House of Lords
Death of a Former Member: Lord Prescott
The Lord Speaker (Lord McFall of Alcluith)
My Lords, I regret to inform the House of the death yesterday of former Member, the noble Lord, Lord Prescott. On behalf of the House, I extend our condolences to the noble Lord’s family and friends.
Carers and Poverty: Carers UK Report
(1 month, 1 week ago)
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Baroness Pitkeathley
To ask His Majesty’s Government how they plan to respond to the Carers UK report Poverty and financial hardship of unpaid carers in the UK, published on 12 September, and in particular its findings that 1.2 million carers live in poverty and that the poverty rate for unpaid carers is 50 per cent higher than for those who do not provide care.
Baroness Pitkeathley (Lab)
I beg leave to ask the Question in my name on the Order Paper and remind your Lordships that today is Carers Rights Day.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, from these Benches I pay tribute to the memory of our dear and noble friend Lord Prescott.
I thank Carers UK for its report, which, importantly, as my noble friend said, is raised on Carers Rights Day. We will take the findings into account as we continue to support unpaid carers, whose major contribution I pay tribute to. We have announced an increase to the carer’s allowance earnings limit. Carers can earn around an additional £2,000 per year. This is the biggest uplift since the allowance was introduced in 1976. Furthermore, we will review the implementation of carers’ leave.
Baroness Pitkeathley (Lab)
My Lords, I readily acknowledge the welcome concessions by the Chancellor in the Budget and thank my noble friend for her response. There is never any difficulty in getting recognition for our moral obligation to carers, but figures published this morning by Carers UK remind us of their contribution to the economy. They show that the value of their support is worth £184 billion per year in the UK—directly comparable to the spending on the NHS in the four nations, which is £189 billion. I hope my noble friend understands that it is against this background of their huge economic contribution that we ask for entitlements for carers and for recognition of their rights to lead an ordinary life, to combine paid work with caring, and to not to be condemned to a life of poverty because of their caring responsibilities.
Baroness Merron (Lab)
I very much appreciate the point my noble friend makes, and the point made in this very important report. As well as the increase to the carer’s allowance earning limit, which I mentioned in my initial Answer, there will be an update to the Accelerating Reform Fund, which provides funding to local authorities, including for support for unpaid carers. In addition, the National Institute for Health and Care Research has commissioned an evaluation of unpaid carers’ support funded through the better care fund.
Baroness Verma (Con)
My Lords, I declare my interests as set out in the register. Will the Minister look at respite relief for not just unpaid carers but paid carers? There is just not enough respite relief for people who are doing this 365 days a year, and they need to have that. Will the Minister also look at families taking unpaid care work and the winter fuel allowance? This will impact a lot of families, and unpaid carers are usually well over 60.
Baroness Merron (Lab)
I understand the point the noble Baroness is making. I was pleased that my ministerial colleagues Stephen Kinnock, the Minister for Care, and DWP Minister Stephen Timms recently attended a Carers UK-hosted round table to discuss all these points, including poverty and finances. I hope your Lordships’ House will acknowledge and welcome the steps we have already taken and be assured that we know there is much more to do. We will continue to work cross-government on this.
Baroness Tyler of Enfield (LD)
My Lords, I welcome the recent announcement about the earnings limit on the carer’s allowance, but that helps only carers who are able to combine paid work with unpaid care. It is estimated that over 1.5 million carers are now providing over 50 hours of care per week, making it impossible for them to do paid work. What are the Government doing to support those carers? Will they look at increasing the carer’s allowance, which is currently £81.90 a week—the lowest benefit of its kind, I believe—and expanding the care-related premium to universal credit and pension credit?
Baroness Merron (Lab)
There is to be an increase in the carer’s allowance from April of next year. The change we have made in the earnings limit will, over the next four to six years, bring in an additional 60,000 people who were previously not eligible. The DWP is very conscious of a number of the pressures on unpaid and other carers and will continue to look at that. Further developments will be reported.
Baroness Watkins of Tavistock (CB)
My Lords, has further consideration been given to reducing or having an amnesty on repayments by carers who were overpaid due to the complex algorithm involved in being able to work for a certain amount of money? Having acknowledged that they should be able to earn at least another £2,000 without such a disadvantage, could we not cancel the situation for many, particularly over this winter, before the new carer’s allowance comes in?
Baroness Merron (Lab)
I and my ministerial colleagues are extremely aware of the anxiety the overpayments have created, and they are being independently reviewed to establish exactly why they happened. While I cannot commit to the amnesty the noble Baroness asks for, I can assure her and your Lordships’ House that we and the DWP are working to be as sympathetic to people as possible. I urge anyone in receipt of carer’s allowance to inform DWP of a change in their circumstances, so that overpayments can be avoided in future.
Lord Kamall (Con)
My Lords, we on these Benches also add to the tribute to the noble Lord, Lord Prescott, who has passed away.
My noble friend Lady Verma referred to the stress unpaid carers are under. We know that unpaid carers who look after family members may themselves have mental health issues, or may be looking after people with such issues. What support do the Government currently provide for the mental health of unpaid carers and those they care for, and what extra measures do they plan to introduce?
Baroness Merron (Lab)
One of the key things in all this is the identification of carers. As has been discussed in your Lordships’ House on a number of occasions, a lot of people do not identify as carers. Therefore, we are encouraging GPs and, in the case of young carers, schools, to identify carers, so that they can get the support they deserve. The noble Lord, Lord Darzi, identified that making sure that unpaid carers receive recognition and support is key, and it will be in the 10-year plan as we go forward.
Baroness Keeley (Lab)
My Lords, I want to raise the issue of the 21-hour study rule whereby an unpaid carer is not allowed to claim carer’s allowance and be in full-time education of more than 21 hours a week. I cannot see a good reason for that rule. It would be very welcome if the Labour Government changed the rule to allow unpaid carers to study without losing their carer’s allowance.
Baroness Merron (Lab)
I thank my noble friend for that and can assure her that I will be discussing that very point with ministerial colleagues and am happy to return to her on it.
Baroness Altmann (Non-Afl)
My Lords, particularly today, will the Minister join me in paying tribute to all carers and care workers, paid or unpaid? Does she agree that, with an ageing population, it is long past time to stop treating care as some kind of second-rate service and to give it parity with the NHS? It saves the NHS significant amounts of money, and carer’s allowance is extremely low. Following the recent Budget, care charities will still have to fund the extra national insurance costs, even though NHS workers are exempt.
Baroness Merron (Lab)
I, of course, join all noble Lords in paying tribute to care workers, whether paid or unpaid. On paid care workers, that is one of the reasons why, as we move towards a national care service, we have for the first time laid legislation to ensure that there will be a fair pay agreement. On national insurance contributions, I can assure the noble Baroness that the Chancellor considered all the implications of the measures that were announced in the Budget when settlements were made. Further details of those will be announced in due course.
Water Bills
(1 month, 1 week ago)
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Lord Woodley
To ask His Majesty’s Government what steps they are taking to reduce water bills for consumers.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, of course, no one wants to see bills rise. We are committed to tackling water poverty and holding the water sector accountable for its commitment to end water poverty by 2030. We are therefore pushing companies to ensure that sufficient support is available for customers who are struggling to pay their bills, while also challenging Ofwat to make sure that all company investments are affordable and that customers do not pay twice for upgrades.
Lord Woodley (Lab)
My Lords, since privatisation, water companies have had 1,100 criminal convictions and have also paid out over £85 billion in dividends. They charge people for sewage disposal but dump millions of tonnes of sewage into our rivers and seas. This is fraud. Does the Minister agree that rather than hiking bills, these companies should give refunds to customers for making fraudulent charges?
Baroness Hayman of Ullock (Lab)
My noble friend points out some of the disgraceful behaviour we have seen from water companies in recent years. We expect companies to invest their own money going forward. However, we recognise that new investment means that customer bills are likely to rise. It is Ofwat’s responsibility to independently scrutinise water company plans, ensuring that the prices companies charge their customers are fair and proportionate. Vital infrastructure investment funding is ring-fenced and can be spent only on upgrades benefiting customers and the environment. Ofwat must ensure that when money for investment is not spent, companies refund customers, with money never allowed to be diverted for bonuses, dividends or salary increases.
Baroness McIntosh of Pickering (Con)
My Lords, can the Minister assure me on the recommendation in the Frontier Economics report of 2021, commissioned by Ofwat, to stop developers passing on the cost of incremental upgrades and treatment works for major new developments? The fact that the recommendation has not been introduced is bloating customer bills, which is unacceptable. Will she ensure that the recommendation by Ofwat is introduced to reduce customer bills and make developers pay for connections for major new developments and the upgrade of treatment works?
Baroness Hayman of Ullock (Lab)
As I just said, when money for investment is not spent, it is important that customers are refunded. The department is having ongoing discussions with Ofwat, and I will certainly take back the noble Baroness’s question for the next discussions.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, water is an essential element in many businesses and industries, not least the farming and horticulture sectors. With ELMS not delivering in the way originally intended, farmers and growers are finding their incomes shrinking and costs rising. Can the Minister ensure that at least their water bills are not escalating?
Baroness Hayman of Ullock (Lab)
As I said, we are working very closely with water companies to ensure that bills do not increase unnecessarily. There are many challenges in the farming industry, and the Farming Minister is working across the piece to try to support farmers. For example, the farming budget was not reduced in the Budget this year.
On ability to pay bills, we know that all water companies have measures in place for people who struggle to pay for their water and waste services, and we encourage water companies to work with customers to apply for those whenever it is appropriate.
Baroness Jones of Moulsecoomb (GP)
My Lords, this House debated the Water (Special Measures) Bill yesterday, and presumably the Government thought it might bring bills down for bill payers and taxpayers—yet it will not. Where is the justification for passing a Bill that makes it more difficult for people to pay bills?
Baroness Hayman of Ullock (Lab)
I do not really understand the noble Baroness’s logic in thinking that it is going to increase bills. That piece of legislation is to ensure that water companies are better held to account and to drive behaviour change from what we have seen in recent years.
Baroness Bryan of Partick (Lab)
My Lords, I am pleased to say that in Scotland we have water in public ownership. Water rates are generally collected as part of the council tax, and the bands can vary from £155 to £465 per annum. Does the Minister agree that privatisation was the biggest mistake ever made about water? I hope that we can rationalise it throughout the UK in years to come.
Baroness Hayman of Ullock (Lab)
There are different forms of water ownership around the world, some privatised, some nationalised and some slightly different. No one system is particularly shown to be efficient or to keep bills down—it depends on how it is run. We are determined to ensure that our water industry is run much better in future.
Lord Roborough (Con)
My Lords, I am disappointed that the Government voted against my amendment to the Water (Special Measures) Bill last night to prevent consumers being the funders of last resort to the water industry. Does the Minister instead wish to commit that consumers will never be called on to bail out losses in a water industry special administration regime?
Baroness Hayman of Ullock (Lab)
As we discussed yesterday in the debate on the Bill, the special administration regime is very much a last resort. Of course, we do not want to see customers bailing out water companies, which is why we are working very closely with Ofwat and the water industry to do everything we can to ensure that does not happen.
Baroness Meacher (CB)
My Lords, the cost of water is obviously important—but even more important is the quality of water. Can the Minister assure the House that the Government are taking all steps to put an end to sewage dumping, for example, assuring the cleanliness of the water that we drink?
Baroness Hayman of Ullock (Lab)
The Drinking Water Inspectorate is responsible for the quality of the water we drink. Our water in this country is among the highest in quality in the world, along with 10 other countries, so the quality of our drinking water is absolutely immaculate. The issue we have is the quality of water in our waterways and watercourses—and that is the situation we are improving through the Bill that is going through at the moment and through the wider review that we will take part in shortly.
Lord Forsyth of Drumlean (Con)
My Lords, is it not incredibly naive for people to believe that water prices are not going to go up when this House has almost unanimously said that there needs to be huge additional investment to deal with water quality? The difference between a privatised system in England and a state system in Scotland is that the money will come from the private sector as well as consumers and not take money from the health service and other public services.
Baroness Hayman of Ullock (Lab)
Clearly, what we are aiming to do at the moment is to increase investment into our water companies. Without that increased investment, which will need to come from private sources, as the noble Lord says, we cannot make the infrastructure improvements that we so badly need.
Lord Tyrie (Non-Afl)
The Minister has described the conduct of the water companies as “disgraceful”, but is it not the responsibility of Ofwat to sort out the water companies? In that case, what steps are the Government taking to make sure that Ofwat does its job as a regulator?
Baroness Hayman of Ullock (Lab)
The noble Lord makes an important point. We are very concerned about regulation over the past few years, which is why we are shortly starting our review into the water industry, which will also look at regulation, Ofwat and the Environment Agency, and whether that is the appropriate way to move forward.
Lord Sahota (Lab)
My Lords, I welcome the fact that the Government not only are taking immediate legislative steps to improve the water sector’s performance but have launched the biggest review of the sector’s operation since it was privatised.
Baroness Hayman of Ullock (Lab)
I thank my noble friend for those supportive comments.
Baroness Pinnock (LD)
My Lords, all water companies have social tariffs to help reduce water poverty. I have relevant interests on the register. It would be extremely helpful in expanding the help to people who find it really difficult to pay their water bills if the Government could put pressure on Ofwat to ensure that water companies focus a greater proportion of their budget on helping people pay their water bills. Will the Minister do that?
Baroness Hayman of Ullock (Lab)
As the noble Baroness says, there are measures in place for people who struggle to pay for their water and waste services. As a Government we are working closely with the water companies to encourage them to work with vulnerable customers and people who cannot pay their bills. It is very much the water industry’s responsibility to ensure that people can pay their bills, and as a Government we need to work with it to make sure that customers who need support actually apply for it. There are many ways in which water companies can do that, and we would work with them and with Ofwat to make sure that vulnerable customers are properly supported.
NHS: Treatment of Children from Other Countries
(1 month, 1 week ago)
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Lord Hogan-Howe
To ask His Majesty’s Government what policy they have in relation to the treatment of children from other countries who have life-threatening and rare diseases for which high-quality treatment is available on the NHS.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, no specific government policy exists for treating children from other countries with life-threatening or rare diseases and it is generally preferable to treat patients close to home, subject to capacity and expertise. Some UK international healthcare agreements, mostly with Europe, the British Crown dependencies and overseas territories, permit doctors to refer patients to the UK. Referrals are usually reimbursed and happen when wait times are excessive or the treatments are not available in the child’s home country.
Lord Hogan-Howe (CB)
I thank the Minister for the reply. This really is a Question about trying to inspire the NHS at a time when it probably most needs it. Professor Owase Jeelani is a consultant paediatric neurosurgeon based at Great Ormond Street. His worldwide speciality is the separation of conjoined twins who are unfortunately joined at the head. He has now carried out nine of these operations, obviously affecting 18 children, and, because of the frequency, his success rate and the outcomes have improved over time. More recently, four of the nine operations were carried out abroad. If they are carried out at home, £1 million has to be raised every time to pay for them, which the professor ends up having to do. Alternatively, he and his team have to travel abroad, which means that he spends less time operating at Great Ormond Street in other specialities on children who need his support. Is the Minister prepared to meet the professor to see whether there is any better way of dealing with these problems, which are rare? It is of course an international problem and the babies affected have no hope unless someone does this.
Baroness Merron (Lab)
The noble Lord shines a light on the rarity of this condition as well as its importance. I would of course be happy to meet the professor. The noble Lord will know from our own discussions that this is an extremely complex area across the NHS and there is, as I said in my Answer, no overarching UK approach. Rightly, this is a trust-led approach because trusts have to make decisions about the balance between specialist work and other work, including the reduction of waiting lists.
Baroness Manzoor (Con)
I support the premise of the Question. Can we look at the NHS supporting these cases? From my perspective it is vital for three reasons. First, it is inspirational on the world stage for the NHS. Secondly, it retains expertise in the NHS. Thirdly, it offers the soft diplomacy powers that we need internationally. I urge the Minister to look at this again to see if the Government can find a way round it.
Baroness Merron (Lab)
I will be glad to take back to the department the comments of the noble Baroness and the noble Lord, but I reiterate that it is individual expert centres that are responsible for liaising with referring clinicians. By definition this has to be done on a case-by-case basis because we are talking about highly specialised treatments for rare diseases. Again, there is no set nationwide policy for local implementation because of the very nature of the challenge and the specialism to which the noble Baroness refers.
Lord Scriven (LD)
My Lords, maybe a good place to start would be to be bolder and more ambitious with the rare diseases framework that already supports international collaboration as part of the Government’s policy. As part of this framework, will the Minister investigate setting up an international centre of excellence in the UK that could be funded by both the UK and international partners for procedures and R&D to be carried out here, which would deal with some of the problems that both noble Lords have mentioned?
Baroness Merron (Lab)
The noble Lord is right to make reference to the UK rare diseases framework. The intention of that is to improve the lives of those with rare diseases—for example, by helping to get a faster diagnosis, increasing awareness of rare diseases, better co-ordination and care, and improving access to care, treatment and drugs for those in this country. I will add his suggestion to the list of matters to raise with the department.
Lord Kamall (Con)
My Lords, we can all be proud that the UK is home to some of the world’s best medical experts on rare conditions. As the noble Lord, Lord Hogan-Howe, said, there are patients in other countries—often poorer countries—who seek the help of a UK expert. The Minister knows that in the UK the NHS charges, understandably, and that is welcome, but there are other challenges if that expert goes abroad. She spoke about some international agreements in an earlier answer, so can she say a bit more about how NHS England works with other systems in other countries, especially with reference to some of those agreements?
Baroness Merron (Lab)
The agreements that the UK has in place which contain referral arrangements whereby the funding is discussed and agreed as part of the process of the referral are with the member states of the EU, Switzerland, the EFTA-EEA bloc of countries, the British Crown dependencies and some overseas territories. As the noble Lord rightly acknowledges, it is only fair that those using the NHS are those contributing to it, and we therefore have to ensure that we stick to those agreements. If trusts seek to undertake work outside of that area, that will be a matter for individual trusts, which will have to make decisions about their funding and their requirements to serve the NHS.
Lord Beamish (Lab)
Will my noble friend the Minister join me in congratulating the heart transplant unit at the Freeman Hospital in Newcastle, particularly the unit which conducts children’s heart transplants, providing a great service not just for this country but for children from across the world? One of the issues, though, is trying to encourage donors to come forward. What more can be done to encourage donors, specifically children, to come forward?
Baroness Merron (Lab)
I am very happy to add my congratulations to the hospital, which my noble friend knows very well. There are several approaches that we take on donors. One is the increased use of technology to ensure that organs donated can be used when and where needed. We tend to lose a lot of organs because that is not possible to do, depending on the technology. Another approach is to ensure that organ donation is a route that people are assured they can take, feel confident in, and are willing to participate in, including where somebody has died and we must deal very delicately, of course, with their loved ones.
Baroness Watkins of Tavistock (CB)
My Lords, I declare my interest as a member of the board of NHS England. Clearly we need to meet the needs of our own population at the moment but also need to retain staff, and there could be a real opportunity for working with the overseas development aid budget to enable exchange sabbaticals between Commonwealth countries and staff here in relation to these special services, so that children from Commonwealth countries who otherwise would not have access to these rare treatments could do so both here and abroad. Could the Minister talk with the ODA department to see whether such an initiative could be developed?
Baroness Merron (Lab)
I will certainly ensure that officials take up the suggestion of the noble Baroness to explore possibilities.
Lord Lansley (Con)
My Lords, one of the reasons why people are envious of the NHS is because we are able to do things through the NHS which are not necessarily able to be supported in other countries by private medical insurance, and we have the benefit here of some of the finest clinicians in the world. That is something I am sure the Minister will want to focus on when she meets Professor Jeelani. There will doubtless be very specific ways in which he and his team might be helped, but could she bear in mind the fundamental principle that only about one in three million babies is in this condition and they have no hope other than to be treated by his excellent team? That is a responsibility, regardless of residence and those definitions, that we probably take on board through the NHS.
Baroness Merron (Lab)
I understand the point that the noble Lord makes and am sympathetic to it. He will also understand the need to ensure not only that we have the expertise here and use it correctly, but that the payment is in place so that the areas of excellence can also meet the requirements of other demands on them, including the reduction of waiting lists. He knows that it is a very delicate balance and that is why it is right that this is a trust-based approach, but I will certainly bear that in mind when I meet the professor.
COP 29: United Kingdom Delegation
(1 month, 1 week ago)
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Lord Robathan
To ask His Majesty’s Government how many people were in the United Kingdom delegation to COP 29 in Baku, what work they did, and what was the total cost of attendance including air fares.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, the UK’s COP 29 delegation is smaller than that for COP 28, but our delegation is planned to ensure a productive summit that will progress UK strategic outcomes. The carbon footprint of this travel is outstripped by the benefits of delivering this agenda. As well as Ministers, diplomats, thematic experts and negotiators, overall UK attendance at COP includes businesses, arm’s-length bodies, devolved Administrations, those from Crown dependencies and overseas territories, parliamentarians and external event speakers from businesses and civil society. Because COP 29 is still ongoing, it is not possible to provide a final number of participants or a cost of attendance.
Lord Robathan (Con)
I thank the Minister for her Answer, although it did not really increase the sum total of human knowledge. My understanding is that the delegation was 470 strong, which is over four times the size of the French delegation and larger than the American delegation—the size of a small army battalion, actually. Can the Minister now confirm whether that is the number? What were they doing? What did they achieve? How much did it cost? She says that she cannot tell us, but she can give us a guess. And what was the carbon footprint?
Baroness Chapman of Darlington (Lab)
The noble Lord, with respect, might wish to retable this in a couple of weeks when COP has actually concluded. At the moment, although we know how many people we have accredited, we do not know how many of those attended, how many attended in person or for how long they attended. We will obviously be able to provide full information, which I am sure he will enjoy reading, once COP concludes, but we are not in a position to do that today.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, does the Minister agree that the noble Lord, Lord Robathan, has scored an own goal with his Question? Although the Labour Government sent fewer to COP 29 than the Tory Government sent to COP 28—
Lord Foulkes of Cumnock (Lab Co-op)
No, it was not in Glasgow; it was in Dubai. That is two own goals—that is better than England. The fact that our delegation was led by the Prime Minister, unlike under the previous Government, shows the real importance that we give to climate change.
Baroness Chapman of Darlington (Lab)
I agree with my noble friend. We need to be serious about this, because the threat of climate change is real and it is driving a loss of resource and of water, it is driving competition for land, it is causing the displacement of people and it is incredibly expensive to deal with. There is a massive opportunity for growth based on climate investment for the UK, which is an opportunity that, as my noble friend said, I am proud is being led by the Prime Minister. I reflect today, on the day that we have learned of the sad death of our friend Lord Prescott, on the work that he did, before many people caught up with him, to lead on this issue. I am proud of what he did, and I am glad that we are able to follow and honour his legacy.
Lord Hamilton of Epsom (Con)
My Lords, if the Minister cannot estimate the cost of the trip to Baku, can she perhaps give us an estimate of the CO2 emissions that emerged from all the aircraft flights to Baku and back again?
Baroness Chapman of Darlington (Lab)
My Lords, these matters are hugely significant for the future of the world. Yes, it would be wonderful if we could reach agreement on really difficult issues—where the UK, I am proud to say, plays a leading role—by circulating an email or on WhatsApp. Sadly, we cannot do that; we need to meet face to face and we need to hammer these things out. The cost of this and the CO2 that may be included in gathering together to make these decisions and to provide that leadership pales into insignificance compared with the benefits to the climate of being able to reach agreements together. I just encourage noble Lords to perhaps raise their sights ever so slightly to look to the longer term.
Lord Purvis of Tweed (LD)
My Lords, the vital issue of loss and damage for developing states, which are at the front line of the climate emergency, was not mentioned at all in the Prime Minister’s speech in Baku. I met a delegation of MPs from Barbados on Tuesday and they, alongside the SIDS community, told me—quite alarmingly—that they see little support from the UK for climate mitigation efforts. First, can the Minister assure me that UK support for loss and damage is ring-fenced against the development cuts that were announced in the Budget? Secondly, does she agree with me that—as the Barbadians told me—when the UK does not offer support, China does? It offers support with conditional lending. Surely, within the Commonwealth, the UK should be doing more and not creating gaps that China fills.
Baroness Chapman of Darlington (Lab)
What the noble Lord highlights is the importance to many of our global partners of action on the climate, whether that is prevention of climate change through the work that we do, not just here in the UK but internationally, on reducing carbon, or whether it is on loss and damage mitigation or resilience against extreme weather events. Many of the countries that the noble Lord refers to are very low emitters but are on the front line of this. That is why I am proud of the leadership that this country takes on this issue.
Lord Alton of Liverpool (CB)
My Lords, in welcoming the presence of the Prime Minister in Baku, does the Minister recall that, in 2023, 120,000 Armenians were driven out of Nagorno-Karabakh in ethnic cleansing, when Azerbaijan cut off electricity, medicine and food? During this conference, even on its margins, did the Prime Minister have the opportunity to raise with President Aliyev the continuing failure to create a peace agreement between Azerbaijan and Armenia and provide for the return of prisoners?
Baroness Chapman of Darlington (Lab)
The UK has been consistent in seeking a peaceful resolution. We take every opportunity that we can to move that forward.
Baroness Ritchie of Downpatrick (Lab)
My Lords, earlier this morning, I chaired a meeting of indigenous peoples from Colombia, Peru and Indonesia. They welcomed the fact that the UK Prime Minister was in Baku, because there is an urgent need to discuss climate change mitigation and how to deal with corporates—many of them from the UK and other large countries—that undertake enormous amounts of wood felling to pursue their particular business, at the expense of indigenous people. Therefore, in the interests of climate change mitigation internationally, would my noble friend meet me and those groups and campaigners who are directly involved on this issue in the UK?
Baroness Chapman of Darlington (Lab)
We are not going to get any improvement in stemming the loss of biodiversity or deforestation without working with indigenous communities. I was very pleased to meet Domingo Peas, the head of Amazon Sacred Headwaters Alliance, on a recent visit to Ecuador, looking at just this topic. I would be very happy to meet representatives alongside my noble friend.
The Earl of Courtown (Con)
My Lords, the Minister, in her initial Answer to my noble friend, talked about outcomes from COP 29 in Baku. Can she outline how these outcomes align with our broader environmental and economic goals?
Baroness Chapman of Darlington (Lab)
Our economic goal is around achieving growth for the UK, and our environmental ambition is to reduce the amount of climate change. We are aiming, still, for 1.5 degrees. How close the precise negotiations at this COP will get to delivering on those ambitions remains to be seen because, as I have already said, COP is still ongoing and there is another round of ministerial talks to take place. Really, the thorny issues have yet to be considered. Perhaps we can return to this topic when COP is completed, when we might have a better chance of assessing how successful it has been.
The Lord Bishop of Manchester
My Lords, last year I took a group of leaders from different faiths in Greater Manchester, along with civic leaders, to meet Pope Francis in Rome to discuss his work on climate change, which makes me think: will the Government commit to working with faith leaders, in this country and overseas, as we seek to mitigate the climate emergency?
Baroness Chapman of Darlington (Lab)
I welcome contributions from any leaders who have influence anywhere. It is important that this task is not just left to the politicians and that community leaders and faith leaders from across the world step up and use whatever power they have to help.
Baroness Hayman (CB)
My Lords, I declare my interests as set out in the register. One of the most memorable experiences of my first few months in government in 1997 was repeating the Statement on the Kyoto conference in this House that the Deputy Prime Minister had given elsewhere. He was an extraordinarily committed environmentalist before many other people, as the noble Baroness said, and he will be missed on that account and on many others. After Kyoto, we had Paris and the 1.5 degree target, to which the noble Baroness has referred. That is in danger of being breached as we speak. Does she agree that the real issue about COP and that process is how we turn an international agreement into delivery locally?
Baroness Chapman of Darlington (Lab)
Absolutely I would, and if there was anyone who took a pragmatic lens to these issues, it would be our friend John Prescott. Perhaps we could think to ourselves “What would John say?” when we reach these agreements. I hope that we do reach some meaningful agreements but, as the noble Baroness implies and as he would no doubt have said, “It’s about getting it done, love, isn’t it?”.
A Northern Ireland Scrutiny Committee (Liaison Committee Report)
(1 month, 1 week ago)
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The Senior Deputy Speaker
That the report from the Select Committee A Northern Ireland Scrutiny Committee (2nd Report, HL Paper 26) be agreed to.
The Senior Deputy Speaker (Lord Gardiner of Kimble)
My Lords, for the convenience of the House, I will speak also to the second Motion in my name on the Order Paper.
In the previous Parliament, it was agreed that the European Affairs Committee should appoint a sub-committee focused on scrutiny of the Protocol on Ireland/Northern Ireland. In due course, it was renamed the Windsor Framework sub-committee. The sub-committee performed an invaluable function, helping the House to engage effectively with the developing post-Brexit framework for Northern Ireland, its practical impact for the people of Northern Ireland and the complex interactions with the rest of the United Kingdom. On behalf of the House, I thank all members of the sub-committee, particularly the chair, the noble Lord, Lord Jay of Ewelme, and its staff for their work.
It was intended that the sub-committee would be temporary and would carry out an important role while the new institutional framework bedded in, which would then reduce over time. Consequently, it ceased to exist in May, at the end of the previous Parliament. At the start of this Parliament, the Liaison Committee received representations from a number of Members that there is a continuing need for a committee of this House to undertake focused Northern Ireland scrutiny for three key reasons.
First, because the Windsor Framework is still in the implementation phase and a committee would play a valuable role in scrutinising the numerous new bodies and structures established by the United Kingdom and the EU to police the framework’s operation. Secondly, because there is still a need for expert committee scrutiny of EU legislation applying in Northern Ireland under the terms of the protocol and the Windsor Framework and of United Kingdom legislation with implications for Northern Ireland. Finally, because a committee would appropriately indicate and facilitate the continued interest of this House in Northern Ireland matters, particularly given the context in which certain EU legislation continues to have effect there.
The Liaison Committee considered these matters fully and recommends the appointment of a Select Committee on Northern Ireland scrutiny, with terms of reference similar to the remit of the Windsor Framework sub-committee in the last Parliament. Crucially, such a committee would be complementary to the work of other parliamentary committees. In particular, the Northern Ireland Assembly now appoints a Windsor Framework Democratic Scrutiny Committee, which plays an important role but whose remit is limited in statute to focusing on new or replacement EU acts. A new Lords committee with a broader remit would complement the work of that committee, including by scrutinising EU delegated or implementing legislation, by examining the governance bodies set up under the various agreements, reviewing the impact of proposed UK legislation on Northern Ireland and considering wider issues such as the Windsor Framework’s provisions on the rights of individuals.
We have received strong indications that the work of the former sub-committee was much valued across civil society in Northern Ireland. We are confident that the new committee will continue that same strong engagement and track record. The institutional framework continues to bed in, so we recommend that the operation of the new committee should be reviewed after two years at the end of 2026.
I will now speak to the second Motion in my name on the Order Paper. This Motion invites the House to agree membership changes to the R&R programme board, namely, to agree with the Commons that Judith Cummins MP becomes chair of the programme board and to appoint the noble Lord, Lord Greenhalgh, as a Lords member of the board, in place of the noble Lord, Lord Sherbourne of Didsbury. I beg to move.
Lord Empey (UUP)
My Lords, I take this opportunity to thank the Liaison Committee for its consideration. A number of us lobbied strongly, and I am very pleased that it has responded. I think what is not understood is that the legislation proposed by the European Union that affects Northern Ireland can have reach-back implications for the entirety of the United Kingdom. I hope that the Northern Ireland Assembly will eventually have a committee that can deal with its part of it. It is totally underresourced at the moment.
I would be failing in my duty not to put on record, for those of us who were members of the sub-committee, the enormous effort put in by the noble Lord, Lord Jay of Ewelme. He achieved miraculous results in getting virtually unanimous agreement for every report that the committee made, given the pretty mixed bunch of us that were on it. He did a fantastic job, and that should be put on the record.
Lord Dodds of Duncairn (DUP)
My Lords, I join the noble Lord, Lord Empey, in thanking the Liaison Committee for agreeing to set up a new Select Committee, following on from the work of the previous sub-committee. I, too, pay tribute to the work of the noble Lord, Lord Jay of Ewelme, and the staff of the committee who did a tremendous job.
