Ministerial Salaries (Amendment) Bill

Baroness Penn Excerpts

2nd reading & Committee negatived & Report stage & 3rd reading
Tuesday 14th April 2026 Lords Chamber

[Baroness Penn (Con)]

My Lords, I, too, welcome the Bill. I do not think it is acceptable that we ask Ministers to do their work unpaid, a burden that has fallen disproportionately on Members of this House. As we have heard, former Leaders on these Benches have worked hard to change that, but, sadly, without success. The noble Baroness the Leader is to be congratulated on the Bill we have before us.

I focus my remarks on another aspect of ministerial salaries: the absence of any provision for paternity leave, shared parental leave or adoption leave. Ministers, as officeholders, are not employees and so do not qualify for any of the normal provisions. For many years, the system for taking maternity and other parental leave was managed informally, with a period of leave agreed with the Prime Minister and cover normally provided by other Ministers within a department or a Whip stepping up. Given the limit we have on ministerial salaries, covering a colleague’s maternity leave was normally in addition to someone’s existing duties, as there were not any spare salaries to appoint a replacement.

I was particularly aware of this when I was pregnant with my daughter in 2021 and was also a Government Whip. I worried that any leave I would take would either put a heavy burden on my other colleagues in the Whips’ Office, who were all already covering at least three or four departments each, or involve asking someone to provide cover for me unpaid.

Happily, the problem was solved before Margot was born, as the inadequacies of the previous system were exposed even more clearly when the then Attorney-General, Suella Braverman, needed to take maternity leave. Because the role of Attorney-General comes with specific constitutional responsibilities that can be fulfilled only by the specific officeholder, staying in post while cover was provided by another colleague was not an option. Because of the limit to ministerial salaries, it meant that Suella faced having to resign in order to take maternity leave, which was not a very satisfactory position at all. The Ministerial and other Maternity Allowances Bill was hastily written and passed to create the position of Minister on leave for Ministers who wished to take a period of maternity leave, the salary for which did not count towards the formal cap for salaries, freeing up the ability to appoint a replacement for that period of leave.

I was the second Minister to take up that provision, and used it again when I had my son Max in 2024. It was a very welcome step forward but it was acknowledged at the time that there were areas that the Act failed to address. There is still no formal provision for paternity leave, shared parental leave or adoption leave, with these still being handled through informal agreement and cover.

It could be argued that this is less of an issue for paternity leave, given that the statutory entitlement is only two weeks, so easier to cover informally. Those who followed the Employment Rights Act through this House will know that I am of the view that two weeks is woefully inadequate and something that I hope the Government’s ongoing review of parental leave will address. Nevertheless, even at two weeks, the current system does not address the fact that if you are an officeholder with formal constitutional responsibilities attached, it simply is not possible for someone else to cover them, even for a short period. The current system also does not address the fact that, even though take-up across the country is low, other fathers have the opportunity to take a longer period of leave via shared parental leave.

Another quirk of the system is that even a Minister who is a new mother, with the ability to be appointed as Minister on leave, does not have the ability for their partner to take up any shared parental leave. Given the demands of a ministerial role, including, as we have heard, long days and—often in this place—very late nights, this is a particularly impactful oversight. The ability to succeed in these roles is often down to the long-suffering and unseen partners who support Ministers. Under the current system, unlike for other couples, a Minister’s partner does not have the ability to take any more time to care for their new baby than the existing two weeks of paternity leave. That is due simply to the fact that their partner is a Minister and therefore an officeholder rather than an employee. I think most people would see that as an unintended consequence rather than a deliberate policy choice.

There is also no provision equivalent to adoption leave, which, unlike paternity leave, is available in ordinary circumstances for up to a year to one parent in an adoptive couple. Finally, there is an important omission when it comes to the provision of sick leave. This was something that affected my friend and former colleague James Brokenshire when he was Secretary of State for Northern Ireland and was diagnosed with lung cancer.

The areas that I have highlighted were unfinished business from the Ministerial and other Maternity Allowances Act five years ago. After the passage of that Act, the Government committed to returning to this at a later date. I had hoped that this Bill was that date but, as it is a money Bill, we cannot address the gaps in today’s debate in our House. I appreciate the noble Baroness the Leader of the House finding time to discuss these issues with me yesterday. I know she is committed to ensuring that we can benefit from the talents of all Members in this House in ministerial office, regardless of background or family circumstance. I would appreciate hearing from her what plans the Government have to address the gaps I have spoken of today.

Health and Care Bill

Baroness Penn Excerpts

Lords Hansard _ Part 1 & Report stage
Wednesday 16th March 2022 Lords Chamber

[Lord Naseby (Con)]

I was suggesting that we do carry on because the evidence is there in government data, not in a forecast from the noble Lord, Lord Crisp, or some minor operation that he—

[Baroness Penn (Con)]

I remind noble Lords that only short questions of elucidation are allowed on Report.

