Financial Services and Markets Bill [HL]
Baroness Bowles of Berkhamsted ExcerptsWednesday 9th September 2026
(3Â weeks, 2Â days ago)
Lords ChamberRead Full debate Financial Services and Markets Bill [HL] 2026-27 View all Financial Services and Markets Bill [HL] 2026-27 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 5-R-II(a) Amendment for Report (Supplementary to the Second Marshalled List) - (8 Sep 2026)
“(a) in subsection (1), at end insert—“(c) ensures that any burden or restriction which is imposed on a person, or on the carrying on of an activity, is proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;(d) recognises the differences in the size, nature and objectives of businesses carried on by different persons (including different kinds of person such as mutual societies and other kinds of business organisation);(e) is as transparent as possible.”;”Member's explanatory statement
This amendment places proportionality and transparency (currently regulatory principles) into the general duties of the FCA and restores protections for the differences in size, nature and objectives of businesses from the original FSMA regulatory principles.
Baroness Bowles of Berkhamsted (LD)
My Lords, as discussed on Monday, we have received constructive letters from the chief executives of the FCA and the PRA. They show genuine willingness to engage, and they elaborate on transparency of activity—consultations, responses, reports, strategies and evaluations. I do not dispute any of that. The government amendments that are proposed restore proportionality as an operational day-to-day have regard, thus they cover my proportionality requests during Committee and those parts of my amendments that I speak to today.
Unfortunately, the Bill still relegates the transparency have regard to the long-term strategy report, which provokes me to articulate something that has not been said clearly before: Parliament cannot check proportionality unless it can see it. Indeed, the Select Committee tried to do exactly that during our inquiry into competitiveness and growth. That is why transparency of reasoning is an integral part of cost-benefit analysis and proportionality. 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.
Internationally, this is well understood. In the United States, the SEC publishes an economic analysis with major SEC rule-making, setting out costs, benefits, distributional impacts and alternatives, all considered. That allows Congress and the courts to scrutinise it. They show their working in detail.
In the European system, the ESAs publish impact assessments showing how burdens fall on small firms versus large firms and how rules were adjusted to reflect proportionality concerns—a lot more specificity than we get. Again, they show their working. We simply do not get that level of working shown, so our regulators are not top of the class by international standards.
While I note the letter on cost-benefit analysis from Nikhil Rathi, CEO of the FCA, which the Minister recirculated to Members today, the frequency and working detail is just not as much as elsewhere. The FCA has denied a statutory requirement to do that and has been criticised for insufficient workings by its own cost-benefit analysis panel.
For example, in CP 24/30, 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”.
That is not very helpful if you are trying to understand them. The panel went on to say that this was important in
“identifying which assumptions are … critical to the expected costs and benefits”.
The FCA accepted the criticism and went back and added sensitivity analysis covering different compliance levels and insolvency rates. But the fact is that the FCA resisted it, including by objecting to the fact that it had to do it by statute and that it was not its first instinct. That is a very good example of the need for a lot more transparency in cost-benefit analysis, which is hindered by this demotion of transparency to being examined at just the strategic level.
As the Minister has already recognised in showing willing to make changes to Clause 17, I ask that he think about this one seriously and about whether he has to do something about transparency. 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 is what government departments are required to do for significant regulatory proposals, but which our 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 this measure in its rightful place, back in Clause 17. 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 Committee. I beg to move.
Baroness Bowles of Berkhamsted (LD)
My Lords, I thank the Minister for his reply to the debate. I recognise the movement that he has indicated, but I did ask him to say something about transparency, which was, I am afraid, absent from what he said just then. He talked about proportionality, but I was talking about the linkage between transparency and proportionality and that, with transparency still languishing at strategy level, I was not sure whether we were going to get adequate transparency over things such as cost-benefit, which are part of proportionality. I know that is a little convoluted and I will not 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 is going to be addressing points about Clause 17, then we should at least cross-check whether there is anything relevant in that to do. For now, I beg leave to withdraw my amendment.
