Alternative Investment Fund Designation Bill [HL]

Baroness Kramer Excerpts

2nd reading
Friday 1st March 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, as the first of the winding-up speakers, I will just say that in this area I lack the expertise of everyone who has spoken up to now, so I will not attempt to summarise the contents of the Bill or discuss the detailed nature of the industry. However, I hope the Government understand that although the Bill may have many highly technical elements, in fact a much more fundamental issue is being addressed. Frankly, it is about the survival of a crucial and key part of our financial sector that makes up both the life of the City of London and of Edinburgh, and of our financial services industry more generally.

I do not think I have ever before participated in a debate where every speaker from every side of the House—for example, the noble Lord, Lord Davies of Brixton, on the Labour Benches, and there is another Labour Member to follow—is of the same view, be it the noble Lord, Lord Hannan, the Cross-Benchers, the Liberal Democrats or the Conservatives. I hope that the Minister will understand the message embedded in that. We are looking at an issue of real significance and urgency, and I stress the word “urgency”.

The one group resistant to tackling this issue in a timely way, minimising the damage already done and preventing further damage, appears to be the regulator, the Financial Conduct Authority. The Government are in a position, through Treasury, to invite the FCA to take a look again at the regulation it has in place and encourage it—I know they cannot instruct it—to act much more rapidly to stem the issues raised today and the sense of anger across this House, because the regulator seems quite complacent in its response to a deep and underlying problem.

It is clear from today’s speeches that we are dealing with the most extraordinary misapplication of legislation and gold-plating, and I doubt whether a single person in either Chamber would defend those two fundamental approaches. I join others in giving special thanks to the noble Baroness, Lady Altmann, and my noble friend Lady Bowles. It is extraordinary that, although we have an expert regulator, we have had to rely on the chance factor of expertise in the House of Lords in order to perhaps be able to force action. I hope the Government will look at the expertise and resources embedded in the FCA, because I cannot believe that if it truly understood this issue, it would be taking the complacent approach it seems to be taking.

There are obviously beneficiaries from this approach, but none of them are British. The United States will be a major beneficiary of the outflow of business, as will, ironically, Luxembourg, Paris and Dublin. As I say, it is very much a gold-plating issue, as many of us here today have discussed.

I wanted to pick up on an issue the noble Lord, Lord Reay, raised: the FCA’s focus on diversity in financial services. I hope my speech will not be seen as an endorsement of that. It is important that our whole industry and every sector understand the issues of diversity, but in no way should that be a distraction from dealing with a fundamental issue concerning the listed investment companies.

In conclusion, these Benches are entirely behind the noble Baroness, Lady Altmann, my noble friend Lady Bowles and the others who drafted and shaped this legislation. I recommend that the Government hand them the pen, as they really have the ability to sort this problem out. However, if they cannot do that, will they turn directly to the FCA and again invite it to take the necessary steps? I think there are powers they can use to issue that invitation in fairly strong language and with strong impact, in order to get a resolution—and rapidly.

--- Later in debate ---

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, I, too, congratulate my noble friend Lady Altmann both on securing this important Second Reading debate on her Bill and on her excellent contribution setting out the challenges that she hopes to fix. I am grateful to her for her engagement on this issue; I hope that it will continue as we continue our work in this area. I am also extremely grateful for all the contributions made in your Lordships’ House today. I note that there was violent agreement that something must be done; I hope to set out the Government’s plans to do this, but I will ensure that my colleague, the Economic Secretary to the Treasury, has a look at Hansard because it is important that he understands the breadth of feeling and some of the important issues that were raised.

As noble Lords have heard, this Bill would amend the Alternative Investment Fund Managers Regulations to remove listed investment companies, also known as investment trusts, from scope. It would also make amendments to other assimilated law, formerly retained EU law, in order to make changes to cost disclosure requirements for listed investment companies.

