Preparing for an Ageing Society (Economic Affairs Committee Report)

Baroness Penn Excerpts

Friday 4th September 2026 Lords Chamber

[Baroness Penn (Con)]

My Lords, I am grateful to the Economic Affairs Committee for this report. It reminds us that an ageing society is not simply about older people, it is about how we structure our whole lives and how that may need to change in future. I will touch on two points; the first is pensions, where I welcome the work of the Pensions Commission. While we await its final report, there are three issues on which I would welcome the Government’s thoughts.

The first issue is how we build a stronger culture of investment more broadly. For most people, pensions are their main exposure to the stock market, and outside that, too many people still default to cash saving, missing out on longer-term growth. The second is the gender pensions gap. Among 55 to 59 year-olds, the commission finds a 48% gap in private pension wealth. This is not primarily because women contribute less when they are saving into a pension, but because they are more likely to work part time, earn less and take time out for caring. So how are the Government considering pensions alongside women’s labour market participation? The third issue is public service pensions, which are firmly beyond the commission’s remit. The committee heard evidence about pension cliff edges discouraging people from potentially working longer.

More broadly, we need to ask ourselves whether we have the balance right across the whole life course, particularly when people in their 20s, 30s and 40s face pressures to buy a home or pay for childcare, while some pension schemes provide a substantially greater amount of security in retirement. Do the Government have a clear assessment of the affordability of these pension schemes and the incentives they create?

The second area I will touch on is fertility, where I agree with the noble Baroness opposite: we should not treat this as a lost cause. Looking at the evidence to the committee and beyond, I am not advocating for one-off incentives or baby bonuses, for which the evidence is weak, but there is evidence to say that fertility responds to economic confidence. UK fertility rates rose through the 2000s, before falling off after the financial crisis and never recovering. Growth must be part of the answer, but that is beyond a three-minute speech.

However, research by Dad Shift and Movember found that 57% of fathers say that financial insecurity after their first child holds them back from having more. Eligibility for paternity leave and the levels of pay in the UK are almost uniquely low compared with other developed economies. I ask the Minister what the Government’s approach is under this Prime Minister to the review of parental leave, due to conclude by the end of the year.

Even if the Government do not think that it would impact fertility, there is strong evidence to show that better leave for dads increases mothers’ and overall labour market participation. That matters doubly in an ageing society for strengthening workforce participation now and helping to close the gender pay gap in future. These issues are related and I hope the Government will treat them as such.

King’s Speech

Baroness Penn Excerpts

Thursday 14th May 2026 Lords Chamber

[Baroness Penn (Con)]

My Lords, following the noble Baroness, Lady O’Grady, I too want to focus on the theme from yesterday’s gracious Speech as being one of security—defence security, energy security and economic security. I will resist the temptation to make a joke about job security, particularly as I believe the Health Secretary has just resigned.

That theme was the right one. In today’s volatile world, we are too insecure as a nation and people feel too insecure in their day-to-day lives. However, as is becoming more apparent day by day, the Government’s rhetoric is not borne out in reality. To start with the cornerstone of our national security, defence, the Government commissioned the serious and widely welcomed strategic defence review. The review concluded nearly a year ago but remains largely unimplemented. I am sure we will hear shortly the views of the noble Lord, Lord Robertson, on that. We have no defence investment plan and in the gracious Speech there was no defence readiness Bill. It is no good talking of the largest sustained increase in defence spending since the Cold War if Ministers are not prepared to take the decisions needed on how it is spent. The claim rings even more hollow as defence spending is due to fall next year. That is the cornerstone of the Government’s agenda, and there is nothing to show for it.

If the national security implications of our changed world have been explored through the strategic defence review, the economic implications for the UK of a changing world economic order remain underexplored and underprovided for in government policy. There have been moments when the Chancellor has attempted to do this, such as securonomics and the two Mais Lectures, but it has come on and off the agenda as priorities change with each new focus group. As is too often the case with this Government, there remains a set of vague, often contradictory intentions, unwilling to make the serious trade-offs needed to meet the new reality. For example, on energy security, the measures to implement the results of the Fingleton review are welcome, but the pace of decision-making and implementation has been painfully slow.

More broadly, in a world in which we have had two energy shocks in under five years, and with projected energy demand for AI, quantum and other technologies due to soar, the Government have failed to look again at the trade-offs between security, cost and decarbonisation—because there are trade-offs. I strongly believe that renewables will be a big part of our domestic energy security and that investment in green technology has the ability to drive growth and jobs. However, it is also true that, when it comes to the Government’s clean power target, focusing on getting to 95% clean power, instead of the around 90% that we were already on track to deliver, over a five-year period, has significant additional marginal costs. Pursuing the last mile of decarbonisation may have the perverse effect of failing to incentivise people to power their homes and cars with electricity as we drive up its cost. At a time when people and businesses are struggling with their bills, the Government are not being straight with them about the decisions that they are taking that drive those bills up even further.

The Government have been equally unable to make the trade-offs needed on spending. Instead of investing in growing our economy and using the proceeds of higher growth and productivity to boost spending, as was outlined in the manifesto, the Government have raised taxes in the most damaging way to growth so as to increase welfare spending before any of that growth or productivity has materialised. Even this Government have realised that the public and the economy are unlikely to tolerate further tax rises. However, we have a set of commitments and demands that must be met, including increasing defence spending to 3% then 3.5% of GDP—the short-term trick of switching ODA to defence cannot be repeated—and meeting the growing demands of our health service and an ageing population. These pressures must, at least in part, be met from savings in spending elsewhere, but the gracious Speech contained not a single proposal for where such savings might come from. There was no sign of welfare reform measures, which the Government continue to claim are necessary but fail to take action on.

Given the demands placed on us in a more insecure world, and given that we are at record levels of taxation, tax reform must now come on to the agenda. If we want to avoid further damaging tax rises, we need to find a way to raise the same revenue, if not more, from a more efficient, more growth-friendly tax system. Instead, we have had a national insurance tax change designed in the worst possible way to discourage work, and the gap between the tax treatment of employment versus self-employment or other income continues to grow. We continue to have a tax system, as the noble Lord, Lord Burns, said, that discourages mobility and investment, and that creates perverse incentives and cliff edges along the way. Perhaps the Government will reflect on the gap between their election promise—and continued claim—that they will not raise taxes on working people and the reality of their decisions as something that may have contributed to the lack of trust in the Government displayed at the ballot box last week.

