Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026

Baroness Kramer Excerpts

Wednesday 2nd September 2026 Grand Committee

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, the Committee will consider together two statutory instruments made under the Financial Services and Markets Act 2023, known as FSMA 2023. Although these instruments address different areas of financial regulation, they share a common purpose, which is to ensure that the UK’s regulatory framework remains stable, proportionate and internationally competitive. Together, they provide greater certainty for firms, preserve appropriate regulatory safeguards and support the continued effective functioning of UK financial markets.

The first instrument supports the Government’s wider programme of replacing retained EU legislation by creating a new overseas prudential requirements regime. The second concerns over-the-counter, or OTC, derivatives and establishes a permanent regulatory framework for certain intragroup transactions. I will address each instrument in turn, beginning with the overseas prudential requirements regulation.

The first instrument is the Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026. Following EU exit, the UK retained a body of EU-derived financial services legislation, known as assimilated law. This includes the capital requirement regulation, or UK CRR, which sets detailed prudential requirements for credit institutions, such as banks and building societies, and for larger investment firms.

In 2025, the Government consulted on their approach to repealing a number of equivalence provisions currently contained in that assimilated law. This instrument delivers that approach. In particular, it restates the existing UK CRR equivalence regimes within a single overseas prudential requirements regime, helping to make the prudential framework easier to navigate while maintaining continuity for firms. Existing equivalence decisions will be preserved as overseas regime decisions under the new framework, providing continuity and certainty for firms.

This forms part of the Government’s wider programme under the Financial Services and Markets Act 2023 to repeal assimilated financial services law while preserving the necessary policy outcomes. This supports the implementation of the FSMA model of regulation, under which detailed firm-facing requirements are set in regulators’ rulebooks rather than in legislation.

As part of this wider reform agenda, the Government are replacing the existing equivalence regimes inherited from the EU with overseas recognition regimes that are tailored to the UK’s needs and reflect the Government’s outcomes-focused approach to the unilateral regulatory recognition of overseas jurisdictions.

This instrument is intended: first, to consolidate currently fragmented equivalence provisions into a single, coherent regime, while maintaining continuity for existing CRR equivalence decisions; secondly, to adjust the treatment of exposures to overseas exchanges so that capital treatment better reflects the underlying risk; thirdly, to replace the definition of “third-country investment firm” with “overseas investment firm” while maintaining the overall scope and effect of the existing treatment; and, finally, to enable the Government, subject to a further statutory instrument and parliamentary approval, to recognise eligible covered bonds from overseas jurisdictions in the future.

I turn to the second instrument, which makes a targeted and important reform to the UK’s framework for regulating OTC—over-the-counter—derivatives, those traded directly between buyer and seller, by addressing intragroup transactions. It replaces the temporary intragroup exemption regime, known as TIGER, with a permanent framework. In doing so, it provides firms with long-term certainty while preserving appropriate safeguards and regulatory oversight.

As I think all my audience knows, derivatives are contracts whose value is linked to an underlying asset, benchmark or index. They are widely used by businesses to manage risks. Intragroup transactions, where companies within the same corporate group are counterparties to a derivative contract, allow groups to manage their risks efficiently. The benefits of intragroup transactions are well recognised, so exemptions from certain clearing and margin requirements for certain transactions are a feature of regulatory regimes in the UK and in other jurisdictions.

TIGER was introduced following EU exit to provide a temporary regime for exempting certain transactions between a UK counterparty and an entity within the same group located in a jurisdiction that has not been declared equivalent under UK legislation. It was only ever intended to be a temporary measure and, having been extended once already, it is due to expire at the end of 2026. The Government consider that a further, time-limited extension would not provide the long-term framework that firms need. This instrument therefore establishes a permanent framework for qualifying intragroup transactions with overseas group entities to benefit from a regulatory exemption. The instrument also provides continuity for firms relying on TIGER exemptions.

These reforms do not remove safeguards. Firms must continue to meet the conditions for intragroup treatment, and for relevant cross-border exemptions, the Financial Conduct Authority will continue to have visibility through a notification process, while retaining oversight of the regime.

In summary, these are proportionate reforms that replace EU exit arrangements with a stable UK framework, reduce unnecessary friction, support firms’ global risk management and maintain robust regulatory oversight. I beg to move.

