Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Bull) (CB)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Financial Services and Markets Bill [HL]
(1 day, 5 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, I want to address a few key areas before we begin. First, we are starting today with the debate on an adjourned group. Only those noble Lords present earlier in the week at the start of the group should contribute. We have a list to help manage that. I am expecting, based on the adjourned debate, that debate will go straight to Front-Bench contributions.
Secondly, on the general rules, I remind noble Lords again that they should declare any relevant financial interest the first time they speak at each stage of the Bill. This means that, in Committee, relevant financial interests should be declared during the first group to which the noble Lord contributes. The declaration does not need to be repeated in debate on later groups at this stage. The declaration should be specific and brief. Members should briefly indicate the nature of their financial interests and not simply refer to their entry in the Register of Lords’ Interests.
I remind the Committee of the guidance in paragraph 8.82 of the Companion that, when withdrawing amendments, noble Lords should be brief, need not respond to all the points made during the debate and should not revisit points made when moving the amendment. A number of contributions made when withdrawing amendments on previous days were lengthy. I encourage all participants to keep their remarks short, in the spirit of the Companion.
Baroness Kramer (LD)
My Lords, I am sure everyone has reread the Hansard transcript and is fully on top of the debate that took place on Monday, so I will attempt to keep my remarks brief.
I am tempted to engage with the challenge from the noble Lord, Lord Bridges, on this group of amendments, to discuss in depth the issue of international rules on the one hand versus growth and competition objectives on the other. However, I say to the noble Lord, Lord Wilson, as the Whip, that I recognise that we are in Grand Committee and so will limit the comments that I make.
Looking at this group of amendments, it is important to say that my party believes in “better together” rather than “beggar thy neighbour”. International rules provide trust, confidence and certainty, which are key to long-term and sustainable growth. This country plays a key role in shaping international rules in sectors that we care about, including finance. The Bank of England is incredibly highly respected, as are our other regulators. There is extensive participation in key bodies, such as the Financial Stability Board, the Basel Committee on Banking Supervision and others. Indeed, the noble Baroness, Lady Noakes, gave a long list of the various committees in which regulators are engaged. I think she thought it might make them go native, but I consider that it is an important opportunity and area of their influence. We remain a player in making those rules, despite Brexit.
International rules need to provide flexibility, but they mean absolutely nothing if we pick only what suits us in the moment. The world is not thriving in the beggar-thy-neighbour world of Trump in the United States, of Russia and of China. The Committee will not be surprised that I am not sympathetic to Amendment 99, which would reduce international standards to a “have regard”.
As for the other amendments on this sector, I have no problem with the reporting amendments, but I am cautious of Amendments 102 and 104A, because they could easily be read as an instruction to waver on the Bank of England’s primary objective of financial stability. We must be careful not to abandon that focus on financial stability. Some people find volatility attractive—it is certainly a way in which the financial sector has frequently made much of its money. But the cost to ordinary people of both boom and bust and continuous volatility has been exceedingly high. The cost to businesses that need a significant measure of certainty is extremely high. Therefore, we will not be supporting these amendments, though, as I say, the reporting amendments make some sense to me.
Baroness Neville-Rolfe (Con)
My Lords, for me, the group speaks to the essential balance which underpins the purpose and function of effective financial regulation. Of course regulation must promote safety, stability and confidence in the system, but regulation must also support growth, competitiveness and innovation. It must help ensure that the United Kingdom remains one of the world’s leading financial centres.
We have often spoken about the contribution that financial institutions and financial services firms make to the UK economy; they provide employment, tax revenue, investment, lending, infrastructure and global influence. This group is about making sure that we put our money where our mouth is. If we say that competitiveness and growth matter then those principles must be reflected in the way regulators act, report and make their decisions.
That is why Amendment 99, to which I have added my name, is important. It would shift the requirement from “aligning with” international standards to considering international standards. That is an important distinction. International standards matter, and in many cases the UK will rightly wish to follow them, but we should not place ourselves in a position where we become passive rule-takers when it is not in our national interest to do so. We can see some rules, such as the unbundling of research in MiFID II, having totally the wrong effect—in this instance, regulating research so heavily that less research is produced, particularly for smaller firms. I know this from relatives who work in analysis; I do not think that is an interest to declare, but it is evidence. Another example is the EU’s sustainable finance disclosure regulation, which is now under review because it is too complex and burdensome.
The whole point of having an independent post-Brexit regulatory framework is that the UK should be able to design rules that work for our markets, our firms and our economy. The UK’s position in financial services is not secured by right. Other jurisdictions are moving quickly. We know the compliance costs are generally higher in the UK, so unless we offer a regulatory environment that is clearer, more cohesive, more predictable and more conducive to growth, it is likely that firms, capital and innovation will go overseas, the opposite of what we and the Government want. We are already seeing this risk in areas such as digital finance. Firms in digital assets, payments and new financial infrastructure need clarity and confidence. Where they do not find it in the UK, they look elsewhere. The Employment Rights Act is also having a chilling effect.
Amendments 100 and 101 are important because they would strengthen accountability around the competitiveness and growth objective. It is not enough for regulators simply to say that they have considered competitiveness. Parliament needs to see how that objective has been applied, what evidence has been used, what impacts have been assessed—for example, on SMEs, which are a key feature of my noble friend Lord Hunt of Wirral’s amendment—and how regulatory decisions have affected firms and markets over time.
Amendment 102, which I have also supported, would extend the secondary competitiveness and growth objective to the Bank of England’s financial market infrastructure functions. The same should apply to Amendment 104A on payment systems. If we want a dynamic payments ecosystem, competitiveness must be considered across the whole regulatory architecture.
The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)
My Lords, the Government share the views of many in this debate, particularly on the importance of ensuring that the secondary growth and competitiveness objectives are comprehensively embedded in the work of the regulators. That is why the Bill legislates to extend the requirement for the regulators to produce annual reports on their actions to advance competitiveness and growth objectives.
Amendment 99 would amend the secondary objective so that when carrying it out the regulators would need only to consider international standards, rather than to align with them. I recognise the desire to ensure that there are no unnecessary constraints on the secondary objective. However, the Government cannot accept this amendment. Aligning with international standards is central to the Government’s approach to supporting the international competitiveness of the UK as a global financial centre. These international standards underpin global financial resilience and support international trade. Stability, predictability and high regulatory standards are the cornerstone of the UK’s reputation as a global financial centre. Weakening the requirement to align would risk undermining the attractiveness of the UK as a place to do business.
However, it is worth noting that the UK is no passive recipient of international standards: we help to shape them. The Governor of the Bank of England is the current chair of the Financial Stability Board, and the UK authorities play leading roles in international bodies. I reassure noble Lords that international standards generally operate on a comply-or-explain basis. No standard trumps the objectives of the FCA or the PRA. Where it is right for the UK to go further, or where the nuances of our market require a different approach, the FCA and the PRA retain full flexibility to do so.
Amendments 100 and 101 would require the growth and competitiveness reports to be laid in Parliament and would prescribe their contents. These amendments clearly demonstrate the importance this House places on the growth and competitiveness reports. The Government absolutely agree about that. Since they were introduced in FSMA 2023, their value to stakeholders in Parliament and industry has been clearly demonstrated, which is why the Bill extends the original temporary requirement and will require the regulators to keep producing the reports on an annual basis. However, these amendments are not necessary: they are overly prescriptive and overlap with existing reporting mechanisms. For example, the regulators already provide ample public reporting on their authorisation metrics, which are published regularly and allow for year-on-year comparisons, and they already publish metrics along with their competitiveness and growth reports.
Amendment 102 would give the Bank of England a secondary objective to facilitate international competitiveness and growth in its regulation of central counterparties and central securities depositories. The Government recognise the importance of a dynamic and competitive UK clearing and settlement market. However, CCPs and CSDs have a unique role in managing risk at the centre of global financial markets and the value they provide is based on reliability and sound risk management. The UK’s success as a global centre for financial market infrastructure depends on its reputation for resilience, and regulation must reflect the roles of CCPs and CSDs as critical, globally shared infrastructure. The Government therefore do not believe that it would be appropriate for the regulatory framework for these firms to focus on international competitiveness or growth in the same way as other firms, or that the secondary objective for the Bank to facilitate innovation is the right one. However, the Chancellor made it clear in her remit letter to the Bank last year that it should consider how it can best support the Government’s growth mission when pursuing its objectives.
Lastly, Amendment 104A seeks to introduce new secondary objectives for the Bank of England in relation to payment systems. I am grateful to the noble Lord for raising this issue. The Government recognise that, where appropriate, secondary objectives can help the regulator to advance its primary objective in a balanced way. Payment systems are critical economic infrastructure and the Government agree that, alongside security and resilience, regulation in this area should support competition, innovation and growth.
However, the Government consider that the Bill already provides a framework that supports the aims of the amendment. Following the FCA taking on the responsibilities of payment systems regulations, it will retain the substance of the PSR’s objectives. This means that it will be responsible for promoting competition and innovation in payment systems and for protecting the interests of service users. The Bill also applies the FCA’s secondary competitive and growth objective to its general payment system functions and it includes provision to ensure that the Bank and the FCA co-ordinate effectively. I therefore ask the noble Baroness not to press her amendment.
Baroness Noakes (Con)
My Lords, I thank all noble Lords who have spoken today and the previous day. These amendments all relate to the secondary competitive and growth objective. I think that we share the same desire to have an effective secondary competitive and growth objective, which my lead amendment, in particular, was designed to ensure. The Minister says that the regulators have flexibility to do what is right, whatever the international standards. I do not think that that is captured by forcing alignment with standards, but I will think again about that before Report. I was also disappointed by the Minister’s other replies, because it seems that the Government are not taking opportunities to ram home the importance of growth and competitiveness, which is something that we fully support. I will withdraw my amendment now and consider what I shall bring back on Report.
Baroness Neville-Rolfe
Member’s explanatory statement
These amendments ensure that the Treasury has the power to reduce various time limits for regulatory approvals, but not to increase them.
Baroness Neville-Rolfe
My Lords, I rise enthusiastically —we have to get going for the football—to move Amendment 105, in my name and the name of my noble friend Lord Altrincham. I will also speak to the other amendments in the group.
I am grateful to my noble friend Lord Holmes for his amendments, which seek to achieve broadly the same objective as ours. I am also grateful to my noble friend Lord Howard of Rising for Amendment 151, which raises an important question about whether experienced and well-regarded individuals with a strong regulatory track record should be able to benefit from a more streamlined authorisation process.
Fundamentally, the amendments in the group all seek to make regulatory approvals faster, clearer and less prone to delay. We have heard throughout our consideration of the Bill that delays in authorisations, approvals and permissions are a brake on growth. They affect firms’ ability to enter the market, to expand, to appoint senior people and to innovate and compete. The Government recognise the problem: Clause 21 reduces a number of statutory determination periods, including for Part 4A permission applications, senior manager approvals and other regulatory decisions. That is welcome. However, the question is whether the Bill goes far enough and whether the powers that it creates are sufficiently disciplined.
One concern raised with us by firms is that the authorisations process can feel driven by deadline, rather than workflow. The issue is not only whether the FCA or PRA technically meets the statutory deadline; it is whether substantive work begins early enough in the process. If a case is not allocated promptly, if an initial review takes place only late in the period, or if information requests are made close to the deadline, the firm bears unnecessary costs and uncertainty, even if the regulator ultimately meets the formal target.
My first set of amendments today—Amendments 105, 110, 113 and 114—would ensure that the Treasury’s power to alter these time limits could be used only to reduce them. If the purpose of the Bill—and, indeed, the Government’s wider financial services strategy—is to make the regulatory system more streamlined and fit for purpose, success must be measured in part by reductions in the time taken to make decisions. I hope that the Minister will be sympathetic to that principle. The Treasury should be able to shorten regulatory approval periods where experience shows that this can be done safely, and it should not be able to lengthen them without returning to Parliament with a clear and specific justification.
The amendments tabled by my noble friend Lord Holmes take a similar approach but go further by proposing an automatic ratcheting-down mechanism. Where regulators had met the applicable time period for a defined period, the Treasury would be required to reduce the time limit further. That is a sensible principle of continuous improvement. If regulators consistently demonstrate that they can meet a deadline, we should be willing to ask whether that deadline can become more ambitious.
Amendment 109 concerns the FCA’s ability to stop the clock during the senior managers approvals process. We have heard from industry that the power to stop the clock can be used repeatedly during an approvals process. That is extremely frustrating for firms. It makes workforce planning more difficult and can leave firms waiting for months without any real sense of when a decision will be made.
Stop the clock powers can render the headline statutory deadline almost meaningless. Amendment 109 would, therefore, allow the FCA to use the formal stop the clock mechanism only once in relation to a senior manager approval application. When it does so, the FCA would be required, as far as is reasonably practicable, to specify all the information that it requires at that point. The FCA could still ask for further information later, but that later request would not stop the statutory clock.
As I have said, delays in approvals can affect business decisions, market entry, expansion, restructuring and succession planning. They can discourage talented individuals from taking up roles in the UK if they fear that the process will be slow, uncertain or opaque, and they could even put at risk our reputation as a leading financial centre.
I welcome Amendment 151 in the name of my noble friend Lord Howard of Rising. It asks whether there should be a more streamlined or expedited Part 4A authorisation process where the applicant is managed or directed by individuals with an established FCA-approved—or PRA-approved, I assume—track record and good regulatory standing. A review could help to identify where duplication exists and where good regulatory history can be taken into account in a practical way.
I would be grateful if the Minister could address three questions. First, what do the Government see as a reasonable timeframe for the approval of new products, new services and senior managers? Those of us who are used to more dynamic sectors think that the new targets are insufficiently challenging, but let us hear what they are. Secondly, do the Government accept the principle that the Treasury’s power to change approval time limits should be used only to reduce them, not increase them? If the Government do not accept that, in what circumstances do they envisage the Treasury using this power to lengthen regulatory approval periods? Thirdly, what safeguards exist to ensure that the FCA’s stop the clock powers are used proportionately and not in a way that undermines the statutory deadline?
We cannot talk about growth, competitiveness and innovation while tolerating unnecessary delays in the basic processes that allow firms to operate and people to take up senior roles. We know from history that we need strong management, as well as strong and challenging non-executive directors for our banks, but we also need an efficient approvals system that supports that. I beg to move.
Lord Holmes of Richmond (Con)
My Lords, what a pleasure it is to follow my noble friend Lady Neville-Rolfe. I agree with everything she said, with all the principles she set out and with the amendments in this group.
I shall speak to Amendment 106 and the other amendments in my name. We are asking a lot of our financial regulators and it is only right that we offer help in the Bill. When we come to the Minister’s response —I do not want in any sense to pre-empt him—there may be comments around the amendments being overly prescriptive. I suggest that these amendments do not ask for prescription but, in fact, deliver clarity and, in a sense, are variously helpful to our financial services regulators.
My amendments seek to offer that help but also, as my noble friend Lady Neville-Rolfe said, to assist in driving that high-performance culture. Our regulators are well-regarded around the world. That is about high performance, but high performance in its turn is about continuous development and improvement. I think that this Bill can assist in that purpose.
In essence, this is all about the “E”s in this group: efficiency, effectiveness and economic activity. It is often said that delay defeats equity. In this instance, delay defeats economic activity and economic growth. It frustrates small, medium and larger businesses in what they are trying to do right across the United Kingdom economies. I believe that this suite of amendments offers clarity to the regulator and that, through that clarity, the regulator can give the right direction and the right support to all our businesses to do what they do best, which is to create economic activity and drive and deliver economic growth. I look forward to the Minister’s response.
Lord Ashcombe (Con)
My Lords, I declare my interest as an employee of Marsh, an FCA-regulated entity. These amendments in the names of my noble friends Lady Neville-Rolfe, Lord Altrincham and Lord Holmes concern Clause 21, which I very much welcome in principle. The improvements to regulators’ approval timelines are a positive step, as are the powers within the clause that enable the Government to amend those timeframes over time. In effect, the Bill already recognises the need for a mechanism to drive improvement. However, the evidence suggests that we can and should go further. The fact that regulators have consistently met their existing targets—targets that have remained largely unchanged for some 25 years—indicates that there is clear scope for more ambitious deadlines.
These amendments are therefore designed to embed a culture of continuous improvement, as referred to by my noble friend Lord Holmes. They would ensure that any future changes to the timeframe set out in Clause 21 could move in only one direction, towards faster decision-making. Moreover, where regulators have consistently met revised targets over a period of two years, the Treasury would be required to reduce those timelines further. In doing so, we would place a statutory obligation on the system to evolve and improve. This matters greatly for the competitiveness of the United Kingdom, particularly for the insurance market in which I work. The speed at which regulators handle authorisations, variations of permission and approvals for senior managers has a direct impact on the ease of doing business. These processes define many firms’ day-to-day interactions with regulation and shape broader perceptions of our market. Firms today have choices about where to deploy capital, where to grow and where to locate talent. A regulatory system that is clear, predictable and timely is a key part of that decision-making calculus.
The UK must offer a compelling proposition. There are many other places to go. Evidence from the London Market Group reinforces this point. A recent survey of firms regulated by the FCA and the PRA shows that both institutions are respected with strong overall scores, yet concerns remain. More than half of firms believe that aspects of the FCA’s approach negatively affect the attractiveness of the London market, and nearly nine in 10 highlight slow approvals for senior managers as having a strong detrimental impact on their operations. Improving timelines is not about reducing standards; it is about ensuring that our system supports growth, innovation and competitiveness. These amendments help to achieve just that.
Lord Bridges of Headley (Con)
My Lords, I should like to speak briefly and, in so doing, declare my interest as an adviser to and shareholder in Banco Santander. I very much support these amendments. I think that we would all agree that we want our regulations and the entire process to be simple and robust, as that is the bedrock of a competitive global financial centre. I do not think that anyone here is arguing for a weakening to the extent that it would undermine confidence in the market, which is absolutely critical.
To support what has just been said, I draw your Lordships’ attention to a study that TheCityUK brought out a few years ago—I think in 2023. It highlighted in its survey concerns among those in the City about the speed of regulatory requirements. If I am reading it right, of those who responded to the survey and were undergoing FCA regulatory approvals, 92% were experiencing delay. If you look at the views on the opaqueness of the systems, which indeed adds to uncertainty and undermines investor confidence, an enormous percentage—almost 100%—saw the system as opaque or somewhat opaque. If one then looks further on in this study at the perceived overall impact that the efficiency of the regulators’ authorisation processes had on the attractiveness of the UK as a place to establish and do business, in terms of the FCA, if my maths serves me right, almost 90% saw it as detrimental or somewhat detrimental to the UK’s attractiveness.
I am sure that the FCA and others are doing their best to solve this issue, but these amendments would do a lot to add pressure to that process and would strengthen the resolve within the system to address what is a clear need if we are to build on the competitiveness of London as a financial centre.
Lord Howard of Rising (Con)
My Lords, my Amendment 151 seeks to enable employment in the financial services industry to be made more efficient. At present, Section 55V of FSMA requires the Financial Conduct Authority to determine a complete application for Part 4A permission within six months and an incomplete application within 12 months. These statutory limits provide certainty but do not distinguish between entirely new market entrants and applicants who have previously been authorised and regulated by the FCA.
Many experienced financial services professionals have already undergone extensive regulatory scrutiny, have held approved positions within FCA-authorised firms and possess established records of compliance, integrity and competence. Despite this, when establishing a new authorised firm, they are often subject to the same authorisation timetable as applicants with no prior regulatory history. This approach can create unnecessary delays, increase costs, discourage entrepreneurship and inhibit competition within the UK financial services sector. It is also inconsistent with the Government’s broader objective of promoting growth, innovation and international competitiveness within the UK financial markets.
I propose that His Majesty’s Government consider introducing a fast-track authorisation process whereby applicants who have previously been authorised by the FCA or who have held FCA-approved senior management or controlled functions for a substantial period, have no record of serious regulatory misconduct, meet all threshold conditions and prudential requirements and submit a complete application should receive a determination from the FCA within 90 days of the application being submitted.
Such a provision would not reduce regulatory standards. It would recognise that the FCA already possesses significant information regarding the applicant’s competence, conduct, fitness and propriety. The FCA would retain full discretion to refuse applications where concerns arise, but qualifying applicants would benefit from a more proportionate and efficient regulatory process. The United Kingdom’s reputation as a leading global financial centre depends on regulation that is not only effective but efficient. A targeted, expedited process for proven and reputable applicants would help reduce barriers to market entry, encourage innovation, support economic growth and make the UK a more attractive jurisdiction in which to establish regulated businesses. It would tie in with the Government’s declared interest in reducing burdensome regulation, which impedes growth in the economy.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Holmes, for tabling these amendments on statutory deadlines for regulatory approvals. The Government agree that determining authorisations and other regulatory applications must be prompt and proportionate, while maintaining high standards, and they continue to push the regulators to be as ambitious as possible. This is why the Government are taking action to shorten a range of statutory deadlines through the Bill and, on top of this, have agreed voluntary stretch targets for the regulators to go further and faster to speed up the processing of the most crucial applications and facilitate growth. This focus is starting to pay off: for example, the FCA’s authorisation metrics for the last quarter show that the FCA determined 99.9% of senior manager applications within the existing three-month deadline, compared to 92.5% in the same quarter for 2022-23. In addition, the FCA determined 98.1% of senior manager applications within its two-month voluntary stretch target, determining 50% of authorisations within only 19 days.
Amendments 105, 106, 110, 111, 113, 114 and 115 seek to ensure that the Treasury can use the power under Clause 21 to reduce the deadlines for determining applications. The Government understand the intention behind these amendments. The Government are committed to keeping these statutory deadlines under review to ensure that they are as ambitious as possible to support firms. The intention behind this is primarily to allow certain deadlines to be shortened further if conditions change in future and the regulators can process applications faster. However, it is vital that the regulatory framework reflects the need for a robust approvals process and the high standards expected of firms operating in the UK. Limiting the Government’s ability to recalibrate the statutory deadlines in the other direction would limit our ability to react to unexpected circumstances and could risk those high standards being watered down or push the regulators to refuse more applications to ensure they are meeting their legal obligations. This is why the Government’s view is that the powers must remain flexible.
Amendments 107, 112 and 116 would oblige the Government further to shorten these statutory deadlines should the regulator meet these deadlines for two consecutive years. The Government understand the intention and ambition behind these amendments but do not agree that this is the right way to achieve it. Meeting an existing deadline for two consecutive years does not in and of itself mean that further shortening the deadline will be appropriate and could risk watering down standards. Such a ratcheting mechanism could also drive perverse behaviour, disincentivising the regulators meeting these deadlines to avoid further operational pressures. The Government’s view is that these amendments would prevent the exact outcome they are seeking to achieve.
On Amendment 109, I understand the concern that statutory deadlines are less meaningful if the FCA can repeatedly stop the clock and make rolling requests for information. The Government recognise the frustrations that firms feel when applications are paused or when they receive repeated requests for information. The noble Baroness, Lady Neville-Rolfe, asked about the proportionality of circumstances in which the FCA can indeed stop the clock. The FCA can stop the clock only in three specific circumstances under FSMA: for change of control, senior manager and appointed representative applications. This power allows the FCA fully to investigate issues that emerge only after an initial response has been received or where further clarification is needed on matters that were not reasonably identifiable at the outset. This is important for ensuring that robust standards are applied.
The Government think it is important that the regulators retain some flexibility to scrutinise senior manager applications properly. A rigid rule limiting the formal stop the clock power to a single occasion risks weakening the regulator’s ability to conduct proper scrutiny in more complex cases, which it does only on very few occasions when really necessary. It also risks encouraging broad, defensive and overly onerous initial information requests as the FCA seeks to adjust procedures to the new requirement, potentially making the process more onerous for all applications. However, I do not want to sound complacent: the Government will continue to engage with the regulators to ensure that they are processing applications as quickly as possible while maintaining standards and avoiding delays.
Lord Holmes of Richmond (Con)
I would like some clarification from the Minister. Does he have, at his fingertips, figures around the stop the clock function? Are the Government currently satisfied with how the function is being used?
Lord Stockwood (Lab)
Let me come back to the noble Lord with that data; I had it in the original draft, but it seems that we have passed it out. I will write to the noble Lord over the coming days.
Our belief is that the right answer is not to hardwire this procedural restriction into primary legislation but to continue improving operational performance and scrutiny of timelines through our wider framework.
Amendment 108 would insert detailed operational requirements into FSMA for the handling of authorisation applications. I recognise the attraction of measurable standards on case allocation, initial review, information requests, publication of monitoring data and limiting the use of the stop the clock mechanism. However, as we discussed earlier, the FSMA model delegates certain responsibilities to the independent regulators and, like any other organisation, they need to figure out how to fulfil those responsibilities. They are responsible for ensuring that they have the resources, systems and processes needed to discharge their functions effectively. The right approach for Parliament and the Government is to hold the regulators to account for speed, service quality and operational effectiveness, not to prescribe in primarily legislation the detailed mechanics of how an application must be processed.
I have been passed the data that was in the original speech, which answers the question from the noble Lord, Lord Holmes. In the year 2025-26, in 55% of FCA solo-regulated senior management applications there was no stop the clock and for 32% of cases the clock was stopped only once. Even when the FCA does use its stop the clock power, it continues to determine applications promptly. In Q4 of 2025-26, 50% of senior manager cases were determined within 19 days. As mentioned previously, 99% were determined within the new target of two months.
Lord Holmes of Richmond (Con)
I thank the Minister for those statistics and very much appreciate him having them in front of him. This ability to elucidate such detail is incredibly helpful. He set out the importance of enabling the regulator to continue to have the option to increase timelines, rather than just having them set as they are or being able to reduce them, as our amendments suggest. Would he be able to set out to the Grand Committee perhaps four or five examples of where it would be helpful for the regulator to increase timelines?
Lord Stockwood (Lab)
I understand that the regulator does not have the power to increase deadlines without our consent.
Lord Ashcombe (Con)
The wording in the Bill is “changing”, so it can go up or down, but we are asking for it to be reduced. That is significantly different.
Lord Stockwood (Lab)
The noble Lord makes an important point, but the regulator does not have that power. Only the Treasury can grant that power to increase the timelines.
Lord Ashcombe (Con)
Then the Treasury can do it, but it should be down and not up.
Lord Stockwood (Lab)
I think this requires some further detail. It is an affirmative power that the Treasury has to regulate, but I will write to the noble Lord in full to make sure that he understands that we are taking this issue seriously.
I turn to Amendment 151 and thank the noble Lord, Lord Howard, for raising this. I know that it reflects a long-standing frustration that credible firms, particularly those led by individuals already known to the regulator, may still face lengthy authorisation processes that can delay market entry and inhibit innovation and growth. However, while the previous approval and track record of senior individuals is clearly relevant to the regulator’s assessment, authorising a firm is not simply a matter of approving the people who run it. The regulators must assess the firm as a whole, including its business model, governance, systems and controls, and whether it is capable of operating safely and in the interests of its customers.
The Government recognise the importance of timely and effective authorisation processes, especially for new firms. This is why the Government are shortening the deadlines for new firm authorisation applications through this Bill. It is also why the Government are taking steps to establish a provisional licences regime, to reduce the barriers that firms face when seeking FCA authorisation and to help them get up and running faster. The challenges that firms face when seeking authorisation are real, and I am happy to discuss that further with the FCA, but imposing a statutory requirement on the Treasury to undertake such a review is disproportionate and not the right way to address them. As I committed to the noble Lord in our meeting prior to today, I will talk to the FCA about this and how it will ensure that this process is sped up.
I fully recognise the concerns that noble Lords have raised about delays, responsiveness and the need for an approvals regime that supports growth and competitiveness. The Government are actively addressing these through the shortening of a range of statutory deadlines in the Bill, in a way that is targeted, proportionate and will ensure competitiveness without compromising the rightly high regulatory standards that firms must meet to operate in the UK. I therefore ask the noble Baroness to withdraw Amendment 105.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to all noble Lords who have contributed to this debate and to the Minister for his response. I welcome that the Government recognise the problem of delay in authorisations and approvals. Clause 21 is clearly intended to make progress in that respect, but the existing approval figures suggest to me that the deadlines are insufficiently ambitious. Leaving it to the FCA and PRA feeds risk aversion, and it is disappointing to hear the Minister endorsing that.
Unless the powers in the Bill on the Treasury and the regulators are better disciplined, we may not achieve the cultural and operational shift that firms need and we all want. There will not be an incentive for continuous improvement, of the kind that my noble friend Lord Ashcombe described in the insurance industry, that is so badly needed. I am also not sure what the unexpected circumstances are, not on stop the clock but on the basic system. What is the detail of that? Is it Covid? Is it a war? I do not know. I am grateful for the Minister’s comments on stop the clock. It was interesting to hear that nearly half the cases involved stopping the clock—and that we have no idea how long the bad cases take. A statutory deadline is of limited value if it can be paused repeatedly or if firms feel that pauses are being used in a way that creates uncertainty. The FCA should, wherever possible, identify missing information early and comprehensively. I do not think I heard a satisfactory answer on that.
I welcome the points raised by my noble friend Lord Holmes on all granular performance data. My noble friend Lord Howard of Rising has also raised the idea of a fast track for established senior managers, and I very much look forward to hearing the results of the Minister’s conversations with the FCA, and perhaps the PRA, on that. I am not that hopeful, and I encourage the Minister to press these issues. They matter a lot to the industry. I know, from planning and other areas that I have been involved in during my long career, that speeding things up can lead to very positive feedback. I hope the Minister will reflect further, but for now I beg leave to withdraw my amendment.
“Section 166 reviews: threshold and proportionality requirements(1) Section 166 of the Financial Services and Markets Act 2000 (reports by skilled persons) is amended as follows.(2) After subsection (1) insert— “(1A) The regulator may not require a person to provide a report under this section unless it is satisfied that—(a) there is a material risk of serious detriment to regulatory outcomes, and(b) the use of a skilled person is a proportionate response, having regard to—(i) the scale and nature of the suspected issue,(ii) the expected burden on the firm, and(iii) whether the matter could reasonably be addressed through the regulator’s existing supervisory tools.”(3) After subsection (4) insert—“(4A) The regulator must publish, at least annually—(a) the number of reports commissioned under this section,(b) the sectors to which they relate, and(c) the aggregate cost to firms of such reports.”(4) In subsection (5), after “may” insert “, subject to subsections (1A) and (4A),”.”Member’s explanatory statement
This new Clause would introduce a statutory threshold for the use of section 166 skilled persons reviews, requiring the regulator to demonstrate a material risk of serious detriment and to consider proportionality, and would require annual publication of the number, sectoral distribution and aggregate cost of such reviews.
Baroness Bowles of Berkhamsted (LD)
My Lords, in moving this amendment, I shall speak also to Amendment 123 in my name. As I have said before in Committee, when we have been talking about proportionality, it is at least possible to look at rules and assess whether they appear proportionate and growth-friendly, but it is far harder to understand what is happening on the ground in supervision and enforcement because that activity is not public and is, therefore, less visible. This is particularly so with Section 166 notices.
I seem to have once again hit on the same subject as the noble Baroness, Lady Noakes. I promise noble Lords that there has been no conferring, as they say on “University Challenge”. There was a time when a Section 166 notice was very rare. It was regarded as a serious matter and something you did not want others to know about, lest it suggest that you were doing something really wrong, you were in real difficulty, or you were in trouble over something. Now, the reaction is much more along the lines of, “Oh, you too?”, and the sense in the industry is that what was once a rare and targeted tool is becoming a routine, general-purpose device—sometimes even a fishing expedition.
These investigations are not small matters. They can go on for a very long time. They are intrusive, expensive and disruptive to normal operations. They require the appointment of external consultants, often at significant cost, and involve a lot of staff time; they even require the hiring of additional staff to deal with keeping day-to-day activity going. In 2023-24, there were 83 Section 166 notices and in 2024-25 a further 47. The cost of them in 2024-25 was £44.7 million, which is not trivial. There is a legitimate concern that the threshold for initiating a Section 166 notice has drifted downwards, and that matters that should be dealt with through the ordinary supervisory channels are now being dealt with through Section 166. They should be dealt with routinely, using the regulator’s own knowledge and expertise wherever possible, but it seems that some of that is now being outsourced through this Section 166 route.
What is needed is a pinning back to serious matters, as well as greater transparency around how and why these notices are used. My amendment aims to restore Section 166 reviews to what they were always understood to be: a tool for investigating issues that pose a serious detriment to regulatory outcomes. It would also introduce a modest reporting requirement for an annual statement setting out the number of notices issued, a breakdown by sector, the reason there was a material risk of serious detriment and the aggregate financial cost to firms. This is not an attempt to remove Section 166 or constrain the regulator’s ability to act; it is simply an attempt to ensure that a powerful and intrusive tool is used proportionately, transparently and for the purposes for which it was originally intended. Too much use is harmful, and a reputation for routine use is itself a deterrent to locating businesses in the UK.
I turn to my Amendment 123, which concerns the information powers under Section 165 of FSMA. It aims to set a framework around the information demands that regulators can make. It is not intended to intrude on anything reasonably necessary for investigatory, supervisory or other statutory functions, or for advancing the regulator’s objectives. However, as the House of Lords Financial Services Regulation Committee heard in evidence, firms are receiving many requests for information that do not appear necessary or are duplicative or made without co-ordination across teams. These requests impose real cost and disruption and are not always proportionate to the matter at hand. This amendment seeks to put some structure and co-ordination around what can reasonably be expected, ensuring that information requests are targeted, necessary and proportionate, and that firms are not repeatedly asked for the same material by different parts of the same regulator. I beg to move.
Baroness Noakes (Con)
My Lords, I have Amendment 118 in this group. As the noble Baroness, Lady Bowles, noted, it is aimed at the same target as her Amendment 117. Both of us are focusing on the regulators needing to have some specific and serious concerns about regulatory breaches before triggering a Section 166 review. I have had some experience of being on the receiving end of Section 166 notices from my time on the board of a major bank. They are genuinely very burdensome: they cost a lot of money, and they divert a huge amount of staff resources and, more importantly, senior management time. They are not something to be undertaken lightly.
The consulting firms absolutely love them. The fees are set by the regulator, so they do not have to do anything awful, such as negotiating with a client around the fees. They often have some perverse incentives, and quite often are structured as phase 1 and phase 2. Phase 1 is where you see whether there is a bit of a problem, then you move on to phase 2. Phase 2 is where the real money usually is, so the consultants leave no stone unturned in their efforts to trigger phase 2, and they can end up creating more work than might perhaps have been needed. Like the noble Baroness, Lady Bowles, I am not saying that Section 166 reviews should not exist, but the use of them should probably revert to the use that existed before. That is why it is important to put a higher hurdle than is currently in the statute for the use of Section 166, so that the burdens are imposed only when there is genuine cause.
Lord Altrincham (Con)
My Lords, I am grateful to the noble Baroness, Lady Bowles, and my noble friend Lady Noakes for bringing forward these amendments. I declare my interest as a director of South Molton Street Capital, which is regulated by the FCA.
The amendments in this group focus principally on Sections 165 and 166 of FSMA. It is worth recalling that the very expression “Section 166” has become part of the language of financial regulation. When the history of financial regulation is written, it will be the most famous item of regulation for this period. It is part of the common language, because there are dozens and dozens of these regulatory interventions.
Section 166 gives the regulators the power to require a firm to appoint or to pay for a skilled person—often a very expensive law firm—to produce a report on specified matters. These reviews can be burdensome, expensive and disruptive for the firms concerned. The concern we have heard from industry is that Section 166 notices have become more and more common in recent years. They were, as the noble Baroness, Lady Bowles, pointed out, initially quite scarce and quite important—and quite quiet, incidentally. Now, they are talked about all the time, because they are as common as anything. The serious issue is that they can, in effect, be used by the regulator as a demonstration of the exercise of its supervisory function.
These notices are supposedly for an inquiry, but they look quite threatening: they can be written in bold and in caps and in different sized fonts. They arrive at the firm with a variety of different names—often the firm has not actually heard of the regulator—and the tone of the notices can be unintentionally discourteous. This, of course, touches on other amendments which reference the right profile for the UK in regulating international firms that may operate in this country.
A Section 166 review is not cost-free regulation; it can require substantial external expenditure, internal management time, legal advice, data gathering, citizens’ work and follow-on remediation. The direct cost of the skilled person report may be only one part of the total burden. This means that there is inevitably a presumption of guilt in these inquiries, without a balanced challenge to which the firm can fully respond. We must bear in mind that firms often do not even know what the inquiry is looking for, so the ability to seek legal protection or a balance in the inquiry is made impossible by this approach to regulation.
In the general insurance and protection sector, an FOI-based report suggested that firms paid around £2.7 million for FCA-mandated Section 166 reviews in the year to 31 March 2024. It noted that internal costs and remediation costs can exceed the external review cost itself. That illustrates the point clearly that the financial and operational impact on firms can be significant. There is also the problem that some firms are not clear on why they are being subject to Section 166 in the first place. The regulator may go on a “fishing trip”, as described by the noble Baroness, Lady Bowles, which really is a good expression for how these inquiries proceed—to find fault without disclosing precisely what they are looking for.