The Government share my noble friend Lady Altmann’s drive to champion the investment company sector and ensure that the UK’s capital markets continue both to thrive and to drive forward our economy. It is true that, over the past two years, there have been relatively few initial public offerings globally; the UK has not been immune to those trends. This market turbulence has also impacted the investment company sector, in which the UK is undoubtedly a world leader. However, London continues to be Europe’s leading hub for investment; it raised more capital in 2023 than Frankfurt and Amsterdam combined.

The Government are committed to building on the UK’s strong foundations in this area by taking forward, through the smarter regulatory framework, ambitious reforms to streamline the regulatory rulebook, boost investment into UK markets and improve the competitiveness of the UK as a listing destination.

Investment companies are a wonderful British—more specifically, Scottish, according to the noble Lord, Lord Macpherson; he is right—invention dating back more than 150 years. The way in which they have become such a backbone of our investment economy is quite incredible. I assure all noble Lords that the Government are committed to supporting this very important sector.

However, I must express some reservations about my noble friend Lady Altmann’s Bill, although we recognise the rationale behind its being brought forward. I will first address the amendments that would exclude listed investment companies from the Alternative Investment Fund Managers Regulations, or AIFMR. Amending the scope of these regulations could have a significant impact. It would not be appropriate for the Government to change the regulatory perimeter using this Private Member’s Bill in isolation, without proper and appropriate consultation and further consideration.

As part of building a smarter regulatory framework for financial services, the Government are already carefully considering how to make AIFMR more streamlined and more tailored to UK markets. The Government recognise the concerns about regulatory inefficiencies for listed investment companies under AIFMR. However, we are also conscious that some investment companies value being regulated financial services providers; at this point, I note the warnings put forward by my noble friend Lord Hannan.

Given the spectrum of views on this issue, it is vital that the Government provide an opportunity for all impacted stakeholders to comment. It is for this reason—this is the first time that it will be publicly known, I think—that the Government will consult in the next quarter on how the UK should approach AIFMR. This will, I believe, fulfil my noble friend Lady McIntosh’s requirement for some consultation. Obviously, we want to do this as speedily as possible, but we need to get information from the industry, the investment companies sector and beyond about how to take it forward. Once we have that, we should be able to move fairly rapidly.

We know that only through careful consultation and consideration can we provide listed investment companies with the longer-term certainty of an appropriate regulatory framework. I agree with the noble Lord, Lord Macpherson: sometimes, it is really important to get these things right. Although some people often criticise the Treasury for taking too long and being—dare I say this as a Treasury Minister? I am not sure—a bit staid and sober, we have to get things right.

[Baroness Kramer (LD)]

I have a question for the Minister. With much of this gold-plating, I am not sure that the regulator consulted on implementing it. Why would it then have to consult on removing it?

[Baroness Vere of Norbiton (Con)]

I will come on to gold-plating. I am not entirely sure that everybody is in alignment on whether or not this regulation is implemented, but consultation is just good government. I do not see us making substantial changes to the regulatory scope on the basis of having not done it before we are not going to do it now. We need to get it right, but we absolutely support the investment company sector and want to get on with this. That is why I am so grateful to my noble friend Lady Altmann for bringing this forward, allowing us to have a conversation in the Treasury and beyond.

I turn to the second element: cost disclosures. My noble friend Lady Altmann has rightly identified that EU-derived legislation is not currently fit for purpose, as many other noble Lords, the Government and the Financial Conduct Authority would agree. The packaged retail and insurance-based investment products regulations, commonly and more easily known as PRIIPs, were originally meant to provide more transparent and standardised disclosure for retail investors across the European Union. Noble Lords are well aware that there are many problems with the EU PRIIPs regulation. It is prescriptive, misleading to retail investors and prioritises comparability over a wide range of financial products at the expense of consumer understanding.

That is why, as part of the Edinburgh reforms, the Chancellor announced that, as a priority, the Government would reform PRIIPs. We have already made significant progress on delivering this commitment. Most recently, at the Autumn Statement last year, the Government published a draft statutory instrument to replace PRIIPs with a new framework tailored to UK markets.

