Government Debt

Baroness Kramer Excerpts

Wednesday 16th September 2026 Lords Chamber

[Lord Pitt-Watson (Lab)]

Overall fiscal discipline is the central question. Discipline is really important. The noble Baroness mentioned the moron premium. I do not know whether all noble Lords understand what that term refers to: it was a slight by an economist describing the behaviour of the team responsible for the September 2022 mini-Budget. To give a sense of the cost, it is £15 billion a year. I think we have learned lessons from that. When I spoke in the debate last week, speakers from across the House agreed that fiscal discipline, independent oversight and not moving the goalposts were critical. The balance of spending on tax might be something on which we disagree, but on fiscal discipline we agree entirely.

[Baroness Kramer (LD)]

My Lords, under the 2026-27 Treasury remit to the Debt Management Office, index-linked gilt issuances will account for 9.3% of total new gilt issuances. Why was this decision made when a quarter of UK gilts are already index-linked well above the international norms, when we are in a period of inflation and rising interest rates, and when defined benefit plans—the schemes which had a hedging rather than a speculative use for index-linking—are rapidly disappearing? Does this make any sense?

[Lord Pitt-Watson (Lab)]

The Debt Management Office is part of the Bank of England. I would be more than happy to write to it, or the noble Baroness herself might wish to write for the answer to her question.

Financial Services and Markets Bill [HL]

Baroness Kramer Excerpts

3rd reading
Tuesday 15th September 2026 Lords Chamber

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to briefly follow the noble Baroness, Lady Hayman, and to applaud the work of her and her allies that has got us to this place, as she said, after a great deal of struggle. One day, we will simply have these provisions arriving in the Bills without the need for struggle—we can but hope.

I have one simple question to put to the Minister, which was inspired by attending “The People’s Emergency Briefing” on climate and nature in Gravesend on Saturday night. It was one of some 3,500 events held all around the country after the initial event in Westminster. We have yet to hear from the Conservative Front Bench, but House rumours suggest that the Opposition are going to oppose this amendment. If that is the case, would the Minister agree that they would benefit from seeing that briefing? I therefore ask the Minister—this is the first time I have asked under the new Prime Minister —whether the Government will organise a live national televised emergency briefing on climate and nature, as all these local events are asking.

[Baroness Kramer (LD)]

My Lords, my colleagues and noble friends Lady Sheehan and Lady Northover spoke eloquently on these issues on Report. If this amendment is pressed and the others are moved by the Government, we will support them.

[Baroness Neville-Rolfe (Con)]

My Lords, as this is Third Reading, I want to start by extending my warm thanks to the Minister and his team for their work on the Bill. I welcome the movement that the Government have shown on several of the issues that we have raised during the passage of this 137-page Bill, which in general we support.

Chief among them is proportionality, which will continue to apply to the regulators in the exercise of their day-to-day functions. That change reflects concerns on all sides of the House; my hope is that it will help to reduce the burden on SMEs, so I thank the Minister for this. I also welcome the movement we have seen on the important issue of financial education and look forward to engaging on that. It is becoming ever more important, whether you are a pupil, a student applying for a loan, or an adult managing your finances or thinking about retirement.

However, there remain important issues which the Government have not yet addressed sufficiently. Among them are the Henry VIII powers in Clause 3 and Clause 50 and the first use of the extensive new powers in the Bill. I understand the Government intend to reintroduce Clause 3 at a later stage in the Bill’s passage with further detail, and that is welcome, but it does not detract from the fundamental point at issue. One of Parliament’s principal functions is to scrutinise government legislation, and we simply cannot do so properly when Bills confer broad powers without setting out clearly how they are to be used.

A digital asset strategy to support faster action to stop further loss of digital entrepreneurs and less aggressive use of Section 166 are two areas where we believe the Government should go further, because we have heard consistent concerns from industry.