That is why these powers need guardrails. As my noble Friend Lady Noakes has argued, Section 166 notices should be reserved for serious circumstances. They should not become a routine supervisory practice; they should not be used where the same information could reasonably be obtained through less burdensome means; and they should not be imposed without proper consideration of proportionality.
Amendment 117, in the name of the noble Baroness, Lady Bowles, would require the regulator to be satisfied that there is a material risk of serious detriment to regulatory outcomes, and that using a skilled person report is a proportionate response. It would require the regulator to consider the scale and nature of the suspected issue, the burden on the firm and whether the matter could reasonably be addressed through existing supervisory tools.
That seems to be a sensible framework, as does that set out in Amendment 118, in the name of my noble friend Lady Noakes. It would restrict Section 166 reports to circumstances where the regulator considers that there is likely to have been a significant contravention of a relevant requirement, and where the information or documents could not reasonably be obtained without the report. These amendments speak to the same underlying principle: Section 166 should be an exceptional tool for serious cases, not a default mechanism.
I welcome Amendment 123, in the names of the noble Baronesses, Lady Bowles and Lady Altmann, which deals with Section 165 information-gathering powers and seeks to set sensible thresholds on access to information. If a regulator asks a firm for information or documents, it should be able to explain why that material is reasonably necessary, why the request is proportionate and why the information cannot be obtained from another source. Requests should not be duplicative and they should not be broader than necessary. Firms should not be left trying to satisfy vague or excessive demands without a clear understanding of the purpose behind them. That is a basic principle of good regulation, and it particularly matters for smaller firms.
The broader issue here is one we have returned to throughout the Committee: regulatory power must be matched by accountability and proportionality. The FCA and the PRA have significant supervisory tools at their disposal. Where those tools impose real costs on firms, there must be proper discipline in their use. These amendments raise important questions about the balance between effective supervision and regulatory burden. We will listen carefully to what the Minister has to say in response.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Baronesses for these amendments, and I have listened carefully to the points made today. The principle of ensuring that the regulators take a proportionate approach to their work—in the case of these amendments, to skilled person reviews and regulatory information collecting—is one that the Government strongly agree with. We have previously debated that principle and how it applies more broadly to the work of the financial services regulators.
Amendments 117 and 118 relate to skilled person reviews under Section 166 of FSMA. It is an important supervisory tool, and the Government agree that it should be deployed proportionately. However, the Government are not persuaded that there is an issue here that requires us to further constrain the regulators’ ability to require these reviews when they consider it appropriate to effectively safeguard the markets and consumers. The regulators have existing procedures to ensure proportionality when considering whether to initiate a skilled person review. The FCA handbook sets out that it will first consider the circumstances of the firm, the costs involved and the availability of other supervisory tools to tackle the issue. The PRA has similar processes in place.
Layering additional statutory requirements on top of this risks creating burdensome delays over supervisory decisions. Skilled person reviews are often used precisely in circumstances where the regulator needs independent expert analysis. For example, requiring the regulator to satisfy a threshold test before commissioning a review could limit the regulator’s ability to direct a skilled person to investigate a potential consumer harm and implement a mitigation strategy.
The data does not suggest that the use of skilled person reviews has grown over time. I reassure noble Lords that the FCA’s use of them has been broadly consistent over the past 10 years, with an average of 48.5 commissioned a year. However, in 2025-26, only 31 were commissioned, down from a high of 83 in 2023-24. This increase reflected the FCA’s strengthened oversight in key areas, including financial crime and appointed representatives and, despite the increase in volume, overall costs to firms remained flat.
Amendment 117 would create statutory disclosure requirements relating to Section 166 skilled person reviews. The FCA and the PRA already provide transparency by publishing data on the reviews they have commissioned in their annual reports.
Amendment 123 seeks to raise the bar for regulators requesting information for the firms they oversee. The Government recognise the impact that regulation and supervision can have on firms, and agree that regulators’ supervisory activities, including information requests, must not create disproportionate burdens on firms. That is why the Government have committed to cutting the administrative burden of regulation by 25% by the end of this Parliament. The financial services regulators are activity contributing to this agenda. For example, the PRA is deleting redundant and duplicative data collections—its future banking data programme has reduced costs to firms by around £26 million annually so far—and the FCA has stripped out data requests for 36,000 firms. All this has been done without detracting from consumer protections or systemwide resilience.
Through the Bill, the Government are taking action to reduce the burden of regulation on businesses. This includes reforms to the senior managers and certification regime, which will enable the regulators to reduce the regulatory burden of the regime by 50% while maintaining its strong and effective framework for individual accountability. Imposing prescriptive statutory requirements on how the regulators gather information risks undermining effective supervision, which might bring serious risks. Regulators must be able to respond quickly to emerging risks, and sometimes that means requesting information in ways that cannot be neatly anticipated by legislation.
The Government agree that proportionality is hugely important, that unnecessary burdens should be avoided and that the regulators must be held properly to account for how they exercise the significant powers given to them by Parliament. But there is no evidence that these amendments are needed to ensure proportionality. They would risk constraining the regulators’ ability to do their jobs effectively, which would introduce risks into our financial system. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Noakes (Con)
The Minister made great play of the importance of proportionality, on which I think there would be considerable agreement. The Bill removes the requirements to have regard to the regulatory principles, including, importantly, the proportionality paragraphs, for anything other than the five-year plan. It is therefore incumbent on the Government to look at all other areas of the Bill to ensure that proportionality, where it is needed, is correctly referenced in the Bill. By taking it away at the outset from the requirement to have regard in areas other than the five-year plan, the Government are leaving the Bill wide open to the non-proportional use of powers by the regulator. This area has not been fully developed by the Government in their thinking on this.
Baroness Bowles of Berkhamsted (LD)
My Lords, I thank all those who have spoken in this debate, in particular the noble Baroness, Lady Noakes, for her last intervention; I presume that the Minister had finished speaking. Perhaps we need 200 amendments on Report saying, “This has to be done proportionately”. That is literally where we are. Anybody who has been near a Section 166 review will know that an awful lot about it seems awfully unfair. For instance, the regulator may not have its own expertise, so it makes you pay to hire it in. Some of these things should be done under the regulators’ ordinary duties. This needs to be looked at and, as the noble Lord, Lord Altrincham, said, some kind of proper discipline must be put around it. That is what we are asking for.
I am glad to hear that there is a target of cutting the administrative burden by 25%. We will see how that goes, but I do not think that everything can be left as open as it is now, which is the much-repeated message that we have been delivering. For now, I beg leave to withdraw my amendment.
Baroness Noakes
“Cost benefit panels(1) The Financial Services and Markets Act 2000 is amended as follows.(2) In subsection (4) of section 138IA, insert after paragraph (a)— “(aa) keep under review the cumulative impact of rules issued by the FCA including those covered by subsection (3); and”(3) In subsection (4) of section 138JA insert after paragraph (a)—“(aa) keep under review the cumulative impact of rules issued by the PRA including those covered by subsection (3); and”(4) In subsection (5) of section 139A, omit “(e)”.”Member’s explanatory statement
This amendment allows the Cost Benefit Panels of the FCA and the PRA to keep the cumulative impact of regulation, including those rules which are not consulted on, under review. It also requires the FCA to prepare cost benefit analysis for guidance and for the Cost Benefit Panel to review it.
Baroness Noakes (Con)
My Lords, I thank the noble Lord, Lord Vaux, for adding his name. Unfortunately, he is not able to be in Committee today. The amendments in this group concern cost benefit panels, which were created by the 2023 Act to underpin the existing FSMA requirement for cost-benefit analysis to be undertaken and published when rules are consulted on by the PRA and the FCA. The panels were created a little under two years ago and they are doing good work, as their annual reports show. The Financial Services Regulation Committee had a private briefing session with the chairs of the two panels, and we were impressed by the progress that they have made.
My amendment has two elements. The first requires the panels to keep under review the cumulative impact of rules, including those for which a cost-benefit analysis was not required because the impact was expected to be less than the £10 million threshold used by both regulators in their cost-benefit analysis policy statements. Keeping track of the cumulative burden of regulation was a recommendation of the Financial Services Regulation Committee in its Growing Pains report on the secondary competitiveness and growth objective. It was also one of the provisional recommendations of the FCA’s panel in its first report for the period to the end of March 2025. The 2025-26 report is not out until next week, but I would be surprised if it did not feature again.
Ideally, FSMA should be changed so that the existing statutory requirement on the regulators, which is confined to cost-benefit analysis on the proposed new rules, is widened so that it will be the responsibility of the FCA and the PRA to keep the cumulative burden on regulatory activity under review. I have taken the slightly easier drafting route in my amendments by putting a narrower requirement for the role of the panels.
The second element of my amendment concerns guidance by the FCA, which was covered last time in Committee, and the PRA. I confess that proposed new subsection (4) of my amendment captures only one part of what I was trying to achieve. I realised that when I was preparing my speaking notes, but it was too late to do anything about it, so I will speak to what I intended to cover in my amendment rather than what it does cover. This is Committee, after all.
At present, the FCA and the PRA are required to issue guidance under Sections 1K and 3I of FSMA and the FCA has power to issue guidance under Section 139A. If the FCA issues guidance under Section 139A, it has to be consulted on, but no cost-benefit analysis is required to be done or published. Proposed new subsection (4) of my proposed new clause in Amendment 119 seeks to require cost-benefit analysis for Section 139A guidance. I intended, but failed, to require cost-benefit analysis for all guidance issued by both regulators—that is a difference not reflected in the amendments.
I am well aware of the Government’s plan in Clause 18 to remove all the guidance obligations from the regulators, as well as the requirement for consultation on the FSA’s guidance under Section 139A. This part of my amendment is predicated on the Government realising the folly of their ways in Clause 18 for the purposes of today’s debate.
One of the findings of the FCA’s cost-benefit panel last year was the minimalist approach taken to cost-benefit analyses by the FCA: they are undertaken only when required by statute rather than being seen as good regulatory practice underpinning the detailed actions of regulation. The Financial Services Regulation Committee, as part of our inquiry into the FCA’s naming and shaming provisions, which had a potentially very significant impact on certain firms, called for a cost-benefit analysis. However, the FCA refused, saying that it was not required to do it by law. Therefore, I believe that attaching cost-benefit analysis to pretty much everything that the regulators do is necessary. Guidance would have been a good start, but the changes required are even broader than I have tried to achieve in my amendment.
My noble friend Lady Neville-Rolfe’s Amendment 132 seeks to widen the work of the CBA panels, and I look forward to hearing what my noble friends on the Front Bench have to say on that. With that, I beg to move.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to follow my noble friend Lady Noakes. I congratulate her on her purposive, rather than literal, interpretation of her amendment. I support her amendment and everything she said, as well as the other amendments in this group. I will speak to my Amendment 129.
Many noble Lords here today were in the Grand Committee debates for the then FSM Bill 2023. As my noble friend Lady Noakes rightly identified, the CBA panels have done very good work in their first couple of years of existence. My Amendment 129 seeks to give them further clarity to assist them in doing that good work, to ensure that they have the materials they need to do it, and to bring an additional element around public awareness of the panels’ work. That speaks to greater transparency, awareness and engagement, which can help not only the work of the CBA panels but the wider work of the regulators themselves. I look forward to the Minister’s response.
Lord Altrincham (Con)
My Lords, I am grateful to noble Lords who have tabled amendments in this group, which all take broadly the same approach to the cost benefit analysis panels. The underlying point addressed here is simple: if we are serious about accountability, proportionality and reducing regulatory burden, the panels that already exist to scrutinise the costs and benefits of regulation should be able to look at the full practical impact of what regulators do.
Amendment 119, in the names of my noble friend Lady Noakes and the noble Lord, Lord Vaux, raises the important issue of cumulative regulatory burden. Amendment 129, in the name of my noble friend Lord Holmes, would give the panels a broader and more visible role, including through regular impact assessments, stronger access to information and greater transparency. Amendment 132, in my name and that of my noble friend Lady Neville-Rolfe, addresses a specific gap: the use of guidance and supervisory practices, which may have significant practical effects on firms, but which do not currently receive the same level of cost-benefit scrutiny as formal rule changes.
I start with the cumulative burden point, because it is extremely important. Regulation is not experienced by firms as a series of isolated events. New rules come on top of existing ones, including guidance, reporting requirements, supervisory expectations, data requests, “Dear CEO” letters and enforcement signals. Individually, each new intervention may appear manageable, but collectively they can become very burdensome. The effect is not only on cost but on management time, operational complexity, legal advice, compliance headcount, systems changes and a reduced capacity to focus on customers, innovation and growth.
Therefore, it seems ineffective that the cost-benefit process so often considers individual regulatory interventions, without proper reference to the wider impact of the regulatory environment as a whole. If the regulator is required only to ask whether one new proposal is proportionate in isolation, there is no real incentive to look back at legacy regulation and ask whether the total burden has become excessive. That is why there is real merit in allowing the cost-benefit analysis panels to look more strategically at the total regulatory load. If we want regulators to support growth and competitiveness, they must not only justify new burdens but have incentives to remove or reduce old ones.
Amendment 132 would extend the existing cost-benefit analysis and consultation framework so that it applies not only to formal rules but to materially significant general guidance and general supervisory practices or policies. That is important because, in practice, guidance and supervisory expectations can have effects that are very close to rules. If such a measure has a material effect on regulated firms, it should not be able to escape scrutiny simply because it is not formally described as a rule.
Our amendment would create a sensible check: it would require the regulator to notify the relevant cost-benefit analysis panel early where guidance or supervisory practice may be materially significant. The panel could then give an opinion on whether the proposal is likely to have a material effect and, where appropriate, request that a cost-benefit analysis be carried out. If the regulator disagreed, it would still be able to proceed, but it would have to publish a statement explaining why it did not accept the panel’s view alongside the panel’s opinion.
The purpose of this is to recognise that materially significant guidance and supervisory practices can impose real costs and that those costs should be scrutinised. This sort of reporting would provide valuable information to inform the work of our important committees, both in this House and in the other place. I do not see why the Government would resist this as a sensible expansion of the remit of the cost-benefit analysis panels, particularly where the regulators they are overseeing have had, and continue to have, a substantial increase in their remits. Indeed, the more power we give regulators, the more important these mechanisms become. If more of the regulatory framework is to be made through rules, guidance and supervisory judgment, rather than primary legislation, Parliament must be confident that there is proper scrutiny of the costs and proportionality of the cumulative burden. The cost-benefit analysis panels are already part of that architecture; these amendments do not create an entirely new body. They strengthen the role of an existing mechanism and make it better able to do the job for which it was created.
Could the Minister explain why, if firms experience regulation cumulatively and guidance or supervisory practices can have material effects, even where they are not formally binding, the cost-benefit analysis panels should not have a broader remit to examine those wider burdens? I hope the Minister will engage constructively with these amendments and particularly with the principle behind Amendment 132.
Lord Stockwood (Lab)
My Lords, the Government agree that cost-benefit analysis sits at the heart of good regulation, and are committed to ensuring that the FCA and PRA are transparent and rigorous when they assess the impact of their rules on firms and consumers.
FSMA 2023 introduced requirements on the regulators to publish a statement of policy for their approach to cost-benefit analysis—or CBA—and to establish CBA panels, as your Lordships know. CBA panels play an important role in the regulators’ work, acting as a critical friend to provide advice to the regulators on their CBAs, with the aim of improving their methodology and approach to CBA. They are required to include experts working at authorised firms to ensure that the regulators benefit from the insights of firms as they develop CBAs, and particularly to improve awareness of the impacts of regulatory proposals on firms.
Amendments 119, 129 and 132 seek to build on these existing statutory requirements to prescribe, in primary legislation, the precise functions, working methods and outputs of the panels. The CBA panels are still relatively new institutions. Their value lies partly in their ability to independently develop their own optimal working practices, to identify where their scrutiny has the highest value and to evolve as the regulatory landscape changes. Locking in their mandate in such detailed statutory provisions removes the very flexibility and ability to evolve that makes them effective.
Many of the detailed requirements set out here are already achieved as a result of normal principles of public law. For example, for the FCA to comply with its statutory requirement to establish and maintain a CBA panel with specified functions, it must ensure that its panel has the appropriate information and data to perform those functions. A further explicit provision is unnecessary.
Amendments 119 and 129 also seek to require the CBA panels to keep the cumulative impact of rules under review. The Government understand the motivation behind this: no single CBA tells the whole story of the regulatory burden facing firms. The PRA’s CBA panel has itself noted that measuring cumulative costs is inherently challenging and would require substantial industry input and resource; it would be subject to constant revision, given the pace of policy development. This could, perversely, add to burdens on firms, by requiring an extensive data-gathering exercise to understand the cumulative impact. Further, focusing exclusively on the cumulative costs could lead to discounting the benefits associated with certain regulations, whether they accrue to consumers, wider society or firms themselves.
The FCA is already making progress by reporting its cumulative regulatory impact through its secondary international competitiveness and growth objective metrics. These include the total value of the equivalent annual net direct cost to business across all CBAs for policy statements published each year and the aggregate benefits of its policy work. The PRA’s CBA panel is already helping the PRA identify where costs may be disproportionate and could be reduced, which is targeted and effective. The Government’s view is that the right response is for the FCA and the PRA to build on these early steps by working with their expert CBA panels to further understand and assess the cumulative impact of regulation, not to mandate the work of the panels through legislation.
Baroness Noakes (Con)
Can the Minister explain what the FCA and the PRA are doing about cumulative burden? Are they focusing on the cumulative burdens of the rules that they have assessed using a cost-benefit analysis, or is it for all of their activities? It is my understanding that they are both pretty clear that they will use cost-benefit analysis in the way the statute has prescribed—that is, they use materiality thresholds, so quite a lot of them are not required at all to be looked at—so the whole range of their activities, which covers anything that is not rule-making, does not get assessed for cost-benefit at all. Can I be clear on what the Minister thinks the regulators are doing?
Lord Stockwood (Lab)
I will have to write to the noble Baroness, because that is a very detailed question.
Lord Stockwood (Lab)
We are trying to be balanced and proportionate here. I recognise that these are important issues but, at the same time, it is about ensuring that the regulator has the flexibility to make those decisions. We are definitely making inroads on this, although I imagine that there is a lot more discussion to be had between now and Report. I want to make sure that I give the noble Baroness the right response.
Amendment 132 seeks to extend the CBA obligations to general guidance and supervisory practices—I take that to mean all guidance. The Government recognise the concern that regulatory burdens can be imposed on firms through guidance and supervisory practice, as well as through formal rules. Where guidance is about rules that have already been made, in most cases the underlying policy would have already been subject to CBA through the rule-making process, so requiring CBA for such guidance would be duplicative. In these cases, the guidance is to help firms understand what the rules require and how they operate. Where guidance may result in significant costs being incurred, the Government note and welcome the regulators’ work to voluntarily prepare CBA for guidance—for example, the FCA’s guidance on fair treatment for vulnerable customers.
Most guidance issued by the regulators does not impose material incremental costs on firms. Obligating the regulators to undertake CBA on guidance would impose heavyweight analysis where it is least meaningful. It would introduce delays for guidance being issued, undermining the regulators’ ability to respond quickly to market developments, risks or firm failures.
The CBA panels are a hugely valuable and still-developing part of our regulatory architecture. The right approach is to allow them to mature and to hold regulators publicly accountable for how they respond to input from the panels, rather than embedding a detailed operational rulebook in primary legislation that will be inflexible in the face of ever-evolving circumstances. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Noakes (Con)
My Lords, I thank the Minister for his reply, but I do not think that it dealt comprehensively with the nature of the problem. I do not think that any of our amendments deal comprehensively with the nature of the problem, actually, because the answer is not loading on extra things for the CBA panels to do; it is about looking again at the obligations of the regulators. That is not what we have put down in these amendments, although we have had a debate on the issue.
I was pleased to hear the Minister say that he was prepared to have discussions between now and Report. This is an area where a number of us would like to get together with the Minister to try to work out how we can make some improvements, because the law as it stands is narrowly drawn. I do not think we can assume that the regulators will voluntarily expand that into the areas that some of us think should be covered, so it is right that we look at the legal provisions—but perhaps not necessarily the ones covered by these amendments. With that, I beg leave to withdraw my amendment.
Baroness Neville-Rolfe
“Review of bank capital requirements(1) Within 12 months of the day on which this Act is passed, the Treasury must lay before Parliament a report reviewing the effect of prudential capital requirements applicable to PRA-authorised banks and building societies, with particular reference to on lending capacity, borrowing costs, competition and economic growth, while also considering financial stability. (2) In preparing a report under subsection (1), the Treasury must consult—(a) the Bank of England,(b) the Prudential Regulation Authority,(c) the Financial Conduct Authority, and(d) such other persons as the Treasury considers appropriate.(3) The Treasury must published the report.”Member’s explanatory statement
This probing amendment would require a review of the effect of prudential capital requirements on lending capacity, borrowing costs, competition and economic growth, while also considering financial stability.
Baroness Neville-Rolfe (Con)
My Lords, my amendment concerns the impact of prudential capital requirements on lending capacity, borrowing costs, competition and growth. Since my amendment was tabled, His Majesty’s Opposition have announced a new policy position in this area, which I shall speak to now.
Our new policy is straightforward. The statutory basis for post-financial crisis bank capital requirements should be amended so that UK regulators are required to take proper account of equivalent capital regimes in competitor jurisdictions, and to identify, justify and, where not justified, remove any UK-specific overcapitalisation relative to equivalent international regimes. We want to consider the position in competitor jurisdictions, to benchmark equivalent regimes, to publish detailed analysis and to explain clearly where the UK is imposing requirements above international standards or above those imposed by comparable financial centres. That seems a basic requirement of a serious competitiveness agenda, on which the UK is particularly reliant. The UK is the world’s largest net exporter of financial services, whereas comparable jurisdictions, such as the US, rely much more on their domestic markets. It is therefore imperative that we remain competitive on the world stage.
Capital requirements matter, but there is a cost. Capital held solely for statutory compliance is capital that cannot otherwise be used to support lending, investment, home ownership, business expansion or economic activity. The central question is therefore not whether banks should hold capital but whether the UK requires materially more capital than comparable jurisdictions without a clear and evidenced stability justification. If we do, we are placing the UK at a competitive disadvantage: we are constraining lending, increasing borrowing costs, making it harder for firms to access finance and weakening growth, and doing so in a way that may not be required by international standards or by the actual risk profile of the system.
The analysis behind our policy suggests that the UK capital framework may materially exceed international Basel III requirements and competitor regimes. It has been suggested that the resulting constraint on UK banks’ lending and financing capacity could amount to £250 billion across overlapping capital requirements and £200 billion across leverage ratio constraints. Of course, not every pound of capital released would automatically translate into new lending—we understand that. Some may be used for business investment, dividends, buybacks or balance-sheet strengthening. The key point remains that capital deployed productively in the economy is preferable to capital trapped by a regulatory framework that is more restrictive than it needs to be.
We appreciate that the Government recognise this issue and have moved a little on it already. They have made the bank resolution regime more flexible, allowing the Bank of England to reduce or remove MREL for some firms where the new FSCS recapitalisation mechanism can substitute for pre-positioned loss-absorbing resources. Our proposal is a step to unlocking a lot more capital. We already require the PRA, in some contexts, to have regard to the UK’s relative standing against competitor jurisdictions, but that duty is incomplete. It does not apply across the whole capital framework and, in particular, it does not fully capture Pillar 2A, the PRA buffer or systemic buffers. The FPC has produced useful comparative analysis, but there is not yet a binding requirement for regular, systematic benchmarking against competitor jurisdictions.
Our proposed review is also about transparency. If regulators believe that the UK should impose higher requirements than comparable regimes then Parliament, industry and the public should be able to see the analysis behind that decision. That is how we preserve independence while improving accountability.
The amendment is part of a wider argument. Prudential regulation must be understood not only through the lens of stability but through the lens of growth, lending, and competitiveness. A capital framework that is more demanding than necessary does not make the economy stronger. It may make it less dynamic, less competitive and less able to support households and businesses, especially SMEs and scale-ups. I speak from experience as a director at a responsible and careful challenger bank, where the UK capital rules were a significant constraint on what we could do. They also consumed a great deal of management and board time.
I would like the Government to accept that the UK should not impose capital requirements above equivalent international competitor regimes, especially if there is no financial stability justification for doing so. The first step is to undertake the necessary analysis. Ours is a serious and responsible policy. It preserves regulatory independence and protects financial stability but recognises that excessive or unjustified capital requirements carry real economic costs. If we want growth, competitiveness and banks to support businesses and homebuyers, then we need a capital framework that is robust but not overrestrictive. That is the balance that our policy seeks to strike. I look forward to the Minister’s response.
Lord Pitt-Watson (Lab)
My Lords, both the amendment and the speech by the noble Baroness, Lady Neville-Rolfe, were sensible in terms of making us think about bank capital requirements and whether we have got them right. As she says, the first step is undertaking proper analysis to be able to work out whether that happens. I noticed she caveated everything that they may not be right. They may be right, but they may not.
My worry is that that is a sensible position to take but it did not sound like the position being taken by the Leader of the Opposition when she made her speech last week saying that she was going to reduce bank capital requirements to release £450 billion in capital. Where did the calculation that hundreds of billions are sitting idly on bank balance sheets come from? Where do those hundreds of billions come from? If we are going to release £450 billion, what is the calculation in the reduction of bank capital requirements that sits behind that calculation? While I feel quite supportive of the issues that the noble Baroness was raising, we need to be sure—I hope she will agree—that we do not jump the gun on this.
Baroness Kramer (LD)
My Lords, the noble Lord, Lord Pitt-Watson, was rather generous in his comments. Sometimes it is important to speak truth to power. This is a lowest common denominator strategy. We have heard it before from the Conservatives, and it is repeated with enthusiasm today. I heard so many of these arguments back in the early 2000s. It contributed and was a fundamental part of the reasons why we ended up with such a major financial crash with huge financial and political consequences that echo through to this day. I could see the argument being made that we need to take proper care that we are looking at capital requirements and that we need to assess them and look at the consequences and do so on a regular basis. That is already part of the programme and certainly would always need to be part of it.
I notice that in line seven of the amendment the phrase is,
“while also considering financial stability”.
If ever there was a phrase lowering the significance of the primary objective with which we tasked the Bank of England, that phrase does it—merely a consideration of financial stability. I was afraid when the growth and productivity objectives were introduced as secondary objectives that quickly the attraction of the phrases would cause them to cannibalise the primary objective. This is a very good example of the way in which that, frankly, has been happening.
I have seen across so many of the measures in the Bill a step away from the precautionary principle—in this case, of looking for appropriate capital requirements, whether in equities or in MREL—to a notion that we deal with all this through a resolution regime. I am suspicious of resolution regimes and of after the fact ways of ensuring financial stability. I would much rather we did not have a bank failure that we must then attempt to remedy through the use of something like bail-in MREL, which I do not think will ever work. Frankly, MREL is held by insurance companies and pension funds, and we are never going to wreck them to save a major bank. I am very concerned about the change in approach that we are hearing today from the Conservative party.
Lord Bridges of Headley (Con)
My Lords, I shall briefly speak in response to the noble Baroness, and I once again draw attention to my interest as an adviser to the chairman of Santander. I want to make three quick points.
First, I overwhelmingly agree with the thrust of the amendment. I think analysis of this critical issue is important for the reasons that the noble Lord, Lord Pitt-Watson, said. He will know much better than I do how notoriously difficult it is to compare the regimes of the United States, the UK and the EU. If noble Lords are interested in this and cannot sleep, I advise them to look online at recent reports that have come out. The Financial Times reports a law firm called Alvarez & Marsal pointing to the impact of the US’s current moves in prudential regulation and how that has unleashed a considerable amount of bank capital. Meanwhile, the ECB has pushed back with its own analysis showing that the US and the EU are broadly on par, so we cannot compare the others. The European Banking Federation has recently come out with its analysis of this issue.
As far as I can see—I stand to be corrected by others—a lot of this depends on how we measure not just the regulatory and prudential aspects but the supervisory actions, and how supervisors can put buffer upon buffer, depending on the banks, the GSIPPS and who you are looking at within the perimeter. This analysis will be very important, and it could be very worthwhile, but it has to try to overcome the enormous problem that exists, now matter we how bridge it. That is the first point.
The second point, flowing from that, is that the more I look at this, the more I think that the objectives—and, underlying those, the culture—of the regulators and supervisors seem to be almost more important here. When you look at the difference in regulatory approach, be it by the Singaporeans or the US, you find that it is largely a matter of the culture within those bodies, where they are coming from and the messages that the politicians are sending them.
I will cite just one example. Picking up on what the noble Baroness, Lady Kramer, said—we disagree on this violently, I know—I am very interested in the US approach. Secretary Bessent in the US Treasury gave a speech about eight months ago where he told the Financial Stability Oversight Council, which is a key body that brings together regulators and supervisors, that low growth was in itself a financial stability risk—let me repeat that: low growth was a financial stability risk—and that they needed to act accordingly. That sent a signal, as far as I can tell, throughout the entire regulatory and supervisory environment in Washington and the States, and they have acted accordingly. That has had more of an impact than necessarily what the capital requirements are for various bodies.
The final point is on SMEs. We will not have a long debate about this, but I would make one point here about the demand from SMEs for lending. We can debate the role of capital requirements—I think there is more of a role for and more impact from capital requirements on bank lending than perhaps the noble Baroness does—but where we would probably agree is that it is the overall general environment in which SMEs are operating that will stimulate demand for lending. If you have a Government who are piling pressure after pressure on SMEs—to be taxed more on employment, to have more regulation, et cetera—that will dent their demand for lending and for more investment. That is what will happen. Therefore, it is very important that we look at that issue per se in the round. With that, I will sit down.
Baroness Kramer (LD)
I probably have a right to reply, because it is Committee and we can speak more than once. The noble Lord, Lord Bridges, and I often find a whole lot of common ground, and I agree completely that the environment in which SMEs are operating is extremely difficult. However, if he goes back and looks at the numbers produced by the Federation of Small Businesses, he will find that there is significant demand for borrowing, which is continuously turned down and rejected. I just want to make sure that the noble Lord understands that side of the picture.
I have no problem with people going away, as I said, and doing proper analysis and trying to understand exactly what the picture is, but there is another side to that, and it is not included in this amendment. If I was amending it, I would add a line, because we need an analysis of the cumulative risk that has been reintroduced into the financial sector by everything from Solvency UK to the whole range of changes—I think I listed them once in a Second Reading speech, and it went on for nearly a page and a half—that have been made. Measuring that cumulative risk would be extremely instructive to us when we start to look at issues such as financial stability. But for goodness’ sake, if we are reducing financial stability to no more than a “have regard”, which is exactly what this amendment would do, we are stepping into really dangerous territory.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Baroness for raising this important issue. Prudential capital requirements play a vital role in ensuring that our banking system remains resilient, supports sustainable lending and underpins confidence in the wider economy. We have heard a range of views on capital requirements today. The UK’s framework is internationally respected and has been carefully designed to balance growth with financial stability.
Amendment 120 would require HM Treasury to publish within 12 months a report reviewing the impact of capital requirements on lending, borrowing costs, competition and economic growth, alongside financial stability, drawing on consultation with the Bank of England and the regulators. I genuinely recognise the intent behind the amendment. However, it is unnecessary, as the Financial Policy Committee is already undertaking a comprehensive review of the UK’s bank capital framework through precisely the lens that the amendment seeks, including the impact on lending, growth and financial stability.
Baroness Kramer (LD)
Can I just check whether it is looking through the lens of treating financial stability as only a “have regard”? Is that what the Minister is saying? The amendment says “considering”. It is a “have regard” statement.
Lord Stockwood (Lab)
No.
The FPC has been tasked by Parliament with responsibility for the stability of the financial system overall. It is the right body to carry out this review, which needs to balance the economic impacts of capital requirements against the protections that they may offer. Getting the balance right in the prudential framework and bank capital requirements has been a key priority for the Chancellor and an issue she discusses frequently with the industry.
The noble Baroness, Lady Neville-Rolfe, raised the issue of international comparisons. The FPC set out its assessment of international comparisons when it reviewed this in December 2025. It found that the requirements are broadly in line with international comparators. In some areas, such as leverage requirements on domestic firms, the FPC noted that the requirements may be higher. However, I assure the noble Baroness that it noted leverage as an area for further reform that it plans to cover in next week’s update.
As noble Lords may be aware, the Chancellor sets out the annual remit and recommendations for the FPC. The most recent remit letter was sent last November and sets out clearly that the UK must regulate for both risk and growth, and remain competitive in a changing world. As part of that, the Chancellor recommended that the FPC’s review should ensure the UK’s capital framework strikes the optimal balance to deliver resilience, growth and competitiveness. I assure the noble Baroness that the FPC understands this balance. In December 2025, the Financial Policy Committee reassessed the optimal level of system-wide bank capital, reducing its benchmark from 14% to 13% of risk-weighted assets.
For these reasons, while I understand the objective, this amendment is unnecessary and risks undermining the clarity and credibility of the current regime. We will come back to this discussion over the coming weeks. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to noble Lords who have contributed to this debate and to the Minister for his response. I thank the noble Lord, Lord Pitt-Watson, for being generally supportive and for explaining that this is a matter of judgment. We now have the resolution regime, so things have changed. As I noted in my introduction, some changes in this direction have already been made. Indeed, I note the Minister’s summary of what is being done by the PRA and the FPC, and I want to look at that before Report. I am sure that we will come back to this issue at a later point, as he said.
Contrary to the suspicions of the noble Baroness, Lady Kramer, we recognise the importance of financial stability and why capital requirements exist. That is why I mentioned financial stability in my amendment—it was meant to be a positive. Perhaps she is overinfluenced by past failures, but they of course took place before we had the resolution regime.
My concern is that the current requirements go further than is necessary or further than the equivalent regimes in competitor jurisdictions, without proper justification. As my noble friend Lord Bridges said, there seems to be a gap. We have a different regulatory culture, and that may be having an effect. He quoted someone saying that low growth is also bad for financial stability—and I feel that strongly.
The cost is felt in lending capacity, in borrowing costs, in competition, in investment and, ultimately, in growth. It is also felt in the UK’s ability to remain one of the world’s leading financial centres. I want to make it clear that I and my party support the UK financial services sector. We want the UK to be the place where firms choose to invest, lend, innovate and grow. That is especially true for SMEs, which have been referenced in discussion.
I repeat that ours is a serious and responsible approach: it protects independence while strengthening accountability and preserving resilience. It recognises that unnecessary overcapitalisation can constrain productive activity in the wider UK economy. Given the objective of growth, which I think is shared across the political divide, we hope that there will be further consideration on what is the right way forward. For now, I beg leave to withdraw the amendment.
“Periodic independent review of financial regulatorsAfter section 1S of the Financial Services and Markets Act 2000 (reviews) insert—“1SA Periodic independent review of financial regulators(1) The Treasury must appoint a panel of at least three independent persons (“the Review Panel”) to conduct a periodic general review of the effectiveness of—(a) the Financial Conduct Authority,(b) the Prudential Regulation Authority, and (c) the Bank of England in respect of its functions under Parts 1 and 5 of the Banking Act 2009 and Part 2 of the Financial Services Act 2012.(2) A person may be appointed to the Review Panel only if—(a) the Treasury has proposed the appointment, and(b) the appointment has been approved by a resolution of the House of Commons and a resolution of the House of Lords.(3) A person is not eligible for appointment if, within the previous three years, they have held senior office in the Treasury, the FCA, the PRA, the Bank of England, the Payment Systems Regulator, the Financial Ombudsman Service, or in any firm or body materially affected by the review, unless the nature of the interest has been fully disclosed and the appointment has been expressly approved by both Houses.(4) A general review must take place at intervals of every two to three years and must include a review of—(a) internal operations and controls,(b) systems for responding to whistleblowers, parliamentary correspondence and reports, and public interest concerns,(c) regulatory perimeters and customer classifications,(d) the effectiveness of relevant legislation and rules and the regulatory burden,(e) whether statutory and public policy objectives have been met,(f) the operation and effectiveness of engagement practices before and during rule making,(g) the skills base of staff,(h) follow up from previous reviews,(i) access to redress and effective remedies,(j) the operation of the FCA/FOS relationship and systemic complaint escalation, (k) evidence handling, audit trails and responses to parliamentary, whistleblower and public interest concerns,(l) whether statutory rights and remedies transferred into regulator rules remain effective in practice,(m) redress shortfalls, repeat misconduct and deterrence,(n) any other matter the Review Panel considers relevant, and(o) any matter requested by a relevant Committee of the House of Commons or House of Lords.(5) The Review Panel must not determine the merits of any individual complaint, regulatory decision or enforcement case, but may consider individual cases, whether anonymised or otherwise, for the purpose of identifying systemic, procedural, evidential, perimeter, redress or accountability issues.(6) On completion of a review, the Review Panel must make a written report to the Treasury—(a) setting out the results of the review, and(b) making such recommendations as the Panel considers appropriate.(7) A copy of the report must be—(a) laid before Parliament within 30 days of receipt, and(b) published in such manner as the Treasury considers appropriate,subject only to necessary redactions for confidentiality, privilege or enforcement sensitivity.(8) The Treasury must publish a response to the report within 60 days of its publication. (9) The FCA, PRA and the Bank of England must each publish a response to the report within 60 days of its publication, including a statement of actions they will take as a result.(10) The Review Panel has a right of access (at any reasonable time) to all information which it may reasonably require for the purpose of performing its functions under this section.(11) The Review Panel is entitled to require from any person holding or accountable for such information any assistance or explanation which the Panel reasonably considers necessary for that purpose.(12) “Information” includes any document, record, data, correspondence, internal report, or other material held by the FCA, the PRA or the Bank of England.””