[Baroness Kramer (LD)]

My Lords, I will address each of these instruments separately. First, on the overseas prudential requirements regime, in the Government’s perspective, this statutory instrument is simply the application of the FSMA model to decisions on equivalence. The Government know that I am quite concerned that the FSMA model removes from parliamentary oversight decisions that were once considered to require democratic engagement and puts them into a model that is notably weak on accountability to Parliament. This is obviously a much bigger issue than this SI.

Initially, existing equivalence decisions will remain in place. Can the Minister explain whether future changes and additions will come before Parliament in any way? Will it be a deciding situation or will it be merely reported? I stress that, to me, transparency and accountability are two different things, yet sometimes, in conversations with the regulators, you would think that they were the same.

Building Societies Act 1986 (Assimilation to Company Law and Changes to Funding Limit) Order 2026

Baroness Kramer Excerpts

Wednesday 2nd September 2026 Grand Committee

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, building societies are a vital part of the United Kingdom’s financial services sector, and the Government are committed to ensuring that their legislative framework remains fit for purpose. This order is the latest step in the Government’s programme of updates to the Building Societies Act 1986 to ensure that it continues to align with company law, where appropriate, and that the Act’s funding framework operates to support financial stability and strong prudential standards among building societies.

The order before the Committee makes two targeted changes, and I will take each in turn. First, the order modernises requirements on building societies when executing legal documents. At present, building societies are required to execute certain legal documents, such as deeds, by affixing a common seal. Companies, by contrast, have greater flexibility under the Companies Act 2006: they may execute documents either by using a common seal or by the signature of authorised signatories.

This order aligns the position for building societies with the company law framework. It provides that a building society will be able to choose whether to execute documents by affixing a common seal or by having the document signed by authorised signatories. Those authorised signatories will include directors and the secretary of the society, and the order also provides for execution by a director in the presence of witnesses. This is a practical and proportionate modernisation: it will reduce unnecessary administrative burdens and it reflects the Government’s broader commitment to keep building society law aligned with company law, where that is appropriate.

The second element of the order concerns building societies’ wholesale funding limit. Under the 1986 Act, building societies must raise at least 50% of their funding from members’ deposits. That requirement is central to preserving their distinctive mutual model, which means that building societies are owned by their members. I want to be clear that this order does not change that fundamental principle.

Instead, the order makes targeted changes to the ways that wholesale funding is calculated. It specifies certain sources of funding that are to be disregarded for the purposes of that calculation. These include funding from specified Bank of England liquidity facilities, debt instruments issued to meet the Bank of England’s minimum requirements for own funds and eligible liabilities, and certain sale and repurchase agreements using high-quality liquid assets that are being held to meet prudential requirements.

The purpose of this change is straightforward. It is inappropriate to treat funding that supports prudent liquidity management or compliance with prudential regulation in the same way as ordinary wholesale funding. Doing so can distort the calculation and, in some cases, in effect, double-count funding.

That outcome is not consistent with the objectives of UK prudential regulation; nor should the funding limit create unintended disincentives for building societies to use Bank of England liquidity facilities. The order ensures, therefore, that the funding limit operates in a more appropriate way by exempting those sources of funding from the calculation. It supports the objectives of prudential regulation, protects financial stability and gives societies greater funding flexibility, while preserving the statutory requirement that at least half of their funding must come from members.

In conclusion, this order makes focused, practical and positive changes. It modernises the legal framework for building societies, supports prudent liquidity management and helps ensure that building societies can continue to compete effectively while maintaining their mutual business model. For those reasons, I commend this order to the Committee and beg to move.

[Baroness Kramer (LD)]

My Lords, the Minister is exactly right, of course. Building societies and mutually owned banks are absolutely crucial to our economy. They hold some 29% of all outstanding residential mortgages, and that figure is growing. They are especially significant for first-time buyers as conventional banks are less active in this market. So, as we try to solve the housing crisis and restore economic growth, both the capacity of the sector to grow and its lending matter—but so, too, does the stability of the sector.

As the Minister said, the Building Societies Act 1986 requires that a building society must raise at least 50% of its funds from individual member deposits, with the consequence that funding from wholesale markets cannot exceed 50%. However, this order changes the way in which the 50% is calculated to specify that certain funding sources will be excluded from the wholesale calculation. The examples given include specific Bank of England liquidity facilities, loss-absorbing instruments —we would typically cite MREL—and specific repo agreements. This is clearly of importance to the larger societies. It sets them on a more level playing field in competing against banks, as well as increasing their lending capacity. However, even though I support this change, I have two questions.