Turning to the amendments, I deeply regret the amendments the Government are introducing today on climate change. This represents a serious U-turn by the Government. Their original proposal was to move these considerations into five-year strategies. The existing requirements they dispensed with are largely superfluous and burdensome. There is little evidence that today’s amendments to restore them make any meaningful contribution, either to reducing climate change or to protecting the environment. At a time when businesses are already facing considerable pressure, and when our wider economic circumstances demand an unrelenting focus on growth, competitiveness and investment, imposing further needless regulatory burdens is the wrong direction of travel.

I would also suggest that, for an economy as dependent as ours on international investment, these amendments send entirely the wrong signal. We should be demonstrating to investors overseas that the UK is a predictable and attractive market. Instead, they reinforce the perception that doing business here means ever more regulation, additional cost and greater complexity for no clear practical benefit. At Second Reading, the then-Minister, the noble Lord, Lord Stockwood, who I am glad to see in his place, said that the purpose of the Bill was to

“modernise how the sector is regulated”

and

“enable it to grow”.—[Official Report, 8/6/26; col. 1146.]

These amendments seem to run directly contrary to that objective. I am deeply disappointed that the Government have abandoned that principle so quickly and with so little resistance. We on these Benches have been consistent in our opposition to this duty, which we have made clear in the House and in discussions with the Minister. I shall seek to divide the House when the amendments are called.

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[Lord Pitt-Watson (Lab)]

My Lords, this Bill delivers important reforms to ensure that the UK’s financial services sector remains open, innovative and internationally competitive while maintaining high regulatory standards and protecting consumers. It strengthens the legislative framework for financial services, supports growth and investment, and ensures that our regulators have the appropriate powers and responsibilities to respond to a rapidly changing market.

The Bill has benefited considerably from noble Lords’ detailed scrutiny and expertise throughout its passage. I hope noble Lords feel that the Government have listened carefully to the arguments advanced in Committee and on Report, and that we have brought forward amendments which were appropriate in response. The Bill, of course, is broad. It touches on lots of areas, but it is united by one common theme, shared by the House: we want to create a clear set of rules which allow the financial industry to serve its customers better and to prosper by doing so.

I thank all noble Lords who contributed to our debates, perhaps in particular my noble friend Lord Stockwood, who led the early stages of the Bill. I also thank my officials, who supported the Bill throughout its passage. It was no mean task. I am also particularly grateful to the Opposition and Liberal Democrat Front Benches; to the noble Baroness, Lady Noakes, and other members of the Financial Services Regulation Committee; to members of Peers for the Planet; and to noble Lords across the House, including Cross-Benchers, for their constructive engagement. If I had a special thank you it would be to my Whip, my noble friend Lord Wilson, without whom I would have found this process quite impossible.

The Bill leaves this House strengthened by the scrutiny that we have given it. I beg to move.

[Baroness Kramer (LD)]

My Lords, I will be brief, which has been my practice—as people may have noticed —throughout much of this Bill. I open by saying thank you to the Minister and to the Box. They have been very willing to share their time with us, brief us and listen to issues that we raised. We did not always get the response that we wanted, but it was a positive engagement that gives us some hope for making progress.

I think the Minister came to this Bill having been told that it was a minor, technical Bill. That probably could not have been more wrong. I am glad we achieved what we did, working across the Opposition Benches. I give credit to Conservative Peers—the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, and others—as well as, on my side, to my noble friends Lady Bowles and Lord Sharkey in trying to deal with the issues around proportionality.

There is a great deal left in accountability that will have to be tackled in future Bills. As we see the speed-up in AI, crypto and the other rapid changes that are coming, we will have to find a new way, as a Parliament, to engage. I also thank the noble Baroness, Lady Neville-Rolfe, for putting in an amendment that began to deal with the digital issue. I really believe that not covering that within this Bill was a miss-out. The Government will have to step up to the plate again very shortly.

I am also very grateful for the fact that we got support on the child trust fund issue, again from the Tory Benches. It is something I feel very personally, as people can probably guess. It benefits 80,000 disabled youngsters who have been unable to access money that is theirs that is sitting in trust fund accounts.