I turn last to growth and the Government’s regulating for growth Bill, which some might call a contradiction in terms, although I am inclined to be more generous. We will have to wait to see the detail, but, on first impressions, although well intentioned it looks like it will struggle to have an impact. Instead of fundamentally revisiting whether the regulatory architecture that we have built over the last 20 years makes sense in today’s economy, it makes a few tweaks here and a few there. Again, it refuses to engage in the trade-offs that might be involved in some of this decision-making. We need to take a step back and look not just at the individual merits of each piece of regulation but at their cumulative effect. The half-measures, the lack of pace and the lack of vision that this represents sum up the Government’s approach.

If growth is the number one priority, you have to go further and faster on planning and on artificial intelligence. If growth is the number one priority, you do not make the labour market more rigid at the exact time you need more flexibility. You need a Government who are willing to take decisions and change the process for implementing those decisions so that it does not take years to get anything done. To quote a different part of the former Home Office Minister’s resignation letter to that quoted by my noble friend Lady Finn, this Government are

“the definition of incremental change. Nothing bold about it”.

For the Government to deliver on our national security, our energy security and our economic security, they need a strategy that faces up to the new realities in which we live, and that recognises that the open and globalised rules-based order that was the foundation of our previous growth and productivity has fundamentally changed. That means we need to look fundamentally at how we support business at home and how we engage abroad. I do not intend to focus on our relationship with the EU—many others in this debate will cover that ground—and personally I am pragmatic about the opportunities and potential costs of a closer relationship with Europe. But in this new world, we need a new approach and—here I agree with the noble Lord, Lord Alderdice—an approach that engages with the world as it is, not as we wish it would be or as we once thought it was.

The Government speak the language of a new global economic order while governing in the paradigm of an old one. That is perhaps best summed up by the response to last week’s local elections being the appointment of Gordon Brown as the special reviewer on global finance. This country cannot afford a Government who are unwilling or unable to take the decisions needed to meet the challenge before us. Something has to give, and I expect that we will find out in the coming days and weeks just what that is.

Minister for Equalities

Baroness Penn Excerpts

Thursday 20th October 2022 Lords Chamber

[Baroness Penn (Con)]

Does my noble friend agree that there is one area where, to advance women’s equality, we need to improve men’s rights? That is on paternity leave. If we want parents to be able to share caring responsibilities, we need to give them more equal rights. That means improving paternity leave and pay. However, given current economic circumstances, maybe a smaller step the Government could take would be to make paternity leave a day one employment right, as it is for maternity.

[Baroness Stedman-Scott (Con)]

That is another very good point. In 2019, the Government consulted on high-level options for reforming the parental leave and pay system, including making changes to paternity leave. We are currently considering responses to the consultation and will respond in due course.

Financial Services Bill

Baroness Penn Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

Moved by

[Baroness Penn]

14A: After Clause 36, insert the following new Clause—
“Retention of personal data under the Market Abuse Regulation
In Article 28 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (data protection), omit “Personal data is to be retained for a maximum period of five years.””Member’s explanatory statement
This amendment removes the prohibition, under the Market Abuse Regulation, on retaining personal data for more than five years.

[Baroness Penn (Con)]

My Lords, Amendment 14A makes a minor change to the market abuse regulation to ensure that the Financial Conduct Authority is able to continue to effectively identify, investigate and prosecute complex cases of market abuse.

The market abuse regulation, commonly known as MAR, aims to increase market integrity and investor protection, which enhances the attractiveness of the UK market for investors. It contains prohibitions on insider dealing, unlawful disclosure of inside information and market manipulation, and provisions to enable the FCA to identify, investigate and take action against such market abuse.

Article 28 of MAR provides that personal data collected for the purposes of MAR is to be retained for a maximum period of five years. The market abuse regulation was introduced as an EU regulation in 2014 and so forms part of retained EU law in the UK following our withdrawal. Article 28 applied from July 2016 and so, without this amendment, from July 2021 the FCA would be obliged to begin deleting five year-old personal data collected under the regulation.

This requirement in MAR is inconsistent with other references to data protection in EU financial services regulation and the approach to personal data retention in data protection regulation, particularly the general data protection regulation, or GDPR. An obligation to delete personal data after five years would cause problems for the FCA when carrying out its market monitoring and enforcement duties.

The FCA needs to retain personal data for longer than five years for three reasons: first, to investigate complex market abuse such as that carried out by organised criminal groups, which can typically occur over a prolonged period of time; secondly, to prosecute those complex cases—prosecutions will draw on evidence from longer than five years ago; and, finally, to enable the FCA to discharge its disclosure duties in prosecution cases by providing relevant information to the defendants that may support their case.

In some cases, the obligation to delete personal data after five years could obstruct the FCA and prevent it carrying out investigations and commencing prosecutions. This is of particular concern when it comes to preventing, investigating and prosecuting complex market abuse undertaken by organised crime groups, which can often take place over five years. For example, in a well-publicised recent case a conviction of insider dealing was confirmed on appeal in December 2020, resulting in custodial sentences and £3.9 million in confiscation. During the 2020 appellate proceedings, the FCA had to disclose information from 2013. The conviction may not have been secured if the FCA had been forced to delete the personal data relating to the case.

The Government therefore consider that it is appropriate to remove the requirement in MAR to delete personal data after five years. If it is removed, the FCA will be required to adopt a GDPR-compliant retention policy for data collected under MAR, consistent with its treatment of personal data collected for other regulatory, compliance and operational purposes. This will enable the FCA to keep personal data so long as it is necessary for the enforcement of MAR, including identifying, investigating and then prosecuting these cases of complex market abuse.

