Health and Care Bill

Baroness Altmann Excerpts

Committee stage
Friday 4th February 2022 Lords Chamber

[Baroness Tyler of Enfield (LD)]

My Lords, I support these amendments from the noble Baroness, Lady Bennett. I thank her for putting them forward. The care sector is both complex and very little understood. Back in 2020, there were approximately 15,000 care homes in the UK, run by approximately 8,000 providers. Some were very small; others were providing very large networks of homes—it is a mixed economy. These figures are a couple of years old but, at that time, 84% of homes were run by the private sector, including by private equity firms, both British and offshore.

Funding is a complex mix of private funders, local authorities and the NHS. I was very grateful to the noble Baroness, Lady Bennett, for highlighting the work that the Financial Times has done, because I was first alerted to this issue by an investigation that the paper did back in 2019 which revealed how Britain’s four largest privately owned care home operators had racked up debts of £40,000 per bed, meaning that their annual interest charges absorbed eight weeks of average fees paid by local authorities on behalf of residents. Many have argued, and I absolutely agree, that this sort of debt-laden model, which demands an unsustainable level of return while shipping out profits of 12% to 16%, often to tax havens, is entirely inappropriate for social care.

I want to make it clear that I do not have an ideological problem with the private sector being involved in the care sector and providing care homes—provided that they are good quality—but I have a real problem with the financial models used. Most fair-minded people in this country, not least those whose loved ones are in care homes, would, frankly, be horrified if they knew how the money—either theirs, if they are self-funded residents, or indeed the money of hard-pressed local authorities—was being used and where it was being siphoned off to.

I greatly support amendments to increase transparency and reporting. Frankly, I would like to see the regulator being a lot tougher and a lot more proactive in this area, so I very much support the review in the amendment put forward by the noble Baroness.

[Baroness Altmann (Con)]

My Lords, I support the thrust of the amendments laid by the noble Baroness, Lady Bennett. I fully agree with her that there is a systemic problem in the care home sector.

In 1991, the community care Act reforms meant social care was transferred from a public sector function—or NHS function when it came to nursing homes—to what was called a mixed market. But, having observed the worsening care crisis, the financial engineering, the periodic failure of large care home operators and the inadequacy of regulation or oversight of their financial backing, I cannot help but urge my noble friends on the Front Bench to look urgently at the need for much greater controls. Southern Cross and Four Seasons Health Care have been in and out of insolvency or near bankruptcy for the past few years, but there are still inadequate controls on their ownership structure.

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[Baroness Barker (LD)]

My Lords, it has been a great privilege to work alongside the noble Baroness, Lady Deech, and I can only admire the persistence with which she has stayed on this issue to get the change which so many people have wanted for so long, and for such good and compelling reasons. I am but one of several Members of your Lordships’ House who have taken part in debates on assisted reproduction over many years.

It was a privilege to discuss these matters in the presence of Baroness Warnock, who was responsible for setting the ethical framework, all those years ago, to which we still refer when dealing with these matters. She was a remarkable person and one of the most important things she did was to foresee that science, knowledge and society would change. What she did was to set down a basic ethical framework, to which we could return as knowledge and scientific understanding increased. This provision is one such part of that.

Other issues in the field of reproductive medicine are equally deserving of our attention. For example, we are starting to uncover the extent to which LGBT people face unfair discrimination when it comes to access to assisted reproductive technology. If, in a heterosexual couple, one of the partners happens to be HIV positive but it is undetectable, and therefore untransmissible, the couple will not be disbarred from receiving treatment; that is not so for lesbians and gay men.

In the last week, some of us who work on these issues have been engaging on the issue of access to telemedicine. In this field it is true, as it is right across the NHS, that it is important to make these services more widely and easily accessible to women by using telemedicine. I hope the Minister might confirm that on another important aspect of women being able to control their fertility, in access to abortion services, we may see the extension of the highly successful scheme which has been run throughout the pandemic to enable women to have consultations and receive treatment at home. In that vein, and in the hope that we may fairly soon have a more comprehensive review of advances in reproductive medicine, which is needed across the piece, it is very pleasing today to welcome this amendment.