[Baroness Walmsley (LD)]

Many thanks. I suggest to the noble Lord, Lord Naseby, that a lot more people will be dead from tobacco if we carry on at this rate. He suggested that, just because this measure was not in the Conservative Party’s manifesto, perhaps we should not carry it forward. Well, the Conservative Party does not have all the best ideas, although I congratulate the Government on the sugary drinks levy, which has been highly successful. We support the polluter pays amendment introduced by the noble Lord, Lord Crisp. I might call it the killer pays amendment because, make no mistake, this is a killer substance.

I happen to live in Wales so I want to raise a matter that has not been mentioned yet. I am glad that the Welsh Government have committed to a smoke-free Wales by 2030. However, although England announced its intention to go smoke-free by 2030 two years before Wales did, Wales has leapt ahead as regards action, which is why I hope that the Minister will either accept Amendment 158 or give adequate assurances. In the Green Paper of July 2019, the Government said:

“Further proposals for moving towards a smoke-free 2030 will be set out at a later date.”


Approaching three years later, still nothing has happened. There are no further proposals and no funding has been announced. In contrast, Wales has published concrete proposals, but many of the interventions require action from the UK Government. Examples include the polluter pays funding mechanism, which could help to fund tobacco control in Wales; raising the age of sale; and putting warnings on cigarettes and pack inserts. I am concerned that, by being so slow, the UK Government are undermining the ability of the devolved Administrations to achieve their smoke-free ambitions. We will support the noble Lord, Lord Crisp, if he chooses to put this amendment to a vote.

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[Baroness Wheeler (Lab)]

My Lords, we had a good debate in Committee on the issue of self-care and the management of health conditions, particularly on its importance as a key part of the primary care pathway. This was underlined in diabetes care and, as I also emphasised, in the care and treatment of people with rare diseases, most of whom are living with lifelong conditions. As vice-chair of the Specialised Healthcare Alliance of charities supporting this key group of patients, I know that they often do not feel sufficiently supported in terms of care and support and health and system information, and with physical and daily living.

As the two noble Lords have stressed, the Health Foundation’s research on the effective self-management by patients has shown a significant reduction in the need for emergency admissions to hospital and in A&E attendances, and fewer GP appointments. In this context, Amendment 165 makes a great deal of sense. If patients with, for example, rare diseases receive appropriate support to manage their less intensive care needs, then promoting self-care has the potential to help them prevent their conditions from deteriorating, to improve their lives and to reduce demands on the NHS, as the noble Lords have stressed.

We therefore strongly support the need for the development of a national self-care strategy, starting with awareness raising among primary and secondary children on how to self-care, and with appropriate staff and management training of healthcare professionals. Improved technologies, as underlined by the noble Lord, Lord Clement-Jones, especially those developed during the pandemic, will have a key role in broadening access to effective self-care and ensuring the better support from primary and community pharmacists that we all want to see. I hope the Minister will respond positively to this amendment.

[Baroness Penn (Con)]

My Lords, I thank the noble Lord, Lord Hunt, for bringing forward a debate on this issue. I reassure him and other noble Lords that the Government absolutely agree that supporting people to maintain their health and well-being and to manage self-treatable conditions is a vital part of delivering a comprehensive health service. Indeed, much of what the amendment seeks to achieve is already government policy. However, I do not agree that requiring the Secretary of State to prepare a single national strategy would add value. Instead, we are threading self-care through a wide range of work, reflecting the range of areas that it impacts upon.

A good deal of work is already under way. The community pharmacy contractual framework for 2019 to 2024 five-year deal sets out how community pharmacy will support the NHS long-term plan. Community pharmacies, which provide easy access to the NHS, are already required to support patient self-care, signpost to other parts of the NHS and local services as necessary, and help people to live healthily.

I am especially aware of the interest the Proprietary Association of Great Britain has shown in this area. The Department of Health and Social Care officials have met with it to discuss its blueprint for a self-care strategy in England and will continue to engage with it about further supporting self-care throughout our healthcare system.

We do not think placing an additional duty on the Secretary of State would be the right way to support this work, as it would take it out of the NHS long-term plan, where it belongs as part of a holistic approach to the provision of a health service. It could risk making it more disjointed rather than integrated in its approach, but noble Lords made a really important point about demand on our health service and the role that self-care has in this. Prevention was a key theme of a speech by my right honourable friend the Secretary of State last week and, clearly, elements of self-care and prevention go hand in hand with each other, particularly in the use of new technology.