I recognise that this amendment has been tabled at a late stage of the Bill, and it would have been preferable to include it earlier. After such a large body of EU legislation was transferred to the UK statute book at the end of the transition period, the Government have been working closely with the FCA to identify any issues. This issue was identified as one that requires urgent attention to ensure the FCA is able to effectively pursue its investigations into potentially criminal conduct.

I know that the importance of investigation and addressing potential market abuse was raised by many noble Lords during debates in Grand Committee. I therefore ask that noble Lords support this amendment to ensure that the FCA is not prevented from using personal data that would support it in identifying, investigating and prosecuting cases of market abuse. I beg to move.

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[Lord Eatwell (Lab)]

My Lords, this seems to be an entirely sensible modification of an overly restrictive time limit on prosecutions for market abuse, and the Minister has certainly made a strong case.

I have one question associated with the Government’s note that accompanied the amendment. The Government stated that they had not found any clear rationale for the five-year limit applying in EU law and could see no reason for maintaining it in UK law. They said they understood that it had also been raised as an issue by EU regulators and they were considering a change to their law. Given that the EU is also considering a change, why have the UK Government not co-ordinated the change in our law with theirs? Is it not the Government’s “go it alone” approach that has been so damaging in the quest for equivalence? Could the Minister outline how the Government’s current stance on this change fits with the Memoranda of Understanding on trade in financial services with the EU?

[Baroness Penn (Con)]

My Lords, I thank noble Lords for their remarks in support of the amendment. As I have said, I recognise that the amendment has been tabled at a late stage of the Bill and that it would have been preferable to have included it earlier. However, as it seems the House agrees it is important that the FCA is able to effectively pursue its investigations into potentially criminal conduct, it is right that we make this minor change to ensure that it can continue to effectively identify, investigate and prosecute complex cases of market abuse. I reassure the noble Baroness, Lady Kramer, that this will not be seen as an opportunity by the FCA to take its foot off the pedal in such cases, but where it is undertaking this work it is essential that it is able to continue if the case spans a period of longer than five years.

To the question asked by the noble Lord, Lord Eatwell, the Government are committed to co-operation with the EU but it is now responsible for its own law and is aware of this issue and we are responsible for ours. As I set out in my opening remarks, without action now in this Bill the time limit would come to bite in July this year, and there is therefore an urgency with which we need to act. While we will continue to co-operate with the EU, it is right that we take this opportunity to address what we view as an unnecessary restriction on the retention of data.

Amendment 14A agreed.

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[Lord Sharkey (LD) [V]]

My Lords, Amendments 21 and 37B are in my name and those of the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady Kramer, and I am very grateful for their support. I declare an interest as co-chair of the APPG on Mortgage Prisoners. The plight of these mortgage prisoners was discussed extensively—

[Baroness Penn (Con)]

My Lords, due to the technical issues that the noble Lord, Lord Sharkey, is having, I suggest that we adjourn for five minutes until a convenient moment after 8.28 pm.

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The mortgage prisoner report of last month—[Connection lost.]

[Baroness Penn (Con)]

My Lords, once more we will need a brief adjournment due to technical issues. I beg to move that we adjourn until 8.30 pm. Or do we have the noble Lord?

[Lord Sharkey (LD) [V]]

Yes.

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[Baroness Penn (Con)]

Ignore me. Please go on, Lord Sharkey.

[Lord Sharkey (LD) [V]]

Thank you. I think I was talking about Amendment 21 being prescriptive; it sets out exactly what must be done and by whom.

It has two sections. The first reduces the currently usurious SVR paid by mortgage prisoners by capping it at two percentage points above the bank rate. This is what, in the end, Martin Lewis thought was necessary. He said:

“Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All-Party Parliamentary Group on mortgage prisoners is pushing it.”


He also said:

“This would provide immediate emergency relief to those most at risk of financial ruin … No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”


This is all necessary, but not sufficient. SVRs are not the normal basis for mortgages, as I have already mentioned. What is needed is access to fixed-rate mortgages, as provided by normal active lenders to 90% of mortgagees. The second part of Amendment 21 sets out how that is to be done.

This is, of course, all very prescriptive, and we understand the Government’s reluctance to write such details into the Bill. That is why we have also tabled Amendment 37B. This amendment takes a simpler and non-prescriptive approach. It places the obligation to fix the problem squarely on those who caused it—the Treasury. It is explicitly fuelled by the overwhelming and undeniable moral responsibility that the Treasury has for the terrible situation in which mortgage prisoners have long found themselves. The amendment sets out what must be achieved to relieve mortgage prisoners, by whom and by when, but it does not say how. It leaves that entirely for the Government to work out.

Amendments 21 and 37B give the Government a clear choice. Amendment 21 prescribes a detailed method of solution; Amendment 37B says what the Government must achieve but leaves the mechanism to them. The Government caused the mortgage prisoner problem, which has caused and continues to cause much suffering to many families. I hope that the Government will recognise their moral responsibility and adopt Amendment 21 or Amendment 37B.

This has all gone on much too long, and it has caused, and continues to cause, far too much misery and desperation. If the Minister is not able to adopt either amendment, or give equivalent assurances, I will test the opinion of the House. I beg to move Amendment 21.

Budget Statement

Baroness Penn Excerpts

Friday 12th March 2021 Lords Chamber

[Baroness Bottomley of Nettlestone (Con) [V]]

Let me add my welcome and congratulations to the distinguished Peers who have made their maiden speeches today. They have whetted our appetites and we very much look forward to hearing more from them.

In the Budget debate a year ago, in his final speech in this House, the late Earl of Selborne said:

“We rightly congratulate ourselves on the quality of our basic research, yet we consistently fail to exploit this to the point where we deliver the new technologies, whether to promote the green economy or anything else.”—[Official Report,12/3/20; col. 1184.]


How right he was. He was a massive force for good, maintaining priority and integrity given to science and technology. He was in the House for almost 49 years, and I hope that his memory and influence will live on with us. He would have welcomed the Government changing the Bank of England’s mandate, despite the reservations of the noble Lord, Lord King, to include climate objectives. This will focus financial markets towards green investment. Many will have noted that the last governor, Mark Carney, in his impressive 2020 Reith lecture, referred to the urgency to reorient the financial system, with a massive investment needed to create a sustainable green economy.