“PRA rules: specialised risk weighting for employee ownership, co-operative and mutual transitionsAfter section 137G of the Financial Services and Markets Act 2000 (the PRA’s general rules) insert—“137GZA PRA rules: specialised risk weighting for employee ownership, co-operative and mutual transitions(1) In making rules relating to credit risk, capital requirements or the calculation of risk-weighted assets, the Prudential Regulation Authority must have regard to the desirability of recognising lending to small and medium-sized undertakings for the purpose of facilitating or supporting an employee ownership, cooperative or mutual transition as a prudentially distinct exposure class.(2) Rules made under this section may provide for specialised risk weights, risk-weighting factors, or exposure sub-categories for such lending where the PRA considers that the underlying risk characteristics justify differentiated treatment.(3) For the purposes of this section, lending that facilitates or supports an employee ownership, cooperative or mutual transition includes—(a) finance for the acquisition of shares by an Employee Ownership Trust, cooperative or mutual structure,(b) refinancing or restructuring of existing debt in connection with such a transition,(c) working capital or growth finance provided during or following such a transition, and(d) any other lending the PRA considers materially connected to the transition.(4) Nothing in this section shall be construed as requiring the PRA to set specific risk weights that are inconsistent with its primary statutory objectives.””Member’s explanatory statement
This new clause enables the Prudential Regulation Authority to establish a specialised risk-weighting framework for lending that supports employee-ownership, cooperative, and mutual transitions, ensuring capital requirements appropriately reflect the lower risk profile and long-term stability of these ownership structures.
Baroness Bowles of Berkhamsted (LD)
My Lords, I declare my interests as chair of the ownership dividend inquiry into employee ownership and as director of Valloop Holdings Ltd.
Amendments 63 and 66 address a structural flaw in financing employee ownership, co-operative 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 interests of time, I have not split this rather diverse group. Amendments 63 and 66 would not mandate outcomes; they would 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 does 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. Basel 3.1 compounds the damage. Removing the SME supporting factor increases risk weights 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 will not 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 prudentially relevant characteristics that justify differentiated treatment, just like infrastructure, green mortgage or project finance do. Recognising this profile is cost-neutral, Basel-compatible and entirely within existing regulatory powers. Without it, I suspect that the Government’s own policy commitments will fail.
I turn to Amendment 64. Section 166 powers were designed for serious exceptional concerns, allowing regulators to appoint a skilled person—typically an expensive consulting firm—to investigate a business. As the noble Lord, Lord Altrincham, and I set out in Committee, Section 166 has suffered severe mission creep. It now seems to be 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 would restore the original statutory boundary. It would ensure that Section 166 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. The House must signal that regulators cannot delegate routine supervision to high-price firms at the expense of regulated businesses. I intend to seek the opinion of the House. I beg to move.
Lord Altrincham (Con)
I thank the Minister for hosting this second day of Report with such grace. I will focus my remarks on Amendment 64, to which I added my name. I am very grateful to the noble Baroness, Lady Bowles of Berkhamsted, for bringing this important issue before the House again.
“Section 166 review” is the name given to FCA investigations. These investigations were originally quite rare, but dozens are now launched every year and they are paid for by the target firms. These investigations are expensive and time-consuming. They can have a rather arbitrary regulatory purpose and are somewhat unconstrained. This regulatory power can be exercised without a statutory threshold requiring the regulator first to demonstrate that the matter is sufficiently serious and that using this particular tool is proportionate.
We hear consistently from firms that Section 166 reviews are increasingly becoming the norm rather than the exception. Without a degree of restraint or oversight, these powers may create regulatory uncertainty. Our amendment would not prevent the regulators acting where there is a serious problem, nor would it remove Section 166 from their toolkit. It would simply mean that such a costly and burdensome power is used proportionately where it is genuinely warranted. I very much hope that the Minister will accept the amendment, but if the noble Baroness, Lady Bowles, decides to test the opinion of the House as she has indicated, we will support her.
Lord Pitt-Watson (Lab)
My Lords, this group raises two important but distinct questions: how the prudential framework should treat lending that supports employee ownership, co-operatives and mutuals; and when regulators should use skilled person reviews under Section 166 of FSMA. The Government have carefully considered the case made for each amendment, but do not believe that these changes should be made through legislation.
Amendments 63 and 66 seek to create a bespoke prudential framework for lending to co-operatives and mutuals, including through lower risk weights. The Government recognise the valuable contribution that co-operatives and mutuals make to the UK economy and are undertaking a multiyear 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 Authority through its rules, rather than being prescribed in legislation. This 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 do not consider it appropriate to prescribe preferential prudential treatment for particular business models through legislation. Such decisions should remain matters for the independent Prudential Regulation Authority. For these reasons, I am unable to support these amendments.