First, have the Government assessed the impact of increased wholesale funding in times of interest rate volatility? I point out to the Minister that there will be an increase in wholesale funding, if one is not going to be highly technical, because MREL, for example, is raised in the wholesale markets, as are the repos. A number of the instruments that are covered and will be excluded from the calculation are, in fact, wholesale market transactions.

Funding short—the characteristic of the wholesale funds—and lending long, at a fixed rate, was the curse of HBOS when it failed. Once, in a conversation with me that discussed such a situation, Warren Buffett’s number two, Charlie Munger, talked of funding short and lending long as living proof of the walking dead. It is a riskier strategy because of the duration mismatch. I am not suggesting that these changes are going to lead to those extreme outcomes, but it is clear that the squeeze on margins that comes from greater wholesale funding can end up inhibiting lending—and does so exactly at the time when the economy typically needs new liquidity and lending the most.

My second question is slightly different. Is there any risk of diluting the mutual identity by, in a sense, changing this weighting of wholesale versus membership funding? Building societies are much more community-driven than conventional banks. If that link were weakened by the need to respond to the pressures from wholesale lenders, we would all be losers, frankly. I would appreciate the Government’s comments on that.

The other issue in this statutory instrument, offering choice on how to execute documents, strikes me as simple common sense. Frankly, I had no idea that common seals are still in use. Indeed, I may be the only person in this building who has actually closed contracts by using a seal. That was under armed guard, because it had to be removed from the vaults and every movement was observed, because the seal was of such extraordinary value. I really thought that those days were over, and I am pleased that building societies are now going to be relieved of the burden.

[Baroness Neville-Rolfe (Con)]

My Lords, I am very grateful to the Minister for setting out the purpose and effect of the order. We on these Benches welcome it. It is a broadly deregulatory measure, and it should reduce unnecessary constraints on building societies and make their day-to-day operations easier.

Building societies play an important role in our financial system and in local communities, as the Minister said in his very clear introduction. Indeed, as the noble Baroness, Lady Kramer, said, they are also very important for first-time buyers. I certainly got my first mortgage from a building society: the Bedford Building Society. Building societies’ mutual model helps to promote diversity and competition, and they remain significant providers of mortgages and saving products. It is right that the law should preserve the distinctive character of building societies without requiring them to operate under legal and regulatory arrangements, which have failed to keep pace with developments elsewhere.

The first part of the order is a practical modernisation. It brings the rules governing common seals—not the seals I saw on the Norfolk coast during my recent holiday—and the execution of documents by building societies more closely into line with company law. In future, a building society may have a common seal, but it will no longer be required to have one. Documents will also be capable of execution using authorised signatories. The order also, interestingly, makes corresponding provision for deeds, powers of attorney, the position under Scots law and the use of official seals abroad.

The changes to the funding limits are, however, the more economically significant part of the order. The requirement that at least 50% of a building society’s funding liabilities should be derived from members’ shares is an important safeguard of mutuality. It distinguishes building societies from wholesale-funded banks and helps to ensure that they remain rooted in their members.

At the same time, the framework must recognise that modern prudential regulation imposes requirements which were not envisaged when the original funding limit was designed. It would make little sense for a building society to be pushed closer to that limit simply because it had used a Bank of England liquidity facility or issued debt in order to meet MREL requirements, or to comply with PRA liquidity rules. By excluding those liabilities from the wholesale funding limit calculation, this order should make it easier for societies to meet modern regulatory requirements, issue MREL-eligible debt and make appropriate use of liquidity facilities.

I would, however, be grateful if, in addition to answering the very good questions from the noble Baroness, Lady Kramer, the Minister could address some of mine. First, to what extent does the Treasury expect the changes to improve the competitiveness of building societies relative to banks? The Explanatory Note says that no significant impact is foreseen, and no full impact assessment has therefore been produced. That is disappointing, since the Treasury’s financial services impact assessments are usually very good and very helpful to us in this House. It would therefore be good to understand what practical or economic benefit the Treasury nevertheless expects the order to deliver and to know of any hidden costs to businesses.

Secondly, will the benefits be distributed evenly across the sector? The exclusion for secondary non-preference debt would appear particularly relevant to the larger societies, which are subject to MREL requirements. Does the Treasury expect smaller societies to benefit?

Thirdly, has the Treasury estimated whether the additional flexibility created by the order could support greater mortgage lending or investment by building societies? How will it monitor whether the reforms release capacity, which is then used to support customers and the wider economy?