Noble Lords also made an important point about how we can use self-care, particularly at community pharmacies, to reduce pressure on GPs and A&E departments. All community pharmacies are required, as I said, to provide support for self-care. To ensure that people get directed to the right support for their health needs, we have introduced referral systems from NHS 111 and GPs to pharmacies for advice and treatment for minor illnesses. We are also exploring expanding referrals from other settings, including urgent treatment centres and A&E to community pharmacies.

I hope that gives noble Lords some reassurance that we place an importance on self-care, as part of our health service. That will only increase in future and work is under way in multiple areas of the health service to do that. I hope, therefore, that the noble Lord is able to withdraw his amendment.

[Lord Hunt of Kings Heath (Lab)]

I am grateful to the noble Lord, Lord Clement-Jones, and my noble friend Lady Wheeler for their support, and to the Minister. I am glad to hear her recognition of the importance of community pharmacy, and about the meetings between officials and the PAGB. That is very welcome.

I agree that the interrelationship between self-care and prevention is important—as is, may I say, personal responsibility. I also agree that the pressure we face in the system is such that this is important for the future. The Government may not want a strategy but, at some point, setting out their aim in this area and giving the right signals to us as individuals, but also to the system, would be very helpful. I beg leave to withdraw my amendment.

Health and Care Bill

Baroness Penn Excerpts

Lords Hansard - Part 2 & Report stage
Monday 7th March 2022 Lords Chamber

[Baroness Merron (Lab)]

My Lords, we have had a considerable debate on these issues, in Committee and this evening in your Lordships’ House. From these Benches, we absolutely support the provisions to tackle obesity. The reasons have been gone over many times, but I make one point in respect of children—that children with obesity are five times more likely to become adults with obesity, and increase their risk of developing a range of conditions, including type-2 diabetes, cancer and heart and liver disease. It is incumbent on us to take the steps that are necessary.

Given the lateness of the hour—and I know that noble Lords wish to get to the question whether there is to be a Division—I shall focus my comments on the amendments relating to advertising, Amendment 151A, in the name of the noble Lord, Lord Black, and the subsequent amendments, to which I have put my own name. There has been a great clarity of argument as to why those amendments deserve favour, but the one that sticks out for me is about ensuring the effectiveness of the legislation that we are speaking about.

We already know that legislation can have a huge impact. For example, the soft drinks industry levy has led to manufacturers reducing 44 million kilograms of sugar each year from drinks in the UK. We also know of the support for the measure of the watershed for advertising of high-fat sugar and salt products—in other words, to protect children from those influences. We know that the measure is supported by organisations such as the British Heart Foundation, the Food Foundation and many other experts as being able to make the difference, because children are influenced by advertising. We should really be ensuring that children see adverts for healthier food and drinks.

Should the will of the House be tested on these amendments, these Benches will certainly be in support, because we feel that the Government should make sure that the proposed pre-9 pm ban on advertising unhealthier foods on TV, with a total ban online, has to be implemented effectively and appropriately across all media and platforms. If it is not and remains as it stands, it will not do the job that it is intended to do, and we will miss an opportunity, which we hope the Minister will reflect on, as the case has been made so clearly and directly.

[Baroness Penn (Con)]

My Lords, I thank noble Lords for this debate. I will turn first to the amendments in the name of my noble friend Lord Bethell. As noble Lords are aware, the Government introduced an amendment in Committee to enable adjustments to the date of commencement of the HFSS advertising restrictions, should emerging issues require it to be moved.

We will continue to work with regulators and businesses to ensure that guidance is produced promptly to support timely implementation; our intention remains to implement restrictions from 1 January 2023. We think that date balances ambition with the importance of sufficient time for business to prepare. However, limiting this flexibility to a period of only three months, as proposed by my noble friend’s amendment, would be counterproductive, as that timeframe may not allow us to respond adequately to any unforeseen challenges or ensure smooth delivery of this policy.

Turning to the amendments tabled by my noble friend Lord Moylan, I seek to reassure him that our current approach provides an overall assessment of the nutritional content of products, as it accounts for nutrients of concern as well as beneficial nutrients. As such, we consider it to be an effective mechanism for permitting healthier products to be advertised, while still restricting those which are less healthy overall. The detail of the products in scope will be underpinned by secondary legislation, which can provide the necessary detail and be adapted in response to future changes to products on the market. The Government will consult soon on this and other definitions included in the draft regulations, such as the small and medium enterprise exemption.

I turn now to the amendments on platform liability. The Government believe that the online advertising programme remains the best way to address such issues on an industry-wide basis, rather than in a piecemeal fashion. I am pleased to be able to confirm that the DCMS consultation, which should launch in the next fortnight, will examine the harms associated with paid-for advertising online and consider the measures that could apply to platforms and others in the supply chain in order to increase accountability and transparency.

