National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Neville-Rolfe Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I must start by thanking the noble Lord, Lord Livermore, for his clear explanation of this short and simple Bill, the context as he sees it, and the “happy new year” that we all hope to see, despite everything we will probably hear today.

I endorse the tribute from the noble Baroness, Lady Kramer, to Baroness Randerson: what a shock. I will come to the noble Baroness’s Motion later.

Despite the welcome increase in the employment allowance—effectively advocated by my friends at the Federation of Small Businesses—it is difficult to hide the fact that this Bill introduces a jobs tax right across the UK; it represents a £23.7 billion raid on employers. During the general election six months ago, the Labour Party claimed that, if it formed the next Government, the first priority would be to increase the rate of economic growth, and the Chancellor said that they would be the “most pro-business Government ever”—that was the promise. I attended the Times summit, and businesses were very reassured by everything the Chancellor said.

On taking office, the Government, notably the Prime Minister and Chancellor, relentlessly and consistently stressed the allegedly dire state of the national economy, constantly referring to their mythical black hole of £22 billion. I believe it would be true to state that no positive words on UK economic prospects ever passed their lips. But, as Keynes and many other eminent economists stressed long ago, economic success is in part a matter of morale. That discovery was, apparently, forgotten by the Prime Minister and Chancellor.

The Budget is the principal mechanism by which the new Government were able to give effect to their aspirations and objectives. Unfortunately, it was widely and correctly described as anti-business. It raised taxes substantially by placing large new burdens on business, most notably by way of increases in national insurance. The consequences of this pessimism at the top of government, and the extra burdens on business, are clear for all to see: a faltering economy, thought by some commentators even to be verging on depression, and an unpopular Government. That is quite an achievement when the Government are only six months old. Noble Lords will recall that in the first half of the year, the economy was growing strongly and inflation had reduced sharply from the highs created by Covid, Ukraine and the energy crisis. I suggest that gives a much more accurate summary of last year’s economics.

Sadly, the financial world is of a similar view. On 3 January, the critical measure of confidence, the 10-year gilts yield, was at 4.59%, which was higher than its peak after the Kwarteng Budget. In Germany, the bond yield rate at the end of December was 2.38%, and even in Italy it was only 3.52%. This morning, we had a stark warning from the British Chambers of Commerce that more than half of firms were planning to raise their prices in response to tax hikes announced by the Chancellor in October. Business confidence is at a two-year low.

The Government introduced several business-related measures in their Budget, and unfortunately, they were overwhelmingly negative. The increase in employer national insurance contributions, which I will come on to dissect, was accompanied by the partial removal of non-domestic business rate waivers dating back to Covid; a further increase in minimum wages; and an affirmation of plans to introduce costly new rigidities into the labour market. This was a quadruple hit on our hard-working businesses, and that is before accounting for the IHT changes that have so unsettled family businesses and our farming community.

The minimum wage is, of course, something we do not oppose, but it introduces further costs to businesses, especially small businesses, at a time when they are drowning in extra burdens. These businesses all play a crucial role in helping the British economy to grow, which is what we all want.

A number of sectors have released reports detailing the profound consequences these measures will have on their businesses, and this has highlighted the extent to which the Government fail to understand not only the private sector but how to promote and encourage a growing economy. The December growth figures from the ONS were very disappointing: down 0.1%, as were the OECD and IMF comparisons.

The noble Baroness, Lady Kramer, actually set out the Opposition’s position on the various sectors affected. However, her amendment is too kind to the Government; the NICs changes are a jobs tax on all business and not-for-profit sectors, not just a few. Passing it will have no effect on the Bill and do nothing for the groups mentioned. Instead, we need the Liberal Democrats to join us, on Wednesday, in opposing the Bill’s committal to Grand Committee. The Floor of the House is the revising Chamber that can be relied on to delve into vital detail and the perverse effects of such legislation. There is huge concern across the country and we should be debating this Bill, which can be amended—unlike money Bills—in Committee in this Chamber.

I turn to some individual sectors. The Government have angered businesses across retail. Over 70 businesses sent a letter to the Chancellor outlining their concerns. Big employers, including Tesco, Sainsbury and Next, said that:

“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale. The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level”.


We find it particularly concerning that the Government maintain a rhetoric that they are pro-growth and pro-business, without listening to the very businesses that can help them. If they did, they would realise that their plans have not been thought through and that they will have far-reaching consequences in closures and the prevention of growth.

The retail sector estimated that the measures introduced in the Budget will cost the sector up to £7 billion a year, and that these costs will be offset through a reduction in headcount, a freezing of wages and increased prices for the consumer. From my own retail experience and observations in recent weeks, I believe that we risk more insolvencies and empty shops on the high street. This is all too likely to have a multiplier effect on confidence and investment. Reports state that the Centre for Retail Research forecasts over 17,000 store closures in 2025, confirming my fears.

UK hospitality will also pay a high price in adapting to the new taxes. The sector indicated that it will pay at least £1 billion as a result of the increase in national insurance alone and that this will hit its far from buoyant profits. Take an example: a survey from the British Institute of Innkeeping indicates that 40% of independently operating pubs will have to reduce their opening hours as a result of this increase in national insurance contributions alongside the other harmful measures towards businesses included in the Budget. As a pub-goer, I know that turning up to a closed pub puts one off going to the pub again and that that has a multiplier effect.

The increase in NICs is unusual in causing pain to many not-for-profit sectors. They often get by, despite straitened circumstances, because of their workers’ passion and hard work. A good example is our wonderful hospices, as we heard during the PNQ. The charity, Together for Short Lives—a children’s hospice—estimated that this specific increase will put up the cost of providing such hospice care by £5 million across the sector. This will have a seriously detrimental impact on already underfunded hospices and will reduce the availability of lifeline care for children across the country. The Marie Curie charity concluded that the NICs changes will force it to reduce headcount and limit services, with more terminally ill patients staying in hospital, which is bad for them and the NHS, at a time when the debate on assisted dying has highlighted the inadequacy and unevenness of hospice provision. I hope that the Government are listening.