Fourthly, Article 4 requires the Treasury to review the order within five years and at intervals of no more than five years thereafter. What metrics will be used? In particular, will it examine the effect on competitiveness?

Finally, does the Treasury regard this order as the final stage in implementing the reforms enabled by the 2024 Act, or are further measures being considered to modernise building society legislation?

Subject to these questions, we regard the order as a positive and proportionate measure. It removes outdated administrative rules, supports compliance with PRA and Bank of England requirements, and gives building societies greater flexibility without undermining the important principle of mutuality.

United Kingdom: Business Competitiveness

Baroness Kramer Excerpts

Tuesday 1st September 2026 Lords Chamber

[Lord Pitt-Watson (Lab)]

We would all like tax to be as low as possible and investment to be as great as possible. Britain is the number two destination for external investment, according to the PwC CEO survey; the United States is number one. Huge investment is taking place in this country—£360 billion in the areas that have been identified for our industrial policy. The chief executive of Lloyds Bank said it is a “phenomenal” place to invest. Although one needs to be careful about the enthusiasm of entrepreneurs from Silicon Valley, Jensen Huang of Nvidia said it is

“a great place to invest … You’re the envy of the world”.

Of course we want to have more investment, but equally we are seeing that growth is coming—in the last six months, the highest in the G7—and last year productivity was the best for 10 years if you take out the effect of the pandemic.

[Baroness Kramer (LD)]

My Lords, I welcome the noble Lord, Lord Pitt-Watson, to his post. He has already allowed me and my colleagues to badger him, and we will continue to do so. When the Government increased employers’ NICs and reduced the threshold, it gave protection to the tiniest small enterprises. But surveys now estimate that more than 40% of small and medium-sized enterprises have been significantly negatively impacted. Have the Government tracked the growth lost from the impact on this critical sector, particularly in the most disadvantaged regions of the country?

[Lord Pitt-Watson (Lab)]

The noble Baroness is correct that 900,000 small businesses are protected from this. There are also protections for hiring people under 21 and apprentices under 25. But there is not a specific study of this, and the reason is because we view this as a system. People pay their tax and therefore we are able to do education, transport and all those other services. Would we want that tax to be lower? Absolutely, but we will do it in a way that balances the books and maintains the fiscal discipline to which this Government are committed.

Pension Access Rules: Impact on Terminally Ill

Baroness Kramer Excerpts

Tuesday 30th June 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am very glad to hear the words of the Government and the Minister on this issue, because it is an issue where remedy is absolutely required. I add an additional point, which is that many of those who will die, sadly, of a terminal illness at a young age will have put money aside or been due a state pension had they lived to the normal end of life, and therefore the tax benefit that they get is very largely offset by the fact that they will never receive the state pension that is their due, so the net cost to the Government is not quite as some might think it is.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her support for what I said. As she said, unlike a personal workplace pension, which can potentially be drawn down earlier, a state pension can be accessed only at the state pension age, and there are no current plans to change this. However, for those nearing the end of their life, special benefit rules apply. These enable people who are nearing the end of their life to get faster and easier access to certain benefits without needing to attend a medical assessment and, in most cases, enable them to receive the highest rate of benefit. These rules apply to five benefits that support people with health conditions or disabilities: personal independence payment; disability living allowance; attendance allowance; universal credit; and employment and support allowance.

Covid Fraud

Baroness Kramer Excerpts

Monday 29th June 2026 Lords Chamber

[Lord Livermore (Lab)]

I am very grateful to my noble friend for his question and his continued determination to see justice in this matter, which I share. Covid fraud and corruption is an appalling financial scandal that has cost UK taxpayers dearly. I thank the commissioner, Tom Hayhoe, for his tireless efforts to chase down fraud so that public money can be used as intended on public services such as hospitals and schools, as my noble friend said. The Government will continue relentlessly to pursue Covid fraud to retrieve taxpayers’ money, to hold those responsible to account and to ensure that such failures can never be repeated. In his report, the commissioner made 22 separate recommendations. The Government have fully accepted 18 and partially accepted the remaining four. The Treasury will now establish a Minister-chaired scrutiny panel to review the implementation of the recommendations every six months for at least the next two years.