It is our intention to legislate on those conclusions in this Parliament, as we share the view that it is the right time to put in place holistic measures to tackle platform liability. However, it is also right to bring forward powers in this Bill now, so that we can begin to tackle obesity via restrictions to TV, on-demand programme services and online, in line with current enforcement frameworks for advertising that are familiar to industry. Platforms are not able to pre-vet adverts in the same way that broadcasters can. We recognise that there is a need to address that issue, but to do so in the round.

Amending this Bill in relation to online platforms without wider consultation and at a late stage risks unintended consequences. Those could include undermining the clear responsibility of advertisers to adhere to the restrictions that we are debating; interfering with the competitive dynamics that apply across the online advertising supply chain; not addressing accountability and transparency issues that apply elsewhere in that ecosystem; the danger of the restrictions applying to a wide range of internet service providers beyond those intended, including intermediaries and publishers; and not providing regulators with the right tools, funding or structures to regulate effectively. Were this amendment to pass, the Government would need to consider very carefully whether implementation from 1 January 2023 remained possible. The risks posed by creating a more complicated regulatory framework are likely to result in a delay.

[Lord Grade of Yarmouth (Con)]

My Lords, I am grateful to my noble friend the Minister for giving way. Do the Government understand the difference between mass brand advertising on free-to-air linear television and the direct addressability to individuals online, where they have all the data—the address, postcode, email address and phone number—of the kids they are advertising to? The Government seem not to understand the pernicious nature of advertising online.

[Baroness Penn (Con)]

My Lords, in our 2020 consultation on advertising, we outlined our concerns about online targeting of adverts, so we did look at the approach suggested by my noble friend. There is no evidence to suggest that targeting online does not account for the use of shared devices and profiles between parents and children, the communal viewing of content or false reporting of children’s ages. This—combined with concerns around the accuracy of internet-based targeting and other behavioural data as a way of guessing a user’s age and a lack of transparency in reporting online—shows why the Government believe that we need to introduce these advertising restrictions online in the way that we have.

Health and Care Bill

Baroness Penn Excerpts

Committee stage
Friday 4th February 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, this has been an important and engaging debate. There has been consensus that childhood obesity is one of the biggest health problems this nation faces—and maybe not just a health problem. We have also talked about the impact of inequality and broader life chances. The latest national child measurement programme data, from 2020-21, showed that some 40% of children leaving primary schools in England were overweight or living with obesity.

That is why, as part of our ambition to halve childhood obesity by 2030, it is imperative that we reduce children’s exposure to less healthy food and drink product advertising on TV and online. To be clear, the Government know that this is not a silver bullet, and this action alone will not solve the problem; it is part of a multifaceted plan. I can reassure my noble friend Lord Grade and the noble Baroness, Lady Walmsley, that this includes working with manufacturers on reformulation and to produce healthier food. Indeed, we are clear that products that are reformulated to pass the MPM will be able to be advertised, and we hope this provides a motivation for brands to do so. Obesity is a complex problem that builds over time through frequent excessive calorie consumption. Through this one action, as part of a wider programme, we estimate that we can remove up to 7.2 billion calories from children’s diets per year in the UK.

Turning to specific amendments and looking first at what should be covered by these priorities, I will speak to Amendments 253B, 254A, 254B, 247A, 249ZA, 249ZB, 250B, 252ZA, 252ZB, 248, 248A, and 251. We believe that the current approach to defining food that is less healthy provides sufficient legal certainty and is consistent with other healthy weight restrictions and policies. For example, it is used in a similar way in the promotions and placement restrictions for less healthy food and drink, which were made law last December.

It is important to provide detail in the Bill on the two-step criteria to determine what is less healthy, in order to ensure that the primary legislation is sufficiently clear. The nutrient profiling model has been used by Ofcom since 2007 to determine what can be advertised around child-specific programming on TV, although outside the statutory framework. The technical guidance of January 2011, which provides the steps to calculate the nutrient profiling model score, is an existing document that has been specifically developed and used to support industry since it was published. Its substance is not changeable at the discretion of the Secretary of State and, as an additional safeguard, the Government have already amended Schedule 17 to include a statutory duty to consult in the event that a change is proposed to the meaning of “the relevant guidance”.

I can assure noble Lords that the current approach would allow healthier products, which may contain fruit, nuts and seeds or be a source of protein, to not be caught by restrictions, while still restricting those which are less healthy overall. However, that will also need to be underpinned by secondary legislation, which the Government will be consulting on shortly, and the points your Lordships have raised will be considered as part of this.