Regrettably, this is part of the wider picture of underfunding in social care, which has already been highlighted. The Nuffield Trust says that independent care providers will face £940 million in additional costs. That dwarfs the £600 million of support introduced in the Budget.

The Government are rightly trying to make more use of pharmacies to tackle waiting times, and yet Community Pharmacy England says that they will be hit by an extra £50 million a year. GPs are caught, as we heard: the Institute of General Practice Management estimates extra costs of about £20,000 a year for the average practice. Ironically, the BMA says that, as public authorities, they are unable to access support via the increased employment allowance. They look with envy and surprise at arrangements already made to protect the NHS and Civil Service from the NICs hikes.

Finally, there is the extraordinary impact on nurseries, where the last Government did so much to extend childcare and help more mothers into work, which boosted growth. The National Day Nurseries Association estimates that the combinations of NICs and salary increases will mean an extra £47,000 on average per nursery, and that those providing more than 50% government-funded childcare will also be deprived of the employment allowance.

I look forward to hearing from others in this debate about the effect of these changes and their unfairness and perverse impacts on so many sectors.

To conclude, we cannot support the key provisions of the Bill. It is a betrayal—yes, a betrayal—of the promise in the Labour manifesto that all reasonable people interpreted as a commitment not to increase national insurance. The stuff said about “working people’’ does not cut the mustard. Moreover, we know from the OBR that the national insurance changes alone will reduce labour supply by 0.2% and add 0.2% to inflation by 2029-30. Sadly, we are already seeing this in business recruitment plans.

We look forward to carrying out our scrutiny functions effectively as this important Bill progresses. It would be very helpful if the Government could update us with their latest view of the impact of the proposed changes on jobs, wages and prices. We are very much in favour of a proper evaluation of policies in the light of experience, and, accordingly, we will be tabling a proposed new clause requiring the Chancellor to publish an assessment of the NICs increases on the employment rate a year after the passing of the Bill. I know from my time as a Minister that such amendments are routinely resisted by the system but that they can be helpful down the road to a responsible Minister keen to do the right thing.

In short, our position is that, even if the Government thought it was right to raise many billions in taxation, this is the wrong way of doing it. The country will regret it.

Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2024

Baroness Neville-Rolfe Excerpts

Tuesday 17th December 2024 Grand Committee

I understand that the Government are hopeful that money from deposits—the free money—will go into UK SMEs. I say to the Minister that I think he is an optimist, as I do not think a lot of it will happen, but we must recognise that, as UK SMEs scale up, they have a high failure rate—it is about 49%—so there is a real impact in fuelling those kinds of investments. We must be careful not to take financial stability for granted but to understand that it requires constant vigilance. If the Minister could help me with those issues, I would be grateful.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to address these three significant pieces of legislation, which collectively aim to refine and enhance the regulation of our financial services sector. The measures come at a pivotal time for not only our financial services industry but the broader economy, as we navigate the challenges and opportunities presented by our post-Brexit regulatory autonomy.

My overall concern is that we are moving too slowly and too modestly to reduce the constraints that existed in the EU regime, and to encourage the competition and dynamism that we need for growth. This means that the US financial services industry and the industry in newer markets, such as Singapore, are eroding our prime position despite our dual advantage of time zone and the English language. Questions have been asked about the effectiveness of our stock market; indeed, that was highlighted today by the reaction to the Canal+ listing in London, which, obviously, we all welcomed. We look forward to debating the reforms announced in the Mansion House speech.

In the light of all this, the instruments demand careful scrutiny. I will also follow the sequence on the Order Paper. The first measure under consideration deals with the supervision and enforcement of designated activities. This legislation builds on the regulatory framework of the Financial Services and Markets Act 2000, empowering regulators to oversee specific activities that pose systemic or consumer risks. From our perspective, this is a necessary and prudent step. By focusing regulatory attention on designated activities rather than institutions alone, we can ensure that oversight remains targeted and proportionate.

Yet it is vital that this power is exercised judiciously. Overzealous enforcement could stifle innovation and deter smaller players and start-ups from entering the market at all. We would like to see a regulatory approach that provides clarity and certainty, enabling businesses to thrive while protecting consumers and market integrity. We also want to keep compliance costs down for business, especially smaller business. Historically, that has not always been the way of the financial regulators—nor, I am afraid to say, of the Treasury. Does the Minister agree that financial regulation should be more careful about the costs that it imposes? I know from the Mansion House speech that the Chancellor wants to be more competitive; I would like to see that reflected in financial regulation.

Incidentally, I was surprised to see this in paragraph 9.1 of the Explanatory Memorandum:

“The government does not generally assess successful enforcement action—such as fines levied after a breach of rules—as a cost to firms”.


From my experience, enforcement can be very costly to a firm: in legal fees, to fight any unfairness and possible reputational damage; in diversion of management time and talent; and in finding money from tight budgets for any fine. That is a good reason for a firm to comply with the established rules but it is also a reason for our regulators to work hard, in order to make compliance with the law easy, and not to judge themselves on the amount of fines they levy.

There is a related point on which I would very much welcome a response. The Minister may be aware of the huge concerns raised by the financial services sector about the FCA’s proposals earlier this year to name and shame firms involved in FCA enforcement action. It is consulting again, I am glad to say, on modified proposals. Can the Minister say whether the FCA intends to apply these new rules to the persons who are within the designated activities regime, which is at issue today, rather than, or as well as, the authorised persons regime? I know that the Chancellor, like her predecessor, has expressed concerns about naming and shaming. Clearly, we need to tread with great care in this area.

