Grand Committee
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Arrangement of Business
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The Deputy Chairman of Committees (Lord Bates) (Con)
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person, respecting social distancing, and others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down and to wipe down their desk, chair and other touch points before and after use. If the capacity of the Committee Room is exceeded, or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
The time limit for the following debate is three hours. Lord Forsyth of Drumlean? Can we try again for the noble Lord, Lord Forsyth of Drumlean? All other speakers, please be on mute. We are still experiencing some technical problems, so we will adjourn for five minutes.
Social Care Funding (EAC Report)
(3 years, 9 months ago)
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Lord Forsyth of Drumlean
That the Grand Committee takes note of the Report from the Economic Affairs Committee Social care funding: time to end a national scandal (7th Report, Session 2017-19, HL Paper 392).
Lord Forsyth of Drumlean (Con) [V]
My Lords, I am pleased to introduce the Economic Affairs Committee’s report, Social Care Funding: Time to End a National Scandal.
We published our report in July 2019, and yet, 18 months later, we still await the Government’s response. The Government are accountable directly to Parliament. They have a duty and a responsibility to reply to committee reports in a timely way, usually within two months. Some 18 months ago, we said:
“With each delay the level of unmet need in the system increases, the pressure on unpaid carers grows stronger, the supply of care providers diminishes and the strain on the care workforce continues.”
Just 20 days after our report was published, the Prime Minister stood on the steps of Downing Street and said
“we will fix the crisis in social care once and for all with a clear plan we have prepared to give every older person the dignity and security they deserve.”
Now, more than ever, urgent government action is required.
Before I explain our conclusions, I would like to thank the committee staff who produced the report: Sam Newhouse, Luke Hussey, Michael Berry, Ben McNamee and Lucy Molloy. Especial thanks go to our special adviser Professor Richard Humphries, whose support was invaluable. I also thank my noble friend Lord Tugendhat, the noble Baroness, Lady Bowles, and the noble Lord, Lord Burns, who leave the committee today under our rotation rules. All of them have made a huge contribution to our deliberations and participated in no fewer than nine inquiries.
I must begin by praising our care workers. They have been on the front line of the pandemic. They have put their own health and safety to one side to care for and protect the most vulnerable among us. Care workers have performed an immeasurable service for our country but clapping alone will not help put in place the major reform that the sector so desperately needs.
In May 2020, I wrote to the Chancellor to press the case that this report deserves renewed attention now that the needs of the sector, and the heroic service and sacrifice of its workforce, have come to the fore of the nation’s priorities. In response, the Chancellor said:
“The Government’s number one priority for adult social care is for everyone who relies on care to get the care they need throughout the COVID-19 pandemic.”
In July 2020, I exchanged letters with the Minister of State for Care in which she assured me that the Government were due to meet shortly to discuss our report and any further reflections on reform. Finally, in October 2020, the Minister, my noble friend Lord Bethell, said that the pandemic had delayed the Government’s work on designing a sustainable social care funding model—words, words, words and broken promises.
Let me be clear. It is quite wrong to suggest that the Government could not have, and cannot, bring forward a plan for social care reform because of the pandemic. The opposite is the case, and I hope my noble friend will not repeat this calumny when he reads out his departmental speech this afternoon. The pandemic has revealed the centrality of social care and the need for no more dithering, no more Green Papers, no more delays; major reform must take place now.
We held a private meeting with care workers, and the stories we heard were truly humbling. We heard of frustration at being described as “just a carer” and that the sector is no longer seen as attractive. We heard from burnt-out workers, who cannot afford to run a car, forced to take multiple train journeys to get to work, working 14- to 15-hour days with take-home pay less than can be obtained for stacking shelves in a supermarket. Social care workers deserve better than this. They should be rewarded and treated as a highly skilled and caring profession. We concluded that career structures, training and the establishment of a professional structure were urgently needed.
Social care is a job-rich sector at a time when, sadly, unemployment is soaring as a consequence of the Covid-19 pandemic. The Resolution Foundation said that it would take an extra 180,000 care workers just to bring the ratio of carers to the over-70s population back to its 2014 peak. That is 180,000 just to get back to where we were in 2014. In our most recent report, on employment and Covid-19, we repeated that the Government should expand the number of care workers by increasing funding to the sector, with stipulations that it should be used to raise wages and improve training and conditions. It is time to turn our hands from applause to actions which give our social care workers the deal they deserve.
We have had enough of excuses for procrastination such as “The Government cannot bring forward plans for reform without cross-party consensus.” Everyone knows there is a consensus in Parliament and the country that we need to commit the resources that are desperately needed to support our most vulnerable citizens, young and old.
In May 2020, when our committee held its annual session with the Chancellor, we pressed him on the problems faced by the care sector. He said that the absence of a consensus over funding is a significant barrier to reform, along with its expense. That translates from Treasury speak to “I don’t want to spend the money.”
Since then, the Government have continued to kick the can down the road. More speeches have been given accepting the need for reform, yet cross-party talks have been delayed, and the proposals the Government have promised have been pushed back again. There was consensus in our cross-party report on a fully costed, long-term solution. The duty now falls upon the Government to bring forward a plan that reflects the cross-party consensus that does exist.
We drew attention to dwindling access to local authority funding, and the increasing pressures that result in the rationing of care to people who are in desperate need. Recent figures from the IFS show that between 2009-10 and 2017-18, per-person spending on social care for the over-65s fell by 31%. Significant investment is needed to buck that trend. We examined various options for how funding social care can be made sustainable. Having done so, we recommended that social care be funded largely from general taxation.
A central theme of our inquiry was the question of fairness. Our report identified three ways in which the present system is unfair: disparities between adult social care and the NHS, between those who fund their own care and those who receive local authority funding, and between different local authorities.
On the first of these, the UK has an ageing population, and many people have complex and difficult social care needs which they must fund themselves. The disparity with the NHS, which is free at the point of use, is striking. Why should support be free for cancer patients but not those suffering from motor neurone disease, for example?
Dementia was cited by several witnesses as an example of this disparity. The costs of caring for dementia can be long-lasting and, in some cases, catastrophic. The Alzheimer’s Society told us that the typical dementia care costs are £100,000, rising to £500,000 in some cases.
Secondly, care homes charge self-funders more in order to make up the inadequate amounts paid by local authorities. The Competition and Markets Authority estimated that self-funders paid 41% higher fees than the local authority rate. Witnesses said this amounted to a cross-subsidy that is unsustainable. We concluded that there is a real danger of a two-tier market emerging, in which care homes are driven to market to self-funders, reducing the availability of places for individuals sponsored by local authorities.
Thirdly, local authorities differ in respect of the cost pressures they face and their ability to raise funds. The result is that a postcode lottery has emerged. These disparities are growing with every day of government inaction. Reports suggest that the Government have been looking at private insurance as a way forward. I am grateful to the Association of British Insurers for the briefing that it sent to colleagues for this debate and which reflects the committee’s conclusions. No country relies primarily on private insurance to fund adult social care costs. It cannot provide the amount of funding required by the social care system, not least because roughly half of public social care funding is spent on people who are of working age; it is not just about the elderly.
Instead, we concluded that social care must be brought closer to the NHS by introducing free personal care. Personal care is about funding the basic activities of daily living: help with washing, bathing, dressing, mobility, eating and drinking. It does not include other, more expansive, activities, such as assistance with housework or shopping. Those in care homes would still pay for their accommodation and assistance with less critical needs. Those receiving care in their own homes would not have to pay accommodation costs, which may encourage care users to seek essential help with personal care early.
As the ABI says in its brief, a universal offer from the state would provide a clearer foundation on which people can plan and make their own provision where they need to top up. If personal care was free, individuals would likely be expected to top up their hotel costs with private funding. An insurance or asset-based top-up market could grow to support this. We concluded that the costs of care should be shared between individuals and the taxpayer. We were told that basic entitlement to publicly funded personal care would cost around £7 billion, if introduced in 2020-21.
We concluded that the Government should adopt a staged approach to providing the additional funding. We said that they should immediately invest in adult social care to restore quality and access to 2009-10 levels, estimated now to cost £10 billion. They should then introduce free personal care over the next five years.
In July 2018, the then Prime Minister announced that NHS funding would be increased by £34 billion over the next five years. This amounted to a spending increase in real terms of £20.5 billion. That increase alone is almost as much as the total spending on social care. It is time Cinderella was taken to the ball.
I have been a Conservative for nearly 50 years. I served in local government for five years, in both Houses of Parliament for 36 years and as a Minister for more than a decade. Of course, during that time, I have supported policies that I was uncomfortable with and promoted others that I regret, but I have never felt the sense of shame that I feel today at our failure to act on the funding of social care and to tackle, in the words of the title of our report, “a national scandal”. I beg to move.
Baroness Kingsmill (Lab) [V]
My Lords, I am delighted that we have at last got this debate, and I share the frustration of the noble Lord, Lord Forsyth, at the time it has taken. He has been an indefatigable leader and chairman of the Economic Affairs Committee in the time that I have served on it, and I am most grateful to him and my colleagues on it for all the work and energy that have gone into not only this report but others, where we have tried to be practical and helpful and to make achievable suggestions for policy change.
I am also grateful for the passion with which the noble Lord, Lord Forsyth, has dealt with this and spoken about it today. My passion is somewhat dimmed by defeat, in a way, because it feels as if this is something that I have been banging on about for ages and we are still not really getting anywhere—but I am sure that everyone in the sector feels the same.
I will focus particularly on the plight of the care workers because that is my background and area of interest. The noble Lord, Lord Forsyth, has mentioned them, but it is worth going into some of the privations that they suffer in a little more depth. They are under- valued, underpaid and definitely undertrained; they do not have the status of nurses or even of childminders. The sector is subject to very weak regulation: we just do not know who they are or what qualifications they hold, and they are not registered with any professional body. The workforce of 1.8 million people in England is almost invisible—that is, until you need them, when they become very important.
The low status and poor treatment of care workers have led to a really vicious downward spiral in one of the most difficult sectors for workers, with a huge amount of exploitation. It is not just that they are badly paid; most of them earn less than the minimum wage, if you take into account the fact that many of them do not get paid for working in between clients. They are not paid for the journeys that they make and are often subject to very exploitative zero-hours contracts, which destabilise their lives and make it extremely difficult for them to do their work properly.
The workforce tends to be older women or migrant workers, which may very well account for the fact that they are not given much priority within the health and care service generally. They are overlooked and, as I say, we do not really know who they are. Turnover among care workers is enormous—between 30% and 40%—because they are badly paid; sometimes the supermarket down the road is offering a pound an hour more, and they have to go. They are often the main wage earner in their family, and they have to go where they can earn the most money, so there is a terrible, very rapid, turnover.
In the context of the Covid crisis that we are suffering, care workers are seven times more likely than the rest of the population to become infected with it. There is a huge amount of absenteeism at the moment because of illness or isolation, and there is a vast unmet need for care workers at the moment.
The other issue that is important when we talk about care workers is the fact that they have no career opportunities. Attracting people into the profession is very difficult: there is no progression and it is seen as unskilled work, which it most certainly is not because, so often, they need to have the skills to deal with complex feeding methods, using hoists for moving patients, dressing wounds and administering medication, as well as providing vital domestic and emotional support for the care recipients. They have to do all of this in 15-minute slots, if they are a domiciliary worker—
Baroness Scott of Bybrook (Con)
I remind the noble Baroness of the four-minute time limit.
Baroness Kingsmill (Lab) [V]
On that point, I will sum up simply by saying that I commend this report and hope that action comes as a result of it.
Baroness Jolly (LD) [V]
My Lords, social care funding for older people or those with a disability has been put in the “too difficult” or “too expensive” box for as long as I have been involved in health and care policy—about 20 years. At every general election since 2010, there has been a promise to fix it, and, sure enough, after the 2019 general election, as we have heard, Prime Minister Johnson joined his predecessors and promised to address the issue “once and for all”.
State provision of social care is not easy, it can be expensive and there is no right way to do it. The German and Japanese models are often quoted; they involve members of the public contributing to an insurance system that will pay for their care once they need it.
England has no state provision of social care. We have a system whereby the person’s needs are addressed and, after a means test, they will find if they are eligible for financial support from their local authority. This will go some way towards the provision of their social care, either in their own home or in a residential setting, but not accommodation costs.
Local authorities pay out at different rates. I sat on the joint scrutiny committee for the Care Bill 2014. We heard of families moving to a neighbouring county to ensure that they were eligible for a more generous provision. Sometimes there is a need to top up from savings or by selling or remortgaging the family home. Some with long-term care needs might, for many years, face care costs that seem reasonable at the outset but will quickly erode savings. So the proposed cap is welcome.
The proposal to introduce free personal care over the next five years should be adopted. This would require an immediate investment of £8 billion—the estimate from the King’s Fund and the Health Foundation.
The other part of the care system is for those adults with disabilities; the majority—1.5 million—have a learning disability. Until last year I was chair of a charity which cared for over 2,000 adults with a learning disability. With help, such people can lead a fulfilling life. Many are in residential care or supported living. The funding from this comes from local authorities, which hold the responsibility for their care. Each year the conversations with commissioners become more difficult, as local authorities’ budgets are stretched and the costs of caring rise.
As the noble Baroness, Lady Kingsmill, said, care workers are paid poorly, and should be receiving the real living wage of £9.50 per hour but many do not. Those who work in the care of either older people or those with a learning or physical disability are not unionised, as nurses are. They are not regulated; nor are they required to have formal qualifications, but many would take the care certificate. Someone who has been fired for negligence or worse can walk out and get a job straightaway. This should change.
Whichever way you look at it, the current system is no longer fit for purpose. There is a sustainable solution. The report of the Select Committee of the noble Lord, Lord Forsyth, offers a route map for the department. Mencap estimates that £3.2 billion would stabilise the system. So, when they have a moment, the Prime Minister, the Chancellor of the Exchequer and the Secretary of State for Health and Social Care should read this report, and do what successive Governments have promised to do: fix the funding of the care system. This would be welcomed by so many older people and their children.
Baroness Finlay of Llandaff (CB) [V]
My Lords, I declare that I chair the National Mental Capacity Forum and am a Bevan Commissioner. This commendable report provides a way forward, recommending that there must be an appropriate national funding formula. That formula must be fair, recognising that areas of high costs are often in areas of less business buoyancy, meaning that the desire to make local authorities more fiscally self-reliant risks widening gaps in provision and worsening the postcode lottery.
The report was prophetic. The pandemic has shown that social care cannot be used as a pressure valve for the NHS. It has also revealed to the nation, as the report points out, that social care sector staff providing direct care are underpaid and undervalued and that their personal well-being has often been overlooked.
Personalised care has two distinct roles. One is providing all the personalised care underpinning and integrated with healthcare interventions, often delivered by health and social care staff working together. Any division based on budgets creates an artificial split, with expensive bureaucratic processes if a person’s care moves from one sector to another, either geographically or by diagnostic category.
The other role of personal social care is to support people—often working-age adults—in their own homes, to allow them to live well and contribute in our society. A key part of this role is in the prevention of healthcare problems arising. Yet this prevention role has been chronically undervalued, even though it saves avoidable expenditure from the health budget. The future of public health in social care needs much greater emphasis.
During the pandemic, some charities have instigated innovative programmes to deliver social care and support, several seeing great results in improving mobility and independence. But current funding difficulties for charities have revealed our overreliance on this sector over years.
The report highlights the workforce—without a workforce any structure will fail and there will certainly be no resilience. Will the Government urgently look again at a proper career structure with parity of esteem and of pay for those in social care? Percentage pay increases simply widen the gap between the lowest paid, who do the work with the most vulnerable, and others. Staff need their travel time between homes recognised and to be able to park on arrival. They need ongoing training and supervision, with support for their own well-being—if they feel cared for, they are better able to care for others. Those receiving social care are potentially very vulnerable, which is why a proper registration and revalidation process of social care staff would set a national standard and could provide a focus—to nurture staff, helping them feel pride in their work and more respected. Their work is highly skilled and low paid, and their indemnity needs sorting out across the sector in the long term as part of an integrated system.
Form must follow function in a fair national funding formula that recognises our duty to each other in society. In this way, we might be able to move forward. To not heed this report will worsen our problems.
The Lord Bishop of Carlisle [V]
My Lords, I add my own expression of gratitude to the Economic Affairs Committee for such a clear and coherent report, based as it is on such careful research and presenting us with such direct and forthright conclusions. Its basic principles for reform are eminently sensible. Like others, I applaud the emphasis, pace Dilnot, on a partnership approach to the funding of social care, and the principles of free personal care, with a cap on accommodation costs, and increased funding enabled by general taxation. I will focus my brief contribution on principle (j), which reads:
“Invest in the social care workforce and ensure a more joined up approach to workforce planning with the National Health Service.”
If that is ignored, any increase in funding will run the risk of being wasted.
We are all well aware of the current situation in this country. The number of older people and working-age adults requiring care is increasing rapidly. Some 1.4 million people over 65 have unmet care needs. Covid has reminded us of just how crucial care homes and carers are in our society, alongside NHS workers and social services. Yet, as the noble Baronesses, Lady Kingsmill and Lady Finlay, have pointed out, carers are usually undervalued; they refer to themselves as second-class citizens; they are underpaid, underqualified and under- resourced, with a chronic staffing shortage that is getting steadily worse.
There are too many adjectives there beginning “under”. It is no wonder that there is a turnover rate of nearly a third in such an underregarded profession, with poor levels of both retention and recruitment. As we have already been reminded, what is so obviously needed for carers is a combination of proper status, good and appropriate training, and reasonable pay. The report before us has significant implications for all of those, as pages 24 to 29 make clear.
With regard to status, if the social care workforce of 1.6 million is to be developed and stabilised, there needs to be more parity of esteem with their 1.4 million NHS colleagues. That necessitates a programme of vocational as well as academic training, which will provide social care staff with the qualifications and career structure that are currently lacking.
In its turn, that should prompt levels of pay, especially in publicly funded institutions, that begin to reflect the value to society of the service being offered. None of this can happen without a substantial increase in funding, which is why the report is so important. That is before even considering the possibility of support for the 5 million or so unpaid carers who do such a great job and save us vast sums of money every year.
However, it involves more than just financial commitment, crucial though that is. This report, like so many before it, is about a change of culture, which is why the greater integration of health and social care to which it refers is so vital. We have a renamed department, but the transformation that that implies must go beyond its title. When asked recently about his biggest hope for change, Sir Simon Stevens replied:
“Seeing health and social care as two sides of the same coin.”
The Select Committee on the Long-term Sustainability of the NHS has exactly the same aspiration.
It has already been observed that, despite many positive and encouraging statements over the years, there has so far been a huge political reluctance to grasp this particular nettle, despite the cross-party consensus mentioned by the noble Lord, Lord Forsyth. I appreciate that much time and attention is currently focused elsewhere, but we would be grateful to know from the Minister whether Her Majesty’s Government have any timetable in mind for the sort of reform of our social care system that, as this report makes clear, is so urgently needed.
Lord Hunt of Kings Heath (Lab) [V]
My Lords, this is an excellent report and its stark conclusions are as relevant today as when it was first published. Social care is severely underfunded, with the most deprived areas being the worst hit. More than a million adults who need social care are not receiving it and the system is riddled with unfairness. We are in a vicious cycle. After decades of reviews and failed reforms, the level of unmet need rises, the pressure on unpaid carers grows, the supply of care providers diminishes and the strain on the undervalued care workforce ever increases.
The core recommendation of £8 billion to be spent immediately to restore quality and access to adult social care has been widely supported. So, too, has the recommendation to introduce free personal care, such as help with washing, dressing or cooking, to be funded through general taxation over a period of five years, at a cost of £7 billion per year. The committee argues that this is simple, fair and not much more expensive than other proposals for reform. But, given the history of many reviews, we should not underestimate the barriers to its adoption, and I would like to mention five of those barriers.
First, adult social care has never commanded the priority that it deserves. The way that care homes have been dealt with over the pandemic is of course illustrative of this, with a lack of priority given to them in relation to PPE, testing and the movement of infected patients from hospitals to care homes.
Secondly, those in care homes would still pay for their accommodation and assistance with less critical needs like housework or shopping, so it is not the whole deal.
Thirdly, I am by no means certain that the costs of even limited free social care have been fully quantified. The experience of the NHS at its beginnings is instructive. Nye Bevan had assumed that, after a few years, the costs of the NHS would come down as the NHS caught up with the backlog of patients who had been unable to afford treatment before. That proved to be a trifle optimistic.
Scotland’s experience is relevant. The King’s Fund and Health Foundation 2018 report A Fork in the Road warned that the introduction of free personal care in Scotland had
“created unexpected levels of increased demand for domiciliary care which we might also expect to occur in England.”
They estimated that, with free personal care, the number of people receiving publicly funded domiciliary care in England would almost double. My concern is that free personal care would be underfunded and long waiting lists would be the result.
The fourth issue is that, in arguing for a mainly publicly funded solution, the committee’s hope for a market for private care insurance would be likely to develop in a system where personal care costs are funded by the state. This was the hope of Sir Andrew Dilnot who argued in his report, which the Government accepted, legislated for but never implemented, that limiting the risk for insurers by a cap on individual costs could help to provide a sustainable market for private social care insurance. The insurance market was unenthusiastic and I would like to hear more from the chair of the committee about how the committee thinks a more positive response would come from these proposals.
Fifthly, the committee says that cross-party co-operation will be necessary if progress is to be made on reforms to social care funding. I wish the committee well on this. Ever since Andrew Lansley’s description of Andy Burnham’s proposals in 2010 as a “death tax”, cross-party consensus has looked an ever distant dream, though I accept that it is desirable.
None the less, and despite the evident challenges, this is surely a good basis on which the Government can build their long-anticipated Green Paper.
Lord Razzall (LD) [V]
My Lords, this report was published in 2019 and I share the frustration of the noble Lord, Lord Forsyth, about the delay in debating it, which I must say is indicative of the treatment of social care by successive Governments.
The history is stark. As long ago as 1999, a royal commission proposed more generous means testing for residential care and free personal nursing care. Nothing happened in England, although I think that free care was introduced in Scotland. In 2011, the Dilnot commission proposed a cap on lifetime care and a more generous means test. The coalition Government legislated to implement these proposals, but the Conservative Government in 2015 postponed their introduction and, in 2017, this postponement became permanent. As Jeremy Hunt said earlier this week:
“It was the silent cut that people didn’t notice until too late”.
In 2017, the Conservative Government promised a Green Paper, but nothing happened, perhaps because of fears about the so-called dementia tax in that election campaign. The 2019 Conservative manifesto promised urgently to seek cross-party consensus on this issue—nothing has happened.
Urgent action, as all noble Lords have indicated, is now required. In 2018, 14% of older people were reported to have unmet care needs. This situation will clearly have deteriorated as a result of the pandemic. To make things worse, we know that, as we speak, there are over 100,000 unfilled vacancies for workers in residential homes—a possible side effect of Brexit—and we also know that finance, as the report says, is forcing care homes to prioritise people who are self-funding over local authority provision.
I therefore endorse the call in the report for cross-party consensus on social care and the demand for a White Paper now to set out the options for funding. I agree with the conclusion in the report that additional funding for adult social care should be provided as a government grant, paid directly to local authorities and funded from general taxation, and that personal care at home should be free. The current postcode lottery in domestic care provision is manifestly unfair. Is there any wonder that local authorities cannot cope, bearing in mind the cuts imposed by central government since 2010? I also agree that there should be a cap on residential care, as Dilnot recommended and as is suggested by the report.
But we should also not forget the position of unpaid carers, without whose help the whole system would collapse. It is estimated that there are 9 million unpaid carers in this country, many of whom have been badly affected by Covid, as Mencap demonstrated this week. The report emphasises the importance of not allowing the body of impartial carers to diminish. Is it too much to ask the Government to increase the carer’s allowance of £67 per week by a further £20 per week, as Sir Edward Davey has called for?
Baroness Hollins (CB) [V]
My Lords, I refer to my interests in the register. I thank the noble Lord, Lord Forsyth, for steering this excellent report. We can no longer ignore the impact that chronic underfunding and political indecision about adult social care are having on the well-being of individuals—something the pandemic has shone a spotlight on.
First, I question whether it is possible sensibly to debate social care for older people at the same time as social care for working-age disabled adults, who are far too often overlooked in debates on social care reform. Perhaps older adults have more political clout. It does not make sense to ignore or exclude a group which, according to the Association of Directors of Adult Social Services, accounts for 64% of demographic pressures on the sector and approximately half of social care spending in England—I know that the noble Lord referred to this.
Secondly, we need a two-way collaboration between health and social care: interdependence rather than dependence. The NHS cures us of disease and mends bones; social care helps to cure loneliness, mends social inequalities and unlocks potential. For social care to achieve its mission, it must have personal fulfilment and independent living at its heart. For many working-age disabled adults, social care is not personal care but rather the support to develop skills such as cooking and maintaining a home so that they are able to make meaningful decisions about how to live their life and to grow in confidence, perhaps to find employment, to make friends and to play an active role in the community. Proposals that include funding mechanisms based on housing wealth, assets, floors, caps and insurance seem to forget about the impact that such models could have on working-age disabled adults. While free personal care would undoubtedly benefit many people, one concern is that underfunding could facilitate a drift towards the medicalisation of social care, where individuals’ horizons are reduced and the goal of the system becomes merely to keep someone alive.
Thirdly, social care must have a better-paid and trained professional workforce, with a meaningful career structure to reward dedicated staff and producing a talent pipeline that creates an avenue for experienced staff to develop, become mentors and pass on their knowledge and skills to a new generation. We know the problems that plague the workforce, including that some people take short-term jobs to fill employment gaps, but it is mainly that low pay and poor career progression lead to high turnover and poor retention. With more than 100,000 vacancies, we cannot underestimate the challenge. These problems are not new. In 2016, I chaired an expert reference group for Health Education England on building a direct support workforce to deliver the transforming care programme for people with a learning disability and/or autism who display behaviour described as challenging. Without adequate support and effective collaboration between social care and community mental health services, that group faces a real risk of ending up in inappropriate in-patient units at huge cost, both personal and financial. Of course, many people post Covid will want to avoid congregate care settings. This will need a different approach to career development and career structures.
The social care sector needs an immediate injection of funding to help improve pay and stabilise the sector, as many have already said, as well as reform in the ways that I have briefly outlined with respect to working-age disabled adults.
The Deputy Chairman of Committees (Lord Bates) (Con)
Before I call the noble Lord, Lord Taylor, I remind all participating remotely to keep their microphones on mute unless they are called to speak.
Lord Taylor of Holbeach (Con) [V]
My Lords, I refer to my interests as set out in the register. However, I have a personal interest in the subject of the report, as, way back in 1987, an announcement was made by the then South Lincolnshire Health Authority that it was to close Holbeach Hospital. I was active in the local community and the area generally and perceived this to be a considerable threat. The hospital provided general bed care; there were consulting rooms for out-patient clinics and a physiotherapy department. It worked with local GPs and hospital doctors to provide the substantial rural community with health and social care. To cut a long story short, with local support, we negotiated a takeover of the premises by forming a local charitable trust, which then raised the money needed to improve the building up to registration standard at nursing home level and entered into a contract with Lincolnshire County Council for the funding of 22 beds. An agreement was reached with the health authority to continue with six doctors’ beds, the out-patient clinics and the physiotherapy department. We reopened in 1989.
I chaired the Holbeach and East Elloe Hospital Trust for 18 years. When I came to your Lordships’ House, I became its patron. The trust has thrived and maintains support locally. As a result of income generated and bequests, we soon purchased the freehold and doubled the number of beds to 47, including 12 re-enablement beds under the doctors’ supervision.
I congratulate my noble friend Lord Forsyth of Drumlean on chairing the committee and producing such a full report. Reforming the sector will be one of the most challenging undertakings for our Government. With such a complex system, it is important to look at all the options on the table. Notwithstanding the challenges, putting social care on a sustainable footing, where everybody is treated with dignity and respect, is imperative.
It is not as though we need a reminder, for the past year has shown just how vital this sector is for people who rely on social care. I welcome the Government’s recognition of the challenge that this sector faces during the pandemic by providing £1.1 billion of ring-fenced funding, which is vital to help put measures in place to improve infection prevention. How much funding have the Government made available for the costs associated with increased testing in care homes?
I want also to focus on the quality of care received by those who rely on adult social care. Despite increasing challenges, it is important that we recognise that the sector continues to provide high-quality care and support. I was encouraged to read that 85% of adult social care providers are currently rated good or outstanding by the Care Quality Commission. I think that the Committee will welcome this figure and want to pay tribute to the care givers, who are doing such a fine job, as many noble Lords have said, during such difficult circumstances.
All social policy areas have been put under pressure as a result of the pandemic, for they are interrelated. Social care, healthcare, pensions policy, the benefits system and even education all play a part in a civilised approach to need, even in the best of times. We need a consensus—
Baroness Scott of Bybrook (Con)
My Lords, I remind the noble Lord that there is a four-minute speaking limit for this debate.
Lord Taylor of Holbeach (Con) [V]
I hope that the report and the purpose of our debate on it will give the Government confidence that they can take Parliament with them in tackling this great issue.
Baroness Pitkeathley (Lab) [V]
My Lords, I declare my interest as vice-president of Carers UK. I am greatly indebted to the noble Lord, Lord Forsyth, for finally securing this debate and very pleased to participate—as pleased as I was, in fact, when I first read the report in July 2019, not just with its content but mostly that it existed at all.
In the 23 years I have been in your Lordships’ House, I have taken part in many debates on social care and have been wont to call those who join me “the usual suspects”. We were a relatively small band who banged on about this subject whenever we got the opportunity and frequently used the expression “a national scandal”, as it is used today. I have to tell your Lordships that it makes pretty depressing reading to go back to those other debates on social care because the problems remain the same and so little progress seems to have been made. But the noble Lord, Lord Forsyth, and his colleagues are not the usual suspects and they reached the same conclusions.
The committee found a situation which, I think it is safe to say, shocked its members. If it was bad in the summer of 2019, how much worse is it now after the ravages wrought by the pandemic? The situation is bad for everyone: for local authorities, for the NHS and for care homes. It is very bad for family carers, as the report acknowledges. We all know now that families and friends are holding the social care system together by providing support for the most vulnerable in society. Many were at breaking point before the current crisis and are now sick with worry. We are asking even more of these unpaid carers than ever before. They urgently need to be supported and their contribution, worth billions of pounds, recognised.
If Covid-19 and the additional focus it has brought on the inadequacy of the care system have any positive outcome, it may be that we are finally forced to take bold decisions about the funding and provision of social care. Over the years, we have all witnessed the endless recommendations about how to reform the system: the reviews, the royal commission, the unenacted legislation and, of course, the endless broken promises. What we need now is a decision of the level and quality that our forebears took in relation to the NHS, but this time it must be about reshaping health and social care around today’s needs, not those of the population of a post-war Britain.
We cannot go on as we are, trying to do more with less, managing demand by simply not meeting it and by being dishonest with the public and the voters. No Government have ever made it clear to the public that responsibility for paying for and arranging care rests with individuals and their families. If they are not prepared to reform the system, the Government must at least be prepared to promote clearer public understanding of how the system works, what people can expect and, more importantly, what they cannot expect.
This problem is not going to go away; it is only going to get worse. The question is not whether these costs will arise, but how they will be met. Will they be met by the public purse or by private individuals? Every independent review of the past 20 years has recommended that future funding of social care, as well as healthcare needs, should come from public, not private, finance. The needs of individuals cannot be divided up neatly into health or social care needs. The time for debate is surely over. We have enough research and experience to enable us to take this decision—to decide on reform. All we need is the will to do so. If we have the will, we can end this national scandal now.
The Deputy Chairman of Committees (Lord Bates) (Con)
I now call the next speaker, the noble Lord, Lord Campbell, after whom I will call the noble Lord, Lord Lansley.
Lord Campbell of Pittenweem (LD) [V]
My Lords, I do not claim expertise, as some of the earlier contributors to this debate obviously have. But at my age I do declare an interest—and if I have an interest, then I have some share in the embarrassment that politicians of all parties should feel at the fact that the problem of the care of the elderly has been so unresolved and for so long.
Reference has been made to the Sutherland report. It is important to remember that it arose out of a manifesto commitment of the incoming 1997 Labour Government, promising a royal commission into long-term care for the elderly. It was launched by the late and much-missed Frank Dobson, who was then the Secretary of State for Health. In doing so, he said that the arrangements for the long-term care of the elderly were so unsatisfactory that they could not be allowed to continue much longer. That was in 1997.
Sir Stewart Sutherland, as he then was—later, of course, Lord Sutherland of Houndwood, and a Member of your Lordships’ House—was invited to conduct the royal commission, but his proposals were rejected by the Government as unrealistic and unaffordable. They were summed up in the expression now most frequently used as “free care for the elderly”. As has been mentioned, they were in fact implemented in Scotland, where it is fair to say that they have not been without criticism.
Let me fast forward, as we must, to the present. As has been said, in July 2019 the Prime Minister said he had a plan to give every elderly person “dignity and security”—remember those words. The Conservatives’ manifesto for the 2019 election claimed that they would build a cross-party consensus to answer the problem. Nothing has happened in respect of that. In January 2020, the Prime Minister yet again said that he had a plan; in June 2020, the Health Secretary said something similar. It is to the credit of the noble Lord, Lord Forsyth, that he has not allowed this matter to rest.
I am struck by the conclusions in the report, a few of which I will refer to: on inadequate funding, increased demand, pressure on family members to fill the gaps, and the geographical disparity in provision across the country. These issues are not new but have been characteristics of this problem for as long as it has been recognised. It is not necessary to agree with every word of every sentence of this admirable report but let me point out this: the Labour Government failed, the coalition Government failed, and the present Government are failing, by way of procrastination.
I will leave your Lordships with this thought to finish. Think of the thousands of elderly men and women who have suffered indignity and insecurity since 1997. That is why I join the noble Lord, Lord Forsyth, in saying that we should not feel embarrassed; we should feel ashamed.
Lord Lansley (Con)
I am pleased to follow the noble Lord, Lord Campbell. It is an abject failure on the part of our political system that the reform of social care funding has not been achieved to date. I will refer briefly to what was my responsibility. In 2010, I asked Andrew Dilnot to prepare a review and make recommendations. His proposals continue to form a part of what should be the reform of social care funding in the future, but I do not think that people quite appreciate the value of what he proposed. It was not just that there would be a cap on the costs people would have to meet, creating, as it were, a fundable and insurable proposition. It is also that there would be a substantial increase in the capital thresholds and a taper, such that under his proposals nobody would have had to lose more than 40% of their total assets.
That would give people the reassurance, even if they were to self-insure or be self-funders, that they would not work all their lives and then find, as a consequence of the catastrophic effects of Alzheimer’s or dementia, for example, that they lost everything and their families got nothing. We have to arrive at this point and make this funding reform happen. I absolutely agree with the noble Lord, Lord Forsyth, and his committee that the cost will not be met simply by the Dilnot reforms. It will require a major injection of government funding. The cost of personal care support should be shared between individuals and the state. To my mind, the great benefit of Andrew Dilnot’s proposals is that people pay towards their costs with only a proportion of their assets; they do not lose all that they have built up during their lives.
I want to make one other point. Why did it not happen? We legislated for it in the Care Act 2014 and it was supposed to happen after the 2015 election. I was not a part of government at that point. I remember somebody in the Treasury saying to me that because part of the process of paying for this involved removing the domiciliary care exemption for people’s own homes, 200,000 people would pay more and only 100,000 would benefit. This quite ignored the fact that most of the 100,000 who would benefit at any time would themselves, on some previous occasion, have been the recipients of domiciliary care.
The noble Lord, Lord Hunt of Kings Heath, is quite right: if we go down this path and do not remove the anomaly of the domiciliary care exemption for one’s own home, we will have an enormous increase in domiciliary care relative to residential care. This would not be desirable, so it has to be paid for. National insurance on older workers is clearly one part of it and removing the domiciliary care exemption is another, but a broader contribution from taxpayers will inevitably be part of it too. But it should not be taxpayers alone, otherwise the intergenerational lack of fairness of young people contributing to the future care of older people, in circumstances where those older people do not contribute but have large assets, would be intolerable.
Lord Dodds of Duncairn (DUP) [V]
My Lords, this is one of those issues that many people do not think about until it affects them or a family member. Successive Governments have thought about it a considerable amount but have chosen to do nothing. As a result, it has become —as described by the National Pensioners Convention, among many others—the Cinderella of public services, inadequately funded and not delivering for many people, when they need it most. This debate, therefore, is important although belated. I am grateful to the noble Lord, Lord Forsyth, and for this most comprehensive report and findings, which are relevant not just to England but to other parts of the United Kingdom.
The Covid pandemic has exacerbated many of the problems that we face and accelerates the need for reform. There always seems to be a good reason—not least financial—to put off reform in this area; it keeps being delayed and delayed. It was good that, in his first speech as Prime Minister, Boris Johnson promised to fix the crisis in social care but, as many noble Lords have rightly said, we now need action. I trust that the Government will soon produce proposals to support and sustain a modern social care system, and that these will be implemented as quickly as possible. I would be grateful if the Minister could tell us what his timescale for reform is.
There is a lot of confusion and misunderstanding around what the state can and cannot provide in social care, unlike the care provided by the National Health Service, which is free at the point of need. The United Kingdom faces a growing ageing population, with higher, more complex health needs. The decline of family and community networks increases the demand for public services. The costs of social care are a significant burden and fear for older people and their families. Social care should be treated, like the NHS, as a core public service: people need to be able to access it when they need it, at all times. That means sustainable funding over the long term, not continued short-term fixes, if they can be called that.
Many families are shocked to discover the labyrinthine process that they have to negotiate when they seek help, at a time when there is often a great deal of stress and strain. The do not understand how health needs are fully met by the state and free at the point of need, yet care needs are means-tested. This can lead to terrible shocks when they are faced with massive care costs. We need to move to the position of free personal care for those who need it, at the very least.
A high quality of care is absolutely essential and, for that, as other noble Lords have said, there must be proper training for care workers, which invests in and respects them, in the same way as there is for those who work for our National Health Service. Low pay needs to be urgently addressed, as do ways to improve retention and recruitment of staff. I add my voice to those who have already talked about recognition and support for the millions of unpaid family carers, who do an incredible job delivering a considerable amount of care across this country, in normal circumstances, but who, during the pandemic, have worked heroically to care for and protect their relatives at home. Many of them are elderly, and likely to suffer from poor health themselves and be in the lowest income bracket. There are estimated to be over 1 million people, maybe 1.5 million, aged over 65 with an unmet care need. That is truly shocking in this day and age. The current system is disjointed, piecemeal and underfunded. That must end as soon as possible.
Baroness Young of Old Scone (Lab) [V]
My Lords, 12 years ago, I was the chairman of the Care Quality Commission, the regulator for the quality of health and social care. I was chilled when I saw the impact of the funding arrangements for social care on people’s access to care and the quality of care they received. Nothing much has changed in the funding system over these 12 years. In the meantime, adult social care needs are rising exponentially and funding has decreased in real terms, even with the recent additions to budgets. Local authorities are responding by raising the eligibility bar for social care, so that you have to be on your knees or virtually destitute to get funded care.
People who cannot access care are hidden at home and are a burden on unpaid carers. For those who can access it, what is the quality of that care? Much care provision at the higher end of the spectrum is fine, but it became clear to me at the CQC that care providers, funded at the very basic levels that local authorities can afford, simply cannot provide a quality service at that cost; nor can they pay the staff who deliver it more than the minimum wage. Providers either live on the edge of going bust or flee to the self-pay end of the business.
The result is that many of the less well-off in our society, who have been unable to amass savings or capital, because they have been in poorly paid jobs or unable to work due to illness or disability, are in a poor position. They are faced with a lack of access to services, poor-quality services and being looked after by staff who are often transient and paid a minimum wage, and have no qualifications and little training. I ask noble Lords: would you relish that prospect for your mum or disabled member of your family or—now that we are getting older—for you or me?
Successive Governments have failed to grasp the nettle. In 2019, the Conservative manifesto committed to building cross-party consensus and bringing forward a lasting solution, but it has not. It spoiled that assertion by continuing the old Conservative shibboleth that no one should have to sell their home. I believe that equity release schemes should not be off the table.
Three things need to happen. First, cross-party consensus talks should be set up now, be independently chaired and have a strict deadline to bring forward both proposals and implementation plans. Secondly, a progressive and pooled contributory system for pre-funding care costs should be set up, as a matter of urgency. It should be kept simple and communicated effectively to the public, in personal terms that talk about care for their family members, so that we get away from these appalling headlines of “death taxes” and “dementia taxes”. Thirdly, radical changes in social care staffing should be fast-tracked, covering qualifications, training, regulation and pay.
The Economic Affairs Committee is right: it is time to end a national scandal. The Government are politically nervous about tackling the issue, as a result of the sorts of headlines I talked about. Right now, Covid has meant that the public understand the challenges and importance of social care more than ever before. Can the Minister tell us that the Government will act now and that we will not get another Green Paper, and that we stop letting down the most vulnerable in society and the staff who are trying hard, against all the odds, to care for them?
Lord Young of Cookham (Con) [V]
My Lords, at a time when your Lordships’ House is under fire, there can be no better example of its value than the document we are debating. The committee achieved in a matter of weeks what has eluded Governments for over 20 years.
In December 2000, the Queen’s Speech said:
“The legislation will also take forward my Government's response to the Royal Commission on Long Term Care for the Elderly.”—[Official Report, 6/12/00; col. 2.]
That was the Sutherland commission. Nothing happened. At the end of the Labour Government’s time, they were back where they started with the 2009 Green Paper Shaping the Future of Care Together. The coalition agreement echoed what Labour said in 1997:
“We will establish a commission on long-term care, to report within a year.”
But Dilnot suffered the same fate as Sutherland.
In 2017, the Queen’s Speech said:
“My Ministers will work to improve social care and will bring forward proposals for consultation.”—[Official Report, 21/6/17; col. 6.]
Nothing happened. The last Queen’s Speech said:
“My Ministers will seek cross-party consensus on proposals for long term reform of social care.”—[Official Report, 19/12/19; col. 7.]
Again, nothing happened, as the noble Lords, Lord Razzall and Lord Campbell, said. That is the background to the substantial achievement of my noble friend and his committee.
Some critics may say that this consensus has been achieved at an unaffordable price—not so. The chairman of the committee, my noble friend Lord Forsyth, is a notable hawk when it comes to public expenditure. I put “Lord Forsyth, control of public expenditure” into Google and got 860,000 hits. On his committee are two former Chancellors and two former Treasury Permanent Secretaries, with the imperative of public expenditure restraint in their very DNA—I do not imply that the other noble Lords on the committee are a soft touch. This is not a body of men and women who will come up with something unaffordable. The next step should be a White Paper and legislation.
I have two comments to make in the time available. I do not agree with paragraph 8:
“We share the concerns of many witnesses about the Government’s plans to make local authorities more fiscally self-reliant.”
I think local authorities should become less dependent on central government, not more, and I hope the forthcoming Green Paper will give them more powers and a broader income base. I understand the committee’s concern that some local authorities are less able to spend on social care than others, but that should be rectified through the revenue support grant, not by making all local authorities more dependent on the Government.
My other comment is about the moral hazard from free personal care, touched on in paragraph 106:
“There may be a deadweight cost to the introduction of free personal care.”
It is a dead weight as some will no longer have to pay and others may opt out of caring to benefit from the free package.
This raises the broader issue of responsibility between the family on one hand and the state on the other, touched on by the noble Lord, Lord Hunt, and my noble friend Lord Lansley. Dilnot’s view is straightforward:
“For those who can afford [social care] it should not be free”.
But that does not address the fundamental problem that the noble Lord, Lord Forsyth, identified in his powerful speech—the unfairness of the present regime for people with, for example, dementia. A possible way to minimise both the moral hazard of people opting out and the initial cost is to look again at activities that might qualify for free personal care—for example, cooking and dressing. These activities could be performed by family members without imposing huge burdens on them. Therefore, to bring the costs down initially, they might be excluded from the free package where there is an alternative. But this is a detail that we can iron out when, as I very much hope, legislation based on this high-quality report is introduced in the next Session of Parliament.
Baroness Pidding (Con) [V]
My Lords, I thank my noble friend Lord Forsyth of Drumlean and the members of the Economic Affairs Committee for the production of such a thought-provoking and rightly challenging report and for initiating this important debate.
While there are clearly long-term issues that need to be addressed, in my view the Government’s number one priority during the current coronavirus crisis should be to ensure that adult social care is available for everyone who relies on it and that they get the care that they need throughout the Covid-19 pandemic. My brief comments today concentrate on this.
I know that, as we started 2021, many families had hoped that we would slowly return to our normal lives, but the new lockdown has shown the unpredictability of living life in a pandemic. This demonstrates the real need to make sure that the sector has all the resources that it needs to continue offering care.
I hope that in his response the Minister will be able to tell the House more about the £120 million workforce capacity fund and how that funding is going to help the sector to deal with the growing workload as a result of the pandemic. The winter months in particular are more difficult for those who need care and those who support them. The Secretary of State for Health outlined the adult social care winter plan last September. I would like to ask the Minister two questions in relation to that plan. First, what feedback have the Government received from the adult social care stakeholders in response to that plan? Secondly, how has the plan been adapted in the wake of the new variant of Covid-19 and the lockdown that has followed?
Lastly, I want to pay tribute to all those who work in the sector—all the carers, nurses, support staff and their families, especially in these exceptionally difficult times.
Lord Shipley (LD) [V]
My Lords, I should remind the House that I am a vice-president of the Local Government Association.
This is an impressive report and I congratulate the committee on its work in addressing the key issues so effectively and on trying to encourage some urgency in government thinking. I want to talk about resources and, in particular, the funding issues identified by the committee in paragraphs 156 and 157. I agree with the committee’s conclusion:
“Social care funding should not be reliant on locally raised revenue which has little connection to local demand for social care.”
I also agree with this:
“The additional funding needed for adult social care should be provided as a government grant, distributed directly to local authorities according to an appropriate national funding formula which takes into account differences between local authorities in demand for care and ability to raise funds from local taxation.”
That is the right approach. I just wish the Government would share the committee’s view that social care funding should not be as reliant on locally raised revenue as it is now.
Unfortunately, there has been a deliberate government policy to force up council tax well above the rate of inflation to help to pay for social care by means of the social care precept that the Government introduced in 2016. This has resulted in council tax payers being required to pay up to 15% more over the last five years. Presumably, in the absence of any solution to the funding crisis, council tax will go on being increased in this way through the life of this Parliament. This approach means that councils able to generate higher receipts from their council tax base can raise more money for social care than poorer councils, when it is often the poorer councils that have the greatest demand for social care.
At the general election in December 2019, the Conservative Party manifesto guaranteed not to increase income tax, national insurance or VAT in this Parliament. These three taxes bring in almost two-thirds of UK tax revenues, so the decision not to increase them means that the Government intend other taxes to bear the burden. Council tax is one of those, so, for a sixth year now, council tax is increasing well above the rate of inflation. Up to 5% is permitted from April, of which a maximum 3% increase is for the adult social care precept. We should be very concerned about this and the fact that this constant rise in council tax forced on councils impacts most of all on poorer families who are already facing greater financial pressures from the pandemic.
Lord Sarfraz (Con) [V]
My Lords, our country’s care system has never been under such pressure as over the last year. I am sure that noble Lords are as grateful as I am to live in a country that could financially afford to step up to the challenges of the pandemic and has worked day and night to make sure that everyone is treated with dignity and respect. Many countries around the world do not have our financial resources—we are indeed very fortunate.
The numbers speak for themselves. The Government have made available £4.6 billion to local authorities to address pressures on local services. There is an additional £1 billion of funding available for social care in 2021-22. Public spending on adult social care services has increased in real terms in every year since 2015, reaching £18.8 billion in 2020. In 2021-22, the Government expect to provide local authorities with estimated funding of around £3 billion to help to manage the impact of Covid across their services. These are very substantial numbers, but they are not just numbers. They translate into countless real people and real families getting the care that they need.
However, the funding system needs reform. This is indeed a complex area and I welcome the Government’s proposals on improvement, which I understand will be brought forward this year. I also welcome the Government’s appreciation that anyone needing care should never have to sell their home to pay for it.
The number of home care agencies in England has significantly increased, from 5,780 in 2010 to 10,294 in January of this year. That is almost double the number of home care agencies. According to CQC registration data, pressures on adult social care from the pandemic do not appear to be translating into significant amounts of reduced capacity or service closures, but this data should of course continue to be closely monitored.
We are not without challenges. Some providers of care settings designated for the discharge of Covid-positive individuals from hospitals have had difficulties securing sufficient levels of commercial insurance cover. This is why I welcome the recent ministerial Statement that new arrangements will provide temporary, state-backed indemnity cover for clinical negligence, employer liability and public liability to designated settings that have been unable to source adequate insurance cover.
This has been an incredibly difficult year for all of us, but there is clear evidence of the tremendous work and effort that the Government have put into ensuring that our care system delivers for everybody. There is always more to do and areas where improvements must continue to be made.
Finally, I would like to pay tribute to all those workers in care settings, who have faced probably the most difficult year of their professional lives and have made our country so very proud.
Lord Truscott (Ind Lab) [V]
My Lords, I too congratulate the noble Lord, Lord Forsyth of Drumlean, and the Economic Affairs Committee on their incisive report. Social care funding has become a postcode lottery, as he said at the outset of this debate, and a national disgrace. Her Majesty’s Government should increase funding by at least £10 billion to restore the 2009-11 levels of quality and access. I agree that social care should be largely funded by general taxation. It should not be funded by local authorities, which, as we have heard, results in variegated levels of care across the country. However, given the challenges facing social care provision, we should be even more ambitious. The old age dependency ratio is increasing, while the number of working-age adults needing care is multiplying. Those receiving social care should not rely on future generations to cover their care costs. Deferred payment agreements should be a right so that no one receiving care is ever forced to sell their home while in care.
Social care should be paid for through taxation. Let me be specific. Those receiving care should pay for it through an inheritance tax, formerly and more properly called death duties, paid on their passing from their estate only if they have the means. The existing £500,000 inheritance threshold could be maintained. A majority of beneficiaries would not be affected; they would receive that inheritance only after the tax was paid. For example, the Tax Research UK blog has estimated that if inheritance tax was raised to 80%, double the current rate and similar to that paid after the Second World War, it could raise £174 billion—virtually enough to pay for the entire pandemic, let alone social care.