[Baroness Kramer (LD)]

My Lords, fraud during Covid—heinous though it was—was carried out mainly by individuals and individual firms. Do the Government accept that, with AI, the character of fraud has now evolved into highly co-ordinated operating systems falsifying identity, behaviour and documentation, and it escapes detection by using digital money—primarily stablecoin and primarily among that tether? Work by Juniper Research shows that in 2025, tech platforms earned £430 million from scam ads in the UK alone. Will the Government require the tech platforms to close down these crimes?

[Lord Livermore (Lab)]

While I absolutely accept what the noble Baroness says about the evolving nature of fraud, I am not sure that I fully accept it is becoming as overwhelming as she says. I understand that the FCA is engaged in cracking down on exactly the type of practice she outlines, and we fully support its actions to do so.

Scottish Government: Social Security Benefits

Baroness Kramer Excerpts

Wednesday 24th June 2026 Lords Chamber

[Lord Livermore (Lab)]

As the noble Baroness knows far better than I do, the fiscal framework is designed to ensure that funding is fair and fiscally neutral at the point of devolution. It provides the Scottish Government with funding that reflects UK Government spending, while also giving them full responsibility for policy decisions in devolved areas. So, as I have said, any additional spending on benefits is a choice for the Scottish Government and must come from within their own budget.

The noble Baroness alludes to wider welfare reform. She will be well aware that spending on welfare increased by £88 billion in the last five years of the previous Government. I do not think anyone believes that the system that we inherited is working. It abandoned too many people to a life on benefits, it wrote off too many people as too sick to work, and it condemned too many children to be too poor to eat, which is exactly why we are reforming the system. She will know that we have launched the Milburn review, focusing on the causes of youth unemployment in particular, and he will come back with specific recommendations later this year.

[Baroness Kramer (LD)]

My Lords, the noble Lord, Lord Bruce, tabled this Question in part because he is appalled that so many people he speaks to in Scotland think that the whole of their benefit comes from Scottish-only taxes, not just the top-up. Ahead of the Brexit referendum, many people whose areas had received millions in EU support declared that their area had never received a penny because the EU contribution was unacknowledged or obscured. Is it time to improve communication and strengthen the union by making it clear that the whole of the UK contributes to benefit funding in Scotland, as well as in the other nations?

[Lord Livermore (Lab)]

There is a lot in what the noble Baroness says. I obviously agree with her, as I often do, on the matter of the European Union. I agree with what she says; it is very much worth looking at.

Middle East: Economic Response

Baroness Kramer Excerpts

Monday 1st June 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, it is a pleasure to return to the House after such a sunny break and to be able to review calmly the Chancellor’s Statement of 21 May.

It was not a major package. It was a collection of small measures, welcomed by some people as far as it went. As far as I know, the Chancellor did not announce the total cost, but except for the short delay in the increase of 5p on petrol, we are told that it will be covered by the changes to corporation tax on overseas investment and the foreign branch exemption. I would be grateful if the Minister could tell us how much that corporation tax change will cost British businesses and in which tax years.

What investment allowances will be made? As someone who made major investments overseas at Tesco and built up some fine businesses in Korea, Thailand and eastern Europe, I can tell your Lordships that we would not have taken the successful risks we did if early losses had not been allowed against profits at home. How is the Treasury going to avoid this change chilling overseas investment—a beacon of British wealth creation, reputation and strength for centuries?

I read the new list of food, drink, fertiliser and fuel items that will attract zero tariffs until December 2028. I note that they are rightly out for consultation. I have two questions here. First, have the Government had regard to the impact on our aspirations for new trade deals, where the granting of tariff-free access is a major bargaining chip? We know that the new Canada deal seems stuck because it has indicated that there is not much extra we can offer it.

Secondly, while government has tried to avoid lifting tariffs in areas where there is significant UK production in the agricultural sector, many of the items—nuts, fruit and tuna, for example—are substitutes for UK-grown foods and will displace demand for them. Moreover, we have a vibrant and important food manufacturing industry now facing stronger competition in areas such as confectionery, biscuits and processed foods. What is the Government’s estimate of the impact on them and the vital jobs that they support? Is this a further nail in the coffin of our manufacturing industries?

This brings me neatly to the third area of concern, which also affects food manufacturing—the high energy costs in the UK. They have been made worse by the Middle East war, but the main reason for them is the Miliband obsession with a drive to net zero. This obsession is doing very little for climate change, as the UK is responsible for less than 1% of global emissions. The Official Opposition have repeatedly made clear, sometimes with some welcome support from the Minister, that we must make full use of the North Sea—not only with tie-backs but with an early go-ahead for Jackdaw and Rosebank. This becomes more urgent by the day, given that there seems little chance of an early opening of the Strait of Hormuz. When can we expect an announcement on these two licences?