I look forward to hearing the answers to the questions from the noble Baroness, Lady Bowles of Berkhamsted, about tribunals and speed. I should like to say that her grasp of technical aspects of financial services law is extremely helpful to this Committee in the scrutiny of complex SIs such as these; we owe her a great deal. However, I have to say, I am not sure that I completely agree with her on FCA objectives, as I think that responsible growth and dynamism need also to come through in the way the FCA behaves.

That brings me to the second measure, which addresses short selling—an activity that has long been a point of contention in financial markets. Short selling, when responsibly undertaken, contributes to market liquidity and price discovery, as the Minister explained. Personally, I would have been more radical in moving away from the EU regulation, and perhaps in giving the FCA narrower rule-making powers. However, the proposed regulations seek to establish a robust framework for managing the risks of short selling while preserving its legitimate role, for example in times of crisis; I think that “exceptional circumstances” was the term the Minister used.

Moreover, on public disclosure, I welcome the move to a list of securities that are within the scope of the rules—this is in paragraph 5.11 of the second SI’s Explanatory Memorandum—rather than having a list of shares the FCA considered to be exempt. This will be clearer and easier. However, I urge the Government to ensure that the reporting and compliance burdens on market participants arising from this new instrument remain proportionate. Excessive red tape hinders the competitiveness of our financial markets, and I believe that we still have too much of it.

I say in response to the noble Baroness, Lady Kramer, that I, too, have learned a lot from history. She mentioned what I think she called “casino banking” but, as a former bank non-executive director—long after the financial crisis—I can vouch for the thoroughness of the checks that are made on personnel with responsibilities. My only concern is that this might be a less leisurely process because, obviously, personnel changes are often needed to run organisations well.

The third and final measure relates to amendments to the ring-fencing framework established in the wake of the global financial crisis. Ring-fencing was designed to protect retail banking operations from the risks associated with investment banking. Although this principle remains sound, the financial landscape has evolved considerably since the original provisions were enacted.

The proposed amendments rightly seek to introduce greater flexibility into the ring-fencing regime. This is a sensible response to changing market dynamics and the need for regulatory frameworks to evolve. Having said that, I think that increasing the limit from £25 billion to just £35 billion is timid, especially given recent inflation. Like the noble Baroness, Lady Kramer, I would like the Minister to remind the Grand Committee which of our banks will need to be ring-fenced going forward and to name some of those that will escape and be able to grow and diversify, both here and overseas, more easily.

In other respects, I say to the Minister and his officials that the Explanatory Memorandum and de minimis assessment on this instrument were very thorough and helpful.

As Conservatives, we understand the critical importance of maintaining the UK’s status as a global financial hub. This requires not only robust regulatory frameworks but a willingness to adapt and innovate in response to new challenges and opportunities, such as AI. I urge the Government to continue the processes of dealing with retained EU law and of engaging with industry stakeholders in order to ensure that domestic measures are implemented effectively and without unnecessary burdens or delays. In doing so, it should be possible to foster a competitive financial services sector that drives economic growth and innovation, creates jobs and enhances our nation’s global standing.

[Lord Livermore (Lab)]

My Lords, I am extremely grateful to all noble Lords who have spoken—specifically, the noble Baronesses, Lady Bowles, Lady Kramer and Lady Neville-Rolfe—for their comments and questions and for, as others have observed, the extraordinary level of expertise that they bring to this debate and, as a result, the level of scrutiny that they are able to provide. I apologise for speaking to the instruments in an order other than that on the Order Paper.

The noble Baroness, Lady Bowles, began by focusing on the designated activities SI. She asked about the direction power. The designated activities regime provides a power of direction to the Financial Conduct Authority. The Treasury can, by regulations, switch on that direction power for the Financial Conduct Authority’s supervision of any given designated activity. This statutory instrument sets out additional procedure for how that power may be exercised, but it does not create or switch on the direction power itself.

The noble Baroness, Lady Bowles, also asked for some statistics on the frequency of tribunals. I will write to her on that, as she requested. If she does not mind, I will also write to her on her second question, which was about the differences in the power of direction between CCIs and short selling.

The noble Baroness then went on to focus on the short selling SI. She asked how the views of consumers were considered. These reforms were informed by extensive industry engagement, taking into account views from a wide range of market participants, including consumers. The new UK regime will ensure that the regulation works effectively to protect against the risks of short selling while improving UK competitiveness.

--- Later in debate ---

[Lord Livermore (Lab)]

Since I am going to write to the noble Baroness on those other two points, it is probably best that I write to her on that one, so that we can be absolutely clear.

In the meantime, I move on to the questions on the ring-fence from the noble Baroness, Lady Kramer. She spoke about a return to casino banking, but she will understand that I disagree with her on that point. These are sensible, technical reforms on which the Treasury has undertaken detailed work with the PRA. The PRA is satisfied that they maintain the appropriate financial stability safeguards. The Treasury has considered the combined overall risk of reforms to the sector, alongside detailed cost-benefit analysis through an impact assessment. That impact assessment concluded that the reforms will improve outcomes for banks and their customers by making the ring-fencing regime more flexible and proportionate, while maintaining appropriate financial stability safeguards and minimising risks to public funds.

The noble Baronesses, Lady Kramer and Lady Neville- Rolfe, asked which specific banks will be removed from the ring-fence as a result of these measures. The reforms create significant new optionality for banks, with the eventual benefits depending on their commercial decisions. It is for the banks to announce how they will utilise the new flexibilities created in the regime and the Government do not comment on specific firms.

The noble Baroness, Lady Kramer, also asked about firms being taken out of the ring-fence as a result of the primary threshold. No firms will leave the regime as a result of increasing the core deposit threshold.

The noble Baroness, Lady Neville-Rolfe, in contrast to other noble Lords, spoke of these reforms being too slow and modest. She also asked what assessment the Government had done on the impact of these SIs. We published impact assessments alongside both the ring-fencing and short selling statutory instruments, which set out their estimated impacts on firms. Both these statutory instruments are estimated to result in a net cost saving for industry.

