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.

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.

UK Convergence Programme

Baroness Neville-Rolfe Excerpts

Monday 24th April 2017 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That this House approves, for the purposes of section 5 of the European Communities (Amendment) Act 1993, HM Government’s assessment as set out in the Budget Report and Autumn Statement, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook and Fiscal Sustainability Report, which forms the basis of the United Kingdom’s Convergence Programme.

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

My Lords, the major political events of the past few weeks have been the calling of a general election and the triggering by the UK of Article 50 of the Lisbon treaty, giving notice of our withdrawal from the EU. Given that background, today’s debate, which stems from arrangements and rules in essence designed to ensure economic convergence among EU member states, might at first glance look a little odd. But the oddity, if it exists, is on the surface only, and there is good reason for submitting the 2016-17 convergence programme before us. Most importantly, there is the fact that, until we leave the EU, we have all the rights and obligations of a member state. Of course, we continue to exercise our rights of membership in this period, and the document before us, which explains UK economic policy, especially in relation to maintaining stability and bringing down the deficit, is one such obligation.

In practice, drafting the paper was relatively straightforward, since it is based on the Spring Budget report and the OBR’s most recent Economic and Fiscal Outlook. I am sure that noble Lords who have examined it will have seen much familiar content.

I should draw to the attention of noble Lords one detailed but vital point. It is the Government’s assessment of the UK’s economic and budgetary position, and not the convergence programme itself, that requires the approval of the House. There is one further point which I should stress now. It is that, as the UK is outside the eurozone, we cannot be subject to any sanctions under the EU fiscal rules encompassed in the stability and growth pact of which the convergence programme forms part.

It may be helpful to the House if I provide a brief overview of the information that we have set out in the UK’s convergence programme, even though much of this will be familiar. Perhaps the most pleasing point is that in March 2017 we were in a better position economically than many—indeed, most—had predicted. The IMF recently revised up its 2017 growth forecast for the UK by 0.5 percentage points and growth in the second half of 2016 was stronger than the OBR anticipated in the Autumn Statement. In fact, last year the UK grew faster than most other advanced major economies, with near record employment, too. The deficit has also been reduced. Overall public sector net borrowing as a percentage of GDP is predicted to fall from 3.8% last year to 2.6% this year. It is then forecast to be 2.9% in 2017-18 and to fall thereafter to 0.7% in 2021-22—its lowest level in two decades.

As a consequence of all this, we are forecast to meet the EU’s 3% stability and growth pact target this year, for the first time in almost a decade. Accordingly, the UK will cease to be subject to the EU’s excessive deficit procedure. Although we are leaving the EU, this is good news. We are within sight of bringing to a halt the increase in the national debt as a proportion of GDP. Nevertheless, at nearly 90% of GDP, the Government believe our debt level is too high. That is why they set out fiscal rules that combine the flexibility to support the economy if necessary in the near term with a long-term objective of returning the public finances to a sustainable position.

The OBR forecasts that business investment will remain subdued as we begin the period of negotiation with our EU friends and partners. It continues to judge that, in the medium term, growth will slow due to weaker growth in consumer demand as a consequence of a rise in inflation. Accordingly, putting the public finances in good order will remain vital for the foreseeable future, all the more so given that the deficit remains too high and that there is a range of risks in the global economy. That is why we are getting ourselves into a position of readiness to handle difficulties of any kind that might come our way.

Our fiscal rules, which enable us to do that, strike the right balance between reducing the deficit, maintaining flexibility and investing for the long term. Our Autumn Statement and Spring Budget set out our plans to build on recent economic growth and our strong employment record, and indeed to raise productivity, which has been disappointingly weak over a long period. We are taking action to improve skills, to give more children the chance to go to a good school, to support the care system and the NHS, to drive innovation and to invest in infrastructure and digital. We have consulted on a Green Paper about an industrial strategy aimed at delivering a high-skilled, productive, competitive economy that benefits people in all parts of the UK. Sound public finances are an absolute necessity to make this happen and to provide the level of public services we all wish to see. That is essentially what the convergence process is about.

