Stamp Duty Land Tax (Temporary Relief) Bill

Baroness Kramer Excerpts

2nd reading & 3rd reading & Committee negatived
Wednesday 18th January 2023 Lords Chamber

[Baroness Kramer (LD)]

My Lords, we shall obviously not oppose the Bill. It extends stamp duty relief until March 2025 to a larger group of first-time buyers and raises the lower-rate threshold for all buyers, helping a limited number either of better-off people or people living in higher-priced regions.

I should note that the Chartered Institute of Taxation has drawn attention to loopholes and anomalies in the drafting of the Bill. While this House can do nothing to tackle that, I hope the Government will follow up what the institute has said because one of our curses is poorly drafted legislation that then has to come back to this House. However, the Bill will do little to achieve its main purpose as outlined by the Government: stimulating the housing market and increasing residential investment and spending on durable goods.

Mortgage interest rates are the issue, alongside the cost of living, as everyone in this House knows. According to Nationwide, UK first-time buyers’ mortgage costs are the highest since 2008—on average, 39% of full-time salary after tax, despite a 2.5% fall in house prices, and the Bank of England is not expected to be done in raising interest rates. A modest change to SDLT does not compensate for the surges in interest rates driven by the Government’s economic mismanagement.

According to the NAO, 1.4 million households face higher interest payments this year as their fixed-rate mortgages expire. The lucky households with good credit will see their mortgage interest more than double, from 2% to more than 4.5%, and the proposals to help—for example, by offering interest-rate-only deals—provide only temporary relief. The Financial Conduct Authority said last week that 200,000 households had fallen behind on their home loans by mid-2022, while another 570,000 households were

“at risk of payment shortfall”

within the next two years because their mortgage costs would be more than 30% of their income.

The housing market requires more housing supply, not short-term temporary fixes. The Government are nowhere near their 300,000 new homes target and affordable homes are in even shorter supply. Shelter reports housing waiting lists of 1.2 million, with over 120,000 children in temporary accommodation. The construction industry is suffering huge workforce shortages and economic uncertainty is discouraging investors.

Members in the Commons, especially my colleagues the Members for Westmorland and Lonsdale and for North Shropshire, argued for amendments that would have provided far greater protection against the unintended consequences of advantaging second home buyers. In areas such as the Lake District and north Shropshire, second home buyers consistently outbid local people and the drop in full-time occupancy is undermining communities. In some areas, purchases of second homes now amount to 80% of total purchases. In rural England, as my colleagues pointed out, there are 132,000 fewer young home owners than there were in 2010. The stamp duty cut of 2020 fuelled a second home boom and house price distortion.

We need a proper housing strategy: one consistent with our net-zero and sustainability goals, so that it really tackles housing inequality for the long term. Research for the Homelessness Monitor report showed that 300,000 households across Britain could be homeless this year. This, together with the cost of living crisis, is the issue that the Government must resolve, and urgently.

Financial Services and Markets Bill

Baroness Kramer Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I begin the first of the winding-up speeches by saying how much I welcome our three maiden speakers and by remarking on the excellence of their speeches. I look forward to their further contributions.

This a significant Bill. There are aspects of it that I strongly support. I do believe that we should tailor regulation to the UK market, although I am of the community that thinks this refers much more to the efficiency of the way that rules are applied than to the removal of gold-plating. I hope that I do not misspeak for the noble Lord, Lord Mountevans, when I say that the absence of profound change would be rather welcomed by most of those I talk to in the financial services industry. I support protection for access to cash, protection against push payment scams, greater scope for credit unions and beginning attempts to regulate crypto assets. In some of these areas, we on these Benches will have amendments to strengthen those changes.

There are missed opportunities. My noble friend Lord Sharkey is leading for us to introduce an effective duty of care, unlike the box-ticking of the consumer duty, and to adjust the regulatory perimeter to properly include small businesses. My noble friend Lady Tyler will lead for us on an objective of financial inclusion, as well as dealing with issues around access to cash and to services. My noble friends Lady Northover and Lady Sheehan are leading on strengthening the net-zero and biodiversity elements of the regulators’ roles. And I think the House is now prepared to understand that my noble friend Lady Bowles is proposing changes to make the regime far more effective at enforcement, including against fraud; to drive regulatory efficiency; and to significantly improve monitoring of systemic risk and financial stability across the financial sector. I suspect that yet more amendments will be coming from her pen.

All of us on these Benches are concerned with accountability. I was going to list everyone who spoke on this issue, but I would have to read out virtually every name engaged in the debate. From my perspective, powers that had democratic oversight in the EU system will be transferred wholesale to regulators with pretty much no engagement with a meaningful democratic process once this Bill is passed. As many have said, the Treasury Select Committee has taken steps to improve its oversight, but it is far too little and I agree with those who say that it is retrospective, which is not what we need. I look to my noble friend Lady Bowles in particular to craft a series of amendments.