The noble Baroness also asked how these SIs will deliver growth. There are several measures in the ring-fencing SI that have an impact on growth. We are increasing the core deposit threshold at which banks become subject to the regime, allowing them to grow, as well as exempting retail-focused banks from the regime. We have also introduced new flexibilities for ring-fenced banks to invest in UK small and medium enterprises. The Short Selling Regulations introduce a streamlined short selling regime, which reduces costs for firms and improves UK competitiveness, while still effectively protecting against the risks of short selling.

The noble Baroness also asked about the powers that the supervision and enforcement statutory instrument provides. Those regulations extend the normal powers that the Financial Conduct Authority already has over designated activities. They will allow the Financial Conduct Authority to supervise designated activities even where those carrying on the activities are not authorised persons. They mean that it will be able to gather information on and launch investigations into persons carrying on designated activities, and to enforce its designated activity rules, by publicly censuring or imposing financial penalties on persons who breach them. The Financial Conduct Authority will also be able to restrict or prohibit persons from carrying on the activity if necessary. I will write to the noble Baroness, Lady Neville-Rolfe, on the broader FCA enforcement approach.

[Baroness Neville-Rolfe (Con)]

Before the Minister goes on, I want to ask about naming and shaming. Is it to be done at the stage when enforcement becomes public? Can we be clear when the naming and shaming will take place? The Government are still considering exactly what they are going to do on naming and shaming, I think. It would be good to have confirmation on that because this area is of particular concern to the industry, for an obvious reason: the reputational hit of naming and shaming is substantial.

[Lord Livermore (Lab)]

If there is anything more that I can usefully add, I will include it in the letter that I will write to the noble Baroness.

A final question was asked about why we have increased the limit by just £10 billion. It was recognised when the ring-fencing regime was originally designed that the threshold would need to be adjusted over time to reflect the evolution of banking practices and growth in the deposit base. The Treasury considered several metrics, as well as financial stability and competition considerations, in proposing the £10 billion increase.

Increasing the deposit threshold will provide smaller banks with more headroom to grow before being subject to the requirements and costs of ring-fencing. This will support domestic competition in the retail banking market. A competitive and dynamic market improves outcomes for depositors. The reforms may also encourage inward investment in the UK, as new entrants to the UK banking market will have more room to grow and develop economies of scale before becoming subject to the regime.

I hope that I have covered all noble Lords’ questions. As I say, I will write on the points that I indicated.

Silicon Valley Bank UK Limited Compensation Scheme Order 2024

Baroness Neville-Rolfe Excerpts

Tuesday 17th December 2024 Grand Committee

[Baroness Kramer (LD)]

My Lords, the Minister may be pleased to hear that I have very little to say on this SI. It makes sense to me. The Bank of England report on the transfer of Silicon Valley Bank UK to HSBC argues clearly and logically that, in any reasonable scenario, SVB’s UK tier 1 and tier 2 capital would have been wiped out, so there are no grounds to compensate the former US parent.

However, the fact that this SI is needed raises a question. The resolution of large banks that fail would require wiping out shareholders and calling in bail-in bonds under the MREL procedures without compensation. Would those processes all require a report and an SI to be laid in order for action by the Bank of England to be legal? If that is what the legislation currently says, is there a flaw in the resolution legislation? If there is a flaw, does it need to be rectified? In other words, it seems extraordinary that we need an SI under these circumstances at all.

[Baroness Neville-Rolfe (Con)]

I also welcome the draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024. It rightly confirms in law that no compensation is due to shareholders of Silicon Valley Bank UK Ltd on the transfer of shares to HSBC UK Bank plc in March 2023, when, as the Minister explained, the former experienced rapid deposit outflows.

The swift action that the last Government took to facilitate the sale averted a potential catastrophe for tech start-ups and small businesses dependent on that bank—precisely the kind of enterprises that can help to drive Britain’s growth and innovation in the decades to come. The special resolution regime reinforced trust in the financial system while reminding us that stability is the foundation upon which innovation thrives.

Although I welcome this order, can the Minister clarify how the lessons learned from this well-handled crisis will inform future regulation of mid-sized banks? Further, can he elaborate on how the scheme aligns with our wider growth agenda? To my mind, the tech sector is critical to Britain’s global competitiveness, and maintaining its trust in the financial system is key to sustaining our position as a world-leading hub for innovation—an ambition that is under some challenge, as I mentioned earlier. But I am very happy with this order.

[Lord Livermore (Lab)]

My Lords, I am grateful to the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, for their support for the compensation scheme order.

The noble Baroness, Lady Kramer, asked whether this SI was genuinely needed. In terms of the specifics, I can assure her that I would not be standing here if it was not, but I will write to her about the hypothetical that she raises.

I am grateful to the noble Baroness, Lady Neville-Rolfe, for the points that she made. I agree very much with what she said about the importance of the action that was taken. She asked whether we have learned the lessons from that for future regulation. I point to the bank resolution Bill that I have just taken through the House. It is absolutely informed by the experience of the Silicon Valley Bank episode and directly flows from it.

The noble Baroness also asked how this order relates to the growth agenda. As I always say, stability is the first pillar of the growth agenda. Financial stability is as important as economic stability and I believe that this order will help to ensure financial stability as that platform for growth. With that, I commend it to the Committee.

Economic Productivity

Baroness Neville-Rolfe Excerpts

Thursday 5th December 2024 Lords Chamber

Asked by

[Baroness Neville-Rolfe]

To ask His Majesty’s Government what plans they have for increasing productivity in the UK economy.