[Baroness Altmann (Con)]

It is a pleasure to follow the noble Baroness, Lady Barker, and I too commend the noble Baroness, Lady Deech—my noble friend, really—for all her work in this area. I particularly thank my noble friends the Minister and Lord Bethell, who I know have listened carefully and responded in the most compassionate and caring way. They have done a great service for many women across the country. I thank my noble friend for these amendments.

[Baroness Thornton (Lab)]

When the Minister and I were discussing government amendments, on this issue I said: “If Baroness Deech is happy with this, then I am happy with this,” and indeed I am.

Health and Care Bill

Baroness Altmann Excerpts

Lords Hansard - Part 2 & Committee stage
Wednesday 26th January 2022 Lords Chamber

[Baroness Merron (Lab)]

My Lords, it is essential that we get the arrangements for the Care Quality Commission right throughout the Bill, and I am grateful to the noble Lord, Lord Lansley, for trying to do that through these amendments. If the health and social care provided is to be of the highest standards, we must ensure, through the powers of scrutiny and review in your Lordships’ House, that we enable the watchdog to have the proper tools and framework to achieve that, so I support the amendments.

As the noble Baroness, Lady Brinton, emphasised, this is about putting the responsibility in the right place to ensure that a key inspectorate can do an independent job and support proper integration and delivery. I hope the Minister will accept the good sense in these amendments.

[Baroness Altmann (Con)]

Can I briefly ask my noble friend whether part of the thinking behind the current wording might be that the remit of the CQC may need extending? For example, when it comes to private operators of social care, the CQC currently does not have the power to look at the financial stability of those operators. Is this provision perhaps based on the thought that the Secretary of State may need to widen the remit and powers of the CQC? If not, we will be returning to this at some point.

[Earl Howe (Con)]

My Lords, I thank my noble friend Lord Lansley for bringing this debate before the Committee. He has made some worthwhile points but I hope to be able to explain why I think his amendments should not be pressed.

My noble friend Lady Altmann is not quite right in what she suggested was the intention of Clause 26. Clause 26 will allow the CQC to look across the integrated care system to review how integrated care boards, local authorities and CQC-registered providers of health, public health and adult social care services are working together to deliver safe, high-quality and integrated care to the public. That will include the role of the integrated care partnership. These reviews serve several functions. They will provide valuable information to the public, help drive improvement, and review progress against our aspirations for delivering better, more joined-up care across the system.

These amendments would remove the requirements on the Secretary of State to set and approve the priorities for these reviews. They would also remove the Secretary of State’s ability to direct the CQC to revise the indicators of quality that it will determine for these reviews. Instead, the amendments would add a requirement on the CQC to consult on those indicators with the Secretary of State, prescribed persons and other persons considered appropriate.

I entirely see where my noble friend is coming from as regards the CQC’s independence, but I must tell him that we have thought about this issue very carefully and we think it is right that the Secretary of State, who is accountable to Parliament, should have the flexibility to set the overall strategic direction of these reviews, with priorities and objectives. That is not an open-ended facility. In the other place, we accepted an amendment to develop this further by making it clear that the priorities set by the Secretary of State must relate to leadership, integration, and quality and safety. The amendment would remove that certainty.

As I have already mentioned in previous debates, there will be quite a range of different forms of accountability and oversight within the system, including NHS England’s role in overseeing ICBs. As a result, we think that the Secretary of State should play a strategic role to ensure that the CQC reviews complement the other oversight and accountability mechanisms. This will be achieved, in part, through the Secretary of State’s approval of the quality indicators. To provide my noble friend with an analogy, we believe, as I am sure he does, that there is a proper role for the Secretary of State in setting the strategic direction of NHS England. He does this, of course, through the mandate.

Finally, the drafting of this clause is not an accident. It is drafted deliberately to protect the independence of the CQC in how it operates, while also encouraging consultation and collaboration. It will allow the CQC to develop its approach in collaboration with NHS England and other partners in the system. The CQC is already intending to develop its approach to these reviews co-operatively and is able to consider a wide range of views in doing so. We do not think it is necessary to require it to consult.