In hosting COP 26, and our presidency of the G7, we look for an all-encompassing road map, delivering green growth at the heart of our recovery. The Chancellor’s planned Leeds-based national infrastructure bank will play a key role in financing green investment. The aspiration is to attract up to £40 billion of private investment in green projects. I also welcome the announcements of the green ports. I declare my interests as sheriff of Hull and chancellor of the university. The unemployment rate there is 7.1%; in my former constituency, it is 3%. Levelling-up and building back better, in the Prime Minister’s words, are crucial. We can see in the Humber how money is already being used to convert the Alexandra Dock, the centrepiece of Green Port Hull, which has been transformed by Siemens Gamesa to manufacture phenomenal zero-carbon energy-producing mega turbine blades.

With all the other measures in the Budget, there is a note of optimism and hope, but like others, I must press the Minister for greater clarity on plans to overhaul social care. This is a Schleswig-Holstein question. It is incredibly complex. Healthcare traditionally has been free at the point of use.

[Baroness Penn (Con)]

I remind the noble Baroness that contributions are time-limited.

[Baroness Bottomley of Nettlestone (Con) [V]]

There has always been an assessment of means for social care, but the issue must now be faced.

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[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

You should ask your Whip that question.

[Baroness Penn (Con)]

Yes you can.

Financial Services Bill

Baroness Penn Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

I really would like a commitment from the Minister to take up this issue, because if we are going to clean up this industry, we need that civilian army that the US has identified. We need a well-resourced enforcement system, but we also need that civilian army, and that could be delivered by the way that we structure the whole system available to whistleblowers.

[Baroness Penn (Con)]

My Lords, the Committee has heard about a range of issues relating to the importance of tackling economic crime. This is an area that the Government have taken significant action to address in recent years. As the noble Baroness, Lady Neville-Rolfe, noted, improved enforcement is crucial. That is why the Government have created a new National Economic Crime Centre, established the Office for Professional Body Anti-Money Laundering Supervision and, in 2019, launched the economic crime plan, which brings together government and the private sector to tackle this issue.

Amendment 49 would require the Treasury to commission a review of the penalties for market abuse offences. Market abuse undermines integrity and reduces public confidence in the financial system. That is why, in the Bill, the Government are increasing the maximum sentence for such crimes, to bring them into line with other types of economic crime offences. However, the Government recognise that, in other respects, the criminal market abuse regime has not been materially updated since these offences were introduced. That is why the Treasury and the FCA have committed to reviewing the criminal market abuse regime by July 2021, as part of the 2019-2022 economic crime plan. The review will consider whether updates are required to ensure that the UK’s regime for combating market abuse continues to work effectively in an evolving market.

Amendment 50 seeks to offer an additional defence to a bank that relies on information from a publicly accessible verified register of the beneficial ownership of companies. This Government are committed to ensuring that our anti-money laundering regulations support the identification of criminal and terrorist financing activity, without placing disproportionate burdens on the regulated sector. The UK was the first G20 nation to introduce a public beneficial ownership register. There are over 3.5 million companies registered in the UK, and over 5 million beneficial owners listed on the register at Companies House. In answer to the challenge from the noble Lord, Lord Eatwell, I want to be clear on the Government’s intention to introduce a package of reforms to limit the risk of misuse of companies, including by verifying the identity of people managing or controlling companies; providing the registrar with new powers to query and remove information; and investing in investigation and enforcement capabilities. This was set out in September 2020 in our response to a consultation on Companies House reform. We will legislate for this reform programme when parliamentary time allows. On the question of resources, the Chancellor made a further £20 million available to support these reforms in the spending review last year.

In answer to the question from the noble Lord, Lord Eatwell, the Government are bolstering the UK Financial Intelligence Unit with an uplift of over 70 additional staff, enabling more feedback to reporters and better analysis of SARs. However, the UK does not consolidate all resources and activity relating to suspicious activity reports in the FIU. The intelligence collected is also distributed to regional and local law enforcement.

Returning to Companies House, this information alone would neither represent sufficient customer due diligence, nor provide sufficient confidence that a transaction did not relate to the proceeds of crime. Central registers are not a “silver bullet”. Effective anti-money laundering regulation will still rely on the private sector playing its part. The regulated industry has significantly more exposure to, and interaction with, its clients and individual transactions than can be captured on a public register, and it is therefore well placed to identify and prevent suspicious activity by carrying out sufficient client due diligence. While I hope that I have reassured the noble Lord, Lord Eatwell, on his first two points—on the Government’s commitment to implement reforms to the Companies House register—I do not agree that we should remove the obligation on deposit-taking bodies to identify abuses by allowing them to simply rely on a beneficial ownership register. The Government cannot, therefore, accept the amendment.

I turn to Amendment 51. The “know your customer” or customer due diligence provisions are part of the money laundering regulations, which the Treasury is already required to review the effectiveness of at least every five years and to publish a report on its findings each time. This review will measure the impact of the existing regulations, assess the proportionality of duties and powers, the effectiveness of enforcement actions, and the interaction of the money laundering regulations with other pieces of legislation.

I also agree with my noble friend on the importance of financial inclusion. The Government are committed to working with a range of stakeholders to ensure that all consumers are able to access the financial services they need and that identification and verification are not a barrier to this, including by using innovations in technology to support this work.

Amendment 51A would replicate a power to amend the money laundering regulations 2017 under the Sanctions and Anti-Money Laundering Act 2018. That means that through statutory instrument the Treasury can, if it chooses, already amend the list of professional body supervisors, or PBSs, in Schedule 1 to the regulations. The remit of the UK’s anti-money laundering supervisory authorities set out in Regulation 7 can also be amended in this way.

On professional body supervision, the Treasury already works closely with the Office for Professional Body Anti-Money Laundering Supervision, known as OPBAS, to ensure high standards of effectiveness and consistency among PBSs. The noble Lords, Lord Rooker and Lord Sikka, spoke about transparency. The Government have introduced a requirement for the 22 professional body supervisors mentioned to publish annual reports on their AML supervision activity. This will support transparency and accountability and ensure consistency.

