Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
My Lords, as usual I must advise your Lordships that, 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.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, I want to highlight a few key areas before we begin. On general rules, I remind noble Lords that they should declare any relevant financial interests the first time they speak at each stage of a Bill. This means that, in Committee, relevant financial interests should be declared during the first group in which a noble Lord contributes. The declaration does not need to be repeated in debates on later groups at this stage. Declarations 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 also want to remind the Committee again of guidance in the Companion at paragraph 8.82 that, when withdrawing an amendment, noble Lords should
“be brief and need not respond to all the points made during the debate, nor revisit points made when moving the amendment”.
A number of contributions when withdrawing amendments on previous days have been lengthy. I encourage all participants to keep their remarks short in the spirit of the Companion.
Financial Services and Markets Bill [HL]
Monday 6th July 2026
(4 weeks, 1 day ago)
Grand CommitteeRead Full debate Financial Services and Markets Bill [HL] 2026-27 View all Financial Services and Markets Bill [HL] 2026-27 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 5-V(b) Amendments for Grand Committee (Supplementary to the Fifth Marshalled List) - (6 Jul 2026)
Lord Holmes of Richmond
“Digital operational resilience of regulated firms(1) The FCA and the PRA must each make rules requiring authorised persons to meet minimum standards of digital operational resilience, including standards relating to—(a) ICT risk management frameworks appropriate to the nature, scale, and complexity of the authorised person's operations;(b) classification, reporting, and remediation of major ICT-related incidents, including cyber attacks, within timeframes to be specified by the regulator;(c) oversight and contractual requirements for third-party ICT service providers, including cloud service providers and critical technology suppliers; (d) regular digital operational resilience testing, including advanced threat-led penetration testing for systemically significant firms.(2) In making rules under subsection (1), the FCA and PRA must have regard to—(a) the need for proportionality with respect to the size and systemic importance of authorised persons;(b) international standards and frameworks, including those adopted by the European Union;(c) the need to avoid duplication with existing regulatory requirements.(3) The FCA must publish a consolidated digital operational resilience framework within 18 months of this Act coming into force, setting out how requirements under this section interact with existing obligations on authorised persons.(4) The FCA and PRA must review rules made under this section no later than every 12 months.”Member’s explanatory statement
This amendment seeks to require the FCA to make rules in relation to the digital operational resilience of financial services firms.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to open day 5 of Committee on the Financial Services and Markets Bill. In moving Amendment 130, which is in my name, I will also speak to Amendments 131 and 168. This is the latest round of AI and technology amendments to the Bill. It is a Bill that is curiously silent on these subjects. At least today there is something timely about my intervention in that, as I am on my feet, across town Sheldon Mills is launching his review into artificial intelligence in financial services—more of which presently.
Amendment 130 seeks to require financial services firms to have regard to all the issues around digital and operational resilience across all their activities. I know that the Minister in his response will refer to the cyber resilience Bill, which is coming to your Lordships’ House in a fortnight. Indeed, there is much in that Bill to commend. But in consideration of the significant impact and position of financial services in the UK economy, I believe that it would be helpful to have something about digital and operational resilience in this Bill.
We are not just talking about foreign states or negative acts from international adversaries; we are talking about issues around supply chain, third-party overreliance and concentration risk on particular providers—for example, in the cloud. Circumstances change and financial services institutions, believing that things will always be as they are, may find themselves extraordinarily exposed by the flick of a switch with perhaps only 90 minutes’ notice. I ask the Minister to consider this when he responds and state, in respect of financial service institutions’ significant contribution and place in the UK economy, whether he agrees that clauses in the Bill pertaining directly to these subjects would be helpful in our endeavours.
Amendments 131 and 168 are on artificial intelligence. Certainly, some of these concepts are covered in Sheldon Mills’ review. Given the proliferation and already deep penetration of artificial intelligence into financial services institutions—and, indeed, its use by not only sophisticated but retail and individual investors—will the Minister not agree that considering AI, not just in these clauses but throughout the Bill, would be beneficial to all those involved in financial services? When we say, “all those involved in financial services”, we could just as easily say “everybody”. The principles are clearly set out in Amendment 131, which takes us to the issue that I have raised on previous days around the Government’s approach to artificial intelligence. As stated, that is a domain-by-domain approach, yet there is nothing currently within this Bill.
Amendment 168 returns to an issue of which colleagues will be well aware, because I raised it when we deliberated on the Financial Services Act 2021 and FSMA 2023. That is to have an officer responsible for AI in all financial services institutions that develop, deploy and use AI—in other words, pretty much all financial services institutions. This is not cumbersome; it is not about compliance and it is certainly not about putting burdens on smaller firms—the proportionality principle would mean that we would be talking about a function rather than an individual—nor is this about delegation or abdication of the board’s responsibility, or indeed the senior managers’ responsibility, to the business. This is about having a point person: somebody who can orchestrate, who can co-ordinate and who can have that crucial horizontal view across an organisation, to assist internally and indeed present externally as to how AI is being used and deployed, for the benefit both of AI use internally and of customers.
To conclude, without having clauses on AI in the Bill, I believe that the legislation will be chronically insufficient for the challenges of our time. That is not the challenges of next year or five years’ time: AI is already impacting financial services right now. To give one example, how can we consider the consumer duty without considering how AI impacts on all elements of that? The Mills review has much good in it, but this legislation is before us today, and I believe that we have an opportunity to thread AI through it for the benefit of individuals, of institutions, of all of our financial services and, through that, of the entire economy of the United Kingdom. I look forward to the Minister’s response. I beg to move.
Baroness Kramer (LD)
My Lords, I was delighted when I saw that the noble Lord, Lord Holmes, had put down these amendments, because it is so apparent, as he has clearly stated, that the whole issue of digital and AI is missing from this Bill. Because of the pace of change and the impact—and strength of the impact—across all our financial services, this is an issue that has to be dealt with and grasped with some sense of urgency.
Like the noble Lord, I have been very interested in the Mills review, although, as it was published today, I have only had time to skim its summaries and some of the newspaper references to it. It is clear that, certainly from Sheldon Mills’ perspective—I think that most of us have, one way or another, dealt with Sheldon Mills over the years and very much respect his judgment—the FCA may well be short of relevant powers in dealing with AI. He noted particularly a lack of powers under the critical third-parties regime, which made sense to me. In his recommendations, he also raised issues around the regulatory perimeter, another area that we have raised on more than one occasion.
In recent years, it has not been uncommon—though I dread it—for the Government to present on Report amendments that deal with an area that has been missed from the body of a Bill in Committee. On this Bill, that would allow a period of thought and the opportunity to absorb and consider what is presented in the Mills review. Since financial services Bills do not come around that often, I very much hope that the Minister will seriously consider taking advantage of the Bill to get those kinds of protections in place. If he fails to do that, we might collectively have to come forward with something on Report. Frankly, given the intricacy, detail and complexity, this is an area where the Government coming forward with an answer would, I think, be welcomed across the House and very much, I hope, within the spirit and theme of the amendments presented by the noble Lord, Lord Holmes.
Lord Altrincham (Con)
My Lords, I thank my noble friend for his comments today on AI and digital resilience and for his comments on previous days. I declare my interest as the director of South Molton Street Capital, which is regulated by the FCA.
These amendments raise an interesting point about emerging technologies, digital resilience and the use of artificial intelligence in financial services, to be covered, as we have discussed, by the Mills review and the FCA itself. We will return to this subject in a later group, when my noble friend Lord Ranger of Northwood and the Opposition Front Bench will speak to our own amendments, particularly in relation to digital assets. We will also comment on supervision in a later group.
Both digital resilience and the proper use of AI are important. However, I am not convinced that this is the right way or the right place to tackle these issues. Our concern is that this could add another layer of regulation on firms that are already subject to a substantial body of obligations in this area. Financial services firms already operate under a wide range of frameworks relevant to AI governance, digital resilience and technology risk. The consumer duty, which we have touched on already, requires firms to deliver good outcomes for retail customers. The senior managers and certification regime provides a framework for accountability and governance. The FCA senior management arrangements and controls already require firms to maintain appropriate systems, controls, governance and risk management. Firms are subject to data protection law, including rules around automated decision-making and profiling. They are subject to equality law where discriminatory outcomes arise. They are subject to operational resilience requirements, outsourcing and third-party risk expectations, and, in some contexts, more specific requirements around algorithmic trading and market conduct.
We should therefore be cautious before adding new statutory requirements on top. That is particularly important because technology develops quickly and a prescriptive regulatory framework can rapidly become out of date. It can also lead to duplication, uncertainty and compliance activity that is focused more on satisfying the form of the requirement than managing the underlying risk.
I would be grateful for reassurance from the Minister about how Amendment 130 would interact with existing operational resilience and outsourcing requirements, and whether the Government believe that further statutory provision is needed.
On Amendment 131, the issues of transparency, bias, human oversight, and redress are all important, but they also overlap with existing duties on fair treatment, governance, data protection, discrimination and consumer outcomes. I would be reluctant to support an approach which simply adds a new AI-specific regime without first demonstrating that the existing framework is inadequate.
On Amendment 168, I understand the attraction of having a named individual responsible for AI governance. Accountability matters, but in financial services we have the SMCR regime to address supervision, and that regime is already quite complex, as we will address in a later group. A mandatory AI officer would probably cut across existing accountability structures in conduct, compliance, operations, risk, data and product governance. It could, in fact, cut across all existing supervisory positions.
This group raises important questions about the future of financial regulation. We must be alert to new risks, but we must also be careful not to respond to every emerging technology by simply adding another layer of regulation. The better approach is to ensure that regulation is proportionate, technology-neutral where possible and focused on real outcomes. I look forward to the Minister’s response.
The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)
My Lords, the Government recognise that the pace and significance of the current wave of technological change is already having an effect on the whole of society. For the purposes of this discussion, I will state that it is clearly having a notable impact on the financial services sector, as mentioned, and that it is set only to continue to grow. The Chancellor set out in her Mais Lecture just a few months ago the importance of the UK grasping the opportunities presented by AI to ensure that we are at the forefront of safe adoption and innovation, so we are entirely in agreement on how important this topic is.
On Amendment 130, the Government are committed to ensuring the operational resilience of the UK’s financial sector. Operational disruptions harm consumers and markets and have the potential to affect financial stability. That is why the FCA and the PRA have powers to ensure that firms have robust plans in place to deliver important business services, no matter the disruption.
Lord Holmes of Richmond (Con)
I thank all noble Lords who have taken part in this debate and the Minister for his response. I look forward to reading the Mills review in further detail and seeing where we take these issues between Committee and Report. For now, I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
I cannot call Amendment 135A as it is an amendment to Amendment 135.
Lord Hunt of Wirral
“FCA: wholesale markets and firms division(1) The FCA must, within 12 months of the day on which this Act is passed—(a) establish and maintain a dedicated unit (a “Wholesale Markets and Firms Division”) within its organisation, and(b) appoint a Deputy Chief Executive to lead this division.(2) The FCA must ensure that its relevant functions in relation to wholesale markets and firms are exercised and discharged through a Wholesale Markets and Firms Division.(3) The FCA, in discharging its functions through a Wholesale Markets and Firms Division, must—(a) act in a way which advances the regulator’s operational objectives,(b) act, so far as reasonably possible, in a way which advances the regulator’s duties under section 1EB (competitiveness and growth objective) and section 3B (regulatory principles to be applied by both regulators) of the Financial Services and Markets Act 2000, and(c) have regard, in particular, to the desirability of—(i) reducing regulatory burdens on participants in wholesale markets,(ii) facilitating innovation in wholesale financial services, and(iii) promoting sustainable growth and international competitiveness of UK wholesale markets.(4) A Wholesale Markets and Firms Division must be responsible for—(a) the development, implementation and supervision of rules and policies relating to wholesale markets;(b) authorisation and supervision of wholesale markets and firms; (c) engagement with market participants active in wholesale markets, including international firms;(d) advising the regulator on the impact of its policies and rules on wholesale market activity, investment and competitiveness.(5) The FCA must, at least once in each calendar year, prepare and publish a report on the activities of its Wholesale Markets and Firms Division.(6) A report under subsection (5) must—(a) be provided to the Treasury, and(b) include an assessment of—(i) steps taken to reduce regulatory burdens in wholesale markets,(ii) progress in supporting innovation,(iii) the contribution of wholesale markets to investment and growth in the United Kingdom, and(iv) the extent to which the regulator has advanced its secondary competitiveness and growth objective in relation to wholesale markets.(7) In this section—“wholesale firms” means regulated firms whose customers, clients or counterparties are pre-dominantly not covered by the UK consumer duty;“wholesale markets” means such markets, activities or classes of regulated activity as may be specified for the purposes of this section by the Treasury by regulations, having regard to—(a) the nature of transactions undertaken primarily between market counterparties acting in a professional capacity;(b) existing distinctions within the FCA Handbook (including, but not limited to, provisions relating to wholesale market conduct, eligible counterparties, and professional clients);(c) the role of such markets in facilitating capital allocation, risk transfer and investment at scale.(8) A statutory instrument containing regulations under subsection (7) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”Member’s explanatory statement
This amendment seeks to require the FCA to develop a dedicated division to undertake their regulatory activities in regard to wholesale market participants.
Lord Hunt of Wirral (Con)
My Lords, in moving Amendment 142A and speaking to the other amendments in this group, which I also support, I am asking for the FCA to be able to develop a dedicated division to undertake its regulatory activities regarding wholesale market participants.
This amendment is all about ensuring that in what is a highly competitive global marketplace the FCA can balance its priorities and resources effectively to benefit the consumer or clients who use them in those markets that the FCA regulates. The FCA’s protection of the individual consumer is rightly prominent, but businesses that are customers of wholesale markets, such as our world-leading London insurance market, require a very different level of protection. Currently, the definition used by the FCA is very unclear and does not distinguish between these two very different sets of needs.
I declare my long-standing interest in financial services Bills over the last 50 years, particularly as a practising solicitor in the City of London and a partner in the firm DAC Beachcroft LLP. I have slowly but surely seen the evolution of regulation, but I am concerned that it is now inhibiting the growth of what is for us one of the great global centres, particularly for insurance. However, the definition of wholesale does not just apply to insurance; it applies to other aspects of financial services as well. The FCA is well aware of the issue. Indeed, it has been raised actively with the FCA over the last few years and there have been commitments to action. However, sad to say, progress is not being made. The FCA appears to be struggling with the definition of a retail consumer and has not found the best way forward.
Once again, we rely on our Select Committee to highlight the issue. The cross-party Financial Services Regulation Committee identified this as an issue, finding in its report last year:
“The FCA does not do enough to distinguish between firms that cater to wholesale and retail markets in its regulation and supervision which … imposes unnecessary burdens and frictions on firms … These issues have fuelled an increase in bureaucracy and imposed significant monetary and resource demands on firms”.
Witnesses to that Select Committee gave key examples. They show that wholesale and retail markets serve fundamentally different customers. Retail regulation is designed to protect individual consumers, whereas wholesale markets are primarily used by professional investors, insurance firms, banks, pension funds and corporate entities. The London insurance market deals almost exclusively with corporate clients, but the regulations take a one-size-fits-all approach, applying consumer-focused rules to firms and activities for which they were never really intended.
We have a situation where pet insurance is essentially regulated in the same manner as marine or aviation insurance. Policies and services delivered in the London market are bespoke to the individual client or individually negotiated and tended, where there is no evidence of this type of market failure. They are not unit-based commoditised products that are offered within the retail market. The FCA’s implementation of what is described as the consumer duty has introduced considerable uncertainty for domestic and international firms operating in the London market. This uncertainty is driven by a lack of clarity on the FCA’s expectations as to how firms should comply with the consumer duty, including which markets and consumers it applies to.
I believe, therefore, that a dedicated wholesale division would help to ensure that regulation is proportionate to the sophistication of market participants. That is why I feel so strongly that this amendment and my noble friend Lord Ashcombe’s amendment should be contained in the Bill. I hope that the Minister will be able to address this issue for the first time as a Minister on a financial services Bill, recognising that, at the moment, we are dealing with two separate markets that are merged under the consumer duty, which is wholly inappropriate. I beg to move.
Lord Ashcombe (Con)
My Lords, I declare my interest as an employee of Marsh, which is an FCA-regulated firm. I shall speak to Amendment 142C in my name, which seeks, in essence, to achieve something modest but necessary: equipping the regulator with a clearer and more effective framework within which to operate.
I am—as, I suspect, other noble Lords are—unequivocal in my support for well-judged regulation. It is the foundation of consumer protection, market integrity and London’s standing as an international global financial centre, particularly in insurance, as my noble friend Lord Hunt mentioned. However, the position in which we find ourselves today is one not of insufficient regulation but of fragmentation, with a system that in parts lacks clarity and coherence.
At present, the FCA operates without a clear statutory distinction between retail and wholesale clients. The distinction between wholesale and retail markets is not academic; it is fundamental, particularly in insurance. Retail regulation exists to protect individuals and small businesses. Wholesale markets are, by contrast, the domain of larger and corporate entities. These participants are not passive consumers. They are typically active, informed buyers engaging in complex and often bespoke transactions, as I said on Monday last week. This is very much in line with my noble friend Lord Hunt’s Amendment 142A, to which I have added my name.
This situation leads to a consequence: a degree of inconsistency that is, frankly, difficult to justify. Businesses of broadly similar scale and sophistication can find themselves subject to different regulatory treatments depending on the regime applied or the particular lens through which they are viewed. That uncertainty serves no one well. It imposes a cost on, first, firms, which must devote increasing resource to navigating overlapping and at times contradictory interpretations, and, ultimately, on consumers and smaller businesses, which bear that burden through higher costs and reduced access to services.
There is, however, a straightforward solution. Where my amendment takes that further than my noble friend’s is as follows. A turnover threshold of £6.5 million already exists in statute and is used by the Financial Ombudsman Service to reflect the size of companies. It reflects a determination made by Parliament of the point at which a business can reasonably be expected to possess a degree of financial sophistication and resource, and it could easily be adopted by the FCA.
My amendment does not seek to innovate for innovation’s sake; rather, it seeks to bring coherence by anchoring the distinction between retail and wholesale clients to that already established threshold. In doing so, it would provide the regulator with a clear statutory direction. It would also introduce a necessary discipline: that retail-style protections should not be applied to wholesale clients unless there is a demonstrable and proportionate case for doing so.
This is not about weakening regulation; it is about smart regulation. It is a call for regulation that is properly targeted and grounded in the realities of the market. This matters because we must allow the FCA to focus its efforts where they are most needed, which is on genuine customer protection for individuals—you and me when we are purchasing insurance, for example—rather than dispersing them across forms of compliance that add bureaucracy cost without delivering commensurate benefit.
There is a genuine competitive point here too. Post Brexit, we have the chance to move faster than Europe, but we can do that only if the industry has certainty. Businesses need to know where they stand. They cannot plan investment or hire teams based on regulatory guidance that shifts depending on whom you talk to and when. They need law. My amendment offers a measure of that certainty. It would reduce unnecessary friction and support the FCA in meeting its secondary objectives of growth and competitiveness, and it would do so without in any way diminishing the protection afforded to those who genuinely require it. This is a measured and pragmatic proposal that respects the importance of regulation while seeking to improve its application. I support the other amendments in this group.
Lord Vaux of Harrowden (CB)
My Lords, this group is really two separate groups as far as I can see, and I am not quite sure why they have been lumped together. One is on operational readiness and the other is on the different treatment of wholesale and retail activities. I will add my support briefly to the principles behind the latter, on wholesale and retail activities, and to Amendments 142A and 142C, tabled by the noble Lords, Lord Hunt and Lord Ashcombe. These bring us back to proportionality, which we have debated a number of times. The Minister can probably see a few themes coming through, and proportionality is definitely one.
In this case, the question is whether the regulators treat wholesale businesses with no retail customer exposure proportionately. By definition, wholesale businesses are dealing with sophisticated customers on a much more equal basis. It cannot be controversial to suggest that the regulation of these businesses could be lighter touch than for those dealing with retail customers.
The report of the Financial Services Regulation Committee on the secondary competitiveness and growth objective gave a number of examples where it appears that the FCA may not be doing enough to differentiate between these two parts of the market, while recognising that this is not always a clearly defined black and white boundary. Howard Davies put it well in his witness evidence:
“In wholesale markets, you are aiming to produce a fair contest, whereas in the retail markets you know it is not a fair contest because there is a significant information asymmetry problem between the consumer and the firm”.
The noble Lord, Lord Hunt, quoted the committee’s conclusion on this matter, so I will not repeat that. Whether this means that we need a separate wholesale markets and firms division within the FCA, as the amendments propose, is debatable, but I will be interested to hear how the Minister proposes to ensure that businesses that are primarily or wholly wholesale in operation are regulated proportionally.
Lord Holmes of Richmond (Con)
My Lords, I support Amendments 142A and 142C from my colleagues, the noble Lords, Lord Hunt and Lord Ashcombe. As has been said, this can be summed up in one word: proportionality. We have debated these themes on previous days in Committee and they are still as strong as they were when we mentioned them on day one. To “proportionality” I would add “specificity” and “applicability” because, without making this critical distinction—though difficult in some of the marginal cases—we are effectively saying that rules apply across the piece, which inevitably means increased burdens, increased costs, a lack of specificity, inapplicability, and holding firms and the UK economy back.
As the noble Lord, Lord Hunt, rightly said, we have the at least odd situation right now where pet insurance is treated the same as marine or aviation insurance. I can see only one potential case where this would be appropriate: if many people were petting flying fish. As I do not believe we have an increase in flying fish petting, I believe that proportionality, specificity and applicability would be achieved by embracing the principles set out in Amendments 142A and 142C.
Baroness Bowles of Berkhamsted (LD)
My Lords, I broadly support Amendment 142A, and I thank the noble Lord, Lord Hunt, for bringing it forward. I also think that the amendment in the name of the noble Lord, Lord Ashcombe, or something similar would obviously be needed as some kind of companion to it.
Whatever the FCA may have been intended to be, it is now proudly and explicitly a consumer protection body. For much of its work that is good, but some noble Lords will know that it has taken me and others four years to get incorrect cost disclosure descriptions for listed investment companies corrected, simply because consumers like the incorrect versions. Indeed, that saga led to a telling exchange at a meeting of the Financial Services Regulation Committee. The FCA chair insisted that consumer views always took priority, and I replied, “If you ask whether one and one makes two or three, and the consumer says, ‘I like three—it’s a bigger number’, is that what you use?” There was no denial. That is the scale of the problem: a regulatory culture where consumer preference for something factually incorrect overrides market integrity. It is a mindset that has already cost billions in potential investment in productive assets.
That was where it touched consumers; now let us move on to look at the wholesale areas. The trouble is that that mindset gets pasted across too. We do not need to debate whether the FCA went overboard in demanding that wholesale businesses had to proactively prove that they do no consumer harm in transactions that never touched consumers. The admission is there in consultation CP26/23 at paragraph 1.3, acknowledging overreach, as well as acknowledging
“unnecessary cost, complexity and uncertainty, without clear benefits for retail consumers”.
However, having finally identified the cancer, the regulator is merely applying a sticking plaster. All that is being offered is the mildest semantic tweak to guidance—effectively, a guide to guidance. It has no legal effect. It allows the regulator to continue its current trajectory with a slight adjustment to its vocabulary. We all know that this change was extracted only after heavy nudging by the Chancellor and intense parliamentary scrutiny. It is hardly being done with good grace and provides no guarantee of permanence.
The fact is, we must deal with the FCA as it is, not as it might have been. Since the advent of the consumer duty, the retail-first culture is irreversibly embedded into the psyche of staff, and in many instances it is the reason why they joined the regulator in the first place.
Perhaps one of the most telling things is to look at what is said about other regulators. On the Monetary Authority of Singapore, which I found a very enlightened body on my visit there some years ago, the comment is, “Although MAS is a unitary regulator, it splits its internal policy divisions strictly by target market rather than by trying to govern everything under an overarching outcomes-based code like the UK’s consumer duty”, and, “It works because the wholesale division, answerable to the MAS leadership, is judged primarily on market liquidity, innovation and international competitiveness. There is zero risk of a consumer advocacy group hijacking a wholesale policy consultation”. I wonder where they were thinking about. A ring-fenced, structurally separate wholesale unit within our regulator’s architecture must live up to that standard.
Some may argue that all wholesale activity impacts retail eventually, and I agree, but there is a massive, fundamental difference between regulating wholesale markets for the integrity of the system, which protects everyone, and regulating as if they are a high-street retail shopfloor. The former ensures safety, the latter ensures paralysis. For any noble Lord worried about this structural change, nothing being suggested would remove liability for wrongs or harms to consumers, should that occur. Let us be clear: this amendment is not an attempt to escape oversight; it is an attempt to ensure that oversight is competent, technically accurate and focused on the reality of the market being regulated. Let nobody forget that MiFID and other legislation already provides a rigorous framework governing transparency, best execution and conflicts of interest. This is no soft ride: this amendment is a necessary structural correction, and I support it.
Baroness Lawlor (Con)
My Lords, I support all the amendments in this group, but I shall confine my remarks to Amendment 165 and the linked Amendment 173 from my noble friend Lady Neville-Rolfe for an FCA operational readiness report presented by the Treasury. Amendment 165 would mean that Parliament has the opportunity to ensure, by a Treasury report, that we have an assessment of the FCA’s operational readiness to exercise any significant new regulatory function conferred by the Act of staffing, resourcing and the capability of the systems in place and of the impact expected on authorisations, supervisions and enforcement timeliness. This will be a formal report to Parliament. Until we have such a report from the Treasury that the FCA is operationally ready, Amendment 173 would ensure that the Act cannot start.
My Amendment 165A proposes that the report must also assess readiness in terms of preparatory training and the interpretation of the application of the Act. Such a requirement should prompt the FCA to deploy and train existing staff with the specific knowledge and understanding of the new powers they will operate under the Bill and to therefore be up to date and competent to regulate firms under the law. It would require the Treasury to report to Parliament and, in this way, there is a measure of accountability.
It might be contended that this requirement is otiose, but the FCA’s workforce is around 5,000, recruited from candidates with a diverse range of skills under different headings. Finance and operations make up 46%; engineering makes up 30% and sales and marketing make up 23%. The median employee tenure is 4.2 years. Regulators come to their post with a diverse range of skills; some are highly experienced and others less so. Today, 17 posts are advertised that cover a wide range of jobs and responsibilities for which different skills are required. For example, there is a senior insurance supervisor job, a financial crime marketing interventions associate, an L&D associate, a lead for global strategy and engagement, a primary markets supervisor, a senior crypto and payment supervisor and a technical specialist in AI—my noble friend Lord Holmes will be pleased to hear that.
The skills range required can include the common skills we would expect or generic skills, for instance, in data systems. The senior crypto asset and payment supervisor responsible for working in this developing sector, who will lead difficult cases, identify risks, deal with crossborder problems and help prevent crime, is also expected to “drive improvements in standards”.
These are important and demanding tasks. They also operate in a rapidly developing area. Given the nature of the system and that the principles still apply, regulators are internally accountable for what will be subject to interpretations and judgments. There should therefore be the requirement of at least general and specific knowledge, and competencies for each role but, as financial products continue to be developed and the framework of law continues to change, there must also be continuous learning and updating in the law and the powers given to the regulators under it, rather than assuming that somehow the regulators will be equipped and operationally ready to do the job.
Baroness Noakes (Con)
My Lords, I will just comment briefly. I completely agree with the notion that wholesale markets and retail markets should be dealt with separately for the reasons that have been given. I am less than clear that a structural solution, such as the one proposed by my noble friend Lord Hunt of Wirral, is the right one. I think that the problem is deeper; it lies in the construction of FSMA because the FCA is given a consumer protection objective that makes no differentiation between wholesale and retail markets . The meaning of “consumer” is generic and there is no understanding that there are radically different markets for retail and wholesale participants. All that means that the burden of treating these markets differently falls on the applicability of the proportionality principle in Section 3B, which we have discussed many times and is due to be downgraded under the current proposals. I do not know what the answer is, but I suspect that, in legislative terms, it is a deeper answer than simply setting up a separate division within the FCA because the construction of FSMA simply does not accommodate easily the fact that there are two quite different types of market.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to my noble friends Lord Hunt and Lord Ashcombe for bringing forward Amendments 142A and 142C. We have heard from industry that there is often insufficient clarity around whether retail or wholesale regulatory standards apply in particular cases. That lack of clarity matters because it means that firms can find themselves applying regulatory standards, processes and levels of prudence that go above and beyond what is required simply because they are concerned that the boundary is not clear. That is why the proposals from my noble friends Lord Ashcombe and Lord Hunt of Wirral for a clearer statutory distinction are important. Any threshold would, of course, need to be carefully considered, but the principle is right. Firms should know which rules apply to which clients. Regulators should avoid applying retail-style requirements to wholesale clients unless that is genuinely proportionate.
I also welcome the broader point behind Amendment 142A, which would create a dedicated wholesale markets and firms division within the FCA. The case for that amendment in a highly competitive global industry, as my noble friend Lord Hunt explained, is that wholesale markets require specialist expertise and a regulatory culture that understands institutional, professional and capital markets activity. If the FCA is regulating retail consumer markets, with lots of SMEs, and complex wholesale markets at the same time, it must have the internal structure and expertise to apply the right approach to each. The noble Baroness, Lady Bowles, a member of the Lords committee, rightly suggested that consumer preference has become a problem mindset in the wholesale area. My noble friend Lady Noakes explained that that followed from the way that FSMA was set up. Interestingly, the noble Baroness, Lady Bowles, cited MAS in Singapore, where regulation is split by target market. Another member of the committee, the noble Lord, Lord Vaux, rightly called for proportionality, which was endorsed by my noble friend Lord Holmes. This is complicated, but it is important that we look at these amendments seriously.
Amendments 165 and 173 are in my name and that of my noble friend Lord Altrincham. These raise the related but distinct question of whether the FCA is operationally ready to take on the significant new functions being handed to it under the Bill. This is a matter for the FCA, as it is an independent regulator, but the fact is that some do not trust it, including those in the payments and consumer credit industries who will be new or largely new to its fiat.
We need a plan to show what will happen and when in all cases where the regulator is taking over responsibilities from elsewhere—which, on reflection, I should have added to our amendment. We also need to know how many staff the FCA plans to add and the accommodation arrangements. The industry pays for our regulators, and the latter should spend every pound as carefully as if it were their own. In time, we would hope to see some economies of scale as the proposed changes drive efficiency. The Explanatory Notes for the Bill explain that because the FCA will take over AML supervision of legal service providers, accountants and trust company service providers, it will need significant preparatory work, including the hiring and training of staff and establishing necessary IT infrastructure. We need more clarity on that point, and particularly on ensuring service standards and value for money.
The point behind Amendment 165 is simple: before significant new FCA functions are commenced, a report would look at FCA staffing and resourcing; systems capability; the impact on authorisation, supervision and enforcement timeliness; the effect on service standards for firms and consumers; and any mitigation measures considered necessary by the Treasury and the FCA. That would have the benefit of allowing Parliament and its committees to examine the plans.
One example that has been raised with us is the movement of the Payment Systems Regulator into the FCA. Firms have told us that there is very limited clarity about the timeline for that transition, the operational arrangements, the treatment of existing PSR work, the continuity of functions and how the FCA will absorb these responsibilities without disruption. They do not see that as a satisfactory position.
I thank my noble friend Lady Lawlor for her support and for her amendment to my amendment. It makes a valuable point about the importance of training staff to ensure a smooth transition, and I very much agree with this from my experience in business and in government.
I look forward to hearing from the Minister, first, on how we can better avoid duplication and the excess caution that is sometimes caused by the existing overlap between retail and wholesale at the FCA, and, secondly, on his view on how Parliament and stakeholders can best scrutinise plans for the handover of new areas of responsibility to the FCA.
Lord Stockwood (Lab)
My Lords, the FCA currently regulates around 42,000 businesses of different shapes and sizes in the UK, across a wide range of different activities. It is incredibly important, therefore, that the FCA has in place the right structures, with adequate resources and governance, and the right people with the right skills to fulfil its role effectively.
Amendment 142A would require the FCA to develop a dedicated division to undertake its regulatory activities with regard to wholesale market participants. Amendment 142C would require the Treasury to introduce a statutory definition of “retail and wholesale clients”. The purpose of this would be to ensure that regulators avoid applying retail-focused requirements to wholesale clients, except where proportionate and appropriate.
I recognise the intention behind these amendments. I am aware that this point about distinguishing between retail and wholesale activities was made by the committee in its report, Growing Pains. Wholesale markets are a vital part of the UK’s financial services sector. The Government fully agree that regulation of those markets must be proportionate, targeted and internationally competitive. But we must be careful about embedding the distinction between retail and wholesale in law. The distinction between retail and wholesale activity is important, but it is not always absolute. For this reason, the FCA needs to be able to regulate proportionately across the markets it oversees, with it being called on to explain the decisions it makes so that they can be scrutinised properly.
The Government agree that the FCA must ensure that its retail-focused rules do not unduly affect wholesale activity. Last July, in her Mansion House speech, the Chancellor tasked the FCA with assessing the impact of the consumer duty to provide more certainty on its scope and application to wholesale firms, addressing a key concern raised by the wholesale sector. In response, the FCA committed to four workstreams aimed at removing disproportionate burdens on wholesale firms and giving firms the confidence to comply with their obligations in a proportionate way, avoiding overcompliance.
I remind noble Lords that those four workstreams were for the FCA, first, to clarify its supervisory approach when firms work together to manufacture products for retail customers; secondly, to consult on its client categorisation to reset how firms distinguish between retail and professional clients; thirdly, to consult on removing businesses with non-UK customers from the duty’s scope; and, fourthly, to consult on the wider scope and proportionality of the duty.
The FCA published consultations on the first two of these workstreams at the end of 2025. Last week, it published a further consultation proposing to remove businesses with non-UK customers from the duty’s scope, as well as proposing wider changes to the proportionality of the duty. In the light of the work that is under way, I do not think that we need to amend the Bill to embed a distinction on which the FCA is already acting.
I turn to Amendments 165, 165A and 173. I have listened carefully to the arguments that have been made. I agree that it is important that we are confident that the FCA is ready to take on its new functions. There are many benefits associated with consolidation: it reduces the number of separate regulators with which businesses need to deal, it promotes consistency of approach between different areas, and it builds on expertise within effective regulators.
As I said earlier, the FCA is responsible for ensuring that it has the resources and capability it needs to advance its objectives and implement any new responsibilities it is given. It also has the powers it needs to do so: it is able to set its own budget, in order to secure the resources it needs, and to set its own pay scales so that it can hire the talent and expertise it needs. However, I reassure noble Lords that the Treasury does not simply confer new additional responsibilities on the FCA without careful and close engagement between organisations.
For example, the Government and the FCA are working closely on reforms to anti-money laundering and counterterrorism supervision in order to ensure that the FCA is ready to take on this new responsibility. The Government are providing funding from the economic crime levy to support the implementation of the reform and to build the capability and sector-specific expertise that is needed, alongside close engagement with existing supervisors and stakeholders.
The Treasury has also worked closely with the FCA and PSR on the reforms to payment systems regulation. The FCA already has extensive familiarity with the payments ecosystem and is actively preparing for taking on its responsibilities for payment systems regulation from the PSR through a phased transition. The Government are confident about the FCA’s operational readiness and will continue to work with regulators to support them in implementing this change.
I hope I have reassured the Committee on how the Government have engaged with the FCA to make sure it is ready to take on the functions that this Bill will give it, and that the right set of actions is being taken on wholesale regulation. I ask the noble Lord, Lord Hunt, to withdraw his amendment.
Baroness Neville-Rolfe (Con)
I am grateful for some of the reassurances that the Minister has given, but the one area that it is difficult for business to cope with is not knowing when these things are going to happen; it is the timelines that are the problem. The Minister may want to reflect on that.
Lord Stockwood (Lab)
I am actually speaking to the FCA next week, so I will get some clarity on that and feed back to the Committee.
Baroness Noakes (Con)
The Minister referred to the four workstreams that the Chancellor set up last year. Can he say when firms might feel any difference?
Lord Stockwood (Lab)
I will come back on that after getting clarification on when those will come into effect.
Lord Hunt of Wirral (Con)
My Lords, what an important debate this has been. It has highlighted some of the difficulties facing the FCA in its wide remit, covering both wholesale and retail markets. I am grateful to my noble friend Lord Ashcombe; as he pointed out, industry needs certainty. I warmly welcome the contribution of the noble Baroness, Lady Bowles, with all her knowledge of this area. She readily reminded us that the FCA acknowledges overreach. So the problem is there, but what is happening about it?
I am delighted to hear from the Minister that all these workstreams are progressing. But from talking to those outside—the London Market Group, for instance—they point out that the UK has to compete with New York, Singapore, Bermuda, Hong Kong and the EU financial centres, and it just cannot do that with the system of regulation that we have at the moment governing the wholesale markets.
I agree with the noble Lord, Lord Vaux of Harrowden: it is all about proportionality. If I can pick up one point that the Minister made, it is to stress the need for proportionality or, as my noble friend Lord Holmes of Richmond called it, applicability. I just think that there is a way through here. My noble friend Lady Neville-Rolfe talked about the overlap between wholesale and retail. There must be a solution if we are to continue to be the global centre that we always have been.