We understand industry’s concerns regarding broader legislation that prescribes firms to calculate their costs as they are required to do so now, and so the Government and the regulator have not stopped there. At the same Autumn Statement, the Government announced that they would bring forward the repeal of relevant cost disclosure provisions in the markets in financial instruments directive, or MiFID, alongside the replacement of PRIIPs.

Many noble Lords have mentioned that the FCA has published the forbearance statement, and some feel that it has not gone far enough. I will ensure that the FCA is made aware of the debates that noble Lords have had today. There has been significant criticism, which it will no doubt be interested in, and some suggestions of how it might be able to go forward.

I hope that this brief summary has provided sufficient reassurance to my noble friend Lady Altmann, and to all noble Lords, that the Government are treating this as a priority. We have a comprehensive plan to alleviate the harms faced by the investment company sector, but are committed to making sure that we get it right for the long term, to ensure that 150 years already gone by becomes another 150 years in the future.

I have mentioned consultation, so I will move on from that to cover some points raised in the debate on timelines. I accept that, for many noble Lords, and indeed Ministers, it is never fast enough. This was mentioned by my noble friend Lord Hannan and the noble Lord, Lord Macpherson. We are delivering a very ambitious programme to build the smarter regulatory framework for financial services. At Mansion House, the Government removed almost 100 pieces of unnecessary EU legislation from the statute book, and now we are looking at wider reforms—those mentioned in the debate today and others, including Solvency II—that will deliver the biggest potential benefits.

I note that my noble friend Lord Hannan would have liked us to go through things in a different way. The Treasury is very much focused on looking at where we can have the biggest and quickest potential benefits to economic growth. We are conducting a phased approach to bringing in this change of regulation because we must also ensure that the system and different financial sectors can cope with this change in legislation.

I note the invitation from the noble Lord, Lord Macpherson, to make commitments from the Dispatch Box on certain matters. I am not able to do so just yet—maybe soon.

There is debate around gold-plating. I hope that that will all be laid to rest as we are able to reform this and ensure that we have the right framework going forward.

My noble friend Lady Altmann mentioned investment companies being removed from platforms. We note and recognise the frustration that some investment companies feel at having been removed from investment platforms. I reassure her that, although this is a commercial decision, the Government and the FCA are well aware of this issue and are carefully considering what options are available. Ditto in the use of the EMT, the MiFID template. This is a voluntary template, but we understand that it may not be providing the best information to retail investors at the current time.

Many noble Lords have noted the competitiveness of the UK capital markets. That is what underpins the smarter regulatory framework. Despite recent challenges, the UK has many vibrant and dynamic capital markets, and they remain some of the deepest and strongest globally. However, we cannot rest on any laurels; we have to keep moving forward in this area. That is why the Government are delivering on my noble friend Lord Hill’s listings review, the wholesale markets review, and the Chancellor’s Edinburgh and Mansion House reforms.

The noble Lord, Lord Davies, mentioned the FCA’s activities and scrutiny of the regulator’s role. My noble friend Lord Reay mentioned the FCA’s D&I work, as did the noble Baroness, Lady Kramer. Parliament does have scrutiny over the FCA and many other regulators. Assimilated law is being replaced, in line with the UK’s domestic model of regulation. This means that the UK’s independent financial services regulators will generally set the detailed provisions in their rulebooks, instead of firms being required to follow EU law. This approach was following two consultations and it received broad support across the sector. Parliament debated this approach during the passage of the Financial Services and Markets Act 2023, and it secured parliamentary support then.

The Government recognise the importance of effective parliamentary scrutiny of the regulators, including their approach to rule-making and other activities that they may choose to undertake. That is why FiSMA 2023 introduced additional mechanisms to strengthen Parliament’s existing ability to scrutinise the regulators’ work, including requirements for the regulators to notify parliamentary committees, such as the new Financial Services Regulation Committee, of their consultations and to explain, when publishing final rules, how representations by parliamentary committees have been considered. I warmly welcome the formation of that committee. It will be hugely helpful, and it is quite right and proper that independent regulators are held to account by Parliament.