A report setting out the findings of the first review of the money laundering regulations to which I have referred will be published no later than 26 June 2022, with a call for evidence planned for this summer. That review will consider the effectiveness of the UK’s AML supervision and whether any reform is needed. It will also cover the OPBAS regulations.

Amendments 81, 82, 83 and 84 all propose to create a new criminal offence for corporate bodies or partnerships of facilitating, and of failing to prevent, economic crime or financial crime. First, I thank my noble and learned friend Lord Garnier for his focus on this important issue, echoed by other noble Lords who have signed the various amendments. The Government are committed to ensuring that under UK law corporate bodies and partnerships are properly held to account for criminal activity that takes place within them or is conducted by others on their behalf. The Government take these proposals seriously and are committed to considering whether there is a need to introduce such an offence. However, this is a complex area that requires careful consideration before acting. As noble Lords have noted, the principle of a “failure to prevent” offence is not opposed by the Government, as long as it is supported by a strong evidence base and addresses perceived gaps in the legal and regulatory framework. That is why in 2017 the Government issued a call for evidence on whether corporate liability law for economic crime needed to be reformed. Those findings were inconclusive and, subsequently, the Government commissioned the ongoing Law Commission review of this issue. That is expected to report by the end of this year.

I appreciate that this is a long-running issue, but before any broader, new “failure to prevent” or facilitation offence for economic crime is introduced, there needs to be strong evidence to support it. A new offence will also need to be designed rigorously with specific consideration given to how it sits alongside associated criminal and regulatory regimes and to the potential impact on business. Unlike with bribery and tax evasion, there are already extensive regimes, both criminal and regulatory, to hold both individuals and corporates to account for money laundering. Further, the “failure to prevent” offences introduced in respect of bribery and facilitation of tax evasion are both formulated to tackle very specific and precise circumstances. Wider economic crime offences present more complications. Fraud, for example, covers a much wider range of activity and business areas. The complexity of a broader economic crime offence is why the Government want to await the conclusions of the Law Commission’s review.

I also note briefly that the proposed new offences would only apply to activity undertaken,

“in the course of using or providing financial services”,

in keeping with the scope of the Bill. However, the 2017 call for evidence did not provide any evidence to suggest that financial services businesses should be specifically targeted with a new offence. Therefore, I believe it is best that this issue continues to be considered within the broader context, rather than focusing on financial services firms.

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[Lord Sikka (Lab) [V]]

The group of amendments which we just discussed focused primarily on economic crime. Matters such as tax avoidance and tax evasion have also been mentioned, which are often the domain of the accounting law firms, banks and others. The noble Baroness, Lady Noakes, is absolutely right in that accountancy trade associations, such as the Institute of Chartered Accountants, also carry out a variety of other regulatory functions; but the question is how well such functions are actually carried out. There have been a number of court cases brought, by HMRC, where the judges have held that the tax avoidance schemes were unlawful. I hope the Minister can help us by telling us whether, after those court judgments, even one big accountancy firm has been investigated, fined or disciplined by the Institute of Chartered Accountants or any other accountancy trade association. Even one example from the past 10, 20, 30, 40, 50 or 100 years will do.

[Baroness Penn (Con)]

My Lords, I would be happy to write to the noble Lord on his question. The debate focused on the role of these organisations in respect of their anti-money laundering supervisory functions. As I said to the noble Lord in my response, a review of the AML regulations will be published no later than 26 June 2022, with a call for evidence this summer. If he feels the need to input to that review, that would be very welcome.

[Baroness Bowles of Berkhamsted (LD) [V]]

I want only to point out to the Minister that I believe she said in her reply that the “failure to prevent” offences were targeting financial services firms. That is not the case. They were targeting use of financial services. The difference is quite important because it is much more generic, and I would not like anybody to think that I was targeting only financial services firms. The point is that it is quite difficult to do a lot of the things that are economic fraud without touching financial services. That is why it falls so full-square within what the Treasury is responsible for and why, as I said previously, it is particularly relevant to the Bill. I know the Minister has to have a “Hands off, do nothing and do not amend this Bill” attitude, but I hope that this issue will be taken to heart and that reasons to do something, rather than reasons not to, will be looked at. I was generic about the use of financial services, not financial services firms.

[Baroness Penn (Con)]

My Lords, I happily acknowledge that point. The point I was trying to make is that even with that slightly broader definition of the use of financial services, a “failure to prevent” offence for broader economic crime is one that people would want to apply in a broader context. I appreciate that the scope of the Bill defines how amendments may be written, and that takes me back to one of the reasons that my noble and learned friend Lord Garnier predicted I might give for resisting this amendment: that this is not the right Bill for it.

[Lord Eatwell (Lab)]

My Lords, this debate has evidenced considerable concern from all sides of the Grand Committee at the level of financial crime and the apparent inability to tackle it in this country in a consistent manner. I am afraid that the Minister’s reply did not provide any reassurance. Indeed, there seemed to be an enormous amount of long grass in evidence into which various reviews and considerations were being kicked.

Before commenting on the Minister’s reply to my amendment, I shall comment on the amendment by the noble Lord, Lord Holmes, on KYC. I entirely sympathise with his point about a modernised means of identification, but I am afraid he will come up against what seems to be a most peculiar British national aversion to any comprehensive means of identification. Therefore in KYC we rely on documents such as utility bills that were never designed for this purpose. The debate over a vaccine passport is running into the same national aversion. However, I wish him well because he is on the right track in what he is attempting to do.

I was also enormously impressed by the amendments in the name of and the speech made by the noble and learned Lord, Lord Garnier. I cannot understand why the notion of failure to prevent, which he described so clearly that even a non-lawyer such as myself could understand it, can apply to bribery and tax evasion but not to other financial crimes. The Minister did not really address that lacuna in her reply.

Turning to my two amendments, first, the UK’s approach to measures against financial crime is underresourced, scatter-gun and generally ill directed. The evidence is clear in the extraordinarily low number of prosecutions. I therefore feel that there is an urgent need for a major reconsideration of this matter. I hope that the review referred to by the Minister, to be conducted by Her Majesty’s Treasury and the FCA, will produce something concrete and effective—for a change, I must say.