At the moment, bearing in mind the growth and competitiveness objectives, and regarding a move by the FCA suddenly to take out wholesale, I would site it in Canary Wharf. That would send a message across the world that the UK really means to grow and be internationally competitive in this vital marketplace. We are bound to return to this on Report but, in the meantime, I beg leave to withdraw the amendment.
“Facilitation of inheritance tax payment before probate(1) The FCA must make rules to ensure that financial institutions facilitate the payment of inheritance tax by executors before probate is obtained through the Direct Payment Schemes for Inheritance Tax (IHT423) form.(2) For the purposes of this section, “financial institutions” include banks, building societies and investment account providers that—(a) are registered with the FCA;(b) are regulated by the FCA.”Member's explanatory statement
This amendment seeks to place the informal procedure of executors using the IHT423 scheme to pay inheritance tax before obtaining probate into legislation, and to require all financial institutions regulated by the FCA to facilitate that service. As things stand it is at the discretion of financial institutions to decide whether to facilitate the IHT423 scheme.
Lord Mackinlay of Richborough (Con)
My Lords, as noble Lords have noticed, this is a very skinny list of amendments; it is a group of one. I will put on record my registered interests: I am a chartered accountant and a chartered tax adviser, and, back in the day, I did the appropriate examinations that allowed me to be licensed for non-contentious probate work under the ICAEW. I suppose that it needs the ingenuity of a chartered tax adviser to get an amendment to the Financial Services and Markets Bill relating to inheritance tax.
Noble Lords may have noted the Economic Affairs Finance Bill Sub-Committee report of 28 January this year. It focused on the six-month rule for paying inheritance tax. It is not actually six months; it is six months after the end of the month of death. For instance, if somebody passed away in December 2025, the due date for inheritance tax would be the end of December plus six months: namely, the end of June 2026. The House of Lords Economic Affairs Finance Bill Sub-Committee was considering how, after next year, the system will deal with SIPP—self-invested personal pensions—coming within the scope of inheritance tax from 6 April next year.
As I hope to show the Minister this afternoon, the system of getting inheritance tax paid is lumpy at best and mixed at worst. It is also very complicated for personal representatives and executors to deal with, at some of the worst times that people have to deal with the state and the system for getting affairs settled. They say that there are three dreadful events in life—death, divorce and moving—but I think most would appreciate that death is a particularly difficult time for all concerned.
I have been administering probates for a very long time, and it is an area where the state really interposes itself to stop the administration of an estate until HMRC is happy that it will get its wedge. It is the absolute blockage, and at a time when the state and the individual are in some conflict, because the state will not move to allow probate to be achieved and those assets to be released until the tax is payable. I do not think there is any other area of tax where an absolute blockage comes into play. There is completely no trust between the state and the individual when administering an estate.
I could say that all used to be well, but it was not really. There was a painful hangover from the November 2025 disaster Budget. It increased interest on all overdue taxes to 4% above base. That is a hefty rate above base whereas, if you have overpaid your taxes, you get credit interest at 1% below base. So the Government enjoy a 5% spread, and there is a huge imperative to get taxes paid when they are due. I hope that is the underlying reason why we currently have a penal rate of 7.75% on taxes that are due.
For many executors, getting the cash together to pay that tax within six months, plus possibly a few days, after death is a very difficult procedure, because probate can rarely be obtained within that timeframe. A scheme has been presented over time, and it has developed quite well, but it is discretionary and varies from institution to institution: it is the direct payment scheme allowed by the IHT423 form, which has been in place for many years. Executors ask banks and building societies to pay the tax in advance of the due date, and often in advance of putting the appropriate forms in to HMRC, so that probate can be obtained smoothly.
If anybody has been involved with a probate situation, they will know that one cannot get probate until the tax is paid. How do you get the money out to pay the tax? Well, you could do it with probate, so we end up in this Catch-22 situation, which the IHT423 system was designed to help break. On 1 October 2024, the IHT423 arrangement, which used to apply only to banks and building societies, was widened to include a greater range of investments with traditional investment houses.
I might not have come across this problem had I not been administering my father’s estate—I am his executor. In my professional years, I had never come across an institution that refused to pay the tax due on an IHT423 request. Now, sadly, I have come across one: M&G plc group, now a dual structure between M&G Investments and Prudential. As huge names in the marketplace, they must have a significant percentage of all investment management in the UK.
My father’s estate is due to pay inheritance tax—I take the “my” away from this as it would apply to any executor—and I had relied on the IHT423 procedure to liberate an appropriate amount of IHT from an M&G Prudential investment that he had held for 24 years. The answer came back, “No, we don’t do that”. I asked why not, since I have been doing probate for many years and have never had a refusal of an IHT423 request. They simply said, “No, we don’t that”. That gets to the heart of what my amendment is all about. It states that all FCA-registered institutions doing business in this country must be part of the IHT423 scheme—no discretion, no “We don’t that”—because this a period of great difficulty for executors up and down the country.
This makes no difference to me, because I am done, but I will explain what many executors have to do. They can either borrow money—which in itself is a tough ask but, given the 7.75% interest rate levied by the Government, perhaps it is cheaper than having any amount outstanding and due—or they can pay the IHT personally, as I had to do. So there is an estate asset, an institution that just says, “No, we don’t do that”, and an estate liability of IHT that has to be paid, or you have to pay 7.75%.
As we go towards Report, I hope that the Government and the Minister will be keen to think about this and say, “Yes, we want to be part of smoothing the administration of estates for people at a tough time in their lives”. I can but guess, and I certainly hope, that the reason for the 7.75% interest rate is to encourage people to pay, and that it is not meant itself to be a receipt for the benefit of the Government. If this is not accepted as an amendment on Report—I would very much like the Government to consider it and draft one—I will be left with the conclusion that the Government are rather more keen on earning money at 7.75% than on helping the administration of estates.
That is a story that is probably being played out in tens or fifties, if not hundreds of thousands of households around the country as I speak. The fact that one of the giants of investment, M&G Prudential, with probably well over 10% of administered funds in this country, simply says no, is not good enough. We must therefore put this on a statutory basis, and this Bill seems to be an appropriate place to do so. I beg to move.
Lord Davies of Brixton (Lab)
The noble Lord makes a compelling case, but can he say what is meant by “facilitate” in the amendment?
Lord Mackinlay of Richborough (Con)
Facilitating means merely that any financial institution registered with the FCA in this country would have to use the IHT423 procedure—it could not say no. At the moment, we have a framework that is purely discretionary. In my professional life every single institution has always said yes, but obviously there are some out there which are saying no. So I want to put the facilitation not as a facilitation of choice but a facilitation of “must” on the request of an executor. There is no risk here. The risk is that either the funds remain in an investment account or they are in the account of HMRC, which, the last time I looked—despite my being a chartered tax adviser—is a safe place for people’s funds to be.
Baroness Kramer (LD)
My Lords, the noble Lord, Lord Mackinlay, makes so much sense to me on this issue. Having gone through the struggles of probate, I think that anything that will make it easier and more straightforward is good. I have worried since the announcement of the change that came with the last Budget, which brought pension pots into inheritance tax, that all kinds of consequences would significantly follow because most people who thought that they had a fairly straightforward settlement upon death will now find that they have handed a very complex picture on to their executors.
I want to put in a plea from personal experience: where there are people who have more than one nationality, or tax residency in one country and nationality in another, the nightmare becomes even more acute. I am not an adviser but I will give this advice: if one is aware that someone close is likely to die, it has almost become necessary to create a separate savings account to deal with all the relevant tax payments because it is so long before probate can be completed, particularly if that is in more than one jurisdiction. I felt at one point that I virtually lived at Kingston Crown Court because I was so often having to get new and updated copies of the death certificate to satisfy some new requirement from someone somewhere else. That is a painful and difficult time, but what the noble Lord, Lord Mackinlay, suggests seems straightforward and effective. Even if it deals with only one small piece, that is something.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to my noble friend Lord Mackinlay of Richborough for tabling Amendment 142B. I am especially sorry to hear of the difficulties that he faced with his father’s estate. That is typical. When people die, their loved ones and executors often have a difficult time, and one of those difficulties is the delay that they often encounter with probate, as I know from family experience, and as we have heard from the noble Baroness, Lady Kramer.
There is both an emotional toll and a worry as to how to pay any IHT within the six-month window. Hopes that this might be extended by the Chancellor to 12 months have now been dashed, so this is a timely amendment. As I understand it, the issue is that, when someone dies, their bank, building society or investment accounts are frozen. Executors may then need to pay inheritance tax before probate can be granted, but they may need probate in order to access the funds from which that tax would be paid. The IHT423 direct payment scheme is designed to address that problem by allowing inheritance tax to be paid directly from the deceased’s bank, building society or investment account to HMRC before probate is granted. The difficulty, as we have heard, is that participation in that scheme is not consistent across all relevant financial institutions. That situation may mean that people have to find funds elsewhere, use personal savings, as we have heard, arrange borrowing or enter into more complicated interim arrangements.
The amendment rightly seeks consistency. It would require the FCA to make rules ensuring that the relevant regulated financial institutions facilitated the payment of inheritance tax through the IHT423 direct payment scheme. There may of course be operational legal issues that the Government will want to consider, but the basic principle seems right: if inheritance tax must be paid before probate, it would be in the interest of all if this inconsistency could be sorted out as a matter of urgency.
We should bear in mind that the interest mounts up at a punitive rate—4% above base rate, so that is 7.75% at present—and that it affects thousands of households every year. The Minister will know that more generally it will be a difficult year for those paying IHT, with IHT payable on pension pots from April 2027. That is all the more reason to show flexibility and sort out this issue, and to use the Bill to do so if that is necessary. I look forward to hearing what the Minister has to say.
Lord Stockwood (Lab)
My Lords, Amendment 142B would require the FCA to ensure that financial institutions that are registered or regulated by the FCA facilitate the payment of inheritance tax by executors before probate is obtained through the direct payment scheme.
I appreciate that the purpose of this amendment is to make it easier for estates to pay inheritance tax. I am sorry to hear of the issues that the noble Lord, Lord Mackinlay, has had with the current system and I am very happy to take that up with HMRC to explore why M&G Prudential is not a member of the current scheme.
I can assure your Lordships from the research for this question that HMRC internal analysis suggests that most taxpaying estates are already able to fund at least a first instalment of inheritance tax before applying for probate. The direct payment scheme allows executors to ask banks, building societies or investment account providers to pay some or all of the inheritance tax due from the deceased person’s accounts. The scheme works well in its current voluntary form and provides an important mechanism to help executors pay any tax that is due.
We need to be very careful here. Releasing funds from a deceased person’s estate before probate is granted carries risk for financial institutions. Those institutions need to ensure that those payments can be made lawfully. The current system enables financial institutions to assess whether it is appropriate to make payments directly to HMRC on a case-by-case basis, ensuring that institutions make payment only if satisfied that the personal representative is indeed acting on behalf of the deceased’s estate and that they are releasing those funds correctly. FCA rules cannot put this issue aside as it is a matter of the wider law. Financial institutions would need to ensure that making these payments is appropriate whatever the FCA rules say. This would leave financial institutions on an uncertain legal footing.
I understand the spirit of this amendment but I do not agree that it is the right solution, and the existing voluntary scheme is working well on the whole. But I will definitely pass on the point the noble Lord raised about HMRC and will come back to him on that. I therefore ask the noble Lord to withdraw the amendment.
Lord Mackinlay of Richborough (Con)
I listened carefully to what the Minister had to say; I thought he was on a good track for a while but he finished rather poorly.
I am grateful for the very sensible words from my noble friend Lady Neville-Rolfe, who understood the situation completely and absolutely, and for the comments of the noble Baroness, Lady Kramer. If people actually listen to what happens in this Committee—I am sure the audience is fairly skinny—I will give a word of advice to them that is exactly on the tack of the comments of the noble Baroness, Lady Kramer. It is not a problem of a multitude of nationalities that might exist. I recommend to anybody who is getting a little older to make their affairs that little bit simpler, so that, once they depart, they are easier to unwind.
I will give your Lordships a very easy example—this is aimed at the point made by the noble Baroness, Lady Kramer. If one holds shares that are denominated in, say, Jersey—it is not uncommon, and there are listed shares on our stock exchange that are headquartered in an overseas territory, which is quite typically Jersey—one would then need to go through the whole probate procedure just for those Jersey-registered assets. There would be cost and aggravation, and my advice is to sell them.
I do not really have a criticism of HMRC, and I am sorry if my speech came across with any criticism. There are two systems. There are relevant assets, which are typically property that cannot be easily realisable into cash to pay IHT. The system has accepted that for many years, and one can pay the tax due on those types of not easily realisable assets such as property or land over 10 instalments over 10 years ahead. But the 7.75% interest applies, so most executors—I am particularly thinking about the beneficiary—would like to clear the inheritance tax as quickly as they possibly can, because 7.75% is not a good deal in terms of an interest payment. That has been flexed for the BPR/APR assets that come in next year, of £2.5 million each, where the 10-year instalment plan will be interest-free. But the point is that the 7.75% interest rate makes it essential that people try to pay.
I do not accept the Minister’s observation that there is risk for the financial institution. In my experience over many years, I have found that 99% of institutions are happy to take that very small degree of risk, because the money will be residing in HMRC’s bank account, which is a safe place for money to reside. The risk is not just small but extremely small. If things have gone wrong, you just ask for it back, or somebody will, from HMRC. Given the speed of operation of HMRC, it might take quite some time to get the money back, but at least it is somewhere safe. So I do not accept the risk, because it is somewhere where there is no risk. It is unfortunate that this has fallen in a family issue, but M&G Prudential is the only institution that I have ever come across that simply says no.
Can the Minister go back to his officials and consider it further? I would be very pleased to meet him or his officials for blue-sky thinking about this. We have Report ahead of us. I am happy to withdraw my amendment.
“Litigation funding as a regulated activityAfter paragraph 24 of Schedule 2 to the Financial Services and Markets Act 2000 (regulated activities), insert—“Litigation funding agreements
24ZA Rights under a litigation funding agreement.24ZB Entering into a litigation funding agreement as funder.24ZC Administering a litigation funding agreement.24ZD Arranging a litigation funding agreement.24ZE Advising on a litigation funding agreement.24ZF (1) For the purposes of this Schedule, a “litigation funding agreement” is an agreement under which—(a) a person (“the funder”)—(i) agrees to fund (in whole or in part) the provision of advocacy or litigation services (by someone other than the funder) to another person (“the litigant”), and(ii) the litigant agrees to pay a sum to the funder in specified circumstances, or(b) a person provides financial support to a firm of solicitors which is involved in contentious matters or to a claims management company.(2) The sum to be paid by the litigant may be—(a) an amount calculated by reference to a multiple (if any) of the amount of the funding provided by the funder,(b) an amount calculated by reference to a percentage (if any) of any specified financial benefit obtained by the litigant in connection with the matter in relation to which the funding is provided,(c) an amount calculated by reference to a rate of interest, or(d) such sum, or method of calculation, as is prescribed by the Treasury pursuant to sub-paragraph (3),provided that in respect of the sum to be paid, howsoever calculated, it must not exceed such sum as may be prescribed by the Treasury pursuant to sub-paragraph (3).(3) The Treasury may by regulations make such consequential, supplementary, incidental, transitional or saving provision as it considers appropriate in connection with this paragraph.”” Member’s explanatory statement
This amendment brings third-party litigation funding within the FCA regulatory perimeter by creating a new category of regulated activity under FSMA 2000.
Baroness Bowles of Berkhamsted (LD)
My Lords, my amendment proposes that the Treasury makes litigation funding a regulated activity, with a list of matters that I propose should be covered in the amendment.
Litigation funding has come into the spotlight for several reasons. There was the 2023 PACCAR decision, which held that litigation funding agreements were a form of damages-based agreement and unenforceable for failing to comply with the DBA regulations 2013. There has also been concern about the source of some litigation funding, especially when a significant proportion of funders who are active in this space are not headquartered in the United Kingdom and may utilise what can be described as dodgy derivatives.
The Conservative Government tried to address the PACCAR decision with a Bill that did not make it through the wash-up. They also proposed a wider review of litigation funding and asked the Civil Justice Council to assess whether the regime was effectively providing access to justice and whether regulation of commercial funders was necessary. An interim report and consultation were launched on 31 October 2024 and the final report was published on 2 June 2025. This was a substantial and diligent review with stakeholders across the spectrum, including litigation funders, welcoming and endorsing its recommendations. In December last year, the Labour Government made clear their intention to reverse the effect of the PACCAR judgment, so that litigation funding agreements would no longer be treated as damages-based agreements. At the same time, the Government said that they would take steps to regulate the third-party litigation funding sector—one of the central purposes of the review and its recommendations.
The issue is not whether there should be regulation but when and by what route. It is urgent. That urgency has been acknowledged by the previous and current Governments in commissioning the review. But a year has passed since the final report and we need fast delivery. At present, the sector is essentially self-regulated, which in practice means that it is unregulated. More than 70 funders operate in the UK, collectively deploying many billions. The Association of Litigation Funders covers only a small proportion of the market and cannot provide assurance about the rest.
Lord Carlile of Berriew (CB)
My Lords, Amendment 172B is in my name. I declare two interests. First, I was formerly, for several years, a part-time chair of the Competition Appeal Tribunal, which hears most collective actions; I heard several collective actions there. Secondly, in my professional life, I accepted membership of consultative panels in relation to two current collective actions in which litigation funding agreements are in place. As an aside, I can offer noble Lords a third, fascinating interest. If they are really bored between football matches, they can read my article on this subject in the Law Society Gazette of 30 June. I know that, as a distinguished lawyer, the noble Lord, Lord Holmes, will read it with fascination.
The points raised by the noble Baroness, Lady Bowles, and the points raised in my amendment are mutually exclusive. I am going to talk mainly about the PACCAR case, to which she referred. I do not disagree with her that there may be scope for further regulation, but I disagree with her on two points. First, paragraph (d) of proposed new subsection (2) and proposed new subsection (3), which would be inserted by the noble Baroness’s Amendment 142D, would give the Treasury the opportunity to fix the fees that are charged by litigation funders in litigation funding agreements. One has to bear in mind that that would potentially raise a massive conflict of interest because some of these collective actions are being, have been or will be brought against the Government. The idea that the Government could impose a low fee—indeed, too low a fee—to try to kill off one of those actions is not something that I would expect, but it is implicit in the noble Baroness’s amendment.
I turn to my Amendment 172B. I was in this Room on 29 April 2024 when Committee on the Litigation Funding Agreements (Enforceability) Bill was heard in its entirety in one day. I have that Bill in front of me. It is not a long Bill; in fact, it runs to a single page. The idea of that Bill was to reverse the decision of the Supreme Court in the case called PACCAR, which had damaged the working of litigation funding agreements. Second Reading had occurred only two weeks earlier, on 15 April 2024, and I hope I will be forgiven for referring to the excellent speech made in it by the noble and learned Lord, Lord Stewart of Dirleton, who was the Minister in charge of the Bill. Before I get to that speech, I remind your Lordships that, by the time we finished Committee, all parts of your Lordships’ House agreed that that Bill should become law, but it did not, because it was not dealt with in wash-up, probably because it had not reached Report, even though that stage would probably have gone through in a shorter time than Report on your Lordships’ House on the National Security (State Threats) Bill in which I was involved a few days ago.
It is my belief that the change in the litigation funding agreements Bill has waited for far too long. I believe we will find that the Government are not opposed to it. I do not expect to hear that from the Minister, because it may be more to do with the Ministry of Justice, but my belief is that the Government will try to find an opportunity soon to push a separate Bill through.
However, it is a bit puzzling. I tried to table as an amendment to this Bill the page that I have just held out, slightly altered to fit into the Bill. I had a fascinating discussion with helpful officials in the Public Bill Office about scope. I was told that putting in that page was out of scope but that tabling my Amendment 172B, which calls for a review of litigation funding agreements, was in scope. I find that difficult to reconcile. I think it is a circular argument. If Amendment 172B is in scope, then I cannot understand why my one-pager is not, but there we are. If a decision has been made that something is not in scope, it is difficult to challenge it. I believe that has only ever been done successfully once in the hundreds of years of existence of this Parliament. So, brave as I am sometimes in legal matters, I thought I would give that one a miss and try a different route.
I remind your Lordships of the importance of this. As the noble and learned Lord, Lord Stewart, said on 15 April 2024, the Supreme Court ruling in the case of PACCAR
“rendered many third-party litigation funding agreements … unenforceable by bringing them into scope of the regulatory regime for damages-based agreements, or DBAs”.
The result was that third-party litigation looked as though it might lose much of its important role in litigation in this country. When I was a baby barrister doing personal injury cases, small contract cases and so on, I used to do masses of small claims for which legal aid was given, and every month I received a cheque—yes, a cheque, a piece of paper—from the Legal Aid Board, with 10% deducted because it was publicly-funded work, and all those actions were paid for by legal aid. Now, in reality, none of them are paid for by legal aid, so litigation funding agreements are here to replace legal aid.
As the noble and learned Lord, Lord Stewart, said:
“The restoration of the previous funding position is needed urgently to reduce uncertainty for both the future of litigation funding and for”
litigation funding agreements
“that had been entered into previously. By rendering many”
of them unenforceable, the PACCAR judgment
“risks undesirable satellite litigation, an increased burden on the courts, and creating an unfavourable market for litigation funding, which, in turn, threatens access to justice”.
As he added:
“Third-party litigation funding plays a key role in enabling ordinary people and small and medium-sized enterprises to bring large, costly claims against better-resourced companies and institutions”.—[Official Report, 15/4/24; col. 798.]
Baroness Neville-Rolfe (Con)
My Lords, this has been an interesting discussion, with cases put forcefully by the noble Baroness, Lady Bowles, and the noble Lord, Lord Carlisle of Berriew, so I approach the issue with some caution. But I will be reading the noble Lord’s article, particularly in view of my contribution to getting to the bottom of the Post Office injustices.
I recognise that third-party litigation funding can support access to justice in some cases, but we also need to be clear-eyed about the risks. An expanded litigation funding and claims management industry could fuel speculative low-merit or mass litigation against businesses. It could increase legal costs, insurance costs and settlement pressure. The purpose of reform should therefore be to protect genuine claimants and promote access to justice, without creating a larger litigation finance industry.
Bringing litigation funding within the FCA perimeter would undoubtedly create a more formal framework of oversight, and we know that there are bad apples in the industry. However, there is a danger that FCA regulation could have the opposite effect to the one intended. It could professionalise and legitimise litigation funding as a normal financial service. It would give funders and claims management firms a form of regulatory kitemark, allowing them to say that they are FCA regulated and therefore giving the market a greater sense of safety, respectability and permanence.
That may sound attractive from an oversight perspective, but if the result is that the market expands, that more claims are funded and that more speculative group actions are brought against productive businesses, we will have solved one problem only by creating another. In any event—this is the important point—I do not believe that this is a matter for the FCA or for the Bill, nor am I sure that a Treasury review of claims management services is the right way to take this forward.
The noble Baroness, Lady Bowles, described some of the challenges that need to be addressed. The noble Lord, Lord Carlile, has highlighted the risk of a conflict of interest on fees. Any such review would need to look not only at the impact of the PACCAR judgment but at other forms of redress through the courts, ombudsmen, the criminal cases review board and public inquiries. We need to compare costs to those claimed against, including businesses, and the benefits to those who seek redress.
The implications for the legal system mean that it goes way beyond the reach of this Bill and it is not in the spirit of reducing unnecessary burdens or improving the regulatory framework for existing financial institutions and those coming under the FCA and PRA umbrella. It is more a matter, as we have heard, for the Ministry of Justice, as the Bill Office apparently seems to advise. I share the noble Lord’s frustration with scope in trying to put amendments down to Bills; we have all been there. Having said that, I look forward to hearing how the Minister views these things and what he thinks can be done.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Baroness, Lady Bowles, and the noble Lord, Lord Carlile, for tabling these amendments on the regulation of claims management services and litigation funding agreements. I am grateful to the noble Lord, Lord Carlile, for bringing this issue to my attention when we spoke two weeks ago, and I will continue those constructive conversations outside the Room. I recognise the importance of clarity in the regulation of claims management services and litigation funding agreements, particularly in light of the concerns that have been raised following the 2023 Supreme Court judgment in PACCAR. The Government recognised the urgency of addressing these issues.
Amendment 142D is targeted at bringing litigation funding within the FCA’s regulatory perimeter. The Government agree that the proportionate regulation of litigation funding could improve standards, transparency and protection for litigants who may be in a vulnerable position, but I do not think the FCA is the right body to take this role. We should not move to what would be a significant decision lightly, especially as this issue has already been considered by the Civil Justice Council. Instead, the Government will introduce proportionate regulation of litigation funding agreements. This model is recommended by the respected, independent Civil Justice Council, where courts assess whether agreements meet regulatory requirements. If not, they would not be enforceable. This approach follows other methods for funding civil litigation.
Amendment 172B would require the Treasury to conduct and publish within 12 months of Royal Assent a review into the regulation of claims management services and litigation funding. The 2023 Supreme Court judgment on PACCAR introduced uncertainty about whether litigation funding arrangements remain enforceable. It also brought to light concerns about whether they are always fair and transparent for claimants using them. The Government have committed to remove this uncertainty and ensure these agreements work fairly for all.
Since the Supreme Court’s judgment, the Civil Justice Council has reviewed litigation funding and published its report in 2025. The Government are taking action accepting the council’s two primary recommendations. First, the Government will legislate to clarify that litigation funding agreements are not damages-based agreements and do not need to comply with the requirements of the regulatory regime for damages-based agreements to be enforceable. Secondly, the Government will introduce proportionate regulation of litigation funding agreements. This is the right approach, and we are working urgently to identify a new legislative vehicle to take this forward.
On claims management regulation more generally, the FCA has announced a market study into claims management services to assess how the market is operating and whether further regulatory intervention is needed. This study is in train. I know that the noble Lord, Lord Carlile, thinks that the Government should take the opportunity of this Bill to resolve the issue once and for all. However, the issue under consideration is primarily about litigation and access to justice, rather than the regulation of financial services and markets, so the Bill should not be used for that purpose. These judgments are made by Parliament, not the Government, just as the noble Lord said. We are working to identify a legislative vehicle to take forward the reforms I have mentioned.
I have a lot of sympathy with these amendments. The Government are seeking to legislate on the issue when they can, but we are not able to do so through this Bill. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Bowles of Berkhamsted (LD)
My Lords, I thank the noble Lord, Lord Carlile, and the Minister for their comments in this debate. The noble Lord, Lord Carlile, may be interested to know that I am a victim of the PBO too. The reason that “Treasury” appears where I put “Lord Chancellor” is down to the PBO. My intention was correct, but it was one of those things where it was one minute to four—the last moment for getting it in—so I said, “I will make sure it is right if it goes to Report”.
I was inspired, if you like, to put this suggestion forward because I was rather alarmed at the fact of litigation funding becoming an asset class into which speculative and dubious investment was going on in overseas countries. Whichever side of the argument you are on, we do not want that kind of inflated funding meaning that cases are brought that possibly never should be, but the whole thing is just speculative. The more I looked at it, I thought, well, if we need any regulation, as I have explained, it belongs with the FCA. Then I looked further and discovered that Australia and elsewhere, as quite often is the case, have got there first and have already assigned it to being under their financial services regulators. That is my background. I think it has been interesting. I offered it as what I thought would be a faster route, especially if we could do it as a designated activity, but I also admit that, yes, I am stealing a march on what the Government will have to do, taking their time a little more. I hope that the possibility of this route has been noted and for now, I will withdraw the amendment.
“Building society governance standards(1) The Treasury must, within six months of the day on which this Act is passed, make regulations by statutory instrument requiring the Financial Conduct Authority to make rules establishing minimum governance standards for authorised building societies.(2) Regulations under subsection (1) must require the Financial Conduct Authority to make rules ensuring that—(a) elections of directors are conducted in accordance with minimum democratic standards, including—(i) equal treatment of candidates in election materials and communications;(ii) protection of candidates’ election addresses from alteration except with the candidate’s request or written consent or where alteration is required by law or for production purposes;(iii) minimum statutory duties and reporting requirements for independent scrutineers;(b) voting arrangements prohibit bundled voting instructions and require voting instructions to be determined separately in respect of each candidate and each resolution;(c) members approve, by ordinary resolution at intervals not exceeding three years, the remuneration policy for directors and senior executives; (d) every authorised building society whose total assets exceed £5 billion maintains not fewer than two board positions to be filled by member-nominated directors elected by Members; (e) every annual general meeting is held at a physical place whilst permitting additional participation by electronic means;(f) every question submitted by a member for an annual general meeting, together with the building society’s response or the reasons for not providing a response, is published following the meeting.(3) Before making rules under this section the Financial Conduct Authority must consult—(a) HM Treasury;(b) the Prudential Regulation Authority;(c) representatives of authorised building societies;(d) organisations appearing to represent the interests of members.(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”Member’s explanatory statement
This amendment requires HM Treasury to require the Financial Conduct Authority to establish minimum governance standards for authorised building societies. It applies governance principles already recognised by Parliament in relation to listed companies, occupational pension schemes and statutory democratic elections to member-owned financial institutions.
Baroness Bowles of Berkhamsted (LD)
My Lords, building societies occupy a unique place in the United Kingdom’s financial system. Unlike banks, they are not owned by external shareholders; they are owned by their members. That distinction is fundamental. It means that the legitimacy of a building society rests not only upon prudent management and financial soundness but also upon effective member democracy. The Building Societies Act 1986 established the statutory framework for that democracy. It has served the sector well for many years. However, Parliament has not stood still. During the four decades since the Act was passed, this House and the other place have progressively strengthened governance standards in many comparable areas of law—I mean company law, obviously.
For quoted companies, Parliament introduced binding shareholder votes on remuneration policy through the Enterprise and Regulatory Reform Act 2013. For occupational pension schemes, Parliament has required member representation on trustee boards. For statutory elections in trade unions, Parliament has established detailed protections to ensure that elections are conducted fairly, that candidates are treated equally and that election addresses are not altered without consent. Building societies, however, remain governed largely by a statutory framework dating from 1986 that has not developed in a similar way. My amendment does not seek to transplant those other regimes wholesale, nor to interfere with the independence of boards or with the mutual model itself—quite the opposite. The amendment is intended to strengthen confidence in mutuality by ensuring that members enjoy democratic protections comparable to those that Parliament has already recognised elsewhere.
The amendment is also deliberately framed as an enabling provision. Rather that attempting to prescribe detailed rules in primary legislation, it would require His Majesty’s Treasury to make regulations requiring the Financial Conduct Authority to establish minimum governance standards for authorised building societies. The FCA is plainly the appropriate body to consult on and develop those detailed standards.
This amendment identifies a number of areas where minimum standards should exist. The first is elections. Members should be able to choose between candidates through elections that are demonstrably fair. Candidates should be treated equally and have equal opportunity to communicate with members, and independent scrutineers should operate to consistent statutory standards.
Baroness Neville-Rolfe (Con)
My Lords, I will briefly speak to Amendment 142E. I can understand the intention behind the amendment, which has been very well described by the noble Baroness, Lady Bowles.
I am particularly sympathetic to the objections to the use of the quick vote, famously used by the National Trust to keep more challenging directors off its governing body. This is known as bundle voting instructions—as in proposed new subsection (2)(b) of the amendment—which not only is rightly prohibited in trade union elections but squeezes out minority views and arguably creates a democratic deficit. I also share the noble Baroness’s concerns about purely electronic AGMs.
However, our concern is whether this amendment is the right way forward to achieve reform. It would impose a new and quite detailed regulatory framework from the centre, requiring the Treasury to direct the FCA to make rules across a wide range of building society governance matters. That would inevitably increase the regulatory burden on building societies, which already operate in a heavily regulated environment. Many are not large, and they are certainly not listed banks with external shareholders and extensive governance departments. Many are regional, community-based institutions, and that is very good. They play an important role in mortgage lending, savings and financial services provision across the country.
There is also a question of proportionality. The amendment would apply a number of quite prescriptive requirements, including on AGM format, publication of questions and responses, voting procedures, remuneration approval and member-nominated directors for large societies. Some of these changes may be sensible in principle, but they could have practical consequences, which need to be carefully understood before being imposed across the sector. We would therefore be cautious before giving the Treasury and the FCA a wide power to regulate all this and things not listed in the amendment. We are, after all, seeking to limit such powers elsewhere in the Bill, in the interests of proper parliamentary oversight. I also have a question as to whether this would not be more appropriate for a corporate governance Bill.
Having said that, there are narrow proposals—for example, on the misuse of bundled voting—that could be put into the Bill without creating such problems or changing its deregulatory thrust. If so, we would be happy to discuss them. We should always ask whether the regulatory lever is the right lever to pull. In my view, central regulation should be a last resort, particularly where the desired outcomes might be achieved through existing government expectations, voluntary best practice, member engagement or a more targeted intervention where there is evidence of a problem.
For these reasons, although I very much understand the purpose behind the amendment and I am glad to have had this discussion, I remain cautious about whether this is the right regulatory mechanism.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Baroness, Lady Bowles, for raising this important issue. Building societies are a key part of the UK’s financial services sector. The Government are committed to supporting the growth and long-term success of the mutual sector, including through our commitment to double the size of the mutual and co-operative economy.
Building societies are already subject to an extensive legislative and regulatory requirement. Building societies must comply with the Building Societies Act 1986, FCA and PRA rules, and the senior managers and certification regime. Of course, there is also wider company law and the financial services regulatory requirements where applicable. The FCA and PRA already have the powers to set and supervise governance standards where they consider it necessary.
However, I do not agree that we should make such detailed rules on things such as board composition, annual general meetings and reporting arrangements. The building society sector is diverse, ranging from small regional societies to large national institutions; this was mentioned by the noble Baroness, Lady Neville-Rolfe. The rules need adequately to reflect the different governance needs, operational models and challenges faced across the sector, and building societies need to focus their energies on serving members. Such governance matters are generally best determined by individual societies, taking into account their size, complexity and membership, while operating within the existing legislative and regulatory framework and ensuring that boards have the skills, experience and expertise needed to govern effectively.
The Government’s approach has been to modernise the framework for building societies while preserving flexibility. Consistent with feedback from the sector, we believe that governance arrangements should uphold high standards while allowing societies to adopt structures that reflect their individual circumstances, business models and memberships. The Government continue to engage closely with the mutuals sector and regulators to ensure that the framework remains proportionate and supports growth, including through the Mutual and Co-operative Sector Business Council and other stakeholder forums. We have welcomed the recent work undertaken by the FCA and the PRA on the mutuals landscape, which is helping inform future policy development as well.
Although the Government share the objective of strong governance and membership engagement, we do not believe that it should be delivered in this way. Building societies already operate within a robust framework, which we continue to keep under review and modernise where appropriate. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Bowles of Berkhamsted (LD)
I thank the Minister and the noble Baroness, Lady Neville-Rolfe; I might take the noble Baroness up on her offer to proceed further with something to do with blind voting. I accept that this is the “Full Monty” version, which I put in at this stage because I wanted to draw comments.
I do not think that you can have what is, in essence, a substantial financial institution with a board that can fiddle who gets on to the board and who does not. This is the nub of the issue: it is possible to block in a way that we do not allow for listed companies. Not all listed companies are as big as some of the institutions I am talking about—I accept the proportionality point; maybe one has a threshold—but the situation that has gone on is not acceptable. If we could start with the bundled blind voting point, we might begin to get somewhere. I thank everybody but, obviously, for now, I will withdraw my amendment.
Baroness Noakes
“Offices for regulatory evaluation(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 1RB (requirements in connection with public consultations), insert—“FCA Office for Regulatory Evaluation
1RC FCA Office for Regulatory Evaluation(1) The FCA must establish and maintain an office for regulatory evaluation, to be known as the FCA Office for Regulatory Evaluation (“the Office”), to provide independent evaluation of the FCA’s regulatory actions.(2) The FCA must appoint a person as Director of the Office who will be responsible for the activities of the Office.(3) Treasury approval is required for the appointment or dismissal of the Director.(4) The FCA must provide the resources that are required by the Director to carry out the evaluation of the FCA’s regulatory actions.(5) The Director must draw up a statement of policy of how the evaluation of the FCA’s regulatory actions will be carried out. (6) The Director must report to the governing body of the FCA at least every six months on the work of the Office and the report must be—(a) published,(b) sent to the Treasury, and(c) sent to the Committees of Parliament referred to in paragraph 28(7) of Schedule 1ZA (the Financial Conduct Authority).(7) The Director must report to the chair of the FCA and be independent of the FCA’s board of directors and its executive management.(8) The chair of the FCA will be responsible for the remuneration of the Director and for settling any disputes about the resources allocated by the FCA to the work of the Office.(9) “Regulatory actions” means any actions carried out by the FCA in discharging its general functions under section 1B and supervision, monitoring and enforcement under section 1L.”(3) After section 2NB (requirements in connection with public consultations), insert—“Bank of England Office for Regulatory Evaluation
2NC Bank of England Office for Regulatory Evaluation(1) The Bank of England must establish and maintain an office for regulatory evaluation, to be known as the Bank of England Office for Regulatory Evaluation (“the Office”), to provide independent evaluation of the regulatory actions of the PRA and the Bank of England in respect of its financial market infrastructure (FMI) functions.(2) The Bank of England must appoint a person as Director of the Office who will be responsible for the activities of the Office.(3) Treasury approval is required for the appointment or dismissal of the Director.(4) The Bank of England must provide the resources that are required by the Director to carry out the evaluation of the regulatory actions of the PRA and the Bank of England in respect of its FMI functions.(5) The Director must draw up a statement of policy of how the evaluation of regulatory actions will be carried out.(6) The Director must report to the court of directors at least every six months on the work of the Office and the report must be—(a) published,(b) sent to the Treasury, and(c) sent to the Committees of Parliament referred to in paragraph 36(7) of Schedule 1ZB (the Prudential Regulation Authority).(7) The Director must report to the chair of the court of directors and be independent of the court of directors, the Prudential Regulation Committee, the Financial Markets Infrastructure Committee and the executive management associated with those Committees.(8) The chair of the court of directors will be responsible for the remuneration of the Director and for settling any disputes about the resources allocated by the Bank of England to the work of the Office.(9) “Regulatory actions” means any actions carried out by—(a) the PRA in discharging its functions under section 2AB and supervision of PRA-authorised persons under section 2K, and(b) the Bank of England in respect of its FMI functions under section 30D of the Bank of England Act 1998.””
