King’s Speech

Debate between Baroness Kramer and Lord Lilley

Thursday 14th May 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, my noble friend Lord Fox has had to leave, as the cold lurgy got him; undoubtedly, it will now get me over the weekend. The core point of his speech—the significance of and need for ambitious and strong leadership now—is almost the central point of the debate we have had today. I hope that the Government are going to take that on board. The impact of the turbulence we face domestically and overseas on the cost of living for ordinary people is really quite devastating. The Government have to deliver bold action in response. I am not sure that this King’s Speech meets that test.

I say to the Government: stop pussyfooting in the European partnership Bill and seize the opportunity. The noble Lord, Lord Livermore, has talked in the past about the 6% to 8% scarring of the economy in 2025. I have seen the numbers and I am with him, but I will leave him to argue that case with the Conservatives, who do not appear to have taken note of them.

I also want to point to the speech made by my noble friend Lord Strasburger, who talked about the specific damage done to one of our most important industries—the creative industry—by Brexit. I could bring industry after industry before this House to make exactly the same case. To those who think that Brexit has not been a huge damage, I say: go out and speak to industry after industry. I defy anyone to continue to make that statement.

[Lord Lilley (Con)]

My Lords, does the noble Baroness speak to the NFU, which does not want to rejoin Europe because it believes that the divergences from EU rules since Brexit have benefited it enormously? Doing away with those divergences would cost £600 million to £800 million a year just for PPPs, and £500 million a year for fisheries.

[Baroness Kramer (LD)]

We may be speaking to the people at the NFU, but I suggest that the noble Lord go out and start speaking to individual farmers. He will find that the agricultural sector has been really badly hit by the processes that we have been through. It also underscores the inadequacy of trying to fill this just with trade agreements. I listened to a lot of the ideas that came from the Conservative Benches; if you added them together, you would be lucky to get 1% to 2% growth, even if you were able to implement them in a positive way. That does not anywhere near offset the 6% to 8% damage. Again, I will leave the Minister to continue with that argument.

This is an important time to be much more ambitious on the European front. Of course I support youth mobility schemes, the recognition of professional qualifications and the reduction of red tape, but this is the time when we need to be going for a bespoke customs union and building the trust, as well as building the British economy, that will enable us to be on a trajectory towards the single market and eventually to rejoining. If I look at just the customs union, I think it is widely accepted now that the impact of that would put £25 billion more into the UK economy every year. That money could bring some relief to our debt numbers, could help us deal with the need for additional investment in defence and could in turn help struggling people.

Missing from the King’s Speech is action to turn around the sad trajectory of small businesses. I applaud the late payments Bill, but I say to the Government that it is time to grasp the nettle and completely revise business rates to keep small businesses viable, and it is time to force the energy companies to offer competitive pricing to small businesses. I do not know what is holding the Government back from referring that industry to the CMA because it is clearly not offering competitive options to small business, and we are paying a huge price for that. A scheme for apprentices is very important, but it is meaningless if we keep losing small businesses because they are the ones that can take on apprentices and they are often the only real source of jobs in our most deprived communities.

What about access to finance for small businesses? The British Business Bank has made a commitment to support community development banks and financial institutions, which is laudable, but the Government have given it pennies to work with. A sector that can lend at best £150 million in the UK lends more than $300 billion in the US; it is the complete backbone to small business and provides the secure foundation for its economy. Will the new legislation allow the National Wealth Fund to step into that space and let us properly grow the community development investment financing sector?

These Benches will scrutinise very carefully the enhancing financial services Bill. It has not been much discussed today but I notice that, in their briefing, the Government—this counters other messages that we heard from the Conservative Benches—finally recognise that the financial sector has suffered quite severely because of Brexit and has been stagnant while other areas have been growing. It is salami slice by salami slice. The EU is building capacity in financial services across a network of cities, often in partnership with British firms. People talk fluently now of Lloyd’s of Brussels, LCH has replaced the term London Clearing House, and LCH Paris is becoming a major force. This will become far worse if in June 2028 the EU decides to limit its grant of equivalent status to UK central counterparties. The risk is not just that we lose trillions in derivatives clearing business but that the financial operations that collocate with CCPs could make that call to collocate elsewhere. Neither the EU Bill nor the financial services Bill seems to deal with any of this.