In this Second Reading, I want to take a step back and ask to what extent the changes introduced in this Bill, combined with what the Chancellor calls “the Edinburgh reforms”, which are, of course, largely coming through secondary legislation, reintroduce risks to the sector and to financial stability that existed prior to the 2007 crash and set us up for the next major crisis. The financial crash was driven by the deliberate disguise of risky assets and irresponsible management by major banks. Consumers endured abuse from extensive mis-selling and, astonishingly, Libor was corruptly manipulated for at least a decade.

Today, we have a shadow banking system—I have to thank the noble Baroness, Lady Hayman, and the noble Lord, Lord Butler; I am afraid this glass of water will not turn into wine, as happened for the noble Lord, Lord Balfe—which now almost matches the formal banking system in size and has embedded new levels of risk. I think LDI, is an example and I say to the noble Lord, Lord Altrincham, that it was the leveraging of those instruments using a loophole that caused the problem. Give them an inch and they take 10 miles, and it continues to be true of the sector.

I accept that some change to Solvency II makes sense, but many insurers see its replacement by solvency UK, which will be empowered by this Bill, as the gateway to extensive investment in high-risk illiquid assets, sub-investment grade—I have talked to the industry—without compensating capital requirements. I am very concerned at the weakening of the matching adjustment. I think the Government are mesmerised by the hope that these investments will fund upscaling of new companies, net-zero projects and high-risk infrastructure with somehow no real risk involved. I suspect a lot will go to remuneration and dividends, frankly. I am constantly referred to the Canadian Pension Plan Investment Board as evidence that a fund can safely invest in high-risk illiquid assets without being burned. I quote from the S&P Global Ratings Review of the CPP:

“The rating also reflects the agency’s opinion of a moderately high likelihood that the Canadian government would provide extraordinary support in the event of financial distress.”


I wonder how much the UK taxpayer wishes to stand behind our insurance industry—and in many senses it also involves the pension industry—with a moderately high likelihood of extraordinary support in the event of financial distress? Taxpayers cannot keep bailing out the financial sector.

The financial services sector, especially the City, is also aggressively behind the international competitiveness objective in this Bill. Many want it elevated to a primary objective. This was discussed by the noble Lord, Lord Bridges, and the noble Lord, Lord Remnant, in his maiden speech. Actually, I may do injustice to the noble Lord, Lord Remnant, on that. He may have said that he is happy with it as a secondary objective. They believe that the regulators—again, I talk with the industry extensively—will find that this objective combined with the mutual recognition agreements in trade negotiations, which, of course, do not come to Parliament for approval, will force UK regulation to be lowered to match that of trade partners, and I suggest that that is very dangerous.

I quote from Paul Tucker, former deputy governor of the Bank of England, in evidence in November to the Economic Affairs Committee:

“please do not, as the UK Parliament, give the Prudential Regulation Authority a competitiveness objective. Someone would only do that if they really disliked the City of London and wanted to damage the City of London in the long run ... I can summon the ghosts of Eddie George and George Blunden in assuring you that the City does not always know its best interests over the medium to long run.”

We are of course bleeding financial services business to the EU and other global financial centres. Financial services exports to the EU are down more than 6%, and it will get seriously worse when euro clearing leaves in 2025, but regulatory arbitrage is not the answer. I am with those who are convinced that a strong rulebook is essential to the reputation and success of the financial services industry as well as the necessary bulwark against a repeat crisis which would create years of damage to the UK economy and bring many further years of austerity.

But the Chancellor has gone farther. The Edinburgh reforms set up processes to weaken the ring-fencing of core retail banking from investment and international banking. I urge the House to stop this in its tracks. Like the most reverend Primate, I sat on the Parliamentary Commission on Banking Standards for nearly two years. Few things fuelled irresponsible behaviour more than the banks’ ability to use what they saw as the free and insured money sitting in personal bank accounts to roll on high-risk casino banking. Add to that the lifting of the cap on bankers’ bonuses and we set up actual incentives for another risk and greed-fuelled crisis.

The Edinburgh reforms also set up a process to change the senior managers and certification regime. My dispute with the SMCR is that the FCA has made it into a box-ticking exercise that does not fulfil its primary purpose to act severely against individual senior managers who fail in their duties, either deliberately or through mismanagement and incompetence. My noble friend Lord Sharkey discussed this. Instead of returning that regime to its original purpose, the industry is very confident that the Edinburgh reforms will remove individual responsibility completely. I suggest that Members of the House visit the evidence given to the commission. Virtually every senior manager, including the CEOs, pleaded a mix of incompetence and collective responsibility to explain away the failures in their institution and why they could not be held to account.