I thank my noble friend Lord Sharkey in particular for fighting the battle for the FOS—that battle is not over either. I also thank my noble friends Lady Northover and Lady Sheehan; we would have gone farther on the climate change, environment and deforestation issues, but we feel that an important step was taken by the Government in the amendments moved today.

This has been a very constructive Bill, but, frankly, it was not the maximum use that could have been made of a financial services Bill and I hope that we will see another one come along shortly. There are problems to be tackled, not least the issues of mortgage prisoners and community development financial institutions, as well as the utterly significant constitutional issue of accountability and how the regulators need to be effectively accountable to Parliament. I thank the whole House for working on a very complex set of issues, particularly as it entered this phase with the understanding that it was only going to be about minor technicalities.

Hospitality Industry: VAT

Baroness Kramer Excerpts

Monday 14th September 2026 Lords Chamber

[Lord Pitt-Watson (Lab)]

I cannot comment about changes in taxation, particularly in the run-up to the Budget, but if I might just correct the noble Lord, the point I made in my first Answer was that there has been support given, particularly to pubs and music venues. Support has been given particularly to smaller businesses—750,000 properties—and in reductions in national insurance to 900,000 people who work for smaller businesses. The corporation tax here in the UK is the lowest in the G7 and it is reduced for small businesses, so I reject the thought that no help has been given.

[Baroness Kramer (LD)]

My Lords, back in November 2025 my party called for a 5% cut in VAT on hospitality because the situation was so dire, with at least a third of the industry operating at a loss. Will the Minister now look again at the VAT cut? Will he also follow through on those other issues where small businesses need help, such as a different regime for NICs for part-time workers? Will he look at their energy costs, because most of them cannot access the attractive energy packages as they are not available to the small firms? The change in business rates favours the corporate chains but actually disadvantages most of the small independents. They are the backbone and they are the employers, especially of our young people.

[Lord Pitt-Watson (Lab)]

I entirely echo the noble Baroness’s congratulations to the hospitality industry. I will be more than happy to answer the questions she has asked after the Budget, but I think most of them anticipate changes in tax, which it would be inappropriate for me to discuss at this point.

Financial Services and Markets Bill [HL]

Baroness Kramer Excerpts

Report stage
Wednesday 9th September 2026 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I welcome the Minister’s statement that he was committed to bringing forward amendments at Third Reading. I think it is relevant to this group of amendments. I simply want to draw the House’s attention to two sessions we have had in the last three or four days with the FCA. The Minister very kindly organised a session with the FCA about its role in climate and environment. To be honest, the kindest thing I can say is that I was underwhelmed. I think that it is doing a lot more than it displayed that day. The defensiveness that it demonstrated in front of a bunch of really friendly, helpful and not at all terrifying Baronesses, was a bit of worry to me, to be honest, because I felt there was real defensiveness and push-back against a responsibility. I thought perhaps we had just given it a hard time and it was having a bad day—but we had another session with it yesterday, organised by Peers for the Planet, and I was horrified.

I have the quote here because I wrote it down and then went home and wept. A fairly senior representative of the FCA said, in terms: “The FCA does not have a mandate to tell businesses what they should do on climate and the environment”. I would like the House to know that and the Minister to bear that in mind when he comes forward with his Third Reading amendments, because there is a real need for a stronger line in guidance than we might otherwise imagine.

[Baroness Kramer (LD)]

My Lords, fairly early on in Committee I said to the noble Lord, Lord Stockwood, who was then in charge of bringing the Bill through, that, when a common opinion was held by the noble Baroness, Lady Noakes, the noble Lord, Lord Vaux, and my noble friend Lady Bowles, he ought to listen. Those are the three real experts that we have in the House on markets, regulation and the financial services industry, and all of them set aside political ideology when they come forward with recommendations. They look to the common good and to good functioning, both for markets and for consumers. So I am very glad that on proportionality—which of all the issues was the most serious in the downgrading of principles, quite frankly—that the Minister is now amending that.