I was honoured to be a member of the previous committee. We produced excellent reports, which have been received very warmly in Northern Ireland, with a lot of interest from civil society right across all sectors of the community and the economy. It is vital that this House continues to play an important role in scrutinising legislation for Northern Ireland that is now being made by a foreign political entity without any input from Members of the Northern Ireland Assembly or Members of Parliament. It is an extraordinary situation, which makes it all the more important that this House, which has done tremendous work in the past and has been the only Chamber doing this work is able to continue that. I think everybody in Northern Ireland, from all sides, will warmly welcome this announcement today.
The Senior Deputy Speaker (Lord Gardiner of Kimble)
My Lords, the noble Lords, Lord Empey and Lord Dodds of Duncairn, have articulated why the Liaison Committee found this a compelling case and have made this recommendation to your Lordships.
Restoration and Renewal Programme Board
The Senior Deputy Speaker
That this House has considered the Commons message of 19 November, and
(1) notes the names of the Members of the House of Commons appointed to the Board on 18 November;
(2) appoints Lord Greenhalgh as a member of the Restoration and Renewal Programme Board, in place of Lord Sherbourne of Didsbury; and
(3) agrees with the Commons that Judith Cummins should be Chair of the Board.
Financial Services: Mansion House Speech
(1 month, 1 week ago)
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Baroness Neville-Rolfe (Con)
My Lords, the Chancellor’s speech at the Mansion House covered a wide range of very important topics which we will need to discuss over the coming months. I can touch on only a few of them today. However, perhaps first we should note that very recent developments include an unexpected reduction in the rate of economic growth and an increase in the rate of inflation; and, today, an increase in monthly borrowing to £17.4 billion—the highest level ever outside the pandemic.
The reduction in the growth rate in the fourth quarter was brought about in part by the unwise and inaccurate remarks on the state of the British economy that have been made frequently by both the Prime Minister and the Chancellor since taking office. Taken alongside the problems of the Budget, it has not been an auspicious beginning for the Government. Some of the effects on hard-working citizens, small businesses and farmers were brought to our attention outside this very building only this week. Furthermore, the UK gilt market has taken a hit, meaning that the cost of servicing our debt has risen. The last time yields on 10-year gilts were this high, Labour promised it would ensure that it never happened again; and, of course, higher bond yields mean higher debt-servicing costs. How do the Government intend to square this particular circle?
One major sector covered by the Chancellor’s very comprehensive speech was pensions, which are important for almost everyone. We share the Chancellor’s aims of securing greater returns for pension savers while at the same time enabling pension funds to contribute to funding increased infrastructure spending here in the UK. These objectives are not necessarily incompatible, but it will be difficult to bring about both. We on these Benches will take a keen interest in how this initiative is taken forward in the forthcoming pensions Bill and elsewhere. When can we expect more details?
We are also keen to know more about how, precisely, the proposed pension megafunds will work and, in particular, what rules they will need to follow as regards UK and foreign investments. We all know about the massive investment that Australian and Canadian funds have made in UK infrastructure. Will the proposed UK funds be able to invest in a similar fashion overseas? The Government have proposed consolidating 86 local authority pension funds into eight. When will this occur and on what criteria? How will the interests of those in well-run funds be protected from the ravages of the less successful ones?
Lastly, I return to the Government’s stated first aim of improving the rate of economic growth. We want them to succeed; really, we do. Per capita growth is the right measure of success. All economic policies should have growth as one of their aims, so I note with particular satisfaction that the Chancellor has recently impressed on several economic regulators that this should be their objective also. Otherwise, unfortunately, the Government have made a poor start on achieving growth and managing inflation. When we left government, we had the fastest-growing economy in the G7. Now that has greatly diminished. Let us hope, for the sake of our citizens, that the Government will do better in future.
Baroness Kramer (LD)
My Lords, my party is determined to see growth in the UK economy and to use tools such as reform of the financial services sector to drive that growth, though we would put much more emphasis on a revival of community banking and financing for SMEs. High risk, however, is not for all. For people with small pensions, safety—not a jackpot—is the goal. Will the Minister assure this House that, in all the various changes, small pensions will in some way be backstopped from losses generated through higher risk, including illiquid investments? In Canada, which seems to be a template for the Government, public sector pension funds are, in effect, wholly backstopped by the state.
Members on these Benches remember the financial crisis of 2007, which destroyed growth for a generation. It was enabled by gullibility and naivety in dealing with the financial sector, both by Conservative and Labour Governments and by the regulators. The Bank of England is re-looking at the regulation of CCPs to allow greater derivates risk; the PRA now allows insurance companies to hold illiquid assets without relevant reserves; the bank ring-fence is being undermined, and the FCA plans to gut the clawback on bankers’ bonuses and downgrade the certification of senior managers. We are back to jobs for the boys.
Much more—if I understand the Chancellor correctly in the Mansion House speech—is to come. I sat for two years on the Parliamentary Commission on Banking Standards, listening to the pernicious incompetence of masters of the universe who were turning a deliberate blind eye to market manipulation, mis-selling and money laundering, with no acceptance of responsibility. Will the Minster read the reports of the PCBS before he proceeds with any further weakening of regulation? If this is not done with extraordinary care, we risk seeing the reseeding the next financial crisis.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions. May I take this opportunity to welcome the noble Baroness, Lady Neville-Rolfe, to her place and say how much I look forward to working with her in the period ahead? I am very grateful to both noble Baronesses for the “cautious”—I think I should say—welcome that they gave to various aspects of these reforms.
The noble Baroness, Lady Neville-Rolfe, began by talking about growth and, of course, we all know that growth was one of the biggest failures of the previous Government. In her Budget last month, the Chancellor set out a number of important measures to fix the foundations of our economy, restore stability to our public finances and rebuild our public services. They included a new approach to public investment to help deliver high levels of economic growth.
As the Chancellor made clear at the time, however, the Budget was not the limit of our ambition. Increasing private investment and reforming our economy are also central to realising the UK’s growth potential. That is why, last Thursday at the Mansion House, the Chancellor placed the financial sector at the heart of the Government’s growth mission and set out a plan for investment and reform. The financial sector employs 1.2 million people and makes up 9% of GVA, and it is one of the largest and most successful in the world, but we cannot take the UK’s status as a global financial centre for granted. The Chancellor therefore set out a commitment to developing a comprehensive plan to grow that financial services sector.
In the spring, the Government will publish a financial services, growth and competitiveness strategy to give the financial services sector the confidence it needs to invest for the long term. It will be published alongside our modern industrial strategy and be clear-eyed about our strengths, proposing five priority growth opportunities: fintech, sustainable finance, asset management and wholesale services, insurance and reinsurance markets, and capital markets.
In her Mansion House speech, the Chancellor also announced plans in the key area of pension funds, which the noble Baroness, Lady Neville-Rolfe, focused on. I am grateful for her supportive words about the objectives behind those reforms. As she knows, the UK has one of the largest funded pension markets in the world, but pension capital is often not used enough to drive investment and growth in our economy. Our system remains highly fragmented and pension funds cannot bring their full financial weight to bear due to limited investment in more productive assets. This holds back investment in infrastructure and for our most innovative companies.
For this reason, the Chancellor announced the publication of the interim report for the pensions investment review. The plan in the report will deliver a significant consolidation of the defined contribution market and the Local Government Pension Scheme in England and Wales, harnessing the collective size of our pension funds and creating larger funds and pools of capital. The noble Baroness asked about the timescale. A consultation on our pension reform changes opened last week and will run until 16 January. To give the market the necessary time to prepare, these changes will not apply in full until at least 2030. Local Government Pension Scheme changes are expected to be completed sooner, by March 2026, given the arrangements already in place.
The Chancellor also set out plans for reform. We will upgrade our regulatory regime across our economy, including reviewing the guidance we give to the Competition and Markets Authority and other major regulators, to underline the importance of growth. The noble Baroness, Lady Kramer, talked about the global financial crisis; I am very happy to read the reports she recommends. While it was right that successive Governments made regulatory changes after the global financial crisis to ensure that regulation kept pace with the global economy, these changes resulted in a system which often sought to eliminate risk-taking and, in some cases, had unintended consequences that we must address. Regulation has costs as well as benefits; when spending large sums on compliance, firms are not using that money to innovate and grow. It can also have costs to consumers, such as by restricting access to financial advice that could help them plan for the future.
While maintaining important consumer protections and upholding international standards of regulation, we must rebalance our approach. I think this was cautiously welcomed by the noble Baroness, Lady Neville-Rolfe. Alongside her Mansion House speech, the Chancellor issued new growth-focused remit letters to the financial services regulators to make it clear that the Government expect them fully to support our ambitions on economic growth.
The noble Baroness, Lady Kramer, asked about risk-taking. Enabling more responsible and informed risk-taking will support innovation and investment to help drive growth. Our aim is to maintain a sound and stable financial system with appropriate consumer protections while allowing businesses and consumers to make informed choices about the level of risk they take on. Protecting consumers is central to these reforms; the remit letters are clear that the regulators must maintain high regulatory standards, including to adequately protect consumers, in the process of embedding their secondary growth and international competitiveness objectives.
Lord Birt (CB)
My Lords, I strongly support the plan to consolidate the UK’s pension funds. However, I used to chair the investor relations committee for a major UK private equity fund and dealt with many of the world’s most illustrious and successful pension funds. Their mission, which we all understand, was to achieve assured, long-term returns for their members and to do so, in part, by managing risk and investing in not one but multiple geographies and sectors. I am unaware—though there may be examples—of any constraints placed on any of those leading funds by their Governments. What justification can there be for the Government to constrain the investment strategies of the UK’s pension funds by requiring them to focus on particular geographies—most obviously, our own—and sectors?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question and the expertise he brings to this conversation. This comes back to the issue of growth that the noble Baroness, Lady Neville-Rolfe, began with; we see these reforms as part of our wider growth strategy and want these significant consolidations and amounts of money to flow, in part, into UK infrastructure and assets to contribute towards our growth strategy. That is a key part of our investment objectives.
Lord Desai (CB)
My Lords, does the noble Lord agree that it is not fair to blame the present growth rate on the Labour Government? There are long and variable lags in economics, so whatever investment we make now will take some time to be reflected in the growth statistics. We all ought to calm down, let this policy go through and then see its effect, rather than immediately blaming whatever we do as having failed.
Lord Livermore (Lab)
I am very grateful to the noble Lord. It will not surprise anyone to hear that I agree with the sentiment behind his question. He is right that you cannot undo 14 years of damage in one Budget. Our economic strategy is based on the principles of stability, investment and reform; the Budget was about restoring stability to the public finances and therefore stability to the economy, which is the essential underpinning of any growth strategy. The Budget also talked about increasing levels of public investment in our economy; these Mansion House reforms are part of increasing private investment into our economy. The noble Lord is correct that there will be lags in that investment, but we very much hope to see growth coming through in due course.
Lord Liddle (Lab)
My Lords, I very much welcome the proposals on pension funds that the Chancellor has put forward. However, I have some sympathies with what the noble Baroness, Lady Kramer, said about City regulation. We must face the fact that, when the financial crisis hit us in 2008, because of the prudence of Gordon Brown as Chancellor of the Exchequer the debt to GDP ratio was less than 40%, whereas under the Conservatives over the last 14 years it has reached 100%. The chances of us being able to launch a massive rescue operation of banks in the way that Gordon Brown did with such success in 2008 will be constrained by that fact. What is the Minister’s judgment of that?
Secondly, what are the Government’s plans to improve access to finance for small and growing firms, particularly those outside London and the south-east? Lots of studies have demonstrated that growing firms find access to capital difficult. The British Business Bank is one response to that. Are the Government proposing to upscale it? That area is a key constraint on UK growth.
Lord Livermore (Lab)
I am grateful to my noble friend for his points. In the letter that the Chancellor sent to the chief executive of the Financial Conduct Authority, she made it very clear that the importance of competition, growth and risk-taking is to be seen in the context of its regulatory duties. She said that:
“The financial services regulators are key to driving forward”
growth;
“we must have proportionate, effective regulation that allows firms of all sizes to compete, innovate and grow, creates a stable, attractive environment which encourages businesses to establish and expand in the UK, and adequately protects consumers”.
She recognises that there are trade-offs to be made, but she would like to see a greater emphasis on achieving that secondary growth objective.
On supporting small businesses and their access to finance, my noble friend is absolutely right that, to date, the UK has been a very good place to start a business but a less good place to scale one, and access to capital is a vital part of improving that. He mentions the British Business Bank, which is incredibly important; it has been very successful in providing some of that finance, and we need to go further. Colleagues in the Department for Business and Trade will also be coming forward with proposals to help small businesses scale and grow.
Baroness Penn (Con)
My Lords, I welcome the inclusion in the Statement of work with tech platforms and telco networks to tackle fraud. Can the Minister confirm whether that work is just the implementation of the charter, launched about a year ago under the previous Government, on voluntary action from those companies, or whether it will move towards mandatory action if sufficient progress is not made? Can he also update the House on the implementation of the measures in the Online Safety Act to tackle fraud online?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. When I first became a shadow Treasury Minister, the noble Baroness was taking through the Act that introduced the secondary objective, and we were very supportive of it at the time—I remember those debates well.
On her first question, I may have to write to her as I do not have that answer to hand. On the fraud question, the Chancellor, Home Secretary and Secretary of State for Science, Innovation and Technology have written to leading tech and telecom companies, calling on them to go further and faster with clear, demonstrable action to reduce the level of fraudulent activity that exploits their platforms and networks. This comes ahead of the legal content duties under the Online Safety Act coming into force next year. The Act requires user-to-user and search services in scope to take measures to respectively prevent and minimise illegal fraudulent content on their service, or face the prospect of significant fines.
Building on existing measures to tackle scam calls, telecom companies have also recently agreed to a second fraud charter, to help prevent the misuse of telephone networks by criminals. We will monitor this closely in the months ahead, as the Government prepare the expanded fraud strategy.
Lord Brooke of Alverthorpe (Lab)
My Lords, I wonder whether the Minister recalls the conversations we had, before he was in government, about the possibility of having a fresh look at PPPs—public/private partnerships—to see whether we could update them and perhaps use them in a better way than in the past. One of my concerns is that the private equity funds that we see growing on such a scale are leading to a diminution of the number of individual personal investors in stocks and shares, of the type who were encouraged in the 1980s and 1990s.
I see that we are now going to call for evidence to examine the common bond on credit unions, and I wonder whether that could have been extended to having a review of the structure on public/private partnerships. We ought to be seeing whether we could encourage a change that would allow the public to invest directly in public/private partnerships, and whether the concept should not simply operate on a national level, as originally introduced, but be moved down to local-level activities and used particularly in expanding the growth opportunities in green energy.
Lord Livermore (Lab)
I am grateful to my noble friend for the question. I do remember the conversations we had in the past and I am, of course, happy to continue to discuss these issues with my noble friend. He talks about partnership; it is a key part of our investment plans. Partnership between public and private investment is key to our national wealth fund, with our public sector investment leveraging greater amounts of private sector investment into exactly the kind of green technologies that my noble friend references. I understand and sympathise with the spirit behind his question, and I am very happy to continue discussions with him on that point.
Baroness Neville-Rolfe (Con)
My Lords, I thank the Minister for his welcome; I too look forward to a constructive relationship in the traditions of the House. Can he comment on my point about gilt yields? My concern is their impact on compliance with the Chancellor’s fiscal rules. There has been a worrying increase of about 0.5% in the gilt yields, and I was interested in his reflections—perhaps in writing—on that.
Lord Livermore (Lab)
The noble Baroness is kind enough to give me the opportunity to write, and I will happily do so.
Baroness Manzoor (Con)
My Lords, I have a very brief question. I put on record that I am the chairman of the Financial Ombudsman Service. I welcome the Mansion House speech from our perspective and, personally, the emphasis on financial reform. It is very important that there is much greater clarity around the rules and regulations that govern both the businesses and the responsibility of consumers. I am particularly concerned about the level of fraud and scam cases in the UK, which continues to rise. We have a call for input, put out by the FCA and the Financial Ombudsman Service. The Minister has already identified the importance of consumer protection, and that remains key, but are there plans to ensure that there is also much greater clarity around the responsibilities of consumers themselves, in terms of the reform measures?
Lord Livermore (Lab)
The noble Baroness raises a very important question and I am grateful for her support around the reforms of the Financial Ombudsman Service; she brings a great deal of expertise to it. Her point about the role of consumers is a good one, and I will write to her on that specific matter.
Baroness Kramer (LD)
My Lords, I pick up the issue of consumer protection that the Minister mentioned, as well as a number of other speakers. Does he recognise that the consumer duty, as it is currently fashioned by the FCA, definitely has cost for businesses—it is very box-ticking? But what it does, which very much pleases businesses, is to deny individuals who have been injured a right of private action. It is that right which allowed the sub-postmasters to challenge the abuse that they suffered. That is not available to people within the financial services sector, and quite deliberately so. Without it, essential consumer protection is, to my mind, very much undermined. Will the Minister take a look at that issue?
Lord Livermore (Lab)
I thank the noble Baroness for her question. She brings out quite eloquently the trade-offs that the regulator has to make across these different protections. I am happy to look at what she says, of course, but I do not believe there are any plans in that respect.
The Ukraine Effect (European Affairs Committee Report)
(1 month, 1 week ago)
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Lord Ricketts
That this House takes note of the Report from the European Affairs Committee The Ukraine Effect: The impact of Russia’s invasion of Ukraine on the UK-EU relationship (1st Report, Session 2023-24, HL Paper 48).
Lord Ricketts (CB)
My Lords, I apologise for being a little late. The previous item ran shorter than I expected.
It is a privilege to open this timely debate on an issue of the utmost importance. On 25 October, your Lordships held a wide-ranging debate on the situation in Ukraine. I was not able to participate, but I have read Hansard very carefully, and a lot of important points were made. The situation has of course moved on quite a lot even since then, with the election of Donald Trump, the massive further attacks by Russia on Ukraine’s energy system and the very welcome—although I think still unavowed—decisions in Washington and London to allow Ukraine to use longer-range missiles against legitimate targets in Russia. All that makes our debate today very topical.
Before coming to the business at hand, I want to pay tribute to the noble Lord, Lord Levene, who is due to make his valedictory speech today. I pay tribute to all that he has brought to this House, on the basis of his extraordinary career in the City, including his memorable year as Lord Mayor. I had the honour of working with him when he was Chief of Defence Procurement. I discovered more recently that we also shared an interest in finding the best way of getting to Normandy on a Friday evening. We will greatly miss the noble Lord.
Our focus today is the report published by the European Affairs Committee at the end of January, on the impact of Russia’s invasion of Ukraine on UK-EU relations. The former Government responded to this on 27 March. Reading the report again nine months on, I think it has stood the test of time and has relevant things to say to those who are now making British policy.
I wish to thank, on behalf of the Committee, our clerk, Jarek Wisniewski, our policy analyst, Jack Sheldon, our committee assistant, Tabitha Brown, and our legal counsel, Tim Mitchell. We took evidence from 22 witnesses, including the then Foreign Secretary, the noble Lord, Lord Cameron, and the then Minister for Europe, Leo Docherty. We received a wide range of written submissions. I will set out briefly the main conclusions on the four aspects we considered: co-operation on sanctions, the UK-EU defence relationship, reconstruction of Ukraine, and the implications for longer-term co-operation with the EU in these areas.
The first area we looked at was sanctions policy. We commended the way the EU and the UK had worked together, but we were concerned even then about the growing evidence that Russia was circumventing sanctions through third states and through its use of uninsured shadow tankers. We also received evidence suggesting that the UK was not as effective as it should be at enforcing the sanctions that had been introduced.
We pressed the Government then to explore options for using sanctioned assets—or their proceeds—to support the reconstruction of Ukraine. In that context, we found it incomprehensible that the frozen assets arising from the sale of Chelsea Football Club, which Mr Abramovich had promised would be used for the support of Ukraine, had then not been disbursed. In their response, the Government assured us that UK sanctions were robustly enforced and that potential breaches were investigated and appropriate action taken.
Despite all the good work, there is worrying evidence that Western sanctions are failing to constrain Russia’s capacity to wage the war or significantly weaken the Russian economy. Could the Minister give us the latest assessment of how effective sanctions enforcement is proving? Is it evidence of their effectiveness that Russia is having to rely increasingly on Iranian drones and North Korean missiles? Would the Minister comment specifically on the revelation in yesterday’s Financial Times that companies registered in the British Overseas Territories have exported $134 million of goods to Russia in 2024 alone? The article alleged:
“Russian documents suggest that a large volume of controlled exports”
is being exported by
“opaque entities in the British Virgin Islands, in particular”.
If true, that is surely totally unacceptable and undermines Britain’s capacity to lead internationally on sanctions enforcement.
On the shadow tanker fleet, it is good news that the Government secured agreement among 40 leaders at the Blenheim Palace summit on a call for action, and that the UK is taking national action to sanction 43 oil tankers, but is there any sign that this is reducing the flow of Russian oil and gas to markets such as India?
On the use of the proceeds from frozen Russian assets, the G7 have now given their welcome agreement to the extraordinary revenue acceleration mechanism, yielding $50 billion for Ukraine, of which the UK is providing around $3 billion. Speed of disbursement is now vital. Could the Minister tell us when the UK share of that will reach the Ukraine Government, and perhaps what proportion of the US contribution of $20 billion is going to get to Ukraine before—to pick a date at random—21 January 2025? Finally on sanctions, is there any end in prospect to the saga of the frozen funds from the sale of Chelsea Football Club?
Turning briefly to the implications of Russia’s aggression on EU-UK co-operation on defence, our report concluded that co-operation on military support had been more effective than previous experience would have suggested. We urged the Government to do what they could to overcome the delays in British participation in the PESCO military mobility project. We noted that the EU’s protectionist rules governing third country access to the European Defence Fund created a major obstacle to participation, even when our strategic interests clearly point to the closest co-operation. We recommended seeking an arrangement with the European Defence Agency similar to those which the US and Norway have.
I think it is fair to say that the former Government’s response was cautious. The current Government have announced an ambitious security pact with the EU, covering these issues and a wider set of economic security challenges. Of course, the return of Donald Trump makes it all the more urgent to pursue close co-operation with the EU across the range of defence issues.
Could the Minister confirm that the security pact will cover all the issues I have referred to? Will the Government also seek to persuade the EU to look again at the third country rules, which at present create such an obstacle at a time when it is more important than ever to have all of us in Europe working together on effective arrangements for the manufacture of, for example, missiles and ammunition?
On reconstruction, our report concluded that the horrific scale of the damage inflicted by Russia’s aggression on Ukraine means that a massive programme of international assistance is going to be necessary over a long period. With Donald Trump’s arrival, the likelihood is that a large proportion of that bill will fall to European countries. We welcomed the previous Government’s initiative to join the multi-donor co-operation platform and to host the first Ukraine recovery conference in the UK in 2023. We concluded that the UK should go on playing a major role in preparations for the reconstruction period—something we have great national experience of—including in the fight against corruption, and that we should support Ukraine in the reforms needed for it to join the EU, which would be a very significant stabilising factor in European security.
Clearly, reconstruction will be massively expensive. The $50 billion G7 loan is of course a helpful down payment, but the World Bank estimated in February this year that the total could be as high as $486 billion—and we have had another year of relentless destruction since then. Are the Government thinking about how it will be possible to raise sums of that order? Is the issue of the $300 billion of frozen Russian assets still off the table in that context?
Our fourth theme was the impact of the Russian invasion of Ukraine on longer-term co-operation between the UK and the EU on foreign policy. The committee recommended, as it has in the past, that there should be more structured arrangements for co-operation on security and foreign policy between the UK and the EU in the future. I am glad to see that the Prime Minister has clearly listened to the committee’s recommendation and has now proposed regular summits with the President of the Commission. The Foreign Secretary has begun a regular series of meetings with the EU Foreign Affairs Council, which is very welcome. However, there are also clear signs of impatience on the EU side because the Government have not said precisely what they want to achieve in the security pact. Can the Minister tell us what the Government’s timetable is for concluding the pact, which has become even more urgent with the election of Donald Trump?
I will step outside the immediate issues in the committee’s report to comment on the issues that lie directly ahead for Ukraine. As I have said, I strongly welcome the fact that the Ukrainians are now able to use the UK Storm Shadow missiles alongside the ATACMS supplied by the US. I realise that the Government are not avowing that decision, but, as President Zelensky said, the “missiles speak for themselves”. This gives a powerful signal of support to Kyiv and complicates Russia’s military planning. It will not change the course of the war, but it is an important move. It undermines the narrative that Putin had been trying to establish—that it was fine for Russia to rain down Iranian drones and North Korean missiles on Ukraine, but it was a reckless escalation for Ukraine to use western-supplied weapons against legitimate targets in Russia.
However much we in this House all want the Ukrainians to come out with a clear victory from this terrible war, the hard fact is that, even with continued, wholehearted western support, they do not have the combat power necessary to drive the Russians off every metre of Ukrainian territory. The advent of Trump is likely to mean that 2025 will see a ceasefire negotiation. President Zelensky himself accepted that when he said last week that Ukraine
“must do everything so that this war ends next year, through diplomatic means”.
It would therefore be prudent for western capitals, alongside continuing to give staunch support to Ukraine, to begin to do contingency planning on the key principles that should guide western policy if there is to be a negotiation. They should start a discussion on those issues as soon as possible with those around Trump, to convince him that, if he is to come out of a negotiation looking strong, which is what he normally wants to do, he must ensure that Ukraine’s vital interests are safeguarded.
I suggest three principles as a start to that discussion. First, Ukraine must be a full party to any negotiations about its future. Trying to impose a deal agreed between Washington and Moscow would be calamitous for Ukraine and for European security. Secondly, Ukraine must not be obliged to cede sovereignty over territories that are currently occupied by Russia, assuming that there will be a ceasefire with in-place forces. The long-term status of those territories must be left open, as was the case in Korea and Germany. Thirdly, Ukraine must be left free to decide its own security policy. It should not be left in some neutral zone, suspended between East and West. The West should be free to give Ukraine security guarantees as a prelude to it joining NATO and the EU in the longer term.
Noble Lords may well ask what Putin’s incentive would be to agree to such a deal. Here I suggest that Trump’s famous unpredictability might come to our aid. If he were to set out a deal on the lines I outlined, and Putin rejected it, that would be the end of a beautiful friendship. In those circumstances, Trump might well decide that, to look strong, he would have to back Ukraine to the hilt. Putin would have to factor in that possibility anyway, even if it did not eventually happen.
If a ceasefire deal respecting those three principles could be achieved, it would at least offer the prospect of building a strong and free Ukraine closely tied to western institutions. It would leave Putin with no long-term gain from his murderous gamble. I much look forward to the debate and the Minister’s reply.
Baroness Blackstone (Lab)
My Lords, I will repeat some of what the noble Lord, Lord Ricketts, said. He has been a first-class, excellent chairman of the committee. If I repeat his points, it is only to reinforce them.
It is now nearly a year since the committee published its report, and any hopes that the war might have come to an end by now have been dashed. At the weekend, Russia launched a devastating drone and missile attack on Ukraine’s energy grid, affecting many parts of the country and resulting in the need for a nationwide rationing of energy. There are currently no signs of de-escalation, nor any prospects for peace in the near future.
There is a need for close co-operation between the UK and the EU on support for Ukraine in the contexts of both growing Russian aggression and the recent election of Donald Trump. It is still unclear what he will do when he becomes President, but the threat to reduce greatly or even to end the supply of arms to Ukraine must be taken seriously. The committee’s inquiry had, as a backdrop, the possibility of a change of political leadership in the USA and cautioned that a reduction of US support for Ukraine would have implications for both the UK and the EU. It is surely now vital that they plan for this contingency.
The Foreign Secretary’s participation last week in the EU’s Foreign Affairs Council is welcome. In the Statement on Ukraine he made in another place on Tuesday, he listed a number of initiatives that the Government are currently taking, including “non-military support”—for example, boosting the economy of Ukraine in various ways and protecting its power grid. Can the Minister tell the House whether lifting the ban on the deployment of UK-designed Storm Shadow missiles, which have some US components, was discussed with our European allies when the Foreign Secretary met them on Tuesday?
This use becomes possible following President Biden’s decision earlier this week to lift the US ban, apparently influenced by Russian escalation and the use of North Korean troops in the Kursk region. When asked yesterday, the Government said that they would neither confirm nor deny allowing Ukrainian firepower and the launching of long-range missiles into Russia. All the evidence suggests that they were used yesterday, so would it not be better for the Government to clarify this, without necessarily specifying precisely where they were used? The danger of possible Russian retaliation must also be acknowledged.
Like the noble Lord, Lord Ricketts, I turn now to the issue of sanctions, which was considered at length in the committee’s report and to which the Foreign Secretary referred in yesterday’s Statement. The committee was broadly supportive of the collaboration that had taken place with the EU, identifying what it called “pragmatic cooperation”. It said that any divergence in policies, or on sanctions, would create “gaps and loopholes” that would be exploited and would make them make them far less effective. While there was general agreement with the EU on where sanctions should apply, it argued that these policies need to be reviewed regularly, including on countries besides Russia and Belarus.
In their reply to the report, the Government reassured the committee that this was happening, although they rejected the idea of a memorandum of understanding with the EU on a sanctions policy. While the committee was relatively sanguine about international agreement on the focus of sanctions, it mentioned that witnesses had raised questions about implementation. Experts have more recently claimed that there are indeed serious concerns about implementation, and a weak enforcement regime with widespread evasion. Third countries such as the UAE and Turkey are party to sanctions-busting, out of which a great deal of money is being made. UK companies in areas such as insurance and shipping are apparently trading with Russia with impunity. Can the Minister tell the House how many UK companies have been charged with breaking sanctions? There can be little point in the Government extending sanctions, as was announced in Tuesday’s Statement, if enforcement is weak and there is no leadership in addressing the difficult issues it raises. We have not seen any specific examples of the robust action the committee requested in its report.
The committee also drew attention to the use of frozen sanctioned assets—in particular, frozen central bank assets—for the reconstruction of Ukraine. It recognised the importance of being consistent with international law, but the then Foreign Secretary suggested there was a legal route in doing so. Has that been identified? More particularly, the committee was critical of the failure to address the frozen assets arising from the sale of Chelsea Football Club. The noble Lord, Lord Ricketts, has already referred to that, so I will say no more on it.
Lastly, I want to raise the general question of the reconstruction that is needed to help the morale of Ukrainians today and to support the functioning of the Ukrainian economy in the future. It cannot until wait war ends, as the committee made clear. Close co-operation with the EU will also be vital if duplication is to be avoided and efficiency maximised. The Government accepted this in their reply. However, if action is not taken to tackle corruption in Ukraine, reconstruction could be damaged by scandals.
In her reply, I hope the Minister will be able to indicate ways in which the UK is addressing how to improve the justice system through UK aid visits, so that the rule of law is enforced in uprooting corruption. There is a need for institution-building in this area, so that the UK private sector can be confident that it can operate effectively in Ukraine in the future.
I end by simply saying that we now have to plan for the possibility that the US will indeed shirk any responsibility to help Ukraine out of its current predicament.
Lord Tugendhat (Con)
My Lords, unlike the noble Baroness, I was not a member of the committee, so I begin by congratulating the noble Lord, Lord Ricketts, and the other members of the committee on the report they have produced. It has been 10 years since I chaired a committee—the EU External Affairs Sub-committee of the old European Union Committee—that produced a report on Ukraine, and I know what is involved in this matter. I congratulate the members of the committee on the outcome.
I must also say that, as an outsider, I found the committee’s report rather encouraging. It shows the extent to which, when faced with a common threat, the UK, the EU and its member states are able to work together in formulating policy and determining objectives. Of course, the implementation has perhaps not been quite as good as the willingness to co-operate. The spirit is willing but the flesh has been weak so far as sanctions are concerned, although I was struck by what the noble Lord, Lord Ricketts, and the report had to say about the greater success in military co-operation.
However, there are clear limits to what is possible. The noble Lord, Lord Ricketts, mentioned the third-party rules arising out of our non-membership of the European Defence Fund. This is not only serious in itself; as I will point out in a moment, it provides a warning of problems to come. Of course, there is a long history of British reluctance to get involved in European initiatives within NATO, and of European reluctance to see outsiders participating in European projects. But, as the report says, what we have at the moment amounts to protectionism. The committee says:
“Protectionism is not the way to build an efficient defence”
alliance, and nor is it the best way to keep the newly elected President Trump involved in European affairs. What he wants is European countries to operate more effectively, as well as to spend more. It is essential that this obstacle to which the committee refers be overcome.