The proposed amendment to permit the advertising of confectionery of less than 200 calories could mean that adverts for chocolate confectionery products could still be permitted on TV before the watershed and online, given the likely difficulty in determining portion sizes in such adverts. This would undermine the policy and send out the wrong message to consumers and producers.

In response to Amendment 244, we do not believe it is necessary to consult on whether alcohol should be included as a “less healthy” product, as these provisions are aimed at reducing the exposure of children to less healthy food and drink advertising. Unlike alcohol, less healthy food and drink products are not age-restricted at the point of purchase. In addition, as noble Lords have noted, there are other measures in place that address the advertising of alcohol.

Turning to Amendments 247, 250A and 253A, I assure noble Lords that brand advertising is out of scope of the restrictions, as these clauses focus on identifiable products. Including an exemption in the Bill for something that is already out of scope would have no legal effect and therefore may cause undue confusion.

I turn to Amendments 248B, 251A and 253C on who will be covered by these proposals. We intend to define food and drink SMEs as businesses with 249 employees or fewer, as outlined in our consultation response. By doing this, the Government want to ensure consistency with other similar definitions, such as for out-of-home calorie labelling. We will consult on the secondary legislation defining food and drink SMEs shortly, but this approach will allow Ministers to act promptly to change the definition of food or drink SMEs in future, should it be necessary.

I turn to platform liability and other questions regarding the watershed hours in Amendments 250ZA, 253ZA, 254A, 255A, 255B, 257B and 253AA. Platform liability is incredibly important. During the 2020 consultation, we considered whether other actors in the online advertising supply chain should have responsibility for breaches alongside advertisers, but concluded that this was not the right place for this broader issue, given the far-reaching impacts for the industry. However, I reassure my noble friend Lady Stowell, the noble Lord, Lord Clement-Jones, and many others that the Government intend to consider platform liability as part of the wider online advertising programme.

On the question of when these restrictions should apply, Ofcom’s research—

[Baroness Stowell of Beeston (Con)]

I am so sorry to interrupt my noble friend, but can she please give us a timescale for that?

[Baroness Penn (Con)]

I believe it is being conducted this year, but I will check that and come back to my noble friend and all other Members of the Committee, because I know there is significant concern on that point.

On the timing of the restrictions on television, Ofcom research suggests that children’s viewing peaks in the hours after school, with the largest number of child viewers concentrated between 6 pm and 9 pm. In this period, half of children’s viewing takes place during adult commercial programming. We do not therefore believe that introducing advertising restrictions only on the weekend is sufficient to meet our policy objectives.

We are committed to ensuring that businesses are supported now and when the regime comes into force. We will, of course, consult on the secondary legislation and guidance, which should give stakeholders more clarity. However, in response to Amendments 245, 255, 256, 257 and 317, we believe that the overall policy direction has been set out effectively and we do not think that there is a need to add the kind of gap between publication of final guidance and implementation, as proposed by my noble friend’s amendment.

In response to Amendments 249A, 252A and 257A, I can assure your Lordships that we will conduct a post-implementation review five years after implementation. This is intended to be based on the variables set out in the impact assessment, published in June 2021. However, the Government believe that further tying down of the criteria at this stage would be counterproductive. We will also use this opportunity to look at any displacement of advertising to other media not covered by the restrictions, such as outdoor advertising.

However, in response to Amendment 244A, there is insufficient evidence at this stage of the influence of further national advertising restrictions in other media on calorie consumption in children, which is why these restrictions focus on TV and online only. We would also advise against adding a sunset clause, as it would pre-empt this evaluative work and could undermine compliance. We have heard quite a bit from noble Lords about the need for certainty on the Government’s approach in this area. I say to my noble friend that a sunset clause on these regulations would undermine that case.

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[Lord Grade of Yarmouth (Con)]

Before my noble friend sits down, can she give the House some sense of what the Government would regard as success as a result of the advertising ban? Is there some target of reduction that they expect to see at the end of five years as a result of this ridiculous ban?

[Baroness Penn (Con)]

I believe that I said that the criteria for measuring the success of this policy have been set out in the impact assessment. I will happily send that to my noble friend. I do not think that it is a finalised list. We have discussed in this Committee the difficulty of assessing success, so we would not want to preclude new research or information that would help us to assess our approach better in future.

My noble friend was right in anticipating that I was about to conclude. This has been a substantial group of amendments—

[Lord Lansley (Con)]

Before my noble friend sits down, can I ask her about the nutrient profiling technical guidance? What is the timetable and process for its review?

[Baroness Penn (Con)]

My noble friend was of course eagle-eared—I am mixing a metaphor—in that I did not address his point on that. I can tell him that, in 2016, the Government commissioned Public Health England to review the UK NPM algorithm that has been in place since 2004, to ensure that it aligns with dietary recommendations from the Scientific Advisory Committee on Nutrition, particularly for free sugars and fibre. I am afraid to say that my next line is that the outcome of that review will be published in due course.

