Class 4 National Insurance Contributions

Lord Northbrook Excerpts

Wednesday 15th March 2017 Lords Chamber

[Lord Young of Cookham]

I think I have already given that commitment: the support that we announced for local government in the Budget will go ahead and will not be affected by the announcement today.

[Lord Northbrook (Con)]

My Lords, I congratulate the Chancellor on his change of heart. I am sure that he is encouraged by yesterday’s debate here on the Budget and the contributions of my noble friends Lord Flight and Lady Altmann and the noble Lord, Lord Bilimoria, and others. I welcome this measure for self-employed business, but can the Minister make representations to the Chancellor on the subject of dividend tax changes, which will hit small incorporated businesses particularly hard, and also on the new proposed probate tax, which has not come in yet but which will affect current and potential Conservative voters in London in particular?

[Lord Young of Cookham]

I am grateful to my noble friend for drawing attention to the very good debate that we had yesterday on the Budget Statement. I will ensure that the Chancellor is aware of the views that were expressed by him and others, not just on the national insurance issue but also on probate and the changes to the dividend tax allowance. Whether it was my noble friend’s speech last night that caused the Chancellor to change his mind this morning, I am not quite so sure, but I am grateful for his support this evening.

House of Lords Act 1999 (Amendment) Bill [HL]

Lord Northbrook Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 9th December 2016 Lords Chamber

[Lord Rennard]

If the noble Lord accepts the principle that representation here should be reflective of votes cast in the past election, I would welcome his support for that principle in the House of Commons also.

[Lord Northbrook (Con)]

My Lords, I apologise to the Committee for being unable to take part at Second Reading. I believe the Bill is unnecessary unless part of a full stage two reform, and breaches the undertaking that has already been referred to.

Contrary to the words of the noble Lord, Lord Anderson of Swansea, I maintain that by-elections produce very capable replacement Peers, such as the noble Lords, Lord Grantchester, Lord De Mauley and Lord Ashton of Hyde, the noble Earl, Lord Cathcart, and the noble Viscount, Lord Younger, all of whom are or have been on the Front Bench of their respective parties. In addition, the number of hereditaries is capped, unlike the number of life Peers. Surely it is this that needs attention, to be included in a total package of reform, which may indeed incorporate a change to the by-election system, but that should not happen until then.

The Campaign for an Effective Second Chamber does a lot of good work but the Bill makes the Chamber much less effective.

Bank of England and Financial Services Bill [HL]

Lord Northbrook Excerpts

Monday 26th October 2015 Lords Chamber

[Lord Northbrook (Con)]

My Lords, in general I welcome the Bill as it applies to the Bank of England, but in the second part of my speech I will say a few words about overregulation. As other speakers have stated, the Bill is split into three main parts. The first sets out the proposed changes to the Bank of England’s governance and procedures connected to its accountability. The second includes a number of provisions linked to the regulation of financial services, in particular the introduction of the SM&CR regime. The third contains provisions on the issuing of bank notes in Scotland and Northern Ireland.

What I like is that many of the Bill’s provisions linked to the governance and accountability of the Bank of England build on changes and suggestions announced by the Bank in 2014. The announcement was accompanied by two reports containing further details on the proposed changes—the Warsh review and the Bank of England’s own report. The Bill was in the Queen’s Speech, when the Government said that this would ensure that,

“the Bank is well positioned to fulfil its … role of overseeing monetary policy and financial stability”.

It will also ensure that the UK’s regulatory framework remains at the forefront of internationally agreed best practice standards.

Clauses 1 to 15 contain the proposed changes to the Bank of England’s governance, financial arrangements and prudential regulation. The Bill changes the membership of the court—it adds an additional deputy governor post. This has not been mentioned by other speakers, so I ask the Minister: what is the rationale behind that? As other speakers have said, the Bill also assigns the oversight functions to the whole court to operate more like a unitary board. The Financial Policy Committee becomes a committee of the Bank, rather than a sub-committee of the court.

The Bill also intends to clarify the Bank’s responsibilities for prudential regulation by ending the status of the PRA as a subsidiary of the Bank. I note the concerns raised by the noble Lord, Lord McFall, on that front. Instead, the Bill provides that the PRA is the Bank of England and creates a new Prudential Regulation Committee with responsibility for the Bank’s functions as the PRA.