I will write with a few further comments on the investment in the UK capital markets by UK pension funds and on a few other issues which have arisen and need a fuller response. For the time being, I am very grateful to my noble friend Lady Altmann and many other noble Lords for their continued championing of the investment company sector.

Overseas Territories: Tax Haven Status

Baroness Kramer Excerpts

Monday 26th February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

As the noble Baroness will know, there is an enormous amount of work going on at the moment around international tax. That has been led by the OECD and the inclusive framework, involving 130 countries and jurisdictions from around the world working on two pillars: one for the greater share of group profits to be taxed in market countries, and the second a global minimum tax, where all profits will be subject to a 15% minimum effective tax.

[Baroness Kramer (LD)]

My Lords, from these Benches I join in with the shock and sense of loss at the death of Lord Cormack. He was such a big figure in this House and I know it is a very personal feeling for many of us sitting here, as well as for those across all Benches.

On 8 February—this month—a jury in Florida found the former Premier of the British Virgin Islands guilty of drug trafficking and money laundering while in office. Do the Government understand that that kind of corruption would have been much more difficult had there been in place the long-promised public register of beneficial ownership? The Government had guaranteed to this House that it would be in place for all overseas territories by the end of last year. Where are we in this process, and do the Government recognise their crucial role in stemming corruption?

[Baroness Vere of Norbiton (Con)]

The Government absolutely recognise their crucial role in stemming corruption; we work very closely with the overseas territories on all sorts of issues when it comes to illicit finance. I refer the noble Baroness to the Written Ministerial Statement from my honourable friend in the other place, the Minister for the Americas, Caribbean and the Overseas Territories; in that is a helpful summary that sets out where each of the overseas territories is in relation to introducing a public, accessible register of beneficial ownership.

Finance Bill

Baroness Kramer Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 21st February 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, as the first of the winding speakers, I will say I have some sympathy for the Minister, who has been hit with a wall of technical expertise that is probably not matched in almost any other sector of debate. I wish her great luck in answering the details.

I draw the Minister’s attention in particular to the comments of the noble Lord, Lord Davies of Brixton, on the pension allowance, because that issue is so mired in complexity, and the scheme needs complete reform. This does not really affect the private sector, which managed workarounds for this long ago; it is people in the public sector who are caught. The judges have been exempted, as the Minister will know—they have their own special scheme—but senior consultants, senior members of the military and some senior civil servants are caught up in this mess. A straightforward reform would be far more effective than this constant chipping away at the edges and getting it wrong, which is the pattern of the last few years.

This Government are, frankly, living in a parallel universe. The economy is in recession. Many people remain under crushing pressure from the cost of living. Real GDP per capita has fallen for seven successive quarters, and, as I mentioned during Questions earlier, according to the Resolution Foundation, that equates to a loss of nearly £1,500 per household. But, just as significantly, the fundamentals that power the economy and economic growth would, if they were put into a risk assessment analysis, be in the red zone for high risk. But the Government have not responded to this kind of risk and this element of real danger for the economy with a coherent strategy. They have failed to take the action that we need to achieve economic recovery and, frankly, to go out and talk more commonly with people on the doorstep, as I do. People have had enough.

The Autumn Statement of 2023, which sits behind this Finance Bill, is often described by the word “fiction”. The cut in the national insurance rate, which the Minister referred to, is in reality a small reduction in tax increases because of the effect of frozen thresholds. I am stunned that the Minister does not understand the impact of this threshold freeze and in fact suggested that thresholds had risen significantly. You would have to go back to 2010, but we are talking about our more recent period, which is what is impacting people. Frankly, if trading standards looked at the Government’s statements and flagged misleading claims from the Government the way it does with retailers, the Government would not be able to make those claims that the national insurance rate is actually a tax cut; it would be recognised as a reduction in a tax increase.