[Lord Clement-Jones (LD)]

I want to follow up on that question. It was in 2018 that the consultation took place; is the Minister aware of that? We are now four years down the track and nothing has come out.

[Baroness Penn (Con)]

The date that I have for the commissioning of the work is 2016, which means that we are even further down the road on that piece of work. I am well aware of the time that has passed since then. I will undertake to see if I can provide any update beyond “in due course”, but I do not want to raise noble Lords’ hopes too far on that.

I hope that I have been able to provide noble Lords across the Chamber with assurances as to our plans and, therefore, that noble Lords will feel able not to press their amendments.

[Baroness Finlay of Llandaff (CB)]

My Lords, we are three hours and 49 amendments on and I am sure that everyone in the House will join me in saying that we have enjoyed hearing from the noble Baroness the Minister now that she is back in Committee with us.

It is perhaps a crumb of comfort to those who have been worried about advertising and the outcomes that Norway’s ban since 2013 has shown that other products moved into the space and there was not a total loss of income. Quebec has had the least rise in childhood obesity in Canada since its ban. I will not comment any more on that other than to say that we have all recognised that obesity is a serious problem that needs to be addressed. The Wild West digital space of the platforms needs to be addressed quite urgently and will be more difficult, but I hope that this will not deter the Government from their action to tackle obesity.

For my amendment, I just remind the House that alcohol adverts are tempting young people into early consumption. It is a highly obesogenic and highly addictive substance, which is why my amendment was there. I am disappointed that the Government are not even considering incorporating it in the list of substances, but I beg leave to withdraw my amendment.

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Moved by

[Baroness Penn]

246: Schedule 17, page 234, line 23, at end insert—
“(1A) OFCOM must ensure that the prohibition provided for by the first standards set by virtue of subsection (1) takes effect from the beginning of 1 January 2023.”Member’s explanatory statement
This amendment ensures that the watershed on television advertising of unhealthy food and drink will not apply until 1 January 2023.

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Moved by

[Baroness Penn]

249: Schedule 17, page 235, line 18, at end insert—
“(4A) The Secretary of State may, before the date specified in subsection (1A), amend that subsection so as to substitute a later date for the date that is for the time being specified there.”Member’s explanatory statement
This amendment allows the Secretary of State to defer beyond 1 January 2023 the date when the watershed on television advertising of unhealthy food and drink begins to apply.

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Moved by

[Baroness Penn]

250: Schedule 17, page 235, line 30, leave out from beginning to “include” in line 31 and insert “From the beginning of 1 January 2023, on-demand programme services must not, between 5.30 am and 9.00 pm,”
Member’s explanatory statement
This amendment ensures that the watershed on advertising of unhealthy food and drink in on-demand programme services will not apply until 1 January 2023.

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Moved by

[Baroness Penn]

252: Schedule 17, page 236, line 16, at end insert—
“(5A) The Secretary of State may, before the date specified in subsection (1), amend that subsection so as to substitute a later date for the date that is for the time being specified there.” Member’s explanatory statement
This amendment allows the Secretary of State to defer beyond 1 January 2023 the date when the watershed on advertising of unhealthy food and drink in on-demand programme services begins to apply.

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Moved by

[Baroness Penn]

253: Schedule 17, page 236, line 32, at beginning insert “From the beginning of 1 January 2023,”
Member’s explanatory statement
This amendment ensures that the prohibition on online advertising of unhealthy food and drink will not apply until 1 January 2023.

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Moved by

[Baroness Penn]

254: Schedule 17, page 237, line 38, at end insert—
“(6A) The Secretary of State may, before the date specified in subsection (1)—(a) amend that subsection so as to substitute a later date for the date that is for the time being specified there, and(b) make corresponding amendments to the references to that date in subsections (10) and (11).”Member’s explanatory statement
This amendment allows the Secretary of State to defer beyond 1 January 2023 the date when the prohibition on online advertising of unhealthy food and drink begins to apply.

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[Baroness Penn (Con)]

My Lords, I am grateful to all the noble Baronesses who have spoken in this group, and in particular to my noble friend Lady Cumberlege for all the work that she has done on patient safety. I have noted their points very carefully and look forward to the further discussion of transparency and scrutiny of healthcare professionals in the debate on the next group where, on the point that the noble Baroness, Lady Thornton, made about payments from pharma and so on, it is my understanding that it will be on industry to declare those nationally.