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

My Lords, in the decade from 2010 the UK economy saw the lowest productivity growth since the Napoleonic Wars, which led to the lowest growth in living standards ever recorded. Reversing that performance is the number one mission of this Government. As part of our growth strategy, we have set out far-reaching plans to increase productivity, including restoring economic stability, reforms to planning, to skills and to the labour market, record levels of investment in R&D, new investment in transport connectivity, a modern industrial strategy and a 10-year infrastructure strategy.

[Baroness Neville-Rolfe (Con)]

My Lords, I believe the Government missed an important opportunity by failing to impose productivity conditions alongside their costly public sector pay rises. I do know that productivity is a complicated area. On most metrics, public sector productivity has been significantly lagging that of the private sector. What measures will the Government adopt to ensure that it increases towards private-sector levels?

In particular, the Minister mentioned planning. Does he agree that speeding up and simplifying planning, and reducing the cost of electricity for businesses, rather than doing endless review, should be important components of the plan that he set out?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her Question. To answer her first point, she is incorrect to say that we did not impose any productivity criteria. We have introduced a 2% efficiency and productivity target in the NHS for this year and next year. We have also gone further than the previous Government did by extending that target to all government departments to ensure that we are improving the quality of public services while also improving value for money.

The noble Baroness mentioned planning. A significant programme of planning reform was announced by the Chancellor on her very first day in the Treasury. The previous Government had 14 years to announce those things but never did anything.

International Banking: Payments

Baroness Neville-Rolfe Excerpts

Thursday 28th November 2024 Lords Chamber

[Lord Livermore (Lab)]

That is very much the spirit that lies behind the Financial Assistance to Ukraine Bill, which will shortly be before your Lordships’ House. The Financial Assistance to Ukraine Bill provides spending authority for the UK to implement our commitment to the G7 Extraordinary Revenue Acceleration Loans to Ukraine scheme, a landmark agreement which provides a collective £50 billion to Ukraine.

[Baroness Neville-Rolfe (Con)]

My Lords, there is much evidence that the international order is undergoing a process of major and very troubling change. The BRICS proposal is just one manifestation of this phenomenon. Given what we have heard from my noble friend Lord Lamont, does the Minister agree that we must be even more clear-sighted as to where our national interests lie? In particular, can he outline what the Government are doing to protect our substantial interests in the financial services industry and indeed in the interconnected system that he mentioned?

[Lord Livermore (Lab)]

I absolutely agree with the noble Baroness that we should of course always proceed from a position of our own national interest. The Chancellor in her Mansion House speech two weeks ago set out a very comprehensive programme to ensure that our financial services industry was examined from that position of our own national interest and set out a comprehensive set of proposals in that regard.

Financial Services: Mansion House Speech

Baroness Neville-Rolfe Excerpts

Thursday 21st November 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the Chancellor’s speech at the Mansion House covered a wide range of very important topics which we will need to discuss over the coming months. I can touch on only a few of them today. However, perhaps first we should note that very recent developments include an unexpected reduction in the rate of economic growth and an increase in the rate of inflation; and, today, an increase in monthly borrowing to £17.4 billion—the highest level ever outside the pandemic.

The reduction in the growth rate in the fourth quarter was brought about in part by the unwise and inaccurate remarks on the state of the British economy that have been made frequently by both the Prime Minister and the Chancellor since taking office. Taken alongside the problems of the Budget, it has not been an auspicious beginning for the Government. Some of the effects on hard-working citizens, small businesses and farmers were brought to our attention outside this very building only this week. Furthermore, the UK gilt market has taken a hit, meaning that the cost of servicing our debt has risen. The last time yields on 10-year gilts were this high, Labour promised it would ensure that it never happened again; and, of course, higher bond yields mean higher debt-servicing costs. How do the Government intend to square this particular circle?

One major sector covered by the Chancellor’s very comprehensive speech was pensions, which are important for almost everyone. We share the Chancellor’s aims of securing greater returns for pension savers while at the same time enabling pension funds to contribute to funding increased infrastructure spending here in the UK. These objectives are not necessarily incompatible, but it will be difficult to bring about both. We on these Benches will take a keen interest in how this initiative is taken forward in the forthcoming pensions Bill and elsewhere. When can we expect more details?

We are also keen to know more about how, precisely, the proposed pension megafunds will work and, in particular, what rules they will need to follow as regards UK and foreign investments. We all know about the massive investment that Australian and Canadian funds have made in UK infrastructure. Will the proposed UK funds be able to invest in a similar fashion overseas? The Government have proposed consolidating 86 local authority pension funds into eight. When will this occur and on what criteria? How will the interests of those in well-run funds be protected from the ravages of the less successful ones?

Lastly, I return to the Government’s stated first aim of improving the rate of economic growth. We want them to succeed; really, we do. Per capita growth is the right measure of success. All economic policies should have growth as one of their aims, so I note with particular satisfaction that the Chancellor has recently impressed on several economic regulators that this should be their objective also. Otherwise, unfortunately, the Government have made a poor start on achieving growth and managing inflation. When we left government, we had the fastest-growing economy in the G7. Now that has greatly diminished. Let us hope, for the sake of our citizens, that the Government will do better in future.

[Baroness Kramer (LD)]

My Lords, my party is determined to see growth in the UK economy and to use tools such as reform of the financial services sector to drive that growth, though we would put much more emphasis on a revival of community banking and financing for SMEs. High risk, however, is not for all. For people with small pensions, safety—not a jackpot—is the goal. Will the Minister assure this House that, in all the various changes, small pensions will in some way be backstopped from losses generated through higher risk, including illiquid investments? In Canada, which seems to be a template for the Government, public sector pension funds are, in effect, wholly backstopped by the state.

Members on these Benches remember the financial crisis of 2007, which destroyed growth for a generation. It was enabled by gullibility and naivety in dealing with the financial sector, both by Conservative and Labour Governments and by the regulators. The Bank of England is re-looking at the regulation of CCPs to allow greater derivates risk; the PRA now allows insurance companies to hold illiquid assets without relevant reserves; the bank ring-fence is being undermined, and the FCA plans to gut the clawback on bankers’ bonuses and downgrade the certification of senior managers. We are back to jobs for the boys.