In evidence to the Economic Affairs Committee, the OBR’s chief executive, Richard Hughes, pointed to the fictional nature of the forecast headroom that the Government claimed in the Autumn Statement and I fear will claim again in the Budget. He explained that the OBR is required to use the Government’s assertions on future tax and public spending, even in the absence of either credibility or detail. I say to the noble Lord, Lord Leigh, who was talking about growth and debt reduction: go back and look at those comments from the OBR in detail.

No one believes that this is just one example, or that the fuel duty escalator—this is one of the tax examples—will be reactivated, but, without it, the tax revenue numbers in the forecast are nonsense. Look at the public spending forecast. Richard Hughes suggested that calling it “fiction” was “generous”. With fiction writers, he said,

“someone has bothered to write a work of fiction, whereas the Government have not even bothered to write down their departmental spending plans”.

Slashing future public spending continuously as a percentage of GDP, which is embedded into that forecast— it is required to be so by government—is either vicious or a con.

Every public service is in dire straits. I am not talking just about the NHS: schools face record deficits, local governments are slashing essentials, the police are short of capacity, prisons are bursting and, frankly, I could go on with every area of public sector activity. Investment in infrastructure, which is absolutely key to our economic future, has not been adjusted by a single penny for inflation, which surely is a recipe for economic self-harm.

We need to focus, with open eyes and real vigour, on economic growth. As we discussed in February, given our older population and its growing dependency, our shortage of working age population is becoming relentlessly more serious. Improving our skills base can help in some sectors, but it requires a revolution in the role of apprenticeships and a complete overhaul of the apprenticeship levy. The drag on our economy of our sick working age population—by percentage, the highest in Europe—requires us to revive the NHS, which is faltering on so many fronts, from GP appointments to long waiting lists. The Government are fiddling at the margins of these issues and not driving forward fundamental change.

A sustained and high growth in productivity is vital—a return to over 2% a year productivity growth instead of the current stagnation. This requires business investment, which continues to be painfully low and has been despite a decade of low corporate taxes—here I agree with the noble Lords, Lord Desai and Lord Sikka. Low taxes have not generated investment, and we have years of experience and evidence for that. I support the full expensing of measures in the Finance Bill, but the OBR figures show that its benefits are actually quite small, and the other measures on R&D and those for the creative industries are useful but, frankly, small fry.

The Government should learn from their own experiences. As I say, low taxes do not persuade businesses to invest, but a proper industrial strategy would attract investment. Policy certainty, instead of shifts in the wind, would attract investment. Reducing friction in our access to the EU market would attract investment. A focus on small businesses, including reforming business rates, would attract investment. In productivity terms, the Government have simply failed to take advantage of the digital revolution. Work practices have changed, but UK productivity has not benefited; it remains utterly stagnant. This Government will waste the potential of the AI revolution unless they change their mind and put in place a coherent strategy.

Trade growth is lacklustre. All the Government’s vaunted trade deals utterly fail to offset the 4% scarring of the economy from Brexit, and we now face the trade consequence of world tensions, anti-globalisation and security concerns, not least with China. I am always stunned when the Government talk about the great trade potential outside Europe—they are essentially referring to either China or countries that fall within the Chinese sphere of influence, where we have so many security and trade issues that looking for that as our rescue is, frankly, a very inadequate response.

Our national debt is running close to 100% of GDP. The OBR, if we take away the requirement that it must give this kind of fake forecast, does not see that number coming down—look at the evidence it gave to the Economic Affairs Committee. There are huge fiscal consequences to running debt at 100% of GDP. We have a very high exposure to variable interest rates, thanks to both quantitative easing and our exceptional volume of index-linked gilts—I think we have twice the amount of any other developed economy; it is extraordinary. Unlike in other major economies, our gilt markets depend on investment by foreigners. It is called the kindness of strangers, and, in volatile times, it is very risky. At times of risk, people exercise a home bias; no one needs to be investing in sterling. We have got ourselves a very risky exposure, as we try to sustain the coherence of the gilt market.