Our high electricity prices are also a cause of wider de-industrialisation. I welcome the support for the ceramics industry. Stoke-on-Trent’s five towns were the Silicon Valley of Britain in their day, and I am an avid collector of Staffordshire pottery. However, something more fundamental is needed on energy to preserve our shrinking industrial base.

Given that the Statement was about the impact of war in the Middle East, I was surprised that it was so light on defence. I ask the Minister again: when will the defence investment plan be published? He used to say “in due course” but in the King’s Speech debate he said “shortly”, which offered more hope.

That brings me on to my final area of concern: the gravity of the wider picture of inadequate and crumbling defence forces because of lack of proper funding or a proper defence investment plan; the country’s finances in a mess; troubling social policies and divisions; and anaemic growth—the lack of that magic which makes governing so much easier. This is not surprising given the avalanche of taxes and business costs that we have experienced—national insurance, minimum wage hikes, the Employment Rights Act, a new visitors’ levy on our hotels, packaging taxes and vicious rates revaluations that, according to the weekend’s papers, risk closing down yet more of our country’s pubs. Further, only today I see that it is proposed to reduce checks on those claiming disability benefits. This would be going in precisely the wrong direction. Is the report correct?

To understand the damage that these policies have caused, we need only look back at the OBR’s March 2024 forecast for 2026. At that point, shortly before we left office, having navigated enormous challenges—not least the unprecedented inflation following the outbreak of the war in Ukraine—the OBR forecast UK GDP growth of 2%, unemployment at 4.2% and inflation at 1.6%. After Labour’s tax rises and spending spree, the OBR now forecasts UK growth at 1.1% in 2026, unemployment at 5.3%—and tragically much more among the young—and inflation of 2.3% for 2026. This is all in the wrong direction over those Labour years.

We face many serious problems in this country, and we on these Benches believe that we need a greater sense of urgency and a much better plan from the Government, especially on growth and productivity, defence, energy and debt reduction. Sadly, the latest package is another bit of unexciting incrementalism, mostly focused on lesser issues and badly managed, as we saw from the outcry of all experts on the proposal to fix supermarket prices. We can do better.

[Baroness Kramer (LD)]

My Lords, till sales at UK supermarkets slowed to growth of just 0.2% in the three weeks to mid-May. Families do not know how they will cope with higher fuel costs, higher council tax and expected inflation. I am sure the Minister will tell us that the Government have tried to ease costs on the most vulnerable, and I support those actions. But with no relief in sight from the consequences of Trump’s Iran war, will the Government look seriously at the emergency £2 billion transport relief package proposed by my colleagues, to be funded by the Treasury’s unforecast boost in tax receipts: a cut in fuel duty by 10%, a slash in bus fares to £1, a slash in rail fares by 10% and a cut on VAT on public EV charging to 5%?

Does he also recognise that this is not a short-term crisis? The Government will have to find ways to reverse or offset the national insurance increase to small employers, especially in hospitality and leisure. They must break the link between electricity prices and the oil price, intensify the move to contracts for difference to spur on renewables, provide an effective programme for individuals and small businesses to install energy saving, and overhaul business rates at least to exclude all new business investment in energy saving from business rate consequences. Can he take this series of actions, which would make a significant difference?

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions. The noble Baroness, Lady Neville-Rolfe, ended her remarks with her usual doom and gloom and talking down the British economy. Unfortunately, she did not mention any of the positive economic news that we have heard in the last few weeks.

She shares with us a belief in the importance of growing the economy and knows that that is our number one objective. She did not mention the fact that last week’s figures confirmed that Britain’s economy was the fastest growing in the G7 for the first quarter of this year. She did not mention that we beat the OBR’s spring forecast, with economic growth at 0.6% in the three months to March. She did not mention the fact that, because of the resilience in our economy, last week the IMF upgraded Britain’s growth forecast for this year.

She also did not mention the positive news on public finances that borrowing last year was £20 billion lower than in the previous year and is falling in every year of this Parliament. She did not mention the fact that the IMF backed our economic plan, saying that the Government’s fiscal framework strikes

“a good balance between deficit reduction and growth-friendly spending”.