Turning to Amendment 64 concerning Section 166 skilled person reviews, I agree that these reviews should be commissioned only where appropriate and proportionate. However, the Government are 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 person review. The FCA and the 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 that a concern has been raised about there being more and more Section 166 reviews. I reassure noble Lords that the FCA’s use of skilled person reviews has been broadly consistent over the past 10 years. In 2025-26, only 31 were commissioned, which is the second-lowest usage since 2016. I am happy to send the figures to Members if they are interested.
In their letters to me, which have been shared with interested Members and laid 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 that this reassures the noble Baroness about the process and proportionality of Section 166 reviews and therefore ask her not to press her amendments.
Baroness Bowles of Berkhamsted (LD)
My Lords, I thank the noble Lord, Lord Altrincham, for supporting my Section 166 amendment. With regard to my Amendments 63 and 66, the Government have interpreted this exactly as I said it was not: I said that it is not telling the PRA what to do, but to consider a prudential distinction. I did not tell it what to do with it. Of course, it has that power anyway, and the purpose of the amendment was to draw attention to a very important sector. I will take the measure up with the PRA directly. For now, I beg leave to withdraw my amendment.
“Section 166 reviews: threshold and proportionality requirements(1) Section 166 of the Financial Services and Markets Act 2000 (reports by skilled persons) is amended as follows.(2) After subsection (1) insert—“(1A) The regulator may not require a person to provide a report under this section unless it is satisfied that—(a) there is a material risk of serious detriment to regulatory outcomes, and(b) the use of a skilled person is a proportionate response, having regard to—(i) the scale and nature of the suspected issue,(ii) the expected burden on the firm, and(iii) whether the matter could reasonably be addressed through the regulator’s existing supervisory tools.””Member’s explanatory statement
This new clause would introduce a statutory threshold for the use of section 166 skilled persons reviews, requiring the regulator to demonstrate a material risk of serious detriment and to consider proportionality.
“Tax treatment of risk transformation arrangements
After section 248A of the Financial Services and Markets Act 2000 (transformer vehicles), insert the following new clause—“284AA Tax treatment of risk transformation arrangements(1) The Treasury must, after consultation with the Commissioners for His Majesty’s Revenue and Customs, publish guidance concerning the tax treatment of investments issued in connection with risk transformation arrangements within the meaning of section 284A.(2) Guidance under this section must include the circumstances in which a risk transformation arrangement is to be regarded as having been entered into for genuine insurance risk-transfer and capital markets purposes.(3) In exercising functions relating to the assessment, collection and management of taxes, the Commissioners for His Majesty’s Revenue and Customs must ensure that arrangements falling within a description specified by guidance under subsection (2) are treated in a consistent and certain manner.(4) Where—(a) a risk transformation arrangement falls within a description specified in guidance under subsection (2), and(b) the arrangement complies with applicable requirements relating to authorisation and supervision,the arrangement is to be treated for all tax purposes as a commercial arrangement entered into for bona fide insurance risk-transfer and capital markets purposes, and not as having as its main purpose, or one of its main purposes, the obtaining of a tax advantage.(5) The treatment in subsection (4) applies without any requirement to consider the purpose of the arrangement other than by reference to the conditions in that subsection.(6) Subsection (4) does not apply only where the Commissioners can demonstrate that—(a) one or more of the conditions in subsection (4) is not met, or(b) there has been fraud, deliberate misrepresentation, or material non-disclosure of relevant facts.(7) The Treasury must review guidance published under this section at intervals not exceeding three years.””Member’s explanatory statement
The amendment requires HM Treasury to produce guidance in consultation with HMRC to confirm the tax status of Insurance-Linked Securities vehicles.
Baroness Bowles of Berkhamsted (LD)
My Lords, I will speak briefly to Amendment 87, and I support the amendment in the name of the noble Baroness, Lady Altmann, on superfunds. These are two issues that need attention. My amendment is about one thing: tax certainty for insurance-linked securities. It would not weaken anti-avoidance rules and does not seek any advantage that Parliament never intended; it simply asks for clarity in a regime that Parliament created to attract ILS business to the UK.
The problem is commercial. Rival jurisdictions give clear outcomes, but the UK does not. HMRC’s 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. The consequence is stark: London is the world’s largest commercial reinsurance centre, yet we have only 2% of global ILS activity. The catastrophe bond market is over $60 billion and the wider ILS market exceeds $140 billion. We could have a big chunk of that, but we are letting this substantial business, and indeed the tax revenue that would come from it, pass London by.