I hope this has given my noble friend some reassurance as to why we have taken the approach we have and, for these reasons, I ask him to withdraw his amendment.

Coronavirus Grants: Fraud

Baroness Altmann Excerpts

Tuesday 25th January 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

That is a very fair question and of course the sort of detailed question that I cannot answer. In terms of the fraud that we are looking to identify as part of the loan book, as of 17 December 2021 some £67 million worth of claims had been settled for the loan scheme. Of those, £13 million for 337 facilities had been flagged by lenders as suspected fraud. That is the sort of detail that we want to get into.

[Baroness Altmann (Con)]

My Lords, I too have sympathy with my noble friend the Minister, but will he reassure the House that the Government are looking seriously at the remarks and observations made by our noble friend Lord Agnew yesterday, particularly at any recommendations that he has for improving the situation and lessons learned at both BEIS and the British Business Bank, as well as at HMRC?

[Viscount Younger of Leckie (Con)]

I am aware that my noble friend has much experience in this area, linked to her work on pensions and in respect of HMRC. She is absolutely right: preventing fraud is incredibly important. We designed the schemes to prevent as much fraud as possible before any payments were made, while still quickly supporting those who needed them in unprecedented circumstances. For example, the first furlough payments went out within six days of being announced. We had to move quickly but, clearly, as she said, lessons will be learned.

Covid-19

Baroness Altmann Excerpts

Thursday 20th January 2022 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

As I said in response to the first question from the noble Baroness, we considered a range of data in the decision-making and, of course, the views of the scientific community.

[Baroness Altmann (Con)]

My Lords, I congratulate the Government on their brave decision to relax the restrictions. I think many people who have been suffering severe mental health impacts from the pandemic will be relieved that perhaps we can start on a road to recovery and, as the noble Lord said, living with this virus. I go back to the question of the right reverend Prelate regarding mandatory vaccinations for NHS health staff. We are perhaps in danger of shooting ourselves in the foot if we get rid of loyal staff, and indeed many staff who are not even patient-facing, at a time when we face such a crisis in the NHS. There has already been a significant impact, as I understand it, in care homes and the social care sector.

Health and Social Care

Baroness Altmann Excerpts

Thursday 9th September 2021 Lords Chamber

[Baroness Altmann (Con)]

My Lords, I am sorry to say that I cannot see how this solves the social care crisis. Can my noble friend explain how this extra money will actually address the discrimination that there is against those who have dementia, relative to those who have cancer, how it will improve staffing levels or the level of pay, and how the Government have decided that nothing needs to be contributed out of pensions income or buy-to-let income to something that is clearly a social insurance need across the economy?

[Baroness Evans of Bowes Park (Con)]

What will help the people my noble friend has talked about is the fact that, under these plans, we will now cover all care costs for anyone with assets under £20,000, which is up from the current level of £14,000. Importantly, she will know that, currently, anyone with assets over £23,350 faces paying their care costs in full. The new £100,000 limit is four times higher than that, which means that many thousands of people will now be eligible for further state support under our plans.

Afghanistan

Baroness Altmann Excerpts

Wednesday 18th August 2021 Lords Chamber

[Baroness Altmann (Con) [V]]

My Lords, of course the UK could not stand alone once US troops pulled out. However, the chaotic withdrawal means that there is no prospect of holding the Taliban back. I fear that this hasty US withdrawal has far more serious implications for the West than the Vietnam exit, which was not a real threat to Britain or the US itself. This is an unmitigated disaster and proves that global Britain needs to partner with like-minded countries such as our European neighbours.

US citizens were understandably tired of foreign interventions, but this catastrophic situation exposes the dangers of applying short-term populist thinking to important long-term commitments. Today’s leadership may have dangerously taken for granted the success of the West’s presence in controlling Afghan extremists’ terrorist atrocities. Can my noble friend say what assessment has been made of the implications for anti-terrorism protections in the UK and what measures are planned to counter rising narcotic dangers on our streets? The Taliban and other authoritarian regimes will no longer fear US military might or western sanctions, so domestic risks have risen inexorably. As so many noble Lords said, authoritarian regimes such as China and Russia will offer support to Afghanistan’s Government without concerns for the fate of ordinary Afghans. This means that our precious values and way of life are more fragile today than just a week ago.