We have to recognise that we are facing a wartime-like crisis exacerbated by the pandemic, which requires a wartime-like response. Currently, a lucky half of young people will inherit 90% of the nation’s wealth; the rest will struggle. Of that wealth, 90% is presently owned by just half of elderly households. The desire to leave everything to one’s family and siblings is not as strong as it once was. Equity release is increasingly popular. People want to enjoy their lives now but be secure in their own homes in old age for as long as possible. Domiciliary care is the preferred option for many, and it should be provided by the state.
Instead of taxing the general population and businesses into the ground or looking at a wealth or property tax, we should tax people for their social care only after they have passed. This avoids squeezing the asset-rich and cash-poor while they are alive. It would be a death duty, not an inheritance tax. There would still be plenty to inherit. Inheritance has doubled in the last 20 years and is expected to do so again in the next 20. If the issue of funding social care and other essential public services is not addressed, and the lucky half benefits by inheriting the bulk of the country’s wealth, intergenerational inequality will worsen—something the noble Lord, Lord Lansley, mentioned. Instead of levelling up, the Government will find that they have created even more inequality and regional disparities, and our society and public services will be the poorer for it.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
The noble Lord, Lord Liddle, is not able to take part in the debate, so I call the noble Lord, Lord Lancaster of Kimbolton.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
We were told that you were not on the call at the beginning of the debate and did not hear it.
Lord Liddle (Lab) [V]
I was on the call and heard the beginning. But if that is your ruling, Chair, that is fine.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
No; we do not want to deny you the opportunity. Please speak to us now, Lord Liddle.
Lord Liddle (Lab) [V]
I am very sorry; I was on the call and heard the excellent speech of the noble Lord, Lord Forsyth. I first pay tribute to him for his chairmanship of the committee, and his ability to produce an objective analysis and a report that commands a wide degree of consensus. I have always regarded him as one of the finest speakers in the House but he is normally making arguments I totally disagree with, so I am delighted to be able to congratulate him on this report.
Secondly, I declare my interest as a member of Cumbria County Council. That is very relevant to this debate because, frankly, we cannot go on as we are with what are, basically, patchwork solutions to the funding crisis in social care while relying on council tax supplements to fund the bulk of the patching that is necessary. We are in a terrible dilemma this year in Cumbria. Should we put up council tax by 5% in real terms during this Covid crisis, when so many workers are on low incomes and the self-employed are in great difficulty? It is very unfair. It would be unfair in any event because council tax is very inequitable in the way that its burden falls. We must find a better solution. I was pleased that when we debated this, the noble Lord, Lord Greenhalgh, said that in his view council tax needed reform. That would be a very good first step.
Thirdly, this is an area where we have to be prepared to contemplate some unconventional state intervention. I am a free market man by nature, or a social market man, but on wages, working conditions and training, we should go back to some kind of wages council cum training board which is determined with a remit to raise standards in this sector.
Finally, there is a need for some intervention to sort out the corporate structure of the sector. Far too many care home chains have been ruined by private equity and loaded up with debt. This needs sorting out without giving a present to the shareholders, so some government intervention is required. I am also in favour of a reform of inheritance tax and of the charging system so that people do not lose the whole of their wealth that they want to pass on but the burden of social care is, basically, paid by the better off through a reform of wealth taxation.
Lord Lancaster of Kimbolton (Con) [V]
My Lords, in recognising that the unifying message of this debate is to call on government to act, I want in the brief time I have available to comment on three areas.
The first is adult social care reform. I start by seeking reassurance from my noble friend the Minister that the Government intend to continue to work closely with local and national partners to ensure that the approach to reform is informed by diverse perspectives, but in particular from those with lived experience of the care sector, both providers and recipients. It is clear that a stable social care provider market and a qualified and committed workforce will be absolutely central to delivering the widely held ambition for raising the quality of, and access to, social care. Equally important are the recipients of care, and I hope that reform will not come at the price of the long-held desire to empower them by supporting people to live independently in their own homes and communities, for as long as possible.
My own 90 year-old father’s desire to stay in his own home comes above all else. One of the biggest challenges he faces, though, is the quality of information on offer to assess his options. I welcome the Government’s plans to tackle this issue. This is particularly important if we are to encourage recipients and their families to make decisions about their long-term care ahead of time, so they are enabled to plan for their care and make better choices rather than ending up forced into knee-jerk decisions.
The second regards the workforce. I take this opportunity to pay tribute to the social care workforce in all their forms, paid and unpaid, who have more than ever demonstrated unwavering compassion and dedication while under the most enormous pressure during this pandemic. As we have heard, one particularly irritating aspect is that they are often spoken about as being “unskilled” and paid accordingly. The reality is that few jobs require a more diverse range of skills, particularly soft skills.
It is vital that the spotlight we have seen placed on the social care workforce during the Covid-19 pandemic is transformed into a long-lasting legacy of recognition for them. This would perhaps help address the biggest single challenge facing the sector, which remains recruitment, despite two successful recent government-backed campaigns.
The Government announced a £600 million infection control fund in May 2020, now extended until March 2021 with an additional £540 million. This is most welcome, not least because it can be used for measures such as helping maintain the normal wages of staff who may need to self-isolate. Equally welcome has been the £120 million of additional funding that was announced earlier this month to help local authorities boost staffing levels in the care sector. What lessons have been learned from the use of this fund when it comes to delivering resilience to a fragile sector once the pandemic is over?
However, the vast majority of care workers are employed by private sector providers, who ultimately set their pay independently of central government. While local authorities work with care providers to determine a fair rate of pay based on local market conditions, I would be interested in my noble friend’s view as to whether the time has come for the Government to consider setting a national benchmark.
The final area concerns quality of care. We need to recognise that the vast majority of care services provide high-quality care and support. As of January 2021, 84.6% of adult social care settings are currently rated good or outstanding by the Care Quality Commission, and, for most people, the experience of adult social care and support is incredibly positive. However, one of the biggest single factors in determining the CQC rating for a care home is the quality of the management, which is why my final question for my noble friend the Minister is: should we consider, as the report highlights, a more structured approach to continual professional development for the sector?
Baroness Tyler of Enfield (LD) [V]
My Lords, I commend the noble Lord, Lord Forsyth, and his committee on this excellent report, proposing clear recommendations in what is a very complex area. I agree with many of them and underline the strong sentiment that we do not need further reviews, consultation or Green Papers; we need government action now or a White Paper with a clear implementation timescale.
Covid has cast a harsh spotlight on a highly fragmented, fragile and underfunded sector reliant on unpaid carers and piecemeal local arrangements, with care providers going out of business or handing back contracts. Other serious flaws in the system include a widespread lack of awareness that social care is not free at the point of use, underpaid staff with little career progression or professional development—leading to high vacancy rates and turnover—and a postcode lottery which leads to unjustifiable variations between places in access to care and its quality, often depending on a local authority’s ability to raise revenue.
The adult social care winter plan commits to providing free PPE to care homes until after the pandemic. What plans do the Government have to extend this pledge until at least late spring? Despite some short-term injections of government funding since 2017, years of significant underfunding, coupled with rising demands and costs, have combined to push adult social care services to breaking point. The Select Committee report points out that funding for adult social care in 2017 was below 2010 levels. It calls for an immediate injection of £8 million to restore care quality and access to 2010 standards, with free personal care available universally by 2025. I fully support these recommendations.
Any long-term reform must take account of the needs of working-age adults, who account for nearly half of the total social care budget, and unpaid carers as well as older people. Many working-age disabled people do not own their own houses—which, unfortunately, is how this political debate is mainly couched—and have not been able to save for care costs.
When it comes to paying for a new system that includes free personal care as a universal entitlement, it will have to be a partnership of public funding and private contributions by the citizen. Like the noble Lord, Lord Lansley, I believe that we should look for a solution through the prism of intergenerational fairness—a way in which all generations contribute but no one generation feels unfairly burdened. The Select Committee report touches briefly on this issue, which is to be applauded.
However, there is one aspect on which I take a different view from the committee. Rather than our relying primarily on raising the money needed from general taxation, I would like to see a funding solution with some element of hypothecation. I had considerable sympathy with the recommendation of the Barker commission that an additional percentage point of employee national insurance contributions for those aged over 40, raising some £2 billion in total, be earmarked for adult social care. This is similar in concept to the proposal put forward by the Intergenerational Fairness Forum of a new system of social care insurance contributions, at a rate of 1%, from the incomes of all working adults from the age of 40 until they stop working. Looking to the over-65s, as I argued in our debate earlier this week on inter-generational fairness, the case for individuals who continue to work beyond state pension age continuing to make national insurance contributions should also be part of the equation.
The shockingly high number of deaths in care homes in the first wave of the pandemic is a matter of national shame. We owe it to those who died and their families to ensure that a properly funded social care system, providing quality care to all, is a fitting legacy.
Baroness Fookes (Con) [V]
My Lords, I applaud the hard-hitting and very practical report of my noble friend Lord Forsyth and his committee, and I hope that it will provide a real springboard for the Government to take action at last—like many other speakers, I think “at last” is very much the phrase to use. I also applaud the masterly overview provided by my noble friend Lord Young, and I hope that that will also be taken seriously into consideration.
I do not pretend to have the kind of expertise that other Members in this afternoon’s debate have shown, but I remember, as a very young, inexperienced MP, wondering why there was a divide between healthcare and social care—it seemed to be wholly artificial. Now, with my greater experience, I realise that it was a tremendous error which has led to the social side being left behind and, as many others have said, badly treated in terms of the workers, their pay and so forth. I hope that, in future, there will be a much better effort to bring together these two sides of the profession, as I see it.
I have some, rather unusual experience of being in a residential care home after a very serious illness some four years ago. I did not feel able to go to my own home alone, so I was fortunately able to book into a very good residential care home, but what I saw amazed me. There were good workers, and I was greatly impressed by the care they showed to the various residents, including me, and the great skills that were required. It was a real eye-opener for me, and it makes me very anxious that they should all receive proper training and have a proper career structure and better payments. I very much hope that this will be one result of the debate we are having this afternoon, based as it is on the excellent report by my noble friend Lord Forsyth.
In a very short time, I will pay tribute to the unpaid carers—in other words, family and friends of people who need care, who do it for nothing. However, it does not come as nothing for them: in many cases, they will have had to give up, quite possibly, well-paid jobs because they cannot combine really good careers, and all that they involve, with caring on a day-to-day basis. It is not necessarily that they were unskilled or low-paid workers themselves, and, therefore, the sacrifice from them is very much greater. I do not think that this has ever been recognised.
I would be interested to know what the cost would be if we paid even the minimum wage to all those unpaid carers; we might then get a much better idea of the valuable service that they provide. We should take far more care of them, giving them some respite care in particular—because I feel that many of them get to the end of their tether. If they could just have a nice little break, it would permit them to go on, whereas, in other circumstances, they break completely. I hope that this will be the end of the pussyfooting of various Governments and that we actually get on and do something for the social care sector.
Baroness Sanderson of Welton (Con)
My Lords, I also commend the members of the committee for their impressive report. We are fortunate to have such distinguished and experienced Members of the House of Lords focusing their attention on one of the most difficult and urgent problems of our time.
Despite that urgency, and as many others have said, this it is a problem that successive Governments have ultimately failed to confront, although I was struck by the comments from Care England, in the report, about the lack of progress over many years, despite all the different reviews and commissions,
“all of which seem to come to similar conclusions—the system needs to be properly funded.”
The committee has made its recommendations and they have been broadly welcomed. While I fully appreciate the difficulties of the past year caused by the pandemic, I hope the Minister will be able to give some indication as to when the Government will be able to respond to its recommendations.
I also appreciate that, for there to be a proper response to this issue, there needs to be the type of cross-party co-operation that the committee has so ably demonstrated. For there to be wider consensus, there needs to be a better understanding of the social care system. The committee quite rightly says that, for this to happen, the system needs to be less complex and easier to understand.
I am no expert in this area but I emphasise that, if we are to have a proper conversation, we need to stop treating social care as the NHS’s poor relation. As demonstrated by this debate, this is not a new concept by any means and was part of the 2019 Conservative Party manifesto, but the pandemic proved again that we have some way to go. The desire to protect the NHS was understandable, but we now know that policies designed to prevent hospitals from being overwhelmed pushed a greater burden on to care homes. Yet again, social care was deemed the second-class citizen.
As my noble friend Lord Forsyth of Drumlean pointed out, by 2023-24, the NHS annual funding increase will be
“more than the entirety of local authority adult social care expenditure.”
This situation surely cannot continue, but if any good has come from the pandemic, it is a greater focus on and appreciation of the fundamental role that social care plays in protecting many of our most vulnerable.
Care England suggested in the report that there was
“a hesitancy by politicians to increase funding for a system that is not well understood by the public”.
Meanwhile, the Nuffield Trust pointed out that new proposals
“are often put forward as part of election campaigns at a point in the electoral cycle when there is minimal incentive for cross-party cooperation.”
As we reach a point of greater understanding and with some years until the next election, I sincerely hope that this is the time to find consensus and for Government to finally come forward with the solution that has evaded us for so long.
Lord Lipsey (Lab)
My Lords, this is a fine report. I hope the noble Lord, Lord Forsyth, will forgive me if I concentrate my remarks on the recommendation with which I profoundly disagree, which is that of free personal care introduced over the next five years, so that it is universally available by 2025-26. I can at least claim to be consistent on this, because I signed a minority to the report to the royal commission saying so.
Why? It is bloody expensive—£7 billion. That is the same amount as is said to be needed to be put into the present system to make it workable. I would prefer to see this money devoted to better care for the less well-off. It would inflate demand. In Scotland, the demand for care in people’s homes doubled when free personal care was introduced. Speaking now as a socialist—if that is allowed—56% of people in need of care, more than half, are paid for by the state already. The £7 billion I have talked about would all go to the remaining 44%, most of them not rich people, but comfortably off. It seems an extraordinary proposition that the state should pick the pockets of the less well-off to subsidise the better off.
The weepy old argument drummed up to whip up support for free care is that people are forced to sell their homes to pay for it. This is simply not the case. First, if you are getting care at home or go into a care home leaving a dependant in your house, the value of the house is excluded from the means test, so you are not forced to sell because you need the money.
Secondly, anyone who does not want to sell can go to the local authority and borrow the money, which is repaid after their death. They do not have to sell their home during their lifetime.
Thirdly—this has been referred to—there is an alternative route for most homeowners that does not involve the state at all. You take out an equity mortgage on your house and use the proceeds to buy an immediate-needs insurance policy, which will go on paying your care home fees for as long as you live—problem solved. L&G, which is the most progressive company, recently went into this market offering increasingly innovative policies. They solve most of the problems that we are worried about with older people having to pay for care.
Finally, and more consensually, I strongly endorse the committee’s emphasis on the need for consensus. It has been tried before, as the noble Lord, Lord Lansley, was saying. First, the Tories branded Labour’s proposals a “death tax”. Secondly, Labour branded the Tories’ proposals a “dementia tax”. This is no way to do business.
I would like to make a positive proposal for how to stop it. You need not exactly a chairman but an appointed neutral mediator, who tries to find common ground between the parties. The great advantage of that, and I have had personal experience of this, is that, if one party or the other tries to get off the agenda and seize party-political advantage by sabotaging the talks, the mediator can call out the offender. I am hopeful that, if you had talks with such a mediator, you could produce a system that, more or less, satisfies everyone.
Lord Bhatia (Non-Afl) [V]
My Lords, being the 28th speaker in the debate, I fear that all that needs to be said has been said. I do not wish to repeat points that already have been made. Therefore, I limit my contribution to, first, thanking the noble Lord, Lord Forsyth, and his committee for this excellent report. It will bring tears to the eyes of those who read it, particularly carers, those who need support and the general public. I say well done to the noble Lord, Lord Forsyth, and the committee. I plead to the Committee to support this report and bring the greatest possible pressure on the Government to commit £8 billion immediately.
Baroness Eaton (Con) [V]
My Lords, I declare my interest as a vice-president of the Local Government Association. I know we all agree that the committee’s report is an excellent contribution to the debate on the future of social care funding. In it, the committee recommends that adult social care is given a long-term sustainable funding settlement for the benefit of those who use and work in these services. I absolutely agree with these sentiments.
As this report highlights, publicly funded social care support is reducing, as smaller budgets have forced local authorities to limit the number of people who receive public funding. Covid-19 has shown the value of social care services and their importance to our society, but the pandemic has also added significantly to the financial pressures on council services. In its submission to the Treasury’s budget consultation, the LGA called on the Government to use the announcement to set out a clear timescale with specific deadlines for how reforms to adult social care provision, eligibility and funding will be introduced. A programme of reform for social care, led by national government, will be essential as we look to improve services and reduce inequalities.
The legacy of Covid-19 for social care and, most importantly, the people who use social care services, must be a reset, not simply a restart. This impetus should spur our thinking around long-term reform of care and support, which should be built on cross-party co-operation, as has already been mentioned. I hope that the Government will work with all parts of the social care world, particularly people with lived experience and local authorities, on a way forward that is informed by the many valuable lessons from the response to Covid-19 on the role and value of social care in all our lives.
I would also like to see the Government commit to a new deal for the care workforce, comprising action on pay, training and development, career progression and professionalisation, and recognition. To achieve those aims, the LGA has suggested that the Government commission an independent review to gather evidence and make recommendations, so that planning for the future of pay and reward in adult social care can begin. Ultimately, we must think about adult social care as an economic opportunity, rather than an economic cost. Reforming pay and reward for those working in adult social care will attract people to work in the sector, fill existing vacancies and benefit local economies.
Adult social care can play an important role as we seek to recover from the pandemic. In bringing my remarks to a close, I point out that the response to Covid-19 has highlighted the essential value of social care to the wider public. It is vital that this support be harnessed to deliver the long-term reform of the adult social care system that we so urgently need. I look forward to working with the Government and Members in both Houses to take this agenda forward.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
My Lords, the noble Baroness, Lady Uddin, has withdrawn from the debate, so I call the noble Baroness, Lady Browning.
Baroness Browning (Con) [V]
My Lords, I fully support this report. There are one or two things in some of the detail of it that I would like to see tweaked, but the thrust of it is absolutely right. This is a national scandal and it is far beyond time that the Government started to put it right. I support everybody who has said that this report should be the basis of a White Paper and not a Green Paper, because action is now needed.
I want to make merely a couple of points that are perhaps not covered in the report. I was reminded, when we were talking earlier in the debate about trusts, of the not-for-profit sector, which I believe has a lot to offer, particularly in care homes. Around the country, there are many homes that are run by trusts—we heard from the noble Lord, Lord Taylor, that new ones have been set up under trusteeships. Their great advantage is that, very often, they are small and locally based and therefore serve a particular client base. One hardship of the instability of the care home sector is that, when homes close, people often need to be moved well away from their relatives and areas where they have lived for many years. Therefore, in order to provide nationally a good mix of care that is affordable and of good quality, the not-for-profit sector could play a much bigger role than it does now. I would like us to look at that in a White Paper.
I will also pick up the funding of personal care, which many speakers have mentioned. I can see why some colleagues with a big local government interest are not very keen on this because they can see the bill. We are looking at billions; this is not a penny-on-income-tax policy. But we should look in more detail at what we mean by personal care. What does the day of somebody who needs personal care look like? It is not just about whether they can get dressed or have a meal provided by somebody in the household. Very often, particularly for those with Alzheimer’s or dementia, it is a question of not knowing what clothes to put on and perhaps dressing in the most inappropriate clothes. When it comes to food, it a matter of have they eaten or have they not? People with dementia may forget within half an hour that they have in fact eaten. Maintaining nutrition is therefore very important. This is a group of people who will wake up at 4.30 am or 5 am and think it is time to get up. They need full 24/7 care.
None of this is “medical” according to the definition of the word, but the demands and effect on carers can be quite catastrophic if those basic needs are not met. A failure in nutrition or in personal hygiene—for people who cannot look after themselves as far as their personal hygiene is concerned—can cause urinary tract infections or all sorts of problems that lead quickly to the need for doctors to be called or hospitalisation. I therefore would not underestimate the importance of personal care. It is something that must be factored in.
We have heard a lot about the political parties coming together; I agree that they will need to join together if this is to be successful, but please can we still do more to bring together social services and the NHS? In my experience as a Member of Parliament, whenever I came across a problem in this area, I would have to personally call for a case conference—and who would be sat round that table? Health, social services and the people involved with the problems. There seems to be a real lack of initiative to come forward and the reason is very simple: when you get those people round a table to sort out a problem, it costs money. They will do anything to avoid getting to the point where they have to sit round a table and commit money. I understand why—it is not easy, but we have to overcome that relationship between health and social services if this is going to work; otherwise, we will have these glass Chinese walls, where it is the responsibility of one and the other one does not want to know.
Finally—I have gone over my four minutes—not all households are one-person households. Often there are two people—two elderly people; two parents, perhaps—who need the help.
Lord Randall of Uxbridge (Con) [V]
My Lords, it is a great pleasure to follow my noble friend Lady Browning. It is always well worth listening to and taking note of her wise words.
This has been a fascinating and very well-informed debate, as we expect from your Lordships’ House. My noble friend introduced the report very forcefully and the Economic Affairs Committee should be roundly congratulated, not only on the detail in this report but on succinctly describing this issue as a national scandal. It is indeed. I am disappointed to hear of the delay of even a response to this report.
One disadvantage of being the last Back-Bencher to take part in a debate is that most things that I wanted to say have been said at least once. However, if there is one thing that cannot be repeated enough, it is to pay tribute to the many care workers, their employers and, indeed, those unpaid carers so eloquently praised by my noble friend Lady Fookes.
Although this debate is about how to fund social care, I wish to add something that I have noticed over the years when visiting care homes, which is the increased isolation felt by those who have poor knowledge of English and who might even find the food offered to them rather alien.
I add my voice to all those who have asked the Government to stop prevaricating and sort this out.
Baroness Brinton (LD) [V]
My Lords, I declare an interest as a vice-chair of the Adult Social Care APPG. This has been an excellent debate on an excellent report, and almost without exception everyone has said that they support virtually all its recommendations. Those who have had issues have had one or two specific points only. But here we are—again—in another year with yet another debate where we discuss the scandal that is the funding of social care in this country.
In fact, this problem is more than just four or five years old. Twenty-five years ago, when I was a member of Cambridgeshire County Council, there was cross-party agreement that the social care funding system was in deep trouble and needed urgent reforms. Sometimes it really does feel like Groundhog Day. However, this report provides a megaphone to government by expertly identifying the urgent issues facing our social care system. It has made a series of excellent recommendations that have received broad consensus across the parties, and even across the sector.
This debate has also demonstrated that the problems are well known and, in policy terms, much has been done to start to address them. Along with other parties, so ably listed by a number of Peers including my noble friends Lord Razzall and Lord Campbell, and the noble Lord, Lord Young of Cookham, we note that the Conservatives had reforms to social care as key manifesto promises in 2017 and 2019, yet here we are still waiting for even the first and most basic of initial announcements. Why are the repeated calls of this House, the Commons, the sector, residents and their families still falling on deaf ears? I urge the Minister and this Government not to start from scratch again with further prolonged consultation or a Green Paper. What we need now, as my noble friend Lady Tyler said, is action and a White Paper which truly addresses the unfair way in which social care is funded and provided.
The comparison has already been made this afternoon between dementia care and cancer care; it is always worth repeating to demonstrate the total unfairness. Worse than that, the noble Baroness, Lady Browning, just mentioned the case conferences where the NHS and social services are at loggerheads about deciding whether something is personal care. I have witnessed this myself when sitting in on a meeting where a discussion about incontinence was whether it was actually due to the dementia, in which case it would be personal care, or due to osteoporosis and a crushed vertebra, in which case it would be nursing care. This is ridiculous. One of the problems with the current system is that it pits one part of it against the other, and that should end.
The founding principle of our much loved NHS is to provide care that is free at the point of use and ensure that no one is bankrupted or pays catastrophic costs for their care. This principle must also apply to long-term care. We need to revisit and update the Dilnot commission to make sure that the amount people are expected to pay out of pocket is capped with, as the report says, the cost shared between the public purse and the social care user.
The pandemic has rightly drawn attention to the plight faced by our social care workers, and I very much agree with Sir Andrew Dilnot’s evidence to the committee. He said:
“It is easy to neglect how wonderful the people providing this care are and, by and large, they are fabulous people working in circumstances that many people would not find desirable.”
During the first lockdown, we saw evidence of care workers leaving their families and going to stay in care homes for its duration to look after and protect their residents. That is the sort of commitment we see from the workers, so it is wrong that social care staff are not regarded in the same light as NHS healthcare staff. There needs to be a complete attitude change, in government and more widely, about the workforce: their supply issues, their pay levels and parity of investment, treatment and esteem between the sector and the NHS. I believe there should also be a royal college for social care to confirm their status and develop best practice, and to raise the esteem of social care workers.
As the noble Baroness, Lady Pitkeathley, outlined, unpaid carers face a really difficult task and this past year, particularly, has been a major problem with the pandemic. These carers have to navigate ever-changing, complicated government guidance to care for those they love, while facing increased anxiety as there is no one to take over if they fall ill or have to self-isolate. Unpaid carers must be part of the conversation on social care reform. Currently, there are just under 1 million full-time carers, relying on the carer’s allowance of just £67.25 a week. It is the lowest benefit of its kind. What does that say about how we value this sacrifice and commitment as a community? Raising the carer’s allowance would certainly be a start. However, it is not sustainable for mostly female, unpaid carers to continue to hold up the care sector with their free labour. We need to take the report’s recommendation and restore access to local authority funding to ease the pressure on friends and family carers.
I add here a brief word about young and child carers. Their education often suffers and although there are things in legislation about it, they are not universally applied. These young people need that support because they face a real difficulty in trying to manage caring for their relative as well as their education. I applaud local government, where some councils have extremely good young carers’ groups, whose work should be spread across the country as good practice.
As well as funding and support, we need to start being innovative in our approach to social care. This means thinking about how we could enrich lives and our communities and not regard those who need care as perhaps a burden. Schemes such as the Humanitas home in Holland, where university students are offered free accommodation in exchange for volunteering with residents, demonstrate how we can look across sectors to find inventive solutions to societal issues. Good adult social care can transform lives and, in turn, prevent mental and physical ill health, providing savings for the National Health Service in the long term and, most importantly, improving the quality of life for all the residents, whatever their age. Those Dutch university students said that it transformed their views about what they wanted to do in their future lives.
Working-age adult social care patients were mentioned by my noble friends Lady Jolly and Lady Tyler, and the noble Lord, Lord Forsyth. They all made the vital point on adult social care being about so much more than the elderly. That those with long-term disabilities and learning disabilities are treated as if they are in the same category as those who have perhaps led a full life must be remedied sooner rather than later. A fair system would recognise that they are different to those who have had the advantage of 40 years’ working.
Finally, many noble Lords have demonstrated that the impact of the pandemic has laid bare the perilous financial position of our care sector. Let me be clear: I am not referring just to the emergency short-term funding via local authorities, which has been vital. The pandemic has exposed the imbalanced relationship between the NHS and the care sector, demonstrating the need for the long-term financial commitment required to fulfil the recommendations of this report. I am referring to the paucity of local authority funding—not the fault of local authorities, because their own funds have been cut so badly, as so well outlined by my noble friend Lord Shipley—for those who cannot fund their own care. This results in even higher barriers to access local funding, as the boundary below which you cannot get funding is raised higher and higher.
As for the care providers, they have faced extraordinary increases in rising insurance premiums and exclusions, and insufficient clinical indemnity. I note that the Government have come in to help on indemnity, but only until the end of March. Please will the Minister look at this and address it? Care homes are already overwhelmed and it is not as if they are going to solve this in the next six to eight weeks. Although the Government have introduced that cover, it does not provide the broader indemnity required after the pandemic to put homes on a parity with the NHS in future. Worse, the future viability of some care homes is at risk, with staff shortages causing reductions to capacity, not least as a result of workers leaving the country following our Brexit. Beds are not being filled because people are reluctant to go into homes after the high death rate in the first lockdown. The big warning, though, is that any future pandemic preparedness must take into account the impact on the social care sector, with clear guidance on how to protect residents and those requiring care.
What do we think has been the impact of the two years of inaction since the committee’s report was published? How many individuals have not had access to the care they need, or been bankrupted to pay for care? How many individuals have reached a crisis point and put pressure on our NHS in its time of crisis, as they have not had access to appropriate community care? This excellent report makes it clear that the time for action is now. Will the Minister please make sure that happens?
Baroness Wheeler (Lab)
My Lords, I too congratulate the committee on its excellent report. We have waited a long time for this debate and, of course, for the Prime Minister’s ready plan for social care that he said he had when he took up office 18 months ago, just after the report was published. I also thank the noble Lord, Lord Forsyth, for his strong advocacy and efforts to keep the report alive and kicking, his continued pressure on Ministers on the need for urgent and long-term action, and his pushing for this debate.
Noble Lords have stressed the devastating impact of Covid-19 on social care. As October’s annual CQC State of Care report said:
“Social care’s longstanding need for reform, investment and workforce planning has been thrown into stark relief by the pandemic”,
thrusting a long-recognised crisis into public consciousness and, with it, awareness of the quality of care, unmet needs, the pay and conditions of social care staff and the lack of co-ordination between NHS and care providers. Age UK has described the “battering” of the social care system from Covid 19, which it was in no position to receive. It stresses that social care staff and the services they deliver are being stretched appallingly thin, with older and disabled people and their families left to pay the price.
Noble Lords have today brought their expertise and experience to the range of issues covered by the report in respect of both Covid-19’s impact and what needs to be done to address the current crisis and build a long-term, sustainable social care system. I want mostly to reinforce some of the issues raised about domiciliary and residential care. Let me first stress our strong support for the report. Eighteen months on from its publication, it remains a solid basis and stepping-stone for moving forward and breaking the cycle of chronic underfunding of social care, of unmet need and of the unfairness and disparity in entitlement to care in the NHS and the adult social care system.
The fundamental principles espoused by the committee have widespread support among the social care stakeholders and community: funding social care largely from general taxation; the top priority of restoring local authority funding for social care to 2010 pre-austerity levels; ending councils’ dependence on locally-raised financing for social care; a new, £7 billion-a-year system for providing free personal care to help people with basic daily needs; and major investment in a new deal for the social care workforce and joined-up workforce planning with the NHS.
Most of all, the report plays a vital role in setting out the scale of the funding required, based on Health Foundation, King’s Fund and ADASS research, just to begin to address current and unmet need and future demand. We have heard the figures repeated this afternoon: £1.5 billion extra this year to maintain the levels of service provision of five years ago and £2.4 billion extra to local authorities just to stop the funding gap from widening even further. The Minister well knows this, so I hope that his response will not just restate the Government’s cash injections into the social care system. Extra cash is always welcome but, to emphasise, periodic cash injections, announced mostly during a crisis and too late, buy only a few months of shoring up already fragile services.
Proper funding and support for domiciliary care must be an essential part of a sustainable system. It is social care’s front line, and its scale and reach are often not widely recognised. If residential care during the pandemic played a grim catch-up to NHS services, then domiciliary care was often an afterthought even to care homes. Its dedicated, low-paid care workers, nearly 700,000 of them in England, visit people’s homes daily, moving from client to client and providing a vital link with the outside world on which they depend, particularly if clients are without family or carer support and especially during the pandemic when most have been unable to leave their homes, or their daycare or support clubs, while community services have been shut down. As a carer myself, regularly in touch with many local carers, I fully support the committee’s recognition of the huge further burden that underfunding of services has placed on unpaid carers.
As with residential care, during the pandemic there have been widespread reports of desperate agency care managers ringing around to try to get the PPE they need. Government recognition and funding are needed to cover the extra costs involved in this, as well as the staff shortages and absences arising from a combination of positive Covid cases following PCR testing, self-isolation following contract tracing, shielding and childcare responsibilities. What additional funding has been provided specifically for domiciliary care, PPE, testing and additional staffing costs in 2020? ADASS estimates that an additional £480 million funding is needed in England now to increase the provision of care at home for older and disabled people so they can live independently, with good care, and be kept out of hospital.
On the key issue of free personal care noble Lords, including my noble and good friend Lord Lipsey, will be well aware that we have long advocated it as a basic entitlement for people with substantial and critical levels of need for help with washing, toileting and other daily living needs that will enable them to live safe, independent lives in the community. We applaud the committee’s recommendation on this vital issue. As it points out, free personal care is fair and better aligned with NHS entitlement than the current system, and it would help keep people more mobile and active in the community rather than needing residential or hospital care.
In England, more than 350,000 older people are currently estimated to use home care services, 257,000 of whom have their care paid for by their local council. The United Kingdom Homecare Association estimates that 249 million hours of home care are delivered each year. It is a service which a further 1.6 million older people should receive but do not, because they do not meet current eligibility criteria or there is just not the funding for it. Does the Minister acknowledge that the domiciliary care service needs urgently to be substantially expanded to meet current and future demand?
We know that there has been deep concern about the Care Act easements arising from the Coronavirus Act during the pandemic. Seven councils used this provision in the first wave, mainly to relieve them of duties to carry out care and financial assessments and care planning reviews and visits. The CQC website has not been updated since last July, so can the Minster tell us whether any further councils have used the easement during the second wave? Will the Government provide a full breakdown of the services or activities affected by them? Age UK’s November survey showed that one in seven of those receiving care before the pandemic have since seen a reduction in their care; that is, 210,000 people either receiving less care or no longer receiving any.
On residential care, the Minister is on record as saying that he sees nothing wrong with the current business model, yet he will know that one of the “big four” independent care home providers, Four Seasons, is riddled with some £50 million worth of debt and that, in any event, the big four—the others being HC-One, BUPA and Barchester—cover only around 15% of the overall market. The bulk of England’s 15,600 residential homes are small, privately owned or voluntary sector-run. Although LaingBuisson reports that no home closures were triggered by Covid-19 through the first lockdown, occupancy fell by 8%. Care England has referred to occupancy rates as “historically low”. As the property agency Knight Frank predicts, small, older care homes will be most affected, as they will find it harder to cope with this. Moreover, of more than 6,500 care homes which have 40 beds or fewer, half do not have facilities to support care during a pandemic. Future care home design will need to provide wider corridors to enable social distancing, larger rooms with full en suite and wet-room facilities as standard to promote residents’ safety and isolation, adapted fixtures and fittings to limit touch points, and safer, more separate visitor areas with enhanced communication systems.
The report strongly underlines the unsustainability of the current system of residential care, particularly fears that the number of publicly-funded care places will decline if care homes are driven to market just to self-funders because councils are unable to meet the real costs of providing care. Does the Minister agree that any future model for residential care will be sustainable only if councils are adequately funded to meet the full costs of care?
The actions proposed in this report enjoy widespread support, as today’s debate and the submissions from key stakeholders have clearly demonstrated. As a starting point, it sets out fully-costed proposals that would begin to restore social care funding to pre-austerity levels, ensure that local government was fully funded for providing care, and address the truly urgent need for people to get free personal care support to meet essential daily living needs. Noble Lords have commended the recognition that a new deal is desperately needed for health and social care staff. That is surely no longer in doubt for anyone who has seen their selfless, remarkable and dedicated response to the pandemic.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Bethell) (Con)
My Lords, I join those who have congratulated my noble friend Lord Forsyth on securing this debate on this most important subject. The Economic Affairs Committee has done a huge service with this remarkable report. I reassure him and the committee that reform of adult social care is one of the most important priorities for this Government. It was a manifesto commitment and remains a major priority for us.
One of the silver linings of this awful pandemic has been the widespread appreciation for our carers, paid and unpaid, and I start by acknowledging the many fine words from noble Lords about the hard work of carers. I pay tribute to them and the incredible work they do every day. We owe it to them to get these reforms right.
The House of Lords Economic Affairs Committee, in its excellent and often-praised report, and many noble Lords today have made important points on social care which I want to address systematically. The committee’s report sets out the need for reform of adult social care, and on that the Government completely agree. I reassure noble Lords that, as detailed at the spending review, the Government are committed to sustainable improvement of the adult social care system and will bring forward proposals this year.
My noble friend Lord Lansley spoke with candour about the challenge facing Ministers, and I completely agree with him. Putting social care on a sustainable footing, where everyone is treated with dignity and respect, is one of the biggest challenges that our society faces. This is a complex area, a range of options are being considered, and we very much look forward to working with other parties on building a consensus around these reforms.
As many noble Lords noted, a stable social care provider market and a qualified, committed and well-paid workforce will be central to our ambitions to raise the quality of and access to social care. We want to empower recipients of care by supporting people to live independently in their own homes and communities for as long as possible. A number of noble Lords noted the Cinderella status of the sector. We want to improve the information provided to the public on the social care system, enabling them to plan for their care and make better choices when the time is right for them, and to raise the status of the sector in the public consciousness.
As regards our direction, we have made absolutely clear our commitment that nobody needing care should be forced to sell their home to pay for it. Our ambitions will necessarily take place on a longer timescale because of the pandemic, but, as the PM reaffirmed at the Liaison Committee in the House of Commons, we will bring forward proposals this year.
On social care funding, we recognise that the Covid-19 pandemic has imposed significant pressures on the social care sector, but I agree with my noble friend Lord Forsyth that the pandemic is not an excuse for inaction. In fact, it is a reason for supporting the social care sector, and that is exactly what we have done. We have now made £4.6 billion available to local authorities so that they can address the pressures on local services, including social care, that have been caused by the pandemic.
I remind noble Lords, including the noble Lord, Lord Hunt, of some of the measures we have undertaken during this period. Through the infection control fund, set up in May, we have provided over 1.1 billion of ring-fenced funding for the care sector. This has funded important measures for infection prevention and control, such as financial security for staff who are isolating, as well as PPE. On 23 December, we announced an extra 149 million to fund costs associated with increased testing in care homes, to help ensure the safety of staff and residents. Today’s announcement of the test and trace results shows the impact of that money. On 16 January, we announced another £120 million of funding to help local authorities to boost staffing levels in the care sector, which could include setting up their own staff bank to assist care homes when their staff need to isolate.
As well as this specific funding for Covid-19, we have also provided councils with access to an additional £1.5 billion for adult and children’s social care in 2020-21, on top of maintaining £2.5 billion of existing social care grants. As announced in the recent spending review, we are providing councils with access to over £1 billion of additional funding for social care in 2021-22. This includes £300 million of new grant funding for social care, on top of the £1 billion social care grant announced last year, which is being maintained in line with our manifesto commitment.
The Government are also enabling local authorities to access up to £790 million of new funding for adult social care through a 3% adult social care precept or top-up to council tax bills. The Government recognise, as is cited in the Economic Affairs Committee report, that the amount that each local authority can raise from this precept is dependent on a number of factors: for example, council tax bill levels. We are looking to address this through using some of the social care grant funding for equalisation. We also expect to provide councils with estimated funding of around £3 billion to help manage the impact of Covid-19 across their services, including in adult social care, and to compensate for income losses. This is a substantial track record of investment during a time of national emergency, and a significant response to the Covid pandemic.
I will say a word about market fragility. The report raises concerns about the strength of the social care provider market. As many noble Lords have noted, this market is varied and includes public, private and voluntary organisations. This is both a strength and a weakness. As noble Lords have noted, not all providers last for ever, but I reassure the noble Lord, Lord Liddle, and my noble friend Lady Browning that entering and exiting is a normal part of a functioning market, and local authorities should have appropriate plans in place to minimise any disruption of services.
I agree with my noble friend Lord Young of Cookham. I say to the noble Lord, Lord Shipley, that local authorities are best placed to understand and plan for the care needs of their populations, and to develop and build local market capacity. That is why, under the Care Act 2014, local authorities are required to shape their local markets.
To push back gently against the noble Baroness, Lady Brinton, on capacity, the number of overall care home beds has remained broadly constant over the last 10 years, from around 460,000 beds in 2010 to around 458,000 beds this month. At the same time, the number of care home agencies in England has increased. There are over 4,000 more care home agencies now than there were in 2010. This reflects the growing trend, noted by the noble Baroness, Lady Wheeler, towards caring for people in their own homes wherever possible. This is largely to be welcomed.
A number of noble Lords commented on the quality of care. I am grateful to the noble Baroness, Lady Young, for her testimony on her time at the Care Quality Commission, which is the independent regulator of all health and social care services in England. It notes that 84.6% of all social care organisations are currently rated as good or outstanding. As my noble friend Lord Lancaster put so well, this is testament to the hard work of so many people in adult social care, who speak of positive experiences in adult social care. We should not forget this.
I also want to cover unmet demand. We have enshrined in law, through the Care Act, the responsibility of local authorities to meet eligible needs. This eliminated the postcode lottery for eligibility across England. Under the Care Act, everybody who appears to have needs is entitled to an assessment. If, following the assessment, they are found to have eligible needs, the local authority has a duty to meet those needs, subject to a financial assessment.
That brings me to the difference highlighted in the committee report and raised by my noble friend Lord Forsyth between, say, cancer care, which is funded by the NHS, and other conditions that people may be living with, such as dementia, and those who have to pay for that care. The reason for this is the type of care required. There are limited treatment options for people living with dementia, so care is predominantly social care and support, rather than the medical treatment afforded by the NHS for those who have cancer. Social care, as we know, is subject to means testing. As I mentioned earlier, the Government are committed to social care reform, so that no one has to face excessive social care costs in their lifetime, whatever their underlying need. In answer to noble Lords, such as the noble Baroness, Lady Hollins, who asked about a timetable, we will bring forward proposals later this year.
The noble Baroness, Lady Finlay, and the right reverend Prelate the Bishop of Carlisle, asked about personalisation and choice. The report raised concerns about disabled people not having choice and control over basic decisions in their lives, such as when they get up in the morning and whether they can leave the house, due to lack of care and support.
My noble friend Lord Taylor of Holbeach was quite right when he called for dignity and respect in social care. On that, the Care Act introduced new functions for councils to focus on promoting well-being and prevention, including offering personal budgets, which are designed to give people control and choice over how their care is planned and delivered. It is based on what matters to the individual and their needs. It enables a new relationship between people, the care system, and health and care professionals, and is a step towards offering people the chance to have a say about their own care. The evidence suggests that, by doing so, people are more satisfied with their care, have better outcomes and can explore more innovative approaches to meet their needs.
I agree with the noble Lord, Lord Razzall, and other noble Lords that our NHS and social care system is facing increased pressure and that it needs to be fundamentally transformed and adapted to meet this demand. Our mission is to deliver integrated health and care services by placing people at the centre of the health and care system, working with them holistically to deliver the outcomes that matter to them most.
I want to say a word about the workforce, but, before I do, let me recognise the very large number of tributes paid to it by noble Lords. I completely acknowledge the comments on the status, training and workload of those working on the front line of social care. As the report recognises, the 1.5 million people who make up the paid social care workforce provide an invaluable service to the nation. We are indebted to their selfless dedication, and we have a duty to give them the support they need.
I have already mentioned the infection control fund to the noble Lord, Lord Liddle, and I reassure him that the £1 billion of funding to which we have given councils access in 2021-22 is designed to ensure that key pressures in the system are met, including the national living wage and national minimum wage. I reassure my noble friend Lady Fookes that the increase in the national living wage means that many of the lowest-paid workers will benefit from at least a 2.2% pay rise next year. The vast majority of care workers are employed by private sector providers, which ultimately set their pay. They must abide by national wage legislation, but they are independent of central government. Local authorities work with care providers to determine a fair rate of pay based on local market conditions.
On recruitment and vacancy rates, which were raised by a number of noble Lords, including the noble Baroness, Lady Hollins, we completely recognise that adult social care employers can struggle to recruit and retain the right number of staff. We are pleased that the vacancy rate reduced to around 7% for the period March to November 2020 from 8.4% in February 2020. We want this to reduce further and are working alongside stakeholders in adult social care to support a growing workforce with the values and skills to deliver high-quality, compassionate care.
It is vital that the spotlight we have seen placed on the social care workforce during Covid-19 is transformed into a long-lasting legacy of recognition for the workforce, as was noted by a number of noble Lords. We will celebrate their work and give them the acknowledgement and appreciation they deserve. To answer my noble friend Lady Fookes and the noble Baroness, Lady Brinton, we have responded to calls to provide the social care workforce with a shared identity to unite the sector. CARE badges are currently available free of charge, to be worn as a symbol of pride across the social care sector, and 1.1 million of them have been provided.
To noble Lords who asked about unpaid carers, I say that, like the report, the Government recognise the vital role unpaid carers play, especially given the difficulties the coronavirus pandemic has placed on those caring for family members, relatives and loved ones. We were all moved by the testimony of the noble Baronesses, Lady Kingsmill and Lady Wheeler. I want to pause for a moment to reflect the country’s gratitude to the people who have stepped up to help one another in their communities during the pandemic, alongside those who care day in and day out for their older or disabled loved ones. As the noble Baroness, Lady Jolly, said, this pandemic has highlighted the invaluable contribution of unpaid carers just as much as that of NHS and social care workers.
I reassure the noble Baroness, Lady Pitkeathley, that we have supported unpaid carers throughout the pandemic by funding the work of a number of charities that support carers, by publishing guidance tailored to carers, and by working with the social care sector to strike a balance between maintaining day care and respite services that we know are critical to many families and controlling infection risks.
In 2018, we set out a two-year programme of cross-government action on unpaid carers in our carers action plan. We will continue to work with carer organisations to support unpaid carers’ access to the support they need to maintain their own health and well-being while continuing to support their loved ones.
This is a comprehensive report. This debate has raised some really good points, and I acknowledge the frustration felt by many that there has not been more progress on this agenda. However, as my colleague, the Minister of State for Care, wrote in her response to the committee chair, this is an important priority, and we are working hard to make progress on it. We are considering the report’s recommendations carefully, and, as the noble Lord, Lord Lipsey, rightly acknowledged, we remain committed to cross-party talks to build a consensus. We remain committed to this vital work and will bring forward proposals later this year.
Lord Forsyth of Drumlean (Con) [V]
My Lords, this has been a brilliant debate and I thank everyone for taking part. I am slightly embarrassed by the tributes paid to me—I just chair the committee. It is a fantastic committee; we reached a consensus and we did so by listening to people and acting on the evidence before us. One thing I can guarantee is that this brilliant debate in the House of Lords will not even be acknowledged by our critics, who present us in a quite different light.
A number of key points have been made, drawn from the report, about the importance of raising the standing, status and training of care workers. The noble Baronesses, Lady Kingsmill and Lady Finlay, my noble friends Lady Fookes, Lord Lancaster, Lord Taylor, Lady Eaton and Lord Randall, and the right reverend Prelate the Bishop of Carlisle all made these points. I must say to my noble friend the Minister that the answer is not to issue people with a badge, but to take direct action in order that people are properly rewarded in a proper career structure with proper training.
Points were made about the litany of reports and broken promises and the requirement for action this day by my noble friend Lord Young of Cookham, the noble Baroness, Lady Jolly, and the noble Baroness, Lady Pitkeathley—who has been on to this, as she said, for years and has led the way, describing herself as something of a lone voice. She must be reinforced by the degree of consensus that she has heard today. My noble friend Lady Browning and the noble Baroness, Lady Brinton, pointed to that.
I ask my noble friend the Minister: what did the Prime Minister mean when he said
“we will fix the crisis in social care once and for all with a clear plan we have prepared to give every older person the dignity and security they deserve”?
That was in 2019. This is 2021. Saying, “We will bring forward proposals this year”, when we are still in January is not really reassuring, given the urgency and the strength of feeling shown in this debate. I am also grateful that my noble friend Lady Pidding and the noble Baronesses, Lady Hollins and Lady Brinton, all pointed out that this is not just about the elderly; it is about young people of working age, on whom half the budget is spent.
One point that has come out very strongly is that it will be necessary to spend this money. We all know that the reason why this has been delayed and we have had endless Green Papers and so on is that the Treasury simply does not want to spend the money—a point that my noble friend Lord Lansley underscored and which was also raised by the noble Lords, Lord Hunt, Lord Truscott and Lord Campbell. The Minister surely can see that the overwhelming message from this Committee is: “No more delays”.
Something that I think is very important and which came out in our report is that many people are completely unaware of the services that will be available to them until the point that they themselves need care or a relative needs care—it comes as a profound shock. People across the country do not realise how limited the services are, which is one reason why politicians of all parties have been able to get away with not addressing this problem—a problem that hits people and causes enormous stress at the time that they are probably most vulnerable.
There has been a universal cry that local authorities are being asked to do the impossible and do not have the resources. I say to the Minister that sticking plasters brought in for particular situations do not deal with the systemic problem of funding and the pressure that local authorities are under. These points were made by the noble Lords, Lord Razzall and Lord Shipley.
I am grateful to my noble friend but he is pretty lucky that we are having to hold this debate virtually and are not able to intervene to challenge some of the points in his departmental speech. If he seeks consensus then he should look around him: there is consensus in this Committee; I have never known a debate where this was the case with almost every single speech. There were arguments about the odd detail here and there, but only one speech did not praise the report, which came from my noble friend Lord Sarfraz, who said that he was impressed with the proposals coming from the Government—I do not know whether he has inside information or has had a look at what lies ahead. The message from this debate is absolutely clear: no more delays, no more Green Papers, no more proposals. Let us have a White Paper and legislation, and let us move forward and say thank you to those people whom the Minister rightly praised but who need more than the recognition of a badge. They need to be given a proper career, and we need to attract people to that career, which offers prospects for many of our young people who face unemployment as a result of the impact of Covid-19.
The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)
That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving.
House of Lords
Arrangement of Business
The Lord Speaker (Lord Fowler)
My Lords, the Hybrid Sitting of the House will now begin. Some Members are here in the Chamber, while others are participating remotely, but all Members will be treated equally. Oral Questions will now commence. Please can those asking supplementary questions keep them sensibly short and confined to two points? I ask that Ministers’ answers are also brief.
EU: Musicians
(3 years, 9 months ago)
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Lord German
To ask Her Majesty’s Government what assessment they have made of the impact of the United Kingdom-European Union Trade and Cooperation Agreement on musicians and musical enterprises seeking to work and tour in the European Union.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, the Government recognise the importance of international touring for UK cultural and creative practitioners. Leaving the EU has always meant that there would be changes to how practitioners operate in the EU. The DCMS has engaged with the sector extensively throughout negotiations and since the announcement of the trade and co-operation agreement. The Secretary of State has agreed to create a DCMS-led working group to work closely with the sector’s representative organisations and other key government departments to assist businesses and individuals as far as possible to work confidently in the EU.
Lord German (LD)
My Lords, I set aside for the moment the ping-pong on who is to blame for what has happened, and remember the anxiety and anguish faced by many of the top musicians in the UK. The Minister told the House last week that
“Our door absolutely remains open”—[Official Report, 19/1/21, col. 1085.]
to dialogue with the EU on this matter. Open doors mean that people can go through them without hindrance. Has an open-door invitation been made to the European Union, and if not why not?