I also fear that, whether or not that is overcome, similar attitudes could be carried through from defence procurement to the reconstruction of Ukraine, notwithstanding United Kingdom participation in the Multi-agency Donor Coordination Platform and our prominent role in the European Bank for Reconstruction and Development. As the report says, the reconstruction of Ukraine will be a colossal task, and it will also be closely linked to Ukraine’s candidacy for membership of the European Union. This means that it will also be closely linked to that most controversial of all issues within the European Union: its budget, for which, many decades ago, I was at one time the responsible commissioner. The danger is that it will be so difficult for the EU member states to reach agreement on programmes and expenditure among themselves that, when they finally do, it will be even more difficult for agreement to be reached with other donor countries. Against that background, the UK Government must ensure not only that the costs of reconstruction are fairly and proportionately divided, but that UK companies receive an appropriate share of the contracts involved.
Finally, I want to say a word about paragraph 222 of the report, which refers to bringing Ukraine into western institutions. Yes, we and the EU do want to bring Ukraine into western institutions, and Ukraine itself wants to be brought into western institutions, but I would suggest that this should not be an exclusive relationship. Looking to the long term—perhaps, but not necessarily, after Putin has gone—Ukraine should also rebuild its economic and personal links at all levels with Russia. To the extent that the Russian people—I emphasise, the Russian people—see Ukraine as the vanguard of western encroachment into their own historic sphere of influence, it will remain a potential casus belli. To the extent that Ukraine has links with Russia as well as with the West, it could provide a bridge to help bring about improvement in relations between Russia and the West. That might sound at present rather idealistic, but it is very important that Ukraine should be facing east as well as west if it is to have a secure position in the West. When one looks at the historic links of the Ukraine economy with that of Russia, it will also be beneficial in the long run if Ukraine is able to rebuild its relationships with Russia, as well as to become embedded in western institutions.
Baroness Suttie (LD)
My Lords, I too would like to congratulate the noble Lord, Lord Ricketts, on his excellent introduction to this important and highly relevant report. I would also like to congratulate the Secretariat and members of the European Affairs Committee. It was a pleasure to follow the noble Lord, Lord Tugendhat. I served on the EU sub-committee under his chairmanship when the report he referred to was produced several years ago.
The report we are debating today is highly relevant and topical, and we do so against a backdrop of increased tension and an increasingly bleak situation in Ukraine. Like the noble Baroness, Lady Blackstone, I welcome the Foreign Secretary’s Statement this week on Ukraine. Ukraine needs to know that the UK remains a firm and steadfast ally and friend at this time. After more than a thousand days of this truly awful war—and, I should add, it is 4,000 days since the first invasion of Ukraine in 2014—we are now moving into probably the most dangerous time we have seen since the first month of the war, February 2022.
Each winter since Putin launched his illegal invasion of Ukraine, the Ukrainian people have faced new and almost unimaginable challenges. But this winter threatens to be the most severe, with the cynical targeting of power stations leaving so many Ukrainians once again with no power or heating in the freezing winter in the months ahead.
I know that several Ukrainian friends—especially those with young children—are facing the deeply difficult dilemma of whether to stay or leave Ukraine this winter. The psychological impact on young children of constant air raid sirens, drone attacks and periods of no power or heating, as well as the impact on their education, cannot be underestimated. Most Ukrainians feel that it is their patriotic duty to stay, but it is incredibly and increasingly hard for them.
The European Affairs Committee report rightly welcomes that—at least until now—the EU, UK and US have been aligned on sanctions. But the report raises concerns that it has been possible for Russia to circumvent these sanctions, particularly, as was said by the noble Lord, Lord Ricketts, and others, in the energy sector and through the use of shadow tankers. In previous debates on Ukraine, I raised concerns that the sanctions regime has not done enough to damage the Putin war economy. As a Russian acquaintance said to me earlier this year, what the war in Ukraine has shown him is that “Russia does not need Europe”. He said this with some regret but said that in terms of his own business, he had just had to switch to looking towards China.
Given the highly probable shift of US policy on sanctions from January, can the Minister say whether the Government plan to review the current sanctions regime with our EU partners to ensure that they have a more direct impact on the levers of power and the Kremlin’s war economy? Like the noble Lord, Lord Ricketts, I ask the Minister what action the Government are taking now to prevent sanction busting via the British Overseas Territories, not least given the Foreign Secretary’s vocal criticism of the previous Government’s inaction on this matter.
Ahead of this debate, I contacted several Ukrainian friends to ask for their views, particularly on the reconstruction of Ukraine—I refer noble Lords to my register of interests and previous work in the Parliament in Kyiv as well as with the John Smith Trust. The report stressed the importance of giving additional assistance now. This is a view shared by many of my contacts in Ukraine, both in terms of economic assistance and capacity building. In particular, they feel that the UK would be extremely well placed to assist with building capacity in public administration and in helping to further reform the legal system in Ukraine to ensure the rule of law. Both would help with anti-corruption measures and in helping Ukraine in its desire to “build back better”. Targeting assistance to a younger generation of Ukrainians could make a big difference, and I would be grateful for a response on this from the Minister in her concluding remarks.
I recently met a delegation from Lviv. They stressed the importance of reopening Lviv airport and of helping now to reconstruct power stations, as well as constructing new, more environmentally friendly ones. Can the Minister give an update on the Government’s approach to assisting with the Ukrainian energy sector this winter and reopening Lviv airport in particular?
None of us has a crystal ball to know exactly what the highly unpredictable President Trump will do in January next year, but all the indications suggest a move away from continued military support for Ukraine. If this happens, the UK is going to have to work ever closer with our European partners in terms of our national security and defence. I hope this country can take a leadership role in this regard, perhaps through convening a summit on Ukraine with our EU and NATO partners.
Of course we must continue to make the case for the importance of continued military support for Ukraine with our American partners too, but it would be unwise, indeed naive, not to prepare for the worst. As the report rightly says,
“any change in the EU’s approach to foreign and security policy will be bound to have implications for UK national security”.
President Putin revels in creating global chaos. The strategists in the Kremlin will be hoping for the double whammy of withdrawal of US support combined with a fracturing of the until now united EU approach towards Kyiv and the war in Ukraine. As one Ukrainian friend put it to me, “Ukraine is not the goal for Russia but a tool to challenge the global order”. I fear he is absolutely right. The war in Ukraine has a direct impact on us all on this continent of Europe, which is why we must maintain our strength and we must remain united.
Our direct influence on EU thinking might have diminished since Brexit, but our bilateral relations, including through our NATO partners, remain strong. We must do all we can to influence our European partners and to stress the importance of maintaining a united front. To add to the excellent set of principles given by the noble Lord, Lord Ricketts, I emphasise that whatever happens in the months ahead, the guiding principle has to be that only Ukraine has the right to decide on Ukraine’s future.
Lord Godson (Con)
My Lords, I too am grateful to the noble Lord, Lord Ricketts, for affording us the opportunity to discuss the committee’s report of last January. I too welcome this nuanced piece of work, which invalidates the idea that Brexit consigned the UK to a peripheral role in the security of Europe.
I was struck by the report’s implicit and explicit references to the enduring UK influence in the affairs of the continent, long after our departure from the EU. To me at least, this report is an important recognition that Europe is not the EU and the EU is not Europe. Indeed, some years ago I had the pleasure of reviewing the book of the noble Lord, Lord Ricketts, Hard Choices: What Britain Does Next, in the New Statesman—published, of course, before the Russian invasion of Ukraine. I am glad in the context of this report that some of his darkest fears in that book have not been vindicated subsequently. The subtitle is What Britain Does Next; Britain has done a great deal since 2022 in this regard, and it is a good thing that the report that the noble Lord and his fellow committee members have produced has acknowledged that.
Indeed, there are two stories to tell here about the UK’s involvement in Europe since February 2022. Alongside that of UK-EU co-operation, there is also the UK’s hyperactive—there is no other word for it—European policy before and after the Russian invasion. We should note that the UK-Ukraine-Poland trilateral, which provided Kyiv with military aid and training right before the invasion, and we also of course recall the rapid response of the UK-led Joint Expeditionary Force, which convened a leaders’ summit only just before that Russian invasion. That is a record to be proud of.
I also note in chapter 2, paragraph 41, it observes that the UK is
“nimbler and swifter in imposing sanctions”
by virtue of not being tethered to the EU’s unanimity requirement for action. In chapter 2, paragraph 33, one witness concludes that two years of trial and error have left us with a
“very well thought-through and effective legal framework for the imposition of sanctions”—
a fact which rather controverts the too often fashionable fear that post-Brexit Britain has somehow become deficient in the rule of law. Chapter 3, paragraph 117, provides a welcome tribute to how the UK has consistently encouraged Kyiv’s allies, in the words of one witness,
“to push out the boundaries of what is possible”.
The report should also be praised for conceding that the EU is often not the most effective multilateral convenor of Ukraine’s “coalition of the willing”—to use a term of art. As the report notes in chapter 3, paragraphs 118-19, the supply of military aid tends to be orchestrated on a bilateral basis or by the US-led Ramstein group of 57 nations.
Nevertheless, it needs to be said that the committee’s own report in some ways does not, for my taste, reflect the full complexity of the picture, for on occasions it privileges the EU above some more effective forums. It proposes a new
“administrative arrangement with the European Defence Agency”,
despite the testimony from the Polish Minister of Foreign Affairs, Radek Sikorski, that the agency has
“not produced anything of value”
in its 20-year history. The committee also does not amplify Sikorski’s noteworthy suggestion—coming also from one other witness—that the EU-US Trade and Technology Council be expanded to include the UK and others, which of course bears more than a family resemblance to the old CoCom of the Cold War era, which proved to be so effective in that epoch.
There is also the broad consideration of the EU’s increasingly protectionist approach to the defence industry. This inclination endangers our transatlantic weapons and munitions productions and thus risks undermining NATO itself. It is not remotely clear to me how the UK stands to benefit from such a development. How might entry into such an insular industrial fortress have impinged on our freedoms to join admirable arrangements such as AUKUS and the GCAP initiatives, which bring our global influence and military heft to bear on our own behalf, and that of Europe and world security interests? In this connection, will the Minister give the House her reflections on how things have changed since the publication of the report in January and what she sees as the enduring limitations of the EU’s role as described in the committee’s report earlier this year?
Indeed, in this connection, one of the things hanging over the deliberations of this House, as has been stated, is how the report’s recommendations stand up in light of the return of Donald Trump to the White House. This is viewed by some as a reason to align more closely with the EU. Of course, as has been noted, the policy of this Administration is not a done deal, and we must not let perhaps some of our darkest fears turn into self-fulfilling prophecies. The policy of this new Administration is a work in progress, and it is surely for the UK to make the case to the next Administration that Ukraine constitutes a perfect opportunity to showcase its peace through strength concept. Indeed, in Marco Rubio and Michael Waltz, the Secretary of State and National Security Adviser designates, Trump has chosen two of the more prominent NATO-friendly figures in the contemporary US Republican national security firmament.
The squeamishness that we hear about the aspects of the Trump Administration’s apparent approach is not surprising, but we must engage. The Foreign Secretary was perceptive and early money in his outreach to the GOP in the United States, long before the demise of the Biden Administration, and he now states that he long predicted that there would be a Trump victory in the United States. The policy approach should surely be that of the incoming National Security Adviser, who once said, in a different time and a very different context, that it is our job in this country to get up the fundament of the White House—that is not the phrase Jonathan Powell used, but I decline to use the precise words that he used in another place and another time. Geopolitics is not for the squeamish. We yet have an opportunity to help tilt the balance in an Atlanticist direction in the new Washington.
Lord Hannay of Chiswick (CB)
My Lords, I declare an interest as back in the mists of time, when this report, so excellently introduced by my noble friend Lord Ricketts, was published, I was a member of the European Affairs Committee. On this occasion, the delay inadvertently makes the report even more topical, as the impending change of Administration in the US brings us ever closer to important decisions that will crucially affect Ukraine’s and our own future security and prosperity. These are decisions over which we must always remember that we in the UK do not have a determinant say.
The self-image in this country and in this House of our role in backing Ukraine since Russia’s 2022 invasion is rightly positive, and successive Governments, up to and including the present one, rightly get credit for that, but it is not the whole story. In 2014, when Russia seized the Crimea and parts the Donbas by force, we were not so forthright. By standing aside from the Normandy group—France, Germany, Russia and Ukraine—which shaped the two ill-fated and ill-conceived Minsk agreements, which Russia then ignored and trashed, we committed an error of judgment in my view, and we must not repeat that error.
While I am in the process of mentioning sins of omission, the committee’s report dealt with the issue of sanctions in detail, and I found the previous Government’s response to that report pretty unconvincing, frankly. The concerns have been considerably increased by recent reporting in the press of ways in which the overseas territories of the UK are being used as loopholes for evading sanctions. I hope that when the Minister replies to this debate she will give us an account of how the meetings this week with the leaders of the overseas territories have done something—a lot, I hope—to close those loopholes.
We and Ukraine now face critical choices, not only on the battlefield and in the supply of weaponry but in geopolitics too in relation to Ukraine’s territorial integrity and sovereignty, which was guaranteed by Russia in the Budapest memorandum when Ukraine gave up its nuclear weapons and was subsequently junked by it, and in relation to Ukraine’s bid for NATO membership and to join the EU. Any geographical settlement based on Ukraine ceding territory and citizens to a neighbour that has seized them by force in disregard of Russia’s international obligations, including the UN charter itself, is necessarily precarious and risks being reopened in the future. Think only of Alsace and Lorraine, where many millions died before a final determination was achieved. Ukraine’s place in NATO could perhaps have been discussed prior to Russia’s aggression, but now, when its permanent exclusion from membership can be achieved only at gunpoint, is that still so? When the hard fact is that any guarantee given by others, ourselves included, will necessarily fall short of the commitment to collective defence in Article 5 of the NATO treaty, there is a lack of credibility there that falls short of what is needed if Russia is to be effectively deterred in the future.
As to EU membership, as a non-member we no longer have any say over that, but it is surely clear enough that Ukraine’s EU membership is in our national interest too, and I suggest that we should not hesitate to say so. In any case, as a signatory of our trade and co-operation agreement with the European Union, and hopefully the new security pact and reset which the Government aim to achieve, we will be a party to those with Ukraine too. Should we not be travelling with them every step of the way, together with our EU partners?
Speculation about which way the unpredictable President-elect Trump will lean on all these issues is probably fruitless. What is essential is that we discuss in depth with the incoming Administration their thinking as it emerges with the aim of ensuring a strengthened and reinforced overall European contribution.
Baroness Hayter of Kentish Town (Lab)
My Lords, it is always a pleasure to follow the noble Lord, Lord Hannay, and I very much look forward to the wise words of the noble Lord, Lord Levene, who is something of an expert of defence. Unbeknown to him, he was just a couple of years behind my husband at the City of London School—it produced at least two fine alumni.
While we meet on the 1,002nd day of war, as my noble friend Lord Spellar said in his maiden speech and as the noble Baroness, Lady Suttie, said today, there have been 10 years of war and of Russian incursion into Ukraine. Sadly, despite regular protests against Israeli attacks on Gaza, the world seems to have forgotten the daily Russian military attacks on Ukraine’s civilian infrastructure and its people.
Two things followed that invasion: it fast-tracked Sweden and Finland into NATO, and it made the EU and UK collaborate on an immediate problem. Neither are things that Putin can have wanted. The EU is now more focused on defence: it has a defence commissioner and a special fund. It knows it will have to do more, despite backtracking from some, such as Slovakia, Hungary and Bulgaria, which will make unanimity difficult.
Since February 2020 the international stage has, of course, changed further: not just in the Middle East, where we have seen Iran flex its muscles—its support for Russia’s war adding another threat to Europe’s security—but, as others have said, with the election of Donald Trump, his tilt at China and his threatened tariffs, and the hostility to the EU that he shares with Putin. All those things challenge our assumptions about trade, Europe and Ukraine.
While the whole world—particularly Ukrainians—desires peace, Zelensky has said on the radio that he wants to do everything so that this war ends next year and ends through diplomatic means. But that does not mean on any terms. It is vital that the EU and UK hold to the view, as the noble Baroness, Lady Suttie, said, that no other country has the authority to negotiate away the territory of Ukraine. That is even more key now because Trump might seek a deal with Russia, even if it means leaving Putin with most of what he gained through aggression—a price that Trump, but not the rest of the allies, might be willing to pay.
If we take Trump at face value, Europe will have to carry more of the burden of supplying Ukraine. This is challenging at a time when Germany, the single biggest donor after the US, is in full election mode, and with Scholz unwilling to allow the use of Taurus missiles. Trump’s obsession with the US trade imbalance with the EU impacts his attitude to Europe’s approach to Ukraine and has implications for our relationships with the EU well beyond anything imagined at the time of Brexit.
Our Government rightly want to reset our relationship with the EU, and to include defence in that. But this comes at a time when the President-elect’s aides hint at excusing the UK from the tariff war that Trump seems to want to wage. That puts us in a difficult position, given our closeness to the US, its significance as a trading partner and our reliance on it in the nuclear area and through Five Eyes. There is certainly trouble ahead in steering this ship of state.
For the moment, rightly acknowledging that the defence of the UK starts in Ukraine, the Government have continued their welcome support for Ukraine and said that this remains “ironclad”—as indeed has the G7. Its leaders’ communiqué this week reaffirmed their unwavering support for Ukraine as long as it takes, and their contribution to its fight for sovereignty, freedom, independence, territorial integrity and reconstruction.
One immediate task for us is to ensure that our population remains staunchly supportive of our continued role. At the level of parliaments, last month in Budapest, COSAC—the conclave of parliamentary European affairs committees—strongly and unequivocally reiterated its condemnation of Russia’s unprovoked illegal invasion, its war of aggression and its occupation and annexation of parts of Ukraine, which constitute a flagrant violation of the UN Charter. COSAC renewed its full, unwavering support for the independence, sovereignty and territorial integrity of Ukraine within internationally recognised borders, along with military and diplomatic support for as long as it takes and as intensely as needed.
That is great from the parliamentarians, but people, as well as parliamentarians, need to be kept onside and engaged. Even after the war, both our people and the UK, working with the EU, will face another challenge—helping to rebuild that shattered land. That means social provision, education, civil society and its future, which depends on its children. As Coram International points out, Ukraine has particular challenges here, with more children in care than any other European nation, and with many orphans and displaced children spread around Europe. Reintegrating those children will be an enormous challenge. If the war is not to produce another scarred post-conflict generation, we and the EU should work together on programmes aimed at people as well as buildings. The EU did it before, after the fall of the Berlin Wall. This is a time for us to rise to that challenge.
Ukraine never wanted to be the fulcrum in our relations with the EU, but it has shown that this continent cannot be constrained by political structures, assumptions and bureaucracy. It must be fleet of foot, united in purpose and committed to peace, freedom and the rule of law. As we go forward, Europe needs a strengthened common purpose. I trust the UK will play a full role in fulfilling that.
Lord Risby (Con)
My Lords, I unhesitatingly congratulate the European Affairs Committee on so comprehensively exploring the subject matter at hand. Yet events have indeed moved on quickly in the intervening months, and the situation in Ukraine has considerably worsened. Uncertainty around the world and at the strategic outlook of the USA has grown appreciably since the election there. Inevitably, the shape of American defence policy has been pulled towards the western Pacific. But, with Ukraine under serious pressure from the renewed efforts by Russia, aided by China, Iran and North Korea, it is appropriate that we look at the future of UK-EU relations in the overall context of Euro-Atlantic security.
I welcome the improvement in relations between ourselves and the EU, to our mutual benefit. I had the personal pleasure and privilege in the other place of taking through the legislation for the Opposition for the enlargement of the EU. I mention this because, during the passage of that legislation, a remarkable individual, the then Polish ambassador, presciently said to me, several times, that it was most important to give Ukraine a European trajectory: if not, its sizeable neighbour would inevitably interfere. In fairness to the EU, some progress was made, but some in successive Ukrainian Governments did not adequately adjust to the highest standards that the EU, quite rightly, demanded.
In this respect I pay tribute to the noble Lord, Lord Macdonald of River Glaven, who voluntarily wrote a comprehensive report on judicial reform and court structures in Ukraine after a number of visits. The situation is of course different today and I hope that, in due course, the European trajectory will be reoffered as standards improve. One matter in the report that needs firm acknowledgement is the degree to which there have been differences across Europe about help for Ukraine. A very small number of countries have opposed support for Ukraine; others have been erratic or lethargic. It is noteworthy that the newer members of NATO are, in many instances, doing so much to uphold security, influenced by their memory of the grim reality of Kremlin control.
The 1,800-mile line between Norway and the Arctic to Romania and the Black Sea has been established as defence against Russian aggression. Above all, Poland has dramatically increased military spending and capability and has just commenced its 250-mile, $2.5 billion border wall with Russia and Belarus, with systems powered by artificial intelligence. It has also acquired 800 American and South Korean cruise missiles, with a range of up to 560 miles. There are equally new defence arrangements in Lithuania and Finland, among others. These are, of course, EU countries, but we can be grateful that this, in effect, improves our security against an aggressive country so hostile to us.
The report outlines the successes and failures of the sanctions regimes rolled out against Russia, and, although there has been an impressive degree of unity across Europe in co-ordinating the introduction of fresh sanctions packages, this has not been matched by adequate enforcement. Exports from European countries to Russia’s neighbours have greatly increased. We should be in no doubt that this is fuelled by sanctions evasion, which must be closed off as it bolsters the Russian economy.
The very prospect of a new Administration in Washington has spurred on increased defence spending in a number of European countries, yet a country thousands of miles away, particularly preoccupied by the Asia-Pacific region, continues to supply the bulk of NATO’s defence expenditure. That is why we must work with our European partners to increase assistance, directly or indirectly, financially and militarily to Ukraine.
I welcome the report’s recommendations on encouraging private direct finance and investment to aid the recovery of Ukraine, a country with immense economic potential, but we must wield our own financial know-how to unlock that potential, and strong and direct government support demands that. The work of the EBRD and other groups is to be admired, but surely this is the time to advance a clear spread of British initiatives, and indeed Lviv airport offers such a clear possibility. The French Government have promoted investment in Ukraine, offering insurance to French businesses. I invite the Minister to look carefully at that French initiative and examine its efficacy. I also recommend to the Minister examining how key areas can be mapped specifically for investment. Businesses in Ukraine that I have spoken to, even large ones, find it extremely difficult to form partnerships with British companies because of the restrictive response of British banks. This is not currently a virtuous circle.
To conclude, just as we took the lead militarily and diplomatically, we must now lead the charge in preparing for the reconstruction and renewal that may be coming all too soon and persuade our EU partners to do so assertively as well.
Lord Levene of Portsoken (CB) (Valedictory)
My Lords, I am most grateful to the noble Lord, Lord Ricketts, for initiating this debate on the impact of Russia’s invasion of Ukraine, as it emphasises to us the debt that we owe to the gallant men and women of our Armed Forces for keeping us safe from such horrors. It underlines the criticality of ensuring that they are equipped with the very best equipment available.
It is, as always, a great privilege to be able to address your Lordships in this House, particularly today as it is the last opportunity on which I will be able to do so. Having said that, I am aware of the fact that my recent spoken contributions have been few and far between, primarily because of limited mobility. Nevertheless, that has not impaired my ability to offer what advice and assistance I can to the Ministry of Defence on what, should I be a contestant on “Mastermind”, would be my chosen subject of defence procurement.
It is, amazingly, some 40 years since I was approached by the noble Lord, Lord Heseltine, to offer assistance to him as the newly appointed Defence Secretary to endeavour to improve our record in the procurement area. That encompassed what eventually became the successful contractorisation of the royal dockyards, and then far more in the management of defence procurement and other aspects of activities within the Ministry of Defence. Some of that advice may well have hit the right note, since I note with some pride that there are now within the MoD a series of recommendations that have been designated as Levene rules.
Most recently, last year the House of Commons Defence Committee commissioned an inquiry into the UK’s defence procurement system because of wide-ranging concerns as to its efficacy. I gave evidence to that inquiry that is reflected in the committee’s report, which was published in July last year, and I hope that those recommendations will indeed be followed through—something that I am sure will be under consideration by the wider defence review under the chairmanship of the noble Lord, Lord Robertson.
If I tried to summarise those recommendations, I would say that I regard defence procurement as being quintessentially a commercial operation. The more that ability in the commercial sphere is predominant in the thinking of the staff of DE&S, the more successful the outcome is likely to be. I shall explain that, when I held the then position of Chief of Defence Procurement, I was the accounting officer for Vote 2, which is the equipment vote of the Ministry of Defence, and the loss of that direct responsibility by the present chief executive of DE&S represented a critical diminution of his ability to manage. I was therefore pleased to see that the recent report of the HCDC to Parliament recommended that that responsibility should be returned to the chief executive.
I shall comment on the relative interests and responsibilities between the defence industry, the Ministry of Defence and the Armed Forces. There is no doubt in my mind that the defence industry, combined with the gallant members of the Armed Forces and the MoD civilian staff who work with them, both do their very best to obtain the best results. However, this is where we come to the crunch: although they may be working in tandem, their primary drivers will necessarily be on opposite sides of the table. As much as the MoD staff in DE&S are pursuing their role, their opposite numbers in the defence industry may, for obvious reasons, be driven by a different imperative.
When I was in office in the MoD, my watchwords were “competition”—or, as my critics liked to call it, “confrontation”—and “value for money”, which I explained as the golden rule, meaning that those who have the gold make the rules. At the end of my term after six years, these drivers produced a result whereby the verdict of the Public Accounts Committee was that we had fulfilled its remit of value for money. I greatly hope that, with the excellent staff, both military and civilian, who have that responsibility today, we may once again fulfil to the utmost the outcome that we were tasked to achieve, and which was clearly spelled out to me by the Prime Minister, Margaret Thatcher, in her typical forceful manner when she said:
“Your job is to obtain the best possible equipment for the Armed Forces on the best possible terms full stop. PS: Your job is not to keep the UK defence industry in the manner to which it has become accustomed”.
For that reason, I do not believe there is a need for a defence industrial policy. The defence industry in this country is made up of some very successful and resilient companies. They are more than capable of looking after themselves without having someone hold their hand.
On taking my leave from your Lordships in this House, I say again what a privilege it is to have served here. I thank all noble Lords and noble Baronesses, who have always treated me with the greatest kindness and friendship, in the same way as the outstanding staff of this building, in whatever post, to all of whom we owe a great debt of gratitude.
Baroness Helic (Con)
My Lords, it is a privilege to follow the noble Lord’s valedictory speech outlining a remarkable journey from transforming United Scientific to leading Lloyd’s of London and serving in government in such a distinguished way. The noble Lord’s contributions to business, public service and the City of London have been truly exceptional. I hope he will not mind me saying that, when I consulted his biography, I thought I was reading a perfect Hollywood script of a businessman who has done it all. I am grateful to have had the opportunity to follow his words today.
I welcome this debate, the report and its recommendations, and I congratulate the noble Lord, Lord Ricketts, and the members of the committee. More than 30 years ago, crimes against humanity and genocide were committed in the country of my birth, Bosnia-Herzegovina. At the time, and until recently, I hoped it would never happen anywhere else again, not in Europe or elsewhere. Yet today, after more than 1,000 days of the most recent aggression, the unprovoked and illegal full-scale Russian invasion of Ukraine, such horrors are once again unfolding in Europe and beyond, in places like Sudan and Gaza.
Since the invasion, at least 16 children per week have been killed or injured. Sexual violence is once again being used as a weapon of war against Ukrainian women and girls. The risk of another Bucha intensifies with every new report of Russian advances. There are reports of serious challenges with the Ukrainian front line and Russia’s territorial gains. Consistent attacks on critical infrastructure are well-known tactics that Russia has deployed in each and every theatre it has fought in.
This demands a sober response. Unity of and with our friends on the continent and across the Atlantic is essential. I therefore welcome the Foreign Secretary’s clarity that:
“UK security is indivisible from European security”,
and the ironclad support for Ukraine from His Majesty’s Government. But the question we should always ask ourselves is: what more can be done?
First, we should work with the European Union to impose tougher and more extensive sanctions on Russia. With that in mind, does the Minister agree that we should work with the EU to explore further seizures of Russian assets, tighten currency restrictions and not neglect sanction-busting third-party states, which have so successfully supported Russia over the last 1,000 days?
Secondly, we should use this opportunity to genuinely reset our relationship with the European Union. I therefore welcome the calls for co-operation with PESCO, the European defence fund and the European Defence Agency. The lack of an institutional framework and regulatory divergence are fundamental problems, but we have other problems that go beyond that; the loss of trust on both sides is at the heart of the issue. We must work towards rebuilding it.
A wide-ranging and legally binding UK and EU defence pact is a perfect opportunity to fill the gaps and rebuild relations. The only way to prevent another Ukraine and to help this Ukraine is to invest in collective deterrence. Increased and consistent funding for the Armed Forces and Diplomatic Service is not a luxury; it is a necessity. Working together is the only way forward.
Thirdly, I would like to step away from Ukraine for a moment, because there is a region the report sadly did not mention or reflect on: the western Balkans, where Russia has continued its damaging, malign influence and spread of disinformation. The foundation of peace and prosperity is deterrence, not appeasement and neglect. That applies to Ukraine as much as to the western Balkans and vice versa. I therefore welcome His Majesty’s Government’s renewed commitment to the region, but we must go further.
We must build on this by working more closely with the EU and partners—I hope the United States as well—to promote capacity building, engage in joint exercises and conduct training missions across the region. This is in our interest. Were there to be a collapse of security and renewed instability in the western Balkans, the illegal migrant route would be wide open. The noble Lord, Lord Coaker, recently visited Bosnia. Can the noble Baroness the Minister let us know his assessment of the strength and capability of the EUFOR deterrent there and the need for a UK role in strengthening Operation Althea? Additionally, has any thought been given to replicating the Joint Expeditionary Force model, which has been such a success in northern Europe, in the Balkans?
Fourthly, I commend the report for its focus on winning the peace. We must be cautious about a Dayton-style agreement between Ukraine and Russia. Incidentally, today it is 29 years since that agreement was signed. While it brought peace, it also created an unworkable institutional system in Bosnia-Herzegovina, easily exploited by secessionists and their enablers. If so-called autonomous regions were to be established in Ukraine to appease Russia and satisfy secessionists, that would be a complete disaster. To do so would be to reward the aggressor and trust it with the post-war power-sharing arrangements. This would entrench corruption, embolden strongmen and autocrats and encourage adversaries worldwide. It would betray the Ukrainians who have lost their lives for their nation and for their sovereignty.
This is all, of course, up to the Ukrainians. They must never feel pressure from any of their partners, allies or friends to agree to or settle on an unjust peace. We have no right to trade in their territory, and I hope that we never see that. Ukraine will outlive Putin and anyone else who comes after him. But its cities, schools and hospitals will need to be rebuilt. The people of Ukraine, who have been fighting so admirably and valiantly, will need to know that this scenario will not be repeated in the future. They need to feel secure and safe.
Much can be learned from the past and from other theatres. The international community must come together to foster reconciliation and prevent another outbreak of violence. The use of tribunals and commissions must be introduced to hold perpetrators accountable. This method worked elsewhere; it should work in Ukraine too.
Finally, as the second Trump Administration approaches, we ought to be cautious but not despondent. We ought to embrace the return of peace through strength by raising our own defence spending and our overall capabilities. I hope, therefore, that we can use this moment to rebuild our relationship with our friends and partners on the continent and strengthen it with the United States across the Atlantic, as we stand with Ukraine in her finest and most difficult hour.
Lord Alderdice (LD)
My Lords, I start my comments by identifying with the tribute and appreciation paid by the noble Baroness, Lady Helic, to the noble Lord, Lord Levene of Portsoken. He has been a great public servant, and that is the best that can be said of any of us in your Lordships’ House. I also congratulate the noble Lord, Lord Ricketts, and his impressively experienced committee and welcome this report as a thoughtful and informed contribution to a crucial conversation about relations with our nearest neighbours in the context of the Russia-Ukraine war. However, as he and others have rightly said, the situation has moved on considerably since the completion of the report, and even in the past couple of days.
I am not sanguine about sanctions, the defence capacity of the EU and a geopolitical transition that is disadvantageous for the UK. Paragraph 86 of the report says that that one of the witnesses noted
“that sanctions are a coercive measure, and their primary aim is to change behaviour”.
In paragraph 104, the Foreign Secretary of the time, the noble Lord, Lord Cameron of Chipping Norton, is noted as having suggested
“that the arrangements for cooperation between the UK, the EU and other allies on sanctions … have been effective in responding to the crisis in Ukraine”.