The new PRA reforms in the Bill are welcome, and London Bridge 2 has brought in new capital, but even that structure repeatedly runs into HMRC uncertainty. If the Government want the market then the guidance has to be clearer. It is only the Government who can fix this if they want the business in the UK. I beg to move.
Baroness Altmann (Non-Afl)
My Lords, I support Amendment 87 in the name of the noble Baroness, Lady Bowles. I will speak to my Amendment 92, and I am grateful to her for adding her name to it. Amendment 92 would insert a provision in the Bill to allow life insurers to set up defined benefit pension superfunds outside of their solvency UK ring-fences, enabling them to participate in the superfund market and potentially even help the UK build its own version of Canada’s much-vaunted Maple Eight. UK insurers—with suitable ring-fencing, as set out in the amendment, to ensure separation from their insurance business—are ideally placed to run 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.
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 superfunds remaining niche players, if the current system is not changed. Insurers could bring large amounts of capital pooled into the pension scheme area and 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 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.
In particular, there are concerns about systemic risk with annuity buyouts. I wondered whether the Minister might agree to meet me and other interested parties to discuss the risks involved in the Government’s current perception that annuity buyout is the gold standard, 100% safe endgame strategy. I hope that he will recognise that the Financial Services Compensation Scheme may not be as secure as expected.
Lord Pitt-Watson (Lab)
If I would be the relevant person to talk to on this matter, I would be happy to meet. If not, perhaps I can direct the noble Baroness to appropriate officials.
Baroness Bowles of Berkhamsted (LD)
My Lords, I thank the Minister for his reply. There is nothing in my amendment that is intended to stop pursuit of things that are wrong, but the evidence is that the guidance is not understood. I welcome the opportunity to have a meeting with HMRC officials so that we can explain more clearly where the problems lie and see if a solution can be found. With that, I beg leave to withdraw my amendment.
Baroness Neville-Rolfe (Con)
My Lords, Amendment 98 would remove Clause 50, thus returning us to the broad principle that we raised in our discussions on Clause 3, which led to a majority of 81 in a vote on its deletion. Clause 50 will allow the Treasury to amend or repeal primary legislation without introducing another Bill, which is another Henry VIII power. We need clarity from the Minister about how the Government envisage the power will be used. Our concern is that it goes further than technical housekeeping, as the text of the clause gives Ministers a broad and potentially permanent power to amend or repeal primary legislation, including devolved legislation, without the full scrutiny afforded to a Bill. I am grateful for the support of the noble Baroness, Lady Bowles. In the absence of a satisfactory reply, I am minded to test the opinion of the House.
Baroness Bowles of Berkhamsted (LD)
My Lords, I have signed this amendment because there are bad things in this Bill and I do not want any more of them.
Financial Services and Markets Bill [HL]
Baroness Bowles of Berkhamsted ExcerptsMonday 7th September 2026
(3Â weeks, 4Â days ago)
Lords ChamberRead Full debate Financial Services and Markets Bill [HL] 2026-27 View all Financial Services and Markets Bill [HL] 2026-27 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 5-R-I(a) Amendment for Report (Supplementary to the Marshalled List) - (4 Sep 2026)
Baroness Bowles of Berkhamsted (LD)
My Lords, it is late, so I shall be relatively brief and not revisit the issues that we looked at in Committee. When I tabled these amendments, I still hoped that there would be some agreement reached on restoring the information hooks that Parliament has relied on until now for oversight, and to suggest a minimum set of reporting requirements in the current void of the strategy report. But it has been made clear by the Minister now, and in discussions between the Minister and the noble Baroness, Lady Noakes, as chair of the Select Committee, that the Government will not accept any statutory requirements. If that is the case, the committee will have to draw that information in itself, and the letters from the regulators offer the promise that they will co-operate in that. I suggest that we should take that opportunity to be able to do more things in real time, rather than long after decisions are made.
Obviously, it is for the committee to decide what written and oral information it wants and when, but one way to address the gap would be a triennial cycle of structured meetings with regulators. Each session could explicitly track developments in consultations and rule-making, including the work of the statutory panels, with an additional cycle of other matters. A suitable timing could be late February, when you could do an operational alignment review of draft business plans, budgets and cost-benefit analysis variances before they are locked in for the financial year. In mid-June, a session could be focused on the secondary competitiveness and growth objective, tracking live authorisation times, licensing, service-level agreements and regulatory overlap arising from current consultations and rule-making activity. In October, one could do a post-Recess review of rule-making, “Dear CEO” letters and summer-period backlogs ahead of the autumn Budget. Those are just examples of how you can get matters to fit in with the other fiscal events.