Baroness Bowles of Berkhamsted (LD)
My Lords, I am moving my Amendment 121, and I support the amendments in this group in the name of the noble Lord, Lord Bridges. My proposal is for an independent oversight mechanism for our financial services regulators. It builds on the ideas in Section 1S of FSMA 2000, under which the Treasury can require an independent review. This is usually triggered after a significant event: the most recent review, Gloster’s review published in December 2020, was triggered after the collapse of London Capital & Finance.
Baroness Bowles of Berkhamsted (LD)
Shortly after my proposal first surfaced, I was contacted by people involved in the Australian royal commission on financial services, because they had noted that I had reached the same conclusion as them: that it was too big a job for Parliament to do by itself, given everything else that national Parliaments have to do.
Australia introduced two-yearly reviews, and it is not the only country to have an independent review. A similar arrangement now exists in New Zealand, and in the US all regulators come under powerful scrutiny by the Government Accountability Office. One advantage of my proposal is that it follows a path we understand from Section 1S reviews, and it could be done quickly—maybe as an interim solution, for example, until an office such as that proposed by the noble Lord, Lord Bridges, could be formed. By having regular reviews, oversight of progress would also be possible. After her review, Dame Elizabeth Gloster told the Treasury Committee that we are left to “hope” that the regulator “implements” regulations. Hope is not a system.
Why did I propose this? It was the point at which the Government were looking at the post-Brexit future financial framework. As has already been rehearsed in this Committee, this Parliament does not have the structure and focus that was available in the EU Parliament. Having been chair of the ECON committee dealing with all the post-financial crisis legislation, I can safely say that I know what it takes and that it is not easy. That is another reason why I do not recommend a continuous process.
There will be more to it in the UK, because many issues arise from the execution of supervision post rule-making. Brexit created the first need, which we eventually tried to patch with a new committee. Your Lordships heard from members of that committee and in the report of the Industry and Regulators Committee, Who Regulates the Regulator?, that now the overwhelming conclusion is that significant independent review is needed.
Now we have a new, second need due to the changes in this Bill, which remove the “have regards” away from operational effectiveness and into a five-year strategy. How is that to be monitored? Is there any intention at all for follow-through? The changes make the already difficult acquisition of information even harder. Several things that the Minister has said in his replies ring alarm bells and show the absolute need for scrutiny. We need it because financial services regulation and supervision is too important to allow issues to creep up—all the more so in a higher-risk environment. LCF-type regulator risk needs even more guarding against.
The Minister has said that proportionality will now be tested only at the strategic level. Let us be clear: testing proportionality at only the strategic level is barely a nudge. Rule-level and supervisory-level proportionality is the real test, but that has been put out of reach of accountability, as there is nothing to measure against. Indeed, they are not even looking at it apart from every five years. From that, it is pretty clear that substantial follow-ups on the five-year strategy are necessary. The Minister says that annual reports and remit letters provide accountability. Some substantial upgrading and interrogation of those is needed. What actionable event flows from an annual report? It is judge, jury and public relations all in one place. Does the Minister genuinely believe that an example here and there constitutes accountability?
The Minister argues that principles remain central, yet they are being moved into a document that cannot be enforced by the courts and cannot be used to test a specific rule or supervisory action. They are applied every five years, when the future cannot really be seen. This is not lip service; it is just print service, and as my noble friend Lady Kramer has shown us from the current version of the five-year report, there is little substance. Will we get something detailed for every category and size of financial market business?
The Government’s rhetoric suggests that reducing the burden of accountability will unleash a more dynamic and agile regulator, but that does not demonstrate the stability that is a prerequisite for competitiveness. Stability is the best friend of a competitive financial sector. Whether you cite centuries of institutional experience or the second law of thermodynamics, left to their own devices, systems corrupt or tend to disorder. Someone has to be on their case. But the Government are making the regulators far more insulated from the procedures that keep them on their toes. Avoiding the burden of accountability today is like banking a much larger, more expensive crisis for tomorrow. Additional periodic or permanent oversight has become even more necessary. I beg to move.
Lord Bridges of Headley (Con)
My Lords, I will speak to Amendments 133 to 135 and 136 to 139 in my name, but not Amendment 135A, which is in the name of my noble friend Lady Lawlor. I thank my noble friends Lady Noakes and Lady Lawlor and the noble Baroness, Lady Bowles, for putting their names to my amendment. This little clutch of amendments is turning into déjà vu, because the noble Baroness, Lady Bowles, has just spoken about issues that she raised some years ago. My amendment is one that I raised in this very Room, sitting on the other side, exactly three years ago—so it is déjà vu all over again.
I start from a basic point, which picks up exactly where the noble Baroness left off. I believe that we here in Parliament need more powers and, critically, more independent analysis to hold financial regulators and supervisors to account. In fact, I just mention here that we need to do far more to hold the Bank of England to account, but that was declared out of scope. I had wanted to table an amendment calling for a regular, probably five- or six-yearly, review led by Parliament into the remit and performance of the Bank of England as an entity and as an institution. I believe that that is an enormous democratic deficit that we need to address. I was told that it was out of scope for this piece of legislation, but I very much intend to return to that at a future date. It is much to the Minister’s relief, I am sure, that we are not going to do that now.
We spent Monday debating clauses in the Bill that I see as weakening parliamentary accountability. My amendments and those of the noble Baroness will take us in the opposite direction, towards more accountability. A number of us, on all sides of the Committee, have been asking a very simple question: do we, in this House and in the other place, have sufficient means to hold our financial regulators and supervisors to account without compromising that operational independence? The answer keeps coming back, resoundingly: no, we do not.
It is not as though this is the first time we have said this. As the noble Baroness mentioned, in its excellent 2024 report, Who Watches the Watchdogs?, your Lordships’ Industry and Regulators Committee found that parliamentary scrutiny of regulators remains too fragmented, too reactive and—I stress this—too limited by the resources available to Parliament. It concluded that the balance between regulatory independence and democratic accountability needs to be strengthened. As I said, that report came after all the debates we had in this Room on the previous Financial Services and Markets Bill, now an Act. We warned then that the transfer of extensive rule-making powers from Parliament to the regulators had created an accountability gap. That is why I addressed this very same proposal then. My concerns about accountability have not diminished; if anything, they have grown in the years since I was standing over there, so I am trying again.
Noble Lords will be grateful to hear that I will not go line by line through what each of these amendments would do. I simply say that Amendment 133 would establish an office for financial regulatory accountability, OFRA, as an independent body to support Parliament in scrutinising the work of financial regulators. It is crucial to stress that I do not see this as second-guessing regulatory judgments or interfering with regulatory operational independence. Rather, as set out in Amendment 135, which is pretty key in this clutch of amendments, it would provide Parliament and the outside world with impartial analysis of regulation, the actions of regulators in the round and, crucially, their performance at meeting their objectives, as set by Parliament.
Why do we need this? For a very simple reason—my noble friend Lady Noakes will pay testament to this. The volume and technical complexity of financial regulations are now making this absolutely necessary. If Parliament is to fully and effectively scrutinise the hundreds of pages of regulation that our regulators keep churning out, we need to do more. My concern—I would be grateful if the Minster could put my mind at rest—is that the Government seem to be suggesting that we do not need to have a case-by-case analysis of regulations. That is wrong: it is absolutely critical to have that analysis. We cannot rely on a five-yearly strategic report, or overall impressions and analysis, from regulators. We need to be able to analyse regulation point by point.
If the Minister responds by saying, “Don’t worry. The regulators will reflect their objectives in their actions and decisions, so we have nothing to worry about here”, I will say, “Let’s prove it”. Let us have the independent analysis to make sure that it is indeed the case that our regulators are reflecting the objectives that Parliament has set them in what they do. Greater scrutiny and, with it, greater accountability, will surely strengthen trust, which is critical.
The Minister might go on to argue that my proposal is not needed for two other reasons, the first being the cost-benefit analysis panels that my noble friend Lady Neville-Rolfe and others talked about when discussing previous amendments. I completely accept that they perform a very important function, but I see their role as being very different. Their role is to improve the quality of individual cost-benefit analyses prepared by the regulators. They are advisory bodies to the regulators themselves. They are not designed to provide Parliament and others with an independent assessment of the overall effectiveness and proportionality of regulation, bit by bit. This amendment would therefore complement rather than replace those panels: the cost-benefit analysis panels improve regulatory decision-making from within; OFRA would strengthen parliamentary accountability from without.
The second reason the Minister might use to oppose my proposal is that the FCA introduced its rule review framework in 2024, with the stated aim of undertaking increasingly rigorous post-implementation analysis of what it does. I stand to be corrected, but my delving into this suggests that the results so far of this new framework are modest. As far as I can see, since its introduction, only one full impact evaluation has been published, and one other has appeared in the past five years—I think that is overall, pre the framework being introduced. I would like to know whether that is the case and how effective the rule review framework has been.
Either way, that underlines the point that Parliament needs access to independent analysis, especially as the Government want to give regulators more discretion. This seems to be the entire drift of the Bill: more discretion for the regulators. If that is the case, surely the quid pro quo for more discretion must be having more mechanisms for accountability. If we are being asked to entrust the regulators with more, we need greater ability to have independent scrutiny of what they are doing.
Baroness Noakes (Con)
My Lords, I have added my name to my noble friend Lord Bridges of Headley’s amendments creating OFRA. I also support the amendment from the noble Baroness, Lady Bowles, which would use a panel to look at how the regulators are performing. The key thing is that we need more external heavyweight oversight of what the regulators are doing. As noble Lords have identified throughout this Committee, accountability is the key issue that we are focusing on, in particular because of the way in which the Bill weakens the current accountability constructs.
My noble friend Lord Bridges referred to the previous time that we were debating the same amendments, when we were sitting on the other side of the Room—I remember it very well. At that time, as my noble friend knows, I did not support his amendments because I was dead set on trying to get either a House of Lords Select Committee or a Joint Committee of both Houses involved. The original version of what is now FSMA 2023 had the involvement of only the Treasury Select Committee in the other place and we were clear that this House had far more expertise in financial services, and that it was important to leverage that either through the use of a dedicated Select Committee in your Lordships’ House or a Joint Committee. There was no appetite for a Joint Committee from the other place. We ended up with a committee, but it took an amendment to the then Bill in 2023, on which I focused all my effort last time. Also, as I said to my noble friend at the time, I did not think that we needed yet another unaccountable public body.
The Financial Services Regulation Committee has been in operation for about two and a half years, and I am now clear that the scale of the task is very large and very hard to execute without the kind of independent analysis that we would get from having something such as OFRA or a panel to assist in the task. It is just too big a task for one Select Committee in your Lordships’ House to handle. We meet weekly, as is customary for all Select Committees, but we have limited staff resources, in common with all other Select Committees of your Lordships’ House. We do pretty good work on that basis, but we cannot cover the whole area, nor can we look at as many things as we would like; we have to be selective about what we look at. We cannot take a comprehensive look at the accountability of the regulators; that is the missing piece now. We need something that is resourced and able to look at it in the round.
I support all the amendments in this group because anything would be a big improvement on what we have to date. I bring good news for the Minister: I have, today, tabled another idea for improving accountability, based on discussions with some people in the industry, which some Members of the Committee already know about. I tabled that this afternoon so I hope that we will be able to debate that on Monday.
The only point I am trying to make is that we are looking for options to improve accountability, which was already under pressure, but we now have huge new consumer credit legislation coming in that will mean lots of regulations and rules being issued over the next couple of years. There is quite a big task coming down the line, and we have to do something about it in the Bill.
Baroness Lawlor (Con)
My Lords, I have added my name to Amendments 133 and 135, in the name of my noble friend Lord Bridges, and I shall say a few words about them. I have also tabled Amendment 135A, which amends Amendment 135.
Two of the questions raised by the Bill are how will the regulators operate, make, impose and judge the rules and how will Parliament’s proper role in the legislative process be ensured? In some cases, not only do we not know what we are supposed to be legislating on, as the Committee has discussed, but we do not know the basis on which the regulators will, in practice, be held to account. Indeed, as matters stand, the arrangements and the deployment of powers is not known, or not entirely, in many cases.
The amendments tabled by my noble friend Lord Bridges and supported by my noble friend Lady Noakes and the noble Baroness, Lady Bowles, to which I have added my name, would establish an office for financial regulatory accountability, which would have the specific duty of examining and reporting on the performance of the FCA and the PRA and how they perform on specific measures, would provide some of the essential answers. The office would assess how far the regulators meet their statutory objectives and principles under FSMA 2000 and, importantly, the effect of specific pieces of regulation. We need to know the impact of these regulations on the domestic development of the financial services and the market, as well as the impact internationally, and we need to know the costs and burdens of compliance. Amendment 135 contains very specific duties, and I think they have been very well thought out. I hope the Minister will take them into account and consider why we need this office, which will be independent of the process of regulation. It will be independent of Parliament, not just of the regulators, and it will help Parliament to do what it ought to do as the legislature.
My Amendment 135A would include in these independent reports examples of how the rules have been implemented and applied to different firms, including similar firms doing the same kind of activity, because we do not have an independent analysis of those rules and regulations, the process or the compliance. Very often, small businesses are at sea; they cannot look to Parliament because we do not have the basis for assessing them, they cannot look to our reports, and they cannot necessarily look to the regulators. They tell me about this and quite often explain that they are not sure. They want to take a step to grow their business, perhaps to develop some new instrument or to expand their market, but they are not quite sure how the regulators will treat it. They have no example of how these things have been seen in the past or of how the rules have been applied.
Requiring an independent office for financial regulatory accountability to provide some examples will help not only Parliament but businesses in being competitive and growing their businesses. They will see the precedents and be able to predict much more easily how the system operates. It is not an expensive way in which to make judgments. They do not have to get in expensive consultants or do little trials here and there and pilots. They would give security in knowing where the boundaries are set and judged and whether they are consistent with the opportunities they need to seize if they are to make their businesses grow.
Above all, such an office reporting and assessing these duties would encourage the regulators to be consistent and predictable and to focus on their statutory objects. As the Bill aims to focus on the competitiveness and growth objective—we have talked a lot about reporting requirements and the overall strategic plan—there is a problematic lack of transparency and accountability by the regulators, other than to the Treasury, and that relationship sometimes seems a little too cosy.
The amendments tabled by my noble friend Lord Bridges would promote an affective mechanism to ensure that we have objective, transparent and impartial evidence externally provided by an independent body. I support them for that reason but add my small amendment so we have greater transparency in how they are applied.
Baroness Donaghy (Lab)
My Lords, I do not want to get involved in the mechanics of the group in how we get this independent scrutiny, but I want to emphasise that it is important. We would welcome a discussion with the Minister about how it is done. We have had various inquiries over the past two and a half years, and I would ask the federations and organisations whether they thought having a concierge service would be useful to overcome some of the difficulties that the noble Baroness, Lady Lawlor, has outlined, especially to help the new boys on the block and the smaller companies to find their way around the complex barriers that they have to face. It seemed to be quite a popular suggestion, but nothing ever came of it.
The example was used was the Singapore settlement, although I am wary of international comparisons, and it is right not to follow too much because they are different, but it has a kind of concierge service to help new companies. Where we have a difficulty—I am thinking back on the history of the relationship between Governments and regulators—is that regulators are subject to political pressures. You might not agree, but that is the fact and the real politics. When things go bad, the regulator will be blamed, so they are cautious. Their very nature makes them cautious because they do not want to be the ones that go on holiday and get the sack because something has gone badly wrong. We need protections for the methodology that the regulator uses. I have to say that the cost-benefit analysis panels are on the nursery slopes. I was rude about them last week, as the Minister knows, and I do not want to be rude again, but they need nurturing. The work that they could do will be really good if they are given more clarity on their possible role so that they cannot be fobbed off by the regulator. I am not suggesting the regulator will fob them off, but there would be a tendency to stick to the law and not go beyond that.
I feel that we need to build this into a system not just because we want to protect the existence of a committee that we think is important, although I do, but because parliamentary scrutiny is important, and we sometimes search for the objective facts and figures, the granularity of why a regulator does something or neglects to do something and to what extent political pressures are involved. I know that no system, even the system that the noble Lord, Lord Bridges, has asked for, will ever get to the bottom of some of that—we are not naive—but I believe we need more transparency and, yes, less complexity, but we need a system that has more checks and balances. I think a lot in this legislation is going the wrong way and what we need to do is carefully assess what is working well, what needs to be nurtured in these very early days and what we need to be avoiding like the plague.
Baroness Kramer (LD)
My Lords, I shall be extremely brief on this. I and my colleagues take the position that from this collection of amendments in the name of the noble Baroness, Lady Bowles, and the noble Lord, Lord Bridges, the Government could craft something really effective and create the information base and the capacity for Parliament to have very appropriate oversight of the regulator. The point I particularly want to add is that this is not hostility to the regulator. Part of the regulator’s problem is that it is trying to communicate to so many different parts of the political framework, with very different levels of understanding.
We have all seen that five-year strategy from the FCA. Let us admit that it is a completely vacuous document, but I can understand that those who crafted it thought that they were dealing with people who had almost no grasp at all of how the finance sector works, operates and is directed or regulated. We have given it the absolutely impossible task of not knowing whom they talk to, in what level of detail, and what information to provide. I would say that, from a regulator’s perspective, having an educated oversight body would remove a huge burden and create a proper and constructive conversation, in the end benefiting both sides. I hope the Minister will take away that this is not some hostility to the regulator; this is a process that will make sure that Parliament can do its job but also that the regulator is far better positioned to be able to do its job and communicate and understand.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to noble Lords who have brought our attention to past debates on these knotty issues from a position of great expertise. All the amendments raise fundamental questions about how we hold our financial regulators to account. We fully support the principle that sits behind these amendments: that Parliament must have proper oversight over the way in which the regulators work. That includes their internal operations, their rule-making and their engagement with firms and consumers, the quality of their impact assessments, their effect on competition and competitiveness, and the burden they pose on the wider economy.
This point has been underscored by many noble Lords throughout our debates on the Bill. If the FCA and the PRA are to be given greater powers and a wider remit, as proposed, that must be matched by greater transparency and stronger accountability. Greater delegated power cannot simply mean more decisions being taken further away from Parliament, with fewer mechanisms for scrutiny. The Minister has written to noble Lords setting out existing mechanisms. That letter refers, among other things, to the ability of noble Lords to ask Parliamentary Questions and to the work of our excellent Financial Services Regulation Committee. Parliamentary Questions have their place, but they are not a systematic mechanism for reviewing the performance, effectiveness or proportionality of regulators. Committees do valuable work, but they cannot be expected to provide continuous expert institutional scrutiny of the FCA’s and PRA’s operations. What is needed is a mechanism through which the regulators can be reviewed, tested and held to account.
The problem is that we have an accountability gap. My noble friend Lady Noakes, from her unique position as chair of the committee, has highlighted the scale of the task that it now faces, so we need an independent source of analysis and expertise. The amendments in this group provide a number of serious and compelling proposals for how that might be done.
The amendment in the name of the noble Baroness, Lady Bowles, would provide for periodic independent reviews of the regulators. A recurring independent health check of the FCA, the PRA and the relevant Bank of England functions could help Parliament understand whether the regulatory system is working as intended, whether burdens are proportionate, whether the regulators are engaging properly, and whether firms and consumers are being treated fairly. I thought we had a good example of the problem in the earlier discussion on Sections 165 and 166.
The amendments in the name of my noble friend Lord Bridges propose a more permanent structure: an office for financial regulatory accountability. This is a valuable suggestion. As I understand it, the office would assess the FCA’s and PRA’s overall performance against their statutory objectives and regulatory principles. It would also analyse impact assessments for specific pieces of financial regulation in order to determine how those regulations contribute to the regulators’ objectives. As my noble friend Lady Lawlor suggested, their reports could include individual precedents and examples to bring problems to light. That is the sort of scrutiny we need.
The two parliamentary committees would have an important locus in scrutinising the reports from the office, improving overall parliamentary accountability while not getting in the regulators’ hair in a way that they are not set up to do. The proposed arrangements would also allow Parliament to see not only what concerns have been identified, but how the regulators intend to respond to them. Significantly, the office would be required to prioritise the analysis of regulations which restrict domestic competition, reduce the United Kingdom’s international competitiveness in financial services, create new compliance costs or have a significant impact on business and individuals in the UK economy —an excellent objective. As we heard from my noble friend Lord Bridges, it would not interfere with operational independence.
The regulators have become powerful institutions. They make rules, issue guidance, set expectations, supervise firms, authorise market entry, influence conduct and shape the competitiveness of one of the most important parts of the UK economy. As we heard from my noble friend Lady Noakes’s committee, they suffer from a culture of risk aversion, fuelled by the current system. It is no longer enough simply to say that the existing accountability mechanisms are adequate. There is clearly a deficit in oversight and that deficit becomes more serious as more power is transferred from Parliament and primary legislation to regulators and rulebooks.
If the Government are asking Parliament to accept that shift, they must accept the need for stronger accountability. Essential parliamentary scrutiny has to trump deregulation. The challenge is set for the Minister and I hope he will provide the clarity that we really need—a request that was echoed by the noble Baroness, Lady Donaghy, who, in another bit of history, I served under very happily on the EU Services Sub-Committee.
Lord Stockwood (Lab)
My Lords, we turn to the important topic of the accountability of the financial services regulators. I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Bridges of Headley, for tabling these amendments and for the thoughtful contributions made by noble Lords during this debate. I hear what the Committee has said on regulatory accountability and am glad to be meeting the Lords Financial Services Regulation Committee, chaired by the noble Baroness, Lady Noakes, next week. I have also written to noble Lords, as has been mentioned, about the existing framework that governs the accountability of regulators and a copy of the letter is available in the Library.
Amendment 121 proposes establishing an independent panel for periodic independent review of the FCA, the PRA and the Bank of England. The Government agree that it is important that regulators are held to account for their performance. This is why they have formalised biannual performance reviews, which the Economic Secretary to the Treasury holds with the CEOs of the FCA and PRA. The minutes of these are published on GOV.UK to support transparency.
A prescriptive, legislative requirement would duplicate this and would not be a good use of taxpayers’ money, as the purpose of such a review could be only to understand the regulators’ performance. But through FSMA, Parliament and the Government already have a large number of levers to understand and assess the performance of the regulators. There is of course nothing to stop the Financial Services Regulation Committee from calling up the CEOs of the FCA and the PRA, or the Governor of the Bank, to discuss their performance as frequently as that committee desires. It is also difficult to see where the panel would get its legitimacy from, when the Government and Parliament are responsible for democratic oversight and accountability for the regulators—the regulators that Parliament has vested with the responsibility for regulation of our financial services sector.
It is the Government’s view that the existing avenues for accountability are appropriate and sufficient, and that Parliament has the authority to do this in a way that no other body could. If Parliament wants to enhance the scrutiny of the regulators, it must consider how best to do that.
Amendments 133 to 139—including Amendment 135A —would, taken together, create a new statutory body, the office for financial regulatory accountability, charged with examining and reporting on the performance of the FCA and the PRA, supported by a charter setting out the Treasury’s regulatory objectives, with full information access rights and funding drawn from the regulators themselves. Such a body would complicate the accountability framework in a way that could dilute individual responsibility and accountability, and create significant additional costs. As such, the Government cannot support the amendments.
Since this proposal was last made, during the debates on the Financial Services and Markets Bill in 2023, the landscape has changed materially. The Financial Services Regulation Committee of this House was established precisely to provide sustained, expert parliamentary scrutiny of the regulators, and it has done so with considerable rigour. In the other place, the Treasury Select Committee continues to hold the FCA and the PRA to regular account. These are active, resourced bodies with the standing and powers to interrogate regulatory performance in depth. More importantly, as parliamentary committees, they have the constitutional authority to scrutinise and opine on the effectiveness of our independent regulators.
Creating a new statutory office alongside these structures would fragment accountability, rather than strengthen it. There is a risk that the existence of a parallel body would blur the lines of responsibility and create confusion about where the authoritative scrutiny sits.
Lord Bridges of Headley (Con)
I just do not understand this argument at all. The committees in this House and in the other place, as my noble friend Lady Noakes said, have the power to summon but, as far I know, they have one policy adviser and one expert adviser—and that is it—to analyse regulations and the actions of regulators and supervisors. As the Minister knows full well, that is nowhere near enough to fulfil what would be the purpose of OFRA.
As I said, OFRA would establish a means by which there is independent analysis of regulations—on the specifics and in the round—and of the performance of the regulators and supervisors. They are very different things. One is a means to hold regulators to account; the other gives parliamentarians the means, analysis and insights to do that. I do not understand how the Minister can say that that would dilute accountability.
Lord Stockwood (Lab)
The point I was making is that the structure that exists today gives the effective governance that we believe is required. We are open to a conversation about the noble Baroness’s options to improve accountability, but the noble Lord rightly raises a separate conversation about the requirements to make sure that those committees are sufficiently resourced. That is a separate conversation but, in our current position, we are trying to balance the accountability that already exists with the ability for the regulators to be flexible. As I have stated previously, we are open to that discussion, because we want to make sure that this process does not dilute that.
Lord Bridges of Headley (Con)
I completely agree, but this is not about making them inflexible; it is about giving Parliament the ability to hold them effectively to account. I do not hear anyone saying that there is that means at the moment, and I cannot think that there would ever be a committee, of either this or the other place, enabled to do that. It would require an enormous resource for a committee, which would be completely impossible, as far as I can see. That is why we need a separate body.
Lord Stockwood (Lab)
We are happy to have that conversation. We believe that the framework we have set out is the right one: it balances that ability to have oversight with the flexibility that we have empowered through FSMA. However, I agree that this debate has clearly illuminated that there is work to do, and I look forward to having that conversation with the Committee next week. I am sure that there are more conversations to be had on this issue between Committee and Report.
Amendment 139 would require the FCA and the PRA to fund this new body from their own resources, which are ultimately drawn from industry levies. The regulators would presumably need to increase their fees on authorised firms to cover this. Establishing a body of this kind, with its own membership, staff, legal powers of information access and publication obligations, would involve significant and recurring costs. We would be making industry pay twice to fund functions that have significant overlap.
Baroness Bowles of Berkhamsted (LD)
My Lords, I sometimes think that a useful thing to do with the Minister would be to sit down with him with the rulebook and go through some scrutiny. Perhaps he might then begin to see the scale of the task.
As I have said, when I chaired the ECON in the European Parliament, the committee there had nearly 100 full and substitute members. All of them were capable of doing work in specialist clusters, doing legislation and scrutinising everything. It was basically a full-time job—they did it all day, every day—and it did not even have anything to do with what was happening in supervision.
This task is not within the capacity of a national Parliament. The Minister was out of the Room when I explained that Australia had a royal commission, as part of its post-financial crisis review, to look at what went wrong with regulation. As royal commissions do, it took a long time. When it finally reported, it came to the consultation that an oversight body was needed; similar has been done in New Zealand and the United States, where they have powerful oversight over all of their regulators.
It is unreasonable to suggest that a committee that sits once a week for three hours could in any way touch this issue. Our committees are really good at doing specific inquiries into problem areas, but they cannot see things across the piece. That is what I described as our first need, when we left the EU. It has perhaps taken some people who do not have my experience a while to gain an understanding of how much it would take, but it happened pretty soon afterwards because, a year later, when the noble Lord, Lord Bridges, came forward with his proposals, the Industry and Regulators Committee had already realised that we needed more.
Then there is, as I said, a second need, following on from the Bill, which has distanced us further away because we do not even have the things we are supposed to measure. We do not have the information. Clause 16 creates the strategy—
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
Can the noble Baroness take a seat, please?
Baroness Noakes (Con)
I think that the Committee would like to hear from the noble Baroness.
Lord Wilson of Sedgefield (Lab)
As I said at the start of this session, when it comes to withdrawing an amendment, noble Lords need to be brief. We do not want them to rehash the whole debate. They have to be respectful to the Committee because we have other amendments to discuss.
Baroness Noakes (Con)
We are a self-regulating House, and this is such an important area that I would like to hear the end of the noble Baroness’s remarks.
Lord Wilson of Sedgefield (Lab)
The noble Baroness is absolutely right that this is a self-regulating House, but the other side of the coin is self-discipline.
Baroness Bowles of Berkhamsted (LD)
I am sorry, but I am replying to the Minister, and I have to say some things again because he was out of the Room. I am trying to explain that the Bill introduces a second need, because we will no longer have access to the information. It is going into a strategy and there is no link to operational duties, no reporting or guidance, and the annual report is only about competitiveness and growth. We are short of the basic information on which we are supposed to do this scrutiny: it is not coming to us; it is being rubbed out by the Bill. It is no good saying that a committee of this House—able, competent and hard-working though the committees are—can do it when you have taken the basic information away. That is the point. There is the fundamental size need, and then the removal of the information need. We need this independent body for the first need and, my goodness, we will jolly well need it if the Act ends up being anything like the Bill is now.
I think we will all want to return to this on Report, but for now, I will withdraw my amendment, even though the Minister seems to think that he has the equivalent of a perpetual motion machine and that something will happen with no input.
“Reducing regulator duplicationIn section 3R of the Financial Services and Markets Act 2000 (arrangements for provision of services), after subsection (3), insert—“(3A) In exercising functions in relation to—(a) a PRA-authorised person within the meaning of section 2B, or(b) a person performing a senior management function in relation to such person,the FCA may rely on analysis, findings, information, or judgments of the PRA, so far as it is reasonable to do so.(3B) In exercising functions in relation to a person falling within subsection (3A), the PRA may rely on analysis, findings, information, or judgments of the FCA, so far as it is reasonable to do so.(3C) Subsections (3A) and (3B) apply in particular in relation to— (a) rule-making,(b) supervisory activity,(c) investigatory functions, and(d) enforcement decisions.(3D) Where a regulator relies on the other regulator under this section, it must have regard to—(a) the need to ensure that its statutory objectives are advanced, and(b) the desirability of avoiding unnecessary duplication of work or inconsistent outcomes.(3E) Nothing in this section prevents either regulator from undertaking its own analysis or reaching its own conclusions where it considers it appropriate to do so.(3F) For the purposes of this section “a senior management function” has the same meaning as Section 59ZA.””
Baroness Bowles of Berkhamsted (LD)
My Lords, the Committee will be pleased to know that this will be very short. I will speak briefly to my Amendment 122, which is quite simple. It is intended to encourage the sharing of analysis, findings, information and judgments between the FCA and the PRA, particularly in relation to senior appointments, regulatory and supervisory activity and enforcement. The amendment would not make this binding in any way; it would apply only in so far as it is reasonable to do so and the regulators want to do so. The objective is to remove duplication and give encouragement to the regulators to rely on one another’s work where that is sensible.
I have not looked recently at their memorandum of understanding; they probably have enabled themselves to do some of this, but I am not sure that that enablement has extended to actually doing it. This meshes with some of the other amendments we have had around not duplicating things. If a person has already been approved as fit and proper by one regulator, why would they not be approved by another regulator to do the same thing?
However, I would not expect this to be done blindly or without review. It goes to what I said: everything should be tried to avoid unnecessary duplication, because duplications are leading to delays. This could help to shorten approval times under the SMCR for tried and tested individuals and to align rules or processes where the underlying purpose is the same. It is a modest, practical amendment aimed at reducing friction and delay in areas where both regulators are already engaged. I look forward to hearing from the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, on Amendment 166, which tilts in the same direction, to some extent. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to the noble Baroness, Lady Bowles, for bringing forward Amendment 122. I will speak to Amendment 166 in my name and that of my noble friend Lord Altrincham. I know that we are all very excited by the result in the football but, as the Minister knows, this is an area of great concern to me, so I will make the case.
In our discussions with firms, we have repeatedly heard that regulation has accumulated over many years in a way that is often overlapping and unnecessarily complex. Firms are required to repeat similar information to different bodies, in slightly different formats, at different times and through different systems. They are expected to absorb new rules and expectations while older requirements remain in place. The result is a regulatory environment that becomes heavier and more expensive over time. This affects not just large institutions but smaller firms, new entrants and challengers, which do not have the same compliance teams, legal budgets or administrative capacity as the largest incumbents.
Amendment 122 raises an important point in this regard. Where both the FCA and the PRA are dealing with the same firm, it is sensible that they should be able to rely on one another’s analysis, findings, information and judgments where it is reasonable to do so. Our Amendment 166 follows the same principle but would apply it more broadly. It would require the Treasury, the FCA and the PRA, when exercising powers under the Bill, to have regard to minimising the overall regulatory burden on regulated persons. That burden is not only the direct cost of complying with a new rule; it includes administrative burdens, reporting requirements, the costs of delay and the disproportionate impact that regulation can have on smaller firms and new entrants. If the Treasury, the FCA or the PRA considered that an increase in burden were necessary, our amendment would require them to publish reasons and an assessment of the expected effects on growth, competition, innovation and market entry.
Regulation should be judged by its practical economic effects. Does it make it harder for firms to grow? Does it reduce competition? Does it deter new entrants? Does it slow innovation? Does it make the UK a less attractive place to do business? Those questions matter because financial services are an internationally competitive sector, as we keep emphasising. If we allow our regulatory environment to become too complex, too expensive and too slow, firms and capital will go elsewhere.
The Bill is presented as part of a wider effort to make our regulatory framework more competitive and more supportive of growth, which we support. Amendment 166 would help make that ambition real. It would require the Government and regulators to keep the burden of regulation in view and to justify increases where they consider them necessary. This sort of provision does not exist in this regulatory area, although we have had amendments of this kind in other areas, in my experience. I hope that the Minister will engage constructively with the amendments in this group.
Lord Stockwood (Lab)
My Lords, I thank the noble Baronesses and the noble Lord for the proposed amendments. These are both important topics. I continue to listen and will definitely try to continue to engage in constructive debate and discussion as the weeks develop.
Amendment 122 seeks to reduce duplication between the work of the FCA and the PRA. I thank the noble Baroness, Lady Bowles, for raising this important issue. The Government agree that it is important to identify and remove duplication between the FCA and the PRA. They have distinct objectives and functions, and each must remain clearly responsible and accountable for the exercise of its own statutory functions and the advancement of its own objectives. Co-ordination is important, but we must be careful about blurring accountability between the FCA and the PRA.
To support co-ordination, the FCA and the PRA have, as noted, a memorandum of understanding, which sets out the framework for how they will co-ordinate and co-operate while carrying out their respective responsibilities. The MoU covers their approach to rule-making, supervision and enforcement investigations under FSMA, as well as how and when they will consult and share information with each other. It is designed to ensure that they do not introduce incompatible requirements; that they share information from supervisory activity that is materially relevant to each other’s objectives; and that they avoid duplication in regulatory data collection. In particular, it makes a commitment that information available to one regulator, including regularly provided regulatory data that is relevant to the responsibility of the other regulator, will be shared where requested. If either regulator considers that the information gathered will be of material interest to the other, it will actively offer it.
Baroness Neville-Rolfe (Con)
I think that, in my amendment, I was trying to talk about when powers are exercised under the Act. Obviously, I appreciate the work that is being done to get the thicket out of the existing regulator. However, we are trying to introduce a system that, when regulations are being made—there will be many as a result of the Bill, because we are extending financial regulation into lots of new areas—that will be done in a way that really looks at the burdens. I am not sure that the cost-benefit panels and their work, which we discussed earlier, quite do that, so I ask the Minister to look at this constructively.
Baroness Bowles of Berkhamsted (LD)
My Lords, I thank the Minister for his reply, and everybody else who has spoken in the debate—I do not need to go over any of it again. It was interesting that the Minister elaborated on some of the co-operation that already goes on. I think that it could be interesting for the Committee to ask the regulators to further explain to us how they do that. We hear from industry that if feels there is duplication going on, so maybe we can try to join up that loop. For now, I beg leave to withdraw the amendment.
Lord Holmes of Richmond
“Open finance framework(1) The FCA must establish and maintain a framework for open finance.(2) The framework must provide for—(a) secure and standardised data sharing interfaces,(b) rights of customers to direct the sharing of their financial data, and(c) interoperability between different categories of financial services providers, including digital asset providers.(3) The FCA may make rules to give effect to this section.”Member’s explanatory statement
This amendment gives the FCA the power to make rules in relation to open finance.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to speak to this group of amendments. Amendment 127 is also in my name, and I thank my noble friend Lady Altmann for co-signing it. These amendments are my latest attempt to get some focus on innovation and technology in a Bill that is currently, strangely, surprisingly and unfortunately largely silent on this subject. It is my latest effort, but it will not be my last.