Baroness Noakes (Con)
My Lords, I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, the noble Lord, Lord Vaux of Harrowden, and my noble friend Lord Bridges of Headley for adding their names to this amendment.
Last week, we debated the need for more extensive regulatory evaluation in order to hold the regulators to account effectively. The noble Baroness, Lady Bowles, suggested a Treasury-convened panel to undertake periodic independent reviews, and my noble friend Lord Bridges of Headley suggested an office of regulatory evaluation, which would assess the regulators’ performance in discharging their duties and meeting the regulatory principles. These would not replace the parliamentary committees in each House but would complement them by providing more in-depth and comprehensive analysis, which could then be built on within the framework of parliamentary accountability. My Amendment 142F would be another way of increasing the amount of the evaluation of the regulators.
I remind the Committee of the background. The volume of regulatory activity has grown significantly in recent years, as the matters that used to be dealt with in the EU have been added to the FSMA model. In addition, innovation is presenting major new challenges, which has the effect of increasing regulator activity.
The ability of Parliament to hold regulators to account was already under strain. For example, the Financial Services Regulation Committee of your Lordships’ House recently undertook a major piece of work on stablecoins, but it would not have been realistic to attempt to encompass all developments in digital assets. We cannot cover everything that we think should be covered.
The Bill is adding to that workload by adding the huge area of consumer credit to the FCA’s responsibilities, all of which will need to be implemented by way of new FCA rules. This will involve very significant issues: the balance between consumer protections; the supply of credit; and the efficiency of credit providers. I do not know how all that will be scrutinised effectively.
Instead of looking to solutions that are external to the regulators, which is what we discussed last week, Amendment 142F proposes that each of the regulators sets up an internal but independent office for regulatory evaluation. Apart from safeguarding the independence of the office and mandating regular reporting, the amendment is deliberately not prescriptive beyond that, leaving it to the new offices to work out how to carry out their work.
Baroness Bowles of Berkhamsted (LD)
My Lords, I support these amendments. They almost follow naturally from the debate that we had earlier about the need for a structurally competent wholesale function within the FCA. It is clear that you cannot produce a credible cost-benefit analysis without a credible evaluation capability. The PRA has understood that and already has the beginnings of an evaluation function, as the noble Baroness, Lady Noakes, said.
I can understand that in part, because prudential regulation requires modelling, capital assessment and an understanding of how rules transmit through markets. The PRA’s world is balance-sheet solvency, capital modelling and risk transmission, so it already employs actuaries, quants and economists, and the evaluation office therefore fits more naturally into that culture. The FCA is different; its culture, as we have discussed, is overwhelmingly consumer focused. That is appropriate for retail regulation but it means that the FCA has never developed the technical machinery for the evaluation of wholesale market impacts. Consumer protection does not require the modelling of liquidity, pricing dynamics or market structure, but wholesale regulation does.
It occurred to me only when I was thinking about this in the context of this amendment that the need for an evaluation office points again to the different sides of the FCA and why somehow upgrading, or separating the wholesale side, becomes more relevant because functions are missing due to the consumer focus. We have heard that the FCA tends to do the minimum of cost-benefit analysis required by statute and then largely ignores it—again, probably because it thinks that it is not relevant to consumer protection, but I would say it is to the particular detriment of the wholesale side. That is an additional reason for supporting these amendments.
Lord Vaux of Harrowden (CB)
My Lords, I am sorry that I was not able to be here last Wednesday for the debates on the amendments tabled by the noble Lord, Lord Bridges, and others that proposed the creation of an office for financial regulatory accountability. I have read the debates in Hansard and there is a remarkable similarity to three years ago when we debated similar amendments. This was a significant error in 2023 during the passage of the last Financial Services and Markets Act. It would have been a significant improvement to the ability of Parliament to hold the regulators to account—a complement rather than a replacement.
I shall touch briefly on the ability to scrutinise the proportionality of specific rules. I shall look closely in Hansard at the Minister’s comments during the second group, when he seemed to agree that the specific scrutiny of the rules is in fact important, contrary to the approach that the Bill now takes. This holding of the regulators to account by Parliament has become only more important and more difficult, I think, as we give yet more responsibilities to the regulators under the Bill with, as we have heard, the move of the PRS, the Consumer Credit Act and so on.
Amendment 142 would provide an alternative way of achieving something similar to the amendments that were discussed on Wednesday that might perhaps be easier for the regulators and the Government to accept. It proposes the creation of offices of regulatory evaluation within both the FCA and the Bank but, unlike the office for financial regulatory accountability proposed by the noble Lord, Lord Bridges, it would lie within the regulator, although it would probably have much the same role. Whichever way we do it, I am sure the Minister will have heard loud and clear the concerns that are shared across the Committee about the accountability of the regulators to Parliament, another of the main themes that are emerging as we load ever greater responsibilities upon them.
Baroness Kramer (LD)
My Lords, I cannot improve on the three speeches that have been made. I rise simply to make clear that on these Benches, we think that this amendment is really important.
We can see in Committee that it is purely random that we have the capacity to raise many of the issues. The noble Baroness, Lady Noakes, and my noble friend Lady Bowles have a deep understanding of the market, as does the noble Lord, Lord Vaux, but it is purely random that they happen to be in the Lords. If we did not have the noble Lord, Lord Holmes, we would struggle to deal with many of the issues around digital assets and the revolution that is taking place. We have no system of ensuring that, in any part of the parliamentary process, there is the capacity to get to the relevant pieces of information, understand the underlying issues and play the role that Parliament should be playing—whether at committee level, with a Special Standing Committee, or as associated with the passage of a piece of legislation. None of that can be done without genuine, adequate and well thought-through information.
Looking at other Parliaments around the globe, in the US, the Senate and Congress have vast numbers of staff available to make sure that those who represent the voice of the people are truly informed in great detail with proper understanding of the articles that are before them and the regulations that they seek to uphold or overturn. We lack this here. We are still an amateur body, which is not appropriate for a modern society. This is a very significant change, but it must be a change in the right direction. From these Benches, we very much support it.
Baroness Neville-Rolfe (Con)
My Lords, we support the principle behind this amendment. It follows the same broad logic as the amendment tabled by my noble friend Lord Bridges. If the financial regulators are to exercise very significant powers, there must be a proper mechanism through which they can be evaluated and held to account.
This amendment seeks to require the FCA, the Bank of England and the PRA to establish offices for regulatory evaluation. Those offices would review the regulators’ actions, including rule-making, supervision, monitoring and enforcement. Only the changes to rules are currently considered by the cost-benefit analysis panels. The offices would be led by directors with a degree of independence from the boards and executive structures of the regulators themselves. They would report regularly to the Treasury and to relevant parliamentary committees. My noble friend Lady Noakes quotes an interesting precedent of such arrangements at the World Bank, the IMF and the European Investment Bank—all long-standing pillars of the international economic community.
It is good to welcome the noble Lord, Lord Vaux of Harrowden, to the debate, but this amendment raises very much the same issues as those that we discussed last Wednesday—at col. 501GC in Hansard, for those who were not present—with regard to the amendments from my noble friend Lord Bridges and the noble Baroness, Lady Bowles. I was pleased to hear that the Minister has agreed to reflect further on the issues raised and to meet, with the Economic Secretary, the Financial Services Regulation Committee later this week. I look forward to the results but, in the interests of time, will not repeat what I have already said on the subject.
All these amendments raise a fundamental point. We are placing great trust in the regulators. That trust must be matched by transparency, evidence and accountability. Today’s cross-party amendment provides another route for the Minister to consider.
Lord Stockwood (Lab)
My Lords, I thank the noble Baroness, Lady Noakes, for notifying us during the debate last Wednesday that this amendment would be tabled. I reiterate that the Government share the view that accountability of the regulators is of great importance. This is why the Government have formalised biannual performance reviews for the regulators and other reporting mechanisms designed to support scrutiny and oversight. As the noble Baroness noted, the Bank of England already has an independent evaluation office which assists the Court of Directors in meeting its statutory responsibility to keep the performance of the bank under review.
Baroness Noakes (Con)
My Lords, I thank all noble Lords who have taken part in this short debate. I know that it is, in part, a repeat of debates we have held already in Committee, but it is bringing together such an important issue, which is the strength of the accountability mechanisms for the regulators. The Minister outlined the things that exist at the moment. I think I explained that the Independent Evaluation Office in the Bank does not do very much, although what it does is actually very interesting: its report on the secondary competitiveness and growth objective was a good piece of work.
Within the FCA there is no visibility, so anybody involved in external accountability of the FCA would know none of it, with the possible exception of the National Audit Office reports. The National Audit Office, as noble Lords know, will do those value-for-money reviews only very infrequently, and I am not sure that the one the Minister referred to would have had any impact on the work of the Financial Services Regulation Committee had we taken it into account.
I will not labour the points now, because obviously we are going to have more substantial discussions this week in the Financial Services and Regulation Committee, and of course I am sure there will be discussions when we get to Report, and I look forward to any other discussions that we have before we get to Report in the autumn. With that, I beg leave to withdraw.
Lord Stockwood
Member’s explanatory statement
This amendment, and my other amendment to this clause, would ensure that both clauses 27 and 36 can be commenced to amend one list in section 66A of the Financial Services and Markets Act 2000 while preserving the final “or”.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
I put on the record that parliamentary counsel has advised that this amendment and all the other government amendments in this group are all technical amendments. If the noble Baroness’s objection is based on the fact that she believes that an all-Peers letter should have been sent for a handful of technical amendments, then that is not normally the case. However, if she wants to object, we will not move them.
Baroness Noakes (Con)
The Minister and I had a meeting on this last week, so I am surprised that he is raising the issue today. I notified on Friday that I would be continuing the line that I had taken on the first Committee day.
Lord Massey of Hampstead
“Appointed representatives: impact assessment(1) Before any provision of this Act relating to the appointed representatives regime comes into force, the FCA must conduct and publish an impact assessment of the effect of those provisions on—(a) the number of principal firms choosing to maintain appointed representative relationships,(b) the total number of appointed representatives operating in the United Kingdom,(c) consumer access to regulated financial advice, with particular reference to consumers with modest investable assets who may be dependent on appointed representatives as their primary source of regulated financial advice, and(d) the viability of smaller principal firms for whom the costs of compliance with the new senior manager function requirement for appointed representative oversight may be disproportionate relative to the revenue derived from appointed representative relationships.(2) The impact assessment required under subsection (1) must—(a) have regard to the existing contraction of the appointed representatives population,(b) include a quantitative assessment of the likely further reduction in appointed representative numbers attributable to the provisions of this Act, and(c) assess the consequent effect on the availability and accessibility of regulated financial advice to retail consumers.(3) If the impact assessment concludes that the provisions of this Act are likely to result in a material reduction in consumer access to regulated financial advice, the FCA must publish proposals for mitigating measures before those provisions come into force.”Member’s explanatory statement
This amendment calls for an impact assessment to ensure that the measures in this Act do not lead to a large drop in the number of appointed representatives who often provide services to smaller clients thereby promoting financial inclusion.
Lord Massey of Hampstead (Con)
My Lords, I should again declare my interest as chairman of Canaccord Genuity Wealth Management, as set out in the register of interests, although I should also state that Canaccord has no appointed representatives, which is the subject of this amendment.
I do not oppose these reforms in principle, although we should recognise that in Clauses 24 to 28 and in other measures we are adding significantly to the regulatory burden of member firms. It can certainly be argued that there is a case for greater oversight of appointed reps, as too many principal firms have historically taken a light-touch approach to supervising the firms acting in their name. Where that has gone wrong, consumers have borne the cost. However, regulation of this kind is always a question of balance, and my purpose in moving this amendment is to ask whether the Bill has struck that balance correctly.
By way of background, this part of the financial sector, affecting mostly retail clients, is surprisingly large, and its fortunes bear directly on financial inclusion, a subject on which the Committee shares a common concern, mindful, as we all are, of the advice gap. The numbers are meaningful. There are approximately 34,000 appointed representatives, according to the FCA, and they generate £11.1 billion in regulated revenue and a further £27 billion in non-regulated financial services revenue, so some £38 billion in total is running through this part of the market. The number of appointed reps fell by 12% in the 3.5 years from 2022 to 2025, but there was a more pronounced fall in the numbers of principal firms—that is, those that appoint representatives. That population has fallen by 26% over the same period, so we are seeing quite a decline in participation in this space.
Why does that matter? Appointed reps are overwhelmingly small firms, often sole traders, regionally based, who work closely with smaller clients. They cannot afford the administrative and compliance burdens of larger firms, hence the need to operate under their regulatory umbrella. They are a significant channel through which smaller clients can access the markets and receive highly personalised service and advice. I am not sure we want this part of the business to be under threat of more serious decline as an unintended consequence of some provisions in the Bill.
Clause 24 introduces a new discretionary FCA gateway before a firm may act as a principal at all. Principal firms will now have to seek specific approval to have appointed reps, and if they enter the business—this is an important point—the FCA can remove their permission at its discretion for vague reasons. Alongside that, the FCA will gain the power to create a bespoke senior management function specifically for AR oversight, layering on a new form of personal regulatory liability to firms taking on ARs. ARs will now be brought into scope of SMCR and will therefore be subject to misconduct rules, so principal firms will have to carry out fit-and-proper tests on ARs, as they do now for their own employees. Furthermore, the compulsory jurisdiction of the FOS is now extended to ARs, which means that principal firms will be held responsible for complaints against ARs in most circumstances. These are significant new duties that represent potential liability risk and a lot of additional cost to principal firms.
We should bear in mind that some of these principal firms are not large organisations, and they may find these new exposures quite onerous, which in turn might render the economic risk-reward of having ARs less attractive. Overall, the clear direction of travel here is to have fewer but larger principal firms. Indeed, this might be the FCA’s agenda for this part of the business.
Amendment 144A calls for the FCA to look before it leaps. It calls for an assessment of the impact of the new rules on the number of principal firms, the number of appointed reps and, most importantly, consumer access to advice, particularly for those on modest means, and the viability of smaller principal firms.
I am not necessarily asking the Government to reverse course, but these measures represent a significant increase in regulatory burden and there is no getting away from that. I am asking for the regulator to measure the impact of what it is doing before the provisions take effect, and to bring forward mitigating proposals if the impact on consumer access turns out to be material. Given that the FCA’s own data already show a firm population in genuine retreat and the implications for the advice gap, this seems to be a modest, proportionate and uncontroversial request. I beg to move.
Baroness Lawlor (Con)
My Lords, I will say a few words in support of my noble friend Lord Massey’s amendment. We should not forget that many of these small firms coming into the market are to be valued in Britain’s highly competitive industry—until there was too much regulation, perhaps—and we rely on them. They are what distinguishes the UK’s financial services historically. From the 16th century on, the growth of financial services and the City of London depended on small people coming together to provide for a niche in the market that people wanted.
If we continue to put too much burden on these small firms, they will not emerge. We have heard from my noble friend Lord Massey how important they are, sometimes locally. They are small firms which meet a need, so it is a very good idea to have an impact assessment of what the costs will be for ARs before the law comes into operation, for the competitiveness of the UK’s sector.
Lord Reay (Con)
My Lords, we support the questions that this probing amendment is asking. My noble friend Lord Massey of Hampstead has put forward a sensible and important amendment, because it asks the Government and the FCA to consider the practical effects of the Bill’s changes on appointed representatives before those changes are brought into force.
This model is used widely across financial advice, mortgage broking, insurance distribution, wealth management and consumer credit. It is particularly important for smaller advisory businesses which may not have the scale, resources or compliance infrastructure to seek direct FCA authorisation themselves. There are good reasons why businesses use this model. It can reduce regulatory costs, allow faster market entry and give smaller firms access to compliance expertise, training and regulatory support. It can also allow advisers to spend more time serving clients, rather than navigating the full cost and complexity of direct authorisation. That has real consumer benefits.
Many appointed representatives are small local firms or regional advisory practices. They often serve clients who may have more modest assets and need mortgage advice, pension advice, insurance advice or investment guidance, but who may not be attractive to larger firms focused on wealthier clients, so we should be careful. If the effect of the Bill is that principal firms face significantly higher costs or liabilities, some may reduce their appointed representative networks or withdraw from the model altogether. That could mean fewer advisers, less competition, less local provision and reduced access to financial advice, particularly for retail customers with smaller portfolios or less complex needs. That is the concern which Amendment 144A seeks to test.
That assessment would consider the number of principal firms likely to continue AR relationships, the overall number of appointed representatives, the effect on consumer access to regulated financial advice, and the impact on smaller principal firms, whose compliance costs may be disproportionate. That seems to me to be a reasonable thing to ask. The policy objective should be to improve standards and reduce harm, without undermining a model that supports competition, market entry and access to advice.
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Lord for raising the importance of ensuring that measures to make the appointed representatives regime safer do not undermine the benefits provided by that regime. This amendment would require the FCA to publish an impact assessment before the measures can take effect.
I am happy to assure noble Lords that the measures have already been assessed as part of the impact assessment completed for the Bill. That concluded that the measures for appointed representatives should result in a net benefit of £108 million over the next 10 years. Before implementation, the FCA will also need to publish proposals for new rules, including on the approach to bringing appointed representatives within the senior managers and certification regime. FSMA already requires the FCA to publish a cost-benefit analysis when it proposes new rules; this analysis may be scrutinised by the independent cost-benefit analysis panel to ensure that it accurately captures the costs and benefits that are likely to result.
I also want to provide some reassurance on the introduction of the senior management function within principal firms responsible for overseeing appointed representatives. The FCA will have the flexibility to apply the senior management function in a proportionate way; it will not be obliged to require this of every principal firm, and may judge that it is not proportionate for smaller principal firms.
The Government share the objective of ensuring that we have a safer regime that does not undermine the benefits provided by appointed representatives. That is why the approach to implementation is designed to minimise disruption and cost to firms, and will be subject to further consultation and cost-benefit analysis by the FCA. I therefore ask the noble Lord to withdraw his amendment.
Lord Massey of Hampstead (Con)
I thank the Minister for his response and take reassurance that some of the measures that I raised have been dealt with already by the FCA, as it has—hopefully—assessed the impact of these quite significant changes, which, as I mentioned at the beginning, do add to regulation, rather than taking away from regulation. I also thank my noble friends for supporting this amendment. I beg leave to withdraw the amendment.
Lord Stockwood
Member’s explanatory statement
This amendment would make section 55AA(4) of the Financial Services and Markets Act 2000 consistent with section 55A(3) of that Act (as amended by this clause).
Lord Wilson of Sedgefield (Lab)
Can I just ask the noble Baroness, Lady Noakes, on that basis—parliamentary counsel has advised that these are technical amendments, and therefore that Peers’ letters do not need to be sent out—does she not agree with the parliamentary counsel?
Baroness Noakes (Con)
I am merely keeping to what I said on the first Committee day.
Baroness Neville-Rolfe
“Review of notification arrangements for previously approved senior managers(1) Within 12 months of the day on which this Act is passed, the Treasury must lay before Parliament a report on whether the new notification framework for senior manager appointments could be used in cases where an individual has already been approved for the same or a similar function, including within the same group.(2) In preparing a report under subsection (1), the Treasury must consult—(a) the Financial Conduct Authority,(b) the Prudential Regulation Authority, and(c) such other persons as the Treasury considers appropriate.(3) The Treasury must publish the report.”Member’s explanatory statement
This probing amendment would require a review of whether the new notification framework for senior manager appointments could be used in cases where an individual has already been approved for the same or a similar function, including within the same group.
Baroness Neville-Rolfe (Con)
My Lords, Amendment 146, in my name and that of my noble friend Lord Altrincham, is a modest and probing amendment. It follows the discussion we had last week on speeding up the senior management and certification regime. It does not seek to change the regime immediately. It would require the Treasury to carry out a review and publish a report within 12 months on whether the new notification framework for senior manager appointments could be used where an individual had already been approved for the same or a similar function, including within the same corporate group.
The amendment echoes my noble friend Lord Howard of Rising’s amendment on a fast-track authorisation process for applicants who have been authorised before, but it would look at how that was working in practice a year after the Act came into effect. The Minister gave a hint that he was sympathetic to my noble friend Lord Howard and would be talking to the FCA about this, so I am hoping we can make some progress on this amendment.
We have heard from the industry that there are several problems with the SMCR regime. One concern is that the regime was originally intended to apply to a relatively limited number of senior people within a firm. Over time, however, roles have become more complicated, responsibilities have overlapped and some organisations have ended up needing a much larger number of people to receive SMCR approval. Regulation should not make legitimate business harder to do and should not slow down sensible appointments where there is no obvious additional risk, yet that is too often the practical effect of the regime as it stands.
The specific issue is what has sometimes been described as SMCR passporting. Where an individual has already been approved, has a strong regulatory track record and is moving into a genuinely comparable role, it seems sensible to explore whether a streamlined notification process could be used. That would have several advantages: it would reduce duplication, it could speed up appointments, it could reduce costs to firms, it could make it easier for groups to move experienced people into appropriate roles and it could allow regulators to focus their resources on genuinely new, higher-risk or more complex appointments. That is the point of the amendment. It does not prescribe the answer. It asks the Treasury to review the position, consult the FCA and the PRA and other relevant parties and report back to Parliament.
If we want the UK to have a regulatory system that supports growth and competitiveness, we need an approval process that is rigorous but also efficient. We should not require firms to repeat the same process unnecessarily where the regulator has already assessed the individual and where the new role is substantially comparable. I would therefore be grateful if the Minister could give us some reassurance on this important matter and agree that an ex post review could be a helpful way of ensuring the direction of travel that I know we both want. I beg to move.
Baroness Kramer (LD)
My Lords, I am always in favour of trying to provide streamlining, and this amendment offers a common-sense approach to that. However, an issue that I want to take up with the noble Baroness, Lady Neville-Rolfe, is that the focus of the FCA should always be on new hires, not previous ones. The ongoing fit and proper process is crucial, particularly if we are going to have lighter-touch regulation as people move from one position to another, but that ongoing process is critical. Perhaps the Minister could expand on that because I am not quite clear about how all the various changes in FCA rules change what has been an annual review process but now gives more flexibility in what that means.
I shall give some examples. I am not sure that when Sir Fred Goodwin—he was not “Sir” then, obviously—was appointed as chief executive of RBS anyone recognised that he was going to get caught up in what I think most people would describe as an addiction to completely irrational acquisitions, which eventually led to the collapse of a major bank. I am not sure that when Jes Staley was hired to be CEO of Barclays people were aware of the significance of his extensive involvement with Epstein. I am not sure that when the Reverend Paul Flowers was approved as chairman of the Co-operative Bank people were conscious that he was potentially someone who would become seriously addicted to and affected by a number of drugs, notably crystal meth. In other words, there is an ongoing process that is critical; it should not be only a one-time process. I hope that will be absorbed into the thinking if this amendment moves forward. The ongoing process is vital. Fit and proper is not a one-time-only process.
Lord Massey of Hampstead (Con)
My Lords, I rise quickly to support this amendment, which is exactly the sort of streamlining amendment we are looking to achieve in this Bill. I politely take issue with the remarks of the noble Baroness, Lady Kramer, on people such as Fred Goodwin, Jes Staley or the Reverend Flowers. The FCA would not have picked up those problems; they all emerged much later. We should give credit to member firms for being able to judge who they should be hiring. If they are already licensed, why would notification not be sufficient?
Lord Stockwood (Lab)
My Lords, I am grateful to the noble Baroness, Lady Neville-Rolfe, for tabling this amendment. The Government agree that the regime should operate more proportionately where that can be done without undermining accountability—in fact, that is what the Bill aims to do. The core objective of these reforms is to reduce unnecessary regulatory and administrative burdens for firms, while preserving the accountability standards that underpin the regime. The changes will help to deliver the Government’s and the regulators’ ambition to reduce burdens from this regime by 50%, while retaining its core benefits.
As set out in the impact assessment for the Bill, the reforms to this regime alone are expected to reduce administrative burdens on the sector almost £600 million over 10 years. The Bill is already speeding up the target for the regulators to make these decisions. As I said in the debate last Wednesday, in Q4 of 2025-26, 50% of senior manager cases were determined within 19 days and over 99% were determined within the new target of two months.
The Bill moves to a more flexible system, led by regulators. Rather than requiring pre-approval for all senior managers, it allows the FCA and PRA to decide which senior management functions require approval and which can simply be notified to the regulators. The regulators will not take this decision without direction. Schedule 3 sets out the factors the regulators may use when designing the notification approach. These include whether an individual has previously been approved for a different role. The detailed operation of the new framework will be taken forward by the regulators through their rules, which are already subject to the statutory consultation and parliamentary scrutiny mechanisms. The regulators already operate a proportionate application process for individuals applying for a similar senior manager function to the one they are already approved for, including when within the same group. This usually allows for a faster and more targeted assessment.
I note the question from the noble Baroness, Lady Kramer. I will pick that up with the FCA. The continued accreditation assessment of senior managers needs to be something that is reported back on; she makes an important point about that.
Finally, I assure the noble Baroness, Lady Neville-Rolfe, that the Government will continue to engage closely with the regulators as they implement these changes, to ensure that the regime operates as intended and delivers a more proportionate approach in practice. I therefore ask her to withdraw the amendment.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to my noble friend Lord Massey for his support and to the Minister for his assurance that administrative burdens will be reduced by these changes. Of course, quite a lot of that is down to the dropping of the certification regime, which we have welcomed. Individual cases can make for bad rules. I think Fred Goodwin was approved—or not approved—before the SMCR regime came in. I am confident that our regulators learn from their mistakes in these matters of appointments; that is one of the features of having a proper, professional regulator. But I remain concerned that the system can still create delay and duplication. Delays affect hiring, promotion, succession planning, business continuity and the ability of firms to operate effectively in a sector where we are trying to support growth and competitiveness. I cannot emphasise that point often enough.
I hope that the Government will continue to look seriously at whether there is scope for some form of SMCR passporting or a more streamlined notification process in cases where a person has already been approved, has a good regulatory track record and is moving to a similar role. I and my noble friend Lord Howard of Rising would like to see progress before Report, ideally in a form that makes my proposal for a review redundant, but for now I beg leave to withdraw the amendment.
Baroness Noakes
Member’s explanatory statement
This amendment requires the Treasury to consult the regulators about regulations which designate countries or territories for recognition.
Baroness Noakes (Con)
My Lords, in moving this amendment, I will speak also to Amendment 153 and the Clause 37 stand part notice.
I am instinctively suspicious of Clause 37 because I think that the best people to judge whether overseas financial services firms should be able to operate in the UK, and to determine the terms on which they operate, are the regulators. The Bill hands major judgments to the Treasury, which means that they are likely, at least in part, to be political judgments. Although new Section 408A requires the Treasury to have regard to various things, that list is not exclusive, so there is nothing to stop the Treasury taking into account factors other than those listed in new subsection (2). Decisions could be made, for example, in pursuit of foreign policy aims against a wider background of international relations in relation to the EU reset. Financial services could also be traded away in the context of international trade agreements. Even if the Treasury sticks with the list of “have regards” in new subsection (2), that subsection has no hierarchy of criteria. Financial stability is on a par with international competitiveness and growth.
This is in stark contrast to the regulators, where international competitiveness, growth and competition are secondary objectives that cannot override their core objectives. I fully support the Government’s quest for economic growth and the pursuit of international trade agreements but, under new Section 408A, the Treasury could set aside any concerns about the integrity and stability of the UK’s financial system because it favours facilitating international competitiveness and growth. Is this really what the Government are trying to enable?
We know that some countries, such as China, seem to have technical compliance with many international financial services standards although, in practice, the degree of state control and the weakness of local regulators leave a lot of questions to be answered about the organisations in their financial services sectors. We know that the Treasury wants more trade with China. Will it let Chinese financial services firms freely into the UK in order to facilitate that? How will the Treasury ensure that it gets a good deal for British financial services firms? Some countries, such as India, give the appearance of allowing foreign firms to operate in them. However, in practice, India places many hurdles in their way, and many organisations give up the struggle after a while. Does the Treasury really have the granular understanding of what is happening in these countries?
My own view is that it would be dangerous to let the Treasury loose on this area, and that the independent financial services regulators are the best people to determine who can operate in the UK and on what terms. This is why I oppose Clause 37 standing part of the Bill. However, I have heard from some in the City that they welcome this new overseas recognition regime, because the regulators do not prioritise negotiations with their foreign counterparts and there is little faith that they ever will. That has a ring of truth to it. The FCA has far too many other things to do, and the Bank and the PRA are exceedingly cautious. For that reason, I have tabled Amendments 152 and 153 in order to emphasise the important role that the regulator should have in the process.
Amendment 152 would add a requirement for the Treasury to consult the regulators when it uses the power under Section 408B. As currently drafted, the Treasury has to consult the regulators only if it exercises the power to recognise overseas firms to operate in the UK under Section 408A. The Treasury does not have to consult the regulators if it uses the Section 408B power to recognise overseas territories. My amendment poses the question: why not? The regulators are likely to know more about financial services and regulation in the overseas countries than the Treasury.
Amendment 153 is aimed at improving the information given to Parliament when the Treasury brings forward regulations to use these new powers. It would require the Treasury to publish any information or advice received from the regulators in connection with the use of the powers. As I mentioned, the Bill requires the Treasury to consult the regulators on only one of the two powers, but then the Treasury could completely ignore the information or advice that it receives from the regulators and Parliament would be none the wiser. This should be more transparent. The Treasury must be prepared to say why it has ignored or overridden the advice that is received, if that is indeed the case. It must therefore be prepared to share any relevant information with Parliament.
We all know that secondary legislation processes give Parliament no effective power over the Executive. That does not mean, however, that Parliament can be ignored. I believe it is necessary to force a bit of daylight into the process and not tolerate the suppression of relevant information from Parliament. Consistent with the stance I have taken throughout this Committee, if the Minister wishes to move his Amendment 154, I shall call, “Not content”. I think even the noble Lord, Lord Wilson, will accept that this amendment is not a small technical amendment.
I had hoped that the Treasury would have organised an all-Peers letter by now. It has had two weeks to do so since I first raised the issue. I was informed on Friday that the Government think it is okay just to write to the Front Benches on some government amendments. Since I was the only Peer who had tabled amendments in relation to Clause 37, I believe it was, at a minimum, discourteous not to have written to me at the same time.
I do, however, stick to my broader point that the whole House should be informed. The scrutiny of Bills is not something that belongs in a cosy club of Front-Benchers. Someone needs to stand up for Back-Benchers and that is what I am doing in this Bill. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I will be very brief. I am sympathetic to ensuring that the overseas recognition regulations are as pragmatic and seamless as they can be to enable easier international competition. But I have quite a lot of sympathy with the comments of the noble Baroness, Lady Noakes, about giving these powers exclusively to the Treasury.
I want to ask one question of the Minister. New Section 408A(2) sets out a list of areas that
“the Treasury must have regard to the importance of”
when making regulations. As an aside, that is quite odd wording; normally it is “have regard to”. I am still not sure I understand what difference
“must have regard to the importance of”
makes to the meaning. Maybe the Minister might explain that. New Section 408(1) does something similar but in a slightly different way. It seems that one area is missing from the lists of “have regards”: the question of economic crime, particularly anti-money laundering and the transparency of ownership in the relevant jurisdictions. Can the Minister say whether he agrees that those are important and explain why they might be missing from the list?
I will just finish with something I should have said earlier today, given that I think we are finishing early and the Minister is going to get some of his evening back: I wish him a happy birthday.
Baroness Lawlor (Con)
I endorse the concern of the noble Baroness, Lady Noakes, about the political pressure that the Treasury will be under to recognise certain countries. Without adequate scrutiny, wider advice and deep analysis, the problem of overleveraging in some banking systems, despite them appearing perfectly respectable, would expose the UK and its financial sector to the dangers of debt and contamination.
I therefore have doubts about the economic implications of the Treasury making these calls on account of political reasons. We see this all the time, whether on international agreements—I sit on that committee—or on European affairs, whose committee I previously sat on. There is constant pressure by Governments to sign treaties that are rather bad for the UK and its various sectors, including financial services. I would have concerns if there were no adequate scrutiny and no proper advice taken on whether such recognition is a good thing for our systems.
Baroness Kramer (LD)
My Lords, I will speak briefly. As the Committee will know, I have expressed before my concern about heading towards a lowest common denominator. The constraints on the engagement of the regulator and Parliament in a process of recognition of overseas regimes is crucial. It provides transparency and challenge, both of which are constantly necessary. So these are well-drafted amendments from the noble Baroness, Lady Noakes.
I want to go a little further. The noble Lord, Lord Holmes of Richmond, is not in his place, but he has tabled Amendment 164D, which would go further in seeking to instruct the Secretary of State to establish memoranda of understanding with a whole series of regulatory authorities. I have significant concerns about that, without the same set of constraints. We must be aware that, at the moment, there is fragmentation in the world in which we are living. International agreements are often treated as “pick and mix”. I object when we do that in the UK, but it is certainly a behaviour that we are watching in the United States at all times. We can see it with the development of AI and the various steps that the White House is taking. It is hard to work out whether or not it will go for AI licensing. A memorandum of understanding that passively accepted whatever the United States decided was the appropriate standard would trouble me hugely.
This is a very good set of amendments. Although the noble Baroness, Lady Noakes, and I often take very different positions on regulation and the primacy of financial stability, in this instance, she is absolutely right. There is nothing more troubling than reading all three objectives be put on a par. That has been my great fear. Anyone looking back on what happened in the 2008 crash will see that a focus on competition and growth without any focus on financial stability led to a crisis that I suspect nobody in this Room wishes to see again.
Baroness Neville-Rolfe (Con)
My Lords, as this is the last group, I too wish the Minister a very happy birthday. He will be glad to know that, on this side, we think this is an important part of the Bill. The overseas recognition regime, which would replace the arrangements put in place as we left the EU, could provide a valuable mechanism for recognising overseas regulatory regimes and allowing certain firms, services or market infrastructure from other jurisdictions to access the UK market without having to duplicate regulatory requirements unnecessarily.
Lord Stockwood (Lab)
My Lords, I thank noble Lords for their warm regards. The fact that this is the most attractive way to spend my birthday probably tells them something about how my life has changed in the past 11 months. I will turn first to Clause 37 and explain why it should stand part of the Bill. I will then cover the amendments, including the government amendment.
The UK is a truly global financial services hub. We are the largest global net exporter of financial services, totalling £103 billion in 2025, representing half of the UK’s services export surplus. Excluding the US, UK financial services exports in 2025 were greater than those of the rest of the G7 combined. Different counties have different rules for the same financial activities. As such, many countries have frameworks to recognise where rules are comparable to their own. For example, the EU has equivalence regimes, and the US has comparability determinations.
At EU exit, the UK assimilated more than 270 EU equivalence decisions across 40 EU equivalence regimes. However, the UK has no way to grant these kinds of decisions except where we have inherited that power from the EU. In new areas of regulation, such as stablecoins, the Treasury currently has no ability to create recognition regimes nor, consequently, to recognise overseas jurisdictions where they have high standards and our firms want to do business.
Clause 37 enables the Treasury to make new overseas recognition regimes. Creating these regimes is done through the affirmative procedure, meaning that no regime can be created without debate in Parliament. Designation under those regimes must then be made by regulations, with the evidence base clearly set out before Parliament each time.
A number of noble Lords, including the noble Baroness, Lady Noakes, and the noble Lord, Lord Vaux, asked me how the “have regards” that the Government must consider will function, and why they have been drafted in the way they have. I have been told that this is a complex piece of drafting, so I will write to them to explain the “have regards” in more detail and why the Government have taken the approach that we have.
Turning to the amendments, there are established processes in place that support the creation and operation of recognition regimes. I assure noble Lords that the points raised in Amendments 152 and 153 speak to matters for which current processes already exist, which support clear and balanced scrutiny of these regimes. The Treasury will always, as part of its designation process, summarise the evidence that it has received and considered in relation to other jurisdictions and their regulatory frameworks. That includes advice received from the UK’s financial services regulators.
