Lords Chamber

Wednesday 9th September 2026

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None Portrait Oral questions: Support for the UK automotive and components sector and workforce
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Fourth Oral Question Lord Spellar. Spellar. >> I beg leave to ask the question standing in my name on the Order Paper.
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None Portrait Business of the House
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Of a private. >> Member's Bill Lord Bassam of Brighton. >> So I beg to introduce a Bill to make provision about the governance make provision about the governance of event venues where seat owners or their nominated representatives form part of the governing body of an event venue to regulate the sales of the use of such seats by seat owners or their nominated representatives. And for connected purposes. I beg to move that this

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bill be now read a first time. The question is this bill be now

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The question is this bill be now read a first time. As many as are of that opinion will say content. of that opinion will say content. To the contrary, not content. The contents have it. Message from the

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contents have it. Message from the Commons that they have passed the health Bill. To which. They desire the agreement of

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They desire the agreement of your Lordships question is that this Bill be now read a first time,

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as many of that opinion will say content. My Lords health Bill, I beg to

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My Lords health Bill, I beg to move that this Bill be. Now read a first time. The question is that this bill

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The question is that this bill be. Now read a first time, as many of that opinion will now say, content to the contrary, not content to the contrary, not content. The contents have it. content. The contents have it. Questions on a statement made in the House of Commons yesterday on Israel Palestine.
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Lord Callanan Portrait Lord Callanan (Conservative)
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My Lords, let me firstly thank. granting us the opportunity to ask questions on this important statement. These measures amount to a major change in the UK's approach to the region, so it is right that we are scrutinising them. In your Lordships House today. In the other place, both the Foreign Secretary and my right hon. Friend the Shadow Foreign Secretary rightly noted the consensus across both our parties on the need for a two state solution to the Israel-Palestine conflict. We agree that the settlements are illegal.

We are both firm in our resolve that Israel has a right to defend itself. And I welcome the Foreign Secretary's explicit statement that he is unwavering in my support for the State of Israel. We also agree that His Majesty's Government were right to designate the Islamic Revolutionary Guards Corps, although I remind the right hon. The noble Lord, the Minister, that the government consistently resisted our amendments to prescribe the IRGC and had to be dragged to this position by noble

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Lords on all sides of this House. Yes. But the question we must ask ourselves today is whether the government's actions have moved us government's actions have moved us closer to a two state solution, or is it a backward step? The Foreign is it a backward step? The Foreign Secretary said a number of times that the UK must not be a bystander. Today we have learnt that Israel Today we have learnt that Israel has ordered the closure of the British Consulate. Can the noble Lord, the Minister, say whether the Lord, the Minister, say whether the news will undermine the UK's ability to influence the future of the region? Has the government actually now made the UK a bystander and a weaker influence on Israel? As a result of these announcements? Can he also say what the FCDO advice was on the risk of the UK's influence in the region being weakened as a result of yesterday's announcement? Then there is the matter of the timing.

Only a matter of weeks ago, Ministers in the previous government, some of whom I serve in this government, also were saying in writing that any trade ban targeting settlements would be practically very difficult to enforce. So can the noble Lord the Minister, confirm that this ban will in fact, need primary legislation that will not be enacted for many months? Foreign Secretary indicated nine months that, but even that seems optimistic to me. Can the noble Lord indicate when we can expect to see this draft legislation? It is also been said by many that the government have made a serious mistake by announcing this dramatic change in policy just weeks before an Israeli election.

Bloomberg reported yesterday that British Foreign Office officials were quietly reassuring the Trump administration that these trade sanctions were, and I quote, largely symbolic, which perhaps explains the somewhat muted U.S. reaction. My Lords, it seems clearer by the day that this announcement has nothing to do with peace in the Middle East, but everything to do with peace in the Labour Party. Can the noble Lord, the Minister, say whether Ministers even considered the risk that these measures would in fact strengthen the hand of extremist politicians in Israel who oppose the two state solution? Yesterday, my hon.

Friend the shadow Foreign Secretary asked him to say what instructions had been given to the Foreign Office on the accreditation of diplomats to the so-called Palestinian Embassy. Should Hamas win the elections in November and send their envoys here?

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Foreign The Secretary also refused to

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The Secretary also refused to answer the same question on radio four this morning. Let me give the noble Lord another opportunity to noble Lord another opportunity to do so now. My Lords, I have deliberately left the most important issue last. Whatever His Majesty's government's approach may Majesty's government's approach may be to issues across the world, its first duty should be to the British people. We must stand up for British Jews. Anti-Semitism has no place in this country. The Chief Rabbi yesterday accused the government of mendacious anti-Israel rhetoric that would put Jewish people in danger.

Can the noble Lord, the Minister, please reassure the House that the government will do everything in its power to keep British Jews safe? They are our fellow countrymen and women, and no conflict in another part of the world should be allowed to feed hate in this country. It is not just security measures for synagogues, for schools and community centres that we need. Although these measures are essential in this time of rising anti-Semitism, we need a much wider approach across our politics and in communities across the country to stamp out anti-Semitism.

So may I ask the noble Lord? Minister, one final question before I sit down. What more is the government going to do to end the scourge of anti-Semitism in the UK?
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Lord Purvis of Tweed Portrait Lord Purvis of Tweed (Liberal Democrat)
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My Lord, the choice of who forms >> My Lord, the choice of who forms the Israeli government is for the Israeli people and them alone. Our Israeli people and them alone. Our foreign policy is for our government and our legislation is for this Parliament. No British Jewish person should be held to account for the actions of another government in the Israeli government. Antisemitism at too high a rate is utterly repugnant and has no place in our communities. And I reiterate what I've said on a number of occasions, and I hope the Minister might take this forward, that this should be the highest level.

Cross-Party talks on increasing measures to tackle the scourge in our country. That said, I agree with the Foreign Secretary's comment in his statement that the Labour Government have not done enough in response to the humanitarian crisis in both Gaza and the West Bank. Therefore, these benches welcome the actions taken by 12 countries, including the United Kingdom, to act on ensuring that there is no impunity for the comprehensive disregard for the rule of law in the West Bank. The Foreign Secretary referred to the time of the Oslo Accords, and the number of those who resided in the illegal settlements.

That number is very high, but I want to go a little bit further back and quote the first speech by Lord Carrington as Foreign Secretary in the Thatcher government in 1979. In this chamber, he said in his first speech as foreign secretary of the West Bank, I quote from Hansard. The objective here must be full and genuine autonomy for these areas as a step forwards towards determining their final status. Nothing would do more to help these negotiations, to build trust in the area and to win the consent of the Palestinians, than for Israel to cease the expansion of its settlements in the occupied territories.

Then there were not much more than 15,000 settlers in the illegally occupied areas. Today, there are more than three quarters of a million. The challenges ahead are enormous. But the prescription. But the prescription of the problem Lord Carrington got exactly right. I have seen myself. The impunity for those that are both in the occupied, illegal occupied territory and those with the outposts. In September 2024, I visited an area. I saw part of the destruction, and I saw part of the intimidation by those who were illegal settlers.

These were in outposts in the West Bank, which are illegal under Israeli law. Our sanctions will not make any difference to those, but I call for action and the end of the impunity. On my return in this House, because settler violence was the worst on record in the year leading up to October the 7th, and has got worse since. If the established view across all the parties in this house is that outposts are illegal under Israeli law and international law and settlements are illegal under international law, then it is surely natural position that UK law should not facilitate the trade and investment with those illegal outposts.

I do not understand those who are saying that we should not have our law to respect Israeli law. It is further surely, a natural position that for those who facilitate illegal settlements and outposts which are illegal under Israeli law, then our law should ensure that both finance and violence by intimidation should also be illegal. In the first hand sites of intimidation that I saw. It was on a particular occasion where the settler was South African and had secured his Israeli citizenship, formalised on the flight from South Africa.

There is unfortunately, actions to ensure that there is no peace in Gaza and the West Bank by a systematic approach by some of those outpost communities. Lord Carrington was right that the outposts in the settlements were a hindrance and a block to peace. So I want to ask the Minister how we in the United Kingdom will now ensure that both Hamas gangsters are prevented from being part of governance. And indeed, we called for the IRGC to be prescribed. And we on occasions were frustrated that the previous government refused to do so, and we have welcomed this government's proscription of them.

But we also have been supportive of the recognition of the state of Palestine. But on the balance of ensuring that Hamas is not part of governance, we need to ensure that there is good governance for Palestine, and that is why we were critical of the government cutting development, partnership, support for the very governance and transparency for Palestine that we will need in the future. With the previous government perpetuated a cut of Oda to Palestine by 80%. That this government is continuing. I hope the Minister might review this to ensure that the UK support for good governance increases and not continues to fall.

The travesty of the Trump administration's failed humanitarian agency shows the need for there to be clarity, law and order, as well as good governance. Finally, I hope the Minister will be able to confirm that the sanctions regime that will be being put in place will ensure that all of those included in circumvention of sanctions regime will be will be caught within it, so that there is no impunity for those within this country, under our law, to continue to support the expansion of outposts that are illegal under Israeli law.
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Lord Wood of Anfield Portrait Lord Wood of Anfield, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office) (Labour)
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Yeah. Yeah. >> Can I thank both mobile Lord Callanan and noble Lord Purvis for their comments? I will answer the questions in a minute, but I think it might be helpful just to give a little bit of context, which I think helped me provide some of the answers that the noble Lords are looking for. This government thinks that the situation in Palestine is a moral emergency, and what the Israeli government has inflicted on the people of Gaza. We all know we can see with our eyes and it is an outrage.

There is increasing evidence, we think, that war crimes appear to have been committed in Gaza, and we are witnessing unprecedented violence, including settler terrorism, in the West Bank. The Foreign Secretary announced yesterday was that it was a decision not to stand by and let this happen. We are going to be stronger in standing up for what is right and bolder in the action we take. What's striking is that all parties Liberal Democrats, Conservative and Labour at the very least, and others I know as well support the two state solution.

As the noble Lord Callanan eloquently stated at the outset of his remarks, freedom, security and self-determination for both Palestinian and Israeli people. This is action which is designed to defend this policy at a time when the already diminishing prospects for that solution are under serious threat. That's why we've concluded that Israel's ongoing occupation of the Palestinian territory is unlawful. In finding, in line with the finding of the International Court of Justice decision advisory opinion in 2024. And that's why we brought in the various sanctions regime measures we talked about.

The Foreign Secretary talked about yesterday, and I'm happy to talk about those in more detail in a minute in response to some of these questions. Turning to the noble Lord Callanan questions, I do think it's striking that he started his remarks by supporting our policy, but is unwilling to support the means by which we prosecute our policy at a time when it's needed most. He asked about whether our actions will undermine influence. How Israel responds is a matter for Israel, just as our foreign policy is a matter for us.

We. We have very strong continuing security cooperation with Israel that will continue. It is in the interests of both our country, Israel, the wider region and the West in general. We also. Of course, he asked about support. We have support, most notably from the Palestinian representatives of the people whom this. Whom these measures affect the most. We also have support directly from France and Canada who align their policies. Yesterday, at the same day that the Foreign Secretary announced his new approach, our new approach and 12 other countries of the noble Lord Lord Purvis said, who are going to support economic measures to pursue the same goal.

He asked about legislation for sanctions. It's a good question. There are a series of separate things. We're taking immediate action under existing legislation to target individual settlers. Action, which the conservative government also took against individual settlers a few years ago. We are going to extend the global human rights regime to expand it, to include violations of humanitarian law. We expect that to be brought into force in the next few weeks. And thirdly, in the longer term, and he's right to say 6 to 9 months, it will take about six months or more to develop a new targeted approach to companies who assist or profit from the expansion of settlements.

