the group who are unaware of the funds they have available?

[Lord Wilson of Sedgefield (Lab)]

All young people who have trust funds are contacted at the age of 17, and those who do not respond will be continually contacted. Secondly, the funds available to them will be available for ever or until, potentially, things change; but at the moment, there is no reason why that should happen. Those funds will be there for as long as they need to be, before they are drawn down by the child. The one thing to remember is the funds not having been accessed does not mean that the person who can access them does not know they are there.

[Lord Naseby (Con)]

I declare an interest as a former chairman of the Tunbridge Wells Equitable Friendly Society, which traded as the Children’s Mutual. Are the Government getting full co-operation from the Association of Friendly Societies and some of the other providers? If they are not, I would be more than willing to try my very best to help to find an answer to this difficult problem.

[Lord Wilson of Sedgefield (Lab)]

We are working across departments and with all the providers to try to ensure that access is gained for people who have child trust funds. I am not quite sure what kind of relationship and communication we have with friendly societies, but I will make sure that someone writes to the noble Lord to let him know.

[Baroness Neville-Rolfe (Con)]

My Lords, I too very much welcome the noble Lord, Lord Wilson of Sedgefield, to his place. There is a problem, as he said, so can he say whether he has formally consulted, or intends to, the financial institutions or the child trust fund providers on the feasibility of simplifying the process for young people accessing their funds? What steps might he take to ensure that they are more aware of the child trust fund accounts—perhaps using social media and so on—so that we communicate this opportunity for people to pick up these funds, which are not being claimed, as the noble Lord, Lord Blunkett, explained?

[Lord Wilson of Sedgefield (Lab)]

As of 5 April 2024, some 2.5 million child trust funds accounts and 670,000 mature child trust fund accounts had not been claimed. The Government recognise the importance of ensuring that we marry up young people with those accounts. HMRC is working very closely with opinion-formers and stakeholders to try to ensure that this group is reached. This includes, for example, working closely with UCAS, joining with younger influencers who discuss personal finances online, and using traditional media and HMRC’s own social media channels to target young people to ensure that they know the trust funds exist.

[Baroness Lister of Burtersett (Lab)]

My Lords, I very much support my noble friend in his efforts, but as there do not seem to be any more questions on that subject, I will broaden it out to another of the Treasury’s responsibilities for children. I realise that my noble friend may not be able to answer this now, but is there any evidence of the impact of the high-income charge, introduced by the previous Government, on the take-up of child benefit? Child benefit is a crucial source of secure income for parents.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness for that question, and she is absolutely right: it is not an area I know very much about. I will get the department to write to her with the answer she requires.