Financial Services Bill

Baroness Penn Excerpts

3rd reading & Report stage
Monday 19th April 2021 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, we welcome the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Holmes of Richmond, on digital ID and other, broader, fintech issues. They provide the Government with an opportunity to elaborate on the responses given in Committee. I hope that those who tabled the amendments will forgive me for not speaking to each in turn, but to do so would be to repeat many of the points already made.

While we would not necessarily endorse some of the timescales envisaged in the amendments, the questions asked by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Holmes, are sensible. In commissioning a review of fintech, the Government have demonstrated a level of interest in it, but the key question is how that is developed into concrete initiatives that grow the financial services sector while also improving the customer experience. The use of distributed digital identification could bring about a fundamental shift in how individuals and financial service businesses operate and interact on a day-to-day basis.

Properly considered implementation of digital ID could empower consumers by giving them greater choice in the services that they can access and better control over their personal data. The latter point is crucial. Any steps to further digitise the sector must come with security and privacy safeguards built in. It may not be possible or desirable to roll out digital ID overnight, but it would be interesting to hear more on the steps being taken by the Treasury and others to assess the opportunities and risks that exist. I hope that the Minister can also speak to potential timescales, even if they are not as ambitious as those spelled out in the amendments.

Amendment 37E in the name of the noble Lord, Lord Holmes of Richmond, appears to be a probing amendment, but I hope the Government will take seriously his suggestion of studying the links between digital and financial exclusion. In an earlier debate I referred to the need to tackle some of the bigger, more complex issues that contribute to financial exclusion. Without concerted effort now, one can envisage a scenario in which certain sections of the population already susceptible to financial exclusion will be unable to avail themselves of the products and services facilitated by new technologies.

We are at an interesting point in the fintech debate following publication of the Kalifa review. Items such as digital ID are mentioned in that document, albeit in the context of the need to establish international codes and standards. The UK has long been a leader in this sector. If we are to continue being so, both government and business must seek to participate fully in relevant cross-border discussions and initiatives.

I note from my latest perusal of the House of Lords business that the ever-tenacious noble Lord, Lord Holmes, has secured an Oral Question on 27 April regarding the Government’s response to the Kalifa review’s recommendations. I hope the Minister can provide sufficient reassurance that the Treasury recognises and wishes to harness the potential of fintech, but I am sure that any gaps in the response today will be revisited in just under two weeks.

[Baroness Penn (Con)]

My Lords, this group of amendments returns to the use of technology and data in financial services, a topic we have discussed at length at earlier stages. It is an important debate, and I welcome the efforts of noble Lords to bring this to our attention again.

As the noble Baroness, Lady Kramer, noted, as part of UK FinTech Week 2021 my right honourable friend the Chancellor, just this morning, delivered a speech setting out the Government’s commitment to fintech as a crucial component of the future of UK financial services. The Chancellor made several announcements, including the launch of a new task force between the Treasury and the Bank of England to co-ordinate exploratory work on a potential central bank digital currency; a new financial market infrastructure sandbox; confirmation that the FCA will take forward the idea of a regulatory scale box; a package of measures to support fintech firm growth; and a commitment to work with the fintech community to realise the idea of a new, industry-led centre for finance, innovation and technology.

The Chancellor also reiterated his thanks to Ron Kalifa for his landmark fintech review and confirmed that the Government will shortly provide a detailed response to Parliament via a Written Statement. I am not sure I can say to the noble Lord, Lord Tunnicliffe, whether that will be before the Oral Question on 27 April.

I turn to the amendments before us today. Amendments 28, 29 and 30 all relate to the establishment of a system of digital identification and call on the Government to publish plans for achieving this. Digital identity is a vital building block for the economy of the future. The Government recognise that digital identities have the potential to make it quicker, easier and more secure for people and businesses to get things done, to simplify people’s lives and to boost business. We want to offer people the choice to provide their identity digitally where and when it suits them, securely, easily and with confidence.

I was pleased to be able to meet my noble friends Lady Neville-Rolfe and Lord Holmes last week. In that meeting, we discussed the ambitious programme of work that the Government are taking forward on digital identities that work across the economy, some of which I will summarise here.

The Government published their response to the digital identity call for evidence in September 2020 and committed to creating a framework of standards, governance and legislation to enable digital identities to be used in the greatest number of circumstances. I assure my noble friend Lady McIntosh of Pickering that this work is being co-ordinated by the Department for Digital, Culture, Media and Sport across all departments, including the Treasury, so that the policy on digital ID captures the widest number of applications and uses for it. An important part of this work was the recent publication of the draft UK Digital Identity and Attributes Trust Framework. This framework sets out a vision of the rules governing the future use of trusted digital identity products.