Baroness Barran (Con)
As the noble Lord knows, it takes two people to meet though an open door. I was also very clear in my answers last week that our priority was working with the sector to understand its needs and working bilaterally with individual countries. But we still believe that our original suggestion would have benefited all parties.
Baroness Bakewell (Lab) [V]
Clearly, this Brexit situation is unsatisfactory for all those involved. The Secretary of State for the arts, Oliver Dowden, calls the arts sector one of our greatest calling cards. It is indeed soft power with diplomatic significance. Musicians from both pop and classical sides of the profession tell me that cultural attachés in embassies across London are concerned about this situation. Setting aside the blame game, can the Government reopen negotiations and go through this open door, as it concerns an industry worth four times the fishing industry to this country?
Baroness Barran (Con)
The Government are also concerned to make sure that our critical and creative sector—and within that, musicians—continue to thrive, which is why we are working closely with the sector to achieve that.
Lord Foster of Bath (LD) [V]
My Lords, in addition to problems with work permits, carnets and CITES certificates, there is another. Prior to Brexit, when UK orchestras toured Europe, they often visited several venues in multiple countries. Their own or rented specialist vehicles would move instruments and equipment from venue to venue. Can the Minister confirm that under the new post-Brexit cabotage rules this will no longer be possible unless UK orchestras stop using UK vehicles and rely on EU ones? Is this another example of taking back control?
Baroness Barran (Con)
The noble Lord is right that there are changes to the cabotage arrangements going forward. UK operators can perform some additional movements within another nation’s territory, but they are more limited than previously. Our colleagues in the Department for Transport are, we know, working hard to address these issues.
Baroness Rawlings (Con) [V]
My Lords, I declare my interest as vice-president of the European Union Youth Orchestra. The outcome of Brexit was that the EUYO had to move to Bolzano and Grafenegg. As it tours constantly, can HMG make certain that the British players, who already have difficulties, can have multiple visas without too much trouble and expense? This is understandably more complicated with the Covid-19 pestilence.
Baroness Barran (Con)
My noble friend raises an important point. As she knows, during the transition period, UK players were guaranteed their membership of the EUYO, and have been reinvited during 2021. As I said, we continue to engage closely with representatives from all parts of the music sector to provide the support that musicians, including the EUYO’s members, need to navigate the requirements that result from the UK-EU Trade and Cooperation Agreement.
Lord Aberdare (CB)
My Lords, 76% of musicians in a recent survey by Encore Musicians said that Brexit restrictions would stop them performing again in Europe. In the light of this, and in the apparent absence of any movement through the open door, will the Minister say what specific help the Government might offer to musicians to help them cope with the new challenges that they face in order to tour in the EU, including administrative support with obtaining work permits, carnets and other requirements, and financial support to offset some of the extra costs involved?
Baroness Barran (Con)
The noble Lord makes a serious point. In relation to the first part of his question, he will be aware that the arrangements are different in different countries. For example, the requirements to tour France are much more straightforward than some other countries. Obviously, musicians may choose to adjust to that. I cannot give him the detail of what will be proposed. What I can say is that the round table that the Secretary of State held with the industry on the 20th of this month was extremely constructive in tone in addressing all those points.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, going back to the answer given just a few moments ago to the noble Lord, Lord German, will the Minister confirm that the plan seems to be that since the Home Office will not provide reciprocal arrangements on the basis that the EU has proposed, we are talking about bilateral deals right across Europe, and that a working group has been formed which is meeting to draw up plans? Is that where we have got to?
Baroness Barran (Con)
I think where we have got to is that we have secured a deal with the European Union extremely recently. The agreement cannot be renegotiated. It needs now to be implemented. We aim to do that in collaboration with the sector to make sure that it can thrive in future.
Lord Strasburger (LD) [V]
My Lords, a year ago the Government told the Commons that free movement for musicians post 2020 was “essential”, but then left them out of the trade agreement. Will the Government now come clean with the touring musicians and crews they have betrayed and say to them, “We’re sorry. We screwed up the trade negotiation and came back with absolutely nothing for you, having promised you everything. We’ll go back to Brussels immediately and sort it out”?
Baroness Barran (Con)
I absolutely reject any suggestion that this Government have betrayed the sector. We continue to support it. We have championed it with a £1.57 billion culture recovery package and we continue to work in a very constructive tone with it.
Lord Mann (Non-Afl)
If this situation is not resolved, our world-leading jazz sector will start to lose its world-leading reputation. Will the Government guarantee to carry on meeting regularly with the Musicians’ Union until this problem is resolved?
Baroness Barran (Con)
The Government meet regularly with the Musicians’ Union and find it an extremely valuable stakeholder in this discussion.
Baroness McIntosh of Pickering (Con) [V]
My Lords, the UK has benefited from and supported greatly the European Union Youth Orchestra and the Chamber Orchestra of Europe. Will my noble friend look favourably on exchanges such as that developed bilaterally between the UK and Denmark, Praktik i udlandet, where business students on both sides can benefit from business placements? If we are going down the bilateral route, can we proceed as positively and as swiftly as possible?
Baroness Barran (Con)
I cannot comment on the specific that my noble friend cites as an example but, as I have said, the spirit of this is working with the sector to understand what it needs, and we will continue to do so.
Lord Berkeley of Knighton (CB) [V]
My Lords, for the purposes of clarity, I ask: does this situation not mean that instead of our musicians bringing several billion pounds into the UK economy, we will be in a negative position? If Oliver Dowden manages to find funds to help us, it will be money going out of the UK coffers to support an industry that normally helps the UK economy by £5.8 billion?
Baroness Barran (Con)
Those export earnings are extremely important but, as the noble Lord understands very well, the ecosystem of the music sector is very broad. There will be larger groups that will be less impacted directly by some of these changes, but our creative and cultural sector is made up of a multiplicity of talented smaller groups of musicians who we absolutely see as critical and want to support.
The Lord Speaker (Lord Fowler)
My Lords, the time allowed for this Question has elapsed.
EU-UK Joint Political Declaration on Asylum and Returns
(3 years, 9 months ago)
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The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, the joint political declaration notes the importance of effectively managing migratory flows between the UK and the EU. The UK will continue to engage bilaterally and multilaterally with member states with which we have a mutual interest on returns or family reunions of unaccompanied asylum-seeking children. This reaffirms the important commitments already made in Parliament. This work is ongoing.
Lord Dubs (Lab) [V]
My Lords, the Minister will be aware that, yesterday at a Holocaust Memorial Day event, her Cabinet colleague Robert Jenrick made a very positive statement about refugees. May I ask her specifically about the discussions that are taking place about child refugees with EU countries? Have these discussions started? If not, when will they start and with which countries will they take place?
Baroness Williams of Trafford (Con)
I know I will disappoint the noble Lord when I say that I will not be giving a running commentary on discussions but, yes, they have started and will be ongoing.
Baroness Goudie (Lab) [V]
My Lords, these events have occurred against a background of reports of disturbing reforms in the British asylum system, including having asylum seekers in places where it is impossible for them to gain access to complete their asylum forms and to get medical attention. What will the world think of Britain’s reputation when we are not being very helpful to future generations and those who have families here in the UK? Will the Minister follow through from her answer to my noble friend and say when we are really going to start being serious about assisting these families and individuals?
Baroness Williams of Trafford (Con)
My Lords, I completely reject the notion that our asylum accommodation is not fit for purpose. The barracks that we used last year and continue to use are of a standard that we would expect in terms of access to medical and legal assistance. The accommodation is fully equipped to deal with anybody’s needs in terms of medical attention and legal requirements.
The Lord Bishop of Durham [V]
Does the Minister accept that some countries in Europe, such as Greece, Italy and France, are particularly important in bilateral negotiations? Will she confirm that a priority list of whom to engage with has been done and is being worked to?
Baroness Williams of Trafford (Con)
The right reverend Prelate is absolutely right to say that there are some countries where there will be more returns and relationships in terms of asylum seekers. I can confirm that those talks are ongoing; what I cannot do is give an ongoing commentary on them.
Baroness Helic (Con) [V]
My Lords, can my noble friend confirm that, following the end of the transition period, the Government published an overview of family reunion routes under the Immigration Rules, as promised during the passage of the immigration Bill? I would be grateful for an update on when, and whether, they also published clear guidance on the savings provisions, under which the UK processes all Dublin regulations requests received before the end of December.
Baroness Williams of Trafford (Con)
I can confirm to my noble friend that new guidance, providing an overview of family reunion routes under, and outside of, the Immigration Rules, has been published on GOV.UK. Those Immigration Rules are unaffected by the end of the transition period. We have also taken steps to ensure that Dublin family reunion cases which entered the system before the end of the transition period continue to be processed after 31 December 2020, and we have published guidance on the savings provisions.
Lord Roberts of Llandudno (LD) [V]
My Lords, the agreement between the European Union and ourselves says that the UK’s intention is
“to engage in bilateral discussion”
with the member states most concerned. That is the promise. To what extent have such discussions started and with which states, and has any agreement been reached?
Baroness Williams of Trafford (Con)
I can confirm that those discussions have started, but I cannot comment on the status of ongoing negotiations.
Baroness Neville-Rolfe (Con) [V]
Does the Minister appreciate the growing evidence that some bogus asylum seekers are claiming to be the victims of trafficking and/or modern slavery in order to bolster their claims, whether they arrive from the EU or elsewhere? What measures does she propose to deal with this?
Baroness Williams of Trafford (Con)
I am very glad that my noble friend has asked that question, because the Home Secretary has outlined very clearly that we want safe and legal routes. She mentions trafficking and traffickers. Of course, at the heart of some of the small-boats activity are some of the worst types of criminality, committed by those who really do not have any care for the human lives that might be lost.
The Earl of Sandwich (CB) [V]
My Lords, Dublin III has been one of the many serious casualties of Brexit, as the Minister well knows. Can she confirm that the joint declaration will soon lead to a new agreement in the best interests of the child—at least in France? She must be as impatient as any of us to reach that agreement. Can she reassure me that the joint Calais reception arrangements, which came in time, are now working efficiently?
Baroness Williams of Trafford (Con)
I can categorically state that we are no longer part of Dublin, and we do not intend to open up that agreement again. As of not last year but the year before, we are not a member of the European Union. In the course of the immigration Bill, I outlined how routes would be open to people who needed our asylum and to unaccompanied children.
Lord Rosser (Lab) [V]
The Government said during the immigration Bill proceedings that they would carry out a review of safe and legal asylum routes. They promised a Statement on the terms of the review within three months of the Act passing, which will be reached on 11 February. Can the Minister give an update on progress on the Statement on the terms of the review and say whether it will be forthcoming by no later than 11 February? Also, how long is it expected to take to complete the review?
Baroness Williams of Trafford (Con)
That is something that I checked on before I left the department this morning, so I can absolutely confirm that we will lay a Statement before Parliament providing those further details by 10, not 11, February 2021.
Baroness Sheehan (LD) [V]
My Lords, can the Minister update the House on current government policy towards asylum seekers whom the Government would have returned to their point of entry into the EU under the Dublin regulations prior to the trade and co-operation agreement coming into force?
Baroness Williams of Trafford (Con)
As I said to noble Lords who asked this previously, routes are available to people who wish to seek our asylum. Those routes have always existed. We were never going to be involved in Dublin beyond our exit from the European Union. My right honourable friend the Home Secretary will, in due course, lay out those safe and legal routes. We will also continue to give people who need our protection refuge in this country.
Lord Singh of Wimbledon (CB) [V]
My Lords, I have consistently argued for a more Christian approach to those seeking asylum after losing loved ones, homes and livelihoods as a result of proxy conflict between the great powers seeking to extend their influence in areas such as the Middle East, with bombs, rockets and drone strikes. Does the Minister agree that countries that behave in that way have a basic moral obligation to look to the well-being of those seeking refuge?
Baroness Williams of Trafford (Con)
Countries that behave in the way that the noble Lord has outlined clearly do not have regard for the well-being or humanity of their people. I think he will be satisfied by the fact that we will take a whole-of-world approach to resettlement and that asylum will be based on people’s need for our protection, as opposed to where they have come from.
The Lord Speaker (Lord Fowler)
My Lords, the time allowed for this Question has elapsed. We now come to the third Oral Question.
House of Lords: Size
Lord Balfe
To ask the Senior Deputy Speaker what plans the Procedure and Privileges Committee has to consult the House on the further steps that could be taken to implement the recommendations of the Lord Speaker’s committee on the size of the House.
The Senior Deputy Speaker (Lord McFall of Alcluith) [V]
My Lords, at present the committee has no plans to consult the House on further steps to be taken to implement the recommendations of the Lord Speaker’s committee. I note that this committee is continuing its important work, and I am sure it would welcome the noble Lord’s thoughts as to how it takes that work forward.
Lord Balfe (Con) [V]
My Lords, I will first make it clear that this Question is not aimed at any of the new creations. In my view, we need to make the House of Lords fit for purpose, but we have not received the co-operation from the Government that we could have expected over the Burns committee. We are often told that we are a self-regulating House, so I ask the Senior Deputy Speaker whether he will seek to set up some further body to look at ways in which this self-regulating House can regulate itself to a situation more acceptable to the British people, so that it can do the valuable job that is far too often rubbished because of extraneous events.
Lord McFall of Alcluith [V]
My Lords, I thank the noble Lord for his question. It is a follow-up to the Question that he asked me on 23 June last year, and I promised to take that issue to the Procedure Committee. Both that committee and the Burns committee are very exercised by this issue, but the matter rests with legislation and with the Government. I will refer his Question again to the Procedure Committee, but in the meantime it might be helpful for him to talk to the Burns committee itself.
Lord Truscott (Ind Lab) [V]
Surely a painless way to reduce the size of your Lordships’ House would be to abolish hereditary by-elections, as proposed in the admirable Bill from by the noble Lord, Lord Grocott. Does the Senior Deputy Speaker see this as a possible way forward?
Lord McFall of Alcluith [V]
Under the Life Peerages Act, Her Majesty has the power to confer a peerage for life, and that peerage entitles the holder
“to receive writs of summons to attend the House of Lords and sit and vote therein accordingly”.
The committee of the House does not have any say over that issue. So, in terms of the hereditary Peers’ by-elections, the Procedure Committee met earlier this week and we have deferred the by-elections for a further period. Information on that will be forthcoming soon for the entire House.
Lord Cormack (Con) [V]
My Lords, the Senior Deputy Speaker will know that the House has given its wholehearted approval to the Burns committee’s recommendations. Does he not believe that, following the creation of a large number of new Peers, all of whom either have been or will be welcomed to your Lordships’ House, it would be appropriate for the noble Lord, Lord Burns, and his committee to be asked to consider further what non-legislative steps could be taken to address the size of the House?
Lord McFall of Alcluith [V]
My Lords, I thank the noble Lord for that question. Again, this is a matter for the Government, and I know that the Leader of the House and the Chief Whip will be listening to this. I will certainly arrange for that to be noted and brought to the attention of the Procedure Committee—it is a very positive suggestion.
Baroness D’Souza (CB) [V]
My Lords, the chairman of the Procedure Committee did indeed undertake in June of last year to look at various issues around the size of the House. Has any discussion taken place within the committee? Given the distinguished role of the Procedure Committee to contribute to the smooth running of the Chamber, would it not be appropriate for the committee to undertake some actions in the near future to reduce the number of Peers, thereby contributing to the efficacy and reputation of the House?
Lord McFall of Alcluith [V]
I thank the noble Baroness for that question; again, there is something very positive in that. However, the problems that have arisen in the past lie elsewhere; they do not lie in the House itself. Whatever the Procedure Committee can do, it will do because, as mentioned earlier, the whole House endorsed the Burns report and the Lord Speaker’s initiative in setting it up.
Lord Blunkett (Lab)
My Lords, I do not expect the Senior Deputy Speaker to comment on anything to do with party politics, but I wonder whether he could reflect on whether the Procedure Committee—and the Burns committee, for that matter—could think about the writ of summons to attend the House and whether, after a year of some Members not attending the House physically at all, it would be possible for the political parties to be brought together to think about the implications for those who might choose to stand down once the House returns fully in person.
Lord McFall of Alcluith [V]
I thank the noble Lord for that question and apologise for the delay in answering; I am having to unmute every time. On the issue of the writs of summons, the person who receives writs of summons
“to attend the House of Lords and sit and vote therein accordingly”.
So the House is restricted in what it can do to limit introductions without undermining that Act of Parliament. It is the Government and the party groups who are best able to ensure that we continue to reduce the size of the House, should they choose to accept the recommendations in the report from the Lord Speaker’s committee on the size of the House.
Lord Wallace of Saltaire (LD) [V]
My Lords, between 2003 and 2009 there were a number of inquiries into executive prerogative powers by parliamentary committees and the Ministry of Justice, which led to an extension of parliamentary oversight. Given recent controversies over Prime Ministerial abuse of prerogative powers over Parliament, which includes some recent Lords appointments, would it be appropriate to encourage the Constitution Committee to launch a new inquiry into this?
Lord McFall of Alcluith [V]
I think that that is a matter for the Constitution Committee itself. I am sure the noble Baroness, Lady Taylor, and her staff will have been listening to that, and they can take it forward if they think it is perfectly acceptable and possible to do.
The Earl of Caithness (Con) [V]
My Lords, does the noble Lord agree with me that the efficacy and reputation of the House are determined more by its behaviour and conduct than by its size? Given how the House has operated recently—I am thinking of examples in the last few weeks—would the committee’s time not be better spent in trying to keep our standards to a higher level rather than at the level to which they seem to have sunk recently?
Lord McFall of Alcluith [V]
That is the noble Lord’s personal opinion. I think the House has conducted itself in an excellent manner in the past six months, not least with regard to remote engagement. By all standards, according to outside commentators, the House of Lords has been the House that has done most in that regard. I think the work of the House is important and its reputation has to be increased. Indeed, the recent review of committees which we undertook—on which I am moving Motions later today —is to ensure that we enhance the reputation of the House. As a House, we do what we can, and I think we are doing that.
Lord Hunt of Kings Heath (Lab) [V]
My Lords, I would like to take the noble Lord back to the point made by the noble Lord, Lord Cormack. He said that reconstituting the Burns committee was a matter for the Government, but it is also a House matter. Could the Senior Deputy Speaker, through the Procedure Committee reporting to the House, arrange an opportunity for noble Lords to debate the re-establishment of the Burns committee? This is very much a House matter.
Lord McFall of Alcluith [V]
My Lords, I understand that the Burns committee, the Lord Speaker’s committee, has agreed to meet again to consider the latest situation. As we know, the committee is an informal body, which I do not speak for. The noble Lord would be best placed to speak to the noble Lord, Lord Burns, directly—but I will bring this Question to the notice of the noble Lord, Lord Burns.
The Lord Speaker (Lord Fowler)
My Lords, the time allowed for this Question has now elapsed.
Small Business: EU Exports
Baroness Quin
To ask Her Majesty’s Government what steps they are taking to support small businesses affected by increased costs in exporting to the European Union.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, small businesses can access trade support from UK Export Finance and the Department for International Trade, including export insurance and free local export champions. Business of all sizes in the UK can also access support services, including those by our free business support helpline, our growth hubs in England, which are expanding, and the British Business Bank. We will continue to review this support to ensure that UK businesses can keep trading successfully with the EU.
Baroness Quin (Lab) [V]
My Lords, many exporters are facing new and huge problems in exporting to the European Union, including increased costs, VAT charges and extra red tape. All of this has serious consequences for our economy, which is already hit by Covid. Did the Government realise that their deal with the EU was going to cause these problems? What are they going to do to ensure that our exporters can overcome them quickly?
Baroness Bloomfield of Hinton Waldrist (Con)
The noble Baroness highlights a very important point. The Government are not just providing advice, important though that is. Through the British Business Bank, the Government have helped improve and diversify the supply of finance to small businesses. Its start-up loans company provides loans of up to £25,000 and advice. HMRC provides grants for recruitment and training of specialist staff and the Government have a £20 million fund specifically to help SMEs adapt, including grants of up to £5,000. The short answer is that the Government recognise the issues small businesses are facing and are doing their best to alleviate some of them through various means.
Lord Triesman (Lab) [V]
My Lords, I am interested in the Answer that the Minister has given to my noble friend Baroness Quin. This has plainly not been a frictionless experience for companies; the arrangements are more complex, there is masses more red tape and there are higher transition charges. Does the Minister share the advice given by some officials—that SMEs should set up inside the EU if they want to conduct business normally, even if the UK staff of those businesses would be dismissed and replaced by EU citizens in the EU? If she would be unwilling to give the same advice that her officials are giving, will she support a compensation scheme to make good on the promise that businesses will not suffer any detriment and thereby also help them save jobs in the United Kingdom?
Baroness Bloomfield of Hinton Waldrist (Con)
I do not recognise the advice the noble Lord refers to. These are early days and we are still in the first month after the end of the transition period. Decisions on whether to offshore business operations will be commercial decisions for those companies, which we would not welcome. We are committed to ensuring that businesses have access to a range of support to help them navigate these complicated new trading arrangements with the EU through support services, including those provided by the Department for International Trade. We will continue to engage with businesses about the issues they face to refine our support further.
Baroness Ludford (LD) [V]
My Lords, the Minister says that the Government are not only offering affected businesses advice on dealing with red tape, they are also offering them loans. This is all very well but recognises the extra costs. Government officials seem to be making suggestions which involve more costs, such as moving operations to the EU or appointing customs specialists. What prospect can the Government offer them of discussions with the EU resulting in streamlining of the bureaucratic burdens and associated costs? That, of course, requires an atmosphere of good will, which is not helped by some of the disputes going on at the moment.
Baroness Bloomfield of Hinton Waldrist (Con)
The noble Baroness makes a number of very important points. The Government have provided the £20 million fund to help SMEs adapt and this includes grants, not just loans, of up to £5,000 to help them through this. In answer to the question on the Trade and Co-operation Agreement, it establishes a standard set of committees and contact points to oversee its operation and run the trade partnership, as well as providing for technical discussion across all other areas. A series of grace periods are agreed in the TCA, including on rules of origin, with evidence of third-party suppliers not required until 2022.
Baroness Finn (Con) [V]
Does my noble friend agree that we need to work with SMEs and other businesses to tackle the lower propensity of British businesses to export? We need to seize export opportunities to the EU and those countries outside the EU. Can she therefore update us on what initiatives exist to encourage exports to countries outside the EU?
Baroness Bloomfield of Hinton Waldrist (Con)
I am grateful to my noble friend for asking a positive question looking at export markets outside the EU. We are committed to enabling SMEs to benefit from these new markets. They have access to a full range of tailored support from the Department of International Trade, through the Exporting is GREAT digital hub, the “business as usual” scheme for exporters’ working capital and the provision of export credit insurance policies where many commercial providers have scaled back. Further, the general export facility announced in the other place on 7 December provides a government guarantee to the five main banks to provide working capital support for SMEs.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, as the Minister said, these are early days. However, there are reports—some in the papers today—about small businesses that export to the EU having difficulties and incurring extra costs. This can impact on consumers, particularly if companies are using the uncertainty created by the end of the transition period to load these costs on to consumers. Does the Minister believe that the Government have the powers they need to stamp out such abuses?
Baroness Bloomfield of Hinton Waldrist (Con)
While I am not aware of the abuses the noble Lord refers to, I will make sure I am fully informed of them. It is vital that traders set up transparent contracts with their consumers, which clearly explain any costs applied, and our consumer rights regulations enable consumers to take legal action to enforce their rights and recover their money if they think that these fees are excessive. If the noble Lord can share specific examples of this activity, I will be able to consider it further and write to him with more details.
Lord Taylor of Goss Moor (LD) [V]
I am sure the noble Baroness will understand that you cannot export what you cannot manufacture. I chair a manufacturing business in renewable heat, and we have critical parts that need to come from Slovakia. The perfect storm of coronavirus, Brexit red tape and order issues, means that hauliers in Slovakia will simply not bring goods to the UK at present. Manufacturing lines will soon halt, even though product and parts were stocked up in anticipation of Brexit issues. What are the Government doing to try and unlock the position for SME companies that are manufacturing in the UK, cannot access parts and do not have leverage to get priority from their European suppliers, as big companies may do?
Baroness Bloomfield of Hinton Waldrist (Con)
I understand the point the noble Lord makes. I know that we managed to secure a much better deal for UK hauliers. They can continue to operate through and within the EU throughout the end of the transition period. As we know, that is important to allow the flow of goods, food and medicine into the country and to ensure that we can export our goods in a cost-efficient way to the EU and beyond. On his specific question about goods coming into the UK, I had better take that back to the department and write to him with further details of what we might be able to do to help.
Lord Bowness (Non-Afl) [V]
My Lords, while it may be less than one month since the transition period ended, for small businesses the situation is urgent and cannot be allowed to continue for many months. Does the Minister agree that the processes and paperwork from 1 January have turned out to be far more onerous than businesses were led to believe, and much more than the publicity in newspapers, online and on television suggested? That publicity told people to prepare for 1 January when they did not know for what they were actually preparing. I consider the matter urgent and some help is urgently required.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lord for his question. The Government’s campaign to inform businesses and citizens of the need to change started in July. We published the first draft of the border operating model in July 2020. The campaign encourages businesses to visit GOV.UK/transition and to use the checker tool to tailor the guidance for their individual circumstances. Customs declarations would still have been necessary even if we had had no deal. While I am very sympathetic about the additional administration burden for small businesses, we are doing all we can to help them catch up with what is required.
The Lord Speaker (Lord Fowler)
My Lords, the time allocated for this Question has ended, and indeed Question Time itself has come to an end.
House of Lords Commission
The Senior Deputy Speaker
House of Lords Commission
That, as proposed by the Committee of Selection, Lord German, Lord Hill of Oareford, Lord Touhig and Lord Vaux of Harrowden be appointed members of the Select Committee, in place of Baroness Doocey, Lord Wakeham, Baroness McIntosh of Hudnall and Lord Laming.
Communications and Digital Committee
That, as proposed by the Committee of Selection, Baroness Featherstone, Lord Giddens, Lord Griffiths of Burry Port and Lord Stevenson of Balmacara be appointed members of the Select Committee, in place of Lord Storey, Baroness Quin, Lord Allen of Kensington and Baroness McIntosh of Hudnall.
Constitution Committee
That, as proposed by the Committee of Selection, Baroness Doocey, Lord Hope of Craighead and Baroness Suttie be appointed members of the Select Committee, in place of Lord Beith and Lord Pannick.
Delegated Powers and Regulatory Reform Committee
That, as proposed by the Committee of Selection, Lord Hendy and Lord Janvrin be appointed members of the Select Committee, in place of Lord Haskel and Lord Thurlow.
Economic Affairs Committee
That, as proposed by the Committee of Selection, Lord Bridges of Headley, Lord Haskel, Lord King of Lothbury and Baroness Kramer be appointed members of the Select Committee, in place of Lord Tugendhat, Lord Cunningham of Felling, Lord Burns and Baroness Bowles of Berkhamsted.
Finance Committee
The Senior Deputy Speaker to move that, as proposed by the Committee of Selection, Lord Campbell- Savours, Lord Davies of Brixton, Lord Lee of Trafford, Lord Levene of Portsoken and Lord Vaux of Harrowden be appointed members of the Select Committee, in place of Lord Cunningham of Felling, Baroness Goudie, Baroness Doocey, Lord Cromwell and Lord Kerslake; and that Lord Vaux of Harrowden be appointed chair of the Select Committee.
Joint Committee on Human Rights
That, as proposed by the Committee of Selection, Lord Henley be appointed a member of the Select Committee, in place of Lord Trimble.
International Relations and Defence Committee
That, as proposed by the Committee of Selection, Lord Anderson of Swansea, Lord Boateng, Lord Campbell of Pittenweem, Lord Stirrup, Baroness Sugg and Lord Teverson be appointed members of the Select Committee, in place of Lord Reid of Cardowan, Lord Grocott, Lord Purvis of Tweed, Lord Hannay of Chiswick, Baroness Helic and Baroness Smith of Newnham.
Liaison Committee
That, as proposed by the Committee of Selection, Baroness Campbell of Surbiton be appointed a member of the Select Committee, in place of Lord Low of Dalston.
National Plan for Sport and Recreation Committee
That, as proposed by the Committee of Selection, the Earl of Devon be appointed a member of the Select Committee, in place of Lord Krebs.
Joint Committee on the National Security Strategy
That, as proposed by the Committee of Selection, Lord Laming, Lord Reid of Cardowan and Lord Strasburger be appointed members of the Select Committee, in place of Lord Powell of Bayswater, Lord Harris of Haringey and Lord Campbell of Pittenweem.
Procedure and Privileges Committee
That, as proposed by the Committee of Selection, Lord Faulkner of Worcester and Baroness McIntosh of Hudnall be appointed members of the Select Committee, in place of Lord Morris of Aberavon and Baroness Warwick of Undercliffe.
Science and Technology Committee
That, as proposed by the Committee of Selection, Viscount Hanworth, Lord Krebs, Lord Mitchell, Lord Sarfraz, Baroness Warwick of Undercliffe and Lord Winston be appointed members of the Select Committee, in place of Lord Browne of Ladyton, Lord Mair, Baroness Hilton of Eggardon, Lord Borwick, Baroness Young of Old Scone and Lord Hollick.
Selection Committee
That Baroness Coussins and Lord Smith of Hindhead be appointed members of the Select Committee, in place of Lord Craig of Radley and Viscount Ullswater.
Services Committee
That, as proposed by the Committee of Selection, Lord Clark of Windermere and Baroness Deech be appointed members of the Select Committee, in place of Lord Campbell-Savours and Lord Laming; and that Lord Touhig be appointed chair of the Select Committee.
Joint Committee on Statutory Instruments
That, as proposed by the Committee of Selection, Baroness D’Souza and Lord Smith of Hindhead be appointed members of the Select Committee, in place of Lord Stirrup and Lord Colgrain.
International Agreements Committee
That a Select Committee be appointed to consider matters relating to the negotiation, conclusion and implementation of international agreements, and to report on treaties laid before Parliament in accordance with Part 2 of the Constitutional Reform and Governance Act 2010; and that, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Foster of Bath, L, Gold, L, Goldsmith, L (Chair), Kerr of Kinlochard, L, Lansley, L, Liddell of Coatdyke, B, Morris of Aberavon, L, Oates, L, Risby, L, Robathan, L, Sandwich, E, Watts, L.
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have power to meet outside Westminster;
That the Committee have leave to report from time to time;
That the reports of the Committee be printed, regardless of any adjournment of the House;
That the evidence taken by the International Agreements Sub-Committee of the European Union Committee be referred to the Committee;
That the evidence taken by the Committee be published, if the Committee so wishes.
Youth Unemployment Committee
That a Select Committee be appointed to consider youth unemployment, education and skills, and to make recommendations; and that, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Baker of Dorking, L, Clark of Kilwinning, B, Clarke of Nottingham, L, Davies of Oldham, L, Derby, Bp, Empey, L, Hall of Birkenhead, L, Layard, L, McIntosh of Hudnall, B, Newlove, B, Shipley, L (Chair), Storey, L, Woolley of Woodford, L.
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have power to meet outside Westminster;
That the Committee do report by 30 November 2021;
That the report of the Committee be printed, regardless of any adjournment of the House.
That the evidence taken by the Committee be published, if the Committee so wishes.
The Senior Deputy Speaker (Lord McFall of Alcluith) [V]
My Lords, as many noble Lords will be aware, the House operates a rotation rule in respect of most Select Committees, which ensures a turnover of membership and broadens the opportunities for committee participation. In October 2020, the House agreed the fourth report of the Procedure and Privileges Committee, which recommended that the House should in future operate a rotation rule, based on calendar years rather than parliamentary Sessions, and that the rotations should occur in January each year.
This change was intended to provide greater certainty around the timing of rotations for committee members, chairs and staff. Today’s Motions therefore represent the first occurrence of what will be an annual January rotation. The overwhelming majority of membership changes on the Order Paper are the result of Members having served the full term allotted to them by the rotation rule. Most of these Members were appointed to their committees in 2016, and have therefore given good service over a number of years, for which we thank them.
The final two Motions will result in the appointment of a stand-alone international agreements committee, replacing the current sub-committee of the EU Committee, and the appointment of a time-limited special inquiry into youth unemployment. These give effect to recommendations contained in the fifth and sixth report of the Liaison Committee, which were approved by the House earlier this month. Further new committees recommended in those reports will be brought forward for appointment in April, following the winding down of our current EU Committee and its remaining sub-committees. I beg to move.
Fertilisers and Ammonium Nitrate Material (Amendment) (EU Exit) Regulations 2021
The Earl of Courtown
That the draft Orders and Regulations laid before the House on 9, 14, 17, 23 and 31 December 2020 and 5 January 2021 be approved.
Relevant documents: 41st Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 26 and 27 January.
Arrangement of Business
The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)
My Lords, the Hybrid Sitting of the House will now resume. I ask Members to respect social distancing.
Alexei Navalny
(3 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Collins of Highbury (Lab)
My Lords, first I pay tribute to the courage of the protesters in Russia standing up against corruption. Fifteen months ago, the Government’s response to the Russia report said that
“driving dirty money and money launderers out of the UK is a priority.”
It confirmed legislation to strengthen Companies House, make limited partnerships less open to money laundering and establish a register of beneficial ownership of foreign companies owning UK property. Is this still a priority, and when will we see the promised legislation? What is the timetable for broadening the scope of the Magnitsky sanctions to include corruption?
The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
My Lords, I am sure that I speak for all noble Lords when I join the noble Lord, Lord Collins, in commending the courage of what we have seen, not just in Moscow but around Russia, in support of Mr Navalny and his early and immediate release from detention. In response to the noble Lord’s question, the Russia report remains a key priority, as I said in your Lordships’ House last week. Our response was issued on the day. In addition to what the noble Lord mentioned, legislation will also enable security services and law enforcement agencies, for example, to tackle early threats of hostile activity. The National Crime Agency offences to criminalise harmful activity will be strengthened. As I said last week, we are reviewing visas in tier 1 issued before 2015. We will be working on the legislative timetable through the usual channels.
On sanctions, the noble Lord will be aware that we have already sanctioned one organisation and six individuals on the issue of the poisoning of Mr Navalny. On the issue of future designations, we will look at egregious abuses of human rights. As the noble Lord is aware, we are currently looking at corruption. We will be looking to see how we can broaden the scope of the sanctions regime in the near future.
Baroness Northover (LD)
My Lords, I too pay tribute to Mr Navalny and the other courageous protesters. The noble Lord rightly said that sanctions are most effective when a number of countries jointly implement them. What joint action are they taking with the EU on sanctions in this appalling case, especially given that Mr Navalny was diagnosed in Germany as having been poisoned with Novichok? Does the Minister agree that it would help such joint working with the whole of the EU if the Government recognised the EU envoy as an ambassador?
Lord Ahmad of Wimbledon (Con)
My Lords, on the noble Baroness’s second point, I believe that I have already informed the House that that is currently in discussion with the EU. On the substantive issue of sanctions, I have said that it works in tandem; we are working closely with the EU, not just on the sanctions regime and co-ordination with other allies. On the question about close working with the EU, the noble Baroness will have noted the G7 statement that just went out, which included the High Commissioner from the European Union, underlining the importance we are attaching, within the context of the G7, to the role of the European Union.
Baroness Blackstone (Ind Lab)
My Lords, does the Minister agree with Mr Navalny that only if we sanction what he calls “the people with the money”, not those operatives who are obeying orders, will there be any impact at all on the Russian authorities?
Lord Ahmad of Wimbledon (Con)
I agree with the noble Baroness. That is why it is a priority for my right honourable friend the Foreign Secretary to look at the issues of corruption and illicit finance in the broadening of the global human rights sanctions regime.
Baroness Nicholson of Winterbourne (Con)
Can the Minister confirm that, while our Government rightly use sanctions as a weapon against the loss of Mr Navalny’s freedom, the many other links that our cultural heritage shares with Russia will not be harmed? I refer, of course, to our shared music, creative writing, sculpture, university links, and the many other creative ways whereby our citizens and professionals share common bonds and deep enduring friendships. Can the Minister assure the House that sanctions will avoid harming those important channels of mutual growth?
Lord Ahmad of Wimbledon (Con)
My Lords, I reassure my noble friend that I agree with her. I am sure I speak for all noble Lords when I say that our challenge and dispute is not with the Russian people. We are standing on their side on their right to representation, and in the protests that we have seen in support of Mr Navalny. There are quite strict criteria for how the sanctions are applied: they are for egregious abuse of human rights.
Viscount Waverley (CB)
My Lords, any abuse of human rights and corruption must be condemned and be in the best interests of the Kremlin and the people of Russia. I join the noble Lord, Lord Collins, in calling for a robust debate on policy towards Russia. Will the call for sanctions be expected to bring the desired results, or is it the requisite reaction? Are there any areas of trust in which a workable relationship with the Kremlin can be hammered out with evidence that we, with like-minded partners, have the ear of decision-makers in this regard?
Lord Ahmad of Wimbledon (Con)
My Lords, on the noble Lord’s first point: wherever sanctions have been applied since we introduced them last year, we have seen that people take notice—Administrations and regimes take notice. But there is an important distinction that we, in using that sanctions regime on human rights, pinpoint individuals and organisations specifically, so it is not about standing against a country in its collective form.
On the issue of relations with Russia: of course, we continue to engage directly with Russia. As I have said before, it is a P5 member of the UN Security Council, and there are many issues around the world on security and conflict in which Russia has an important role to play.
Lord Rooker (Lab) [V]
My Lords, I, too, salute the courage of Alexei Navalny. Nobody is questioning the Minister’s commitment to this issue, but the sanctions have not worked. Sanctioning the people with the money is not necessarily sanctioning the people who have committed the human rights offences. It is Putin’s mates in London receiving the dirty money who we need to go for. The connection to Putin is the thing that will hit them, because while that money is allowed into London in the way it is at the moment—and, outside Europe, London is the centre—Putin can act as he wishes. If we fail to do this, it will start to look like the UK Government are compromised in some way. I do not believe they are, but it will look as though they are.
Lord Ahmad of Wimbledon (Con)
As someone who worked in the City of London for 20 years, the integrity and robustness of the structures of the City of London are of paramount importance to me, as they are to the UK Government. Therefore, I share the noble Lord’s view that it is important we take constructive steps to stop the use of illicit financing and stop money flowing through London in the manner he suggests.
Lord Walney (Non-Afl)
President Putin’s abhorrent disregard for international law has turned his great nation into a pariah on the global stage. I accept what the Minister said about keeping specific measures under review, but do the Government at least accept that the current suite of measures from the UK and our partners is not, thus far, proving sufficient to rein in this behaviour?
Lord Ahmad of Wimbledon (Con)
While I note what the noble Lord has said, the steps we have taken within the context of the OPCW and with the G7 partners does, I believe, demonstrate to the Russians a strong international response. It is important we continue to strengthen our alliances in this respect so Russia does take notice and, more importantly, does so with regard to courageous individuals such as Alexei Navalny, who is being held without detention. Just to update your Lordships’ House: as I was coming in, I was informed that in his hearing, his appeal was not upheld, so he remains in detention. I will, of course, update the House as we get more details. We hope Russia will take note of these international actions, and I believe in certain quarters it is doing just that.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, I thank the Minister for updating the House with that news, disappointing though it is. In preparation for this Question, I checked the 2019 Conservative election manifesto, which speaks of the UK being a champion of the rule of law, human rights and anti-corruption efforts. Does the Minister agree that we need to work consistently to have clear, consistent rules dealing with Russia, China, Saudi Arabia, the United Arab Emirates, Thailand and, indeed, the UK Overseas Territories, with Magnitsky-style sanctions and other actions, setting up plans for reaction, if and when standards are breached? I should probably declare my position on the All-Party Parliamentary Group on Hong Kong.
Lord Ahmad of Wimbledon (Con)
My Lords, the noble Baroness poses a wide-ranging question about different countries and jurisdictions—she also mentioned the British Overseas Territories. Without generalising, it is important that we look at the specifics of each case, but I understand what she puts forward. We need to have measures to hand, and the human rights sanctions regime is one with which we can act specifically and, importantly, with key partners and allies to ensure individuals or groups who abuse human rights are held to account for their actions. I hope that, in time, as we have discussed today, the broadening of any scope of those sanctions, on the issue of illicit finance, in particular, will also be to the satisfaction of Members of your Lordships’ House.
The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)
My Lords, the time allowed for this Question has now elapsed.
Arrangement of Business
The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)
My Lords, I will call Members to speak in the order on today’s list. Interventions during speeches or “before the noble Lord sits down” are not permitted and uncalled speakers will not be heard. Other than the mover of an amendment or the Minister, Members may speak only once on each amendment. Short questions of elucidation after the Minister’s response are permitted but discouraged. A Member wishing to ask such a question, including Members in the Chamber, must email the clerk.
Leave should be given to withdraw amendments. When putting the Question, I will collect the voices in the Chamber only. If a Member taking part remotely wants their voice accounted for, if the Question is put, they must make this clear when they speak.
Telecommunications Infrastructure (Leasehold Property) Bill
Thursday 28th January 2021
(3 years, 9 months ago)
Lords ChamberRead Full debate Telecommunications Infrastructure (Leasehold Property) Act 2021 View all Telecommunications Infrastructure (Leasehold Property) Act 2021 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 118-I Marshalled list for Third Reading - (25 Jan 2021)
Lord Alton of Liverpool
“(f) there are no grounds to suspect the operator intends to use the telecommunications infrastructure, or any part of it, to breach human rights after 31 December 2023.(1A) For the purposes of sub-paragraph (1)(f), “human rights” has the meaning of “the Convention rights” given by section 1(1) (the Convention Rights) of the Human Rights Act 1998.”Member’s explanatory statement
The amendment seeks to prevent companies from using UK telecommunications infrastructure to facilitate human rights abuse. To the extent that “use” of the infrastructure “or any part of it” brings in the supply chain, this seeks to engage the transparency in supply chain provisions of the Modern Slavery Act 2015.
Lord Alton of Liverpool (CB)
My Lords, in moving Amendment 1 we return to an issue that we debated at Report stage of this Bill, back in June. Amendment 1 seeks to prevent companies using the United Kingdom’s telecommunications infrastructure to facilitate human rights abuses. To the extent that use of the infrastructure, or any part of it, brings in the supply chain, this seeks to engage the transparency in supply-chain provisions of the Modern Slavery Act 2015.
Exactly one year ago, I asked the Government what assessment they had been able to make of the implications of their decision to award contracts to Huawei and other companies required under China’s national intelligence law to support, assist and co-operate with that state’s intelligence work. I also asked about Huawei’s compliance with the Modern Slavery Act 2015, and what consideration they have given to such compliance in regard to their decision to award contracts to Huawei. Last year, the Government deftly avoided answering my question by simply saying it had
“expressed its concerns about China’s systematic human rights violations in Xinjiang, including credible and growing reports of forced labour”.
Throughout the previous two years, 2018 and 2019, I had raised my concerns about some of the shocking events unravelling in western China, a region in which I have travelled. In August 2019, for instance, I asked the Government what assessment they had made of reports that United Kingdom investors hold shares totalling £800 million in companies that supply CCTV and facial recognition technology being used to track Uighur Muslims in Xinjiang. Although aware of the reports, the Government said they had
“not undertaken analysis of British investor shareholdings in Chinese surveillance companies”.
I wonder whether that is still the situation. Perhaps when the Minister comes to reply she can tell us.
My dissatisfaction with those replies, and in the context of my involvement in the legislative stages of the 2015 Act, my pro bono role as a trustee of the charity Arise, and as vice-chairman of the All-Party Parliamentary Group on Uighurs, prompted me to speak in Committee on this Bill on 19 May, and again on Report, on 29 June, when I moved an all-party amendment to the Bill. Co-sponsors of that amendment were the noble Lord, Lord Adonis, who is in his seat today, the noble Lord, Lord Forsyth, and my noble friend Lady Falkner. Two of them will be speaking to this group today.
In a series of powerful speeches from right across the Chamber—with only one partially dissenting voice—Members of you Lordships’ House made clear their deep anxiety that the Government were ready to hand over up to 35% of our 5G infrastructure to Huawei, a company that actively partners with the Chinese Communist Party in Xinjiang, where 1 million Uighur are incarcerated and used as slave labour. Parallels were drawn, during the course of that debate, with the way in which companies such as Siemens had used labourers in Nazi concentration camps to build an industrial empire, and the way in which Stalin used gulag labour to power his economic programmes on the backs of those who had been incarcerated.
In June, the Minister asked us not to divide the House but said that she would be willing to return at Third Reading—today—with an amendment to provide a human rights threshold which companies would be required to meet. It was also suggested that the Telecommunications (Security) Bill would be a more appropriate piece of legislation on which to attach such an amendment. I would be grateful if, when the Minister comes to reply, she can confirm that the title of that Bill has been drawn in such a way as to exclude that possibility.
Since June, meetings have been held with the noble Baroness and Ministers from the Department of International Trade, the Home Office and the Foreign Office. The debate also triggered a determination to lay further amendments both to the Medicines and Medical Devices Bill and to the Trade Bill. I know that the Minister has genuinely and faithfully tried her very best to honour the commitment that she gave to the House in June, and I really am grateful to her for the time and trouble she has taken throughout.
Let me remind the Government and the House why this issue is not going to go away quietly, and why the House will have the chance, on Tuesday next, to demonstrate that. Academics have described Xinjiang as the world’s most shocking example of state-sanctioned slavery. In Committee, I drew the Government’s attention to the work of the Australian Strategic Policy Institute and quoted the institute’s Vicky Xu, who said that the idea that Huawei is not working directly with the authorities in Xinjiang is just “straight-up nonsense”.
I sent the Minister a video recording of shackled and blindfolded Uighur Muslims being led from trains to camps. The Foreign Secretary, Dominic Raab, whose own family suffered the grotesque horrors of the Shoah— commemorated yesterday, on Holocaust Memorial Day—said that such scenes were
“reminiscent of something not seen for a long time”.
I know that the Minister shares the sense of revulsion that we have all felt on learning of forced sterilisations and forced abortions for Uighur women, to prevent births within their community; the desecration of Uighur cemeteries to eradicate any trace of their identity; the deliberate separation of family members; propagandised re-education; and their exploitation as forced labour. Indeed, she drew my attention to an article in The Economist, setting out the scale and nature of what is being done. We all need to have a better understanding of what it really means when we see a label that says: “made in China”. Who made it? How was it made? Under what conditions was it made?
By way of exchange with the Minister, I would draw her attention to an article in The Spectator that appeared on 23 January. It was written by Harald Maass. He gives the example of Coca Cola’s production plant, which he says is
“a joint venture with a Chinese state company … surrounded by prisons and re-education camps in which China suppresses local ethnic minorities”.
Within 30 kilometres of that plant, there are 25 prisons and internment camps. In the whole of Xinjiang, there are at least 380 internment camps, some of which have huge structures and watchtowers, barbed wire and thousands of inmates. An analysis of satellite imagery suggests that there are crematoria in at least nine of them. The Chinese Communist Party says that the camps are educational and training facilities. Precisely what purpose does a crematorium have in an educational facility?
Uighurs are forced to work for factories or farms making products, some of which are sold in the United Kingdom. Over the past two years, work programmes have been significantly enlarged, with official statistics showing that 2.6 million “surplus rural workers” in Xinjiang were “relocated” within one year—an increase of 46%.
In July, the Government responded to the concerns expressed about both the use of slave labour and the security challenges by announcing that they would be removing Huawei from the UK’s 5G mobile network. UK mobile providers have been banned from buying new Huawei 5G equipment and they will have to remove all its 5G kit by 2027. I think the Government’s decision is the right one, and they have taken notice of the concerns which were raised during the debate in your Lordships’ House. In December, they went on to publish the 5G Supply Chain Diversification Strategy, and I also welcome that.
But the Government have gone further. Last week, Dominic Raab announced more plans to outlaw Chinese imports which can be linked to human rights abuse, and there will be fines and possible sanctions against companies which are connected to slave labour. He told the House of Commons that he had been shocked by, in his words, “the industrial scale” of the forced labour and the concentration camps, saying that he had never again expected to see pictures of people being herded like animals on to trains to take them away from kith and kin to be enslaved and stripped of their humanity. Such echoes from a terrible past have also been heard in reports of human hair taken from the shaved heads of Uighur people being exported to be used in wigs by those who, sadly, seem equally comfortable wearing fashion items made by Uighur slaves.
We await news from the noble Lord, Lord Ahmad of Wimbledon, about how Magnitsky sanctions will be used against senior Chinese Communist Party officials who have overseen these programmes of mass incarceration. Perhaps the noble Baroness can give the House further information about when such action will be taken.
It is instructive that the US Government have already imposed sanctions and restrictions against 48 Chinese companies suspected of using forced labour or providing technical assistance to the suppression system of Xinjiang, described by the US Congress as the
“largest mass incarceration of a minority population in the world”.
Adrian Zenz, a leading authority on Xinjiang, estimates that most of today’s cotton in Xinjiang is picked under forced labour conditions and with minimal payment. I particularly pay tribute to the BBC for highlighting this in a documentary recently. Zenz says:
“More than half a million Uyghurs — probably whether they want to or not — are being sent by the state to the fields for three months”.
Brands including Hugo Boss, Adidas, Muji, Uniqlo, Costco, Caterpillar, Lacoste, Ralph Lauren and Tommy Hilfiger have been named in reports linking them to Xinjiang factories or materials. One in five cotton products worldwide is made with Xinjiang cotton. To its credit, Marks & Spencer has pledged to stop using any cotton from Xinjiang.
Next week, on Tuesday, the House will be asked to vote again on the all-party genocide amendment to the Trade Bill, which was passed in your Lordships’ House by a formidable majority of 126. In the House of Commons, with the equally formidable support of the former leader of the Conservative Party, Sir Iain Duncan Smith, Nus Ghani Member of Parliament and other senior figures from the Government Benches, it came within 11 votes of achieving a majority. The movers of that amendment in both Houses have listened to constructive suggestions and have modified the amendment, which now stands in lieu and is on our Marshalled List.
There is no greater abuse of human rights than genocide: it is the crime above all crimes. No other word adequately describes a state complicit in the destruction of a people’s identity; complicit in mass surveillance; complicit in forced labour and enforced slavery; complicit in the uprooting of people, the destruction of communities and families, the prevention of births, and the ruination of cemeteries where generations of loved ones had been buried. It is the only word to describe a state which seeks to re-educate you so that you will believe that you, your people, your religion and your culture never existed, and the certainty that, through ethno-religious cleansing, you will cease to exist in the future.