Adopting that kind of timetable would give Parliament timely visibility. We could avoid boilerplate reporting and ensure accountability, even though we lose the statutory hooks. But I think that neither the regulators nor the Government really appreciated the message that crossing out all these previous statutory things indicated, and it seemed as if Parliament had been totally ignored as a stakeholder and as a party that should have been consulted.
I hope that we can recover and come through this, probably with more reporting in the end that is pulled in at our request. I do not see that this as something that we have to negotiate; this is something where Parliament can ask, and we expect that the regulators will comply. Now that sounds aggressive, but I actually think that it will be able to be negotiated relatively reasonably, at least if it is anything like the experience that I have had elsewhere.
Baroness Noakes (Con)
My Lords, this is the first time I have spoken on Report, so I need to declare my interests as shown in the register, namely, that I hold shares in listed financial services companies, which may well be affected by the content of this Bill.
I start by thanking the Government for tabling Amendment 31, which is in fact identical to an amendment that I tabled in Committee. The Minister, the noble Lord, Lord Stockwood, who is in his place, said then that he could not accept my amendment because the Government were
“looking into this point to determine if this is fully clear within the drafting of the clause”.—[Official Report, 24/6/26; col. GC 333.]
That was nonsense, and I feel sorry for Ministers who are told by their officials to say these sorts of things. It was clear that the drafting of the Bill was wrong, and that my amendment put it right. I am very glad that the Government have now caught up with me.
The rest of the amendments in this group deal with the knotty issue of accountability of the regulators. The noble Baroness, Lady Bowles of Berkhamsted, has tabled several amendments to try and improve what is in the Bill and reverse some of the changes in the Bill that will undoubtedly weaken the accountability arrangements. Of course, I support those amendments. But accountability means much more than plans and reports, which is what the noble Baroness’s amendments tend to focus on. Some of us put forward various ideas in Committee about how we could improve accountability—the point being that we are looking to get a step change in the accountability arrangements.
This all comes back to the FSMA model, which my noble friend Lady Neville-Rolfe spoke about in the first group. I support the FSMA model in principle, but it is under increasing strain, as has been mentioned already today. It was first invented long before Brexit, when swathes of financial regulation were drawn up in the EU and scrutinised in detail via the EU Parliament. When FSMA 2023 paved the way for this additional delegation to the regulators of all of those EU competences, it was partially offset— only partially—by strengthening the role of Parliament. When the regulators use their powers to create rules and guidance, they now have to send that into the parliamentary committees, including the Financial Services Regulation Committee, which, as has already been said, I currently chair.
I am clear that holding the regulators to account for how they are using their powers—that is, real-time accountability rather than the ex-post accountability that annual reports deal with—is an uphill battle for very many reasons, not least an imbalance between the scale of resources devoted to parliamentary committees compared with the vast resources that are deployed within our financial system regulators. As we know, this Bill creates yet more areas of delegated powers to the regulators—consumer credit, which we debated earlier today, but also the payment systems which the Minister spoke to a few moments ago. This, again, is why we need to strengthen the accountability arrangements rather than weaken them, as the Bill currently does.
The Government have partially recognised that the Bill went too far and have tabled amendments on proportionality, which we will debate on our next Report day. The balance, however, has still shifted away too far from Parliament being able to operate effective accountability mechanisms. That is why I tabled Amendment 68, and I thank my noble friend Lord Bridges of Headley, the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Vaux of Harrowden, for adding their names to it.
Autumn Budget 2025
Baroness Bowles of Berkhamsted Excerpts(9Â months, 4Â weeks ago)
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Baroness Bowles of Berkhamsted (LD)
My Lords, I will focus on the Government’s support for start-ups and scale-ups, as outlined in the entrepreneurial prospectus published with the Budget, and on the work needed beyond investment to fulfil the Chancellor’s promise to become a better customer to innovative procurement. That promise, aimed at achieving revenue for companies for exports and growth to boost the economy, will remain an illusion until we eliminate Whitehall’s four horsemen of the apocalypse—pestilence, war, famine and death—rampaging deep within our procurement and innovation systems.