The Monetary Policy Committee is also subject to change in the Bill. Generally, the MPC has worked pretty well in recent years, judged by the low level of inflation and of interest rates. The big move is in the timing of publication of the MPC’s minutes. It is proposed that they are now published as soon as is reasonably practical following a meeting. The MPC will meet fewer times in the year, changing from at least once a month to at least eight times a year. I do not really know what effect that will have, but it may be less or more valuable in these circumstances.

As other noble Lords mentioned, the Bill gives the National Audit Office the power to carry out examinations of the economy, efficiency and effectiveness with which the Bank uses its resources in discharging its functions. It also gives the Treasury power to carry out value-for- money reviews of the prudential regulation functions of the Bank. I disagree with other speakers; it seems to me that that is a sensible role for the NAO. Also, I like new Section 7D(3), in Clause 11, which says:

“An examination under this section is not to be concerned with the merits of the Bank’s general policy in pursuing the Bank’s objectives”.

Clause 3 gives the oversight functions previously delegated to the oversight sub-committee of the court to the full court. I note the comments from the noble Lord, Lord Eatwell, on this. I am slightly concerned about the reduction of the oversight committee’s role, although the Government say that it will simplify the way the Bank’s oversight functions operate.

Part 2 of the Bill makes a welcome change. Here I disagree with most other speakers. I think that the reverse burden of proof in situations of regulatory breach was a very bad idea: that you should be presumed guilty until proved innocent does not seem to go down well in many other areas of the law. The original regime meant that a senior manager responsible for certain areas of a firm’s business would be presumed accountable when regulatory requirements were contravened in that area. Now it will be necessary, quite rightly, for the regulators to prove that a senior manager has not taken reasonable steps to prevent that contravention to avoid being found guilty of misconduct.

SM&CR is due to come into force in March next year for financial services firms, defined as banks, other deposit-takers and those investment firms which are regulated by the PRA. The Bill extends the operation of SM&CR to cover all firms carrying out regulated activities under the Financial Services and Markets Act 2000. Part 2 also extends—which I welcome—the remit of the Government’s Pension Wise service to holders of annuities specified by the Treasury, so that it can deliver guidance to pensioners who will be eligible to sell their annuity income stream in 2017. I also welcome the duty that Part 2 imposes on the Bank to give the Treasury information about what action the Bank proposes to take if a particular bank fails, such as what impact the failure will have on the financial system and on public funds.

In the rest of my speech I have a few words to say about a paper produced by an organisation called New City Initiative, which supplies an independent expert voice in the debate on financial reform. Its intention is to restore society’s trust in the financial sector. I worked in the investment management sector until 2005.

The UK investment management industry generates about 1% of GDP and remains Europe’s leading centre for fund management. It earns an estimated £12 billion a year for the UK, and London is the hub of specialist boutique firms. The financial crash of 2008 was especially damaging. The serious long-term cost was, perhaps, the death of trust.

Extra regulation was clearly necessary, but the extent is open to debate. The UK SME asset management sector has traditionally been vibrant and grown strongly, but is now stagnating, because start-ups cannot afford the cost of increased regulation. A chart from the FCA shows how the number of new firms—approvals—declined from 230 in 2004 to between 150 and 170 in 2014.

Boutique asset and wealth management firms find compliance increasingly onerous. New financial regulations from the EU and UK are applied equally to the very biggest and smallest asset management firms, disregarding their ability to shoulder the consequent financial and legal burdens. If financial regulation is not imposed more proportionately on large and small asset management firms, New City Initiative is convinced that many fewer start-up firms will come to market. This arrest of competition will damage all, but especially the consumer, because choice will become more limited. The complexity of new regulations, and the potential punishment for infringement of them, pose massive obstacles to the growth of competition in the sector.

A new priesthood, called compliance officers, has emerged from the financial crash. Extra regulation is necessary, but as the regulatory regime continually evolves, becoming ever more complex, and the scale of potential punishments becomes so damaging to small firms, the temptation is for compliance officers to engage in gold-plating, to avoid any possibility of failure to comply. Their numbers—again according to the FCA—have more than doubled in the last 14 years.

I make a final point on banking regulation generally. Can the Minister say whether it is true—as I have read—that retail banks are going to be allowed to pay dividends to their investment banking operations?