Last week, I read the testimony of Sayragul Sauytbay, a woman who escaped from one of the camps. She said:
“Some prisoners were hung on the wall and beaten with electrified truncheons. There were prisoners who were made to sit on a chair of nails. I saw people return … covered in blood. Some came back without fingernails.”
One elderly woman’s skin had been flayed. She said:
“Some prisoners were hung on the wall and beaten with electrified truncheons”,
and that prisoners are used for medical experiments:
“Some of the men become sterile. Women are routinely raped.”
On the same day that the House of Commons voted on the genocide amendment from your Lordships’ House, the incoming and outgoing US Administrations both declared events in Xinjiang to be a genocide. Secretary of State Antony Blinken said at his confirmation hearing in the US Senate that:
“On the Uyghurs I think we’re very much in agreement. And the forcing of men, women and children into concentration camps, trying to, in effect, re-educate them to be adherents to the ideology of the Chinese Communist Party, all of that speaks to an effort to commit genocide.”
The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)
The noble Lord, Lord Adonis, has withdrawn, so I call the noble Lord, Lord Forsyth of Drumlean.
Lord Forsyth of Drumlean (Con) [V]
My Lords, I do not wish to detain the House at this stage in the Bill, especially following that excellent speech by the noble Lord, Lord Alton. I do not wish to repeat many of the arguments that have been put at an earlier stage in the Bill and the information which has been made available to the House about the atrocities which are happening in China today—not just among the Uighur people. The noble Lord, Lord Alton, has set out in great detail the arguments which I would have thought would persuade any Government of the virtues of this amendment.
I join him in paying tribute to my noble friend the Minister, who has worked hard to find a way through this. I appreciate that collective responsibility means that it is not always possible to deliver what Ministers might wish to achieve. However, following on from the remarks the noble Lord made about the debate on Tuesday next week on the all-party amendment on genocide, I think it is absolutely outrageous that those of us who wish to speak in that debate are unable to do so unless we appear in person at the House.
I have just received a letter from the Clerk of the Parliaments advising me that it is very undesirable for Members to come to the House, as indeed it is from a wider social point of view. At the beginning of each sitting, the Chair has indicated that all Members will be treated equally. It seems that the procedures that operate under ping-pong are preventing Members of the House carrying out their duties while being socially responsible and while following the advice from Public Health England and Scotland. I hope very much that this can be looked at before next Tuesday, so that we are all able to carry out our duties to the House of Commons and meet our responsibilities to our fellow citizens.
The noble Lord, Lord Alton, seemed to indicate that he would not press this amendment to a Division. Had he done so, I would have happily supported him, because I believe that it is a sensible amendment for the reasons put forward in earlier stages of the Bill. However, as I have said, I will not detain the House other than to indicate my support for the noble Lord and my admiration for the enormous energy that he has put into defending human rights and championing the cause of those people in China who, unbelievably, are experiencing what we have always been told after the events in Germany during the 1930s and 1940s would never be allowed to happen again.
Baroness Northover (LD)
My Lords, I too start by paying tribute to the noble Lord, Lord Alton, for his commitment and persistence. He is so often the conscience of this House on human rights abuses globally, and once more he has made a very powerful speech.
How can anyone who watched the ceremony to mark Holocaust Memorial Day, which was broadcast last night, not be deeply moved. It made plain how propaganda led to persecution and, step by step, to the appalling slaughter of the Jews and others in the Holocaust. It has been said, “Never again”, and international measures were put in place to try to counter such atrocities and bring people to account, yet there have been genocides in Cambodia, Bosnia, Rwanda, Darfur, Myanmar and so on. As the Holocaust memorial event also mentioned, we are now hearing appalling accounts coming out of China, especially in relation to the Uighurs, including of forced organ harvesting, the sterilisation of women and the re-education camps. We hear credible reports, as the noble Lord, Lord Alton, mentioned, of slave labour. We know that, in Germany, the chemical and pharmaceutical industries, in which the country had an international lead, drew on such slave labour, as did others.
We have seen worrying signs in the UK and across Europe more generally, and especially whipped up recently in the United States, of propaganda and discrimination being exploited by those seeking power. It has been an object lesson in how these things can happen, step by step, and how constant vigilance is always required. We knew it then, and we know it now, so the mover of the amendment and those speaking to it are right that, even here, in this limited Bill covering a specific area, the test should be applied as to whether an operator could be using infrastructure to breach human rights.
I am glad to hear of the efforts being made by the Minister to seek to address this, as the Government also did in the Medicines and Medical Devices Bill, and there managed, working with the noble Lord, Lord Hunt of Kings Heath, and others, to bring forward a relevant amendment. In her letter to us, the noble Baroness cites the actions of the Foreign Secretary in relation to Xinjiang. We are waiting to see the results of this translated into targeted sanctions, as the noble Lord, Lord Alton, mentioned, and the persuasion of other countries, starting with the EU, to follow suit. Sanctions are most effective if they are undertaken collectively.
We will shortly be considering the National Security and Investment Bill, and I am sure that these issues will be raised again. Prior to that, we have the Trade Bill. Surely if the Government are committed to this issue, when we get to that Bill, it is obvious that the Government must accept the amendment on genocide. How could we possibly agree to trade with a country that is committing genocide?
I thank the Government for their engagement, including that of the noble Lord, Lord Ahmad, with Sir Geoffrey Nice, the chair of the China Tribunal, on forced organ harvesting, and I look forward to further engagement. However, that engagement needs to turn into specific action. We cannot turn a blind eye, and I am sure that the noble Lord, Lord Alton, will make sure that we do not.
The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)
The noble Lord, Lord Vaizey of Didcot, has withdrawn, so I call the next speaker, the noble Baroness, Lady Falkner of Margravine.
Baroness Falkner of Margravine (CB) [V]
My Lords, last night at 8 pm, I lit my candle to commemorate Holocaust Memorial Day. Yesterday, Jewish leaders asked us to include later, less egregious events that have been committed against other groups—notably, and most recently, Chinese Uighurs. China is a superpower and we are a mid-sized state, but if the measure of a people is its moral standing, the United Kingdom has stood tall in the past and should continue to do so.
I note that the noble Lord, Lord Alton, is evaluating whether to press this amendment. I say to the House only that the amendment is modest. It seeks to prevent companies using UK telecommunications infrastructure to facilitate human rights abuses. The consumers of that infrastructure would not want infrastructure delivered to them on the back of human rights abuses. It would also give investors a steer, because they would know that the law is clearly set out, and they could make their choices accordingly. There is little that I would add, other than to say that the people of this country rightly hold their leaders to high standards, and this House should uphold those expectations.
Baroness Morgan of Cotes (Con) [V]
My Lords, I am pleased to speak at the Third Reading of this Bill. Like other noble Lords, I do not wish to detain the House for long, because it has taken some time to get to this stage.
I want to speak to Amendment 1, but it is worth reminding noble Lords that this Bill is, of course, intended to help the 10 million people in this country living in flats and apartments have the right to ask their landlord to help them get better broadband connectivity. This is a Bill to stop landlords failing to engage with telecoms operators. If we have learned nothing else in the past 10 months, although I am sure that we have learned plenty, broadband and better connectivity overall is now absolutely essential for people to be able to go about their daily lives in this country. As we have been hearing in the Covid-19 Select Committee of this House, the need for strong and reliable digital infrastructure will continue even after the pandemic has receded.
We have heard a very powerful speech by the noble Lord, Lord Alton. I remember him asking me the question this time last year. I will just say this to him: as he set out in his powerful speech, since the Bill was first debated last summer, events have indeed moved on. Although, as the Minister set out in her letter to all noble Lords, the amendment is not in scope, I am pleased to note that he and other noble Lords have recognised that the Minister has worked very hard to see if a way could be found to bring forward an amendment to the Bill that was in scope. I hope that the noble Lord, Lord Alton, will accept that the motivation behind his amendment and the passion and knowledge with which he speaks have been recognised and widely accepted, and are already influencing policy. He rightly pointed to the recent statement made by the Foreign Secretary as well as, of course, to the Telecommunications (Security) Bill which is being considered in the other place and will reach us.
I want also to pay tribute to the 5G Supply Chain Diversification Strategy which was published last month. When I was the Secretary of State with responsibility for digital, we made the decision last year about who would be able to work to roll out better connectivity. It was absolutely clear that we must not find ourselves in the situation again of being overly reliant on one supplier; we need to have more suppliers in the chain. I think that the new US Administration will help us through working together to achieve that.
The noble Lord, with his amendment, has compelled the Government to act. He has outlined the fact that there will be another opportunity, next week in the Trade Bill, for the House to consider the very important matters that he and other noble Lords have raised. For the reason that our fellow citizens need better connectivity, and that those who live in flats or apartments must be able to ask their landlords to engage in connectivity issues, this Bill is much needed now on the statute book.
Lord Fox (LD)
My Lords, on Report, the noble Lord, Lord Alton, said that this amendment would empower the Government to deny infrastructure access to operators whom, they believed, were abusing human rights. This is part of an important conversation about how modern slavery legislation might apply to the digital economy and especially its supply chain.
Since Report, this argument has been rehearsed on a number of occasions in other places. That reflects the tenacity of the noble Lord, Lord Alton, and his colleagues. Each time the argument is repeated, it is no less powerful, horrifying or revolting to hear what is happening.
As we heard from the noble Lord, the Trade Bill has been one focus for this discussion. The Government spurned a real opportunity when they whipped Conservative MPs to vote against the so-called genocide amendment earlier this month. That amendment reflected the discussions during the passage of the Trade Bill in your Lordships’ House. It sought to introduce a mechanism to allow British courts to determine whether a foreign country had committed genocide. The amendment was introduced in your Lordships’ House to deal not just with the Uighurs but with other human rights issues as well. I hope that your Lordships will listen sympathetically next Tuesday when the amendment is reintroduced.
I, too, thank the Minister both for her comments and for her detailed letter, which showed empathy on this issue and explained why her department had been unable to bring forward the amendment previously promised. My admiration for the ingenuity of the noble Lord, Lord Alton, and others has increased. They have managed to table this amendment to a Bill that, as the noble Baroness, Lady Morgan, correctly characterised it, is intended to help tenants obtain broadband.
The noble Baroness, Lady Morgan, also implied that the issue had, as a result of these discussions, somehow been dealt with. Although there has been welcome movement on the Government’s part over Huawei, it would be wrong to say that the issue has been dealt with. I asked the House of Lords Library whether a law exists that prevents telecommunications operators from using their infrastructure to breach human rights. I thank the Library for its thorough work, but it was unable to find evidence of legislation preventing telecoms operators from using tele- communications infrastructure to breach human rights. In other words, there is no such legislation. The Library asked Ofcom whether it was aware of any such requirement in legislation; Ofcom said that it was not. Legal experts were also unaware of anything in telecoms legislation. In other words, the noble Lord, Lord Alton, and the signatories to this amendment have identified a gap in the legislation.
The Human Rights Act applies only to public authorities and other bodies—public or private—that perform public functions. There is no general requirement on companies to comply with human rights obligations, although that has sometimes been applied to the relationship between companies and private individuals. As others have said, there are UN guiding principles on human rights and business. The Companies Act 2006, the EU non-financial reporting directive 2014 and the Modern Slavery Act all contain commentary on human rights but none deals with this particular issue.
It is a shame that we have had to have this debate almost by proxy. Even the noble Lord, Lord Alton, would admit that this Bill was not designed to address this issue. Such a Bill is needed so that we can have this discussion in a discrete environment. I understand that my noble friend Lord Clement-Jones was promised that there would be a communications security Bill. I assume that the National Security and Investment Bill is what that has metamorphosised into—perhaps the Minister could confirm that. As my noble friend Lady Northover suggested, this issue could be discussed in that context. I am working on that Bill, but it seems to me to have to been drawn very narrowly. Given this legislative absence, it is appropriate that the noble Lord, Lord Alton, and others have brought forward this amendment now. If the noble Lord, Lord Alton, decides to push it to a vote, we on the Liberal Democrat Benches will support it. If he does not, we shall support an amendment to the Trade Bill. Even if the noble Lord decides not to push for a vote today, the Government can be sure that this issue is not done with and will not go away.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I am glad that the noble Lord, Lord Alton, has rehearsed the background to his Report stage amendment and explained the reasons for bringing it back to your Lordships’ House today. We simply cannot turn a blind eye. Standing aside or ignoring what is happening in China is tantamount to condoning the appalling actions described by the noble Lord in his powerful and moving speech.
A lot has changed since June. I am sure that the Minister will update us on subsequent government action, particularly in relation to Huawei equipment. As a number of noble Lords have said, other legislation—including the Trade Bill, before your Lordships’ House again next Tuesday—has amendments bearing on this issue. The case made by the noble Lord, Lord Alton, is unanswerable, as I have made clear. However, tabling this amendment to this Bill is perhaps not the best way of achieving his wider objectives. It might, I suppose, adversely affect the chances of the big win that we hope to achieve on Tuesday with his amendment to the Trade Bill.
Everyone who has spoken today has supported the noble Lord, Lord Alton, and paid tribute to his campaigning and his ceaseless tenacity on this cause. If he chooses to divide the House, we will support him, but I hope that he will feel able to accept the Government’s position on this narrowly focused Bill and that it would be better to defer the decision to Tuesday’s debate on the Trade Bill.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, I thank all noble Lords for their contributions to this important debate. We all agree that this is a matter of great importance, which is why, on Report, I committed to bringing the issue back at this stage. I said:
“We will endeavour to find all the time possible to have sufficient ground to bring back a government amendment.”—[Official Report, 29/6/20; col. 538.]
I would like to reassure noble Lords that, working with officials in my department, I have tried my utmost to find a way forward.
I thank the noble Lord, Lord Alton, for his generous words. I have virtually met and spoken with him and other noble Lords on several occasions to discuss their concerns. My officials have had discussions with their colleagues in the Home Office, the Foreign Office and the Public Bill Office on how the Government might bring forward a legislative provision that—to quote the noble Lord, Lord Alton, on Report—had “teeth”.
We put two different versions of a government amendment forward to do this but were advised by the Public Bill Office that they were out of scope. It has been unequivocal that this includes any amendment addressing issues in the supply chain, such as those issues rightly raised by the noble Lord. Such issues—and thus, amendments seeking to address them—are therefore out of scope of this Bill. As a result, regrettably the Government have been unable to table an amendment to this effect, as I set out in my letter to all Peers on 26 January.
This also means that this amendment will not impact on the supply chain in the way that its sponsors intend. Indeed, it does not touch the supply chain at all. This is why we are resisting the amendment today, but along with other noble Lords, I commend the noble Lord, Lord Alton, for beginning a very important new stage of the conversation about modern slavery, particularly in Xinjiang, and human rights more broadly.
Several noble Lords invited me to share some of the actions that the Government have taken, and I am pleased to do so. On 12 January, the Foreign Secretary announced a series of measures to ensure that UK businesses and the public sector are not complicit in human rights violations in Xinjiang. This includes four main actions: first, strengthening the overseas business risk guidance to make clearer the risks to UK businesses investing in, or with, supply chains in Xinjiang; secondly, a review of export controls as they apply to the situation in Xinjiang, to ensure that we are doing all that we can to prevent the export of goods that may contribute to human rights violations in Xinjiang; thirdly, the introduction of financial penalties for organisations which fail to comply with the Modern Slavery Act; and, fourthly, ensuring that government and public sector bodies have the evidence that they require to exclude suppliers that are complicit in human rights violations in Xinjiang.
This announcement is a clear demonstration of the UK’s global leadership role in standing up for the rights of Uighurs and other ethnic minorities in Xinjiang. I thank all noble Lords who acknowledged that Government’s work in this area. These measures will help to ensure that no British organisation, whether public or private sector, is contributing inadvertently to violations in Xinjiang. As we know, consumer opinion and reputational considerations can and do play an important part in influencing corporate behaviour, and we as a Government are sending a strong signal that we will not stand by as these violations continue, and that there is a reputational and economic cost to them.
The noble Lord, Lord Alton, asked me three questions. The first was about the timing of putting into practice the legislation from the Home Office. We will legislate as soon as parliamentary time allows us to introduce penalties for non-compliance, and other measures which will strengthen the transparency legislation.
Regarding our conversations with BT, I am sure that he will understand that it would not be appropriate to comment on conversations with an individual company, but I think that he will also agree that we, like him, want respect for human rights to be at the centre of all business that takes place in this country.
On the role of the judiciary and state genocide, which the noble Lord understands much better than many people, and certainly me, state genocide clearly is very difficult to prove in a judicial context. The evidential threshold is high, and proceedings tend to be long and costly. It would be difficult for the High Court effectively to determine genocide, with the inevitable constraints that would exist on access to evidence and witnesses, and it would be wrong for the Government or MPs to subcontract to the courts our responsibility for deciding when a country’s human rights record is sufficiently bad that we will not engage in trade negotiations. Parliament’s responsibility is to determine when sanctions take place and with whom we negotiate. We continue to believe that responsibility rests with Parliament.
The Deputy Speaker (Lord Haskel) (Lab)
My Lords, I have received requests to ask a short question of elucidation from the noble Lord, Lord Adonis, and the noble Baroness, Lady Northover.
Lord Adonis (Lab)
My Lords, we are very grateful for the Minister’s reply. She said that the Government wished to table a specific amendment which was ruled out of order by the Public Bill Office. Is it the Government’s intention to bring the precise power that they were going to take in this Bill in the Telecommunications (Security) Bill? The Government control the legislative process. Will they bring forward the precise proposal they wished to bring forward in this Bill in another, which will come before us in the near future?
Baroness Barran (Con)
Just to clarify, the Government brought two versions of the amendment, not one. To the best of my knowledge, there is no intention to bring it back because the focus of the Telecommunications (Security) Bill is on telecoms security and national security. Therefore, any such amendment would face the same barrier as it faced in this Bill—namely, it would be out of scope. If it were effective on the supply chain, it would be out of scope.
Baroness Northover (LD)
The Government have always said that genocide must be decided judicially. The noble Lord, Lord Ahmad, has always reiterated that. Can the Minister clarify what she apparently said —that the Government seem now to have decided, in effect, that genocide might be decided by Parliament?
Baroness Barran (Con)
I hope I did not confuse the House. I am very happy to put in writing the Government’s exact position on this.
The Deputy Speaker (Lord Haskel) (Lab)
I have received a request to ask a short question from the noble Lord, Lord Alton.
Lord Alton of Liverpool (CB)
My Lords, I am very grateful to the Minister for the way she set out the case to the House. In response to the noble Lord, Lord Fox, she talked a little more about digital supply chain transparency. Given that this falls within her departmental brief, can she explain whether it will be within the security Bill that will come forward, so that it can be part of the discussion that takes place on that Bill? Also, will she share the wording of the two amendments she referred to in reply to the noble Lord, Lord Adonis, with the House so that Members can decide whether there are things that we would like to test on the Table Office, to see whether they could be brought into scope?
Baroness Barran (Con)
On the noble Lord’s second point, I will have to defer to colleagues about the ability to do that. In relation to the supply chain, my understanding is that that work is complementary to the security Bill rather than directly within it. Again, I am happy to write to the noble Lord to confirm that.
Lord Alton of Liverpool (CB)
My Lords, I promised the House that I would listen carefully to noble Lords’ contributions. I gently say to the noble Baroness, Lady Morgan of Cotes, that we would not have been having this debate if the amendment had not been in scope, so this amendment is in scope. The problem for the Government has been being able to get an amendment in scope to deal with the human rights issue. I recognise that the problem is that this is not a tree on which you can very easily hang new limbs. The Bill was therefore an opportunity, rather than necessarily the right piece of legislation, to bring before the House the enormities of what is happening in Xinjiang and the links of state agencies and arms, such as Huawei, to the Chinese Communist Party. That we have done across the Chamber very successfully, and I am grateful to the Government for the moves they have made. I set that out in my remarks at the outset of the debate. I am particularly grateful to the Minister, the noble Baroness, Lady Barran, who has been exemplary in the way she has dealt with the arguments and with individuals, especially difficult, persistent, awkward Members of your Lordships’ House, who do not easily let go on issues of this kind, and I do not think the House would expect us to.
The Minister has been given notice that we will be here again on Tuesday dealing with the extraordinary issue of genocide and what can be done about it. Like the noble Baroness, Lady Northover, I was puzzled by what the Minister said to the House a few minutes ago. It has always been the position of the Government—not just this Government, but their predecessors as well—that the determination of genocide is a matter for the courts. Indeed, the Prime Minister himself said that in the House of Commons only a week ago, and therein lies the problem. If there is not a court mechanism in the United Kingdom to deal with this, we have to rely on international courts, particularly the International Criminal Court, and everyone knows that if you were to take to the Security Council the horrors taking place in Xinjiang, which have been described in your Lordships’ House, the possibility that the People’s Republic of China would refer itself to the International Criminal Court for a criminal investigation is risible.
I am a great supporter of the ICC, which was set up by the Rome statute and a genuine attempt to fill the gap that has always been there since the 1948 convention on the crime of genocide, but sadly it has not done so and we still have to address how we can get determinations of genocide made. I think the only way we can do that is now through our own courts. Senior figures from our judiciary have spoken in favour of this. Retired Supreme Court judges, a former Lord Chief Justice and many senior figures in your Lordships’ House with a legal background have said that it is practical and something that our courts can and should do. I hope the House will have heard what the noble Lord, Lord Forsyth, said today.
I end by saying two things, one which the Minister will be pleased to hear and the other directed to the House authorities. Like the noble Lord, Lord Forsyth, I find it extraordinary that, under ping-pong arrangements, it is not possible to take part in a debate on something as important as an amendment sent back to your Lordships’ House by the House of Commons on an issue such as genocide without being physically present. To be told that in the same week that we are being told that we should not be here at all unless we really have to be is vexing, to put it mildly. I hope the House authorities will consider that and see whether there is anything that can be done before next Tuesday, as the noble Lord said.
Having made all those points, the Minister will be very pleased to know that it is not now my intention to force this issue to a vote today. I simply thank all those who have taken part in our proceedings. Like the noble Lord, Lord Fox, I say to the House that this is not over yet and there is so much more that can be said and will be said before it can be brought to a resolution. I beg leave to withdraw the amendment.
Baroness Barran
“(k) aimed at ensuring that nothing done by the operator in the exercise of the Part 4A code right unnecessarily prevents or inhibits the provision of an electronic communications service by any other operator.”Member’s explanatory statement
This amendment would require a Part 4A code right to be subject to terms intended to prevent uncompetitive behaviour.
Baroness Barran (Con)
My Lords, I have tabled this amendment in light of the strength of feeling in both Houses. Throughout the passage of the Bill, the Government have been clear about the intentions and goals of the legislation. We want to make it easier for digital infrastructure providers to access multiple-dwelling buildings so that those living in flats and apartments can access the connectivity they need from the providers they want. We want to ensure that residents are given choice and are able to access fast, reliable connectivity without being limited by their property owner’s silence.
Members of both Houses have raised concerns that consumers could find themselves locked into a provider as a result of this legislation. We continue to believe that such a scenario is unlikely and the legislation as drafted originally prevents it happening. The Bill, for example, does not limit the number of concurrent Part 4A orders that can exist at a property. This allows any resident in the property to search for the provider or service they want and request a service, even in properties where gigabit-capable, full-fibre connections might already exist. That provider is then able to make an application for a Part 4A order via the courts, should the landowner repeatedly fail to respond to requests for access.
Nevertheless, while we are confident that sufficient protections are already in place, we believe there is a benefit in taking a belt-and-braces approach. This amendment ensures that when operators access a property under a Part 4A order the terms on which they will do so will preclude them installing their infrastructure in such a way that would prevent a subsequent operator installing their own apparatus. As with the other terms imposed by a Part 4A order, they will be contained in regulations. Those regulations will be subject to the affirmative resolution procedure and, before they are made, they will have been consulted on with a range of key stakeholders. In this way, we seek to prevent a scenario whereby an operator purposefully installs their network equipment within the property so that it obstructs a second operator in installing theirs and providing a service to the building. I hope that this amendment reassures noble Lords and alleviates their concerns on the matter. I beg to move.
Lord Fox (LD)
My Lords, the amendment, which we welcome, brings us into the territory of the Bill. The noble Baroness, Lady Morgan of Cotes, if she is still in her virtual seat, will be sitting more easily in this part of the discussion.
When speaking previously to an amendment brought by the noble Lord, Lord Stevenson, supported by myself and others, the Minister agreed that we should aim to simplify the lives of consumers. To that end, she said that the Government would be willing to table an amendment at Third Reading. My understanding is that this amendment honours that statement. The Minister said that Her Majesty’s Government consider it fair to amend the Bill in this way and that the aim is to include measures to ensure that an operator must not install their equipment in any such anti-competitive way. Therefore, the test of the amendment is whether it reaches that objective.
I shall discuss two aspects of the amendment’s wording. First, the words,
“nothing done by the operator”,
seem to imply more than just technology, because there are other things that an operator could do. Perhaps the Minister can explain “nothing”. It could refer to a contractual matter or all sorts of other areas, including service as well as the purely technological. Secondly, there is the phrase, “unnecessarily prevents”. What is a necessary prevention? In other words, how will the regulations deal with those two areas—“nothing” and “unnecessary”?
I had the opportunity to virtually bump into the Minister this morning—obviously with at least two metres between us—and give her some warning of my concerns. Regarding the practical way this matter will work, let us imagine that I am a tenant in a new property. I move in, wish to switch my operator and start to encounter technological problems with the process. What do I do next? How does the amendment help me to deliver on that?
Quickly in conclusion, none of this means anything if we do not have great connectivity. I could not, therefore, pass this opportunity by without asking the Minister where we are on that. The delivery of ultrafast broadband was a subject for discussion in Committee and on Report, as was the creation of an open source network. It is safe to say that some time has passed since we last discussed that issue. As the Minister stated, some technological developments have included, not least, the gradual removal of Huawei from the supply chain. Meanwhile, the Prime Minister has made several statements about the bandwidth that will be provided and its extent—statements at odds with what network providers have said is possible. Where are we on the Prime Minister’s gigabit connectivity being available to everyone? Where are we on the development of open source networks? If the Minister can answer those questions, I am sure that we will support the amendment.
Lord Vaizey of Didcot (Con) [V]
My Lords, I refer to my entry in the register of Members’ interests. I was not a Member of this House when the Bill was debated at Second Reading or on Report. Therefore, I begin by saying how much I welcome it. In my experience as the Minister responsible for rural broadband rollout between 2010 and 2016, I soon came to realise that planning is the biggest obstacle that prevents the rapid deployment of the broadband that this country desperately needs. The planning system is hopelessly complex and time-consuming, and imposes enormous costs on operators. Anything that can make their lives easier has to be welcomed. Multi-dwelling units contain dozens of potential recipients of ultrafast broadband. If we can make it easier and simpler for operators to deploy their technology, that is to be welcomed.
I was also delighted that the Government yesterday published a consultation on reforming the Electronic Communications Code. Again, I was the Minister who had a first stab at that, which was obviously not good enough, and that is why we need a second bite at the cherry. I should point out to the noble Lord, Lord Fox, that the foreword to that consultation document contains some heartening statistics on the deployment of gigabit broadband. From memory—I read it only this morning, but I am getting older—some 30% of homes can now potentially receive gigabit broadband. It is good to see the Government pressing ahead on another front.
I should say on operators entering multi-dwelling units that one of the Government’s commitments during the passage of the Bill was to publish a consultation on the code of practice and then a code following Royal Assent. Given that the Bill imposes obligations on landlords and effectively interferes with their property rights, it is vital that landlords are reassured that the operators will adhere to the highest possible standards. The code of practice is also important for some of the smaller operators. There is some nervousness among them. If landlords are worried about operators’ standards when deploying the technology, they will simply take refuge by dealing only with the biggest operators and not allow insurgents, as it were, or start-ups to fibre-up their buildings. I hope that when she responds the Minister can give some reassurance that the code of practice consultation will be issued imminently.
I should also point out that the Bill does not yet cover the issue of shared freeholds, and I hope that the consultation on the Electronic Communications Code, which I am not covers this issue, could be used as a vehicle for looking at how operators can enter buildings where there is a shared freehold—the typical building being a Victorian house that has been split into flats. Some 5 million premises fall within that category and there needs to be some way forward to allow operators to access shared freehold premises.
I am not sure whether the amendment is necessary in practice, but I understand the Government’s motivation to reassure Members of both Houses that the Bill will not inadvertently create monopolies in multi-dwelling units. I should also ask the Minister to respond, either now or in writing, to the concern of some operators about the Government and Ofcom’s ongoing intentions to impose wholesale access on operators. It is one thing to say that an operator should not do anything, intentionally or inadvertently, to prevent a competitor supplying technology to multi-dwelling units, but it is quite another to impose on a company the obligation to allow others to use the infrastructure it has invested in and paid for. What is the direction of travel of the Government and Ofcom, because I know that they have previously thought about imposing wholesale obligations on operators in multi-dwelling units?
However, as I say, I welcome the amendment. My understanding is that any attempt to physically impede competitors from entering a multi-dwelling unit would fall foul of the ATI regulations and, indeed, the EU’s Electronic Communications Code, so I am not entirely certain that the amendment is necessary. However, in the sense of providing statutory reassurance that a much- needed piece of legislation will open up access to ultrafast broadband to many millions of people living in multi-dwelling units the amendment has to be welcomed.
Lord Clement-Jones (LD) [V]
My Lords, it is a pleasure to follow the noble Lord, Lord Vaizey, and to welcome him to the select band of broadband and telecoms legislation aficionados in this House. As my noble friend Lord Fox said, on Report we welcomed the principle of the previous amendment in the name of the noble Lord, Lord Stevenson, in respect of Part 4A code rights. Likewise, we welcome the Government’s Amendment 2 today.
Strangely enough, however, I do not think that the Government’s amendment is as good as the original, in terms of what the noble Lord, Lord Stevenson, was trying to achieve. It substitutes an arguably unclear negative injunction for a positive duty, where it is clear what is intended. On these Benches, however, as my noble friend Lord Fox indicated, we understand the intention behind the amendment, but how it is interpreted when put into practice will be the test. As he also said, we have throughout been encouraged to hear of the development of open radio access networks and strongly support them.
As the noble Baroness mentioned in her letter to us, in the period between Report and today, we have seen the publication of the Government’s 5G diversification strategy. I see that now NEC acting as the systems integrator will be building a testbed for O-RAN funded by the DDCMS, the new O-RAN project. Will the Minister say when this will be up and running and is this the promised Smart RAN interoperability centre—SONIC—or a precursor to it?
What is the current status of the telecoms diversification task force and the National Telecoms Lab, and what is the status of international collaborations? When developed, these open RAN standards will provide operators with the flexibility to use different vendors and obviate the need to take out existing networks on a change of operator. By the same token, for the consumer it would mean likewise that they are not captive to any particular operator with their equipment. That is a development that we wholly welcome.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I thank the Government for their amendment. As other noble Lords have said, this was originally raised in the other place by the Labour Party and withdrawn. A similar amendment was tabled by myself and others, supported by the Liberal Democrats, and we had a good debate in Committee. It is important for the progress of the Bill as a whole that these points were picked up. It is very good that the Government have come back with a proposal. Although, as the noble Lord, Lord Clement-Jones, said, the language is slightly different, the intention is clear and similar to what I wanted, because it deals with a real-life issue which could affect consumer choice. Despite the points made by the noble Lord, Lord Vaizey, I would argue that it is pro-competition and will benefit to those involved in this process.
The noble Lord, Lord Fox, raised some interesting points of detail and I look forward to the Minister’s response. The noble Lord, Lord Vaizey, raised some important wider points about the Bill’s narrow focus, which, of course, it cannot be blamed for, in the sense that it is what it is. It is about a particular issue which will unblock the current arrangements, in which non-responsive freeholders can hold back developments wished for by their tenants.
He also made some good points, which I hope we will not lose sight of as we look forward to further work from the Government on this issue: planning issues relating to the access required for new-generation technology; shared freeholders; questions about street works—how we synchronise them and make sure that they are effective; and the use of masts, particularly for 5G and other superstructure, which is not covered by this Bill but obviously needs wider consideration, perhaps in the next round of legislation.
As the noble Lord, Lord Clement-Jones, said, although a blizzard of other issues were raised in his short introduction, it is very good to have the noble Lord, Lord Vaizey, with his extraordinary experience in this area, contributing to this debate. I hope he will keep on with his very focused questions. I am happy to support the amendment and look forward to the Government’s response.
The Deputy Speaker (Lord Haskel) (Lab)
I have a request from the noble Lord, Lord Alton, to ask a short question.
Lord Parkinson of Whitley Bay (Con)
I think that might be from the previous group. The noble Lord, Lord Alton, is not in his place. He wanted to ask the Minister a question on the first group, but I think the message he sent was delayed in reaching the Woolsack electronically.
The Deputy Speaker (Lord Haskel) (Lab)
I call the Minister, the noble Baroness, Lady Barran.
Baroness Barran (Con)
I thank noble Lords who spoke in this short debate for their support and reflections. In response to the questions from the noble Lord, Lord Fox, about “unnecessarily” and “nothing”—a level of detail of which your Lordships’ House can be proud—“unnecessarily” is included to allow for the possibility that there might be circumstances in which an operator may have to, by necessity, prevent or inhibit the provision of a service, such as a broadband connection by a subsequent operator. I am happy to put this in writing. Similarly, nothing done by the operator is a protection to make clear that an operator cannot hide behind exercising their Part 4A code right, to do something that would unnecessarily prevent or inhibit the provision of a connection by a subsequent operator.
The key point, as I said in my opening remarks, is that we will be setting out in secondary legislation the terms under which operators will be granted access rights. We have committed to consulting on those terms and it is of the utmost importance that we get that right. The noble Lord also asked how this will impact on real life and the tenant—another important question. A customer can always request an operator of their choice; nothing has changed in the legislation. Nothing in the Bill prevents a second operator requesting code rights from a landlord.
Turning to the noble Lord’s questions about the Government’s ambition in this area, I thank my noble friend Lord Vaizey for highlighting the important progress we have made. The Government are working hard with industry to target a minimum of 85% gigabit-capable coverage by 2025, but will seek to accelerate rollout further to get to 100% as soon as possible We have committed £5 billion to support the delivery of gigabit-capable connections to the hardest-to-reach locations in the country.
My noble friend Lord Vaizey and the noble Lord, Lord Stevenson, referred to the further progress needed to facilitate the rollout and welcomed the new consultation on the electronic communications code, which was announced yesterday. We are seeking advice and guidance on a number of potential changes, including addressing unresponsive landowners outside multi-dwelling building environments—a subject debated by your Lordships in earlier stages of the Bill—and supporting operators and landowners to reach mutual agreement that facilitates the deployment of gigabit-capable networks. While the consultation does not propose specific reforms, it sets out a range of possible measures to tackle the issues raised with us about the current code. These include the time it takes for agreements to be completed, the confusion about upgrading and sharing rights, the lack of consistency in the treatment of entirely new agreements and the renewal of expired agreements.
My noble friend Lord Vaizey asked some very particular questions, including about the imposition of obligations on companies to allow others to use their infrastructure. If I may, I will write to my noble friend to clarify those points.
In the words of the noble Lord, Lord Stevenson, the noble Lord, Lord Clement-Jones, asked a “blizzard” of questions about diversification. Our diversification strategy was published on 30 November. We were very clear in it that we seek to create a much healthier supply market that is open, flexible and diverse. We have backed that initially with £250 million of investment. In relation to the noble Lord’s other points, I hope I may write to him.
Baroness Barran (Con)
My Lords, as noble Lords will be aware, this piece of legislation, though short in length, has taken many months to reach this stage and has sparked impassioned debate from all sides of this House. It is a Bill that will benefit huge numbers of people, and I appreciate the dedication with which your Lordships have scrutinised it. Our debate and your Lordships’ questioning have exposed important global issues, particularly in relation to human rights, and no one watching the passage of this Bill could doubt the rigour of your Lordships’ scrutiny.
I am particularly grateful for the openness and co-operation shown by Members on the Front Benches opposite: the noble Lords, Lord Stevenson, Lord Livermore, Lord Clement-Jones and Lord Fox. I must of course mention the noble Lord, Lord Alton, from whom I have learned much in our conversations during the passage of the Bill. He has shone a light on some terrible human rights abuses. I also thank his co-signatories: my noble friend Lord Forsyth, the noble Baroness, Lady Falkner, and the noble Lord, Lord Adonis.
I will take this opportunity to congratulate the noble Lord, Lord Stevenson, on his appointment to your Lordships’ Communications and Digital Committee. I thank him for his generous advice behind the scenes and his friendly challenge in the Chamber. I will miss seeing him opposite me, virtually or physically, but look forward to working with his successor.
I am pleased with the shape in which the Bill leaves the House. Once it comes into force, it will ensure that those living in apartments and blocks of flats are supported in accessing fast, reliable and resilient connectivity. I do not need to remind your Lordships how important that is.
Finally, I take the opportunity to thank the Bill team and officials across government who have worked tirelessly and very patiently with this Minister to deliver this important piece of policy. I beg to move.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I thank the Minister for her kind words. We have enjoyed working with her over this period. The Bill has been an exemplary one in terms of making sure that the House is able to do its job and that the processes necessary to make it fit for legislation once it leaves Parliament are carried out in the best way. That can be done only if there is a spirit of mutual support and trust, and we certainly had that.
I actually took this Bill over at a relatively late stage. Most of the heavy lifting was done initially by my noble friend Lord Griffiths of Burry Port, and the show was kept on the road by Dan Stevens, our legislative assistant, whose skills and expertise I have drawn on mercilessly. I join the Minister in thanking members of the Bill team, who made themselves very much available and answered our detailed questions in the private meetings that we had.
This is a small but important Bill. As the Minister said, it will affect a lot of people; it will make their lives better and give them access to what has become a utility necessary for modern living. It has been scrutinised carefully in this House, and I am confident that it will play a part in helping to achieve a gigabit-enabled economy across the whole country—something that we need as soon as possible. There remains a lot to do, as we picked up today, but it is good to hear that the consultations on the remaining issues are taking place, particularly on the rollout of 5G and the development of fibre to the home. I urge the department to up its game on this and on a number of other issues that we talked about, and I will be watching from the sidelines.
Lord Clement-Jones (LD) [V]
My Lords, I doubt very much whether the noble Lord, Lord Stevenson, could ever possibly watch from the sidelines—but that is an aside.
After an unusually long gap between Report and Third Reading, we are sending the Bill back to the Commons in much better shape than when it arrived. It is still, however, a modest Bill with much to be modest about, to coin a phrase. We on these Benches have never thought that it was adequate in itself to deliver the ambition of one-gigabit-per-second broadband capability by 2025, and of course the goalposts themselves have now been moved by the Government. However, we now have the consultation on changes to the Electronic Communications Code, which is a step forward. I do hope that the Government will see the wisdom of retaining the review mechanism of the code in Clause 3, which the House inserted on Report, which can assess after that what other measures might be needed. We on these Benches will continue to press the Government on their electoral promises.
We also stressed during the passage of the Bill that we would like to see broadband treated as a utility, as with gas, water and electricity, with all the necessary and equivalent rights of entry. The last year could not have demonstrated more graphically the essential nature of good broadband to all our lives, alongside, if not ahead of, all those other utilities. We on these Benches advocate strongly for the universal service obligation to be raised to 25 or 30 megabits per second—that is, superfast levels—which should be treated as the minimum for these rural areas.
That said, I thank the Minister, the noble Baroness, Lady Barran, together with her Bill team, as ever, for their very good nature. I also thank her for her kind words, good nature and patience with us all throughout the Bill and for her willingness to listen, even if she did not always accept our arguments. I also thank the noble Lord, Lord Stevenson, for his collaboration and co-operation during the course of the Bill, which showed how we always achieve better results by cross-party working.
I also thank the noble Lord, Lord Alton, for raising some extremely important questions with reference to human rights abuses and modern slavery. His campaigning has clearly changed the Government’s approach and, despite what the Minister has said, it might become even more relevant in the context of the Telecommunications (Security) Bill, which, as we have heard, will come to this House shortly. Of course, the acid test will come next Tuesday on the Trade Bill ping-pong. This is of great significance in terms of the relationship between human rights and trade as a whole. Like him and many other noble Lords, I urge the Government to reconsider their position ahead of that vote.
Lastly, I thank Sarah Pughe in our whips’ office for her valuable help, and my noble friends Lord Fox and Lady Northover, who have contributed so knowledgeably throughout on different aspects of the Bill that they have given me a very easy run when leading on it.
Baroness Falkner of Margravine (CB) [V]
My Lords, it is a privilege to make the concluding speech for the Cross Benches on this Bill today. I place on record our thanks to the noble Baroness, Lady Barran, and the Bill team, who have been so ready to engage with our concerns, albeit to limited avail in the end.
It was the late Robin Cook who, as Foreign Secretary, first set out a framework for the UK to have an ethical foreign policy in 1997. Given where the UK is now—debating sanctions only an hour ago against Russia in defence of human rights and democracy, standing up for the rights of people in Hong Kong and shortly to be in the process of discussing the National Security and Investment Bill—I think he would have been pleased with the progress made in the intervening period, not least with our efforts to prevent Chinese commercial enterprises, under the control of that country’s national security laws, from participating in egregious human rights violations and cashing in their profits in this country.
I first spoke to my amendment preventing firms that are a security threat operating our critical national infrastructure on 19 May 2020 in Committee on this Bill. In the intervening eight months and numerous debates, it was never my intention—and I think I speak for all other noble Lords who have led this charge; the noble Lords, Lord Alton, Lord Forsyth and Lord Adonis, joined by the Front-Bench speakers of the Liberal Democrats and the Labour Party—to prevent the necessary tools needed to roll out broadband to those who need it. Our concerns were well grounded and have, regrettably, come to pass as more information on the treatment of Chinese Uighurs comes to light.
It is also the co-operation between the House of Lords and the other place, so ably led by my noble friend Lord Alton, on these numerous amendments that has allowed us to help the Government to think through where the balance lies in relation to commerce and complicity in human rights abuses that has helped us reach this place today with our amendments. It is now for the other place to decide where that balance lies. I wish the Bill well.
Air Traffic Management and Unmanned Aircraft Bill [HL]
Thursday 28th January 2021
(3 years, 9 months ago)
Lords ChamberRead Full debate Air Traffic Management and Unmanned Aircraft Bill [HL] 2019-21 View all Air Traffic Management and Unmanned Aircraft Bill [HL] 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 98-I(Rev) Revised marshalled list for Report - (18 Jan 2021)
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)
In moving that the Bill do now pass, I shall make some brief observations and reflect on its passage. At the outset, I thank the noble Lord, Lord Tunnicliffe, for his patience, focus and good humour in scrutinising the Bill, and the noble Baroness, Lady Randerson, for her very valued input. I also thank the cadre of noble Lords who showed a particular interest in this very important Bill and shared so much of their experience and wisdom in scrutinising it. Contributions and questions from all sides were thorough and searching. We listened to concerns and made changes where needed, and we have a better Bill for it.
The Bill has had a rather longer gestation than I would have liked, but that was to be expected in the circumstances. Having been introduced to your Lordships’ House in January 2020, it entered an unprecedented period which has thrown numerous challenges at the Bill and, of course, the aviation industry. However, the Government are clear that the powers in the Bill remain critical, even in the current Covid-19 context. The need to modernise the UK’s airspace has not changed, and the Bill will help reduce aircraft noise, reduce traffic delays and support the aviation industry’s recovery and growth. Additionally, there are emissions savings from modernisation.
It has been 20 years since the establishment of an economic regulatory regime for the provision of en-route air traffic control services. The Bill will modernise regulatory provisions relating to air traffic services, provided by NATS (En Route) plc, or NERL, and regulated by the Civil Aviation Authority, ensuring that the framework remains fit for purpose and continues to build on the UK’s excellent safety record. Following Report, the Bill now also enables the Government to continue to provide alleviation from the requirement to use slots at co-ordinated airports 80% of the time for them to be retained. These powers will be temporary, until August 2024, and I thank all noble Lords for their constructive engagement on these amendments. It was far from ideal to bring these amendments to your Lordships’ House before Report; however, Covid-19 has provided many unexpected twists and turns.
Finally, the Bill will give the police new powers to enforce the existing law surrounding unmanned aircraft to ensure the skies above us are safe without damaging the unmanned aircraft industry. There are, as ever, many people beyond your Lordships’ House who have helped shape the Bill—the CAA, NATS, the police and others across government—and, of course, we have a fantastic and more than a little patient Bill team who have had to shepherd the Bill through interesting times. I am very grateful for their hard work and persistence.
Lord Rosser (Lab) [V]
Speaking for myself and my noble friend Lord Tunnicliffe, I take this opportunity to thank the Minister and all her officials and colleagues involved with the Bill for their willingness to have informal meetings to discuss, in an open and helpful way, a range of complex issues relating to the Bill as a whole and Parts 1 and 2 in particular. This has greatly contributed to effective scrutiny, needed technical amendments and useful clarifications and amplifications, including those read into Hansard by the—
The Deputy Speaker (Baroness Watkins of Tavistock) (CB)
The noble Lord, Lord Rosser, has been cut off, so we will proceed with the noble Baroness, Lady Randerson, and return to the noble Lord if we can.
Baroness Randerson (LD)
My Lords, I start by thanking the Minister and her officials for the time and patience they have devoted to explaining the Bill and, in particular, the many amendments. I am very grateful to them, as I am to the noble Lords, Lord Rosser and Lord Tunnicliffe, and all noble Lords who added their expertise to our debates.
This Bill is, I believe, the third recent attempt at aviation legislation. On Report, I called the Bill a bit of a mess: it is, indeed, an extraordinary saga, worthy of featuring in one of the excellent briefings we get from our Library about historic aspects of our proceedings. There can rarely have been a year between Committee and Report on a Bill, and certainly not a year of such momentous events. Covid and Brexit have both had a profound effect on aviation, and technological development meant that drone capability has greatly increased.
There are now three elements to the Bill; it started with only two. The modernisation of airspace seemed urgent a year ago—less so now that flights are at a fraction of previous numbers. However, concerns remain for airport operators about the conflict between the CAA’s new enforcement powers and other aspects of their role. There are concerns about the financial costs of modernisation at a time when airports have suffered severely financially, and concern about the requirement to release so-called spare airspace capacity for general aviation.
The wholly new section on slot waivers is a direct result of the pandemic and is welcome in order to avoid environmentally damaging ghost flights, but I remain concerned and hope that the Government will make sure that in future the rules are tightened to ensure fair competition and fair prices for consumers.
The section on unmanned aircraft has been subject to wholesale rewriting because of the changed legal situation. However, it is still far too narrow in scope, concentrating on new police powers rather than on the modern capabilities of drone technology and how drones should be used safely and effectively.
My amendment, which would have ensured a wholesale review, narrowly failed to secure a majority. However, I hope that the Minister and her colleagues will take that approach in the near future, because BALPA, our airports and airlines, as well as many drone manufacturers and commercial operators, believe that more is needed on this. The Bill now goes to the other place and I am sure that many Members there will pick up on the issues that I have referred to.
Lord Craig of Radley (CB) [V]
My Lords, from the Cross Benches, I thank the noble Baroness, Lady Vere, and the Bill team. I am grateful to have this opportunity to speak.
As others have pointed out, the Bill must have gained an entry in the Guinness book of records. It started life in your Lordships’ House with its First and Second Readings over a year ago. After Committee in early February, it sat month after Covid month in the pending tray, then, at the last minute, the Bill team had to drag it swiftly into a new framework—one created by that large amendment to ANO 2016 that took effect so close to Report. However much forewarned, it cannot have been a straightforward task to draft and present so faultlessly the plethora of government amendments required to bring the Bill up to date. That was a great effort that all should admire.
For the noble Baroness herself, it must have been a considerable challenge to master her brief on this complex subject so fully and comprehensively, and I pay tribute to her, too. I admit to having been something of a thorn in her side, but she willingly and courteously exchanged, both on and off the Floor, on our respective views. In her reply to my amendment on Report, she got one point spot on: she said that she suspected that I might not be reassured.
I expect the issue to resurface, but honest differences are the meat and drink of legislation. Given the complexity of this subject, the noble Baroness earns credit for her steady determination. When discussing drones a year ago in Committee, she said, referring to the future of manned and unmanned aircraft traffic management, that it would be
“a whole new world of pain.”—[Official Report, 10/2/20; col. 2111.]
I hope that the passage of the Bill has not been too painful for her. From the Cross Benches, I thank her and the Bill team for their efforts.
The Deputy Speaker (Baroness Watkins of Tavistock) (CB)
I call the noble Lord, Lord Rosser, who I think is back in contact.
Lord Rosser (Lab) [V]
I am afraid that I have little alternative but to start again from the beginning, because I do not know at what stage I got cut off, so I hope that noble Lords will forgive me for that.
Speaking both for myself and for my noble friend Lord Tunnicliffe, I take this opportunity to thank the Minister and all her officials and colleagues involved with the Bill for their helpful approach and willingness to have informal meetings to discuss in an open and constructive way a range of complex issues relating to the Bill as a whole and Parts 1 and 2 in particular. That has greatly contributed to effective scrutiny, needed amendments and useful clarifications and amplifications, including those read into Hansard by the Minister on Report. I know that my noble friend Lord Tunnicliffe has been particularly appreciative of this way of working with the Minister and her team. It has undoubtedly resulted in a better Bill.
I also thank Ben Wood in our office for all his hard work, which has been of real value to me and to my noble friend Lord Tunnicliffe on the Bill. Our thanks go, too, to all other Members of your Lordships’ House and outside organisations with whom we have worked, not least the noble Baroness, Lady Randerson.
As has been said, the Bill has not had the quickest of passages through the House. It started out in your Lordships’ House a year ago around the time when, as I remember it, I was temporarily out of action. It now goes to the other place for their consideration, and I am quite sure that the work that we have all done on the Bill will assist its passage through the Commons.
Baroness Vere of Norbiton (Con)
My Lords, once again, I thank all noble Lords for their contributions. I of course note the points raised and look forward to further debate in the coming months on matters relating to aviation and unmanned aircraft. With that, I think we are done: the Bill is clear for take-off.
Covid-19
(3 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Smith of Basildon (Lab) [V]
My Lords, I always think that it is shame that we are not able to hear the Statements in the House first.
When I heard the Prime Minister’s Statement, I was struck by how quickly it moved on from reflecting on how we have got to this point straight to vaccinations and quarantine. Obviously, the focus must be on the future, but surely at every stage we need to reflect on what has gone before—both on the successes and on what we would do differently.