I have not yet referred to the greatest risk of all: climate change. The EU’s climate service announced that global heating exceeded 1.5 degrees across an entire year for the first time last year. That is years earlier than was anticipated. Dealing with climate change is not a “nice to do”; it is a survival issue. I say both to the Government and to Labour: if we do not progress rapidly now, the consequences will be crushing, not least for our economy.

We will soon have a Budget. It is very strange to be discussing a Finance Bill with a Budget less than two weeks away, but I hope that the Government will begin to redeem themselves. Ordinary people are still feeling pain, and that pain will get worse before it gets better. We are in recession, but the downturn in the standard of living has been far greater. The fundamentals of the economy and of economic growth are sounding the alarm. Climate change is coming relentlessly. I say to the Government that looking for the populist vote by floating tax cuts is not the answer. Leaving a scorched earth for the next Government—which I fear is what they have in mind—is not responsible. Let me repeat what I have heard on the doorstep: enough is enough.

UK Economy

Baroness Kramer Excerpts

Wednesday 21st February 2024 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

I absolutely believe that our plan is working. It is critical that we continue along the path that we have set out. One of the biggest challenges we have faced in this country over recent months is high inflation. That is the biggest barrier to growth and that is why halving it is still our top priority. Thanks to decisive action, supported by the Government, inflation has fallen. If one looks at what happens when inflation falls, one sees that interest rates can also fall, which will also mean that growth will begin to rise. The noble Lord mentioned growth. It is the case that the Government have very clear policies for growth. Noble Lords will discuss them with me shortly, as we debate the Finance Bill.

[Baroness Kramer (LD)]

My Lords, the Resolution Foundation has reported that GDP per capita is now 4.2% below its path before the cost of living crisis. That is the equivalent of a loss of nearly £1,500 per household. The OBR has said that we are set to see the biggest fall in living standards since 1950. Do the Government understand that, for ordinary people, their plan is delivering real day-to-day pain and often deprivation? Nothing she has said or proposes to do changes that, as she will see if she looks at the forecasts.

[Baroness Vere of Norbiton (Con)]

What is absolutely clear is that the forecasts show that the UK is forecast to grow, and very strongly. The IMF has forecast that we are to grow faster than Japan, Germany, France and Italy over the next five years. I absolutely accept that the economy has seen some very significant challenges over recent years, with global instability in Ukraine and in the Middle East, and the legacy of Covid. I was a Minister throughout that period, and at no time did I ever hear any ideas from the party opposite or the Liberal Democrats that would have put the economy in a better situation than it is in now. They called always for more spending, for longer periods. We must fix the issues that appeared, mostly due to external factors, which is exactly what we are doing. The economy is turning a corner—indeed, it has turned a corner, thanks to our decisive action.

Buy Now, Pay Later: Regulation

Baroness Kramer Excerpts

Wednesday 7th February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I agree with my noble friend that this is at the heart of it. Any credit facility, be it interest-free or not, has to be understood by those who use it. To that end, the national curriculum has included financial education since 2024. In primary schools, children learn about the uses of money. In secondary school, they go on to learn about budgeting and managing risk, which is of course incredibly important in the credit markets. They learn about financial products and services and raising and spending public money. We have put those elements in place.

[Baroness Kramer (LD)]

My Lords, a number of the firms that provide buy now, pay later—which are of course unregulated schemes currently—are seeking authorisation from the FCA also to offer regulated credit schemes. As we saw with the mini-bond scandal, this mixing of regulated and unregulated lulled ordinary people into misunderstanding the absence of supervision for unregulated products and led them into serious financial distress. Will the Minister advise the FCA not to authorise any schemes for buy now, pay later firms until buy now, pay later is itself properly regulated?

[Baroness Vere of Norbiton (Con)]

While it is fair to say that buy now, pay later itself is not regulated, many elements of getting out to consumers are regulated. The broader consumer protection legislation which exists provides such protections. For example, the FCA has rules and guidance on advertising and financial promotion. Only today, the FCA financial promotions gateway is in force. Buy now, pay later firms must also go through that gateway with all their marketing materials to ensure that they are not misleading, and that is to the benefit of consumers.