To conclude, following the House’s approval of the economic and budgetary assessment that forms the basis of the convergence programme, the Government will submit it to the Council of the European Union and to the European Commission. Doing so also provides the EU with a useful framework for co-ordinating fiscal policies. A degree of fiscal policy co-ordination across countries can be beneficial to ensure a stable global economy, which is of course in our own interest. The UK has always taken part in international mechanisms for policy co-ordination, such as the G7, G20 and OECD. Although we are leaving the EU, we will continue to have a deep interest in the economic stability and prosperity of our European friends and neighbours. We will also continue to play our part in this process while we remain an EU member, and we will play our part in other international policy co-ordination processes once we have left the EU. The Government are committed to ensuring that we act in full accordance with Section 5 of the European Communities (Amendment) Act 1993, and I ask this House to approve the economic and budgetary assessment that forms the basis of the convergence programme. I beg to move.

[Lord Davies of Oldham (Lab)]

My Lords, the Minister made the best fist of a pretty thin case. First, it is somewhat absurd that we are debating and seeking to put through a Motion on the issue of convergence just at the point when the Government have set their sails in the opposite direction, away from any convergence as far as their direct relationship with the European Community is concerned. At least the Minister in the other place, when pressed on this particular obvious sailing point, said, “Well, I don’t really think the issues of convergence affected government policy a great deal”. It is quite clear that the Government have had their own agenda for the economy and have pursued it with considerable rigour, at particular cost to sections of our population—and, I might add, to the economy as a whole. But the issue of convergence certainly did not rank particularly highly in that agenda and the Government, I imagine, can therefore begin their approach to the question of Brexit untrammelled with any regrets that no British Government will have to face up to this issue in the future.

The Government are making much at this stage of economic growth over the last year and a half, with the prediction that it might last a little longer. That is against a background where their record on economic growth was close to catastrophic. They presided over the slowest recovery from a recession in more than 100 years and followed the worst policies for getting the country back on to an even keel. What has this meant? Their target was 2015, which was two years ago. They were meant to hit their target in 2015 but we now have a revision under a new Chancellor, who has slightly more elastic concepts on how rigorous an onslaught should be pursued on the debt position. He is saying that it may be the early 2020s but has not made too great an assurance about that. What would your Lordships say normally to anybody who had promised that they would bend every sinew to producing a position where they got out of debt in five years, and then after seven years said, “We haven’t made it—in fact, we are only half way there and we don’t think we’ll be able to do it for another five years anyway”? It suggests that there is a slight flaw in the Government’s thinking on how well they have done with the economy over the last few years.

The other dimension of it is quite clear: the absence of growth has reduced significantly the receipts to the Exchequer and made the Government’s onslaught on public expenditure even more savage. The Government boast about the fact that they have been conducting their position on public expenditure with a real sense of fairness. Tell that to the disabled. Tell that to the families where children are entering poverty in numbers that we have not seen for two decades. Tell that to the people who are seeing benefits for those in work cut at the levels which they are by this Government. That is to say nothing about what I hope the Government recognise is a crisis in the health service, or about the problems we have with regard to welfare and in particular with care for the aged. It says nothing about the real problems of so many in our community, who depend upon government handouts not because they are idle and have brought things upon themselves but because they live in a society, and an economy, in which it is difficult for them to earn sufficient to sustain their living standards. Yet the Government are busy eroding any support which they enjoy.

Let us turn as well to the question that the Government always emphasise as such a significant achievement: levels of employment. What kind of employment is it? It is no coincidence that when the Minister says that we have made painfully little progress—I am not sure whether she used quite that adverb but she was generous enough to concede that progress on productivity has been limited in recent years—it is a direct reflection of the employment conditions of so many of our people. Far from them being engaged in enterprises alongside employers who are seeking to promote the work, to engage the workers constructively and perhaps even from time to time to listen to them on how work could be done better, we have the exact antithesis. We have people on zero-hours contracts with no commitment to the company at all, apart from the hope that they will be able each week to sustain enough hours in work to keep their living standards.