Pestilence commandeers intellectual property in grants and contracts, stripping innovative tech businesses of their competitive edge and deterring investors. War forces indemnities, demanding that fledgling companies shoulder risks that are impossible for them to bear. Famine blocks procurement, as in the new Department for Transport’s technology programme, which excludes the very innovators it claims to champion. Death is delivered by exercising the harshest terms in innovation loans, compelling the wind-up of viable companies, refusing flexibility and extinguishing enterprise. These are not abstract flaws: they are lived realities.
Last Wednesday, the Times exposed the strangulation trap that Innovate activated against Wootzano, with a government agency looking more like an asset stripper. It is not the only example. Crown Commercial Services publications show that the new transport technology framework rejected every single start-up and scale-up applicant. Companies such as Vivacity Labs, with nearly $20 million raised to optimise traffic networks with AI, were rejected. Caura, backed by £4 million from Lloyds Bank, and contributing to the National Parking Platform, was rejected. Liftango, advancing shared mobility with $10 million raised, was rejected. Each rejection is not only lost contracts: it is a lost opportunity for Britain’s future. Many others have given up applying, knowing they will be assessed by big-company criteria—by EBITDA—when they do not yet have revenue. That is what they need the procurement for: the Government’s role is to be first mover, not a follower.
I commend the noble Lord, Lord Vallance, for his valiant efforts to reform the IP-grabbing terms in Innovate UK contracts over this last year since I first raised the matter. But it shows the uphill task, and there are all the procurement departments yet to tackle. Therefore, in line with the prospectus promise, I appeal to the Minister to meet with me, examine the evidence and bring the Treasury’s weight to bear in all departments to bring rapid change. The Chartered Institute of Patent Attorneys, the ScaleUp Institute, which the Minister referenced in his opening remarks, and countless companies have all sounded the alarm on these issues. We are not all wrong, whatever the Government are being told. Will they stop the rampage of these horsemen?
Budget: Small and Medium-sized Businesses
Baroness Bowles of Berkhamsted Excerpts(10Â months ago)
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Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Wheeler) (Lab)
It is the turn of the Labour Party.
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. No, I do not accept that the Budget is bad overall for growth and for SMEs. As I have said, the OBR has upgraded Britain’s growth forecast for this year from 1% to 1.5%. The noble Baroness’s policy of going back to austerity and cutting spending by £47 billion would be exactly the wrong thing to do at this point for growth. We need to maintain investment in our economy. In this Budget, we are cutting inflation, cutting borrowing every year of the forecast and keeping interest rates down. We are maintaining higher levels of public investment for decades, building houses, roads, railways and energy infrastructure, and backing our fastest-growing companies. She mentioned growth. She may have seen this morning that JP Morgan, the global investment bank, announced a $10 billion investment in the UK with its intention to build its new landmark tower in London. Jamie Dimon, the CEO, said:
“The UK Government's priority of economic growth has been a critical factor in helping us make this decision”.
Baroness Bowles of Berkhamsted (LD)
If the Government are supporting scale-ups and start-ups, what do they think about the fact that every single start-up and scale-up, even those very successful at fundraising, has been eliminated from the Department for Transport’s recent procurement framework and that they were asked to provide indemnities if they were to participate? How does that measure up with HMT asking regulators and the private sector to take more risk and not doing so itself? How do they get value out of the investment that they are putting in if it is not followed up with routes to revenue?
Lord Livermore (Lab)
The noble Baroness is absolutely right about the importance of procurement to scale-up firms; I completely agree with her on that point. As part of the announcements that we made yesterday, we said that the Government will act as a better early customer to help UK firms prove commercial potential, including through a new innovation marketplace to fast-track strategically important firms into public procurement.
Forthcoming Fiscal Changes
Baroness Bowles of Berkhamsted Excerpts(10Â months, 1Â week ago)
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Baroness Bowles of Berkhamsted (LD)
My Lords, does the Minister consider that, apart from him, the days of trying to avoid government-induced market glitches are history? Do the Government and Chancellor think that markets will cease to be responsive or that investors will not go elsewhere as they have done for other countries exhibiting inconsistency?
Lord Livermore (Lab)
As the noble Baroness knows, and as I think I have made clear, I am not going to comment on speculation ahead of the Budget, neither am I going to comment—I never do—on market movements.