This is a Bill we have to get right. Risk applies asymmetrically in the financial services industry. In the 2007-08 crash, almost no senior manager or executive was hurt and, indeed, almost every one of them walked away with years of bonuses based on what were really false profits. The taxpayer and ordinary people, coping with the austerity that followed—never mind the funds that had to go into the banking system—bore the real cost. On the Parliamentary Commission on Banking Standards, we were very afraid that after a few years the lessons of the crash and the abuse would be forgotten and the new safeguards watered down. This is an industry that knows how to promote itself and speaks with a great sense of invincibility. As we work our way through the Bill, we should keep at the front of our minds the concern that those safeguards, which were so necessary, will be pushed to be watered down.

Russia: UK Companies

Baroness Kramer Excerpts

Thursday 8th December 2022 Lords Chamber

[Baroness Penn (Con)]

I hope the noble Lord will understand if I do not comment on the specific case in the Chamber, but if he writes to me, I will look at Hansard and get back to him in writing on that point.

[Baroness Kramer (LD)]

My Lords, do the Government agree that private citizens in the UK should follow the example that is being urged on British businesses and sell any shares they have in businesses that still operate in Russia?

[Baroness Penn (Con)]

My Lords, that is an individual decision for people to take. Where individuals have found themselves invested in companies that are subject to sanctions, the Office of Financial Sanctions Implementation has issued some general licences to facilitate the divestment of those shares where individuals need to do so.

--- Later in debate ---

[Baroness Penn (Con)]

The UK operates its sanctions regime and will continue to have conversations with all Crown dependencies, overseas territories and others.

[Baroness Kramer (LD)]

My Lords, the Minister will be well aware that one of the ways in which members of the Russian oligarchy became resident in Britain was through the use of the “golden visa” mechanism. The Government have undertaken a review of that but, as I understand it, Parliament has not seen it. Could she tell us when we can expect that report to be published?

[Baroness Penn (Con)]

I do not have that information with me, but I can take it back to the department and write to all noble Lords.

Autumn Statement 2022

Baroness Kramer Excerpts

Tuesday 29th November 2022 Lords Chamber

[Baroness Kramer (LD)]

My Lords, if I had not been cheerful before hearing from the noble Lord, Lord Desai, obviously I am in an excellent mood now. It is a dark prospect indeed. I offset it by welcoming the noble Baroness, Lady Lea of Lymm. I look forward to hearing her controversial speeches and, I suspect, some future jousting with the noble Lord, Lord Skidelsky, on economic models.

The noble Lord, Lord Lamont, led the charge, as it were, with support for the Government. He got quite a bit of support from the noble Lord, Lord Leigh, and warm words of support from the noble Lords, Lord Tugendhat, Lord Horam and Lord Livingston. I can accept that the pandemic and Putin’s war in Ukraine have hit our economy hard, but the damage that has driven the harshest Budget in memory—the Autumn Statement was really a Budget—has been the systemic mistakes of a Conservative Government I see as largely blinded by ideology. This was an Autumn Statement dominated by the need to calm the financial markets, and for that we are now all paying a high price.

The noble Lord, Lord Eatwell, may agree with those last few words, but he might have made a little slip in his speech. The previous recession was in 2008, when we had six quarters of negative growth, the most significant of which was in the first quarter of 2009, under a Labour Government. During the coalition years there was no recession.

Speakers today have raised many concerns that I share. I pay tribute to the extraordinary speeches of both the right reverend Prelate the Bishop of Gloucester and the noble Lord, Lord Rooker, in really exposing the pain that so many vulnerable people are feeling. This is despite government help with inflation-rated increases in benefits and the state pension. They face a dire winter, and over time many will suffer additionally because of the delays in the migration of ESA to universal credit and in the PIP rollout.

I am really shocked to hear from the noble Lord, Lord Rogan, that in Northern Ireland even the energy money has not been paid out. My noble friend Lord Shipley spoke of the absence of housing anywhere in the Autumn Statement when it is so utterly critical to so many people’s well-being. The noble Lord, Lord Tugendhat, added very much to that discussion of housing.

The squeezed middle, thanks to fiscal drag, which the noble Lord, Lord Razzall, talked about, face tax increases of over £2,000, increases in council tax—we have heard that the impact of council tax is so unevenly spread across the country—higher mortgages or rent and £500 more in energy bills. I have not even started to list the increased costs of food, shoes for the kids and the rest of daily living. Wages in the private sector, rising at an average of 6.2%, can take no more than the edge off the pain, and public sector wages, rising at only 2.2% on average, are leaving many public sector workers not only near despair but ready to quit the sector. The noble Lord, Lord Davies of Brixton, very much raised this issue.