High Street Banks and Banking Hubs

Baroness Kramer Excerpts

Thursday 25th January 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, this has been a very short debate, but my goodness it has been a very powerful one—including the example we have just heard from the noble Lord, Lord Hacking. I have great empathy as I have spent hours in NatWest branches just to get an APPG account transferred from one treasurer to another. Let me congratulate my good and noble friend Lady Tyler on obtaining this debate on a crucial issue on which she has campaigned tirelessly.

The access to cash review, chaired by Natalie Ceeney, goes back to March 2019. That is nearly five years ago, and the problems were apparent long before that. Many of us have raised the issues over and again in this House. The Government have made progress, but it is glacial, despite the obvious truth that local banking services are vital to a very wide range of individuals and small businesses. We have, as others have said today, just 31 banking hubs. LINK has recommended over 100, but acknowledges that 1,000 could be needed just to provide cover for medium to large towns, and that is assuming that bank branches stay open in the largest towns and cities.

I am pleased that the FCA, as the new regulator, is conducting a consultation—but my it is narrow and missing many of the key issues. So I thought that I had better talk to some colleagues to see what they were picking up in their local communities. I was stunned when my colleague Jamie Stone, MP for the far north, reported that the Bank of Scotland is closing even its mobile banks, reducing even further the already skeleton access service that is provided. Tom Morrison, my LibDem colleague and the PPC for Cheadle, described the success of the local campaign to get a hub for the south part of Cheadle. However, as yet there is no agreement for a separate second hub that is needed to give access to face-to-face services to thousands of people in the northern part of Cheadle. Lisa Smart, another LibDem colleague and the PPC for Hazel Grove, asked me to thank LINK very clearly for responding to the request for a review of banking services in Bredbury and Woodley but to press for much faster action. A large number of colleagues have asked me both to praise banking hubs but to warn that they should not become an excuse to close branches. That must be reflected in FCA rules.

Therefore, I very much support the proposal of my great noble friend Lady Tyler that the last branch in town should not close until the banking hub has been established. That is the minimum. It must be obvious to every major bank that, if they insist on closing branches—I hope they will be very cautious in doing that—then banking hubs are an efficient way to deliver at least some critical service to the local community on a face-to-face basis. It must be obvious to the banks that local financial services are necessary if we are to grow the kind of economy that banks themselves require if they are to be profitable in the future.

Across the globe, there are a wide range of different models providing banking services, typically face to face, that meet local needs. There are community development banks in the United States, created under the Community Reinvestment Act; the Landesbanken in Germany, which support a local structure; and major credit unions in Ireland, which have a lot of face-to-face presence. Although different, these various models have demonstrably cushioned communities in difficult economic times and provided a resilience not available in the UK. I do not understand why our UK banks have not, in their own interests, seized on the banking hub model and participated with enthusiasm. Perhaps the Minister could tell us. Are they just uninterested, quietly hostile or what? They are the reason we have only 31.

Recently, I used the opportunity of Oral Questions to ask the Minister why bank participation in a banking hub is voluntary, even when a request for a banking hub has been shown by LINK to meet the qualifying criteria. She told me that putting the scheme on a statutory basis has removed what is effectively the bank veto that I was referring to. But, as I look in more detail, and as my noble friend Lady Tyler made clear, this statutory basis applies only to access to cash; banks need not co-operate in providing other services. But that seriously undermines this whole scheme. Communities desperately need access to cash but also to saving and investment products, to mortgages and business loans, to guidance in resolving system problems—indeed, a wide range of services. That simply comes in. As well as reinforcing my noble friend’s proposal on the last bank in town, I want to ask the Minister: will she now bring forward legislation that will take away the voluntary participation in providing the broader range of banking services? Will she say to banks, “You must participate in a banking hub where the criteria have been met showing that a banking hub is vital for this local community”?