I am also appreciative that there is going to be movement on climate change because, as colleagues have said, this is a crisis that is on our doorstep. We have no choice but to act, and it means we need to focus all our strengths on dealing with that crisis. I am very conscious of the impact of financial stability and how it crept up on us, because we only looked at it through a very narrow lens instead of looking across the piece and recognising how holistic and interconnected so many issues are.

I have Amendment 67 in this group. I have to confess that it is an odd place for this amendment, and I shall deal with it briefly. Amendment 67 arose because a number of banks have been refusing to take small businesses and SMEs generally in the defence industry as their customers, usually because they are concerned about reputational risk. That has made it very difficult for those SMEs to raise credit, and it is seriously undermining the UK’s plans to build up its defence forces, which I think we all agree is not acceptable. Some Members may not be aware that the most innovative defence firms are SMEs. It is not just about the big players—the SMEs are critical, particularly at a time when so much is changing in the strategic and defence sector. These small SMEs already face high regulatory hurdles, and they often face slow procurement processes when they work with the Ministry of Defence. The absolutely killer blow is then not to be able to finance the projects, no matter the quality of the contract that they have.

The FCA has said its rules present no obstacle to lending to SMEs and considers that to be a green light, but that is not having very much impact. My amendment essentially attempts to put some welly behind the FCA in dealing with these issues. It would require it to conduct and publish a review at least once every three years, including identifying any barriers. I would have thought that a report like that might get the Government going as well. I know that the Government are aware of the problem, but I emphasise that knowing about it is not enough; they actually need to act and change minds.

[Baroness Neville-Rolfe (Con)]

My Lords, we welcome the Government’s decision to retain proportionality as an express statutory consideration for both the FCA and the PRA when they exercise their general functions. This responds to productive discussions in and outside Committee, for which I thank the Minister and indeed the noble Lord, Lord Stockwood, who I am delighted to welcome back to the discussion of the Bill, and I thank him for his efforts to improve it. I also thank my noble friend Lady Noakes, the noble Baroness, Lady Bowles, and the noble Lord, Lord Vaux, for their constructive and flexible approach to the substantial problems on these clauses.

Time and again, one of the concerns we hear from business is that regulation can be disproportionate to the risk it is intended to address. That is particularly true for the small and medium-sized firms that we rely on so heavily for competition, innovation and economic growth, right across this country. The proportionality changes help to address this and we will not therefore be pressing our Amendment 62 on SMEs to a vote—even though it is my favourite amendment and I have the support of the noble Lord, Lord Vaux. The noble Baroness, Lady Kramer, is right to focus on lending to small defence companies as well.

The requirement for the FCA and PRA to explain in their annual reports how they have taken these proportionality principles into account, alongside the requirements relating to consultation and parliamentary committees, creates an important mechanism through which Parliament can examine whether the principle is actually being applied in practice, with concrete examples, as the noble Baroness, Lady Bowles, suggested. This is important because the ultimate test of these amendments will not simply be whether “proportionality” appears in statute. It will be whether firms see a genuine difference in the way regulation is developed and applied, particularly by the regulators. We hope that the Government’s amendments will prove to be a meaningful mechanism through which regulation can become easier to comply with, less costly and ultimately more successful in achieving the objectives that Parliament has set for the regulators—of course, the proof will be in their implementation.

The Government have listened to concerns raised during the passage of the Bill and we support the amendments that the Minister has tabled in response. This is good House of Lords practice. Like my noble friend Lady Noakes, I do not intend to pursue the other amendments today.