Many small businesses, the backbone of our economy, are struggling with costs in every direction. They need to know urgently what happens to energy support after April simply to be able to plan and price their products. The Government provided small businesses with a little relief from the uprating effect of business rates, but freezing the VAT threshold, keeping the lower NICs threshold for employees and cutting the R&D relief scheme will undo much of the benefit.

The loss of the R&D scheme, as we heard from so many today—the noble Lords, Lord Fox, Lord Bilimoria and Lord Londesborough, and the noble Baroness, Lady Blackwood—is having such an impact on small businesses. In the industry conversation I had last week, they said that nearly a quarter of small firms are considering either downsizing, restructuring or closing rather than investing in innovation, and that is driven by that change.

The economic forecasts in the Green Book require not just a soaring tax take but a virtual slash and burn of unprotected public services post 2025. The noble Lord, Lord Horam, talked about support for public sector investors; that is not in this Autumn Statement. The noble Lords, Lord Fox, Lord Hain and Lord Davies of Brixton, again focused on the impact on public services post the next election. All of us are in favour of efficiency in public services but we know that efficiency requires substantial investment in people, training, systems, physical plant and equipment. It is usually cost up front and savings later. Indeed, that same pattern of slash and burn after 2025 is repeated for infrastructure; I think the noble Lord, Lord Howarth, caught on to that issue.

When the Government used the phrase “a plan for growth”, most of us thought, “If only.” It is extraordinary to me that, as far as I could see, the detriment of the absence of growth drew together the remarks of the noble Baroness, Lady Noakes, and the noble Lord, Lord Bridges, with those of the noble Lords, Lord Skidelsky, Lord Sikka, Lord Bilimoria and Lord Londesborough—an extraordinary gathering who at least agree on what the detriment is. They might disagree on the causes and solutions but they are in the same place on the underlying problem.

Even the CBI, despite its usual caution, has said that there is no meaningful plan for growth. My party, the Liberal Democrats, focuses on growth and, importantly, sustainable growth. I say that to the noble Baroness, Lady Jones, as I know that is her concern. We have done it in the past by working with businesses. Vince Cable’s industrial strategy, the creation of catapults and a huge focus on innovation made such a marked difference, as did Ed Davey’s use of contracts for difference to unleash private investment in renewable energy.

This matters because business investment is now the lowest in living memory. Changing Solvency II—everyone says, “We will do it with regulation”—to allow for more pension money to go into infrastructure and upscaling may help marginally but it does not fix the problem. My goodness, do we need to be careful that our pension funds do not embark on excessive risk as a result of new freedoms to invest in illiquid and risky assets. I note today that the City Minister has just indicated that he will weaken ring-fencing on the retail banks.

Net-zero business offers us a significant opportunity for growth—we heard so much on this from the noble Baroness, Lady Hayman—but we have to be globally competitive and that means a far more effective and targeted collaboration between government and the private sector. It even means an industrial strategy. I refer to the noble Lord, Lord Bilimoria, who raised that issue; it is so absent from any government proposal.

We also have to fix the collapse in our trade. The OBR explains that our trading intensity has declined by 15%. Much-touted new trade deals barely shift the dial; to paraphrase George Eustice, the much-extolled Australian trade deal is a failure for British agriculture. The financial services industry in the UK has lost 6.6% of its services exports to the EU. The Lord Mayor of London said this week that

“businesses, intellectual property and people are leaving our shores.”

Worse is to come when euro clearing moves in 2025. I also understand this week from talking to manufacturing trade organisations that manufacturing has lost 30% of its volume of physical exports to Europe and UK firms have been essentially removed from European supply chains.

The Federation of Small Businesses tells us that most small businesses have now dropped out of exporting. At the very least, the Government should be using the trade and co-operation agreement with the EU to mitigate what they can of this damage, and they need to work out very swiftly—I refer to the noble Lords, Lord Bilimoria and Lord Razzall—how to get back to obstacle-free access to Europe.

Businesses large and small are exercised by workforce shortages. I am on the Economic Affairs Committee, which will come out with a report on this issue, but I wanted to pick up on a point made by the noble Baroness, Lady Blackwood: it is people who are already retired who are falling sick; they are not falling sick and then retiring. That is a real conundrum for us and a very dangerous pattern. Getting inactive people over 50 back into the workforce is not going to happen. I know the committee has not come to its conclusions, so we will see where it goes, but the noble Lord, Lord Londesborough, also pointed to the population demographics that are now working so strongly against us.