More than 100,000 people across the UK have died. That figure is chilling. Each death has been mourned, often in shock and despair. In the 11 weeks since 11 November, the number of deaths has been higher than in the previous eight months. So when the Prime Minister says that the most important thing that we can do to honour their memory is to persevere against the virus with even greater resolve, he is only partly right. It is the absolute minimum that we must do.
We agree that we must use the expertise, energy and commitment of every agency and resource of government to ensure that our lives can start to return to normal as soon as possible. But there are two other ways in which we must respect the memories of those who have died: first, by recognising and learning the lessons of past mistakes and, secondly, by preparing for the post-Covid economy and the society of the future.
Such a worldwide crisis is unprecedented. The scale and severity of the pandemic would be challenging for any Government. Britain is the first country in Europe to suffer 100,000 deaths, with one of the highest death rates in the world. Add to that the deepest recession of any major economy and the lowest growth, and we are on course for one of the slowest recoveries of any developed nation. We recognise that the Prime Minister is trying to manage competing pressures from those who want to put health first and those calling for restrictions to be lifted early because of the economic impact. However, as we have said so many times, these are not competing issues; it is impossible to have a healthy economy without a healthy population and we will not emerge from the economic crisis with a further hokey-cokey approach to lockdown, where we start too late, stop too early and then start all over again.
With so many across the UK struggling mentally, physically and economically, Boris Johnson should reflect on his reaction to those who raise questions and concerns, or offer advice. Early last month, Keir Starmer questioned the Prime Minister on whether the Government’s four-day window for lifting restrictions over the festive period was appropriate, with the R rate rising. In response, the Prime Minister shouted that Labour wanted to cancel Christmas, before bowing to the inevitable a few days later. Again, last month, when schools in some London boroughs sought to stop transmission by closing early, they were threatened with legal action—by a Government that then took that same course of action. The Prime Minister has never properly addressed the times when he has been too slow to accept the advice from SAGE. Even if it is a different viewpoint, which does not chime with his position at that time, Mr Johnson should consider the merits of the suggestions and comments put to him. We want, and we need, the Government to get this right. It is no exaggeration to say that lives, and livelihoods, depend on it.
The way out of this nightmare has now been provided by amazing scientists, our National Health Service, the Armed Forces, and hundreds of thousands of volunteers. The vaccine programme is making incredible progress—a truly national, and an unprecedented, effort. The Government are of course right to focus on the rollout. There will be problems and glitches, so transparency and clarity are critical to success, and I have three questions for the Minister on that point. Can she tell us how the Government are ensuring the even distribution of vaccines around the country? How are they working with local government and other public bodies to ensure efficient targeting and take-up, particularly in the priority groups? Can she also tell us how quickly, when best practice is identified, it is communicated elsewhere?
Reports today that cases are falling, but not fast enough to ease the pressures on the NHS, bring home just how important it is that the test and trace scheme is effective. At a cost of £22 billion and rising, we were promised a world-beating system, and we desperately need it to succeed. I still think it would be helpful to your Lordships’ House if the Government permitted the Minister’s colleague, the noble Baroness, Lady Harding, to answer questions in the House on test and trace. In her absence, I ask the Minister: given the failures of test and trace in the autumn, what lessons have been learned since?
The Minister will be aware, as I am, of the changes to counting methodology. An individual who tested positive, having come into contact with others, four of whom then tested positive, would previously have been counted as one identified contact, because that person was the contact who passed the disease on. Under the new counting rules, that individual will now be counted as four identified contacts. I do not understand the reasons for that. The figures may look better, but no additional people will have been contacted. Even the Government have admitted that this change will result in duplicate counting. Can she explain why the counting is being changed but the process is not? The Government have confessed to spending almost £1 million a day on private consultants for test and trace. Is this really the best they can come up with?
We desperately want schools to be safe, and we agree that this is complex. We will look at the details of the Education Secretary’s plans for the Covid support premium, including how it will be allocated to help children catch up on missed education. Can the Minister tell me how the Government are dealing with gaps in online provision? On the previous Statement, I asked her how many children still did not have adequate access; she replied about how many people did have access. Yes, I agree that that is impressive, but the immediate priority is those who do not. Can she answer that same question today, or write to me with the number, and about immediate plans?
The Prime Minister has suggested that some schools might return in early March. Can the Minister therefore comment on Labour’s proposal—echoed, incidentally, by both the Children’s Commissioner and the Conservative Chair of the Commons Education Committee, Robert Halfon—to use the window of the February half-term to vaccinate school staff and other key workers? With the weekends either side, there will be a clear 11 days in which that could be done. We must appreciate that, if it were done, it would have an impact on the initial plans for a rollout. This is part of my point about clarity and transparency. Ensuring that everyone knows and understands how, when and why the vaccine is being rolled out will reassure, and assist with public confidence.
Finally, we know very little about how the Government’s quarantine plans will work in practice, including who will be responsible for enforcing them and how. I listened to the Home Secretary’s Statement, and I have to say that it provided more questions than answers. So I have two questions for the Minister today. Given reports that only three in every 100 people quarantining are contacted, how is that figure being increased, and what agreements have been reached with the hotels that will be accommodating those quarantined? I look forward to hearing the noble Baroness’s answers, and I trust that, where she does not have full details, she will write.
Lord Newby (LD)
My Lords, this Statement marks the most sombre milestone. One hundred thousand deaths is an horrific figure. Our hearts go out to the families of all those who have died and to all those who are currently suffering from the disease, either at home or in hospital. We must also pay tribute again to the staff in the NHS and in care homes, who are fighting the battle against Covid on a daily basis, often under the most extreme pressure.
On Monday, in announcing the 100,000 figure, the Prime Minister said that the Government “did everything we could”, since the pandemic struck, to minimise its impact. This simply is not true. Among the many things the Prime Minister chose not to do was to take SAGE’s advice, on 21 September, for a circuit-breaker of restrictions. Instead, he did nothing for three weeks and then introduced a watered-down version of what SAGE had recommended. Many people died as a result. I know it is a big ask, but I ask the noble Baroness the Leader of the House to suggest to the Prime Minister that he would have more credibility in the future if he stopped misrepresenting his actions in the past.
I have not, until now, been a huge fan of the immediate initiation of an inquiry into the handling of the pandemic because I thought that all our efforts should now be going into fighting it. However, as the Government clearly do not believe that they have made any mistakes, despite all the evidence to the contrary, I can now see no other way in which a light can be shone on past failings to ensure that they are not repeated. When do the Government intend to make good on the Prime Minister’s commitment, some six months ago, that an inquiry should indeed be held?
Today’s Statement repeats some past mistakes. Most obviously, the restrictions on arrivals to the UK from 22 countries where there is a known variant of the disease are both too little and too late. The requirement to spend quarantine in a hotel is a good one; it has been extremely effective elsewhere—Australia, for example. But given the weakness of the policing of self-quarantining, it surely makes sense now for all arrivals in the UK to quarantine in a hotel. The measure is too little, and it is certainly too late. We should have been doing this months ago.
The Statement is understandably upbeat on the progress of the vaccination programme, and we congratulate all those who have worked so hard to develop the vaccine, and now to deliver it. But it is curiously silent on the other principal pillar of the fight against the virus—the track, trace and isolate system. That system may have become a bit more successful at tracking and tracing, but it remains very largely ineffective in persuading those who are asked to stay at home actually to do so.
The reason for that is undisputed. A large proportion of those affected simply cannot afford to take the time off work. The Government’s response so far, in terms of financial support, has been pathetically inadequate. We hear that arguments are still under way within government about what to do next. Given that they spent £22 billion on the track and trace system but peanuts on the isolate system, surely it is now time to introduce a system that makes up for people’s loss of earnings if it is to stand any chance of being successful. So when do the Government intend to announce a new compensation scheme that might actually work?
Looking forward to the easing of the lockdown, the Government say that nothing will happen for at least another six weeks. But they completely fail to set out the criteria against which they will make their decisions in mid-February. That failure has both practical and psychological costs: practical because nobody can begin to plan for the reopening, and psychological because all that people can see in front of them is a further long period of lockdown, with no clarity on the conditions that will allow its easing.
Why is it impossible to set thresholds of case numbers and hospital occupancy, above which restrictions will remain, but below which they might—not will, but might— be reduced? Why cannot the Government say in advance of mid-February how, and by what stages, the opening of schools and the economy as a whole will proceed? In that way, school leaders would be able to plan now for a resumption of normal classes and would not need a further two weeks while a decision was taken to open up. The idea that parents need two weeks’ notice for their children to go back to school is just nonsense; given the stress they are under, two days would be more than long enough.
Will the Government therefore bring forward the point at which they tell schools the basis on which they will reopen, whenever the actual reopening date proves to be? Will they equally signal to those businesses which are now unable to operate the triggers that will enable them to do so?
Baroness Evans of Bowes Park (Con) [V]
My Lords, I thank the noble Baroness and noble Lord for their comments. Like them, my thoughts and sympathies are with every family that has tragically lost loved ones during this terrible pandemic.
The noble Baroness asked about working with local government. I assure her that we are working extremely closely with local government, and indeed many partners. This is a national endeavour, uniting local and national government, the NHS and many more. Over the past few months, we have recruited and trained a vaccination work force of 80,000, including retired clinicians, the Armed Forces, pharmacists and volunteers. Over 200,000 members of the public and businesses have offered non-clinical support and help with the logistics of the programme.
I can certainly assure both the noble Baroness and the noble Lord that we are doing everything we can to roll this programme out as smoothly as possible. We are sharing data to ensure that priority groups around the country are receiving their vaccines as quickly as possible. We have vaccinated over 80% of the over 80s, and 75% of elderly care home residents. Vaccinations are now being offered to everyone over the age of 70.
The noble Lord, Lord Newby, asked about an investigation or inquiry into the handling of the pandemic. As the Prime Minister has said, we will turn to that, but at the moment I hope he understands that we have other priorities that we are working on.
The noble Baroness once again rightly asked about schools. We have bought 1.3 million devices and delivered over 870,000 to schools in England so far during the pandemic. We bought an additional 300,000 laptops and tablets this year, increasing our investment by another £100 million. We have spent over £400 million supporting disadvantaged children who need help with access to technology. I fully recognise that there are people who will fall, and currently are still falling, through the gaps, but we are working closely with our school partners around the country to try to make sure that all families and all children have access to the technology that they need.
The noble Baroness asked about vaccine prioritisation. It is an issue that many have rightly raised. I reiterate that the JCVI advises that the immediate priority for the vaccination programme should be to prevent deaths and protect healthcare staff, with old age deemed the biggest single factor determining mortality. That is why we are following the advice of the independent body. The top four priority groups account for 88% of Covid deaths.
I say to the noble Baroness that the ONS has looked at rates of death involving Covid in men and women who work as teaching and education professionals. They were not statistically significant when compared to the rates seen in the population among those of the same age and sex. I know that sounds slightly bureaucratic, but we are looking at the data and have taken advice from the JCVI. There is a reason for the prioritisation, although I entirely accept that there are many groups who would like to have the vaccine as soon as possible. That is why we are rolling out the programme as we are.
The noble Lord and the noble Baroness asked about the international travel situation, as announced by the Home Secretary yesterday. The noble Baroness asked a number of questions. There will be further information and details set out next week, so I am afraid that I am not able to provide any additional information than that provided yesterday. But we will introduce a new managed isolation process in hotels for those who cannot be refused entry, including those arriving home from countries where an international travel ban has already been imposed. Further details about this policy will come next week—we are working as quickly as possible across government and industry to bring these measures in.
Both the noble Lord and the noble Baroness asked about test and trace. We have contacted over 7 million people who may otherwise have spread the virus through the system, and we have reached 86.7% of those testing positive, so the system continues to work and improve.
The noble Lord asked about support for those self-isolating. As he will be well aware, there is a one-off £500 test and trace support payment, which helps those on low incomes who are self-isolating, and we have extended that until the end of March. In total, more than 4 million people could be eligible to receive this support payment. In addition to that, accepting that not everyone is covered by it, we have provided £25 million funding to local authorities to make discretionary payments to those facing financial hardship who are not eligible for the £500 scheme. We have also made statutory sick pay available from day one, while making emergency changes to reimburse small and medium-sized businesses with two weeks of sick pay per employee. Of course, we continue to support the lowest paid with a temporary universal credit uplift worth £1,000.
The noble Lord asked about our future plans. The reason why the Prime Minister set out the end of February as when we will return with a plan is that at this point we do not yet have the data on the impact of the vaccine rollout on case rates, hospitalisations and deaths, which will be vital in determining the timeline to releasing the measures. By mid-February, we will know much more about the effect of vaccines in preventing hospitalisation and deaths, using data from both the UK and nations such as Israel. We will know how successful the current restrictions have been in driving down infections and we will know how many people are still in hospital with Covid. We intend to look at all that data and information and will set out the results of that and publish our plan for taking the country out of lockdown when we announce that on the week of 22 February.
Our aim will be to set out a gradual and phased approach towards easing restrictions in a sustainable way, beginning as we have said with the reopening of schools, which is our national priority. We hope to commence the reopening of schools from 8 March with other economic and social restrictions being removed after that.
The Deputy Speaker (Baroness Watkins of Tavistock)
We now come to the 30 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.
Lord Herbert of South Downs (Con)
My Lords, I draw attention to the relevant interest in the register, which I have declared. I welcome the Prime Minister’s Statement yesterday and, in particular, the remarkable rollout of the vaccine which has, rightly, impressed so many. Would my noble friend accept, however, that, despite fully recognising what she said about the advice from the Joint Committee on Vaccination and Immunisation—and of course we all accept the view that the most vulnerable people should be vaccinated first—there are particular claims from groups of people for priority for the vaccine that we should listen to? In particular, the police—although I accept there are many others—are on the front line, very often putting their own lives at risk. A view has been expressed by the Police Federation and others that the police service and in particular front-line officers should be recognised when it comes to decisions about who should be vaccinated next. Can my noble friend take that view to the relevant authorities?
Baroness Evans of Bowes Park (Con) [V]
I am grateful to my noble friend for setting out an eloquent case for the police, as indeed many others do for teachers and many of the other keyworkers who we have been so relying on, and we are so grateful for all their help and work during the pandemic. As he alluded to, I set out the fact that we are following the advice from the JCVI, and I am sure that it hears the strong cases that people put forward. I reassure my noble friend that the JCVI has considered evidence on the risk of exposure and mortality by occupation. Under the priority group’s advice, those over 50 years of age and all adults in a risk group would be eligible for a vaccination in the first phase of the programme. This prioritisation catches almost all preventable deaths from Covid, including those associated with occupational exposure to infection.
Baroness Bull (CB)
My Lords, following on from the question of the noble Lord, Lord Herbert, Public Health England has reported that people with learning disabilities are six times more likely to die of Covid, and those under the age of 35 with learning disabilities, 30 times more likely. They are at greater risk of transmission via peripatetic care staff and less likely to be able to understand and follow guidance on hand hygiene, social distancing and masks. Despite this, they are not recognised in the vaccination list; currently, they are in the sixth tier. Given that the Secretary of State has now accepted that he was not required to accept the JCVI advice on prioritisation, will the Government act swiftly to address this and give priority access to individuals with learning disabilities on an equal basis with other highly clinically vulnerable individuals?
Baroness Evans of Bowes Park (Con) [V]
The noble Baroness makes an eloquent case, but I have set out where we are with prioritisation. As we have said, the JCVI’s advice is clear that we should initially focus our efforts on those in care homes, health and social care workers, the elderly and the extremely vulnerable.
The Lord Bishop of St Albans
My Lords, the position for young people in school and education is mixed, with some students in poorer areas still not having access to online education and those in remote rural areas with not-spots simply not able to get online. Could the noble Baroness comment on the priority of trying to ensure that we move much more rapidly on the provision of broadband, particularly in those difficult areas? Secondly, we are going to have to do a big catch-up on educational standards and achievements, but it is important, at the same time, to look holistically at the spiritual, emotional and psychological work we are going to have to do with our young people. What plans are being made by Her Majesty’s Government?
Baroness Evans of Bowes Park (Con) [V]
The right reverend Prelate is absolutely right. While we are putting in support to help now, we recognise that the long-term damage caused by this extensive period in which young people and children have not been able to go to school is clear and significant. We have set out that we will work with parents, teachers, schools and colleges, and, I am sure, wider community representatives, to develop a longer-term plan to make sure that pupils have a chance to make up their learning over the course of the Parliament. While we of course have short-term schemes to attempt to address issues now—for instance, partnering with the UK’s leading mobile network operators to guarantee internet access and providing free data to key educational websites for disadvantaged families—there is a much longer-term issue that we want to address, and we will be doing that in partnership.
Baroness Andrews (Lab) [V]
My Lords, the Prime Minister’s claim that the Government have done everything they could to minimise death and suffering during the pandemic has, tragically, been contradicted by the shameful figure of 100,000 deaths. The BAME community has suffered disproportionately. I have two questions for the noble Baroness. First, can she tell me what the take-up of the vaccine is among BAME communities? Secondly, what are the Government doing, with whom and to what effect, to maximise take-up? We are one of the richest countries in the world and we have one of the best health services; we should not have failed our poorest communities in the way we have.
Baroness Evans of Bowes Park (Con) [V]
The noble Baroness is absolutely right. We are still in the early days of collecting vaccination data, but the early data we have confirms that we need to work hard to make sure we get the vaccine take-up that we need. We will be looking to improve the data that we publish, although we are doing a lot already, to make sure we are aware of the issues she raises. I reassure her that we are cognisant of the need to encourage BAME communities. That is why, for instance, patient leaflets have been published in around 20 languages, as well in easy read and British Sign Language, and as audio advice. We are doing targeted advertising in 13 languages and holding regular meetings with local authorities and local faith leaders to encourage take-up. I do not know whether noble Lords have seen it, but there is an excellent video on social media with BAME MPs from across the House of Commons, highlighting the importance of taking the vaccine. These cross-party, cross-community initiatives are what we need to ensure that all our communities take up the vaccine.
Lord Scriven (LD) [V]
My Lords, countries that have managed this public health crisis best, with fewest deaths, least damage to their economies and young people being kept in education, have adopted “elimination of the virus” lockdown strategies. Can the noble Baroness the Leader of the House inform the House whether the lockdown exit plan criteria will be predicated on achieving elimination or suppression in the next phase of government policy for dealing with the virus?
Baroness Evans of Bowes Park (Con) [V]
As I said, we will be looking at all important data, which we will be publishing and reviewing so that we can then set out a strategy for leaving the lockdown. Our aim will be to set out a gradual and phased approach towards easing restrictions in a sustainable way. A sustainable way is critical, beginning, as I said, with the reopening of schools, which is our priority.
Baroness Meacher (CB) [V]
My Lords, when the Prime Minister says in his Statement that the UK has more than enough vaccines for this year, does he mean that we have sufficient vaccines on order or sufficient vaccines accessible to the NHS and the vaccines rollout programme? If we have only sufficient vaccines on order, and in view of the EU conflict and in particular the threat of the German Government to block exports of the Pfizer vaccine to the UK, can the noble Baroness guarantee that the most vulnerable groups will still have access to their second vaccinations within 12 weeks, as promised, and that the rollout of our first vaccinations can continue as planned?
Baroness Evans of Bowes Park (Con) [V]
I can certainly reassure the noble Baroness that we have total confidence in our supplies. We remain in close contact with all suppliers, and scheduled deliveries will fully support vaccination of our top four priority groups by mid-February, as intended. I can also confirm that individuals will receive their second dose, as it does provide better, long-lasting protection, as we planned.
Lord Cormack (Con) [V]
My Lords, this is not a time to play the blame game, and as my noble friend recognised in her opening words, it is a time to strive for national unity. To this end, would she not agree that all information on the pandemic should be shared on Privy Council terms with all opposition leaders, and that Sir Keir Starmer should be invited to meet the Prime Minister every week, both before and after Prime Minister’s Questions? That affair does not help to cement national unity.
Baroness Evans of Bowes Park (Con) [V]
I think the engagement between the Prime Minister and the leader of the Opposition is for them. I have been extremely heartened by the unity your Lordships have shown in presenting the importance of the vaccination programme and in raising important issues in the House during this. It is in that spirit that we will continue to work.
The Deputy Speaker (Baroness Watkins of Tavistock) (CB)
I call the noble and learned Lord, Lord Morris of Aberavon. Lord Morris? I will move on. I call the noble Lord, Lord Storey
Lord Storey (LD) [V]
My Lords, will the noble Baroness agree to publish the written advice from NHS England and the Chief Medical and Scientific Officers that led to the letters issued by the Minister for the Constitution and Devolution to political parties and MPs about campaigning in the local elections? Will she request a statement from the Government’s law officers confirming the precise legal status of this advice? Could the noble Baroness tell the House whether this is her advice, the Government’s view, or part of the legally enforceable Covid regulations?
Baroness Evans of Bowes Park (Con) [V]
I will pass the noble Lord’s question to the relevant Minister.
Baroness Buscombe (Con) [V]
My Lords, clinically extremely vulnerable shielding patients below the age of 70 who receive some private healthcare are not being given any priority to receive the vaccine, despite their critical condition. They are told by despondent clinicians and their NHS-registered GP surgeries that they must wait in the queue for their age category. I am sure there is no intention to discriminate against these incredibly ill patients. Could my noble friend the Lord Privy Seal ask the Joint Committee on Vaccination and Immunisation to address this critical issue as a matter of urgency?
Baroness Evans of Bowes Park (Con) [V]
Many noble Lords’ contributions have shown how difficult this issue is. So many groups and individuals rightly have a claim to prioritisation of the vaccine, which is why we have been following the advice of the JCVI, which has taken all these issues into account and come up with its prioritisation list. Most importantly, that is why we are rolling out our vaccination programme as quickly and effectively as we can, so that we can reach the largest number of people as quickly as possible during this endeavour.
Lord Loomba (CB) [V]
My Lords, the Covid-19 pandemic has so far taken the lives of over 100,000 people. Businesses small and large have collapsed or are on their knees, 800,000 fewer people are in employment, and millions more remain furloughed. Would the noble Baroness the Leader of the House agree that the Government should have used the experience of other countries to improve its approach, to save lives while protecting the economy?
Baroness Evans of Bowes Park (Con) [V]
We have in fact put in place one of the world’s most comprehensive economic packages in response to the pandemic, spending over £280 billion on support so far. That is absolutely not to diminish the situation that many people have found themselves in, or to question the hardship that many have faced, but we have put an extremely generous package in place. We have continued to review and refine it as and when it has been necessary. I also remind the noble Lord that we have protected more than 12 million jobs through the furlough and self-employment schemes, both of which have been extended until April.
Lord Rooker (Lab) [V]
My Lords, the question from the noble Lord, Lord Cormack, showed that we currently suffer from an immature system of national leadership. I spoke earlier today with a year 8 pupil. She wants to get back to school. She said she did not feel that schools would be safe at present, and that she wants a staggered return, announced as soon as possible after 8 March. She also thought that support for the staff to be vaccinated was a good idea. Is she being sensible?
Baroness Evans of Bowes Park (Con) [V]
She sounds like an extremely sensible young lady to me. I hope that the noble Lord reassured her that the issue we face with school closures is not that schools are unsafe for pupils or teachers. The problem is that the new variant is so pervasive that we need to use every lever at our disposal to reduce all contacts outside households, wherever possible, to reduce the pressure on the NHS. I am sure she will be aware that her teachers will, I have no doubt, have implemented a lot of protective measures to ensure that children who can still attend school are safe. Perhaps he might also like to let the young lady know that we are offering biweekly asymptomatic testing for all secondary school and primary school staff. Over 90% of secondary schools and colleges have now registered for this testing.
Lord Taylor of Goss Moor (LD) [V]
My Lords, we can probably all agree that sending pupils back to school on the Monday and keeping them home from Tuesday was not a wonderful situation to put schools, pupils and families in. The Government are clearly trying to give some indication of a timescale well ahead this time, which is welcome, but as a single parent of three boys, who are here at home with me now, it is evidently the case that parents and schools need good notice. There also needs to be some understanding of the pressures on parents. What does a phased return mean? Will it mean one child stays at home while a parent drives the other to school? How will it be managed? Is it regional? The more notice that can be given, the more arrangements can be made at school and at home to make this work. I hope the Government will continue to work to give the earliest possible indication of how schools will be brought back to functioning.
Baroness Evans of Bowes Park (Con) [V]
The noble Lord speaks on behalf of parents throughout the country. He is absolutely right that, when we do start to re-open schools, we want to ensure that will be sustainable. That is why we have taken the difficult decision, in the light of the current data and the current situation, to say that we will not be able to open school immediately after the February half term. He will also know that we have promised to give at least two weeks’ notice to schools, colleges and universities of when they can return to face-to-face teaching to do exactly as he says: to allow student, staff and parents to prepare.
Lord Wigley (PC) [V]
My Lord, I really must press the Minister to reconsider her scant response to the noble Baroness, Lady Bull, on the pressing need of those with learning difficulties. Does she not understand the desperate challenges facing these people’s families and carers? I beseech her to think again and, in doing so, I declare my interest—[Inaudible.]
Baroness Evans of Bowes Park (Con) [V]
I entirely understand the points that the noble Lord and the noble Baroness made. I am sorry if he felt that I had not responded properly, but I have reiterated in answer to a number of noble Lords that many individuals and groups throughout the country would love to get a vaccine, and quickly. All I was trying to do was to explain that we are following the independent JCVI advice. I hope that I have set out the reasons for that, albeit while entirely acknowledging that many noble Lords feel that there are other very worthy groups, which I would not question.
Baroness Gardner of Parkes (Con) [V]
My Lords, I had wanted to speak from personal experience, since, as someone aged over 80, I have been very satisfied: I have been given both of the injections and I think well of them. However, I will ask the Minister about the plans to impose hotel quarantine on travellers from 12 countries with new Covid variants. As an Australian, I know that Australia has been using this system for quite a long time. It has a high profile at the moment because the Australian Open tennis players are in hotel quarantine. How can we be certain that travellers will not seek to hide their country of travel origin by routing through other countries to avoid restrictions and costs? In addition, how effective is it to ask all other travellers to quarantine for 10 days after arriving when my noble friend Lady Harding tells us that track and trace reports that only 60% of people isolate when asked to do so? Should all travellers be made to quarantine in hotels?
Baroness Evans of Bowes Park (Con) [V]
People from any country have to fill out a passenger locator form, on which they have to declare which countries they have previously visited. Any traveller coming into the country would have to fill that out, so we will know who has visited the red countries, even if that was not the immediate place they travelled in from. We can therefore make sure that they go to a hotel. I am sure that my noble friend would be interested to know that failing to provide information accurately on a passenger locator form is an offense and can lead to a £500 fine. As I said in my opening remarks, more details about how this scheme will work will be set out next week.
Baroness Wheatcroft (Non-Afl) [V]
My Lords, Covid is rampaging through our hospitals, but some eligible in-patients are not receiving the vaccination. That ensures that infection continues to rise in some hospitals. It also seems that the latest strain is behaving differently in relation to unborn babies. In the early stages of this virus, pregnant women might contract the virus, but their babies did not. This time it seems that the babies, too, are at risk. Could the Minister answer two questions? First, what is the policy on vaccinating elderly and vulnerable patients in hospital for other reasons? Secondly, when will the Government consider reversing the policy on vaccinating pregnant women, which was arrived at before this strain arrived?
Baroness Evans of Bowes Park (Con) [V]
I can assure my noble friend that new data around the impact of the new strain is being continually looked at and a lot of work is going on to survey and understand the new variants. That will feed into any advice or information, or decisions made. I can only reiterate to my noble friend what I said in answer to a number of noble Lords: we are following the advice of independent experts on which groups to prioritise for vaccines. The advice has been clear: we should focus our initial efforts on those in care homes, health and care workers, the elderly and the extremely vulnerable. I reiterate again that these top four priority groups have accounted for 88% of Covid deaths.
Baroness Kennedy of Cradley (Non-Afl)
My Lords, I will follow on from the question of the right reverend Prelate the Bishop of St Albans. We know from the Office for National Statistics that only half of households earning between £6,000 and £10,000 have internet access, compared with 99% of households with an income of more than £40,000. How will the Government ensure that the £300 million of catch-up and tutoring money will be targeted in areas where there are high levels of digital poverty and will go directly towards the pupils who have suffered disproportionately because of deprivation the high rates of infection and isolation that have kept them off school?
Baroness Evans of Bowes Park (Con) [V]
I can reassure the noble Baroness that we will be targeting this money towards the very pupils she talks about. Yesterday, the Prime Minister announced that we will provide a further £300 million for tutoring. We will work in collaboration with the education sector to develop specific initiatives for summer schools and a Covid premium to support catch-up in exactly the way she said.
I refer back to the longer-term plan I mentioned. We understand that, while help is needed immediately, this situation is not going to be fixed quickly. Our pupils have lost a lot of time by being out of school and we want a longer-term plan, looking across the Parliament at how we can make sure we help pupils across the country to catch up as they have lost so much over the past few months.
Lord Bradshaw (LD) [V]
Throughout the Covid pandemic, the Government have supported the bus and rail industries. There are long outstanding appraisals of both industries, a national bus strategy and a White Paper on railway reform. As both are key components in combating climate change, can the Leader of the House please inform the House of when the publication of these documents may be expected?
Baroness Evans of Bowes Park (Con) [V]
I am sure the department continues to work on these issues. They are very important, but I am afraid I cannot give an update on publication.
Baroness McIntosh of Pickering (Con) [V]
My Lords, I congratulate my noble friend and the Government on the vaccination programme and for sticking to the advice of the JBC. It is vital for people to have confidence in the integrity of the vaccination programme. Does my noble friend share my concern about the South African mutation? If this was a seasonal variation, it would respond to the heat and climate of South Africa at this time of year, so it is deeply disturbing. What research is going into this variation at this time to ensure that it can be defeated and managed at the earliest opportunity?
Baroness Evans of Bowes Park (Con) [V]
I assure my noble friend that much work is going on in our scientific community to analyse the new variants. As she will know, the UK has one of the most extensive genomic sequencing capabilities in the world. We have offered a new variant assessment platform to work with the WHO to offer our expertise in genomic sequencing to other countries. Indeed, we have sequenced over half of all viral Covid genomes that have been submitted to the global database. I assure her that we are at the forefront of work on these variants.
The one thing that I hope will give her some comfort is that all the current evidence continues to show that both vaccines we are currently using remain effective against both UK and South African variants. Moderna has said that it expects its vaccine to protect against the South African variant as well. It has also said that the reduction in antibody levels suggests that immunity could wane more rapidly, so Moderna is having a further look at its vaccine. That shows how much work is going on, both within the companies developing vaccines and more broadly, to make sure we stay ahead of these new variants.
Baroness Bennett of Manor Castle (GP) [V]
I will follow on from the comments of the noble Lord, Lord Newby. Perhaps the greatest area of government failure, although there is tragically lots of competition, is the failure to provide sufficient support to the infected and exposed who cannot self-isolate. Given that the Government are finally looking to set up quarantine hotels for overseas arrivals, will they consider a similar programme for those such as families forced into over- crowded accommodation by the bedroom tax, who cannot self-isolate in their current accommodation?
Baroness Evans of Bowes Park (Con) [V]
I am not aware of any plans in that area, but I am happy to pass on the comments made by the noble Baroness about other things we might look at to the relevant departments.
Lord Framlingham (Con) [V]
My Lords, while congratulating the Government on their amazing achievement in rolling out the vaccine so rapidly, I urge the Minister to do all she can to ensure that the new mass vaccination centres do not operate to the detriment of traditional GP practices. Their patients’ needs are the same as everyone else’s and they frequently live in remote rural areas.
Baroness Evans of Bowes Park (Con) [V]
I can certainly—[Inaudible.] Sorry, I seem to be having a battle with my unmute button. I can certainly assure my noble friend that that will not be the case. I hope I can assure him that more than 2,000 vaccination sites are now set up and 96% of the population in England live within 10 miles of a vaccination site. We are incredibly grateful to the GP surgeries, pharmacies and everyone helping to roll out the programme. I would like to mention, as the noble Lord did, the mass vaccination sites. They are operating from 8 am to 8 pm, but across our communities we have lots of ways in which people can access the vaccination. They can do so in the way most appropriate and easiest for them.
The Deputy Speaker (Lord Haskel) (Lab)
My Lords, the time allocated for questions has now elapsed, so I am unable to call any more.
Financial Services Bill
Thursday 28th January 2021
(3 years, 9 months ago)
Lords ChamberRead Full debate Financial Services Bill 2019-21 View all Financial Services Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 13 January 2021 - (13 Jan 2021)
The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)
My Lords, as set out in the register of interests, I declare shareholdings in Close Brothers, Hampden & Co and Ovington Investments—the last of which I have significant control over.
The financial services sector drives growth and generates millions of jobs in every corner of our country. It has secured our reputation as a dynamic and world-leading financial centre and it contributes vast sums to the public purse—money that has helped this Government support millions of individuals and business through the pandemic.
Now that we have left the European Union and begin our recovery from Covid-19, we commence a new chapter in the sector’s story. As the Chancellor set out in his wider vision for the UK’s financial services sector in November, we remain committed to ensuring that the UK maintains the highest regulatory standards and remains an open and dynamic global financial centre. This is even more important now that we have left the European Union. Having left, the UK must assume full responsibility for its financial services regulation. The Economic Secretary has assured the other place—as I can assure noble Lords—that this will be underpinned by an unwavering commitment to high-quality, agile and responsive regulation, with a focus on safe and stable markets.
There will inevitably be some areas where the UK will take an approach which better suits our markets. To capitalise on this opportunity, we will fundamentally review our financial services regulatory framework to ensure that it is fit for the future. A consultation on this is open as we speak. The Financial Services Bill should, therefore, be understood as a key part of a wider process—the important first step in taking back control of our financial services regulation. It does so in a way that delivers our international commitments, is consistent with the highest standards of regulation and provides certainty and clarity for this important sector.
The Bill has three overarching objectives: first, to enhance the UK’s world-leading prudential standards; secondly, to promote openness to international markets; and, thirdly, to maintain the effectiveness of the financial services regulatory framework and sound capital markets. I will briefly set out each of the Bill’s measures, and how they contribute to these objectives. Much of the content is highly technical. I will do my best to explain each measure, but we have provided detailed explanations of each measure in the Explanatory Notes.
The Bill intends to enhance the UK’s world-leading prudential standards and to protect financial stability. Clauses 1 and 2, together with Schedules 1 and 2, empower the Financial Conduct Authority—the FCA—to create a tailored prudential regime for investment firms. Investment firms are currently part of the same prudential regime as banks, even though they do not typically provide banking services and therefore do not pose the same risks to financial stability. This Bill will allow the FCA to set prudential requirements which are more appropriate for investment firms. The reforms are similar to changes being taken forward in the EU, which the UK strongly supported while we remained a member.
The UK’s financial services regulators have the technical expertise and market understanding necessary to set complex rules for firms. I thank the Delegated Powers and Regulatory Reform Committee for its work in scrutinising the Bill’s approach to the delegation of powers and welcome its conclusion that there was nothing necessary to draw to the attention of the House.
The regulators will also be guided by the statutory objectives established in the Financial Services and Markets Act. Their independence ensures that they will not be swayed by political considerations. This Bill introduces a new accountability framework. It will require the FCA to consider the most significant public policy issues relevant to the regime, including the UK’s international competitiveness, and publicly report on how consideration of these factors has affected its rules. In addition to the existing accountability mechanisms in the Financial Services and Markets Act, this will allow Parliament to scrutinise the work of the regulators.
This approach aligns with suggestions made by the EU Financial Affairs Sub-Committee to the Chancellor in March last year, when it recommended giving the UK’s regulatory regime more flexibility. However, I can reassure noble Lords that systemically important investment firms and all banks will remain subject to internationally agreed prudential standards, namely the Basel banking standards. Clauses 3 to 7, along with Schedules 3 and 4, will enable the prudential regulatory regime for these firms to be updated in line with the latest Basel standards, endorsed by the G20. This will build on the existing regime and increase the UK’s resilience to economic shocks, meeting our international commitments to protect the global financial system. In a similar way to the prudential regime for investment firms, responsibility for making the detailed firm-facing rules will be delegated, in this case to the Prudential Regulation Authority. This will also be subject to a new accountability framework.
As noble Lords will be aware, promoting financial stability goes wider than prudential regulation. The Libor benchmark is referenced in upwards of $400 trillion-worth of contracts across the financial system and beyond—from complex derivatives to household mortgages. I am sure that noble Lords will recall the Libor scandal of 2012, which saw many banks attempt to manipulate the Libor benchmark for their own gain. Since then, significant improvements have been made to the administration of the Libor benchmark by its administrator, and to the regulation of benchmarks in the UK. This is in part due to the important work of the Parliamentary Commission on Banking Standards, which includes a number of Members of this House.
The Financial Stability Board—the international body that monitors the health of global financial markets—has made it clear that the continued use of certain interest rate benchmarks such as Libor represents a potentially serious source of systemic risk. The decline of the inter-bank lending market has meant that Libor and other similar benchmarks are increasingly reliant on the judgments of panel banks, rather than on actual transactions. The FCA’s voluntary agreement with the Libor panel banks, requiring them to continue contributing to the benchmark, so preventing the premature collapse of Libor, will expire at the end of this year. After this point, there is a risk that Libor will become unrepresentative, which may cause disruption. Clauses 8 to 19, and Clause 21, along with Schedule 5, give the FCA the powers it needs to oversee the orderly wind-down of critical benchmarks—including Libor—thereby reducing significant risks to market stability. This includes powers to provide for the continuity of Libor for those contracts which are unable to transition away from it. Alongside this, clause 20 will extend the transitional period for benchmarks with non-UK administrators from the end of 2022 to the end of 2025.
I turn to the Bill’s second objective: to promote openness to overseas markets. Clauses 22 and 23, together with Schedules 6 to 8, establish a framework to provide and effectively maintain long-term market access between the UK and Gibraltar for financial services firms, now that we have both left the EU. This delivers on a ministerial commitment made to Gibraltar and recognises our special, historic relationship. The arrangements will preserve Gibraltar’s regulatory autonomy and enable it to choose where it wishes to access the UK market, on a basis of alignment and co-operation.
Clauses 24 to 26, together with Schedule 9, simplify the process under which overseas investment funds obtain permission to be marketed in the UK. These changes will supplement the current regime, which requires the FCA to assess every individual fund. The changes will introduce a system under which the Treasury can determine whether a specific category of funds from another country has equivalent regulatory standards to those in the UK. This means that funds in this group wishing to market in the UK can undergo a simpler process, due to the confidence provided by the equivalent regulatory standards of their home country. This will increase choice for UK investors and maintain the UK’s position as a centre of asset management. The current regime will remain in place for overseas funds located in countries which have not been found equivalent. Clause 27 and Schedule 10 amend markets in financial instruments regulations to update the equivalence provisions for investment firms based outside the UK.
The Bill’s third objective is to maintain the effectiveness of the financial services regulatory framework and sound capital markets. Clause 28 introduces a streamlined process for the FCA to remove an inactive firm’s authorisation and position on the public register. This will improve the accuracy of the register and reduce the risk of fraud. Clause 29 will make small changes to market abuse regulations to make the regime more effective while reducing some of the administrative burden on firms. Clause 30 raises the maximum sentence for criminal market abuse from seven to 10 years, bringing it into line with other economic crimes.
I would like to pause at Clauses 31 and 32, along with Schedule 12. These clauses were added by the Government by amendment in the other place.
It has recently become clear that some provisions in the Proceeds of Crime Act 2002 are creating challenges for some e-money institutions and payment institutions, such as Revolut, Worldpay and TransferWise. They currently need to submit a defence against money laundering request to the National Crime Agency to seek consent before proceeding with any transaction where there is suspicion of money laundering, however small. Standard banks do not have this administrative burden. In certain circumstances they are exempt from submitting a request for transactions under £250.
The £250 threshold exemption was originally introduced to allow those with frozen accounts to pay for their day-to-day living expenses. While the transactions may be under suspicion, these low-value reports provide little useful information for law enforcement, so processing them is not a good use of resources. E-money and payment institutions must submit a large number of these requests for low-value transactions. This is burdensome and, again, a poor use of law enforcement’s time and resources. This Bill therefore equalises the treatment of banks and payment and e-money institutions in this respect. Importantly, e-money and payment institutions will still be required to submit reports of suspicious activity to law enforcement.
Similarly, we have expanded the scope of account freezing and forfeiture powers in the Proceeds of Crime Act 2002 and the Anti-Terrorism, Crime and Security Act 2001 to include accounts held at payment and e-money institutions. This will ensure that law enforcement agencies are able to quickly and effectively freeze, and activate forfeiture of, the proceeds of crime and terrorist property when held in payment and e-money institution accounts; this mirrors their existing powers with banks.
Clause 33 will ensure the continuation of existing powers assigned to HMRC to access information on who really owns and benefits from overseas trusts with links to the UK. The Government are also taking proportionate and effective action elsewhere to prevent the misuse of these trusts, including recent changes expanding the requirement for non-UK trusts to register with the HMRC trust registration service.
The Bill underlines the Government’s commitment to helping people in debt rebuild their finances. Clause 34 gives the Government the full range of powers they need to effectively implement statutory debt repayment plans, part of the Government’s breathing space debt respite scheme. These changes will mean creditors can be compelled to accept different repayment terms. They will also allow for the administration of the scheme and repayment plans to be funded by a charging mechanism and will allow debts owed to the Government to be included in a statutory debt repayment plan. This will support the Government’s work to ensure that those in problem debt can make repayments to a manageable timetable.
Clause 35 relates to the Help to Save scheme, which supports those on low incomes to build up savings. Help to Save accounts have a four-year term, during which the Government pay a bonus of 50% on up to £50 of monthly savings. At the end of the four years, customers will be asked to provide instructions about where they want their savings transferred to. This clause gives the Government the power to introduce successor accounts for Help to Save customers who do not provide instructions in future, where this is necessary. For now, the Government propose to support these disengaged customers by transferring their savings into the same account where the bonus has been paid, reuniting these customers with their savings.
Clause 36 makes amendments to the packaged retail and insurance-based investment products regulation, known as the PRIIPS regulation. This EU regulation has been widely criticised for its potential to mislead consumers. The Bill will allow the FCA to clarify the scope of the regulation, addressing significant uncertainty that exists now, along with some other helpful changes.
Clause 37 finalises reforms to the European market infrastructure regulation, which the UK supported as a member state. Clause 38 confirms the legal effectiveness of the financial collateral arrangements regulations and makes associated amendments to the Banking Act 2009. Finally, Clause 39 will make the appointment of the chief executive of the Financial Conduct Authority subject to a fixed five-year term, able to be renewed once. This is in line with other high-profile roles in the financial services regulation field.
In summary, this Bill is a necessary and important step in ensuring that our financial services regulatory framework delivers for the UK now that we have left the European Union and the transition period is over. It forms part of a wider programme of regulatory reform that will be guided by what is right for the UK’s financial services industry. It will support economic prosperity across the country, ensure financial stability, market integrity and consumer protection. It will ensure that the UK remains a world-class financial centre. I beg to move.
Lord Reid of Cardowan (Lab) [V]
My Lords, I thank the Minister for his remarks. I do not oppose the principle behind the Bill, because, like all noble Lords, no doubt, I recognise the need for post-Brexit stability in financial regulation. The Bill is a mass of detail and the Minister has gone to some lengths to go through it. I confess that it does remind me somewhat of a Christmas tree, with little packages all over the place, some of them no doubt previously stored in various government departments—particularly the Treasury —waiting for an appropriate legislative tree on which to hang them.
Leaving that aside, the Bill occurs, as the Minister said, at an important moment for the country’s economy and our financial services industry. As the Minister in the Commons said:
“Our financial services sector is critical to our national effort to recover from the impacts of Covid-19 and move towards a resilient, open and sustainable future for the UK economy.” [Official Report, Commons, 13/1/2; col. 357.]
I agree with that, but he stressed the pandemic and we all know that it is more than just a response to Covid. As the Minister said, the Bill is an essential part of the effort to improve the UK’s regulatory framework for financial services following the end of the Brexit transition period.
As regards our future post-Brexit development, only time will tell, but the early signs do not augur well. Only this month, we approved the post-Brexit trade and co-operation agreement, but, for financial services, this is basically a no-deal agreement. Within a few days of the agreement, £6 billion-worth of euro- denominated share trading shifted from London to European exchanges.
Of course, the express intention of the Government is to secure a memorandum of understanding on financial services by March, and the ambition for regulatory alignment where appropriate. We should have no illusions how difficult that might prove. Only this week, the noble Lord, Lord Hill, a former EU Financial Services Commissioner and a former Minister leading the Government’s review into the City, has confirmed what many of us have long known. He warned that Brussels is targeting London’s position as a global financial services centre and predicted that the EU will not grant British-based firms the highly prized access they are seeking to the European market. It was not in Brussels’ interests, he said, to allow London to continue to dominate the European financial market in the way it did before Brexit. He continued:
“Given that their strategy is to build up the EU, why on earth would they?”
Why, indeed? We should not be surprised then that, so far as we now know, Brussels has granted the UK time-limited equivalence on only two of the roughly 40 different financial areas where London is seeking market access. The EU has, of course, given no further indication on when it will take more equivalence decisions.
I am afraid that the way the Government approached the Brexit negotiations means that there is now no incentive for the EU to agree equivalence arrangements, because their absence means jobs and trading formerly done in London migrating to the EU. Why do I mention this? Herein lies the paradox: the Bill is part of a process aimed at increasing our competitive edge, including vis-à-vis the European Union, but in our present, post-Brexit circumstances any move by the UK to enhance the City’s competitive edge is likely to lessen the chances of progress on equivalence in the EU and the market access that comes with it.
There are, of course, aspects of the Bill that we welcome. I welcome the preliminary agreement between Gibraltar, the UK and Spain, which the Minister mentioned, and look forward to further detail following review by the European Commission. This is of importance to our whole financial sector, not least to our insurance industry.
I also welcome the moves that have been made to tighten up the fight against crime, money laundering and fraud, but equally I wonder, despite the passage of this legislation, how that struggle against criminality will have been affected by the loss of 400,000 records from our criminal database. That has been a disaster that will overrule many of the measures in this Bill.
There are some strange and disappointing omissions from the Bill. I will mention only one, but it is significant. The UK financial services sector has a key role to play in empowering the changes that we need to make to preserve the planet for future generations. But the Bill, which empowers the regulators in so many other ways, is totally silent on that critical issue. The Government say they want the UK to be the centre for green finance globally. Why then, in their first major piece of legislation on this sector since we left the EU, do they say nothing about instructing the regulators to make that a part of their objectives? I hope that the Minister can respond to this.
Of course, the private investment sector is making strong moves towards greater environmental investing, and there is growth in public demand for these products. But this cannot be done by the private sector alone. It will take both the private sector and the public sector working together and pulling in the same direction. I wish the Bill well in its intent, but I fear that it will fall far short of its aims.
Lord Sharkey (LD) [V]
My Lords, I shall focus my remarks chiefly on Clauses 3 and 5, and on Schedule 3. Before I do so, I should congratulate the Government on the speed with which they are addressing the matter of Gibraltar’s financial services industry. The Bill has 183 pages, and over 50 of them are devoted to Gibraltar.
With two important and welcome exceptions—debt respite and Help to Save—the rest of the Bill deals with technical and complex matters. In doing so, it raises profound questions about parliamentary scrutiny and the desirability of embodying an international competitive element in our financial services regimes.
Clauses 3 and 5 contain provisions to allow the PRA and the FCA effectively to make law by making rules without any parliamentary scrutiny. Clause 3 lists the provisions of the CRR that the Treasury may revoke by regulation. The list runs to 42 items, all of them significant. Clause 3(4) makes these revocations conditional on their being or having been adequately replaced by general rules made or to be made by the PRA, or to be replaced by nothing at all if the Treasury thinks that is okay. As things stand, it looks as though the Treasury is the sole judge of what may or may not be an adequate replacement. In any event, Parliament is bypassed. There is no provision for parliamentary scrutiny of these new rules, which have the force of law, but these rules can and will reshape critically important parts of our financial services regimes. Clause 5 takes the same lawmaking-by-rule approach to the regulation of credit institutions. Again, there will be no parliamentary scrutiny of these rules.
The Government have acknowledged the need for a discussion about the role of parliamentary scrutiny in the post-Brexit repatriation of powers previously exercised by the EU directly to our regulators without stopping en route at our Parliament. In March of last year, the EU Sub-Committee on financial services, of which I was chair, wrote to the Government about the issue, as the Minister has mentioned. In his response, the Economic Secretary to the Treasury noted that we had highlighted that
“delegating more powers to the financial regulators will require enhanced parliamentary oversight of their activities.”
There is now an open Treasury consultation on the future of financial services. The call for evidence in this consultation contains 17 key questions. Three of these relate to the issue of parliamentary scrutiny. They are: through what legislative mechanism should new financial regulations be made?; what role does Parliament have to play in influencing new financial services regulations?; how should new UK financial regulations be scrutinised? The consultation closes on 18 February. In practice, it means that the Bill will have left this House by the time the consultation results are available to us. In any case, HMT has indicated that the results will inform yet another consultation, later in 2021, in which the Government will set out a package of proposals. By that time, of course, the provisions in this Bill will have become law and there will no longer be an opportunity for real parliamentary scrutiny of the legally binding rules they will generate.
The Minister emphasised in his closing remarks on Report in the Commons that this Bill is
“just one part of the wider long-term strategy for financial services.”—[Official Report, Commons, 13/1/2021; col. 398.]
Given the narrow and technical scope of the current contents of this Bill, I was glad to hear that, and take it to mean that a second and more comprehensive financial services Bill is in prospect. But the fact is that, by the time we get round to that, the “making laws by rulemaking” procedure will have passed into law. Parliamentary scrutiny of the new rules as laws will have been avoided. We will want to return at later stages to the question of what we can do about this bypassing of Parliament in such critical areas.
I turn briefly to Schedule 3 and the insertion of new Part 9D into the already overloaded and much-amended FSMA 2000, and in particular to new subsection 1(b) of Clause 144C. This seemingly innocuous subsection could bring about radical change in our regulatory regimes. It introduces as a “have regard” in the PRA’s making of CRR rules the notion of international competitiveness for our regimes. This is a highly contested area and the idea has been opposed by many leading figures, including from the party opposite, as being likely to promote conflicts of interest. We will want to examine this in detail at later stages.
During the passage of the Bill through the Commons, there was some discussion of more directly consumer-facing measures. These included imposing a duty of care on the financial services industry and providing significantly more relief for those mortgage prisoners trapped by the Treasury’s dereliction and carelessness in selling on mortgage books to unregulated entities. We will want to return to these issues later in our consideration of the Bill.