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Moved by

[Baroness Kramer]

60: After Clause 22, insert the following new Clause—
“FCA rules: access to certain savings accounts for persons lacking capacity(1) The FCA must make rules requiring a relevant provider, where the conditions in subsection (3) are met, to enter into an agreement under which payments from a relevant account held by a person who lacks capacity to manage their own financial affairs (“the account holder”) are made to a person acting on the account holder’s behalf (“the recipient”) instead of to the account holder.(2) A “relevant account” means—(a) a Child Trust Fund within the meaning of the Child Trust Funds Act 2004;(b) a junior individual savings account within the meaning of regulations made under Chapter 3 (income from individual investment plans) of Part 6 (exempt income) of the Income Tax (Trading and Other Income) Act 2005;(c) an account of any other description specified by the FCA in rules made under this section.(3) The conditions are that—(a) there has been provided to the relevant provider either—(i) a document signed by a registered medical practitioner stating that the account holder lacks capacity to manage their own financial affairs, or(ii) a statement in writing by the recipient that they understand their duty to apply any money received in the best interests of the account holder, that they are aware that they may incur civil or criminal liability if they misapply the money, and that, so far as they are aware, no other person has authority to receive the money by virtue of a power of attorney or an order or appointment made by a court, and(b) the account holder has not informed the relevant provider that they do not wish such an agreement to be made.(4) Rules made under this section must—(a) secure that a relevant provider which makes a payment in accordance with such an agreement does not, by making it, incur any liability to the account holder, unless the provider has reasonable cause to believe that the recipient is likely to apply the money otherwise than in the account holder’s best interests, (b) require the recipient to apply any money received under the agreement in the best interests of the account holder, and(c) provide that the aggregate of the payments made under an agreement may not exceed £5,000 in any period of 12 months.(5) The purpose of rules made under this section is to enable access to be obtained to money held in a relevant account on behalf of an account holder who lacks capacity without the need for an order or appointment of the Court of Protection or any equivalent order of a court.(6) In this section “relevant provider” means an authorised person (within the meaning of the Financial Services and Markets Act 2000) who provides a relevant account.”Member’s explanatory statement
This new clause seeks to require the FCA to make rules enabling money in a Child Trust Fund or Junior ISA belonging to a person who lacks capacity to be paid to someone acting in that person’s best interests, subject to safeguards, without an application to the Court of Protection.

[Baroness Kramer (LD)]

I wish to test the opinion of the House.

Financial Services and Markets Bill [HL]

Baroness Kramer Excerpts

Report stage
Monday 7th September 2026 Lords Chamber

Moved by

[Baroness Kramer]

17: After Clause 13, insert the following new Clause—
“Reimbursement of fraud: liability of technology companies(1) The FCA must make rules providing that, where a person is to be reimbursed in respect of losses arising from an authorised push payment fraud, the cost of that reimbursement is to be borne, in whole or in part, by any relevant technology company on whose service the fraud was initiated, facilitated or communicated.(2) Rules under subsection (1) must provide for—(a) the apportionment of the cost of reimbursement between relevant technology companies and payment service providers, by reference to the extent to which each contributed to the fraud occurring,(b) a process by which a payment service provider that has reimbursed a victim may recover the apportioned cost from a relevant technology company, and(c) the information that a relevant technology company must provide to the FCA and to payment service providers for the purposes of the rules.(3) In making rules under this section, the FCA must have regard to the principle that the cost of reimbursing victims of fraud should fall, so far as is reasonable, on the persons best able to prevent the fraud.(4) In this section—“authorised push payment fraud” means a transfer of funds executed by a payment service provider on the instruction of a payer, where the payer was deceived into giving that instruction;“relevant technology company” means a person who provides— (a) a user-to-user service or a search service within the meaning of the Online Safety Act 2023,(b) an electronic communications service, or(c) any other online service by means of which an authorised push payment fraud may be initiated, facilitated or communicated.”Member’s explanatory statement
This new Clause would require the FCA to make rules placing liability for the cost of reimbursing victims of authorised push payment fraud, in whole or in part, on the technology companies on whose platforms the fraud originates, rather than solely on payment service providers, and to apportion that cost according to who is best able to prevent the fraud.

[Baroness Kramer (LD)]

My Lords, let me address Amendment 17 in my name, which is also signed by the noble Lord, Lord Vaux, which I very much appreciate. It addresses authorised push payment fraud and would require the tech companies whose platforms are host to this fraud to share in the reimbursement of losses to the victims of such fraud.