She did not mention any of the things that we are doing to ease the cost of living, including that interest rates have been cut six times since the election, that real wages have continued to rise in every month of this Government and that inflation fell in April faster than expected, making the UK the only G7 economy where inflation fell last month. She did not mention any of those things, and I think that continuing to talk down the economy when we are doing all that we can to help it through this difficult period, with the war in the Middle East, does not benefit anyone.

She talked about the cost of the measures that we are introducing and about the foreign branch profits. I hope she will agree with us that, when a country faces challenges because of higher oil and gas prices, we must ensure that those who benefit from increased prices and volatility pay their fair share.

She will remember that, in our first Budget, the Government extended and increased the energy profits levy, last year we announced a new permanent windfall tax regime for oil and gas price shocks, and last month we increased the electricity generator levy, alongside further action to weaken the link that the noble Baroness, Lady Kramer, mentioned between high gas and electricity prices.

Now, the Government are making specific changes to the taxation of foreign branch profits, changing how companies are taxed in relation to their overseas activities. The noble Baroness will know that, until now, some businesses have structured their affairs with taxable branches to pay little or no corporation tax on UK profits. The change that we are introducing removes the ability to achieve disproportionate relief for overseas costs without UK taxation or future profits. The change, from 1 September 2026, for oil and gas-extracting UK resident companies will ensure that the UK continues to have a robust and effective corporation tax regime in line with international best practice and will ensure the effective taxation of profits attributable to UK activities.

The noble Baroness talked about the cost. She is absolutely right to say that we expect these reforms to raise hundreds of millions of pounds per year and that they will fully fund the package of measures announced by the Chancellor. The costings will be certified by the OBR forecast in the usual way at the next fiscal event.

The noble Baroness talked about zero tariffs and rightly said that they are out for consultation. Obviously, that is the case and I am pleased that she agrees with that. She mentioned the impact on trade deals. These are temporary suspensions to tariffs and so will lapse long before any trade deals are negotiated. So I think we will be able to see immediate improvements in the cost of living, and perhaps over time there will be trade deals that achieve that more permanently.

The noble Baroness talked about high energy costs and blamed them on the drive to net zero. I think we had an Oral Question in this House when the IMF put out its previous forecasts, and she will know that the IMF said that we faced higher energy costs in this country exactly because the previous Government had failed to take action to make the UK more self-sufficient in energy. So blaming the solution to the problem and saying it is the problem itself is a little perverse. The problem for the UK is that we are too exposed to imports of energy and we are, as she knows, taking action as a Government to reverse that.

The noble Baroness knows I agree with her when it comes to oil and gas production from the North Sea and how important and valuable that is. She asked me specifically about two fields, Jackdaw and Rosebank. She will know that the development proposals are a matter for the North Sea Transition Authority and the Offshore Petroleum Regulator for Environment and Decommissioning. I am unable to comment on the specifics of any individual project while the regulatory process is under way, or on the investment decisions of individual operators. As I understand it, the Secretary of State for Energy Security and Net Zero will be making a decision regarding the environmental impact assessments of these projects in the coming months.

I am pleased that the noble Baroness welcomed the support for the ceramics industry. She is right to say that there are far longer-term issues at play in terms of the competitiveness of many of our industries: the foundational sectors so important to the industrial strategy. That is why we have already increased support for our most energy-intensive companies through the British industry competitiveness scheme that we announced a couple of weeks ago.

The noble Baroness asked me about defence spending. As she knows, the defence investment plan is the first zero-based review of defence spending in almost two decades. It will set out the MoD’s plans to ensure that resources are directed effectively to meet its priorities. The Government are working hard to facilitate this and to ensure that the plan delivers the outcomes the UK needs for defence and for taxpayers. I shall repeat what I said previously: it will be published shortly.

The noble Baroness asked about supermarkets, finally. As she knows, it is quite right that we have discussions with supermarkets, as we have with fuel retailers and high street banks, to discuss ways we can work together to ease the cost of living on households. But, as I said to her, I think in a previous Private Notice Question, this is not about price caps, as some speculation has suggested; we would never advocate for that, and it is not for us to tell supermarkets how to run their businesses.

The noble Baroness, Lady Kramer, focused primarily on quite a long shopping list of support that her party would like to see introduced. Obviously, we did introduce some support last week, as the Chancellor set out, but I am not convinced that the funding that the noble Baroness thinks is there for her package of support actually is. Unfunded commitments are not the way to ease the cost of living crisis. We saw exactly that with the Liz Truss Government, and we saw exactly that with the previous Conservative Party Government. Introducing unfunded support now would mean higher inflation and higher interest rates in the long term, meaning that the very people we are trying to help now would pay more for their rent, bills and mortgages in the long term. I do not believe that is a sustainable way to help people with the cost of living crisis.