One measure of effectiveness is how well the UK and the EU have co-operated on developing a sanctions regime. There has been some progress, although in response to the acute crisis of a war it seems to go at a rather sluggish pace more suited to a time of peace. A different measure of effectiveness would be how far it has modified Russian behaviour. If the purpose was to bring the war to an end in Ukraine’s favour, it seems that sanctions have not been very effective, but they have deepened the global division between the G7 and our other allies and the growing community of BRICS and their allies. The global economic landscape has shifted dramatically in recent years. In 1992 the G7 accounted for some 45% of global GDP against the BRICS countries’ less than 17%. However, by 2023, the BRICS bloc accounted for 37% of global GDP, compared to the G7’s 29%. This is not a development likely to impact President Putin’s behaviour in ways that are helpful to us and Ukraine.
On the more immediate defence issues, the picture is perhaps even more troubling. As noted in paragraph 117, we can take some pride that the UK has been important in
“normalising the provision of certain weapons systems early on”,
pushing out
“the boundaries of what is possible”
and providing
“some leadership in allowing a debate to be had about particular weapons systems”.
While eventually and belatedly President Biden has permitted ATACMS to be used directly in Russian territory against Russian aggression, our German friends remain resistant to provide the Taurus missiles that could make a significant difference.
The report points out that the EU, with its population and resources, ought to have the potential to produce and sustain a substantial defence against Russian aggression. However, even after years of our US ally—and some of us in this House—warning of the imperative for Europe to shoulder the burden of its own defence, there is an almost universal recognition that the EU is not a sufficient defence pillar, as evidenced by the PESCO initiative, for example, being so slow to get up and running despite having been on the agenda for years.
In truth, our defence at this point remains dependent not on our EU relations but on NATO. Without an enthusiastically committed US pillar to NATO, we would not be able to sustain the resourcing for Ukraine and, as the report says, Europe is
“lagging behind Russia’s ongoing efforts to prepare and provide for the long war that is probably ahead of us”.
Concerns about the incoming Trump presidency and a likely
“dramatic change of US policy”
have resulted in many meetings and press column inches in Europe, but they do not yet seem to have galvanised the EU into sufficient production and action, and while the UK has taken the lead in some senses, recent reports about £0.5 billion of savings being demanded by the Treasury send the wrong signal to Russia and her allies. It all seems to show a lack of appreciation of the gravity of the situation we face, quite possibly for much of the lifetime of those participating in this debate. I ask the Minister to clarify for us as much as she can what the situation is with these reports of cuts.
I have not said anything about reconstruction because I cannot see how Governments, never mind the private sector, can be persuaded to espouse in practice the injunction in paragraph 192 of the report that:
“Reconstruction cannot wait until the war has finished”.
Many will take the view that it is unwise to spend resources on reconstruction that will be destroyed, rather than on the weapons needed to bring the war to a satisfactory end. In addition, as noted in paragraph 215, reconstruction is expected to be linked closely to Ukraine’s candidacy for EU membership, and it is difficult to see how this country is able to do much to facilitate this long-term ambition for Ukraine when we have so recently departed the EU ourselves and are not at the table. Perhaps even more significantly, our departure hardly makes us the best people to recommend and facilitate Ukraine’s entry into the EU.
In any case, as the report says, NATO is the critical actor in providing Ukraine with long-term security, not so much the EU, and that should perhaps be our focus from a security and indeed a foreign policy perspective. NATO membership is more likely to be the solution to the defence of Ukraine and will ultimately provide the context for its reconstruction, as the EU remains divided over aspects of its response to the conflict, not least the impact of the decisions of Hungary and Slovakia.
More widely, the EU’s problems in establishing a clear agreed geopolitical role, whether in response to the conflict in Israel, Gaza and the wider Middle East or relations with China, reflect additional divisions between EU member states compared to their response to the Russian invasion of Ukraine. At this stage in the Russia-Ukraine war, one could have hoped for and expected a more impressive and impactful response from our relationship with the EU. I am disappointed that we still seem to await such a development and I look to the Minister to give us some encouragement that we can expect more in the upcoming year.
Lord Balfe (Con)
My Lords, I thank the noble Lord, Lord Ricketts, for this report and the noble Lord, Lord Levene, for his valedictory speech. I am sure that he has contributed much to the House and will continue after he leaves us to make a distinguished contribution to public life.
I have reminded this House on many occasions that you can rewrite your history but you cannot do much about your geography. That is part of the problem here. The fact of the matter is that this Parliament on all sides has been very silent about what we are actually doing. We have not said, as we should have said, to the pensioners of Britain, that their winter fuel payment is exactly the same sum of money that we are sending to the Ukraine. We have not levelled with the British population at all.
I went to the Ukraine many times between about 1998 and 2014. I gave up in 2014, because it was evident to me that Ukraine was then going to fall apart. It was never a single country; it was always the country of the Molotov-Ribbentrop pact, which we should remember was added to western Ukraine and confirmed at the Crimea conference as belonging to Ukraine, which was of course seen as part of the Soviet Union.
It pains me to say so but, if you look back in history, you can see that sanctions have never worked. They did not work in Abyssinia, and they have not worked since. I had an email yesterday—many noble Lords may have had it—from a group called Spotlight on Corruption. It was not about the Ukraine, which is pretty corrupt; it was about Britain. It says:
“Weak enforcement has long been the Achilles’ heel of the UK’s fight against economic crime”.
It says that
“the powers available to UK enforcement authorities are stronger”
but court challenges to UK sanctions have so far failed and criminal and civil enforcement has been weak.
I am not surprised, in a way. If people cast their minds away from the dancing in Samoa to the actual conference in Kazan, and the Russian group, they will see that sanctions are not working. I have Russian friends—not people in high places, but people who live in cities in Russia. They will tell you, “We’ve got round the sanctions. Yes, it’s difficult and we’ve had to make substitutions”. As one of them said, “Ikea has gone, but my uncle has managed to take over the factory, and we now have a Russian Ikea in our family”. One advantage, of course, of the collapse of communism is that capitalism has moved in to fill the gap that sanctions have caused.
We have made no attempt to discover what the real, underlying problems are. I was in Crimea before it was taken over. I was in Donetsk, Luhansk and Mariupol, and it was clear that, when the Ukrainian Government decided to outlaw the Russian language as a means of communication in schools they were going to annoy a lot of people, to put it mildly. Of course, one difficulty with Viktor Orbán is that Transcarpathia, which is part of the Ukraine, used to be part of the Austro-Hungarian empire, and used to have Hungarian schools there—and they were suddenly told that they could no longer use the Hungarian language. That is just glossed over; it is not reported or looked at. I am not in the least surprised that sanctions have not worked.
A new officer in the Trump Administration, Tulsi Gabbard, has said that the United States provoked the Russians in Ukraine. That is undoubtedly true. There was a lady from the State Department, Victoria Nuland, who spent years doing just that. Of course, Ukraine must be fully represented in any peace negotiations, because we do not want a “stab in the back” philosophy to grow up. Ukraine has to be there and has to accept whatever is negotiated.
From time to time, President Zelensky has demonstrated a willingness to do this, but he has been bullied and pushed around, particularly by the United States and to a lesser extent by us. The Ukraine must be part of the negotiation. It must be at the table and accept the outcome, but I am not sure that outcome is exactly what our foreign policy supremos have been driving at for the last few years. We need another look at this.
Lord Liddle (Lab)
My Lords, first, I pay tribute to the noble Lord, Lord Levene, for his decades of very distinguished public service. We all owe him a great deal for what he has done. Secondly, it was a great pleasure to serve on the European Affairs Committee under the chairmanship of the noble Lord, Lord Ricketts. He was a brilliant chairman but greatly assisted by a highly capable team of staff to whom we owe a lot.
We are in a pretty gloomy place at the moment. I often reflect on how different it is from the optimism of the late 1990s, when we thought that democracy was going to spread across the world in a victorious way. My noble friend Lord Robertson of Port Ellen as Secretary-General of NATO was welcoming the Russian top brass into NATO and the accords were agreed for co-operation with Russia. I also remember, when I worked in No. 10, my Prime Minister’s real optimism about the future when Vladimir Putin took over as Russian President and his intense attempts to engage him in co-operation on the challenges facing the world then. It is a very difficult time now. The invasion of Ukraine by Russia was shocking and now we have President Trump again in the White House. To those who think, “Oh, well, it might be all right”, it might be all right, but the fact is that the Republican Party has already contributed to the great weakening of Ukraine’s position by delaying US aid to Ukraine for some six months in Congress. We should not forget that. We are in a bad way.
Let us think about what really matters for the future. First, even if there is some agreement with Putin next year, as long as he or someone else like him is there, he is going to remain a great threat to us in Europe and we have to resist that threat with all the power we can. This will be the big challenge for UK foreign and defence policy in the years ahead. Defence spending is going to have to rise, and that is going to create great difficulties for taxation and public spending, but it must. As part of our resistance to imperial Russia, as I think it now is, we have to get much better at defence, particularly at defence procurement, and we need to have much stronger collaboration with our allies and partners.
We should be open-minded about the European Union’s efforts to make this process more efficient. Wherever possible, we should co-operate. The old argument was that NATO was the thing, and European defence got in the way of NATO. I think that, in this present situation, the argument is the other way around. If we are to save NATO with the Americans, Europe has to act collectively to convince President Trump that he should continue to back us.
I favour a single market in defence equipment, which there is not at the moment. The UK should try to be part of it, even if we are still outside the EU. We have to take more responsibility, which requires a much closer relationship with the EU. I am very encouraged by the way our new Prime Minister Keir Starmer is pursuing a new security deal with the EU. That is absolutely essential and will put us in a good position for the future.
Of course, I think we should treat Donald Trump seriously. We have to work with him and hope that we can influence him—although I think that, too often in the past, Britain has exaggerated its influence in Washington. He wants, apparently, to do a deal with Putin on Ukraine. We have to persuade him that it should be a deal that is fair to Ukraine, and he has to recognise that Ukraine’s central ambition is to be part of the European Union. Its European vocation is driving those soldiers to resist the Russian attacks. I think we can play our best part in this by rediscovering our own European vocation.
Lord Stirrup (CB)
My Lords, I congratulate the noble Lord, Lord Levene of Portsoken, not just on his thoughtful valedictory speech but on his outstanding contribution to your Lordships’ House over so many years, and of course to the defence of the realm for such a long period as well.
The report on the UK-EU relationship that we are debating today is titled The Ukraine Effect but, as we have heard many times this afternoon, it should now perhaps be called “The Ukraine and Trump effect”, since the result of the US presidential election has thrown the issues raised by the report into even sharper relief. The Russian war in Ukraine has finally opened the eyes of many who, for so long, were oblivious or blind to the threat that Putin poses to the wider safety and security of Europe. Now, the imminent return of President Trump to the White House has thrown into doubt the degree of American military power that might be available for the defence of this continent. Even the less contentious members of the future Trump Administration are very much focused on China and are looking to direct an even greater proportion of their national effort towards the Asia-Pacific region. The more contentious nominees regard the European members of NATO as little more than freeloaders.
The obvious—and by no means new—conclusion is that Europe must do much more to deter aggression and, if necessary, to defend itself. We need a far stronger European pillar within NATO, and we need it quickly. In particular, European nations must now look very carefully at how they might provide more of the strategic capabilities for which we have traditionally been overreliant on the US.
President Macron has talked about the need for the EU to achieve strategic autonomy. That seems to me overambitious, at least in the short term, but there are a number of important military capabilities where European nations need to make a greater contribution and where individual national efforts alone are unlikely to be sufficient—where co-operative efforts will be required. These include the exploitation of space; the provision of command, control, communication, intelligence, surveillance and reconnaissance systems; more extensive defensive and offensive capabilities in the cyber domain; and a much more comprehensive approach to cognitive warfare in the round. These are all areas where the UK has considerable expertise and can make a significant contribution to, or even lead, efforts to improve European capabilities.
For example, Scotland is one of the only places in the world which has an end-to-end development chain for small satellites. They can be designed and built there, and launched into polar orbit from SaxaVord spaceport. We also have 53% of Europe’s surveillance UAVs, 42% of its airborne early-warning and control aircraft and 38% of its intelligence aircraft. Our cyber capabilities are extensive and we have the potential to be a force in the developing field of AI. We also have significant capability and expertise in the application of soft power, so we have much to offer.
But if we are to work more co-operatively on such strategic defence programmes within Europe, we must have effective mechanisms for achieving this. We must be able to contribute jointly with partners to the formulation of policies and the development of strategic direction. As the report makes clear, however, existing EU processes and mechanisms make it extremely difficult, if not impossible, for third-party nations to play a leading role in its work or influence its direction in any substantial way. Although we should seek to change this, I rather doubt that the EU would be prepared to make an exception for the UK, in which case one potential solution might be to develop new mechanisms outside the existing systems, where the UK’s participation could be built in from the outset. This might apply particularly to areas where we are trying to develop a new field, rather than expand an existing one: cognitive warfare springs to mind.
Failing that, we would have to look for co-operative arrangements that fall outside the EU entirely. Perhaps a distinct European arrangement under a NATO umbrella might be one way forward. The European Commission tends to be protective of its turf and might not look kindly on such ideas, but the scale and influence of the threat ought to outweigh such bureaucratic considerations. Can the Minister confirm that the Government will explore all avenues and innovative ideas to resolve this issue?
There is, however, another complication. Our Five Eyes intelligence arrangement, our other intelligence programmes with the US and our engagement in projects such as AUKUS could create some tension between the needs of our confidential undertakings with the US and greater European security development. If America is serious about Europe doing more to defend itself, there is surely sufficient incentive to find solutions to such challenges, but none of this will be possible without the necessary funding.
Setting out grand aspirations and developing effective mechanisms without providing the necessary resources would be hollow posturing—just so much hot air. It would certainly not persuade President Trump that we were shouldering our share of the security burden, nor would it do much to deter Putin from his programme of aggression. Given the scale, immediacy and seriousness of the challenge, European nations, including the UK, will need to invest 3% of GDP and upwards in defence if they are to meet the needs of such a changed and perilous international situation.
I see no sign that many Governments within Europe, and I include our own, are prepared to acknowledge this. Given the undoubted economic challenges they face, they are making some very modest increases in defence expenditure and hoping that the problem will go away. Well, it will not. Without the necessary expenditure, the strategic capabilities we need within Europe will not be developed. President Trump will continue to believe that the US defence budget is being used to permit greater European spending on social programmes, and NATO’s capabilities and cohesion will both be threatened. Far from learning the lessons from Ukraine, the EU and the UK will have allowed them to pass over their collective heads. Talk is cheap; effective deterrence is not. It is well past time that political leaders in Europe faced up to their responsibilities in this regard.
Baroness Nicholson of Winterbourne (Con)
My Lords, it is an honour to serve on the European Affairs Committee, particularly under the exceptional chairmanship of the noble Lord, Lord Ricketts. The question on which our committee chose to focus was the rebuilding of the UK’s relationship with the European Union in the wake of the Russian invasion, now just over 1,000 days ago. The answer is, of course, clear: the relationship has steadily improved. We are now firmly and clearly on the same side as the European Union in our unyielding support of Ukraine, despite the enormous suffering that both sides and others have endured. Our relationship, therefore, has improved.
I declare two personal interests on Ukraine, both of which are voluntary. First, I am chair of AMAR International Charitable Foundation, where I have gained first-hand knowledge of the immense destruction by Russia of Ukrainian families. I have worked with some of the children and the mothers, who are destitute and frantic. I also have knowledge of the corruption which I encountered during my chairmanship of the Ukraine Britain Business Council, another voluntary organisation. The corruption has been intensified and deepened by the war because where Russia goes, corruption seems to grow. Noble Lords are therefore stating the obvious when they say that the rebuilding of Ukraine will not be easy at all.
Yet Ukraine has great friendships in its neighbourhood. Romania in particular has been magnificent: in Romania there are perhaps 50,000 or so Ukrainian husbandless mothers and their children. I am glad to say that, in Romania, there are still Ukrainian schools and even Ukrainian universities. The welcome has therefore been enormous. I pay great tribute to Romania, which has refused to put them into so-called refugee camps. Every single Ukrainian has been placed in a family, a monastery or a nunnery. It is absolutely magnificent, but it is not at all easy for those Ukrainian families themselves. The likelihood of them returning to their real homes in Kyiv is negligible, since many were bombed. On top of that, there is Poland, which has been magnificent, and other nations. Ukraine is therefore very fortunate where she is.
One wonders how the UK can help. First, the rebuilding of Ukraine, as has been said, will focus largely on business and industry. We in the Ukraine Britain Business Council already have some of the brightest, best and strongest that the UK can provide rebuilding the nation’s companies. Yet visiting Kyiv with some of those companies, it was painful to see the huge diminution of, and the enormity of the endless assault by Russia on, the capital city of Ukraine—which, of course, Russians believe is the capital city of their own nation. Ukrainians themselves have suffered this massive impact—it is huge—but the UK can help, mainly through our position as a partner member of the Council of Europe. We do not belong to the European Union, and we are a major member of NATO, but we are partners with Ukraine and the other nations mentioned in the Council of Europe. I suggest that, for Ukraine to enter the European Union, which is tough and difficult but is going to happen in perhaps eight or nine years, it will have to be via the classic route of the Copenhagen criteria.
One of the key elements of the Copenhagen criteria’s 10 rules is, of course, the fight against corruption. Despite the comments made by earlier speakers on Britain’s own corruption weak spots, it is nothing like the corruption to be found in Ukraine, which is truly enormous and has been so for a considerable time. We should pick up that as one of our key ways of assisting Ukraine to move closer to the European Union.
The other element is child trafficking. Ukraine, unnoticed by others, has been a major child trafficking country. All our work as a nation, and of the European Union at an integrity level, has been on child trafficking. That brought Romania into the European Union. We have done it once and we could do it again. I highly recommend that: it is in the Copenhagen criteria, and it is another element through which we could help.
Russia herself, the aggressor, has been drastically weakened and tragically harmed. Her relationship with her neighbourhood has almost shrivelled into nothing, including with Kazakhstan next door. A few of us recall that Russia had an enormously good tertiary education system: hundreds of thousands of students from different nations, both next door and as far away as Morocco, were having a much cheaper, high-level university education in Russia than they could obtain in western Europe. All those students had to be thrown out—they had to leave, it has all stopped—with the invasion. They poured over the border into Kazakhstan, for example. Some of our universities did their best to help, but with nothing like the enormity of the education they were gaining in Russia.
Inside Russia, supply chains are breaking. With Azerbaijan, for example, there are enormous difficulties in recovering and recreating supply chains for simple things such as fertiliser, which has made agricultural movement so difficult. So Russia herself is desperately damaged and we need to think ahead about how we can help her recover her economy later on.
The invasion was not unexpected—we should have been expecting it for a very long time. In Moldova, Russia took over Transnistria in 1991; then Georgia; and now Ukraine. There is a common denominator of moving ahead. The first Duma visit to Strasbourg took place in 1999. I chaired a dinner and asked them how they were getting on with the new world of democracy—to which they replied that the world had seen the destruction of the greatest empire ever known and that they were steadily rebuilding it. That we have been so slow to pick this up is distressing and disturbing. Above all else, this report should remind us of the need to remain vigilant and work to recover those former territories.
I thank the committee very much for allowing us to make this report and I look forward to the next steps.
Lord Teverson (LD)
My Lords, I will start with a couple of bits of good news. As Members of the House may have heard, last year, for the first time, the European side of NATO collectively spent 2% of its GDP on defence. Eight nations did not, but at least we got to that threshold. As other noble Lords, including the noble and gallant Lord, Lord Stirrup, have said, it will certainly not be enough for the future, but that progress perhaps shows a seriousness of intent, not least in Germany. The other particularly positive thing was the attendance of our Foreign Secretary, David Lammy, at the EU Foreign Affairs Council last month. I hope that will continue on some sort of basis. I would be interested to hear the Minister’s comments on that.
One of the biggest obscenities in the Ukrainian-Russian war is that, in Putin’s vainglorious intent, he has already sacrificed at least 70,000 to 80,000 of his citizens, who have been documented as killed in action. Realistically, we can probably double that to 140,000. Something like 400,000 Russian citizens and others involved in the war on the Russian side have been permanently injured or killed in action. Sacrificing his citizens through propaganda and war for his own purposes is an obscenity in Putin’s leadership. The damage in Ukraine has been equal to and even worse than that, but we should take note of those human statistics in this war.
I chaired the EU security sub-committee in the term before the noble Lord, Lord Tugendhat. I was really surprised that, particularly in the UK, we look so suspiciously between the EU and NATO when it comes to defence areas. It is ironic that I, like many other noble Lords, used to visit Brussels fairly regularly, where we had two headquarters in the same city that seemed so far removed from each other in many ways. However, it was very clear at that time—pre the Ukrainian war—that the EU did not see itself in terms of territorial defence; it saw NATO as that, and it still does. It saw itself in terms of the Petersberg tasks from the 1990s, and was very clear about its involvement in defence security training and mixed civilian/military areas. In fact, it even had the Berlin Plus arrangement in 2002, under which it would agree to share resources between the EU and NATO where NATO did not want to intervene. All that was able to happen even then, although Turkey often got in the way of the process.
Of course, when we get to 2014 and then 2022, all that started to change—I think quite rightly. The one thing that was never understood by Governments in the UK, particularly perhaps Conservative Governments, was that it was not about having different resources for EU defence and NATO defence. They were the same platforms and personnel, so it was not a question of having to divide the budgets; it was one area of defence that could be applied to either of them. All that did change in the European Union, where we now have PESCO, the European Compass and all those areas where the EU has started to get involved. As has been said already, we are about to have a defence commissioner as well, focused very much on the defence industry.
I find it somewhat ironic that Members here have—maybe quite rightly—talked about the protectionist area of the EU and the defence industry, but I rather look at that as us having decided to get outside the tent, then looking back and saying, “That’s not fair”. I think that, if it heard that message from us, the European Union would look upon us rather sarcastically. We should welcome a robust European defence industry—and, sure, we should try to be a part of that and participate, although I understand that might be difficult.
We now move on, post Ukraine, into a different situation entirely with the Trump Administration. I rather agree with the commentator Phillips O’Brien that Trump is probably not anti-NATO, he just does not see it as very important. Rather, he sees it as an encumbrance on the United States where it spends money unnecessarily and the Europeans should look after themselves. I do not see the Trump Administration coming out of NATO, but the corrosive effect is that they will make it very clear that, in terms of Article 5, they cannot be relied upon any more. That is, if you like, the killer of that side.
We should also be aware of the European side of NATO. We have President Macron being proved wrong over NATO being brain-dead, but we often forget that France only became part of the military structure of NATO in 2009 and, if we have a Marine Le Pen presidency in France, will we be at risk of having a withdrawal again?
In my final seven seconds, what I want to say is that we have to be practical. The reality is that we should make sure those fuzzed boundaries between EU and NATO come closer together, and work in reality.
The fact is that—in terms of European Union defence—heads of government, heads of state and heads of defence departments meet far more regularly in the EU than they do in NATO. It means that, practically, we need to be a part of that working together.
The report did not talk about the European Political Community in any way. I would be interested to understand how the Minister sees that playing a role in this defence mosaic as well.
Lastly—I know I have gone over time—my noble friend Lady Suttie was absolutely right that Ukraine must have the final decision on everything that is decided. We cannot go through Munich a second time in a second century.
Lord Banner (Con)
I start by congratulating His Majesty’s Government on their work to enable Ukraine finally to fire Storm Shadow missiles at military targets in Russia yesterday. I have already spoken in this House about just how important this is, not just to defend Ukraine from existential threat, but to defend us from the war which will not stop there if Putin is allowed to win.
I also congratulate the noble Lord, Lord Ricketts, and his committee on an excellent report. I agree with all its recommendations and shall make observations about two of them. I start with the imperative to fill any funding or weapons gap left by a change in US foreign policy by the incoming Administration. The report calls for UK-EU co-operation on this, and rightly so. If America pulls back, it is in the interest of all Europeans, including us, to step up, not give up.
International agencies in Kyiv reckon privately that if the heating and power grid in Ukraine were to fail in winter, Europe would face an influx of 5 million new refugees. If Ukraine falls, I am told that the figure may be several times that. The small boats crisis will pale into insignificance in comparison with the unprecedented humanitarian disaster that this would involve. It would be likely to become the single largest humanitarian crisis Europe has seen since the Second World War. Are Europe and the UK ready for this? It would be the price of inaction, indeed the price of insufficient action, at this critical moment for Ukraine.
The fall of Ukraine would moreover not be the end of Russia’s assault on European freedom and democracy; it would only be the beginning. In every respect, therefore, the long-term cost of letting Putin win is greater than the short-term cost of stopping him, even if we have to pay more in light of a change in US foreign policy. Can the Minister therefore confirm what work has been done, whether domestically or in conjunction with EU partners, to price the cost of filling any funding or weapons gap left by a change in US foreign policy, including consideration of how that might be apportioned across the EU and its European allies, such as us? Has any calculation been made of the possible countervailing cost of the humanitarian crisis that will be facing our country and the rest of our continent should Russia prevail?
It is also vital, I suggest, for European Governments to communicate with and persuade their electorates of why this is a justified investment, not just for Ukraine’s sake but for our and their sakes too. If, as a well-placed source suggested to me earlier this week, the UK’s pro-rata contribution were to come down to the cost of a cup of coffee per taxpayer per month—even if it were, frankly, a cup of coffee per day—should we not be explaining it in such clear terms to our electorate, and ditto our European neighbours? Few, surely, would doubt that this or anything like it is a price worth paying to secure freedom and democracy on our continent.
I turn now to the report’s recommendations relating to the reconstruction of Ukraine. The report makes a number of important points in this respect. I would like to draw particular attention to two: first, the need to authorise the use of frozen Russian state assets towards financing the rebuilding of Ukraine. Paragraph 83 of the report records the previous Foreign Secretary, my noble friend Lord Cameron of Chipping Norton, as acknowledging that there is, in his words, a “legal route” to this. I agree.
The legal position is set out comprehensively and convincingly in an article in the May 2024 edition of the Journal of International Banking and Financial Law, by Tetyana Nesterchuk of Fountain Court Chambers. In short, it would amount to a lawful off-setting, or advance payment, of Russia’s international law obligation to pay the cost of cleaning up after itself. I must make a full and frank disclosure: I am married to the article’s author. She always was the smartest lawyer in our house.
Do the new Government also accept, like my noble friend Lord Cameron, that using frozen Russian state assets in this way would be lawful? If so, will they commit to doing so without delay? Could this be done, for example, by amending the current Financial Assistance to Ukraine Bill, allowing not only interest from frozen assets but the underlying assets themselves to be deployed to repay loans to Ukraine? Unshackled by EU membership, with no obligation to wait while the ECB continues to dither, there is a golden opportunity for the UK to show global leadership on this issue and set an example for others to follow.
Secondly, there is the importance of the EU and the UK working together now to plan the rebuilding of Ukraine. As the committee rightly observes, this cannot wait until the final bullet is fired; it must happen now. In keeping with my earlier comments, a central consideration is the need to appreciate that investing in the reconstruction of Ukraine is not simply a one-way exercise in charity; there is something—in fact, quite a lot—in it for us, too. There are substantial long-term opportunities for the UK with trade, investment and natural resources if we take a lead in partnering with Ukraine to help it rebuild. If we do not, someone else will—China, for example, was already leasing swathes of Ukrainian agricultural land before the war started—and their gain will be our loss.
Here, too, it is right to collaborate with the EU, but we can take advantage of no longer being obliged rigidly to co-ordinate with it and take the opportunity to go further and faster. British businesses should be given greater fiscal incentives to invest in Ukraine. The built environment sector, in which I practise as a lawyer—architects, master planners, surveyors, engineers and the like—should be encouraged to train a new generation of Ukrainian apprentices, who can deploy the skills they learn in the decades-long rebuilding exercise ahead.
Some pioneers are already doing that off their own steam, such as NJL Consulting in Manchester, which is funding a Ukrainian student through a master’s degree in planning at the University of Manchester, followed by a placement with its planning consultancy, giving her the hardwiring to play her part in planning the restoration of Ukraine’s shattered cities. That kind of initiative should be more widespread. A range of levers is available to the Government to make it happen. I encourage them to consider how they may do that and to take advantage of their independence from the EU to shine the path for other member states to follow, rather than waiting for them to take the lead.
The Lord Bishop of Chichester
My Lords, it is a privilege not only to speak in this debate, which touches on a matter of such great importance, but to be reminded, in the valedictory speech of the noble Lord, Lord Levene, of what a resource of wise experience and courtesy exists in this House.
I am very grateful for the work of the European Affairs Committee in its report, and to the noble Lord, Lord Ricketts, for this debate. I am glad to follow the noble Lord, Lord Banner, and the positive statements he made about reconstruction. It is on that subject that I will focus my contribution. Reconstruction must look at economy, buildings, infrastructure and the fabric of society, but I hope it will also look at something distinctive about Ukraine, which is the place of the church. In talking about people and not parliamentarians, the noble Baroness, Lady Hayter, already reminded us of that. The noble Baroness, Lady Nicholson, made similar comments about the neighbours of Ukraine who have given assistance. In large part, monasteries and nunneries will also be an extension of the familiarity of a Christian tradition that is so important in Ukraine.
The United States Institute of Peace notes that,
“high levels of religiosity in Ukraine make religion a central element of legal, cultural and political affairs. The close relationship between the institution of the Orthodox Church, state authority and national identity mean that religion is inseparable from all contemporary events. It is therefore of utmost relevance to the ongoing war in Ukraine”.
I hope that the Minister and the European Affairs Committee would want to make space for the consideration of what contributions the Church might be invited to make to the reconstruction of life in Ukraine.
However, the issue is complex. Following the war there, there is fracture in the church. The Russian Ukrainian Orthodox Church, under the Moscow patriarchate, has been a sign of Moscow imperialism, and so there is now the emergence of the Orthodox Church of Ukraine, alongside the Ukrainian Orthodox Greek Catholic Church and the Roman Catholic Church. However, between these bodies, there is already very little considerable co-operation. In the Church of England, we have been in contact with the Ukrainian Christian churches council, through the work of the Archbishop of Canterbury at Lambeth Palace, which we believe reflects the majority of Christian churches in Ukraine and seeks to provide a forum for restoration of relationships between those jurisdictions. The fracture of those jurisdictions has had international consequences in terms of relationships not just across churches but also across some national boundaries as well. A letter from Patriarch Sviatoslav to Ukrainians dispersed in exile and also in Ukraine writes that, if peace,
“does not develop and establish social justice upon the … principles of human dignity, the sanctity and inviolability of human life, the common good, and solidarity, humanity will end up in societies where the concept of law is replaced by the concept of interests, be they of particular individuals or maleficent groups”.
I hope that the churches can be an important part in building the peace in Ukraine which has been spoken about so powerfully this afternoon.
Baroness Ludford (LD)
My Lords, the Foreign Secretary said in his recent Statement on Ukraine marking 1,000 days since Russia invaded:
“Ukraine’s cause is a just one. … We need Ukraine to stay strong, and … they need us to stay strong by their side”.
In that respect, I salute the yellow and blue outfit of the noble Baroness, Lady Hayter, which sends that very signal—she is always a sharp dresser, but particularly today—and I also welcome her excellent speech.
David Lammy also said in his Statement this week, quite rightly:
“This war matters greatly for Britain and the global order … When we support Ukraine, we are not just aiding its fight for freedom; we are also contributing to our fight for our freedom”.—[Official Report, Commons, 19/11/24; cols. 162-63.]
Arguably, it is even more than that. While it is a welcome decision by President Biden, followed by Britain and France, to grant the Ukrainians the discretion that they have long pleaded for to use the long-range weapons supplied by allies to strike targets inside Russia, let us not underestimate the peril which not just Ukraine but we in the West are in.
I am delighted that this debate has benefited from the valedictory speech from the noble Lord, Lord Levene. I was never in the Ministry of Defence, but I was an EU adviser to Lloyd’s of London, albeit a long time before his chairmanship.
Edward Luce, the Financial Times’ chief US commentator, has written in the FT this week regarding President-elect Trump’s nomination of Tulsi Gabbard as Director of National Intelligence to oversee the 18 US intelligence agencies that:
“Given Gabbard’s close affinity to Vladimir Putin’s Russia, she would be unlikely to get a low-level security clearance in normal times. Now she will be custodian to America’s most classified secrets. Should Gabbard be confirmed as director of national intelligence, America’s allies will surely re-evaluate the wisdom of sharing secrets”.