What employers have been doing is worse. There are appalling examples. They have been saying to such people, “Sling your hook”. That phrase comes from dockers in the 19th century who turned up for work with their hook and if not so many were needed or those who were needed were carefully selected, they rest had to sling their hook, go away and receive no remuneration or sustenance of living standards. It is not surprising that the late 19th-century state had to react to that situation in the face of such discontent. The Government may feel that they are not presiding over a period of such discontent at this time. That may partially be because so many of the people who are in that position have no voice. They have no voice because the very vulnerability of the work they do renders them unable to challenge.

What does this all mean? It means that the Government are now engaged upon Brexit, which will dominate all political and economic debate for a considerable period ahead. What is conspicuous about Brexit—I hope the Minister may at least own up to this fact—is that the Government had absolutely no plans to cope with Brexit and had not anticipated that the vote might go that way. If they did anticipate it, they are very culpable for leaving us in this position, where it is quite clear that our negotiating position is a good deal weaker than it ought to be. The Government keep on saying that we are out on a deep, wide ocean and that we can greatly increase our trade with others whom we have neglected in the past. I have not noticed the British economy neglecting markets in the past. Our problem is being able to be sufficiently competitive to win them. We are walking out on the largest market of all. Whenever the Government mention the United States, India or China, do they not realise that trade with those countries adds up to only a fraction of that which we enjoy at present under the framework of the European Community? That is the nature of the risk being taken.

I realise that this is a straightforward Motion today. There is no question of the Opposition not seeing that we make a last gesture towards convergence, which is required of us as long as we are a member of the European Community, which we are at present. Underpinning it all—and this is what this Government have to face up to—is the basic weakness of their economic position. That may not worry Ministers in this House too much because, although they would probably like to continue in office, it is not quite as serious a threat as that to Ministers at the other end who have to retain not just their office but their seat as well. The confidence of Ministers in the other place may be shaken somewhat, and therefore, although I have indicated that the Opposition support this Motion, I offer some warnings as to the future.

[Baroness Neville-Rolfe]

First, I thank the noble Lord, Lord Davies of Oldham, for supporting the Motion and for filling the void in a debate with few participants today. I suspect he will not be surprised to learn that I do not agree with his cynicism. We have our own economic policy of course in this country, and as I tried to explain, the work to bring deficits down is important from both a European Union and a UK point of view, and we have made progress. It has been difficult, not least because of the legacy—the mess—that we inherited on the economic side, but since 2010 our economy has grown by 14.6%: faster than Germany’s and twice as fast as France’s. As I mentioned in my opening remarks, we have had good news recently from the IMF, and indeed the CBI published strong figures today. The deficit has been cut by almost two-thirds from a post-war peak of 8.8% and, as he acknowledged, employment is up, by nearly 2.8 million. The employment rate is at a record high of 74.6%.

This is, in my experience, the envy of other member states in Europe, alongside the small business creation that we have also managed to oversee. Our labour laws are strong, and will remain strong, but they also allow different types of employment which have helped us in this country to grow and to innovate. The rise in employment is not all in lower-paid or unskilled jobs. Three-quarters of the rise is in higher-skilled occupations. Zero-hours contracts have a part to play in a modern, flexible labour market, as we have debated before. They are also a small proportion of the workforce—2.8%. We have invested for the future and are at last tackling productivity in a comprehensive way, something which I am certainly very engaged in.

I do not think there is any point in us arguing about Brexit, but I am clear that our bold and ambitious plan offers this country a great future.

As I stated in my opening remarks, following this debate, and with Parliament’s approval, the Government will inform the Council of the European Union and the European Commission of our assessment of the UK’s medium-term economic and budgetary position. This is a legal requirement under the EU’s stability and growth pact, and the information we present is based entirely on information and documents already presented to Parliament and, in the main, debated. That includes the Budget we set out this spring, which upholds our economic stability, invests in the future and keeps the UK on a clear path to prosperity over the long term. The foundation of all those things lies in our work to improve the national finances, and that is the basis of the convergence programme that we are, this month, presenting to the EU. I am pleased to commend this to the House.