There are challenges in bringing that about. There's no doubt about it. There will be tough cases, particularly as we are committed to protecting the integrity of trade with Greenland, Israel. But we are confident we have a very sophisticated sanctions regime with various institutions that have obviously played a part in applying sanctions elsewhere. I take I've taken decisions in my short time in this job with regard to Russia, for example, we have a sophisticated coordination between HMRC, Osea and other bodies, which we are confident can can deliver a manageable regime.

He asked about timing in front in advance of the elections, the elections, as the noble Lord Purvis eloquently, more eloquently than I could say, said, elections are a matter for Israel and the Israeli people. Our responsibility is to our country and to advance a policy that defends the commitments which aren't just shared, aren't just shared across parties, but we believe are shared across the country on Hamas. Let me be absolutely clear about Hamas. There is no place for Hamas in the future governance.

There should be no place for Hamas in the future governance of Palestine. And we have taken strong action to prescription of Hamas. We will continue to take strong action against Hamas in funding, but also against individuals. The priority at the moment with Hamas, obviously, is to support the United States 20 point plan, and that's a crucial plank of achieving a restoration of order and peace in the region at the moment. But we will not hesitate to use the powers we have to, to target Hamas individually and collectively in the future.

He asked about the chief rabbis comments. I have huge respect for the Chief Rabbi. I disagree with the chief rabbis conclusion anti-Semitism is a scourge not just in our country but elsewhere. It is something that everyone should take hugely seriously and do the utmost to stamp out. But the government has to be able to take decisions about foreign policy of another government. It has to have the freedom to do that, and it is as noble. Lord Purvis again eloquently said, I think it is wrong.

It is something that we should all condemn. To highlight the distinction between British Jews and the responsibilities they have and the Israeli government, the responsibilities they have, we should deny that connection. Turning now to Lord Purvis questions. I agree with much of his. I mean, he supported much of the announcement from yesterday. I'm very, very grateful that. And he's right to point to the number of countries that have coordinated in in aligning themselves with the Foreign Secretary's new approach yesterday. And he's also right to point to the cross-party roots of action against settlers.

The quote from Lord Carrington shows that action against settlers is not a new part of Labour government policy. It's a it's a consistent theme that's across distinguished members of both parties and other parties for a very. Areas where settlers have. Let's let's be honest, I'll have wreaked havoc, have caused misery and destruction. I went with the Foreign Secretary when he was then the leader of the Labour Party to the E one area where we met and dined with the Bedouin community, who had been there for decades and were being forcibly expelled by settler violence.

I think he's absolutely right in putting his finger on the key rationale here, which is that once you take a position on the legality of the occupation, as we have done, then our trade policy aligning with that is not just an extra but a duty. And that's the policy that was was announced yesterday. And that's why we are targeting not just those who perpetrate violent settler violence, but also individual companies in the future who will seek to assist settlement expansion and profit from it.

He's right also to point to the need to ensure Hamas is not involved in future Palestinian governance arrangements, and right also to say that the UK needs to play a strong part in supporting good governance in Palestine. My noble friend Lord Barber, I'm not sure if he's here, plays an important part as an envoy on Palestinian governance. We have a range of support measures that we will continue, continue to provide. And on the last point about sanctions circumvention, he's absolutely right that a regime needs to be devised which is not easily evaded, which the regime will be based on postcode declarations.

This is an established mechanism which is used elsewhere, and the combination of activity by HMRC, the Office of Trade Sanctions Implementation, Office of Financial Sanctions Implementation. They've worked together many for many, in many ways for a long time. They'll continue to work together to ensure that this regime is as watertight

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as we can make it. My Lord, my Lord. My Lords. Before we go on.

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Before we go on. To the next 20 minutes, which is for backbench questions only if we have short questions, not have short questions, not statements or speeches, will be able to get in as many noble Lords as possible. And with bearing that in mind, we'll start with the Conservatives and work around the chamber.

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chamber. In thanking the Minister for his answers to the two front benches. The proud tradition of the Conservative Party, not just the noble Lord Carrington, but successive conservative prime
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Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (Liberal Democrat)
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Lib Dems, Lib Dems. >> Lib Dems, Lib Dems. >> My Lords, I first must declare an interest as the president of the Liberal Democrat Friends of Israel. And in that context, I and we unequivocally oppose expansion of Israeli settlements in the West Bank and condemn settler violence. Those responsible for the violence should face the full force of the law. However, the government's decision to ban trade with settlements is the. In my view, the wrong response and at the wrong time announced just before the Israeli elections, which are next month.

This strengthens the far right of Ben-Gvir and Smotrich, whose claim that Israel is under siege, pushing voters away from the less hardline parties and weakening Israel's. Israelis vote for change. My Lords. Britain should refrain from acts which will influence Israeli elections, as I say, which are next month. We wouldn't like. It happened if a foreign country was doing that during the course of

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the UK elections. We should be supporting moderates and the Minister mentioned. The question.

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The question. Could the Minister confirm that we should be supporting moderates like the Lipids Party and Samuel Lord Wills new party at the Fatah PIPI, which does not hold an election for decades. We must also election for decades. We must also refer to the Minister also confirm that we need to safeguard UK's vital security and intelligence relationship with Israel, which help to protect religious lives. And lastly, no. And and lastly.
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Lord Wood of Anfield Portrait Lord Wood of Anfield, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office) (Labour)
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Honourable Lord, to sit down, please. I think he's had ample time please. I think he's had ample time to make his point. >> Yeah. >> Well, I thank the noble Lord for

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Well, I thank the noble Lord for those comments. And it obviously speaks with great authority and, and, and passion and interest in this in this subject. I agree that this in this subject. I agree that we should be supporting moderates, not intervening politically to support moderates, but supporting moderate voices across Israeli society. And within the Palestinian Authority. There is serious reform that needs to be done in the Palestinian area as well. On timing, let me be clear that the reason for the timing of this announcement.

Obviously, there is a new a new Prime Minister and a new Cabinet in place, but the timing is a result of a sharp rise in settler violence, an accelerating expansion of settlements, a new tender process in the E1 settlement area, which was issued in August, which, by the way, completes a week before the Israeli election. A consistent failure on many of those in power in Israel to hold those who perpetrate violence to account. That's the that's the explanation for the timing.

Israel's elections will proceed according to Israel. Israeli law, and we will not intervene in Israeli politics. We have to make decisions based on the facts that we see. The new government has come in and made an assessment, and that's why we responded when we did.
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Baroness Blackstone Portrait Baroness Blackstone (Labour)
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On both the tone and content of his statement, both on the West Bank and on Gaza. Moreover, I regret the hypocrisy of those opposite who claim to support a two state solution, yet refused to endorse actions against the Israeli government whose settlement policy is making such a solution impossible. I also wonder why they don't condemn its continuing breaking of international law on occupation, as too often the Israeli government have overreacted, including by including by deciding to close the British Consulate.

More than one speaker has raised this issue, and I would like to ask the Minister whether particular care will be taken to ensure that Palestinians wishing to get visas to come to the UK, and we will do that normally through the consulate, will be able to do so. Finally, I finally, if I can just finish, will the government make clear to the Israeli government that the overwhelming support of the measures that it produced yesterday coming from the British population, as demonstrated by polling information, is something that should be taken, taken into account in any constructive dialogue that

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takes place. I thank the noble Lady for those questions, and I think she raises an important point. If I'd be interested down the line to find out whether the Conservative Party agrees with the advisory opinion of agrees with the advisory opinion of the International Court of Justice from 2024, we've made our decision. I'd be interested to find out down I'd be interested to find out down the line what the Conservatives and other parties positions are on the provision of consular services,
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Baroness Northover Portrait Baroness Northover (Liberal Democrat)
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Goodness me. >> Goodness me. >> My Lords. I rise to move amendment 34 and speak to amendment 34 and speak to amendments 55, 65 and 91. And I'll speak briefly. I thank other noble Lords for their support and that of peers for the planet. There can be no doubt of the climate challenges we face after another summer of drought, wildfires and loss of life. Underlying all these amendments is concern about the vulnerability of the financial system and the huge consequences of that.

We saw the results of ignoring weaknesses in the in the financial crash of 2008 and its aftermath, the Adaptation Committee of the Climate Change Committee emphasises the risks in the UK of intensifying heat, floods and wildfires. We need to ensure that these risks are addressed in the financial system. Clause 17 removes whole swathes of protection to be replaced by as yet undefined strategies. The FCA is to be given huge new responsibilities when we know that regulators have a poor track record in monitoring areas under their responsibility, let alone horizon scanning for new risks.

The deletion in the bill takes out regard for climate change, the need to focus on sustainable growth and to be compliant with the Climate Change Act. Amendment 34 addresses climate risk. It would replace clause 17 amendments to the regulator's general duties with a single new duty, requiring both regulators, both regulators, to consider the financial stability risks associated with climate change. And I'm grateful to the noble Lady Baroness Hayman and the right reverend Prelate, the Bishop of Manchester, for their support. There have been extensive discussions in this bill about the sweeping away of the the duties in this clause and this amendment seeks, at the very least, to ensure that climate risk must be addressed.

Amendment 55 would require annual reports by the FCA and the PRA to include consideration of climate related financial stability risks. This way we can see exactly how climate risk is being factored in. Amendment 65, which is led by Baroness Hayman, seeks to enable the government to set out how and when it intends to implement its manifesto commitment to mandate UK regulated financial institutions to develop and implement credible transition plans. Amendment 91 is relevant to climate risk in the
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None Portrait Deputy Lord Speaker. Lord Ponsonby of Shulbrede (Non-affiliated)
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I'm very pleased to follow the noble Baroness, Lady Northover, and will speak to her amendments and my
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Baroness Hayman Portrait Baroness Hayman (Crossbench)
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will speak to her amendments and my own, on this subject in a moment. But first of all, could I express my gratitude for the time and the effort that the Minister and his colleagues and all the team Bill team have put into addressing these issues and attempting to reach exactly the sort of conclusion that the noble Baroness referred to, perhaps I could first just say a few words about the other amendments in this group as far as amendments 1997 A on forest risk commodities, I have a great deal of sympathy that over the last five years we have not made progress in this area, and I hope very much that the noble Lord, the Minister, will be able to give at least a little glimmer of hope that this kicking of the can down the road will not continue.

And I'd also like to make clear my support for amendment 91 by the noble Lady Northover, again seeking further clarity from the government on the issue of green mortgages, which will become even more important as the effects of climate change on the housing market become even more apparent than they are now. And I also have amendment 65 on timetable for transition plans. We discussed this at length at committee, but I think this summer made all of us think about our future plans, whether it was to plant more hibiscus and less hybrid ranges in our gardens, or how to make our homes more habitable with shutters or with air conditioning.

This summer's extreme weather has had some very serious impacts. 287 2877 heat related deaths estimated in May and June alone. A thousand wildfires raging and disruption and dangers to our transport system causing knock on impacts to productivity and daily lives. I recognise that transition plans need to be part of a wider programme of action, but I also think that if we wait until we have every duck in a row and every avenue explored, you'll actually be leaving a very dangerous gap in progress in this area, and I hope that the government would recognise in its manifesto the importance of these plans can give us some sense today of the timetable they see for implementation.