The Treasury published, in July last year, guidance on overseas recognition and a memorandum of understanding with the regulators detailing the role of regulatory advice in the decision-making process for recognition designations. Within those documents, the Treasury has already committed to seeking advice from the relevant regulators in all but exceptional circumstances.
On Amendment 164D, tabled by the noble Lord, Lord Holmes, and spoken to by others, the Government recognise the potential benefits of working towards recognition arrangements on crypto assets with compatible jurisdictions. As I have mentioned, this supports the case for the Treasury to have the powers in Clause 37. However, the Government have the tools they need to be able to respond appropriately to international regulatory developments to facilitate the UK’s access to global markets and vice versa, while ensuring that consumers are adequately protected. These tools include the powers in Clause 37 alongside the existing power to create mutual recognition agreements that was introduced in the Financial Services and Markets Act 2023.
I reassure the noble Lord, Lord Holmes, that this does not reflect any desire on the part of the Government to be insular in the development of crypto asset regulation. The UK continues to play an active role in the development of international standards for crypto assets, including through the financial stability board and the work of the International Organization of Securities Commissions. The Government also remain committed to working closely with international partners through multilateral fora on our approach to crypto assets.
I turn now to the amendment in my name. When the Bill gains Royal Assent, there will already exist a number of overseas recognition regimes created using existing powers inherited from the EU. This amendment is a transitional provision that enables the Treasury to restate the existing regimes within the new overseas recognition regime framework. The power is narrowly framed; it can be applied only to regulations listed in a specific schedule to which the overseas recognition regimes are currently added once they are in force, and it can be used only to create substantially the same effect as the existing regulations. This is essentially a tidying-up exercise. Without this amendment, overseas recognition regimes created before and after Clause 37 comes into effect will be rooted in different legislation. As my noble friend Lord Wilson said, parliamentary counsel has agreed that this amendment is minor and technical. However, I understand that the noble Baroness, Lady Noakes, objects to this amendment, so I will not move it.
I thank noble Lords for this debate, and I hope that I have sufficiently explained the Government’s intentions. I ask the noble Baroness to withdraw her amendment.
Lord Vaux of Harrowden (CB)
The Minister has not answered the question I asked about why the “have regards” do not include the economic crime issues of anti-money laundering and transparency of ownership. If he wants to write on that, that would be fine.
Baroness Noakes (Con)
Before I decide what to do with my amendment, I ask the Minister—because I may not have been paying attention—whether he explained why there is a requirement to consult the regulators for powers under new Section 408A but not under new Section 408B.
Lord Stockwood (Lab)
Again, I will write to the noble Baroness to clarify that.
Baroness Noakes (Con)
The Minister is stacking up rather a lot of letters that need to be written.
I thank all noble Lords who have spoken in this debate. It raises important issues. The Minister said, in relation to consultation, that the Treasury would summarise the evidence. That is not the same as being transparent about the advice from regulators. Although I am quite happy for the Treasury to summarise most other evidence on any consultation it undertakes, I think the regulators are a special case here. However, I will read Hansard and consider what, if anything, I will do with this topic before Report. Before sitting down, I too add my birthday wishes to the Minister. I beg leave to withdraw the amendment.
House of Lords
Fracture Liaison Services
(4 weeks, 1 day ago)
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Lord Black of Brentwood
To ask His Majesty’s Government what progress they have made in delivering on their policy to ensure universal coverage of Fracture Liaison Services in England by 2030, including implementation plans, timelines and milestones for rollout.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, our 10-year health plan committed to rolling out fracture liaison services nationwide by 2030 and outlines our vision for a more devolved health service. We have cut the number of NHS planning guidance targets from 130 in 2022 to 18 in 2025, and that has given local leaders greater flexibility to adapt and serve local needs. Expectations have been set through the new women’s health strategy that ICBs prioritise community-based models when commissioning new fracture prevention services.
Lord Black of Brentwood (Con)
My Lords, I apologise to the Minister for bringing her back yet again to this issue. However, it is now two years since the former Secretary of State said that a national fracture liaison service rollout would be one of the Government’s first actions in office. Two years on, we are still waiting for something—for anything—to happen, and people have died as a result. I have two questions for the Minister. First, does she really believe, in the light of all the evidence she has been given, that it is still possible to achieve universal coverage by 2030? Secondly, if she does, do the Government have funding to make it happen and a timetable and implementation plan which she will publish? If the answer to either of those questions is no, would it not be better to be honest and say that the Government have dropped their commitment?
Baroness Merron (Lab)
The noble Lord does not need to apologise for raising this extremely important matter. I am grateful for his campaigning on this, as I am to other noble Lords. There has been a lot of progress. In answer to his first question, I believe that it is possible, not least because all but two ICBs in the new, reconfigured groups have fracture liaison services already, with some having more than one. With respect to his specific request, as with other policies, I cannot give him exactly what he asks for, but I have already referred to some of the Government’s actions. We are looking, through the UK National Screening Committee, at screening women for osteoporosis, and a public consultation is about to start. We are cutting waiting times, and we have expanded community diagnostic centres and DEXA scanners. These, along with a whole range of other measures, show real commitment to tackling the matter that the noble Lord rightly raises, which affects lives and costs lives.
Baroness Pidgeon (LD)
My Lords, people from deprived areas have a 25% higher risk of fractures, spend longer in hospital recovering and die in greater numbers after hip fractures. The rollout of fracture liaison services is important to help tackle health inequalities. The Minister mentioned 2030, but how can this be rolled out faster to make sure that we help all these communities?
Baroness Merron (Lab)
We have rolled this out further, as we inherited a more limited coverage of fracture liaison services than we have currently, and we are looking at how to improve access. As I said to the noble Lord, 23 out of 25 ICBs have at least one fracture liaison service. We will push this forward through various means, including the Best Practice Guide for NHS Frailty Pathways, which recommends comprehensive neighbourhood-level frailty plans, and the modern service framework, to mention a couple of ways. I have to emphasise that this is about a complete change in the delivery of NHS services, from which fracture liaison will greatly benefit.
Baroness Lane-Fox of Soho (CB)
My Lords, I declare an interest as a patron of Day One Trauma Support and as someone with a relatively high knowledge of fractures. How does the Minister expect the new fracture liaison services to embed charities and other organisations on a fully funded basis, as they are vital in working alongside the health service to make sure that rehabilitation goes smoothly and that people from all backgrounds have the best chance of recovery success?
Baroness Merron (Lab)
That is absolutely key, as the noble Baroness says. We have to look at the way that we are working. I emphasise again that we are looking at how we can roll out the modern service framework, which will really push this forward. That will involve full consultation with the groups that the noble Baroness rightly mentioned. She spoke about funding. I cannot give specifics without knowing them, but we will be further delivering this already improved service, as well as taking other supportive actions. These include asking local authorities to include menopause in the NHS health check later this year, which will help greatly with earlier identification.
Lord Winston (Lab)
My Lords, the noble Lord asks a very important Question. Can the National Health Service make sure that there is a checklist for all fractures, just as an aircraft pilot does when he is taking off? There are numerous examples in the NHS—I speak from personal experience—of patients not being screened for bacteria before they go down to theatre. That should be a routine check. Further, it is very common for patients to be discharged from hospital when there is a lack of liaison between the hospital and local services. Sometimes, a wound may not be dressed for several days until somebody visits, where there is a risk of bone infection. This is a very serious and common problem.
Baroness Merron (Lab)
I understand my noble friend’s point. He referred to checklists. Requirements are in place; I believe he is suggesting that they are not always followed, so I will certainly pick that up. As we move towards a neighbourhood health service, I feel ever more confident that we will attain the right standard of care, along with cutting waiting times. For example, we will make sure that, by 2028-29, for the first time, 80% of community health service activity should take place within 18 weeks. That has not been the case thus far.
Baroness Chisholm of Owlpen (Non-Afl)
My Lords, there seems to be a problem for men suffering from prostate cancer, who are also likely to get osteoporosis. Last week, my noble friend and I heard from a consultant neurologist who said that there is not a joined-up approach going back to primary care. The GP should be aware that these people are more likely to have fractures, but they are quite often having these fractures without having been told that that is a possibility, and they are not then getting the care that they need. We need a bit more joined-up thinking, if that is possible.
Baroness Merron (Lab)
I understand that point well and I am grateful to the noble Baroness for raising it with me separately. Similar to my response to my noble friend, I will gladly follow that up.
Lord Kamall (Con)
My noble friend Lord Black specifically asked about fracture liaison services implementation plans, timelines and milestones on progress towards universal coverage in 2030, to which the Government have committed. To double-check, does the Minister agree with the principle that there should be a published implementation plan, and that timelines should be published and annual milestones set?
Baroness Merron (Lab)
I am sure noble Lords would welcome that, and I have heard that call in here, but the noble Lord will know that that is not something we do with every single policy; rather, we take the steps to actually make them happen. The commitment and progress are there, and that will continue.
Baroness Hayter of Kentish Town (Lab)
My Lords, unfortunately, at the moment, progress has almost flatlined—I think it will take 38 years to get to the 2030 target. My noble friend said to me on 9 June that the Government have not set milestones. If there are not such milestones as those just referred to, how is the department monitoring this, and will it speed up to reach its own target?
Baroness Merron (Lab)
As I have said, delivery will be through ICBs. Of the new clusters, we know that only two do not have fracture liaison services. As my noble friend is very aware, ICBs are held to account through NHS England. Of course, when we make a change through the NHS Bill, that will come within the department. There are many ways we drive progress, including cutting waiting times, opening new community diagnostic centres, investing in DEXA scanners and upping the game on osteoporosis screening, as well as on medication and research. In all these ways, we are contributing to the development of the service that I know my noble friend seeks.
West Bank: Purchase of Settlement Land and Property
(4 weeks, 1 day ago)
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Baroness Kennedy of The Shaws
To ask His Majesty’s Government what steps they are taking to criminalise the purchase of settlement houses and land on the West Bank by British citizens.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, settlements are illegal under international law. We condemn settlement expansion. In June, the Foreign Secretary updated business risk guidance to explicitly advise against economic and financial activity in illegal settlements. The UK’s citizens and businesses should be aware of the clear evidence of possible human rights abuses associated with Israeli settlements and the risk of involving themselves in Israel’s serious breaches of international law. Anyone contemplating economic or financial involvement in settlements should seek legal advice.
Baroness Kennedy of The Shaws (Lab)
My Lords, I thank the Minister for her reply, but it really is time to match words with actions. There is evidence of purchasing of homes and property on the West Bank in the Occupied Territories. We cannot have British citizens being complicit in violations of international law, and the purchase of or investment in settlement land and property would be complicity.
In the Public Gallery, sitting behind the Bar, we have Mr Justice Ted Meron, who was the president of the Yugoslav war crimes tribunal and is one of the world’s most distinguished international lawyers. He was himself a child survivor of the Holocaust; his grandparents and mother were taken out of a Polish ghetto and shot dead by the Nazis, and his brother was killed in the Treblinka concentration camp uprising. Judge Meron became the chief lawyer in Israel’s foreign office before becoming a judge. In 1968—
Baroness Kennedy of The Shaws (Lab)
In 1968, he advised the Government of Israel that the creation of settlements in the Occupied Territories would be contrary to international law, then and now. If only the Israeli Government had listened.
Baroness Kennedy of The Shaws (Lab)
I listen to this cabal shouting out. What is happening is unlawful, and we are seeing that it is becoming impossible for the Palestinians ever to have a state of their own because of the actions that are currently taking place.
Baroness Kennedy of The Shaws (Lab)
The question is this: the UK banned the purchase of land by Russians in the occupied territories of Ukraine; do the Government have the political will to do the same in the West Bank and Gaza?
Baroness Chapman of Darlington (Lab)
It is not a case of political will. This is about what we can do that would make a practical difference and be enforceable and implementable. Our guidance is clear. We are looking at the small number of countries that are exploring going further and implementing such a restriction, and we will continue to do that.
Lord Callanan (Con)
My Lords, we do not criminalise British citizens for buying property in disputed territories anywhere else in the world. Why should the West Bank be singled out, particularly when such a measure could even extend to Area C, which is under full Israeli control under the Oslo accords, and would criminalise British Jews for purchasing a home in the Jewish Quarter of the Old City of Jerusalem? Is not the status of disputed territory ultimately a matter for states and international law rather than something to be determined through domestic criminal law applied to individual purchases?
Baroness Chapman of Darlington (Lab)
I think the implementation of international law in this circumstance would be a very good thing. We are not telling people what they have to do; we are pointing out that there is a risk of engaging in business or financial activity that may well support illegal actions. We are very clear that there should be a two-state solution that includes a secure, viable, prosperous, safe and successful Israel alongside the same for Palestine.
Baroness Hussein-Ece (LD)
My Lords, Israel’s “doomsday” settlement project in E1, which would split the West Bank in two and destroy any possibility of a future Palestinian state, is about to pass the point of no return, with tenders for construction in E1 having been issued last month. The Israeli Government have repeatedly stated their intentions to destroy any possibility of a two-state solution. Given that the Government have said they condemn the project and are considering what actions to take, will they do the right thing now and commit to a package of sanctions, including fines for UK businesses that bid for tenders relating to illegal settlement construction?
Baroness Chapman of Darlington (Lab)
As the noble Baroness knows, we do not comment on sanctions pre-emptively, because that would reduce their effect. But her sentiment of discouraging UK individuals and businesses from doing this is one that the Government share.
The Lord Bishop of Southwark
My Lords, the Minister referred to the advice that the Government published following the Statement on 9 June warning of the dubious legality of the purchase of property in the West Bank. Will she acknowledge that those most likely to do so are unlikely to heed such advice? Will she ensure that HMRC and the Financial Conduct Authority act to inhibit the unlawful use of funds in this way through the UK banking system?
Baroness Chapman of Darlington (Lab)
UK agencies are well aware of the Government’s position on this. The advice we have given is to guide and protect UK businesses and individuals from getting themselves involved—perhaps unwittingly, although the issues around this are fairly well understood—in something that is illegal.
Baroness Deech (CB)
My Lords, has the Minister considered the global legal implications of this Question? What about British citizens who holiday or buy a property in illegally occupied north Cyprus? Or is the aim simply to target Jews? If this were implemented, which I am sure it will not be, in what way could it possibly contribute to lasting peace?
Baroness Chapman of Darlington (Lab)
The position is that these settlements are illegal, and it is the duty of the Government to make clear that position to UK businesses and others. That is the view of this Government. Having been there and spoken to those who have been forced to move by violent settler activity repeatedly—six, seven or eight times—and have had to rebuild their homes and restart their lives, with the trauma that all of that involves, I do not see this as something that targets Jews at all. I see it as a move that is designed to ensure the preservation of the potential of a two-state solution and viable lives for people on both sides.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, we will hear from the Labour Benches next and then from the Conservative Benches.
Baroness Primarolo (Lab)
My Lords, the Minister told us that the settlements are illegal and that the Government support a two-state solution. How do the Government think they will achieve a two-state solution? Are the settlements, and the purchases by British citizens, fulfilling the UK’s international obligation to recognise the State of Palestine and facilitate that two-state solution? If not, what steps will we take to make that a reality?
Baroness Chapman of Darlington (Lab)
In this Government’s view, the purchases do not help to bring about a two-state solution or peace and stability in the region. That is why we have taken the position that we have, and it is why we ultimately recognised the State of Palestine in the summer of last year. All these issues come about because of a failure by many to understand that, to have a two-state solution, you need safety, security and prosperity on both sides of the fence.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, it is the turn of the Conservative Benches. Can they please make up their minds as to who will ask the question?
Lord Polak (Con)
I appreciate the noble Baroness, Lady Helic, giving way, because the debate has been one-sided. The noble Baroness, Lady Deech, was right: the double standards on show are staggering. Is it okay for a Brit to purchase property in occupied Northern Cyprus? What useful objective does the Minister consider that this proposal will achieve, other than propagating the deeply antisemitic notion that Judea and Samaria—an area, I remind the House, that remained under Israeli administration throughout the Oslo accords—should be ethnically cleansed of its Jews?
Baroness Chapman of Darlington (Lab)
As the noble Lord knows, for generations communities have lived side by side in the West Bank and throughout Israel, and that is the aspiration that we all share. The reason we have not done this is because of pragmatic issues around implementation and how you enforce it, and what the good of it would be in the end. There is no point to us embarking upon measures that turn us back and move us further away from peace, and which prolong this conflict. But I have to say that it is becoming increasingly difficult to hold back from some of the things that we are being encouraged to do, because of the behaviour and the settler violence and the increased aggression that we see. I know the noble Lord to be a man of integrity who cares greatly for his fellow human beings, whatever their faith, and I know that some of the things that have been happening—which he will be aware of—will be distasteful to him, as they are to me.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, before we move on to the third Question, I remind all noble Lords that questions and answers should be short, sharp, succinct and to the point. That is what the House wants. Please can all Members adhere to that.
Imprisonment for Public Protection Prisoners
(4 weeks, 1 day ago)
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Lord Carlile of Berriew
To ask His Majesty’s Government what resources are being allocated to HM Prison and Probation Service and the Parole Board to expedite the progression of Imprisonment for Public Protection prisoners towards release.
The Minister of State, Ministry of Justice (Lord Timpson) (Lab)
The IPP sentence is a stain on our justice system. I believe the best way to support IPP prisoners towards a safe and sustainable release is via the IPP action plan, well-run and well-resourced prisons, and a Probation Service that is thriving. The good news is that, according to the inspectorate, 75% of our prisons are achieving higher scores than in previous inspections, and 90% of our probation regions are too. That is the best way to expedite release.
Lord Carlile of Berriew (CB)
I thank the Minister for his Answer. Does he agree that the fact that there are nearly 900 unreleased IPP prisoners still in custody, of whom 99% are over-tariff, is wholly unacceptable? How much will that shameful statistic be reduced in the next 12 months? What steps will be taken to reform the way the Parole Board and the currently laggard and dilatory post-release processes operate in these cases?
Lord Timpson (Lab)
From March 2025 to March 2026, there was an 11% reduction in the number of never-released IPP prisoners, but I want to get more men and women out for the first time and post recall. We need to do more, and we are doing more. We are rolling out IPP advocates to 12 prisons where there is a large concentration of IPP prisoners so that they can wrap their arm around these people and help them get ready for parole. We are establishing the Phoenix wing in HMP Aylesbury in August, which will be a specialist wing for those furthest from release, and the Parole Board review time has already reduced from an average of 18 months for IPP prisoners to 14.5 months—I aim to get it to 12 months soon. I also believe in employment and second chances. Having employed many IPP prisoners in the past, this to me is the most positive route we can take, so that when they get out, they stay out.
Lord Blunkett (Lab)
My Lords, I commend my noble friend on the time and commitment he has given to talking to organisations on behalf of prisoners and their families. Does he agree, however, that there appears to be an increasing logjam of those on recall who are held in prison often when the original allegation that got them there has already been set aside?
Lord Timpson (Lab)
I thank my noble friend for all his continued support in this difficult area and for sending me a lot of cases that I can look at. The good news is that recall is down by 31%. Under the risk-assessed recall review, which is a specialist review where we can quickly release someone quickly, we had released 50 prisoners early up to September 2025—in the next couple of weeks, we will be releasing the updated figures, and I hope for that figure to be higher. We also have the round table of the Peers’ IPP group on 20 July, which I am really looking forward to, because we can go into this in more detail then.
Baroness Ludford (LD)
My Lords, can the Minister, whose personal commitment is not in doubt on this issue, tell us why the Government continue to reject a significant proportion of recommendations by the Parole Board for the transfer of IPP prisoners to open conditions? In answering that question, perhaps he will help me answer a mother who has written to me and whose son is an IPP prisoner. He was given a six-year sentence and has now served 18 years. She says: “He is 50 this year. I fear I will not see him liberated and free before I die”. She wants transfer to an open prison, because most of these prisoners are too traumatised and too mentally incapacitated to undertake the action plans.
Lord Timpson (Lab)
I am a big fan of open prisons. That is where the best recruitment is and that is where people reintegrate into society a lot more. I was in HMP Birmingham three weeks ago, where I met an IPP prisoner who had been to open conditions for the first time and then had asked to come back because he did not feel ready, so it is a good way of testing people on their journey. I would like to do more, but this comes back to the point that we want our prisons to be working well and then they have the time to really support people on that transition. However, we have to protect the public and we have to make sure that people are ready.
Lord Carter of Haslemere (CB)
My Lords, we know that the psychological harm caused by the IPP sentence adversely affects prisoners’ risk assessments. What are the Government doing to improve the mental health of IPP prisoners so as to improve their prospects of release?
Lord Timpson (Lab)
It was important two years ago to get the IPP prisoners in the right prison so that they could get the support they needed. We have gone from the 70% range to now 95% of IPP prisoners being in the right prison, which means that they can get the right support. Again, it comes back to the question: do we have prisons that are working well and do we have the right support teams around those individuals? I am seeing that regularly. When I go around prisons, I am seeing things getting better, but we still need to do more. We also need to do more to support individuals who are neurodiverse IPP prisoners. The autistic wings that we are developing are a really positive step forward.
Baroness Hyde of Bemerton (Lab)
My Lords, the Prisons and Probation Ombudsman pointed to IPPs as a contributory factor in prisoner suicides. Indeed, the Minister of Justice’s own figures declare that there have been 92 self-inflicted deaths over the last 20 years since the introduction of the sentence—I can cite figures that suggest there have now been 96. What are we doing to reduce distress and keep people safe in our prisons, so that they may one day have the prospect of being safely released rather than dying by their own hand while in the care of the state?
Lord Timpson (Lab)
It is very important that we safely release people and that they are safe when they are in our care. That is especially so for IPP prisoners—as well as their families who are also trying to support them. Self-harm for both men and women is down in our prisons. The number of deaths up to March 2026 was also down, by 12%. Even so, these are people—and people who we need to help. We need to make sure that we have that wraparound support for them. They are often people who are unwell and, whether they are in secure hospital or not, they need our support.
Lord Hope of Craighead (CB)
My Lords, has thought been given to the support that families can give to these prisoners? Their support can be important, particularly on release, in minimising the risk of their having to be recalled because they have broken the rules.
Lord Timpson (Lab)
The noble and learned Lord is exactly right: families play a huge role—it is employment, it is housing and it is families. One important thing about open prisons, for example, is that prisoners can go out on day release and reintegrate. Some 193,000 children are affected by parental imprisonment, so we need to make sure that we help both the prisoner and their family on that journey.
The Earl of Effingham (Con)
My Lords, there appear to have been 3,000 IPP prisoners in 2024, 2,500 in 2025 and still close to 2,500 in 2026, with the never-released group dropping from 1,200 to around 950 in the same timeframe. In his response to the noble Lord, Lord Carlile, the Minister said that there had been an 11% reduction in the never-released group from 2025 to 2026. Is 11% also a firm commitment for the next 12 months, or will the department commit to even more?
Lord Timpson (Lab)
Noble Lords who know me will know that I do not lack ambition. Although I cannot put any figures on it, I can say that we are doing all that we can. I work with incredibly professional and dedicated teams within the Ministry of Justice. Whenever I go round a prison, I always meet an IPP prisoner; I sit in their cell and talk to them about where they are up to. I sense their hope as well as that of the staff who work with them, because it is very much a team effort.
Lord Marks of Henley-on-Thames (LD)
My Lords, the House understands the need to balance risk to the public from release against the injustice to IPP prisoners of their continued detention long after they have served their tariffs. Granted that we are making progress, does the Minister think that we yet have the balance right—even now, 13 years after the IPP sentence was abolished—when, every day, we release prisoners who have served determinate sentences and now need to do so to relieve pressure on space without the need for determination that their release is risk-free?
Lord Timpson (Lab)
Release is never risk-free, but we need to balance the opportunity and the risk. I am seeing a much more stable Prison and Probation Service. By that, I mean that we have the right number of people in the right places with the right resources. I have been going round the country doing probation roadshows, talking to probation staff up and down the country about what our plan is to get through to next April, when we will have supply matching demand. Even though the focus of many of these conversations is on prisons, if we do not sort out and support probation—that is where the heavy lifting in the justice system is done—we will never make the progress that we all want to achieve.
Lord Bird (CB)
The Minister says that he is ambitious, which I am pleased to hear, but where in government is work to prevent people ending up in prison? I cannot see it. I cannot see homelessness prevention, prison prevention or the exportation of poverty from people’s lives—90% of people in prison are there from poverty.
Lord Timpson (Lab)
I thank the noble Lord for that question and for the work that he does. Some 80% of offending is reoffending, so something is going wrong when so many people just go round in a cycle. One of the main reasons is related to housing. We have far too many people leaving prison with nowhere to live, so I have managed to get agreement across government to halve the number of people leaving prison with nowhere to live by the end of this Parliament. That is one important step in making sure that, when people get out, we help them to stay out.
International Marine Protected Area: Sargasso Sea
(4 weeks, 1 day ago)
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The Lord Bishop of Manchester
To ask His Majesty’s Government whether they intend to support the establishment of an international marine protected area in the Sargasso Sea under the Global Ocean Treaty.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, the UK recognises the global importance of conserving the Sargasso Sea and has long worked with the Government of Bermuda on science-led conservation, including with the Sargasso Sea Commission. Together, we have been spearheading the Hamilton II Declaration, a political initiative that allows the UK and its co-signatories to signal support for the development of a collective proposal under the BBNJ agreement for area-based management tools, which would be used to protect this environmentally significant area.
The Lord Bishop of Manchester
I thank the Minster for her Answer; I am comforted by it. It is well documented that networks of ecologically connected MPAs deliver greater conservation benefits. Will the Government commit to working alongside other Atlantic countries to advocate at upcoming international fora for a network of Atlantic MPAs?
Baroness Chapman of Darlington (Lab)
I will have to take the right reverend Prelate’s word that that is the case. That certainly makes sense to me. As signatories to the agreement, we would hope to work with our partners, wherever they may be, to bring the benefits of this treaty as widely as possible.
Lord Howell of Guildford (Con)
My Lords, I know that we have signed the global ocean treaty, but have we ratified it yet? Does the Minister think that the Commonwealth, which is increasingly involved in maritime affairs, with 33 island states, has an important role to play and could it make it work still better?
Baroness Chapman of Darlington (Lab)
The Commonwealth is a vital international union of countries that can do much good around the world. As for ratification, the noble Lord is right—we have not ratified it yet, but I hope that we will be able to do so imminently.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark)
My Lords, we have plenty of time. The Liberal Democrat Bench is next, then the Cross Benches.
Baroness Northover (LD)
I appreciate that. The Sargasso Sea is extremely important for hundreds of species, so will the Government advocate for the highest level of protection, under which all industrial fishing, in particular, is banned?
Baroness Chapman of Darlington (Lab)
Exactly what will be contained within the measures needs to be negotiated and worked through. We are working closely with the Government of Bermuda to get this right. Our aim is to get this settled for the first conference of the parties under the agreement, which I think will happen early next year.
Lord Hannay of Chiswick (CB)
Does the Minister recognise that there is a real risk that the global ocean treaty remains just words on paper if something is not done to create operational effect, and that the ideas put forward by the right reverend Prelate for some collective action—for example, in the Sargasso Sea—make a lot of sense? Will the Government now take steps to organise, with other like-minded countries, some way of turning the words on paper into reality?
Baroness Chapman of Darlington (Lab)
The noble Lord is absolutely right and that must not be allowed to happen in this case. This agreement is important and it seeks to resolve something that I think many noble Lords care deeply about. The practical implementation now needs to happen at pace and there will be a conference happening early next year, as I said, to put the ideals in the agreement into action.
Lord Callanan (Con)
My Lords, we are supportive of the Government doing the right thing and protecting our most biodiverse areas, seas and oceans. On Report of the Diego Garcia military base Bill, the Minister admitted that Mauritius does not have the capabilities to protect the current marine protected area, one of the largest in the world. Can the Minister assure your Lordships’ House that the Government will never again seek to transfer the BIOT to a nation incapable of or unwilling to protect the current marine protected area?
Baroness Chapman of Darlington (Lab)
To say that Mauritius is unwilling is a bit harsh—it is very willing and it has committed to do this. We have committed to work alongside it to make sure that the waters around the archipelago are protected.
Baroness Jones of Moulsecoomb (GP)
My Lords, in the UK, there are 377 marine protected areas, and, of those, only 38 ban the destructive practice of bottom trawling. What makes the Government think that they can do any better in the Sargasso Sea?
Baroness Chapman of Darlington (Lab)
At risk of stepping on the toes of my noble and good friend Lady Hayman, the Defra Minister, I believe that Defra is either consulting on or has just concluded a consultation on this issue. The Government will be responding very shortly.
Lord Hintze (Con)
My Lords, protecting the seas is one of the most pressing issues of our time, in my view. What maritime strategy do we have to make sure that these treaties have any bite? Let me remind people: soft power without hard power is no power, and we need to be able to protect those areas.
Baroness Chapman of Darlington (Lab)
I think soft power can be very impactful, and you do not always need hard power to get what you want in the world, thank goodness. This is about oceans beyond national jurisdiction, so it needs—it will not work unless there is—joint agreement and an agreed way forward on what you do to protect a particular area. That implementation work of which areas, who is responsible and who is going to do what is still to be negotiated ahead of the first conference in 2027.
Lord Foulkes of Cumnock (Lab Co-op)
When I was listening to the Opposition Front Bench, I was trying to recall who it was who first suggested the transfer of Diego Garcia to Mauritius. Perhaps my noble friend could remind me and the House but, above all, the opposition spokesperson who it was.
Baroness Chapman of Darlington (Lab)
Now that my noble friend asks me, I believe I am correct in saying that there were 12, 13 or 14 rounds of negotiations undertaken by the previous Conservative Government on the future of the Chagos Archipelago.
Lord Bellingham (Con)
Further to that question, surely the fact that 12 negotiating sessions went on shows that the last Government did not reach a deal because they could not. The Chagos Archipelago contains not one of the world’s most vital reef wildernesses but the world’s most vital reef wilderness. The question is: who is best placed to manage it? Ten prominent marine biologists have said that they do not trust that incredible wilderness in the hands of Mauritius, so surely the time has now come for the Government to abandon this discredited treaty.
Baroness Chapman of Darlington (Lab)
Reaching viable agreements was not a strength of the previous Government. However, the fact that they had so many rounds of negotiation did speak to the fact that there was a problem which needed to be resolved. This Government came up with a viable proposition for its resolution. The problem remains, and it still needs to be resolved. Protection of the ocean around the archipelago is incredibly important, which is why we are working so intensively with Mauritius to ensure its protection.
Lord Mohammed of Tinsley (LD)
Given that, as we have just heard, it took 12 meetings for His Majesty’s Opposition to realise that, in their opinion, Mauritius was not a great place to protect the environment, does the Minister think that this is just rank hypocrisy on their part, given that they started those negotiations? Trying to blacken Mauritius and saying that it cannot protect the environment is not a great way of negotiating.
Baroness Chapman of Darlington (Lab)
It is not for me to throw insults around this Chamber, but Mauritius itself has said that it does not feel that it is currently able to maintain and protect the ocean around the archipelago. I see that as a positive sign. What worries me is when a country claims to be able to do something which it demonstrably cannot; that is not the situation we are dealing with. The technical assistance needed to support the protection of the ocean, which is always going to be a collective endeavour, is taking place.
Lord Redwood (Con)
I urge Ministers to look again at the giving away of the Chagos. There is no legal need to do so, and my noble friend Lord Cameron, as Foreign Secretary, realised that, did not do so, and had the full support of many of us.
Baroness Chapman of Darlington (Lab)
The noble Lord, Lord Cameron, will confirm if you ask him that yes, he did pause the negotiations, but he restarted them because he could see that this was a necessary process.
Baroness Coffey (Con)
I had the privilege of being alongside my noble friend Lord Ahmad when we signed the BBNJ treaty at the UN in 2023. It is great news to hear about progress on the Sargasso. I think there is a real opportunity, building on what my noble friend Lord Howell of Guildford said, about using the Commonwealth. There are certainly wonderful opportunities around overseas territories such as St Helena and linking up with Namibia. I encourage the Minister to use whatever aid is left, but more importantly our marine science expertise, to try to propagate these right around the world.
Baroness Chapman of Darlington (Lab)
I think the noble Baroness put that incredibly well. I take her encouragement in good spirit, and I will work with my fellow Ministers to do just that.
Private Landlord Redress Schemes (Approval and Designation) Regulations 2026
(4 weeks, 1 day ago)
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Baroness Taylor of Stevenage
That the draft Regulations laid before the House on 28 April be approved.
Relevant document: 2nd Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 30 June.
Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Legal Aid: Anti-social Behaviour and Prevention and Investigation Measures) (Miscellaneous Amendments) Order 2026
(4 weeks, 1 day ago)
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Baroness Levitt
That the draft Order laid before the House on 1 June be approved. Considered in Grand Committee on 30 June.
West Midlands Combined Authority (Key Route Network) (Amendment) Order 2026
(4 weeks, 1 day ago)
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Lord Hendy of Richmond Hill
That the draft Order laid before the House on 19 May be approved. Considered in Grand Committee on 30 June.
Register of Overseas Entities (Protection and Trusts) and Limited Liability Partnerships (Application of Company Law) (Amendment) Regulations 2026
(4 weeks, 1 day ago)
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Lord Leong
That the draft Regulations laid before the House on 1 June be approved.
Relevant document: 5th Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument). Considered in Grand Committee on 30 June.
Social Housing Bill
(4 weeks, 1 day ago)
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Baroness Taylor of Stevenage
That the amendments for the Report stage be marshalled and considered in the following order: Clauses 1 to 13, Schedule 1, Clause 14, Schedule 2, Clauses 15 and 16, Schedule 3, Clauses 17 to 22, Title.
National Maternity and Neonatal Investigation
(4 weeks, 1 day ago)
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Lord Kamall (Con)
My Lords, I thank the Minister for the Statement and the noble Baroness, Lady Amos, and her team for the thoroughness and compassion with which they have conducted this important investigation. Above all, our thoughts must be and are with the women, babies and families whose experiences lie at the heart of this report. Many have had to revisit the most painful moments of their lives when some want to simply move on. But after years of fighting, they must be heard. Their courage, dignity, determination and persistence place a responsibility on all of us in this House. We owe it to them not simply to listen, but to ensure that their experiences finally lead to lasting change.
Only last week the House considered Donna Ockenden’s devastating findings in Nottingham. Here, the noble Baroness, Lady Amos, presents us with a wider national picture. Once again, we see the same troubling themes emerge—women whose concerns were dismissed, staff who felt unable to speak up, inequalities that remained unchallenged, and organisations that failed to learn from previous mistakes. As Donna Ockenden herself observed, much of what is contained in this report is sadly already known to us, as it was to Governments of all political colours in previous years. That is perhaps the most disturbing and sobering conclusion of all.
The challenge before us is no longer one of evidence. We have had inquiry after inquiry, report after report and recommendation after recommendation. The challenge now is implementation. Families have every right to expect that this report will become the catalyst for sustained improvement across maternity and neonatal services. I am sure that all noble Lords welcome the fact that work is beginning immediately in a number of critical areas, including maternity triage, tackling discrimination, strengthening staffing and addressing urgent estate risks. It is right that today’s expectant mothers be given assurance and reassurance about what will change immediately, not only at the end of the year when the wider plan is due.
A few outstanding questions arise from the Statement. First, can the Minister update the House on the timetable for the Leeds and Sussex reviews? How will the Government ensure that concerns which have already been identified in those services are acted on before these reviews conclude? Secondly, it is welcome that the Secretary of State will publish the new maternity triage standards next week, but by when does the Minister expect every NHS trust to have implemented these standards and will Parliament receive regular updates on trust-by-trust progress so that families can see that improvements are generally being delivered? Thirdly, the Government propose establishing a statutory maternity and neonatal commissioner. Can the Minister explain what powers the commissioner will have to hold trusts, regulators and national bodies to account? How will local leaders remain accountable for the safety of the services that they are supposed to oversee?
The additional midwifery posts announced today are also welcome, but the report from the noble Baroness, Lady Amos, like those before it, identifies workforce pressures as a fundamental challenge to safe maternity care. Do the Government intend to address this issue immediately, or will we have to wait for the long-awaited workforce plan? If it is the latter, can the Minister update the House on when it will be published and whether it will specifically address maternity and neonatal services? I can understand her perhaps raising an eyebrow here, as she rightly and persistently challenged me on this when I was a Minister in her place.
Since the report’s publication, concerns have been raised by Dr Bill Kirkup about the removal of references to so-called normal birth ideology from the final report. Previous maternity inquiries have identified this as a contributory factor. It would not be fair of me to ask for comment on the editorial process, but can the Minister reassure the House that all relevant evidence—including from Morecambe Bay, which found that midwives were pursuing normal birth at any cost—will be fully considered?
Finally, the Secretary of State is right that culture lies at the heart of this challenge. Often, while policy changes and restructures are visible, it can be more difficult to bring about cultural change. Where the Government act with the urgency that this report demands, they will have our support. However, women and families will judge today’s Statement not by new structures, new titles or another report, but by what happens when a woman says that something is wrong. Is she heard? Are warning signs acted on? Is help from senior colleagues available when needed? Are maternity units safely staffed and can staff speak up without fear? Do families receive honesty and compassion when harm occurs? Above all, are we reducing the number of mothers and babies coming to harm?