National Insurance: Partnerships
Baroness Bowles of Berkhamsted Excerpts(10Â months, 3Â weeks ago)
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Lord Livermore (Lab)
I am sorry to disappoint the noble Lord, but I am afraid I am not going to comment now on individual tax measures.
Baroness Bowles of Berkhamsted (LD)
My Lords, does the Minister recognise that the self-employed sector creates growth and increases economic participation and that self-employed people are risk absorbers without access to various state benefits? Is the suggestion floated concerning LLPs potentially the thin end of the wedge to attach more tax to all self-employment? Possibly, there is an issue, in that LLP status transfers risk from partners to societies at no cost to the partners. If there is a moral case for payment for that risk transfer, surely, it must be separately investigated, not wangled through national insurance.
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question, the first part of which I agree with. On the rest of it, as she knows, I am not going to comment on individual tax measures right now.
Gilt Yields
Baroness Bowles of Berkhamsted Excerpts(1Â year, 1Â month ago)
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Lord Livermore (Lab)
My noble friend says it much better than I can. I agree wholeheartedly with what he says. Of course it is important that we grow the green economy, but we must also make sure that we grow the whole economy as well.
Baroness Bowles of Berkhamsted (LD)
My Lords, can the Minister explain what the high level of bond yield means for those renewing fixed-rate mortgages, given that those are determined more by bond yields, albeit at the shorter end, than by base rates? At the moment, the disconnect is creeping towards the shorter rates too.
Lord Livermore (Lab)
As the noble Baroness knows, the Government do not comment on specific financial market movements, but it is very clear that we have created space for the Bank of England to cut interest rates five times since the election. That will absolutely help those people taking out a mortgage.
Primary Stock Exchange Listings
Baroness Bowles of Berkhamsted Excerpts(1Â year, 2Â months ago)
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Lord Livermore (Lab)
My noble friend is absolutely right on the importance of capital for start-ups and how we can enable them to scale up. It is why in the industrial strategy and the spending review we significantly increased the funding available to the British Business Bank to help innovative small companies to do exactly that. They now have record amounts of capital. We have increased the capital available to our funding streams in that way by 40% since the election, and I think that is exactly what my right honourable friend is seeking to do.
Baroness Bowles of Berkhamsted (LD)
My Lords, I declare my interest as a director of the London Stock Exchange. In addition to the pull of US investors, does the Minister recognise that there are push factors making the UK a hostile environment for innovative, high-tech growth companies? There are neither public nor private sector customers, as the chair of GSK told our Science and Technology Committee recently. Excessive government retention of IP exploitation rights in procurement and grant contracts undermines companies’ growth prospects.
We are 45 years behind the US, which ended such emasculating IP contract terms in the Bayh–Dole Act, leading to the boom in revenue-producing high-tech companies and university spinoffs. Will HMT put its weight behind the economic benefit and long-term value for money that growth-friendly licensing contracts would have? Will the Minister meet to discuss these and how the UK can get its own Bayh–Dole effect?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. I do not necessarily share the overall pessimism that she started her question with. Of course, reform is necessary and that is why next week at Mansion House the Chancellor will publish the 10-year strategy for financial services, which I hope will cover some of the things the noble Baroness is talking about. We need to rebalance our system towards growth in the way she described.
Closed-Ended Investment Companies: Cost Disclosure
Baroness Bowles of Berkhamsted Excerpts(1Â year, 6Â months ago)
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Lord Livermore (Lab)
I am very grateful to the noble Baroness for the question. I also pay tribute to other noble Lords, including the noble Baronesses, Lady Altmann and Lady Bowles, for their continued championing of the investment trust sector and for bringing their concerns to the Government’s attention in their Private Members’ Bills in this Parliament and the previous one. As a result of their campaigning, the Government have now legislated to provide the Financial Conduct Authority with tailored powers to deliver a new disclosure regime. The Government have also temporarily exempted investment companies from cost disclosure legislation.
On the specific matter raised by the Question, of requirements by investment platforms for the investments they offer, that is now a matter for the industry and the regulator. While I recognise that the Government may not have gone as far as the noble Baroness would like, we have a shared objective of ensuring that that this reform achieves the right outcomes for investment companies and for the sector as a whole.