At present, victims of APP fraud are reimbursed up to £85,000, half by the bank sending the payment and half by the bank receiving the payment. This is under rules set by the Payment Systems Regulator. The rules and the cost of reimbursement have had a positive effect, in that banks have set up a much more effective regime to alert people to the possibility of fraud. Many of us have seen that in transactions that we do and the warnings that we receive. However, APP fraud continues to grow relentlessly and, on the most recent figures, is up by 19% in the last year, reaching £576 million in the UK. Payment fraud altogether in the UK has reached £1.3 billion a year. It is essentially 40% of all serious crime.

Some 66% of these scams—that is what they are—originate on online tech platforms. These platforms made £430 million in revenue last year from advertising these scams. I find that outrageous. Surely these platforms should be picking up at least part of the cost of reimbursement, instead of the cost falling wholly on the banks while the tech companies pocket the advertising revenue. I do not think that the tech companies will ever stop scams and take them seriously until it starts costing them money.

I cannot understand why the Government are rejecting my amendment. Are they so afraid of the tech companies and Trump that they cannot provide this protection to ordinary consumers who are being defrauded on such a scale? But I also had a eureka moment in understanding why the FCA has not acted. It came from an absolutely chance conversation. Neither the FCA nor Ofcom is apparently sure which one of them should take the initiative in trying to deal with tech companies and this form of fraud.

Regulatory courtesy has led to inaction. Frankly, when I look at the number of victims and the size of the losses, this is completely unacceptable. This amendment breaks that conundrum, and I would expect the Government to attempt to break that conundrum and ensure that action takes place.

On other amendments in this group, I support Amendments 19 and 20. I know they will be spoken to eloquently, but I admit to not fully understanding the issues in Amendments 95 and 97. But I will listen carefully.

I beg to move.

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[Lord Pitt-Watson (Lab)]

Again, if the noble Baroness will accept it, I will write to her on that. I do not know the timetable offhand.

[Baroness Kramer (LD)]

My Lords, the online platforms know exactly what they have to do to stop online fraud; they are just choosing not to do it. The Government say that the answer will come from Ofcom, but that has certainly not worried the platforms one iota. The platforms will take notice only when they have to pay out to reimburse people who have been victims of those fraud scams. That is why Amendment 17 matters, and that is why I am going to test the opinion of the House.

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[Lord Pitt-Watson (Lab)]

In moving my Amendment 22, I will also speak to government Amendments 58 and 59. Amendment 22 is developed from our discussions in Committee.

Payment systems are essential national infrastructure. They allow households to pay bills, businesses to trade and financial institutions to transfer funds securely. As technology changes how we pay, those systems must continue to evolve, becoming more efficient and capable of supporting new services while remaining trusted and resilient. The Bank of England has a critical responsibility to protect and enhance UK financial stability. The Bank is also working with the Government and other authorities to support safe innovation in payments and digital finance. The Bank has welcomed this measure and will reinforce that work while preserving the primacy of financial stability.

Amendment 58 places the Bank’s role in facilitating innovation on a clear statutory footing. When exercising certain key functions for recognised payment systems, recognised digital settlement asset service providers, and in-scope service providers, the Bank must, so far as is reasonably possible, facilitate innovation with a view to improving the quality, functionality and economy of those systems and related services. The objective is expressly secondary and does not require the Bank to facilitate innovation where doing so would undermine its primary financial stability objective. This change will also bring the regulation of systemic payment systems and digital settlement assets into closer alignment with the Bank’s supervision of other financial market infrastructure. The Bank already has a secondary innovation objective for central counterparties and central securities depositories. Providing a comparable objective for payment systems and digital settlement assets provides the Bank with a clear and consistent statutory framework.

Amendment 58 also ensures that the Bank can be held accountable under its new objective. It enables the Treasury to make recommendations about aspects of the Government’s economic policy for the Bank to have regard to when considering how to advance its financial stability and secondary innovation objective in relation to payment systems. Those recommendations must be published and laid before Parliament. The Bank must explain the action it has taken, or its reasons for not acting, and provide updates where required. The Bank’s annual reports must now also explain how it has advanced the secondary innovation objective and engaged with interested stakeholders.