Families have told their stories. The evidence is clear. We will support and, where appropriate, challenge the Government and the NHS as they seek to bring about this much-needed change. The Minister in the other place has made a good start, and we hope to see further progress.
Baroness Pidgeon (LD)
My Lords, this is another week and another traumatic and difficult-to-read report about the state of maternity services. Behind it are thousands and thousands of women and families deeply affected by these service failures. I thank them all for their contributions to this report, as well as the noble Baroness, Lady Amos.
Women are not being listened to, heard or believed, with serious consequences for safety and quality of care. Racism and discrimination are embedded throughout the maternity and neonatal system. Services are not responsive to the changing profile of women giving birth and the increase in medical interventions during birth. Antenatal, birth and labour, neonatal and postnatal services are just not joined up. From Somerset to Blackpool, the safety of having a baby has become a lottery. Women are silenced and staff who raise the alarm on unsafe care or systemic discrimination are crushed by a culture of fear. We need to see genuine accountability throughout the NHS and the investment necessary to make Britain the safest country in the world to have a baby.
I have a number of questions for the Minister. I welcome the Government’s commitment to a national maternity commissioner, but can the Minister confirm that this post will go to an independent expert and not a political appointee? Will the Minister reassure us that action will be taken before December, rather than waiting for the taskforce to report on its plans? Will the Government guarantee safe staffing at all hours in every maternity ward in the country, so that no woman has to give birth in an unsafe unit?
This inquiry has, once again, raised the issue of poor bereavement support across the NHS after pregnancy or baby loss. The national bereavement care pathway seeks to resolve this by ensuring high-quality and consistent bereavement care across the UK. The trauma of baby death and pregnancy loss can last a lifetime. Parents’ memories of the care they receive at that moment will stay with them for ever. Good bereavement care can help parents and families navigate their bereavement journey, while poor care can just add to the trauma of loss.
The first moments after a baby dies can be the only opportunity parents have to make memories with their baby, and there is only once chance to get this right. After a baby dies, parents often face really tough decisions, and they cannot make informed decisions about their baby without clear and compassionate communication from healthcare professionals. I therefore ask: will the Government roll out all five national bereavement care pathways, including for miscarriage, and actively monitor implementation across the health system? Will they ensure that suitable bereavement rooms are available in all trusts, not as a “nice to have” but as part of dignified trauma-informed care? This would be a step change for so many families.
There is so much more I could say on a topic that has shocked us all. All families, wherever they live and whatever their ethnicity, must be supported to have their babies safely. This has clearly not been the case for too many years. This is the point where things must change, and I really look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, we know—and we can never acknowledge it enough—that women, babies and families across the country are being harmed, traumatised and let down by a broken system. I am grateful to both Front Benches for the way in which they have received this report and for their support, and their acknowledgement of the role we have taken in government.
The noble Baroness, Lady Pidgeon, talked about trauma lasting a lifetime, and that is indeed the case. When I have met women and families who have been affected, that is what has stuck with me: the trauma never goes away. I also accept the correct challenge from the noble Lord, Lord Kamall, that the judgment will be on what has changed, not on what is written. We are very conscious of that, and I am grateful to him for reminding me of it.
Before turning to the helpful questions from the noble Baroness and the noble Lord, I will make a few comments. I too want to express my gratitude to every woman, family member and member of staff who came forward to give evidence to the noble Baroness, Lady Amos, and her team, who heard from thousands of people who showed great courage and determination to share their experiences, painful though they were, and conducted their investigation with immense sensitivity and care. The noble Baroness, Lady Amos, diligently brought together evidence from families, staff, 12 local investigations and all the past reviews, and her review shows systemic, repeated failures by our maternity and neonatal system. It has also given us the opportunity and determination to break that cycle.
As I know your Lordships’ House will agree, it is also important that we acknowledge the very positive role that so many staff and families have played in providing the necessary care.
It was most helpful that some of our immediate actions were acknowledged. But, on top of those immediate actions, some of which have been mentioned today, we have ongoing actions. We have been tackling avoidable brain injuries and maternal deaths through dedicated programmes and packages. We have already begun the expansion of Martha’s rule to all maternity and neonatal units, to give families and patients the right to request a second opinion where there are concerns.
Among other things, we have also introduced a perinatal culture and leadership programme, which is important to develop a safety culture and a learning and support culture for the leadership across all units, and an early warning system to better identify safety concerns. Importantly, because continuity of care is something that has been highlighted a lot, we are providing £10 million of recurrent funding to ICBs for this very purpose, in particular to provide midwifery continuity of care for those women who live in the most deprived neighbourhoods and who are at risk of poor outcomes.
I will do my best to answer the questions asked by noble Lords. The noble Lord, Lord Kamall, asked about the timeline for Leeds and Sussex. Donna Ockenden, who will be chairing those reviews, is currently engaging with the families on terms of reference, which will include timelines. We will not be waiting for the publication of the findings to make changes. As they emerge, those issues will be shared with us, so that we can act.
In answer to the question from the noble Lord, Lord Kamall, the new maternity triage standards will be implemented by June 2027. There must be clear board oversight in place of the operation of the triage system, including regular reviews of waiting times and actions to improve the necessary services. The role and remit of the maternity commission is being urgently considered by the National Maternity and Neonatal Taskforce. The commissioner will co-chair the taskforce, which will drive all the change as well as setting it out.
On workforce pressures, we are not waiting. There is £10.6 million investment funding in an additional 1,000 temporary roles to help newly qualified midwives to join the NHS, which is extremely important. So, we are not waiting for the 10-year workforce plan. However, the taskforce will take into consideration wider work, including the 10-year workforce plan.
With regard to concerns raised by Bill Kirkup about what is referred to as “normal birth ideology”, women have to be able to make the right decision about what is safest and best for them. No woman should ever feel pushed into a particular type of care. The words “normal” and “natural” are perhaps not particularly helpful in this setting. We are talking about vaginal births; what matters is what is best and what is safest, and I am certainly very grateful to Bill Kirkup for all this work.
The noble Baroness, Lady Pidgeon, asked further questions about the commissioner, which were helpful. The selection and appointment process will be considered as part of the process of establishing the role.
Questions were asked on action being taken before December, when the report of the taskforce will be available. As I mentioned, immediate actions are already being driven forward. These actions were already under way over the last two years and as part of the immediate response to the recommendations of the noble Baroness, Lady Amos. Where we can, we have already actioned work, and, where we need further work done, that will be developed over the next few months, at pace.
The noble Baroness raised a good point about the rollout of bereavement pathways, including for miscarriage. We are rolling out all five strands of the national bereavement care pathway. All trusts in England have signed up to implement the core standards of the national bereavement care pathway. That is relevant in this case and, across other areas of bereavement, is of particular concern.
As I draw my remarks in this section to a close, let me give noble Lords a sense of the urgency. The taskforce and its supporting expert reference groups are meeting tomorrow to discuss the findings of both the Donna Ockenden report, on which we had a Statement last week, and the report by the noble Baroness, Lady Amos. Next Tuesday, the taskforce—which is spearheading all this and chaired personally by the Secretary of State—will be meeting to discuss next steps for the action plan. To the questions from the noble Baroness, Lady Pidgeon, about the commissioner’s role, the Secretary of State has already said that he wishes that the maternity and neonatal commissioner will co-chair the taskforce with him. That would be a very welcome move.
I hope that I have dealt with the questions and, more than that, given a sense of the pace and seriousness, as well as the action that I know we all seek.
Baroness Blackstone (Lab)
My Lords, I declare an interest as the chair of the Royal College of Obstetricians and Gynaecologists board of trustees. The RCOG desperately wants to see an improvement in the services that mothers and children are getting in maternity. I do not know whether the Minister is aware that some 68% of all clinicians are working hours way beyond their contracts, and 25% of them are talking about leaving the profession within five years because of a fear of burnout. Obviously, everything must be done to prevent that happening. Does the Minister agree that workforce planning is central here, including better integration between the work of doctors in maternity and midwives? There should not be barriers between the two; they should be working in units together and dealing with high-risk cases. In that context, will some decision be made pretty soon about when a redesigned workforce tool will be available for obstetricians in particular? They desperately want to see that as soon as possible and do not want to have to wait maybe as long as a year before an action plan is completed.
Baroness Merron (Lab)
My noble friend allows me to say how grateful we are to the Royal College of Obstetricians and Gynaecologists for its continuing work, as we are grateful to our many partners who are committed to driving through change. We are working particularly closely with RCOG in developing routes forward. I agree with the points that my noble friend made. Most NHS maternity staff—and other staff, but we are talking about maternity staff—are providing exceptional care. It must be very difficult for them to hear about and read these findings. Our job is to support them with the right culture and leadership, and to equip them and support them to listen and learn. It is important that we have the right skills mix among consultants, to whom my noble friend refers, and retain them, because they are absolutely key. We will continue to work with RCOG accordingly.
Baroness Watkins of Tavistock (CB)
My Lords, like others I recognise the kindness and compassion that the majority of staff in our health service deliver, but as the Secretary of State for Health and Social Care rightly said:
“We must break the cycle of recommendations sitting on a shelf gathering dust”.
The Minister has already made it clear that the reviews currently planned will continue. I wondered whether they might be postponed or cancelled, but, as they are not going to be, will we ensure that we stop looking further and actually implement what is necessary now, in particular more senior midwives on duty at night? As well as employing more midwives, can we look, through the NHS workforce plan, at putting both general nurses and mental health nurses on fast-track midwifery courses so that we have experts in other areas working in midwifery?
Baroness Merron (Lab)
I know that the noble Baroness, Lady Amos, made the kind of comments to which the noble Baroness refers. The National Maternity and Neonatal Taskforce will certainly look at all these areas and, as I mentioned, those reviews will continue. I emphasise that we have to bring this cycle to a close. That is exactly why the former Secretary of State commissioned the noble Baroness, Lady Amos, so that we would bring together a coherent, fully informed list of national recommendations. That is indeed what we have, and we have already actioned a number of them. To the points that the noble Baroness made, that work will continue and will not be held up.
Baroness Adams of Craigielea (Lab)
My Lords, I will follow on from the excellent question and suggestions from the noble Baroness, Lady Watkins, about specialist nurses being fast-tracked into midwifery. Donna Ockenden’s report found that many student and newly qualified midwives feel they do not have the necessary level of skills to deal with complex cases. What conversations will the taskforce or the commissioner have with the Royal College of Midwives about the training pathway for midwives? Currently, the Royal College of Midwives does not seem to see any need for a return to nurse training.
Baroness Merron (Lab)
I am fully aware of—I will put it tactfully—the difference of opinion in this regard. This morning, I was speaking with one of our main advisers, who did not feel it was necessarily an answer to go down the road of midwives being nurses—I know the noble Baroness did not say that—and I bow to that experience, but for me it raises the complexity.
It is important to emphasise a point about which I have been concerned for some time: about a third of student midwives have no role to go to. The noble Baroness is right, but some of it is about basic experience, and nobody can gain experience without putting the years in—that is a fact. That is why getting the new funding, up to £10,000 per post, means we will keep students in the profession and give them the chance to develop the very important expertise to which the noble Baroness refers. Further, having multidisciplinary teams and the right people means that you can manage whatever complexity. There is no way that any one person can deal with all complex cases. Every case has a high degree of individuality, as I know the noble Baroness is aware.
Baroness Thornton (Lab)
My Lords, “welcome” is not quite the right term to use about these reports, but they are indeed absolutely essential. I need to declare that I am the maternity lead, as a non-executive member, at the Whittington Hospital, and I will be at the conference as a member of one of the reference groups tomorrow.
Several years ago, when Donna Ockenden produced her first reports, we set up what we called the Ockenden cafes in the Whittington, to which we invited all the multidisciplinary teams, plus mums and patients and people who had been involved over a period of time; it was an enormously valuable and uplifting experience for all of us involved in the maternity care of the women in our area.
However, I want to ask my noble friend about MIS, the Maternity Incentive Scheme, which is now in its eighth year and, as she will know, is designed to get maternity units to improve year by year and through that win some investment in their hospitals. Has that been factored into what might happen next?
Baroness Merron (Lab)
I thank my noble friend and all her colleagues for the work they do. We have many examples across the country of first-rate care and great initiatives like the one my noble friend spoke of, which really takes on board one of the problems the noble Baroness, Lady Amos, found: that the voices of women and their families, and of staff, were just not heard or acted on. That is the one thing that comes through.
To the question, would the abbreviation be MIS in this case?
Baroness Merron (Lab)
We have two “MISs” that we often talk about: MHIS and MIS. I will ensure that MIS is considered, but it is probably worth saying that we are already developing a tool for assessing the quality and experiences of care being provided for women using maternity services, through the patient reported experience measure. To the point made earlier by the noble Lord, Lord Kamall, that is one of the ways we will ensure that women and their families can actually see, feel and know the difference.
Lord Kakkar (CB)
My Lords, I draw noble Lords’ attention to my registered interest as chairman of King’s Health Partners. In addition to addressing workforce concerns and driving a much-improved culture in the delivery of maternity services, the physical environment in which maternity services are delivered is critically important. These are very frequently delivered in some of the worst parts of the NHS estate in such a way that the holistic nature of the services that need to be provided is not available at a single site. Can the Minister confirm that the NHS capital budget identified for this spending period is going to be protected so that these matters might be addressed?
Baroness Merron (Lab)
The noble Lord makes a very accurate observation. Perhaps I can go a bit further than he is asking me, because just last week we announced an additional £41 million of safety funding to improve the estate. That is on top of the £145 million that was previously announced, so that will give a great opportunity to really improve the estate, which is crucial for safety as well as experience.
Lord Redwood (Con)
My Lords, my sister died at birth, so I remember well the impact this has on families. What more can the Government and the NHS do to help those families who have lost a baby in such painful circumstances, or who are now bringing up a disabled child as a result of medical difficulty?
Baroness Merron (Lab)
I am very sorry to hear of the loss the noble Lord experienced and of the deep effect on his family; I am sure he still lives with that feeling. I think the greatest gift we can give is to reduce the risk of something going in the way that it did in his family, and that we avoid all avoidable risks. That is exactly what this work is about, and that would be the right thing. For those who are affected, I mentioned the bereavement pathways. In terms of support that ICBs arrange across the country, there is a much greater awareness of the need to support people when they need it most.
Baroness Tyler of Enfield (LD)
My Lords, both the report of the noble Baroness, Lady Amos, and the Ockenden inquiry identified poor leadership cultures—defensive cultures, dismissive cultures and doctor-knows-best cultures. The noble Baroness already referred to the voices of women and their partners being ignored, particularly when they are complaining of pain. Is the Minister satisfied that the various important recommendations, provided they are implemented and seen through, will fundamentally address and change this culture?
Baroness Merron (Lab)
It is a challenge to take on a deep-rooted culture, but we are doing that and it will require action at every level, without doubt. The main thing, as the noble Baroness said, is putting women, babies and their families at the heart of care. This has not been the case. NHS England’s chief executive brought all trust chief executives to London on the day the report was published to discuss the urgent actions trusts can take on this and to focus on the next 100 days. All perinatal leadership teams have also completed a culture and leadership programme, which I believe will strengthen collaboration across maternity and neonatal services. Those are just two of the actions we will take, but this is absolutely fundamental to all the system changes.
Lord Winston (Lab)
My Lords, I listened to this short debate with a bit of amazement. We are looking at the end results, but we need to look a little further up the channel. My noble friend Lady Blackstone touched on a very important point, as indeed did the noble Baroness, Lady Pidgeon, which is much more crucial than we may perhaps understand. First, as has been said, these people come to hospital not to access maternity services but to have a baby. They are not ill. That is different from the rest of the NHS, even though they are in the NHS. What we are partly seeing here is a cultural situation that is a problem throughout the NHS, not just in maternity services. It is bad in maternity services for the obvious reason that, in the main, these people are healthy, although some are not terribly fit. We are losing the plot a bit.
For example, the noble Baroness, Lady Pidgeon, said that there is a need for much better psychological support, and I agree. We tend to forget that a woman who is having a baby, even a normal baby who is fully alive, is losing a life within her uterus. She feels a loss when that happens. It may not be expressed as a loss—it is expressed as happiness—but it is an extraordinary change of feeling, which psychiatrists know is very common in maternity. We forget that this affects not just women but men as well.
We also sometimes assume, as we have done in this report—certain things are obvious—that it is much better not to have a caesarean section. That has been suggested, but it turns out that a caesarean section is safer than a vaginal delivery, if you want to be absolutely safe. This has been shown through various studies. I am not advocating caesarean section, of course, but I am pointing out that we sometimes deplore it when it may actually be a useful thing to do.
We have to understand that we are looking at not a broken service but a service under great stress, and we have to deal with that. The noble Baroness, Lady Blackstone, pointed out that its manning is very inadequate. It needs to be a consultant-led service and people have to stay in overnight, but there is not always enough conversation between midwives and obstetricians. There needs to be much closer understanding between the two. Above all, the culture should be one of kindness. Kindness is what we must ensure.
Baroness Merron (Lab)
I absolutely agree with what my noble friend said about kindness; when we had the Statement last week, we discussed compassion as well. It is disappointing to have to talk about it, because it should be a given, but we have found that it is not. I totally agree that pregnancy is not an illness—I was once quoted as very sharply telling an interviewer that. I am not aware that it is, and it is not, but it is worth restating, in my view. On the role of men, I am very careful to speak about women and families; that is the right thing. I also clarify that, in this Statement, I do not believe anybody is suggesting that one form of birth is preferable to another. I think we would probably all agree that it is about the form that is safest and the right one for the circumstance.
Lord Patel (CB)
My Lords, I thank the Minister for the Statement today and the noble Baroness, Lady Amos, for her excellent report. We have many reports now describing the tragedies occurring in maternity services. I hope this report will be the final one before we go back to delivering the best maternity care, as we used to. It was world leading.
I am privileged to have been an obstetrician for nearly 40 years of my life, delivering many thousands of babies—normally, as people refer to it, and by caesarean sections, which are done when there is an indication to do so. We expect the mothers to enjoy normal deliveries, but also to enjoy the delivery when they must have a caesarean section. The greatest privilege I had was to hand a baby to a mother and see the first look on the mother’s face, which is unbelievable; I had the privilege to witness that first-hand, long before partners would see it. It is important that we deliver world-class maternity services and, therefore, that what the task force comes up with has the standards to be delivered. I hope it will be mandatory for those standards to be followed, monitored and audited against. It should be possible, at the mother’s first visit to the antenatal clinic, to have a plan for how her pregnancy will be managed by midwives and obstetricians. It should also be possible to have every maternity unit audited, as used to happen, when things go wrong involving the mother and the families—and to have a plan for how that will be tackled. I hope that will be the answer.
Baroness Merron (Lab)
I am sure we were all touched to hear what the noble Lord said. It must be a privilege to have done what he has done, and to have affected so many lives—those at their beginning but also the lives of the women themselves and their families. I am sure we are all grateful to him for that. The work of the task force, and of the expert reference groups—I am so grateful to the noble Lord, as well as my noble friend Lady Thornton, for taking part in one of them—will be to develop a plan of action, not just for how it will happen but for how it will be audited. Perhaps I should say that key to all this is accountability. The Secretary of State himself said in the Statement that what stuck with him from one of the bereaved mothers he spoke to was that accountability is what drives change. Certainly, when it comes to the regulators, that is why we are also taking action to improve.
Armed Forces Bill
Monday 6th July 2026
(4 weeks, 1 day ago)
Lords ChamberRead Full debate Armed Forces Bill 2024-26 View all Armed Forces Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 22 June 2026 - large print - (22 Jun 2026)
Lord Coaker
That the Bill be now read a second time.
Scottish legislative consent granted, Northern Ireland and Welsh legislative consent sought.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
My Lords. I start by highlighting the interests I have declared: my son-in-law is an active reservist.
It is a great honour and pleasure to speak to the Armed Forces Bill, as I know it is for us all. We should be reminded that without the Armed Forces Bill, the current Armed Forces Act 2006—the legislation that provides a system of command, discipline and justice for His Majesty’s Armed Forces—could not continue in force beyond the end of this year.
Since 1688 and the Bill of Rights, it is a constitutional requirement that Parliament, rather than the King or the Executive, has the authority to exert control over our Armed Forces. It is Parliament, through our common consent and the act of renewal, that ensures that there remains a legal basis for the continued existence of His Majesty’s Armed Forces. As such, the Bill is for the Armed Forces, although it goes beyond simply providing the legal framework for them to continue to exist as disciplined bodies. It is an opportunity to renew the nation’s contract with those who serve.
This substantial Bill does much for our current and former personnel, and the Armed Forces community as a whole, to provide better support, housing and protections for victims of crime, and to provide greater resilience for the nation by increasing the size and availability of the strategic reserves. It does this by delivering meaningful reform across four key pillars.
The Armed Forces covenant—the pledge between the nation and those who have served—will be strengthened by delivering on the manifesto commitment to place it fully into law. Establishing the defence housing service will allow us to properly manage, develop and improve the defence housing estate and make it fit for purpose for our Armed Forces personnel and their families. Providing the service courts and the service police with new powers to provide improved victim support and protections will bring it in line with the 10-year strategy to halve violence against women and girls. Reforms to boost the size and availability of the strategic reserve will reinforce the UK’s defence forces at a time of increasing global threats and uncertainty.
I shall say a little more about each of the four pillars. The Armed Forces covenant was introduced 15 years ago and has made a real difference to many in the Armed Forces community. At its heart is a promise between the nation and those who serve, those who have served, their families and the bereaved, recognising the unique demands and sacrifices of service life. It has already helped to reduce disadvantage for our Armed Forces community across the areas of housing, healthcare and education.
We recognise, however, that it must go further. Clause 2 therefore delivers on the Government’s manifesto commitment to place the Armed Forces covenant fully into law. It does this by broadening the covenant legal duty to 12 policy areas and, for the first time, the devolved Governments of Scotland, Wales and Northern Ireland, and UK government departments, will be subject to the duty. This means that, in addition to housing, healthcare and education, the covenant will also apply to areas including social care, childcare, employment, taxation, social security, criminal justice, immigration and citizenship, pensions, transport and Armed Forces compensation.
On defence housing, the Government have a moral duty to provide safe and decent homes to service personnel and their families. They have been previously let down by homes that are not fit for purpose, and we are determined to change that. Underinvestment in defence housing over decades led to record lows in satisfaction with defence homes. The 1996 sale of tens of thousands of defence homes to Annington led to taxpayers picking up the bill for maintenance and rent to the tune of £600,000 a day.
However, just six months after being elected, the Government transferred 36,000 defence homes back into public ownership, reversing a privatisation that the Public Accounts Committee described as “disastrous”. The next task is to bring homes up to a decent standard—a standard that our service personnel and their families deserve. The Government therefore commissioned an independent review and, in November last year, we published our defence housing strategy—our plan for the wholesale renewal of defence housing, backed by a £9 billion investment over the next decade.
Clause 3 delivers on one of the recommendations of the defence housing strategy: the creation of a new stand-alone public body—the defence housing service. This will serve as a single point of accountability for defence housing, staffed by experts and with forces families represented as part of its governance. As such, it will put the needs of the forces and their families first. With a clear strategy, unprecedented investment and a dedicated organisation in the defence housing service, we will deliver on this once-in-a-generation opportunity to provide the safe and decent homes our forces and their families deserve.
Through the Bill, we will also deliver important reforms to the service justice system, especially in the area of victim support and protections. Clauses 5 to 10 provide a comprehensive package of protection measures, with Clauses 11, 12, 26 and 27 providing improved support and assistance to victims of offending. I add that, while these measures will strengthen the service justice system, we recognise that not all unacceptable behaviours reach the threshold of a criminal offence. That is why the Ministry of Defence continues to develop policies that seek to address unacceptable behaviours.
Through the Raising our Standards programme, we are tackling unacceptable behaviour and driving lasting cultural change across defence, with better training, clearer reporting systems and greater trust in leadership. The new VAWG prevention taskforce has been deployed to Catterick and to the south-west to assess lived experiences, tackle root causes of unacceptable behaviour and roll out effective interventions. Immediate initiatives are already being deployed, such as the recruitment of additional sexual assault referral nurses, who will cover the south-west, and the rollout of an independent legacy advocacy pilot that will support victims of sexual offences to understand their rights and what to expect when navigating the service justice system.
These policies, together with the separate service complaints process, now overseen by the recently appointed Armed Forces Commissioner, will also help ensure that unacceptable behaviour is challenged and addressed appropriately. I say to the noble Baroness, Lady Goldie, as well as the noble Baronesses, Lady Smith and Lady Kramer, that this improvement in culture also includes the whistleblower review. We will be meeting in due course before the publication of that review, which is now ready, subject to the noble Baronesses’ comments.
I move on to the package of measures relating to the reserves. Clause 32 will enable regular personnel at warrant officer level or equivalent, and below, to seamlessly transfer into the Volunteer Reserve, and vice versa, without having to leave one force and rejoin the other. Clauses 33 to 37 amend the Reserve Forces Act 1996 in relation to call-out and recall liability, ensuring that it is fit for purpose. This will help ensure that defence has access to more people with the right skills and experience it needs at times of need. It will harmonise liability across the services, widen the pool from which we can draw resources, and allow us greater access to both our Volunteer Reserve and Strategic Reserve pool. It is good to see the noble Lord, Lord Lancaster—who heads up the reserves—in his place. I know how hard he has been working, as many other noble Lords have been, with respect to this.
Just to digress slightly, I know that many noble Lords across the Chamber are particularly concerned about resilience and homeland defence and all those sorts of things. I look forward to the debate in Committee on that aspect, as we move forward on how we make the best use of our reserves around all of that.
Clauses 33 to 37 will make it easier to mobilise personnel earlier ahead of the outbreak of any war and increase the maximum age—from 55 to 65—at which reserves can be recalled. I welcome that increase. There are many people who would be eligible for this who are 64 and they would be brilliant doctors, brilliant accountants, brilliant cyber analysts—brilliant in many ways that would be of interest. I am aware of some of the initial reporting when that announcement was made, but if you look at it in that light, you can see the significance of the contribution that many older reservists could make to the defence and security of our country. Looking at it from that perspective, one understands the importance of and the reasons for raising that age limit. I just wanted to reiterate that important point at the start of our discussions on the Bill. These measures align with the direction provided by the strategic defence review to allow for a whole-defence approach, to re-energise the relationship with the Strategic Reserve and, as I say, increase our readiness for war or potential conflicts.
Beyond these four main pillars, the Bill contains other important measures that cover such areas as protecting the defence estate from drone activities—again, something that I know has been of particular concern to many noble Lords—providing increased protections for military shipwrecks, and extending cross-border powers for the Ministry of Defence Police.
This Armed Forces Bill makes important and positive changes for the Armed Forces, their families and the wider defence community. I look forward to the detailed scrutiny the Bill will be given in Committee, and the challenge that there will be to some aspects of it, while noting the general support there was in the other place and that there is—as I know from conversations I have had—in this place. Such challenge and scrutiny can only improve the Armed Forces Bill and make it a Bill of which our Armed Forces and defence community can be proud—which is indeed what we all want. I beg to move.
The Earl of Minto (Con)
My Lords, I thank the Minister for his engagement with me and my noble friend Lady Goldie on the measures in the Bill. I extend my thanks to the officials for their professional and insightful briefing on the Bill. I reiterate at the outset that His Majesty’s most loyal Opposition fully support the Bill. We recognise the legal requirement for the renewal of the Armed Forces Act 2006 for the continuation of our Armed Forces, and so I share with the Minister the desire to see the Bill reach the statute book promptly.
Before I turn to the substance of the Bill, I put on record our deep admiration for the men and women of our Armed Forces. Whether deployed on operations overseas, protecting NATO’s eastern flank or supporting the civil authorities at home, they continue to do an exemplary job. They do so at a time when resources, manpower and equipment are all being stretched to the very limit. Recruitment and retention remain a challenge, but time and again our gallant service personnel rise to meet the task they face. Whatever disagreements I may have with the Government about resource, I hope the Minister will accept that these take nothing away from our sincere respect for all those who serve.
However, I cannot ignore the elephant in the room: this Government’s continuing unwillingness to properly fund our Armed Forces. The Government have spoken of making tough choices, but they have not—or at least not yet. Perhaps our NATO allies in Ankara will change minds. The defence investment plan is effectively unfunded. One-third of the extra money is to be allocated in the Autumn Budget, meaning it is not available now, and the rest of it is to be financed by as yet unknown efficiency savings.
Lord Beamish (Lab)
I concur—and I am on the record as saying—that the defence investment plan needs the money: we need to get to 3% as quickly as possible. But does the noble Earl also agree that the coalition and Conservative Governments between 2010 and 2017 in fact cut the defence budget by 22% and made people compulsorily redundant? At least this action will increase the defence budget over the next seven years by 27%.
The Earl of Minto (Con)
My Lords, we are dealing with a very different situation globally from what we were dealing with then. There was not a country in the western world that was not making savings on defence at that time.
The Earl of Minto (Con)
Well, yes.
I was saying that the money is not available now and the rest of it is to be financed by as yet unknown efficiency savings. The departments that have apparently been required to reduce their capital spending have not yet identified what they will cut, and the Government have not yet told us what asset sales they will follow through with. It is all rather unconvincing and unsatisfactory.
There are of course ways to increase defence spending without more tax rises and more borrowing. The required funds could be found by a sensible and sustainable reduction in the welfare budget, scrapping the now discredited Chagos deal, appropriately reducing the size of the Civil Service or reprioritising some of the more extreme and costly net-zero projects. The depressing reality appears to be that this Government have not been willing to grasp the nettle and make the genuine hard choices to give our Armed Forces the funding they so desperately need—and are pleading for—to keep us safe.
I now turn to the Bill. This side of the House welcomes the further incorporation of the Armed Forces covenant into law. It was a Conservative Government, through the Armed Forces Act 2021 that my noble friend Lady Goldie took through your Lordships’ House, who first placed the covenant on a statutory footing, requiring specified bodies to have due regard to its principles in the fields of housing, education and healthcare. That was a significant and hard-won step, and I am glad the Government are building on it.
However, support in principle does not exempt the Government from scrutiny in practice, and I must ask the Minister a straightforward question: what assessment has been made of the impact on those bodies newly brought into scope, and what extra costs will this impose on national authorities, local authorities, education bodies and health bodies up and down the country? I have been assured that the cost implications of extending this legal duty are expected to be minimal. Although I am grateful for that reassurance, the House will forgive me for wanting it tested more rigorously as the Bill proceeds through Committee, particularly given the number of new bodies being brought within the statutory duty and the breadth of new subject matter involved. What financial consequences, if any, does the Ministry anticipate falling on the Ministry of Defence itself as a result of this expansion? Has Treasury sign-off been secured for any downstream costs that may arise?
I think—in fact, I know—that we are united across the House in our belief that those who serve our country should never have to live in substandard accommodation, regardless of their familial status. I think we can also all agree that the current state of much service housing ranges from below standard to abysmal and exposes the immediate need for significant structural expenditure and reforms to bring all forces housing up to the expected standard for the 2020s. It was my honourable friend the shadow Secretary of State for Defence, James Cartlidge, who initiated the buyback of the housing estate from Annington Homes, as the noble Lord has referred to. It is welcome that this Government have now completed that purchase, but I believe that there must be an acknowledgement of who started it.
Clause 3 and Schedule l give legislative effect to the second pillar of the Government’s defence housing strategy, published last November, by establishing a new body corporate: the defence housing service. I understand why the Government wish to create a dedicated body with the supply, availability and quality of defence housing at its heart, and a “forces first” approach to its work is one that these Benches can readily and fully endorse. But the creation of a new statutory body inevitably raises questions about what happens to the old arrangements. What precisely is happening to the Defence Infrastructure Organisation? What functions will be transferred to the new defence housing service? Will there be an overlap in responsibility during a transition period? If so, for how long and at what cost to the taxpayer? Clear accountability will be critical to the success of both organisations in the future.
Can the Minister also set out clearly how this new body differs in practice from the alternative that my party has proposed, which is the establishment of an armed forces housing association? This would be a private, independent but, crucially, not-for-profit organisation that would reinvest all revenues back into maintaining properties and building new homes. It would have an oversight board allowing for representation of those living in service family accommodation. It would allow service men and women to benefit from different property ownership models—for example, part-ownership—allowing those of all ranks to realise their dream of owning their own home. It would allow us to reduce the reliance of the MoD on private sector renting, which costs it £80 million a year. Before I leave this point, there is a widely circulated rumour that, to fund the DIP, investment in service housing is to be deferred. This matters. Can the Minister clarify the position?
I turn to a matter that does not appear in the Bill, but that this side believes to be fundamental to the war-fighting capabilities of our Armed Forces. The jurisprudence of the European Court of Human Rights has expanded the application of the European Convention on Human Rights so that it now applies extraterritorially, as this House will recall from the judgment in Al-Skeini v United Kingdom. There is absolutely no question that British troops must abide by the Geneva conventions and the law of armed conflict; that is not, and never has been, in dispute. We are not arguing for complete prospective immunity from legal accountability. However, we need to ensure that our troops feel confident in taking necessary action and must be clear on the limitations of that action in law. They must be on a level playing field with the enemy they face. To be in doubt, or at a disadvantage, could, in extremis, be fatal at the critical moment.
While the preference of my party is to leave the European Convention on Human Rights entirely, that is not within the bounds of the Bill, so we will be bringing an amendment in Committee to place a duty on the Secretary of State to derogate from the convention during armed conflict—a switch from “may” to “must”. I hope that the Minister will engage constructively with that amendment in the spirit in which it is offered: not as an attack on the rule of law, far from it, but as a recognition that our troops must be able to fight for and defend this country without the fear of endless retrospective litigation on decisions taken in the heat of combat.
I turn now to the provisions on the Reserve Forces, which these Benches broadly welcome. Clause 32 removes the requirement for a service person to formally leave the Regular Forces and re-enlist in the Volunteer Reserve, or vice versa, in order to move between the two. We are pleased about the greater flexibility that this clause allows for movement between the regulars and the reserves, and we hope that it will remove a genuine source of friction for service personnel who wish to serve in different ways at different points during their career.
The strategic defence review, published last year, sets out the aim of increasing the Active Reserve by 20% when funding allows. That is a laudable aim; nobody on this side of the House would quarrel with the ambition to build a larger, more resilient reserve capability at a time of growing geopolitical uncertainty. But an aim is not a plan, and I must press the Minister on the timeline. By when does the Ministry of Defence expect to achieve that 20% increase? What recruitment targets have been set year on year to get there? Crucially, given the funding caveat built into the review’s own language, how do the Government intend to fund it, given everything I have already said about the state of the defence investment plan?
I suggest one way of doing this to the Minister: incentivise more people to join the reserves by introducing a tax-free reserve service, whereby the first 30 days of reserve service in any one year would be completely free of income tax. Such a measure would cost the Exchequer relatively little, it would send a clear signal that this country values the commitment reservists make alongside their civilian careers, and it might do more to improve recruitment. I hope that the Minister will take that suggestion back to his department, even if he cannot commit to it from the Dispatch Box today.
I have covered a good deal of ground this afternoon, and there is more in the Bill that we will wish to probe in Committee, not least the reforms to the service justice system. We support the principle of aligning the powers available to service police and service courts with those already available in the civilian criminal justice system, but there are questions to be asked about how these provisions will operate in practice, and my noble friend Lady Goldie will address those in more detail in closing.
I simply say this in conclusion. This is a Bill these Benches support, because the renewal of the Armed Forces Act is a constitutional necessity, and because much of what sits alongside that renewal—the covenant, the housing reforms, the modernisation of the service justice system and the flexibility of our reserves—represents sensible and positive progress. But support for the Bill is not the same as satisfaction with the Government’s record on defence. Our Armed Forces deserve a Government willing to match warm words with hard funding decisions. Until this happens, this House will continue to ask the difficult questions the Government would rather not answer, and I look forward to the Minister’s response and to the scrutiny that lies ahead in Committee.
Lord Wallace of Saltaire (LD)
My Lords, I find it rather rich that the noble Earl, Lord Minto, has attacked the Government for not spending enough on defence when the Conservative Party is still calling for tax cuts, as well as economies in other areas, and we are still discovering just how thin our Armed Forces had become in the last five years and more, and how much now needs to be done to repair where we are. The message of the strategic defence review last year, now 12 months ago, was that we are now in a different situation. We are facing more serious threats to this country of different sorts, and we need political leadership from the highest levels of government in a national conversation to carry the public with it, and explicitly to spend more money on defence. That is a painful message, and it is undermined by those who are still calling for tax cuts without quite explaining how those cuts will be paid for.
Others on these Benches will address housing, military justice and other aspects of this Bill. I want to focus on the issues covered in Clauses 32 to 38: the Reserve Forces, their role, recruitment and retention, and conditions of service. The emphasis in the Bill appears to be primarily on regular veterans as the key to a strategic reserve, even into their 60s. I am conscious that there was a long history of Britain’s peacetime forces undervaluing volunteer reserve units. Our Army and Navy were designed for long-term deployments on other continents, not for defence of the homeland, neighbouring waters and countries, but, as the SDR clearly sets out, we are now facing different threats, many of them very close to home. As it states in chapter 6, we need to integrate homeland defence with Britain’s contribution to the defence of our continent, which is now again the chief priority.