That was pretty up front as a statement, but it shows how the debate we are having today about the report from our European Affairs Committee, so ably led by the noble Lord, Lord Ricketts, is even more pertinent and urgent that when the report was published 10 months ago.
With uncertainty and trepidation hanging over our expectations from Washington, it is even more important that the European end of the transatlantic partnership gets its act together on both security and defence, as the noble Lord, Lord Liddle, said. My noble friend Lord Teverson spoke of how much EU-NATO complementarity has progressed, although deeper co-operative structures are needed, and that is what I mainly want to speak about.
I believe that neither the UK nor the EU can afford to be too precious in the search for the ties that bind when it comes to political, diplomatic, security and defence co-operation. I am not being so unrealistic as to ignore Brexit—if only I could—but we need to push for solutions which, while respecting some rules and limits, are hard-headed in keeping in view the tough reality of what challenges we jointly face and the substance of the goal we must reach.
We have reason to feel encouraged, because in its recent general election manifesto the Labour Party pledged to seek
“an improved and ambitious relationship with our European partners”,
and that, as part of that, a Labour Government would seek
“a new security agreement with the EU”.
We already have the promise of regular EU-UK summits, and the Foreign Secretary has participated in the Foreign Affairs Council. He has argued that:
“UK security is indivisible from European Security”,
and he has agreed with the EU high representative to establish a six-monthly strategic dialogue, with the first meeting early next year.
Let us not forget that Norway is ahead of us, having signed a security and defence partnership with the EU in May of this year. According to the EU press release,
“It covers existing areas of cooperation such as our common continued support to Ukraine, Norway’s participation in EU CSDP missions and operations, and its involvement in EU defence initiatives”.
Can the Minister confirm whether the UK Government are looking closely at this model? Of course, the difference is that Norway is an EEA, and therefore single market, member—that is perhaps a hint of what advantages such membership carries.
As the noble and gallant Lord, Lord Stirrup, said, ideas for European defence co-operation are nothing new. Efforts to put some kind of order into the NATO-EU overlap and to fortify the European pillar have been going on for decades. In the 1950s, there was an attempt to set up a European defence community, but it was killed off by a vote in the French Assemblée Nationale just over 70 years ago, such that Europe then left security to NATO while it focused on economics. That knowledgeable and astute commentator Timothy Garton Ash recalled in an article earlier this year, just after our report was published, that the then French Prime Minister, Pierre Mendès France, explained the reasons his Parliament rejected the European defence community as
“too much integration and too little England”.
Mr Garton Ash mused:
“Might there also be a lesson there?”
He pointed out:
“Today, a European defence project would not be a single, clear, unified institution of the EU. That was the road not taken 70 years ago. Rather, it would be a European defence community with a lowercase d and c, connecting European, bilateral and national capabilities to the existing military operational core in Nato”.
So, the good news is that there is no longer any need to have these theological arguments.
During the NATO summit in Washington in July, our new Defence Secretary suggested that the UK could join EU defence initiatives even before a more formal pact is agreed. Can the Minister decipher this for us? Has the EU indicated any flexibility on this score?
Other speakers have covered the issue of sanctions, and I do not have the time to do that. They pointed out that the major challenge seems to be one of enforcement. There is a worrying story today about how some parts produced in the UK have somehow ended up in Russian drones. Both the noble Lord, Lord Ricketts, and my noble friend Lady Suttie also spoke about the involvement of companies in British Overseas Territories in sanctions busting. This is a matter my noble friend Lord Purvis of Tweed has been taking up. So, obviously, we need to know a bit more about what is being done on that.
The Labour manifesto in July committed to working with allies to enable the
“seizure and repurposing of frozen Russian state assets to support Ukraine”.
That meant seizing the principal—the $300 billion—not just using the interest under the G7 initiative. Our report noted that the last Foreign Secretary, the noble Lord, Lord Cameron, had suggested to us that there is a legal route to achieve that. Can the Minister tell us what this Labour Government are doing to implement their manifesto pledge to overcome the claimed legal obstacle, including any discussions they have had with the EU and other partners?
I am grateful to the wife of the noble Lord, Lord Banner, for the article, which I will read when I have tracked it down. There are suspicions that these frozen assets are being stored up to use as a bargaining chip in negotiations. I was not sure whether this is what the former Estonian Prime Minister and future EU High Representative Kaja Kallas meant when she told the Financial Times in February that:
“This is economic pressure we can place on the Russian economy to hasten the breaking point of this war”.
That was slightly ambivalent language; I hope I do not cause offence when I say that, but I was not clear. Finally, do the Government agree that the best idea is to let Ukraine use those assets now? Can they perhaps pitch to President-elect Trump that Ukraine would likely use perhaps half of the $300 billion to buy arms from US defence manufacturers, which is perhaps a temptation?
Lord Callanan (Con)
My Lords, it is indeed a particular pleasure to participate in another debate on Ukraine and to see almost complete unanimity yet again across the House on the findings of the European Affairs Committee’s report on the Ukraine effect, examining the profound impacts of Russia’s invasion of Ukraine on UK-EU relations. I join in thanking the noble Lord, Lord Ricketts, for chairing this committee, and all noble Lords who participated in the production of this report and in today’s debate. Special mention should go to the noble Lord, Lord Levene, for such a splendid valedictory speech. We will miss his contributions to the House. An extra-special mention goes to the noble Baroness, Lady Hayter, who has turned up so stylishly attired in the colours of Ukraine. I miss our exchanges across the Dispatch Box during the Brexit years.
As we mark the 1,000th day of war in Ukraine, most noble Lords taking part in this debate have agreed that the war is indeed taking on a concerning and deadly new angle. I think we all agree that we have a moral and political duty to stand up for Ukraine. We have seen troops from North Korea arriving in Russia and videos of them training in Russian fatigues, and we also know that Russia has procured multiple weapons from North Korea and Iran to aid in, frankly, the murder of Ukrainian citizens. Yesterday, it was reported that Russia even launched an ICBM at Ukraine. Yet, also yesterday, I watched with open-mouthed astonishment the Russian Foreign Minister gazing at the camera and solemnly complaining about the West apparently escalating the war. The unbelievable hypocrisy of the current Russian leadership would indeed be laughable if the issue were not so profoundly serious.
As many speakers have observed, we are all waiting, perhaps with some trepidation, to see what the new US Administration will do on Ukraine. I hope and expect that the Government will do all they can to ensure the continuation of the vital military and financial support. I do not often agree with the noble Lord, Lord Liddle, but he was right to call out some members of the GOP for delaying the much-needed support that Ukraine needed in Congress earlier this year.
I am extremely proud of the fact that the previous Conservative Government were instrumental in supporting Ukraine in holding the Russian war machine to account. We implemented an unprecedented number of sanctions on Russia, with the EU closely following and aligning with us, as outlined in the report, and I am delighted to see that the current Government are continuing with that excellent work.
The report states that
“the imposition of sanctions since the Russian invasion of Ukraine has been effective overall”,
but we should always look to do more. I was particularly pleased that we established the OFSI—a vital part of the process—but it is of some concern that the OFSI has yet to fine any single individual or entity for sanctions evasions. I would be grateful if the Minister gave an update on what current enforcement action is foreseen, because we all know that widespread sanctions evasion is taking place.
To take one example, I saw yesterday that the exiled Russian opposition leader, Mikhail Khodorkovsky, highlighted how one Indian company, Shreya Life Sciences, exported to Russia over $300 million-worth of high-end Dell AI computer servers, sourced from Malaysia, earlier this year. These servers are restricted under both US and EU sanctions targeting military technology, and they can be used to power Russia’s electronic warfare systems. It deserves saying that the company is probably acting legally under Indian and Malaysian law, but I strongly believe that it is about time we started sanctioning some of these many companies—often Indian, Chinese, and perhaps some from the British Overseas Territories—that are making huge sums of money supplying Putin’s war machine in Ukraine.
As my noble friend Lord Godson observed, it is also clear from the report that leaving the EU has not in fact hindered our ability to work alongside the EU and to be swift and firm in sanctioning Russia. The report says:
“Without the need for agreement on unanimity, the UK can be nimbler and swifter in imposing sanctions”,
which, of course, it would not have been able to do if we were still in the EU.
This conflict starkly underscores the importance of close co-ordination between all like-minded nations—both those within and those without the EU. It has reunited the UK’s leadership on European security and reaffirmed the strategic value of NATO, where we must continue to champion that important collective defence. However, the report also highlights some underexplored areas of our post-Brexit relationship. Perhaps the Minister will able to say more about this in her reply. The report’s note that
“persuasive evidence that sanctions are most effective when they are enforced by as wide a coalition of countries as possible”
is indeed true.
Perhaps the Minister could update the House on how the Government are working with international partners to ensure that our sanctions regime is working in coalition with our many esteemed international partners. Does she know of any loopholes in the sanctions regime in the context of gaps between our regimes and our international partners’ regimes? Reinvigorating these ties enhances our strategic autonomy and bolsters resilience against the many authoritarian threats we now face.
The report also notes:
“The UK’s expertise in developing and implementing sanctions regimes is an asset which should be used more actively to support the capabilities of other countries, both EU and non-EU”.
The aim of sharing the UK’s experience should be to ensure a more effective implementation of sanctions by a wider range of countries. Again, I am interested to hear the Minister’s comments on that.
We on these Benches welcome the recent moves by His Majesty’s Government to sanction Russia’s shadow fleet by way of statutory instrument. The report goes on to claim that sanctions enforcement is a big issue, noting that
“REDRESS’s assessment of the UK’s performance as ‘weak’ and Spotlight on Corruption’s evidence that investigation of sanctions evasion had experienced ‘serious setbacks’”.
We all know that these issues are difficult. The previous Government struggled and I am sure the current Government will struggle. Things will never be perfect but we really should redouble our efforts to ensure that sanctions are as widely observed as possible. As many noble Lords have observed, effective sanctions regimes rely completely and solely on effective enforcement. Can the Minister address this concern in her response and perhaps share some specific examples of the robust action being taken by the Government and their agencies to enforce UK sanctions regimes?
In conclusion, it has been gratifying to see so much cross-party support across the House, across the Benches and political parties, for the Government’s actions on Ukraine. It is great that we are not suffering some of the political difficulties some other European countries are seeing in standing by Ukraine in its hour of need. I look forward to hearing the Minister’s response.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, I thank the noble Lord, Lord Callanan, for his speech and for the way the Opposition are approaching this important issue. It is vital that we maintain the bipartisan approach towards Ukraine, and we continue to appreciate his words and sentiments and the way in which the noble Lord puts his points across.
I thank the noble Lord, Lord Ricketts, and all noble Lords on the European Affairs Committee for the valuable insights in the report. Normally I complain about the length of time it takes for us to get to examine these reports, but on this occasion I do not think it has been a problem. It may even have been a benefit that some months have passed.
I particularly thank the noble Lord, Lord Levene, for his valedictory speech and for his years of service. As the noble Baroness, Lady Helic, said, he has done so much and brought a lot of experience to bear, and I shall remember his golden rules.
Earlier this week we passed a grim milestone, as the Foreign Secretary said in the other place. Not only is it 1,000 days since Putin’s full-scale invasion stunned the world and brought turmoil, violence and bloodshed to millions, including the Russian people, but 1,000 days of Ukrainian bravery has inspired the world to stand with Ukraine.
Russia’s illegal and unprovoked invasion of Ukraine poses a direct threat to European and Euro-Atlantic security. It struck at the heart of the international rules-based system on which our shared global security and prosperity depend, and that is why supporting Ukraine to defend itself against Russian aggression is this Government’s foreign and defence priority.
The Foreign Secretary has made it his personal mission to do all we can to constrain the Kremlin. Earlier this week he announced more sanctions in response to Iran’s transfer of ballistic missiles to Russia, including on Iran Air, and measures against the monsters who forcibly deported Ukrainian children for attempted indoctrination by the Kremlin.
All this builds on the sanctions that we have ramped up, sanctioning almost 40 vessels in Putin’s shadow fleet of oil tankers, leaving many of them idling or at anchor since sanctions were imposed; sanctioning cybercriminals from the aptly named Evil Corp; sanctioning Russian troops who used chemical weapons on the battlefield and mercenaries responsible for destabilising Africa; and sanctioning firms that supply Russia’s military-industrial complex, including Chinese firms, sending critical components for weapons including drones. Indeed, the cost of components has risen by 30% for the Russian defence sector, and Russia’s military exports have fallen to levels not seen since the Soviet Union’s collapse.
The UK’s military, economic, political and diplomatic support for Ukraine remains ironclad as we have made clear to the world just what is at stake. The vivid description by the noble Lord, Lord Banner, of the cost of allowing Ukraine to fall is vital. We work alongside our European partners to rally international support. The noble Baroness, Lady Ludford, encouraged the deepening of our defence and security co-operation, and she is right to do that.
Since taking office, the Foreign Secretary has visited Ukraine with US Secretary of State Tony Blinken, the first such joint visit to any country for more than a decade. He discussed Ukraine with the EU Foreign Affairs Council in October, the first appearance by a Foreign Secretary at a regular council meeting since our exit from the EU, and in recent days he chaired a meeting of the United Nations Security Council on Ukraine before joining a meeting of close European allies to discuss how to bolster our support for Ukraine.
In our very first week in office, my right honourable friend the Prime Minister confirmed that we would provide £3 billion a year in military aid this year, next year and every year that it is needed. That includes my right honourable friend the Defence Secretary’s announcement earlier this week of more funding for Ukraine’s navy and for drones, and the extension of Operation Interflex, which has trained more than 50,000 Ukrainian troops to date.
We have increased non-military support for Ukraine this financial year. We will give at least £250 million in bilateral assistance for work such as protecting the Ukrainian power grid, which this weekend suffered one of Russia’s biggest aerial assaults since August, involving 120 missiles and 90 drones, causing an emergency blackout in several regions across the country just as the Ukrainian people head into winter, when temperatures can drop to minus 20 degrees.
Crucially, with the realism so eloquently expressed by the noble Lord, Lord Liddle, our bilateral support, both military and non-military, will be higher this financial year than in any previous financial year since the war began. As many noble Lords are urging, we are finding creative ways to strengthen the Ukrainian economy. We have brought the UK-Ukraine digital trade deal into force, so that Ukraine benefits from cheaper and quicker trade. UK Export Finance has provided more than £500 million in loan guarantees, including for Ukraine’s own defence industry.
British International Investment is working with the European Bank for Reconstruction and Development to support Ukrainian trade. By the end of this year, we will have deployed a further $484 million in World Bank loan guarantees. Colleagues have now begun debating a Bill confirming a new £2.6 billion loan to Ukraine as part of a G7 package of $50 billion to sustain Ukraine’s fight, all paid for by the profits from frozen Russian assets primarily held in the EU.
It is profoundly in our interests and those of the UK’s European partners to make sure that Ukraine is able to restore its sovereignty and territorial integrity and the integrity of international law, including the UN charter. Just as Russia’s full-scale invasion of Ukraine has made NATO stronger, it has brought about intensified foreign policy co-operation between the UK and the EU.
We are working together closely on a wide range of issues, from sanctions against Russia and making sure Ukraine gets the resources it needs to sustain its military campaign and grow its economy, to training Ukrainian soldiers, recovery and reconstruction. This Government are committed to continuing and strengthening this co-operation.
I was asked to comment on Storm Shadow, but I do not think it would be wise to go any further than the Defence Secretary did this morning. I do not have anything in addition to say—just that, as the Prime Minister has said, it is important that we double down and ensure that Ukraine gets the support it needs.
The noble Baroness, Lady Nicholson, rightly praised the support of many of Ukraine’s neighbours and welcomed the work across Europe to help Ukraine. We welcome the progress that Ukraine is making. She was talking about accession to the EU. We welcome the progress that has been made on its path to Euro-Atlantic integration, and we welcome the EU’s continued commitment to Ukraine.
The noble Lord, Lord Alderdice, and the noble Baroness, Lady Helic, asked about talks on UK participation in Permanent Structured Cooperation, PESCO. The UK will continue to progress our application to join the PESCO military mobility project. We will explore the opportunity to engage with other projects that align with UK interests on a project-by-project basis, and we continue to review the progress of other PESCO projects.
I note the speech of the noble Lord, Lord Ricketts, and how the UK can be a force in cybersecurity, AI and soft power. I think that point might actually have been made by the noble and gallant Lord, Lord Stirrup—if it was, he will have to forgive me. His point was that projects are very good but that strategic leadership and integration are far better. His encouragement of fresh thinking and creativity on this is very welcome.
Noble Lords including the noble Baroness, Lady Helic, and the noble Lord, Lord Callanan, asked about EU-UK sanctions co-operation, and this is important. We continue to prioritise co-ordination with international partners including the EU to enhance the impact of our collective sanctions and share information more seamlessly. We have frequent engagement with EU institutions and member states at all levels. We hold quarterly consultations with the EU to enable strategic co-ordination and co-operation on sanctions.
We will continue to work closely with the EU to jointly engage with countries where we are seeing spikes in trade of sanctioned goods with Russia, as many noble Lords mentioned. This has included the central Asia region and the UAE. In early September the UK sanctions director, the EU sanctions envoy and the US sanctions co-ordinator jointly visited Malaysia to discuss growing trade and maritime circumvention risks in the south-east Asia region. Together we are developing our collective offer of capacity building and technical assistance to third countries to support improved sanctions compliance and enforcement, and to offer assistance to both government and the private sector.
The noble Lords, Lord Alderdice and Lord Ricketts, and the noble Baroness, Lady Suttie, asked about the impact of sanctions on Russia. Sanctions have deprived Russia of over $400 billion since February 2022. By one estimate, that is equivalent to four more years of funding for Putin’s invasion of Ukraine. The UK has sanctioned over 2,100 individuals and entities under the Russia sanctions regime, over 1,900 of which have been sanctioned since Putin’s full-scale invasion. Over £22 billion of Russian assets have been frozen because of UK financial sanctions.
Putin thought that he could take Kyiv in three days; two and a half years on, his military is turning to North Korea and Iran for supplies. Sanctions are putting grit in the system; they are increasing costs and delays and reducing equipment quality. Russia has managed only to stabilise supplies, not increase them, and at a cost. Russia has been forced to pay over 135% more for microelectronics; over 320% more for advanced machine tools, procured by China and Turkey; and over 210% more to import critical US-origin items through third countries.
By the end of the first two years of the war, Russia had lost about 3,000 tanks and 5,000 other armoured vehicles. The difficulty in getting components is hampering Russia’s ability to build new tanks and infantry vehicles, as well as to refurbish old ones. A “new” Russian T-90M tank captured by Ukraine last year was found to have a gun made in 1992. Since the imposition of the oil price cap, data from the Russian Ministry of Finance showed a 30% reduction in tax revenues from oil in 2023, compared to the year before.
Thanks to the efforts of the UK and our allies, Putin faces extreme costs from the conflict. According to Putin himself, sanctions are causing a colossal number of difficulties. Of course, sanctions are only one lever and when people say, “Are sanctions working?”, that is probably the wrong way to look at this. They are one tool that we can use.
I was asked about Chelsea Football Club. I am afraid I am no further forward than when I was last asked about this. The funds remain frozen while a new foundation is established. We continue to hold talks with Mr Abramovich. All I can do, I suppose, is to promise to redouble our efforts and try to reach a solution as quickly as possible.
The noble Lords, Lord Callanan and Lord Risby, and the noble Baronesses, Lady Blackstone and Lady Suttie, among others, asked about sanctions enforcement. The idea of sanctions is that they work well as a deterrent, and we are working to make sure that businesses know how to comply with our sanctions regime. However, we accept that they have given rise to some challenges, which is why the Minister for Europe, who has responsibility for sanctions, is reviewing how they work, as you would expect of a new Government.
The noble Baroness, Lady Ludford, the noble Lord, Lord Hannay, and others asked about the overseas territories. I can confirm that these issues were raised at this week’s JMC with the OTs. We are committed to working with them to investigate and act on any evidence of breaches. For noble Lords’ information, a communique will be issued at the end of the conference, and I expect sanctions to feature in it.
The noble Lord, Lord Ricketts, asked about the shadow fleet. The shadow fleet undermines our sanctions and poses serious maritime security and environmental risks. We are working closely with partners to tackle the risks posed by these vessels. Since July, the Government have sanctioned 39 vessels under the Russia regime that were transporting oil originating in Russia to a third country, leaving many of them idling or at anchor since the sanctions were imposed. The Government have also sanctioned nine LNG carriers and six vessels involved in the transporting of military goods, and another four oil tankers and two military goods transport vessels were sanctioned under the previous Administration. In July, the UK hosted the European Political Community at Blenheim Palace, as noble Lords will know, and launched a call to action to tackle Russia’s shadow fleet. It was signed by 40-plus countries and has since been endorsed by the US and Canada.
The noble Baronesses, Lady Blackstone and Lady Suttie, and the noble Lord, Lord Tugendhat, asked about the recovery and reconstruction of Ukraine. This is an important issue, and I can assure noble Lords that we are working closely with a range of international partners—including the EU and EU member states such as Germany, France, Italy, Poland, Sweden, Denmark and the Netherlands—to deliver reforms and economic support for Ukraine’s recovery and reconstruction through the Ukraine donor platform and bilaterally.
The noble Lord, Lord Risby, invited me to explore the French insurance scheme, and I am happy to do that. The right reverend Prelate the Bishop of Chichester reminded us, too, of the value of faith-based organisations. It was good to hear about the work the Church is doing in Ukraine.
Like the noble Baroness, Lady Suttie, I, too, met the delegation from Lviv recently, and we discussed the psychological, societal and physical reconstruction that is needed. The noble Baroness, Lady Hayter, spoke movingly about these issues in her speech. We were asked about the airport. The UK specialists are in close contact with Ukraine about the airport, and we are providing technical assistance to get it open safely.
On the issue of reconstruction, the noble Lord, Lord Banner, was inspiring in his vision. It is vital that we keep the hope that he expressed. I think I remember that last time, he read us a note from his niece. I take this opportunity to wish her and the rest of his family well in Ukraine.
I thank the noble Lord, Lord Teverson, for noting that, on the issue of UK-EU security co-operation, on 14 October the Foreign Secretary attended the EU Foreign Affairs Council. I hope the noble Lord will welcome the fact that we agreed to work towards a security partnership and have committed to six-monthly foreign policy dialogues, starting in early 2025. We are engaging with the External Action Service to explore options for a new security partnership, focused on foreign policy and defence co-operation. In particular, we want to work closely to address wider global challenges, including economic headwinds, geopolitical competition, irregular migration, climate change and energy prices, which pose fundamental challenges to the shared values of the UK and EU.
I listened carefully to the noble Lord, Lord Godson, and I would just say that no one wants to spend years reopening old divides. This is not about renegotiating or relitigating Brexit; it is about looking forward and realising the potential of the UK-EU relationship as it stands today. He spoke about his frustrations at the EU’s treatment of third countries. We get it, but clearly, the EU is free to make its own choices. We are no longer members, so of course, our influence is not what it was; but the relationship is improving now, and we see this as being very much in the UK’s interests.
I end by echoing the Foreign Secretary in recent days and weeks. He said:
“UK security is indivisible from European security. This government is determined to reset our relationships and deepen ties with our European partners in order to make us all safer”.
We are working with our international partners, including our European colleagues, because we are always stronger when we work with others, for the freedom of all states the world over to choose their own future. That includes brave Ukrainians, who need not just words but actions. This Government have not wavered, ramping up the pressure on Russia, stepping up support to Ukraine and rallying the international community. We can all be proud of the unity we have shown as this country proves that Britain will remain Ukraine’s staunchest friend throughout this war and in the peace that follows.
Lord Ricketts (CB)
My Lords, I am grateful to all the speakers who have taken part in this debate, including a number of distinguished former members as well as current members of the European Affairs Committee, and also to the Minister for a very comprehensive response to all the many points that were raised. It was a privilege to listen to the valedictory speech of the noble Lord, Lord Levene, which was characteristically reflective and substantive; we will miss him a lot in this House.
This has been a thoughtful, wide-ranging and constructive debate under the shadow of the impending Trump presidency, with all the implications that has for Ukraine and for European security. Once again, this House has sent out a strong, powerful and unanimous message of continuing support for the courageous people of Ukraine.
We have heard widespread concern about the need for rigorous enforcement of the quite elaborate sanctions regime now in place. I take away a strong message from many speakers that European countries are going to have to take greater responsibility for their own defence and for the support of Ukraine in the years ahead. For many, that underlines the need for closer EU-UK co-operation on all the issues we have been talking about.
There was also the thought that, however this conflict ends, we are going to be sharing the same continent with a hostile Russia for the foreseeable future. That has far-reaching implications for our foreign policy, defence spending and much else. But those are issues for another day. With renewed thanks to all the participants in this debate, I beg to move.
Motion agreed.
Farming Families
(1 month, 1 week ago)
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Baroness Northover
To ask His Majesty’s Government what steps they are taking to ensure the continuity of farming families.
Baroness Northover (LD)
My Lords, I am glad to have secured this debate, but I am sad that it was necessary to do so. I am the daughter of a tenant farmer. My father had always wanted to farm, though he originally trained as an engineer, mending steam engines on the railway—a skill which proved useful in due course with the maintenance of his fourth-hand and fifth-hand farm machinery. He gradually built up 350 acres on the South Downs just below Cissbury in Sussex. Ours was a full-time family farm and around us were many others—a community lying behind the coastal towns.
It was these family farmers whom I thought about when I listened to the Budget. The figure at which IHT was to be applied made no sense to me. Even I knew what seemingly the Treasury did not: small and medium-sized family farms are potentially asset-rich but cash-poor.
The Government might have wished to target those who have been buying agricultural land to avoid IHT. Those landowners will probably find ways around this. Meanwhile, the Government have ended up undermining small and medium-sized family farms—hence the absolute devastation in the farming community at the Budget. I received an email from a farmer whose widowed father, in his 90s, owns the farm. There are simply no spare resources to pay IHT should, as sadly is likely, his father die before seven years have passed. I heard so many similar stories on Tuesday when the farmers gathered in Westminster.
Two Cornish farmers whom I met almost broke down as they told me their stories, just as NFU president Tom Bradshaw did when he was speaking to us in Church House, with sustained applause allowing him to recover. One of the Cornish farmers I met owns 270 acres on the Lizard peninsula. He and his brother actively farm the land, but the farm is owned by their widowed father, who is 94. It was never thought necessary to pass on the ownership of the farm, because it was protected from IHT, as had been established years back with the very intention of preserving family farms. To pay IHT, they would need to sell land, which would make the farm unviable. In the other Cornish case, the farm of 350 acres is owned a widow of 87. Her daughter’s voice broke as she told me that her mother thought she was better off dying before the change comes into effect in April 2026. The debates over assisted dying and the elderly potentially feeling that they are a burden came horribly to mind as I listened to her.
The distress is palpable. Families may have farmed their land for generations, which is why this debate is focused on seeking continuity in farming families. I know from my own extended family how extreme financial pressures in farming can play out. My mother came from a farming family—my father did not—and vowed that she would never be a farmer’s wife. Then she met my father and paid for her engagement ring from her schoolteacher’s salary, as his milk cheque had not yet come through. But a cousin of my mother’s, facing great financial pressure on his mid-Sussex farm, went out one morning with his shotgun and took his own life. His 20 year-old son had to abandon college to come back to run the family farm.
Farmers may love their lives—my father certainly did—but they are people who work all hours, whatever the weather, every day of the year. I remember the 5 am starts to check on lambing ewes and Christmas presents that could not to be opened until my father came in from milking and had had his porridge. I cannot complain. I happily revised for my various exams in the lambing field, reluctant to miss anything. I stacked bales, was an excellent sheepdog, burned fields of straw when that was allowed and knew so much more about my parents’ work and lives than did any of my school friends. But I also recall the endless financial discussions, the loans from the bank and the visits from the bank manager. My father used to say, when we had arable, sheep and beef, that one would be making a loss, another would break even and the third might make a profit—but he would never know which one would be which.
Weather, disease blights, the prices that supermarkets are willing to pay, government policies and global events that drive up the cost of fuel and fertiliser: there are so many aspects over which the farmer has little or no control. But we depend on those farms for food security, and the farmers as custodians of the countryside. Some 60% of our food comes from the UK and Governments have pledged to increase, not reduce, that.
This Budget comes after a series of blows to British agriculture. Brexit damaged farming, undermining our ability to trade into the EU and removing its financial support. The Government promised their own scheme but that has been less, late and complex, so where are we now? I am shocked that the Chancellor has not agreed to meet the NFU. If she is so sure of what she is doing, she should have that confidence. I am shocked that the Treasury did not consult Defra. Will the Minister confirm that the Chancellor will now meet the NFU, and is Defra now fully engaged with the Treasury?
The NFU calculates that 75% of farms are affected, strongly disputing the Treasury’s claim that it is only a quarter. The NFU argues that many agricultural property relief claims would have been alongside business property relief claims, making the APR claim unrepresentative of the total worth of the farm. In addition, the Treasury’s figures are skewed by its inclusion of smallholdings. Nearly 40% of holdings for which APR is claimed in England are under 20 hectares; many of these are not really working farms. Defra’s own figures show that 66% of farms have a net value of over £1 million. If families are unable to pay IHT from their limited resources—the product of a 0.5% return on their capital—they will have to sell their land, thus breaking up farms, which may also have a devastating effect on rural communities.
I have had a sense that the Government have had their fingers in their ears. I hope that this is not true of the Minister. Can she confirm that the Government’s intended targets were not small and medium-sized working family farms? I note that a Defra Minister yesterday gave financial advice to farmers on how to avoid the implications of his own Government’s measures—the irony of that. I know that many Labour MPs now hold rural constituencies. They hear the distress that this sudden policy change is causing.
I understand that this proposal is not in the current Finance Bill. That gives time, I hope, for proper consideration of the policy to be undertaken. Will the Minister accept that a solution must be sought that does not cause further damage to this sector, which has suffered so much in recent years? Farmers may be willing to work long hours in all weathers, for little reward and for the love of that life, but it does not bode well for them, or for our food security, if we pull the rug out from under them. I look forward to the Minister’s response and the contributions of others.
Viscount Goschen (Con)
My Lords, I thank the noble Baroness, Lady Northover, for bringing the House’s attention to this issue today and for her powerful speech. I declare at the outset that I am the owner of a smallholding of farmland in Devon. I am not going to cover the IHT issue; I will leave that to others in this distinguished company with much greater knowledge than I have. However, I listened carefully to the noble Baroness’s powerful speech and look forward to the Minister’s detailed response to her specific questions.
I am certainly not an agricultural expert, but I have great admiration for those who have farmed land for generations and a strong belief that a thriving farming sector lies at the heart of prospering rural communities. We are very fortunate in the UK in having farms run by families for generations. They have immeasurable expertise in understanding what works and what does not for their land. They are prepared to make a total commitment to the management of their enterprises, their stock, their ground and the habitats it contains in what is, as we must recognise, particularly in the hill-farming world, a tough, demanding and often dangerous vocation.
Farmers also have a very deep and multi-generational commitment to the environment, and tend to take a very long-term view of maintaining and enhancing the quality of the land and the habitat that they manage. However, we should not take them for granted, and this is a very delicate balance which should be preserved.
We have heard that farming is a highly capital-intensive activity that typically generates a very low return on capital employed and a relatively high risk, given the volatility of commodity prices and, of course, the vagary of the weather. It is, therefore, a very long-cycle business. What is required is a stable and settled regulatory and financial settlement, against which long-term investment decisions can be taken. That requires an unambiguous agricultural policy with very clear objectives against which a regulatory settlement can be developed. There was extraordinary frustration even before the Budget that this really was not the case. That is not a party-political view, given the total lack of clarity that the previous Administration provided in the post-Brexit subsidy settlement.
Food production goals must be put front and centre of a regulatory system. It is far too complex to be understood, but clearly many small businesses do not have the resources to drill down to truly understand the regulatory and financial environment. There is an overall concern that farmers’ voices are not being given sufficient weight in the development of agricultural policy. I look forward to the Government’s response.
Lord Carrington (CB)
My Lords, I also thank the noble Baroness, Lady Northover, for bringing this debate forward and for her extremely powerful speech. I declare my interests in farming as set out in the register.