Pension Investments

Baroness Kramer Excerpts

Tuesday 23rd January 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I should be delighted to meet with my noble friend to discuss these matters further. The UK has a world-leading investment trust sector representing over £250 billion of assets and is highly aligned with the Government’s priority to promote long-term productive investment. She will know that at the Autumn Statement, the Government published draft legislation to replace the packaged retail and insurance-based investment products, or PRIIPs, regulations. We also announced that we will bring forward the repeal of the relevant provisions of the Markets in Financial Instruments Directive. This will enable the FCA to put in place more proportionate cost disclosures.

[Baroness Kramer (LD)]

My Lords, I am keen to see increased domestic investment in the UK economy, but is it appropriate to put pension money from small pots—people who cannot afford to lose part of that pot —into liquid, high-risk start-up investments, as the Mansion House compact seems to contemplate?

NatWest: Account Terminations and Branch Closures

Baroness Kramer Excerpts

Wednesday 10th January 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

The Government do recognise that banks hold a key position in our society. We need to ensure that our banking system meets the needs of that society. Certain banks, as I am sure the noble Lord is aware, pride themselves on keeping their bricks and mortar on the high street. If customers require that sort of service, they should be able to vote with their feet.

[Baroness Kramer (LD)]

My Lords, I think we have something like 20 banking hubs—the Minister will correct me if I am wrong, but it is a piffling number. Will she assure me that, in the statutory instrument that is coming, the banks will be required to participate in banking hubs where their area meets the criteria standard? Everything I have heard up to now still leaves the banks with the ability to refuse to participate even where the standard is met.

[Baroness Vere of Norbiton (Con)]

The noble Baroness is absolutely right. That is why we are putting this voluntary provision on a statutory footing. The Treasury has the power to designate not only banks but the operators of the cash access co-ordination services—Cash Access UK—to do the banking hubs, so they must then follow the requirements set out in the legislation.

HMRC: Tax Returns

Baroness Kramer Excerpts

Wednesday 10th January 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

HMRC is an office-based organisation. However, officials can work from home for two days a week, if they can be fully effective in their roles. On average, advisers answer the same number of calls per day and work the same number of hours, whether they are in the office or at home.

[Baroness Kramer (LD)]

My Lords, I wonder whether the Minister is aware that so many people have become so intimidated and discouraged by the process of trying to claim a tax repayment that an industry has grown up. Tax repayment agents and companies are now stepping in as middlemen to provide that service to people, but there is no professional standard or certification, and there is no regulation of any of these bodies—so the potential for people to be abused and scammed is very great. Are the Government going to take action to deal with this, either by improving the service so that these people are not needed or else by regulating them if they are?

[Baroness Vere of Norbiton (Con)]

The noble Baroness may be aware that the HMRC made a very targeted intervention on overpayments over the summer, to enable a backlog that had arisen to be repaid. That is now cleared, and the self-assessment helpline prioritises queries relating to returns, repayments and other complex matters.

Financial Stability: Private Equity Firms

Baroness Kramer Excerpts

Wednesday 13th December 2023 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My noble friend is absolutely right. We need the right flexible employment laws to ensure that private equity can continue to steward companies that employ millions of people. Indeed, the British Private Equity & Venture Capital Association estimates that private equity-related companies employ 2.2 million workers.

[Baroness Kramer (LD)]

My Lords, the Minister should take the Question from the noble Baroness, Lady Bennett, very seriously. A very large part of the private equity market is heavily overleveraged, although that is often disguised through complex financial engineering; it is not just Thames Water. At the same time, there are serious questions about the condition of the public debt market, with gilt rates so dependent on volatile foreign buyers for their gilt sales. Has the Treasury looked again at the stress tests being used by the Bank of England to see if they encompass potential issues in these two markets? There is a real risk that not just one but both could have serious problems at the same time, with systemic consequences.

[Baroness Vere of Norbiton (Con)]

I reassure the noble Baroness that the Treasury works with the Bank of England and other regulators to monitor the system.