Another of the traditional arguments for Regular Forces, as against short-term service reserves or volunteers, has been that it takes a long time to train an effective soldier. Again, the SDR questions this with its comment that the finance sector, civil society, academia and others all have much to contribute to countering the hybrid threats we now face. This is not new. I recall 15 years ago, when I was in government, the Ministry of Defence worrying about how to attract into the forces personnel with digital skills to combat the development of cyber warfare, and then discovering that one service unit, the Honourable Artillery Company, already contained a large number of workers in the financial sector with the advanced skills that were needed. I note the impressive contribution of one Territorial Army officer, Tom Tugendhat, in Iraq and Afghanistan, a volunteer officer whose language and other skills proved invaluable.
The experience of the Ukraine war has confirmed that civilian skills can now be immensely valuable in wartime circumstances. Hybrid threats must be faced with hybrid skills, many of which are often to be found more easily in civilian life than in the traditional military. We have also seen in Ukraine how quickly people can be trained to high effectiveness in fields where existing skills add value. The Armed Forces Bill in this respect falls far short of the vision set out in the SDR. It prioritises extending obligations for existing reserves up to the age of 65, rather than expanding and transforming the reserves for the defence of our homeland and UK waters and transforming the relationship between reserves and our broader national society. The cautious phrase that the reserves might usefully be expanded
“by at least 20% when funding allows, most likely in the 2030s”
declares how limited a role is still foreseen.
I have gathered some impressions about current dependence on reserve personnel from association with the London Scottish, a territorial unit in which my father served a very long time ago and which has now been transformed into the reserve company of the Scots Guards. I was struck when invited some years ago to a unit dinner by its honorary colonel, the noble Lord, Lord Robertson of Port Ellen, by how many of its members had been mobilised individually for short periods to fill the ranks in Iraq and Afghanistan. It is a sign of the current shortage of regular soldiers that individual reservists are also mobilised to make up the numbers for ceremonial events, including Trooping the Colour. One of our doorkeepers was marching round Horse Guards Parade 10 days ago.
I understood Chapter 4 of the SDR to be saying that the authors would have loved to recommend expansion and greater integration between regulars and reserves but hesitated to push that very far, given more urgent priorities for limited funding. They praise the Australian military’s gap-year model for short regular service with continuing reserve commitment. They note the positive relationship between skills training for military service and for civilian tasks and suggest that military partnerships with further education colleges could provide a way forward in civil and military apprenticeships. That should become a major part of the Government’s reskilling agenda through cross-departmental co-operation, and I would welcome the noble Lord, Lord Coaker, saying more about how that is to be implemented. Chapter 7 recommends that
“the Royal Navy should adjust its personnel balance to include greater numbers of Reservists to generate efficiencies and release Regulars for front-line and operational roles”.
That seems a highly practical way of reinforcing defence of our maritime waters.
So far as I am aware, little follow-up has been taken on any of this in the 12 months since the SDR was published. There has been nothing on the whole-society approach to defence that should more closely associate civilian skills and responsibilities with military. The authors recommended the national conversation to alert the public to new threats and how they might share in responding. The noble Lord, Lord Coaker, told us recently that he has been designated the responsible Minister for the national conversation. No offence to him, but it should be the Prime Minister who leads this, and perhaps the new Prime Minister will realise that he must. The IISS, for example, has just published a report detailing Russian use of drones to overfly British military installations and airports, but it should have been Ministers who told us that to alert the public that we are facing real new threats and we need to respond.
When I asked which government department would be responsible for the proposed homeland defence force—a new iteration of what the Territorial Army was originally organised for—I had the impression that Ministers did not know before they told me that it was most probably the Cabinet Office rather than the MoD, which I suspect is a mistake. I hope the noble Lord, Lord Lancaster, will be able to cheer me up by telling me that I am underplaying what has so far been done and that cadet forces and others are already helping to build a new relationship. I was rather struck the other week when talking to one of Britain’s major public schools about how political education will be adjusted when votes at 16 come in to be told that it had abolished its cadet force some years ago because of the cost and the feeling that it was not a vital part of its educational process.
On my reading, this Bill confirms that the Government have not reflected on the changing value of reserve and volunteer forces or followed the recommendations of the SDR. They have not learned the lessons of the Ukraine conflict or the changing nature of hybrid threats. Veterans in their early 60s will do their best to fill the ranks when called on, but there is so much more that should be done to recruit and mobilise reserves to contribute to national resilience and security and to link our Armed Forces more closely to our civilian national community.
Lord Craig of Radley (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Wallace of Saltaire. We share the honour of having fitted a military covenant report into the Armed Forces Act 2006 in 2011.
This Bill deserves credit for finally setting out a more adequate statutory treatment of the military covenant, but it has been a long, slow process. Nearly 20 years ago, in 2008, a Command Paper first introduced an undertaking to treat the military covenant in statute. Three years later, as I have mentioned, the Armed Forces Bill of 2011 was the start. It introduced a single minimalist clause entitled “Military Covenant Report”.
While welcoming its inclusion, I objected to its being inserted towards the tail end of the miscellaneous sections of the 2006 Act as lacking appropriate prominence. I also said that its insertion as new Section 359A of the Act, immediately following Section 359, implying in a contents list that the two sections were related, would be an unfortunate juxtaposition. Why? It was because Section 359 granted pardons to veterans executed in World War I for desertion and other disciplinary offences. The Government accepted these criticisms and, after further discussion, proposed a whole new part—Part 16A—on the covenant report. The Minister, Lord Astor of Hever, kindly invited me to put my name to their formal government amendment and to be the first speaker to introduce it.
Only in later Bills was the concept of due regard by some local authorities introduced, initially in a much-restricted way. Attempts by myself and others in 2021 to require due regard by national authorities were resisted, but an agreement to consider this further was given by Ministers to get the Bill passed in time. This brings us to the present Bill, which will now require due regard by national authorities when appropriate. In other words, the covenant is finally being brought fully into national as well as local law.
I am pleased also to note that in new Section 343AZA(2)(c) a significant consideration is now present—namely, that special provision for servicepeople may be justified by the effects on such people of being a member or former member of the Armed Forces. So far, that is good news. However, the Royal British Legion and other charities have a number of issues and queries about details yet to be resolved, such as care home responsibility for “due regard”. I sense too that there will be inevitable disagreements between local and national authorities about which should be responsible for taking action, and a temptation to play ping-pong over it. Were this to occur, it might be for the Armed Forces Commissioner or a veterans’ commissioner to resolve. The Minister might like to comment on this possibility.
The issue of removing immigration fees for close dependants of non-UK personnel granted leave to remain because of their former service in the Armed Forces will be an amendment to return to in Committee. The 2024 manifesto commitments by the three parties undertook to waive the current and increasing immigration fees that families of non-UK Armed Forces personnel are required to pay before being allowed indefinite leave to remain in the UK with their spouse. Two years have passed, but there is still nothing but empty assurances that this waiver is to be honoured. It is time for action to correct this unfairness.
I am saddened that there is no further attempt to deal with the incompatibilities between this Act and human rights, frequently exposed in examples of lawfare, or further consideration of some form of better combat immunity for service personnel on operations. I sense, however, that this is not a field this Government wish to enter, and it may be rather fruitless to raise it now.
I will also repeat a complaint—some might call it a whinge—I have made at Second Readings of previous Armed Forces Bills: about the way the constitutionally important Armed Forces Act 2006 has to be renewed. Like its 2011, 2016 and 2021 predecessors, the present Bill is, in effect, a 150-page Marshalled List of amendments to the 2006 Act, which itself has almost 350 pages. I commend the efforts of officials to produce in the Bill before the House a masterclass in amendments to the 2006 Act and many other Acts, but unless a major change of approach is found, our successors will be dealing with Bills whose size is measured not by page numbers but in kilograms.
One issue covering more than 32 pages—some 10%—of the 2006 Act is defence housing and other property. Noble Lords will be aware of the Government’s commitment to improve living accommodation for service personnel. This is clearly meant as a key step towards achieving that ambition. The defence housing service is being given wide powers in new Section 343F, with Treasury consent being required only if the housing service is to borrow money. Other functions, such as entering into contracts or agreements, or forming or investing in a company or partnership, do not appear to need Treasury agreement. Such freedom does seem to me to be unusual.
Is the MoD to be responsible for the size of this service and paying for it? Have the Government made any estimate of the cost of and manpower required for this new organisation? Bearing in mind the difficulties facing the MoD because of the shortfall in defence investment planning funding, and the expectation that living accommodation expenditure will fall to the back of the queue, what rate of improvement is to be expected from the new defence housing service? Has the Minister any figures for the House?
The Lord Bishop of Norwich
I thank the Minister and his officials for their work on this Bill. It is a privilege to follow the noble and gallant Lord, Lord Craig, and I look forward to hearing further contributions from noble and gallant Lords with their wealth of experience. When I read in Hansard the record of the Second Reading debate on this Bill’s predecessor five years ago, I could not help but notice that the noble Lord, Lord Coaker, and the noble Baroness, Lady Goldie, will simply be swapping places when they come to sum up this debate. In my remarks, I will focus on three areas: first, the Armed Forces covenant; secondly, the whole-society approach to civil preparedness; and thirdly, some niche comments related to the service police powers.
“Covenant” is an ancient word with deep resonances in Judaism, Islam and Christianity. It is about gifts offered and received, about commitments made and honoured, lived in mutual reciprocity. When we ask much of our Armed Forces—and, God forbid, we might need to ask more of them and their families in the years to come—pledging a commitment to what they can expect in return for all that they give and, for veterans, have given, is the mark of a grateful society.
“Gratitude” is perhaps an old-fashioned word these days, but when we lose it, recruitment drops, morale drops and retention drops. At its heart, the Armed Forces covenant seeks to embed gratitude—not special favours or a jingoistic patriotism, but a simple commitment to understanding, fairness and opportunity. That is why I am pleased that His Majesty’s Government are proposing in the Bill to enshrine the Armed Forces covenant fully in law, by extending it to central, devolved and local authorities, and expanding the issues to which these and certain public bodies must have due regard.
So much flows from that: mutual responsibility, protecting the vulnerable, providing hospitality and integration, and including appropriate housing at a good standard. Although the focus is rightly on family housing, I hope the new proposed defence housing service will also ensure that single persons’ accommodation is of a standard that can create a sense of home. I hope consideration will also be given to fitting housing with good insulation and solar panels, so reducing energy costs and contributing to His Majesty’s Government’s net-zero commitments.
The Armed Forces covenant was signed on behalf of the Church of England by the then Archbishops of Canterbury and York in February 2015. Since then, a number of English dioceses have also signed, working in partnership with local veterans, reservists and military bases. I confess that the diocese of Norwich needs to catch up, though I value my own engagement with RAF Marham, with the Queen’s Dragoon Guards at Swanton Morley, and those who serve at the STANTA. At the latter, I have witnessed the valuable work being done by the British Army, in collaboration with forces of other nations, in training Ukrainian conscripts to fight for the freedom of their country against Putin’s tyranny.
I believe that churches and Church schools have a particular role to play in supporting the 124,000 children of military families, who are likely to have to move school more often than others and to have parents away on deployment, sometimes for long periods with limited contact.
It strikes me that the conversations around signing the covenant, the engagement that involves with His Majesty’s forces, and the prompt that this gives to think more through the eyes of service personnel and veterans, is of as much importance as the ceremony of signing. Through good conversations, understanding is fostered, and the gift of concern and care can be extended.
I imagine that I am not the only father of a soldier who has stood at the central memorial at the National Memorial Arboretum in Staffordshire and run his hand over those panels of carved names on Portland stone, only to reach our contemporary era, where the stone becomes smooth: smooth stone awaiting chiselling—the names of those who will be prepared to pay the ultimate sacrifice in defence of our nation in whatever will unfold in the years to come.
There are other people, each also treasured by God, who carry or will carry the scars of conflict and war in body, mind and soul long into the future, often impacting those around them. Among those who support and care for them are our Armed Forces chaplains—men and women, both regulars and reservists, whose calling is to serve alongside, being with and being there at both joyous and tragic moments, offering hope, peace and prayerful presence, and being the bearers of spiritual, moral and pastoral support. The Armed Forces covenant is, in a sense, a continuation of that pastoral care shared by us all in wider society.
My second point is about whole society preparedness. The recently published Global Peace Index 2026 found that
“the world has continued its longstanding trajectory of deteriorating peacefulness … There are now more active state-based conflicts than at any point since the end of the Second World War, while the number of countries involved in external conflict has nearly doubled since 2008”.
Given the troubling and dangerous times we live in, the Church of England’s General Synod has been considering how we might be called to be the Church in a time of war. Last July, we heard from the Lutheran Archbishop of Tallinn, Urmas Viilma, about how their preparedness is significantly advanced. This does not sit easily with the Jesus that I encounter in the gospels proclaiming peace-making and that most difficult of commands about love of neighbour and love of enemy.
I note that Bishop George Bell in November 1939, faced with a terrible impending European war, said:
“It is the function of the Church at all costs to remain the Church”.
The Church’s task is therefore to work and pray for peace, and to shape and form peacemakers, peacebuilders and peacekeepers. I would argue that, while not scaremongering, we need also to prepare for the threats we face. The Church and other faith groups would play a key role in supporting communities in the event of a major conflict. Resilience, community solidarity and hope are all key Christian virtues that people have valued in previous wars and would be much needed in any future conflict. As St Paul’s letter to the infant church in Rome put it:
“Hate what is evil, hold fast to what is good”.
Will the Minister outline what preparations are in place and what resources are being made available to meet the strategic defence review’s goal of a “whole-of-society approach” to the review’s implementation, including
“widening participation in national resilience”?
My final point, and I declare a familial connection with the Royal Military Police, is a concern that under the Armed Forces Bill, service police will not be able to authorise pre-charge custody for Schedule 1 offences—that is, for battery, even when there is a domestic context. This is because the legislation is drafted for all serious offences to be in scope, which does not include Schedule 1 offences and does not articulate the context of domestic abuse offences. The issue of commanding officers dealing with domestic abuse offences was brought up by the Centre for Military Justice in its evidence in response to the Armed Forces Bill. It recommended an amendment to the relevant schedules to prevent commanding officers dealing with any domestic abuse matter at summary hearing. Although the Royal Military Police has a strong policy position that, where there is a domestic abuse context to offences, the commanding officer could investigate, it is very clear that such cases should always be referred to the relevant policing authority so that it can consider investigating. This is not articulated in legislation. Will the Minister commit to look at that please?
More broadly, I raise the issue that the additional requirements of meeting the threshold of a serious offence will add additional bureaucracy for service police during the arrest of suspects. This could be reduced by giving complete authority to authorise pre-charge custody to the provost marshals. The definition of a serious offence is noted as being similar to, but different from, the definition of a serious service offence in Part 1 of the Armed Forces (Powers of Stop and Search, Search, Seizure and Retention) Order 2009. The added complexity of this definition will inevitably slow down the processing of suspects in arrest and risk incorrect authorisations of pre-charge custody. Giving the provost marshals authority to authorise pre-charge custody in all offences would reduce these risks and give the service police greater parity with its civilian counterparts, who can authorise custody in such cases.
I have been made aware that service police currently have no specific legal protection against impersonation, either by civilians or by persons subject to service law. As the service police as forces are not constituted under the Police Act 1996, the offence of impersonating a police officer and the linked offences in Section 90 of the Police Act do not create an offence of impersonating a service police officer; nor are service police currently protected by the enhanced sentencing powers of the Assaults on Emergency Workers (Offences) Act 2018. Service police officers are regularly assaulted on duty yet are not given the same respect and protections afforded to civilian police officers and other emergency workers.
Will the Minister commit to looking at these anomalies around impersonating and assaulting service police so that there can be parity with their civilian counterparts, with a view to potentially introducing a government amendment to bring clarity to these current anomalies? I look forward to engaging with the Bill as it progresses through your Lordships’ House.
Baroness Penn (Con)
My Lords, it is a real pleasure to follow the right reverend Prelate. This is my first contribution in this House on the matter of defence. The reasons it has come now are twofold.
The first reason is the time we are living through. In my time in government, in the Home Office and No. 10, we dealt with terror attacks, the Novichok poisonings, cyber attacks, and the use of chemical weapons in Syria. But the scale of the threat, and the response we need, are of a different order of magnitude today. As we have heard in the debate, that means a whole-society response. We need to widen the debate that we have in this House and the people who engage in it, not least on the question of funding. Meeting 3% and 3.5% of GDP towards defence will be incredibly challenging, but it is important that we get there. I do not envy the current Government in trying to do it, but it is a long-term task. The trade-offs are real, and we should not pretend that they are not. That means a wider conversation about what we have to sacrifice to meet those funding commitments.
The same is true when we think about the contribution that we want people to make to our defence beyond our Armed Forces. We need to hear more about that national conversation. I encourage the Government—again, it is a difficult conversation to have—to try to be more open in how they tackle and approach this question. It is not something we have done for a very long time, and I do not think we can come up with the answer behind closed doors without an ongoing period of engagement.
The second reason I am speaking now is my participation in the Armed Forces Parliamentary Scheme, which has given me much greater insight into the people who serve in our Armed Forces—particularly the RAF, the branch through which I am doing the scheme this year. It is clear that we will deliver on our commitments in the SDR and the defence investment programme only if we deliver for and through our people in the military. Therefore, I welcome the measures in the Bill that will improve conditions for people: the measures to strengthen the Armed Forces covenant, to take further action on housing and to strengthen and expand the role of reservists.
Given the premium that the military places on experience, retention—as well as recruitment—will be more important than ever. In that context, I will raise two issues that I think touch the lives of Armed Forces families in particular.
The first is paternity leave for dads in the military. In the UK, we give dads two weeks’ full-paid paternity leave; in Australia, it is eight weeks; in Canada, it is a share of up to 35 weeks; and in the US, that well-known bastion of parental rights and pay, it is 12 weeks at full pay. The US example is pertinent, because this is about a hard-nosed approach to what we need in order to retain the very best people in our services. I have made the case before about changing our statutory provision in the civilian world and how it is good for dads, mums and kids, but all those reasons are magnified in a military setting because of the demand that we place on the people serving in our military and the absences that they often have from their families. That opportunity early in a family’s formation to spend time together, to bond and to establish ongoing relationships is even more important.
It is also worth reflecting on the dynamic for couples who are both in the Armed Forces. At the moment, mums get 26 weeks at full pay under their occupational provision, and dads get two weeks, so think about the effect that that has on the career of both those people as they have each additional child and how the balance of how they approach care is different.
I recognise that members of the Armed Forces are not employees with traditional employment rights in this sense, that the provision for the occupational scheme is different, and that leave needs to be and is subject to operational demands. Nothing that I would propose in changing it would change that fact, but I think we can and should go further.
I would also like to raise a specific case with the Minister of an Army Reserve sergeant who was denied statutory paternity pay after his mobilisation to support Ukraine was treated as a work break from his civilian job. My understanding is that this is not how the current system is meant to work, but this issue affecting a particular member of the reserves has not been resolved and we do not know whether others are also being affected by, perhaps, a misunderstanding of the rules. I hope the Minister can commit to looking further into this and getting it resolved. If we are going to expand the role of reserves in our country, we need to make sure that the move between mobilisation and deployment and civilian life is smooth and works for them.
The second area I would like to raise is that raised by the noble and gallant Lord, Lord Craig of Radley: the fees for indefinite leave to remain for family members of service personnel with service of four years or more. Removing these fees is a Labour manifesto commitment, and it is supported by the Royal British Legion. In the other place, it had a very vocal supporter in my colleague Ben Obese-Jecty, who tabled an amendment to this Bill in the Commons to introduce those changes that are a government manifesto commitment. Sadly, it was voted against in the other place; the Minister responded by saying that work is under way, but no timescale has been given. As the noble and gallant Lord, Lord Craig, said: it is two years since the election. In that time, the fees for indefinite leave to remain have risen by almost £350. For a family of four to get indefinite leave to remain will cost well over £10,000 and the increase for that family is over £1,000 since 2024.
I recognise that this requires work with the Home Office. Both the Minister and I have worked in the Home Office, and we know that on occasion it can be hard to get things done in that very great department, but two years is long enough. We change our Immigration Rules twice a year. The next changes are due in October, and it would be fantastic to hear from the Minister that the fulfilment of Labour’s manifesto commitment in this area will be contained within those changes.
There is the old saying that you recruit a soldier but retain a family. I hope that, alongside the measures in the Bill, the Minister can signal some progress on both of the issues that I have raised today.
Baroness Lane-Fox of Soho (CB)
My Lords, I am very happy to follow the noble Baroness, Lady Penn, because I too have been trying to understand defence, both personally and professionally, over the last year. I declare three interests that have helped me. Like her, I am taking part in the Armed Forces Parliamentary Scheme, so ably chaired by the noble Lord, Lord Stevens, who is in his place, but as part of the Navy. In parallel, I have become the proud sponsor of HMS “Achilles”, the last of the new Astute class nuclear submarines being built in Barrow. Finally, I am an adviser to the Lakestar resilience fund, which invests in defence and societal resilience technologies.
Therefore, I am lucky enough to have spent time on bases and in ships, in classrooms and in boats, and in service accommodation. I feel as though I have met hundreds of servicepeople, but I have also been thinking about the technologies that sit beside our national resilience. The two experiences are different, but they reinforce the same thought: when we talk about defence, we often talk about platforms, procurement and capability, yet much of our resilience depends on more practical questions. Can we recruit and retain talented people? Can they build a stable family life? Are they learning quickly enough to keep pace with technology? What happens when they take the uniform off?
Until recently, perhaps like many people in this country, my understanding of what our Armed Forces actually do was embarrassingly shallow. I could not have explained what we ask a submariner to endure on a nuclear deterrent patrol or what it means for a Royal Marine to operate in the High North, where a minor mistake can become life threatening. That has changed through my time with the Royal Navy: it has put faces and human cost behind phrases that I once skimmed over. It is with these perspectives that I approach the Bill. I will focus on two areas—housing and skills.
The contrast in housing between what is often expected at entry and what some individuals still experience is striking. I have seen good accommodation, but I have also seen damp, broken heating and long waits for basic repairs—and heaven forbid there should ever be any wifi. The creation of the defence housing service is one of the Bill’s biggest changes. The real test is simple: will life improve for the families living in those homes? I would like to understand how Parliament will know whether these arrangements have worked three or five years from now. What standards will the new service meet? How quickly will repairs be fixed? Will performance be published? How will servicepeople influence the system if it is not delivering? Poor housing affects morale, retention and families. If we ask people to serve their country, we must ensure that they have a decent place to live.
The second area is the Armed Forces covenant. As we have heard, every five years, it allows us to ask whether we are keeping our side of the bargain with our armed services. I welcome the Bill’s decision to strengthen the covenant and extend the statutory duty more widely, but it raises a wider question: what does “no disadvantage” really mean in 2026? The world of work has changed irrevocably. AI technology is reshaping recruitment, jobs and skills. Every year, thousands leave the Armed Forces and enter the labour market. The Armed Forces are exceptionally good at teaching people how to learn under pressure. In a world of constant technological change, that ability may be one of the most valuable things that our servicepeople leave with. Judgment, teamwork, adaptability and leadership are becoming more valuable, not less, and are qualities that the Armed Forces develop every day. Perhaps the Minister could say how the Government see the covenant evolving alongside these changes. If the labour market is shifting, should “no disadvantage” include helping people to develop their skills more during service, making it easier for employers to recognise them?
The Bill also updates arrangements for reserves and recall, recognising that the skills of former personnel remain valuable long after full-time service. If we value those skills enough to maintain that relationship, are we also doing enough to help people keep them up to date—especially as we face the hybrid world which the noble Lord, Lord Wallace, talked about earlier? To me, that is part of what conditions of service now means. They still include pay, housing and family support, but they could also include the chance to keep learning and moving confidently into civilian life. I do not suggest that the Bill should become a workforce strategy, but it is reasonable to ask whether the covenant, transition support and reserve policy reflect the world that people who leave the Armed Forces now go into, including the impact of AI and automation. One of the privileges of spending time with serving personnel has been seeing the skill and determination across the forces. We invest heavily in developing those qualities while people are in uniform; we should be just as determined to ensure they continue to benefit after they leave.
We should all welcome and support the Bill, and, as the noble Baroness, Lady Penn, said, make sure it is widely supported outside this House and part of a national conversation. If, in a few years’ time, we can look servicepeople in the eye and say that they are living in better homes, that veterans are finding it easier to build good civilian careers and that people feel better supported to keep learning throughout their careers and beyond, the Bill will have done something significant alongside its constitutional importance.
Baroness Brinton (LD) [V]
My Lords, it is a pleasure to follow the noble Baroness, Lady Lane-Fox of Soho, who spoke eloquently about the need for improved housing for service men and women and their families. I am grateful, too, to my noble friend Lord Wallace of Saltaire for his introduction to the Bill.
In my contribution today, I want to focus on protection from sexual and violent behaviour and domestic abuse, stalking and harassment, in Clauses 5 to 10; support for victims of service offences, in Clauses 11 and 12; service courts, in Clauses 21 to 27; and Schedules 2 and 3. These clauses and schedules all have a direct impact on the victims of offences perpetrated by service men and women. I have some concerns that, as they stand, the proposals do not give parity with the non-military administrative police and court systems. I also want to ask some questions about the protocols on visiting forces, in Clauses 41 and 42, in the light of the recent case in Cambridge.
My Front-Bench portfolio of victims and vulnerable people is more usually found in home affairs and justice legislation, and it is good to work with the noble Baroness, Lady Penn, again. It is also good to see the Bill trying to strengthen the arrangements inside the military criminal justice system to match those elsewhere. I particularly thank Aurora New Dawn and the Suzy Lamplugh Trust for their briefing on the Bill and for copying the letter that they have sent to the Secretary of State for Defence. Both groups are very concerned that there are some key gaps in the Armed Forces Bill that will mean that victims in the military system do not get the same level of support and protection. I really hope that the Minister will agree to a meeting with them and those who speak today on these issues, preferably before Committee stage. If possible, it might be helpful if the noble Baroness, Lady Levitt, could be present at the meeting, because, as Courts Minister, she has recently been dealing with the equivalent in the non-military world.
I know from my own experience, two decades ago now, as a victim of a sustained, nearly three-year stalking campaign that the effect on victims of an obsessive, manipulative stalker is awful but, worse, that victims are re-victimised when those in the criminal justice system just do not understand how serious it can be. Since 2012, the laws relating to stalking have slowly changed, but those changes are only partially covered in the Bill. I note that the effectiveness of service stalking protection orders—SSPOs—will depend on the ability of military personnel, not just military police and courts, to recognise stalking, assess risk and respond appropriately. This is reflected in the report of the Select Committee on the Armed Forces Bill, which included an official recommendation that:
“The introduction of the restrictive orders under Clauses 5 and 6 should be accompanied by extensive training across the system in order for the measures to be properly understood, implemented, and enforced”.
One thing is clear: the need for training to identify and respond to stalking will be even greater within the Armed Forces setting than in the civilian world. That is because the nature of service life presents unique challenges, including hierarchical structures, close-knit communities, shared accommodation, deployments, and overlapping professional and personal relationships, as well as opportunities for community surveillance. We know already from domestic abuse cases in the military world that these factors will increase opportunities for perpetrators to maintain unwanted contact and try to exert control, as victims may continue to live, work and serve alongside them.
Effective implementation of SSPOs will therefore depend on specialist training delivered by independent experts, as in the civilian world, so that any personnel can recognise stalking behaviour, understand patterns of escalation and respond appropriately, as well as fully understand all the SSPO provisions, including the possibility of placing positive requirements on perpetrators. It is important to note that the statutory guidance on the independent stalking advocate requires specialist stalking responses and should not be subsumed within broader domestic abuse frameworks. Over a third of stalking cases are nothing to do with domestic relationships.
This is also reflected in the recommendations arising from the super-complaint on the police response to stalking, led by HMICFRS, the IOPC and the College of Policing, which highlighted the need to draw on specialist expertise in the development and delivery of all stalking training. Failure to identify stalking can result in victims being directed into responses that do not adequately address stalking-related risk and allow behaviours to escalate. Why is there no provision in the Bill for this important training?
Another area I have concerns about are the arrangements relating to the service stalking protection notices themselves. Early intervention is particularly important in stalking cases, where behaviours may escalate over time and are associated with an increased risk of serious violence and homicide. While the introduction of the SSPOs is very welcome, there remains a significant gap between identifying risk and securing an order within the civilian system.
The Bill addresses this challenge in the domestic abuse context through the provision of domestic abuse protection notices, which provide immediate protection while interim orders are being pursued. It is shocking that there is no equivalent mechanism in the Bill for stalking. Introducing service stalking protection notices would provide an important safeguard during this period and bring the stalking provisions into closer alignment with the domestic abuse framework.
It is not clear from the relevant clauses and Schedules 2 and 3 whether or not the Bill provides for continuity of protection after a convicted service man or woman has left the services. Whether a domestic abuse protection order, a stalking protection order, a sexual harm prevention order or a sexual risk order, it absolutely beggars belief that the service protection order automatically lapses when the offender has left the military, often after release from prison, even if the details of the protection order make it plain that the military police and/or military court still believe that the victims in these cases need formal protection.
It appears there is no facility at the moment to transfer protection orders, with the appropriate level of information, to the civilian police service where the victim and their dependants live, and the service where the offender will live, to explain under what circumstances the protection and prevention order was made. It should also ensure that victims are signposted to civilian victim support that is appropriate for their case. At best, the Bill is ambiguous; at worst, these specific issues and gaps were highlighted by the evidence of the Director of Service Prosecutions at the Bill’s Select Committee hearings.
When gaps such as this are created in stalking cases, danger thrives. The offender thinks they are home free and, especially with stalking, might well target their victim again. If they think that the police in their area do not know about them, that will embolden them further. Will the Minister say that the Government will table amendments prior to Committee to remedy this serious and dangerous gap?
Finally, I am very concerned by reports in the Guardian and by the BBC last week about the case of the US Air Force pilot, Captain Jacob Wulfson. My noble friend Lord Thomas of Gresford is much more expert than I on the military court system of visiting forces, and I look forward to his contribution. My focus is on how badly the victim in this case was let down, not just by the US court-martial process but by the local police and the CPS, at the moment it was suggested—I presume by RAF Lakenheath—that the case should be moved from the Cambridgeshire Constabulary to the US military courts.
My information comes from the two reports of the case. The most horrifying aspect is how on earth the rape of a British subject in Cambridge, which is British soil, by an American who chose to live off-base in Cambridge, could be tried in a US system that derides and diminishes a victim in a way that our criminal justice system—from police to courts and appeals—absolutely cannot.
I mention the Wulfson case as an exemplar. We know there have been many other such cases where the US system has intervened but without the details becoming public. I suspect that many of those are equally unsatisfactory. For example, I did not know that, in the USA, no rape case can be tried without evidence from the victim, even if there is ample forensic and other witness evidence, and that the victim can be cross-examined and derided by the defence attorney in a manner absolutely forbidden in our courts. Further, I did not know that the prosecutor does not need to have specialised training in rape and other sexual offences to balance the defence attorney’s contribution, or that, in this particular case, the eight jurors—all service personnel from Lakenheath, who, under US law, can also judge the case—can include someone with a spent conviction for sexual assault. This is unbelievable.
The victim has been brave beyond measure, but she does not have—as we have here—the chance of submitting a request to the Attorney-General for a review of an unduly lenient sentence. Further, because she is an alien—that is, not an American citizen—she is not entitled to any support from the American victims system, which helps guide their citizens through. That is shameful. Even worse, any convicted US service man or woman has an automatic right of appeal, as well as being able to ask the Secretary of Defense or the President to grant them clemency because their military service outweighs their crime, even if it is a serious sexual or violent assault.
This case is an absolute travesty, but it is not isolated. We need to address why Cambridgeshire police or the CPS thought it appropriate to allow the case to pass to Lakenheath base. Can the Minister please write to those of us speaking on this issue today to answer the following questions? At what level was the decision to transfer made? What was the relevant rank of the police officer or CPS staff? Did they have training to do this and therefore understand the full legal ramifications of the decision on treatment and justice for the victim? Were there any referrals back to the Ministry of Justice? I presume they would be via the Attorney-General, but I do not know. Do the Ministry of Defence, the Ministry of Justice, the Home Office and the Foreign Office have a co-ordinated approach to or a protocol for cases such as this, where the crime occurs on British soil but the case is moved to a visiting military court system?
It is interesting that we now have an interdepartmental protocol between the Foreign Office, the Home Office and the coroner service for when a British citizen is murdered abroad, with these departments all helping bereaved families. In cases similar to the Wulfson case, is there a protocol with these departments’ opposite numbers for high-level conversations to understand the consequences? I would be very grateful if the Minister, and the Courts Minister, the noble Baroness, Lady Levitt, could provide the answers to these questions as a matter of urgency, preferably before I and others table amendments in Committee.
Lord Lancaster of Kimbolton (Non-Afl)
My Lords, it is a pleasure to follow the noble Baroness, Lady Brinton. I start by declaring an interest that, as of 15 June, I was appointed Assistant Chief of the Defence Staff, with responsibility for reserves and cadets. I am now the de facto most senior reservist in defence. Perhaps if the noble Lord, Lord Wallace of Saltaire, could give me another couple of weeks to get my feet under the table, I would happily accept the burden of responsibility for the things he mentioned in his remarks. I hope to offer him some encouragement that progress is indeed being made. Equally, before taking up this recent role, I was asked, in my capacity as the independent chair of the Reserve Forces Review 2030—RF30—to give oral evidence when the Bill was in Committee in the Commons. After consultation with the Minister, and with the permission of your Lordships’ House, it is in this capacity that I speak today—as an extension of that earlier evidence session.
I support the Bill, as it brings much-needed clarity and simplification to the role of the Strategic Reserve and provides the enablement, through the formation of a non-departmental public body, for the reserve forces and cadets associations. The reserve landscape is complex. RF30 sought to simplify this landscape by broadly dividing the reserve between the Active Reserve—part-time and predominantly, but not exclusively, paid volunteers, such as me—and the Strategic Reserve; that is, former regular service men and women who retain a liability to be called back into service.
In recent years, the Strategic Reserve has been pretty much ignored. This Bill does much to enable its greater use, as both the Active and Strategic Reserve will be essential not only in war but in the transition to war, and it is the latter that elements of this Bill enable.
To the noble Lord, Lord Wallace of Saltaire, I say that considerable work has been done in this area. In recent months, tens of thousands of records of former service personnel have been checked and reloaded on to defence databases. I was surprised to discover— although perhaps I should not have been, given that the average age of a service leaver is 31—that the vast majority of these members of what will be the Strategic Reserve are under the age of 45. So, even though this increases the age of liability to 65, the vast majority of the Strategic Reserve is relatively young—just like us.
I will say a few words on the Active Reserve—the part-time volunteers—and equally, I hope to cheer up the noble Lord, Lord Wallace of Saltaire by dispelling the myth that somehow these reservists are a contingent capability who train only at weekends and on drill nights. Today’s Active Reserve is a very different beast, with a large percentage of reservists in all three services and Cyber & Specialist Operations Command contributing on a daily basis to delivering defence capabilities on operations in the UK and around the world: for example, on recent reserve-lead UN missions in Cyprus or specialists such as cyber experts bringing their skills to defence, or working shifts as logistical experts at RAF bases. They are fully integrated with our regular force and must be valued as such.
I want to try to tie together the measures in this Bill with the aspiration, the ends and ways, of the Strategic Defence Review, published last year, and the Defence Investment plan, the means, published last week. The SDR, published in June 2025, called this
“the most serious and least predictable”
security environment since the Cold War. The ongoing war in Ukraine and recent events in the Middle East underline this assertation. At its heart, the SDR highlighted three shifts: a move to warfighting readiness; an integrated force model; and, crucially, a whole-of-society approach to national defence—a theme that has already been explored by the right reverend Prelate and, indeed, my noble friend Lady Penn.
The SDR proposed a major boost to the reserves: a new UK Strategic Reserve by 2030 and a commitment that the Army should be able to rapidly expand and mobilise reserve forces. The Strategic Reserve measures in this Bill are sensible, in that they provide both simplification and harmonisation between the three single services, with liability to 65, and form the basis of that rapidly expandable force. The key, though, will be the data that we hold on individuals and its digital management. We need to move away from a traditional paper-based system to a digital solution: interrogating the data we hold and contacting reservists digitally, perhaps via mobile phone apps, so we can best mobilise and employ reservists based on their current skills as well as their historical skills, and at pace. Defence should invest in this technology as a priority, otherwise we will struggle to convert whatever legislation we pass in the Bill into genuine defence capability. I was pleased to see the DIP specifically highlighting the need to invest
“in new methods and technology for engagement with the Strategic Reserve”.
The SDR also recommends an expansion of the Active Reserve by 20%, albeit with the caveat “when financial conditions allow”. I would say to the Minister that the Reserve is a fragile beast, overly reliant on the goodwill of its volunteers, and, while we await the financial conditions that will allow its expansion, we must in the meantime ensure we continue to nurture it.