Like others, I attended the farming demonstration in Whitehall on Tuesday, which only confirmed the desperation in the farming and small-business community in relation to the Budget measures affecting them, particularly the changes to APR and BPR. I would like to concentrate on the likely effect of these measures on growth and investment in the industry and, by association, the continuity of family farms.
When a previous Government first introduced these inheritance tax reliefs, it was on the basis that tax charges, when there was a change of ownership of a family business, were viewed as having a
“damaging effect on risk-taking and enterprise within a particularly important sector of the economy”.
This rationale remains, and is why agricultural relief has existed since the late 19th century, when estate duty was introduced. Using IHT reliefs to pass on a family farm is not about avoiding tax; it is about facilitating the long-term stewardship of the land and keeping the family business going.
Unfortunately, at present there is considerable dispute on the number and nature of farming businesses likely to be affected, so I urge the Minister to ensure that the Treasury, Defra, the NFU and the CLA establish an agreed factual base as soon as possible, as well as then having the much-needed meeting between the Chancellor and the NFU.
Remember Mark Twain’s dictum:
“There are three kinds of lies: lies, damned lies, and statistics”.
Perhaps this is case here. Current government figures for APR claims appear to be based on only one year—2020-21—and no BPR figures have been given. Clearly, this is insufficient information. The £1 million combined APR/BPR limit per person will protect only the very smallest of farms. These tend to be smallholdings operated as a sideline for people with other sources of income; they are not the businesses that provide most of the nation’s food.
The payment of the proposed IHT in an industry of low and volatile returns, which is asset rich and cash poor, will result in the sale of land, which will affect the viability of farms and inevitably have huge consequences for further investment in both working capital and fixed capital, which could also increase any future IHT liability. Have the Government assessed in any way the likely impact on growth and productivity in farming as well as the consequential effect on related businesses and communities?
Lord Taylor of Holbeach (Con)
My Lords, I congratulate the noble Baroness—my coalition friend—on getting this debate. How topical it is. The industry is in shock; the truth is that nobody expected this, probably including Defra. Farmers are having to cope with lots of other difficulties, in particular the weather. Uncertainty is one thing, but deception is another. I use that word as a third-generation farmer. I do not farm any more, but the business is in the hands of my son and my nephew and I have a grandson reading agriculture at Newcastle at the moment. This is what family businesses are about. The shock is fed by the sense of deception.
At the Lincolnshire Show, during the general election campaign, I challenged the president of the NFU, Tom Bradshaw, about the rumour in the paper. He said, “That’s only Conservative propaganda”. I had no idea, but I expected a better answer or at least an acknowledgement that this might have some bearing on things. On 15 October, I hosted in this House the presentation of the agricultural societies awards. The Secretary of State, Steve Reed, came along and was asked directly whether he believed that inheritance tax alterations were likely; he said that he had no such information and no view that they were likely to occur. I think the anger was based on that deception.
I like and admire the Minister, but what would she say if a progressive farmer asked her advice about investing in a new automated harvesting machine, for example, or whether he should buy the acreage of land up for sale next door? If we want growth in farming—I agree with the Government’s growth agenda—we need progressive farming, investment in farming and farmers prepared to back the Government’s policy.
Lord Cryer (Lab)
I apologise for interrupting the debate, but I gently remind all noble Lords that the speaking limit is three minutes. If noble Lords go well over that, we will eat into the time of the Front Benches and the Minister.
The Lord Bishop of St Albans
My Lords, I too congratulate the noble Baroness, Lady Northover, on securing this debate. I declare my interests as president of the Rural Coalition and a vice-president of the LGA. I am a farmer’s son, and one of the great privileges of my job serving in a diocese that covers Bedfordshire and Hertfordshire is going into some of the most wonderful, forward-looking and innovative farms in this country, which are at the forefront of farming across Europe.
Even though there are many successful, go-ahead farmers, there is nevertheless a huge level of mental stress among them. That has been true for many years. Sadly, there is an extraordinarily high number of suicides among the farming community. As one elderly farmer put it, “Many of us are feeling so depressed because these announcements suggest that we are not wanted and are worth more dead than alive”. He pointed out that if he manages to die before April 2026, his assets will be passed on; if he does not, the farm will probably not survive.
This cost on the mental health of so many of our farmers should not be underestimated. They are performing a fundamental service to our nation. The responsibility of government is defence of the realm, of course, but also to guarantee that we can feed the realm. If we cannot feed it, we will not have anybody here to defend within a very short time indeed, and that is why I pay tribute to organisations such as the Farming Community Network for their marvellous support for our farmers.
We understand that the Government are facing challenges and the need to raise revenue. We also know that APR has been used by some as a means of tax avoidance and treated as a loophole. We have some extraordinarily complex tax arrangements in various areas of life; is it not possible to find some way of defining those who really use their land and produce food to make a living? Can we not define that in some way, to address the loophole of those who are causing huge hikes in the value of land and sometimes taking it out of production because they have bought it as an investment? Can the Minister give us any clues as to whether some work is being urgently done on this? Will she commit to responding to the modelling done by the CLA and the NFU, so that we can really try to understand this huge disparity between the Government’s analysis and what the people on the land believe is happening? It would help us as we try to find a way through this impasse.
The Earl of Caithness (Con)
My Lords, the Budget is notable for kicking an industry that is already stressed as it adapts to the new farming regime. It is not just the bombshell announcement of the change in inheritance tax that is causing so much anger and distress in the farming community. Besides climate change, they are having to cope with accelerated BPS reduction, costing a modest-sized arable farm between £30,000 and £40,000 a year in subsidy income; minimum wage and NI increases; carbon tax on fertiliser imports; and now the less-publicised changes to double-cab pick-up tax status. Trade deals are allowing cheaper imports of products of lower standards than they are required to meet. In September this year, average earnings were £651 a week in this country. In agriculture, the average was almost 25% less at £507 a week. While the farming budget of £2.4 billion—a reduction in real terms—was confirmed, it is only for one year, making planning for farmers that much harder.
To meet their net-zero and biodiversity targets, the Government must rely on land manager and farmer engagement. That requires incentives, consistency and trust. The Government have just shattered that and will not get it back. They clearly do not understand that you cannot farm green if you are in the red. The uplands, with their many family farms, are particularly at risk, with few options within the current ELMS. It could be that these farmers decide to sell out to carbon farming, given the payments offered, which would be detrimental to other public goods and to communities, associated employment and businesses, as well as putting food security and nature recovery more at risk.
Many good, well-run family farms, especially those on our less good land, are currently not making any return and are often living on overdrafts. The Budget proposals have already resulted in banks reducing lending facilities and increasing lending rates to farmers. As a very good farmer put it to me yesterday:
“Right now I have no wish to pass the farm down to my children. Growing food is a thankless task, every year we are taking a gamble when we put seeds in soil, and each year the odds are more and more against us. The risk/reward is just not there anymore. I tell my kids to pursue other more rewarding work, where you get paid holidays, sick pay and are reasonably certain of your income”.
The Government are sacrificing the farming industry, all in the hope of raising half a billion pounds in tax revenue—that is 0.3% of the NHS budget.
Lord Colgrain (Con)
My Lords, I also thank the noble Baroness, Lady Northover, for bringing this debate. I declare my interests as set out in the register.
The Minister will know that there was no consultation about how the Budget would affect farmers. It is said that the Treasury told Defra only the day before about the APR/BPR changes, which partly explains why they cannot agree between themselves on the figures for affected farms. Both their sets of figures differ from those of the Institute for Fiscal Studies, a more reliable commentator in this instance. In the run-up to the election, the then shadow Minister Steve Reed said consistently that there would be no change to APR. His discomfort was clear when interviewed on television two nights ago after the march, and indeed at the NFU conference this morning.
Those farms that have diversified their holdings, to endeavour to create new income streams away from traditional sources of farming, now find they will be liable for BPR as well as APR reductions. This will be found all the way down the feed chain, from seed and fertiliser suppliers to hauliers and abattoirs—a significant additional burden on an already beleaguered section of the agricultural economy. The capping of BPS for the next year at £7,200 has thrown the cash flows of many farms into disarray. With no indication of how future payments will be calculated for the next two years, it is now impossible for them to realistically forward plan. Self-evidently, both these measures will discourage investment.
Most importantly of all, with reduced investment will come reduced food production. We produce only 60% of foodstuffs in this country as it is, and this will reduce further. With an inflationary budget, interest rates that will stay higher for longer—so the gilt market is telling us—and additional NI and minimum wage costs further curtailing investment, it is difficult to see how this will reflect the Government’s desire to see increased productivity. It will do precisely the opposite.
Mitigations are said to be that the price of land will fall, thus making it easier for new entrants. But what will this do for farmers whose land is collateral for mortgages or bank loans? If land is sold off in small parcels to pay IHT, with the current environmental and woodland schemes in place, it will be bought at enhanced values and taken out of food production. We must ensure that we have a productive, secure and profitable agricultural economy, and this Budget looks designed to undermine all three of these objectives.
Lastly, there has been little mention of the state of our woodlands and how the Budget will bear down on an asset class which, by its very nature, can mean that, for decades, no income will derive from it. Can the Minister please confirm today that the Government will be providing the Forestry Commission with the budgetary resources it needs to meet the targets that it has been set for tree planting by 2025?
I also ask the Minister to take back to the Treasury some suggestions: to apply 100% capital allowances and partnerships to farm buildings, extend the £1 million limit to £3 million, and exempt those farmers who are over 80 on the day of the Budget from the BPR and APR taxes.
Baroness Hoey (Non-Afl)
My Lords, I rise to express my disappointment and indeed my sadness at the Government’s attack on family farms. The Budget decision to abolish APR on inheritance tax—whatever is said by the Treasury about the dubious figures of the number of families affected—is a body blow to small family farms and is undermining the most important industry in our country. What makes it so much worse is that a specific promise was given before the general election that there were no plans to abolish APR, and it was not in the manifesto.
As has been said, this proposal was introduced with no prior involvement or discussion with the National Farmers’ Union. Indeed, it is impossible to find anyone who was consulted. I would like the Minister to confirm that it seems that even Defra officials and the Secretary of State were told only the night before the Budget. It is a measure being pushed through by the Treasury, which has long wanted to do this but was stopped by both Labour and Conservative Chancellors over the years. Sadly, the current Chancellor has given in, and now she will have to face the consequences—not just for her party but for the country. It sends a signal that the Government still do not really understand or even care about how farming works and the massive effects this will have on our rural communities.
I was born and reared in a very small farm in County Antrim in Northern Ireland, where there is a particularly large number of small-sized to medium-sized family farms. This will affect thousands of family farms in Northern Ireland. Not much unites politicians in Northern Ireland, but a letter was signed to the Chancellor just last week by every Member of Parliament, and every Peer in this House, from all the parties in Northern Ireland. That shows how strongly people in Northern Ireland feel.
Farming is not a normal business in so many ways, and even the Prime Minister seemed to understand that when he told the NFU that
“losing a farm is not like losing any other business—it can’t come back”.
Does the Minister understand that what can appear to be an affluent farm, with perhaps a well-maintained farmhouse, can be making virtually no money at the end of the year? The farm may be asset-rich, but the farming family is cash-poor.
What is so deeply worrying about this is that there has been no rural proofing. I thought that this was something that the Government said:
“Rural proofing is a commitment by government to review and examine all public policy to ensure it does not disadvantage rural areas”.
Have I missed this? Surely this could have been done by every government department before such a drastic measure was introduced. Even at this late stage, the Government could show that they have listened. Changing policy when it is proving disastrous is a mark of strength in a Government, not weakness. We all know what we want to achieve: to stop the very big, rich people buying land not for farming but just to get tax incentives—we must stop that. Surely there are some brains somewhere in the Treasury or the Government that could have come up with something that would have protected the small family farms and the livelihoods of those people and their rural countryside.
The Earl of Shrewsbury (Con)
My Lords, I congratulate the noble Baroness, Lady Northover, on securing this important debate and making such a powerful speech. I declare my interest as a member of the National Farmers’ Union. In addition, my eldest son is a land agent and my youngest son is a poultry farmer.
It is vital that young people are encouraged into the farming industry. They are the seed corn of the future for farming. Becoming a tenant farmer is often the first step into the industry for a young hopeful. In the past, council-owned smallholdings have played a significant role in this process, but over the years the number of these holdings has diminished as councils have needed to draw in their horns and realise capital assets. Many hopefuls rely on becoming tenants of private landlords. Indeed, tenant farmers look after over one-third of England’s farmland and are thus vital to food production.
Now, thanks to this Budget, they will face additional obstacles placed in their path. In this Budget, delinked farm payments have been capped from next year at £8,000, which will inevitably make it more difficult for tenants to pay their rent. The changes to employers’ national insurance contributions will make employing a farm worker more expensive. In addition, the announced changes to APR and BPR may well force landlords to take tenanted land back in hand and sell it to pay their IHT liability.
The incentive for landlords to invest in and improve their tenanted farm will be severely compromised. Who in their right mind would wish to enhance the value of their property and thus risk a higher tax bill? The banks will be far less inclined to lend to farmers and landlords—especially to tenant farmers.
Both the Government and, in particular, the Secretary of State Steve Reed—I listened to his speech to the CLA conference earlier today—have demonstrated that they are unsupportive of, and uninterested in, either the agricultural industry or the wider rural community. Throughout the run-up to the general election, and ever since, the Government have trumpeted that they are fully supportive of, and wish to protect—in their words—“working people”. I ask the Minister: in their definition of “working people”, do they include tenant farmers and owner-occupier farmers, some of the hardest-working people in the land? If not, why not?
The Government should take a deep breath and rethink these Budget decisions. They have lost the trust of the rural community.
Lord Herbert of South Downs (Con)
My Lords, I draw attention to my entry in the Register of Lords’ Interests as chairman of the Countryside Alliance.
I was proud to join the farmers’ demonstration in Whitehall on Tuesday. The sentiment was clear: farmers were already desperately worried about wider policy challenges, but the change announced in the Budget was a tax too far. The Government do not appear to understand that farms are not conventional businesses. Where farm incomes are too low to pay this new inheritance tax bill, part or all of the farm will have to be sold. If the next generation cannot afford to pay this tax, they will lose not just the chance to run a family business but their home, their way of life and their chance to maintain their family’s custody of the land.
So many talk freely of the “family farm”, without apparently the slightest comprehension of what that actually means and how valuable this institution is in the story of the British countryside. If it is so wrong that farms have relief from inheritance tax, why did Ministers, when they were in opposition, promise farmers that they would not change it? Reneging on that explicit assurance has not just fatally undermined the trust of farmers and indeed the wider rural community but damaged trust in politics generally.
Yet instead of trying to repair this fissure with farming, the Government seem intent on opening up the wound. The Defra Secretary has said that:
“Half of farmland sold last year went to non-farmers including wealthy individuals trying to avoid inheritance tax”.
Does he not understand that if family farms are broken, more farmland will be sold to non-farmers? He says he wants everyone to pay their share so that young farmers can realise their dream of buying their farm. So today, this is a Levellers’ policy to change the ownership structure of land. Yesterday, it was a redistributionist policy to help pay for the public services on which farmers rely. Only a few farms would be affected, yet somehow it would help to save the NHS.
Even if the Treasury’s claim that only 500 farms a year would be caught by this tax was right—and all the agricultural experts say it is not—that would mean that over a generation of four decades 20,000 farming families would be affected. That is not a small number. It is a seismic change that would change forever the social fabric of the countryside.
It is intolerable that highly controversial tax changes such as this should be imposed without a proper assessment of their impact and where there is disagreement on the data within government, never mind outside it. If the Government want to find a way through this and genuinely tackle tax avoidance, which is a perfectly proper aim, the starting point must be to reach agreement on the actual effect of the change. I suggest that the Government should consider appointing an independent person or body to assess the true impact of the tax changes and to advise on how to meet their declared policy objective of preventing tax avoidance while protecting family farms.
Braving the rain and the cold will hardly have troubled farmers, of all people, this week, but it is not a small thing for these fundamentally decent, hardworking people to leave their farms to come to London to try to protect their livelihoods. These are the people who care for our countryside and who put food on our tables. They run one of our most important industries and manage one of our most valuable national assets. They deserve better.
Baroness Bakewell of Hardington Mandeville (LD)
I congratulate my noble friend Lady Northover on her excellent speech. I have a Riverford box of organic vegetables once a week, including a leaflet with thoughts on farming and the countryside. I have permission to quote from Guy Singh-Watson of Riverford. On 11 November, Guy wrote:
“Should James Dyson (who owns 36,000 acres of land) or Jeremy Clarkson (1000 acres) be the beneficiaries of a tax break designed to help working family farms?
In her budget, Rachel Reeves announced that Agricultural Property Relief (APR) is changing ... Under the new rules, assets above £1m will be taxed at 20% (half the general rate of inheritance tax). This may sound generous – but £1m will buy you about 100 acres, which is far short of a viable farm. If … Reeves’ aim was to close the loophole whereby rich tax dodgers buy up land primarily as a way of passing wealth, tax free, to their children”,
which may result in small farmers going out of business.
“As a second-generation farmer”,
Guy understands,
“the impact of this change. Farming is a long-term business requiring substantial assets that … earn meagre returns. Introducing inheritance tax to our work and planning is a big deal … If Reeves, quite rightly, wants to extract from wealthy landowners some of the £40 billion we need to rebuild our country, here would be a fairer approach. Firstly, a higher threshold on the APR change. In most cases, the smallest commercially viable farm is 300 acres. Taking an average land price of £10k per acre, that would suggest a threshold of £3m before inheritance should be taxed. I can see little reason why those owning land worth more than, say, £7m should not pay the standard rate of 40%. Secondly, where planning permission is granted, land value can increase 10- to 1000-fold – and as long as the owners reinvest in more land, they pay no tax. Reeves could target these capital gains, where the landowner has added no value … Finally, APR is given to all landowners, without differentiating between working farmers and those who are buying up our country mostly to avoid tax. The unintended consequence … has been to inflate land prices, and … exclude new entrants … from farming. Taxation to encourage the sale of such estates could create opportunities for new farmers to buy land and revitalize farming rather than adding to its decline”.
We have had some excellent contributions this afternoon, and I look forward to the Minister’s response.
The Earl of Effingham (Con)
My Lords, as many of the 13,000 farmers on the streets of Whitehall flagged on Tuesday, the Government’s policy is a hammer blow to farmers, and taxation into bankruptcy is not sustainable.
I urge the Minister to listen to her own team. The Labour MP Steve Witherden has called on the Government to reveal their modelling so that everyone knows where they stand and can plan accordingly. Defra figures show that 49% of farms are worth more than £1.5 million pounds, and Defra states that there are 70,000 farms more than 200 acres in size, which, according to the CLA, means at current land rates that they will be subject to the new tax. We desperately need transparency and clarification on the model. Please will the Government provide it?
These changes to inheritance tax for family farms will mean that those who I have just highlighted, who have farmed their land for generations, will be unable to afford the tax bill, forcing them to sell their farm. Will the Minister, who I know to be a friend to our farming communities, say what impact the Government expect this policy to have on the mental well-being of our farmers, who are already at a higher risk of suicide than the rest of the population? Will she commit to publishing the Government’s data on suicides, including among farmers and business owners, for the past few years and on an ongoing basis?
His Majesty’s Official Opposition are committed to reversing the family farms tax if the Government refuse to listen to farmers before the next general election. These rules will be extremely challenging for farming families when the current owners of farms die, and many noble Lords have pressed the Government on this point already. Tenant farmers farm one-third of the farmed land in England. Can the Minister confirm whether the impact assessment for the changes to inheritance tax specifically addressed the effect these changes would have on the number of tenant farmers in the UK?
Regarding fertiliser, in the Budget the Government confirmed that carbon pricing will be applied to fertiliser from 1 January 2027. Does the Minister accept that this will see fertiliser prices rise, hammering our hard-working farmers, many of whom already struggle to turn a profit each year?
Given that this tax will hit many families who have to secure other incomes to keep their farms and smallholdings going, does the Minister accept that this tax will see many farms sold to larger corporates and foreign businesses? What impact do the Government expect this to have on our countryside?
Finally, what might the Minister say to a young woman or man today who has already spent years helping their parents working on the family farm who has just seen their future dashed by the Government’s policy? What hope does a young woman or man in that position have now?
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank the noble Baroness, Lady Northover, for securing this important debate and all noble Lords who have taken part and made their contributions. I welcome the opportunity to speak further about the central role that family farms have in this country.
I know that the noble Baroness comes from a farming family—she has expressed that on many occasions—and that this is a subject very close to her heart. She has spoken before about the number of challenges that upland farmers face. As a resident in Cumbria and the niece of an upland farmer, I completely understand the points that she makes in this area.
The Government’s commitment to British farmers, including family farms, remains steadfast. We must not forget that farmers are the beating heart of our great country. Farming and food security are the foundations of a healthy and resilient economy, the local community and the environment, and it is the hard work of this country’s farmers that puts food on our tables and stewards our beautiful countryside.
I know that many farmers have found recent years very challenging. They have faced down major issues, such as the coronavirus pandemic. They have been struggling with extreme weather events, such as flooding, and huge rises in energy costs. They have been undermined by damaging trade deals and have endured poor harvests. I know how low farmer confidence has become as a consequence of these challenges, and that is why the Government want to restore stability and confidence in the sector.
Clearly, the APR announcement has been met with great concern in some quarters, but I also draw attention to the fact that, in the Budget announced last month, the Government committed £5 billion to the farming budget over two years, including more money than ever for sustainable food production. This enables us to keep momentum on the path to a more resilient and sustainable farming sector. Environmental land management schemes will remain at the centre of our offer for farmers and nature, receiving £1.8 billion for the financial year 2025-26.
Our three ELM schemes—the Sustainable Farming Incentive, Countryside Stewardship higher tier and Landscape Recovery—are all continuing. We now have over 67,000 live agreements across all our agri-environment schemes, including 24,500 Sustainable Farming Incentive and 35,100 Countryside Stewardship agreements. This enables thousands of farmers to be supported to produce food and support the environment. There are 56 Landscape Recovery projects, covering over 240,000 hectares.
In order to focus investment on ELM schemes and achieve that more resilient and sustainable farming sector, the Government are accelerating the end of the era of payouts to large and wealthy landowners simply for owning land. The fastest reductions in subsidies will be to those who historically received the largest payments. For example, the 4% who received more than £100,000 in subsidies in 2020 will receive no more than £8,000 in 2025. The majority of farmers, who received less than £10,000 to start with, will continue to see a gradual reduction in their delinked payments but will have ongoing access to funding through SFI and other schemes, which offer funding streams for farmers who have often been ignored, such as small, grassland, upland and tenant farmers.
Tenant farmers have been mentioned on a number of occasions, and I remind noble Lords that we have announced a commissioner for tenant farmers to work to support them in their endeavours.
What is more, the Government have announced that they will rapidly release £60 million through the Farming Recovery Fund. This will support farmers, including those operating family farms, who were affected by unprecedented extreme wet weather last winter. Around 13,000 farm businesses, including family farms, will receive an exceptional, one-off payment to help with severe flooding. The Government are also investing £208 million so they can protect the nation from disease outbreaks that threaten the industry, food security and human health.
We will continue funding the Farming Community Network to support tuberculosis-affected communities by putting in place a three-year contract, starting from 1 December this year. The support, which began in 2009, provides TB-affected farmers and their families with a national, free-to-access business and pastoral advice service.
I absolutely recognise that farmers face challenges on many fronts, and we will do everything we can to safeguard the mental health of people working in the sector. Access to mental health support can be very important to farming families, who can often find themselves isolated and sometimes struggle to ask for help. The Government are working to improve mental health and access to services. I pay tribute to all those who work to raise awareness of these issues and encourage farming families who are struggling to reach out for help.
All this support forms just part of the Government’s new deal for farmers. Besides these measures, the Government are working to cut red tape at our borders and get British food exports moving again, and to protect farmers from being undercut by trade deals. The Government will lower energy bills for farmers by switching on GB Energy; introduce grid reform to allow farmers to plug their renewable energy into the National Grid; use their own purchasing power to back British food, so that 50% of food bought in hospitals, army bases and prisons is locally produced or certified to high environmental standards; introduce a land use framework which balances long-term food security and nature recovery; introduce the first ever cross-government rural crime strategy to crack down on antisocial behaviour, fly-tipping and GPS theft; and set up a new British infrastructure council to steer private investment in rural areas, including broadband rollout in our rural communities.
I turn to the points raised in the debate. The noble Lord, Lord Herbert of South Downs, asked, as did others, why the Secretary of State said when in opposition that he did not expect the inheritance tax situation to change. Unfortunately, the Government have had to take tough decisions on tax, and on welfare and spending, to fix the foundations and deliver change, including a series of decisions on tax that protect the payslips of working people. This has been possible only by making changes to a number of taxes, such as agricultural property relief, which was previously available on all agricultural properties at a rate of 100%.
I appreciate the real disappointment felt by the noble Baroness and others in the Chamber at these changes, and I assure noble Lords that the measures have been designed to protect small farms. We know, as we have heard, that the current rules have been used by wealthy landowners to avoid inheritance tax. Currently, the largest estates pay a lower effective inheritance tax rate than smaller estates. The latest figures show that the top 7%—the largest 117 claims—account for 40% of the total value of agricultural property relief. This costs the taxpayer £290 million. The top 2% of claims—which is 37 claims—account for 22% of agricultural property relief, costing £190 million.
I understand the point raised by the right reverend Prelate the Bishop of St Albans—that that there has been a great deal of discrepancy in the figures. Our figures are based on actual claims for APR and show that around three-quarters of claims each year are expected to be unaffected by the changes. Looking at asset value alone does not necessarily mean that the farm will be impacted, as it depends on individual circumstances. If anybody wants to look at the figures in more detail, they are available to view online and have been assessed by the independent OBR.
We do not think the current situation is fair or sustainable, which is why we have been making changes to ensure that larger estates contribute more than smaller ones. But we want to safeguard small family farms while also fixing the public services those same families rely on, so that they can pass the family farm down to their children just as previous generations have always done.
The Question specifically refers to the continuity of farming families. An issue that needs to be addressed is succession. The noble Earl, Lord Shrewsbury, mentioned it, although it was not generally brought up in the debate. Succession is a really important point, which is why we need to make farming a much more attractive business for people to move into. This has been the case for many years, and I am pleased that we are starting to talk about this within Defra and in government, with a long-term strategy for farming. For example, when my uncle wanted to retire, nobody from my generation wanted to take the farm on. We had seen how hard he had worked as a hill sheep farmer. We had seen that he worked part-time as a mechanic at the local garage to try to make ends meet. It simply was not attractive enough for us to decide that that was where we wanted to invest our future. Among the many discussions we have had on this, if we are going to secure family farms for the future, we need to make farming more attractive for new people who want to come into farming. The noble Earl also made a very important point about council farms, which have been sold off far too frequently. I wanted to make that point before I close, because it is important.
The noble Baroness asked whether the Chancellor of the Exchequer had met with the NFU. I can tell her that earlier this week, both Defra and Treasury officials met with farming sector representatives to look at this.
We recognise the valuable role that farming families serve in this country, and we are committed to working with farmers to enable the vast majority to pass the family farm down to their children. The new deal for farmers, and other support announced at the Budget, will support that.
I would like to make a final point. In opening the CLA’s rural conference, the Secretary of State for Defra said that he wants to listen in order to understand how government can make these changes easier to bear. I support him in that, and my door is open to anyone who would like to come and discuss this with me.
Large Language Models and Generative AI (Communications and Digital Committee Report)
(1 month, 1 week ago)
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Baroness Stowell of Beeston
That this House takes note of the Report from the Communications and Digital Committee Large language models and generative AI (1st Report, Session 2023-24, HL Paper 54).
Baroness Stowell of Beeston (Con)
My Lords, it is a great honour to open a debate in your Lordships’ House but an even bigger one to chair one of its Select Committees. Indeed, it is a pleasure to work with colleagues from around the House as we investigate important areas of public policy, and our inquiry on large language models and generative AI was no exception.
Several committee members are here today, and I thank them and all my colleagues for their commitment and contribution to this work. We received, and were grateful for, specialist and expert advice from Professor Mike Wooldridge. We were also supported brilliantly, as ever, by our excellent committee team. I will not run through them all individually but I take this opportunity to make a special mention of our exceptional clerk, Daniel Schlappa. After three years with the Communications and Digital Select Committee, he has this week moved on to the Intelligence and Security Joint Committee. We all owe Dan our sincere thanks and wish him well in his new role.
When we published our report on foundation models in February, we said that this technology would have a profound effect on society, comparable to the introduction of the internet. There has been a lot of hype and some disappointment about generative AI but our overall assessment looks sound. It is not going to solve all the world’s problems but nor is it going to drive widespread unemployment or societal collapse, as some of the gloomiest commentators suggest. However, it will fundamentally change the way that we interact with technology and each other, and its capabilities and the speed of change are astounding. Generative AI models are already able to produce highly sophisticated text, images, videos and computer code. Within just a few months, huge advances have been made in their ability to perform maths and reasoning tasks, and their ability to work autonomously is growing.
The committee was optimistic about the benefits of this new technology, not least because its implications for the UK economy are huge. The Government’s recent AI sector study notes that there are more than 3,000 AI companies in the UK generating more than £10 billion in revenues and employing more than 60,000 people in AI-related roles. Some estimates predict that the UK AI market could grow to over $1 trillion in value by 2035. However, to realise that potential, we have to make the right choices.
Capturing the benefits of AI involves addressing the serious risks associated with the technology’s use. These include threats to cybersecurity and the creation of child sexual abuse materials and terrorism instructions. AI can exacerbate existing challenges around discrimination and bias too. That all needs addressing at pace. We also need better early warning indicators for more catastrophic risks such as biological attacks, destructive cyber weapons or critical infrastructure failure. That is particularly important as the technical means to produce autonomous agents intensifies, meaning that AI will increasingly be able to direct itself.
I am pleased that the Government took forward some of the committee’s suggestions about the AI risk register. However, while addressing the risks of AI is critical, we cannot afford to let fear dominate the conversation. The greatest danger lies in failing to seize the opportunities that this technology presents. If the UK focuses solely on managing risks, we will fall behind international competitors who are racing ahead with bold ambition.
I do not mean just what is happening in the US and China. Government spending on AI in France since 2018 is estimated to have reached €7.2 billion, which is 60% more than in the UK. Here the Labour Government, since they were elected, cancelled investment in the Edinburgh exascale computing facility. This sends the wrong message about the UK’s ambition. Unless we are bolder and more ambitious, our reputation as an international leader in AI will become a distant memory. Our new inquiry into scaling up in AI and creative tech will investigate this topic further.
To lead on the global stage, the UK must adopt a vision of progress that attracts the brightest talent, fosters ground-breaking research and encourages a responsible AI ecosystem. I hope that the Government’s long-awaited AI opportunities action plan will be as positive as its title suggests. However, I have also heard talk of closer alignment with EU approaches, which sounds less promising. I will say more about this in a moment. I hope the Minister will confirm today that the Government will embrace a bold, optimistic vision for AI in the UK.
With that ambition in mind, let me highlight three key findings from our report, which are particularly pertinent as the Government formulate their vision for AI. These are: the importance of open market competition, the need for a proportionate approach to regulation, and the urgent issue of copyright.
I will start with competition. Ever since the inception of the internet, we have seen technology markets become dominated by very few companies, notably in cloud and search. The AI market is also consolidating. As Stability AI told us last year, there is a real risk of repeating mistakes we saw years ago. No Government should pick winners, but they should actively promote a healthy and level playing field and make open competition an explicit policy objective for AI. Lots of indicators show that the transformational benefits to society and our economy will be at the application layer of AI. We must not let the largest tech firms running the powerful foundation models create a situation where they have the power to throttle the kind of disruptive innovators that will power our future growth.
I was concerned to see the Secretary of State advocating for tech companies to be treated as if they were nation states. I appreciate that their economic heft and influence is extraordinary. Of course we value and want to attract their investment, but we need to be careful about what kind of message we send. Do we really want to say that private companies are on an equal footing with democratically elected Governments? I do not believe we do. I would be grateful if the Minister would reassure the House that the Government intend to deter bad behaviour by big tech companies, not defer to it.
Moving on, the committee called for an AI strategy that focuses on “supporting commercial opportunities”, academic research and spin-outs. As the Government consider AI legislation, they should ensure that innovation and competition are their guiding focus. They must avoid policies that limit open-source AI development or exclude innovative smaller players. When some of us were in San Francisco, we heard about recent efforts to legislate frontier models in California, which sparked varied concerns from stakeholders, ranging from big tech to small start-ups. We understand that getting these things right is a challenge, but it is one that must be met.