We will also want to discuss extending the FCA’s perimeter to take in more of the SME lending market. This is particularly urgent given the terrible position that many SMEs find themselves in as a result of Brexit and Covid-19. We will also want to debate the issue of preserving access to cash in the Covid and post-Covid world. I look forward to the Minister’s reply and to our future debates.
Lord Hammond of Runnymede (Con) (Maiden Speech)
My Lords, I draw attention to my directorship of OakNorth International and my membership of the international advisory board of Nomura, both of them banks.
It is a privilege to address your Lordships’ House for the first time. It may be only 100 yards from the other place, but it is a very different place. I am extremely grateful to the officers and staff of the House and to my supporters, my noble friends Lord Moynihan and Lord Barwell, for their welcome and assistance as I navigate the customs and practices—and indeed the corridors—of this place. I am delighted to be making this speech from the Government Benches, having momentarily mislaid the Conservative whip during the last few weeks of my 22-year career in the Commons.
The title of Lord Hammond of Runnymede may speak to the wider world of the ancient roots of our democracy and of the origins of the rule of law, but, for me, it will always recall the privilege of representing the people of Runnymede and Weybridge, sharing their problems, challenges and triumphs over more than two decades.
My Back-Bench career in the other place was short. The year 1997 was rather like the day after the battle of the Somme in the parliamentary Conservative Party. The general staff was in disarray, the officer corps decimated and new recruits like myself were being promoted in the field; thus began my 12-year apprenticeship on the Opposition Front Bench, before entering the Government in 2010, where I had the privilege to lead four great departments of state, each remarkable in its own different way.
I arrived at the Department for Transport with a single clear instruction: get HS2 built. As an immediate former shadow Chief Secretary, I approached this task with a degree of scepticism, but quickly became a convert to the potential of high-speed rail to change the facts of economic geography, as the original railway had changed Victorian England, and to play a key role in rebalancing the UK economy.
I moved on to defence in the dying days of the Libya campaign of 2011. The MoD is an extraordinary place, a military headquarters as well as a department of state. It is shaped by its unique blend of civilian and uniformed staff and the ethos of the Armed Forces that pervades it. It was an enormous privilege to work with it through a period of managed withdrawal from Afghanistan and majoring restructuring at home as we reconfigured the department and delivered a balanced Budget for the first time in a decade.
In July 2014, my next move was across the road to the grandeur of the FCO and by far the best office in Whitehall. I say to noble Lords that it is not for nothing that successive Foreign Secretaries have gone to extraordinary lengths to ensure that Prime Ministers do not enter that room. In two years as Foreign Secretary, I made 104 overseas visits to 78 countries, gaining an invaluable insight into how others see us and our contribution to their histories—for better or for worse, there are remarkably few in whose histories we have not played a role of some kind. What I learned is how much importance our many friends attach to the characteristics, structures and institutions that define our nation and of which we sometimes appear to be so careless.
In July 2016, my final move was to No. 11. As the guardian of Britain’s economic and fiscal interests, it is hardly surprising that, whatever the political arguments, the Treasury saw Brexit primarily as a threat to the UK’s economic success story. With storm clouds gathering over the economy and uncertainty rife, I set myself a four-point plan: first, to complete the rebuilding of our public finances as a bulwark against the next crisis, little guessing that the next crisis would come so soon; secondly, to soften the economic blow of exiting the single market by securing a transition period, which is uncontroversial now but was a heretical notion in the Brexit-intoxicated days of autumn 2016; thirdly, to shift the balance of public spending, albeit gently, from consumption to investment as part of a plan to unlock the productivity riddle that has bedevilled the British economy since the Second World War; and, finally, to protect our vital financial services industry, which despite the Treasury’s sometimes expansive view of its role is actually the only sector for which it has direct responsibility. That brings me neatly to the Bill.
I strongly support all the objectives that the Government have set out for the Bill, making it an ideal vehicle for a maiden speech by someone who has so recently recovered the Whip. I want to take the opportunity to note the importance of financial services not just to London but to the whole UK economy—it provides 7% of our GDP, 11% of tax revenues and millions of jobs across the length and breadth of Britain—to plead, even at this late stage, for a greater focus on it in our ongoing discussions with the EU and to suggest the inclusion of a duty on our regulators to promote competitiveness as some other countries have done. I hope that it will be the first of many measures designed to reinforce the stability and competitiveness of UK financial services as they absorb the challenge of what, for them, is a no-deal Brexit and the inevitable, albeit gradual, loss of EU business.
I enjoyed every minute of my nine years in Cabinet and I learned much from the many extraordinary people I encountered on my journey. I hope that the experience that I have gained leading four great departments of state will qualify me to contribute to your Lordships’ debates over the years to come.
Lord Hunt of Wirral (Con)
My Lords, I first draw attention to my interests as set out in the register and I congratulate my noble friend Lord Hammond of Runnymede on a maiden speech of great breadth and insight, which served to underline what a considerable asset he is going to be to these Benches in particular and to this House more widely. As my noble friend reminded us, he has served with distinction in a number of departments, culminating in his time as Chancellor of the Exchequer. How right he was to point out huge sectors of our economy, in particular financial services, where we are not in the business of finessing a new relationship with the European Union but are yet to ensure that there are any arrangements at all. When my noble friend speaks on economic matters, he does so with rare authority and I look forward to hearing much more from him.
There is one specific point that I would like to develop in my remarks today. The Financial Services and Markets Act 2000—FiSMA—set out four objectives for the Financial Services Authority, the FSA, as it then was: market confidence, public awareness, the protection of consumers and the reduction of financial crime. In addition, the FSA was required to have regard to a number of other factors, including efficiency, proportionality, innovation and
“the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom.”
The Financial Services Act 2012, in response to the 2008 banking crisis, removed that requirement because it was argued that it had served to dilute the robustness of regulation. This argument was founded on an entirely false dichotomy between effective regulation and international competitiveness, for the truth is that a robust, respected and proportionate regulatory regime is an intrinsic part of the UK’s competitive advantage in financial services. We now have the future regulatory framework review. In its phase 2 consultation paper, which I happen to have with me, the Government acknowledged this:
“A gap in the original FiSMA model is that, while it set high-level general objectives and principles, it did not provide for government and Parliament to set the policy approach for specific areas of financial services regulation.”
A partial move towards more activity-specific regulation is seemingly adumbrated in Schedule 3 to the Bill, which has been referred to by the noble Lord, Lord Sharkey. This would require the PRA, when considering capital requirements regulation, to have regard to
“the likely effect of the rules on the relative standing of the United Kingdom as a place for internationally active credit institutions and investment firms to be based or to carry on activities.”
A similar obligation is to be imposed on the FCA when making Part 9C rules in relation to internationally active investment firms. So competitiveness is edging slowly and surely back into the picture sector by sector and it is a process that I believe many of us want to see accelerate in the months ahead. I also hope that the Government will now come forward with a clear action plan to establish the UK not only as the world centre for broking—that is to say, the selling of insurance and reinsurance—but as the natural home for insurers and reinsurers.
I warmly welcome the Bill because it suggests a direction of travel that will deliver the high-quality, agile and responsive regulation that we need, putting the UK at the forefront of the world market in terms of competitiveness, consumer protection and innovation.
Baroness Coussins (CB)
My Lords, I declare my interest as an ambassador and former president of the Money Advice Trust, the charity which runs National Debtline and Business Debtline. I, too, congratulate the noble Lord, Lord Hammond, on his excellent maiden speech, and look forward later on to the second maiden speech in this debate, from my noble friend Lady Shafik.
I comment first on Clause 34 in relation to the debt respite scheme and, in particular, statutory debt repayment plans. I am delighted that the first element of the debt respite scheme, Breathing Space, is coming into force on 4 May this year. This will give people in debt much needed protection while they seek debt advice. But it is vital now that the Government prioritise the introduction of the second element of the scheme, which is statutory debt repayment plans—SDRPs. They have never been more needed than now, in the wake of Covid-19, and I hope the Government will set out a clear timetable for their implementation.
After all, there is a great deal of agreement on their merits. They will ensure that people who are repaying their debts in full, but who need to do so in an affordable way over a manageable period, will receive binding, legal protection from creditor action and from having additional interest, fees and charges added to their debts. Crucially, public sector creditors—including local authorities and central government—are included in the scheme, and I commend the Government for taking this step. When the Government first consulted on introducing SDRPs in 2018, no one could have foreseen where we would be today, in 2021, facing the severe financial impact of a pandemic, but it is clear now that SDRPs can be a key part of helping households to recover from the financial impact of the outbreak.
I would like to illustrate with one very quick example. Imagine a couple, with two children—one of them furloughed, the other with their hours cut. They struggle to cover their bills and miss a few council tax payments. Being at home with the children more than usual means their energy bill is higher than expected, so arrears build up. They have a mortgage and some outstanding consumer credit debts too. Despite getting an initial payment break on these, this has now expired. Fast forward a few months and, promisingly, they have returned to work and their income has stabilised. They can afford to make some payments towards their debts every month, but not enough to meet their obligations in full. As a result, the council starts enforcement proceedings to recover the arrears, and the energy company wants paying too. This couple will be able to repay their debts in full, but they need time. They need an option to do so affordably without being chased for more than they can pay or having extra fees or charges added. This is exactly what a statutory debt repayment plan would offer them, and it would stop their temporary financial difficulty growing into a bigger debt problem.
Of course, it is understandable that some time will be needed to pass regulations and ensure the necessary infrastructure is in place to introduce these repayment plans, but I hope that the Minister can assure the House that this will be an absolute priority for the Treasury. I ask the Minister to ensure that the Government set out a firm timetable for introducing the new plans.
I turn very briefly now to another important issue that I hope the Government will consider as the Bill progresses through this House. The Bill considers future regulation and rightly highlights the importance of maintaining high consumer protection standards. One area of current concern is that of “imposter” or “clone” websites which pose as legitimate free debt advice charities. Of course, the National Debtline or StepChange actually are free debt advice charities, but these imposter websites can be highly convincing and can mean individuals end up thinking they are speaking to a free debt advice charity when they are not. They may end up in inappropriate debt solutions or being charged significant fees. Will the Government use the Bill to close the regulatory loophole that allows this to happen by bringing forward an amendment to bring the activity of introducing an individual to a debt advice or debt solution service within the FCA’s regulatory remit?
Given the financial impact of Covid-19, it is more important than ever that people are offered safe routes out of debt, and I hope the Government will continue to make this a priority, through this Bill and elsewhere.
The Lord Bishop of St Albans
My Lords, it is right to underline the importance of the financial services sector in our country and the huge contribution it makes. There are many laudable things in this Bill: the strengthening of money laundering regulations; encouraging saving; and the creation of parity between white collar crimes, such as market manipulation, and general fraud by extending the maximum sentence.
I was disappointed, however, to hear that the Commons amendment exploring the whole issue of ethical investment with reference to genocide did not make it into the Bill. I understand the Government’s reservation—they do not want to politicise the FCA. Nevertheless, I hope that “global Britain”, as laid out by the intentions of the Bill, will also be very much “ethical Britain” as we place ourselves in the world under the new freedoms that we have. I also note, with other noble Lords, the concern that there seems to be so little clarity on the question of parliamentary scrutiny. I am sure we will return to this as the Bill passes through your Lordships’ House. Of course, fundamental to this whole future is that the FCA is adequately resourced to fulfil its task.
I touch on just one major issue, which takes up a major part of the Bill: the Gibraltar authorisation regime. The issue of Gibraltar’s lower corporation tax rate of 10% was raised during the Commons Report stage as a significant issue, and it is one that warrants raising again. During his evidence session, the Minister said that corporation tax rate was not a factor in relocation to Gibraltar. While I recognise that relocation can be costly and that operating in London has many benefits not offered by Gibraltar, nevertheless there are significant tax advantages.
This has become all too clear in another area of work that I have raised repeatedly in your Lordships’ House—the issue of the tax avoidance of many companies, including gambling firms, which are a particular focus I have had. For example, in 2019, the Daily Mail revealed that 32Red, based in Gibraltar, paid just £812,000 in corporation tax over a 10-year period—an effective UK tax rate of 3%. William Hill, with its six subsidiaries in Gibraltar, is expected to pay 12% in corporation tax in 2020. Ladbrokes Coral is not required to disclose its tax rate, but one of its two licences to operate in the UK is registered in Gibraltar. While these relate particularly to a very focused area of my interests, of course this mechanism applies equally to financial firms.
These arrangements predate our departure from the EU and, given the likelihood that Gibraltar continues to be used in this matter, I am not placing the blame on this new Financial Services Bill. However, during the progress of this Bill, there will be an opportunity to examine again what the appropriate rules would be, particularly within the financial sector, to prevent Gibraltar being simply a place where firms and companies are reducing their tax bill. Will the UK Government commit to publishing an annual report assessing the consequences of the Gibraltar authorisation regime on tax receipts from the financial industry, as well as outlining how they intend to work with the Gibraltarian authorities to ensure there is a fair tax settlement for both territories?
Lord Bridges of Headley (Con)
My Lords, it is a great pleasure indeed to welcome my noble friend Lord Hammond of Runnymede to this House and to congratulate him on his excellent speech. Runnymede is, of course, a place where a bunch of irate barons got together, incensed by high levels of tax they were having to pay to fund the war with France. Disgruntled Peers, cross about the impact that relations with Europe were having on their nation—not much changes, does it?
I turn to the matter in hand and draw your Lordships’ attention to my entry in the register of interests. As has been said, the Bill arrives in this House at a key juncture for the UK’s financial services sector. In the post-Brexit world, it is more critical than ever that we keep our financial services competitive, as others have said, and remain a globally competitive financial centre. Some may think that the best way to do that is to ensure that our regulations remain, as far as possible, aligned to the EU’s. That approach overall would be unwise and unrealistic. It would be unwise because it is in our national interest to chart our own course for our financial services sector—a goose that lays so many of our golden eggs. The approach would be unrealistic because the EU wants to build up its own financial services and therefore, in the words of my noble friend Lord Hill, whom the noble Lord, Lord Reid, quoted a moment ago, the EU will not seek to do us any favours. We would soon find out that our interests and those of our EU friends would be at odds.
Instead, we need to have the confidence that comes from the City being—to quote Mark Carney—the EU’s investment banker and a global financial epicentre that existed well before the European Union was dreamt of. We need to look to a future that is green, a future that is digital and a future that is full of opportunities. We must strengthen our position in this new world. To achieve that, Ministers and regulators must focus on how our regulatory system can help to strengthen our competitiveness. As my noble friend Lord Hunt has just said, competitiveness was one of the regulator’s objectives but was removed after the financial crash and, as has been mentioned, the Government are now consulting on whether to reinsert competitiveness as an objective. It is a pity that that consultation is still underway, given its relevance to the Bill. I will be pressing the Minister on that point.
Of course—let me make this very clear—we should not forget the lessons that we learnt from 2008, nor should we race to the bottom in terms of regulations. Robust regulation is the bedrock of strong financial services but we must not get trapped in the past and regulate entirely via the rear-view mirror. Look overseas: regulators’ objectives have been adjusted since the financial crisis but without abandoning competitiveness altogether. Australia, Singapore, Hong Kong, Japan and Malaysia have competitiveness or growth as a regulatory objective or principle.
We need to look ahead and plan ahead. We must properly balance the need for stability with the need to be competitive so that the UK is innovative, dynamic and a great place to do business. I do not agree with the false choice contained in the Government’s consultation, which states that,
“a new competitiveness objective could distract from or dilute the key stability, market integrity and consumer protection objectives.”
We can and should strive to be both competitive and stable as a financial centre. Nor is the new so-called accountability framework sufficient. Requiring the PRA to consider the impact of its actions on competitiveness is no substitute for making competitiveness a core objective.
That brings me to the issue of accountability and scrutiny. Our regulators are getting more power and the Government are perfectly open about that. They have stated that they are,
“delegating a very substantial level of policy responsibility to the UK financial services regulators.”
If regulators are being given additional powers, there should surely be a commensurate increase in scrutiny. I therefore argue and agree with others that we need to look carefully at how regulators will be scrutinised by Parliament. Of course, getting the balance right is critical but we do not want Ministers or Parliament micromanaging regulators. There are questions as to whether enough is being done to hold unelected regulators to account.
That brings me back to where I began. The best way for Parliament to make regulators accountable is for elected MPs to set unelected regulators very clear objectives. At the moment, those objectives will not achieve our aim to strengthen our competitiveness. That needs to be addressed.
Lord Davies of Brixton (Lab) [V]
My Lords, I congratulate the noble Lord, Lord Hammond, on his maiden speech. I particularly welcome his entry to the House because I am also an unapologetic fan of spreadsheets. The Bill is necessary, of course, consequent on leaving the European Union. To a large extent, it is intended simply to replace what we had before but it provides the opportunity to go further, as we have been promised. I shall mention a couple of points that I hope we can pursue in more detail in Committee.
First, there is the Financial Conduct Authority. I do not have enough time at this stage to go into any detail but I want to put down a marker, that the FCA has failed too often in the past and simply has to do better in future. In the Bill, Clause 39 deals with the appointment of the chief executive. What is required here is clearer and greater accountability, and I would argue that Parliament has a crucial role there.
Secondly, Clause 34 relates to the debt respite scheme. I support debt respite, particularly given the situation in which we find ourselves, and I support the remarks of the noble Baroness, Lady Coussins. However, the proposals in the Bill totally lack ambition, given the scale of the problems we face. We need to understand that while debt has a personal impact, ruining lives and leading to much misery, it also affects us all by acting as a drag on the economy and the recovery that is so desperately needed.
There should be a modern debt jubilee—that is, a comprehensive package of debt cancellations targeted at the household sector. We need, in effect, a debt write-off for households, broadly along the lines established for the financial sector 12 years ago. We were told then that some banks were too big to fail because of the harm that it would cause to the economy. I argue that the failure of individuals because of debt means as much, or even greater, harm for us all.
That is not such a radical proposal. The ancient kings, under the Mosaic law, would announce debt forgiveness for their people so that they could start anew. Traditionally, that would be every 50 years, hence the jubilee. It is crucial to understand that those rulers were not being idealistic or kind in forgiving debts; in fact, they were being very practical. If the economic imbalance was not reset, there was a danger that their kingdom would fall. The main argument for such a scheme, therefore, is that in addition to relieving much individual misery it would provide a direct and targeted macroeconomic boost to the economy, exactly where it is needed. Relieving household debt would generate economic growth in the same way as a tax cut would, but it would be better targeted, allowing people to keep more of their income as pounds in their pockets. The money would flow into consumption, savings or investment, rather than into debt repayment.
There will, of course, be concern that cancelling any debts, even those debts long-abandoned by the lender, will punish the prudent and reward the profligate. That is to misunderstand how the credit system functions and how retail financial markets operate. It is hard to believe that a debt write-off will cause greater harm to those who are unaffected by indebtedness than it will benefit those who are already struggling. The beneficial effects will come to us all. Abolishing household debt, starting with the most pernicious and harmful, will generate gains that are generalised and distributed across the people of the UK as a whole.
As noble Lords will be aware, plans are already being made to celebrate one jubilee next year. Let us also plan a jubilee that will assist not just those among us who are the hardest pressed in our society but all of us. How far we can go towards such an objective in the context of the Bill, I hope we can explore in Committee.
Lord Holmes of Richmond (Con) [V]
My Lords, it is a pleasure to take part in this Second Reading. I declare my interests as set out in the register. It is greater pleasure to congratulate my noble friend Lord Hammond of Runnymede on his exquisite maiden speech. In it, I think the whole House heard that he is so much more than the misnomic “Spreadsheet Phil”. We have a real heavyweight in our midst, and I very much look forward to his future contributions on economic matters and so much more.
I would like to cover the areas of financial technology, or fintech, financial inclusion, or fininc, and the international perspective. Fintech is a great British success story, but we are slipping. The FCA sandbox was world-leading in its time and its great success demonstrated in how it has been copied around the world. Does the Minister agree that we need to update the sandbox to enable it to be available to all comers at all times rather than just those who are first in class? Does he agree that, in a sense, we need to industrialise the sandbox? Does he also agree that we need, for want of a better phrase, a growth box to address the scale-up challenge facing our fintechs? Does he have some early learnings from the City of London and FCA’s proof of concept around the digibox? It is early, I know, but there may be learnings that we can take into Committee and Report of this Bill.
Similarly, I would like to touch on crypto. The UK could be a world leader in crypto assets. Are we going to look to emulate MICA, do more than MICA or do something different? Similarly, we could be a world leader in setting the taxonomy for global crypto assets. Is that part of the plan? We have a fintech industry ripe for solving so many problems and driving so much economic growth. Does the Minister agree?
Another example is a central bank digital currency. If we looked at a hybrid model, we would be a world leader in rolling that out. If we do not, what about the challenge from Libra, now Diem, with the private sector potentially taking a huge influence over our macroeconomic policy? Look at what has happened with social media. If even a fraction of that happened with a digital currency, it would have not just an economic but a social impact—an impact on our very polity.
I turn to financial inclusion. Macmillan Cancer Support, which has done so much in this area, is pushing for a duty of care. I agree. Does the Minister? Similarly, with the SDRP regime, what is the timetable for bringing it into being? When we are looking at the breathing-space clauses, which are welcome, do they need further review against the backdrop of the Covid crisis? Similarly, can the Minister say whether bailiffs are being stopped from doorstepping people during this lockdown, as they were during the first one? It is not clear right now whether that is the case.
I turn to the international perspective, like other noble Lords I welcome the action in relation to Gibraltar. Will there be moves to enable Gibraltar to be part of a free-trade area with the UK?
When we look at the Basel framework, how does that work in terms of some of the international contexts? I would like to see a lot more British involvement in the continent of Africa, but African assets and investments are currently highly weighted from a risk perspective. Is that prudential or protectionist?
Does the Minister agree that when we look at technology and financial technology across the piece it would seem to make sense that we need a unit, a centre within government, maybe within the Treasury—for want of a better expression, a “fourth industrial revolution delivery unit”—to bring policy problems to private and public sector practical solutions?
In the Bill I believe we have the opportunity to reflect and consider what financial services are for. If they are for anything, they must be about enabling, empowering and unleashing individuals, institutions, innovations, neighbourhoods and nation states in a connected, interoperable and economic globe.
In the other place the Economic Secretary to the Treasury, the right honourable John Glen, called the Bill a “portfolio”—right enough. I hope noble Lords will be able to persuade the Minister during the passage of this Bill through your Lordships’ House that we can turn it into a portmanteau—a portmanteau to carry us, our economy and our society better through 2021 and well beyond.
Baroness Hayman (CB) [V]
My Lords, I declare my interest as co-chair of Peers for the Planet. My contribution today will focus on what is not in the Bill —namely, any reference to climate change considerations in relation to financial services and their regulation. First, I have a couple of more general points, and of course a welcome for the impressive and engaging maiden speech by the noble Lord, Lord Hammond of Runnymede.
I was very sympathetic to the points made by the noble Lord, Lord Sharkey, and others on the need for improving the arrangements for parliamentary scrutiny set out in the Bill. I shall be very interested to follow the arguments and discussions on competitiveness, particularly in the light of a powerful speech that I heard last week from David Miliband when he spoke about the sharp dividing line between cultures of accountability and cultures of impunity that apply not only to political systems but, as we have painfully learned, to financial systems as well.
I turn to my main point—a point that I was pleased was raised by the noble Lord, Lord Reid of Cardowan—which is the absence of any reference within the provisions of the Bill to climate change risk and the UK’s net-zero commitments. That the financial sector will be crucial for unlocking the private investment necessary for both green recovery and long-term economic security was made very clear by the Government in their 10-point plan for a green industrial revolution. Alok Sharma, then the BEIS Secretary of State, pledged:
“We will harness the international reputation of the UK’s world leading financial sector to encourage private investment into supporting innovation and manage climate financial risk.”
The Chancellor of the Exchequer wrote in his 9 November Statement of
“putting the full weight of private sector innovation, expertise and capital behind the critical global effort to tackle climate change and protect the environment.”
This strong rhetoric from the Government reflects what is happening in the financial sector in the UK and across the world. Only this week we have seen Black Rock adopt a climate alignment metric for its funds while many other financial institutions, from pension funds to banks, are announcing their commitments to net zero. However, to deliver systemic change at the speed required, we need increased action. Fine words and long-term aspirations will not be sufficient to tackle the scale of the challenge, and the Government need to take a lead in creating the environment and regulatory framework to encourage rapid progress.
The mismatch between rhetoric and activity can be seen across the sector. Lending to fossil fuels from 35 of the biggest banks continued to rise, up from $700 billion in 2018 to $736 billion in 2019. UK banks are currently the worst in Europe for high carbon lending. While the total value of assets held by financial institutions in the UK is around £20 billion, estimates put the value of global funds managed with explicit ESG criteria as, at most, 0.4%.
The Bill needs to reflect the urgency of the task and set the direction of travel through the future regulatory framework for financial services. We have to create a framework that supports our climate goals and explicitly provides for climate risk to be assessed and factored into decisions. The wider consultation on the future framework to which the Minister and others have referred provides no justification for neglecting the opportunity to put the appropriate markers and measures down in the Bill when the Government’s green finance policy and ambition has been so clearly set out already.
We need a concerted and urgent focus on actively aligning investment with the objectives of the Paris Agreement, so it is extremely concerning that the Bill does not even include the first step of addressing climate risks by ensuring that they are taken into account by the regulator when discharging its duties in making new regulations. I look forward to working with other noble Lords on amendments that would rectify these omissions and send a clear signal of a direction of travel to the sector and regulators.
In the year that the UK hosts COP 26, we must be meticulous in ensuring that we lead by example in every aspect of government policy. Mark Carney, the Prime Minister’s financial adviser at COP 26, wrote in November:
“The objective for the private finance work for COP26 is simple: ensure that every professional financial decision takes climate change into account.”
We must ensure that the Bill underpins that objective.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, I declare my interests as set out in the register.
I have been in this House for five years, wondering what happens about our most important industry. Diligently commenting on unamendable statutory instruments, or having yet another debate about regulators’ failure, does not really cut it for parliamentary scrutiny. In a similar length of time, I negotiated the 40 complex sets of post-financial crisis legislation in the EU. I do not expect to do that again, but it is good to see a Bill, and it is attracting two substantial maiden contributors. The problem is that to keep up on Basel 3.1 and separate out investment firm prudential regulation, it runs ahead of the consultation that is still open, implementing the division of powers in isolation from whatever comes from the consultation, deliberately fixing the path.
It did not have to be this way. The SIs revoking provisions when regulators’ replacements have been drafted could instead contain those changes, but the truth is that the Government have decided the future. Regulators are indulged, Parliament ignored. The excuse is made that the division of powers is just returning to the original FiSMA 2000, despite that being out to consultation. Apart from it not turning out well then, and the prioritisation of industry consultation over Parliament, financial services were not without EU involvement in 2000. There was already EU banking and insurance legislation. The Financial Services Action Plan was laid out in 1999 and broadly completed by 2004, with co-ordinating financial supervisory bodies well established.
It is true that the UK was on its own with the FSA’s supervisory mistakes, and cheer-led the Basel blundering, but since the financial crisis, there is so much more detailed and complex legislation than there was in 2000, so much more EU, public and parliamentary consultation and scrutiny. The FiSMA 2012 amendments were done in that setting. Now the light is switched off, and we fall back on arrogant, secretive policy-making, which is no way to be world-leading in the modern age.
It is not transparent what UK regulators and the Treasury get up to in the international standards bodies. Supervisory-led bodies have not always got it right. They got Basel II wrong. We do not know but just hope that they have got it right now. They suffer from groupthink, and then regulators implement and mark their own homework. That is why there must be big, public conversations involving Parliament.
Some legislatures, such as the EU and the US, get to scrutinise and confirm alignment with international standards once they have debated them. In the EU, regulators are regularly reviewed and peer-reviewed. In the US, the US Government Accountability Office conducts an independent annual study of financial regulations and the federal agencies. In this Bill, the Government tie our hands and legs before the scrutiny race starts.
The Explanatory Memorandum says that accountability measures have been included, meaning the scant “matters to consider” provisions for when the regulators are making rules. These “have regard” lists are too short—there are other matters of policy to consider—and there is no measure of how the regulators are accountable, other than by their own explanations and a bit of shouting by us if it has all gone wrong and still more Gloster, Connaught or GRG reports turn up. Heaven knows how anyone thinks that skeleton primary legislation can give certainty for other major jurisdictions to find us equivalent, when substantive policy can be changed in the blink of a regulator’s eye. No wonder they say that they do not know what is planned. They never will.
It is not easy being a regulator, but things have been missed too often, even when newspapers and Parliament have drawn it to attention, so we need regular independent reviews, rather like a Section 166 inquiry on regulators, with oversight on follow-through. Statutory regulator’s consultations are for industry, and there is nothing in the Bill that marks a position for Parliament. There is no access to data for industry or Parliament to independently check or challenge fair basis of the rules.
The Bill separates different types of financial institutions that have previously been swept together under banking legislation. The regulators should be given a specific direction to do more of that for small and non-systemic banks and for different categories of insurance, especially captives and reinsurance, as Ireland has. That would be useful for partial equivalences, too. The FCA’s financial system integrity objective needs backing with failure-to-prevent offences. We need duties of care, better treatment of small businesses in commercial contracts and to make the regulator’s statutory panels transparent, independent and able to consult, not secretive, selective and steered. I do not agree that FiSMA 2000 is the right model. It is arcane, it failed then and it is still secretive and shallow now, diminishing the UK. I will try to make it better.
Lord Sikka (Lab) [V]
My Lords, I congratulate the noble Lord, Lord Hammond, on his excellent speech. I welcome him to the House and look forward to his wise words on many issues.
The Bill has many deficiencies. I have sufficient time to speak on only two matters. In the post-Brexit world, the UK needs to compete to attract business. A key requirement is to ensure that the UK is a clean place with robust regulators. However, the Bill does not do that. It should have been preceded by an independent public inquiry into the finance industry and its regulation.
Regulatory failures continue to make headlines. For example, Dame Elizabeth Gloster’s report on the collapse of London Capital and Finance found that the FCA’s supervision was “wholly deficient” and that its staff
“had not been trained sufficiently to analyse a firm’s financial information to detect indicators of fraud or other serious irregularity.”
The report concluded that the FCA failed to fulfil its statutory objectives. The FCA has also been criticised in a report on the collapse of the Connaught Income Fund, and the long-running saga of frauds at the Royal Bank of Scotland and HBOS are further evidence of the FCA’s failures.
Anyone tackling corrupt practices in the finance industry faces obstacles. In February 2017, the Thames Valley police and crime commissioner, Anthony Stansfeld, prosecuted six financiers, including a senior ex-HBOS banker. They were jailed for a total of 47 and a half years. After being shamed, the FCA in June 2019 fined Lloyds Bank £45.5 million. Thames Valley Police force spent £7 million on the prosecutions, but it has not really been compensated by the Government and thus the force has been disabled from mounting any further investigations.
The Conservative police and crime commissioner for Thames Valley has also sought to tackle other cases of financial frauds but has met political and regulatory opposition. On 8 February 2019, he told the London Evening Standard:
“I am convinced the cover-up goes right up to Cabinet level. And to the top of the City.”
That is a strong condemnation of the current regulatory arrangements. The recurring problem is that the regulators are too close to the industry and like to bat for the industry rather than protect people from malpractices. The Bill does not cleanse the finance industry or enhance protections for the people.
My second point relates to the Basel III framework which is implemented by the Bill and affects the calculation of minimum capital requirements and leverage ratios for banks. However, many of the problems highlighted by the 2007-08 crash remain unaddressed. The Government want banks to have more equity, but they have incentivised debt and high leverage, as the interest payments attract tax relief and enable banks to report higher returns to shareholders. Why have the Government not addressed this contradiction at the heart of the calculations of capital for banks?
Financial statements of regulated financial enterprises are based on international financial reporting standards—IFRSs, as they are commonly known. Their use was heavily criticised in the 2013 report by the Parliamentary Commission on Banking Standards. The IFRSs give management too much discretion and management has used that to massage financial statements, as was shown by Carillion, for example. The IFRSs have no clear concept of capital maintenance and therefore calculations of capital based upon accounting numbers are fundamentally flawed. On bank balance sheets, various transactions in historical costs, amortised costs, net realisable values, present values, fair values, market values and even internally generated numbers are all added up. The calculation does not yield any meaningful number for capital maintenance. Banks are currently neither maintaining money, nor real or physical capital, so why do the Government consider them to be a useful guide for regulators?
Neither the FCA nor the Prudential Regulation Authority sets accounting rules for financial enterprises, but they rely on whatever the Financial Reporting Council comes up with. They are storing trouble for the future. The bank financial statements are targeted at short-term shareholders, essentially speculators and capital markets. They do not tell the regulators anything about market interdependencies or systemic risks, all of which were the causes of the 2007-08 crash.
The UK regulators rely on external auditors, even though big accounting firms are unable to deliver honest and robust audits. All banks which crashed in the 2007-08 crash received unqualified audit reports. The Financial Reporting Council routinely laments that 25% to 50% of the audits conducted by the big four accounting firms are deficient. Yet, bizarrely, regulators rely upon auditors. Auditors owe a duty of care to the company but not to any regulator. Regulators do not have a statutory right of access to the auditors’ files or staff. That was one of the reasons why the Bank of England was unable to fully investigate audit failures at Barings, delivered by Deloitte and Coopers & Lybrand, a firm which is now part of PricewaterhouseCoopers. Yet no lessons have been learned. One must also ask whether the reliance on ex-post audits is wise in a world of instantaneous movement of money. Is it not time that the regulators took direct responsibility for auditing the financial statements of banks?
Baroness Penn (Con)
My Lords, perhaps this is an opportune moment to remind Back-Benchers of the advisory time limit of six minutes for speeches.
Lord Sharpe of Epsom (Con)
My Lords, I draw attention to my entries in the register of interests. I join in the congratulations to my noble friend Lord Hammond on an excellent maiden speech. I will focus on his remarks about the regulator’s promotion of financial industry competitiveness, a theme expanded on most eloquently by my noble friends Lord Bridges and Lord Hunt. In order to achieve that, the regulatory framework must be robust, but the regulator must be nimble, agile, appropriately resourced and with carefully defined powers. It also needs to be accountable, as many noble Lords have noted. I look forward to the results of the current consultation into the wider framework for regulation and note that it is due to close by the end of next month.
Much of the current Bill before us is welcome and I support it, but I wish to raise some questions ahead of the Financial Conduct Authority having yet more powers delegated to it. I note that in the debate in the other place, which has been referred to a number of times, this theme was explored with reference to parliamentary scrutiny. That is a valid concern, but my concern is also to do with the FCA’s enormous existing remit and whether that is now simply too big to manage.
I will cite a couple of examples of where I think that perhaps this is the case. First is MiFID II, the market in financial instruments directive. Part of this dealt with the unbundling of commissions paid for stock market research. The FCA was the architect of these rules, but the French regulator recently noted that they have “profoundly changed” the research landscape and that this has had a negative effect on the quality of research available on smaller companies and therefore, by implication, the capital allocated to those companies. In the UK, the independent and not-for-profit CFA Institute has made similar points. The FCA has said that there is no evidence of this, but both the French and Germans have now changed the rules to exempt smaller companies from this part of the directive. There is no equivalence there, and I cannot recall a previous incidence of a French regulator changing rules to allow less regulation than our own.
Another example is that, last week, two opposition Members of the other House published a letter criticising the FCA’s customer protection skills with regards to the handling of advice given to British Steel pension holders. They alleged that the FCA lacks “sufficient vision” to tackle issues facing consumers and urge the regulator to use the full strength of its powers of enforcement to tackle rogue advisers. I am not particularly familiar with this case, if I am honest, but a swift Google would suggest that they have a point.
However, on the subject of enforcement, the most famous insider trading case launched by the FCA took eight years, cost in the order of £20 million, involved at least 40 investigators who pored over vast amounts of data and in the end secured two of five convictions, confiscation orders of £1.7 million and the longest custodial sentence that was handed down was four and a half years. It has been argued that regulators are discouraged from starting this type of investigation, because of the difficulty of winning, but the FCA has publicly regarded this as a success. It was a partial success perhaps, but at what cost, particularly to those acquitted individuals whose lives were on hold for eight years?
Other investigations that the FCA has conducted into funds management firms suggest that poor product knowledge, excessively high staff turnover and poor handover continuity make relatively straightforward investigations, which are launched perfectly legitimately, run for much longer than they need to. This has a deleterious impact on staff morale and massively increases compliance costs. Large firms can bear those costs with relative ease, but what of the SMEs that the sector relies on for competition and innovation?
I am sure that the FCA will argue that I have cherry picked a few instances which show them in a less than optimal light—perhaps I have. But I could have drawn on a number of other examples, for example, the Gloster report published in December referred to by the noble Lord, Lord Sikka, or the Parker report, also published in December. They were much more complex cases, so I have not used them here. They did not require much effort to find. These examples illustrate only a small part of the FCA’s incredibly wide remit, but the skills and knowledge required to investigate and appropriately regulate each of these examples is discrete and detailed.
So it is hard to escape the conclusion that the FCA is trying to do too much with too little. Yet we are debating delegating additional powers—for example, handing over the power to manage the orderly wind-down of Libor, which, as the briefing documents note, is used to benchmark an eye-watering $400 trillion-worth of contracts. There is no room here at all for mistakes of any kind, although I should note that the FCA is consulting the industry widely on this.
Many in the City believe that the FCA has the appropriate powers but does not use them often enough. On 21 December last year, the Times noted:
“The Financial Conduct Authority has fined only ten wrongdoers this year, its lowest scalp rating since its creation in 2013. It has meted out only £183.6 million in penalties, its third lowest total fines tally.”
I am quite sure that Covid will be cited as one reason for this, but the police carried on policing. Can that be a valid excuse, or is this because of the vast complexity of its role? Here, on complexity, I cite a June 2019 IEA report that claimed:
“The amount of data being collected under MiFID II is now beyond the ability of the UK regulators to assess in any meaningful way.”
I do not believe that the nuts and bolts of regulation, including enforcement, should be subject to political interference, but I think we should ask whether the FCA’s current remit is too broad. Is there a case to be made for smaller and more specialist regulators, particularly as financial markets become ever more complex? I am also concerned that regulated firms lack effective rights of appeal against the FCA’s decisions. As the Government themselves have noted in the past, such rights—and I quote from a BEIS consultation—are
“central to ensuring robust decision-making and holding regulators to account in the interests of justice”.
We have seen the results of failed or inadequate regulation before and they are recent and raw, as the noble Lord, Lord Davies of Brixton, noted. Post Brexit we have an opportunity to design and implement a system that does all the things the Government want, all the things that the industry needs, and all the things that the country deserves. We should do it properly and urgently, not least because we know where the blame for failure will land.
Baroness Falkner of Margravine (CB) [V]
My Lords, I start by congratulating the noble Lord, Lord Hammond of Runnymede, on his maiden speech today, and I look forward to the maiden speech of my noble friend Lady Shafik. I have a tenuous connection to both speakers today. I chaired the EU Financial Affairs Sub-Committee in the period when the noble Lord was Chancellor, providing him with the odd unhelpful report on the UK exit fee, or the dangers of losing passporting rights, for his late-night reading. I should alert him to the fact that four of us from that committee are speaking in this debate today. My noble friend Lady Shafik is the first female appointed as director of the London School of Economics, my alma mater, and a former deputy governor at the Bank of England, where I am a member of the Enforcement Decision Making Committee, an independent panel under the PRA. Given my interests declared vis-à-vis the PRA, I will keep my contributions on this Bill high level, and restricted to certain areas only.
In early 2018, the EU Financial Affairs Sub-Committee published a report on the future of financial services regulation and supervision post Brexit. I believe that this was the most comprehensive survey of the options available to the UK if—and at that point it was an if—the UK left the EU. On examining the provisions of this Bill, I am pleased to say that our analysis was pertinent, and several of our recommendations will now see the light of day as this legislation becomes law.
One of our considerations is indeed at the heart of this Bill—that of where powers and standard setting by EU bodies rightly reside now that the UK is responsible for its own regulation. We concluded that our regulators were well regarded internationally and, despite some concerns expressed by noble Lords today, which I accept, the United Kingdom’s financial services sector is still regarded as number two globally, having been replaced in the number one slot by New York. It is leagues ahead of any other continental centre. This is relevant not out of some nationalistic hubris but because the real jobs and revenue that it provides are really important across the country.
Until last year the UK’s regime derived its legislative base from EU law, but we found out that in reality those standards were actually framed upstream through the Financial Stability Board, Basel, IOSCO and other standards setters. It is at that level that we need to focus our energies now, confident that our technical expertise is highly valued, but we also need to build new relationships. I note that the five largest financial sectors behind New York and the City are in east Asia, and Zurich is the only one in the top 10 globally from continental Europe. So we have opportunities upstream in co-operating with those jurisdictions to establish fair and proportionate frameworks.
While I have confidence in our regulators, I want to add my voice to the need for accountability. Standards setting and underpinning legislation that is now passing to our regulators is highly technical, but that does not mean that parliamentary scrutiny is redundant. So I urge the Minister, through the usual channels, seriously to consider setting up a joint committee of both Houses to carry out ongoing scrutiny of the effectiveness of this type of legislation. The City, as I know, is not keen to be a low-tax, low-regulation haven for dodgy dealing; it wants to preserve its hard-earned recent reputation. Oversight by Parliament at a more technical level can only enhance this. So when the Minister tells us that further legislation will build on this omnibus Bill, I urge him to suggest to his political masters that there will inevitably be a democratic deficit unless we have a parliamentary mechanism to do the relevant scrutiny, not least of HMT, when the Treasury Select Committee in the other place simply cannot carry out that technical work.
My final point is about competitiveness. The post-Brexit UK will inevitably need to rethink its competitiveness as business investment becomes more challenging to attract. So I also urge the Minister to explain what reservations the Government have, if any, about establishing an international competitiveness duty for the regulators. We recommended this in our report, and I think that the Treasury can usefully incorporate it into its thinking on the future regulatory framework. I know that some see competitiveness as a race to the bottom. I ask them to think of one very current example: the pharmaceutical sector. Would anyone today, looking at our vaccination strategy and successes, think that having a state of the art and competitive pharmaceutical sector represents a race to the bottom—or is it a necessary tool in the global challenge to remain in the lead where we have the relevant skills?
I look forward to the detailed scrutiny that we will undertake on this Bill in the months ahead but, in the meantime, I look forward to hearing the Minister’s response.
Lord Northbrook (Con) [V]
My Lords, putting the contribution of the UK’s financial services in context, according to a City/PwC paper in January 2020 they contributed £75.5 billion in tax revenue in 2019, employing about 1.1 million people. Overall, I support the Bill’s measures, which bolster the consistent use of international standards. This is crucial to reducing the unnecessary fragmentation of markets that impacts on consumers. I agree with the delegation of responsibility for financial firm requirements to the regulators, subject to an enhanced accountability framework and necessary parliamentary scrutiny.
The three main objectives stated in the Bill are entirely sensible. The Bill also amends existing laws on financial services in the 17 separate areas grouped by these three stated objectives.
My only criticism of the second objective is that, while it promotes openness to EU and overseas financial firms that come here, no attempt was made in the Brexit negotiations to obtain passporting rights from the EU as a quid pro quo. The Government seem to have believed that these should only now be negotiated—alas, when we have no bargaining tools left in other areas. The EU seems in no hurry to assist us. Can the Minister explain the logic in this?
I welcome the new regulatory regime proposed for non-systematically important investment firms. The Government rightly state that the existing regime for these institutions can be disproportionate, inappropriate and impose unnecessary burdens. The Bill would rightly allow the Financial Conduct Authority to introduce a tailored regime for such companies. The Government say that the UK regime will be flexible and is intended to achieve similar outcomes to the reform in the EU in 2021 but
“tailored to the specificities of the UK market.”—[Official Report, Commons, Financial Services Bill Committee, 17/11/20; col. 59.]
I welcome the Bill’s implementation of Basel III standards on banking supervision. Some member firms will have been working towards implementing the EU’s capital regulatory requirements, CRR II. How may the UK diverge from CRR II?
I also support the framework to wind down the Libor benchmark, as outlined in the Bill. Will the Minister urge the FCA to publish further detail on its replacement as soon as possible?
Can the Minister clarify how the Treasury intends to make equivalence decisions under the framework for the new overseas fund regime? Will the Government publish a regular report on the progress and results of negotiations for obtaining equivalence for UK firms in EU countries? I strongly support maintaining the effectiveness of the financial services framework and sound capital markets in Clauses 8 to 17.
During the rest of my contribution, I will focus on the unfortunate statistic of the rise in complaints to the FCA and cite two examples of regulatory failure. According to an FTAdviser article of February 2020, the number of complaints about the City watchdog jumped by more than 50% in 2019, primarily due to concern about the regulator’s supervision of the industry. The main driver behind the hike was the sharp increase in the number of complaints relating to the FCA’s advisory role—namely, failure to act on information and to spot a problem. In the same month, the FCA was reprimanded by the complaints commissioner, Antony Townsend. He wrote to the FCA board expressing serious concerns, branding the current situation at the watchdog “totally unacceptable”. This followed a previous report in 2019, where the complaints commissioner highlighted a
“lack of effective prompt action”
by the financial regulator, in a number of cases where advisers and consumers reported concerns about a fund.
The two individual examples of regulatory failure on which I will focus are London Capital & Finance and Beaufort Securities. In December 2020 an independent investigation into the FCA’s handling of the LCF mini-bond scandal rebuked the regulator for “significant gaps and weaknesses” in its policies and practices. The review found that the City watchdog had failed to properly regulate the now collapsed company. It warned that its handling of information about the business from third parties was “wholly deficient” and an
“egregious example of the FCA’s failure to fulfil its statutory objectives”
in regulating the company. The mini-bond provider collapsed in May 2019, owing more than £230 million and putting the funds of some 14,000 bondholders at risk.
The main highlights of the review were that, first, investors had not received enough protection from the regulatory regime, and, secondly, LCF had not been adequately supervised by the FCA. Most importantly, the review stated that the root causes of the FCA’s failure to regulate LCF were “significant gaps and weaknesses” in the policies and practices it implemented to analyse the business activities of regulated firms. It had allowed LCF to use its authorised status to promote
“risky, and potentially fraudulent, non-regulated investment products to unsophisticated retail investors”.
Although the regulator’s financial promotions team had raised concerns about LCF’s financial promotions on six occasions, the breaches did not result in a referral to the supervision or enforcement divisions. Lastly, the report said:
“FCA staff who reviewed materials submitted by LCF had not been trained sufficiently to analyse a firm’s financial information to detect indicators of fraud or other serious irregularity … Neither did the FCA appreciate the significance of an ever-growing number of red flags, which were indicative of serious irregularities in LCF’s business. This occurred at a time when LCF’s unregulated bond business was growing at a rapid pace and substantial funds were being invested by Bondholders.”
I do not have time to go through the case of Beaufort Securities with which there were many of the same problems, though in a number of cases, investors got their money back. Overall, I welcome the Bill.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I declare an interest as a former chair of StepChange Debt Charity.
I congratulate the noble Lord, Lord Hammond of Runnymede, on his maiden speech. In your Lordships’ House we do a good line in former Chancellors of the Exchequer; in normal times, when the House is sitting on a regular basis, there is almost a full Bench of them. He joins an exalted group, and I am sure he will quickly make his mark, even among that competition.
I will focus on Parts 6 and 7. I echo the noble Baroness, Lady Coussins, and the noble Lords, Lord Davies and Lord Holmes, in welcoming these proposals. I want also to raise the specific issue of high-cost credit, which the Government should stamp out.
Clause 34 amends Sections 6 and 7 of the FGC Act. I participated in the debates on that Act a few years ago. We welcome the clause, which will, as the noble Baroness, Lady Coussins, said, compel creditors—including all public sector creditors—to accept amended repayment terms, provide for a charging mechanism for debt advice, and underpin the instruction of the Statutory Debt Repayment Plan. But the Bill is short on detail. We hope to take this further in Committee. We assume and hope that the scheme will be modelled on the successful Scottish scheme.
More details will be needed in Committee about the timetable. Debt respite, which is being introduced in May, and debt repayment should go together. How are the powers to be framed and what role will Parliament have? What will be the arrangements for creditor agreements and the veto, if any, on the quantum of payments? Should there be a wider reform of debt collection practices, particularly the use of bailiffs by local government? The noble Lord, Lord Holmes of Richmond, raised this.
Clause 35 deals with successor accounts to Help to Save and inserts a new clause into the Savings (Government Contributions) Act 2017. This will provide regulation-making powers in respect of orphan funds or where no instructions have been provided to the director of savings. Although the Government sensibly propose to take powers for this eventuality, there are currently no plans to implement them. Why not? What circumstances would trigger action? We can return to this in Committee.
My other area of interest is in repealing the Victorian bills of sale legislation, which permits an egregious area of high-cost credit to continue and flourish. For those who are not aware of them, bills of sale are a way that individuals can use goods they already own as security for loans while retaining possession of them. The use of bills of sale has grown from fewer than 3,000 in 2001 to more than 30,000 in 2016. The numbers have dropped recently, but are probably in the order of 15,000 a year. They are mainly used for what are called “logbook loans”, where a borrower grants security over their vehicle. Borrowers may continue to use their vehicle while they keep up the repayments but, if they default, the vehicle can be repossessed without the protections that apply to hire purchase transactions and very few consumer credit concerns.
Bills of sale are currently governed by two Victorian statutes, the Bills of Sale Acts of 1878 and 1882. This legislation is archaic and wholly unsuited to the 21st century. In September 2014, HM Treasury asked the Law Commission to review the bills of sale legislation and to make recommendations for reform. A consultation paper was issued and a report was published in September 2016. In February 2017, the Government asked the Law Commission to draft legislation to implement its recommendations. These plans have now been shelved. Lenders and consumer groups agree that the law is in urgent need of reform. The current law creates hardship for borrowers and private purchasers. It imposes unnecessary burdens on lenders and restricts access to finance for unincorporated businesses and high net worth individuals.
The great majority of bills are issued for logbook loans, often taken out by borrowers who have difficulty in accessing other forms of credit. These borrowers are particularly vulnerable to inadequacies in the existing law. To make this clearer: the current APR in a recent advertisement for a car logbook loan was 450%.
The Law Commission says that the statutory form for a bill of sale, as set out in the 1882 Act, confuses borrowers rather than helps them to understand the consequences. The bills of sale Act provides only minimal protection to borrowers, and their goods can be repossessed if they default. The FCA has rules about this and logbook lenders must have policies to deal with default, but lenders differ radically in their approach to repossession. There have been complaints that some lenders use threats of repossession to demand unreasonable and unaffordable sums.