I too pay tribute to the bravery and dedication of our troops, local staff and aid workers and to those Afghans who helped us. In the name of humanity we must live up to our moral debt, as the most reverend Primate stated, to all those at risk in a Taliban Sharia state: Christians, other religious minorities, journalists and BBC staff there, as well as so many brave women now at risk, including those female judges who risked their lives to uphold our vision of the law, not the Taliban’s version that is now to be imposed. What is the Government’s estimate of the numbers of people involved here?

In closing, I urge greater appreciation of our western freedoms, which are often taken for granted: freedom of religion, equality, women’s rights, respect for diversity. Most of us assume these values will always be there for us. But we are not the global norm. Having worked so hard to build and maintain these values, it saddens me that so many in our country have criticised our past. It is tragic that today’s western leaders, after encouraging other countries to adopt and aspire to our freedoms, have abandoned them too rapidly. Short-term populist thinking has meant that the US lost patience before the Afghan people were ready to live with our values. We are honour bound to help as many as we can.

Ecocide

Baroness Altmann Excerpts

Wednesday 21st July 2021 Lords Chamber

[Baroness Bloomfield of Hinton Waldrist (Con)]

I am not sure that I can go any further than my noble friend Lord Callanan did yesterday, but I take the noble Baroness’s points on board and will make sure that they are relayed to BEIS.

[Baroness Altmann (Con)]

My Lords, I congratulate the Government on all the excellent work they are doing in preparation for COP 29 and in the Environment Bill. Will my noble friend tell the House what the Government are doing to increase funding for nature-based solutions to address climate impact, especially as I understand investing in nature could provide at least one-third of the cost-effective climate mitigation solutions?

[Baroness Bloomfield of Hinton Waldrist (Con)]

My noble friend is entirely right: investing in nature-based solutions for adaptation will also help build resilience, support jobs, support livelihoods and help tackle biodiversity loss, but finance is lacking. Only 3% of global public climate finance flows was spent on nature. Noble Lords will recall that at the One Planet Summit in January 2021 the UK committed to spend at least £3 billion of our international climate finance on climate change solutions that protect and restore nature and biodiversity over the next five years.

United Kingdom–European Union Parliamentary Partnership Assembly

Baroness Altmann Excerpts

Monday 12th July 2021 Lords Chamber

[Earl Howe (Con)]

My Lords, yes, indeed, and that is why there is explicit provision in the trade and co-operation agreement for the setting up of a PPA. We were and remain enthusiastic for the kind of dialogue that the noble Lord is so keen on.

[Baroness Altmann (Con)]

My Lords, I am delighted to hear that my noble friend is keen to set up this body, and I understand that the EU Parliament itself is ready. Surely, it is very important that this Parliament get on with building mutually beneficial relationships in order to discuss important programmes such as Horizon, Euratom and others, and issues that are relevant to both EU and UK citizens. Does he agree that important ideas can be killed off by inaction?

[Earl Howe (Con)]

I agree with my noble friend’s last remark, but I can assure her that there is no inaction in this instance. I understand that a letter addressed jointly to the Speaker of the House of Commons and the Lord Speaker was received last month from the President of the European Parliament, David Maria Sassoli, confirming the recent decision of the Conference of Presidents to establish the standing inter-parliamentary delegation of the European Parliament, so the process is moving forwards at the European end as well.

Financial Services Bill

Baroness Altmann Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

FiSMA 2000 does not protect consumers adequately. The FCA is always playing catch-up. Malfeasance continues to grow and to take new forms. Redress is patchy, time-consuming and stressful. A duty of care would address these problems. That is what the FCA consumer panel recommended in its submission to the Treasury’s FSFRF review last month. A duty of care would provide a strong and clear incentive for real, lasting cultural change in our financial services industry. I hope that the Minister will be able to accept our amendment or commit to bringing an equivalent to us at Third Reading. If not, I hope that the noble Lord, Lord Stevenson, will press this amendment to a vote.