Future safety rules are a good example. Our report called for mandatory safety tests for high-risk, high-impact models. But the key thing here is proportionality. It is important for the riskiest and most capable models to have some safety requirements—just look at the pace of progress in Chinese LLMs, for example—and the AI Safety Institute is making progress on standards. But if the Government set the bar for these standards too low and capture too many businesses, it will curb innovation and undermine the whole purpose of having flexible rules. Again, I would be really grateful if the Minister would reassure me and the House that the Government will ensure that any new safety tests will apply only to the largest and riskiest models, and not stifle new market entrants.
Many US tech firms and investors told us the UK’s sector-led approach to AI regulation is the right route. It strikes a balance between ensuring reasonable regulatory oversight while not drowning start-ups and scale-ups in red tape. In contrast, some investors said the EU’s approach had given them pause for thought. Regulatory alignment with the EU should not be pursued for its own sake. The UK needs an AI regime that works in our national interest. Again, it would be helpful if the Minister could assure the House that he will not compromise the UK’s AI potential out by closely aligning us with Europe in this area. Our regulatory independence is a real advantage we must not lose.
Relying on existing regulators to ensure good outcomes from AI will work only if they are properly resourced and empowered. The committee was not satisfied that regulators were sufficiently prepared to take on this task. On that, we drew attention to the slow pace of setting up the Government’s central support functions which are supposed to provide expertise and co-ordination to the regulators and check they have the right tools for the job. It would be good to hear from the Minister that progress is being made on all these fronts.
We must also be careful to avoid regulatory capture by the established tech companies in an area where government and regulators will be constantly playing catch-up and needing to draw in external business expertise. I was pleased to see that DSIT has published the conflicts of interest for key senior figures. That sort of transparency within government is much needed and sets a really good example to everyone else.
Finally, I turn to copyright and the unauthorised use of data—a topic that the committee has continued to investigate in our current inquiry on the future of news. We were disappointed by the previous Government’s lack of progress on copyright. It is crucial that we create the necessary conditions to encourage AI innovation, but this should not come at the cost of the UK’s creative industries, which contribute over £100 billion a year to the UK economy. The approach of setting up round tables, led by the Intellectual Property Office, was not convincing and, predictably, it has not solved much.
But I have not been impressed with the new Government’s approach so far either. There has been little action to address this period of protracted uncertainty, one which is increasingly entrenching the status quo with negative consequences for rights holders and AI start-ups. A handful of powerful players continue to dominate and exploit their position with impunity. It is good to see more licensing deals emerging. Advocates say this is a positive development which recognises news publishers’ contribution. But critics argue that the deals are effectively an insurance policy which further cement big tech’s position. More scrutiny of this is needed. I very much hope that the Minister will tell us today when the Government will set out their next steps on copyright. We must find a way forward and one that works for the UK.
I note that the Minister in a previous role has before advocated for an opt-out approach to text and data mining. He will know that the previous Government did not adopt that approach because of how badly it went down with the content creators. Rights holders must have a way of checking whether their request to block crawlers has been respected. There need to be meaningful sanctions for developers if the rules are not followed. At the moment, the only option is a high-risk court case, probably for a very limited payout. This is not a satisfactory solution, especially when a huge disparity of legal resources exists between the publisher and tech firm. Unless these fundamental shortcomings are resolved, a new regime will be woefully inadequate. I will be disappointed if the Minister proposes an opt-out regime without also providing details of a transparency framework and an enforcement mechanism. If the Government intend to pursue that path, could the Minister explain how he has addressed the concerns of the publishers, when the previous Government could not? It is important to note—and I am very pleased to see this—that the industry itself is coming up with solutions, whether through partnerships or the development of new AI licensing marketplaces. Indeed, there have been some announcements only this week.
All that brings me back to the point that I made at the beginning. Large language models and generative AI offer huge opportunities for innovation. In turn, we must remain innovative ourselves when considering how to harness the potential impact of this technology while also mitigating the risks. We must ensure that our minds and our markets remain open to new ideas. I look forward to hearing everyone’s contribution to today’s debate, both committee members and others with an interest in this area. I am especially looking forward to hearing from the Minister and learning more about his Government’s approach to this critical technology. I beg to move.
Lord Knight of Weymouth (Lab)
My Lords, while I have interests in the register relating to AI, none is directly involved with LLM development. However, the Good Future Foundation and Educate Ventures Research are both advising others on AI deployment, while Century-Tech and Goodnotes derive some product enhancement using LLM and generative AI technology.
I joined the Communications and Digital Committee after this report was concluded, so I am not marking my own homework when I say that this is an interesting and informative report that I would highly recommend to a wider group of Members of your Lordships’ House than those in their places today. I congratulate the noble Baroness, Lady Stowell, on her speech and the way in which she has introduced this, and the rest of the committee on the report.
We have a big problem of conscious incompetence in the House, with the vast majority leaving tech regulation and debate to a small group of usual suspects. We need a wider diversity of opinion. Given the high probability that this technology will impact almost all sectors, we need expertise in those sectors applied to AI policy, and I recommend reading this report as an opportunity for Members to improve their AI literacy. That is not to say we, the usual suspects, have all the answers; we simply have the confidence to be curious around our own conscious incompetence.
The report reminds us of the core ingredients needed to develop frontier AI: large markets, massive computing power and therefore access to significant energy sources, affordable high-end skills and a lot of high-quality data. All this needs a lot of money and a relatively benign regulatory environment. The report also reminds us that we risk losing out on the huge opportunity that AI gives us for economic growth, if we do not get this right, and we risk otherwise drifting once more into a reliance on just a few tech companies As Ben Brooks of Stability AI told the committee, currently the world relies on one search company, two social media companies and three cloud providers.
It is worth asking whether we have already missed the boat on the frontier of LLMs. Much of this activity lies in the US, and it is fair to ask whether we are better off building off existing open or closed foundational models at the application layer and using our unique datasets and great skills to develop models for public service outcomes in particular—in health, culture, education and elsewhere—that we and the world can trust and enjoy. Such an approach would acknowledge the limited market access that we have post Brexit, the limited compute and energy resources, and the limited amounts of investment.
However, those limitations should not constrain our ambition around other large models. This report is just about large language models, but others will come and it can help inform attitudes to frontier AI more generally. The coming together of robotics or biotechnology with generative AI and the development of quantum computing are yet to be fully realised, and we should ensure that as a nation we have capacity in some of these future frontiers. It is worth reminding noble Lords that if they thought generative AI was disruptive, some of these next frontiers will be much more so. The UK must prepare for a period of heightened technological turbulence while seeking to take advantage of the great opportunities.
As I said on Tuesday in our debate on the data Bill, we urgently need a White Paper or similar from the Government that paints the whole picture in this area of great technological opportunity and risk. The report finds that the previous Government’s attention was shifting too far towards a narrow view of high-stakes AI safety and that there is a need for a more balanced approach to drive widespread responsible innovation. I agree that the Government should set out a more positive vision for LLMs while also reflecting on risk and safety. Perhaps the Minister could set out in his wind-up when we are likely to get the wider vision that I think we need.
I agree with much of the report’s findings, such as that the Government should explore options for securing a sovereign LLM capability, particularly for public sector applications. The report also covered the likelihood of AI-triggered catastrophic events. While I agree that this is not an imminent risk, it needs a regulatory response. AI could pose an extinction risk to humanity, as recognised by world leaders, AI scientists and leading AI company CEOs. AI systems’ capabilities are growing rapidly. Superintelligent AI systems with intellectual capabilities beyond those of humans would present far greater risks than all existing AI systems currently. In other areas, such as medicine or defence, we put guard-rails around development to protect us from risks to humanity. Is this something the Minister agrees should be addressed with the flexible, risk-based rules referenced by the noble Baroness, Lady Stowell?
To conclude, this issue is urgent. We need to balance the desire to grow the economy by harnessing the potential of AI with the need to protect our critical cultural industries, as the noble Baroness referenced. It is a special feature of the British economy, and regulation is needed to protect it. On this I commend the Australian parliamentary joint committee on social media and traditional news. It calls for a number of things, including a must-carry framework to ensure the prominence of journalism across search and social media and a 15% levy on platform online advertising, including revenues technically billed offshore that would then be distributed by an independent body. Based on estimates, the rough scale of the proposal is that approximately 1 billion Australian dollars or £500 million of revenue would be generated, which is roughly two or three times the magnitude of what licensing is currently delivering in that country. That is a bold set of proposals and I share it to raise our sense of ambition about what we can do to balance regulation and the desire for growth. These are difficult choices, but the Government need to act urgently and I strongly commend this report to the House.
Baroness Featherstone (LD)
My Lords, it is a great pleasure to follow the noble Lord, Lord Knight of Weymouth, and I pay tribute to the chair of the committee, the noble Baroness, Lady Stowell of Beeston, for her first-class chairing of what was a really complex issue to those of us who are not in the AI or tech industries. It was completely fascinating and very eye-opening—a masterclass.
Today I want to address one of the most pressing and critical issues raised by the noble Baroness, Lady Stowell: the clear evidence that creatives and their living are in great danger. They are up against the overwhelming and overweening power of the big tech companies and what appeared to be a great deal of reluctance by the industry to concede that a way to remunerate for intellectual property use was vital. It was clear that the LLM industry is using the products of the creative industries to train AI and were text and data mining extensively for their own benefit without paying for it. As I listened to a cascade of excuses and rationales for not dealing with the issue, it was a real-life example of killing the goose that laid the golden egg.
At its most basic, it is critical that we recognise original work, deliver fair compensation, and respect creators’ rights and economic justice. We listened to all the arguments about who owns what, how you prove it, how it is all too difficult, that it is like reading a book or that somehow it is a public good. But in the end, creatives must be recompensed for the use of their creations. We need to ensure a sustainable creative economy. As the noble Baroness said, the creative industries are a massive economic driver for our national economy.
There is both a legal and an ethical responsibility to ensure that there is adherence to copyright laws. Those laws exist to protect the work of creators. As this field develops, and AI becomes more integrated into industries, it is a critical requirement and ethical responsibility of companies to respect intellectual property. It was clear from the evidence we heard that much of the data mining that has been going on has taken place without any permission from or compensation to the rights holders. Yes, there were esoteric discussions as to where copyright belonged: could it really be the original artist when somewhere in a black box—or maybe it was a sandbox, I cannot remember—fibres were creating something anew from the feed? That may be challenging, but the onus is on the AI industry and the Government to protect our creatives. As a group, and given their talents, they are not always paid well anyway. For them not to receive anything, when their work provides the basis for AI training for an industry that is going to grow wildly economically rich, is simply not acceptable.
Our copyright law is absolutely clear on this. Moreover, the evidence given to the committee, such as from the Society of Authors, noted that AI systems “would simply collapse” if they could not access original talent. It was equally clear from Dan Conway, CEO of the Publishers Association, in his evidence to the committee, that LLMs
“are infringing copyrighted content on an absolutely massive scale … when they collect the information”
and in
“how they store the information and how they handle it”.
There was clear evidence from model outputs that developers had used pirated content from the Books3 database, and he alleged that they were “not currently compliant” with UK law. Microsoft countered with the argument that, basically, they were offering a public good and therefore copyright laws should not apply to ideas—good try.
I was also interested to receive a briefing from UK Music, which is concerned—justly, in my view—that the Government might try to introduce further text and data mining copyright exceptions, which would allow AI service providers to train their systems on music without the consent of, or need to compensate, its creators. The oft-made suggestion, as raised by the noble Baroness, is an opt-out system. It seems relatively practical: you could opt in if you did not mind your stuff being used, or you could opt out. But it will not work. There are no existing, effective opt-out schemes that reliably opt out content from training. Doing so is quite impossible. There is no way to have control over whether downstream uses of original work are opted out of generative AI training, since there is no control for the artist over the URLs where they are hosted—perhaps we should look at extraterritorial law. The evidence suggests that the majority of people who have the option to opt out of generative AI training do not even realise that they have the option. Moreover, if opt-out schemes are adopted, publishers and copyright holders will have only the illusion of choice. If they opt out of AI training, they opt out of being findable on the internet altogether.
Record keeping has also been suggested—I do not think the committee covered this, but I stand to be corrected. Currently there is no stand-alone legal requirement in the UK to disclose the material that AI systems are trained on, beyond the data protection law framework. I believe that record keeping should be mandatory.
AI cannot create in a vacuum. It needs huge data sets, so often drawn from copyrighted materials, to function. Clearly, it would be much better to encourage collaboration between the tech industry and the creative industries, instead of AI becoming a threat or being a threat, as it is. I implore AI companies to accept this thesis and ensure that they are transparent about how their models are trained and which data is used.
There are a lot of ideas around about group licensing and so on. It would be far more productive if the LLMs worked with the creatives. A lot of creatives are individuals or small companies. They just do not have the means to enforce their IP rights through the legal process or to track how their works are being used in AI training. That is why the committee’s recommendation that the IPO code must ensure that creators are fully empowered to exercise their rights is so important, alongside the requirement for developers to make clear whether their web crawlers are being used to acquire data for generative AI training or for other purposes.
Ultimately, AI’s integration into the creative industries brings a host of economic, ethical and legal challenges, but the most essential part is protecting the rights of creators to ensure fairness in the distribution of economic value, so that creators and the AI industry can both thrive. I trust the Government will ensure that the committee’s recommendations are implemented in full.
Baroness Wheatcroft (CB)
My Lords, it is a pleasure to follow the noble Baroness, Lady Featherstone. I must join others and add my thanks to the noble Baroness, Lady Stowell, for the impressive manner in which she led the inquiry and introduced this debate. I cannot exaggerate the excellent service we had from our staff, as the noble Baroness, Lady Stowell, said. In particular, one must single out our brilliant clerk, Daniel Schlappa, simply because he is no longer our clerk. The committee that gets his services next is very lucky; his insights were always pertinent and helpful.
I was delighted when the committee decided on this topic because it was clearly an important subject but one on which my knowledge was limited. It would therefore provide a stimulating learning experience. That certainly proved to be the case and continues to be so. In preparing for this debate, I encountered the word “exaflop”. I am not sure that it will ever be part of my daily vocabulary, but I have no doubt that the Minister, with his background, is more than familiar with the term. The idea of one quintillion—that is, one followed by 18 zeros—is hard to grasp, but one quintillion floating point operations per second is an exaflop. The joy of being in the Lords is that one is always learning. Why that is relevant to this debate is something to which I will return.
First, I stress the committee’s conclusion that LLMs and AI can, and will, be hugely positive contributors to our lives and economy. We must therefore be careful not to allow a climate of fear to be fostered around this latest stage in the march of technology. Careful and considered regulation is essential but while nations individually can deal with some aspects of this, global co-ordination, that nirvana for so many sectors, remains the ideal.
The Bletchley declaration was a positive step in the direction of global co-operation. Signed in late 2023 by 28 countries and the EU, it pledged to establish an international network of
“research on … AI safety ... to facilitate the provision of the best science available for policy making and the public good”.
That sounds a good and noble aim, although the presence of China on the list of signatories caused me to ponder just what might emerge from this laudable pledge. If the Minister is in a position to update the House on what the results have been so far, I think we would all be grateful. The Bletchley delegates planned to meet again in 2024, so perhaps he could tell us what came out of that meeting, if it ever happened.
Our report made a sheaf of recommendations to government. The two most important, perhaps, might be summed up as follows. First, do not waste time: there is no time to waste; this is happening now and at breakneck speed. Secondly, avoid regulatory capture, but regulate proportionately, as the noble Baroness, Lady Stowell, said.
We were also concerned about the need to protect copyright. This is a creative country in which many individuals and businesses earn their living through words and ideas. They cannot afford to have them stolen, and AI is already doing that at scale. The noble Baroness, Lady Featherstone, made this case admirably, and others will no doubt address this topic, but the need for government clarity on copyright remains pressing.
I return to those exaflops. In the remainder of my speech, I will concentrate on two specific issues in our report: the lack of compute power and whether the Government should explore the possibility of a sovereign LLM capability. The technology we are discussing today consumes computer power on an unprecedented scale. The largest AI models use many exaflops of compute: many quintillions of computer power. That also requires a huge amount of energy, but that is an issue for another debate.
In his 2023 review of compute in the UK, Professor Zoubin Ghahramani concluded that:
“The UK has great talent in AI with a vibrant start-up ecosystem, but public investment in AI compute is seriously lagging”.
He made that point in evidence to the committee. He recommended in 2023 a national co-ordinating body to deliver the vision for compute, one that could provide long-term stability while adapting to the rapid pace of change. He called for immediate investment so that the UK did not fall behind its peers.
To me, the exascale computer project in Edinburgh sounded like just the thing—50 times more powerful than existing AI resource—but this Government have pulled the plug on that. We all know about the £22 billion black hole, but, without uttering that phrase, can the Minister tell us whether he thinks that that decision might not be the end of the story? After all, the new fiscal rules allow the Chancellor to borrow to invest in important infrastructure projects. Would compute come into that category?
Secondly, will he say whether there might be some fresh thinking on the idea of a sovereign LLM? The previous Government’s response to our recommendation on this was that it was too early because LLM tools were still evolving, but the dominance of just a few overseas companies puts the UK in the potentially uncomfortable position of having to rely on core data from elsewhere for government to provide essential services. As the noble Lord, Lord Knight of Weymouth, said, perhaps the UK must accept that it missed the boat on LLMs and concentrate on what it is already doing very successfully: building specialist AI models. For government, that poses particular risks. Might there be some middle way that government should be—and maybe is—examining?
Baroness Healy of Primrose Hill (Lab)
My Lords, it is a pleasure to follow the noble Baroness, Lady Wheatcroft. I welcome the new Government’s determination that artificial intelligence can kickstart an era of economic growth, transform the delivery of public services and boost living standards for working people. Therefore, I hope they will welcome the recommendations in our Select Committee report, Large Language Models and Generative AI, which clearly sets out the opportunities and risks associated with this epoch-defining technology.
I, too, served on this committee under the admirable leadership of the noble Baroness, Lady Stowell of Beeston, who has set out the findings of our report so well. We are fortunate to have such a knowledgeable Minister in my noble friend Lord Vallance replying to this debate. His Pro-innovation Regulation of Technologies Review, undertaken when he was the Chief Scientific Adviser in a former life, raises important questions on copyright and regulation, both of which feature in our report.
Last week, the Minister, my noble friend Lady Jones of Whitchurch, explained to the House the difficulties in finding the right balance between fostering innovation in AI and ensuring protection for creators and the creative industries. Her acknowledgement that this must be resolved soon was welcome, but our report made clear the urgency surrounding this vexed question of copyright. Can my noble friend the Minister give any update on possible progress?
The News Media Association warns that, without incentivising a dynamic licensing market, the creative industries will be unable to invest in new content, generative AI firms will have less and less high-quality data with which to train their LLMs, and AI innovation will stall. Our report recognised the complexity of the issue but stated that
“the principles remain clear. The point of copyright is to reward creators for their efforts, prevent others from using works without permission, and incentivise innovation. The current legal framework is failing to ensure these outcomes occur and the Government has a duty to act”.
This was directed at the previous Government but applies equally to the present one.
Another matter of concern to the committee are the powers and abilities of regulators to ensure the safety and innovation of these LLMs. The new Labour Government clearly recognise the importance of the AI sector as a key part of their industrial strategy and I welcome the announcement of the AI action plan, which is expected to be published this month. Can my noble friend confirm that this is still the expected timescale, and when the AI opportunities unit will be set up in DSIT to implement the plan?
More details of how AI will enhance growth and productivity and support the Government’s five stated missions, including breaking down barriers to opportunity, would be welcome to better understand how AI will transform citizens’ experiences of interacting with the state and boost take-up in all parts of the public sector and the wider economy. But, before this is possible, regulatory structures to ensure responsible innovation need to be strengthened, as our report found that regulators’ staffing suggested significant variation in technical expertise. There is a pressing need for support from the Government’s central functions in providing cross-regulator co-ordination. Relying on existing regulators to ensure good outcomes from AI will work only if they are properly resourced and empowered. As our report said:
“The Government should introduce standardised powers for the main regulators who are expected to lead on AI oversight to ensure they can gather information relating to AI processes and conduct technical, empirical and governance audits. It should also ensure there are meaningful sanctions to provide credible deterrents against egregious wrongdoing”.
Can my noble friend clarify how the new Bill will support growth and innovation by ending current regulatory uncertainty for AI developers, strengthening public trust and boosting business confidence? Is this part of the new regulatory innovation office’s role?
I welcome the Secretary of State’s commitment that the promised legislation will focus on the most advanced LLM models and not seek to regulate the entire industry, but rather make existing agreements between technology companies and the Government legally binding and turn the AI Safety Institute from a directorate of DSIT into an arm’s-length body, which he has said
“will give it a level of independence and a long-term future, because safety is so important”.
In conclusion, how confident is my noble friend that the recommendations of his March 2023 review will be implemented? It recognised that:
“Regulator behaviour and culture is a major determinant of whether innovators can effectively navigate adapting regulatory frameworks … the challenge for government is to keep pace with the speed of technological change: unlocking the enormous benefits of digital technologies, while minimising the risks they present both now and in the future”.
I wish the new Government well in this daunting task. As our report said:
“Capturing the benefits will require addressing risks. Many are formidable, including credible threats to public safety, societal values, open market competition and UK economic competitiveness. Farsighted, nuanced and speedy action is therefore needed to catalyse innovation responsibly and mitigate risks proportionately”.
Mitigation is essential, and I welcome the Government’s announcement of research grants to commence the important work of
“boosting society’s resilience against AI risks such as deepfakes, misinformation and cyberattacks”,
and
“the threat of AI systems failing unexpectedly, for example in the financial sector”.
Our report outlined the wide-ranging nature of these risks:
“The most immediate security concerns from LLMs come from making existing malicious activities easier, rather than qualitatively new risks. The Government should work with industry at pace to scale existing mitigations in the areas of cyber security (including systems vulnerable to voice cloning), child sexual abuse material, counter-terror, and counter-disinformation”.
I trust that the new AI strategy can be truly effective in countering risk and encouraging developments of real benefit to society.
Lord Strasburger (LD)
My Lords, I congratulate the noble Baroness, Lady Stowell, and the Communications and Digital Committee on their very thorough and comprehensive report. It points out the very considerable benefits that generative AI and large language models can deliver for this country, and the human race in general. The report declares that large language models put us on the brink of epoch-defining changes, comparable to the invention of the internet, and I have no doubt about the truth of that prediction.
However, what price will we pay for these benefits? I am deeply worried about the great risks that are inherent in the breakneck pace at which this technology is being developed, without any meaningful attempts to regulate it—with the possible exception of the EU. The report identifies a plethora of potential areas of risk, from minor through to catastrophic, covering a non-exhaustive list of areas, including multiplying existing malicious capabilities, increasing the scale and pace of cyberattacks, enabling terrorism, generating synthetic child sexual abuse material, increasing disinformation via hyper-realistic bots, enabling biological or chemical release at pandemic scale, causing critical infrastructure failure or triggering an uncontrollable proliferation of AI models. I will not go on with the list, because anyone who has read the report will know what I am talking about. These are the consequences of malicious, or perhaps merely careless, uses of the technology, and they could have a very significant—perhaps catastrophic—impact on the citizens of this country, or even worldwide.
The report states in paragraph 140:
“There are … no warning indicators for a rapid and uncontrollable escalation of capabilities resulting in catastrophic risk”.
It then tries to reassure us—without much success, in my case—by saying:
“There is no cause for panic, but the implications of this intelligence blind spot deserve sober consideration”.
That is putting it very mildly.
However, this is not my main concern about the risks presented by AI, and I speak as one who had slight interaction with embryonic AI in the 1980s. The risks I have mentioned so far arise out of the probable misuse of this technology, either deliberately or accidentally. They might be mitigated by tight international regulation, although how we can prevent bad actors operating in regions devoid of regulation, I do not know. These enterprises are so competitive, so globalized and so driven by commercial pressure that anything that can be done, will be done, somewhere.
My main concern, and one to which I cannot see an obvious answer, is not what happens when the technology is misused. What worries me is the risk to humans if we lose control of the AI technology itself. The report does mention this risk, saying:
“This might occur because humans gradually hand over control to highly capable systems that vastly exceed our understanding; and/or the AI system pursues goals which are not aligned with human welfare and reduce human agency”.
That is a very polite way of saying that the AI systems might acquire greater intelligence than humans and pursue goals of their own: goals that are decidedly detrimental to the human race, such as eliminating or enslaving it. Before any noble Lords conclude that I am off with the fairies, I direct them to paragraph 154 of the report, which indicates a “non-zero likelihood”—that apparently means a remote chance—of existential risks materialising, but not, the report says, in the next three years. That is not very reassuring for those of us who hope to live longer than three years.
Some months ago, I had a conversation with Geoff Hinton—here in this House, as it happens—who is widely recognised to be one of the godfathers of AI and has just been awarded a Nobel prize. He resigned from Google to be free to warn the world about the existential risks from AI, and he is not alone in those views. His very well-informed view is that there is a risk of humans losing control of AI technology, with existential consequences. When I asked him what the good news was, he thought about it and said, “It’s a good time to be 76”. My rather flippant response was, “Well, at least we don’t have to worry about climate change”.
Seriously, the thing about existential risks is that we do not get a second chance. There is no way back. Even if the probability is very low, the consequence is so catastrophic for mankind that we cannot simply hope it does not happen. As the noble Lord, Lord Rees, the Astronomer Royal, said 10 years ago in a TED talk when discussing all cataclysmic risks:
“Our earth has existed for 45 million centuries, but this”
century
“is special—it’s the first where one species, ours, has the planet’s future in its hands … We and our political masters are in denial about catastrophic scenarios … But if an event is potentially devastating, it is worth paying a substantial premium to safeguard against it”,
rather like
“fire insurance on our house”.
The committee’s report devotes seven paragraphs out of 259 to the existential risks of the technology turning the tables on its human masters. This would suggest the committee did not take that risk all that seriously. Indeed, it says in paragraph 155:
“As our understanding of this technology grows … we hope concerns about existential risk will decline”.
I am not happy to rely on hope where existential risk is concerned, so I ask the Minister for some reassurance that this matter is in hand.
What steps are the Government taking, alone and with others, to mitigate the specific risk—albeit a small one—of humans losing control of AI systems such that they wipe out humanity?
Lord Kamall (Con)
My Lords, I refer noble Lords to my interests as set out in the register. I also thank the committee staff for their work during the inquiry and in writing the report, all the witnesses who offered us a range of views on this fascinating topic, as well as our incredibly able chairperson the noble Baroness, Lady Stowell, and my committee colleagues.
I am someone who studied engineering for my first degree, so I will go back to first principles. Large language models work by learning relationships between pieces of data contained in large datasets. They use that to predict sequences, which then enables them to generate natural language text, such as articles, student essays, or even politicians’ speeches—but not this one. Finance companies use LLMs to predict market trends based on past data; marketing agencies use LLMs to analyse consumer behaviour in developing marketing campaigns; and, in health, LLMs have been used to analyse patient records and clinical notes to help diagnosis and develop treatment plans.
While this is welcome, LLMs also hallucinate. They produce a result that seems plausible but is in fact false, since the LLM’s source data in calculating the probability of that information being correct was actually incorrect. An AI expert told me that all output from an LLM, whether accurate or not, could be considered an hallucination, since the LLM itself possesses no real knowledge or intelligence. In fact, so much of what we call artificial intelligence at the moment is not yet intelligent and can be better described as machine learning. Given this, we should be careful to put too much trust in LLMs and AI, especially in automated decision-making.
In other debates, I have shared my terrible customer experiences with an airline and a fintech company, both of which seemed to use automated decision-making, but I will not repeat them now. While they got away with it, poor automated decision-making in healthcare could be dangerous and even catastrophic, leading to deaths. We need to proceed with caution when using LLMs and other AI systems for automated decision-making, something that will be raised in debate on the Data (Use and Access) Bill. We also need to consider safeguards and, possibly, an immediate human back-up on site if something goes wrong.
These examples about the good and the bad highlight the two key principles in technology legislation and regulation. You have, on the one hand, the precautionary principle and, on the other, the innovation principle. Witnesses tended to portray the US approach, certainly at the federal level, as driven mostly by the large US tech companies, while the European Union’s AI Act was described as “prescriptive”, overly precautionary and “stifling innovation”. Witnesses saw this as an opportunity for the UK to continue to host world-leading companies but, as other noble Lords have said, we cannot delay. Indeed, the report calls for the UK Government and industry to prepare now to take advantage of the opportunities, as the noble Baroness, Lady Wheatcroft, said.
At the same time, the Government should guard against regulatory capture or rent seeking by the big players, who may lobby for regulations benefiting them at a cost to other companies. We also considered the range of, and trade-offs between, open and closed models. While open models may offer greater access and competition, they may make it harder to control the proliferation of dangerous capabilities. While closed models may offer more control and security, they may give too much power to the big tech companies. What is the Government’s current thinking on the range of closed and open models and those in between? Who are they consulting to inform this thinking?
The previous Government’s AI Safety Summit was welcomed by many, and we heard calls to address the immediate risks from LLMs since malicious activities, such as fake pictures and fake news, become easier and cheaper with LLMs, as the noble Baroness, Lady Healy said. As the noble Lords, Lord Knight and Lord Strasburger, said, witnesses told us about the catastrophic risks, which are defined as about 1,000 UK deaths and tens of billions in financial damages. They believe that these were unlikely in the next few years, but not impossible, as next-generation capabilities come online. Witnesses suggested mandatory safety tests for high-risk, high-impact models. Can the Minister explain the current Government’s thinking on mandatory safety tests, especially for the high-risk, high-impact models?
At the same time, witnesses warned against a narrative of AI being mostly a safety issue. They wanted the Government to speak more about innovation and opportunity, and to focus on the three pillars of AI. The first is data training and evaluation; the second is about algorithms and the talent to write, and perhaps to rewrite, them; and the third is computing power. As other noble Lords have said, they criticise the current Government’s decision to scrap the exascale supercomputer announced by the previous Government. Can the Minister explain where he sees the UK in relation to each of the three pillars, especially on computing power?
As the noble Baroness, Lady Featherstone, and others have said, one of the trickiest issues we discussed was copyright. Rights holders want the power to check whether their data is used without their permission. At least one witness questioned whether this was technically possible. Some rights holders asked for investment in high-quality training datasets to encourage LLMs to use licensed material. In contrast, AI companies distinguished between inputs and outputs. For example, an input would be if you listened to lots of music to learn to play the blues guitar. AI companies argue that this is analogous to using copyrighted data for training. For them, an output would be if a musician plays a specific song, such as “Red House” by Jimi Hendrix. The rights holders would then be compensated, even though poor Jimi is long dead. However, rights holders criticised this distinction, arguing that it undermines the UK’s thriving creative sector, so you can see the challenge that we have. Can the Minister share the Government’s thinking on copyright material as training data?
For the overall regulatory framework, the Government have been urged to empower sector regulators to regulate proportionally, considering the careful balance and sometimes trade-off between innovation and precaution. Most witnesses recommended that the UK forge its own path on AI regulation—fewer big corporations than the US but more flexible than the EU. We should also be aware that technology is usually ahead of regulation. If you try too much a priori legislation, you risk stifling innovation. At the same time, no matter now libertarian you may be, when things go wrong voters expect politicians and regulators to act.
To end, can the Minister tell the House whether the Government plan to align with the US’s more corporate approach or the EU’s less innovative AI regulation, or to forge an independent path so that the UK can be a home for world-leading LLM and AI companies?
Lord Ranger of Northwood (Con)
My Lords, it is truly an honour to follow my noble friend Lord Kamall. I begin by acknowledging the excellent work of the House of Lords Communications and Digital Committee, led with great dedication by my noble friend Lady Stowell, in producing this thorough report on large language models and generative AI.
I note my entry in the register of interests, especially my last role at Atos, where over six years ago I led a thought leadership campaign on the digital vision for AI. Six years is an exceptionally long time in the world of tech. Since then, we have accelerated into the early adoption and application era of AI. Now, as a Member of your Lordships’ House, I am delighted to be vice-chair of the AI APPG.
The pace of both development and adoption in the last 24 months has been breathtaking, and a key moment for the AI industry was obviously the launch of ChatGPT on 30 November 2022. That date will no doubt go down in history, not just for technologists but because of how it transformed the awareness and accessibility of LLM-based gen AI services to the public. It was the AI users’ big bang moment. It is because of the pace of commercial and technological change that I have been meeting with businesses and AI organisations during the past six months to hear at first hand what they see as the main issues and opportunities, as well as taking part in the evidence sessions that the AI APPG has held.