Turning to the amendments dealing with the major and for many of us, the most concerning issue, that of the downgrading of the regulatory principles that the FCA and PRA should have in regard to the exercise of their functions contained in clause 17. Lady Northover has made it very clear, and I won't rehearse the arguments she made about the risks to financial stability that we're already seeing in the housing and insurance markets, which could go far wider. And that is precisely why we fought and gained in in 2023, the climate and nature provisions that are contained in the 2023 Fisma act.

They ensured that these considerations would be taken into account across the regulator's work and day to day functioning, not simply something to be looked at at every five years, with a retrospective assessment of what had happened and a strategic statement about what might happen next. As is proposed in the current Bill, the government has recognised the concern around course 17 and it is changed its approach to proportionality by putting forward amendments to ensure that that is reflected in the regulator's annual reporting and day to day operations.

The issues of climate and nature, risk to our financial systems, and their viability for the future are just as important. Hence my amendment. Seeking similar treatment for climate and nature risks. As for the proportionality regulatory principle and my support for Baroness Northover amendment 34, the Minister and his officials have, I know, thought very carefully about these issues when we've discussed them since Committee stage, and I hope very much that today he will be able to recognise the centrality of them to the future stability of our financial systems and the role that the FCA and the PRA need to play.

My Lord, I rise to speak in favour of this group of amendments on re embedding climate and nature considerations into UK financial institutions, investment decision making, and in particular I want to speak in
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Baroness Sheehan Portrait Baroness Sheehan (Liberal Democrat)
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favour of amendments 90 and 97 a may I start by thanking the Minister for his constructive conversation with me earlier this conversation with me earlier this week. I'm reassured that he shares the ambition to see this through the ambition to see this through and has the steel to deliver it. The Minister understands the The Minister understands the urgency of the risk climate change presents to the financial stability of the city, and he is the right messenger, not least because he used to work for Hermes.

Hermes, the messenger of the Greek gods, was known for his great cleverness and speed. He wears winged sandals and carries a staff, and I can vouch for that staff. Amendment 90 in my name was tabled with the support of the noble Lady Baroness Young of Old Scone, the right Reverend prelate, the Bishop of Manchester, and the noble Lady Baroness Coffey. All Co-signatories have been long standing, passionate advocates of getting this legislation onto the statute books, and it would be patronising of me to thank them when they have already done so much.

And I'm delighted to see the noble Lady Baroness Boycott in her place, because she, too, has been a passionate, outspoken advocate of legislation against deforestation. Amendment 90 simply requires regulations under schedule 17 of the Environment Act 2021, which refers to the use of forest risk commodities in commercial activity to be made within six months of this act, receiving Royal Assent and would commence the Treasury Review into deforestation linked finance. My amendment 97 A was submitted to come after clause 22 and was in fact accepted by the public Bill office.

It was only very late in the day yesterday that I learnt that it had been moved to after clause 47. So, my Lords, my attempt to move it to a possible vote earlier in the day was scuppered, which I admit leaves me a little disappointed. 97 A is exactly the same as 90, with the small addition of specifying the FCA as the verification and enforcement agency. And in his response to this amendment, if the Minister feels that the FCA is not the right regulator, where does he think that responsibility lies? And that is a question to which I would welcome an answer.

My Lords, these measures are five long years overdue. As the noble Lady Baroness Hayman has said, and the prevarication must end, especially now that the EU has agreed its deforestation regulations and they will be implemented on the 30th of December this year, 2026, and will apply to Northern Ireland. We on the mainland will be operating under different rules. That's an untenable position. The government's announcement in June this year to consult and deliver legislation to align next year isn't really good enough.

We don't know when and we don't know what it will say. And businesses such as the UK Cocoa Coalition, whose members include Sainsbury's, Waitrose, Ferrero, Hershey and other very big organisations, are calling for certainty to plan investment and growth. A clearer timetable for the UK's forest risk commodities regime would avoid further uncertainty for both businesses and investors. Companies are already making decisions about supply chain management, traceability systems and compliance processes in response to the EU detr and other international requirements.

Greater clarity on the UK's timelines and next steps would support investment, facilitate preparation and provide confidence that the UK is moving towards a coherent and predictable regulatory framework. My Lords, we've been around this particular block a number of times and as Einstein said, Einstein said it's a sign of madness to do the same thing time and time again and expect a different result. And it won't surprise him in this if I say that had circumstances been different today, I would have pushed my amendment 90 to a vote.

Instead, I hope the Minister will give assurance from the despatch box that he gets it. That climate and destruction of carbon sinks, i.e. deforestation, are two sides of the same coin. And if climate is a financial risk, then so too is deforestation and investment decisions will be poorer. If these considerations are not taken into account.
16:49
Lord Bishop of Manchester Portrait The Lord Bishop of Manchester (Bishops)
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Here. >> Here. >> My Lords, financial stability is crucial for sustainable growth. It's what allows people and It's what allows people and families to plan for their future to reliably hold savings, pensions, mortgages and of course, it supports businesses to create the jobs on which we depend. In the same way, financial growth and environmental stewardship are interdependent. Growth provides us with the resources that allow us to invest in new, sustainable fuels, clean infrastructure, and new ways to tackle the climate crisis.

But it goes both ways the climate crisis many of us now do call it the climate emergency also threatens financial stability. Increasing extreme weather events may well, as the Baroness Hayman has already reminded us, reduce access to insurance for both households and businesses. And again, as we face the prospect that the heat waves of this summer become the new normal, agricultural assets are already projected to be affected by drought impacting on our farmers. And yet these risks have a disproportionate impact on the most vulnerable.

Financial shocks hit hardest for those who have no savings to fall back on. Food shortages load further pressure to those who are already going hungry. Some of the amendments in this group seek to recognise that interdependence between a stable environment and stable financial markets and services will give us a bit later. Baroness Hayman amendment that would require financial institutions to develop credible transition plans to. Consistent with the Paris Agreement's 1.5 target. If it's not already too late for that, prevention is of the utmost importance if we're to stop the worst impacts of global warming before opportunity lapses.

But prevention must go hand in hand with preparedness, as we are already feeling the impact of climate change at home, we must do all that we can to supplement preventative work with measures that allow us to adapt to this changing reality. It was my privilege. I was then the chair of the Church of England's Ethical Investment Advisory Group and deputy chair of the Church Commissioners for England to be present at the opening of the London Stock Exchange. When we launched with support from FTSE, the first index that was weighted towards environmental issues.

These voluntary measures enable those investors who need to track indices to take environmental factors into account. But I doubt many of us here in your Lordships House today

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believe that voluntary action alone is going to solve the climate crisis. Amendment.

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Amendment. 34, to which I've added my name. Would, as. A noble Baroness, has already said, create a responsibility for regulators to consider the effects regulators to consider the effects of climate change in their decision making. In the same way as they would any other significant would any other significant financial. That is, my Lords, an important step towards ensuring that our financial institutions are resilient in the face of the growing risks posed by global warming, and that financial services continue to serve the needs of consumers as we pursue prevention on a wider scale.

My Lord, we are not to place the amendments in this group on the face of the Bill. Will the Minister please explain? I know others have already asked this, how the government intends to ensure financial services and markets do not develop without regard to their environmental impact.
16:52
Baroness Young of Old Scone Portrait Baroness Young of Old Scone (Non-affiliated)
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My Lords, can I declare my interest as chair of the Forestry Commission and my other environmental interests in the register? I want to speak to register? I want to speak to amendment 65 and to amendment 90. I put my name to both of those amendments and also the noble Lady Baroness Shields amendment 97. And can I add my thanks to the noble Lord, the Minister for the time and care he has taken to engage with noble Lords over our concerns. But all these amendments arise from from the same issue, the inordinate length of time it's taking government to come forward and fulfil its commitments, which have already been agreed some previous time before.

Others have laid out the reasons for the importance of these amendments in detail, and I will not repeat them, but simply to say amendment 65 is already a manifesto commitment that UK financial institutions should be mandated to develop and implement credible transition plans that align with the Paris Agreement. The amendment that has been laid today is very, very gentle. It simply asks for a roadmap within six months of Royal Assent of this bill, and it allows the government plenty of wiggle room to decide how and when and in what manner it would prevent the drifting along.

That is so at odds with the urgency of the climate change threat. Business and investors need clarity to be able to have confidence and to deliver growth and competitiveness. As I said, it's a manifesto committee. This summer's heat has underlined its importance. The public want action. It has electoral salience. This is a must do moment. Can I call my on my noble friend the Minister, to restate the government's commitment to the principle and clarify the pace by accepting the amendment, or giving some assurance about the timescale to which the government will deliver the transition plan commitments.

Now, I had a very lovely speech written about amendment 90, to which I put my name and amendment 97 in the name of the noble Lady Baroness Sheehan, because they were about an even more delayed issue and would bring in a requirement for government to make regulations that were already provided for in the Environment Act 2021. And I stress 2021, five years ago, but still not implemented, to prohibit the importation and use of illegal forestry goods. Are we now in the position where the European Union is bringing forward its deforestation regulations? They're going to come into effect at the end of this year for large and medium companies and during 2027 for micro and small enterprises, Northern Ireland will be in a position of having to follow these EU regs.

The government says it wants to align rules across GB, and at the time of laying this amendment, I felt that it was reasonable to ask for this to be done and completed within seven months after a five year delay period and some consultation already having taken place, because all the while, UK financial systems, including public equity and corporate bonds, are funding and fuelling climate and biodiversity declines directly. Now the Committee stage. I kind of lost the will to live because the previous Minister described all the stages that had to happen, and if they didn't stretch into infinity, at least they stretched for several years.

I thought a couple of years worth at least. And to be honest, it's a major international embarrassment for the new government. We led the change internationally for the forest risk commodities action at Cop, and we persuaded umpteen other countries to sign up. Here we are five years later, still claiming we want to demonstrate our leading role in green finance, yet not delivering this legal commitment that we were a prime actor in. But this afternoon, I had a little ray of light.

And I just want to read to you some excerpts from a letter which I've received from Defra Ministers about pressing the issue of forest risk. Commodities forward. The letter says that we are progressing the policy and legal work needed at pace to deliver the approach. In GB. We are developing the consultation material. There is a statutory duty to consult on these regs. Our plan is to consult during autumn. I think autumn is almost here. We are planning to deliver the legislation required to implement this regime in 2027.

At the centre of our considerations is the pressing need for us to make rapid progress, to address the role that deforestation plays in the climate and nature crises. This summer's extreme heat waves have brought home the urgency of tackling climate change, while halting and reversing forest loss is a vital part of that effort. I absolutely welcome this statement from Defra that they are moving forward at pace, and I hope that we can hear today from the Minister that the Treasury is as one, as one with Defra, and that we can confidently expect the regulations to be implemented during 2027.

Of course, once we've got the regulations in place, there is a commitment in the legislation that the Treasury will review legal deforestation challenges and the extent of deforestation issues for the UK, including the range of products included. So I do hope that we can get assurances from the Minister on this issue this afternoon. My Lords, I rise to support 97 A in the name of Baroness Sheehan, but I also absolutely support 34, 55, 65 and 91 in this group.

And like others have said, we're really grateful for the government's support. And actually what Baroness Young just said, I think puts a spring in everybody's step that this very, very overdue. I mean, as many
16:58
Baroness Boycott Portrait Baroness Boycott (Crossbench)
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people have said, this has been going on for five years and why we haven't done it is a puzzle, but it haven't done it is a puzzle, but it does sound like some doors are opening. I think sometimes people get a bit confused about what get a bit confused about what forest risk commodities actually are. They are beef, palm oil, soy, are. They are beef, palm oil, soy, cocoa and rubber. On the whole, they're ingredients that run right through the ultra processed food through the ultra processed food system, which is already, I'm really pleased to say on behalf of this government, I'm getting a lot of action in terms of trying to slow it down.