[Baroness Altmann (Con) [V]]

My Lords, I am pleased to speak to this amendment. I have worked in this industry for many years. The numerous scams, frauds and scandals that have plagued consumers are ongoing. It seems clear, as the noble Lord, Lord Sharkey, said, that the Financial Services and Markets Acts 2000 does not protect consumers. I thank the noble Lord, Lord Stevenson, for his clear explanation of why the amendment, in all its parts, is required.

A duty of care on providers to make sure that they are considering the interests of their customers would certainly help to address the asymmetry of information between the providers and the consumers. It might also assist customers in the manner that the products that are developed are offered. Too often, providers develop new products with new complexities that are clearly not user-friendly. The FCA requirements are that the risks and details of the products must be disclosed, but the disclosure documents are impenetrable to the ordinary person. Those working at the FCA and those working for the providers understand the language used—it is natural to them—but the vast majority of the public do not understand the specific product literature which the FCA has been relying on to offer this kind of protection. It is clearly not helping consumers to be faced with bamboozling jargon and many pages of legalese in the product descriptions and the terms and conditions.

The FCA consulted on this in 2017 and it released a statement in 2019, and other consultations have covered this as well. I congratulate the Government for having engaged on this issue, and my noble friends Lord True, Lady Penn and Lord Howe; I know they have all worked on this issue. But, from a practical perspective, and as someone who has worked in this industry, developed product for consumers and worked with consumers on the other side who have suffered detriment, I believe that the fears about competition are somewhat overdone. All firms, if they have a duty of care, will then have to look after customers, so the issue of competition should not really pose so much of an impediment. Markets currently function in the interests of providers rather than consumers, and regulators are reactive to problems rather than trying to pre-empt problems that have been highlighted and pointed out for two or three years before anything is actually done—by which time so many consumers have lost out.

Of course I believe that firms should not profit from exploiting the public’s lack of understanding and education when it comes to retail financial services. Successive Governments have talked about improving financial literacy, but they have not managed to achieve this. In practice, providers do not know their customers, the customers do not understand the product literature and, indeed, it seems that there is very often no requirement for the provider to even ask basic questions of the consumer before the consumer buys a particular product. There are countless examples of areas where just a basic question could have prevented a consumer buying an inappropriate product.

So I urge my noble friend on the Front Bench to take up the offer of the noble Lord, Lord Stevenson, and work with him and other interested Peers to come up with a form of words for Third Reading that can prevent a vote on this issue and can also help accelerate the important duty of care that is required. Waiting for a consultation later this year is simply not good enough when it comes to the kinds of scandals and scams that we know are going on day in and day out.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Altmann, and her powerful plea, which I hope the Government will listen to. I also speak to Amendment 1 in the names of the noble Lords, Lord Stevenson of Balmacara, Lord Sharkey and Lord Eatwell, to which I was pleased to attach my name, as I did to a very similar amendment in Committee.

Any noble Lords who have read the Second Reading debate will note that I majored on a “duty of care” in my speech. I used what you might call an expanded definition of “duty of care” to suggest that it might not be too much to put on the face of the Bill a demand that the financial sector should not engage in reckless, fraudulent, corrupt, obviously damaging systemic behaviour, including shipping off tranches of cash into tax havens, deploying complex financial instruments that they clearly do not understand and handing over control of markets to automated systems without adequate controls—things that threaten the security of all of us. But while I believe that principle remains sound, the lawyers convinced me that, in narrow legal terms, “duty of care” could not be stretched that far.

What the amendment here clearly introduces is a duty of care to individual customers. As proposed new subsection (2)(ea) says, their

“vulnerability, behavioural biases or constrained choices”

should not be exploited. Once, perhaps, such a clause was not necessary. There was a not ideal, but certainly useful, constraining paternalism: your local bank manager would look after you, both in limiting borrowing and in making allowances for unexpected disasters, personal and business. That has long gone—as of course has, almost universally, the local bank manager and, all too often, the local bank branch—so we need the law to step in to protect people to constrain the behaviour of financial institutions. As noble Lord, Lord Sharkey, said, we are in a situation where malfeasance has just continued to grow, with technical developments being one cause of that and, as noble Baroness, Lady Altmann, said, scandals and fraud have plagued consumers.