Notwithstanding the ambition to increase the size of the Active Reserve within the SDR, it is worth taking a moment to compare ourselves with the actions being taken by some of our NATO Allies. In Belgium, a territorial force, a combination of regular and reserve, is being developed with a focus on the protection of the homeland and critical national infrastructure, with an ambition to have 0.5% of the working population as reservists. Canada is doubling the size of its active reserve forces to 100,000 and developing a strategic reserve of 300,000. Simplifying processes for recruiting and training, the Canadian armed forces have had their best recruiting year for many years, led by a national conversation from the top of government. The Czech Republic is reported to have increased gross numbers of reserves by 5,000 in a year from a population of just 10 million. This contrasts with the increase of a few hundred for the UK Reserves; however, we should note that numbers of applications continue to grow. We are not alone in recognising the need to expand our Reserve Forces as an effective addition to deterrence.
RF30 and the SDR were both clear on the need for reinvigorated training and modernisation, and learning lessons from Ukraine on drones, autonomy and digital warfare. I was pleased to see the recent Defence Investment Plan prioritise these measures. This preparedness for conflict, however, cannot be Defence’s job alone. The SDR was also clear that defence to be a whole-of-society matter—something that other noble Lords have raised. With our homeland under attack via cyber, and critical infrastructure on a knife edge, we cannot simply contract out our defences to those in uniform.
That means we need civilian and military integration, with Defence playing a key role in the Cabinet Office-led home defence programme; community mobilisation—the SDR envisages substantial numbers of volunteers at local level; civilian rescue teams, reserve firefighters, special constables and a new home defence force; and partnering with society with a new partnership with industry, wider participation in resilience, an expansion of the specialist industry-sponsored Reserve and a national conversation on security.
This builds directly on the recommendations of the RF30 report, which asked us to redefine the Reserves’ relationship with society, to share expertise with industry and academia, and to unlock flexible service, enabling regulars and reserves alike to move between civilian and defence roles, sharing their expertise. The SDR and DIP were clear: we need a defence that is NATO first, innovative and lethal, but we also need a defence that is rooted in our communities. Our reservists, be they Active or Strategic, are the bridge between regulars and civilians, between barracks and boardrooms. If we are serious about resilience, defence is not just the job of the Ministry of Defence; it is the responsibility of all of us.
The modernisation of the Strategic Reserve and the Reserve Forces’ and Cadets’ Associations elements in this Bill represent a good first step, which I hope will be built on in the Government’s future defence readiness Bill. But legislation, as I have said, is only one element, and I have one plea to the Minister—apart from, of course, for continued support for the Reserve. It is that the Government embark on a conversation with wider society to explain why defence is a national responsibility. I know that work is being done on that within the MoD and I am very grateful to the Government for ensuring that it is being done—but we need to start that conversation now.
Lord Magan of Castletown (Con)
My Lords, it is somewhat daunting to follow my noble friend Lord Lancaster of Kimbolton. He certainly knows what he is talking about.
We have to talk about money. It is the critical lifeblood of our Armed Forces and their effectiveness. This Labour Administration are totally failing to recognise fully their financial responsibilities for the defence of the realm. We are on a collision course with a Russia that is on a war footing. The threats are not imaginary; they are real. Yet the current Labour Administration are intent on sleepwalking into a critical situation for want of mobilising the immediately necessary and substantial funding to keep our country safe.
Yes, the UK is extremely vulnerable and exposed at this time, not least because of the very substantial underinvestment in our nuclear submarine capability. The strategic defence review made abundantly clear the scale of the increased investment in defence capabilities that is needed. The defence investment plan has quantified the requirement at £28 billion over the next four years. The reality is that the current Labour Administration have prevaricated and procrastinated until very late, coming up with a—very rushed—financial commitment of just £15 billion over four years, but substantially sourced by as yet unidentified cost savings. This is just far too little and far too late.
Defence expenditure will rise in 2030 to just 2.7% of GDP, far short of the 3% committed by the Prime Minister to our NATO allies. No wonder that John Healey, until recently Secretary of State for Defence, resigned—because, in his words, the proposed level of spending
“falls well short of what is required for defence and the country at this dangerous time”.
So Prime Minister Starmer goes to the NATO summit this week as a derided lame duck—an ignominious ending to his disastrous term in office. His weakness will hugely upset our European NATO partners but will enrage President Trump, whose ire will no doubt manifest itself in other ways of significant damage to the UK and our trading relationship with the USA. Starmer has surely smashed the special relationship; it will take a very long time for trust and confidence to rebuild.
Lord Dannatt (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Magan of Castletown, who has rightly pointed out the inadequacies of the funding package announced last week in the defence investment plan. However, that is not what I wish to talk about this afternoon.
I welcome the strengthening of the Armed Forces covenant, but I do so in the wider context of the funding—and underfunding—of defence. We put the Armed Forces covenant into being in 2011, following several years when the Armed Forces had been under huge pressure as a result of the double commitment in Iraq and Afghanistan. At that time, there was an imbalance between what the nation was asking the Armed Forces to do and what it was providing them with in order to carry out their tasks. That imbalance was translated into what is now the Armed Forces covenant. The covenant now focuses largely on individuals’ requirements and making sure there is no disadvantage, which is good, and we are now going to widen it and its legal underpinning.
I stress that the origin of the military covenant, as we called what is now the Armed Forces covenant, was a moral foundation to ensure a balance between what the nation was asking of the Armed Forces and what the Armed Forces were being given to do it with. In welcoming the strengthening of the covenant, I make the wider point that there is that moral consideration, as well as the legal underpinning.
Secondly, I welcome the defence housing strategy, but we have been there before. I have been in and out of the Ministry of Defence for the better part of half a century, and successive Governments have vowed to do what they can to improve the standard of service accommodation, both for married families and for single-living accommodation. They have identified money to be put to one side specifically to improve that, but time and again those pots of funds have been raided when other priorities were deemed to be higher. In the context of the underfunding of the defence investment plan, can the Minister say whether, this time, we have a commitment that the money being ring-fenced for the housing strategy will itself be preserved and used for the purpose for which it has been identified?
Thirdly, I welcome the reference in the Bill to a veterans’ commissioner for England. Such commissioners exist in Wales, Scotland and Northern Ireland, but there is no commissioner yet for England. Some 20 years ago, with a previous Government, one argued hard that there should be such a commissioner. The Government of the day said that there should not. Well, that same party is now in power, and we seem to be going down the track of having a commissioner for England. I welcome that, but as I understand it, it was announced almost two years ago and a person has not been recruited, identified and put in place.
Fourthly, I raise Clause 48, which amends the Protection of Military Remains Act 1986 and will have some unintended consequences. I am not a diver, but the unintended consequence of strengthening that Act is that it places the hitherto innocent activities of diving parties into an illegal framework. If they conduct their diving as they have in the past, this legislation having changed, they will be conducting illegal activities that will render irrelevant their insurance to cover their hobby and diving practices.
As the Minister is aware, I chair the Gloucester 1682 Charitable Trust. That trust exists to fully expose for the benefit of the nation the story of the “Gloucester”, lost off the Norfolk coast on 6 May 1682. Why is that important? It was carrying James, Duke of York, who went on to become James II. If he had drowned, the course of English history would have been changed. If John Churchill, who was with him at the time, had drowned as well, he would not have gone on to become the first Duke of Marlborough, win the battles of Blenheim, Ramillies, Oudenarde and Malplaquet, and end the War of Spanish Succession. The course of European history would have been changed. I highlight the story of the “Gloucester” because we also run the risk of being prevented from continuing to excavate and bring to the surface artefacts that can tell the story of that ship and that important episode in British and European history. I therefore ask the Minister for assurance that the amendments to the Protection of Military Remains Act will not hinder our work as far as the “Gloucester” is concerned.
Fifthly and finally, I raise a subject I have raised many times in this House. In 2013, I was privileged to be given a debate in my name relating to the Northern Ireland Troubles. Well, 13 years later, we are still really no further forward. The Act recently passed has now been suspended, and the current Government’s intention to bring new legislation has itself been suspended. We cannot allow ageing soldiers, ageing veterans, to continue to run the risk of vexatious inquiries and subsequent court cases. If these things could have been settled, they would have been so 20, 30 or 40 years ago, when the evidence was fresh. Most of these cases collapse because the evidence is inadmissible and, frankly, old, and it is difficult to get fresh evidence. I therefore ask again that resumed efforts be made to bring fresh legislation forward to prevent further inquiries and the harassing of now aged and ageing veteran soldiers who served in Northern Ireland during the Troubles.
Baroness Carberry of Muswell Hill (Lab)
My Lords, it is a pleasure to follow the noble Lord, Lord Dannatt, and I start by congratulating the Government on bringing forward this Armed Forces Bill in this particular form. My noble friend the Minister has set out how the Bill strengthens the nation’s enduring covenant with armed services personnel. I thank the men and women who serve, who defend our nation and who protect our interests.
Every Armed Forces Bill is of course more than just an administrative requirement: it says something important about what the country stands for. This current Bill is an opportunity to modernise, strengthen and improve. As has inevitably been noted, the Bill arrives alongside the defence investment plan. Whatever the level of noise around that plan, there is no denying that this Government have already shown that they are prepared to make hard choices to invest in defence and that there must be even more, even harder choices to come. Meanwhile, against a background of growing global instability, the Government are acting decisively, with money attached, to begin to shore up our defence capabilities to meet present and future external threats.
Fundamentally, the Bill is about the people who defend us and I hope that one of its effects will be to help with recruitment, retention and morale. The Bill builds on the big pay increases, better housing, expanded childcare and the more flexible offer of service that the Government have already brought in. As my noble friend the Minister detailed in his introduction, the Bill deepens the legal force of the covenant, stretches obligations across government, improves the service justice system with better protection for victims and, as several noble Lords referred to, establishes the new defence housing service, backed by £9 billion over the next decade. We cannot honourably carry on expecting people to go off to risk their lives if they do not have a decent home.
Like many other noble Lords, I take every opportunity to encourage young people to consider joining the armed services. To a young person considering service, the Bill says that your country values you. It tells a parent that a service career for their son or daughter offers dignity, respect and opportunity. On recruitment, the defence investment plan promises investment in the first four years, then an expansion of the regular workforce, including increasing the size of the Army. I ask my noble friend the Minister: how will progress on this be tracked and reported?
The investment plan also signals a £4.2 billion spend on the reserves to the end of the decade. Like other noble Lords, particularly the noble Lord, Lord Lancaster, I want to focus on the reserves. There is a reason that around 12,000 employers across the United Kingdom have now signed the covenant. They will tell you that they recognise both their duty to support those who serve and the real benefits reservists bring into civilian employment. The British Chambers of Commerce, for example, signed the covenant five years ago and it uses its voice to encourage chambers and the broader business community to do the same. Over half of UK accredited chambers of commerce are signed up and all these signatories actively support the Armed Forces, including encouraging member employers to take on reservists and to give them the support they need.
The BCC and other employers regard this as an active and mutually beneficial partnership, particularly as businesses are up against skills shortages. The benefits of this flow in both directions. Employing reservists gives employers access to skilled staff and to skills training that they would otherwise have to pay for themselves. Organisations gain crisis-capable staff with leadership skills and sound judgment. For the Armed Forces, civilian employers provide the flexibility and support that makes reserve service viable.
There are also advantages for the wider economy. Employing reservists sustains a two-way flow of skills between the military and civilian sectors in, for example, engineering, logistics, cyber and healthcare. For example, a reservist cyber specialist may bring cutting-edge commercial knowledge into a defence company; a reservist military engineer may return to industry with world-class leadership experience; and a reservist medic strengthens both military readiness and civilian resilience.
It is not just private sector employers who testify to this. For example, NHS Employers reports that reservists in NHS trusts bring emergency decision-making, leadership confidence, problem-solving and resilience under operational pressure. One NHS trust recently described reservists as improving workforce capability daily, particularly in acute and emergency settings. That matters because healthcare is one of the clearest civilian environments where crisis management skills transfer directly. Reservists themselves report using the skills they get from military service in civilian jobs, as we saw in the 2024 tri-service reserves continuous attitude survey. I invite the Minister to consider what more the Government can do to encourage more employers to take on reservists.
It is, of course, the strategic reserve, as has already been said this afternoon, that is the Bill’s main target, and rightly so; it makes absolute sense to keep ex-servicepeople on the books longer and make call-up easier. But I ask Ministers not to underplay the Active Reserve. I anticipate a positive response to this from my noble friend the Minister after what he has told us about his close family member, who is a member of the Active Reserve.
I acknowledge a persistent low conversion rate among applicants to the reserves. It takes a constant effort to recruit, and it depends very much on employer support being sustained. But there is a positive pay-off from investment in the Active Reserve. It creates a continually renewing source of capability. It gives the military access to live civilian skills, and it is a source of larger long-term mobilisation and deeper long-term resilience.
The Defence Minister recently said in the other place that the MoD had taken urgent and targeted action to streamline and speed up volunteer reserves recruitment processes, and, from next year, reserve recruiting will pass to the new Armed Forces recruiting system. In conclusion, I join other noble Lords, notably the noble Earl, Lord Minto, in asking, in light of all of this, when will it be possible to make progress on the SDR’s ambition to increase the Active Reserve by 20% over time?
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to take part in this debate. I welcome noble Lords who have said that they are relatively new to engaging in military issues, which is something that your Lordships’ House should encourage more of. In this age of geopolitical shocks, unlikely to reduce in intensity or frequency any time soon, and direct if undeclared attacks on the UK, we need far more and broader engagement in security issues than has traditionally been the case. We need a realistic assessment of the level of Armed Forces that the UK population and economy can support, rather than seeking to find a place in the world beyond our capabilities, and a realistic assessment of the unstable diplomatic environment in which we operate. We know who our friends are, and we also need to know that those who have been our friends in the past may not be so in the future. We owe it to the Armed Forces, as the whole of society, to be brutally realistic about the circumstances we now find ourselves in.
I begin by being positive. I welcome the defence housing strategy and the creation of the defence housing service, which, as the letter to noble Lords from the noble Lord, Lord Coaker, put it, aims to put first the needs of forces personnel, veterans and their families. That will be a welcome change from the disastrous privatisation—one more disastrous privatisation—of forces housing that, as the Financial Times summarised it,
“sparked multiple court actions and saddled the government with billions of pounds in rent and maintenance costs”.
When I was completing the Armed Forces Parliamentary Scheme a few years ago with the RAF—I should perhaps declare now that I am completing the RCDS international security and strategy course—forces housing was the issue raised with us perhaps the most often when we spoke to forces personnel, and it is undoubtedly going to take a great deal more in costs and attention to repair. I note the amendment in the other place on ensuring consistent investment and support in the Bill for forces housing, and I think that is certainly worthy of your Lordships’ consideration.
I also welcome the improved attention to the Armed Forces covenant and to victim support, particularly for women and girls, and I was interested in the technical issue raised by the right reverend Prelate, who is not currently in his place, about the treatment of domestic abuse cases; that certainly deserves more examination. I will be probing the Government on how they might act more strongly on rape and sexual assault cases, something the House united in indicating its strong desire for changes to in 2021.
Saying that, I note that I am a veteran of the Armed Forces Bill 2021 and the Armed Forces Commissioner Bill 2025. The noble Lord, Lord Coaker, and the noble Baroness, Lady Goldie, will be hearing from me on some very familiar issues, and I make no apology for that. They are important issues, particularly violence against women and girls in the military and the recruitment of 15, 16 and 17 year-olds into our forces, but I will be adding a couple of new issues to raise.
The Long Title includes
“to make provision about visiting forces”.
I note that in the other place Green MPs supported what was a new Clause 4, which probably comes under that provision, and I will be happy to work on that here, but I want to raise a new issue now and pursue it at later stages, one that I have also raised by way of Written Question. It is that of foreign personnel based or visiting here who commit crimes.
This issue is raised through an excellent job of reporting by the Guardian, which it deserves to be commended for, on the case of Jacob Wulfson, who strangled in his apartment in Cambridge a British woman he met online. This case was allowed to be tried at an US airbase court martial, instead of him facing UK justice. That involved an all-male panel of Wulfson’s fellow US Air Force officers, all stationed at the same base as him. The victim described the hearing as a “distressing and degrading” experience. She said that the system, which was unfamiliar to her,
“picked me up, chewed me out”.
I want to see whether we can use this Bill to prevent any similar cases in future.
I will also be delighted to back up the noble Baroness, Lady Penn, not currently in her place, on the issue she has indicated she intends to lead on, that of inadequate paternity leave in the military. I note, since I was speaking on Friday about transparency in lobbying, that I have been lobbied on this by the NGO called The Dad Shift, and I am backing the campaign that it is leading. I always try in your Lordships’ House to bring the voices of people who cannot be here, so I want to bring some of those voices of men who have indicated their concerns about the current inadequate provision of maternity leave. This is from an Army soldier:
“Being posted 4 hours away from my child when she was born was tough, only having 2 weeks to bond before I was back to being 200 miles away with limited time to travel back and see her was tough and has definitely caused irreparable damage to our relationship, ultimately leading to the collapse of my relationship with her mother too”.
Another said that when his child was born, he was granted two weeks of standard paternity leave, with an additional two weeks of discretionary leave due to his wife requiring an emergency c-section. It is usually said that it takes at least six weeks to recover from a caesarean section. I note that in the joint service publication JSP 760, there is a discretionary element of providing additional compassionate leave, as that second account indicates, but it is, of course, discretionary.
It is difficult to put a full scale on this problem, but nearly eight in 10 service families have children, and 32% have children under five. The level of paternity leave actually taken has dropped, which may be accounted for by a slight fall in headcount, but it is a really significant drop. I would be interested if the Minister, now or in future, can provide any information on what he knows about the level of take-up of paternity leave.
I note that there is a review of parental leave arrangements currently ongoing, due to report in late in 2026 or early 2027, so there is a window of opportunity here for your Lordships’ House to do something really positive. I would argue that it is obviously the right thing to do, but also a great many of the contributions to the debate today have focused on retention of military personnel, and this is obviously an important issue, as well as supporting military families.
I come to the second issue that will not surprise those who were here in 2021, about recruitment of 15, 16 and 17 year-olds into the military and particularly the Army Foundation College in Harrogate, where over the past five years an average of 2,380 children have been trained each year. This has been a cause of considerable complaints and campaigning. I note that I am drawing on the work of Child Rights International Network, which obtained the inspectors’ reports from the last Ofsted visit to the site in March 2024. Recorded under a section titled “Ill-treatment of recruits by staff” was the following. In 2021: eight allegations made, six substantiated and military action taken. In 2022: 10 allegations, five substantiated and action taken. In 2023: six allegations, two substantiated and actioned. For 2024, the data was greyed out.
I have seen some very disturbing footage of not just the treatment of recruits by instructors but behaviour within groups of recruits. It cannot be shared very widely because it might identify the child who took it, but it is very disturbing. There are reports of a 16 year-old former recruit who witnessed his friend being so badly beaten by an instructor that they broke his leg. He was then forced to march on it for miles. We are an utter outlier among developed countries in recruiting 15, 16 and 17 year-olds, and this is something that I will be raising further.
I want to mention just two more issues. One is the Wiltshire Police investigation of sexual abuse during military examinations, which has been ongoing for some time and dates from the 1970s up to 2016 at different locations across the UK. I wonder whether the Minister can update us now, or I will understand entirely if he wishes to do it in writing, on how that inquiry is proceeding. There are a great many people with cause for concern who would like to know what is happening with that.
I also note a very specific issue, but one that is clearly of great concern to some people, with good reason, calling for the recognition and protection of the SS “Tilawa” from 1942 and comparable cases. This is identifying a statutory framework gap governing maritime war graves. Perhaps, again, the Minister might like to write to me about that. I realise it is a fairly technical issue, but it is one that we will be raising in future.
Baroness Fraser of Craigmaddie (Con)
My Lords, like others, I start by welcoming this Armed Forces Bill. There are many measures within it that have been identified today that are in urgent need of our attention, such as the provisions to ensure that service personnel and their families have access to quality housing and the intention to modernise and strengthen our Reserve Forces; particularly the inclusion of support for employers, for example. I declare an interest: I have a daughter who is a serving reserve officer in the very unit that the noble Lord, Lord Wallace of Saltaire, mentioned, the London Scottish. I also welcome the desire to place the Armed Forces covenant fully into law. The Bill rightly recognises that our duty to those who serve must not end with warm words but must be reflected in legislation and public policy. However, in some areas, I wish that the Government would go further.
As others have identified, the measures in this Bill extending the recall liability and easing the transfer from regulars to reserves focus on the Strategic Reserve. If we are really going to adopt a whole-defence approach and increase the Active Reserve by 20%, we need to be much smarter about who we have, what skills they bring and how we attract, train and retain people within all the Volunteer Reserve Forces. The MoD does not manage or track total spending on Reserve Forces. Answers to Written Questions in the other place show that the MoD has no idea as to the make-up and skill set of the Reserve Forces. My noble friend Lord Lanacaster of Kimbolton suggested that we focus on digital data solutions; would they not be basic low-hanging fruit that the Government should ensure they resolve as a first step?
Along with others, I, too, look forward to the Minister explaining how else the Government plan to deliver on expanding the pool of reserves. Should this Bill be confined to changing the length of time and age limits for recalling personnel? What about tackling the less favourable treatment of reservists regarding pension access and daily rates of pay, and addressing the conclusions of the 2024 employment tribunal ruling? Will he commit to supporting my noble friend Lord Lancaster in implementing the recommendations of RF30, or perhaps the suggestions for tax incentives for reservists made earlier by my noble friend Lord Minto?
There is another area where this Bill suffers from a glaring omission. There is a group of people who wear a uniform with pride. They are described by the Minister himself as essential and a unique asset to government. They participate in military operations in contested environments in direct support of the UK’s national security. These personnel spend months away from their families. They can be exposed to missile threats, hostile actors and escalating regional tensions. They accept restrictions on their freedoms. They may suffer the same psychological impacts of operational deployment as others in our Armed Forces, yet when they return home, they do not enjoy the same recognition under the Armed Forces covenant because they are classified as civilian employees. I am referring to the Royal Fleet Auxiliary, the RFA. Because its members are employed as civil servants, the Armed Forces covenant and the provisions in this Bill do not extent to them.
The Royal Fleet Auxiliary is not a commercial shipping company; it is a uniformed fleet owned by the Ministry of Defence, operating under naval command, crewed by people who volunteer to deploy wherever the Royal Navy is sent. Without them, carrier strike groups do not remain at sea, amphibious operations cannot be sustained, and NATO task groups cannot remain on station. They are not merely supporting defence; they are part of defence. RFA “Tideforce” has recently been participating in maritime security operations in European waters, working with NATO forces and Royal Navy warships, including on tracking, intercepting and seizing Russian shadow fleet oil tankers. Right now, the crew of RFA “Lyme Bay” is deployed in the Middle East. Repurposed as a specialist mothership for autonomous mine-hunting, the vessel carries advanced underwater drones, uncrewed surface vessels, and specialist mine warfare and diving personnel. The 60 or so members of the ship’s company who run RFA “Lyme Bay” were trained and tested thoroughly before deployment alongside the embarked forces who provide the mine warfare expertise. With the destroyer HMS “Dragon”, RFA “Lyme Bay” will play a central role in any future multinational effort to safeguard the freedom of navigation in the Strait of Hormuz.
RFA personnel have trained, and are deployed and operating right now, in one of the most volatile places on the planet, yet when they return home, they and their families will not be covered by the Armed Forces covenant. The Minister confirmed this in an Answer to my Written Question on 3 June:
“In the spirit of the Covenant, organisations who have signed the Armed Forces Covenant pledge are encouraged to consider the needs of other groups within the wider Armed Forces community if individual circumstances merit it. This includes members of the RFA that have seen duty on defined military operations”.
We have an opportunity in this Bill to put this right. I know first-hand that the Minister is a supporter of the RFA. Surely, tracking the shadow fleet, deployment in the Middle East, and supporting NATO task groups are defined military operations, and surely every member of the RFA who has been part of them deserves to be protected by the provisions of the Armed Forces covenant. I hope this Bill can be amended to ensure that from now on, this is unambiguously the case.
The Armed Forces covenant exists because those who serve our nation accept unique risks, restrictions and sacrifices. It is not founded on military status but on military service. It is profoundly unfair, then, that there remain men and women, routinely deployed alongside our Armed Forces in areas of conflict and crisis, who enable military operations every day but who remain outside the covenant’s protections. That cannot be the intention of this Bill. I therefore urge the Government to consider an amendment that extends covenant eligibility to Royal Fleet Auxiliary personnel who have undertaken defined operational service. It would be a modest change to this Bill, but a significant statement of fairness.
Lord Morse (CB)
I am delighted to speak after the noble Baroness, Lady Fraser. I am an Army brat. I am not sure how many of them are in the room, but my father was a serving officer and I was brought up in some 25 different insalubrious married quarters around the world, so I have some feeling for what we speak of. In addition to that, as Comptroller and Auditor-General, I had the pleasure of making quite a lot of reports on both the MoD as a whole and on the Annington Homes “deal”, which is probably the most neutral expression I can use.
I am clear that we owe a massive debt to the Armed Forces, and it is not easy to pay it off, because it requires seeing them integrate into society in a comfortable way, which is often very difficult for them, quite painful, and not always successful to be honest. We need to recognise responsibility for a lot of people who have been deeply embedded in major institutions for long periods, and are coming out of that and trying to live what we would call a normal life. They need help when they are doing that, and if we are not responsible, then I do not know who is.
I respect and support the objectives of this Bill, and I believe the best way I can help is by trying to point out a few areas where we need to be on guard against building disappointment into the legislation. The Bill places a legal obligation on various public bodies that are likely to be providing services to service people before or after retirement to give due consideration to the armed services covenant in making decisions on access to their services. This is positive, but it is important to remember that local authorities have a wide range of services they are legally obligated to provide to their residents, as do health providers. There is a significant difference between a legal obligation to give due consideration, which could be satisfied by having a minuted discussion, and an obligation to provide a service where residents can and frequently do seek judicial review to enforce provision of services. I suspect that many local authorities feel they are under heavy financial pressure already, and struggle to meet their existing statutory obligations, so the obligation to consider the covenant may sometimes produce disappointing results for people who believed that they were walking forward with the Armed Forces covenant in their hand, expecting a fulsome response. It may be very difficult for local authorities to do that.
Local authorities may be able to seek relief under the new burdens rules, but most applications of this relief are intended to provide transitional cover only, so the burden will generally last a lot longer than the relief. Notwithstanding that some service providers support champions to assist forces people to find their way to what may be available, it may be worth while to consider an independent professional advocacy service modelled on the ombudsman, with ombudsman-style authority and the ability to command witnesses. That would provide much more effective and wider enforcement of their rights, or at least make sure that, when we say “due consideration”, it really means something. Having an authoritative voice at the table might help a great deal.
On service accommodation, the record of underachievement is a long one. The Annington Homes example is currently in the press, although it all took place a long time ago. Put briefly, this was a sale and lease back of a large estate of MoD-owned properties in need of extensive repair. The deal provided the MoD with a significant capital payment and a future rental obligation, but the responsibility to keep the estate in repair has been the subject of a long-running dispute. Meanwhile, the estate has become progressively more dilapidated and, in some cases, uninhabitable. The lump sum that the MoD received certainly did not go into keeping the estate in repair. The moral of the story is that assets with no income stream to support maintenance lose value and fail in their primary purpose of providing good-quality accommodation for forces people.
Could this sort of thing happen again under the Bill’s provisions on property? It is obviously not meant to. Let us answer that by looking at the three pillars of The Defence Housing Strategy 2025. The first looks to a renewal of defence family housing stock over a 10-year period and commits £9 billion to support this. The second calls for an independent body for defence housing and the third looks to ensure that defence housing and defence land deliver for the nation. I will come back to that one.
The first two pillars look mutually reinforcing, although it would be helpful to set a standard that housing stock could be brought to and maintained at, rather than just hoping it will be in good condition. As we saw with Annington Homes, maintenance is crucial in sustaining the value and usability of a property. Since lack of maintenance is not necessarily obvious, it is perilously easy to rob Peter to pay Paul elsewhere in the MoD budget. I have seen this happen quite a few times. One suggestion to push back on this would be to set a required enforceable objective, perhaps treating the decent homes code, which is familiar to the MoD, as the basement and then building up from that to the quality of accommodation we want this scheme to deliver. We could and should think about that.
On the third pillar, the objective of delivering for the nation may involve delivering to the nation instead. The objective has a Treasury-ish tone to it. The pressure to generate substantial funding and to assist in the pursuit of national housebuilding targets and other wider policy objectives could become a very powerful driver. However, this need not be irreconcilable with providing excellent accommodation for our armed services, provided this is suitably protected and the defence property budget is specifically ring-fenced and protected so that it is accumulated over the 10-year period specified for renewal and not accessible for other purposes.
The enshrinement of the Armed Forces covenant in law is a significant step forward. The ambitions inherent in it deserve our support and as much reinforcement and stiffening on the delivery front as we can bring to bear. We need our military, now more than for many years, and we owe it our strong engagement in this Bill.
Lord Thomas of Gresford (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Morse, who spoke movingly of his experience of some 25 married quarters and the immense debt we owe to the services. I entirely agree with him. I declare an interest as president of the Association of Military Court Advocates, though I speak entirely on my own behalf.
In the last 30 years, the traditional court martial system has been completely overhauled as a result of the European Court of Human Rights decision primarily in the case of Findlay in 1997. It was ironic to hear the noble Earl, Lord Minto, talk about the modernisation of the justice system and at the same time call for the abolition of our membership of the European Court of Human Rights. I had a flash of when I was a bus conductor as a young man and the driver told me how, in his youth during the First World War, he had been tied to the wheel of a gun carriage and lashed. The military justice system has come a little way forward since those times.
As the noble and gallant Lord, Lord Craig of Radley, reminded us, the main reforming legislation was the Armed Forces Act 2006, which set up a justice system under the control of civil judges in serious cases and, in particular, independent of the chain of command. On our last excursion into this area in 2021, more reforms were pushed through which have now been brought into force. I am pleased to see further important reforms in this Bill, which I entirely support. It is extremely important to the recruitment and retention of personnel not just that the social and welfare conditions of the Armed Forces are maintained, matters with which this Bill also rightly deals, but that, where problems arise, the justice system is fair, appropriate to the conditions of service life, proportionate to the civil system and, above all, attracting the confidence of those who serve.
The area that has given rise to controversy is that of sexual and harassment offences. Although there has been a great deal of improvement in the investigation and support services, there remains a need for vigilance at all times. It is an area of concern to military justice not just in the United Kingdom but in the United States. I gave evidence to a Department of Defense review in Washington DC in September 2014 when the issue was very much alive in relation to American forces. My evidence concerned the matters I have referred to: the independence of the chain of command and, in particular, the employment of civilian judges experienced in Crown Courts. However, the US Department of Defense committee was persuaded by a formidable array of gold-braided generals, led by the chief of the general staff, to maintain its existing system of ranking military judges acting within the chain of command.
There are therefore significant procedural differences between British and US courts martial which have an impact on US forces stationed in this country. I am grateful to my noble friend Lady Brinton for raising the case of Captain Jacob Wulfson, referred to last week. Your Lordships will recall that this was a sexual attack by an off-duty US pilot on a British lady in civilian accommodation in the city of Cambridge. That offence in 2023 gave rise to concurrent jurisdiction between the British and US authorities. Prima facie, where an offence by an off-duty American serviceman against a British civilian takes place outside the ambit of an American base, the appropriate investigation should be by UK police and the prosecution should be brought in our own Crown Courts.
What happened in this case, however, was that the Cambridgeshire police waived jurisdiction and the trial took place by court martial before a US military judge and a convened panel in the Lakenheath base. It is undoubtedly the case that, without any of the measures we have developed to protect the victim as a witness, the attack on the lady’s character by a US defence attorney went far beyond what would be permitted in a UK Crown Court. Captain Wulfson was acquitted of a rape-type charge but convicted of strangulation—something he admitted had happened in the course of their encounter. In accordance with the practice at the time, the sentence on him was determined by the lay panel of fellow officers at the US base, and he received six months’ detention in a commodious detention facility on camp. He was also dismissed from the service.
Two issues arise, and the first is jurisdiction. On what basis did the Cambridgeshire police hand the case over to the US military police for investigation? There are unpublished agreements—the details of which we know nothing—between the Attorneys-General of the United States and the UK. Will the Government undertake to publish those agreements in the interest of transparency? Should there not be a register kept of decisions made by UK authorities to waive jurisdiction which would set out in writing the reasons for such waivers, whether by the police, the CPS, the Director of Public Prosecutions or the Director of Service Prosecutions? This would inform the public and enable a victim to challenge such decisions by way of judicial review if the quality of justice was at risk.
The second issue is sentencing. In this country, the sentence is determined by the board sitting with a judge advocate, who advises the members on the law and the scale of sentence recommended by the Sentencing Council for a particular offence. In the event of an equality of votes among the members of the board, the judge advocate has a casting vote. I have argued in the last two Armed Forces Bills that, in the modern era, the judge advocate in the UK system should sentence alone, on the basis that the exercise of sentencing today is highly technical and beyond the competence and experience of members of the board who, unlike magistrates, have no training and have probably never been in court before and are unlikely to be there again.
This sensible reform has always been resisted, on the basis that the board of senior officers and NCOs has the military experience valuable for addressing the just penalty. That view has been supported elsewhere. However, I would argue that a judge advocate sitting in courts marital on a daily basis has more than adequate experience of the military world. The wholly inadequate sentence passed in the Wulfson case shows what can happen when sentencing is left to amateurs. In the US system, the military judges’ role—in accordance with the practice then in force—was limited to indicating to the panel the maximum and minimum levels of sentencing. That US system has since been replaced and, had the offence occurred after December 2023, the process would have followed the system I have been putting forward for years, in which the judge passes the sentence alone. Wulfson was lucky. I hope to advance these areas in Committee.
Baroness Dacres of Lewisham (Lab)
My Lords, it is a pleasure to follow the noble Lord, Lord Thomas of Gresford. I take this opportunity to thank all those who serve and have served, and their families. This Bill is about more than just military law; it is about the promise we make to those who serve our country and their families that their service and sacrifice will be recognised, not only while they serve but long after their military service has ended. Our Armed Forces do not serve alone. Their families also make sacrifices in support of that service.
I welcome this Bill, in particular the measures to strengthen the Armed Forces covenant. My own experiences have shown me why these issues matter so deeply. Earlier in my career, while working at JP Morgan Chase, I had the privilege of managing a colleague who had served in the Royal Engineers. He brought with him not only highly transferable skills but also professionalism, teamwork, a good sense of humour and a can-do attitude that benefited everyone around him. His military experience enriched our workplace and demonstrated the enormous value that veterans can bring to employers across every sector.
My work as a councillor gave me a different perspective. I helped a veteran who was experiencing serious housing difficulties in the private rented sector. Despite those challenges, he continued working as a bus driver, supporting his family—including a severely disabled child—while completing a law degree and then a master’s in law. Today, he is a practising solicitor. His journey demonstrates the grit, determination and resilience that so many who have served continue to show in civilian life. It also reinforced my belief that our duty to those who serve does not end when military service ends. Veterans leave the Armed Forces with the qualities to continue making significant contributions to our communities and our country. They deserve our gratitude and continued support, and the opportunity to fulfil their potential in civilian life.
For that reason, one issue that particularly resonates with me is ensuring that the Armed Forces covenant is delivered consistently across every local authority and public service, as well as in the private sector. The promise we make to those who serve should not depend on where they happen to live. The covenant must not be simply a statement of intent or a legal obligation; it must become a practical reality in every community across the United Kingdom.
We should also do more to support veterans as they transition to civilian life. Veterans bring a wealth of expertise and transferable skills that strengthen our workplaces, public services and economy. We should encourage employers and organisations across the public, private and voluntary sectors to recognise the qualities that veterans bring and the value their skills and expertise can add to their organisations.
Many people have little direct experience of military service or the Armed Forces community. That makes it all the more important that we strengthen public understanding of the contributions made by our Armed Forces. Greater awareness helps foster respect for those who serve and encourages future generations to consider a career in the Armed Forces. Supporting our Armed Forces and supporting veterans are not separate responsibilities: one flows naturally from the other. If we are to honour the priorities and promises embodied in the Armed Forces covenant, we must ensure it is reflected not only in legislation but in the everyday experiences of those who serve and those who have served, and their families.
I therefore ask my noble friend the Minister: what further steps will the Government take to ensure that the Armed Forces covenant is delivered consistently across the country? How will that consistency will be measured? What more can be done to support veterans into employment and encourage employers and organisations across the public, private and voluntary sectors to recognise the qualities that veterans bring and the value their skills and experience can add to their organisations?
Lord Hay of Ballyore (DUP)
My Lords, the Armed Forces Bill comes before the House at a very important time in the history of our nation. The threats facing our country are the most complex there have been for many decades. War continues to rage in Ukraine, which is a reminder that our country’s defence cannot be taken for granted. We need to invest properly in our Armed Forces. This starts with giving our brave Armed Forces personnel the best possible support.