This is an area that should be cleaned up. Action should be taken. A simple way would be simply to repeal the Acts that I have mentioned and I will bring forward amendments in Committee to do that.
The Earl of Shrewsbury (Con)
My Lords, I, too, congratulate my noble friend Lord Hammond of Runnymede on an excellent maiden speech. I refer noble Lords to my entry in the register.
The EU-UK Trade and Cooperation Agreement, which came into force on 1 January this year, is a free-trade agreement that does not facilitate the same access to the EU single market, for the UK’s financial services, as that which was available pre-Brexit. The EU passporting regime is founded on a 20-year history and there are nine different passports that cover financial services, from core banking services such as lending and deposit taking, through to asset management and more. Each passport is embedded in a particular EU directive or regulation, establishing the basic rules for that activity.
Your Lordships will be fully aware that, from 1 January, the passporting regime was no longer available to UK-based financial services firms. Consequently, the extent to which UK firms can continue to provide services to customers in the EEA or EU will depend on local law and local regulators’ expectations or a grant of equivalence from the European Commission. Conversely, EEA-based firms must now either have a UK-based operation, be able to rely on an exemption or exclusion or be acting in accordance with one of the UK’s temporary regimes in order to undertake regulated activity in the UK.
The removal of the passporting regime, together with the uncertainty duly generated, has resulted in financial firms operating in the UK relocating around 7,500 employees and more than £1.2 trillion-worth of assets from the UK to the EU. Over 40 financial firms have announced plans to make local hires for existing or newly created roles in Europe, equating to over 2,850 additional new jobs. There are alternatives to passporting, but they are complex and I do not have sufficient time available today to visit them in this debate. The European Commission can grant equivalence to a third country if it seems that the laws of that country have the same intention and produce more or less the same outcomes as the laws of the EU. However, the Commission can also unilaterally withdraw equivalence, should the situation change, within 30 days. It is my understanding that, in order to prevent the Commission from withdrawing equivalence at short notice on the grounds that the UK rules diverge materially from those of the EU, the UK is seeking a form of enhanced equivalence whereby both parties would regularly update each other on new regulations. Given that financial services were specifically excluded from the TCA, what efforts are the Government making to ensure that passporting rights—and, in the absence of those, equivalence rights—and access to the EU for the UK financial services industry are secured? Further, depending on the outcome of the discussions between the UK and the EU regarding equivalence, what additional measures are the Government proposing to take to support the UK financial services industry and reinforce its competitive advantage?
I am aware that the sector has a number of specific concerns, which include the temporary permissions regime and the capital markets union, with further concerns held by the UK funds industry and the UK insurance industry. My understanding is that, in November last, my right honourable friend the Chancellor announced that the UK proposed to recognise the equivalent status of EU financial services laws in a number of key areas, including those that I have just mentioned. By granting equivalence to EEA-member states in three of those areas, the UK acknowledged that insurers and reinsurers, established in the EEA, have the same capital and governance requirements as UK firms. This gesture of good will from the Government has, I believe, not yet been reciprocated by the European Commission, which has yet to take any action whatsoever towards granting similar rights. Are we surprised? Nothing changes.
This is a complex and substantial Bill, which aims to improve the UK regulatory framework for financial services following the end of the Brexit transition period and I support it. Doubtless it will receive much scrutiny during the stages to come, but we must remember that the other place gave it its support and we, too, should give it a fair wind.
Baroness Shafik (CB) (Maiden Speech) [V]
My Lords, it is a great honour to make my maiden speech today and I begin by thanking your Lordships and the staff of the House, who have been so welcoming. I am particularly grateful to my sponsors: the noble Lord, Lord O’Donnell—Gus O’Donnell—who was both my mentor and manager in the Civil Service, and the noble Lord, Lord Stern—Nick Stern—who was my teacher and is now my colleague at the London School of Economics and Political Science. It has been a strange time to join this great House, but my induction has proceeded very capably through digital means and I thank Black Rod, the Garter and the noble and learned Lord, Lord Judge, for their guidance.
I was born in Alexandria in Egypt, although my connection to the UK began with my grandfather, who came on a scholarship to do his undergraduate and doctorate degrees at Imperial College in the 1920s. My father was born and raised in Notting Hill, before it was fashionable, and the family eventually returned to Egypt, where my grandfather retained a love of croquet and lawn bowling well into his 90s. My maternal grandfather studied in France and my mother was sent to a French Catholic school by her forward-thinking Muslim mother, who believed that everyone should learn about other people’s religions. I wish that they could all be here today.
My family’s prospects changed radically with the nationalisations in Egypt in the 1960s, when we lost most of our property and went from being well-off to being immigrants in the United States, where my father had studied. For my father, who had a PhD in Chemistry and little else, education was the only path to success. His mantra was, “They can take everything away from you except your education.” Those experiences —seeing how people’s fortunes could rise and fall because of economic shocks and the importance of education for social mobility—instilled in me a deep curiosity about the architecture of opportunity in a society. That curiosity led me to a career in economics that spanned the World Bank, the UK Department for International Development, the International Monetary Fund, the Bank of England and the London School of Economics.
While I spent 18 years in universities, most of my career has been in the trenches of policy-making in some of the poorest countries in the world and some of the richest. I have worked with politicians from across the political spectrum. In the UK I was a permanent secretary under both the Labour Government and the coalition between the Conservatives and the Liberal Democrats. In my years at the World Bank, DfID and the IMF, I travelled to over 100 countries, working with politicians of every imaginable political stripe. I saw clearly the benefits of sharing experience across countries.
I have had jobs that are primarily about making good things happen—lifting people out of poverty at the World Bank and DfID and spreading education at LSE. I have also had jobs that are primarily about preventing bad things from happening—fighting international financial crises at the IMF and maintaining monetary and financial stability at the Bank of England. Making good things happen is often more fun and one’s colleagues tend to be more optimistic. Organisations that prevent bad things tend to be populated by people whose job is to worry and look for risks, but their work is vital because, as the pandemic has shown us, bad events can swiftly destroy decades of progress.
These experiences are why I have chosen the Financial Services Bill for my maiden speech. It is first and foremost intended to prevent bad things from happening, as well as to create opportunities for new good things. It is the first important step in defining a distinct UK regulatory framework after leaving the EU and restoring the regulatory philosophy embedded in the Financial Services and Markets Act 2000, with improvements based on the lessons from the 2008 financial crisis. That philosophy is based on legislation setting out the policy objectives and operationally independent expert regulators translating that into technical regulation and supervision.
It is reassuring that the Government remain committed to the highest standards of regulation to avoid future bad events. Robust standards are essential for the stability and fairness which make our financial markets attractive to global investors and ensure consumers are protected. Chasing competitive advantage through lower regulatory standards and financial services is a chimera.
At the IMF, we used to describe the UK’s financial sector as a global public good because of its systemic importance to the world economy. The success of the UK’s regulatory framework has far-reaching consequences, and maintaining active engagement in global standard-setting, such as through the Basel Committee and the Financial Stability Board, is the best way of remaining the most global financial centre in the world. For example, when I was at the Bank of England it worked with central banks around the world to shape the first global standard for the foreign exchange market—the largest financial market in the world with a turnover of $6.6 trillion every day, over 40% of which occurs in London.
There is a huge opportunity, as many noble Lords have said today, for the UK to set global standards on green finance, from mandatory disclosure and the development of green investment products to defining regulatory approaches to climate-related stress-testing, which will be done for the first time this year. The return of full independence in setting the regulatory framework for financial services to the UK also provides an opportunity to rethink the framework for accountability and scrutiny in a system that relies heavily on experts. I have to confess, I like experts. I know Members of this House fall comfortably into that category, and the expertise in this House adds enormous value to the legislative process. But as the noble Lord, Lord King, has said, experts must resist the pressure for an illusion of certainty. It is best to listen to many views and subject expert judgment to challenge.
I hope that I can add my voice to the well-informed and lively debates in this House and bring an especially global perspective to our deliberations. Hopefully, we can prevent many bad things happening as well as enable many good things to progress. I look forward to working with all of your Lordships in the future.
Lord Butler of Brockwell (CB) [V]
My Lords, it is a privilege to be the first to congratulate the noble Baroness, Lady Shafik, on her charming and hugely impressive maiden speech. This debate shows the House is fortunate to have the addition of not one but two real heavyweights to our number. I am sure I speak for the whole House when I welcome the noble Baroness and say that we look forward to her continuing to contribute her extensive expertise and experience—national and international—to the work of our House.
This is a large Bill and, in view of the significance of the financial services sector in the UK, a very important one. I declare my interests as set out in the register and as a former member of your Lordships’ EU Financial Affairs Sub-Committee—one who worked under the splendid leadership of the noble Baroness, Lady Falkner of Margravine.
Like the noble Lord, Lord Sharpe of Epsom, I want to direct my remarks to the part of the Bill relating to the regulation of investment firms, in particular, the EU markets in financial instruments directive, popularly known as MiFID. The current directive, MiFID II, came into force in the United Kingdom on 3 January 2018. Its provisions have been widely criticised, not only in the UK but throughout the EU, as excessively burdensome and not sufficiently distinguishing between market operators on grounds of size or function. Now the UK is responsible for its own regulation, which is welcome, but using the powers to be conferred by this Bill the Financial Conduct Authority will be able to introduce a more tailored approach under the title of an “investment firms prudential regime”. It is also welcome that the FCA has already circulated a discussion paper inviting comments on its approach.
One area in which MiFID II produced unforeseen adverse consequences—at least, unforeseen by its proponents, for it was foreseen by others—was the treatment of investment houses’ research costs. It was an aim of MiFID II to prevent the financing of research services from trading commissions, because it was believed that this would remove an incentive to unnecessary churning of investments as a means of providing funds for research. This was a laudable objective, but it was predicted during consultation on the directive that a complete ban on the commission-sharing regime would cause fund managers to cut their spending on research and benefit competitors outside the EU, who were not subject to similar restriction. It would also discourage new businesses seeking to establish themselves in the market. This has, indeed, been the result.
An alternative suggestion was that the aim of greater transparency could be achieved by disclosing to clients in advance fixed, budgeted amounts for research. This was adopted in MiFID but not considered sufficient in itself; further onerous reporting was required. This is but one example of the competitive burdens imposed by MiFID II. It is to be hoped that they will be mitigated in the UK’s new investment firms prudential regime, so as to combine transparency about costs with removing disadvantages suffered by UK firms in comparison with competitors in the United States and the Far East.
The FCA’s consultation on the new regime coincides with two other developments that are currently under way. One is the discussions being conducted with the EU, and due to be completed by April, about a new framework for equivalence between the UK and EU following Brexit. The second is that, like the UK, the EU is itself reviewing and preparing modifications to its regulatory regimes, covering not only MiFID but other matters covered by the Bill, such as the capital requirements directive implementing Basel III and the anti-money laundering directive. The UK’s discussions with the EU about equivalence are taking place on ground that is shifting beneath our feet. Such developments in regulation in the UK and the EU will, and inevitably should, continue as financial markets continue to develop.
If anything were needed to persuade both sides in the present UK-EU negotiations that it is in our mutual interest to work in close consultation with each other, it is a report last week that in the absence of UK trading platforms for derivatives being given EU market access, business in euro-denominated interest rate swaps fell sharply in London during the first fortnight in January. At the same time, it has doubled not in the EU financial hubs, where it also fell, but in New York. It is to be hoped that the EU can be persuaded that a restrictive approach to the UK is contrary to not only the UK’s interests but its own.
The United Kingdom has long been a leader in international financial regulation, as shown by our pivotal role in the 2007 financial crisis and its aftermath. We must see to it that this Bill and its implementation continues to allow that leadership, not only in the UK’s interests but, as the noble Baroness, Lady Shafik, said, in the world’s.
Lord Hendy (Lab) [V]
My Lords, I add my congratulations to the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent maiden speeches. I agree with my noble friend Lord Sikka and other noble Lords who have pointed out that the Bill does not go far enough to secure proper governance, financial integrity and measures against corruption. The current state of the law is a blot on the finance industry in the United Kingdom, which has seen outrageous criminal conduct on a massive scale go unpunished and sometimes uninvestigated. I am speaking of money laundering, fraud, false accounting and the like. I have in mind the collapse of BCCI, the Libor scandal, HSBC’s money laundering and other cases referred to by noble Lords. The case for a public inquiry into the finance industry is now incontrovertible.
A particular problem has been the current state of UK corporate liability law, the “directing mind” test, which effectively puts large companies and financial institutions beyond the reach of criminal prosecutors for many economic crimes other than bribery and tax evasion. The charities Finance Innovation Lab and Spotlight on Corruption have highlighted this in briefings, and I am grateful for their elucidation of the problem and their proposed solution.
This is a rule of law issue. An amendment to the Bill is needed to make it a criminal offence to facilitate an economic crime or to fail to take reasonable, necessary steps to prevent an economic crime. Individuals should be personally liable, and so should corporate entities in a sufficient relationship with a guilty individual to found vicarious liability under the ordinary principles of the common law. This would be a straightforward yet vital step to bring fraud, money laundering and false accounting into line with bribery and tax evasion. It would bring the UK into line with equivalent laws which exist and are used, sometimes with spectacular results, in the United States and the EU. Given the well-reported increase in fraud cases during the current pandemic, this is an urgent matter.
By the same token, since Brexit and the failure to secure any deal in relation to financial services, the need to restore the reputation of the finance industry and highlight its effective regulation by passing such an amendment is particularly pressing. It is understood that the Law Commission is currently reviewing corporate crime, but this Bill presents an unmissable opportunity now to create such an offence, and I hope the Minister will be able to tell us an amendment on these lines will be introduced.
Lord Oates (LD)
My Lords, I congratulate the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent maiden speeches. I look forward to the important contributions they will both undoubtedly make to the House.
On Monday 9 November last, the Chancellor made a Statement to the House of Commons in which he set out the Government’s vision for financial services. He pledged, as the noble Baroness, Lady Hayman, reminded us, to put
“the full weight of private sector innovation … behind the critical global effort to tackle climate change and protect the environment.”—[Official Report, Commons, 9/11/20; col. 621.]
Just two hours later, his colleague, the Economic Secretary to the Treasury, John Glen, got to his feet to introduce the Second Reading of this Bill. In his opening speech, which lasted over 25 minutes, he did not refer to the climate and ecological emergency once. He made no mention of green finance, climate risk disclosure or the critical role the financial services industry will have to play if we are seriously to tackle climate change.
The omission of any reference to climate change, replicated by the Minister this afternoon, was not the result of an oversight on the Economic Secretary’s part. Far from it; it was simply a logical consequence of the fact that the Bill does absolutely nothing to address the climate emergency we face. The Economic Secretary had a number of answers for this failure when he got around to the matter in Committee. First, he argued that these issues were not relevant for discussion, as they were not directly related to the Bill—a strange and circular argument, as their absence from the Bill was precisely the complaint he was addressing. Secondly, he argued that the regulators were making progress on climate-related issues and we should let them get on with it. Finally, he said:
“The Bill grants the Treasury a power to specify further matters in the accountability framework at a later date, which could be used to add a requirement to explicitly have regard to green issues in the prudential framework, if appropriate … I can assure the Committee that the Treasury will carefully consider a green ‘have regard’ in the future.”—[Official Report, Commons, 24/11/20; col. 157.]
Essentially, he was telling Parliament, “It’s not for you to worry your little heads about these things, and to ensure that you don’t have to, the Bill will take the powers away from Parliament in this regard and vest them in the Treasury and the regulators, who know best.”
We on the Liberal Democrat Benches do not think that they know best. History does not cause us to put much faith in the willingness of the Treasury, or of unaccountable regulators, to act. Nor does it give us any faith in their ability to determine the appropriateness, or otherwise, of action on such critical matters for our planet. We agree with the Chancellor that financial services have a key role to play in tackling climate change, but we believe that it is for Parliament to determine that role. Accordingly, we will bring amendments forward in Committee to ensure that the Bill does exactly that. They will do this, first, by requiring the Prudential Regulation Authority to have regard to climate-related financial risk when setting capital adequacy requirements and, secondly, by ensuring that credit-rating agencies have to take climate risk into account in setting credit ratings. Thirdly, they would bring forward the date when the recommendations of the task force on climate-related disclosure will be mandatory from 2025 to 2023.
We will also seek amendments to ensure that, in setting general rules, the FCA has regard to the climate-related financial risks to which FCA investment firms are exposed and that the FCA, in setting Part 9C rules, and the PRA, in setting capital requirement regulation rules, have regard to the UK’s domestic and international climate obligations. I look forward to working on these issues with the noble Baroness, Lady Hayman, and other members of Peers for the Planet, the excellent organisation which she chairs.
I welcome the lead that the Government have taken in setting the net-zero target. I applaud the Treasury for moving on the TCFD recommendations, so far as they have gone, and for their positive words on green finance. However, the awful truth is that action in every respect of our response to the climate emergency is glacially and catastrophically slow. We are way off line to meet the Climate Change Act’s original 80% reduction target, let alone the revised net-zero one. There is a time when the talk of distant targets for which none of us will be held accountable has to end and the activity and action to meet them has to start. That time is now. The climate crisis is not something that might happen in some distant future if we do not get our act together. It is happening right now. Just ask those on the front line of the crisis; ask the people of the small island states who live with the prospect of being literally wiped off the map. Ask the farmers facing ever more erratic weather patterns and deteriorating soil conditions in Africa or South Asia. Ask householders in the UK who are becoming ever more susceptible to flood risk; ask the firefighters in California or New South Wales.
As we speak, the world is on course for three degrees of warming. The devastation that would cause is beyond contemplation. We know the threat that we face, and what we have to do to mitigate it, but that does not guarantee that we will do it. A global pandemic was number one on the Cabinet Office’s risk register. We knew it would happen one day, yet it seemed so far off that, when it suddenly arrived, we met it almost completely unprepared. We cannot afford to do the same with climate change. So I urge the Government to use this Bill to start, however modestly, to match their fine rhetoric with action and to ensure that the financial services industry is able to play its full part in combating climate change.
Lord Jopling (Con) [V]
My Lords, I begin by drawing attention to my interests in the register. The House has heard two outstanding maiden speeches today. I doubt the House of Lords has seen the introduction of two individuals with such extraordinarily wide qualifications for many years, and we certainly welcome them very much.
The Government have told us that one objective of the Bill concerning financial services is to promote openness between the United Kingdom and internal markets. Obviously that is a laudable notion, which is important to the UK because our financial services are in many ways the golden nugget of the UK economy. I want to ask the Minister to give us an assessment of how such an aim is achievable and to report on progress over the past few years, and particularly recently, on achieving that greater openness. To what extent since Brexit are other countries also showing preparedness to negotiate towards that goal?
For a start, I cannot imagine that the European Union will resist the temptation to shift some of the pre-eminence of the City of London to Paris and Frankfurt. That point was made by the noble Lord, Lord Reid, and my noble friend Lord Bridges. So far as the EU is concerned, it will be a case of holding on to what we have got and trying to avoid the power of the City and British financial services ebbing away to the continent. However, that is not the main point that I want to raise.
I am concerned at the prospect of opening up the financial markets between the United Kingdom, the United States and others. Some years ago, when the European Union was negotiating the TTIP agreement with the United States, I went on a Select Committee visit to Washington as part of our inquiry into the progress of the TTIP negotiations. Of course, reflecting on the strength of the City and the United Kingdom’s powerful financial services sector, one of Britain’s main aims, while we were still members of the EU, was to enhance the prospects of the pre-eminence of the City within those negotiations with the United States. Indeed, one of our principal aims was to open up the financial sector between the US and the EU, as it was then. Now, after Brexit, that must obviously continue to be a major aim of the UK but all of us who went on that delegation to Washington, some years ago now, were seriously shocked, when meeting the United States Treasury at that time, to be told in the firmest possible way that there was no way at all that the United States was prepared to open up the financial services sector within the confines of the TTIP negotiations. In strident, almost offensive terms, we were told to forget it.
That is very concerning for the future. I have heard no evidence since then that the attitude of the United States has softened so far as financial services are concerned. I have two questions to the Minister, which I hope he will refer to in his wind-up; if he cannot do so, perhaps he will be good enough to write to me. First, has there been any softening in the attitude of the United States to protect its financial services sector and open it up to the UK or others? Secondly, does he see any prospect of fulfilling the Government’s aim of opening up these markets, especially within the United States?
Lord Rooker (Lab) [V]
My Lords, I pay a real and sincere tribute to the two maiden speakers, the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik. I found their speeches really useful and interesting, and they will make major contributions to the House in the future.
I shall be brief but I want to say a few words about three items. The first concerns Clause 34, on the debt respite scheme. This is much welcomed and we can leave the detail for Committee. It was useful to hear the Minister confirm that priority debts include council tax arrears, energy arrears and benefit overpayments—in other words, broadly speaking, public sector government debts.
Such debts can be a nightmare for people and get worse when, with the best of intentions, attempts are made to repay and are then frustrated because the odd creditor or two believes that more should be repaid quicker. I certainly had experience of that when I advised constituents in the 1970s and 1980s. I got their debt sorted out, but then either a creditor that I did not know about or one of the existing creditors decided that they wanted to speed things up. The Money Advice Trust has provided a really useful and supportive brief on Clause 34.
We now have Covid in play, which, by common consent, has affected poorer families financially more than others, besides the million self-employed people who have not received any help from the Government, many of whom will have taken on debts. Will such debts be covered by Clause 34?
An affordable timeframe is the one element that can give people hope, so this clause is a very big incentive for people to enter into agreements to repay debts in full and not simply ignore them, letting them build up and hoping that something will turn up. It can prevent an escalation of the problem, which of course is a worse nightmare. The key, according to the Money Advice Trust, is the timetable. The mental pressure on people with debts is enormous. Having a timetable which is affordable is key. My question is whether this is a priority for the Treasury, as it is needed as soon as possible.
Secondly, I would like to touch on the issue of economic crime. The Bill—I wrote my speech before my noble friend Lord Reid spoke—appears to be a parliamentary Christmas tree, on which we can hang new bits of legislation. The one I would cite is that regarding the prevention of economic crime. Spotlight on Corruption has made it clear that there is problem. The rules for holding large companies and financial institutions to account for economic crime are unfair and ineffective, and they undermine good corporate governance.
Prosecutors have requested that laws on fraud, false accounting and money laundering be strengthened in line with the laws on bribery and tax evasion. The Commons Treasury Select Committee is in favour of that, and over 70% of those responding to a consultation —last year, I think, or the year before—said that current rules inhibit holding companies to account. It is also in line with previous Conservative Party manifestos, and I am sure, although I have not gone back to check the text today, that it is consistent with the seminal speech that David Cameron made on the issue. I will leave it there, as it is a detail for Committee.
In a way, my final point follows what the right reverend Prelate the Bishop of St Albans said. I have never favoured Gibraltar becoming a brass-plate economy. It is true that we more or less passed it over to Spain after Brexit, so it might well now be a bigger income generator. I have no interest to declare—I had two private holidays there in 1977 and 1979 as a gesture of solidarity when the Spanish closed the border—but the fact is that there are some serious issues to debate given the amount of the Bill that relates to Gibraltar and the fact that it is becoming a bigger brass-plate economy than it has been in the past. This will need further exploration in Committee.
Viscount Trenchard (Con)
My Lords, I declare my interests as stated in the register. I too congratulate my noble friend Lord Hammond of Runnymede on his excellent and entertaining maiden speech, and the noble Baroness, Lady Shafik, on her most inspirational one. I thank my noble friend the Minister for introducing this important Bill, which will help to ensure that the City of London remains the pre-eminent global financial centre. For more than 100 years the City has rightly enjoyed a reputation as the safest centre in the world in which to conduct financial business, and the old maxim “My word is my bond” continues to reflect the high level of trust accorded to financial firms operating in this country.
Many commentators have lamented the fact that the financial services chapters of the trade and co-operation agreement with the EU are thin. This partly reflects the fact that the EU’s single market in financial services is only partially developed, although in recent years the European Commission has made progress in its drive to harmonise financial regulation across the bloc.
We have certainly influenced the development and formulation of this regulation, but we have had to work within the EU’s Napoleonic-style framework. We therefore have cumbersome and bureaucratic rulebooks, which explains why the fastest-growing departments of banks and other regulated companies have been compliance and legal departments, rather than those devoted to innovation and the development of new products, and those that actually conduct business and earn revenues.
Sometimes we have been overruled by excessively cautious Commission technocrats and by the European regulators, especially since the pendulum swung too far towards tighter regulation after the financial markets crash of 2008. I shall give just two examples of this: first, the whole of the AIFMD, which is disproportionate and expensive for many smaller asset management companies, driving some offshore and forcing others to merge or discontinue operations. The second example is Solvency II, which prescribes excessive capital requirements for UK insurers. The Treasury has said that it intends to change the rules to make them less prescriptive and less complex, and to increase the ability of regulators to apply supervisory judgment. Can the Minister confirm that this Bill will enable that to happen?
Miles Celic, of TheCityUK, told the EU Services Sub-Committee, on which I am privileged to serve under the excellent chairmanship of the noble Baroness, Lady Donaghy, that negotiations on post-Brexit financial services arrangements are being driven by political concerns rather than regulatory or legal issues, and that equivalence is becoming increasingly politicised. Does the Minister expect that the MoU will be completed by the end of March, and does he expect the EU to have made any further equivalence assessments by that time?
I am not surprised that the EU is unwilling to grant equivalence decisions in many areas, because we have rightly made it clear that we intend to diverge from the EU model. I would encourage the Government to be bold and to develop a plan to move in an orderly manner to a completely different regulatory system, based on principles rather than prescriptive statutory regulations.
I was privileged to serve on the Joint Committee on Financial Services and Markets, chaired by the noble Lord, Lord Burns, in 1999. We had much discussion on whether the FSA should have a competitiveness objective. It was ultimately decided that the need to minimise adverse effects on competition should be supported merely by a principle, listed fifth out of five. The PRA today has a secondary competition objective, which is subordinate to its two primary objectives—to promote the safety and soundness of the firms it regulates, and to protect holders of insurance policies.
The FCA has been charged, since 2015, as the third of three operational objectives, with the promotion of effective competition in the interests of consumers. Does my noble friend think that the promotion of competitiveness of financial markets is too low down the priority list? Ultimately, as Adam Smith argued, the invisible hand of competition, and the eradication of anti-competitive behaviour, will surely accord with consumers’ best interests.
The Treasury’s phase 2 consultation paper on the future regulatory framework review suggests that the Government are responding positively to powerful evidence from the coalface, but I question any acceptance of the argument that an excessive concern for competitiveness contributed to the financial crisis. I believe that both regulators should have a clear, unqualified objective to promote the international competitiveness of financial markets. This should be an important part of the Government’s agenda for global Britain. The Minister told your Lordships that the Bill has three objectives, but none of them is competitiveness. Does he not agree that the Bill’s second objective, which is described as
“openness between the UK and international markets”,
should be “the competitiveness of the UK’s international markets”? My noble friend Lord Hill of Oareford’s review of the Stock Exchange’s listing rules should also help in this regard.
Clause 36 is especially welcome in handing the damaging PRIIPs regulation and the troublesome KIDs to the regulators. They should also deal with the corresponding parts of MiFID II. I greatly welcome the direction of travel of the future regulatory framework. It is, however, necessary to make arrangements for the proper accountability to Parliament of the regulators before they start to exercise their new powers. Can the Minister tell the House how the Government intend that that should be done? I look forward to other noble Lords’ contributions and to my noble friend’s reply.
Lord Bruce of Bennachie (LD) [V]
My Lords, I join other noble Lords in congratulating both the noble Lord, Lord Hammond, and the noble Baroness, Lady Shafik, on their maiden speeches. The noble Lord, Lord Hammond, showed the insight and intelligence that has characterised his approach to the challenges of the past few years. I particularly welcome the noble Baroness, Lady Shafik, to our House and fondly remember working with her when she was Permanent Secretary at DfID and deputy managing director of IMF and I was chair of the International Development Committee. I look forward to hearing more from her in the future. I am sure her contributions will always be well received.
There is no doubt that as a member of the EU the UK provided the leadership in financial services regulation because of the leading role of the City of London, which was the main capital and euro exchange market for the EU and beyond. But how UK financial services will fare from now is debated. It is argued, I suggest with justification, that the concentration of expertise, innovation and flexibility that characterises UK financial services will ensure that it continues to play a leading role. However, it will be challenging, for how will it maintain its pre-eminence if EU business ebbs away? That means servicing the EU financial services market from the UK and enabling firms and individuals located outside the UK to access its services through the UK.
Scale and expertise have been key factors in the UK’s pre-eminence but, as many people have observed, other centres will seek to pick up business from London, and the scale of New York may enable it to consolidate top spot. I have no doubt that the larger players in the sector will look after themselves, and that will not necessarily be to the benefit of UK plc. It has been said that the feared exit of jobs has not happened on any scale—to which the answer has to be, “Yet”. Without equivalence in key sectors, businesses and jobs will migrate—not that thousands of UK-based personnel will necessarily leave, but jobs that would have been created here will be created in other EU centres, such as Dublin, Amsterdam, Frankfurt, Paris and Malta. It will take time and the key question is, during that time, how will the UK develop to maintain its world-leading role and will the Bill help or hinder that process?
Having served in former times on the House of Commons Treasury Select Committee, and until recently on the House’s Financial Services Sub-Committee, I am well aware of the importance of effective financial regulation and scrutiny. The light-touch approach of the Labour Government contributed directly to the financial crash of 2008 and the blurred separation, or lack of it, between retail and investment banking brought the economy to its knees and threatened the savings of millions. Let us hope that the Bill does not open the door to too light a touch or to cavalier regulation to promote competition and attract business.
Financial regulation is a matter of balance. If it is too tight, it may stifle innovation, but if it is too loose, it may lead to financial disaster and reputational destruction. In the EU, we not only had the benefit of the scrutiny committee of the UK Parliament, but the substantial resources of the European Parliament, in which British MPs played a key role, not least my noble friend Lady Bowles of Berkhamsted. So what assurance can the Minister give that under this Bill regulation will be transparent and subject to effective scrutiny? Will the Government support the creation of a dedicated financial services committee with the resources to staff it effectively? If they do not, any financial failings in future will lie squarely at the Government’s door.
Speaking as I do on Scottish affairs for the Liberal Democrats, I remind the House of the importance of the financial services sector to the economy in Scotland. It is valued at £13 billion—or 9.4% of Scotland’s gross value added—employing between 150,000 and 160,000 people in more than 2,000 businesses. Particularly, it accounts for 24% of UK jobs in life assurance and 13% of all UK banking jobs. While Edinburgh has the greatest concentration, Glasgow, Aberdeen and Perth also record substantial employment in this sector.
Scottish Financial Enterprise, which represents the sector, is bullish about the future, claiming that Scotland is a sought-after location for delivering financial services. Without Brexit, there would certainly seem no reason why the sector should not continue to grow, as much of it delivers cost effectively and reputationally to the domestic market. However, Betsy Williamson, the chief executive specialist recruiter for the sector’s Core-Asset Consulting, says recruitment to the sector has dropped and that key jobs are being relocated or created outside of the UK. Aberdeen Standard has opened an office in Dublin and transferred £17 billion of assets there, and no doubt others are considering or doing the same. Today’s FT shows how many goods-based businesses are struggling with red tape and either deciding to abandon exporting to the EU as uneconomic or planning to transfer some of their activities to the EU.
Financial services are evaluating what is going to happen to them. Some have already moved, and others will. If we get this wrong, the trickle could become a flood. So even if you were bullish about the UK’s prospects, we are going to have to run harder to replace the revenue and jobs that are leaving and then try to grow new opportunities. Will there be enough scope for new businesses to replace these jobs and then add net growth? Will this Bill help or hinder? Will our regulation be lighter or tighter than the EU? Either way, will it be transparent enough and subject to adequate scrutiny to maintain resilience and confidence in the system? A lot is riding on this Bill. When people say it is technical, they mean that most people do not understand it, and that is exactly when things can go wrong.
Baroness Altmann (Con) [V]
My Lords, first I congratulate my noble friend Lord Hammond of Runnymede on his brilliant maiden speech. I look forward very much to his future contributions to our debates. I am delighted that he has joined us and can bring us his tremendous expertise as a brilliant addition to your Lordships’ House—as indeed is the noble Baroness, Lady Shafik. I would also like to welcome her, particularly as a colleague from the London School of Economics, where I am currently visiting professor in practice and emeritus governor. We have been privileged to hear two such excellent maiden speeches this afternoon.
Like so many others, I warmly welcome the trade and co-operation agreement reached for goods a few weeks ago as we left the transition period. But this Bill is of significant importance for our economy, as no deal was agreed for financial services—which accounts for such a significant part of our economy. I appreciate the Government’s stated intention to secure a memorandum of understanding on financial services with the EU by, I believe, March 2021, and I ask my noble friend how this is progressing. Have any decisions been reached about areas in which it will be considered appropriate to retain regulatory alignment? What negotiations are ongoing with stakeholders in connection with this? I also believe that the Treasury has recently launched a review of Solvency II, so I ask my noble friend when this review and the wider review of financial services will publish findings and conclusions.
I am particularly interested in the potential for reforms of Solvency II rules, which could pose an attractive opportunity for UK firms which provide long-term savings, investment products and insurances to free them from the straitjacket imposed by Solvency II. It was always rather less appropriate for UK firms than for those on the continent, which has a much more bond-oriented traditional financial culture, rather than the UK approach, which has always more readily embraced and understood the benefits of equity investment, early stage in venture capital firms, and other diversified asset classes with higher expected return potential, and can have greater impact on supporting or boosting economic growth.
Freeing these financial firms to invest more in green assets, infrastructure and low-carbon housing projects will help, as we are aiming to move towards a net-zero economy. I support the words of the noble Baroness, Lady Cousins, and the noble Lord, Lord Reid, that financial services regulations and risk assessments should take account of environmental risks and means of mitigation.
Clearly, the Treasury would like to move towards a more principles-based approach from a rules-based approach. But, as other noble Lords have said, this opens many new challenges and risks. Could my noble friend, in support of the words of my noble friend Lord Sharpe, say what analysis has been done to assess whether our regulators are equipped to cope with the significant transfer of power this Bill’s measures would involve?
My noble friend, in his excellent introduction to this Bill, stated that the Government believe that regulators have the technical expertise and market understanding necessary to exercise the new powers and will be guided by the FSMA financial objectives. The noble Baroness, Lady Bowles, explained the serious shortcomings of the FSMA, and I share her concerns.
In addition, it has long seemed to me that the FCA has either insufficient powers or insufficient capacity to protect consumers against poor practice and products or services that have too often proved damaging to customers, who find themselves without protection and, in certain cases, without recourse to compensation. I urge the Government, for the future of financial services and consumer confidence in this industry, to require greater emphasis on proactive regulation, which anticipates problems, rather than try to clear up failures after the event.
Could my noble friend explain to the House whether he believes regulators will have enhanced accountability to Parliament, as called for by the noble Lord, Lord Sharkey, the noble Baroness, Lady Hayman, and others? To what extent does he believe they will have greater scrutiny to help legislators to assess whether financial services operate as safely as possible?
Of course, the aims of supporting financial providers, financial stability or firm competitiveness are important, as set out in this Bill. However, I have particular concerns about consumer protection, which is so directly important to ordinary individuals and families across the population. I echo the words of the noble Baroness, Lady Coussins, that we should take the opportunity to help those stuck with unmanageable debt, particularly in light of the Covid pandemic. I support the debt respite scheme rollout and continuation, as well as calls for this Bill to include measures that will impose far more effective controls on high-cost credit promotions. I was interested in the comments of the noble Lord, Lord Stevenson, about bills of sale. I also support the aims of the help to save initiative.
Finally, I add my voice to those calling for much greater emphasis on green issues in financial services regulation and for proper parliamentary scrutiny of this critical issue to protect our planet and mitigate the impacts of climate change.
Baroness Noakes (Con)
My Lords, I congratulate my noble friend Lord Hammond of Runnymede and the noble Baroness, Lady Shafik, on their excellent maiden speeches. I look forward to their future contributions in your Lordships’ House.
For the last nine years, I have largely sat on the sidelines on financial services legislation, as I was on the board of a major bank. Now liberated from that, I am enjoying putting my financial services legislation anorak back on. I remind the House of my financial interests, as declared in the register.
The Government have described this Bill as a portfolio Bill, which is a fancy name for what is not much more than a motley collection of topics that have little in common apart from fitting under a financial services umbrella. This Bill certainly gives us no strategic insights into the future of financial services. That said, I broadly welcome this Bill, as it deals with a number of items in a sensible, pragmatic way.
Financial services legislation is very complex. Since FiSMA was enacted over 20 years ago, there have been numerous revisions, some of which, such as the Financial Services Act 2012, were significant. Huge amounts of EU law have been imported and we can expect more changes as we embark upon our post-Brexit life. We are getting close to consolidation being essential if our financial services legislation is to be accessible. Can the Minister say whether the Government accept the need for consolidation?
My principal reservation about this Bill concerns the considerable new rule-making powers that are being conferred on the PRA and the FCA, and I agree with much of what other noble Lords have already said on this. I find it a bit odd that the Government have chosen to go down this route ahead of the outcome of the consultation on the future regulatory framework review, which is still open. This looks like another example of the Treasury mind being closed to challenge through consultation. We are somewhat used to this, but familiarity does not make it acceptable.
More substantively, the Government have made a good case for the rules to be set by the people with the best technical knowledge, but they have not, I am afraid, made a case for the quality or quantity of accountability alongside that. In particular, I am unpersuaded that adding a list of “have regards” against which the PRA or FCA must report when they consult on rules amounts to a significant addition to the accountability framework. The House will know that I have been steadfast in my commitment to our exit from the EU, but it was never my understanding that taking back control of our laws would mean less parliamentary control and oversight than before. The Bill proposes to hand significant rule-making powers to the PRA and the FCA without any noticeable Parliamentary oversight. Ad hoc scrutiny through the existing committees in both Houses is no substitute for regular and structured parliamentary involvement. I hope that the Government will engage with those of us who want to find a practical solution to this accountability deficit.
Before leaving this topic, I would say that we need to look carefully at the new “have regards” when we get to Committee. I share the exciting vision of the future prospects for financial services that my right honourable friend the Chancellor of the Exchequer outlined in his November statement, but I do not see that fully reflected in the Bill. Like many noble Lords who have spoken today, I believe that international competitiveness needs to be firmly embedded into our regulatory arrangements and the statutes that govern that. I particularly welcome my noble friend Lord Hammond’s enthusiasm for this, which goes a long way, I have to say, towards offsetting his lack of enthusiasm for Brexit in his former life.
Finally, on tough legacy contracts that use Libor, I completely support the powers in Clauses 14 and 15 that allow the FCA to make arrangements for legacy contracts. It is good that the Government have accepted the very real practical issues involved in dealing with a relatively small number of debt instruments. There are, however, two outstanding issues relating to continuity of contract and safe harbour. I know the Treasury is well aware of these issues. I will save arguing the detail of them until we get to Committee, but I expect to table amendments aimed at giving the UK equivalent protections to those being drafted for the US market.
Financial services are a major part of our economy and we must allow this sector to flourish now that we are unshackled from the EU. Strong regulation will remain essential but we need all players, regulators and industry alike, to build the UK as the undisputed leading global financial centre. I hope that the House will remember that as we scrutinise the Bill through its remaining stages.
Baroness Sheehan (LD) [V]
My Lords, I congratulate the noble Lord, Lord Hammond, and the noble Baroness, Lady Shafik, on two of the most enjoyable maiden speeches that I have heard. I look forward to their future contributions in the House.
My contribution to today’s debate will very much reflect the views of the noble Baroness, Lady Hayman, my noble friend Lord Oates and a couple of other noble Lords who have mentioned climate change. Just yesterday we heard of an ingenious global survey carried out by a UN agency, the UNDP, to gauge opinion from around the world on climate change. The findings were really quite fascinating. The first thing to note is that by placing polls in mobile gaming networks the UNDP was able to get over 500,000 youngsters under 18 to take part. They are the ones who will have to live with the consequences of our action—or indeed inaction—today, and therefore their voices and opinions must be heard, especially by us here in the UK, who, at this crucial juncture of make-or-break climate policy, hold the leadership of the biggest opportunity, in COP 26, to steer the global tanker towards a clearer, greener horizon.
In this biggest-ever climate poll, almost two-thirds of the over 1.2 million people surveyed worldwide said that climate change is a global emergency and urged our leaders to greater action to address the crisis in all sectors. For instance, in eight of the 10 surveyed countries with the highest emissions from the power sector, the majority backed more renewable energy; in four of the five countries with the highest emissions from land use change, the majority supported conserving forests and land; and nine out of 10 of the countries with the most urbanised populations backed more use of clean electric cars and buses and bicycles.
Britain, as it reshapes its investment and legislative landscape post Brexit, in the same year in which it hosts the seminal COP 26 climate summit, must embrace its mantle of climate leadership. Therefore every Act of Parliament dated 2021 must acknowledge somewhere within its makeup that we recognise the importance of our actions today for the generations that will follow us. Environmental, social and governance—ESG— considerations must be pervasive through all Bills, especially the one that underpins our economic and financial well-being and stability and which will define the big future investment decisions that will affect us all for decades to come.
The sad fact is that, despite an ever-increasing number of commitments from banks and other financial sector actors to align their activities with the Paris agreement, recent research has found that, for example, lending to fossil-fuel-linked investments by 35 of the biggest global banks continues to rise: $736 billion in 2019, up from $700 billion the year before. The movement is in the wrong direction.
Part of the reason why financial institutions are not moving fast enough to help to prevent catastrophic climate change is that regulators and policy-making departments do not sufficiently consider climate and environmental impacts. For example, in the Treasury’s impact assessment for the Bill before us today, greenhouse gas impacts are listed as “not applicable” even though significant changes to how investment funds behave, the centrepiece of the Bill, are bound to have such impacts. That is unacceptable.
I will be lending my support to amendments working towards ensuring that regulations and financial sector policy-makers take climate change, our natural capital and the UK’s international commitments on these issues into account when setting regulations and making policy. Of course a stronger indication of government policy intent towards meeting their net-zero target would be the imposition of a green capital requirement, a move that I would welcome, as I would a requirement for the Government to review the impact of the Bill on meeting the Paris agreement commitments. I look forward to seeing those amendments.
Lord Garnier (Con) (V)
My Lords, this is a lengthy Bill, and although in some respects it is politically uncontroversial, there are many points of technical detail that the House will want to scrutinise closely. I can think of no better people to assist in our deliberations on the Bill than the two maiden speakers. My noble friend Lord Hammond of Runnymede made a superb speech. I hope that, having briefly sipped from the glass of independence in 2019 after nine years in the Cabinet, he will not lose the habit of free thinking, even though he has retaken the Conservative Party Whip. The noble Baroness, Lady Shafik, also made her maiden speech today. Her contribution to the study and practice of economics in a whole host of financial and academic institutions is inspiring, so I look forward to learning a good deal from her, as well as from my noble friend, in the future.
I am intervening in this debate to highlight a matter that is not in the Bill, but it ought to be. It is a subject that the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Rooker, have touched on, and I gather that my noble friend Lord Hodgson of Astley Abbots may also speak about; namely, the need to expand the criminal law concept of failure to prevent crime, not least corporate financial crime. I have been thinking about the law on financial crime since the 2008 financial crash. I was the shadow Attorney-General for two years before the coalition Government came into office, and then the Solicitor-General in government. I developed the deferred prosecution agreement, or DPA regime. It was enacted through the Crime and Courts Act 2013. It is a regime that pragmatically and justly deals with corporate financial crime under the supervision of the courts. I will not go into the detail of the system now but, if I may say so, it works. I declare an interest not only as the Minister who introduced the system into this jurisdiction, but also as a practising barrister who, now long out of Government, appears in DPA cases.
DPAs are not, however, the end of the story. Financial crime is often thought of as the crime that does no real harm: no one gets killed, no bones are broken and there is no blood on the carpet. Equally, corporate offending is sometimes hard to visualise. But corporate crime and financial crime both cause great harm to people, to communities, to the economy and to our national reputation as a safe place to do business. Both are all too common and need to be investigated and dealt with effectively by the public authorities here and abroad. Financial crime is often, by the very nature of modern financial services, both international in its scope and committed electronically through corporate structures, albeit with a human mind and will behind it.
I hope, with other noble Lords, to expand on this theme in Committee, but for present purposes I shall say only this: Section 7 of the Bribery Act 2010 creates a corporate offence of failing to prevent bribery. It has been deployed successfully on several occasions and provides a model which can and should be replicated in other areas of financial crime. Furthermore, the Criminal Finances Act 2017 introduced corporate criminal offences of failure to prevent criminal facilitation of tax evasion. I suggest we should by this Bill expand the failure to prevent regime to cover at least some of the 50 or so financial or economic crimes that are available to be dealt with by DPAs listed in Schedule 17 to the Crime and Courts Act 2013.
Finally, we must reform the law relating to corporate criminal liability. The noble Lord, Lord Hendy, is right and I profoundly agree with him. I have been writing and speaking about the need to do this for years. The concept of the directing mind and will as the basis for corporate criminal liability, which the Americans abandoned before the First World War, worked for the small family businesses of the 19th century, but is now long outdated. Today, companies can operate in many different countries with national, regional and global boards and with hundreds of thousands of employees engaging in multi-jurisdictional trade in goods and services. Locating the directing mind and will of these vast conglomerates is difficult, if not impossible, and the current law does not reflect the reality of modern business life. It is an affront to common sense and justice. As in the United States, we need to introduce vicarious liability into our corporate criminal law.
Lord Desai (Non-Afl)
My Lords, first, I apologise for being slightly late when the noble Lord had started presenting the Bill. It is my good luck to be able to congratulate the noble Lord, Lord Hammond. I briefly knew him when he was a Foreign Office Minister, and he gave me a very nice breakfast the day we unveiled the statue of Mahatma Gandhi in Parliament Square. I do remember that. Of course, I also congratulate the noble Baroness, Lady Shafik, who is director of the London School of Economics. As I am an emeritus professor, she is my boss, so I welcome her.
I was also, as the noble Baroness, Lady Falkner of Margravine, said, a member of the EU Financial Affairs Sub-Committee, and I have been through some of this in an earlier phase. I remember saying to some City witnesses that the City should not think it is popular in the country. When push comes to shove, the Government will go for fishermen, not the City. I said fishermen, but there are others to which that would apply. And I think the Government did go for the fishermen, not the City, because the City is not popular in the country.
We may say proud things about the City, but what has struck me—I state this observation—is that in the Bill, we have missed the chance, as many other noble Lords have said, to tighten up regulatory structures in the City. I was alarmed when I saw how much power the FCA is going to have. The FCA is not a very efficient regulatory institution.
Many noble Lords have mentioned the LCF case, and I think what had happened at LCF was known, and it was a scandal because lots of ordinary people were deprived by that scheme. I am sorry to say this, but even when it was known that this had happened, the head of the FCA was promoted. I know he was printing money for the Government, but I still think it does not look good, especially if we are going to establish a global reputation. If we are going to be competitive in the world, we must have a much better reputation for our regulatory institutions than we have.
I have been in your Lordships’ House for a long time. We started with the Baring Brothers, the BCCI and all sorts of other scandals, and we do slip up. Now we are on our own and we have to compete globally, we will have to really tighten up and not be smug about it. I hope this Bill gets amended or something else happens to get a better regulatory structure, better rules for the FCA, better accountability to Parliament and proper punishment for people failing on the job.
Lord Hodgson of Astley Abbotts (Con) [V]
My Lords, I am afraid the wonders of modern technology are such that I am confined to a landline today, but that has not prevented me hearing two distinguished maiden speeches from my noble friend Lord Hammond of Runnymede and the noble Baroness, Lady Shafik, and I congratulate both of them. I also add my congratulations to the Minister on his explanation that this Bill was the first step in creating a regulatory framework designed to reinforce the UK’s position as a leading world financial centre and enable the UK to take advantage of our post-Brexit freedom of action.
In addition, as the Association of British Insurers pointed out in its briefing on the Bill, it also provides a good foundation for positive future co-operation with our European neighbours. As such, it has my enthusiastic support, but as the noble Lord, Lord Reid of Cardowan, pointed out in his speech, it is a Christmas tree Bill, and there are, inevitably, some decorations about which I am less enthusiastic, and there is at least one decoration that seems to be missing from the tree altogether.
Before I go any further, I draw the House’s attention to my entry in the register of interests, in particular that I chair a company that is regulated by the FCA. My foremost point concerns the culture we are trying to create with this Bill. What do I mean by culture? When the regulators, the FCA and others come to see you in the firm, they are very interested in what the culture of the firm is and what the prevailing attitudes of the senior management are; for example, the balance being struck between innovation and conservatism, the level of acceptance of financial and operational risk, the treatment of staff and so on. Up to now, a large measure of this culture has been dictated by the institutions of the EU. This, of course, will no longer be the case. I ask my noble friend: who is going to be responsible for establishing this future culture? How do the Government plan to assess the culture? How, if at all, would they plan to achieve changes to that culture? Last, but by no means least, as many other noble Lords have remarked, what role will Parliament have in that process? At first glance, there seems to be a considerable democratic deficit, as many noble Lords have said.
A good part of the Bill is devoted to improvements in the tightening up of the regulatory regime. Having participated in the proceedings on the Sanctions and Anti-Money Laundering Act 2018, I understand and support such changes, particularly where they reflect changes in business practice and business behaviour. However, all these measures come with a cost. That cost is borne not by the Government or by financial institutions but by the consumers, clients and investors. There is a need, as we introduce new regulations to deal with new circumstances, to step back and see what old regulations can be amended, or be dispensed with completely as being no longer effective.
As we sail into this brave new world, an important issue will be the extent to which the Government are able to obtain reciprocity or equivalence from the EU. It will be a matter of great interest to Parliament, this House, and indeed the country as a whole. I chair the Secondary Legislation Scrutiny Committee. When the committee considered the various interim regulations for the financial services sector, it was far from clear what, if any, reciprocity had been achieved. I was asked by the committee to write to the Minister John Glen about this, and I am afraid that his response, dated 7 January, which I invite my noble friend to read, was hardly a model of clarity. The Government declined to accept new Clause 8 in the other place, which required the Government to report on equivalence. If this is still the Government’s considered position, they will need to do better than Mr Glen’s letter.
I turn finally to a decoration that I think is missing from the tree altogether. I served as a member of the post-legislative scrutiny committee on the Bribery Act. Our investigation revealed a number of concerns. The first was the difference in treatment of smaller companies as opposed to larger companies as a consequence of the application of the directing mind principle—this was referred to by the noble Lord, Lord Hendy, and my noble and learned friend Lord Garnier. The second concern was the often inordinate time taken over investigations, and, finally, the strange position that the failure to prevent offences applied only to bribery and tax cases and not to corporate crime generally.