Much more—if I understand the Chancellor correctly in the Mansion House speech—is to come. I sat for two years on the Parliamentary Commission on Banking Standards, listening to the pernicious incompetence of masters of the universe who were turning a deliberate blind eye to market manipulation, mis-selling and money laundering, with no acceptance of responsibility. Will the Minster read the reports of the PCBS before he proceeds with any further weakening of regulation? If this is not done with extraordinary care, we risk seeing the reseeding the next financial crisis.

--- Later in debate ---

[Lord Livermore (Lab)]

I am grateful to my noble friend for the question. I do remember the conversations we had in the past and I am, of course, happy to continue to discuss these issues with my noble friend. He talks about partnership; it is a key part of our investment plans. Partnership between public and private investment is key to our national wealth fund, with our public sector investment leveraging greater amounts of private sector investment into exactly the kind of green technologies that my noble friend references. I understand and sympathise with the spirit behind his question, and I am very happy to continue discussions with him on that point.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for his welcome; I too look forward to a constructive relationship in the traditions of the House. Can he comment on my point about gilt yields? My concern is their impact on compliance with the Chancellor’s fiscal rules. There has been a worrying increase of about 0.5% in the gilt yields, and I was interested in his reflections—perhaps in writing—on that.

[Lord Livermore (Lab)]

The noble Baroness is kind enough to give me the opportunity to write, and I will happily do so.

Autumn Budget 2024

Baroness Neville-Rolfe Excerpts

Monday 11th November 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I am speaking from the Back Benches today about productivity, but I want to start with a thank you to the Minister on two counts. He has rightly resisted the temptation to erode further horse racing’s competitiveness, vis-à-vis France and Ireland, by increasing betting duty—I declare an interest as a member of the racing APPG. I was also pleased to hear that the Government are going to tackle the ever-exploding level of retail crime. A few years ago, from the Back Benches, I sought an amendment to the Policing and Crime Bill to achieve just that, but although I worked constructively with the noble Lord, Lord Coaker, on a proposed amendment, I could not persuade him to be sufficiently radical. This Pauline conversion is most welcome.

As a country, our greatest economic challenge is to increase the growth rate, by which I mean GDP per person. The only sustainable way to do that is to increase productivity, and I was disappointed that the Budget includes so little to advance that aim. The truth is that the productivity figures since the financial crisis of 2008 make depressing reading. The situation is not the same everywhere, and I note that, in my old sector of retail, matters are somewhat better than elsewhere. According to the BRC, productivity in retail is 8.1% higher than in Q4 2019—which was before Covid—while the equivalent figure for the whole economy is 1.45%.

What should we do? The most important change is to have efficiency in mind when taking all decisions. The Government state that growth and productivity are right at the forefront of their concerns. That is a good start, but they have to act as though they mean it. They state in the Red Book that, in the medium term, above-inflation pay awards will be funded from improved productivity—good. It is a pity they did not follow that policy when, on attaining office, they awarded public sector bodies above-inflation pay awards costing £9.4 billion without any productivity conditions. I am glad the Government have seen the light on this, but will Minister look at my proposal for a new productivity and growth assessment to accompany all legislation, which I mentioned in our debate in the House on 9 October?

Other necessities are to reduce unnecessary bureaucracy and to examine environmental requirements. On bureaucracy, I do not believe that checks to counter money laundering need to be anything like as onerous and time-consuming as they are. The march of the data society, with its many benefits, has made government, regulators and others lazy. They do too much checking and collect too much information, instead of focusing on what really matters and doing that speedily. It creates some pretty awful jobs too, in both the public and private sectors. David Graeber, in his splendid book Bullshit Jobs, stresses how depressing this can be.

On environmental protection, I read with despair that HS2 has spent £100 million on building a tunnel to protect bats. Can we have a sense of proportion? Moreover, why are our electricity prices for industrial users, which make up the most productive part of the economy, treble those in India and the US? Both phenomena seem good candidates for early study by the new Office for Value for Money.

I turn to construction, including housebuilding and infrastructure; I have two points. The first relates to planning controls, which need simplifying and speeding up. The second relates to the building-related workforce. There is much evidence that more skilled labour of every kind will be required for the foreseeable future. What plans do the Government have to help in that regard?

Likes others, I am very concerned about the triple whammy of increased national insurance—especially the lower threshold—the new national minimum wage and the new regulation on workers’ rights. I know from my own experience that these are particularly difficult for SMEs because of the extra cost and bureaucracy that they will bring. The “good news”—I suppose—from a short-term productivity point of view is that this will send the less efficient into insolvency, but that is a very hard way to improve productivity.

As our new Conservative leader has so rightly said:

“It is not the Government that creates growth, it’s business that creates growth”.


The Government’s attitude to business and public sector efficiency so far is unsatisfactory. If they are to achieve their growth ambitions—which we all share—they need another Pauline conversion.

United Kingdom Declining Birth Rate

Baroness Neville-Rolfe Excerpts

Wednesday 6th November 2024 Lords Chamber

[Lord Livermore (Lab)]

My noble friend makes some very interesting points. I assure him that the Treasury is working closely with the Department for Science, Innovation, and Technology to advance the things that he mentions.

[Baroness Neville-Rolfe (Con)]

My Lords, we have just had a Budget which the OBR says will lead to a loss of jobs and the first ever taxes on education. What does this do for family life and for the birth rate in the shorter term?

[Lord Livermore (Lab)]

To clarify, the OBR is very clear that, over the next five years, employment will grow by 1.2 million people.