If we take a step back when it comes to open finance, how have we got to where we are? It is something in which everybody across the UK should take incredible pride. Open banking was created here. I offer anybody who believes the false dichotomy that recurs with tedious inevitability—that you can have either regulation or innovation—open banking as a deliberate, willed and intended regulatory intervention to address a market failure. Has it had a measure of success? That is not for me to say, but open banking, which was made in the UK, has been replicated and taken up in just shy of 80 jurisdictions around the world, many of which have taken it much further and much faster than the United Kingdom.
Although open banking is an excellent, positive and inclusive innovation, it still has not come to fruition in terms of mass take-up. However, we should consider how these principles can apply to open finance. We have some good stuff in the Data (Use and Access) Act, but we need more to provide a focus on what open finance can do, not least in obviously adjacent sectors such as telco and energy. My Amendment 126 seeks to do exactly that by looking at what is possible with the data that is currently out there. This would not be a data grab. It would not push citizens off the ball, to give an up-to-the-minute analogy; it would enable and empower those citizens who are often at the sharpest end of financial services and who may even be unable to avail themselves of financial services at all. Imagine being able to look in real time, on a consented basis, at existing alternative data, such as rental history or other activity, to empower an individual to access financial services, perhaps for the first time, or to access better financial services. All too often, what happens is that those who have the least have to pay the most. How can anybody tolerate that in 2026? Open finance could be enabling, empowering and transformational. We have the technologies. I suggest that Amendment 126 would be a tiny element of the next step on that journey.
Amendment 127 suggests an innovation unit for the Financial Conduct Authority. I am well aware that the FCA already has an innovation unit internally; it does excellent work. In terms of the work of regulators across the piece on innovation, it is far more than market-leading. It goes back to the innovations on which the FCA has led for more than a decade: the excellent fintech regulatory sandbox, the digital security sandbox and the tremendous AI sandbox, which was announced last year. They are all market-leading not just in this country but internationally. It is fantastic work. It is similar on other emerging technologies, such as quantum.
Therefore, in no sense is this amendment suggesting that the regulator is not looking at emerging technologies. What this amendment seeks to do is to empower the regulator further by putting that innovation unit on a statutory footing and bringing in external voices and expertise to be part of it, not a board of the great and the good, white, male, pale, stale, but experts in the area of emerging technologies. What a fabulous addition that would be to the excellent work that it is already doing. It would be a minor change, but it would have a major impact. I very much look forward to the Minister’s response and the discussion on this group. I beg to move.
Baroness Kramer (LD)
My Lords, I am absolutely delighted with these two amendments from the noble Lord, Lord Holmes. To begin with Amendment 126, I have long been, as he has, a real supporter of open banking and see the potential for it to expand into open finance, and have been utterly frustrated that it languished for so many years. I am convinced that, under the current leadership, real change is happening and real progress is being made. I hope that is a correct assessment, and in other places the Bill continues to assist that process. It is absolutely logical that entities are looking for financial services and going to one provider that they presumably know or can access but are failing to find a satisfactory answer, and cannot then avail themselves of the ability to talk to the rest of the financial services provider world. Open banking and open finance provide those mechanisms.
I have one caveat. In proposed new paragraph (c) to be inserted by Amendment 126, the noble Lord, Lord Holmes, explained that the framework needs to provide for
“interoperability between different categories of financial service providers, including digital asset providers”.
I agree completely with that. The question is who pays. Traditionally, it has always been the banks that have paid. I took a position earlier in the Bill, and continue to take it, that all users of the payment system should be contributing. This should not be something that falls on the banks while the tech companies, in particular, end up with a free ride. That will leave us with an unsustainable system that is far less effective than it could be if it had the full resources of all those who participate and potentially benefit from it. It would also engage them in innovation, which is addressed in Amendment 127.
I can see the advantages presented by Amendment 127, but there is one more feature that I want to add. One of my permanent frustrations with the regulator has been that it does not step in when there is market failure. It always says that if a new company or business comes in that will fill a gap, it will regulate it appropriately—that is its contribution to encouraging players to come in and fill the space where there is market failure. One good example is lending to small businesses, but there are many more market failures that the FCA will happily acknowledge, but then say it is nots its job to get that gap filled.
The US regulators take a very different view: if there is a market failure, they will be proactive in trying to design incentives and opportunities to go out and, in effect, market to relevant players so that the gap is filled. A simple example in the United States, thanks to the regulators, is something I call “bank in the box”—I have to be careful because there is a company of that name. It was devised to enable small players to come into the lending space. In the box were all the regulatory pieces that a banking service needed to offer, so that it would be very simple for a new player to simply plug in the investors at one end and the particular customer base at the other. It also means that, in time of failure, that small bank can easily be recovered, because all the complex content of regulation and compliance is in the box in a way that that is understood by the others within the system.
I have talked to the FCA and asked about bank in the box. It says that if someone comes forward with it, it will gladly regulate it, but it will not take a step that would encourage the provision of some such service. I would love to see this approach to market failure incorporated in the innovation discussion. Regulators are incredibly influential; it is amazing what a few words from a regulator, or a proposal from a regulator, will do to make sure that action actually happens.
Lord Altrincham (Con)
My Lords, I am grateful to my noble friend Lord Holmes—and for his rather delicate comments on “pale and male”—for bringing forward these amendments. They raise an important set of questions about open finance, innovation, emerging technology and the extent to which the regulatory framework is preparing for the financial services market of the future.
We welcome the spirit of this group. My noble friend Lord Ranger of Northwood has tabled amendments in later groups which address digital assets specifically, so I will not pre-empt that debate now, but the broader question raised by this amendment is vital: how are we preparing for financial technologies which are on their way and, in many cases, already here? Regulation cannot be developed only for the market we have today. It must be developed with the market of tomorrow in mind. We need a forward-facing regulatory framework, not one that is constantly trying to catch up after innovation has already moved elsewhere. That means anticipating new technologies, understanding how firms are using them and creating a clear and proportionate regime before uncertainty drives businesses out of the United Kingdom.
It is worth reflecting, as we close this day in Committee, that this amendment touches on a very fundamental change that might be coming to financial regulation. All the earlier amendments really concern how credit is distributed within the UK in our current structure, which, let us remember, rests on fractional reserve banking and large customer deposits—Lloyds Bank currently holds £600 billion of customer deposits. This mixture of innovations, in open banking, open finance and digital currency, would completely upend the regulatory environment in which finance operates at the moment. While it might feel rather edgy to talk about an innovation unit, it is completely and fundamentally at the heart of where financial regulation is going. Many of the things we have been talking about might find themselves out of time quite quickly if some of these technologies were to advance.
If firms developing digital assets, tokenisation, AI-enabled financial services, open finance tools or new payment systems cannot get clarity in the UK, they will go to jurisdictions where the rules are clearer, faster and more supportive of innovation. We have already seen concerns that the UK risks falling behind in some of these areas. We want the United Kingdom to be a place where financial innovation can thrive, but that requires clarity, leadership and a regulatory framework that is designed for the future. I hope the Minister can provide a reassurance that this is the direction in which the Government are moving and the nature of drivers for innovation, as he sees it.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Lord, Lord Holmes of Richmond, for Amendments 126 and 127, and for raising the important issues of innovation, inclusion and the future shape of financial services. I spent 10 years building a business in this space for the insurance sector, so it is something that is dear to my heart. The Government recognise the importance of these themes and, as I said at Second Reading, the Bill is intended to modernise the way the sector is regulated, to help it grow and lend more to businesses, and to make consumer protections fit for the digital age.
On Amendment 126, the Government fully recognise the potential of smart data schemes, including open banking and open finance. The wide range of benefits from smart data was set out in the Government’s smart data strategy, published in March this year by the Department for Business and Trade. The FCA’s Open Finance road map, published in April this year, sets out steps for collaborating across industry and the wider ecosystem to explore extending the principles of open banking to a much broader range of products.
We have already made it clear that the long-term regulatory framework for open banking will help to secure the foundations for open finance, and that our ambition is for the UK to remain a world leader in this area. The Government will be consulting on the long-term regulatory framework for open banking in the coming weeks and intend to lay a statutory instrument by the end of this year. The FCA’s road map is an important step in exploring what is needed to support the development of open finance.
The noble Lord, Lord Holmes, has noted that the Government already have powers under the Data (Use and Access) Act 2025. This enables the Government to create a framework for open finance, including a wide range of financial data, not just current account data. It includes the power to require the FCA to regulate for open finance and make rules about the sharing of customer data with financial services providers through interoperable interfaces. The Government have already committed to set out further detail on their approach to open finance during the summer.
On Amendment 127, the Government agree that regulators must have access to the right expertise as financial services evolve, and that innovation and financial inclusion should be embedded in the approach that regulators take. The FCA’s innovation hub, which includes both the regulatory and digital sandbox, is designed to support firms to launch innovative products and services.
On payment systems, the Bill provides the FCA with objectives and powers that are generally equivalent to those of the Payment Systems Regulator, including innovation and competition objectives, alongside a broad service user objective. This will allow the FCA to respond to the interests of service users as markets and technologies evolve. The FCA is already well versed in considerations of competition, innovation and the interests of consumers and businesses due to its wider role as a regulator for financial services.
As the Committee discussed on Monday, financial inclusion is a key priority for the Government, and we continue to work closely with the FCA to ensure that individuals get the right support with their financial products and services. This includes working with the FCA on the delivery of the financial inclusion strategy.
The FCA already uses its innovation services to further innovation which supports financial inclusion. For example, the FCA ran a tech sprint which supported firms to develop innovative services, such as brand new apps to support people when they are declined for credit and AI tools to spot scams and to simplify terms and conditions.
The Government consider that the FCA must have the flexibility to determine how best to reflect expert input across its functions to deliver on its objectives in a fast-moving landscape. The Government are supportive of the broad objectives the noble Lord is pursuing—innovation, inclusion and a regulatory framework that keeps pace with change—but we do not consider these amendments to be the right mechanisms for achieving those aims. For the reasons I have set out, I therefore respectfully ask the noble Lord to withdraw his amendment.
Lord Holmes of Richmond (Con)
My Lords, I thank all noble Lords who have taken part in this short debate. I agree entirely with the points raised by the noble Baroness, Lady Kramer, about who pays and I agree with the noble Baroness’s earlier amendment on APP. When we have variety in our participants in this market, it is right that, if you are in the market, you pay alongside all other participants, rather than having the asymmetry which currently exists of banks being on the hook and others swimming freely. I also agree with the main thrust of the noble Baroness’s other points, none of which made me queasy at all.
I thank the Minister for his response. I agree largely with his comments. I delicately say that bringing in expert independent voices in a more formalised but flexible structure would further empower the FCA to take the excellent work that it does in innovation and go broader and faster. I ask the Minister to reflect on that and if there is more that the Government can do in concert with the FCA, without in any sense fettering its discretion. It would give the FCA even more power to increase the fantastic work it is doing across all these emerging technologies. For now, I beg leave to withdraw the amendment.
House of Lords
Drink-Driving
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Hayter of Kentish Town
To ask His Majesty’s Government what assessment they have made of the potential role of innovation and technology in reducing drink-driving, particularly repeat offending.
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, the Government recognise the role that innovation and technology can play in reducing drink-driving and repeat offending, alongside effective enforcement, education and penalties. Through the road safety strategy, we consulted on measures to tackle drink-driving and drug-driving, including the potential use of alcohol interlocks for offenders. Responses are now being analysed. Our approach will remain evidence-led, proportionate and focused on reducing deaths and serious injuries on Britain’s roads.
Baroness Hayter of Kentish Town (Lab)
I thank my noble friend for his response. He will know that unless an alcolock—which is, in effect, a breathalyser in a car—gets a negative response, the engine will not start. Alcolocks have been introduced in many counties, where they have halved repeat offending and therefore reduced deaths. Might the Government move just a little bit faster than awaiting the outcome of the consultation and take action to either introduce or pilot these as a potential sanction for a drink-drive conviction? Might the Government follow the EU in requiring all new cars to be fitted with a basic kit so that, if this was introduced, it would be very simple to implement?
Lord Hendy of Richmond Hill (Lab)
My noble friend is a great advocate for better policing of drink-driving. I understand the sad reasons why, and our hearts go out to everybody who has suffered bereavement or injury through drink-driving. Alcolocks are widely used internationally, and the evidence shows that they reduce reoffending while installed, but reoffending returns to a similar level once they are removed. That is not a reason for not doing it, but it is a reason for being careful. The Government have published the first comprehensive road safety strategy for many years, and it is right that we consult on that and that, when we have consulted, what we do about it is proportionate and thought-through, so that the measures actually work.
My noble friend also mentioned installation facilitation, and we are thinking about that carefully. Meanwhile, we are carrying on with a package of advanced safety technologies that are ready now.
Lord McLoughlin (Con)
My Lords, the number of drink-driving convictions is falling, which is very welcome news. But the number of drug-related driving offences is on the increase, which is very concerning indeed. In 2015, the law was changed to make it easier to get prosecutions. I think there is still a lack of understanding in the general public of the danger of drug-driving. Will the Government look at whether they are doing sufficient to highlight this as a very serious crime?
Lord Hendy of Richmond Hill (Lab)
The noble Lord is absolutely right: drug-driving is, as he said, on the increase. We are consulting on better detection of drug-driving, because it is a complex issue: there are many different sorts of drugs and not all the methods of testing will currently stand up in court. But he is absolutely right and we are on the case for this. We publicise the huge dangers of doing it, but we need to get through the operational and forensic challenges of detecting different sorts of drugs through alternative forensic testing procedures, including oral fluids, saliva and sweat.
Baroness Finlay of Llandaff (CB)
My Lords, given that somebody with a blood level of 50 to 80 milligrams of alcohol has a six times greater chance of dying in a road accident and, on top of that, of killing other people, when will the Government finally implement a lowering of the limit? They are aiming to have an overall decrease in road deaths of 35%, and this would significantly contribute to it.
Lord Hendy of Richmond Hill (Lab)
The first comprehensive road safety strategy for some time was published a few months ago, and part of the consultation is indeed to look at lowering the limits for drink-driving. All the statistics the noble Baroness quoted are of course correct. We need to do something about it, and one of the reasons for the publication of the road safety strategy was that the number of deaths and serious injuries on the road has plateaued and it should be going down.
Baroness Grender (LD)
My Lords, UK courts can disqualify drink-drivers, but they cannot currently require an alcolock as a condition of returning to the road. Will the Government consider giving courts this option, in particular for repeat and high-risk drink-driving offenders?
Lord Hendy of Richmond Hill (Lab)
That is precisely one of the things that the Government have consulted about, because it is important that the maximum range of penalties and actions is available to deal with drink-driving and, even worse, repeat drink-driving. That is why we have consulted. This is one of the items in the consultation and why I anticipate that we will take action when we have analysed the results of it.
Lord Forbes of Newcastle (Lab)
My Lords, when I was 18, my parents’ car was hit head-on by a drunk driver. Both my parents survived, but my mother was left with life-changing injuries. I therefore warmly welcome the Government’s road safety strategy, especially the consultation under way on lowering the drink-drive limit and expanding the use of alcohol interlock technology. Can my noble friend the Minister give assurances to the House that any new enforcement powers, particularly immediate licence suspensions and alcolock technologies, will be applied consistently by the courts and consistently across all police forces, so that public confidence in the drink-drive reduction measures we are seeking to introduce are strengthened rather than undermined?
Lord Hendy of Richmond Hill (Lab)
I am sure that our hearts go out to my noble friend and to many other people like him who have suffered this sort of terrible family or close relationship catastrophe. Of course, the enforcement of the law is a matter for chief police officers. However, I have no doubt that, if we improve both the techniques that can be used to detect drink-driving and drug-driving and the range of penalties that are available for enforcement, chief police officers will treat this seriously, as will the courts.
Lord Moylan (Con)
My Lords, I too welcome the fact that the Government are consulting on how to improve road safety, and I am sure that the noble Lord would agree that any response to that consultation needs to be evidence-based. In that light, how does he take account of the fact that it appears from Scotland, where the limit has been reduced, that there has been no discernible effect on accidents as a result of that measure?
Lord Hendy of Richmond Hill (Lab)
The noble Lord is right that we should respect the evidence. Scotland’s experience is relevant, but it is not the only evidence. The Government recognise that Scotland did not see a significant casualty reduction, but we also cite wider evidence that alcohol impairs driving ability below the current England and Wales limit. Evidence cited in the consultation found that drivers with a blood alcohol concentration of 20 milligrams to 50 milligrams per 100 millilitres have at least a three-times greater risk of dying, and we will certainly take that into account when we decide what to do as a result of the consultation.
Lord Hampton (CB)
My Lords, alcolocks take an hour to fit, they cost £200 to fit, paid for by the user and, as the noble Lord said, they work while they are being used. Why are we not using them to save lives?
Lord Hendy of Richmond Hill (Lab)
I said that we are consulting on the first comprehensive road safety strategy for many years. It is right to consult, because a number of things in the road safety strategy—not just this one—affect many people, we need to hear from everybody, and we have heard from many people what they think of the proposals in the road safety strategy. I would say to him that it is worth waiting for, because it is not right to legislate before you understand what all the evidence is.
Lord Harper (Con)
My Lords, perhaps I might ask the Minister, given that there have been questions both about reducing the threshold for drink driving but also about enforcement from the noble Baroness, Lady Hayter, what is the Government’s assessment, because it was not clear from the road safety plan, of the biggest contributor to deaths and injuries on the roads? Is it people who do not obey the existing limit, or is it people who obey the existing limit but are none the less not safe to drive?
Lord Hendy of Richmond Hill (Lab)
I have to say there is a whole range of factors that go into it. The reason for the road safety strategy is that the death and serious injury rate has plateaued, rather than going down. The strategy has made it clear that there are a number of reasons for that. If there were only one issue in the strategy, with one consultation, that would be different, but there is a wide range in there intended to make all road users, including pedestrians and cyclists, safer. I think it is right, if the noble Lord reads the whole thing, to look at a number of solutions to this.
Pharmacy Closures
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Janke
To ask His Majesty’s Government what assessment they have made of the impact of increasing numbers of local pharmacy closures on primary healthcare services.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, pharmacies are an easily accessible front door to the NHS and we understand the impact that closures may have. We have increased the community pharmacy budget by £340 million—a 10% uplift that builds on the 19% increase, which was at the time the largest uplift in the NHS. That was delivered in 2024-25 and 2025-26 in order to support pharmacies’ essential role. Recent data indicates that closures have slowed, with 19 net closures in 2025-26 compared with 112 in 2024-25.
Baroness Janke (LD)
My Lords, I thank the Minister for her response, but 65% of community pharmacies are now operating at a loss; 45% have been forced to rely on personal savings or remortgaging their own homes just to keep their doors open, mainly to vulnerable people with the highest levels of need. What is the Minister’s response to the fact that individual pharmacists are subsidising essential front-line services out of their own pockets? Given that the closures are hitting deprived communities the hardest, what specific measures is the Secretary of State taking to prevent the creation of pharmacy deserts in areas with the greatest health needs?
Baroness Merron (Lab)
We are taking a number of actions on the point that the noble Baroness rightly raises. I have spoken about the uplift on the back of a major uplift in the two years previously. For underserved areas, the pharmacy access scheme provides financial support to pharmacies in areas where there are fewer of them. About 1,400 benefit from the scheme and they receive an average of £1,130 per month. Also on the question that the noble Baroness raised, local authorities have health and well-being boards, which assess whether the local provision of pharmacy services meets the needs of the population. Integrated care boards make decisions on pharmacy openings, and they can directly commission a pharmacy if necessary.
The Lord Speaker (Lord Forsyth of Drumlean)
My Lords, the noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.
Lord Campbell-Savours (Lab) [V]
My Lords, while we all will welcome this year’s very significant increase in funding, which greatly helps the viability of small chemists, we have a real problem in Cumbria, with its small towns, rural communities and limited chemist availability. Could we go further where the result of non-viability is problems in primary healthcare? Could we allow the remaining chemists greater flexibility and discretion in making changes to the strength, quantity and formulation in prescriptions? This could help to relieve the impact on primary healthcare services.
Baroness Merron (Lab)
My noble friend is quite right to identify the very important role that pharmacies play in the move from hospital to community. That is why we are funding the rollout of, for example, independent prescribing from autumn this year. That will build on the success of Pharmacy First and the pharmacy contraceptive service, and provide much more local, on-the-spot care for common conditions. In rural areas, dispensing doctors can dispense medicines to patients who live more than a mile from a pharmacy. Also, online pharmacies can deliver medicines free of charge.
Baroness McIntosh of Pickering (Con)
My Lords, I refer to my interest advising the Dispensing Doctors’ Association, and my late father and my brother were dispensing doctors. The Minister will be aware that where there are no community pharmacies, dispensing doctors stand prepared to give vaccinations, such as for meningitis B for students returning to university. Will she make good the commitment by dispensing doctors to dispense meningitis vaccinations to this cohort? It seems to have been overlooked in this case.
Baroness Merron (Lab)
We are constantly in discussion with Community Pharmacy England and its organisations about how we develop their role. I am very enthusiastic, as many noble Lords are, about the role that they can play. I was looking at statistics between April 2025 and February 2026 about the millions of clinical services, not just vaccinations, that have been delivered. For example, there have been over 4.7 million flu vaccinations. There is scope for discussion on how we can expand the vaccination programme, but the service provided by community pharmacies is to be credited.
Lord Kamall (Con)
My Lords, has the department undertaken any analysis of the characteristics of pharmacies that are most of risk of closure to understand whether geography, deprivation, the ownership model or dispensing volume are the principal drivers? Does she agree that having this data might help the department to target some of the uplift more effectively and prevent closures? Can she update the House on whether the department carries out that analysis?
Baroness Merron (Lab)
I know that the noble Lord is aware of this, but pharmacies are private businesses that open and close for a range of reasons. Sometimes pharmacies close and then reopen. That is why I spoke in my Answer about 19 net closures. It is worth noting, as the previous Government did, that access to pharmaceutical services remains good—80% of patients can access a pharmacy within a 20-minute walk. However, local authority health and well-being boards look at local areas and we have a financial scheme to support the development of pharmacies in underserved areas.
Lord Tyrie (Non-Afl)
Has any consideration been given to some relaxation of the rules which restrict the ability of GPs to open pharmacies at their practices, to which the Minister has already alluded? Might it be possible to alleviate this problem by relaxing those rules?
Baroness Merron (Lab)
As I have said, we keep this constantly under review, but it is the case that GPs can provide dispensing services in a number of situations. That particularly helps if people live further away from a community facility than is ideal.
Baroness Nargund (Lab)
My Lords, I thank my noble friend the Minister for her reassuring reply about the closure of local pharmacies. However, research published in 2025 shows that access to local pharmacies has declined almost four times faster in England’s poorest communities. What assessment have the Government made of the impact of this on health inequalities? What steps will they take to integrate pharmacy services within neighbourhood health centres?
Baroness Merron (Lab)
That comes into the category of underserved areas, particularly if there are fewer pharmacies. I disagree with my noble friend about the overall picture in terms of pharmacies; we are supporting them to do more work, and a bigger range of work strengthens their position. It is not necessary to live right near a pharmacy, because of provision by online pharmacies. Finally, I repeat that local authorities can also seek to open pharmacies where there are underserved areas.
Lord Scriven (LD)
My Lords, community pharmacy has lost thousands of full-time pharmacists in recent years, and many have been recruited directly to other parts of the NHS that can afford to pay more. What more can the Government do to support community pharmacists to minimise this internal displacement and help keep vital local pharmacies open?
Baroness Merron (Lab)
This is an important point and why the refreshed 10-year workforce plan, which we will soon see, will deliver the transformation of the health service, which pharmacists are very much part of. We are also looking to support employers in offering a range of national training opportunities for pharmacists and pharmacy technicians. We need to train and upskill the current workforce, and invest in community pharmacy staff. Pharmacists are very important, but there is a whole team with them. Training will include independent prescriber training, clinical examination skills and training the next generation of education supervisors.
Counterterrorism: AI and Facial Recognition
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Davidson of Glen Clova
To ask His Majesty’s Government what assessment they have made of whether the current legal architecture permits the appropriate use of AI and live facial recognition for counterterrorism purposes.
The Minister of State, Home Office (Lord Hanson of Flint) (Lab)
The current legal architecture allows effective use of these technologies, but the Government continue to keep legislation under regular review as threats evolve. The Government are investing a record £141 million in AI technology and automation, including over £11 million on 40 new live facial recognition units. The police reform Bill will complement this by introducing clearer rules and independent oversight for facial recognition, ensuring that its use remains lawful, proportionate and responsible.
Lord Davidson of Glen Clova (Lab)
I thank my noble friend for his Answer. The Home Office consultation was a welcome recognition of the gaps in the current statutory framework in this area. I welcome the notion that there will be a development of legislation, particularly the police reform Bill, which covers these important technologies. On the proposed legislation, will there be support for behavioural analytics in relation to counterterrorism? I ask because that is a very important tool.
Lord Hanson of Flint (Lab)
I am grateful to my noble and learned friend for his question. What we are trying to do in the police reform Bill is respond to the consultation he has mentioned, which closed a few weeks back. We are currently analysing the responses to that consultation, and the intention is to put in place a legal framework that covers all aspects of facial recognition technology, so that there is proper governance, proper accountability, and a clear understanding of what, where and how facial recognition technology can be used. I will ensure that when the Bill is brought forward, my noble and learned friend has an opportunity to reflect on the points that he has made today.
Lord Kirkhope of Harrogate (Con)
My Lords, while I welcome the Government’s approach to this, with the postponement of the EU-UK summit, which was to discuss security issues, from 22 July to another date, I am all the more concerned that the re-establishment of our links to SIS II, the information system which gives real-time information on movements of terrorists around Europe, will now be put off as well. I wonder whether the Minister will update us on what we are doing to try to get ourselves back into what is undoubtedly the best means of dealing with terrorists.
Lord Hanson of Flint (Lab)
The noble Lord knows my clear view on this matter: we have to have a very constructive relationship with Europe; the things that we lost due to the Brexit withdrawal need to be examined in detail on the criminal justice front; it is in Europe’s and United Kingdom’s interests to have better access and understanding of who goes where, when and why; and it is the objective of the Government to try to help the European Union and to receive benefits. The summit that was planned for July has been postponed for reasons that are self-evident—because of a change of Prime Minister—but the objective of the Government remains the same.
Lord Anderson of Ipswich (CB)
My Lords, artificial intelligence chatbots are already engaged in skilfully targeted radicalisation. They may even be used in attack planning, as in the case of the Windsor Castle crossbow attacker, who was thwarted, fortunately, in his ambition to kill Her late Majesty but was assisted and encouraged throughout by his online “girlfriend”, Sarai. The Independent Reviewer of Terrorism Legislation has suggested that we may need laws against the creation and deployment of computer programs that can be used for such malign purposes. Could the Minister update us as to what the Government are going to do about it?
Lord Hanson of Flint (Lab)
I am grateful as always for the expertise that the noble Lord brings to this issue. The independent reviewer did indeed consider, in his annual report, the impact of generative AI on terrorism-related activity. The report concluded that, where AI is intended to be used for terrorist purposes, existing terrorism legislation generally provides sufficient coverage. Nevertheless, we are continuing to look at that. It is an important issue. As the noble Lord knows from our long discussions in the last few days, we have a security Bill and a police reform Bill coming up. We keep those matters under review and, obviously, it is a very fast-moving situation. We need to be ahead of the game for the reasons the noble Lord has mentioned.
Baroness Doocey (LD)
My Lords, the Government have committed substantial resources to live facial recognition technology, but, at present, the police authorisation makes no distinction between the technology being deployed on the high street and for counterterrorism purposes. Will the Minister confirm that the forthcoming framework will establish a distinct statutory authorisation regime for counterterrorism purposes so that we are not leaving both of them to inadequate police superintendent authorisation, as we are at the moment?
Lord Hanson of Flint (Lab)
The noble Baroness makes a valid point about the difference between terrorism and what I will term other crime. As she knows, facial recognition technology is sometimes used for things such as identifying missing persons who have not been involved in crime at all. There needs to be a clear framework for this. As she knows, the consultation paper raised a number of questions. We are trying to resolve and respond to those and to look at the great analysis that we had in responses. We will bring forward proposals, which she will have an opportunity to test when we bring forward the police reform Bill.
Lord Cameron of Lochiel (Con)
My Lords, it has been reported that the newly created PoliceAI centre will roll out large-scale pilots in up to 10 police forces to help officers triage, disclose and summarise digital evidence. Can the Minister inform your Lordships’ House as to what impact the police reform Bill, and specifically the proposed mergers of police forces, will have on these plans for a more enhanced role for AI in policing?
Lord Hanson of Flint (Lab)
At the moment, as the noble Lord knows, the Government’s policy objective is to reduce the number of police forces. We have asked the noble Lord, Lord Hogan-Howe, to look at that. Ministers have not yet had his final report with his proposals for the size of police forces. In the police reform Bill, we are trying to establish national responsibilities on crime, counterterrorism, training, and procurement. As part of our consultation, we are looking at what we need to do on a framework for facial recognition technology. As the noble Lord rightly said, we have put in £140 million, including £11 million on 40 new live facial recognition units, and we have looked at retrospective facial recognition. We are trying, in a very long-term plan, to get national capability, better resource and better efficiency for taxpayers, while at the same time recognising, as I know he does, that facial recognition is an extremely important tool for identifying known criminals, people who have broken licence terms and people who are missing, and for intelligence-led policing that can ensure that we know exactly who we are looking for and why.
Baroness Blower (Lab)
My Lords, this is clearly a very useful technology, but given that it has very wide application, can my noble friend say anything about how we monitor the level of possible misrecognition by these systems?
Lord Hanson of Flint (Lab)
That is an absolutely vital point, as it is with many forms of technology. The old identity parade misidentified some people. ANPR—number plate recognition—occasionally looks at information that does not identify the right number plate. This is technology that is used to support the police. I reassure my noble friend that at the end of it there is always a set of human eyes. Humans determine whether to put a case to the CPS for prosecution and whether the information is correct. But AI, including AI used for facial recognition, means that we are saving the police hours, to the extent that we can potentially deploy an extra 3,000 police officer hours for other purposes. That is because AI can sift out, examine, look at characteristics and determine one, five or even 10 suspects who we might need to have further eyes on. It is important to look at the developments. Ultimately, it is under operational police and political control.
IVF Treatment
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Nargund
To ask His Majesty’s Government what assessment they have made of The Lancet article Is IVF treatment heading in the right direction?, published on 23 June, indicating that many IVF add-ons do not work; and what consideration they have given to giving regulators the power to ban them.
Baroness Nargund (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I declare my interests as the lead author of the Lancet insight paper on IVF add-ons and as a board member of the Human Fertilisation and Embryology Authority.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, we are aware of the issues raised in the Lancet article regarding the effectiveness of IVF treatment add-ons. The regulator, the HFEA, provides information to patients on the effectiveness of fertility treatment add-ons through its website. In most cases, there is insufficient evidence to demonstrate that they improve treatment outcomes. The Government are considering a range of proposed reforms to fertility regulation, including the scope of regulator powers to regulate add-ons effectively.
Baroness Nargund (Lab)
I thank my noble friend the Minister for her reply. The concern about IVF add-ons is not only that many are unproven and ineffective but also that some can pose serious health risks to patients and unnecessary emotional and financial harm. The HFEA’s current traffic light system is guidance only and the regulator has no enforcement powers, which means that some add-ons with a red rating continue to be offered in clinical practice. Will she consider granting the HFEA interim enforcement powers for the use of red-rated IVF add-ons to protect patients from harm while the wider reforms to the fertility regulatory framework are being developed and implemented?
Baroness Merron (Lab)
I recognise the situation that my noble friend describes and note that, while the relevant Act has provided a strong framework for over three decades, the fact is that treatment, science and societal expectations have all evolved very significantly since the last major reform in 2008. It is the case that the Act does not currently provide powers to ban add-ons. We are constantly looking at what we can do while we await and consider legislative change, but that really is the best way forward to tackle this.
Baroness Pidgeon (LD)
My Lords, the reality is that patients in England are struggling to access publicly funded IVF, with only two out of the 42 integrated care boards in England complying with NICE fertility guidelines. Can the Minister advise whether the Government are considering following Wales and Scotland in centralising commissioning for IVF rather than the current postcode lottery?
Baroness Merron (Lab)
We are not doing that, not least because, as the noble Baroness is aware, we believe that the needs of the local population are best served through local decision-making and through the integrated care boards. That said, I absolutely recognise that access to NHS-funded fertility services is variable, and we are reviewing the situation so that we can determine the next steps. I should emphasise that NHS commissioning organisations are expected to commission fertility services. They do have NICE guidance, which we are supporting them in following.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark)
My Lords, we will hear from the Cross Benches next and then from the Conservative Benches.
Baroness Deech (CB)
My Lords, I declare an interest as a former chair of the HFEA. Does the Minister agree with me that we really must get on with modernising the Act, as more and more gaps are revealed? In the meantime, does she agree with me that the HFEA should collect data by asking clinics to supply it? Then it would get firm evidence about what works and what does not. It could then publish the data, and make sure that patients are informed by their clinics, or by leaflets in the waiting room, to go on the clinic website and the HFEA website to get the accurate information.
Baroness Merron (Lab)
I would agree with the noble Baroness about the importance of ensuring that those who are considering accessing services—particularly the “add-on services”, as they are referred to—have the full information. The place for that is the HFEA website. The HFEA does make efforts, as do we in the NHS, to ensure that people are guided; however, it will be down to the individual. I absolutely agree with her about the need for reform for the reasons that I said earlier, and that is why we are looking at it.
Baroness Owen of Alderley Edge (Con)
My Lords, the HFEA has reported a 44% increase in the number of patients freezing their eggs from 2022 to 2024, yet data shows that very few women return to use those stored eggs and success rates decline with age. Given the frequent promotion of egg freezing to women without adequate reference to these limitations, will the Minister set out what steps the Government are taking to ensure that accurate information is widely available to those considering this procedure?
Baroness Merron (Lab)
The noble Baroness is quite right to identify that this is not an insurance policy to be relied on to guarantee a baby in the future, no matter what suggestion there may be to the contrary. It is also worth knowing that, while egg freezing is the fastest growing fertility treatment, it is proportionately still small—comprising about 5% of treatments. To her point, there is a responsibility on fertility clinics to ensure that anyone using their services understands the risks—which I must emphasise—as well as the long-term impacts of any treatment decisions that they make. It is quite right and proper that they do that.
Lord Hunt of Kings Heath (Lab)
My Lords, with the abolition of NHS England, ICBs will be given many more responsibilities in the future. However, does the Minister agree that their record on IVF, where they are not following the clear, specific guidance that they have been given, does not induce confidence in ICBs’ performance? Inevitably, Ministers will be drawn to make decisions more centrally. Does the Minister think ICBs understand that the kind of rationing that they undertake at the moment in relation to IVF is utterly unacceptable?
Baroness Merron (Lab)
I do find it unacceptable that people have different access to treatments in the way that noble Lords have described. I would expect that the move through the Health Bill will enable us to have a far more effective means, in all sorts of areas, to ensure that local populations are properly served. That is why we will be bringing the functions of the NHSE into the department. As my noble friend will know, that will ensure that we no longer have duplication and that we have the right resources. I very much expect and want to see adequacy of access and fairness, which is the basic thing in all NHS treatment, to be established in fertility treatment.
Lord Kamall (Con)
My Lords, I begin by thanking and paying tribute to the noble Baroness, Lady Nargund, and to her co-authors of this fascinating paper. Clearly, it shows that IVF is an area in which innovation is important but so too is the need for evidence. At a time when add-ons have sometimes quite fancy scientific names such as platelet-rich plasma, embryo imaging or intralipid infusion, it is understandable why patients may feel confused and think that this is a much-needed medical intervention. Are the Government aware of high-quality research into IVF add-ons that would give patients, clinicians and regulators greater confidence about which treatments generally improve outcomes for patients?
Baroness Merron (Lab)
All of this is important, not least because noble Lords will have seen in the women’s health strategy that we want to ensure that every woman can access effective fertility services easily and safely. I would certainly agree that there are areas where the fertility evidence base could be strengthened, and we are looking at how we can best support research and data collection, which was another point raised by noble Lords. We are currently working with NHS England, which will become part of the department, because we want to support equitable commissioning but also the right evidence base so that information is properly available. At present, there is scant evidence that many of these add-ons are anything other than optional and not recommended.
Baroness Gerada (CB)
My Lords, would the Government consider requiring the HFEA to share data on these inappropriate and harmful add-ons with the General Medical Council so that fitness to practise concerns can be acted on?