The Government control our immigration system, so why do they not use it to support our economy and tackle the labour shortage? The four-year visa system for skilled workers is cited constantly by Ministers, but many businesses cannot cope with the churn of workers who come for just four years; they want workers who stay long-term. We need a far more flexible system before we lose horticulture, undermine construction and shrink hospitality, just to name three sectors facing crisis.

The OECD forecasts that only Russia among the major economies will contract more than the UK next year. As so many have said, we are the only G7 country whose output has not recovered to pre-pandemic levels. I echo the noble Lord, Lord Desai: the Government have constantly neglected the fundamentals of a modern economy. They have undermined our resilience and they offer us a plan for pain, not for growth.

Bank of England: Libor System

Baroness Kramer Excerpts

Thursday 17th November 2022 Grand Committee

[Baroness Kramer (LD)]

My Lords, I am very glad that the noble Lord’s health is supporting him through this debate. He is absolutely right to draw our attention to the importance of a liquid and well-functioning interbank lending market.

My understanding—and I will leave it to the Minister to make sure that we are properly informed and updated—is that Libor is no longer a valid benchmark, not only in the UK but now in the United States; that even the period in which synthetic Libor existed has now come to a close; and that the translation of outstanding contracts which had embedded in them the Libor benchmark to the new benchmarks has been overwhelmingly successful. I think we were all afraid that there might be some orphans left out there, where you could not contact one party or the other and therefore it was very difficult to make the legal changes necessary for the contracts to remain in place but attached to new benchmarks. My understanding is that that process has gone very well; I am sure the Minister will update us. Of course, in the UK now we have all migrated to the sterling overnight index average, known as SONIA.

That has been a successful process, but I want to pick up another point to which the noble Lord, Lord James, was directing us. I am not going to describe the mechanisms for Libor because everybody in this Room understands how that process worked. There was a panel of banks which submitted every day to the British Bankers’ Association their assessment of what it would cost them to borrow from other banks, in five major currencies and over lending periods of different durations. What concerned me, and I think many of us, was that that system, which relied on trust and was not transparent, was corrupted. For at least 10 years, the major players on those panels adapted their submissions to the British Bankers’ Association to suit their own target profitability, the bonuses of the traders who were informing the submissions to the benchmark and, frankly, the bonuses of senior management.

Not only was this extensive practice but it was completely open. When I was on the Parliamentary Commission on Banking Standards, we heard from quite a number of people about how, on the trading floors, a trader would shout quite openly, “I need a Libor submission set at this level because it will let me close this deal” or “so I get across my bonus benchmark”, or, “We need to do it as a favour to so-and-so at bank X”, or whatever else.

It was standard that Libor was a manipulated number and not a genuine estimate of what it would cost one bank to borrow from another, to the extent that in 2007 and 2008, when we had the financial crisis, the Bank of England, not for any purposes of self-reward but to try to stabilise the economy, contacted the chief executives of the major panel players as they made their Libor submissions and asked them to lowball the number to try to minimise panic in the market. This corruption and manipulation of the process was exposed by American journalists, who passed information to the US supervisors, who turned around and put pressure on the regulators in the UK, which led finally to an FCA report and essentially to the public acknowledgement that this system had completely failed to operate with integrity, probably for a period of at least 10 years.

I have a question for the Minister. We never bottomed out how great the impact of that manipulation was. To give noble Lords an idea of why I am concerned about that number, I have done a back-of-an-envelope calculation. According to figures provided to us by the Library, outstanding loans where the interest rate was based on Libor on any one day approximated $400 trillion. That is the daily outstanding block of loans for which Libor established the interest rate. That would have been a combination of variable-rate loans, which would have been Libor plus a spread, depending on the risk of the borrower—Libor plus 10 basis points, or perhaps 125 basis points for a riskier company—but also fixed-rate loans, because they were a Libor loan with a derivative with an interest rate swap sitting on top. Even fixed-rate loans attached themselves to the number established as the Libor benchmark.

If every day for a year—banks work in 360-day years—Libor manipulation increased the cost of borrowing by one basis point, the collective cost to borrowers would have been an overpricing of $40 billion on any one day. If that is extrapolated to every day for 10 years, we are talking about $144 trillion. This is without question the largest financial scandal ever. If one looks at those funds as being stolen, because the loans were deliberately improperly priced, we are talking about a scandal well in excess of all financial corruption of all kinds over the same period. We have never bottomed out that number. I wonder whether the Minister has a number that would give us an idea of what the theft from borrowers, which is what it was, amounted to.