Working From Home: Public Sector Productivity

Baroness Neville-Rolfe Excerpts

Wednesday 23rd October 2024 Lords Chamber

[Lord Livermore (Lab)]

I am not sure I am going to be able to answer that right now, but, as set out by the noble Lord, Lord Darzi, in his investigation into the state of the NHS, productivity in the NHS has fallen significantly and is far too low. Improving productivity in the NHS is a key priority. What the noble Lord said about management was really interesting. Emerging studies show that, where workforces are well managed, productivity can rise with working from home. This is a point that the noble Lord who asked the original Question raised in a previous debate on this subject, which I read: the quality of management has a key impact on productivity when working from home.

[Baroness Neville-Rolfe (Con)]

My Lords, although good management certainly makes a difference, there is strong evidence from academic studies that working from home reduces productivity—although there are other benefits. So far, this Government have been coy about publishing office attendance figures for government departments, as we used to do. Will the Minister ensure that the publication of such figures is restarted and that working from home is limited to those areas where efficiency is not compromised?

[Lord Livermore (Lab)]

This Government have exactly the same policy in terms of civil servants working from home as the last Government: civil servants should be in the office for a minimum of 60% of the time. That is unchanged and those figures will of course be published in exactly the same way. The noble Baroness said that working from home reduced productivity: that is not actually the case, according to many studies. I read one from the IMF recently that said that the positive and negative effects of working from home roughly offset each other, generating no net productivity impact.

Finance (No. 2) Bill

Baroness Neville-Rolfe Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords
Wednesday 26th April 2017 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the Bill be now read a second time.

[The Commercial Secretary to the Treasury (Baroness Neville-Rolfe) (Con)]

My Lords, this Government have long demonstrated that we can deliver a stronger, more secure economy. The economy continues to grow robustly, employment is at a record high and the deficit has been brought down by almost two-thirds. Following discussions, the Bill before us is shorter than on its introduction in the other place. None the less, the changes it will make take significant steps in helping to create a fairer and more sustainable tax system.

Following the parliamentary vote on the general election, the Finance Bill is proceeding on the basis of consensus. At the request of the Opposition, the Bill has been amended to take out a number of measures originally included. There has been no policy change. The provisions before the House will make a significant contribution to the public finances and the Government will legislate for the remaining provisions at the earliest opportunity at the start of the new Parliament. These include: corporation tax restrictions on interest expense and on loss relief; the reduction in the dividends allowance; changes to the tax treatment of the non-domiciled; anti-avoidance changes, such as the new penalty for enablers of tax avoidance; and the primary legislation for the Making Tax Digital programme. The Government remain committed to the digital future of the tax system, a principle which has been widely accepted in extensive consultation. I want, in passing, to acknowledge the work that the Economic Affairs Finance Bill Sub-Committee has done on the tax administration aspects of the programme. The Government have decided to pursue this measure in a Finance Bill in the next Parliament, in the light of the restrictions on time which now apply.

I now turn briefly to the main provisions included in the Bill before us. The UK has one of the highest rates of obesity among developed countries. Soft drinks are a major source of sugar in children’s diets. Obesity drives disease and it costs our economy. The NHS incurs direct costs of over £6 billion each year from treating ill health related to obesity. The Bill legislates for a soft drinks industry levy to encourage producers to reduce added sugar in their drinks. I am pleased that this change has gathered a wide degree of support here and elsewhere. I am even more pleased that the levy is already working, with Tesco—once my employer, so that is good to hear—and the manufacturers of Lucozade, Ribena and Irn-Bru among those already committing to reformulate their drinks and reduce added sugar. That is good news for our children’s health and, although revenues will be lower, we will maintain the full £1 billion funding committed to the Department for Education to give children a better and healthier future.

There has been debate as to whether the levy should go further and, in particular, whether it should apply to milk-based drinks. Milk and milk products are a source of calcium and other nutrients. One in five teenage girls do not get enough calcium in their diet, and the same is true for one in 10 teenage boys. However, we want milk-based drinks to contain less added sugar, so Public Health England will challenge and support producers to reduce added sugar content by 20% by 2020, and will publish a detailed assessment of progress in that year. Yesterday, in the other place, my honourable friend the Financial Secretary, Jane Ellison, committed to review the exclusion for milk-based drinks in 2020, based on the evidence from Public Health England’s assessment of producers’ progress against their sugar reduction targets. I am happy to reaffirm that today.

The Finance Bill also legislates for increases in duty rates as announced in the Spring Budget and that took effect shortly afterwards. These increase tobacco duty rates by 2% above RPI inflation for all tobacco products, which also makes an important contribution to the Government’s wider health agenda to reduce smoking prevalence. A minimum excise tax on cigarettes ensures that the cheapest cigarettes will pay a minimum level of duty, making it less profitable to sell cigarette packs below this level. Alcohol duties will be uprated in line with RPI inflation, while producers will continue to benefit from the effect of freezes and reductions in recent years.

The Finance Bill makes an important contribution to securing the nation’s public finances, reducing the deficit while allowing the Government to support our critical public services. For that reason, we announced in the Autumn Statement an increase in the rate of insurance premium tax from 10% to 12%. The Bill provides for this increase, which will take effect from 1 June and is expected to contribute over £800 million annually to the public finances.

Turning now to personal tax, the tax system needs to keep pace with the different ways in which people are working. As the Chancellor set out in both the Autumn Statement and in the Spring Budget, the public finances face a growing risk from the cost of incorporations. Indeed, the Government estimate that by 2021-22 the cost to the Exchequer from people choosing to work through a company will be over £6 billion. Part of this arises from people choosing to work through their own personal services company who would otherwise be classed as employees. The off-payroll working rules, also known as IR35, are designed to ensure that, where individuals work in a similar way to employees, they pay broadly the same taxes. However, non-compliance is high, costing an estimated £700 million each year. The Finance Bill therefore addresses this by transferring the liability for compliance with the rules in the public sector to the body for which the individual is working. We expect it to improve compliance significantly, raising revenue, while simply ensuring that the correct amount of tax is paid under the existing rules.