Baroness Merron (Lab)
It is important that, where there are concerns, they are acted on. Perhaps the noble Baroness, with her experience, has a particular way in which that could be followed up, but certainly the GMC would be expected to take action if there was incorrect and unacceptable practice. I am not suggesting that in respect of add-ons to fertility treatment; I am focusing on the need for fair, equitable, NHS-funded fertility services and ensuring people know that there is not evidence that their chances of conceiving will be improved currently by any of these add-ons that are being offered, which is the worrying situation that we have.
Numeracy for Life Committee
The Senior Deputy Speaker
The Senior Deputy Speaker (Lord Ponsonby of Shulbrede)
My Lords, I beg to move the three Motions standing in my name on the Order Paper en bloc.
Prisoner Early Release
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Keen of Elie (Con)
My Lords, victims of rape and child sexual exploitation have now received letters informing them that their attackers and abusers are soon to be released from custody, much earlier than would have been expected. Yet during the recent passage of the Sentencing Act, which paved the way for such reductions in custody, Ministers repeatedly assured Parliament that the most serious offenders would not benefit from these changes. Today we have been told that some convicted rapists and child abusers will be released only half way through their custodial sentence. I therefore ask the Minister two simple questions. First, does he consider that rapists and child abusers are not serious offenders? Secondly, will he explain why the assurances the Government gave to Parliament during the passage of the Sentencing Act have been so swiftly abandoned?
The Minister of State, Ministry of Justice (Lord Timpson) (Lab)
First, I would like to express my sincere sympathy with the victims of all these appalling crimes. Convictions for child sex offences are at a record high, and we as a Government have made grooming an aggravated factor so that perpetrators face longer sentences. Without the Sentencing Act, the courts would be at risk of grinding to a halt, preventing sex offenders and others from being brought to justice. We have acted to avert that crisis. We are delivering the largest prison expansion since the Victorians, with 14,000 extra places by 2031, and we have already delivered 3,100 since taking office. But if we do not tackle this problem of prisons running out of space, we will be back to where we were again. Two years ago, when I first took on this job, there were some very dark days in the Ministry of Justice. When you have fewer than 100 prison places left, that is dangerous for victims and future victims.
Lord Marks of Henley-on-Thames (LD)
My Lords, these issues are very difficult, but we share the Government’s determination to ensure that we do not run out of prison cell space as a result of past serious underprovision. However, I have two questions on early release. First, can the Minister say how effectively victims notified of the impending release of their perpetrators are signposted to victim support services, and how such provision can be improved? Secondly, the Minister has often stressed the importance of technology in the context of early releases. How far away are we now from having details of prisoner release arrangements available online in all prisons, including release dates, release locations, tagging arrangements and intended addresses following release, where those are available?
Lord Timpson (Lab)
The noble Lord is right to raise the point about prison building, because we have to keep building these prisons. There is a role for them but there is also a role for technology. I have been keen on pushing technology in all parts of the justice system. I am pleased that we have £82 million going into the justice ID project, for example, and there is a load of AI work going on. In fact, if you walk into the Ministry of Justice and see someone who looks about 19 in jeans and a T-shirt, they are probably one of our amazing AI team, who are making a very big difference.
But it is very important that victims are notified as soon as we know. We work closely with those who sign up for the victim liaison scheme. We have the highest ever amount being invested in victim support services, over half a billion pounds, because we want to work with victims to make sure that they get transparency and all the support—for example, making sure that the exclusion zone is right, and explaining what the electronic monitoring provisions will be. It is important that we work together in the interests of victims, and that we keep investing in technology to improve accuracy and improve speed.
Baroness Hyde of Bemerton (Lab)
My Lords, having previously worked with people being released from prison and having helped people resettle in the community, I know how crucial the right support is after release to prevent reoffending and to prevent further victims. In light of this, is my noble friend the Minister confident that our Probation Service, which was so appallingly treated by the party opposite when they were in government, is now strong enough to cope?
Lord Timpson (Lab)
I thank my noble friend for that question. Probation has had a very difficult time, but I am pleased to tell noble Lords that 90% of our probation regions are now improving, ahead of last year. I am doing a series of roadshows at the moment, going around the country speaking to probation staff—in fact, I will be in Bristol tomorrow—talking about the £700 million of extra investment we are putting into probation. There are extra staff—in fact, we have recruited more staff than we expected and more than ever before, and we are investing in technology and more housing too. While probation has had a difficult time, we are seeing green shoots across the whole of the Probation Service, and the support we are giving it through extra stability, extra recruitment and extra tech will mean that it can get back to the levels of service it was delivering many years ago.
Baroness Falkner of Margravine (CB)
My Lords, I want to draw the House’s attention to a specific case concerning child-grooming gang rapists who are no longer British citizens. I think the Minister will not be surprised to hear me refer to the case of Mr Shabir Ahmed, who we are told cannot be deported because of an immigration law passed more than 55 years ago in a different context. I ask the Minister a simple question: will the Government pass an amendment to that law so they can follow the law and the will of the people as exists now—that very serious offenders who are not British citizens are not welcome in this country and should be deported?
Lord Timpson (Lab)
What I can tell the noble Baroness is that all our sympathies are for the victims of these shocking crimes. It is absolutely terrible what happened. By law, tomorrow this this criminal will have to be released. What is important is that there will be substantial and robust licence conditions under MAPPA, with a recall option as well. He will know that the eyes of the state will be on him 24 hours a day.
Lord Garnier (Con)
My Lords, there are 3,650 women in prison in England and Wales. There are 12 women’s prisons and, as it happens, all 12 of them are in England. Of that 3,650, 2,500—that is about 70% of the women’s prison population—are in custody for non-violent offences. Why do the Government not release them, or at least some of them, and redesignate some of the women’s prisons to house the rapists and child molesters that seem to be about to be released?
Lord Timpson (Lab)
The noble and learned Lord’s figures are correct. What I also believe is that most women should not be in prison. I believe most women are victims. When you know that over 60% of women in prison have brain damage as a result of being beaten up, you have to ask yourself the question, “Where is the right place for them?” What we need is a very robust and well-invested Probation Service. We need to make sure they have a house to live in when they are released and that they get the support both in prison and out, so that the likelihood of reoffending can be reduced. With the Women’s Justice Board that we set up last year, we have done a great amount of work on a women’s diversion fund. We already had one women’s intensive supervision court, and we have announced another four, so this is part of the process of getting to a point where we can close a women’s prison.
Lord Brooke of Alverthorpe (Lab)
Does the noble Lord agree that tagging has an important part to play in this—the investment in new technology should cover that—and are the Government going beyond that to explore implanted chips?
Lord Timpson (Lab)
I thank my noble friend, who probably reads Inside Time newspaper, because it had a headline about implanting chips. That was suggested by a potential supplier when we had a sort of a “Dragons’ Den” day, and it was not something we accepted at all. At the moment, 29,000 offenders are on an electronic tag, and that will be going up to 40,000 as a result of the changes we are carrying out. The technology is robust and it works, but we are also making sure that we use that technology better by using data better. That means working with the police, for example, so we can link crimes to where people are going about with their tag. We are also very interested in something called proximity tags, which means, for example, that a victim of stalking or domestic violence will know at any time where their perpetrator is so they can have the freedom to move wherever they want, not their perpetrator.
Baroness Gohir (CB)
Can the Minister tell us the projected number of rapists and child groomers who will be released, and over what period? Are we expecting hotspots around the country?
Lord Timpson (Lab)
What is important is that we get the numbers right. While we are here today, our incredibly hard-working and talented staff in our offender management units are working out the release dates of a large number of people who are currently in prison. We have already stated that we think, as part of our impact assessment, that there will be 7,500 prison place savings, but there is more work to be done. We have a quarterly update that we publish, and that is where this sort of information goes. But the most important thing throughout all this is that we cannot run out of prison places. We need to make sure we do this safely, with great communication with victims, but we need to make sure we do not run out of prison places again.
Draft Conversion Practices Bill
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Cash (Con)
My Lords, it should go without saying that anyone who has been subjected to violence, coercion or abuse because of who they are or whom they love deserves the full protection of the law, but this Bill provides no necessary new protections and risks criminalising people who have done nothing wrong. It is deeply flawed in its drafting, and the evidence on which it is based is at best weak and at worst misleading. I will come back to that.
The Government’s Explanatory Notes say that abuse ranges from beating a person to coercive control, but these are already crimes, and those who are not in a relationship are covered by harassment or common-law assault. The Explanatory Notes also say that the Bill will cover “psychological or emotional pressure”, “economic pressure” and conduct that
“causes serious alarm or distress which has a substantial adverse effect on their usual day-to-day activities”.
This represents an average day for most teenagers when one is parenting them, as I am.
That drafting and those terms would put in question a wife who asks her husband to stop wearing her clothes, or parents who tell their child that they will not fund puberty blockers or cross-sex hormones, or a school that insists on referring to all its pupils as girls and boys. Despite reassurances from the Minister in the other place, the way this Bill is drafted causes all these possible problems. Can the Minister tell the House why the Bill contains no carve-outs for such interactions, and can he explain how the clear conflict with Articles 8 and 10—the right to freedom of expression, and the right to a private and family life—are to be reconciled?
This Bill also hands the power of private prosecution to any organisation that wishes to use it, without requiring the consent of the Attorney-General or the Director of Public Prosecutions. This means that litigious, bad-faith, privately funded campaign groups, such as the Good Law Project, could destroy the lives of those with whom it disagrees by bringing prosecutions. Can the Minister tell the House why there is no requirement in this Bill for prosecutorial consent?
I turn to the evidence base on which the Bill is built. The Minister Olivia Bailey quite rightly stated in the House of Commons that
“it is beholden on us all to ensure that this conversation is based on real facts”.—[Official Report, Commons, 25/6/26; col. 548.]
I am sorry to say that she then relied on the report from Galop, an LGBT+ anti-abuse charity. She claimed that it contains hundreds of case studies demonstrating appalling abuse happening right now. But it contains fewer than 200 identified cases and, of those, only 51 people were specifically seeking help with conversion practices. The rest were already seeking help for domestic abuse, forced marriage, housing or mental health.
I am sorry to say that the Minister also failed to mention a highly significant fact: that Galop ran a helpline on behalf of the Government, funded to the tune of £360,000 over three years. This is a government contractor’s report, therefore, created to justify further funding for that same contractor, and presented as independent evidence. In their report, the Galop researchers themselves admitted that the cases they found align with existing offences including ABH, rape, sexual assault, forced marriage and coercive control. Will the Minister explain why a report produced by a government contractor was presented to Parliament as independent research?
The impact assessment, published yesterday, fares no better. That relies on a Stonewall opinion survey that found that 10% of LGBT people had undergone an exorcism, which—as one mathematician, helpfully verified by the charity Sex Matters, has calculated—would imply 24,600 gay exorcisms a year in this country. That is preposterous and incredible, and yet the Government have used the same survey and flawed methodology for the 75,000 to 93,000 prevalence figure on which the entire financial case for the Bill rests. This is not a small matter, because every government department is required to follow the Treasury’s Green Book rule against cherry-picking data. This document fails that test. Can the Minister please explain why the data has been used so selectively, and what will be done to correct this?
I am afraid it gets worse. It is said that the Bill will generate a benefit of £783 million by assuming, first, that this legislation will prevent 100% of conversion practices occurring and, secondly, that—and very precisely—38% of those saved from conversion practices will also avoid depression. It is curious that the 38% figure came from a US study with no assessment of multifactorial causes of depression and without any peer review. As for preventing 100% of offences, if any law in history had achieved that, we would have no crime at all. The estimated costs of the Bill are then limited to 45 minutes of training per police officer and other workers troubled with implementing it. No other police time, court time—wasted time—is factored in; it is all to be confirmed. One might laugh, if only it were not so gravely serious.
I very much welcome the fact that the Bill is going to a Joint Committee for pre-legislative scrutiny. As we can already see, that scrutiny will be vital. Can the Minister give a firm assurance to this House that the Joint Committee will be given adequate time to take comprehensive evidence from all interested parties? It is worth us remembering that the Scottish Government tried a Bill like this in 2024 and that the public ferociously rejected it—leaving it, as one commentator said, “torn in shreds”. As this Bill goes forward, I very much hope the Minister will ensure the scrutiny it requires.
Lord Scriven (LD)
My Lords, before I start, it is worth remembering that in the middle of all this conversion therapy are individuals who are dealing with trauma. It is beholden on all of us to dial down the volume and discuss this much more calmly.
We on these Benches welcome this Statement and the publication of the draft Bill for pre-legislative scrutiny. For eight years, across five Prime Ministers—most of them Conservative—we have heard repeated commitments to end conversion practices. It is conduct that the British Psychological Society and professional bodies have long condemned as unethical, so it is a relief to the one-in-six LGBT individuals who have been offered this unacceptable practice that this Government have finally advanced a draft text to fill any potential gaps in our laws.
However, publication for pre-legislative scrutiny is the commencement, and not the conclusion, of where we will get to. The Liberal Democrats have constantly pushed for an effective, workable ban. We acknowledge the Government’s intent to create a framework that includes protections regarding gender identity, as it is vital that no individuals are subject to genuinely abusive, coercive or harmful practices. Yet we must acknowledge that, for some, it is precisely around the intersection of gender identity, clinical guidance and the family sphere that this legislation will face its most contentious challenges. Striking the right balance here is an incredibly delicate task. We and the Government must get this right to avoid any unintended consequences.
In particular, we must ensure that the threshold of “abusive acts causing serious harm” is drawn with clear legal precision, so that it does not create problems for some parents, for example. It is a fundamental part of loving parenting to guide children as they navigate deep, complex questions about who they are. A parent who in good faith advises a child to take time or who expresses questions about social or medical transition is acting out of care and duty for their child’s protection. This legislation must be drawn carefully enough to guarantee that these supportive conversations within families do not unintentionally cause a crime to have been committed.
Furthermore, we must ensure absolute clarity for teachers, clinicians and therapists so that they can continue to offer objective, non-directive and exploratory support, without the fear of legal reprisal or professional hesitation. The Liberal Democrats have always championed a balance between robust protections from abuse and the defence of civil liberties, free expression and freedom of religion. These boundaries between parental guidance and legitimate healthcare must be balanced, and the work of the Joint Committee will be incredibly welcome in guiding this House in deciding on this legislation. It provides the exact rigorous cross-party forum needed to test these definitions, listen to all viewpoints and build the workable consensus required.
Therefore, I ask the Minister three important questions. First, how will the Government ensure that the draft definitions explicitly and robustly protect the rights of parents to have open and loving conversations with their children without fear of investigation? Secondly, what specific steps are being taken to ensure that the Joint Committee’s scrutiny processes actively engage with all views within the LGBT+ community, family support groups and medical professions to ensure that these boundaries are balanced and appropriate? Finally, what is the anticipated timescale for this pre-legislative scrutiny, so that this House can eventually examine a Bill that is genuinely balanced, fair and effective?
The Deputy Leader of the House of Lords (Lord Collins of Highbury) (Lab)
I thank the noble Lords for their questions. I am acutely aware that there is a consensus across this House. There are no bipartisan divides here. The previous Government were committed to the principle of this legislation, and I welcomed it at the time. So, irrespective of what the noble Baroness says, there is consensus and there is concern. At the end of the day—I agree with the noble Baroness here—we can all agree that no one should face abuse just because of who they are, and our draft Bill is about protecting LGBT+ people from serious physical and psychological harm.
The Galop anti-abuse charity has for many years supported people who have suffered abuse. It is only reflecting the evidence that has been given to it. We must be clear that we are talking about victims of severe abuse here. One case of this abuse is one too many, which is why we are criminalising it. So let us not say that we are getting this out of proportion.
The noble Lord, Lord Scriven, addressed the fact that there are gaps in the existing law that mean we cannot prosecute offences properly with domestic abuse legislation. For example, on coercive control, the legislation is designed for someone who has a relationship with an intimate partner, and it would not capture an offence committed by someone they did not know. There are many other examples of gaps in the law that need to be addressed.
Secondly, the noble Baroness missed an important point: for the first time, we will have a clear definition in law of conversion practice. As with other offences, such as upskirting or non-fatal strangulation, a definition is important to help victims understand what has happened to them and be able to come forward, and for prosecutors to build a case. I am confident that there is a need to legislate in this area.
On the points that both noble Lords raised about parents and legislation, I want to be absolutely clear that this Government and this law will not dictate how people raise their children. Our measures are not intended to infringe on the right of parents to bring up their children in line with their beliefs or core values. We are absolutely clear that the ban must be balanced and targeted so as not to impinge on legitimate healthcare or the range of broader support that those exploring their sexual orientation or gender identity might seek or receive. I also stress that this draft Bill is not about regulating medical care. We understand how important it is that people get the medical support they need, depending on their particular needs and circumstances. This is a matter for the DHSC and the NHS.
I and Minister Bailey in the other place have been clear right from the beginning about the importance of the pre-legislative scrutiny. I very much welcome the fact that the Liaison Committee has agreed to this. It will be scheduled and the usual channels will bring forward calls for participation in that committee fairly shortly. That will hopefully be a great opportunity to reassure people about what are genuine questions and concerns that we should not be afraid to deal with. Many people in this House know and have met people who have experienced the abuse defined in this Bill, so I hope that through the pre-legislative scrutiny we can all come together and return to the consensus that we have had on dealing with this terrible abuse.
Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Wheeler) (Lab)
My Lords, I gently remind noble Lords that this next session of 20 minutes is for Back-Bench questions only. We will start with the Conservatives and then work our way around.
Baroness Meyer (Con)
My Lords, given that abusive conversion practices are already criminal offences, can the Minister tell the House what conduct the Government intend this Bill to criminalise that is not already unlawful? Can he identify a single case in which a victim was denied justice because existing criminal offences were insufficient, thereby demonstrating the need for this new criminal offence?
Lord Collins of Highbury (Lab)
I had hoped that the noble Baroness would have listened to my response to the Front Benches. To be clear, we have identified gaps in existing law where we cannot prosecute offences properly. The legislation on domestic abuse and coercive control, for example, is designed for someone who has a relationship with an intimate partner and would not capture the offence committed by someone they did not know. There are many other examples that I think the pre-legislative scrutiny will be able to identify.
We should not forget the point I made about the other offences that we have introduced, where people could have argued that existing law would capture them. Upskirting and non-fatal strangulation are two good examples, because they highlighted offences that were being committed and could have been prosecuted, but the victims were not prepared to identify or could not identify properly that it was an offence. That is an important element of why this Bill is so important.
Baroness Thornton (Lab)
My Lords, can I say how much I welcome this draft Bill and the pre-legislative scrutiny that will take place? His Majesty’s loyal Opposition have to sort out their lines on this, because as late as 2023 their Government confirmed their intention to publish a trans-inclusive draft Bill and set out time for scrutiny.
I know that the noble Baroness, Lady Cash, feels strongly about some of these issues. I had to smile, though, because she is probably an utterly brilliant lawyer, but we are not a court of law. My question to my noble friend the Minister is: would he agree that the next step is to ensure that the draft is carefully considered during pre-legislative scrutiny, so that we can be sure that it will protect all those who are vulnerable to abuse, while not criminalising important exploratory conversations about people’s sexuality or gender identity?
Lord Collins of Highbury (Lab)
I thank my noble friend for her question. She is absolutely right, and that is why the pre-legislative scrutiny will be important. We are very clear that the Government will not dictate how people raise their children. Our measures are not intended to infringe parents’ rights to bring up their children in line with their beliefs and values. We are clear that the ban must be, as my noble friend pointed out, targeted and balanced, so as not to impinge on legitimate healthcare workers who may be giving advice.
I was at the Spanish embassy last night and I was very pleased that Spain has adopted similar legislation. It has passed it, and there is similar legislation in other European countries. We can learn from their experience. I also met the ambassador when I was in Copenhagen at the IDAHOT+ conference to talk about the experience in Iceland, which has also adopted similar legislation. So there are plenty of examples where, in pre-legislative scrutiny, we can understand some of these issues and how they have been adapted.
Baroness Ludford (LD)
My Lords, the Minister says the Bill is intended to criminalise only seriously abusive conduct and not, for example, to impinge on parents’ rights to bring up their children. So why does Clause 1 say that any conduct can be a conversion practice? Is a parent who fails to take a child to private services that offer puberty blockers, or to give them the money to go themselves, guilty of psychological or emotional pressure, given that we know that sometimes teenagers do not like the word “no”?
Lord Collins of Highbury (Lab)
I cannot be clearer, and I will repeat the point: this is not about the Government dictating to people how to raise their children. The measures in the Bill are not intended to infringe parents’ rights to bring up their children in line with their beliefs or core values. That is the straight answer. We will see how this can be properly tested and scrutinised in the pre-legislative Joint Committee of both Houses. I am absolutely satisfied that we can do that. The draft Bill seeks to target harmful and abusive acts; it will not impinge on any other legislation.
Lord Hayward (Con)
My Lords, I will take the opportunity to repeat what has been said, so that some of my noble friends can recognise that this is a piece of legislation that was to be introduced by a Conservative Government, but they failed to do so. They were repeatedly committed to introducing that legislation. The detail that has been raised by noble Lords this afternoon is a matter for pre-legislative scrutiny, but the principle of the legislation is absolutely clear and correct.
I wear the tie of the Kings Cross Steelers. One of our members was subjected to conversion therapy over a long period of time. How he has remained so balanced and such a nice person I do not know, because I would not have been so balanced if I had been subjected to what he was subjected to. All those, including the Minister, who are going to question aspects of the law in the proposed Bill should have serious conversations with people who have actually been subjected to conversion therapy, rather than reading from a script that has been concocted by people who do not like the Bill, which the Conservatives wanted to introduce in the first place.
Lord Collins of Highbury (Lab)
I thank the noble Lord and I appreciate his comments. I meant what I said: there is cross-party consensus and a consensus across this House on stopping this abuse, and he is absolutely right. The United Kingdom has long championed the rights of LGBT+ people at home and abroad, and we proudly uphold one of the most expansive legislative frameworks in the world—and I want to make it clear that that has been delivered by both Labour and Conservative Governments.
However, I also remind the House that this is part of the work to fulfil the commitments set out in the Government’s manifesto on advancing rights and protections to LGBT people. Therefore, as well as this legislation banning conversion practices, noble Lords will know that we have equalised hate-crime laws, established a scheme to address the historical wrongs against LGBT veterans, and improved healthcare services for LGBT individuals. Additionally, we are collaborating with international allies to strengthen our position as a global leader. One of the important things is that we set standards which are important for other countries to see because, with some of the abuse and the legislative changes that we are now seeing, we are facing more countries that have criminalised homosexuality than there were two years ago. So we are going the wrong way, and we need to set a positive tone here.
The Lord Bishop of Leicester
My Lords, I welcome the intentions behind the draft Bill. Indeed, in 2017, the General Synod of the Church of England passed a Motion, in fact by a large majority, which called on the Government to outlaw conversion therapy. However, I want to mention today that I have a number of concerns about the drafting of the Bill, and indeed particular concerns about the lack of clarity on the difference between harmful conversion practices and perfectly acceptable practices of pastoral care and indeed prayer, which is much needed for those who are in difficulty. If this difference is not crystal-clear within the legislation, it will potentially have a very significant negative impact on what I believe is legitimate spiritual care offered by faith groups. So, alongside the vital importance of consulting with LGBT+ people, can the Minister tell me what consultations have taken place with religious groups, and is he open to further conversations about how appropriate spiritual care can be guarded within this legislation?
Lord Collins of Highbury (Lab)
I thank the right reverend Prelate. The important thing here is that the consultations have been going on for some time, as have the debates on this legislation, as the noble Lord, Lord Hayward, pointed out. However, we remain committed to that level of consultation. The Government have no intention of interfering with people’s right to religious belief and expression. We are not seeking to prevent people living a life that aligns with their religious or cultural values. This is not about telling people that they cannot hold certain views. We are targeting clear instances of abuse here, and we are very clear about sending a message that LGBT+ people deserve to be safe from harm.
An offence occurs only if someone seeks to change a person’s identity through abusive conversion practices that result in harm. A religious leader teaching their faith’s views on LGBT+ matters should not be affected by this draft Bill. The principle that the right reverend Prelate raises with regard to counselling and advice is covered by what I said about parental responsibility and medical advice. These things are absolutely covered in the Bill, but we will address these questions in the pre-legislative scrutiny.
Lord Isaac (Lab)
My Lords, I start by congratulating my noble friend on his appointment as the UK Special Envoy for LGBT+ Rights. It is significant that we need this role to address some of the real lack of progress that we see around the world. I also thank my noble friend and the Minister for Equalities for their important work in bringing forward this Bill. Having grown up gay in the 1980s, I know what it is like to be a young person growing up in a society where people say that you are not normal, and there is no sense of belonging by you and by your family. I am glad that that is no longer the case for very many people but, sadly, that is not universally the case. I know people who are constantly put under pressure to change their identity, not necessarily by their family but by external third parties. As a lawyer, I think that the draft legislation does plug gaps in the criminal law, so my question is: does my noble friend agree that passing this legislation after examining it in the pre-legislative scrutiny phase will help him in his role as the special envoy but also help us regain our place as a leader in LGBT rights across the world?
Lord Collins of Highbury (Lab)
I thank my noble friend for emphasising that point, because I think it is really important. I also thank him for his congratulations on my appointment as Special Envoy for LGBT+ Rights. That is an additional task I am extremely willing to take on, because in the current global climate, it is important that we can set out how we and our values in this country are so important—how we have taken the lead and that lead has shown other countries how to behave. We are absolutely clear on that. I do not think we should underestimate the importance of that because, in my recent travels, I attended the conference of the Organization of American States, where I met 200 civil society activists from across Latin America, central America and South America who were talking to me about the sorts of pressures that they were under as LGBT people. It is unbelievable the pressure that they are under, but they were determined to highlight how progress can be made. Progress can be made by seeing the example that this country sets, and we should not underestimate that.
Baroness Fox of Buckley (Non-Afl)
I appreciate the Minister’s intention but will the Government note that already family lawyers have warned that allegations under this law—not another law—as drafted, with its loose definition of “abusive” and so on, could indeed trigger criminalising parents; for example, if you are a mum who says to a teenager who says that they are born in the wrong body, “No you’re not”. That is a challenge to their identity, and that could even trigger social services investigations. Does the Minister hear those voices? Does he appreciate that in this pre-legislative scrutiny period, the last thing we want is consensus? What we need is scrutiny and proper and robust argument, so that we draft the law that the Minister obviously wants but is not the one that is written down at present.
Lord Collins of Highbury (Lab)
I think I am inclined to agree with the noble Baroness that scrutiny is about challenge. I have no problem with questions being asked. I have no problem in addressing the issues that have been raised this afternoon. I have attempted to give very clear reassurances, as did my honourable friend in the other place, that the Bill will not interfere with the rights of parents, will not impact on the rights of medical people giving advice, et cetera. We are talking about horrendous abuse. The noble Lord, Lord Hayward, knows what I am talking about, because he has heard people tell others about their experience. Serious harm and abuse, that is what we are talking about. We all know that much of that remains hidden and is not talked about because people are afraid to express it. That is why I think it is really important—I come back to my original point about the gaps in the law—that when people understand that what they have suffered is subject to law, is subject to the possibility of prosecution, I think we will find a lot more people coming forward, and that is good for them and it is good for this country.
Lord Sentamu (CB)
My Lords, the right reverend Prelate the Bishop of Leicester talked about the General Synod in 2017 debating outlawing conversion therapy. I put my head on the block and supported the motion that it should happen because in my book conversion is to make the person whole but not to oppress them. It is not to put your ideas on to them. Why has “conversion therapy” been taken out and replaced with “conversion practice”? When you read the first clause of the Bill, which defines these conversion practices, you have to reorientate yourself about what is being talked about. Why has “conversion therapy” not been used? We should be committed to the scrutiny of the legislation and all play our part in making sure that it arrives in a better place than it is at the moment.
Lord Collins of Highbury (Lab)
I thank the noble and right reverend Lord for his question and sort of agree with him. I have tried to be clear that the Bill criminalises abusive, harmful acts that are intended to change a person’s sexual orientation or transgender identity. That is what it is intended to do. Like my honourable friend in the other place, I welcome questions. I am not fearful of challenge. That is why we have put forward a very clear programme of pre-legislative scrutiny. It is an opportunity for these issues to be properly addressed.
Baroness Brown of Silvertown (Lab)
I am delighted that the Minister is here today with this piece of legislation. I thank him for that. When I was in the other place, I had members of my religious communities come to talk to me about their fears regarding conversion practices and therapies being undertaken in our community for vast amounts of money. Can the Minister assure me that we will do all that we can to protect those who are most vulnerable to abuse while not criminalising conversations about people’s sexuality or gender identity? That is what my religious community would want me to ask.
Lord Collins of Highbury (Lab)
I am glad that my noble friend has asked that question because I cannot be clearer. I might be offended by someone saying to me, “You’re gay, we don’t like it” or “It’s against my religious belief, I don’t want to be associated with you”. I can certainly be offended, but I would not argue that it should be against the law. When we have debated same-sex marriage in this House and the right reverend Prelate’s colleagues have stood up and said that it is wrong, I have never felt offended. Some of the comments in that debate I did feel offended by, but I expressed my views at the time.
We have really positive values in this country. Where is our compassion? Where is our urge to protect people from abuse? That is what this legislation will do. I ask noble Lords not to shake their heads. They do not need to. If noble Lords have questions and concerns, we have a process of pre-legislative scrutiny where these can be addressed. I am not afraid of debate or discussion. I am certainly not afraid of debate. As Minister for Africa, I faced Presidents of countries which were criminalising my sexual orientation. I was not afraid to enter into a debate with them. I am not afraid to enter into a debate with noble Lords opposite.
Farming Road Map and Profitability Review
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Roborough (Con)
My Lords, I thank the Minister for the Statement, the noble Baroness, Lady Batters, for her excellent review on farming profitability, and my noble friend Lady Rock, who is in her place, for the Rock report, which also seems to have been carefully read by the Government. I draw the House’s attention to my register of interests as a farmer, forester, and landowner; as a commons owner and non-grazing grazier on Dartmoor; and as the owner of SSSIs.
This farming road map is intended to provide a long-term strategy for farming for the next 25 years, but often seems disconnected from this Government’s other actions and policies. The family farms inheritance tax directly threatens long-term business viability and the partial U-turn has not been enough to restore broken trust or confidence. The £15 million investment in genetic improvement networks until 2029 remains overshadowed by the threat of the SPS negotiations to precision breeding and gene editing. Can the Minister give us any assurance that these, or the development of bovine TB vaccinations, will not be impacted?
The road map promises to make trade easier with the EU through the SPS agreement, but the new regulations will also apply to our domestic produce without input from Parliament. Growers and breeders are making production decisions now for produce which will be sold beyond mid-2027, without any guarantee that this produce will still be compliant. We have highlighted the need for a sufficient transition period to mitigate these potential consequences, but the Government will not even publish an impact assessment until after the agreement has been signed. The road map also states that it wants to protect UK farmers from unfair competition, yet it lacks any mention of closing the flag loophole on food packaging.
The draft Carbon Budget Order that we debated just last week requires a reduction in livestock numbers, and in meat and dairy consumption. The road map is right to say that farming and the environment should not be positioned against each other, but that is exactly what is happening. We recently saw this confusion between farming and the environment on Dartmoor, where the latest ELMS agreements administered by Natural England require a 60% to 90% reduction in grazing pressure, in a one-size-fits-all policy for moorlands around England. Natural England disclaiming responsibility for any resulting pony cull is disingenuous, as the consequence will inevitably be sharp reductions in pony numbers.
The 2030 goal of 50% of SSSIs being on track to be in favourable condition is disappointing. How is this progress from the 62% that Natural England reported to be in favourable or improving status as recently as last year? What exactly has Natural England been doing all these years, with 2,800 staff and £300 million per annum of funding? These are our most important biodiversity sites, and that shows remarkably little progress. Imposing the same grazing policy across all the moorlands around England in order to improve SSSIs fails to reflect that every SSSI, moor, and every part of every moor, is different.
Can the Minister tell us whether she believes that Natural England is fit for purpose and delivers value for money for the taxpayers who fund it? We need an overhaul of arm’s-length bodies, of which there are over 34 in Defra alone. There is a clear lack of co-ordination, accountability and value for money.
Within the Statement, though, we welcome commitments such as increasing domestic timber production, and helping farmers and growers to access a greater share of the public sector food and catering market. However, there are a number of concerning commitments in this road map: doubling the number of Environment Agency farm inspections by 2029; turning sustainable farming incentives into unremunerated regulations; environmental permitting for dairy and beef farming; and a geospatial enabling programme to monitor land use. Does the Minister believe that this punishment and regulatory approach is really the right one? Would it not be more helpful to farmers to deregulate and allow them to focus on their businesses?
There are also encouraging comments throughout the road map on bringing in greater private investment to support environmental outcomes, which we on these Benches robustly support. However, the detail is lacking. Will the water Bill that we expect in this Session include support for nature-based solutions helping farmers diversify their income? Which other carbon and nature markets does the Minister expect to deliver meaningful revenue for the rural economy by 2030? I look forward to the Minister’s response.
Baroness Grender (LD)
My Lords, I thank the Minister for the Statement. I have several questions and would be more than happy for her to write if she is short of time or the relevant information. I also join in the thanks to the noble Baroness, Lady Batters, and there will be more about the Rock review later.
For these Benches, a central question raised by the Farming Roadmap 2050 remains: what, in practical terms, has changed in the short term for farmers on the ground as a result of this document? The language of clarity and partnership is welcome, of course, but many of the underlying challenges—income instability, an uncertain transition away from direct payments, and rising regulatory pressures—remain firmly in place. What immediate measures within the road map are intended to restore confidence, particularly for small and upland farms?
I turn to funding. The headline figure of £2.5 billion for England is in regular use, but there is limited clarity as to how that funding is allocated in practice. Can the Minister undertake to provide the House with a breakdown of how that budget is spent across the principal schemes, including the sustainable farming incentive, Countryside Stewardship, higher-level stewardship and capital grants? In addition, what proportion of that budget was actually spent in 2025-26 and what is the projected spend for 2026-27? Can the Minister confirm how many farmers have been in receipt of payments in each of the past six years and whether the Government expect that number to increase or decline under the new framework?
The reopening this week of the sustainable farming incentive is, of course, welcome. However, concerns remain about the operation of a first come, first served system. What assessment has been made of whether this approach risks favouring better-resourced farms with access to professional support, such as accountancy, over the small family farms that the early release scheme is intended to benefit?
The road map presents itself as a shared vision, yet it makes no direct reference to the tenant farmers review by the noble Baroness, Lady Rock, which set out clear and practical recommendations on fairness, access and security for tenant farmers. Recommendations in this road map appear to have been informed by that review; it is just a bit of a shame that there is no explicit acknowledgment of that.
On land use, the document does not adequately address the complexity of common land arrangements, particularly in upland areas. Commoners operate within systems of shared rights that do not align easily with standard scheme design. What specific provisions are being made to ensure that those farming common land are not disadvantaged? I wonder whether, in that context, the Government will perhaps consider something such as a rolling over of higher-level stewardship agreements, with appropriate uplifts, to provide a certain level of continuity while a more suitable long-term approach is developed for what I am calling the common land conundrum, which affects around 4,000 farming businesses.
On trade, farmers continue to face a dual pressure: competition from imports produced to lower standards and friction in exporting to key markets, particularly the EU. I thank the Minister for keeping us regularly informed on progress on the sanitary and phytosanitary agreement with the EU. Would it be fair to say that some of the assumptions underpinning the road map mean that we need this resolved sooner rather than later? I wonder if even the date in the road map is a little too late.
The Government say that food security is national security. Can the Minister explain how the road map will improve the UK’s level of self-sufficiency, over what timeframe and against which measurable indicators?
Finally, at present, the gap remains clear between the laudable ambitions set out in the road map, which I think we can all support, and the immediate realities facing farmers. Can the Minister please explain how the Government intend to bridge that gap in practice in the meantime?
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, there was an enormous number of questions—and, obviously, I do not have an awful lot of time. We are talking about the Statement on the road map; many of the questions are not about the road map and are much broader. As I have only a certain amount of time, I shall concentrate initially on the questions to do with the road map.
Questions were asked about the UK-EU SPS agreement, which is still ongoing. I am sure noble Lords are very aware that the summit was postponed. Currently, we do not have a new date for the summit, but we are continuing with negotiations. Just because the summit has been postponed, that does not mean that we are not continuing to engage with the EU. We are making good progress in a number of areas. Clearly, I am not able to tell the House about the specifics on gene editing, pesticides and so on while negotiations are ongoing, because I would not want to impact them or the outcomes in any way.
The noble Lord, Lord Roborough, said that the environment and farming are being pitted against each other. I dispute that. We have a huge challenge in farming, which the road map is designed to tackle. That is why it is a long-term, 25-year plan. Farming is among the sectors most exposed to climate shocks, environmental degradation and growing resource pressures. So, we have a huge challenge here. How are we supposed to maintain food production and food security, and support profitable farming, while we move towards a lower-impact, market-led, climate-resilient system? That is what this road map is designed to do.