The noble Lord, Lord James, is right that when the various regulators and enforcement authorities looked to hold someone accountable, they decided that our laws on fraud did not encompass misinforming or deliberately manipulating a benchmark. Therefore, almost nobody ended up paying any price for having participated in these schemes, nor did they lose the bonuses they had gained on the basis of the artificial profits that resulted from using them. As the noble Lord said, just one or two people ended up as scapegoats, usually for a fairly narrowly based conviction.

The damage done to London was extraordinary. London always relied on its reputation for integrity; “My word is my bond” was meant to be an underlying principle. It underpinned the whole notion of light-touch regulation and the beginning, in a sense, of the loss of our standing in financial services is very much linked to the whole Libor-era scandal. I am glad that Libor is behind us but incredibly sad that it happened this way. I understand that there have also been market changes that make things such as Libor less relevant, because there really was not enough depth in the interbank market to make the system—even if you operated it fairly and truthfully—particularly efficient. The move in our case to SONIA makes a great sense, for example, so I am glad that period is behind us.

However, as we look at legislation coming through Parliament that moves to much greater financial regulation, it is now important that we understand why Libor went so wrong, why regulators did not act and how weakened regulation could encourage a repeat of similar behaviour. When we get to the Financial Services and Markets Bill, I will particularly draw the Minister’s attention to the changes in the rules that are being introduced for black pools, which are basically exactly like the Libor panel clubs and in which people exchange information and carry out transactions. At present, those black pools are transparent because pre-trade transparency is a requirement under the European directives. That is about to be removed in the Financial Services and Markets Bill, which returns us to a construct like a Libor panel—one to be manipulated by major institutions.

I am extremely concerned that the lesson of transparency which the whole Libor scandal underpinned is now, in effect, being discarded as we move towards deregulation. Part of that is because we have never bottomed out the size of the damage done to borrowers, and it is about time that we had that number.

UK Green Taxonomy

Baroness Kramer Excerpts

Thursday 3rd November 2022 Lords Chamber

[Baroness Penn (Con)]

I agree that the green taxonomy is an essential part of being a leader in green finance. The UK has led the way: we were the first country to lay regulations to make reporting mandatory under the TCFD framework and firms listed on the London Stock Exchange have the highest sustainability disclosure rate of any global financial centre. But, if we want to continue that leadership, we need to continue to make progress. We have laid out a number of future steps under our road map. I accept that some have been delayed, and it is for us to continue to work to make better progress, to ensure that we continue to lead in this area.

[Baroness Kramer (LD)]

Last night in this House, the Lord Mayor of London underscored that retaining our leadership position on green finance is essential to retaining a leading role in financial services far more broadly. Understanding the pressures generated by that, could the Minister please tell us when we will get the green finance strategy? Given all the government changes, could she publicly recommit to the earlier commitments to become the first net zero-aligned financial centre, as described by the noble Baroness, Lady Hayman?

[Baroness Penn (Con)]

My Lords, that commitment has not changed. On the importance of retaining our leadership position on green finance for London as a financial centre, I completely agree with the noble Baroness: that is why we have been so ambitious in this area. We have taken a number of steps to ensure that we lead the way, and we work with our international partners to bring them along with us. When we chaired the G7 last year, we got commitments on sustainability disclosure requirements, for example, from all the G7 Finance Ministers. So we are not just leading the way; we are also trying to bring other countries with us.

Financial Markets: Stability

Baroness Kramer Excerpts

Thursday 3rd November 2022 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I join in welcoming the Minister to her role and thank all noble Lords who have spoken. It has been a quite exceptional debate, both for its quality and new ideas and the wide range of contributions. But while we have been standing here, the Bank of England has raised interest rates by 0.75 of a point to 3%. That is the biggest hike since 1989 and it is forecast that the UK is facing a “very challenging” two-year recession, which would be the longest on record.

I say to the Minster, since she is here, that this calls for the Chancellor to come to Parliament and to speak more generally to the nation. So many people will now be desperately worried about what will happen to them. Several speakers today—I am thinking of the noble Lords, Lord Young, Lord Best and Lord Campbell-Savours—focused on housing, both on mortgage costs and the immediate impact on the rental market. That will feed through to people long before we get to the Autumn Statement on 17 November. Will the Minister ask the Chancellor to reassure the nation before then, rather than leave people twisting, quite frankly, with overwhelming concerns? All three of those speakers talked about longer-term reforms. Those things matter, both for housebuilding and for the rental sector, but we have an immediate crisis, and that is what I ask the Minister to focus on and deal with immediately.