Finally, while some changes to address tax avoidance and evasion originally included in the Bill have been omitted and will be legislated for at the next available opportunity, the Bill includes a number of changes that advance the Government’s aims in this area. This Government are committed to tackling tax avoidance and evasion at all levels in order to ensure that everyone, no matter who they are, pays the right amount of tax at the right time. Since 2010, we have invested more than £1.8 billion in HMRC to tackle evasion, avoidance and non-compliance, helping to secure more than £140 billion in additional tax revenues. This includes more than £45 billion from large businesses and more than £2.5 billion from the very wealthiest. The UK also has one of the lowest tax gaps in the world, and the Government have announced more than 35 policies in this Parliament which are forecast to raise more than £18.5 billion by 2021-22. The Finance Bill extends that record by making changes to ensure that those who promote tax avoidance schemes cannot circumvent the rules by reorganising their business while continuing to use high-risk tactics in promoting avoidance schemes. It tackles abuse of the VAT relief for adapted motor vehicles and introduces a new charge on loans from disguised remuneration schemes that have allowed beneficiaries to avoid paying the tax that should have been due on their employment. The Government’s record on tackling avoidance and evasion and making sure that tax is paid fairly is one of which I am proud.

So to conclude, this Finance Bill supports our commitment to a fair and sustainable tax system, one that can support our critical public services and gets the country back to living within its means. I beg to move.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their valuable contributions to this select debate. In his wide-ranging speech, the noble Lord, Lord Haskel, mentioned the importance of social measures and, as usual, made a number of interesting suggestions, including the point he often rightly makes about the importance of digital. On this occasion he not only referenced the workplace generally but the importance of getting it right in Whitehall.

On care and the NHS, to which he referred and which was also tackled by the noble Lord, Lord Davies of Oldham, we announced at the spring Budget an additional £2 billion for social care. This will help to ease pressures on the NHS by supporting more people to be discharged from hospital and into care as soon as they are ready. We are giving the NHS the funding that it needs. The Five Year Forward View plan asked for annual funding to rise by a minimum of £8 billion above inflation by 2020-21 and for investment to be frontloaded. The Government have delivered what the NHS asked for on both counts: the NHS’s annual funding will increase by £10 billion above inflation by 2020-21 and £6 billion of this £10 billion will be delivered by the end of 2016-17, which is particularly important. I was pleased that to help manage demand on A&E we have committed to provide £100 million of new capital investment in A&E departments because that will help to ensure that patients access the most appropriate care as quickly as possible by improving the space for assessing patients and providing on-site GP facilities. This can help with bed blockers and is a good example of how things can be improved through management and efficiency, which I always regard as extremely important.

The noble Lord, Lord Haskel, talked about business investment and growing consumer debt. The OBR forecast business investment to grow by 15% over the forecast horizon period to 2021 and to rise as a share of GDP. Households’ financial positions are certainly stronger than they were before the financial crisis, and debt interest as a proportion of income is at a record low.

The noble Lord also talked about productivity, a subject that we have often debated here. At the Autumn Statement, we announced £23 billion of extra investment through the national productivity investment fund, and tackling the UK’s productivity challenge is a priority. To respond to the noble Lord, Lord Davies: the Chancellor mentions it often, it has pride of place in the Prime Minister’s industrial strategy consultation and I agree that it is important. The Government are taking targeted action to invest in important things such as innovation, infrastructure and digital, to promote skills, to improve management and—I see my noble friend the Minister for Trade here—to encourage firms to export, which always tends to be associated with strong productivity growth. There is work to do, as has been said, but productivity as measured by output per hour grew by 0.4% in Q3 of 2016 and by 0.4% in Q4 of 2016.

The noble Lord, Lord Haskel, asked about Brexit resourcing. The Treasury is working with all departments to understand the work required to prepare for a successful exit from the EU. Although aggregate spending plans for this review period remain in place, I can assure the noble Lord that the Treasury continues to engage with departments to ensure the right resources are allocated to the right places. I would add that I know from my own experience in dealing with Brexit for financial services that there is very high-quality Civil Service and external support, both in the Treasury and in DExEU.

The noble Lord, Lord Davies, asked about HMRC resourcing. The Government have always ensured that HMRC has the resources it needs. It makes sense to do so, and since 2010 we have invested over £1.8 billion in HMRC, and steps have again been taken to improve its effectiveness and efficiency.

I, too, was grateful to the noble Lord, Lord Kerr of Kinlochard, for joining us in the gap to share his view on making tax digital and for referring to the two recent parliamentary reports on the subject—particularly the one that was done in this House by the Finance Bill Sub-Committee, which I mentioned in my opening remarks. I am always very grateful for the work that is done on Treasury areas in the House. It really helps us to improve policy formation. Although there has been no change of policy, I entirely accept that time is needed for proper debate and scrutiny of the provisions for making tax digital. The Government remain committed to the digital future of the tax system—it was good to hear support for that from the Opposition Benches—and it was of course, in principle, accepted in the extensive consultation we held. But more time is needed for parliamentary scrutiny, and that will be made available at the earliest opportunity in the next Parliament.

I am grateful to noble colleagues for their contributions. We will debate some of the wider issues in the country, when we will demonstrate that we have a programme for a stronger, more secure and more productive economy under a Prime Minister who is also determined to lead a country which works for all people and for all regions.

I have this evening outlined the benefits that the finance Bill, in this form, will bring in advancing our aims for a fair and sustainable tax system. I take this opportunity to thank Treasury officials for their high-quality support on the Bill and for getting it quickly into a state in which it could be considered today. On that basis, I invite the House to give the Bill a second reading.

Bill read a second time. Committee negatived. Standing Order 46 having been suspended, the Bill was read a third time and passed.