So that is the institutional side of where we are, but we also have to think about the state that people and our society are in today and make the law fit for our modern times, for these are times of massive insecurity. The idea of saving, or of even making the incoming funds match the essential outgoings each month, was an impossible dream for millions of people even before the arrival of the SARS-CoV-2 virus.

No one can know when sudden illness might strike—this Bill has been championed by Macmillan Cancer Support, to whose work I give credit—or it could be a redundancy or a pandemic that strikes people unexpectedly. That is one side of vulnerability and care that financial institutions should acknowledge. As Macmillan highlights, almost one in three of those severely financially impacted by their cancer diagnosis had to take out a loan or credit card debt. That is a public health issue. What we have are institutions that have been making profit from customers, sometimes for decades, and they have a duty to act compassionately and fairly in such circumstances.

But I think we also need to pay a bit of attention to the elements of the proposed new clause referring to “behavioural biases” and “constrained choices”. The noble Lord, Lord Holmes of Richmond, has been a rather isolated champion in this Bill on issues around the use of artificial intelligence algorithms and issues such as their potential bias, but he has also highlighted the way in which financial companies now have a historically uniquely detailed understanding of customer behaviour and the chance to exploit that through complex, opaque mechanisms.

As the noble Lord, Lord Stevenson of Balmacara, said in introducing an amendment, there has always been asymmetrical access to information between financial sector companies and their clients, but this has been massively magnified by technology—something that is only likely to grow. To create an assumption that this inequality of arms should not be misused should, we hope, constrain the behaviour of the financial sector—or at least, if it does not do that, provide a potential route for redress should it occur. There are already many who have need to seek redress for the behaviour of financial sector companies. I spent time with some of them this morning at a meeting of the Transparency Task Force.

As noble Lord, Lord Stevenson, said, the Government are likely now to say “Wait”—but why? We know that there is already an existing massive problem and a huge risk. If the Government do not acknowledge the need to act now, I offer the Green group’s strong support for the intention of the noble Lord, Lord Stevenson, to test the view of the House.

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[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

We appear to have lost contact with the noble Lord, Lord Holmes. Perhaps we should move on to the next contributor, the noble Baroness, Lady Altmann.

[Baroness Altmann (Con) [V]]

My Lords, I have added my name to Amendment 3, moved so excellently by the noble Lord, Lord Oates. I congratulate him on his work on the issues relevant to this group of amendments.

I also commend my noble friend the Minister and his department for listening to the concerns expressed in Committee and for laying his own amendments to the Bill, which previously made no mention of climate change at all. I believe that the Government are committed to making a real difference on climate change and environmental issues, and have recognised the dangers that our precious planet faces due to climate change and biodiversity risks, as the noble Baroness, Lady Bennett, mentioned and as is in her amendment. I welcome the Government’s Amendments 43, 46, 47 and 49, and hope that the issue of climate risk will continue to move up the agenda in financial services.

I have enormous respect for my noble friend Lady Noakes and her experience in banking. She makes relevant distinctions between assets held by insurance companies, regulated by the FCA, which hold investments directly in fossil fuel or environmentally damaging firms and activities, whereas banks’ main assets are loans rather than more direct investments. Their balance sheets, as she noted, have some leasing, but, should the worst predictions of climate catastrophe materialise in a shorter timeframe than currently anticipated, there could be unexpected defaults on a number of the loans on the loan books, which also needs to be considered, I would hope, in terms of risk weightings.

In Committee, I supported the noble Lord, Lord Oates, in seeking to update the existing capital risk weightings to reflect climate change risk. Having listened carefully to the Committee’s arguments, he has taken care to adjust his amendment for Report. As we have all discussed in this group, climate change is now recognised widely as posing a significant risk to the entire global financial system and, in fact, to our expected and hoped-for way of life. Current central bank policy risks reinforcing a carbon lock-in through a systemic bias to fossil fuel investments—indeed, insurance arrangements and pension funds also have significant investments in this area. I believe we need a twin-track approach that both reports on and quantifies climate-related financial risks and, at the same time, amends prudential risk tools to reflect the risk of loss or stranding in relation to fossil fuel investments or, indeed, loan books.