But the facts are nonsensical. For instance, beef, the largest driver of tropical deforestation beef production, is responsible for 25% of global land use emissions, but it's estimated that 60% of agricultural land is used for beef production. That includes all the food that is grown for them the soy, the palm oil, etc. but it is 2% only of global calorie consumption. So that's just one example about why not only is this terrible for the forests, terrible for nature, terrible for the infrastructure of life on which we depend, and which is at the moment in a very, very fragile condition.

But it is also nonsensical on many other levels. So I feel very encouraged that this government will set out legislation as well as ways to enforce it, because it is extremely difficult in forcing this. There are many companies who will put proudly on their products that they have got non, you know, illegal legal soy. That was something, for instance, that Unilever always used to trumpet, but I'm not entirely sure how you do it. And I'm very in favour of what the Europeans are now looking at, which is saying it's legal and illegal deforestation.

That should count because we can't afford to cut down any more forests. Really, there are many things we can't afford to keep doing, but this is one of them. And the El Nino that is brewing up in the Pacific is going to come bursting across the Amazon rainforest, producing heaven knows what in terms of damage to that incredibly precious environmental resource that affects the weather of the entire world. So this legislation cannot come too soon. And I really welcome the government's progress.
17:00
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (Green Party)
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My Lords. >> My Lords. >> I rise with great pleasure to follow. All of the speakers thus far in this group and to support far in this group and to support all of these amendments. I haven't attached my name specifically to any of these. Some of the most prominent are fully subscribed, and I wanted to leave space for the breadth of that broad subscription, noting particularly amendment 90, which has also been signed by the noble Lady Baroness Coffey, not currently in her place.

I want to just take a second to reflect on the point where we are at now with this whole bill. Overall, what we have before us is essentially the same bill that was introduced under a different Prime Minister and a different Chancellor. I remain astonished that the the approach to competitiveness and deregulation that was directed by Rachel Reeves is now being continued, although after hearing the new Chancellor the speech two days ago, I'm somewhat less surprised. But I will particularly reflect on all of the environmental measures here.

And we do still have before us essentially the same thing as the bill was under the previous government. And I note that our current Prime Minister in June 2025, when Mayor of Manchester, supported the fossil fuel treaty and when running for the Labour leadership in 2015, said then Labour, under my leadership, will never turn our back on our duty to tackle climate change. So all of these amendments are putting the bill back on the track, that it should be on a bill that the the track that the government's apparently signed up to.

And I'm going to focus just very briefly on amendment 90 and the forest risk commodities, because as with pretty well everyone who's already spoken, we I think we remember the long wrestle to get not the strong thing we were looking for, but at least the promise of schedule 17 into the Environment Act in 2021. And there's a real problem here in terms of members of the public. They heard that fight. They saw that fight. They saw the law put down by the government, and they expect it's going to be delivered.

Yet five years later, we still don't have this provision. Now, I actually have having listened very carefully to noble Lady Baroness Young of Old Scone, I actually have a constructive suggestion to make because the timetable coming from Defra suggested that within 12 to 18 months, we will finally see the delivery of what was promised in 2021. So it would be very positive if we could hear from the noble Lord, the Minister saying, as I'm sure he will say, that he can't accept amendment 90, but perhaps it's Third Reading.

The government could table an amendment committing to these regulations in, say, 18 months time, which would be a minor adaptation to the amendment put down by the noble Lady Baroness Sheehan and others. We have. The noble Lady, Baroness Young has that promise. That pledge in a letter. Let's go a little bit further and put it on the face of the bill.
17:03
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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My Lords, we have a lot to cover >> My Lords, we have a lot to cover today, so I'll be brief. We don't believe that imposing additional reporting duties, transition plan reporting duties, transition plan requirements and regulatory processes on financial services firms is the right way to address the concerns that have been addressed in these amendments. And this evening, one of the merits of this bill is the way it cuts out needless and repetitive operational requirements on financial services firms and regulators, and instead introduces a more effective approach based on five year strategies.

As we've heard on Monday, stakeholder views will be sought in the course of establishing those strategies. Now, of course, climate change and environmental objectives already remain an important statutory regulatory principle which are intended to contribute to the UK's net zero target under the Climate Change Act and to the environmental targets established under the Environment Act. However, requiring banks and other financial institutions and the regulators themselves to fill in forms, tick boxes and produce more and more reports about climate change, will not have a meaningful effect on global temperatures.

It will simply add costs. We need a regulatory environment which supports growth, enterprise and investment. And that means cutting down on the red tape and extra requirements that are putting our international competitiveness at risk. These amendments would add a further layer of process and obligation, without a sufficiently clear demonstration that the burdens would advance the environmental objectives being pursued. This is a time when we should be seeking to streamline regulations. Be careful about new requirements, however well intentioned, because of the need to to get the economic growth that we lack.

I think these amendments risk taking us a step backwards so we can't support them and we'll be voting against them if noble Lords present or vote.
17:06
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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Yes. >> Grateful to the noble Baroness Cass for these amendments and for the wider debate on sustainable the wider debate on sustainable finance and adapting to climate change. These amendments address a number of important issues climate transition planning, tackling deforestation, how the regulators consider climate risk. The products, commonly known as green mortgages, as several noble Lords have argued today, both climate related risks and nature related risks can have significant implications for the economy, for financial markets and their ability to deliver for customers and for long term prosperity.

As many of you may know, it's a topic close to my heart, including through my past chairing of the United Nations Environment Programme Finance Initiative at the Paris climate talks. Unep Fi is a voluntary organisation of over 500 financial organisations from the north and the South, with over £100 trillion funds under management, it's established some of the world's foremost sustainability frameworks for finance, including involvement with the Red project, reducing emissions from deforestation in degradation, which I believe is now preserving many millions of square miles of forest.

I share the underlying objectives behind these amendments. The question before us is, therefore, not whether action is needed, but how best to deliver that action in a way that's effective and proportionate and aligns with the wider framework we're putting in place? Let me come to amendments 34 and 55, which raise important points regarding how the regulators consider and report on climate and environmental related issues. I have spoken to Baroness Hayman and members of the peers from the planet throughout the week on this important issue.

I also hosted a drop in session for peers with the FCA. During that session, I heard a number of concerns about the absence of climate and environmental target. Environmental targets have regard operating at a day to day level, and I have, of course heard the issues raised in this debate today. While I still believe there is significant value in streamlining, the regulators have regards. I appreciate it is important that the regulators continue to focus on the vital issue of the sector's contribution to climate change at a day to day level, and I appreciate the importance of regular reporting on this issue to aid parliamentary scrutiny.

While I cannot do anything today, I am prepared to return to this issue at Third Reading and would be prepared and undertake to table amendments to clause 17, which would require the PRA and FCA to continue to consider their existing climate change and environmental targets, have regard at a day to day level and to maintain appropriate notification and reporting requirements. Amendments 34 and 55 introduce a new have regard and reporting requirements on climate related financial stability issues.

I therefore ask noble Baroness Baroness Northover and Baroness Hayman not depress amendments 34 and 55 on that basis, and I will return at Third Reading with the amendments I have described. Let me now turn to amendment 65 on transition plan requirements. The government remains committed to this area. We consulted in 2025 on options for implementing transition plan requirements and are considering responses alongside wider work on sustainability and corporate reporting reform. In February, we finalised the UK Sustainability Reporting Standards for voluntary use.

The FCA has also consulted on aligning listed company disclosure requirements with these standards. The FCA aims to publish final rules this autumn, with requirements expected to take effect from January 2027. This amendment would place on a statutory statutory timetable on an area where policy development remains under active consideration across government. We believe in the importance of finalising this work before imposing an arbitrary roadmap. Let me turn to amendment 90 and 97 a I recognise the strength of feeling on the issue of deforestation, and I agree that urgent action is needed.

I am therefore pleased to report that this work is moving forward. As Baroness Young said, Defra have confirmed that they will consult later this year on Great Britain's approach to tackling deforestation in domestic supply chains and the next steps for forest risk commodities regime for the forest risk commodities regime. My officials have spoken to Defra, who have confirmed that they plan to consult during the autumn, and that legislation will be delivered in 2027. A the responsibility for enforcing the regime will be determined by a Defra when they design the regulations, but we share the objective of progress as quickly as possible.

However, a six month statutory deadline risks prioritising speed over effectiveness. The government believes the better approach is to ensure that any resulting regime is robust, proportionate and capable of decoupling supply chains from global deforestation. The government has also already committed through the Financial Services and Markets Act 2023, to review the regulatory framework for tackling deforestation linked finance within nine months of DEFRA legislation on domestic supply chains. Further, the principle that I committed to reapply to day to day activities also explicitly covers consideration of environmental targets in the Environment Act 2021, and so this will remain part of the regulator's day to day work.

Turning to amendment 91, the government supports high quality green mortgage products that can help households to finance energy efficiency improvements and improve resilience to climate related risks. However, the amendment risks duplicating efforts by regulators, departments and existing frameworks. FCA rules already require clear disclosure, and the FCA is considering disclosure further through its mortgage rule review. The Green Home Finance Strategic Partnership also has a dedicated working group focussed on consumer protection and standards, with over 90 green mortgage products now available, compared with fewer than 10 in 2019.

The government considers that imposing a statutory timetable would be premature, while policy and the market continue to develop. The current approach provides the flexibility to develop clear, proportionate standards while maintaining consumer protections. In conclusion, the government supports the objectives that sit behind these amendments. Indeed, we have listened to the House and will, for Third Reading table amendments to clause 17, which would require the PRA and FCA to continue to consider their existing climate change and environmental targets have regard at a day to day level and to maintain appropriate notification and reporting requirements.

More broadly, we support credible transition planning. We support action to address deforestation and forest risk commodities, and we support the development of high quality green mortgages, and the government is already taking forward substantial work in these areas and will continue to do so in a coordinated and proportionate way. I therefore ask the noble Baroness to withdraw the amendment.
17:14
Baroness Northover Portrait Baroness Northover (Liberal Democrat)
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My Lords. >> I thank the noble Lord, the. >> Minister, for his very encouraging reply. I think that we are in agreement that there couldn't be a more important area, and no one paid attention to the subprime market. And then we had the 2008 crash, and the economic and social costs are still with us. A generation later, incomes stalled, politics driven left and right and causing further economic and social damage. So we know the risks of not paying attention to the risks to financial stability.

And I'm afraid I do not accept what the noble Lady, Baroness Neville Rolfe, says. And I regret the loss of cross-party agreement in this area. But of course, beyond those risks, what is even more important is to address climate change and nature loss. And the noble Lord. The Minister acknowledged that that is an existential crisis, and we increasingly see the reality of that. And I noted with interest his history, and I remember the commitment that Mark Carney made and how he said that he thought others were doing this, others were addressing this, and he realised that that wasn't the case and that he needed to address this.

And he led the move, particularly at Glasgow and in the financial sector, in the way that the Minister has just described. So I am encouraged by what the Minister has said that he will bring forward at Third Reading, and I trust what the noble Lady Baroness Hayman has said in relation to the conversations she's had with the Minister and about his commitment. He's made this commitment for Third Reading, and I look forward to seeing how that is to be delivered, and that he clearly is very much involved in this.