Higher Earners: Emigration

Baroness Kramer Excerpts

Thursday 21st May 2026 Lords Chamber

[Lord Livermore (Lab)]

As the noble Lord says, the data is not available, so I am not sure that he can make the conclusions that he seeks to make. The data will not be available until we have the January 2027 self-assessment data, which is the most reliable data. The costings that were certified by the OBR for the previous Government’s and this Government’s reforms account for a potential behavioural response. They factor in an assumed level of migration from non-doms, just as they did for the previous government reforms. The OBR has said that there is no evidence to change the estimated impact of the reforms on migration. This has always been a highly mobile population. For example, in 2023-24, there were 9,100 arrivals and 9,500 leavers, so the noble Lord knows that this is nothing new. The reforms to the tax treatment of non-doms have been designed specifically to make the UK competitive, with a modern, simple tax regime that is also fair.

[Baroness Kramer (LD)]

My Lords, I have a personal interest in this. Do the Government recognise that outdated tax treaties are driving away talent that the UK wants, especially in life sciences and AI? Many overseas nationals, especially Americans, end up paying significantly more tax than any equivalent UK-only citizen. It is not a non-dom issue but a failure to modernise relief to deal with tax savings such as ISAs, investments in mutual funds and the complexity of death duties. Will the Government get to grips with this?

[Lord Livermore (Lab)]

The new residents-based regime is more competitive for new arrivals than the previous rules. It is more attractive than the previous approach. They can bring their foreign income and gains into the UK without attracting an additional tax charge. These changes will encourage individuals to spend and invest these funds in the UK.

VAT Relief: Business Donations

Baroness Kramer Excerpts

Tuesday 19th May 2026 Lords Chamber

[Lord Livermore (Lab)]

I very much agree with the noble Lord. I think we may have discussed this once before, and I agreed with him then as well. As I understand it, HMRC is absolutely cracking down on this type of behaviour.

[Baroness Kramer (LD)]

My Lords, most foods subject to VAT are high in fat, salt and sugar and are often ultra-processed. Is there a danger that VAT relief will increase the donation of such foods to food banks and charities, putting people already at high risk of obesity and diet-related illnesses at even higher risk? Will the Minister consider excluding HFSS foods, at the very least, from VAT relief?

[Lord Livermore (Lab)]

I am aware of the concerns set out by some, including the noble Baroness, about the inclusion of foods high in fat, salt and sugar within the scope of this relief. The work that many of these companies, such as the Company Shop Group, do to support local communities is crucial, and it is important that the new VAT relief does not undermine their ability to do this work. We have not yet been presented with sufficient evidence to justify carving out from the relief foods high in fat, salt or sugar, but Treasury officials will monitor the situation carefully and maintain an open dialogue with the sector.

Defence, Security and Resilience Bank

Baroness Kramer Excerpts

Tuesday 19th May 2026 Lords Chamber

[Lord Livermore (Lab)]

The scale and precise focus of the mechanism remain to be determined, but the scope of those activities would include lending to sovereigns and to the sector and providing loans to supply chains and loans for capacity expansion. We anticipate that it will make a material contribution to defence spending and investment across those involved. The intention is that this mechanism will be established as an independent international financial institution underpinned by an international agreement and with sovereign countries as members in the first instance. As with other international financial institutions, paid-in capital will be expected to leverage in private sector funding by a multiple of that initial contribution.

[Baroness Kramer (LD)]

My Lords, I am now completely bewildered. I would have thought that, with the state of the gilts market, the Government would be leaping at the opportunity to find AAA financing for their defence expenditure, and on a multilateral basis. Are we dealing with the underlying problem of a Treasury that basically says, “not invented here”, rather than looking at an opportunity that has been virtually handed to it?

[Lord Livermore (Lab)]

No, and I do not quite understand why the noble Baroness is confused, because we are doing exactly what she says. We are setting up—or being part of—a proposed multilateral defence mechanism. I thought the noble Baroness would share a similar worldview in terms of wanting to see greater amounts of co-operation and procurement among a core group of EU allies and NATO allies and partners. What she is asking for is exactly what the Government are exploring.