Baroness Bowles of Berkhamsted (LD)
My Lords, I declare my interest as a director of the London Stock Exchange. As the Minister said, in November, the PRIIPS SI made an immediate policy and legislative change in view of responses to HMT’s CCI consultation, aiming to free the investment trust market from incorrect legislation. Did the Government expect the FCA to reverse that in their December consultation? Will the Government reassert their policy? Will they also assert their policies against duplicative legislation and in favour of growth for consumer investments? If not, how do the Government expect to harness either retail or professional investment in this valuable sector for infrastructure?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. I absolutely recognise the key role that the investment company sector plays in the UK’s economy, as she sets out, representing more than 30% of the FTSE 250 and investing in assets that support the Government’s growth agenda. We have listened to industry concerns and, last year, as the noble Baroness said, we legislated to reform retail disclosure. The FCA launched a consultation on an entire replacement regime in December. The Government look forward to seeing the outcomes of that consultation in due course.
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. What she is saying is right; the Government share her view. That is exactly why the Chancellor established the pensions review, for example, in her recent Mansion House speech. Her view is that the pensions review could unlock billions of pounds in additional investment in fast-growing businesses and infrastructure while improving outcome for savers. That is exactly the objective of that policy.
Baroness Bowles of Berkhamsted (LD)
My Lords, the Minister must know that some 329 firms and individuals signed a response to the HMT consultation, and there were many other submissions besides. The Government said that, in response to that consultation, they changed policy. How can that policy be changed a month later? This time, 558 firms and individuals have signed the response to the Financial Conduct Authority, with many more similar, separate responses. Does that not tell the Government that the direction of travel is wrong and that if they want this solved in less than another two years, by when this investment opportunity will be gone, they will have to intervene?
Lord Livermore (Lab)
I am grateful to the noble Baroness, again, for her question. I am not sure that we are going to agree on this specific point. I have already set out the Government’s position very clearly. I recognise that there are frustrations among some noble Lords and in the sector. It is the Government’s view that operationalising this legislation is a matter for industry and the regulator. The Government look forward to seeing the outcomes of the FCA’s consultation in due course.
Lord Livermore (Lab)
The Government have a very clear objective of increasing living standards in all parts of the country. We want all households to have more money available to spend and to save.
Baroness Bowles of Berkhamsted (LD)
Early last week, the Government published another statutory instrument in draft form with a lot of amendments to MiFID. Can we expect that those MiFID amendments to legislation will likewise be ignored by the Financial Conduct Authority in due course?
Lord Livermore (Lab)
I think that is a matter for the Financial Conduct Authority.
London Stock Exchange: Decline in UK Funds
Baroness Bowles of Berkhamsted Excerpts(1Â year, 7Â months ago)
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Lord Livermore (Lab)
I am grateful to the noble Baroness for her question and for telling us about her first-hand experience this week. She may know that feedback from industry and consumers on the last Government’s proposed Great British ISA was mixed at best, and no clear value-for-money case was made for that, so, as she says, we will not be proceeding with it. But as she will know, at the Masion House speech the Chancellor published the interim report on the pensions investment review and launched consultations on measures that would deliver a major consolidation of the defined contribution market and local government pension schemes. They could unlock around £80 billion for investment in private equity and infrastructure, but of course, there is no guarantee that that will be invested in UK markets, as she says. The pensions review is absolutely committed to looking at further ways in which that can be achieved.
Baroness Bowles of Berkhamsted (LD)
My Lords, when the Government chose not to follow the overwhelming response calling to exempt listed investment companies, otherwise known as listed funds, from consumer collective investments and to refer them to the Financial Conduct Authority consultation, did they realise that it would cost another ÂŁ30 billion in lost investment? Did the Government realise that their interim solution, which the FCA is not enforcing, is a short-term solution and cannot give confidence to what are long-term investors and investments? Does the Minister agree that correct arithmetic cannot be a matter for consultation, and will he facilitate my meeting with officials to explain that beneath the jargon, smoke and mirrors, this issue is a simple matter of correct arithmetic?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question, and once again, I pay tribute to her for her campaigning on this issue. The Government absolutely recognise the key role the investment company sector plays in the UK economy; it represents over 30% of the FTSE 250 and invests in assets that support the Government’s growth agenda. We have listened carefully to the noble Baroness’s concerns, not least through her campaigning in the previous Parliament and her Private Member’s Bill in this Parliament. Last year we legislated, I think as a direct result of her campaigning, to reform retail disclosure, with the FCA launching a consultation on an entire replacement regime in December.