And so therefore, I take what he says at face value and look forward to seeing that. And on the basis of that, withdraw my amendment. Is it your Lordships pleasure that this amendment be withdrawn? It is by leave withdrawn. Amendment 35, Baroness Bowles my Amendment 35, Baroness Bowles my Lords, as discussed.
17:17
None Portrait Deputy Lord Speaker. Baroness Morgan of Drefelin (Labour)
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On Monday.

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From the chief executives. Of the FCA and the PRA. They

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Of the FCA and the PRA. They show genuine willingness to engage and they elaborate on transparency
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None Portrait Amendment:35 Baroness Bowles of Berkhamsted (Liberal Democrat)
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and they elaborate on transparency of activity that is, consultations,
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None Portrait Deputy Lord Speaker. Baroness Morgan of Drefelin (Labour)
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responses, reports, strategies and evaluations. And I do not dispute
17:17
None Portrait Amendment:35 Baroness Bowles of Berkhamsted (Liberal Democrat)
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evaluations. And I do not dispute any of that. And the government amendments that are proposed now restore proportionality as an operational day to day have regard, and thus they cover my proportion reality requests during committee. And those parts of my amendments that that I speak to today. But unfortunately, the bill still relegates the transparency have regard to the long term strategy report. And that provokes me to articulate something that has not been said clearly before.

Parliament cannot check proportionality unless it can see it. And indeed, the select Committee tried to do exactly that during our inquiry into the competitiveness and growth. And that is why transparency of reasoning is an integral part of cost benefit analysis and proportionality. So today I ask the Minister to confirm that this is understood and that it applies at the operational level under the proportionality requirements. To be clear, what I am talking about here is the transparency of the cost benefit analyses.

Now internationally, this is well understood in the United States. The SEC publishes an economic analysis with major SEC rulemaking setting out costs, benefits, distributional impacts and alternatives, all considered. And that allows Congress and the courts to scrutinise it. They show their working in detail in the European system. The ESA's publish impact assessments, showing how burdens fall on small versus large firms, and how rules were adjusted to reflect proportionality concerns a lot more specificity than we get.

Again, they show their working and we simply don't get that level of working shown. So our regulators are not top of the class by international standards. And while I note the letter on cost benefit analysis from Nick Hill, the CEO of the FCA, that the Minister has recirculated to members today the frequency and working detail of them is just not as much as elsewhere. The FCA have also denied statutory requirement to do that, and have been criticised for insufficient workings by their own cost benefit analysis panel.

For example, in CP2430, which was on changes to the safeguarding regime for payments and e-money firms in September 2024. The panel said the CBA does not include analysis of how sensitive its results are to variations in its main assumptions and estimates, so that's not very helpful if you're trying to understand them. The panel went on to say that this was important in identifying which assumptions were critical to the expected costs and benefits. Now, the FCA did accept the criticism and went back and added sensitivity analysis covering different compliance levels and insolvency rates.

But the fact is they resisted it, including the objection to the fact that they hadn't to do it by statute. And it wasn't their first instinct. So I think that that is a very good example, that we need to have a lot more transparency around the cost benefit analysis. And I think that that is hindered by this demotion of transparency to just being looked at at the strategic level. And as the Minister has already recognised and shown, willing to make changes to clause 17, I ask that he thinks about this one seriously and whether, in fact he has to do something about transparency.

And in any event, going forward, I challenge the regulators to deliver on the detail of proportionality with full reasoning, working and concrete examples showing how burdens were weighed, alternatives considered, and adjustments made. After all, it's what government departments are required to do for significant regulatory proposals, but which are regulators do not follow. I hope that the regulators will step up and do this. I hope that the Minister will step up and put it in its rightful place back in clause 17, and I expect the select committee will also want to pursue this.

But quite frankly, this legislation is leaving an awful lot of heavy lifting to the select

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committee. I beg to move. My Lords, Amendment 35 in clause

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My Lords, Amendment 35 in clause 17, page 21, line 34. After duties, insert the words printed on the
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17:25
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (Green Party)
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My Lords, I rise in interest of time just to focus on my amendment 38, which appears in this group, which retains the need to have regard to regulatory principles, which has already been broadly discussed. But I'll focus on the way in which it specifies the need to have regard to financial crime related to organised environmental crimes. I must, however, take a second to welcome the the comments and commitments from the government frontbench to bring in some climate components to the Bill to bring them back into the law at Third Reading.

It's always good to celebrate when campaigning works, and I think we can all hope to reach a time when we don't have to do campaigning on such environmental basics. But I spoke extensively at committee about the issues around financial crime related to organised environmental crimes, and I won't repeat what I said then, but I and other careful observers were not satisfied with the Minister's response there at committee. The response from the noble Lord. The Minister then was extremely general.

The response was that financial crime and money laundering, whether related to environmental crimes or not, is illegal and something that financial regulators in this government take extremely seriously. The FCA has a broad remit to tackle financial crime. That was a very general response that didn't address the specific concern about environmental crime and the way in which many other jurisdictions are taking actions in this area, and I acknowledge the support I've received in preparing this response from WWF, and refer to a WWF and Themis survey of 644 financial service professionals from 17 countries, which found almost half of the financial institutions sampled operated in high risk sectors or areas for environmental financial crimes.

Yet over a quarter said they did not undertake specific related due diligence. Additionally, 60% of financial institutions surveyed had no land conversion risk policy in place. A 2025 survey by Financial Investigations Unit of Financial Investigations Unit by the Egmont Group identified a lack of alignment of environmental laws with anti-money laundering and anti-terrorist financing standards, and a limitation on their ability to share data or conduct specific activities related to environmental crimes. As regulatory constraints. Without explicit recognition of this through the regulatory principles of the FCA and PRA, relevant actors are not required or equipped to respond with the necessary action.

Indeed, the above mentioned survey respondents said that self-regulation is not a sufficient driver of change when it comes to land conversion and called it, quote, optimistic to think financial institutions would commit to affirmative action with just voluntary frameworks in place. And I note that around the world, the FATA try that again. FATF recognises environmental crimes as predicate offences for money laundering. The European Union has strengthened its criminal law framework through Environmental Crime Directive, requiring member States to publish a national strategy on combating environmental crime offences by 2027.

And just as an example from the Global South Zambias Economic and Financial Crimes Division of the High Court, recently forfeited to the state a vast array of assets associated with a major illegal logging operation. Diplomatic momentum for the Fourth Protocol under the UN Convention Against Transnational Organised Crime to address crimes against the environment, is also advancing with support from the UK. That's what we're seeing internationally. What are we doing domestically as a global financial centre? The UK has a specific responsibility to ensure that he is taking effective action against environmental crimes globally and against any involvement of our financial sector in those crimes, and can play an important role in achieving a stronger global

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approach. It's a privilege to make my

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It's a privilege to make my first contribution as a backbench member of this of this House, in a slightly more relaxed environment slightly more relaxed environment than the last time I spoke on clause 17 in the Moses Room. Indeed, I'm told that some of the colours I'm told that some of the colours start to return to my face, which is entirely due to the recess. But rather than having to face off against the rather formidable against the rather formidable experience across the house, I've spent a considerable amount of time defending clause 17 before the summer.

I want to say a few words
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Lord Stockwood Portrait Lord Stockwood (Labour)
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about this group and particular amendment 37. I argued then and continue to believe that the basic continue to believe that the basic architecture of clause 17 is right. We need regulators capable of exercising expert judgement, and we exercising expert judgement, and we should also be cautious about responding to every legitimate concern by adding another statutory concern by adding another statutory duty or layer of prescription. But I also heard very clearly the arguments made across the committee arguments made across the committee that greater regulatory discretion must be accompanied by proportionality and meaningful parliamentary accountability.

That is why I welcome the direction of these amendments that reflect the concerns that were raised repeatedly before the summer, whilst preserving the regulator's ability to exercise judgement. Amendment 37 is particularly important because there is a practical problem underneath the question of accountability. Parliament is scrutinising institutions such as the FCA, PRA and Bank of England with enormous analytical policy and research resources, and by comparison, even the Financial Services Regulation Committee operates with a very small team across an extraordinarily broad agenda.

And that imbalance does matter. And we heard that better accountability cannot simply mean regulators producing more information, and Parliament must be able to interrogate that information, track what regulators have previously said and promised, and challenge them when the evidence does not match the rhetoric. I have written to the noble Baroness Lane-Fox offering some practical help, including exploring whether new analytical tools and AI using publicly available information could help narrow that resource gap and do some of the analytical heavy lifting for the committee.

Technology, just to be clear, will not replace the judgement of those members or the expertise of the committee staff, but it can potentially make the judgement better informed. But there is also a broader lesson in this group. One, one thing I learned during those six sittings of committees that scrutiny works best when government is prepared to listen. There may have been moments when I appeared rather detached, rather attached rather to the moments when I seemed rather detached. But there were moments when I appeared rather attached to the draft din in front of me, which may be putting it mildly, but the purpose of this house is not simply to test the minister's powers of endurance, although sometimes it felt like that it is to improve legislation.

I think the group demonstrates that process working well. The government has listened without abandoning the principles of the bill, and the House has helped strengthen the framework around proportionality and accountability. I particularly welcome amendment 37 and support the approach represented by this group.
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Baroness Young of Old Scone Portrait Baroness Young of Old Scone (Non-affiliated)
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My Lords. >> Can I welcome the statement that was made by my noble friend, the Ministers, in saying he was committed to bringing forward committed to bringing forward amendments at Third Reading? I think it's very relevant to this. Group of amendments, and I simply want to just draw the House's attention to two sessions we have had with the FCA in the last 3 or 4 days. The Minister very kindly organised a session with the FCA about their role in climate and environment, and to be honest, I think the kindest thing I could say was I was underwhelmed.

I mean, I think they have a lot more that they are doing than they displayed on that day, and the defensiveness that they just demonstrated in front of a bunch of really friendly and helpful and not at all terrifying. Baroness Cass was a bit of a worry to me, to be honest, because I just, I just felt that there was a real defensiveness and pushback against our responsibility. But I thought perhaps we'd just given them a hard time and they were having a bad day.

But we had another session with them yesterday, which Pierce of the planet organised, and I was horrified. And I've got it written down here because I wrote it down and I went home and wept fairly. Senior representative of the FCA said. Absolutely. In terms. The FCA does not have a mandate to tell businesses what they should do on climate and environment, and I would just like a. The House to know that and b for the Minister to bear that in mind when he's coming forward with his Third Reading amendments, because I think there is a real need for for a stronger line in guidance than we might otherwise imagine.
17:35
Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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My Lords, that I think fairly on in the Committee stage. I said to Lord Stockwell that who was then Lord Stockwell that who was then obviously in charge of bringing the Bill through, that when there was a common opinion held by Baroness Noakes, Baroness Bowles and Lord Faulks that he ought to listen. These are the three real experts that we have in the House on markets, on regulation and on the financial services industry, and all of them set aside political ideology when they're coming forward with recommendations, look to the common good and look to the well functioning, both for markets and for consumers.

So I am very glad that on proportionality, which of all the issues was the most serious, that is the sort of downgrading of principles, quite frankly, that I'm that is that the Minister is will has now amended or is now amending that that. And I'm also very appreciative that there's going to be movement on climate change because, as colleagues have said, that this is a crisis that is on our doorstep and we have no choice but to act. And it means we need to focus all strengths that are on on dealing with that crisis.