On beneficial ownership, I was amused by the point made by the Minister that, because of the peculiar structure of my amendment, I was somehow letting the private sector off the hook. That was not my intention, of course; it was about the necessity of getting the argument in the Bill. However, I was really disappointed to hear her repeat the discredited support for Britain’s so-called wonderful public beneficial ownership open register. This public register is inaccurate, misleading and shelters criminals, and I am surprised that she is so enthusiastic in her support for it. I hope that the committee that scrutinises financial matters, which we discussed earlier in this Committee, will be able to keep an eye on developments in the prosecution of financial crime and the provision of a proper, verified beneficial ownership register. I hope that it will push these matters forward and not let them disappear into further reviews.

In the meantime, I beg leave to withdraw Amendment 49.

Financial Services Bill

Baroness Penn Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Sikka (Lab) [V]]

My Lords, I congratulate the noble Lord, Lord Hammond, on his excellent speech. I welcome him to the House and look forward to his wise words on many issues.

The Bill has many deficiencies. I have sufficient time to speak on only two matters. In the post-Brexit world, the UK needs to compete to attract business. A key requirement is to ensure that the UK is a clean place with robust regulators. However, the Bill does not do that. It should have been preceded by an independent public inquiry into the finance industry and its regulation.

Regulatory failures continue to make headlines. For example, Dame Elizabeth Gloster’s report on the collapse of London Capital and Finance found that the FCA’s supervision was “wholly deficient” and that its staff

“had not been trained sufficiently to analyse a firm’s financial information to detect indicators of fraud or other serious irregularity.”

The report concluded that the FCA failed to fulfil its statutory objectives. The FCA has also been criticised in a report on the collapse of the Connaught Income Fund, and the long-running saga of frauds at the Royal Bank of Scotland and HBOS are further evidence of the FCA’s failures.

Anyone tackling corrupt practices in the finance industry faces obstacles. In February 2017, the Thames Valley police and crime commissioner, Anthony Stansfeld, prosecuted six financiers, including a senior ex-HBOS banker. They were jailed for a total of 47 and a half years. After being shamed, the FCA in June 2019 fined Lloyds Bank £45.5 million. Thames Valley Police force spent £7 million on the prosecutions, but it has not really been compensated by the Government and thus the force has been disabled from mounting any further investigations.

The Conservative police and crime commissioner for Thames Valley has also sought to tackle other cases of financial frauds but has met political and regulatory opposition. On 8 February 2019, he told the London Evening Standard:

“I am convinced the cover-up goes right up to Cabinet level. And to the top of the City.”


That is a strong condemnation of the current regulatory arrangements. The recurring problem is that the regulators are too close to the industry and like to bat for the industry rather than protect people from malpractices. The Bill does not cleanse the finance industry or enhance protections for the people.

My second point relates to the Basel III framework which is implemented by the Bill and affects the calculation of minimum capital requirements and leverage ratios for banks. However, many of the problems highlighted by the 2007-08 crash remain unaddressed. The Government want banks to have more equity, but they have incentivised debt and high leverage, as the interest payments attract tax relief and enable banks to report higher returns to shareholders. Why have the Government not addressed this contradiction at the heart of the calculations of capital for banks?

Financial statements of regulated financial enterprises are based on international financial reporting standards—IFRSs, as they are commonly known. Their use was heavily criticised in the 2013 report by the Parliamentary Commission on Banking Standards. The IFRSs give management too much discretion and management has used that to massage financial statements, as was shown by Carillion, for example. The IFRSs have no clear concept of capital maintenance and therefore calculations of capital based upon accounting numbers are fundamentally flawed. On bank balance sheets, various transactions in historical costs, amortised costs, net realisable values, present values, fair values, market values and even internally generated numbers are all added up. The calculation does not yield any meaningful number for capital maintenance. Banks are currently neither maintaining money, nor real or physical capital, so why do the Government consider them to be a useful guide for regulators?

Neither the FCA nor the Prudential Regulation Authority sets accounting rules for financial enterprises, but they rely on whatever the Financial Reporting Council comes up with. They are storing trouble for the future. The bank financial statements are targeted at short-term shareholders, essentially speculators and capital markets. They do not tell the regulators anything about market interdependencies or systemic risks, all of which were the causes of the 2007-08 crash.

The UK regulators rely on external auditors, even though big accounting firms are unable to deliver honest and robust audits. All banks which crashed in the 2007-08 crash received unqualified audit reports. The Financial Reporting Council routinely laments that 25% to 50% of the audits conducted by the big four accounting firms are deficient. Yet, bizarrely, regulators rely upon auditors. Auditors owe a duty of care to the company but not to any regulator. Regulators do not have a statutory right of access to the auditors’ files or staff. That was one of the reasons why the Bank of England was unable to fully investigate audit failures at Barings, delivered by Deloitte and Coopers & Lybrand, a firm which is now part of PricewaterhouseCoopers. Yet no lessons have been learned. One must also ask whether the reliance on ex-post audits is wise in a world of instantaneous movement of money. Is it not time that the regulators took direct responsibility for auditing the financial statements of banks?

[Baroness Penn (Con)]

My Lords, perhaps this is an opportune moment to remind Back-Benchers of the advisory time limit of six minutes for speeches.

United Kingdom Internal Market Bill

Baroness Penn Excerpts

Consideration of Commons amendments
Monday 14th December 2020 Lords Chamber

Moved by

[Baroness Penn]

That this House do not insist on its Amendments 48B and 48C to which the Commons have disagreed for their Reason 48D.

48D: Because the Lords Amendments would alter financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[Baroness Penn (Con)]

My Lords, the other place has disagreed with Amendments 48B and 48C regarding the power to provide financial assistance which the Bill confers on the UK Government. Once again it has invoked financial privilege. I remind noble Lords that this is not a decision for the Government to make but is independently determined in the other place. It would, of course, be contrary to normal practice for the House to insist on any amendment disagreed for a financial privilege reason.