After the events of the past weeks, I hope we no longer have to deal with discussions that question the need for financial stability. It is a prerequisite for a functional economy, and fiscal responsibility clearly underpins that stability. I have been listening for years to people who have claimed that we can print money, borrow, cut taxes and spend, with almost no limit. I pick up the phrase of the noble Lord, Lord Kestenbaum, who said that one day the music will stop. We have to take proper responsibility.

We also need to recognise that we are not the US economy with the almighty dollar and a domestic market of 350 million people. We are not in the EU with a domestic market of 450 million and 27 countries at our back. We are a medium-sized European economy, adrift since Brexit from any significant trading bloc and with a currency that is no longer a globally used trading vehicle. We have made our economy significantly more vulnerable. I pick up the point made by the noble Lord, Lord Desai—that the UK is an inherently fragile economy and we have to recognise that in the decisions and actions we take.

I also hope—I really disagree with the noble Lord, Lord Bilimoria, here—that we have heard the last from those who claimed that very low corporate taxes, reducing taxes on the richest, slashing regulation and cutting public services are the answer that will hand us growth.

[Lord Bilimoria (CB)]

I did not say cutting public services.

[Baroness Kramer (LD)]

I misunderstood; I thought the noble Lord was advocating cuts in public services to balance the books.

[Lord Bilimoria (CB)]

I said efficiencies.

[Baroness Kramer (LD)]

I would like to deal with that issue of efficiencies and cuts. After so many years of cutting out the fat and getting to the bone and flesh, the word efficiency is used extremely casually. Very often, it is expensive to make the change that underpins efficiency, so I will be looking to see if the noble Lord, Lord Bilimoria, speaks out against cuts in the real financing of public services.

We have been through this low-tax strategy and, frankly, it is an ideology that has been proven to be wrong. It may have suited or looked sensible when first implemented, but we have seen consistently over a long period that it does not deliver growth in the UK economy. I shall be fascinated to hear speeches from the Conservative Benches after the Autumn Statement. I am sure there will be lots of support for whatever the new orthodoxy is, and I look forward to seeing how Members opposite align that with the enthusiastic speeches in favour of the mini-Budget.

Businesses are now trying very hard to get the Government to hold back from their other false growth claim, which is slashing regulation. I noted that even the noble Lord, Lord Wolfson, said in this House that business is not looking to cut or change existing regulation. Last week I was at Mansion House to hear the Lord Mayor of London trying to impress on the Government and regulators that the City and financial services depend on the accreditation and confidence that regulation provides. If ever we needed to understand that regulation, having standards and getting it right are important, it is in light of the crisis triggered by LDI.

Numerous speakers picked up that point, including my noble friends Lady Bowles and Lord Sharkey, the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Sikka, as well as the noble Lord, Lord Davies, who looked specifically at the need to reform the way we think about and structure pensions. These are not deregulatory actions; they will often incur different, but firm, regulation. Regulation is a mechanism for enforcing standards, and the casual notice that a deregulation agenda somehow leads to growth is something most of industry is pleading with the Government not to adopt.

In the end, it is ordinary people and small businesses that pay the price of decisions that fly in the face of the real world and the experience we have been through. The noble Lord, Lord Kestenbaum, made the point that market instability hits many ordinary people. I will not repeat the many conversations that have taken place today on the impact of the rising cost of living, mortgages and rents; that has been very well laid out. The noble Lord, Lord Liddle, made the point that we cannot ignore poverty, the right reverend Prelate the Bishop of St Albans talked about the problems of in-work poverty, and all the conversations about rental reform very much feed into these concerns. I have simply no idea how most families manage when the cost of the very basics for living are up by 17%.

The Government are going to have to confront the impact of declining real wages. You cannot clap nurses one week and push them to food banks the next. I disagree again with the noble Lord, Lord Bilimoria, that uncapping bonuses is just a timing issue. You cannot say that one group of people cannot work effectively unless they have uncapped bonuses, then look at nurses and say that they can work effectively even with declining real wages. That bonus system, together with light-touch regulation, played a huge role in driving the 2007-08 crash that still scars us today. There is an old saying: fool me once, shame on you; fool me twice, shame on me. We have to be very careful about how we handle the financial services industry, for which I have great respect but where the wash of money tempts people to find a workaround in so many different ways. Indeed, LDI is a very good example of the industry trying to find a workaround.

We wait to see the Autumn Statement on 17 November. I think everyone here is very well aware that Shell announced last week not just quarterly global profits of $9.5 billion, over twice those for the same period last year, but that it also paid no windfall taxes. BP had almost the same earnings and paid a tiny bit of windfall tax. The House might be interested to know that the oil and gas sector has in just this quarter paid out $29 billion to shareholders. This, if anything, demonstrates that this tax has been very badly structured. I understand the Chancellor wanted to put in many thoughtful loopholes, but they desperately need to be removed and this must become a meaningful tax. To pick up on points made largely by the noble Lord, Lord Liddle, one of the things we need to think through is a shift from taxing earned income so heavily to looking at unearned income.