I am very conscious of the impact of financial stability and how it crept up on us, because we only looked at through a very narrow lens. Instead of looking across the piece and recognising how holistic and how interconnected so many issues are. My Lords, I have amendment 67 in this group, which is why I'm standing on my feet, that I have to confess, it's kind of an odd place for 67, and I'm going to deal with it very briefly. But 67 arose because a number of banks have been refusing to take small businesses and SMEs generally in the defence industry as their customers, usually because they're concerned about reputational risk.

And this has made it very difficult for these SMEs to raise credit. And it is seriously undermining the UK's plans to build up its defence forces, which I think we would all agree is not acceptable, that some members may not be aware. But the most innovative defence firms are SMEs that it's not just the big players, it's the SMEs that are critical, particularly at a time when so much is changing that it's the strategic and defence sector. So these small SMEs already face high regulatory hurdles, that they often face slow procurement processes when they work with the Department of Defence.

But they absolutely killer blow is there not to be able to finance the projects that, no matter the quality of the contract that they have now, the FCA has said that its rules present no obstacle to lending to SMEs and considers that to be a green light. It's not having very much impact. My my amendment essentially attempts to put some welly behind the FCA in dealing with these issues, and would require it to conduct and publish a review at least once every three years, including identifying any barriers.

And I would have thought that a report like that might get the government going as well. I know the government is aware of the problem, but can I just emphasise knowing about it isn't enough. It actually needs to act and to change minds. We welcome the government's decision to retain proportionality as an express statutory consideration for both the FCA and the PRA when they exercise their general functions. This responds to productive discussions in and outside committee, for which I thank the Minister and indeed the noble Lord Lord Stockwood, who I am delighted to welcome back to discussion of the Bill and thank him for his efforts to improve it.

I also thank my noble friend Lady Noakes, and the noble Lady, Lady Bowles and Lord Faulks, for their constructive and very flexible approach to the prob. Substantial problems on these clauses. Now, time and again, one of the concerns we hear from business is that regulation can be disproportionate to the risk it's intended to address, and that is particularly true for the small and medium sized firms we rely on so heavily for competition, innovation and economic growth right across this country.

The proportionality changes help to address this, and we will not, therefore be pressing our amendment 6062 on SMEs to a vote, even though it is my favourite amendment and I have the
17:40
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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support of the noble Lord Lord Vaux, and I thank the noble Lady. Cramer and I thank the noble Lady. Cramer is right to focus on lending to small defence companies as well. small defence companies as well. The requirement for the FCA and PRA to explain in their annual reports how they've taken these proportionality principles into account, alongside the requirements relating to consultation and relating to consultation and parliamentary committees, create an important mechanism through which Parliament can examine whether the principle is actually being applied in practice, with concrete examples of the noble Lady, Bowles suggested.

This is important because the ultimate test of these amendments will not simply be whether the word proportionality appears in statute, it will be whether firms see a genuine difference in the way regulation is developed and applied, particularly by the regulators. We hope that the government's amendments will prove to be a meaningful mechanism through which regulation becomes easier to comply with, less costly and ultimately more successful in achieving achieving the objectives Parliament has set for the regulators. And of course, the proof will be in their implementation.

The government have listened to concerns raised during the passage of the Bill, and we support the amendments. The noble Lord, the Minister has moved in response. This is good. House of Commons practice, House of Lords practice. Like my noble friend Lady Noakes, I do not intend to pursue the other amendments today.
17:42
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lords, thank you for this debate. I hope it does demonstrate that the government has listened that the government has listened carefully to the arguments made by noble Lords during committee debates, and recognises the debates, and recognises the strength of feeling and the logic around addressing clause 17 in committee. In committee, noble Lords made clear they had concerns with that clause, which removes the requirements to consider regulatory principles each time they exercise a general function in favour of considering them just at a strategic level.

But these points were particularly strongly made with regard to proportionality. And in response, we have tabled amendments 37 and 43 in my name. These amendments ensure the two proportionality regulatory principles will continue to apply to the regulator's day to day actions. There was also a rich debate at committee about the different facets of proportionality and the factors that the regulator should consider. Here again, I think the government has listened. Amendment 44 makes changes to the existing principles to explicitly include that the regulator should recognise the differing abilities of firms to engage and comply with regulation owing to their size, a point raised both by the noble.

Baroness Neville-Rolfe and by the noble Lord Vaux. This means that regulators will need to consider the specific impact of their proposal on SMEs. It was also clear that a number of noble Lords had concerns about the possible effects of clause 17 on Parliament's ability to effectively scrutinise the regulators in response. Amendments 40 and 46 to 50 ensure that existing reporting requirements on the proportionality regulatory principles will remain in place, including as part of the consultation on annual reports.

So the government is retaining the majority of existing transparency and reporting requirements, including through a panel reports, consultation requirements and annual reports in their letters to me, which have been shared with interested members and laid in the library. Both the regulators set out details of their approach to delivering proportionality. They also commit to ongoing engagement with the parliamentary committees on their approach, and I am deeply grateful to the noble Baroness Noakes for saying that, as chair of the committee, she will take up this challenge.

But I'd also. I'd also like particularly to recognise the generous offer made by my noble friend Lord Stockwood, to use his expertise in artificial intelligence to support Baroness Noakes and the financial Services Regulation Regulation Committee and the Treasury Select Committee in their work to scrutinise the work of the regulators. It just feels to me like a an offer that is made in the spirit of consensus and team working about what it is that we would like to do here.

So the government is grateful to noble Lords for the careful attention they paid to this matter, and is confident that these amendments will support effective scrutiny and target regulator reporting more meaningfully at the issues Parliament cares most about. Let me then turn to the A non-government amendments 35, 36, 39, 41, 42, 45, 62, 67, and 69. I hope I have demonstrated that the government is taking action to ensure that proportionality does remain a central consideration in the framework, and that the framework supports SMEs of all types, and that these amendments are therefore not required.

With regard to amendment 38 concerning financial crime related to organised environmental crimes, the FCA already has a broad remit and the powers it needs to tackle all financial crime. My Lords, I hope I have demonstrated that the government has listened carefully to the strong feeling from across the House about the need to ensure that the regulator's exercise of the regulators exercise their power in a way that is responsive to the differences between firms and business models. I am grateful to all those present for the focus issue.
17:47
Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted (Liberal Democrat)
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But, my Lords, thank you very much for the replies to the debate much for the replies to the debate that we had from the Minister, and I recognise the movement that that he has indicated. I did ask him to say something about transparency, which was, I'm afraid, absent from what he said. Just then. He said he talked about proportionality, but I was talking about the linkage between transparency and proportionality, and that with transparency still languishing at a strategy level, I was not sure what whether we were going to get adequate transparency over things like cost benefit, which are a part of proportionality.

I know that's a little bit convoluted, and I won't pursue it any further here, but I would be very grateful to have a meeting with the Minister before we get to Third Reading, because if he's going to be addressing points about clause 17, then we should at least cross check whether there's anything relevant in that to do. But for now, I do beg leave to withdraw my amendment.

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Pleasure that this amendment be withdrawn. It is by leave withdrawn. withdrawn. It is by leave withdrawn. Amendment 36 Baroness Noakes moved. Amendment 36 Baroness Noakes moved. Amendment 37. Lord Pitt-Watson moved formally. The question is moved formally. The question is that amendment 37 be agreed to. As many as are of that opinion will say content to the contrary, not say content to the contrary, not content. The contents have it. Amendment 38 Baroness Bennett not moved. Amendment 39.

Baroness Noakes not moved. Amendment 40 Lord Pitt-Watson amendment moved formally as many as are of that. Sorry. The question is that amendment 40 be agreed to. As many as are of that opinion will say content to the contrary, not content. The contents have it. Amendment 41 Baroness Bowles not moved. Amendment 42 Baroness Noakes not moved. Amendment 43 and amendment 44 moved. En bloc moved formally. En bloc. The question is that amendment 43 and amendment 44 be agreed to.

En bloc as many as are of that opinion will say content the contrary not content, the contents have it. Amendment 46 to amendment 50. Sorry 45. Many apologies, my Lords. Amendment 45. apologies, my Lords. Amendment 45. Lord Holmes not moved. Apologies. Amendment 46 to amendment 50 moved formally. En bloc. The question is that amendment 46 to amendment 50 be agreed to en bloc as many as are of that opinion will say content to the contrary, not content.

The contents have it question amendment 51 Baroness Bowles not moved. Amendment 52. Baroness Noakes not moved. Amendment 53. Baroness Noakes not moved. Amendment 54. Baroness Bowles not moved. Amendment 55 Baroness Hayman not moved. Amendment 56 Baroness Bowles not moved, not moved, not moved. Amendment 57 Lord Holmes not moved. Amendment 58 and amendment 59 moved formally. En bloc Lord Pitt-Watson as many as. The question is that amendment 58 and 59 be agreed to En bloc as many as are of that opinion will say content to the contrary, not content.

The contents have it. not content. The contents have it. Amendment 60 Baroness Kramer. Moved formally. The question is that amendment 60 be agreed to. As many as are of that opinion will say content to the contrary, not content content. The question will content content. The question will be decided by a division. House when voting is open. Voting is now
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18:04
Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted (Liberal Democrat)
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Baroness Bowles of Berkhamsted my Lords, I declare my interest as chair of the Ownership Dividend Inquiry into employee ownership and also as director of the Loop also as director of the Loop Holdings Limited, amendment 63 and 66 address a structural flaw in financing employee ownership, cooperative and mutual transitions, a problem sharpened by recent tax changes and incoming Basel prudential rules. Amendment 64 concerns the systemic misuse of section 166 investigations. In the interest of time, I have not split this rather diverse group.

Amendment 63 and 66 do not mandate outcomes. They simply require regulators to consider a distinct exposure class and review lending to these entities. The PRA already possesses the power to do this, just as it has for infrastructure. But this asset class is too niche to attract regular focus without a push. So this is my push. The government's manifesto commits to doubling the co-operative and mutual sector, yet reducing capital gains tax relief for employee ownership trusts has already drastically reduced conversions.

And Basel 3.1 compounds the damage, removing the SME supporting factor increases risk rates under the standardised approach used by challenger banks, the very lenders willing to finance these transactions, the large IRB banks could theoretically model lower charges, but generally won't incur the cost for such a small market. The result is clear funding these transitions will become harder, if not impossible. Yet these business models carry lower default rates, higher survival rates and greater economic resilience.

These are potentially relevant characteristics that justify differentiated treatment. Just like infrastructure, green mortgage or project finance does. Recognising this profile is cost neutral. Basel compatible and entirely within existing regulatory powers. And without it, I suspect the government's own policy commitments will fail. Turning now to amendment 64, section 166 powers were designed for serious exceptional concerns, allowing regulators to appoint appoint a skilled person, typically an expensive consulting firm, to investigate a business as a noble Lord, Lord Altrincham and I set out in committee.

Section 166 has suffered severe mission creep. It now seems, used routinely, disproportionately and beyond its intended scope. These reviews impose high costs, disruption and management distraction on firms, often for issues that supervision could and should handle. My amendment restores the original statutory boundary. It ensures section 166 is deployed, is deployed only where there is material risk of detriment to regulatory outcomes and where its use is strictly proportionate. Having regard to the burden on the firm and whether normal supervisory tools would suffice, this House must signal that regulators cannot delegate routine supervision to high priced firms at the expense of regulated businesses, and I do intend to seek the opinion of the House.

I beg to move.