Amendments 48B and 48C, in the name of the noble and learned Lord, Lord Thomas, required the Government to have the consent of the devolved Administrations before exercising the financial assistance power in devolved areas. As I emphasised last week, this power is additional to the devolved Administrations’ existing powers, which I was glad to see noble Lords accept in the debate last Wednesday. It does not override the devolution settlements. I note that the noble and learned Lord, Lord Thomas, has tabled further amendments on this matter and I thank him for discussing these with me in advance. I also thank the noble Lord, Lord Stevenson, and the noble Baroness, Lady Hayter, for their discussions with me on these matters.

Amendments 48E and 48F would require the Government to consult on and publish the principles for investment, and to seek advice from representatives jointly appointed by the UK Government and the devolved Administrations before providing financial assistance in devolved areas. I reassure the noble and learned Lord that, when using this power, we will, of course, work with the devolved Administrations and other key stakeholders throughout the country. As I have mentioned previously, the UK shared prosperity fund provides a more detailed example of how we intend to use the power to provide financial assistance. In doing so, I hope that noble Lords recognise that the process is consistent with the intent of the amendments proposed by the noble and learned Lord, Lord Thomas.

The financial assistance power means that the UK Government can make good on our commitment to level up and create opportunities across the UK in places most in need, such as ex-industrial areas, deprived towns and rural and coastal communities, and for people who face labour-market barriers. We have discussed the UK shared prosperity fund extensively and I reiterate that, while the specific arrangements for the governance of the fund are still being developed, there will be governance structures and the devolved Administrations will have a place within those structures. I hope that noble Lords will accept that this is a clear commitment to work collaboratively and demonstrates that this is not at all “Westminster knows best” or “a Westminster power grab”. As noble Lords have mentioned, we have also worked collaboratively with the Scottish Government, the Welsh Government, and the Northern Ireland Executive for over six years on city and growth deals, and we intend to continue in that spirit of partnership and joint working.

The power in the Bill creates a unified power that operates consistently UK-wide. In exercising that power, we will work with stakeholders, including the devolved Administrations. This will help to make sure that UK Government investments and devolved UK Administration spending will deliver effective outcomes for the people of Scotland, Wales and Northern Ireland. The UK Government are best placed to identify and fund schemes that take into account all parts of the country and across administrative borders to connect all parts of the UK. Indeed, we have shown how crucial the scale and responsiveness of the UK Government support can be throughout this difficult year.

The response to Covid-19 has illustrated how the Government can work strategically and at scale to save jobs and support communities throughout the UK, working alongside the devolved Administrations to keep every citizen safe and supported, no matter where they live. I hope that this will encourage the noble and learned Lord to withdraw his amendment.

--- Later in debate ---

As the noble and learned Lord, Lord Thomas of Cwmgiedd, said, we need to think harder about how and where we operate—we should not just be thinking about a consultative, consent-seeking mode. We should be thinking harder about what works best when done from the bottom end of the prospective policy, what works best jointly through common frameworks or market access principles, and what has to be done by the UK. I am not sure we have quite got to the bottom of that in these debates.

[Baroness Penn (Con)]

My Lords, I thank all noble Lords for their contributions to a debate that was slightly longer than the one we had during the previous round of ping-pong. I will address the points made by the noble and learned Lord, Lord Thomas of Cwmgiedd, and in doing so I hope to address those made by other noble Lords too.

On financial privilege, I very much welcome my noble friend Lady Noakes saying that this is not a decision by the Government but one taken by the Speaker in the House of Commons. I do not have an answer for her on whether there are any precedents for twice resisting financial privilege as a reason given by the Commons, but it must be highly unusual. This is not the place to raise further constitutional questions in bringing that principle into doubt in this Bill.

The noble and learned Lord talked about a principled basis for the spending powers being taken through this Bill. I completely agree with him on that. He spoke of consultation, the establishment of principles and advice from jointly appointed advisers. We do not propose a structure involving jointly appointed advisers, but we do plan to have the devolved Administrations represented in the governance structures for the fund. I apologise to the noble Lord, Lord Fox—I cannot give further details of how that will work at this stage; we will work on that with the devolved Administrations. There are further stages to come in the development of the shared prosperity fund, its governance and the principles around it, after this debate and in future. As I have said to noble Lords before, the fund will not be introduced until the following financial year, which gives us time to work through some of these details.

I hope I have made it clear to noble Lords that the Government have already been engaging in consultations on the shared prosperity fund. To date, we have conducted 25 engagement events across the UK, attended by over 500 stakeholders, including the devolved Administrations. The noble Lord, Lord Liddle, made a good point about LEPs and mayoral authorities—of course we will want to consult and collaborate with those organisations as well as the devolved Administrations as we take these proposals further. Those mentioned at the Dispatch Box were not an exclusive list of those whom we wish to engage, but the debate has focused very much on the question of devolution.

As for the establishment of principles, raised by the noble Lords, Lord Fox and Lord Liddle, and others, there is not a huge amount of disagreement here. The EU set the terms and conditions for investment in the UK as well as other member states, with which the UK Government and the devolved Administrations alike had to comply. Devolved Administrations and other areas were then responsible for managing EU funds in those projects. The idea of setting out principles in a framework and then collaborating in local delivery is very much something we wish to take forward. We have set out some of those principles already in the heads of terms for the shared prosperity fund that we published at the spending review. We have said that a much more detailed investment framework will be published in the spring, following further discussions.

Regarding the focus of that investment, I would have thought the noble Baroness, Lady Bennett of Manor Castle, would welcome our saying at the spending review that investment should be aligned with the Government’s clean growth and net zero objectives. Those are the kinds of principles we have already set out and that we want to see in the investment from these funds.

On the establishment of principles and the conduct of consultations, the Government and noble Lords are rather in agreement. The noble Lord, Lord Fox, asked about the quantum and the distribution of funding. Again, I apologise and will have to disappoint him slightly. I said at the spending review that the quantum will ramp up to £1.5 billion a year, I think, to match that commitment to, at minimum spend, the previous levels. I also referred in the last debate to our setting out certain commitments in our manifesto that will guide us in future. But there is more work to be done on the detail—from taking the heads of terms to the investment framework—to get the kind of answers that the noble Lord is asking for.