Amendment 59 reinforces that accountability by requiring the Bank to publish a stand-alone annual report on both secondary innovation objectives. The report must explain how objectives have been embedded in the Bank’s operations, processes and decisions, and how it has advanced them with respect to relevant functions. This will give Parliament and industry clear sight of how the objectives operate in practice.

Amendment 22 is consequential. It ensures that the mechanism already in the Bill for co-ordination between the Financial Conduct Authority, the Prudential Regulation Authority and the Bank with respect to relevant payment functions makes appropriate reference to regulator objectives, which would now include the Bank’s secondary innovation objective.

In summary, these amendments together place the Bank’s role in facilitating safe innovation on a clear statutory footing, while preserving financial stability as its primary objective. They also provide stronger and more transparent accountability for how the Bank applies the objectives in practice. I hope that noble Lords will join me in supporting these amendments.

[Baroness Kramer (LD)]

My Lords, I have a couple of very brief comments. I am comfortable with the amendments that the Minister has just described, but I have one note of caution. The drive for innovation, which we all think is a good thing, in many ways also increasingly exposes the UK to a loss of monetary sovereignty, particularly where that innovation has to be brought in from overseas, and gives overseas companies far greater control of the payments systems in the UK. That is one of the ongoing fears that we have had. Scott Bessent has been quite open in saying tariffs are very old-fashioned in controlling western economies’ and that stablecoin is the way to do it.

I am therefore cautious when I hear this drive for innovation without some counter-warning and counter-consideration of the monetary sovereignty impacts. I never hear those words used, nor are they captured in any way in anything that I hear around regulation. So often, the move into digital assets—which is, in essence, what this is all about—is about plumbing and pipelines; it does not recognise the political implications. We have seen this in many other areas, such as where we have given away food security and energy security. We need to be very careful that we do not give away security in the financial services and payments sector.

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Moved by

[Baroness Kramer]

26: After Clause 14, insert the following new Clause—
“Anti-money laundering: provision of support to professional services firms(1) Within three months of the day on which this Act is passed, the Treasury must publish an assessment of the arrangements that will be made to provide education, guidance and compliance support to professional services firms subject to anti-money laundering supervision by the FCA.(2) The assessment must include a comparison between—(a) the education, guidance and compliance support currently provided by professional body supervisors, and(b) the support that will be provided by the FCA.(3) The Treasury must lay the assessment before Parliament.”Member’s explanatory statement
This amendment seeks to require the Government to explain how education, guidance and bespoke compliance support currently provided by professional body supervisors will be maintained following the transfer of anti-money laundering supervisory functions to the FCA.

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[Baroness Kramer (LD)]

My Lords, I am afraid that all the amendments in this group are mine. Amendment 29 has also been signed by the noble Lord, Lord Vaux, for which I am most grateful. I will be brief as the hour is late.

In this Bill, the Government will transfer all supervision of professional service firms in respect of anti-money laundering and counterterrorism financing from the current professional bodies to the FCA. Members of this House have received representation from a wide range of professional groups which are, frankly, utterly dismayed. They recognise that the FCA is trying to respond to their needs and issues, but it seems to have very little idea how to fund or resource the complex guidance and education required as part of that supervisory and monitoring process. It seems, as far as I can understand, that the FCA now says that it would like the professional bodies themselves to continue to provide all that work but, in essence, on an unpaid basis. That is not realistic.

The FCA has produced a high-level road map, but I hear universally that it is very short of information and low on timing details. I can agree that the current system has historically suffered from fragmentation, but I am not sure that we needed a remedy on the scale of the changes that are in the Bill. The fragmentation issue was being dealt with reasonably effectively by OPBAS—the Office for Professional Body Anti-Money Laundering Supervision—that had been created to sit above the professional bodies to provide co-ordination standards and make them effective. Where OPBAS had a weakness was in its communication with enforcement agencies, but this issue could have been remedied without the radical change on the scale represented in the Bill.