From our nature security assessment, we know that ecosystem degradation is a significant risk to food production. That is why, instead of the environment and farming being pitted against each other, we are trying to bring resilience to farming. We know that environmental resilience means that we have better food security and food production, and that is what the road map is designed to achieve.
We are trying to make farm inspections and environmental permitting more effective. We need to have inspections and permitting because we need to tackle issues such as water pollution, air pollution and problems with emissions. It is really important that we get farm inspections better organised. On a grant that we had a few years ago, we had three separate groups of people come round to inspect the same thing. That is what we have to stop—it is a waste of everyone’s time and money. We need to look at how we regulate and how we manage permits.
The noble Lord talked about land use. The Land Use Framework is an important document, because land management will be absolutely central to our commitment to maintaining domestic food production at at least its current level, while at the same time restoring biodiversity and, as I just mentioned, improving water and air quality and reducing emissions. One of the key things this document does is bring together our different policies. We have an animal welfare policy and the land use framework, as well as the different farming grants and taxations. We need to bring them together, because if farmers are to be able to properly plan for the long-term future, they need to understand how all these different things link together. Having too many different things going on at the same time is not helpful. That is something else we are trying to look at.
The document mentions the water Bill, alongside water pollution and things such as planning for reservoirs. Various things to do with farming and water that we need to be getting right are mentioned in the document.
The noble Baroness, Lady Grender, talked about the importance of restoring confidence. We absolutely need to do that, but there are so many things we need to do to ensure that farmers have that confidence. They need access to the right skills and advice—again, that is central to our approach. One of the important things about this road map is that we spent a lot of time talking to the sector, right across the board, because we wanted to hear what farmers had to say and what they were concerned about. A consistent message came through from whoever we spoke to: the need for clarity so that they could plan for the future. The overview of the road map is designed to answer that call for clarity so that farmers can plan. They need to know what the Government are looking to achieve and the future direction of travel, so that they can plan with confidence. Ultimately, farmers are businesses; you cannot plan for the future as a business unless you have some form of clarity and security in the future.
The noble Baroness, Lady Grender, also mentioned uplands. Pages 37 and 38 of the document have a specific section on supporting upland farmers, and that includes improving access to schemes and support. One of the bees in my bonnet, as somebody in Cumbria, is that uplands have not had access to support, particularly regarding common land. I have spoken in this Chamber about that before, and I am pleased the noble Baroness raised it, as there is also a commitment in the document to ensure that
“support is accessible, practical and viable for common land”
where improvements are needed. That is why, given that the SFI has not been available for common land due to technical reasons, we have asked the RPA to look at this and try to come up with something that will work for common land. This is something I am very keen to encourage further.
On the breakdown of the budgets and the details on the numbers of different applicants, I think the best thing will be to write to the noble Baroness. She has requested quite a lot of detail, and I would not want to say something off the top of my head that was not entirely accurate.
On small family farms, we have just announced the latest SFI—the Written Statement on this has just come out—and the latest round is designed specifically to target and support smaller farms and those who have not had an agreement. We want to ensure that as many farms as possible are involved in agreements that help support sustainability, improving the environment while allowing them to continue to become more productive as farms.
That leads into the whole discussion around food security. We have to get this right. If we are to have food security for the long term, we have to get our soils right. We have to get our water pollution and our emissions right. This is why it is so important that we bring absolutely everything together.
Thinking about small farms brings me back to the comments made about Dartmoor and, again, uplands. It is important to remember that, as well as the farming road map, we are carrying out other things right now that are designed to make a difference. That comes back to the noble Baroness’s point: this covers 25 years, but what we are doing now? One of the things I am particularly excited about is the role Hilary Cottam will be playing in running pilot schemes in both Dartmoor and Cumbria on how to support those more challenging environments. Hopefully, that will make a real difference. She will be working with local communities as well as with Natural England.
On tenancy, it is great to see the noble Baroness, Lady Rock, in her place; she has done so much on tenancy. “A vibrant tenanted sector” is the headline on page 36. A lot of people do not realise just how large the tenanted sector is. It is incredibly important that it is supported in the way it needs to be. The Tenant Farmers Association welcomed the farming road map. I am looking forward to continuing to work in a constructive way with the noble Baroness on how we can make sure the tenanted sector gets what it needs out of this road map, so that we have long-term security and longer-term tenancies. The average tenancy is now only five years, which is not ideal, to say the least.
I have just about run out of time. The important thing here is that the Government are serious about having proper, long-term, year-on-year policy-making so that, instead of having short-term opportunities, farmers understand where the Government want to go. If farmers do not understand where the Government want to go, what we are trying to achieve and that we want to work with them on such things as innovation and skills—those long-term investment plans—they will never know where they are going to get the next grant or trade agreement from. That is what we are trying to achieve with this.
Baroness McIntosh of Pickering (Con)
My Lords, the road map does not appear to address the very real issue of the funding gap between the collapse in basic farm payments, which is accelerating faster than anyone expected, and the incoming funds from environmental land management schemes. Have I missed it? How does the road map address that very real challenge to farm incomes this coming year?
Baroness Hayman of Ullock (Lab)
The road map is designed to be a long-term look forward. Clearly, the important thing is that we make sure, because of that gap, that farmers can access the schemes that they need to support the farming that they are doing. Access to grant schemes has not always been straightforward. We want to make schemes simpler, fairer and more accessible, so more farmers can take advantage of the support they need.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I thank my noble friend the Minister for bringing this Statement to your Lordships’ House this afternoon and the Government for ensuring that the road map was published, because I asked about this on several occasions during Oral Questions. I recognise that agriculture is a devolved matter, but does my noble friend agree that the UK Government’s farming road map is an opportunity to set out a vision for supporting Northern Ireland farmers and helping to grow the sector’s future contribution to UK food security? And will she discuss this issue with the Minister for DAERA in Northern Ireland when she next meets him?
Baroness Hayman of Ullock (Lab)
As my noble friend is very aware, agriculture is a devolved policy area in the United Kingdom, so the Northern Ireland Executive are responsible for their own farming policy and can tailor that to best support their farming sector, which is different from England’s in a number of ways. I work very closely with DAERA and with the office of the Secretary of State for Northern Ireland as well as with the other devolved Governments. Regarding her question about raising this with my counterpart in Northern Ireland, I am meeting him online next week, so I am more than happy to do that. We work regularly on this. I go to Northern Ireland quarterly and discuss exactly these issues.
Baroness Rock (Con)
My Lords, I welcome the objectives for a vibrant tenanted sector set out in the road map. I draw the House’s attention to my interest as a tenant farmer. However, the Government appear to be a bit reticent still about taking the radical and necessary steps to improve the security of the tenanted sector. As the Minister has pointed out, 80% of all new farm business tenancies are now for five years or less. Short-term tenancies are the greatest barrier to sustainability, resilience and profitability. Both my review and that of the noble Baroness, Lady Batters, to which this Statement is also the response, identify taxation as the most appropriate lever to achieve greater security. Will the Government look again at the way in which stamp duty land tax penalises the very tenancy agreements that the road map says it wants to encourage? We must also ensure that tenant farmers are not unfairly treated when land is taken away for development, including solar development, so will the Minister confirm that they are willing to look again at the legislative changes needed to improve compensation for tenant farmers who lose land so that they are compensated for the real loss their businesses suffer?
Baroness Hayman of Ullock (Lab)
The noble Baroness makes some good points. I am more than happy to discuss these issues in the department and with the Farming Minister. Looking at our response to the review by the noble Baroness, Lady Batters, on tenancy, because she particularly mentioned this, we recognise the benefits of longer agricultural leases and the importance of security of tenure for tenant farmers. New industry-led guidance was published in March of this year, which hopefully will help more landlords and tenants look at how long-term agreements are of benefit to both landlord and tenant. Also, we know that the Law Commission is looking to review agricultural tenancies within its 14th programme, and we welcome that, because we genuinely believe that longer-term tenancies are better for the sector.
Lord Redwood (Con)
Is this not a policy to make us more dependent on imported dairy and meat from the EU, because these policies will find that the carbon targets, the grazing policy and the wilding policy will mean far fewer farm animals in our country?
Baroness Hayman of Ullock (Lab)
I disagree with that. In fact, I think the opposite. When we have met industry sectors, whether pigs, cattle or whatever—particularly in Northern Ireland, interestingly enough—we have found that they really see the benefit in the opening up of markets by us working closer with the EU. A lot of the trade restrictions, the paperwork and the bureaucracy will go. We lost, I think, 40% of our trading opportunities with Brexit, but this is an opportunity to have more trade and support for our farming industries.
Lord Harlech (Con)
My Lords, I declare my farm management interests as set out in the register. I would be interested to hear more from the Minister about more direct and clear support, helping farmers to access markets that are close to them; that is, public buildings and organisations. How can we prioritise local British farmers getting their produce into local schools, hospitals and that sort of thing?
Baroness Hayman of Ullock (Lab)
I do not have time to find the exact page, but I know that somewhere in this lovely document is a whole section on procurement and trying to achieve exactly what the noble Lord is talking about. We have talked about the importance of “buy British”—all Governments do that—but we need to look at how to make that happen. I urge the noble Lord to read that section; if he has not, it is great. I see that he has it in front of him—excellent. He is right: this is critical. If we are going to become more sustainable for the future, we need to look at how we support our farmers through public procurement.
Baroness Bennett of Manor Castle (GP)
My Lords, under the heading “Government actions and commitments”, the road map says that the Government will work with industries to
“co-develop horticulture and poultry Sector Growth Plans”.
Given that we are only 17% self-sufficient in fruit and 55% in vegetables, I hope that no one in your Lordships’ House would disagree with the need for a large and urgent growth plan in the horticulture space. However, I question the inclusion of poultry. We already kill 1 billion chickens a year in the UK. Particularly in the hotspots in Lincolnshire, Norfolk, Shropshire and Herefordshire, we have huge environmental and public health problems from highly concentrated nitrogen and phosphate waste, problems with air pollution from ammonia and, of course, huge animal welfare issues. Are the Government planning to further concentrate the poultry industry in those areas or are they going to spread the problem more widely?
Baroness Hayman of Ullock (Lab)
It is not for the Government to decide where poultry farmers want to farm. I will say that we are working closely with the poultry industry to improve animal welfare, because there are some issues around that. I am sure noble Lords who have been on the Tube have seen the posters about fast-growing chickens; again, that is something we are discussing with the industry. We are keen to promote the better chicken commitment, and we are very disappointed that certain restaurant chains decided to renege on their commitments on that—Nando’s was the key one. We are looking to improve things with the poultry industry and are working closely with it to make that kind of progress.
Lord Mackinlay of Richborough (Con)
My Lords, I pay tribute to the Minister for so adroitly finding her way through the document, but are we not rather discussing it in a vacuum? She said clearly that she did not want to stray into issues relating to the EU reset, but is it not the fact that this whole document will be put on to the altar—that is, will be thrown away—in an instant depending on what the EU requires us to do under the reset? As my noble friend Lord Roborough said, farmers do not know what they will be allowed to grow, what they will be allowed to sell, what types of herbicides or pesticides they will be able to use or even the genome of what they might be allowed to grow in the future. We have already seen that with foie gras, which will have to be imported into the UK under the reset. Can the Minister please give me her absolute assurance that there will never be live animal exports ever again through my old port of Ramsgate, which I and other activists worked so hard to stop? That was delivered only because of Brexit.
Baroness Hayman of Ullock (Lab)
There have not been any live exports since Covid. It stopped then, as I am sure the noble Lord is very aware. I am sure everybody knows that I simply cannot talk about what we are discussing in the reset, but I can give my absolute assurance to the noble Lord that that is one of the exceptions carve-outs we have asked for.
Lord Bellingham (Con)
My Lords, the noble Baroness, Lady Rock, mentioned tenant farmers being forced out of farms to make way for solar arrays. There is evidence of this happening today in Norfolk and Suffolk. The road map mentions “sustainability” and “food security” on a number of occasions—food security is mentioned many times. What is the Minister’s view of the location of large-scale solar arrays on prime agricultural land?
Baroness Hayman of Ullock (Lab)
This is what the land use framework does. It looks at what we use land for, and that includes farming, energy, housebuilding and so on. That is why the farming road map is designed to bring those different policies together. We need to be looking at how we meet our net-zero targets and how we become more sustainable in energy. We have seen with the war in Ukraine and other problems that if we rely too much on other countries in the volatile world that we live in, it is not good for our long-term security. We need to look at more renewable energy, but it needs to be in the right place.
Lord Fuller (Con)
My Lords, the Government have made their long-term choice for our farmers, and it is to align with the EU. I accept that the Minister cannot talk about the detail of the SPS, but it has been reported that it does a huge amount of harm, whether it is the abandonment of black grass chemistry or turning our back on enhanced breeding. The land use framework will take 1.7 million hectares—20% of the country’s farmed land—out of production. That is the long-term choice that Labour has made for our farmers. But the system of alignment with the EU works only because the EU has subsidies that we do not have in this country. Why are the Government damaging our farmers so badly with all the trade costs, the friction costs and the insane carbon costs—all those costs—but providing none of the subsidy revenues?
Baroness Hayman of Ullock (Lab)
I suggest that we do have grant schemes available. The SFI has just been announced and ELMS has been running for some time. ELMS came in under the previous Government, who decided that we would not have basic payment systems as the EU does and would move to a more environmentally sustainable grant system, which I support. That is the long-term future. As I keep saying, I cannot comment on the EU negotiations. There are a lot of discussions around things such as pesticides and transition periods, but we do not know what the final outcomes will be.
The Duke of Wellington (CB)
My Lords, I declare my farming interests as detailed in the register. My noble friend Lady Batters is sorry not to be here today, but she sent me a WhatsApp earlier, and if I can get the technology to work and read it, which I currently cannot, she has asked me to ask this question, which I hope I am allowed to do on her behalf—
Lord in Waiting/Government Whip (Lord Katz) (Lab)
I suggest that perhaps the noble Duke can find a way of asking the question in his own words.
The Duke of Wellington (CB)
Then I will happily do so. My noble friend Lady Batters—I am sure we all thank her very much for the work she did in this area—did a report that has led to the production of the road map. What I, and she, now ask is: when will the road map be turned into action?
Baroness Hayman of Ullock (Lab)
The plan is to crack on with it, because that is what we need to do. One of my frustrations is that it is very easy to write a document, or to say lovely things, but what we need is delivery. At Defra we are very keen to focus on delivery.
Baroness Bennett of Manor Castle (GP)
My Lords, the word “agroecology” and its grammatical variants appear three times in this road map. It is rather swamped by references to technology and things such as gene editing. On this poisoned planet and on these poisoned islands, we have exceeded the planetary boundary for novel entities, of which pesticides are a significant part. Does the Minister see that healthy soils, healthy water and healthy air have to be at the core of delivering both food security and a healthy environment for people to live in?
Baroness Hayman of Ullock (Lab)
Absolutely. The word “agroecology” may be used only three times, but sustainability—improving water, air and soil quality—runs all the way through the document. Just because it does not say the word, that does not mean this is not a key part of what the document intends to deliver. As I said earlier, environmental degradation leads to poor farm profitability: the Batters review was about farming profitability. That is also what the farming road map is designed to improve, because we need to improve our farming profitability.
Lord Redwood (Con)
Why are the Government asking for carve-outs from bad EU laws when, as a sovereign country, we should just say that we do not accept bad laws?
Baroness Ritchie of Downpatrick (Lab)
My Lords, does my noble friend the Minister agree with me, from talking to farming organisations in Northern Ireland and to the Minister, that there is considerable agreement about the need for the SPS agreement? They see it as underpinning profitability in the agri-food industry.
Baroness Hayman of Ullock (Lab)
This is really critical. What is often missed is the impact that Brexit has had on Northern Ireland, and the increased amount of bureaucracy and red tape in trade with Northern Ireland. Even for, say, a supermarket taking its goods over into Northern Ireland, it is much more complex than it used to be. We have red lanes and green lanes, and we have the Northern Ireland retail movement scheme. These things add not just complexity but expense to people trading in agri-foods with Northern Ireland.
One of the things that the SPS agreement is looking to achieve is to get rid of the majority of those checks and to make much smoother and more frictionless trade with Northern Ireland. The department and the Ulster Farmers Union are very keen that we work with it to achieve the best outcomes in this area.
Lord Fuller (Con)
My Lords, the arithmetic of the sustainable farming incentive proposals for later this year is that the £240 million, divided by the typical claim from last year, means that only about 5,000 claims would normally be successful, out of a total constellation of 60,000 eligible claimants. This means that less than 10% of claims are likely to be met. What advice does the Minister have for the 95% of farmers who do not get their application in by 9.05 am on 1 September?
Baroness Hayman of Ullock (Lab)
To be honest, I was not aware that 95% of farmers did not get their application in on time. The important thing is that we have a long-term, clear road map so that farmers do not end up not knowing what they are eligible for, what they can apply for and the Government’s direction of travel. The road map is designed to bring an end to exactly those sorts of problems.
Baroness Rock (Con)
My Lords, I welcome the Minister’s comments on the Law Commission review, and the indication in the road map that the Government will support that review and act on its recommendations. It would be very helpful if the Minister could reiterate that commitment today.
Baroness Hayman of Ullock (Lab)
The Law Commission has an important role to play here, because, if we are to start to unpick some of the issues, we need proper, clear evidence and facts. A review by the Law Commission—a responsible, highly regarded body—will enable us to do that.
Defence Investment Plan
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Goldie (Con)
My Lords, I thank the Minister for both the briefing and prior sight of the defence investment plan, which he provided to me and my colleague, the noble Earl, Lord Minto, yesterday. I doubt any plan was so dogged by delay and preceded by such drama as this one, but that doleful prelude was eclipsed by the gloom and scepticism that engulfed the plan when it became public. To quote my honourable friend in the other place, Mr James Cartlidge, it is “too little, too late”.
The threat we face is now. This plan, lacking in significant detail, is for the next four years. It was intended to deliver the recommendations in the SDR. It does not. It should have laid out a path to the 3% of GDP needed before the end of this Parliament, never mind during the next one. It does not. As for a path to NATO’s target of 3.5% of GDP by 2035, that apparently remains in the mists of the Prime Minister’s imagination: undiscernible and shortly to disappear.
The Prime Minister criticises the previous Government for not spending enough, but I point out to your Lordships that my party responded to the threat as we understood it then, in the wake of a searing economic challenge inherited from a Labour Government in 2010. However, despite austerity, we kept the RAF Lossiemouth air base open; ordered the vital Poseidon planes that operate from there; ordered eight Type 26 frigates and five Type 31 frigates, which are being built now; launched the Global Combat Air Programme to produce the next-generation fighter; and commissioned the Dreadnought programme to renew our nuclear deterrent. I am not going to speculate on Mr Burnham’s Harry Potter powers to wave a magic wand to fix this deficient defence investment plan. Given his projected political strategy to date, fixing defence is not on any wish list I have seen. However, I know that none of this is the Minister’s making. He is here to answer questions, which I know he will do with his customary loyalty, integrity and courtesy.
I will start with the Secretary of State’s foreword to the plan. If we strip out the roseate language, £298 billion is to be spent over the next four years. Some £283 billion of that is not new money; it is simply what is required to keep the doors open, pay the people turning up and ensure that the day-to-day bills are paid. The crux question is: how much is needed on top of that? The Chief of the Defence Staff, Sir Richard Knighton, says that £28 billion of additional money is needed over the next four years to do what must be done to keep us safe. My party is prepared to answer that call and fund it by reinstating the two-child benefit cap, reallocating up to £50 billion currently being spent on welfare and costly net-zero projects, and scrapping Labour’s catastrophic Chagos deal. This Government are not prepared to answer that call and will short-change defence by the £13 billion that they were never going to provide. That is completely unacceptable.
The former Secretary of State, John Healey, has said that this plan leaves the country “less safe”. The authors of the strategic defence review have said that the funding package is “not enough”. What will it take for the Government to listen to the service chiefs, the retired senior officers, and indeed members of their own party, and find the money that they all say is needed to keep us safe?
Even the inadequate £15 billion that the Government are going to provide immediately starts to fall apart under scrutiny. We know from the Chancellor that £4.7 billion is not there. According to the accompanying funding explainer, it is to be allocated at the Autumn Budget, presumably by a new Prime Minister and a new and as yet unknown Chancellor.
If this were not bad enough, page 73 of the Defence Investment Plan is revealing. It discloses that £10.7 billion of the £15 billion is to come from “defence efficiencies” over four years. So, as we speak, that money is not there either. This is accountancy smoke and mirrors. On the defence efficiencies, £1.1 billion is to come from “reform and service redesign”—so what reform, what redesign and what details can the Minister provide? Some £3.3 billion is to come through “workforce and resourcing”. What does that mean and what detail is available? Some £2 billion is to come through “infrastructure”. What infrastructure? How is that money to be provided? Some £0.2 billion is to come through “digital”—how? Some £3.7 billion is to come through “acquisition and supply chain”. How has that figure been arrived at, and what underpins that estimate? The more alert among your Lordships will have noticed that that totals £10.3 billion, not the £10.7 billion that is at the head of the defence reform efficiencies. So we have another £400 million whistling into the blue yonder. Separately, the plan also states that £1.1 billion will come from asset sales, so what assets will the Government flog off?
Unless the questions I have posed can be answered, this plan is meaningless. NATO, the MoD, politicians and the public need clarity about how much money is being given, when it is coming and how it is being provided. Smoke and mirrors and Treasury trickery do not cut it.
Lord Fox (LD)
My Lords, this is clearly a very delayed and extremely underfunded plan. As we have heard, at £15 billion it falls well short of the £28 billion requested by the defence chief to keep our country secure. But we know that it actually falls even shorter than that, as nearly £5 billion is unfunded and some £11 billion or more relies on undetermined efficiency savings. So, after months of paralysis, resignations and Cabinet chaos, the Government have short-changed the Armed Forces.
However, we should remember that it was the Conservatives who hollowed out our military, leaving the Army and Navy smaller than they had been for hundreds of years. The Tories failed to look after service personnel properly, through a lack of suitable housing and poor mental health support—that was unforgivable.
This Statement is a long way from solving these vital issues and many others. It is a political choice made by Sir Keir Starmer and the Treasury, and it leaves us less safe. Furthermore, it undermines our reputation as a leader in NATO. Last year, all NATO countries pledged substantially to increase investment so that we all hit 3.5% of GDP by 2035. But, even if the missing money is found, the share of GDP that we spend on defence by the end of the decade will be only 2.7%. In media interviews today, the Procurement Minister, Luke Pollard, said that the spending review next year will describe a pathway to 3.5%. That review will need to find an extra £25 billion per year to get to our stated target. Given where we are starting from, this is hardly credible.
This lack of credibility is not just a domestic phenomenon. When I attend NATO Parliamentary Assembly meetings, I can sense the reputation of the UK falling back. This is more than just worrying. So I will suggest some ways to increase investment and leverage what resources we have more effectively. The Liberal Democrats’ plan for defence bonds would provide an additional £20 billion at least, funnelling in private sector investment. This is not pie in the sky. Poland’s armed forces support fund, for example, was established in 2022, with the main source of funds being issuing bonds. For context, last year Poland spent 4.7% of its GDP on defence.
There are better ways of leveraging our existing defence spend. The UK could take part in the nascent defence, security and resilience bank. This ticks a number of important boxes: it would be multilateral; it would work with a greater number of allies; it would help project financing to span election cycles; and it would cost-effectively pull in private finance, multiplying our state investment by many times. The Canadian Prime Minister, Mark Carney, is a major proponent of this initiative. He met with Sir Keir’s envoy, Gordon Brown, last month to discuss it but, disappointingly, there seems to have been no progress.
The Government could also take bolder steps towards working with our European allies. Last month, the Lib Dems announced a plan for a UK-EU defence pact, including our intention to join Security Action for Europe—the SAFE programme. Andy Burnham is quoted as having said favourable things about both defence bonds and the DSR bank. He has also been historically in favour of closer relations with the EU. Does the Minister agree that the new Burnham-led Government should issue defence bonds, work with Canada to deliver the DSR and join the SAFE initiative in Europe?
There are also ways of making our spend on big ticket items go a bit further. For example, GCAP currently involves the UK, Japan and Italy. Canada, Saudi and possibly Germany have been mooted as additional partners. Can the Minister confirm that, through adding to the GCAP group, money could be diverted to other UK defence needs?
Much has been made of the headline spend of £5 billion for advanced uncrewed systems over the rest of this Parliament. I am sure this is welcome, as these systems are at the heart of modern warfare. However, to put this into context, the three-year £5 billion investment is only a tiny percentage of the plan’s £298 billion spend over four years.
We welcome the commitment to establish six new energetics factories by 2030. However, the nine-month delay in publishing this spending plan has frozen procurement and put many SMEs in peril. Now that we have a funding plan, how will the Government change the procurement process to give SMEs the certainty to invest and the cash flow to thrive?
Finally, last year’s strategic defence review rightly stated that national resilience cannot be bought with military equipment alone. It stressed the need for a comprehensive national conversation to shift our mindset and prepare the wider British public, local government and business for the hybrid, cyber and non-traditional threats that we already face. This is a whole of society challenge that spans far beyond the MoD, so what concrete progress is the Minister making with his government colleagues to initiate this national conversation?
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
I thank the noble Lord, Lord Fox, and the noble Baroness, Lady Goldie, for their contributions and important questions.
I will start by dealing with the question of spending, which goes to the heart of what both noble Lords were saying. Let me put on record some of the things that were said about the defence investment plan. I will make only one political point—that there will be a 27% real-terms increase in defence spending between 2023-24 and 2029-30—because all of us have at heart the security and defence of our nation and how best we should do this.
As both noble Lords and the House will know, the Government have set out plans for an agreed £15 billion increase in spending. This is outside the normal spending review process. That is not necessarily the way that Governments normally do things, but I gently remind the noble Baroness that it is not unheard of for Governments to take action outside the new spending process and to refer to the next Budget as the place where the detail will be confirmed. Indeed, the previous Government announced their five-year NHS plan in 2018 outside the Budget and the spending review. What did they say when challenged about it? I think the noble Baroness and the noble Lord, Lord Fox, will know: “We will be able to explain exactly where every penny is coming from, but we will do it in the next Budget”.
I will also refer to when the Conservatives published the integrated defence review in 2020. What did they do? They said that they would set out the funding at the next spending review. So, let us drop the idea that this is an abnormal process. It is important that the Government have taken the decision outside the spending the review to reprioritise and reallocate spending between spending reviews.
We have said that we will lay out the process for the 3% in the next Parliament. We will come back to the 3% and, indeed, the 3.5% at the next spending review, which will be next year. That is not an abnormal process; that process of taking action outside the spending review is one that Governments have taken over the past few Parliaments. That is an important point to make. Indeed, the foreword by the Secretary of State refers to the commitment until 2035 as a “promise”. It is laid out in there. He and I would expect all of us to be held to account with respect to that.
The noble Baroness, Lady Goldie, and the noble Lord, Lord Fox, mentioned defence savings. I will be clear about the efficiencies, or the savings—whatever we want to call it. The allegation seems to be that the efficiencies are to be taken out of the spending power that the department would have. To be clear, the increase in our spending power is not conditional on these efficiency savings. That is a really important statement for us to make. Who would expect the Treasury, under any political party, not to require a department to have some sort of target for tackling fraud? Who would not see the use of increased efficiency through the use of AI or better technology as bringing about savings that could be reinvested? Who would not expect the Treasury to say, “We would wish you to find efficiencies through an increased reliance on consultancy”? Who would not expect efficiencies to be dealt with? Many noble Lords opposite have called on me in the past to find a way to make sure that we have the most efficient use of the workforce that we have.
The noble Lord, Lord Fox, asked me about housing. Over the next 10 years, the Government, having spent nearly £6 billion to bring Annington Homes back into public ownership, will spend nearly £9 billion over the next 10 years on improving military housing. That is hugely significant.
The noble Lord, Lord Fox, mentioned reputation. I often say that this country faces challenges, but the idea that this country is not respected in Europe or across the globe is not true. In fact, this country is hugely respected in Europe and across the globe. Do not take my word for it: read what the Secretary-General, Mark Rutte, said about the defence investment plan. He welcomed it; noble Lords can read that in today’s and yesterday’s papers.
With respect to the important contribution that we make to NATO—I do not want to risk the ire of the noble Baroness, Lady Bennett—I just remind everyone that one of the most important contributions that our country makes is through the nuclear deterrent. That is a huge contribution that we make to the security of NATO and of Europe, and to our defence.
On GCAP, of course there is always a need to look at new partners. A few weeks ago, the noble Lord, Lord Fox, and many other noble Lords questioned whether GCAP would actually be in the document. Now the accusation is that we are spending it too late—it is over £8 billion-worth of money—and that it is not being spent quickly enough. A huge amount of money has gone into GCAP. Of course the Government will negotiate on new partners, but that has to be agreed not only with us but with Italy and Japan. That is important for us as well.
There is a whole section on SMEs in the defence investment plan; it is not only on the big primes but on the SMEs. I say to the noble Baroness, Lady Goldie, that all the chiefs are content with the defence investment plan and have been involved in bringing it forward.
A number of noble Lords asked me about private finance initiatives and how we can bring that on board. I know that the Government are looking at the Defence, Security and Resilience Bank and whether that is a good way forward rather than necessarily defence bonds, which count as borrowing. No decisions have been taken about that, but we are of course looking at alternative ways of bringing that in. I say to the noble Lord that we tried very hard to get into SAFE, but we failed—we could not get into it. So it is not a question of trying to get into it; we tried and we will try again, but we were not successful. But in the meantime, the country will obviously continue to do what it can to build up its own defences.
The defence investment plan is a huge contribution to the defence of this country. It points to a way forward, it is transformative and it improves our readiness. For any investment plan brought before this House and indeed this country, that is quite an important statement of where we are.
Baroness Stuart of Edgbaston (CB)
My Lords, all European countries are struggling with coming to terms with new realities and what that requires for their defence and equipment to be appropriate to modern warfare. However, irrespective of the money and the percentages spent, if we do not start the national conversation—which we have been talking about for several months, if not years, now—the British public will not accept that they will have to accept cutbacks in other areas to defend our borders and our airspace, and, above all, the sea around us. Let us not forget that we are a nation, and our resilience and our capability to defend ourselves is not just about money; it is all about the support of the people. Can we start with that now?
Lord Coaker (Lab)
Indeed, we will come forward with proposals and plans with respect to a national conversation. The noble Baroness is right in her suggestion. We can see—many Members of this House will know this—that some of the ways in which the Government have asked different departments to contribute to this uplift in defence spending are already starting to cause some angst among certain communities. For example, in the east Midlands, where I live, the building of some roads is now being delayed, which is causing people to say, “Where’s the money going? What’s it being spent on?” Of course, having a national conversation is right, and the Government and all of us in here will have to make the case that defence is a priority, and that may require us to reallocate resources from one budget to another. We started that process, but as part of that process we must have the national conversation the noble Baroness refers to.
Lord Howell of Guildford (Con)
My Lords, I welcome part of this plan—it obviously has some holes in it, as we have already heard. I also welcome, as I do every time I hear the Minister speak, a great deal of his comments and his profound thinking. However, I wonder today whether the brief he has been given really tells the whole story. Not only have we heard about the deficiencies on the arithmetical and budget side but in the Second World War, for instance, our military spending rose to 69% of our total budget, and here we are, talking about 3% and 3.5%—it may be rather more than that when we look at the unfolding scene. I just wonder whether we should not be a bit more frank with the British people—or whether our briefing or the Government’s words should—in reminding them that we are beginning to move towards a total war footing. The late Lord Skidelsky often reminded this House that this is the way we are going, and we will have to seriously consider the sort of percentages that I am talking about. I am not sure that term comes through at all in the blue paper that we have all been given to read.
I am very pleased that we are reaffirming the huge global combat air co-operation between ourselves and Japan and Italy. This link with Japan and Japanese industry is hugely important. It is one of our ways into the giant consumer markets of Asia, which is where all the action is going to be. So good on that, but let us have a brief that honestly faces the fact that we are moving towards a war footing, and that that will cost far more than we are considering now.
Lord Coaker (Lab)
I thank the noble Lord for his question and his comments, which come from a great knowledge and experience, and I thank him for his remarks about me. Just to reiterate, the GCAP programme is extremely important, and as he just said, that is outlined in the money allocated within the paper. The debate is about how quickly we move towards increased spending, and I have outlined—without repeating myself—how the next spending review in 2027 will look to 3% but that the absolute commitment is to 3.5% to reflect the change in the security environment in which we are operating. In addition, I mentioned the nuclear deterrent, and across this House we have mentioned the importance of preparing for war, because one of the ways you deter war is to prepare for it.
Baroness Foster of Aghadrumsee (Non-Afl)
First, I welcome this Statement, which this House has been waiting on for some time, and share my concerns about the funding, which I hope will be sorted out under new leadership. However, I welcome the fact that there is an emphasis on innovation and supporting small businesses, and I hope to see that coming through. In terms of the detail of the plan, I note that there is £330 million to be spent on investment in critical underwater infrastructure protection to tackle hostile activity within UK waters. I have raised this issue with the Minister before. Can we expect the Republic of Ireland’s Government to pay towards helping with that undersea capability, because, as he knows, it is as important to the Republic of Ireland as it is to the UK?
Lord Coaker (Lab)
I cannot give the noble Baroness an assurance about what the Republic will pay for, but let me just say that there has been improved and increasing co-operation between the Republic and ourselves where it is in both our interests to do so. She will know that underwater cables and underwater infrastructure are important to the Republic and to the whole of the UK, so it is in both of our interests to work together. I cannot give her a commitment about paying for that, but I can give her the commitment that there is increasing co-operation and working together to deliver the shared objectives we would all have.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, I think it is time to hear from the Labour Benches and then we can hear from the Liberal Democrats.
Viscount Stansgate (Lab)
My Lords, I welcome the publication of the defence investment plan and the recognition in it that science, technology and innovation are going to play a very big part in the future. Does my noble friend agree that it is not just a financial challenge that faces the defence investment plan; there is also a credibility challenge? We are going to have to explain to the public more effectively than perhaps we have been able to do so far exactly why we need a funding plan to reach 3% of GDP by 2030 and 3.5% by 2035.
Lord Coaker (Lab)
Indeed, as I said to the noble Baroness, of course we need a conversation to more fully and carefully explain to the public why we need to increase our expenditure on defence and security and, alongside that, to help them to understand why that might mean changed priorities for budgets within the sort of priorities that people would have. Whether that means less spending on this area or that area of government, I think we would all agree that the increase for defence and security is essential, and there will be difficult decisions ahead. As part of resolving that, we need to talk openly to the British people.
Lord Teverson (LD)
My Lords, one of the unfortunate realities is that the United States is moving away from the defence of Europe. Whether we like it or not, this is not just for this Administration; it is a danger that is likely to happen in future as well as the US looks to the Pacific. We understand that, and we understand that Europe should take more effect of its defence, but there are a number of capabilities that are not replaceable if the United States is not there—strategic airlift, a lot of the space intelligence, ISR and missile defence. I see nothing in this strategy or this expenditure report that tries to replace that. Clearly, one sovereign nation cannot do that, so how does Europe, together perhaps with Canada, ensure that we can defend ourselves into the future?
Lord Coaker (Lab)
There is a lot in the strategic defence review and the Defence Investment Plan about building up a greater sovereign capability in some of the areas that the noble Lord has addressed. But I think it is important in every debate to say that the alliance between the United States and our country and the alliance between the United States and Europe, notwithstanding the fact that the President has called for Europe to do more for itself, is absolutely essential to the defence and security of our country. The noble Lord may disagree, but I am telling him what the Government’s view is. The Government’s view—and, I am sure, the view of the vast majority of your Lordships’ House—regards the alliance between ourselves and the United States as absolutely essential for the security of this nation, so we have to be very careful about that. Of course there are challenges and difficulties, but the document refers to how we build up some of the capabilities to which the noble Lord refers. Of course Europe needs to do more, but it also needs to stand with the United States, not only in Europe but across the globe.
Lord Craig of Radley (CB)
My Lords, I share widely the view that this belated DIP comes nowhere near funding the strategic defence review, but the DIP does make clear the Government’s commitment, together with Japan and Italy, to the next-generation Global Combat Air Programme. This is welcome news, given the inevitable withdrawal of the RAF Typhoon air fleet from front-line service due to airframe fatigue and age in the early 2040s. Following the recent break-up between Germany and France on their similar programme, what political approach are the Government making to Germany to get them interested in GCAP?
Lord Coaker (Lab)
The noble and gallant Lord is right to point out the importance of GCAP and how it offers a sixth-generation option for us after 2040, when Typhoon is expected to go out of service. There is money in the defence investment plan for the upgrade of Typhoon to ensure that it has the capability that it needs until 2040. Regarding other partners in GCAP, as I said to the noble Lord, Lord Fox, we are open to discussions with anybody who comes to us with proposals or desires to join that programme, but that will be a matter for international negotiation between ourselves, Italy and Japan, although we are not opposed to looking at having further partners as part of that scheme.