I have mentioned some of the details of the shared prosperity fund, and I also talked about our approach to city deals. I gently disagree with certain noble Lords’ use of “pork-barrel politics” terminology. I point to examples of our trying to take a collaborative approach—a principles-based approach from the centre, while also working with those on the ground regarding their needs. That is very much the approach we plan to take with the shared prosperity fund.

I am afraid that I will have to take away the concerns of the noble Lord, Lord Stevenson, about a possible replacement for Erasmus and how that might operate. Again, this is an example of the fact that the detail of this matters. The Government take this very seriously. However, we disagree on some points. This power will be used for the shared prosperity fund and may be used in other areas. We want it to be flexible enough for the UK Government to respond quickly and at scale to investment challenges and opportunities. It is not practical to set out a single plan for investment in legislation now, which is why, for the shared prosperity fund, we will set out plans and collaborate with the devolved Administrations as we will have developed that. In other areas in future—the noble Lord mentioned Erasmus, for example—we will take a similar approach.

I hope that the noble and learned Lord, Lord Thomas, will feel able to withdraw his amendment although it did not sound as though he was minded to.

[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

I call the noble Lord, Lord Adonis, to ask a short question for elucidation.

[Lord Adonis (Lab)]

I want to ask the Minister a very specific question. She talked about consultation, but will she undertake on behalf of Her Majesty’s Government to commit that they will not make investments under the shared prosperity fund, or any of its successors, in the territories of the devolved Administrations without their consent? This is about not just consultation but consent. Further, does she realise that, if she does not do so, none of the other assurances that she has given is worth the paper they are written on?

[Baroness Penn (Con)]

I believe that this issue was the subject of the amendments tabled by the noble and learned Lord, Lord Thomas, in the previous round of ping-pong. Those amendments were sent to the Commons and the Commons rejected them, so we are discussing a new set of amendments in this round of ping-pong. This question was dealt with in the previous round and is, as the Speaker of the House of Commons determined for previous amendments, subject to financial privilege.

--- Later in debate ---

[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

You wish to test the opinion of the House? The Question will be decided by a remote Division. I instruct the clerk to start the remote Division.

[Baroness Penn (Con)]

My Lords, I believe the clerk will give us some advice on how to proceed in hybrid proceedings in these circumstances. I suggest we adjourn for five minutes until we get that advice on how to proceed.

Economy

Baroness Penn Excerpts

Monday 28th September 2020 Lords Chamber

[Lord O’Neill of Gatley (CB) [V]]

My Lords, I broadly compliment the proactive role played by the Treasury in response to this crisis, which has, sadly, been in marked contrast to the overall policy of the Government. Notwithstanding the sometimes confusing and certainly erratic policies of the Government, and possibly aided by the Treasury and the Bank of England, at least through mid-September the UK, perhaps surprisingly, appeared to be sharing in what some economists might describe as a V-shaped recovery through the third quarter. What will happen beyond this month and through the next quarter looks very uncertain, and the more pessimistic scenarios are not implausible. To avoid them may greatly depend on the introduction of a successful vaccine and a much more truly successful test and trace system.

But what I really want to speak about today is to inquire about the so-called levelling up agenda. Is there ever going to be anything beyond the endless rhetoric? The Government talk frequently and ambitiously about levelling up and the northern powerhouse agenda. They have done so since they were elected and have continued to do so despite Covid-19, yet they show no sign of this rhetoric being backed up by deed. They were close to presiding over a colossal levelling down in school education attainment, they repeatedly postposed plans for a spending review in which infrastructure spending is highlighted as being in the centre—

[Baroness Penn (Con)]

My Lords, I encourage questions to the Minister on the Statement.

[Lord O’Neill of Gatley (CB) [V]]

What is happening to this and the spending review as well as the much-talked-about Green Book review as well as the promised paper on devolution? Surely the ongoing consequences of this crisis suggest an even greater need for true levelling up rather than excuses and repeated delays.

Covid-19: Economy

Baroness Penn Excerpts

Thursday 4th June 2020 Lords Chamber

[Baroness Bull (CB)]

My Lords, the UK’s creative industries are a major economic asset: before Covid hit, they were generating more than £111 billion in GVA, growing at five times the rate of the UK economy, employing more than 2 million people and adding jobs at over three times the rate of the national average.

As other noble Lords have highlighted, this pandemic has demonstrated the sector’s value beyond the economic, with arts, culture and creativity sustaining and connecting us, giving us reasons to hope and supporting mental health and well-being. This is despite the sector being among those most affected by the pandemic. An ONS survey found that just 17% of arts and entertainment businesses were still operating, 42% of creative organisations say that income has dried up completely and 63% predict annual turnover will be cut by half by the end of the year. In line with the broader UK economy, 95% of creative enterprises are SMEs with fewer than nine employees. Studies have found that these microbusinesses are particularly vulnerable to the negative effects of this crisis.

The creative economy faces a specific challenge, in that a third of its workforce is self-employed, compared to 15% of the economy overall. Many operate as limited companies, taking taxable dividends alongside a small salary. This renders them ineligible for both the SEISS and the job retention scheme, despite losing 100% of their contracts overnight.

Creative, cultural and entertainment businesses face significant challenges to economic recovery, with the workforce decimated and income streams closed down. The sector will be among the last to come out of lockdown, given the impossibility of operating fully while social distancing is in place. Brexit and the loss of EU funding pots present additional challenges on the looming horizon. Can the Minister say when and how the UK shared prosperity fund will be allocated, given its role in replacing EU structural funds, which have been so vital to the infrastructure and local growth of the creative industries? Can he also say what the Government are doing to provide urgent support, tailored to the needs of the creative industries, so that they can be swiftly restored as a major driver of the UK’s cultural, social and economic success?

[Baroness Penn (Con)]

My Lords, I remind noble Lords of the time-limited nature of this debate and the limit for Back-Bench contributions at two minutes to allow the Minister to give the fullest possible response.