I am aware that, in the other place, the Government declined to accept a widening amendment, but I think that the noble Lord, Lord Rooker, the noble Baroness, Lady Bowles, my noble and learned friend Lord Garnier and I will wish to explore this anomaly and return to this question in Committee.
To conclude, this is an exciting time for this country and for our financial services sector. Getting the right foundations in place quickly will be of critical importance, which is why this Bill has my support in principle.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, I join the House in universally welcoming our two outstanding maiden speakers. Given that the noble Lord, Lord Hammond of Runnymede, discovered a long-hidden rebellious streak in the other place, and that his title has links to the Magna Carta, I hope that we will be seeing even more rebellion on the Benches opposite with his arrival. I also welcome the noble Baroness, Lady Shafik, who is clearly a powerful new voice on our Cross Benches. I was very glad to hear her mention green finance. I hope we will be hearing a lot more from her on that, as we just powerfully heard about those issues from the noble Baroness, Lady Sheehan. I will, as you might expect, be backing many of the amendments to which the noble Baroness, Lady Sheehan, referred.
However, on the Bill, I must begin by thanking Macmillan Cancer Support for its extremely useful briefing. I shall take its conclusions and extend them far more broadly than it ventured to do. Macmillan calls for an amendment to the Bill requiring organisations to have a statutory duty of care for customers. The charity suggests that that is the best way to ensure that financial service providers take a pre-emptive approach to ensure that they act in the best interests of their customers.
As you might expect, Macmillan focuses on the financial difficulties of people with cancer but also notes that the Financial Conduct Authority concludes that one in two people will become financially vulnerable at some point in their lives. I suggest that, in a complex and fast-changing world, overloaded with pressures on time and attention, with so many people stressed by the struggle for mere survival and the fear of rampant insecurity, the sensible approach would be for everyone to be treated as vulnerable and to acknowledge that our whole society is acutely vulnerable. If we created a system that works for the most vulnerable, it would be one that will work securely, resiliently and safely for everyone.
We know that our current system is not working for many at an individual level. Just look at the practical and topical example of the disastrous performance of the insurance sector when it came to business interruption insurance for small businesses in relation to Covid-19. The financial sector is utterly failing at a structural level to meet the collective needs of our whole society, acutely vulnerable as the Covid-19 pandemic has shown us to be. A system that works best for everyone would involve a financial sector that it a utility: a provision of essential services for the real economy—the economy that feeds us, builds our shelter, clothes us and provides the other essentials of life.
Instead, following decades of financialisation of everything from the care sector to the so-called water industry, we have a financial sector as parasite, sucking funds out of the real economy—all too often to tax havens—and loading essential provisions and services with unsustainable debt. If noble Lords think that I am being radical here, I invite them to read the extensive coverage in the Financial Times of the impact of financial engineering on the water companies.
We are more than a dozen years on from the 2008 financial crash, when the cash machines nearly stopped working. In the age of Covid-19, we are surely more aware now of the need for resilience and stability in this age of shocks. Yet I note that an Oxford University Faculty of Law conference held in 2018 on financial regulation concluded:
“We are safer, but not as safe as we should and could be.”
And that was just the thinking in the financial sector’s own terms.
I listened carefully to the Minister’s typically detailed and careful introduction and heard quite a bit about limiting risk. However, I did not hear the words “climate” or “nature” once. But we know that we need a financial sector that does not continue to fund the trashing of the planet and societies, supply funds to fossil fuel operations that are destroying the planet, pour money into the destruction of the rainforest, stuff the oceans with plastic or spread poverty and inequality through funding sweatshops and outright slave labour.
On 25 January, the US Federal Reserve and the European Central Bank simultaneously said that they would make climate considerations a central part of finance, the importance of which the noble Baroness, Lady Hayman, highlighted. It appears that we are not world-leading but world-trailing, yet again.
We are, of course, world-leading in dirty money, as explained earlier in considerable forensic detail by the noble Lord, Sikka. The issue was also mentioned by a number of Members of the House in an earlier question session on our relationship with Russia. We are a major global centre of corruption. The City is an Augean stables and the Bill is clearly sparing in its distribution of shovels. I give the House notice that I intend to support a proposed amendment to create a new corporate criminal offence for companies or bodies regulated by the FCA of failing to prevent economic crime. I also look forward to working with the noble Lord, Lord Hendy, on the issues of liability that he raised.
In summary, we obviously need a Financial Services Act, but the Bill is nothing like what we need. We are seeing increasing numbers of communities around the world understand that the model of economy, society and finance needed is one that allows us to live within the doughnut, as the saying goes—in the essential space that respects planetary limits while meeting human needs, thereby ensuring that everyone is treated with respect and given dignity, as defined by the economist Kate Raworth in her book Doughnut Economics. We need a Financial Services Act that sets out how our financial sector can meet the need to do that—a very differently structured sector that takes care of all our needs, instead of risking our security and future. We are in an emergency state in 2021. Your Lordships’ House has a responsibility to act to transform our planet-trashing, poverty-creating financial sector, as the other place has very clearly failed to do.
Lord Leigh of Hurley (Con) [V]
My Lords, I refer your Lordships to my registered interests and extend a very warm welcome to my noble friend Lord Hammond of Runnymede. I have sat through many of his speeches, including the famous one in which he described why “Spreadsheet Phil” is inappropriate, but this was exemplary. His maiden speech and that of the noble Baroness, Lady Shafik, were excellent.
The final EU withdrawal agreement was a success, but, as has been discussed in this House and elsewhere, it was light on financial services. Mark Carney, the former Governor of the Bank of England, said this time last year that the City of London must not be a “rule-taker” after Brexit, effectively outsourcing the regulation and supervision of our global financial centre. Therefore, while adopting the EU rulebook in the first instance has delivered much-needed continuity and stability, we must now think about what comes next. That must surely be an approach that sees the UK continue to set global standards in prudential regulation and consumer protection, without losing sight of our broader objectives of innovation and competition.
There are three initiatives worthy of mention that can reinforce the initial steps taken in the Bill. The first is the future regulatory framework review. The Government’s response to this will give us the clearest indication yet of the vision for financial services post Brexit. I note the stress placed on equivalence of outcome. This should give us more room for interpretation, and indeed the opportunity to revisit many areas of law which were effectively gold-plated into UK law when we were EU members.
The second is the productive finance review. This concerns the means to unlock more capital to increase productive capacity in the real economy. I mention it here because it should also look at the impact of regulation on institutional capital flows into key areas such as infrastructure and technology. EU directives IORP and Solvency II limit such capital flows with prohibitive capital charges and should be looked at immediately. There is £6 trillion in UK private pensions alone that could be unlocked for more productive purposes.
The third is the Kalifa review into UK fintech. The Chancellor and my noble friend Lord Gadhia recently spoke of the need to see a second big bang in the City. Fintech is a key part of that. I hope the review proposes reforms as transformational as the first big bang was for the City.
Turning to the specifics of the Bill, there are commendable measures that will advance the competitiveness of financial services within our current regulatory envelope. Asset management remains our most globally significant subsector. Therefore, the measures to update the regime for third-country investment firms is to be commended. Similarly, introducing a more proportionate prudential approach to regulating investment firms will lower their costs of doing business, and better reflect underlying risk. On the other side of the coin, there are important measures on supervision and consumer protection. In particular, I commend the review that former FCA director Chris Woolard is leading on “buy now, pay later” lenders, where there is mounting evidence of bad debt, mis-selling and very bad practice. However, on FCA enforcement, there is a balance to be struck, and this Bill is, I am afraid, another opportunity missed to strike that balance. I am referring to the FSCS levy, FCA enforcement and the endless ex-post powers of the Financial Ombudsman Service.
The FSCS levy is due to soar by a third, to over £1 billion, with one of the reasons given being the cost of compensating SIPP consumers. However, there is mounting evidence that the FOS has been overreaching itself in its decisions against those very same SIPP providers. For example, many SIPP providers provide execution-only services on behalf of a client—the clue in the phrase “self-invested”—and yet claims of mis-selling are upheld, even where no financial advice is proffered and no advisory permissions are even held.
Frankly, this has the appearance of a racket. Blessed by the FCA, the FOS adjudicates, the FSCS is jacked up accordingly, the FS industry is forced to pay, driving some literally to bankruptcy, and the money flows seamlessly back to the FCA. It is a system with no accountability before the law, and no right of appeal. In short, it is unjust, and at a time when the broader powers of the FCA are being debated. Will the Minister consent to revisiting this important issue? It is a shame that the Bill does not seek to rebalance the relationship between the FCA and FOS and bring some common sense into how FOS operates.
Members of this House might recall that I have been banging on about FOS for some time, and I have had the pleasure of meeting the City Minister to discuss it. Well, something fell into my lap this summer. I received an unsolicited credit card from a company called NewDay. I had not asked for a credit card. A day or so later, a neighbour spotted someone rummaging in my outdoor letter box. It was a scam. Someone had ordered a card in my name and was seeking to retrieve the PIN subsequently sent in the post. A simple remedy would be to require credit card recipients to confirm that they had ordered one before it is sent to them. I suggested that to the company; it refused, so I complained to the FOS and it took six months for the FOS to tell me it could not fix the issue as the FCA handbook, which, as we know, governs FOS, states that as I was not yet a customer, I was not an eligible complainant under the FCA dispute resolution—rule 2.7.2, if you are interested—so it would take it no further and, as a result, others will now get scammed in this way.
That shows a dramatic shortage of common sense. Does the Minister agree that it is not clear that FOS is fit for purpose, and that the Bill provides us with an opportunity to ensure that FOS and the FCA do the job Parliament had envisaged, or to let us change the way FOS and the FCA operate?
Baroness Ritchie of Downpatrick (Non-Afl) [V]
My Lords, I take this opportunity to congratulate the two new Members of your Lordships’ House, the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent and thought-provoking maiden speeches.
Undoubtedly, the financial services sector is important to the City of London and to the UK. It is very much the engine that drives our economy. In the post-Brexit situation—I hasten to add that I did not favour or want Brexit—we need economic and financial stability and a strong means of financial regulation. That must be accompanied by consumer protection. I note that the Bill contains a new regulatory regime for investment firms, and thus provides the Financial Conduct Authority with additional powers to set rules for such firms, while also containing measures to make the FCA much more accountable.
One area I want to concentrate on—other noble Lords have referred to it this evening—is economic crime. We have all heard stories about individuals who have been fleeced by investment companies that were not properly registered, and therefore could not get the money they invested returned to them when problems occurred. Will the Minister and his colleagues bring forward amendments containing retrospective powers to help such individuals and ensure that such effective financial scams, otherwise known as economic crime, cannot happen in the future? I shall also refer to two other issues about protecting individuals, in relation to credit services and our environment.
I have been advised about some individuals in the UK who have invested money—pension funds—in Dolphin Trust, now known as the German Property Group. This organisation had its UK office in Hanover. It was an unregulated property investment scheme. Apparently, this company was supposed to use investors’ money to revamp derelict buildings in Germany into apartment blocks. Then, after several years, investors would receive their money back with a hefty interest rate. They were told to invest in this company and that it was safe to do so because their money was aligned to a certain property so they would not lose out. I have talked to one family who did this and they have lost everything. There are over 1,300 individuals, throughout the UK, owed in excess of £165 million. Problems emerged when they found out that the properties did not exist, and the company was not even registered.
Will the Minister indicate whether the new regulatory regime for investment firms will prevent such actions happening? I doubt that it will. Will the new legislation have retrospective powers to ensure that companies such as the German Property Group are held legally and financially accountable to their investors for the malfeasances that have occurred? What protections can be offered by the FCA under the new provisions in terms of capital levels, liquidity, risk management processes and governance arrangements?
Other areas addressed in the other place included the need to ensure that buy now, pay later credit services are brought into the scope of the Financial Conduct Authority to protect people from spending more than they can afford. Many people in this net take out further debt to repay the initial credit. What legislative consumer protection can be afforded to these individuals? Will the Minister bring forward amendments in your Lordships’ House to that effect?
I am of the firm belief that the Financial Conduct Authority should have regard to the UK’s target of reaching net zero greenhouse gas emissions by 2050, particularly in the year when the UK will chair COP 26. This would help to support the overarching goal of a green economy and financial sector. I note that the Minister in the other place stated that climate change is an issue to which the regulator should have regard. What, therefore, is the Government’s exact position and what is their timeframe for bringing forward legislative change in this regard? Will they do it now, through amendments? If not, I know that other noble Lords will do so, and I will support them.
Lord Blackwell (Con) [V]
My Lords, as well as adding my congratulations on the two excellent maiden speeches, it is customary to start by declaring my interests. Since I retired as chairman of Lloyds Banking Group at the beginning of the year, I am pleased to say that, for the first time in many years, I can address the House with no active interests other than as an ordinary shareholder. With that freedom, I welcome all the measures in the Bill, but I will comment on two that are particularly important.
First, it is essential to help provide more certainty on Libor contracts at this stage. In his opening remarks, my noble friend gave mortgages as an example. While I welcome the measures in the Bill, do the Government believe that the measures that enable the FCA to replace Libor in benchmark contracts are sufficient to apply to mortgages and commercial loans? Might my noble friend also consider some kind of safe harbour for banks if they suffer litigation from clients as a result of FCA instructions?
Secondly, I welcome the enabling legislation for the Statutory Debt Repayment Plan scheme, but note that, in developing the regulations later this year, it will be important to ensure that all the customer’s debts can be looked at holistically, and that the proposed plan is offered to customers only where it is the right and best solution for their particular needs.
More broadly, as the Minister made clear, many of the measures in the Bill are to establish UK-based regulations to replace those previously enacted through the European Union. I welcome the principle the Bill establishes that, unlike EU regulations, the UK should keep the primary legislation limited to the overall framework for regulation, with the Treasury providing necessary secondary legislation, with the regulators then given freedom to apply that in proportionate and flexible rules.
As the noble Lord, Lord Butler, pointed out in respect of MiFID, experience has shown that attempting to legislate in detail on the regulation of financial services can create unintended anomalies that the regulators are then powerless to address. It also inhibits their freedom to shape rules to reflect varied industry circumstances, or to adapt to market innovation, and those companies that seek to innovate. So, I also welcome the Government’s ongoing review and consultation on the future regulatory framework, which is looking at going much further in transferring responsibility for detailed rule-making back to the PRA and FCA.
While there will be debate on the initial measures covered in the Bill, the point I want to focus on, like other noble Lords, is what is missing from it on the effective governance of the regulators in exercising those increased powers. I recognise these are matters that have been subject to consultation, but they are nevertheless germane to many of the delegated powers in this current legislation. As I said, I believe it is right to give the PRA and FCA the responsibility and powers to make, adapt and apply regulations to promote the stability of our financial markets and protect the interests of consumers within the framework of laws passed by Parliament. Between them they have the expertise to do that and, as with the Bank of England, we should expect them to undertake their role with an objective independence—independent, that is, of short-term political pressures.
I welcome the fact that this Bill also introduces, for the first time, the obligation on the FCA and PRA to consider the international standing of the UK investment and credit institutions in making their rules. Like my noble friends Lord Hunt and Lord Bridges, I believe that, post Brexit, it should be part of their formal objectives to promote a healthy UK industry that can compete successfully on the global stage. To do that, there may also need to be a greater requirement for them to ensure that the two regulators have complementary rule-making and supervision without, at this stage, seeking to recreate the single FCA.
In delegating those powers to the FCA and PRA, Parliament needs to ensure that there is an effective way to scrutinise their work and hold them to account for their actions. I do not believe that the Treasury Select Committee, while it has an important and critical role, is the right or adequate forum to provide that detailed and apolitical oversight. By contrast, having served in the past on a Joint Committee on rewriting tax laws, I believe that Joint Committees of both Houses can bring greater experience and expertise to bear in a more considered and less political environment.
So, I join the noble Baroness, Lady Falkner, in proposing, as a complement to this Bill, that Parliament establishes a new purpose-built Joint Committee that I would call the financial services regulatory oversight committee. It would be supported by appropriate technical experts whose role would be to provide detailed scrutiny of new regulations—I stress not to give ex ante approval, but simply to review them after the event. The committee could also take evidence from those in the industry on the implementation of financial regulations and any concerns that raised. If necessary, the committee could then have the power to propose statutory instruments to Parliament where amendments were required.
The Bill may or may not be the right place to introduce provision for this kind of oversight. I recognise that the Government’s consultation has only just closed, but I would welcome any early thoughts my noble friend can give on how the Government see this oversight issue being addressed and what their timetable is for doing so. I look forward to the Minister’s response.
Lord Lucas (Con) [V]
My Lords, I very much welcome this Bill. As the chair of the cross-industry Enforcement Law Review Group, I will concentrate very much on Clause 34, which I and many others welcome. I anticipate that there will be a number of amendments trying to get to the bottom of exactly how the Government see it operating, and I should be enormously grateful if the Minister could circulate to me the current draft of the regulations, so that we shall be talking to each other off the same hymn sheet, as it were, in Committee.
I very much encourage the Government to bring forward these regulations swiftly, and I encourage the Opposition to support the Government. There will be an obvious need for them as we come out of Covid, and I do not believe that, given the state of the debt advice industry, there is any quick perfectibility on offer. It would be far better to get something up and running, to review it pretty swiftly—perhaps after six months—and to produce a better version then and a better version a year or two after that. This is something that the industry will learn to work with, and we should aim at the start not for perfection but for something practical and effective.
Baroness McIntosh of Pickering (Con) [V]
I welcome the Bill and congratulate my noble friend on bringing it forward. I add my warm congratulations to my noble friend Lord Hammond of Runnymede. Being elected on the same day, I am glad to see another from the class of 1997 joining our Benches. I also give a very warm welcome to the noble Baroness, Lady Shafik, and I look forward to hearing both their contributions going forward.
I support all the objectives of this Bill, and I entirely endorse the contributions that the financial sector makes to the UK economy, not just in London but also Leeds and Edinburgh in particular. I will focus on some aspects in the current Bill that I would like to see strengthened as well as aspects that are not in it, which I hope to pursue in Committee.
I warmly welcome Clause 35 and the “Successor accounts for Help-to-Save savers”. Like the noble Baroness, Lady Bennett of Manor Castle, I have sympathy with the request and briefing from Macmillan, calling for support for cancer patients, who are a most vulnerable group in a particular time of need. When undergoing both diagnosis and subsequent treatment, they often enter a period where their financial circumstances are severely compromised. I believe that the FCA’s contention that the current principles are adequate needs to be qualified, and therefore I have some sympathy with the call for a statutory duty of care in this regard. I would very much welcome my noble friend’s response to that particular call.
I also hope that this Bill and its provisions will give the opportunity to review how the regulations, which came into force in 2012, on short selling are currently working. I believe that that is a particularly distasteful and immoral practice, and my noble friend may prefer to pursue this through international and global means. Therefore, I would be very interested to hear what discussions he and his colleagues at the Treasury have had within the context of the OECD and other international organisations. However, I believe that this would be a good opportunity to go back and revisit these regulations and see how they are operating. At worst, they can be very damaging to the economy and employment, leading to many people losing their businesses and livelihoods.
I turn to the question of green financing and the opportunity that this would give, in the context of the Bill, to benchmark all stocks against green credentials. For me, a particularly welcome recent move has been the ban on fracking in the United States.
I will quote the words of Mark Carney, who said when he launched his Green Horizon summit in November last year:
“Private finance will play a critical role in funding the initiatives and innovations of the private sector and helping companies realign their business models for net zero.”
I believe that the COP 26 climate change summit, which the UK is hosting in Glasgow in November, will be an ideal opportunity to ensure that the UK is at the forefront of green finance. I hope that, as the Bill before us today passes through its legislative stages, it will give us an opportunity to show that London, Edinburgh, Leeds and other financial centres in the UK are at the heart of green financing. I support the Bill and look forward to its passage through this House.
Lord Gadhia (Non-Afl) [V]
My Lords, I congratulate my noble friends Lord Hammond of Runnymede and Lady Shafik on their maiden speeches. Their choice of debate is especially appropriate, and the quality of their contributions demonstrates how much they will enrich your Lordships’ House. I look forward to their future active participation.
I turn to our main topic. I welcome this omnibus Financial Services Bill in the spirit in which it is intended: as an entrée to the main course that will follow once the Government have consulted on the future regulatory framework. We should therefore calibrate our expectations of the Bill accordingly and not attempt to boil the ocean. Instead we should keep our powder dry to tackle the more fundamental issue of the accountability framework between the Government, regulators and Parliament, with a potential role for an independent body, which I will come on to.
First, some personal context. I started my own career in financial services 30 years ago this year at a City merchant bank in the aftermath of the big bang. I have therefore seen my fair share of trials and tribulations over three decades. During this period the City—and financial services more broadly—has constantly reinvented itself, sometimes by choice and more often through necessity. So, if I bring a bias to this debate, it is as someone who has seen the financial services sector overcome its challenges to not just survive but thrive.
Apart perhaps from our life sciences sector, there are not many globally significant industries where the UK plays such a world-leading role. An effective regulatory framework is clearly one of the key ingredients to sustain this position. The financial crisis and now Brexit have forced us to re-evaluate the regulatory architecture in quick succession. The onshoring of powers from the EU has triggered an inevitable debate between those who would like to see the UK take full advantage of its new-found freedoms to simplify and reduce the burden of regulation and those who fear that we might embark on a race to the bottom, to the detriment of consumers and society. That debate is illusory. However much some of us might dream of radically streamlining regulation, we are simply not destined for a bonfire of rules. To quote Treasury Minister John Glen, speaking in the other place during its Second Reading debate,
“we have no intention of needlessly, ideologically or recklessly diverging from EU legislation. Instead, we will maintain existing regulations where they make sense for the financial services industry in this country.”—[Official Report, Commons, 9/11/20; col. 669.]
It is not surprising to hear that strong statement, since the UK has played an active role in shaping much of the EU legislation. It is therefore increasingly unbelievable for the EU to maintain that it is seeking assurances about our future intentions before making an equivalence decision. We should recognise that the equivalence process is being used as a political lever, not a technical determination. I therefore agree with Andrew Bailey’s sentiments, expressed in recent evidence to the Treasury Select Committee, that we should not hold our breath for a quick decision and should treat trade equivalence as a bonus if and when it comes.
We should also recognise that the EU is unusual in drawing up such detailed rules and incorporating them into legislation. This is not the norm around the world. Other jurisdictions rely more heavily on the expertise of independent regulators to translate legislative objectives into detailed rulebooks. Delegating responsibility for technical areas of financial regulation is necessary, but also brings important accountability and scrutiny issues.
This subject requires more than a six-minute speaking slot, so I shall make three brief points. First, we need to be strategic in the scope of powers we delegate and the risk of concentration—what Sir Paul Tucker, in his excellent and thoughtful book Unelected Power, calls an “over mighty citizen”. Another of his observations is the importance of having a clear objective that can be monitored. He warns against having three or four objectives in statute that are ranked equally and are vague, which is relevant to the new “have regard” clauses incorporated in the Bill. While I would hope we can manage primary and secondary objectives, we should consider this input from a respected former front-line practitioner.
Secondly, while we decide upon the new architecture, the show must go on and Parliament needs to have a role in the process. I suggest a relatively simple fix: the next set of remit letters from the Chancellor to the PRA and FCA should be published in draft form and offered for consultation and debate in both Houses, either in the Chamber or through Select Committees. It could also make sense to look at a Joint Committee of both Houses, drawing on the considerable expertise available across Parliament.
Thirdly, we need a more permanent body to help the Executive and Parliament scrutinise and streamline regulation more systematically. I suggest we look at creating an independent office for financial regulation, which draws on the examples of both the Office for Budget Responsibility and the Office of Tax Simplification and whose remit is a hybrid of the two. It would report annually on whether the statutory objectives of the financial regulators have been met and systematically review regulation to propose how it could be simplified. A continuous series of incremental improvements appear more feasible than a one-time reform package. The cumulative impact could be significant over time, and more enduring.
In conclusion, we must now deal with the world as it is, not as we would like it to be. If we can be as fleet of foot in financial regulation as we have been in vaccine procurement, then I am confident that the financial services sector can remain a strategic national asset, supporting jobs and prosperity. This Bill provides a start on that journey.
Lord Naseby (Con) [V]
My Lords, this is one of the key Bills of this Parliament. Thankfully it is in the hands of a team who we all respect, as does the country at large. I too welcome our two new colleagues, my noble friend Lord Hammond and the noble Baroness, Lady Shafik, and look forward to hearing them again.
Just by way of background, I have chaired two quoted companies and have chaired the Tunbridge Wells Equitable Friendly Society. I am a firm believer in mutuality and successfully piloted through the Private Member’s Bill that became the Mutuals’ Deferred Shares Act 2015. I also spent 12 years on the Public Accounts Committee in the other place.
Other speakers have covered a huge spectrum this afternoon and this evening, so I just want to mention, in the macro, three issues as regards the City. First, coming from the Public Accounts Committee, I think that scrutiny of regulation is absolutely vital. I have listened to a number of noble colleagues—my noble friend Lord Blackwell, in particular— and I agree on the need for a Joint Committee. I will not say any more than that; it seems to me absolutely fundamental.
Secondly, economic crime is an increasing market—if I may use that phrase. Thankfully, we have the City of London Corporation which has its own police authority; it is the national lead for economic crime and supports calls by industry bodies for increased funding to fight economic crime. Over a third of all crime is economic or cyber, but only 2% of total police resources are allocated to policing this type of crime. Frankly, we need to look at this very closely and find some increased resources.
Finally, on the macro side, I was talking to the remembrancer in the City, and the City of London Corporation is an enthusiastic supporter of the greening of the economy. The City of London Corporation supports work by the Green Finance Institute including, for example, the plan to launch the UK’s first sovereign green bond; work to identify and remove investment barriers to wide-scale decarbonisation of the UK’s heating; and work on the development of a market for financing net-zero carbon properties. As I said, colleagues have mentioned a great many other things about the City.
I also want to look at one macro challenge that I have known about for years: payday loans. Every family in the UK needs access to credit. Historically, the average working-class family has used what is called home-collected credit. This is not new; it has been used across the UK for well over a century. I first came across it in the 1960s, when I was a councillor and alderman in the London Borough of Islington, and more recently in Northampton. A customer takes out a small short-term cash loan and the repayments are collected by the company agents who visit the customer at home each week. One single charge for the credit covers everything: the interest, the home-collection service, the cost of bad debts, company overheads and so on. There are no additional or penalty charges. If a customer cannot pay, the term of the loan is simply extended and the customer does not pay a penny more. It is 100% flexible and forgiving. However, home-collected credit is now under threat and, if that threat materialises, society will lose something very important.
If that happens, it will simply be because we have regulatory indifference. The authorities—the FCA and the FOS—are currently flouting their statutory remit to decide each case on its own merits. Historically, the regulator had a sound understanding of the product and how it worked in harmony with the budgeting cycles of these customers. Customers who use this methodology borrow only three or four times a year to cover the usual family expenses—at Christmas, Easter, back-to-school times or whatever. Now, the FCA sees this annual pattern as problematic—as re-lending, rather than sensible budgeting. In doing so, it fails to differentiate between payday lending, which is extremely harmful, and home-collected credit, which is not. The FCA and Financial Ombudsman Service are targeting the exact same re-lending patterns on affordability grounds, and their judgments act as a magnet to dubious claims management companies, which are just piling in.
When we reach Committee, we need to look very long and hard at this area. We, as legislators, need to hold the FCA and the FOS to account, because millions of working-class consumers up and down the country will be badly affected if this system of home-collected credit, which has been running for decades—for over a century, as I said earlier—comes to an end. It works well and it must be protected. Somehow or other, we have to sort out the terrible payday lending organisations.
We have had a long day and I know that we are looking forward to hearing the Minister wind up.
Baroness Kramer (LD) [V]
My Lords, I declare my interests as set out in the register. I join in the very warm welcome extended to the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, who introduced themselves so powerfully in their maiden speeches.
This Bill may look technical, but it deals with a number of crucial issues, including the stability of our financial institutions. The Bill incorporates Basel III by using skeleton clauses that lay out policy at a very high and general level. It then eliminates secondary legislation and hands to the PRA the power to develop policy through its use of rules. It gives the regulators almost unlimited rein to craft rules that could be at the weak end of international standards, or the strong end, without parliamentary interference. The PRA faces no meaningful accountability, only delayed and minimal transparency, and an occasional review by a Select Committee.
The Financial Conduct Authority expects to follow the same template for the activities it regulates, as it makes clear in the financial regulatory framework review now in consultation. I join others in being shocked that this Bill does not wait for that consultation to be completed, but I think it indicates that the Government have already made up their mind. The PRA will later this year expand the scope of this template to cover its remaining activities. This is not delegated powers; it is the permanent removal of Parliament’s powers in the area of financial regulation. It is not just temporary; it is permanent. Let me quote from the framework review, which states that
“this approach will result in greater policy responsibility and discretion for UK regulators than has existed at any time since the early operation of FSMA following its introduction 20 years ago.”
FSMA 2000 is the regime that underpinned the culture—the noble Lord, Lord Hodgson of Astley Abbotts, reminded us of the importance of culture—and the naive regulation that led to the 2008 collapse, failed us over Libor and failed us for years over PPI. I could go on with other examples, but quite a few noble Lords have already done so very usefully. I hope that the Minister will look back and examine their speeches.
I am shocked on three grounds. The first is the general contempt for Parliament. We so often today see the pattern of skeleton Bills with policy then enacted through statutory instruments. However, this is even more cynical: a skeleton Bill with policy then set by the regulator in its rulebook. There is not even a semblance of accountability. This is not designed for flexibility, because we have plenty of fast-track procedures; it is deliberately designed to ensure that no effective oversight or challenge can be made by Parliament.
Secondly, we are at a critical time following Brexit, as my noble friend Lord Bruce of Bennachie and others reminded us. There is no way that the EU is going to grant anything but limited and temporary equivalence to financial services if they are only governed by rules in a regulator’s rulebook and can be changed without any parliamentary process. Indeed, I suspect the United States—I am thinking particularly of Janet Yellen—will be nervous of any equivalence rulings in the absence of any significant legislative underpinning. My noble friend Lady Bowles and the noble Baroness, Lady Altmann, raised real issues that remain unanswered and I hope that the Minister will address them.
Lastly, I am shocked because although I respect the integrity and intelligence of our regulators and recognise that they have more substantive powers than in 2008, I am still certain that this is not enough to discipline a sector where arrogance and greed have such a history of motivating bad behaviour. I sat on the Parliamentary Commission on Banking Standards for nearly two years. Senior managers who are respected figures, many with gongs and widely recognised, had rushed for short-term, false profits to boost their huge bonuses, and boards of directors were intimidated into silence over reckless behaviour. The regulators failed to speak out, obsessed with regulatory perimeters and constrained by a deep deference to the big institutions. That deference remains, and today the noble Lords, Lord Sikka, Lord Northbrook and Lord Desai, have given us some very powerful examples, which again I hope the Minister will examine.
The regulators also lack the resources to take on the industry, and I think it was the noble Lord, Lord Sharpe of Epsom, who took us through some examples of that. The reports from the Parliamentary Commission on Banking Standards and the legislation that followed changed the landscape, but many of us on the commission feared that the powerful financial institutions would bide patiently and, as memories of the 2008 crash faded, would carefully—we guessed in our conversations that it would take 10 years—persuade the Government to unwind the constraints that prevented the high-risk gambling and the crafting of loopholes to increase both power and bonuses. This Bill tells us that we guessed that timing pretty right, and I would remind the noble Lord, Lord Blackwell, who advised after-the-event oversight but not before-the-event oversight, that that approach pretty nearly destroyed the economy of this country.
It is an irony that the Bill deals with the final end of Libor and the other IBORs, abused in one of the biggest stains on the reputation of the UK’s financial services sector and its regulators. If we want an example of deference in the Treasury and in the regulators, we should listen to these words in the Explanatory Notes to this Bill. The reason that the notes give for ending Libor and similar benchmarks is:
“in response to cases of attempted manipulation of IBORs”.
Attempted? Fake submissions were made by the major banks in London every day for at least a decade, and probably two, in order to get a Libor benchmark that would boost the bonuses of traders and senior managers. Every day for those one or two decades, more than $400 trillion in outstanding loans across the globe were corruptly priced. The knowledge among regulators was evident, partly because the banks in their arrogance made no attempt to hide it, but also because the Bank of England got in on the act, asking banks to manipulate their Libor submissions for the more public-spirited purpose of hiding the depth of the 2008 crash. The scale of the corruption was so large and pervasive that it cannot be unravelled.
I have two other quick comments on the contents of the Bill. Many in the financial services industry have pressed for an international competitiveness requirement for the regulators, and there is in the Bill a “have regard” for both the PRA and the FCA, at least for certain sectors. We heard about that again today from the noble Lords, Lord Hunt of Kings Heath and Lord Bridges of Headley, and others. The industry says constantly that it does not seek a reduction or dilution in regulatory standards, but I—and, I suspect, many others—am going to take some convincing that this competitiveness provision is not doing just that, and driving standards down.
Secondly, the clauses on statutory debt repayment plans and the debt respite scheme are good, but they fail to include a clear implementation timetable. I support those actions, but please may we have the timetable? With Covid, it is now exceedingly urgent.
The Bill is also noteworthy for everything that it does not include. This House will need to remedy that. I have quite a long list, but today the hour is late, and I shall mention only two. The first is a duty of care by financial institutions to all customers. My noble friend Lord Sharkey, the right reverend Prelate the Bishop of St Albans, the noble Baronesses, Lady Bennett of Manor Castle and Lady McIntosh of Pickering, and others, highlighted that need.
The second—although it is not second in terms of priority—is action to motivate and incentivise the financial services sector to support our goals on climate change. My noble friends Lord Oates and Lady Sheehan and the noble Baronesses, Lady Hayman and Lady Bennett of Manor Castle, all spoke about that, and so did many others. It is crucial that those additions be made to the Bill. There are also other priorities, such as financial inclusion, but I will not go through that list now.
If there has been one message in this debate, which the Minister must now address, I can cite what was said by the noble Baroness, Lady Noakes. She and I do not often see eye to eye on an issue, but she talked about the accountability deficit. If regulators are to be given such untrammelled powers as the Bill anticipates, will the Minister tell us now how they are to be held accountable to Parliament? He has heard the words of so many in this House, from all Benches and all political persuasions, who have made it clear that accountability is required.
Lord Tunnicliffe (Lab) [V]
My Lords, I begin by thanking the Minister and his officials for their early engagement on this legislation, which is both wide-ranging and highly technical. I very much hope that this spirit of co-operation will continue throughout the Bill.
In recent times, our consideration of financial services matters has been restricted mainly to a raft of EU exit statutory instruments. As joyous as those debates were, this Bill provides a welcome shift in focus. It is a rare opportunity to review and revise the sector’s regulatory architecture, to ensure it is fit for purpose in the post-Brexit world.
As others have noted, financial services make a significant contribution to the UK economy in several respects: economic output, contribution to the Exchequer and the provision of skilled jobs. Despite recent capital movements to places such as Frankfurt, London remains one of the main global hubs of financial activity. The Chancellor has spoken of his wish to make London the world’s pre-eminent financial centre and, through our consideration of this Bill, we will be passing judgment on whether—and how—that ambition can be achieved.
While we often speak of London or the City, it is important to remember that financial services firms employ hundreds of thousands of staff across the country. Banking, insurance and other financial services have a significant impact—mostly positive, but sometimes negative—on the lives of consumers in every corner of the UK. A further task of ours is to make sure that this legislation works for them, as well as the firms themselves.
We may be more than a decade on from the global financial crisis, but this debate has highlighted that the events of that time remain at the forefront of our minds. Given the severe economic and social costs that came out of past regulatory failure, that is only right. It speaks to the points that I have just raised, that is, the importance of ensuring an appropriate balance between flexibility and responsibility.
Central to achieving this balance is the topic of oversight and scrutiny. As far as I can see, and as other noble Lords have observed, this Bill is severely lacking. Several fundamental regulatory changes are proposed in the Bill, yet, in many cases, there is no scope for formal parliamentary scrutiny. The Treasury has not always availed itself of the opportunity to attach scrutiny procedures to existing processes that could benefit from them.
I am sure that the Minister will assure us that the parliamentarians will be able to feed into and keep abreast of consultations and other policy exercises. To avoid any doubt, we clearly would not wish to unduly impinge on the independence of the Financial Conduct Authority, the Prudential Regulation Authority and other key actors. However, half of the delegated powers in this Bill go directly to regulators, and not even one of those has a formal parliamentary process attached to it.
I would not go so far as saying these proposals amount to deregulation, but I do believe that there is an absence of proper oversight and scrutiny mechanisms could lead us down a dangerous road in the future. As my noble friend Lord Eatwell, who will join us during later stages of the Bill, notes, the language used in the Bill’s supporting documents is, in places, worryingly reminiscent of the early 2000s.
It seems to me that, at the very least, regulators should be required to engage meaningfully with Parliament as a matter of course. It means more than periodically publishing reports or giving evidence to committees after important policy changes have been enacted. In the other place, arguments were put forward that Parliament should have a role in approving new rules before they take effect. I am sure we will explore this further.
Given the level of interest in this topic, I hope we can work collaboratively across your Lordships’ House to ensure improvements are made. In an ideal world, the Minister would work with us. However, if the Government remain unconvinced of our arguments, we reserve the right to ask MPs to think again. After all, we were told time and again that leaving the EU would see power returned to Parliament. Let us ensure the promise is upheld.
I am sure there are many of us who were hoping never to utter the word “Brexit” ever again. However, this Bill is inherently linked with the outcomes of the Brexit process. Therefore, as we progress to Committee, we will need to examine forensically the gap between the Government’s many commitments on financial services and the suboptimal reality the sector faces. Even if the Government seal a memorandum of understanding in March, access to EU markets will be well below what they have been. Why has the Prime Minister fallen so far short of his promises?
I am conscious that noble Lords are eager to hear from the Minister, so I will be brief in outlining other areas of concern. We expect important debates on the shift from LIBOR to SONIA and all that entails. Several noble Lords mentioned additional steps that could help to tackle money laundering and other forms of financial crime. It is important that we get this right. As I have mentioned, we need to ensure that consumers are properly protected from unscrupulous practices. On this last point, we will seek to table amendments that require proper regulation of the “buy now pay later” firms which appear to have grown exponentially during the Covid-19 pandemic. A review is under way in this area, but Labour believes that more urgency is required, especially if we are to avoid a repeat of the social problems that resulted from the past behaviour of certain payday lenders.
We look forward to working with colleagues on all Benches to hold the Chancellor to his word on greening finance. The Government have made a range of broader commitments, domestic and global, on climate change and it is vital that our legislation reflects the urgency of the situation.
This has been a very good debate, graced by two excellent maiden speeches. I congratulate the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent contributions. It has been both a good debate and a surprising one. There has been a remarkable level of consensus running through the discussions, and I believe that that consensus means that the Bill is going to be much amended before it is sent back to the other place. I particularly think that the whole issue of accountability and scrutiny of the regulation-making powers is crucial and has to be further considered. I think the noble Baroness, Lady Noakes, got it right—it is not often I agree with her—and the words “accountability deficit” are crucial.
I recommend that the Minister ponders carefully what he hears in the subsequent days of debate in Committee. The best way forward will almost certainly be through negotiated agreement to reintroduce a satisfactory level of accountability and scrutiny.
Lord Agnew of Oulton (Con)
My Lords, I thank noble Lords for their help in the thorough scrutiny of this Bill, both in this Chamber today and outside it. First, I offer my congratulations to my noble friend Lord Hammond of Runnymede, both on his speech and on the timing of his arrival at the beginning of this important piece of legislation. I also congratulate the noble Baroness, Lady Shafik, whom I have had the pleasure of meeting on one occasion. I know she will bring great wisdom to this House.
As I have said, this Bill represents the first step in a wider programme of reform and work to deliver the ambitious vision for financial services that the Chancellor set out in November. My noble friends Lord Hammond, Lord Hunt and Lord Bridges, among others raised the issue of how to appropriately balance the UK’s competitiveness as a global financial centre with the need to ensure the safety and soundness of the market. It cannot be a race to the bottom, and I take the point of the noble Baroness, Lady Kramer, that we cannot be a first-class global financial centre if we try to race to the bottom, bearing in mind her comments about Janet Yellen. We need to show to the rest of the world that this will be a soundly regulated environment.
As the Chancellor stressed in his November speech, the Government are committed to maintaining and enhancing the UK’s position as a global hub for finance. We will continue to consider appropriate ways to further this ambition in the way we approach this legislation. This is demonstrated by the inclusion of a duty on the regulators, when making the prudential rules covered by the Bill, to have regard to the likely effect on the UK’s competitiveness.
The noble Lords, Lord Oates and Lord Naseby, and the noble Baronesses, Lady Hayman, Lady Sheehan, Lady McIntosh, Lady Ritchie and Lady Bennett, underlined the important role that the financial services sector must play in our efforts to tackle climate change and its impact. To reassure noble Lords, green finance will remain integral to financial services legislation in the UK. The Chancellor made a number of green commitments in his November speech. The noble Lord, Lord Reid, noted that net zero was not explicitly addressed in the Bill, but this Government can show a substantial track record in tackling carbon in our economy. I believe that we are one of the fastest reducers of carbon emissions of any G7 country. The regulators already consider climate change as a risk to the economy, including through climate change stress tests, which assess the impact of climate-related risks on the UK’s financial system.
My noble friends Lord Holmes and Lord Leigh of Hurley spoke on the importance of fintech. The UK is building on its existing strengths as a leading global destination to start, grow and invest in fintech. We will shortly have Ron Kalifa’s report on this important issue and I am sure that this House will debate it further once the report is available.
Constraints on time mean that I may not be able to address all the issues raised in detail, but I will write to any noble Lord to whom I am not able to respond today. I start with the first objective: to enhance the UK’s world-leading prudential standards and protect financial stability. It would be remiss of me not to acknowledge the strong views across the whole House on the issue of regulatory oversight and the delegation of powers to regulators. It will be the Government’s job over the next few weeks to try to reassure this House that we have got the right balance. We have heard much on this from the noble Baronesses, Lady Kramer, Lady Noakes, Lady Altmann and Lady Bowles, the noble Viscount, Lord Trenchard, the noble Lords, Lord Sharkey, Lord Blackwell, Lord Tunnicliffe, Lord Desai and Lord Sharpe, and the right reverend Prelate the Bishop of St Albans—quite a wide spectrum.
I do not, however, accept the suggestion that anything in the Bill undermines Parliament’s role in relation to financial services regulation. The Financial Services and Markets Act 2000 creates the existing UK model for financial services legislation. It sets the objectives for the PRA and FCA and confers broad rule-making powers to give them the tools that they need to meet those objectives. It also specifies the mechanisms for Parliament to scrutinise the regulators’ success in meeting the objectives that are set for them. Through the FSMA, Parliament therefore establishes the appropriate architecture to guarantee that our financial services sector is well regulated. Parliament entrusts the detailed rule-making needed to deliver this to the UK’s independent and expert regulators. Our role is to give them the right objectives to ensure that they prioritise the safety and soundness of our financial system.
While the original FSMA model is 20 years old, following the financial crisis there was a thorough review of our approach to financial services legislation. We made significant changes to the regulatory architecture, splitting responsibility for prudential and conduct regulation and establishing a Financial Policy Committee with a remit to identify, monitor and take action to address systemic risks to the UK’s financial system. We also made regulatory changes, such as ring-fencing retail parts of banks from their investment and international banking activities. However, there was no change to the principle that independent and expert regulators are best placed to make detailed rules, albeit with the appropriate parliamentary scrutiny. The International Monetary Fund, the OECD and wider academic literature consider the FSMA model to be world leading. The Government likewise continue to believe that it forms the appropriate basis for our financial services regulation. However, they also recognise that it is important to balance the regulator’s role as a rule-maker with a greater level of democratic oversight and accountability.
The approach that the Bill seeks to take in relation to prudential measures builds on our respected FSMA model of regulation. We are consulting on the broader approach to regulation. This will close shortly on 19 February. However, it is necessary to act now on these elements of prudential regulation to ensure that we keep pace with international developments. In relation to these specific measures, having considered the issue, the other place reached the view that the Bill gets the balance right.
The approach taken here will ensure that our regime has the agility and flexibility needed to respond quickly and effectively to emerging challenges. There is a balance to be struck between the level of detail put down in legislation and regulators’ ability to respond to a changing environment. We are seeking to help UK firms seize new opportunities safely and responsibly. The accountability framework we have written into the Bill provides appropriate strategic policy input and democratic oversight from the Government and Parliament in these specific areas. Through this accountability framework and related provisions, Parliament will set the policy framework within which the regulators operate. For example, it will require the PRA to have regard to the effect of the Basel rules on the provision of finance to the real economy. The Bill places obligations on the regulators to report on how the matters specified in the Bill have influenced the rules that they make. Various mechanisms are available to Parliament for further scrutiny—for example, calling the regulators to appear before the relevant committees. As my honourable friend the Economic Secretary said in the other place, the make-up of these committees is primarily a matter for Parliament, and not the Government, to determine.
I hope these points have addressed some of the issues and concerns raised by my noble friends Lord Naseby and Lord Blackwell. I look forward to discussing this further in Committee, with my other government colleagues, to see what assurance we can provide for noble Lords that we have the right approach.
My noble friends Lord Northbrook and Lord Blackwell asked about the FCA’s use of Libor powers. The FCA published a consultation on 18 November, on the use of its power to provide for the continuity of Libor after panel banks withdraw their contributions. The Bill will mean that the FCA is required to publish, and have regard to, statements of policy when exercising its power to change the methodology of a benchmark. Industry respondents have noted that our legislation marks an important step in the wind down of Libor, but we also recognise their suggestions that it may be beneficial to provide additional legal protections to limit the potential for litigation associated with the application of a synthetic Libor. In Committee in the other place, my honourable friend the Economic Secretary stated that the Treasury was committed to looking into the issue further and providing industry with the reassurance that it needs.
The Bill’s second objective is to promote openness between the UK and international markets. The noble Lord, Lord Butler, spoke about the markets in financial instruments directive and the investment firm prudential regime measures. I can confirm that the FCA has already published its first consultation on the details of this regime. I will write to the noble Lord further on his wider questions, which extend beyond the Bill specifically. Likewise, I will respond to the question of the noble Lord, Lord Jopling, about our relationship with the USA, in writing. I reiterate the point I made at the beginning: we have a common interest in having a regulatory framework that is attractive to large markets such as the United States. Similarly, I will write to the right reverend Prelate the Bishop of St Albans on his questions surrounding the access to Gibraltar.
The noble Earl, Lord Shrewsbury, the noble Lords, Lord Reid, Lord Gadhia, Lord Northbrook, Lord Holmes and Lord Hodgson, and the noble Baroness, Lady Altmann, spoke of equivalence, in our new relationship with the EU. In November, the Chancellor announced as many equivalence decisions as we could for the EU and EEA member states, in favour of openness and it made sense to do so. Equivalence is an autonomous, unilateral mechanism, and our preference has always been for a full set of mutual decisions for both the UK and the EU. We remain open for further discussions with the EU on the decisions. The UK and the EU have agreed to structured regulatory co-operation for financial service based on a shared commitment to preserve financial stability, market integrity and the protection of investors and consumers. A memorandum of understanding will be agreed in discussion between the EU and the UK in March, to establish a framework for this co-operation. However, I accept the realpolitik of the situation and that, as many noble Lords have said today, we must not put all our hopes in that particular expectation. We need to use our new-found independence to create a regime that can have a successful relationship with the EU, but if it is not prepared to reciprocate, we need to move on to deal with that.
I will say a little bit more to the noble Baroness, Lady Kramer, on delegated powers. Several other jurisdictions largely use regulator rules to regulate financial services; indeed, the EU is the outlier in this regard. This means that the EU is used to assessing regulator rules and practice as part of its equivalence assessments. There is no reason why it would not be able to assess the UK in the same way, if the will is there. There is no suggestion that the US would not accept this as a proper and responsible regulation.
I say to my noble friend Lord Leigh of Hurley that the Government are continuing to work together with the Financial Services Compensation Scheme, the PRA and the FCA on the issues he outlined. I will ask officials to write to him specifically on the example he gave about the scam to which he was subjected, and this strange anomaly about the regulator not being able to deal with it because he was not actually a customer. That deserves a detailed response.
The Bill’s third and final objective is to support the maintenance of an effective financial services regulatory framework and sound capital markets. I greatly appreciate the efforts of colleagues on the opposite Benches, particularly the noble Lord, Lord Tunnicliffe, in engaging with the Bill. The noble Lord, Lord Stevenson, and my noble friend Lady Altmann spoke about bills of sale and logbook loans. I am grateful to them for raising the issue. I will write to my noble friend Lord Naseby on the issues he raised regarding home-collected credit and the perhaps mistaken conflation with payday lending.
I restate my commitment, and that of all my government colleagues, to work constructively with the noble Lord, Lord Tunnicliffe. I have found him to be a very constructive interlocutor and I want to try to maintain that dialogue over the next few weeks.
From economic crime to buy now, pay later, which the noble Baroness, Lady Ritchie, raised, it is important to stress that the Government are firmly committed to protecting consumers. Chris Woolard, the former interim CEO of the FCA, is undertaking a review of the unsecured credit market, including buy now, pay later. This report is due shortly. If it concludes that regulation is necessary, we are ready to take quick and proportionate action to implement it.
I can assure my noble friends Lord Jopling and Lord Naseby, my noble and learned friend Lord Garnier, the noble Lords, Lord Hendy and Lord Rooker, and the noble Baronesses, Lady Ritchie and Lady Bennett of Manor Castle, that the Government are committed to making the UK a hostile place for illicit finance. The UK is internationally recognised as having some of the strongest controls worldwide for tackling money laundering and terrorist financing. In 2019 the Government published the landmark economic crime plan, which brought together the Government, law enforcement and the private sector in closer co-operation than ever before, to deliver a whole-system response to economic crime.
I listened intently to the comments of the noble Lords, Lord Rooker and Lord Davies, and the noble Baroness, Lady Coussins, regarding the statutory debt repayment scheme measure. I confirm that implementing this scheme remains a key priority of this Government. We will consult of draft regulations as soon as possible after the Financial Services Bill receives Royal Assent.
Now that we have left the EU, this comprehensive package of measures represents the UK assuming responsibility for making its own laws in this area. The Financial Services Bill is a first step towards achieving that goal. I beg to move.