Overall I welcome the Bill and wish it safe passage through the House.

Succession to Peerages Bill [HL]

Lord Northbrook Excerpts

Friday 11th September 2015 Lords Chamber

[Lord Northbrook (Con)]

My Lords, I welcome my noble friend Lord Trefgarne’s Succession to Peerages Bill. As an aficionado of the topic, I declare an interest as my title will die out under current peerage inheritance rules. I have a very capable eldest daughter who would be more than suitable to carry it on.

I believe that the Bill offers a way forward to prevent this extinction without seriously threatening the status quo for those peerages where there are male heirs. It is better than Lord Diamond’s Bills of 1992 and 1994, which proposed that hereditary Peers could petition the Crown to amend their letters patent so that the peerage could descend to the eldest legitimate child, male or female. It seems more logical than my noble friend Lord Lucas’s recent Bill, which sought to enable the succession of female heirs to hereditary peerages if the incumbent of the peerage wrote to the Lord Chancellor to ask that this should occur. I prefer it also to Mary Macleod’s Succession to Hereditary Peerages and Estates Bill in the other place, which included provision to remove male preference primogeniture in succession to hereditary peerages.

After the Succession to the Crown Act has passed, it seems only logical that appropriate change should be made for hereditary peerages. The House of Commons Political and Constitutional Reform Committee’s 2011 report on the rules of succession to the Crown noted that the proposal to end the preferential treatment of men in the line of succession had been,

“widely welcomed, and with good reason”.

It also drew attention to holders of hereditary peerages, noting that,

“the way in which their titles are inherited, and its effect on the gender balance in Parliament, remain matters of public interest”.

My noble friend Lord Fellowes of West Stafford stated in a submission to the Hereditary Peerage Association in 2008:

“People will tell you how difficult it would be and how it would involve re-creating all the peerages from new. … When”—

in the 1700s—

“the Duke of Marlborough was needed for another campaign and his only son was dead, a bill was introduced into Parliament granting a new remainder allowing a unique form of female descent to the existing title, without recreating it”.

As we have heard, my noble friend Lord Fellowes has now approved what are essentially the contents of this Bill, based on the Marlborough precedent.

In the same submission, my noble friend Lord Fellowes touched on his concern that, if nothing is done in this sphere, European law may step in with a solution of its own. The noble Lord, Lord Pannick, surprisingly did not mention it, but as I understand it Section 14 of the Human Rights Act 1998 makes it now illegal to discriminate on the basis of sex, where both sexes may perform the function required. Discriminating against women solely on the basis of their sex is also illegal. The noble Lord, Lord Pannick, has also mentioned to me that, if a legitimate female issue, where the peerage would otherwise become extinct, referred a case to the European Court of Human Rights, they could well have a chance of success. The organisation called The Hares—I think I see a couple in the audience—may well pursue this route, or much worse could happen if Mr Corbyn gets into power. It is far less disruptive to peerages, in my view, to pre-empt such a referral by enacting this Bill. Will the Minister give the Government’s thoughts on the outcome of such a referral, and their reaction to it?

I can understand the logic of Clause 3, which would guarantee a batch of new Peeresses, making the peerage look refreshed and modern from the first moment of the change, as opposed to having to wait years for any alteration really to show, and 1952 seems a sensible date. It is striking that there are currently no women on the most recent register of hereditary Peers who have put themselves forward to be eligible as candidates for future by-elections. All the hereditary by-elections since 1999 have been won by men. As of now, only one Peer of the 92 hereditary Peers who were allowed to continue in 1999 is female.

I have two other issues to raise. I think that there should be an amendment extending the change to baronets, although I take the point made by my noble friend Lord Trefgarne about that being outside the Title of the Bill. I am not sure either about the principle in the Bill of excluding a very close relative such as a brother from inheriting a peerage. Ruling out cousins and distant relatives is fair enough as their expectations are never high, but a very close relation may be a step too far. As the noble Lord, Lord Fellowes, stated, family financial arrangements could be seriously disrupted. There could be an argument for an amendment extending the peerage succession to brothers—a modification of the semi-Salic system, although it has to be said that an heir presumptive has never had the security of an heir apparent.

But overall I welcome this Bill wholeheartedly. It would merely put peerage succession on to the same basis as the Crown used to be. I wish it a safe passage through the House.