It has become clear to me that the UK’s AI market and particularly native AI businesses—those that develop and directly deliver AI capabilities and services—are seeing their growth turbocharged. They are recruiting, expanding and developing a skilled workforce, receiving investment and harnessing opportunities locally and internationally faster than they can think. This is an exciting time for our AI industry.
What do they want from Government? It is a case not of what we can do for them but of what these native artificial intelligence businesses can do for us. They want to be able to inform, influence and raise awareness of the key factors impacting them and their industry: how they are witnessing at first hand the adoption and implementation of AI systems and services; the investment landscape and growth opportunities that are available and how government policy can further support them; and the need to support investment in industry skills and academic research to ensure medium to long-term sustainability of their workforce and capabilities. As part of the development programme for the much-anticipated government AI action plan, what engagement has there been with the industry on these specific topics?
There are also various macro factors that the industry is clear on and that must be part of any AI plan or growth strategy for the UK. First, the availability of large datasets, as has been mentioned in this debate, is critical to the development of LLMs. Secondly, increasing the national availability of compute power will be directly proportionate to the advancement of generative AI. Thirdly, energy requirements to support compute must be considered as part of the investment landscape and even as part of national critical infrastructure. That is why there was such disappointment at the decision by this Government to cancel the investment into delivering the exascale computer in Edinburgh. I echo the words of the noble Baroness, Lady Wheatcroft, and ask the Minister how the Government will mitigate the impact of the loss of this compute power in the UK.
There is one other major consideration that has been mentioned already, and that businesses all raised—regulation. The AI industry is desperately keen to input into any development of regulatory considerations and is looking for signals from this Government as to their approach.
In July the Secretary of State for DSIT, Mr Kyle, said in a Written Statement that in line with the Labour Party’s manifesto, some AI companies will be regulated. Legislation would be
“highly targeted and will support growth and innovation by ending regulatory uncertainty”.—[Official Report, Commons, 26/7/24; col. 34WS.]
Four months later, on 6 November at the Future of AI Summit, the Secretary of State said that legislation would be introduced “next year”—that is a large 12-month window. In August, Mr Kyle said that legislation would focus on the most advanced LLM models and would not regulate the entire industry. It feels a bit like a trail of breadcrumbs being laid, with the industry not knowing when or where the next crumb indicating a sense of regulatory direction will be found.
As I mentioned, every AI business and sector partner I have met has requested both clarity and the opportunity to input into regulatory development, but has felt uncertain about how the Government are developing their thinking. The industry has been clear on the need for any regulation to be proportionate, to avoid duplication with existing technology-neutral rules and to minimise regulatory fragmentation. For example, this is key to the UK financial services industry’s international competitiveness and its role as an enabler of economic growth across the UK. For a leading tech-enabled industry that has been using advanced technologies safely and effectively for years, disproportionate legislation would create unnecessary regulatory burdens and stifle operations and trade, slowing innovation and productivity, and putting our firms at a global competitive disadvantage. Have the Government established a series of clear principles that will be used in the development of targeted and proportionate regulation?
As my noble friend Lady Stowell highlighted, I am also aware, through discussions with major investors, that the development of the regulatory environment in the UK is being closely viewed to assess how attractive our industry is and how much international investment may flow into it. Global investors clearly see an opportunity for the UK to learn from the US light-touch approach but also from what appears to be the vice-like grip approach the EU has taken with the development of its landmark AI Act.
By the way, I do not take this view on EU regulation as my own without input from others. Notably, I attended the AI CogX summit in London at the beginning of October, where an MEP who had worked on the Act stated that he believed the EU had
“created a barrier to entry”
and established a law that had such a high cost that it was creating compliance problems. It appears that there is a sense that the EU AI Act has taken a wrong turn and is already diminishing both innovation and the flow of investment into the region. What assessment are the Government making of the Act, and has its early impact on the region been discussed with EU counterparts?
To conclude, I have a few quick-fire questions. The previous Government had committed to a pro-innovation regulatory approach—will this Government too? Will the Government’s AI action plan include a suggested regulatory approach for the UK? When will it be published?
Lord Tarassenko (CB)
My Lords, I draw the House’s attention to my registered interests as a director of Oxehealth, a University of Oxford spin-out that uses AI for healthcare applications.
It is a great pleasure to follow the noble Lord, Lord Ranger, in this debate. Like him, in the time available I will speak mostly about the opportunities for the UK, more specifically in one sector. I congratulate the noble Baroness, Lady Stowell, on her excellent report, which she would probably like to know has been discussed positively in the common rooms in Oxford with the inquiry’s expert, Professor Mike Wooldridge.
It is not even 10 months since the report was published, but we already have new data points on the likely trajectories of large language models. The focus is shifting away from the pre-training of LLMs on ever-bigger datasets to what happens at inference time, when these models are used to generate answers to users’ queries. We are seeing the introduction of chain-of-reasoning techniques, for example in GPT-4o1, to encourage models to reason in a structured, logical and interpretable way. This approach may help users to understand the LLM’s reasoning process and increase their trust in the answers.
We are also seeing the emphasis shifting from text-only inputs into LLMs to multimodal inputs. Models are now being trained with images, videos and audio content; in fact, we should no longer call them large language models but large multimodal models—LMMs.
We are still awaiting the report on the AI opportunities action plan, written by Matt Clifford, the chair of ARIA, but we already know that the UK has some extraordinary datasets and a strong tradition of trusted governance, which together represent a unique opportunity for the application of generative AI.
The Sudlow review, Uniting the UK’s Health Data: A Huge Opportunity for Society, published two weeks ago tomorrow, hints at what could be achieved though linking multiple NHS data sources. The review stresses the need to recognize that national health data is part of the critical national infrastructure; we should go beyond this by identifying it as a sovereign data asset for the UK. As 98% of the 67 million UK citizens receive most of their healthcare from the NHS, this data is the most comprehensive large-scale healthcare dataset worldwide.
Generative AI has the potential to extract the full value from this unique, multimodal dataset and deliver a step change in disease prevention, diagnosis and treatment. To unlock insights from the UK’s health data, we need to build a sovereign AI capability that is pre-trained on the linked NHS datasets and does not rely on closed, proprietary models such as Open AI’s GPT-4 or Google’s Gemini, which are pre-trained on the entire content of the internet. This sovereign AI capability will be a suite of medium-scale sovereign LMMs, or HealthGPTs if you will, applied to different combinations of de-identified vital-sign data, laboratory tests, diagnostics tests, CT scans, MR scans, pathology images, discharge summaries and outcomes data, all available from the secure data environments—SDEs—currently being assembled within the NHS.
Linked datasets enable the learning of new knowledge within a large multimodal model; for example, an LMM pre-trained on linked digital pathology data and CT scans will be able to learn how different pathologies appear on those CT scans. Of course, very few patients will have a complete dataset, but generative AI algorithms can naturally handle the variability of each linked record. In addition, each LMM dataset can be augmented by text from medical textbooks, research papers and content from trusted websites such as those maintained by, for example, NHS England or Diabetes UK.
A simple example of such an LMM will help to illustrate the power of this approach for decision support—not decision-making—in healthcare. Imagine a patient turning up at her GP practice with a hard-to-diagnose autoimmune disease. With a description of her symptoms, together with the results of lab tests and her electronic patient record—EPR—data, DrugGPT, which is currently under development, will not only suggest a diagnosis to the GP but also recommend the right drugs and the appropriate dosage for that patient. It will also highlight any possible drug-drug interactions from knowledge of the patient’s existing medications in her EPR.
Of course, to build this sovereign LMM capability, the suite of HealthGPTs such as DrugGPT will require initial investment, but within five years such a capability should be self-funding. Access to any HealthGPT from an NHS log-in would be free; academic researchers, UK SMEs and multinationals would pay to access it through a suitable API, with a variable tariff according to the type of user. This income could be used to fund the HealthGPT lab, as well as the data wrangling and data curation activities of the teams maintaining the NHS’s secure data environments, with the surplus going to NHS trusts and GP practices in proportion to the amount of de-identified data which they will have supplied to pre-train the HealthGPTs.
For the general public to understand the value of the insights generated by these sovereign LMMs, a quarterly report on key insights would be sent out through the NHS app to all its 34 million users—three-quarters of the adult population in the UK—except to those who have opted out of having their data used for research.
The time is right to build a sovereign AI capability for health based on a suite of large multimodal models, which will improve the health of the nation, delivering more accurate diagnoses and better-targeted treatments while maximising the value of our NHS sovereign data asset. I hope the Minister will agree with me that this is an opportunity which the UK cannot afford to miss.
Lord Griffiths of Burry Port (Lab)
My Lords, it is with even greater apprehension that I stand after hearing that learned disquisition, which I shall re-read in Hansard to make sure that a person whose intellectual background is in medieval literature, theology and Caribbean history might have a chance to get hold of some of the key concepts. I am most grateful that the noble Lord has exemplified the progress that is being made in science to give us tools at our disposal that might greatly enhance many aspects of contemporary living.
I say my own word of thanks to the noble Baroness, Lady Stowell, for her man and woman management of the committee. I am not an easy man to manage at any time and am capable of eruptions, which she gave me some scope for. I also share her commendation for Dan, who has now moved on to higher things.
The noble Baroness will remember that, at the outset of the committee’s concerns, Professor Wooldridge from Oxford, a colleague of the noble Lord, Lord Tarassenko, urged us to take a positive look at this subject—granting that there were both positives and negatives but not to dwell on the negatives but try to maintain a focus on the positive. The noble Baroness, and other members of the committee, will remember that I expressed a dissentient view at that time. I was very worried by some of the implications of the science we were looking at and the developments in the field under study. It was rather nice to hear the noble Lord, Lord Strasburger, make his contribution and create the same tone of approach to this subject as I would want to make.
I bored the committee more than once by explaining how, 30 years ago, I met a man called Joseph Rotblat. Professor Rotblat was a nuclear physicist who had been recruited for the Manhattan Project and had withdrawn from it when he realised that the need that had created the project—the fact that Germany was developing atomic weapons—had ceased. He had given his help to the Manhattan Project, which would give the Allied cause the possibility of replying to, or deterring, the use of such weapons, but when the Germans ceased their operations and research he withdrew from the project because he did not want his science to be used in this military way and for those purposes. He set up a series of conferences—the Pugwash conferences—that took place regularly down the years and for which he was awarded the Nobel Peace Prize in 1995.
My conversations with Professor Rotblat, when I was just a young callous youth and knew little about these things, has educated me in one principle: I can only admire the findings of science and the work of scientists, but I recognise that the findings of science when monetised or militarised take the very brilliance that has been unearthed and developed in potentially very dangerous directions. It took someone who knew about that from the inside when it came to nuclear developments to warn the world and to keep alive the flame of understanding of the dangers of such uses.
I mention that in this debate because my point in offering that memory was the conviction that out of the very engine room of those developing the present scientific advances, we need to hear the voices that are going to help us because what can we do? Legislation, as we have heard, is already behind the curve. Elon Musk, with his spaceships and the rest of it, is taking something in a direction nobody can calculate. I wonder whether his middle name is Icarus. We will see, will we not?
For all that, this very day the American newspapers are announcing that Brendan Carr has been appointed by Donald Trump as his Federal Communications Commission man—a man with a long record of deregulation, of taking all the constraints off what he calls the constitutional freedom of Americans of free speech and free intellectual activity. So we may be overregulated, but soon we are going to be quite heavily underregulated, and once the world is in that cauldron of competing and keeping up with each other or outrunning each other, we will be in a dangerous place.
I know this makes me seem like Eeyore, the depressed donkey in Winnie-the-Pooh. Indeed, if I took the time, I could go around the committee—their faces are in my head—and give equivalents for them. I can certainly see the honey searcher over there, but there are also Rabbit, Kanga, Roo, Tigger and Piglet. They were all sitting there discussing large language machines. We now know that we can put an extra M in, and no doubt by the time we have a debate next year there may be yet another M to put in because things are advancing fast.
I urge Members of this House and our sector of British society to try to encourage people like Geoffrey Hinton, who has been mentioned, who know what they are talking about, are at the front edge of it all and see the pluses and the minuses to help the rest of us, the Eeyores, the depressed donkeys of this world, to have a better grasp of things and to feel that we are genuinely safe in the world that we are living in.
Viscount Camrose (Con)
My Lords, what a pleasure it is to address this compelling, balanced and, in my opinion, excellent report on large language models and generative AI. I thank not just my noble friend Lady Stowell but all noble Lords who were involved in its creation. Indeed, it was my pleasure at one point to appear before the committee in my former ministerial role. As ever, we are having an excellent debate today. I note the view of the noble Lord, Lord Knight, that it tends to be the usual suspects in these things, but very good they are too.
We have heard, particularly from my noble friend Lady Stowell and the noble Baroness, Lady Featherstone, about the need to foster competition. We have also heard about the copyright issue from a number of noble Lords, including the noble Baronesses, Lady Featherstone, Lady Wheatcroft and Lady Healy, and I will devote some more specific remarks to that shortly.
A number of speakers, and I agree with them, regretted the cancellation of the exascale project and got more deeply into the matter of compute and the investment and energy required for it. I hope the Minister will address that without rehearsing all the arguments about the black hole, which we can all probably recite for ourselves.
We had a very good corrective from the noble Lords, Lord Strasburger and Lord Griffiths of Bury Port, and my noble friend Lord Kamall, that the risks are far-reaching and too serious to treat lightly. In particular, I note the risk of deliberate misuse by powers out of our control. We heard about the need going forward for, if possible, greater clarity about regulatory plans and comparisons with the EU AI Act from my noble friend Lord Ranger. I very much enjoyed and respond to the remarks by the noble Lord, Lord Tarassenko, about data as a sovereign asset for the UK, whether in healthcare or anything else.
These points and all the points raised in the report underscore the immense potential of AI to revolutionise key sectors of our economy and our society, while also highlighting critical risks that must be addressed. I think we all recognise at heart the essential trade-off in AI policy. How do we foster the extraordinary innovation and growth that AI promises while ensuring it is deployed in ways that keep us safe?
However, today I shall focus more deeply on two areas. The first is copyright offshoring and the second is regulation strategy overall.
The issue of copyright and AI is deeply complex for many reasons. Many of them were very ably set out by my noble friend Lord Kamall. I am concerned that any solution that does not address the offshoring problem is not very far from pointless. Put simply, we could create between us the most exquisitely balanced, perfectly formed and simply explained AI regulation, but any AI lab that did not like it could, in many cases, scrape the same copyrighted content in another jurisdiction with regulations more to its liking. The EU’s AI Act addresses this problem by forbidding the use in the EU of AI tools that have infringed copyright during their training.
Even if this is workable in the EU—frankly, I have my doubts about that—there is a key ingredient missing that would make it workable anywhere. That ingredient is an internationally recognised technical standard to indicate copyright status, ownership and licence terms. Such a standard would allow content owners to watermark copyrighted materials. Whether the correct answer is pursuing an opt in or opt out of TDM is a topic for another day, but it would at least enable that to go forward technically. Crucially, it would allow national regulators to identify copyright infringements globally. Will the Minister say whether he accepts this premise and, if so, what progress he is aware of towards the development of an international technical standard of this kind?
I turn now to the topic of AI regulation strategy. I shall make two brief points. First, as a number of noble Lords put it very well, AI regulation has to adapt to fast-moving technology changes. That means that it has to target principles, rather than specific use cases where possible. Prescriptive regulation of technology does not just face early obsolescence, but relies fatally on necessarily rigid definitions of highly dynamic concepts.
Secondly, the application of AI is completely different across sectors. That means that the bulk of regulatory heavy lifting needs to be done by existing sector regulators. As set out in the previous Government’s White Paper, this work needs to be supported by central functions. Those include horizon scanning for future developments, co-ordination where AI cuts across sectors, supporting AI skills development, the provision of regulatory sandboxes and the development of data and other standards such as the ATRS. If these and other functions were to end up as the work of a single AI regulatory body, then so much the better, but I do not believe that such an incorporation is mission critical at this stage.
I was pleased that the committee’s report was generally supportive of this position and, indeed, refined it to great effect. Do the Government remain broadly aligned to this approach? If not, where will the differences lie?
While many of us may disagree to one degree or another on AI policy, I do not believe there is really any disagreement about what we are trying to achieve. We must seize this moment to champion a forward-looking AI strategy—one that places the UK at the forefront of global innovation while preserving our values of fairness, security, and opportunity for all.
Like the committee—or as we have heard from the noble Lord, Lord Griffiths, like many members of the committee—I remain at heart deeply optimistic. We can together ensure that AI serves as a tool to enhance lives, strengthen our economy, and secure our national interests. This is a hugely important policy area, so let me close by asking the Minister if he can update this House as regularly and frequently as possible on the regulation of AI and LLMs.
The Minister of State, Department for Science, Innovation and Technology (Lord Vallance of Balham) (Lab)
We have heard really wonderful insights and thoughtful contributions from across your Lordships’ House this afternoon and I am really grateful to the noble Baroness, Lady Stowell, for organising this engaging debate on such an important topic. It is probably the only debate I am going to take part in which has LLMs, SLMs, exaflops, Eeyore and Tigger in the same sitting.
The excellent report from the Communications and Digital Committee was clear that AI presents an opportunity, and it is one that this Government wish to seize. Although the report specified LLMs and generative AI, as has been pointed out by many, including the noble Lord, Lord Knight, AI is of course broader than just that. It represents a route to stronger economic growth and a safer, healthier and more prosperous society, as the noble Viscount, Lord Camrose, has just said, and we must harness it—it is incredibly important for the country.
Breakthroughs in general-purpose technologies are rare—the steam engine, electricity and the internet—and AI is set to be one such technology. The economic opportunities are already impressive. The AI market contributed £5.8 billion in GVA to our economy in 2023, it employs over 60,000 people and is predicted to grow rapidly in size and value over the next decade. Investing in technology has always been important for growth, and investing in AI is no exception.
Today, already, a new generation of UK-founded companies is ensuring that we are at the forefront of many of these approaches, and leading AI companies have their European headquarters in London. We have attracted significant investment from global tech giants—AWS, Microsoft, CoreWeave and Google—amounting to over £10 billion. This has bolstered our AI infrastructure, supported thousands of jobs and enhanced capacity for innovation.
The investment summit last month resulted in commitments of £63 billion, of which £24.3 billion was directly related to AI investment. The UK currently ranks third globally in several key areas: elite AI talent, the number of AI start-ups, inward investment into AI, and readiness for AI adoption. But we need to go further. In July, DSIT’s Secretary of State asked Matt Clifford to develop an ambitious AI opportunities action plan. This will be published very soon and will set out the actions for government to grow the UK’s AI sector, drive adoption of AI across the economy, which will boost growth and improve products and services, and harness AI’s power to enhance the quality and efficiency of public services. Of course, as was raised early in this debate, this also has to be about creating spin-outs and start-ups and allowing them to grow.
One of the largest near-term economic benefits of AI is the adoption of existing tools to transform businesses and improve the quality of work—a point raised very clearly by the noble Lord, Lord Ranger. AI tools are already being used to optimise complex rotas, reduce administrative burdens and support analytical capabilities and information gathering, and in healthcare to interpret medical scans, giving back more time for exchanges that truly need a human touch. Government will continue to support organisations to strengthen the foundations required to adopt AI; this includes knowledge, data, skills, talent, intellectual property protections and assurance measures. I shall return to some of those points.
In the public sector, AI could unlock a faster, more efficient and more personalised offer to its citizens, at better value to the taxpayer. In an NHS fit for the future—the noble Lord, Lord Tarassenko, made these points very eloquently—AI technology could transform diagnostics and reduce simpler things, such as administrative burdens, improving knowledge and information flows within and between institutions. It could accelerate the discovery and development of new treatments—and valuable datasets, such as the UK Biobank, will be absolutely essential.
The noble Lord, Lord Tarassenko, rightly identified the importance of building large multimodal models on trusted data and the opportunity that that presents for the UK—a point that the noble Lord, Lord Knight, also raised. Several NHS trusts are already running trials on the use of automated transcription software. The NHS and DHSC are developing guidance to ensure responsible use of these tools and how they can be rolled out more widely.
The noble Lord, Lord Kamall, rightly pointed out the role of the human in the loop, as we start to move these things into the healthcare sector. The Government can and should act as an influential customer to the UK AI sector by stimulating demand and providing procurement. That procurement pool will be increasingly important as companies scale.
DSIT, as the new digital centre of government, is working to identify promising AI use cases and rapidly scale them, and is supporting businesses across the UK to be able to do the same. The new Incubator for Artificial Intelligence is one example.
The Government recently announced that they intend to develop an AI assurance platform, which should help simplify the complex AI assurance and governance landscape for businesses, so that many more businesses can start with some confidence.
Many noble Lords touched on trust, and AI does require trust; it is a prerequisite for adopting AI. That is why we have committed to introducing new, binding requirements on the handful of companies developing the most advanced AI models, as we move towards the potential of true artificial general intelligence. We are not there yet, as has been pointed out. This legislation will build on the voluntary commitments secured at the Seoul and Bletchley Park AI safety summits and will strengthen the role of the AI Safety Institute, putting it on a statutory footing.
We want to avoid creating new rules for those using AI tools in specific sectors—a point that the noble Viscount, Lord Camrose, raised—and will instead deal with that in the usual way, through existing expert regulators. For example, the Office for Nuclear Regulation and the Environment Agency ran a joint AI sandbox last year, looking at AI and the nuclear industry. The Medicines and Healthcare Products Regulatory Agency, or MHRA, launched one on AI medical devices. We have also launched the Regulatory Innovation Office to try to streamline the regulatory approach, which will be particularly important for AI, ensuring that we have the skills necessary for regulators to be able to undertake this new work. That point was raised by several people, including the noble Baroness, Lady Healy.
New legislation will instead apply to the small number of developers of the most far-reaching AI models, with a focus on those systems that are coming tomorrow, not the ones we have today. It will build on the important work that the AI Safety Institute has undertaken to date. Several people asked whether that approach is closer to the USA or the EU. It is closer to the US approach, because we are doing it for new technologies. We are not proposing specific regulation in the individual sectors, which will be looked after by the existing regulators. The noble Lords, Lord Knight and Lord Kamall, raised those points.
It is important—everyone has raised this—that we do not introduce measures that restrict responsible innovation. At the recent investment summit, leaders in the field were clear: some guidelines are important. They create some clarity for companies. Companies currently do not have enough certainty and cannot progress. Getting that balance right will be essential and that is why, as part of this AI Bill, we will be launching an extensive consultation, leading to input, I hope, from experts from industry, academia and, of course, from this House, where many people have indicated today the very insightful points they have to make.
I was asked by the noble Lord, Lord Ranger, whether pro-innovation regulation would be the theme. That was a topic of a review that I undertook in my last role and that will certainly be a theme of what we wish to do. We will continue to lead the development of international standards through the AI Standards Hub—a partnership between the Alan Turing Institute, the British Standards Institution and the National Physical Laboratory—and by working with international bodies. Indeed, I went to speak to one of the international standards bodies on this topic a few weeks ago.
I turn to some other specific points that were raised during the debate. The AI Safety Institute’s core goal is to make frontier AI safer. It works in partnership with businesses, Governments and academia to develop research on the safety of AI and to evaluate the most capable models. It has secured privileged access to top AI models from leading companies, including test models pre deployment and post deployment with OpenAI, Google DeepMind and Anthropic among others. The institute has worked very closely with the US to launch the international network of AI safety institutes, enabling the development and adoption of interoperable principles, policies and best practice. That meeting has taken place in California this week. The noble Baroness, Lady Wheatcroft, asked for an update and I think we will have the update when the readout of that meeting is known. Just this week the AI Safety Institute shared a detailed report outlining pre-deployment of Anthropic’s upgraded Claude 3.5 Sonnet model. This will help advance the development of shared scientific benchmarks and best practices of safety testing and is an important step because it begins to show exactly how these things can also be made public.
I was asked about mandatory safety testing. I think this model, which has been a voluntary one and has engaged big companies so that they want to come to the AI Safety Institute, is the correct one. I have also noted that there are some other suggestions as to how people may report safety issues. That is an important thing to consider for the future.
To respond to the points raised by the noble Lords, Lord Strasburger and Lord Griffiths, the question of the existential threat is hotly debated among experts. Meta scientist Yann LeCun states that fears that AI will pose a threat to humanity are “preposterously ridiculous”. In contrast, Geoffrey Hinton has said it is time to confront the existential dangers of artificial intelligence. Another British Nobel prize winner, Demis Hassabis, the CEO of DeepMind, one of the most important AI companies in the world, suggests a balanced view. He has expressed optimism about AI, with its potential to revolutionise many fields, but emphasises the need to find a middle way for managing the technology.
To better understand these challenges, the Government have established a central AI risk function which brings together policymakers and AI experts with a mission to continuously monitor, identify, assess and prepare for AI-associated risks. That must include in the long term the question of whether what I will call “autonomous harm” is a feature that will emerge and, if so, over what time and what the impact of that might be.
I turn to data, the very feedstock for AI. First, data protection law applies to any processing of personal data, regardless of the technology, and we are committed to maintaining the UK’s strong data protection framework. The national data library will be the key to unlocking public data in a safe and secure way, and many speakers this afternoon have indicated how important it will be to have the data to ensure that we get training of the models. There is a huge opportunity, particularly, as has been indicated, in relation to areas such as the NHS.
The Information Commissioner’s Office has published guidance that outlines how organisations developing and using AI can ensure that AI systems that process personal data do so in ways that are accountable, transparent and fair.
On copyright, I will not list the numerous noble Lords who have made comments on copyright. It is a crucial area, and the application of copyright law to AI is as disputed globally as it is in the UK. Addressing uncertainty about the UK’s copyright framework for AI is a priority for DSIT and DCMS. We are determined to continue to enable growth in our AI and creative industries, and it is worth noting that those two are related. It is not that the creative industries are on one side and AI on the other; many creative individuals are using AI for their work. Let me say up front that the Government are committed to supporting the power of human-centred creativity as well as the potential of AI to unlock new horizons.
As the noble Baroness, Lady Featherstone, has rightly pointed out, rights holders of copyright material have called for greater control over their content and remuneration where it is used to train AI models, as well as for greater transparency. At the same time, AI developers see access to high-quality material as a prerequisite to being able to train world-leading models in the UK. Developing an approach that addresses these concerns is not straightforward, and there are issues of both the input to models and the assessment of the output from models, including the possibility of watermarking. The Government intend to engage widely, and I can confirm today that we will shortly launch a formal consultation to get input from all stakeholders and experts. I hope that this starts to address the questions that have been raised, including at the beginning by the noble Baroness, Lady Stowell, as well as the comments by the noble Baroness, Lady Healy.
On the important points that the noble Viscount, Lord Camrose, raises about offshoring and the need for international standards, I completely agree that this is a crucial area to look at. International co-operation will be crucial and we are working with partners.
We have talked about the need for innovation, which requires fair and open competition. The Digital Markets, Competition and Consumers Act received Royal Assent in May, and the Government are working closely with the Competition and Markets Authority to ensure that the measures in the Act commence by January 2025. It equips the CMA with more tools to tackle competition in the digital and AI markets. The CMA itself undertook work last year that identified the issues in some of the models that need to be looked at.
Demand for computing resource is growing very quickly. It is not just a matter of size but of configuration and systems architecture. Two compute clusters are being delivered as part of the AI research resource in Bristol and Cambridge. They will be fully operational next year and will expand the UK’s capacity thirtyfold. Isambard-AI is made up of more than 5,500 Nvidia GPUs and will be the UK’s most powerful public AI compute facility once it is fully operational next year. The AI opportunities action plan will set out further requirements for compute, which we will take forward as part of the multiyear spending review. I just say in passing that it is quite important not to conflate exascale with AI compute; they are different forms of computing, both of which are very important and need to be looked at, but it is the AI compute infrastructure that is most relevant to this.
The noble Lord, Lord Tarassenko, and the noble Baroness, Lady Wheatcroft, asked about sovereign LLMs and highlighted the opportunity to build new models based on really specific trusted data sources in the UK. This point was also raised in the committee report and is a crucial one.
I have tried to answer all the questions. I hope that I have but, if I have not, I will try to do so afterwards. This is a really crucial area and I am happy to come back and update as this goes on, as the noble Viscount, Lord Camrose, asked me to. We know that this is about opportunity, but we also know that people are concerned, rightly, about socioeconomic risks, labour market rights and infringement of rights.
There are several other points I would make. It is why we have signed the Council of Europe’s convention on AI and human rights, why we are funding the Fairness Innovation Challenge to develop solutions to AI bias, why the algorithmic transparency recording standard is being rolled out across all departments, why the Online Safety Act has powers to protect against illegal content and specifically to prevent harms to children and why the central AI risk function is working with the AI Safety Institute to identify and reduce the broader risks. The Government will drive private and public sector AI development, deployment and adoption in a safe, responsible and trustworthy way including, of course, with international partners.
I thank noble Lords for their comments today. It is with great urgency that we start to rebuild Britain, using the technology we have today, and prepare for the technologies of tomorrow. We are determined, as the noble Viscount, Lord Camrose, said, that everyone in society should benefit from this revolutionary technology. I look forward very much to continuing engagement on this important topic with what I hope is an increasing number of noble Lords who may find this rather relevant to everyday life.
Baroness Stowell of Beeston (Con)
My Lords, I am very grateful to all noble Lords who have contributed to this debate. I thank all noble Lords who made such very kind and generous remarks about me and the committee’s work. I will pick up on just a couple of things because I do not want to take up much time.
As far as some of the things that the Minister has just said, I thank him very much for his comprehensive response. I will read it properly in Hansard tomorrow because there was obviously a lot there. I was pleased to hear that the action plan is coming very soon. He emphasised “very” before he said “soon”, so that was encouraging. Clearly, we should learn some more from that about plans for computing power, as he said.
As was mentioned by most noble Lords contributing today, we know that computing power is essential. I understand the point that the Minister made about exascale being different from AI-specific computing power. What the Government are doing on the latter is where it really matters in the context of this debate. It is important none the less not to forget that when commitments to compute, which people see as a signal of the country’s ambition, get cancelled that sends a rather confusing and mixed message. That was the point we were trying to emphasise.
On regulation, I hear the Minister in that there will be extensive consultation about the AI Bill. As he has heard me say already, it is clearly important in my view and that of the committee that we do not rush to regulation. It is better that it is got right.
I will say a couple of things about copyright, which many noble Lords have mentioned today, that gets such emphasis in this debate, perhaps sometimes to the surprise of the large tech businesses that are US companies. I think it does because it is a reflection of our very mixed economy over here. We are not in a position where we can put all bets on tech and know that that is where we will see growth so that we do not need to worry about anything else. As the Minister said, which will give some people in the content-creating community comfort, this technology cannot develop without content. Hearing that that is well understood by the Government is important to content creators. However, as much as it will be good to have a serious consultation on whatever proposals the Government come forward with, it is none the less essential that we get a move on on this because a lot of businesses are starting to feel very threatened by all that.
The only other thing I would add is on the question of risks. In this debate, there has been broad consensus about the opportunity of this technology and its importance. The noble Lords, Lord Strasburger and Lord Griffiths, talked about existential threat, and that was mentioned by the Minister in his reply.
Risk was not something that we treated with any lack of seriousness at all when we carried out our inquiry. The noble Lord, Lord Griffiths, is right: it is important that we listen to the range of voices that have knowledge and experience in this area. However, it is important to recognise—we took this seriously as a committee when conducting our inquiry—that this technology has been subject, and probably is continuing to be subject, to quite a significant power struggle. At the start of our inquiry, the debate about existential threat was very live. One thing that we learned throughout our inquiry was about the divide within the tech world on this debate, and how you had to be really quite tuned in to where these different threats and messages were coming from, so that we did not get sucked down a path which ended up allowing a concentration of power that was also not what many noble Lords wanted.
Overall, our view and certainly my personal view is that, with something as important as this new general-purpose technology—as the Minister said, these things come along very rarely—we make sure that we are driven by the opportunities mitigating the risks as we go along, and are not driven by the risks and miss out on the opportunities that this technology will provide. All of us today have been able to agree on that, and it is a most important conclusion for us to take away from this debate. I certainly look forward to studying again the proposal of the noble Lord, Lord Tarassenko, which sounded interesting in terms of any sovereign LLM concentrating on health issues. I am very grateful to noble Lords.