Lord Robathan (Con)
My Lords, may I say that this is a disappointment, to put it mildly? I am on the same side as the Minister on this. This, I assume, was what led John Healey to resign—I suspect that it was the same document. Given that, does he think that any other Minister should resign, given the appalling lack of money in the Statement?
Lord Coaker (Lab)
There is an additional £1.5 billion, and there are also some changes with respect to the way in which there is a greater emphasis in this document on autonomy, AI and the transformation of the Armed Forces to have more new types of aircraft, vessels and capabilities. For me, that is as important as the amount of money, compared with not spending on new capabilities. But I would just say to the noble Lord that it requires difficult decisions to do that. On replacing the Type 45, we have scrapped the plans that we had in the document in favour of replacing them with new, uncrewed vessels. That requires us to make really big decisions, and there are a number of those sorts of decisions all through the document. Of course there is a debate about the amount of money, which is why I have talked about the 2027 spending review, but it is also about the type of capabilities that we need. The document shows that we are not afraid to make big decisions around that to give us the capabilities that we need in the future as well.
Lord Liddle (Lab)
My Lords, is it not clear that this is a welcome step forward, but that it cannot be the end of the story? We have to reaffirm our commitment to 3% by the end of this decade, and 3.5% by the middle of the next decade, as firm commitments of this Labour Government, and that in the period ahead we will carry out the kind of national conversation that was referred to earlier, and find a means of getting there. With due respect to noble Lords opposite, you cannot achieve this just by welfare cuts.
Lord Coaker (Lab)
In terms of the spending, I have made the point about the 2027 spending review, and that the document lays out that we will come back to the 3% commitment at the 2027 spending review, and, of course, the 3.5% commitment is laid out in the document as well. That lays out what the Government’s plans are.
Baroness Bloomfield of Hinton Waldrist (Con)
The noble Lord, Lord Liddle, has just alluded to the elephant in the room, which is that there are no cuts to the £333 billion welfare bill, which would go a long way to helping with additional support for the defence industry. My worry is that most of these cuts are unknown, and they are optimistic efficiencies, but I know that the £2 billion being cut from the BEIS budget is a worry. How is this going to affect Mr Miliband’s ambitions for net zero?
Lord Coaker (Lab)
I do not know about the ambitions for net zero. All I can say to the noble Baroness is that, of course, spending is important, and increasing the amount of spending on defence is important. Whatever decisions are made will require the reprioritisation of budgets for what the Government plan to do. That is the reality of finding more money for defence. We are ensuring that everything in the current plans, and the defence investment plan, is funded. The spending review will come back to how it is funded beyond 2029-30, and how that is done will be a matter for that review.
Lord Kerr of Kinlochard (CB)
My Lords, I was head of the Treasury’s defence division, and I welcome all this concentration on the money, but the document is actually about investment and where the money is to be spent. Ukraine is making, using, and losing 7 million drones a year. The life cycle of any particular model of drone is under three weeks, because they have to be continually reprogrammed because of countermeasures, so I rather like the emphasis in this document, in section 3.2, on industrial agility. I hope that the Minister can deliver on industrial agility, as it is crucial that the Ministry of Defence gets away from operational requirements that are negotiated for months and fixed for years, and accepts that there has to be an open partnership with business, and a two-way flow of intelligence and innovation. From now on, the weapon is the production facility, the drone is only the bullet and the only constant is change.
Lord Coaker (Lab)
I agree with that. In the document, it talks about the need for the transformation of our Armed Forces, and much of that will be around uncrewed capabilities and drones. It is not only about big primes; much of this, including in Ukraine as the example, is delivered by small and medium-sized businesses, which have that particular agility to which the noble Lord refers, and we need to develop that.
Baroness Bennett of Manor Castle (GP)
My Lords, with the honourable exception of the noble Lord, Lord Kerr, much of our debate today, as in the many months leading up to the defence investment plan, has focused on the bottom line and where the money is coming from; we have, unfortunately, had far less debate about how the money is being spent. I note that less than £10 billion over four years is set aside for homeland defence in areas such as cyber security, air and missile defence, and undersea infrastructure protection. By comparison, about £100 billion is being spent on nuclear submarines and jet fighters, AUKUS subs and cruise missiles. As the leading article in the Guardian said today, we are still binding our force structure to an American-led posture. Is that not deeply dangerous in the current geopolitical circumstances of an unstable, uncertain America?
Lord Coaker (Lab)
“No” is the answer to the noble Baroness’s question. Homeland defence runs all the way through the document: how we have better air defence, what we do about improving the use of reserves, and various protections for our critical national infrastructure, which is really important. As I have said before, on our alliance with the United States, the development and maintenance of things such as our nuclear deterrent are really important, not only for our defence and security but for the defence of Europe and beyond, and we should continually reiterate that.
Lord Spellar (Lab)
My Lords, I put it to the Minister that it would have been better to have had the conversation with the public before we put out the policy, so that we had rolled the pitch and people understood the nature of the threat. I welcome, therefore, what he is saying about the position going forward, but can we also make sure that the public understand the chronic neglect of our defence capacity that took place under previous Governments—notably the Annington housing and the neglect of maintenance—not least the failure to order nuclear submarines and the six-year delay between 2010 and 2016, which has left us in a very difficult position regarding our deterrent and our crew? Will the Government be making clear who the guilty men and women were?
Lord Coaker (Lab)
The catastrophic decision to pick out of what my noble friend said—given the importance that I, the Government and Members across this House attach to this—was the delay in 2010 for a number of years in renewing the nuclear deterrent. That was a really bad decision, and as a result our nuclear submarines are at sea for months and months. That is a problem we have to deal with, as is the fact that renewal of the deterrent, which is included in the defence investment plan, will be later than we would wish.
My noble friend talked about Annington Homes. It was a disastrous decision to privatise it, and we have brought it back in at a cost of £6 billion.
I know that a number of people who wanted to ask questions were unable to. We have the Armed Forces Bill on Monday, and if noble Lords and Baronesses wish to ask a question then on the defence investment plan, I am perfectly happy for them to do that, so that they do not feel that they have missed the opportunity to ask about something which is massively important to the defence and security of our nation and beyond.
Steel Industry (Nationalisation) Bill
(1 day, 5 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sharpe of Epsom
“(3A) On the day on which this Act is passed, the Secretary of State must lay before Parliament a consultation document on the proposed exercise of the powers under this section.(3B) The consultation document must invite representations from—(a) every steel undertaking affected by the provisions of this Act,(b) trustees or managers of any pension scheme in respect of which such an undertaking, or a group company of such an undertaking, is or was an employer,(c) persons appearing to the Secretary of State to represent members and other beneficiaries of such schemes,(d) trade unions representing employees of such undertakings,(e) the Pensions Regulator, and(f) the Pension Protection Fund.(3C) Before making regulations containing provision by virtue of this section, the Secretary of State must have regard to the interests of members and other beneficiaries of affected pension schemes, including the protection of accrued rights and the security of benefits.”Member’s explanatory statement
This amendment requires the Secretary of State to lay a consultation document before Parliament on the day the Act is passed, consult affected steel undertakings and pension stakeholders, and have regard to scheme members’ and beneficiaries’ interests before exercising the pension powers.
Lord Sharpe of Epsom (Con)
My Lords, my apologies: I was asleep at the wheel, much like the England defence. I rise to speak to Amendments 16 and 17 in my name and that of my noble friend Lord Hunt of Wirral.
I thank the Minister for his letter on Clause 44 and for meeting us to discuss the Bill and the ways in which it may be improved. I welcome his confirmation that the Government’s intention is for workers’ pension benefits to remain unchanged, but where the Bill gives the Secretary of State powers to modify or apportion pension rights and liabilities, transfer accrued rights between schemes, and amend scheme terms, workers and pensioners need more than an assurance of present intent. They need a clear legal safeguard, which my Amendment 17 would provide. It would ensure that regulations made under Clause 44 could not reduce the value of accrued pension rights or benefits, nor make the terms on which benefits accrue less favourable in future.
Amendment 16 addresses consultation and engagement. It would require the Government to consult affected undertakings, pension trustees and managers, scheme members and beneficiaries, trade unions, the Pensions Regulator and the Pension Protection Fund, and to have regard to the interests of members and beneficiaries, including the protection of accrued rights and the security of benefits. The Minister suggested that full consultation before the use of these powers may not be realistic where urgent action is required. We understand the need to avoid delay where a transfer must take place swiftly, but urgency cannot mean that pension stakeholders are simply bypassed. If consultation cannot practically take place before a transfer, will the Minister commit to a prompt and meaningful consultation afterwards, and in any event before any further pension regulations are made? Will he also confirm that the Government will engage formally with the Pensions Regulator, the Pension Protection Fund, trustees, scheme members and their representatives, so that any necessary arrangements are made to protect members’ accrued rights and the long-term security of their benefits? I beg to move.
Lord Fox (LD)
My Lords, I, too, am confused, because I thought Amendment 20 was in this group.
Lord Fox (LD)
Unfortunately, the proposer failed to mention it in his speech. I signed it merely because I wanted to indicate that the contingent liabilities are an important part of the Bill as we discuss it. However, the main issues within this group are those that I will discuss later, in group 4. In that respect, I am going to keep my powder dry.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab)
My Lords, before I start, I am sure all noble Lords want to join me in wishing the England team the very best for the rest of the match this afternoon.
First, let me thank the noble Lord, Lord Sharpe, for his contribution and his amendments. Amendment 20, in the name of the noble Lord, Lord Fox, would require the Government to provide a statement to Parliament outlining the value of contingent liabilities and the steps they would take to minimise taxpayer exposure to them before an intervention. As I have set out previously, the Government are somewhat constrained in the procedural steps they can take before exercising the power in the Bill. This is why the transfer powers are exercisable by regulations subject to a negative procedure. We will likely be operating in a fast-moving commercial environment where intervention needs to be done at pace, and negative procedure transfer regulations do not require prior parliamentary approval before they take legal effect.
It is not appropriate to publish details of a private company’s contingent liabilities prior to nationalisation. If a steel undertaking is brought into the public sector, its financial position will rightly be subject to parliamentary scrutiny, including the publication of its annual report and accounts. Of course, the Government will take steps to minimise taxpayers’ exposure to liabilities wherever possible. Any decision to exercise the transfer powers will be subject to the usual principles of Managing Public Money and government approval processes.
Amendment 17, tabled by the noble Lord, Lord Sharpe, seeks to prevent any pension regulations from reducing accrued pension rights or benefits or worsening future pension terms. I thank the noble Lord for his amendment and understand his concerns that the Bill may adversely affect pension rights, benefits or terms for employees. I reassure the noble Lord that any use of these powers would be considered on a case-by-case basis, with the primary objective of ensuring alignment across pensions. These powers give the Government the flexibility to achieve this. Any changes to the terms would likely be due to regulatory changes where pension terms may need to be standardised or contributions adjusted. The Government would seek to consult regulators, unions and employees, where possible, on any future changes.
Amendment 16 seeks to require the Secretary of State to consult with affected steel undertakings and affected pension stakeholders before exercising the pension powers. To address the concerns raised by the noble Lord, Lord Sharpe, perhaps it would be useful to set out the Government’s intent behind Clause 44. Clause 44 is essential for managing the consequences of a transfer for pension schemes and for employees’ rights under a pension scheme. It enables the Government to make provision for pension schemes where the steel undertaking is or was an employer.
These powers are necessary and give the Government flexibility on a case-by-case basis to make suitable provision for pensions during the transfer. For example, the provision would enable the Government to modify terms in the event of regulatory changes where pension terms may need to be standardised upon transfer or contribution minimums adjusted. It also gives the Government flexibility on a case-by-case basis, if needed, to consider a fair division of pension liabilities between the transferer and transferee in complex transfers.
In the case of British Steel, if, after Royal Assent, the Government decided that nationalising British Steel was necessary in the public interest, this power would not be required. To the best of our knowledge, British Steel has a defined contribution scheme, so there is nothing to transfer or leave behind.
In relation to the requirement to consult before exercising these powers, I reassure the noble Lord that, wherever possible, the Government would seek to consult with regulators. However, a statutory duty to consult could delay the transfer of the pension schemes, causing uncertainty and concern among employees. That is exactly what the Government are trying to avoid. For those reasons, I do not consider this amendment necessary and ask for it to be withdrawn.
Lord Sharpe of Epsom (Con)
I am grateful to the Minister for his answers and to the noble Lord, Lord Fox, for correctly pointing out that I neglected to mention Amendment 20 on contingent liabilities. We will come back to that.
As regards Amendments 16 and 17, I am grateful for the Minister’s commitments, particularly on consultations where possible. Perhaps we could explore in another forum what potentially that will mean in practice. People’s pensions are their future and their security. It is vital that the Government ensure that workers’ pension rights are properly protected—I have no doubt at all that the Minister agrees with that—and that the relevant experts, regulators and representatives are fully consulted as these powers are exercised. We are merely trying to explore how that is done. I look forward to picking up that subject again in the future. For the present, I beg leave to withdraw Amendment 16.
Lord Hunt of Wirral
“Duty to try to find a private sector purchaser for any nationalised steel undertakingWhere a steel undertaking has been subject to a principal transfer power under this Act, the Secretary of State must—(a) make all practicable efforts to find a private sector purchaser for the steel undertaking, and(b) lay a report before Parliament every six months which sets out progress made towards finding a private sector purchaser for the steel undertaking.”Member’s explanatory statement
This new clause would put a duty on the Secretary of State to seek a private sector buyer for any steel company that has been nationalised, and report to Parliament on progress made every six months.
Lord Hunt of Wirral (Con)
My Lords, Amendment 21, standing in my name and that of my noble friend Lord Sharpe of Epsom, would, ultimately, put into the Bill what the Government say is their objective. The then Secretary of State for Business and Trade said that the Government’s aspiration for British Steel was
“a co-investment agreement with a private sector partner to secure a long-term transformation”.—[Official Report, Commons, 12/4/25; col. 841.]
The future of British Steel cannot rest indefinitely on public ownership and continuing working capital injections, together with an open-ended commitment from the taxpayer. It must be a viable, competitive and investible business able to secure private capital for the investment and the transformation that it requires. Yet that objective does not appear in the Bill. There is no statutory duty on the Secretary of State to seek a private sector purchaser, no clear exit route from public ownership and no requirement to report to Parliament on progress. Without that discipline, there is a real risk that nationalisation becomes not just a temporary intervention to stabilise and restore business but an accumulating and indefinite cost to the taxpayer. If the Government are serious about a private sector-led future for British Steel, they should have no difficulty in accepting that duty.
Amendment 23 from the noble Lord, Lord Fox, is very important indeed. It goes to the heart of concerns raised throughout these debates, including by my noble friend Lord Redwood on the first day in Committee, that the Government need a genuine business strategy for steel. Where nationalisation is contemplated, there must be a strategy for skilled employment, retraining, reskilling and local economic renewal. Workers cannot be treated as an afterthought to a transfer of assets or as a balance sheet exercise. I look forward to hearing the Minister’s response. I beg to move.
Lord Fox (LD)
My Lords, Amendment 23 is in my name. I was very pleased to hear what the noble Lord, Lord Hunt, just said, because I had put in my notes that I feel that this is an important amendment. I hope it is pushing at an open door.
In the previous debate, on Monday, the noble Lord, Lord Wigley, spoke of the effect on local communities. I agreed then, and this amendment would put in place a requirement for a jobs and industrial transition strategy to follow once the Secretary of State has exercised the principal transfer power in respect of the steel undertaking. I emphasise that this would be post exercising that power.
This amendment calls for the strategy to be laid before Parliament within six months—sooner, I would hope—from the exercise of the transfer powers. This published strategy must set out the Government’s investment and transition plans to protect employment, deliver a skills and reskilling programme and, if necessary, redeployment opportunities, and deliver real economic renewal, while supporting resilience in communities that are dependent on that steel undertaking. I am happy to discuss with the Minister ways of achieving this objective, but this process is aimed at ensuring that there is an explicit plan to which Parliament will be able to hold the Government to account.
Lord Redwood (Con)
My Lords, these are indeed important amendments. It is a tragedy what has been happening to our steel industry in this country. It suffered considerable decline under the last Government thanks to very high energy prices and decarbonisation, which turned out to be disruptive. In the last full year of the Conservatives, we were down to 5.6 million tonnes of manufactured steel—around half our requirement.
There has now been a further very big collapse, such that our output last year was, I think, around half of that in 2023—around 2.5 million tonnes—and we are heading for an even smaller output this year unless the business plan is provided, kicks in and starts to do something to help the ailing Scunthorpe business that we are talking about. I think we are united in our belief that this is not what we want from our steel industry. It means that we have a chronic dependence—in the last year, 7.1 million tonnes—on imported steel and we are heading to a position where we import practically all our steel. I fear we will discover that, unless we do something about electricity prices, even when electric arc production starts to kick in on a bit of a bigger scale, it will be very difficult to sell that steel at a profit because the electricity costs are unrealistic and uncompetitive, as well as the general carbon taxes and carbon costs, which have been adversely affecting the blast furnaces.
Given our common interest in saving jobs and having a better steel sector, I again urge the Government to provide that plan and that thought-through work, which should be shared without commercial secrets with the wider public and both Houses of Parliament. This would give us some confidence that there is a way out of this very deep tunnel that we are going down to producing less and less steel of our own.
The Government have clearly introduced very penal tariffs on importing steel from non-EU sources, with the 50% increase in tariff. They hope that that will change the situation but, because they have relaxed the quotas for the EU, I suspect that we are still extremely vulnerable to EU import competition at a time when our industry is not properly competitive. They will find that the tariffs will not protect the diminishing British steel industry, but that the much bigger and somewhat stronger steel-using industries in the United Kingdom will be very gravely affected, because more than half our imported steel may well have to come from sources that attract tariffs. That will be very penal and, therefore, will reduce the amount of steel-using activity that we can undertake.
I urge the Government to take some of these points seriously. I am glad that two sensible amendments have been put forward to concentrate this debate.
Lord Wigley (PC)
My Lords, I am glad to have the opportunity to support Amendment 23, tabled by the noble Lord, Lord Fox, concerning a jobs and industrial transition strategy, which is very much in in line with the comments I made in our previous debate. The question of protecting skilled employment, in particular, and the need to reskill and deliver the tangible economic renewal, support and resilience in the local communities is very close to my heart. It is also very close to the minds of those in places such as Port Talbot who have faced insecurity in these matters. I hope that the Government, if they are not able to accept this amendment, will at least underline their agreement with its approach. I would be very surprised if it was not the Government’s approach, in fact.
When it comes to Amendment 21—I address this to the noble Lord, Lord Hunt, who moved the amendment —if a duty is placed to find a private sector purchaser as soon as possible then surely that has to be constrained very much more than in the amendment. What would the situation be if an overseas company in the private sector was to make a bid? As I see it, the whole logic behind the nationalisation that we have here is to defend the United Kingdom’s strategic interests as well as its economic interests. If an important part of the steel industry was to fall into overseas hands—perhaps a perfectly reputable company but an overseas company outside the control of anybody within the United Kingdom—would that not raise serious questions? These are issues that I put to the noble Lord, Lord Hunt, rather than to the Minister. I regard them as a serious weakening of the Bill’s strategic objectives, which I generally support.
Lord Leong (Lab)
My Lords, I thank the noble Lords, Lord Hunt, Lord Fox, Lord Redwood and Lord Wigley, for their contributions. I am very grateful that the noble Lords, Lord Sharpe and Lord Fox, are raising important questions about the future structure and operations of any steel undertaking that may be brought into public ownership under the Bill.
Before addressing their specific amendments, I should make this very important point: no decision has been made in relation to any particular steel company. Any decision to exercise the powers in the Bill can be made only after the Bill has received Royal Assent and only if the statutory public interest test is satisfied.
With that important caveat, I turn to the specific amendments before the Committee. Amendment 21, in the names of the noble Lords, Lord Sharpe and Lord Hunt, would place a duty on the Secretary of State to secure a private buyer for any nationalised steel undertaking at the earliest opportunity. As a matter of corporate governance, however, we would expect responsibility for exploring future ownership options to rest with the company’s board and chair, working closely with Ministers, rather than being imposed as a statutory duty on the Secretary of State. More fundamentally, I reassure the Committee that the Government share the amendment’s underlying objective. As we made clear in the steel strategy, the long-term future of the UK steel industry depends on attracting sustained private investment.
Public ownership is not an end in itself; it is a means of safeguarding a strategically important asset when exceptional circumstances require government intervention. The Government do not envisage a steel undertaking remaining in public ownership indefinitely. Our objective would be to stabilise the business, restore its commercial viability and place it on a sustainable footing so that it is well-placed to attract private investment in due course.
That said, timing is critical. A company requiring nationalisation is, by definition, unlikely to be an attractive investment on day one. It will first need financial stability and operational improvements, and in many cases a revised strategic direction, before credible private investors are prepared to commit significant capital.
Throughout that process, Ministers and the company’s leadership would remain in close dialogue about its long-term future, including the most appropriate ownership model and opportunities for private investment when the conditions are right. I hope this reassures noble Lords that the Government’s ambitions align with the intent behind this amendment. We are happy to consider further whether there are appropriate ways to make that position clearer, but we do not believe that placing a statutory duty of this kind in the Bill would improve its operation.
I turn finally to Amendment 23, in the name of the noble Lord, Lord Fox, which would require the Secretary of State to publish a jobs and industrial transition strategy after the exercise of the principal transfer power. I fully appreciate the purpose of the amendment. If the Government were required to intervene to safeguard a steel undertaking, Parliament would rightly expect a credible plan for its future. The Government share that objective. However, the success of any nationalised steel undertaking will ultimately depend on strong commercial leadership, not on a strategy prescribed by legislation.
One of the Government’s first priorities would be to appoint a board and an executive team with the expertise, commercial experience and vision to restore the business to long-term sustainability. The detailed strategy for the company’s future—including its workforce, investment, operations and industrial transition—should therefore be developed by that leadership team in close partnership with Ministers, rather than being imposed from Whitehall via a statutory reporting requirement. That approach provides the flexibility to respond to changing commercial circumstances while ensuring that the company is run on sound business principles.
That said, I recognise the importance of parliamentary scrutiny. When a steel undertaking enters public ownership, Parliament should have appropriate opportunities to understand the company’s strategic direction and to hold the Government to account for its stewardship. I am therefore happy to reflect further on the most appropriate mechanisms to provide that transparency. I am grateful to the noble Lord for raising these important issues. I hope I have provided assurances about the Government’s approach. For the reasons I have set out, I respectfully ask that the amendment be withdrawn.
Lord Hunt of Wirral (Con)
My Lords, the purpose of any debate in Committee is justified when the Minister responds by giving us the series of assurances that he has just done, and I warmly welcome his approach. He has clearly outlined that without a clear route towards private investment, this ownership, as I pointed out in moving the amendment, becomes an open-ended commitment. I thank my noble friend Lord Redwood and the noble Lord, Lord Fox, for their contributions, and I owe my good friend the noble Lord, Lord Wigley, an explanation, because this is very much a probing amendment. He is quite right that you can envisage various circumstances which are counterproductive, and that is why I warmly welcome the fact that the Minister has given such a clear commitment that there is no public ownership in perpetuity intended here. We are all determined to produce a plan which will last for generations to come and secure the future of our great steel industry, so I have no hesitation in seeking to withdraw the amendment.
“Stakeholder Advisory Committee(1) The Secretary of State must establish a Stakeholder Advisory Committee to provide advice on the exercise of principal transfer powers under this Act (“the Committee”).(2) The Secretary of State must ensure that the membership of the Committee includes representation from stakeholders, including but not limited to—(a) industries that rely on the supply of steel, including the defence sector and critical national infrastructure,(b) representatives of the workforce of the steel undertaking, and(c) local authorities for the areas in which the steel undertaking operates.(3) The Secretary of State must consult, and have regard to the advice of, the Committee before making a determination that the exercise of a principal transfer power is necessary in the public interest under section 2.”Member's explanatory statement
This new clause requires the Secretary of State to establish a stakeholder advisory committee. The Secretary of State would be required to seek the committee’s advice before making a determination that the exercise of a principal transfer power under the Act was in the public interest.
Lord Fox (LD)
My Lords, I move Amendment 22 in my name, but just briefly, with your Lordships’ indulgence, let me first respond to the Minister’s response to Amendment 23. I think he is quite right that it is up to the management of the company to set its own course, but that course will have wider implications than simply the company itself. It will have implications on the community in which that company is located, and that is something the Government, local government, and indeed the Welsh Government if appropriate, have to be concerned about. That was very much part of the point I was bringing forward. There might be another way of doing this, and perhaps we can discuss it when we get to a later group, but I am pleased to hear the Minister’s relatively positive response.
Turning to Amendment 22, in a sense the purpose of this follows on from Amendment 23 and keys into some of what the noble Lord, Lord Redwood, was talking about just now. An area not covered to date is the need for the wider supply chain to have an explicit voice in what is going on here. We should remember that there are about 400,000 employees working in the steel-using community and about 40,000 in the steel production capacity, so this is a 10 times bigger part of our national wealth and we need to make sure that there is a place for steel users and producers to have a voice within the strategic decision-making going forward.
I believe the Government have a steel board, but it is not clear to me how the steel-users community feeds into that steel board. In what we have seen in the setting of tariffs, users seem to have a somewhat second-class status within the decision-making process. This amendment envisions the creation of a statutory stakeholder advisory committee, which would make sure that those producers are well represented in the decisions that Government make concerning the industry on things like tariffs. Union and community interests and those kinds of things should also be included.
I am very flexible about the approach taken to do this, but I feel there needs to be a formalised, statutory approach. We have seen with respect to the proposed tariffs that users are falling behind producers on the Government’s agenda. This amendment is there to ensure that users have a formal voice. Trade associations do a great job, but in the end Secretaries of State can and do ignore them on a regular basis. This amendment is there to add a voice for the manufacturers in any debate. I beg to move.
Lord Redwood (Con)
My Lords, I welcome the intent behind Amendment 22. We should not be careless about the interests of the steel-using industries. Many years ago, I was responsible for Darlington & Simpson Rolling Mills. In those days, that was a profitable and successful business, but the price of raw material was critical to that type of operation. I was very interested to learn from noble Lord, Lord Fox, that he thinks that there are 10 times as many people involved; that may well be an underestimate. When I was trying to do some research on this, I identified a number of sectors where steel use is an important part of cost, and I came up with about £200 billion of business activity in those areas, excluding construction, which is obviously the main steel user in the country. That was many times the amount of turnover we are talking about in trying to protect maybe 2 million tonnes of steel production in this country from our own resources. Both in setting the tariffs and in setting the plans, and in the details of any future nationalisation, we need to have fuller recognition than we have had so far of the legitimate interests and concerns of the steel-using industries.
I hope that Ministers will see that we are also interested in a report and audit on where we are at already. Although we have not nationalised British Steel and do not own the assets, we are otherwise completely responsible for the people who do those jobs and their families, for the safety and success of the production processes of those two ageing blast furnaces, and for that part of what remains of the British steel industry, so I think we are probably owed a bit more consultation and plan already.
Lord Wigley (PC)
My Lords, I am delighted to support the amendment moved by the noble Lord, Lord Fox, and to be following the noble Lord, Lord Redwood. I am sorry the noble Lord, Lord Hunt, is not in his place at the moment, but both he and the noble Lord, Lord Redwood, will be very familiar with a project that took place in north-west Wales 40 to 50 years ago now—the construction of the pumped-storage scheme at Llanberis by the CEGB. The reason that is relevant is that, in the very early days of that project, the CEGB was wise enough to pull together trade union leadership and the local authorities in a regular meeting to review issues that were arising. Over the 10-year period of the construction of that exciting project, only about a week was lost due to industrial difficulties. The company, the CEGB, was working with the workforce and the local community, and problems were sorted before they boiled up to triggering strikes and all the rest. It is motivated self-interest to have such an approach to bring in these forces: with good leadership coming from the company involved and, yes, from central government but also from local government and from the trade unions within the company involved, so many problems can be overcome before they cause difficulties and boil up to something that they do not need to be. I believe such an approach should appeal to the Government, and I am very glad to support the amendment.
Lord Sharpe of Epsom (Con)
My Lords, I thank the noble Lord, Lord Fox, for this amendment. He is quite right to point out that decisions about the future of a steel undertaking affect a wide range of sectors that rely on secure domestic supply, including defence, construction, advanced manufacturing and critical national infrastructure.
National security has, rightly, featured prominently throughout our debates. If the Government are relying on that argument to justify the exercise of these exceptional powers, it is surely right that those with responsibility for defence and critical infrastructure should have a voice in the wider policy discussion. The number of workers potentially affected in the broader and wider supply chain, as cited by both the noble Lord, Lord Fox, and my noble friend Lord Redwood, is staggering.
It is difficult to argue that the steel-using community is really being consulted, as the noble Lord, Lord Fox, pointed out; that is certainly true of the representations we are getting from members of that community. I urge the Government on this occasion to have a careful think about what this amendment is trying to achieve. It recognises, as the noble Lord, Lord Wigley, has pointed out, the importance of the workforce and of local communities. Workers, their representatives and local authorities will understand better than most the consequences of a transfer for jobs, skills, supply chains and of course the local economy. It is difficult to see how the Government can judge properly what is in the public interest without hearing from the workers, communities, industries and strategic sectors most affected by the decision. I look forward to hearing the Minister’s response.
Lord Leong (Lab)
My Lords, I am pleased to inform noble Lords that we have equalised—so come on, England!
I thank the noble Lords, Lord Redwood, Lord Wigley and Lord Sharpe, for their contributions. I am grateful to the noble Lord, Lord Fox, for tabling Amendment 22, which would require the Secretary of State to consult a stakeholder advisory committee before determining whether an intervention under the Bill was in the public interest. I fully understand the motivation behind the amendment. Decisions of this significance should be informed by expert views, and I have considerable sympathy for the desire for strong parliamentary and stakeholder engagement.
However, as I said in relation to earlier amendments, the Government cannot support a statutory precondition of this nature. The powers in the Bill are intended for exceptional circumstances in which events may be moving quickly and decisive action is required. Introducing a mandatory consultation process before intervention could delay action at precisely the moment when speed is essential to protect jobs, safeguard strategic capability and secure the future of a steel undertaking. In some cases, a delay could undermine the very purpose of the intervention.
Nor do I believe that establishing a statutory advisory committee is necessary to ensure that the Government receive expert advice. My ministerial colleague, Minister McDonald, regularly maintains contact and extensive engagement with the sector through a wide range of established forums. This includes the steel council, the steel council working groups, the metals circularity group and a programme of industry round tables. Alongside those formal structures, Ministers and officials regularly meet with steel producers, downstream users, trade associations, trade unions, recyclers and other stakeholders throughout the supply chain. These relationships provide the Government with a detailed understanding of the opportunities and challenges facing the sector and ensure that policy is informed by those with direct operational experience.
I am also pleased to inform the Committee that we will shortly be inviting the UK Metals Council, which I understand is the largest downstream user group, to join the steel council, so we are reaching out to downstream users too. This will strengthen the representation of downstream users and ensure that their perspectives are fully reflected in future discussions about the sector.
The Government firmly believe that sustained engagement with industry is essential to delivering our steel strategy, but there is an important distinction between ongoing engagement and creating a statutory procedural hurdle that could impede timely intervention when the national interest requires it. For those reasons, while I fully recognise the amendment’s intent, I do not believe it would improve the Bill and I therefore respectfully request that the noble Lord withdraw it.
Lord Fox (LD)
I thank noble Lords for their contributions to this short debate. It was stark that when the Minister went through his long list of parties that the Minister at the other end consults with, the vast majority of the ones that the noble Lord, Lord Redwood, and I were discussing came under the “other stakeholders” category, so it is encouraging that the UK Metals Council will be invited.
I take the point about the nature of preconditions for any activity, and I understand the Minister’s reaction to that, but the purpose of the amendment was to make the point that users are underrepresented as it stands. We can wait and see whether adding the UK Metals Council is sufficient to reweight that, but I hope the Minister can go away and perhaps come back to us with a statement as to how users will become central to the Government’s philosophy in making plans, rather than being just another stakeholder, which is where they currently seem to be. Leaving that to one side, I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
Before we move to the next group, I want to point out that Amendment 25 in that group is in fact to Clause 54, not Clause 53 as printed on the Marshalled List.
Clause 52: Compensation scheme regulations
Amendment 24
“(5A) Compensation scheme regulations must include provision which specifies that payment of compensation may not be made until any written estimate under section 54(4A) is laid before Parliament.”Member’s explanatory statement
This amendment and others in the name of Lord Fox require that payment of compensation cannot be made until the Secretary of State has published a written estimate of the environmental liabilities of the steel undertaking, provided to them by the independent valuer.
Lord Fox (LD)
My Lords, I will also speak to Amendments 25 to 28, 39 and 45, all in my name—I think I must have gone slightly mad at the time.
As promised when we touched on the contingent liabilities earlier, this group homes in on how such liabilities affect possible compensation in the event of nationalisation. As I set out at Second Reading, the possible environmental liabilities and future remediation costs for a site as large as Scunthorpe, let us say, are potentially huge. Scunthorpe has been there for a long time and is a very big site. The site has also employed a lot of people for a long time, and their pensions and any contingent liabilities should be fully understood by Parliament, as we discussed in the debate on the previous group.
Those contingent liabilities are likely to majorly impact the current and future valuation and sustainability of any steel undertaking. The current draft has evaluating the environmental liability as a voluntary exercise and the pension liability seems to have been ignored, but I take on board what the Minister has just said and perhaps withdraw that sense, as some elements seem to be covered.
Amendments 24 to 27 together would require that the payment of compensation could not be made until the Secretary of State had published a written estimate of the environmental liabilities of the steel undertaking provided to them by an independent valuer. Amendment 28 would require that the payment of compensation could not be made until the Secretary of State had published a written estimate of the pensions liabilities of the steel undertaking provided to them by an independent valuer.
Amendment 39 would require the Government to report on the compensation paid under any compensation scheme regulations made under Clause 52. Finally, Amendment 45 seeks to place a limit on financial assistance and compensation without additional parliamentary approval. This proposed new clause would prevent the Secretary of State paying more than £500 million—which I point out is quite a lot of money—in financial assistance and compensation under the Bill unless the House of Commons passes a resolution authorising them to do so. In this way, we would ensure that there was no blank cheque.
I am happy to approach these issues in other ways, as long as the material objective of this group of amendments is achieved. I beg to move.
Lord Redwood (Con)
My Lords, I am glad that the noble Lord, Lord Fox, has raised this; it was also something that I mentioned in our previous debates. In my experience of old industrial sites, the land under and around the plant is often heavily polluted and may contain toxic substances. Clearly, the Government need a report on that and would need to consider it not only when considering any possible compensation to a previous owner but as part of the costings of the whole project. Sooner or later, that land will have to be cleaned and if there is any current risk to water courses, it might be sooner rather than later that action would need to be taken. I trust that will all be properly investigated and has been properly investigated where we have already taken operational and financial responsibility for the plant in the case of Scunthorpe.
On other liabilities which can occur in these situations, which probably should be mentioned for the sake of completeness, it is a good idea to find out about current and retired staff to see whether any long-term health issues have arisen which can be attributed in any way to the processes they have been handling and the working conditions they have been in. Those, too, need sensitive treatment and can, if something has gone wrong, amount to significant sums of money.
Lord Wigley (PC)
My Lords, I want to speak briefly to Amendment 28, which deals with pension liabilities of the undertaking that has gone into state ownership. Some noble Lords will remember in our pensions Bill debates that we had the example of Allied Steel and Wire, where employees, who had been given all sorts of promises that they would be safeguarded, feel that they have been very badly let down. If the shadow of Allied Steel and Wire is to find its way to Scunthorpe, or any of the other locations where these questions may arise, the failure to safeguard the interests of those pensioners will militate against employees wanting to accept the course being taken by the Government unless provisions are written into the Bill of the sort provided by Amendment 28. There may be other ways of doing it, but certainly these assurances need to be given.
Lord Sharpe of Epsom (Con)
My Lords, I am very grateful to the noble Lord, Lord Fox, for tabling these amendments, which raise an important point of principle. Where the Government are taking a steel undertaking into public ownership, the environmental, pension and other contingent liabilities which may fall on the taxpayer should be clear to Parliament and, of course, to the public. The Minister in the other place suggested that further disclosure was unnecessary because the Government already had a reasonably good understanding of the potential liabilities and that the independent valuer would take them into account, but that is not the same as ensuring that Parliament can see the likely costs before compensation is paid and further public money is committed.
I was very taken with my noble friend Lord Redwood’s comments about the environmental impact. From memory—and I might have this date wrong—I think the oldest of the blast furnaces dates back to 1939, so it is inconceivable that that site is not contaminated in some way, which we probably do not have any accurate historical records for.