There is much in the Bill to welcome. The creation of a new defence housing service is a long overdue step to improving the unacceptable standard of military accommodation that too many service families have endured for years. Good-quality housing is fundamental to keeping up good morale, giving our Armed Forces a place they can call home during active service. There are changes also to expand our Reserve Forces. Likewise, the reforms to the service justice system should improve efficiency and confidence that cases are dealt with fairly and transparently.
However, there are important areas where the Bill does not go far enough to support our Armed Forces. Most concerningly, the protections in the Armed Forces covenant do not apply to every corner of the country. The Bill proposes to strengthen the commitment to our Armed Forces by extending the statutory duties under the covenant to devolved and local government across this United Kingdom. The intentions behind this are good, but it is simply unacceptable that the Bill will potentially leave an opt-out for councils in Northern Ireland. That risks creating a situation where veterans, serving personnel and their families receive different levels of support based simply on where they happen to live. As we know, in Northern Ireland there are local councils which are controlled by parties which have pursued a political campaign against those who have served the Crown. It is simply unacceptable that a veteran in Northern Ireland can have less access to the support protected by the covenant than a veteran in Scotland or Cardiff.
Unfortunately, this is part of a wider pattern of inconsistency in the Government’s approach to veterans’ rights when it comes to Northern Ireland. The former Armed Forces Minister in his recent resignation highlighted the lack of protection for veterans in Northern Ireland as one reason why he could no longer serve in government. Many veterans of Operation Banner feel that the Government’s Troubles Bill does not provide the necessary protection from fictitious claims and legacy investigations. While transparency and the rule of law must always be upheld, many feel that the current legacy framework does not take into account the extraordinarily difficult circumstances that our security forces faced in the line of duty and that it leaves the door open to endless cycles of investigations, even where no evidence exists.
The Bill is a step in the right direction to improving the conditions that our Armed Forces serve under, particularly with the improvements to Armed Forces housing and the justice system. There is still significant work to do to ensure that our Armed Forces personnel are not left behind because of their service, especially in Northern Ireland, and we owe it to them to get this right. It is the very least we can do to support them, just as they have supported us by serving the Crown and putting on their uniforms every day to protect our country.
I support the principles of the Bill, but there are some concerns that have already been raised in the House, including about the level of defence investment that is needed for our future security.
Lord Bailey of Paddington (Con)
My Lords, it is a pleasure to speak after the noble Lord, Lord Hay of Ballyore. Before I come to my remarks, I declare my interests: I am the chair of the cadet health check team; my daughter is currently wading her way through basic training to join the RAF; and I am an honorary colonel of the Royal Regiment of Fusiliers cadets.
I welcome the opportunity to speak on the Bill, and I do so with great respect for those who serve, those who have served and the families who support them. The Armed Forces are not simply a military institution, they are one of the great social institutions of our country. They teach discipline, duty, teamwork, resilience, courage and service. At their best, they give people a sense of belonging and purpose. That is especially powerful for young people who sometimes find it hard to find these things and may not have access to them elsewhere in their life.
That is why I want to focus on what I believe is missing from the Bill: a stronger recognition of the wider social impact of the Armed Forces, particularly the role of the cadet forces. The Minister will understand my going on about the cadet forces. Across the United Kingdom, cadet units are doing extraordinary work. They give young people structure, they teach self-control, they build confidence, and they connect children and teenagers with adult volunteers who model responsibility, leadership and service. For many young people, particularly those from struggling communities, this can be life-changing. I know this from my own life and many years of working with young people. I used to be a member of the Army cadet force, and it was the only institution in the neighbourhood where I grew up that was stronger than gang culture. I can point to the day that the Army cadets saved me from going to jail, and it is why I stand in front of noble Lords today.
Over many years working with young people, you come to understand that opportunity is not just about money; it is about access as well. It is about having someone say that you are capable of more, but you must turn up, work hard, be a part of this team and, above all, take responsibility. This is what the cadet movement does every week. Yet, too often, cadets are treated as a nice extra rather than a serious national asset. The Bill rightly deals with the Armed Forces covenant, service family housing, veterans and the justice system. But it does not go far enough in recognising the role of the Armed Forces in strengthening society itself.
I ask the Government to look again at the Bill and what it could do for cadets. First, we need a clear duty to support the growth of the cadet units. I know the Government are doing this work, but the Bill is an opportunity to lay it down and make sure it continues, supported by long-term funding as well. This is especially so in poorer areas and communities where young people would really appreciate and benefit from this access, because they do not have much structured youth provision.
Secondly, we need proper reporting to Parliament on cadet numbers, waiting lists, adult volunteers, facilities and funding. If we value cadets, we should measure whether their number is growing or being allowed to decline. Thirdly, we need better support for adult volunteers. Cadet units cannot run on good will alone. Volunteers need training, safeguarding support, equipment, facilities and recognition. They are giving up their evenings and weekends to help build the next generation—the Government should make this easier, not harder.
Fourthly, we should place cadets more clearly within the Armed Forces covenant. The covenant should not only speak for those who have served or are now serving; it should also recognise the pipeline of service, citizenship and leadership that cadets help to create.
If we are serious about defence, we must also be serious about the society from which our Armed Forces are drawn. Recruitment and resilience do not begin at the recruitment office; they begin in the homes, schools, youth clubs and cadet units of this country. In communities where too many young people are exposed to gangs, drugs, crime and, worst of all, low aspirations, and there is an absence of trusted adults, the cadet force offers some profoundly positive things: discipline without hostility, authority without fear and ambition rooted in service. Those are social and national goods, and they deserve to be recognised in the Bill.
The Armed Forces do not only defend our nation abroad; they help build character at home. They remind us that service and duty still matter and that young people, when given structure and belief, can rise. The Bill is an opportunity not only to support those who serve today and have served in the past but to invest in those who may serve tomorrow, whether it be in uniform, in public service, in our communities or simply as stronger and more responsible citizens. I hope that the Government take this responsibility.
Lord Stevens of Birmingham (CB)
I declare my interest as an honorary officer in the Royal Naval Reserve and as chair of the Armed Forces Parliamentary Trust. At this stage of the debate, after such a wide-ranging and thoughtful set of contributions, I will make just three brief points.
The first is in respect of Clause 2 of the Bill, on the Armed Forces covenant, which, as a number of other speakers rightly pointed out, builds on the progress that has been made in recent years. In fact, it was five years ago that I, in my former role, together with the Minister for Veterans and People, launched what was called Op COURAGE. It provides specialist mental health services for veterans. It has been great to see its progress since then. The Bill is now expanding beyond health, education and housing to bring in scope a wider range of public services for the Armed Forces covenant.
I will just raise two questions for the Minister on Clause 2. The first is a very detailed one: new Section 343AZB appears to exclude GP practices individually from obligations under the Armed Forces covenant. Instead, it talks about integrated care boards as health bodies, but not GP practices. He will also be aware that the Royal British Legion has argued that the Bill does not explicitly list non-departmental public bodies, such as HMRC or HM Prison and Probation Service. Can the Minister say whether he regards those as in scope of the provisions of the Bill or whether that is a lacuna, as the Royal British Legion appears to believe?
As well as scope, can we hear a little more about practical impact? The noble and gallant Lord, Lord Craig of Radley, the noble Baroness, Lady Lane-Fox, and the noble Lord, Lord Morse, all raised the bite that the “due regard” requirement will actually have. I suspect that, in practice, it will only be when the Government issue new guidance, as they intend to do, to identify the practical steps that this wide range of public services should take that we will see whether the inclusion of “due regard” has any impact. Can the Minister tell us when that guidance will emerge and how granular it will be? That was the first point on Clause 2.
Secondly, on Clause 4, the Bill contains new powers to prevent and respond to drone attacks on defence. On their own terms, these provisions make great sense, but I wonder whether the powers are perhaps too circumscribed and hemmed in. Is there, for example, an opportunity to use the Bill to create a more permissive and expansive maritime statutory framework for the testing and training of military uncrewed vehicles above and beyond the specific cases that are identified here? How will the measures be synced up with the Government’s regulating for growth Bill with its proposed regulatory sandbox for maritime autonomy? How do the Government think about the interface between the defence and civilian aspects of drone testing and training in UK territorial waters?
Equally, rather than confining the scope of the Clause 4 provisions to defence property and areas, I wonder whether consideration has been given, for example, to expanding the scope to include critical national infrastructure in UK territorial waters. If not, can the Minister confirm that it is the Government’s view that no new legal authority will be required to do that, or are they instead waiting for the defence readiness Bill to provide the statutory vehicle for that set of measures? The defence investment plan has £330 million of investment earmarked for critical underwater infrastructure protection. Are the statutory provisions needed to give effect to that in place? Could they be covered by the Bill, or will they emerge through the defence readiness Bill?
Thirdly, as a number of other speakers have said, there is obviously a read-across between the Armed Forces Bill and the defence investment plan. Like other speakers, I note the concerns around the funding of the DIP and that, nevertheless, many of the commitments that the DIP makes are to be welcomed, such as confirmation of support for major capabilities, including Defence Nuclear, AUKUS and GCAP. It has to be said that far and away the boldest and most radical aspect of the DIP is the rapid move to a hybrid Navy and increasing integration with other northern navies from JEF nations.
The biggest bet is on a networked mix of sensors, effectors and deciders as a radical new force design for maritime air defence systems, intended, by 2035, to replace the Type 45s and in lieu of the previously proposed Type 83s. The risk with this big bold bet is if the funding does not stack up, the hybrid Navy cannot cohere, because it will work only if you have all the components in place. For example, the Type 94 uncrewed radar platforms need to co-exist alongside the Type 91 uncrewed missile platforms, which, in turn, need to co-exist alongside the common combat vessels—underpinned by the comms and information systems that will sync up the entire network. If the components are not all in place at the relevant time, the hybrid Navy will struggle to succeed. That implies that we need to get going on the procurement for many of those key components, including the CCVs, if they are going to be in place for the early to mid-2030s. Can the Minister tell us when the procurement for that aspect of the hybrid Navy will begin?
Looking at the financial environment facing defence over the next three to four years, I think the pressures are real. The RDEL uplift for defence is only £2.9 billion in total by 2029-30 compared with 2026-27, which is a miserly real-terms increase. People in defence talk about the fact that the revenue position will be something of a bloodbath over the next several years, which will have a big impact on current operations and other capabilities. In any event, the revenue uplift will be more than offset by the so-called lower-maturity—that is, unidentified—efficiency gaps that will outweigh that funding between now and the end of this Parliament.
Most depressingly of all, for noble Lords who got to the end of the otherwise excellent DIP, on the very last page of text, page 78, they will have seen that, no doubt at the behest of the Treasury, a big asterisk has been inserted to say that terms and conditions apply. I will just quote some of those:
“The investments described in this document … do not constitute binding commitments and are subject to … affordability considerations … They may be reprioritised, deferred, re-scoped, or cancelled”.
If the DIP is not fully and expeditiously implemented, all the good of this Armed Forces Bill will be for naught.
Baroness Smith of Newnham (LD)
My Lords, it is a pleasure to speak after the noble Lord, Lord Stevens, who, as he said in his declaration of interests, is currently chair of trustees of the Armed Forces Parliamentary Trust, which runs the Armed Forces Parliamentary Scheme. I am currently a trustee, having attended all parts of the scheme, starting off in 2015, when the noble Baroness, Lady Hodgson of Abinger, and I were the only Members of the Lords who participated in the scheme. People were not quite sure what to do with Members of the House of Lords on the scheme. They did not quite know how the arrangements would work. Everything was thought through for Members of the House of Commons. So I am absolutely delighted today that we have heard from so many Members of your Lordships’ House who have participated or are participating in the Armed Forces Parliamentary Scheme. That means that we have heard a range of different voices today.
The right reverend Prelate pointed out that all that seems to have happened since the last Armed Forces Bill in 2021 is that the noble Baroness, Lady Goldie, and the noble Lord, Lord Coaker, have swapped places. I and the noble and gallant Lord, Lord Craig of Radley, have not moved, yet some of what I am hearing from the Opposition Benches sounds quite similar to what I was hearing in 2021, and the responses that I suspect we will hear from the Minister this evening may sound quite similar as well. In particular, the noble Baroness, Lady Penn, and the noble and gallant Lord, Lord Craig of Radley, called for us to look again at the costs for those from services families applying for indefinite leave to remain.
So there are perennial questions that some of us have been debating for several years. I hope the change of Government might allow the Minister to give some slightly more positive answers, at least on some issues, even if he will have to go back and persuade his colleagues in the Home Office to support those families—I assume we are talking primarily about the Nepalese Gurkhas who are here. We owe them a duty as well.
We are here primarily to talk about the quinquennial Armed Forces Bill. Every year, we have to renew our endorsement of having Armed Forces. At times we have been doing that in the Moses Room as a statutory instrument with four Members of your Lordships’ House present—the noble Lord, Lord Coaker, the noble and gallant Lord, Lord Craig of Radley, the noble Baroness, Lady Goldie, and I—plus some officials. For the five-year Armed Forces Bill, it is really important that we are hearing so many voices from across your Lordships’ House engaging with issues that matter so fundamentally at this time, precisely for the reasons that the noble Lord, Lord Hay of Ballyore, pointed out. In 2026, the position we are in is fundamentally different from when we debated the Bill five years ago.
We could have all sorts of debates about whose fault it is that the Armed Forces are not sufficiently well funded, but the point is that, in 2026, we all know that we need to invest more fully in the Armed Forces. That is a national concern, and the national conversation is beginning but does not go far enough. If every one of your Lordships who has spoken in this debate, particularly if they do not come from a services background, goes out and talks to their family and friends about what they have been doing when they have been out on the Armed Forces scheme, that would begin to raise conversations beyond the echo chamber where we normally are. As we have heard from many noble Lords today, it is vital that we have a conversation that looks to how we strengthen resilience.
The particularly welcome aspect of the Bill this year, as far as I am concerned, is the expansion of the Armed Forces covenant. I have called on His Majesty’s Government on many occasions for its extension. In the past, when the Conservatives were in government, there was very much a sense of, “Yes, yes, we’re committed to the covenant. It’s really important that health, education and other people deliver the covenant”. The response on these Benches was, “No, it is vital that the whole country understands the covenant, but particularly that His Majesty’s Government take on that responsibility”.
The expansion of the scope of the covenant is clearly welcome, yet, as we heard from the noble Lords, Lord Morse and Lord Hay of Ballyore, and the noble Baroness, Lady Dacres, we need to look carefully at some of the aspects of how the Armed Forces covenant can and will be expanded to local authorities. The noble Lord, Lord Morse, is right that, if we appear to put something on the statute book that is unaffordable, or if we give further duties to local authorities that they cannot afford to deliver or that some councils will deliver and others will not, that will create a whole set of unintended consequences.
During my time in local government—under a very different Government in very different financial times—the Lib Dems had control of Cambridge City Council during the new Labour Government. We did not really need to worry about funding. A lot of questions were very easy, but there was still a bit of a sense that it was too easy for central government to tell local authorities what to do without giving commensurate funding. Times have changed financially for local authorities, so we need to be very careful that if we are asking local authorities to do more things, we try to work out how they will be able to deliver them. But the principle of extending the covenant is hugely welcome.
One issue that many noble Lords have talked about today is the defence housing service and the moves towards spending the £9 billion on service accommodation. It is clearly an area where we need to hold the Government to account in the most appropriate way. This is not a criticism of Governments of any complexion, but it is a reality that a decade ago, when we were debating the Armed Forces Bill in 2016, I raised questions about the standard of forces accommodation. At the time I was a newbie on the Armed Forces Parliamentary Scheme, and it was pointed out to me by service personnel and their spouses that there were a couple of Facebook groups. At the time, one was “Victims of CarillionAmey”. Carillion went bankrupt and it became “Victims of Amey”. This afternoon I double-checked and there is still a Facebook page. It is now called “Victims of Pinnacle”.
When she was a Minister, the noble Baroness, Lady Goldie, congratulated me on one occasion. She said, “We’ve been listening to you. The new arrangements now mean that the telephone will be answered much more quickly. People will get the responses they need”. Yet criticisms remained. The defence housing service and the defence housing strategy are very welcome, but it will be an area where close monitoring and accountability are hugely important.
The Armed Forces Bill and the annual renewal are very often about service justice, and that is an area I always hand over to my noble friend Lord Thomas of Gresford, who knows far more about service justice questions than I do. I very much hope that in Committee he and my noble friend Lady Brinton will table amendments. As we have heard today, there are a range of very technical issues. It would be helpful to have a sense from the Minister of whether he will be open to some amendments of a technical nature that are needed for service justice.
There has been discussion about the gap in funding of the defence investment plan. This is the final point from these Benches; my colleagues on defence would expect me to say it. There is a proposal from the Liberal Democrats perhaps to support defence funding with defence bonds. Has the Minister had a chance to think about that as a way of enhancing the provisions? I conclude by saying that in principle we welcome the Bill, and we look forward to debating it in Committee.
Baroness Goldie (Con)
My Lords, it is a pleasure to wind up this debate for His Majesty’s most loyal Opposition. I say to the noble Baroness, Lady Smith of Newnham, that I am very pleased to be sitting here and I do not envy the Minister sitting over there. Everything has its moment.
As my noble friend Lord Minto said, we on these Benches support the Bill. This House has renewed this legislation every five years since the 2006 Act, in an unbroken constitutional tradition stretching back to the Bill of Rights of 1688—a discipline this House takes seriously. We certainly shall not be a roadblock to its progress.
This has been a rich debate; as the noble Baroness, Lady Smith, said, there have been many contributions which have been genuinely interesting to listen to. However, one issue has recurred with such frequency it is almost like a musical reprise: funding. I shall leave the Minister to respond to that in whatever way he can, but the current position is overwhelmingly regarded as unsustainable.
Turning to other matters addressed by my noble friend which resonated with others, I want to reflect briefly on some contributions from around the House. The importance of housing was universally agreed throughout the Chamber. As the right reverend Prelate the Bishop of Norwich reminded us, houses, flats, terraced accommodations, bases and dockyards also have to be homes. I am grateful to him; we should never forget that.
On housing and the creation of this new defence housing service, there is a risk of duplication of function—I remember the extraordinary size of the defence infrastructure organisation when I was in the MoD—as I gather this will remain as a directorate within the MoD. If we have two organisations both claiming responsibility for defence estate, duplication is not a hypothetical risk, and that is precisely the kind of institutional confusion this House should be pressing the Government to eliminate before Royal Assent and not after.
I note that Section 343F gives the defence housing service the power to
“form, participate in forming, or invest in, a company, partnership, joint venture or other similar form of organisation”.
I simply want to ask the Minister: why do the Government see this as necessary? What kinds of commercial vehicles does the ministry envisage the defence housing service establishing? And what safeguards will apply to ensure that a body created to serve service families and house them does not drift into activities that begin to serve as accountancy balance sheet operations?
There must also be a clear boundary between the defence housing service and the residual functions of the Ministry of Defence, and clarity of purpose about where responsibility and accountability lie, not least because Schedule 1 provides that the service will not enjoy Crown status in respect of much of its property, save in specified circumstances, which itself raises questions about its legal exposure that I hope the Minister can address.
My noble friend Lord Minto offered up the policy on these Benches of an Armed Forces housing association. That is an alternative model for service accommodation reform to that which the Government propose. Whereas the Government have opted for a body that remains tied closely to the Secretary of State, subject to Treasury borrowing consent and a government direction, our model would deliver a genuinely independent, tenant-accountable organisation. I would welcome the Minister’s reflections on why the Government judged a Crown-adjacent body preferable to that independent, not-for-profit model, and what protection service families will have to ensure that the defence housing service does not simply repeat the mistakes of the past. At the risk of making the Minister feel a little uncomfortable, my noble friend asked about the rumoured deferral of investment in defence housing to help fund the DIP, and I hope that question can be answered.
Since I, as a Minister, took the then overseas operations Bill through this House, politicians from all parties, with the possible exception of the Liberal Democrats, have started to question the impact of the ECHR on UK sovereign law and sovereign decision-making across a whole spectrum of activity, and there is a debate to be had. Specifically in relation to defence, the court decision of Al-Jedda v the United Kingdom, decided in 2011 by the Strasbourg court, clarified the reach of that law into a live arena of conflict. The court ruled that the detention of terrorist suspects in Basra by British troops violated Article 5 of the convention, and that the British state had therefore acted unlawfully. This has serious ramifications for future operational decision-making and for the ability of British troops to hold prisoners of war in any future conflict.
The extent to which such law may now to be incompatible with the overriding need to make instant life and death decisions in a conflict environment requires, in my opinion, serious reflection. I look forward to continuing this argument in Committee, where our amendments will receive fuller scrutiny, and I hope the noble and gallant Lord, Lord Craig, is feeling encouraged by my contribution.
A number of very interesting contributions were made on the service justice system. I certainly welcome the sensible alignment of various provisions with the arrangements in the civilian criminal justice system. I am very grateful to the right reverend Prelate the Bishop of Norwich for raising a number of valid concerns, because there is a conundrum here. Under the Bill, service police will not be able to authorise pre-charge custody for offences under Schedule 1 to the Armed Forces Act 2006—offences such as battery—even where there is a clear domestic context, because the legislation is drafted so that only “serious offences” fall within scope, a category which does not capture Schedule 1 offences and does not separately articulate the context of domestic abuse.
A further issue arises under Clause 16, whereby a provost marshal may act as the appropriate authority when a person has been charged with a serious offence, meaning there will no longer be any involvement from the commanding officer in terms of pre-charge attention for such an offence. This seems to be fairly significant interference with the chain of command if we consider the environment where many of these offences might be occurring, which could be a base remote from other places with a military police presence but not an extensive one—I would be grateful if the Minister could expand on the Government’s reasoning here. There is also a concern that commanding officers are not obliged to refer offences, such as common assault, voyeurism, and actual bodily harm in a domestic abuse context, to the service police. Consideration should be had to amending Schedule 2 to the Armed Forces Act 2006 to ensure that commanding officers are required to refer such offences for investigation.
These Benches welcome the incorporation of the Armed Forces covenant into law. It finishes off what I was privileged to start in this Chamber in a previous iteration of the Armed Forces Bill. I say to the noble and gallant Lord, Lord Craig, that I realise the pace may have been too slow, but I pay tribute to his tenacious pursuit of this issue and to the noble Lord, Lord Dannatt, for his continued and vigorous support of the covenant. The previous Government’s reticence was through caution, because we need to understand the consequences of such statutory incorporation. Further questions will follow, and it seems from the Bill’s attempt to define national authorities, local authorities, education authorities and health bodies that this is far-reaching. But what about arm’s-length bodies—corporate bodies which deliver many of the functions detailed in Clause 2? Can the Minister explain their omission from the Bill?
I think we all welcome the provisions in the Bill on reserves to improve flexibility and create fluidity. That is important because there are skills, expertise and niche specialisms in civilian roles which our Armed Forces need to be able to call on at short notice. Indeed, the noble Baroness, Lady Carberry, gave some interesting examples to show how that could work in practice. But as for the laudable objective to increase numbers in the active reserve by 20%, my noble friend Lord Minto indicated a proposal from these Benches of a tax-free first 30 days of reserve service, and that seems to me a no-brainer. I am sure that my noble friend Lord Lancaster of Kimbolton’s reference to the successful recruitment experience in Canada following a national conversation has not been lost on the Minister. I pay tribute to my noble friend for the vital work which he is doing and ask the Minister to take some of these ideas back to the department.
This has been a useful and constructive debate, and I have highlighted the issues of particular significance to these Benches. I hope that the questions that my noble friend Lord Minto and I have posed can be addressed by the Minister; I have also tried to indicate where we expect to return to issues in Committee. I conclude by saying that, notwithstanding these Benches’ serious reservations about the broader funding issues, there is a lot of good in the Bill, which I am sure the scrutiny of your Lordships can make even better. My colleagues and I shall endeavour to make a positive contribution to that process.
Lord Coaker (Lab)
I thank the noble Baroness for winding up the debate and noble Members from across the House for their contributions. I am really pleased—as I think the Opposition Chief Whip heard me say—that everyone is in favour of the Bill. I would hate to be answering on a Bill that everyone opposed; I would be in serious trouble answering all their questions, challenges and gaps, so I start by saying that I am so pleased that everyone is in favour of the Bill. Somebody outside the Chamber used the term non-controversial, but I will not use that phrase as it was made outside the Chamber.
That said, noble Members from across the House have made some serious points about how a Bill that they support could be further improved. I accept that and the challenge for the Government to take it forward. As I said in my introductory remarks, we all want the Bill to succeed because we support its aims.
Let me deal with some points. We have had the debate about funding, and I appreciate that the noble Earl, Lord Minto, and the noble Baroness, Lady Goldie, will continue to make their various points about that. I will make the same points back, and that debate will continue.
However, a number of noble Lords, including the noble Earl, Lord Minto, raised defence housing. I do not often get irritated—and I am not irritated—but I find it slightly strange that a Government who have committed £9 billion of public money over 10 years to improve housing are being taken to task on it. That is all I will say: the Government’s policy is to improve defence housing with £9 billion over 10 years.
Somebody asked whether it applies to single-person housing. With the defence housing service, we are talking about family accommodation. A separate review is going on for single-person accommodation which will report in due course and then the Government will have to respond. That is a very clear answer on that.
The noble Earl, Lord Minto, and the noble Baroness, Lady Goldie, raised the DIO and its relationship with the defence housing service. I will read out this bit of my brief to make sure I get it completely right: “The responsibilities of the Defence Infrastructure Organisation will continue to be provided as part of the National Armaments Director Group within the MoD alongside the new defence housing service, which will assume responsibility for the provision of family housing and the development of surplus defence land in line with the objective set out in new Section 343E(1) inserted by Clause 3 of the Bill. The new defence housing service will continue to work closely with departmental teams, and this will be covered in the framework document between the department and the defence housing service in the usual way”. That seeks to clarify some of the points that the noble Earl, Lord Minto, made in his introductory remarks, and that the noble Baroness, Lady Goldie, and other Members made about the relationship between the DIO and the housing service.
On the ECHR and its application continuing, I think the noble Earl, Lord Minto, made the point that an amendment would seek to change the Government’s wording from “may” to “must”, but all Governments usually argue, and this Government will argue, that they often require flexibility in how they implement various laws. That is something that we would seek to continue.
I thank noble Lords for their interesting ideas about funding for the future. The noble Baroness, Lady Smith, also raised the issue of defence bonds. The Government are looking at different ways in which we can finance defence in the future and no doubt that discussion and debate will continue.
The noble Lord, Lord Wallace, talked about the national conversation. That may change. This is a “stop the press” announcement: responsibilities among the ministerial team may change and I may already have lost the national conversation—not because I have not started it yet, I hasten to add. The serious point is that that national conversation is a priority within the department; the ministerial responsibility for it may well change, but it will be taken forward. I think that is something that the noble Lord, Lord Wallace, will be particularly pleased about, as will we all.
The noble Lord mentioned cadets, which I will come to later, when I also respond to some of the moving remarks made by the noble Lord, Lord Bailey.
Clearly, the national conversation is extremely important, not least around how we support homeland defence. The noble Lord, Lord Wallace, and other noble Lords also made the point about how we ensure that we get and retain public support for the amount we spend on defence. That is crucial to the way forward.
I thank the noble and gallant Lord, Lord Craig, for his welcome of the extension of the covenant to national bodies and his general support for that. He and the noble Baroness, Lady Penn, raised visas. I cannot answer all the questions, but I will answer some of them. Again, the Government are committed to scrapping visa fees for non-UK veterans who have served our country for four or more years, and their dependants. The MoD has started work with the Home Office to deliver this manifesto commitment, and that commitment on visa fees remains. I know that the noble and gallant Lord, Lord Craig, raised that, as well as the issue with the ECHR, and he heard me address that.
Lord Craig of Radley (CB)
I hope that the intention to proceed with it will be coupled with a date when it will be done.
Lord Coaker (Lab)
That is always my intention—rather than to be just aspirational—to try to demand change of the system. The noble and gallant Lord will know from his experience and military service that even a senior rank or senior ministerial rank does not always mean things moving quite as quickly as one would hope. Certainly, this is not an aspiration but a desire to actually bring it about. We will work with other government departments to try to ensure that something happens on that as quickly as possible.
The right reverend Prelate the Bishop of Norwich raised various issues and welcomed the covenant. He heard what I had to say about single-person accommodation and the importance of a whole-society approach. A number of noble Lords mentioned service police and we will come back to some of those issues in Committee.
The noble Baroness, Lady Penn, heard me talk about some of the changes to visas. She mentioned the importance of paternity leave and raised that with me at another meeting outside the Chamber. Of course, we will look at that and see how we can take it forward. I think she mentioned an individual case as well; if she wants to write to me about that, because I do not know the case, I will look into it for her.
The right reverend Prelate the Bishop of Norwich made a really interesting point with respect to not just the Church of England but faith organisations as a whole. The moral dilemma there is between supporting the Armed Forces and appearing to support war versus being a peace-loving faith, which all faiths are. That is a moral dilemma, but sometimes you prevent war by preparing for it. That is the difficulty with respect to that.
The noble Baroness, Lady Lane-Fox, made the point about housing; she will have heard what I had to say about that. She made some other points about the need for transition support, learning and training, which were really important.
The noble Baroness, Lady Brinton, made a number of very important points, which were linked to points made by the noble Lord, Lord Thomas. I thought his was a brilliant legal contribution—I actually understood it, which is not always the case—in the way that he laid out some of the issues with respect to the cases that he referred to, as the noble Baroness, Lady Brinton, also pointed out. I do not want to say too much, because there are ongoing legal issues with respect to that, but there are certainly discussions taking place about how we take it forward.
Here is the legal advice I have had—and this is for the noble Baroness as well as the noble Lord. The Visiting Forces Act 1952 sets out the legal basis for how jurisdiction for criminal offences is decided between the UK civil authorities and a visiting forces service court martial. This is implemented in practice by the police, the Crown Prosecution Service and the UK courts as part of the criminal justice system. Following the deeply distressing recent case, officials are working across government to establish the full facts of how this process was enacted in this case.
If needs be, regarding some of the other things said by the noble Baroness, Lady Brinton, I will make sure that we come back in Committee with answers to the questions she raised, when I have had a full legal response to the things she asked. I thought they were really important, and I will bring them forward and share them—obviously, if I bring them up in Committee, people will see that.
I thank the noble Lord, Lord Lancaster, for the points he raised about the Strategic Reserve, and the point about data and the digitalisation of the system strikes me as one of those important things where it seems we ought to be able, sometimes, to just get on with them.
I take the point made by the noble Lord, Lord Magan, and we will continue the debate around resources. My only point of contention with him is that I really do not think we have “smashed” our special relationship with the United States. There are ups and downs, and sometimes it is difficult, but the UK-US relationship is of immense importance to our country and continues to be so.
I thank the noble Lord, Lord Dannatt, for the points he made. He will know that we are working hard to ensure that we do all we can to work properly with respect to historic wrecks. I will take the point about divers and come back to him in Committee about how the Bill impacts on that.
I thank my noble friend Lady Carberry for her remarks and the importance she gave to the reserves, not underplaying the role of the Active Reserve, and of employers being on side. I completely agree with that, and we will continue to take that forward.
The noble Baroness, Lady Bennett, also made the point about paternity leave, and she will have heard what I said to the noble Baroness, Lady Penn. The noble Baroness and I will continue to have the debate about 16 and 17 year-olds, the young adults—they are not child soldiers. I see it as a really important part of the contribution that the Armed Forces can make to the development of some of our young people, but that is a debate that we will continue to have. I do not know what the maritime war graves committee is looking at, but I will come back to her on that in Committee.
I thank the noble Baroness, Lady Fraser. We may not have delivered exactly what she wants with respect to the covenant but, if she looks at Clause 31, she will see that we have moved on the commissioner having responsibility for RFA personnel. She will know, given the continued remarks that she has made over a number of years around the importance of the RFA, that, although not giving her what she wants with respect to the covenant, the Government have moved on the extension of the role of the commissioner to that, which shows that contributions from all sides of the Chamber can actually make a difference to government policy.
I have said what I have said to the noble Lord, Lord Thomas. The noble Lord, Lord Morse, made the point about housing which, again, is really important.
My noble friend Lady Dacres made a good contribution. The consistency of delivery around the covenant across the country is really important, and she is quite right to make that point. I would say that one of the successes of the introduction of the covenant has been that it has changed attitudes and culture, which often does not require legislation. I think that the Armed Forces covenant has forced local authorities—and will soon do so for national government, although it has probably changed national government behaviour by its very introduction—to change the way in which people operate and the way people interact with our Armed Forces and veterans. I think it has made a difference there, and I say to my noble friend that that is how we see it taking place across the country.
With respect to the noble Lord, Lord Hay, discussions continue on the Troubles Bill and Northern Ireland and the proper place for our veterans and respecting them.
The noble Lord, Lord Bailey, made a hugely moving speech about his own experience and the way in which cadets work. We all support cadets. There are significant sums of money going into cadets, and we wish to expand on that. The noble Lord made an important point about how we attract more volunteers to support that. He will know there are tens of thousands of cadets across the country. This is a point I often make: you see them at events such as Remembrance Sunday but also many others, including Armed Forces Day, which we had recently. The role of cadets in those events, nationwide, was a great tribute to their organisations and a symbol of the sort of society we want in the way in which cadets can bring people together. I thank the noble Lord again for the contribution he made, from his own personal experience, on the way that cadets can help people who may need help and also help those who are simply young people growing up. I think that that is important.
May I congratulate the noble Lord, Lord Stevens, on his work as a graduate of the Armed Forces Parliamentary Scheme?
Lord Hay of Ballyore (DUP)
My Lords, I thank the Minister for giving way. He will know Northern Ireland extremely well, and he will know that there are at least five councils of Northern Ireland that do not implement the covenant. What do you have when your veterans lose out? You end up with a two-tier system where, across the rest of the United Kingdom, the covenant is very much rolled out. There is an opportunity in the Bill to try to address that issue, so it is not the responsibility of a local government to implement the covenant.
This issue has been going on for some time. I could name the councils involved, but, when you have five councils out of 11, you are in a situation where you have almost half of Northern Ireland not implementing the covenant and veterans losing out, when the rest of the United Kingdom and the veterans benefit from the covenant. So I ask the Minister: is there a way, within the Bill, of addressing the issue around Northern Ireland and the covenant?
Lord Coaker (Lab)
The noble Lord explained some of that in his question. There is a particular situation, as he will know, with respect to Northern Ireland and the application of the covenant to all bodies there. As he will know, the duty applying to local authorities does not apply, and that becomes a problem, but we expect the covenant to apply to Northern Ireland through what the UK Government do. It is an ambiguity and it is difficult, but we will always seek to apply the covenant where we can, where it is appropriate, and where it fits the various devolution settlements with respect to that.
The covenant supports the Armed Forces community in Northern Ireland. Borough districts and city councils in Northern Ireland do not generally exercise functions in the policy areas in scope of the covenant legal duty. This does not exclude councils in Northern Ireland from pledging their support for the Armed Forces community by becoming a covenant signatory. I think that is what the noble Lord referred to. Some councils will choose to do so and others will not. That is the situation as it stands.
Baroness Hoey (Non-Afl)
The Minister must recognise that if this goes through without any recognition that Northern Ireland is again being treated differently, it really is not good enough. Surely, they are the Government of the United Kingdom of Great Britain and Northern Ireland, and the covenant is so important to all those people who have served in Northern Ireland and who live there.
Lord Coaker (Lab)
The noble Baroness will know from my record that the Government support the Armed Forces community in Northern Ireland completely. I went to Armed Forces Day in Northern Ireland last year, a government Minister went to Northern Ireland just a couple of weeks ago to support Armed Forces Day, and I have been asked to an event in Northern Ireland in a few weeks’ time, which I hope to go to.
Support for Northern Ireland’s Armed Forces community with respect to the aims of the covenant are clear. We seek to recognise the reality that is there. Councils can pledge themselves to the covenant if they wish. A number have done so, but some have chosen not to. I reiterate the Government’s support for the Armed Forces community in Northern Ireland.
I turn now to a couple of remarks the noble Lord, Lord Stevens, made. On the covenant, as I said, it is the bite of the “due regard” that makes a difference. We saw, when it was introduced by the last Government, that “due regard” has impact as it seeks to bite. Cultural change will cause the councils—as they were then; they are now national bodies—to start to do things that they would not otherwise have done.
It is good that drones are in the Bill. They start to plug a gap. There will be questions about how we deal with that.
I thank the noble Baronesses, Lady Smith and Lady Goldie, for their remarks. There are many questions that we will have to come back to.
I finish by saying that I welcome the general support for the Bill. I also welcome the various challenges and questions that have been posed. We will seek to address those and move forward in a constructive way. If there can be improvements and adaptations, and the Government agree with them, we will see whether we can find a way forward.
Lord Coaker
That the bill be committed to a Committee of the Whole House, and that it be an instruction to the Committee of the Whole House that they consider the bill in the following order: Clauses 1 to 3, Schedule 1, Clauses 4 and 5, Schedule 2, Clauses 6 and 7, Schedule 3, Clauses 8 to 31, Schedule 4, Clauses 32 to 36, Schedule 5, Clauses 37 and 38, Schedule 6, Clauses 39 to 46, Schedule 7, Clauses 47 to 56, Title.