Motion agreed.

Premium Bonds

Baroness Neville-Rolfe Excerpts

Thursday 23rd March 2017 Lords Chamber

[Lord Lee of Trafford (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I declare an interest as a bond holder—one among 21 million.

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

My Lords, premium bonds are a popular savings product. They date back to 1956 and were introduced by Harold Macmillan, the Chancellor of the Exchequer of the day. They provide a way for government to raise debt financing through the retail savings market. Depending on the Government’s financing requirement, NS&I promotes sales through its website, through direct correspondence with customers, through media coverage and through advertising.

[Lord Lee of Trafford]

My Lords, is it not time, after 60 years, to look again at the rules and aims of premiums bonds? Specifically, why cannot clubs, societies and charities own premium bonds? Could not those who win, say, £25 but do not wish to receive that prize have it designated and directed to a national charity by ticking a box? More radically, could we not think about reconstructing and converting premium bonds into something perhaps rather more popular, such as national care bonds? I think that would generate much greater public support, particularly if the unclaimed prizes were hypothecated to the care sector.

[Baroness Neville-Rolfe]

My Lords, that is for a debate, not a Question. I am not a fan of hypothecation. The Government raise premium bonds to fund government expenditure, as I have explained, and obviously there is nothing to stop anybody giving their tax-free winnings to charity as they see fit. We do not have any plans to introduce a direct transfer to charities, which would require stakeholder consultation and a systems change. The product is a good part of the portfolio of savings products that we have and, as I said, it is very popular.

[Lord Dubs (Lab)]

My Lords, would not more people buy premium bonds if there were not such a miserably low rate of interest?

[Baroness Neville-Rolfe]

We try to make sure that premium bonds are a reasonable deal in the market for savings. The noble Lord will probably know that we delayed reducing the rates on premium bonds until quite recently. They continue to be popular, and it makes sense to look at them in the round, aiming for a balance for savers and taxpayers, as well as stability in the sector, obviously, in which they have a role as part of NS&I’s work.

[Lord Lansley (Con)]

My Lords, will the Government consider giving pensioners who are eligible for the winter fuel payment the option of electing to receive premium bonds instead of a cash payment, thereby helping to meet the Government’s funding requirement and reducing the cash call on government?

[Baroness Neville-Rolfe]

That is another innovative idea for premium bonds. I will certainly think about it, but the basic point about premium bonds is that they have to be part of a portfolio of sensible savings, such as the investment bond that we are bringing in. That seems to me the right way to go. They are popular and successful, and they give people a bit of excitement, as well as easy access to saving, and there is a 100% Treasury guarantee.

[Lord Davies of Oldham (Lab)]

My Lords, every statistician and financial adviser can establish that premium bonds are a pretty poor deal, and the Government are in the business of reducing the rate yet again, so the deal is not getting any better. What they are is a flutter but, as my horse will fall at the second fence in the Grand National in the fairly near future, I am not going to argue against gambling at this point.

[Baroness Neville-Rolfe]

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

[Baroness Kramer (LD)]

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

[Baroness Neville-Rolfe]

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

[Lord Forsyth of Drumlean (Con)]

My Lords, would my noble friend look at the rules, which, while respecting the importance of avoiding money laundering, make it extremely difficult for grandparents and others to gift premium bonds to young children? That would be a very useful way of encouraging saving.

--- Later in debate ---

[Baroness Neville-Rolfe]

I am grateful to my noble friend. I will certainly look at the point without commitment.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, I am not sure whether the Minister is old enough to qualify for the silly £10 a year Christmas bonus that most of the people in this Chamber will receive. Apparently it was introduced decades ago and if it had been updated with inflation it would now be worth £187 a year. Building on the suggestion of the noble Lord, Lord Lansley, why should that not be converted into savings rather than paid out, when many people do not know what it is about, why they are receiving it or what they do with it?

[Baroness Neville-Rolfe]

The noble Lord highlights that there are many good pension benefits in this country. I take his point but this is a difficult area in which to make sudden changes.