My amendments require an assessment of this transition process, particularly on issues such as education guidance and compliance support, timetables, regional coverage and supervisory fees. There is real concern now that with an additional layer of supervision brought into the picture, fees are going to increase very significantly. My amendment would also require the FCA to have regard to having the appropriate expertise on hand to provide that support and guidance—that is significant expertise ranging from accounting to taxation. It has not really taken on these issues historically.

I will not be pressing this issue because the FCA is trying to find ways to make this system work. I honestly do not think that the FCA would have wished this upon itself; nor would the professional bodies have wished it upon themselves. It really is important that the Government understand that they need to think much more carefully when they introduce radical change when, frankly, much more modest and targeted change would have served the purpose better.

[Lord Vaux of Harrowden (CB)]

My Lords, I support the noble Baroness, Lady Kramer, on her Amendment 29, to which I have added my name. The noble Baroness has already explained with her usual clarity the concerns that lie behind this group of amendments so I will try not to repeat what she said.

The changes proposed by the Bill to the AML supervisory regime will move the AML elements of supervision from the relevant professional body to the FCA. This means that firms will now have to deal with two separate regulators rather than one: the FCA for AML and the professional body for everything else. It seems inevitable that this will have cost impacts for those firms even if, as the FCA argues, the regulatory rules themselves will not change. That is likely to be especially true for smaller firms.

The impact assessment that accompanies the Bill on this section is, frankly, almost laughably poor, relying almost entirely on the statement that the AML rules themselves will not change. It does not address, in any meaningful way, the question of moving from one supervisor to two. It must, therefore, be sensible to carry out an assessment of what the impact of the changes will be on firms and to ensure that the costs remain proportionate to the benefits that the FCA and the Government argue will accrue, before going ahead with the changes. That is what Amendment 29 is looking to achieve.

The Government are commendably keen to reduce the regulatory burden on businesses, so I look forward to hearing what the Minister has to say on this. Does he agree that there is likely to be an increase in costs to firms from having to deal with two supervisors rather than one? How will he ensure that that is proportionate to any benefits that will arise?

--- Later in debate ---

[Lord Pitt-Watson (Lab)]

I am not aware of an individual calculation that has been done for that. I do not think that there will be a materially greater cost once the move is made. The key issue that we are trying to address here is that, right now, we have 23 regulators of AML, and that job needs to be done in a more co-ordinated and consistent fashion. If I have information on that, I would be delighted to write to the noble Lord on those costs.

Finally, Amendment 30 addresses the FCA’s capacity to undertake effective AML/CTF supervision across all parts of the United Kingdom. Amendment 30 would require the FCA to report on its capacity to supervise firms throughout the UK. The FCA already operates across the United Kingdom through its offices in London, Leeds and Edinburgh and anticipates having a significant presence for the new AML regime outside London. This provides a strong foundation for maintaining regional coverage, preserving local knowledge and ensuring that jurisdiction-specific issues continue to inform supervision and implementation planning. This will also help with ensuring that regional risks and jurisdiction-specific considerations are understood and addressed, while maintaining a consistent approach across the United Kingdom.

I recognise the objectives behind these amendments: careful implementation, appropriate support, maintenance of expertise, proportionate fees and sufficient FCA capacity. The Government understand why these assurances are being sought. However, additional statutory reports, assessments and fixed requirements are not necessary. These matters are being addressed through implementation planning, capability building, stakeholder engagement, consultation and parliamentary scrutiny of the necessary secondary legislation. The Government will continue to work closely with Parliament, industry, existing supervisors and the FCA. Our aim is to deliver a more consistent, effective and co-ordinated AML/CTF supervisory framework, while ensuring that firms receive proportionate supervision and appropriate support. I therefore ask the noble Baroness, Lady Kramer, to withdraw her amendment.

[Baroness Kramer (LD)]

I withdraw the amendment.

Amendment 26 withdrawn.

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.