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Amendment proposed after clause 22. Insert the following new clause

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as printed on the Marshalled List. I thank the noble Lord, the

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I thank the noble Lord, the Minister, for hosting this second day of report with such grace, and I want to focus my remarks on amendment 64, to which I added my name. I'm very grateful to the
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lords, this group raises two important but distinct questions how the prudential framework should how the prudential framework should treat lending that supports employee ownership, co-operatives employee ownership, co-operatives and mutuals, and when regulators should use skilled person reviews. Under section 166 of Fisma, the government has carefully considered the case made for each amendment, but does not believe that those changes should be made through legislation. Let me begin with amendment 63 and 66, which seek to create a bespoke prudential framework for lending to co-operatives and mutuals, including through lower risk weights.

The government recognises the valuable contribution that co-operatives and mutuals make to the UK economy, and is undertaking a multi-year programme of work to support the growth of the sector. This includes making amendments to the Building Societies Act 1986, which we debated last week to align it with company law and give societies greater funding flexibility. However, prudential capital requirements should reflect the underlying risk of a lending activity rather than the ownership structure of the lender. Prudential requirements are generally set by the Prudential Regulation through its rules, rather than being prescribed in legislation allows the framework to respond to evolving risks and market developments while operating within a statutory framework established by Parliament.

The Prudential Regulation Authority has clear statutory objectives and is accountable to Parliament for the exercise of its functions. It is therefore the appropriate body to assess risk characteristics and determine the appropriate prudential treatment of different exposures. The government, therefore, does not consider it appropriate to prescribe preferential prudential treatment for particular business model through legislation. Such decisions should remain matters for the Independent Prudential Regulation Authority, and for these reasons, I am unable to support these amendments. Turning to amendment 64 concerning section 166 skilled person reviews, I agree these reviews should be commissioned only where appropriate and proportionate.

However, the government is not persuaded that a further statutory threshold is necessary. As we discussed in committee, regulators already consider the circumstances of the firm, the costs involved and the availability of alternative supervisory tools before commissioning a skilled persons review. The FCA and PRA have established supervisory processes for doing so, requiring the regulators to satisfy an additional statutory test could delay supervisory action and make it harder to intervene before problems occur. That could damage the interests of consumers or affect the functioning of markets.

I know a concern has been raised about there being more and more. Section 166 reviews, and I'd like to reassure my Lords that the FCA's use of skilled person reviews has been broadly consistent over the past ten years. Indeed, in 2025 to 2026, 2031 were commissioned, which is the second lowest usage since 2016. In their letters to me, which have been shared with intra arm happily send those figures to members if they're interested. But in their letters to me, which have been shared with interested members and late in the library, both regulators set out details of their approach to delivering proportionality, with the FCA explaining how its approach to supervision is proportionate, risk based and targeted.

They also commit to ongoing engagement with parliamentary committees on their approach. I hope this reassures the naval noble Lady about the process and proportionality of section 166 reviews, and therefore ask the noble Lady to withdraw her amendments.
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None Portrait Division
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open. Clear the bar.

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The The question The question is The question is that The question is that amendment

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The question is that amendment 64 be agreed to, as many of that opinion will say, content contrary, opinion will say, content contrary, not content. The contents will go to the right by the throne. They're

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So. I'm I'm not. I'm not. Yeah. I'm not. Yeah. Everyone.

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The The question The question is

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The question is The question is that The question is that amendment

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Is Is that.

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My My Lords

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My Lords there My Lords there have My Lords there have voted contents 226 not contents. 162 so Amendment Amendment 65 Baroness Hayman not moved. Amendment 66 Baroness Bowles not moved. Amendment 67 Baroness Kramer not moved. Amendment 68 Baroness Noakes not moved. Amendment 69 Lord Ashcombe not moved. Amendment 70 Lord Mackinlay not moved. We come now to amendment 71.

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Lord Holmes of Richmond my. Lords. I rise. To move amendment 71 in my name and to speak to the amendments in and to speak to the amendments in this group which I support. My Lords, there are two critical Lords, there are two critical threads running through this bill. I say, running through the bill. In reality, they are two critical threads that don't appear at all in
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None Portrait Amendment:71 Lord Holmes of Richmond (Conservative)
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finance, open finance, digital assets, stablecoins, CBDCs or the whole subject of AI and how it's whole subject of AI and how it's currently transforming all things across consumer, retail, wholesale across consumer, retail, wholesale and financial markets right around the world. You could be forgiven for not appreciating this if you for not appreciating this if you just looked at the contents of this bill to see the impact that these forces are already having. And when it comes to digital assets or indeed AI, there are many elements clear and present requiring primary legislation.

We have this current Financial Services and Markets bill in front of us, and yet it is silent on all of these issues. We have the excellent report of the Digital Markets Task Force, the great work so far of Chris Woolard and indeed the report of Mark Austin all having elements within it already at this stage, requiring primary legislation, and yet nothing in this bill to say on those subjects. My Lords, I believe the UK has an extraordinary, a unique opportunity when it comes to both digital assets, stablecoins, tokenization, market demat and artificial intelligence.

But we require the primary legislation and indeed the attendant regulatory framework, not just to give effect to that and to enable that innovation and that economic growth that would come. But to give the signal from government as to the direction that they want the UK to go when it comes to all of these extraordinary transformational growth, creating economic opportunities, I look forward to the Minister's response. I beg to move.

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Lord Barber proposed after clause 22. Insert the following new clause as printed on the Marshalled

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List. Sir, I also rise in support of this group.

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this group. Of amendments, but particularly in support of amendment 88, I. I in support of amendment 88, I. I also welcome and echo my noble friend's comments in terms of the challenges that are being faced in challenges that are being faced in the area of financial services, from the forces of technology and technological evolution, and I welcome the direction of travel from the government, the FCA, the Bank of England. There has been real progress on crypto assets, stablecoins, tokenization and I particularly also am encouraged by the work of the government's wholesale digital markets champion, Chris Woollard.

His published report and the work towards his forthcoming reports, and would like to thank the government and the Minister and the Economic Secretary and the champion for their engagement so far. But this amendment, amendment 88, asks a bigger question are we simply regulating digital assets or are we building digital assets, a digital assets economy? That distinction matters. Chris Woollard's work on Tokenising wholesale financial markets is extremely important, but digital assets are bigger than financial services regulation. They are becoming part of infrastructure of money payments, settlement, capital markets and the wider economy.

That is why I strongly support the work of the Bank of England and the governor on a multi money system, or even a multi money verse with traditional bank money, tokenised deposits, stablecoins and central bank money playing complementary roles. We should be thinking about the whole ecosystem, not simply individual technologies. That is what this amendment seeks to do. It requires the Treasury to develop a proper digital asset strategy, informed by regulators and, crucially, by industry. It specifically asked government to look at practical conditions in which firms operate, including access to banking payments and settlement.

That matters because a firm can be authorised and compliant, but it cannot access the financial infrastructure it needs. That authorisation is largely theoretical. Industry is telling us that this is a real barrier. We should listen. There is also an international dimension. In my regular discussions with senior policy makers in Washington, including the US SEC and the CFTC, it is clear that the United States is moving rapidly to shape the digital assets market through genius and clarity. Acts. My Lords, we do not need to copy the US, but we do need to recognise the competition and recognise the particular opportunity for the United Kingdom.

Of course, the UK is a global financial centre with extraordinary strengths in financial markets, legal services, fintech and professional services. That gives us an opportunity not simply to follow international developments but to lead international standard setting. Indeed, the Bank of England is already showing what that leadership can look like through its work on interoperability and multi-asset multicurrency tokenised financial systems. So I welcome the increased engagement with industry from the government. But we now need a consistent drumbeat, a stronger leadership and a clear plan of targets and delivery so industry can plan alongside government and regulators.

That is why I believe this amendment is important, and would press the Minister and the government to give further consideration. It asks for a strategy that sets out where we want to go, what barriers we need to remove, what infrastructure and standards we need, how we remain internationally competitive, and what success looks like. Woollard's work is an important part of that, but we need to be more ambitious than a single work stream. Other countries are moving quickly. The UK should not simply seek to regulate the digital assets economy of tomorrow.

We should build it and help write the international rules for it. Here in the United Kingdom.
18:33
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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My Lords, this is an important and forward looking group of and forward looking group of amendments covering open finance, digital market infrastructure and the future of digital assets. And I am very grateful to my noble friend Lord Holmes of Richmond for his amendments and for explaining the scale of the digital tide and the AI wave, and the lack of specific signals in the bill on these opportunities. I want to focus my remarks on amendment 88, standing in my name and those of my noble friend Lord Altrincham and the noble Baroness, Lady Cramer, who I thank for her support.

We debated these issues in committee, but the central concern remains digital assets are becoming an accelerating part of our financial and economic landscape, yet policy is still developing too often issue by issue, product by product and regulator by regulator. What is missing is a comprehensive strategy. This matters. Industry is telling us that the most basic building blocks of a comprehensive regulatory regime, such as legal definitions, do not exist. This uncertainty is translating into a lack of confidence, which is driving wealth creators away.

Amendment 88 asks the Treasury to step back and set out a coherent strategy for the regulation and development of digital assets and related financial market infrastructure in the UK. It asks them to establish their objectives, consult properly with industry and other interested parties, and explain how the different strands of policy fit together. This can build on the work of the Bank of England and of Chris Woollard, the new wholesale digital markets champion at the Treasury, and we are most grateful for yesterday's briefing at which Chris set out his forthcoming plans for another report, due to be published next year.

The opportunity for the UK is considerable. We have the legal system, deep capital markets and an extensive professional services ecosystem, but firms need to know which regulator is responsible for which part of the system, what rules will apply, how different regimes will interact and how quickly decisions will be made. We are seeing the effects of current ambiguity in reports of firms wishing to offer digital asset products being debunked, a point to which my amendment refers. Other financial centres are moving rapidly to establish their own frameworks for digital assets and for tokenised markets.

As my noble friend Lord Ranger explained from his position of great expertise, if business conclude that another jurisdiction offers greater regulatory certainty or a clearer strategic direction, they can quickly go elsewhere. Amendment 88, therefore, offers the government an opportunity to bring those strands together. The work of Chris Woollard is welcome, but our amendment encompasses a wider range of concerns raised with us, so I hope the government will engage with the amendment. But if I'm not satisfied with the minister's response, I will seek to test the

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opinion of the House. My Lord, I thank the noble Baroness, Lady Neville-rolfe and Baroness, Lady Neville-rolfe and Lady Cramer, the noble Lord Altrincham and Holmes, for their amendments in relation to the adoption of technology in the financial services sector and further contribution to this debate. Technological change is already having a significant impact on the sector, and there are huge sector, and there are huge opportunities for the UK, alongside risks to be managed. Amendment 71 seeks to require the FCA to create and maintain a work, a framework for open finance.

However, the government already has powers to create a framework for open finance under the Data Use and Access Act 2025. Parliament has therefore already legislated here, and that legislation includes the power to require the FCA to regulate for open finance and includes appropriate safeguards and scrutiny. The Treasury has also confirmed that mansion House in 2020 6th July 2026, its commitment to open finance and said it will consult on open finance next year. Amendments 88 and 89 are both focussed on digitalisation.

Amendment 88 seeks to support the UK's approach to digital assets by requiring the government to publish a digital asset strategy. It sets out a number of important issues that such a strategy should consider. Amendment 89 similarly seeks to support digitalisation by requiring the government to make regulations establishing an issuer Digitalisation Council, composed of representatives from issuers, intermediaries, FCA, PRA, Bank of England and the Treasury. As noted in the debate at Committee stage, the government is a strong supporter of digital assets and sees them as a key strategic priority.