I have also recalled the reason why I was a bit lukewarm on my own Amendment 20. I hate to say this, and I hope I never have to admit it again, but it is rather because I preferred Amendment 27 from the noble Lord, Lord Fox—a shocking admission to have to make.
Environmental remediation, pension obligations and historic liabilities can amount to very substantial sums. The Government are using taxpayers’ money, and Parliament should be able to scrutinise the liabilities assumed alongside the compensation and support provided. For those reasons, the amendments make a valuable contribution to transparency and accountability, and I look forward to the Minister’s response.
Lord Leong (Lab)
Harry Kane, thank you.
The noble Lord, Lord Fox, has several amendments in relation to the compensation provisions in the Bill. I appreciate his careful attention to detail, which is a key aspect of this Bill, and will respond to the points raised in order. I will preface these points by noting that, if introduced, compensation regulations will be subject to the affirmative procedure, thereby providing opportunities for parliamentary scrutiny.
Amendment 27 is on the approach to environmental liabilities in the compensation process. The noble Lord, Lord Fox, has indicated that this would prevent the payment of compensation until the independent valuer has delivered to the Secretary of State a written estimate of the environmental liabilities of the steel undertaking in question and the Secretary of State has published that estimate and laid it before Parliament.
It is important that the independence of the valuation process is maintained. It is not appropriate for the inputs to the valuation exercise to be disclosed before the valuer reaches their determination. This may risk exposing the independent valuer to undue pressure while they are still deliberating on an outcome, thereby undermining the independence and fairness of the compensation scheme. None the less, the Government would have the power to direct the independent valuer to consider environmental liabilities in their determinations of compensation. We also intend to allow the final compensation determinations to be made public, including any consideration of environmental liabilities carried out. There is an opportunity for further parliamentary scrutiny, as the compensation scheme regulations will be subject to the affirmative procedure, allowing all Members to debate the specific framework set at that stage.
Amendment 24 would prevent the payment of compensation until an estimate of liabilities arising from the environmental and health and safety matters under Clause 54(4) is provided to Parliament. An important principle of the compensation process is that it is assessed independently to ensure that affected parties are treated fairly. The proposed amendment would begin to erode this independence by making the payment of compensation contingent on parliamentary scrutiny of one of the factors that would inform the outcome. It is therefore not feasible to proceed with the proposed amendment. As a general point, compensation scheme regulations would require the independent valuer to consider environmental liabilities as part of the assessment. Additionally, in the event that a steel company is nationalised, we would expect it to publish an annual report setting out its financial position, including any liabilities.
I now turn to Amendment 28. The noble Lord has tabled a similar amendment that would require the Secretary of State to publish an estimate of the pension liabilities of the relevant steel undertaking before compensation is paid. I understand the concerns the noble Lord has about taking on unknown liabilities and putting undue pressure on the public balance sheet. If the Government decide to nationalise British Steel, subject to the public interest test, I can reassure the noble Lord that the Government would not be taking on a large contingent pension liability. The company’s pension scheme is a defined contribution scheme with a pot funded by contributions made by the employees and the company over time. In other cases, the pension scheme may be based on different arrangements, but we have built flexibility into the Bill to address these circumstances on a case-by-case basis.
The pension power in Clause 44 allows us to adapt to regulatory changes, standardise terms and adjust contribution minimums. Where necessary, it also allows for consideration of a fair division of pension liabilities between the transferor company and the government corporation. This follows the approach in the Banking Act. Where relevant, pension liabilities will form only part of the picture in the valuation exercise, and publishing them in isolation without the wider context would not be helpful. As I have already mentioned, following nationalisation we would expect contingent liabilities to be included in the company’s annual reporting.
I am more sympathetic to the noble Lord’s Amendment 25, which would require that the compensation regulations provide for the appointment of an independent valuer in all cases to determine compensation. The current wording makes it discretionary whether an independent valuer is involved in any given case. In practice, it is very likely that the Government will consider it fair to provide for an independent valuer to be established in compensation scheme regulations to consider any compensation for a transferor. The clause is currently discretionary because there could be situations where independent valuation is not required. For example, where the Government and the transferor agree on a sum, it would be unnecessary for the legislation to require that an independent valuer be engaged. However, I will reflect further on the noble Lord’s points and consider how I expect to return to this on Report.
Lord Wigley (PC)
Before the Minister sits down, will he please address the question of why steelworkers in Scunthorpe, Port Talbot or anywhere else should have faith in the Government’s provisions for pensions when they failed to safeguard the pensions of Allied Steel workers in Cardiff and continue to do so?
Lord Leong (Lab)
I will have to write to the noble Lord, because I do not have specific information on that particular pension scheme.
Lord Fox (LD)
My Lords, I thank noble Lords for their contributions—particularly the noble Lord, Lord Wigley, who was saying what I was thinking, but he said it with authority: he understands the issue for those workers quite viscerally. It was in my mind that some level of protection or safeguard needs to be there. I thank the Minister for his very thorough answers. They are so thorough that I will have to spend some time with Hansard, reading them through, to find out how much comfort there is in there. His comments regarding Amendment 25 were certainly encouraging, and I hope we can come to some sort of agreement. On the others, I will have to come back him later, but, with those comments, I beg leave to withdraw Amendment 24.
Lord Sharpe of Epsom
Member’s explanatory statement
This amendment seeks to limit the financial assistance that can be provided under the Act.
Lord Sharpe of Epsom (Con)
My Lords, in moving this amendment, I will speak to Amendments 33 to 35, 40 and 41 standing in my name and that of my noble friend Lord Hunt of Wirral. These amendments address a basic question: if the Government are to provide financial assistance under these powers, what limit is there on the liability being placed on taxpayers? I heard what the Minister had to say in the previous group, but I will carry on regardless and probe a little further.
Clause 58 permits financial assistance in an exceptionally broad range of forms. This could be grants, loans, guarantees, indemnities, the acquisition of shares or assets, contractual payments or other expenditure. It is additional to any other funding powers available to Ministers. Yet the Bill contains no overall financial ceiling, no requirement for advanced detail to Parliament and no explicit statutory value-for-money test.
We understand the need for urgent support, but the Government’s stated objective is not permanent public subsidy but a viable, competitive, private sector led future for British Steel. That requires a business capable of attracting investors with capital, commercial expertise and a long-term commitment. To achieve that, public support must be disciplined, transparent and as limited as is consistent with the securing of the strategic objective. Otherwise, the Government risk creating a perverse incentive: a prospective purchaser may conclude that it need operate the business efficiently enough only to maintain access to public support, rather than to establish a genuinely sustainable commercial future. This would be an indefinitely subsidised business model, with the taxpayer carrying the risk.
Amendment 32 would place a £2.5 billion limit on financial assistance until August 2029. That figure reflects the Government’s own stated steel funding envelope in the steel strategy. Amendment 33 would provide a further test of proportionality by limiting assistance over five years to £1 million per employee. It is intended to ensure that support is targeted at transformation and viability, rather than becoming a substitute for a credible business plan.
Amendment 34 would require a detailed statement to Parliament before assistance is provided. Parliament should know the amount, form and recipient of support, its intended purpose and expected effect, and any conditions, repayment arrangements, guarantees, indemnities or other liabilities attached to it. That is particularly important where exposure may not appear as a simple cash grant. Guarantees and indemnities may create significant liabilities that only crystallise later. Taxpayers should not be asked to accept those risks without clear disclosure.
Amendment 35 would ensure that the Secretary of State is satisfied that financial assistance represents value for money. Value for money does not just mean ignoring strategic capability, national security, skilled employment or supply chain resilience. Ministers must weigh those against the costs, the liabilities, the alternatives and the likelihood that support will lead to a competitive business capable of standing on its own feet. In the other place, it was rightly argued that, if the Government believe in this intervention, they should be willing to set limits on it. Without such limits, taxpayers are simply being asked to sign up to an unlimited liability. The Government have already been providing working capital support and have been in discussion with potential private sector partners. Therefore, they should now have a clearer understanding of the likely financial assistance required, the risks involved and the route to a sustainable outcome.
I turn to Amendments 40 and 41. The Government have been providing monthly updates on working capital being provided to British Steel since the passing of the Steel Industry (Special Measures) Act 2025, which is welcome. It should be the same for financial assistance if British Steel, or indeed any steel undertaking, is nationalised. I beg to move.
Lord Fox (LD)
My Lords, Amendment 37 is in my name. This amendment covers concerns regarding the level of financial assistance but also focuses on the relationship between the United Kingdom and the EU. I think we covered this in a previous group on Monday, so I am not opening up that, but I have some contributions that I hope are helpful to the noble Lord, Lord Sharpe. I am still reeling from his bombshell on the last group, but bear with me.
Clause 52(1)(a) says that the Secretary of State must make regulations for compensation. Clause 57 makes those regulations subject to the affirmative procedure. However, Clauses 58 and 59, on financial assistance, do not have such requirements to make affirmative regulations. It seems that there is an asymmetry here. If the Government are prepared to use the affirmative procedure for the compensation process then why is there not an affirmative process for the financial assistance process? If the Minister was prepared to give ground on that then many of the discussions that the noble Lord, Lord Sharpe, wishes to have about financial assistance would be had during the discussion of the affirmative resolution. That is a helpful and, indeed, balanced way of dealing with this issue.
Lord Redwood (Con)
My Lords, I am grateful to the two noble Lords on the Front Bench for setting out this challenge to the Government. When you have a company in loss that is really struggling, there is an absolute requirement for accurate, speedy and regular financial reporting. Many years ago, I was a chairman with a large group of industrial companies reporting to me. I am pleased to say that none of the subsidiaries reported anything like the losses or the cash haemorrhage of British Steel, and we could not have afforded such a thing. I remember that if I or the chief executive saw one of our subsidiaries in danger of going into loss or dipping into bad performance, it would be put on to monthly reporting and quite often weekly reporting. That was not just because we wanted to know the bad news early but because it started a conversation between us, and other senior directors and executives, and the leading executives of the ailing subsidiary around how they could generate more cash and revenue, win more business and reduce costs in the meantime. If there was no immediate prospect of increasing the revenues, they needed to reduce the cash outflow.
My advice to Ministers, who took responsibility for British Steel many months ago, is that they should be seeing that kind of information, because it is now their responsibility. They decided to undertake this action without advice on value for money, so they need to have that sort of detailed information in front of them. They or their representatives also need that informed conversation with the people they have entrusted with running this business to find out why, as I understand it, the numbers are still not going in the right direction. You need that information weekly, and certainly monthly, because these things accumulate. The National Audit Office has led us to believe that the losses in this business have already accumulated to £642 million.
The description that the Government have offered help with working capital is true, but I do not think it is the whole story. As I understand it, there is a massive trading loss, and taxpayers—through Ministers and the Treasury—are having to pay trading losses. That means the Government are both subsidising the customer, who is getting it too cheaply, and paying for costs that the business needs to meet, which the customer is not going to pay for. In addition, the Government may need to provide additional working capital to provide for the work in progress and the stocks and raw materials for the next bit of production. I would regard the loss as a different category from the provision of additional working capital to keep the business running, and I would be much more worried about the loss.
From my business experience with industry, my conclusion is that cash is the king. By all means look at the P&L—that will give you an indication—but a business has to generate more cash than it spends. Otherwise, it goes bankrupt. That is the fundamental discipline that Ministers, through their chosen representatives, need to impose on this business. They need to see the cash line of outflow starting to reduce—otherwise, they need a fundamental rethink of policy.
Lord Leong (Lab)
My Lords, I thank all noble Lords for their contributions on this group. I will address each of the issues raised in turn. Amendments 32 and 33, in the names of the noble Lords, Lord Sharpe and Lord Hunt, would impose a cap on the amount of financial assistance the Government could provide under the Bill. Amendment 32 seeks to place a statutory cap of £2.5 billion on financial assistance until 15 August 2029. Amendment 33 would apply a cap on a different basis, relating to the number of employees in a steel undertaking.
Imposing a fixed cap of any kind on financial assistance would risk constraining the Government’s ability to respond effectively to evolving circumstances. It could ultimately undermine the very objectives the Bill is designed to achieve, namely the protection of our domestic capability in a strategically vital sector. The Bill contains proportionate and robust measures to ensure transparency and accountability in the provision of financial assistance. Clause 59 requires the Secretary of State to report to Parliament every 12 months on the use of financial assistance. Furthermore, as I am sure all noble Lords will know, any financial assistance provided by the Government will be subject to the established framework for managing public funds, including HM Treasury approval processes, departmental accounting officer responsibilities, and reporting to Parliament through the usual public spending controls.
Lord Sharpe of Epsom (Con)
My Lords, I am grateful to the Minister for his response, and I agree with him that the focus must be on operational challenges. But I think the Minister will have agreed very much with what my noble friend Lord Redwood said about cash flow. The Minister is a businessman and will know exactly what my noble friend was talking about. Therefore, the focus should not be solely on operational challenges; there obviously also has to be a very keen focus on the cash position. I would have thought that the transparency we are suggesting would aid the Government in that.
If one month is not right, as per Amendment 40, I am happy to have a conversation about what might be. But we think that 12 months is far too long a gap between reports. Far be it from me to help the Government in this regard, but I would have thought that it would minimise the potential for political shocks if there was a more of an ongoing dialogue with the British public about the state of play in any entity that is nationalised, as opposed to one-off bombshells on an annual basis—but I will leave that for the Government to ponder.
I am grateful to the noble Lord, Lord Fox, for his helpful comments about asymmetry—he is correct. I believe the Government’s heart may be in the right place on all this. We want to see growth, we want to see investment, and we want to secure jobs in the steel sector, but we are ultimately talking about taxpayers’ money. That is why we think there must be clear limits and proper discipline around this financial assistance. Support should not be simply open-ended with no clear ceiling, no transparent statements of exposure and no statutory tests of value for money. We would welcome further discussions with the Minister on how the Bill can better reflect those safeguards but, for the present, I beg leave to withdraw the amendment.
“(1A) Financial assistance under subsection (1) must be provided through regulations, specifying—(a) the financial assistance proposed to be provided, and(b) the estimated cost to public funds of that assistance.(1B) Regulations under subsection (1A) are subject to the affirmative procedure.”Member’s explanatory statement
This amendment requires financial assistance under Clause 58 to be approved by a resolution of both Houses of Parliament before it may be provided.
Lord Fox (LD)
My Lords, I thought it would be helpful, on this group, to bring together the necessary levels of scrutiny about which I have spoken on various other groups in various different ways. In moving Amendment 36A, I will speak to my Amendments 38 and 41A.
As prefaced on the previous group, Amendment 36A would require financial assistance under Clause 58 to be approved by a resolution of both Houses of Parliament before it may be provided. By amending Clause 58, financial assistance under the relevant subsection would have to be provided through regulations specifying the financial assistance proposed to be provided and the estimated cost to public funds of that assistance. These regulations would be subject to the affirmative procedure.
The Minister got his revenge in early on the previous group, because Amendment 38 outlines a mechanism by which parliamentary scrutiny of the public interest test and nationalisation could work. I propose a new clause after Clause 58 that would prevent financial assistance being provided until 90 days after information about the package of financial assistance has been made available to a Select Committee of the House of Commons or the House of Lords.
I take the Minister’s point about timing, but this is a useful probing amendment to look at the role of Select Committees going forward in the scrutiny of this. I hope the Minister will have something broader to say if he continues to shoot down the principle of the timing of this intervention. This amendment proposes that the Select Committee should look at
“details of the nature and amount of the financial assistance … the intended beneficiary or beneficiaries of the financial assistance … the expected purpose and effect of the financial assistance … any conditions, repayment arrangements, guarantees, indemnities or other liabilities attaching to the financial assistance, and … any other information the Secretary of State believes it is necessary for the Committee to have in order to complete its consideration of the proposal”.
Whether this is before or post hoc, the Select Committees —either of just the Commons, or of the Commons and the Lords—need to have this important investigation. Of course, any information that would be made public that might compromise national security, fiduciary duties or commercially sensitive issues would not be included. Going forward, it would be useful to hear from the Minister his understanding of how Select Committees will be involved.
I had hoped to persuade the Government to commit to an annual parliamentary debate on the steel industry—its strategy, the market and the state of nationalised businesses in the industry—both in the Commons and in the Lords. This would take place once a year, as long as there were still steel undertakings in public ownership. Perhaps we can discuss this, but Amendment 41A proposes an alternate approach to information sharing. It would require the Secretary of State to make a Written Ministerial Statement every three months on the progress of any nationalised steel undertaking.
During the during the passage of the Steel Industry (Special Measures) Act—SISMA—just before Easter last year, Ministers committed to a debate six months following Royal Assent on the use of direction-giving powers. That took place in October 2025. This was a commitment to a single occurrence, but SISMA also included a commitment to a monthly Written Ministerial Statement on the use of direction-giving powers. If British Steel were taken into public ownership, this commitment would fall away, replaced only by any commitments associated with this Bill.
To date, there are no provisions of anywhere near this level of information sharing within the Bill. So, without this amendment, as the cost to the taxpayer increases, the level of parliamentary scrutiny would actually decrease, creating less scrutiny for steel nationalisation than there is under SISMA. I accept that a monthly report may be unreasonable, and I know that the Minister has mused in our discussions about half-yearly reports, but I think quarterly would be a sensible interval, and that is what this amendment seeks to achieve. I do not think any Minister would be afraid of doing this because, as the noble Lord, Lord Sharpe, said on the previous group, a level of public understanding of what is going on—the difficulties, the struggles, the cost and the importance of the industry—is important. This is an opportunity to restate that, coming back to the point about what is happening in the communities, and with jobs and skills. We would expect that to be included in those quarterly reports. If we are not getting a debate every year, this would be a better response, in a way.
Taken together, these three amendments are designed to deliver a level of comfort: an affirmative process for assistance, a role for the Select Committees and a quarterly reporting mechanism. I beg to move.
Lord Hunt of Wirral (Con)
My Lords, this is a very important debate, and I thank the noble Lord, Lord Fox, for these amendments. It is not just a case of public understanding; I think the public would expect Parliament to hold the Government to account. In many ways, I hope we are pushing at an open door with these amendments. In an area potentially involving substantial financial assistance, the Government must be able to provide both Houses of Parliament with a clear indication of the estimated cost to public funds. Parliament must be able to scrutinise not only the principle of financial assistance but its scale, purpose, conditions and likely liabilities.
The proposed 90-day period in Amendment 38, which we have already debated, strikes a sensible balance. It would allow an expert Select Committee to examine the proposals and make recommendations, while preserving the Government’s ability to proceed once that scrutiny has taken place. The noble Lord, Lord Fox, seemed uncertain several times as to whether it should be a Select Committee of the House of Commons or of the House of Lords. I have always been a great believer in Joint Committees. Something of this importance requires both Houses of Parliament to scrutinise it, and the best way to do that is through our expert Select Committee process.
Parliament has enormous expertise which should be used in determining the appropriate level and form of support. That is particularly important where taxpayers may be exposed through grants, loans, guarantees or indemnities. I hope the Minister will be able to respond positively on how he intends to proceed.
Lord Leong (Lab)
My Lords, I am grateful for all the contributions in this group of amendments.
Amendment 38 in the name of the noble Lord, Lord Fox, would require the Secretary of State, before providing any financial assistance, to put forward a proposal to Parliament for doing so, setting out the underlying details. The amendment stipulates that a Select Committee would have 90 days to provide any recommendations on the proposal before it can proceed. I respectfully suggest that this amendment is not realistic, given that financial assistance may need to be provided immediately following a transfer. It is unlikely that there would be time for the parliamentary scrutiny envisaged by this amendment without imposing significant risk to the continued operation of the steel undertaking. I appreciate the noble Lord’s intention in tabling this amendment but, for the reasons I have outlined, I ask that he does not move it.
Amendment 36A would require the financial assistance power in Clause 58 to be exercised by regulations specifying the purpose and estimated costs. I understand the desire for further parliamentary scrutiny of the costs that might be incurred in relation to an intervention in a steel undertaking. The Government have been transparent about the costs incurred to date as a result of the intervention in British Steel under the special measures Act. Estimating future costs relating to nationalisation is more challenging because they would depend on decisions not yet taken about the future operation of a particular steel undertaking.
I hope I can provide reassurance by emphasising the extensive controls over expenditure that would apply by default. If these provisions are used, the Government would need to consider the potential range of costs and make the usual value-for-money tests under the accounting officer. These spending processes are subject to ongoing parliamentary scrutiny by the Public Accounts Committee. The Permanent Secretary to the Department for Business and Trade appeared before PAC last week to discuss steel.
As with Amendment 38, I am concerned that this amendment does not reflect the operational realities of a potential intervention. It is likely that there would be urgent and immediate pressures to draw down on the financial assistance spending power to maintain operations in a way that would not be conducive to the set-up of the secondary legislation process. However, I understand that the noble Lord would like us to go further in this respect, and I appreciate the constructive engagement we have had on this and other issues. I will of course consider whether anything more can be done to give him the reassurance he desires.
Amendment 41A, also tabled by the noble Lord, would require the Secretary of State to make a Written Ministerial Statement every three months on the progress of any publicly owned steel undertaking. I am sympathetic to this amendment and recognise Parliament’s interest in the Bill’s impact on the steel industry, employment and public finances. That is why the Bill requires the Government to produce an annual report on financial assistance under it and the company will publish its annual report and accounts. I do not think reporting every three months for as long as a steel undertaking remains in public ownership is necessary. However, the principle is sound and the noble Lord made some excellent points. I recognise that our current reporting commitments may not encompass the full scope of his amendments. I ask him not to move the amendment, and the Government will consider this further before Report.
Lord Fox (LD)
My Lords, I thank the Minister for his positive response on the last amendment, and I understand the nature of his concerns on the first two. All roads point back to Clause 2 and the public interest test, frankly, so perhaps we should have another discussion about that. However, on that basis, I beg leave to withdraw.
Lord Sharpe of Epsom
“Exemption of iron and steel carbon border adjustment mechanism goods(1) Section 143 of the Finance Act 2026 (charge to carbon border adjustment mechanism) does not apply to emissions embodied in a CBAM good which is an iron and steel good for the purposes of Schedule 16 to that Act where the good is imported by a transferred steel undertaking for use in connection with the carrying on of its business.(2) In subsection (1), “transferred steel undertaking” means a steel undertaking in respect of which the Secretary of State has exercised a principal transfer power.”Member's explanatory statement
This amendment would exempt iron and steel CBAM goods imported for use by a steel undertaking brought into public ownership under this Act from the carbon border adjustment mechanism.
Lord Sharpe of Epsom (Con)
My Lords, I will speak to Amendments 47 and 48 in my name and that of my noble friend Lord Hunt of Wirral. These amendments address two costs which bear directly on the viability and competitiveness of a transferred steel undertaking: the carbon border adjustment mechanism and the United Kingdom emissions trading scheme.
Amendment 47 would exempt a transferred steel undertaking from the carbon border adjustment mechanism in respect of iron and steel goods imported for use in its business. Amendment 48 would disapply the United Kingdom emissions trading scheme in relation to installations forming part of such an undertaking. These amendments go to a wider question which has run throughout our debates: whether the Government’s approach will genuinely secure steel-making in this country or simply add further costs to an industry already exposed to intense international competition.
The Government’s impact assessment on the free allocation review makes the point. It accepts that reducing free allocations increases businesses’ exposure to carbon costs. It accepts that energy-intensive industries producing globally traded commodities are particularly vulnerable because they cannot simply pass those costs on to consumers. It also recognises the danger of carbon leakage—production, investment, jobs and emissions moving overseas, rather than emissions genuinely being reduced. The assessment says that the traded carbon price could be approximately £25 per tonne lower by 2030 if free allocations do not fall in line with the industry cap.
This is a policy choice, and it has consequences for industry. The steel sector has warned of the effect of reducing free allocations. It has described the proposed changes as an “earthquake moment”. The Government must listen to that warning. CBAM can affect imports into the domestic market; it does not protect a United Kingdom producer competing in export markets. Moreover, higher costs can be passed down the supply chain to downstream manufacturers, reducing their competitiveness and risking the relocation of activity and jobs abroad.
We have now seen the Government introduce new trade measures with substantial tariffs and lower quota volumes. The Minister in the other place, Chris Bryant, said:
“We are determined to make sure that we have a proper steel production industry in the UK, and that means that we have to take some tough measures”.—[Official Report, Commons, 30/6/26; col. 767.]
But thus far the tough measures appear to fall on downstream manufacturers and therefore, inevitably, on British consumers. The Government cannot impose new trade barriers and costs on those who use steel while also increasing carbon costs for domestic producers, and then claim to have solved the competitiveness problem. When will they get tough on the ideological net-zero policies which are imposing substantial costs on the steel industry?
The Government need to make a clearer choice. Do they want a steel sector which can compete, invest and employ people in the United Kingdom, or do they want to continue a policy framework which makes domestic production more expensive and pushes activity overseas? This is particularly important as they pursue electric arc furnace production. If they want greener steel, they must ensure that the electricity required to make it is available at a competitive price. It is no good requiring industry to electrify while maintaining a policy environment in which power and carbon costs make that transition commercially unviable.
The Government should not use nationalisation to shield themselves from the consequences of their own industrial and environmental policies. They should instead create the conditions in which steel can be produced competitively in Britain, with lower energy costs, realistic carbon policy and a serious commitment to preventing industrial activity leaving our shores. I beg to move.
Lord Redwood (Con)
My Lords, I support my noble friend. I have also referred to this in past interventions, so I need not say very much. Looking at the tragedy of the British steel industry under successive government policies, there is no doubt about it: the very high energy costs, carbon taxes, emission trading arrangements and CBAM coming in are the main reasons why we are not competitive and we have had this colossal collapse. If the Government will not accept that, they will never have a successful steel industry.
Lord Fox (LD)
My Lords, I will be equally taciturn. I have spoken a lot about CBAM, and I do not intend to repeat it. It occurs to me that if the Government become a major owner of the steel industry, they might become more sympathetic to some of the arguments that the noble Lord, Lord Sharpe, has just advanced.
Lord Leong (Lab)
My Lords, I am grateful to the noble Lords, Lord Sharpe and Lord Hunt, for their thoughtful amendments on the UK emissions trading scheme and the carbon border adjustment mechanism and their impact on the steel sector.
A common theme across these amendments is the proposal that a publicly owned steel undertaking should be exempt from one or both of these measures. I understand the concerns that have been raised about the sector’s competitiveness and the costs faced by steel producers. However, I must be clear that the Government cannot support this approach. We remain firmly committed to industrial decarbonisation and to securing a competitive, sustainable and low-carbon future for the UK steel industry. The UK cannot build a resilient steel sector by exempting it from the very policies designed to support the transition to cleaner production and to create a level playing field against higher-carbon imports.
The UK emissions trading scheme and the carbon border adjustment mechanism are complementary policies. Together, they encourage investment in cleaner production, while ensuring that UK producers are not undercut by imports from countries with lower environmental standards. Exempting a publicly owned steel undertaking from these measures would not only undermine those objectives but create an uneven regulatory framework within the UK steel sector. With this in mind, I will turn to the amendments tabled by the noble Lords, Lord Sharpe and Lord Hunt.
Amendment 47 seeks to exempt a publicly owned steel undertaking from CBAM. I understand the noble Lords’ concern that CBAM will increase the cost of imported products for steel undertakings. However, I emphasise that the CBAM’s purpose is to ensure that imported carbon-intensive goods face comparable carbon prices to those of domestically produced goods. It will give industry the confidence to invest in the UK, knowing that its decarbonisation efforts will not be undermined. CBAM makes no exemptions for particular UK firms. Its intent is to target the problem of carbon leakage and ensure that highly traded carbon-intensive goods from overseas, including steel, pay a comparable carbon price to that paid by UK manufacturers.
Amendment 48 seeks to exempt a publicly owned steel undertaking from the emissions trading scheme. I am sympathetic to the fact that this also imposes a cost on activities that have significant emissions. However, as with Amendment 47, accepting Amendment 48 would provide preferential treatment based on ownership and undermine a level playing field across the industry. The transition to low-carbon steel must be fair, credible and consistent across all operators, whether publicly or privately owned.
I emphasise that the ETS includes targeted protections for energy-intensive, trade-exposed industries, including steel. Further protections will be introduced through CBAM from 2027. It is for these reasons that I cannot support these amendments and ask that they not be pressed.
Lord Sharpe of Epsom (Con)
I am very grateful to the Minister, but I have to admit that I am very disappointed in his response, and I wonder if he is a bit disappointed in the response that he had to give. It seems to me that you can either have decarbonisation or have a competitive steel industry, but at this precise moment in time you cannot have both; at this precise moment in time, they are mutually exclusive. That is not to say that we should not pursue net zero in the future—of course, we should—but this is a particularly exposed industry at a particularly critical time.
Lord Hunt of Wirral
“Strategic reports: transferred steel undertakings(1) Chapter 4A (strategic report) of the Companies Act 2006 does not apply in relation to a company carrying on a transferred steel undertaking.(2) In this section, “transferred steel undertaking” means a steel undertaking in respect of which the Secretary of State has exercised a principal transfer power.”Member’s explanatory statement
This new Clause would disapply strategic report requirements for companies carrying on transferred steel undertakings.
Lord Hunt of Wirral (Con)
My Lords, I will speak to Amendments 49 to 55 standing in my name and the name of my noble friend Lord Sharpe of Epsom. As we have just discussed, the explosion of environmental, social and governance—ESG—red tape has created a vast and complex web of rules, which force businesses to comply with political targets at a cost to investment, job creation and, above all, the competitiveness of Britain.
Admittedly, I should add a declaration of interest, as a practising solicitor in the City of London. This has undoubtedly created an explosion of work and therefore I should probably declare an interest. But I do not take any pride in the fact that ESG reporting requirements have become more and more burdensome and onerous.
This is why I am delighted to confirm that His Majesty’s Official Opposition have committed to repealing a number of ESG reporting requirements, including those addressed by this group of amendments, so that unnecessary business costs can be removed and businesses can focus on investing, growing and creating jobs. However, if the Government are going to nationalise a steel undertaking, in order to minimise the cost of its transition, attract private sector investment and reduce the burden on the taxpayer, they should at least disapply these regulations in respect of that undertaking. British Steel employs more than 4,000 people and is, therefore, likely to be caught by a number of these costly and burdensome requirements.
Amendment 49 would disapply the Companies Act strategic report requirements, which require quoted companies to include annual greenhouse gas emissions information and reporting on environmental impacts in directors’ reports. Amendment 50 would disapply greenhouse gas emissions and related environmental reporting requirements. Amendment 51 would exempt a nationalised steel undertaking from the energy savings opportunity scheme, which requires large companies, including those with more than 250 employees or turnover above the relevant threshold, to carry out energy audits every four years to identify energy efficiency opportunities.
Amendment 52 would disapply the energy and carbon reporting requirements which apply to large companies and limited liability partnerships. Amendment 53 would remove executive pay ratio reporting requirements. These require certain companies to report chief executive pay against median, lower-quartile and upper-quartile employee pay, with the figures subject to audit. Amendment 54 would disapply forest-risk commodity due diligence and reporting requirements. These would require businesses using certain commodities to conduct supply chain due diligence and publish annual reports. Finally, Amendment 55 would disapply climate-related financial disclosure requirements. These require companies and LLPs to report how their boards oversee climate risks, the impact of climate change on strategy, and the metrics and targets used to assess those risks.
None of these requirements reduces electricity costs, secures orders, improves productivity or makes British Steel more competitive, yet each requires additional reporting, auditing and compliance costs on a business which the Government may have taken into public ownership at substantial expense to taxpayers. I therefore say to the Minister that, if the Government are serious about making a nationalised steel undertaking viable, investable and capable of returning to the private sector, they should focus on reducing unnecessary burdens and allowing management to concentrate on commercial recovery, investment, modernisation and jobs. I beg to move.
Lord Fox (LD)
My Lords, I was planning to say nothing and I will say little more than nothing. I have a question for the noble Lord, Lord Hunt, which he can answer when he gives his response to the Minister. Can he remind me when most, if not all, of these measures were brought on to the statute book?
Lord Leong (Lab)
My Lords, the noble Lords, Lord Sharpe and Lord Hunt, have tabled a number of amendments regarding the deregulation of the steel sector. These amendments focus on three core areas of regulation: industrial action, environmental regulations and reporting, and company reporting.
I recognise the concern from noble Lords that any publicly owned steel undertaking will face a significant array of reporting requirements. That is true, and the Government believe that these are necessary to ensure that any publicly owned company operates in a similar way to its privately owned counterparts. Any publicly owned steel undertaking must protect its workers’ rights, fulfil its environmental obligations and transparently report on its progress.
At the outset, I make the general point that a company under public ownership is ordinarily treated as a public corporation—that is, it is run as a private company with an independent board of directors, operating under broad strategic direction from Government Ministers. It is right, therefore, that such a company is subject to the regulatory frameworks within which any similar private company operates. I also emphasise to noble Lords that amendments seeking to level the playing field within the steel industry are inconsistent with that position. Instead, the amendments in this section seek to give preferential treatment to publicly owned steel undertakings.
I will now address the amendments directly. I believe that Amendments 50 to 52, 54 and 55 are intended to address the noble Lord’s concern that the Government’s industrial decarbonisation policies could impose additional costs and burdens on publicly owned steel undertakings. In summary, these amendments seek to exempt publicly owned steel undertakings from a number of statutory requirements, including greenhouse gas reporting, the energy savings opportunity scheme, energy and carbon reporting, forest-risk commodity due diligence, and climate-related financial disclosures. Although I recognise the noble Lord’s concern that there is a range of requirements on the steel sector with regard to environmental reporting, I cannot support these amendments.
The reporting requirements the Opposition have identified are integral to this Government’s commitments to decarbonising our industries. Our steel strategy set out a vision for a move towards green, decarbonised steel production. We are committed to supporting the sector in achieving those objectives, as evidenced by the £500 million of funding to Tata Steel for the development of its electric arc furnace in Port Talbot.
A public steel company, no more than any other steel company, should not be exempt from these important transparency requirements. Accepting these amendments would undermine the intent of the Government’s industrial decarbonisation policies, creating an unfair system for other domestic steel producers. The Government are committed to revitalising the entire UK’s steel industry, not only the companies in public ownership. Alongside this, the Government believe that these requirements are critical to industrial decarbonisation and to meeting net zero.
Finally, I will address Amendments 49 and 53 together, as both seek to exempt a publicly owned steel undertaking from existing corporate reporting requirements. Amendment 49 would disapply the strategic reporting requirements under Chapter 4A of the Companies Act 2006, while Amendment 53 would remove the requirement to publish information on executive pay ratios.
I recognise that the purpose of these amendments is to reduce the administrative burden on a publicly owned company. However, the Government do not believe that public ownership should entail lower standards of transparency or accountability. Indeed, if a steel undertaking is brought into public ownership, there is an even greater expectation that it should operate openly and be subject to appropriate public scrutiny. That is why the Government expect any publicly owned steel undertaking to comply with the standard reporting obligations that apply to comparable public corporations. Its annual report and accounts should provide Parliament, taxpayers, employees and the wider public with a clear and comprehensive overview of the company’s financial position, operational performance, governance and remuneration arrangements.
Transparency is not merely a regulatory requirement; it is an essential part of maintaining public confidence. It supports effective parliamentary scrutiny, promotes sound corporate governance and demonstrates that public assets are managed responsibly. It also serves a practical commercial function. Should the company seek external finance, strategic partners, or, in due course, a return to private ownership, prospective investors and creditors will rightly expect access to robust, reliable and consistent corporate reporting. Maintaining those standards will enhance rather than diminish the company’s long-term prospects.
For all these reasons, the Government believe that a publicly owned steel undertaking should be held to the same high standards of openness and disclosure as comparable public corporations. Public ownership should set the bar for transparency, not lower it. I therefore hope I have explained why the Government cannot support these amendments, and I respectfully invite the noble Lord to withdraw the amendment.
Lord Hunt of Wirral (Con)
My Lords, I should first deal with the question raised by the noble Lord, Lord Fox, who perhaps sought to point the finger at me as a Minister for having introduced some of these requirements. I was indeed a Minister for 16 years, and I cannot recall having introduced any of these requirements at any stage. In fact, the Minister answered the noble Lord by pointing out that, under Tony Blair, the Companies Act 2006 started a process of requiring companies to include many of the things we are now debating and discussing. That is his answer. Perhaps when the noble Lord next gets to his feet—perhaps sometime next week—he might tell us what Vince Cable, who inherited all those requirements, did about minimising the burden on business.
Undoubtedly, at the present time, there is an overregulated regime facing the private sector, and in many ways, we are seeking to alleviate that burden as far as the new, nationalised steel industry is concerned, if the Government proceed down that road.
I remain concerned that the Government do not recognise the cumulative burden that these requirements place on an energy-intensive and strategically important industry. If Ministers are serious about restoring a nationalised steel undertaking to competitiveness and attracting private sector investment, they should be looking to reduce unnecessary compliance costs, not preserve them. No doubt we will return to these issues at a later stage. For the present, I beg leave to withdraw the amendment.