I agree with the noble Lord, Lord Bilimoria, that small businesses are under terrible pressure, and that needs to lead to reform of business rates and various schemes that will let them manage the debt they are carrying, many for the first time. Of course, I also join with others in calling for the uprating of benefits in line with inflation and protection for the triple lock.

There are many things that I do not forgive this Government for, because for years they have ignored the fundamentals of growth in the economy. That may be a point for a different debate—I would love the opportunity to develop it. The Chancellor faces hard choices. The Conservative Party has over the last decade brought those choices on itself, but the unfortunate part is that it has also brought them on the country.

Defined Benefit Pension Funds

Baroness Kramer Excerpts

Tuesday 1st November 2022 Lords Chamber

[Baroness Penn (Con)]

I thank the noble Lord, and all noble Lords for their welcome back, but I have to disagree with the noble Lord’s interpretation of the provisions in the forthcoming financial services Bill. Financial stability will remain at the core of our system, but I do not think it is wrong to also recognise the importance of competitiveness in that system.

[Baroness Kramer (LD)]

My Lords, the Minister, whom I welcome, said that the Government had handed off to a committee of the House of Commons the responsibility for looking at whether reform of the Pensions Regulator was required. Surely, the Government should be looking at whether reform is required because, very clearly, we have a regulator that neither recognised the embedded risk of strategies that it was allowing pension funds to pursue, nor understood the broader implications. This suggests that change is urgent.

[Baroness Penn (Con)]

If that was the impression the noble Baroness had of my Answer, it was not the one I meant to leave with noble Lords. The regulators, including the Financial Policy Committee, the Pensions Regulator and others, will want to look at and reflect on the lessons that can be learned from the events of recent weeks. In pointing to the Commons committee’s work, I merely sought to address the noble Lord’s point about a different or more independent set of eyes also looking at this.

Premium Bonds

Baroness Kramer Excerpts

Thursday 23rd March 2017 Lords Chamber

[Baroness Neville-Rolfe]

I think we can agree on the excitement, but there is also a more serious point underlying this. When you are choosing how to save, you need to look at a number of options, which we have debated here in this House, including having a pension through the auto-enrolment system and taking advantage of other savings products such as ISAs and so on. I see premium bonds as a very important part of the savings market. And I am so glad that the noble Lord likes to have a flutter.

[Baroness Kramer (LD)]

My Lords, I exclude my noble friend Lord Lee from this but many people who purchase premium bonds also have an adverse amount of credit card debt or personal loans outstanding. They are attracted rather to the prize element of the premium bond. Would it be sensible to have on the website some advice to encourage people to think first about paying down their debts before they go for a low-interest savings product?

[Baroness Neville-Rolfe]

As I said, it is important that people have choice and look at a sensible way of saving. Having material on different websites is important but, in the round, we try to make sure that government advice gives people a sound sense of direction on savings, including what is good value for money. Again, I emphasise the point about pensions: investing in a pension is a very good form of saving.

Budget: Saving for Retirement

Baroness Kramer Excerpts

Thursday 16th March 2017 Lords Chamber

[Baroness Neville-Rolfe]

As we have discussed before, living standards have been rising. Yesterday, it was announced that we had a record number in employment and a 40-year low in unemployment. Getting people into work makes a huge difference. We made a series of proposals in relation to both pensions—this step change with auto-enrolment—and savings products that help people to save. The most important thing is to have a plan to restore our finances—we inherited a considerable mess—for everyone in this country, and for our children and our children’s children.

[Baroness Kramer (LD)]

My Lords, most people, in their busy lives, just want a savings scheme that is trustworthy, has a reasonable rate of return and does not eat a large amount of their savings through fees. Instead, the Government—and previous Governments—constantly come back with competition, incredibly complex rival products and switching. Will the Government finally identify someone—I would almost say anyone—whether a government Minister or regulator, to make sure that a workable product that meets most people’s needs is actually delivered, rather than this endless tinkering, which only a sophisticated financial adviser can possibly unravel?

[Baroness Neville-Rolfe]

I certainly do not take such a gloomy view of the products. The NS&I investment bond, which we started on, gives a rate of 2.2% for three years. That is significantly higher than the market average of 1.38%. Savers know that they can trust products offered by NS&I. Obviously, rates of return on savings products have come down and that has to be reflected, but the £7 billion of additional government financing will be at a cost of £295 million compared to borrowing through gilts.