As such, the government has been very active on this agenda and has a comprehensive strategy to drive forward digitalisation of wholesale markets through the wholesale Financial Markets digital Strategy, published in July 2025. The government has been taking forward the actions of the strategy at speed. There has been progress even since the issue was debated at Committee stage. Chris Woolard CBE published his first report as the government's wholesale digital markets Champion in July, setting out a comprehensive, cross-sector approach to digital assets.

The Economic Secretary to the Treasury and myself hosted a drop in session with Mr. Woolard here in Parliament just yesterday. So members of your Lordships House could hear more about his agenda. I think those of you who were there would agree we should be impressed by the scope and comprehensiveness of the work that he is doing. He outlined not one workstream, no. Nine task force action groups who are taking forward the industry roadmap, including an action focussed group on primary issuance of digital securities, with an initial focus on delivering an end to end use case.

These groups and the overarching orchestration group
18:39
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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represent a huge amount of work expertise and industry input that Chris is leading. They include the Chris is leading. They include the industry. They include a strategy. They include 50 companies just to be joined with the head from of Europe, from BlackRock and from the London Stock Exchange. Absolutely great work. As Lord Holmes said at great work. As Lord Holmes said at that meeting, a Chris Woolard was asked, did he see there as being any need for further primary legislation? I think Lord Ranger was there at the meeting and can confirm that.

He said. Right now he did not think that there was and could confirm that. I also said to him that should there be that need, myself and the Economic Secretary to the Treasury would be listening to that, because, look, there is a real threat to UK competitiveness if we fail to act in this area and a considerable. And opportunity if we get it right, I hope the opportunity to engage Mr. Woolard prior to this debate should have given insight into the extent and the vast amount of work that is taking place already constructively, to make sure that this happens.

There are many other actions that are taken to support this work, such as the Bank of England and the Financial Conduct. Authorities call for input on tokenization, which closed in July. They intend to publish a further roadmap in the autumn. In your speeches, I have heard that you want momentum and a strategy involving industry. That is indeed what is happening right now. The government has also highlighted progress on the digital security sandbox, the digital instrument at Committee stage.

My Lord, the government strongly believes in the need to digitalise financial markets, and I had hoped that the measures that the government was taking forward and the further updates that you'd received from Chris Woolard as wholesale digital markets champion, show that the government is working with the sector and the regulators to deliver a strategic approach to

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digitalisation, and that. May I. Forgive me for interjecting, but

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Forgive me for interjecting, but the Minister is quite right. We had a very progressive session with Mr. Woolard yesterday, but the question Woolard yesterday, but the question we did raise, and I did raise with him, was about the future strategy where we were heading, because his focus is quite clearly on tokenization. But we did notice that there was a discussion to be had further on standard setting had further on standard setting internationally, and also on Agentic finance and various other elements that are in development that need strategic thought.

And I think the champion did take that on board, that there was a broader vision that needed to be identified,

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which is what we would be looking for in a set strategy. Did indeed take that on board,

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Did indeed take that on board, and I would thank the noble Lord Ranger for coming and making that point. And he was also asked point. And he was also asked whether, at this point, further primary legislation was needed. And primary legislation was needed. And he said that it was not, but was invited, should that situation change, to talk to the Ministers in the Treasury. And therefore I asked the noble Baroness and the noble Lords to withdraw their amendment.
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None Portrait Deputy Lord Speaker Lord Young of Cookham (Conservative)
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Pitt-Watson moved formally. The question is that amendment 81 be agreed to, as many of that opinion will say, content not content. The contents have it. We now come to amendment 82 Baroness Kramer not moved. Amendments 83 to 86 Baroness Kramer not moved. We now come to

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amendment 87. Baroness Bowles of Berkhamsted. Yes, I'll let you sit down, my

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Yes, I'll let you sit down, my Lords. I'll speak briefly to amendment 87, and I support Baroness Altman's amendment on Superfunds. I think these are two issues that need attention. My issues that need attention. My amendment is about one thing tax certainty for insurance linked securities. It does not weaken securities. It does not weaken anti-avoidance rules and does not seek any advantage Parliament never intended. It simply asks for clarity in a regime Parliament created to attract ILS business to the UK.

And the problem is commercial rival jurisdictions give clear outcomes. The UK does not. HMRC guidance leaves too much ambiguity and advisers reach conflicting conclusions on identical transactions. So in a market where speed and predictability drive choice of domicile capital goes elsewhere and the consequences are stark. London is the world's largest commercial reinsurance centre, yet we have only 2% of global ILS activity. The catastrophe. The catastrophe bond market is over $60 billion, and the wider ILS market exceeds $140 billion.

And we could have a big chunk of that. But we are letting this substantial business and indeed, the tax revenue that would
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Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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super fund market, potentially even to help the UK build its own to help the UK build its own version of Canada's much vaunted Maple. Eight UK insurers with suitable ring fencing, as set out suitable ring fencing, as set out in the amendment to ensure separation from their insurance separation from their insurance business, are ideally placed to run large pools of pension investments large pools of pension investments with existing in-house expertise in areas such as investment, actuarial and legal.

At present, insurance buyout is seen as the gold standard for defined benefit pension scheme. Endgame strategies, but Superfunds could provide a means to add billions of pounds worth of productive capital into the UK economy and allow pension members to enjoy better benefits, rather than super funds. Remaining niche players. If the current system is not changed, insurers could bring large amounts of capital pooled into the pension scheme area and to collect pension assets so that scheme members would have better upside opportunities and robust alternatives to the finality of annuity buyouts, which are generally considered 100% safe, but which could well not be.

Buyout pushes assets into low return, unproductive opportunities and denies members greater returns and better pensions, which could come from superfunds. But more particularly, there are concerns about systemic risk with annuity buyouts. And I wondered if the noble Lord, the Minister, might agree to meet with myself and other interested parties to discuss the risks involved in the government's current perception that annuity buyout is the gold standard, 100% safe end game strategy. I hope that he will recognise the Financial Services Compensation Scheme may not be as secure as expected, and therefore I beg to move that this amendment be considered.



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My Lords, I thank the noble Baroness Lady Bowles and Lady Altmann for their amendments. I'll Altmann for their amendments. I'll take each in turn, starting with amendment 87. As was noted noted by amendment 87. As was noted noted by my predecessor, this government recognises the role which. The bespoke tax regime for transformer bespoke tax regime for transformer vehicles plays in ensuring the UK is competitive. We also recognise, is competitive. We also recognise, as does this amendment, the importance of robust anti-avoidance measures and clear guidance in ensuring that the regime functions effectively, provides certainty to business and safeguards the integrity of the tax system.

It is right that we preserve HMRC's ability to effectively pursue instances where vehicles are established for the purposes of avoiding tax, and it is important that we preserve that ability and avoid creating risks for the Exchequer. However, I recognise the strength of feeling in industry over this issue. I would therefore offer the Baroness a meeting with

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HMRC and Treasury officials To discuss in more depth. I remain of the view that this remain of the view that this legislation is not the appropriate place to make provision for the tax regime governing transformer regime governing transformer vehicles. The Risk Transformation Tax Regulation 2017 being the Tax Regulation 2017 being the specific regulation legislation designed to govern. Turning to designed to govern. Turning to amendment 92, the government recognises the important role that defined benefit pension scheme consolidation can play in improving outcomes for pension scheme members and providing additional options for schemes.

This amendment seeks to place in legislation an explicit permission for PRA authorised insurance to establish, own or operate DB Superfunds that would introduce statutory requirements requiring the separation of Superfund and insurance activities. However, insurers are already able to establish and operate Superfunds under the existing regulatory framework. The amendment, therefore, does not create a new route into
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None Portrait Financial Services and Markets Bill : Division: Amendment 88
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Unfortunately. Unfortunately. There Unfortunately. There are Unfortunately. There are a Unfortunately. There are a number of people, I thought. One of the women in number one was so. women in number one was so. I women in number one was so. I would Not Not too Question is that amendment 88 be agreed to, as many of that opinion will say content. To the contrary, not content. The contents will go to the right by the throne.

The not the right by the throne. The not

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Don't Don't worry, Don't worry, don't Don't worry, don't worry. My Lords.

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The question is that amendment

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Coming To.

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My Lords, they have voted. Contents 194 not contents. 138 and Contents 194 not contents. 138 and so the contents haven't.

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so the contents haven't. Yeah yeah yeah yeah yeah. That's all right.

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Amendment 89 Lord Holmes not moved. Amendment 90 Baroness moved. Amendment 90 Baroness Sheehan not moved. Amendment 91 Baroness Northover not moved. Baroness Northover not moved. Amendment 92 Baroness Altmann not

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Amendment 92 Baroness Altmann not moved. Amendment 93 already debated. Baroness Neville-Rolfe amendment 93 and it's consequentials are 93 and it's consequentials are intended as a compromise with the government. I do not feel that the government have fully engaged with the practical proposal that we put forward on Monday. I therefore wish to test the opinion of the House on amendment 93.
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None Portrait Deputy Lord Speaker Baroness Pitkeathley (Labour)
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For.
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None Portrait Financial Services and Markets Bill : Division: Amendment 93
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The question is that amendment 93 be agreed to. As many as of that opinion will say content Of the contrary, not content. the contents will go to the right. By the. By the throne. The not contents to the

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Yes, Yes, exactly. Yes, exactly. But.

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My My Lords, My Lords, the My Lords, the question My Lords, the question is My Lords, the question is that

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My Lords, the question is that My Lords, there have voted. Contents 196 not contents. 138 so the contents have it. contents have it.

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What is surprising. No, no. Amendment 94 Baroness

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Amendment 94 Baroness Neville-Rolfe not vote not moved 94 Neville-Rolfe not vote not moved 94 not moved. 95 Lord Howard. I not moved. 95 Lord Howard. I understood 100 203 were consequential. Is there is this is this one consequential 94? No, no not moved. 95 Lord Howard not moved. 96 Lord Jones not moved 97 already debated Baroness Bennett not moved. And now I call 97 a from the supplementary sheet Baroness Sheehan.

Not moved, not moved. 98 amendment 98 Baroness Neville-Rolfe.

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Hello my Lords, I rise to move amendment 98, which would remove clause 50, thus, returning to the clause 50, thus, returning to the broad principle we raised in our discussions on clause three, which led to a majority of 81 in a vote
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lords. >> My Lords. >> Amendment 98 would remove the consequential power contained in consequential power contained in clause 50. The government understands the concern that delegated power should be used appropriately and should be should appropriately and should be should not become a vehicle for making substantive policy changes without parliamentary scrutiny. And indeed, I think on Monday, in response to issues to do with Henry the Eighth powers, I gave some sympathy to that argument. However, the power in clause 50 is not a power to introduce new policy, nor is it a power to revisit the policy that Parliament will have approved by passage of the Bill.

It is a narrow regulation making power limited to dealing with matters that arise as a consequence of the provision that Parliament has already approved within the Bill. It is common and often necessary for legislation of this scale and complexity to require consequential adjustments elsewhere on the statute book so that provisions operate as intended. Without such a power, relatively minor or technical changes would require further primary legislation creating unnecessary delay and complexity. For these reasons, the government does not believe that removing this clause would improve the bill.

I would also note that this was not a point raised by the Delegated Powers Committee about this bill. And finally, I would like to assure the noble Lady that parliamentary committees will, of course, be able to call the government to appear in front of them and account for the use of consequential power, or indeed any other power in this bill. I therefore ask the noble Baroness to withdraw this amendment.
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