The enhancing financial services Bill intends to enable credit unions to expand. We have called for that for some time and it should help with financial inclusion, but we need a more far-reaching strategy, including clarification of the future of banking hubs. Consolidation of the PSR and the FCA can be successful if it is done with care, but I am much more concerned about plans to scrap much of the certification regime that sets the standard for senior management recruiting and accountability in the banking world. Before the certification requirements were brought in, senior bankers simply hired their friends. I was shocked, in going around to HR department after HR department, to discover that they did not even require CVs or check references if someone was referred by a senior banker within their own organisation. That accounts for a lot of the failures that we have had to deal with historically.

I also suggest that the Members here who question the importance of the certification regime look at the evidence that the Parliamentary Commission on Banking Standards got from senior bankers. The changes I can see to the certification regime weaken individual responsibility and return to the concept of collective responsibility. It was on that basis that bankers were shocked that they should have been expected to call out any kinds of concerns or failure in management, or carry the can for what went wrong. This is an industry that genuinely needs good regulation. I do not care if it is streamlined—that is always an advantage—but we have to recognise the importance of regulating this industry.

I am equally concerned about changes to ring-fencing. The co-mingling of retail and investment banking was a major factor in the 2007-08 crisis. The free money from retail deposits fuelled casino-type investment. Retail banking dropped credit standards, mis-sold products such as PPI, and switched to short-term funding. If anyone thinks that reducing the ring-fence will help the financing of small businesses, think again. The major banks have restructured their operations and staffing in ways that make cash-flow lending impossible except to large clients.

I cannot see how this Bill tackles risks outside the recognised institutions. I have been truly concerned with the Government’s love fest with private credit, which we saw during the passage of the Pension Schemes Bill. Private markets play an important role in financing productive investment, but these markets, which now exceed $18 trillion, as Sarah Breeden, Deputy Governor of the Bank of England, said,

“have not yet been tested, at that scale and complexity, by a broad-based macroeconomic shock in a higher-rate environment”.

There is little transparency, underwriting standards are weak, the loans are sliced and diced, and liquidity is very limited. Private credit is now deeply wound into the banks, insurance companies and pension funds through lending arrangements. Interconnection matters. Add in potential bubbles in tech and AI valuations, and the play by hedge funds now in the gilts markets, and it becomes evident that risk has not gone from the financial sector, it has simply taken a new shape. This Bill is a chance to make sure our regulators have the powers and capacity to respond. I am afraid there is a current complacency and that is very dangerous.

This Bill is also an opportunity to urgently address the issues of digital currency, both fiat and stablecoin. Too many powers have been switched from Parliament to the regulators. Digital is not just a variation on plumbing. Should sterling stablecoin be redeemable at par, for example? What quality of assets is required to back it? I suggest not gold and bitcoin. Who controls the exchanges that can shut off transactions at will? At the international level, what happens to UK monetary sovereignty when future cross-border trade is dominated by dollar and renminbi stablecoin? These issues are above the pay grade of the FCA and the Bank of England, and need to come to Parliament.

We will support the expansion of the sandbox in the regulating for growth Bill, but my noble friend Lord Clement-Jones will, I think, speak extensively on the risk of getting on a deregulation bandwagon without looking extremely carefully, particularly as we are dealing with AI. We saw the damage that has been done by the failure to regulate social media early enough—a price paid by vulnerable people and by many of our youngsters. This is not to be repeated in AI, so again, beware the worship of a deregulation programme.

We will also look closely at the highways financing Bill to make sure that the RAB funding is not a way to burden ordinary people with funding costs that the capital markets have rejected. It has a place, but we have to be careful with it.

My noble friend Lord Fox has detailed our support, but with care, for nationalising the steel industry as we try to sort out its role. There is a need for a long-term strategy to underpin that process.

I thank my noble friend Lord Stoneham for focusing on housing, which is an issue that has not been extensively debated today but which absolutely underpins the future of our economy. I also thank him for his focus on the industrial strategy.

We will work hard to ensure that the competition reform Bill ensures an independent CMA with teeth. This should not be a proposal to weaken the CMA; it should be a proposal to strengthen it in very changing times.

However, none of this, frankly, is enough. Our work is going to be to put together a programme of much greater ambition—ambition that can be managed without excessive risk but that takes real care and real energy.

Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019

Debate between Baroness Kramer and Lord Lilley

Monday 18th February 2019 Lords Chamber

[Baroness Kramer (LD)]

Perhaps I could explain to the noble Lord, Lord Lilley, that one reason why so many of us are making comments and expressing concerns about procedure, including about the impact assessment and the limitation on what we can do with statutory instruments—we cannot amend or change them—is because the whole process pales greatly in comparison to the equivalent process available to us as we dealt with these fundamental issues as EU members. Then, we were framing the overarching directive that set the context through extensive and transparent consultation and scrutiny, via a process in the European Parliament and the European Council. Typically, we then engaged our regulators for the final stretch, but in the context of all that work in discussion and negotiation. One of the reasons for London’s great success is that it was able to shape so much of that discussion in the way it thought appropriate, bringing all its experience to the table. That is what made it Europe’s premier financial centre and the great global financial centre it is today, all of which it achieved in the context of EU membership.

[Lord Lilley]

The noble Baroness makes an important point but one that deflects a little from reality. When I was a Treasury Minister, I had to negotiate things in Europe. I suppose we had a certain influence, but at no point did the House get involved much, rightly or wrongly. She should not create an ideal world that did not exist.

[Baroness Kramer]

I accept fully that this House did not get involved, but I do not consider democracy as having only one locus. Our Members of the European Parliament were democratically elected as democratic representatives. The Ministers we sent to Councils engaged with democratic representatives. I do not think that this process happens in only one place. It seemed to me that as a consequence of that representation, we had real importance. Now, we face two situations—

[Lord Lilley]

The point being made by the noble Lord, Lord Adonis, and others is that we should not leave that process to Ministers. The noble Baroness seems to be saying that our doing so in the past was jolly good because they defended our interests.

Trade Bill

Debate between Baroness Kramer and Lord Lilley

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 30th January 2019 Lords Chamber

[Baroness Kramer]

The noble Lord, Lord Lilley, is right that I have not read the document. I have just taken my information from fairly extensive conversations with companies. Perhaps they do not know what they are doing.

[Lord Lilley]

Perhaps the World Customs Organization knows nothing about customs, but we have to reach the judgments that we can, and certainly under the REX system the fees that the noble Baroness referred to will not have to be paid, as I understand it. However, again, I ask the Minister to confirm that.

Finally, the noble Lord, Lord Davies, waxed eloquent about the single market. I take that as personal praise, as I had to introduce the whole single market legislation back in the early 1990s and spoke eloquently about how it was going to boost our trade. How sad we, and he, must be that in the ensuing 25 years our exports to fellow members of the single market have risen by just 18%. It did not have quite the big and wonderful impact that I hoped it would have and which he in retrospect believes occurred. Our trade with the rest of the world rose by 72%, so let us get these things into perspective.

Trade Bill

Debate between Baroness Kramer and Lord Lilley

2nd reading (Hansard): House of Lords
Tuesday 11th September 2018 Lords Chamber

[Lord Lilley]

The Swiss have to fill in rules of origin on their trade with Europe, which constitutes 80% of their exports. They say that the overall cost of dealing with borders is about 0.1% of the value of trade. How does the noble Baroness make that tie in with the scare story she is currently retelling?

[Baroness Kramer]

This is not a scare story. I think the Government will be able to confirm the description that I have just given. I will make one, more general comment but I do not want to go on because of time. Different countries have different patterns of production and trade. Over the past 40 years the UK has integrated into a supply chain, just as the Northern Ireland economy has integrated across those borders. I cannot speak about the Swiss because I do not know that economy in detail. It requires detailed knowledge of the specific economies. We are part of a crochet, deeply embedded into it, just as many of the supply-chain countries are, with constant trading across borders within the EU.

Even under the Chequers proposal, rules of origin certificates are required on every good. I have talked before about the small company that sells party supplies across Europe. It would be £30 every time they sent out a shipment of cups, £30 for the plates, £30 for the paper napkins, £30 for the tablecloths—you can go on with those kinds of numbers and you quickly realise why for many companies this is a totally destructive additional cost, which changes the game completely. I ask the Minister: can we please have some comprehensive answers? Can we have the impact assessment of what this will do to our businesses as they are today—not the fictitious new businesses that may develop in the next 20 years which will abandon the kind of trade that I have described and specialise in something different, perhaps more along a Swiss pattern, but the real businesses that exist today, in which people have invested and by which people are employed?