Such an approach would reflect the urgency of the challenge we face and, as Andrew Bailey said in a speech last year:

“Investments that look safe on a backward look may be existentially risky given climate risks.”


The Minister’s response in Committee was that the proposed amendments would require the PRA to set punitively high risk weights against exposure to existing and new fossil fuel production and exploitation, and that these risk weights would, in effect, make it more expensive to finance such activities and thereby make them less attractive. Loans would be more expensive, potentially, to companies involved in this area. Is this not the very point that we should be seeking to achieve—to reflect the risks of carbon-intensive investments quantitatively, through higher risk weightings, and potentially through the issuing of loans to such companies?

Amendment 3 recognises the Government’s concerns and now proposes only that the PRA carry out a review of the current risk weightings applied to existing and new fossil fuel activities. In this regard, such a review may indeed confirm what my noble friend Lady Noakes suggested would be the outcome but, without such a review, I feel that we will not necessarily be taking this sufficiently seriously. I hope my noble friend can agree that this is a reasonable and prudent way to recognise the urgency of the climate change challenges we face, and that it would provide evidence to inform any necessary future changes to existing prudential rules around capital weightings, should that be found to be required.

In addition, two reports have just been published highlighting the systemic nature of climate risks. The LSE’s Grantham Research Institute report—I declare an interest as a visiting professor—Net-Zero Central Banking stated:

“Central banks and supervisors will need to take a systemic perspective, addressing both micro- and macroprudential risks over a much longer time horizon than they do now, and work to ensure that financial flows become aligned with net-zero.”


Policy Exchange’s report Capital Shift recently stated:

“Whereas international banking codes require banks to include emerging risks such as cybersecurity in capital adequacy compliance … climate change barely features.”


It recommended:

“Central banks and supervisors should introduce higher capital charges for assets at greater risk from climate and nature-related financial risks.”


I hope my noble friend the Minister can provide assurances that an urgent review of this vital area is possible and will be considered.

I speak briefly in support of the aims of Amendment 22 in the name of the noble Baroness, Lady Hayman, on climate-related financial risk reporting. I commend her for her work in this area and declare a further interest as a member of the Peers for the Planet group, which she so ably leads. Amendment 22 would require adjustments to reflect the systemic risk in the whole financial system. I hope my noble friend will commit to a future consultation, at least, on the FCA and PRA objectives having regard to net zero targets.

Finally, I have added my name to Amendment 23, also in the name of the noble Baroness, Lady Hayman, whose work on environmental protection has been so powerful. I congratulate the new chief executive of the FCA, Nikhil Rathi, on the latest announcement that he is recruiting a senior role focused specifically on environmental and other ESG matters, so I suspect that this amendment may no longer be required.

Financial Services Bill

Baroness Altmann Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Sheehan, who has made powerful points. A little more than a year ago, we faced the Covid emergency and the Government moved very fast with multiple rules and regulations. The world has moved very fast and science has moved very fast. That is a demonstration of how fast the world can change in an emergency—and we are all in agreement that we are in a climate emergency.

Given that I agree with many of the comments already made on this group of amendments, I aim not to repeat them all but perhaps to take us a little bit forward. To briefly outline, I am speaking on Amendments 28 and 42 in the names of the noble Lord, Lord Oates, and the noble Baroness, Lady Kramer, as well as my name. I also express my support for the principles and direction of Amendments 31 and 32 in the name of the noble Lord, Lord Oates. In his expansive and effective introduction, the noble Lord presented a strong case for the detail contained in these amendments.

With Amendment 136A, the noble Lord, Lord Holmes of Richmond, is heading in the direction of an amendment of mine discussed last week. I spoke about introducing acknowledgment of our international obligations on biodiversity. This amendment heads in the direction of thinking in terms of the sustainable development goals, and that kind of system thinking is very much what we need. It goes a lot further than simply looking at the climate emergency. I would like to see us go further than where we are at. The full SDGs are a big step that we need to take at some point very soon.

The noble Lord, Lord Sharpe of Epsom, noted that there are other uses for fossil fuels than energy generation or transport. Many of those uses are, of course, the production of plastics, which are creating a whole different set of crises in our plastic-choked world: a pollution crisis and a crisis in the impact on animal life and quite possibly on human health.

It is pretty clear that we are already in a carbon bubble. We know from an organisation as radical as the International Energy Agency that we have to leave at least three-quarters of our known fossil fuel reserves in the ground to avoid catastrophic runaway climate change. Yet we still see money being lent, sometimes by the UK Government—the chair of COP 26—to develop and even explore new reserves. This clearly is not the way forward.

To build on what others have said, rather than simply repeat it, I refer noble Lords to an article by Semieniuk et al in volume 12, issue 1 of the journal WIREs Climate Change, published in January/February 2021, entitled “Low-carbon Transition Risks for Finance”. In the conclusion of that article, the authors say:

“Asset stranding combines with other transition costs, notably unemployment, losses in profits, and reductions in real incomes from price changes that generate significant risks for portfolio losses and debt default. Financial actors might become unable to service their own debt and obligations, creating loss propagation within the financial network. The adverse impacts of credit tightening and lack of confidence as well as the direct impact of transition costs to the macroeconomy, could lead to a general economic crisis with further risks for finance.”


They continue:

“Targeted financial policies, however, can dampen some transition risks by direct regulation of the financial sector.”


This element of the conclusion relates in some ways very closely to the debate we will be having tomorrow on the National Security and Investment Bill, but it is worth noting that, with a different cause at its base, it could be taken as a pretty fair description of what happened in the 2007-08 global financial crash.

I referred to that article, at least initially, not primarily for its conclusion but for the detailed calculations and models in its body. I suspect that one answer that we might hear from the Minister in responding to this group is that something needs to be done, but not quite yet—the Augustinian approach mentioned by the noble Baroness, Lady Hayman, in our debates last week. However, the article demonstrates that thorough work has been done and is available to the department to act now. As the noble Lord, Lord Oates, and the noble Baronesses, Lady Hayman and Lady Sheehan, all referenced, we are in a state of extreme urgency—a climate emergency.

However, the noble Baroness, Lady Noakes, gave me a further reason to draw on that conclusion. She said that she relies on the banks in calculating and pricing risk. She said, “Banks do not lend in situations where default is likely.” Well, we all know how that worked out in 2007 and 2008. The noble Baroness also said, “Carbon debt financing could be driven out of the City of London.” If we look at the costs we bore from risky lending and risky actions by the financial sector in 2007 and 2008, we see that that could indeed be a very good thing for our financial security. I do not believe that we would see a direct migration of financing shifting out of the City of London and going to other places. If the British Government were to take this action and become world-leading, as they so often tell us they want to be, that would have an impact on other financial markets around the world. Other people would say, “Well, if London is doing that, perhaps we should have a look at it, too.”

Let us look at the best possible outcome: we entirely prevent a carbon bubble financial crash. One problem, of course, is that you do not get credit for stopping things that never happened, but perhaps we would know that we had done the right thing. Even if we managed only to significantly reduce the size of that carbon bubble crash, we would indeed be world-leading. We are ready to take action: this is an emergency and so we have to take action. I commend these amendments to the Committee.

[Baroness Altmann (Con) [V]]

My Lords, I thank the noble Lord, Lord Oates, for his excellent introduction to this group of amendments and his work to try to ensure that the Bill rises to the challenge of ensuring that our financial services institutions, regulations and activities are properly concerned with the dangers of climate change. I am happy to add my support to Amendments 28 and 42 in the names of the noble Lord, Lord Oates, and the noble Baronesses, Lady Kramer and Lady Bennett—who it is a pleasure to follow—which seek to ensure that capital adequacy and credit rating agencies take account of climate risk.

I also have sympathy with Amendment 136A, in the name of my noble friend Lord Holmes, which seeks to require that fund management firms should report on their ESG compliance. My only thought on that is that it may not go far enough. Such a requirement could become just a tick-box exercise and I believe we need to go much further than that if we are to meet our obligations to today’s younger people.