Financial Services Bill

Baroness Penn Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, during our debates on this Bill, we have referred several times to the success of principles-based regulation in this country. We have contrasted it with the more prescriptive regulatory structures introduced within the European Union. The idea of a duty of care is a prime example of principles-based regulation because it presents a principle from which particular actions can be derived. It is now very important, given the financial stresses created by the pandemic to which several noble Lords have referred in their contributions to this debate. This is but one example of the unexpected pressures in the financial system that arise on a regular basis, not least because of the fintech innovations referred to earlier which require a flexible, principles-based approach. The strength of this approach is that is encompasses financial innovation—the changes to which many noble Lords have referred.

I understand that later in the consideration of this Bill the Government will bring forward measures to regulate the “buy now, pay later” market. This would already have been encompassed in a duty of care. It would not have slipped through the gap. If there had been a general duty of care in place, consumers would have received some degree of protection already.

One of the striking things about the issue of a duty of care and the FCA rulebook is that a number of measures that amount to a duty of care exist in the rulebook already. There are “know your customer”, “treating customers fairly” and the consumer credit rules, which require assessment of creditworthiness. What is striking is that this specific list has gaps in it.

Many noble Lords referred to the examples of malfeasance; it is this structure that creates the environment for and encourages malfeasance. It encourages testing of boundaries and of gaps. If there were instead a broad principle it would significantly discourage that persistent, competitive drive to test the gaps that exist in the current list of consumer protection measures in the FCA rulebook.

It is not simply that the lack of a duty of care creates the inability to deal with malfeasance; it actually creates it by the structure it presents for a very competitive market. We all know that this particular structure—having a specific list of something in a legal document—always raises the question of what has been left out. That is exactly the case in the FCA rulebook. It lacks the firm foundation of principle.

In Grand Committee, the noble Baroness, Lady Penn, was quite right to argue in summing up that

“the FCA is already taking steps to ensure that financial services firms exercise due care and regard when offering products, services and advice to consumers.”

She was right that there is a list, but she was quite wrong to then argue that a statutory duty of care

“does not add to the FCA’s existing powers in this area.”—[Official Report, 22/2/21; col. GC 116.]

Of course it does. It must do, in one of the most dynamic industries in the United Kingdom, associated with innovation, change and competition. It is the very nature of successful principles-based regulation that actions should derive from general principles.

The FCA lacks this statutory declaration of general principle. This is why Macmillan Cancer Support’s campaign Banking on Change was necessary, and why it is so important to place a general principle of duty of care on the statute book. My noble friend Lord Stevenson has made a very specific offer to the Minister with respect to Third Reading. I strongly urge her to accept it.

[Baroness Penn (Con)]

My Lords, I am grateful to the noble Lords who have put forward this amendment, and I appreciate the strength of feeling that exists around this important issue. I also pay tribute to the arguments made in previous stages of this Bill, including in Grand Committee. Noble Lords have spoken passionately about the need to tackle issues of consumer harm that exist in the financial services industry, and I agree that it is essential that this issue is addressed effectively.

The Government are committed to ensuring that financial services consumers are protected and that steps are taken quickly to address issues when they are identified. The noble Lord, Lord Eatwell, argued for a principles-based approach to financial services regulation. That is what is contained in the FCA’s principles for business, which govern financial services firms’ treatment of their customers, as well as the specific requirements in the FCA’s handbook.

I hope noble Lords will not mind if I set out the principles of business, because that will help us in considering the amendment. The principles include:

“A firm must conduct its business with integrity … A firm must conduct its business with due skill, care, and diligence … A firm must pay due regard to the interests of its customers and treat them fairly … A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair, and not misleading … A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client … A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.”


These fundamental principles aim to protect consumers who often have less knowledge and expertise than the firms providing them services.

--- Later in debate ---

[Lord Eatwell (Lab)]

My Lords, we should all be grateful to the noble Baroness, Lady Noakes, for her persistence in this vital area. She is quite right that the clock is ticking: with nine months to go, we really need to do something about this issue; to do otherwise would be irresponsible.

Amendment 4 is valuable in defining continuity of contract, but there remains a problem that it does not and cannot solve: if the foundation of a contract is changed, its value can change. That leads on to Amendment 5. Here, I regret to say that I differ with the noble Baroness, Lady Noakes, and with the noble Baroness, Lady Bowles. It is surely the responsibility of Parliament in this case primarily to protect the retail investor, as it is the retail investor who is not the professional, who typically does not have the same information as the professional and who is likely to be more financially vulnerable, not least because retail investment is dominated by pension savings. I therefore conclude that the provision of a safe harbour is inappropriate in this case and would be looking instead for some mechanism of reconciliation rather than prevention of claim.

However, I am delighted to express my support for Amendment 6—which is not surprising as my name is on it. Here the noble Baroness, Lady Noakes, has actually saved the Government from considerable embarrassment by presenting an amendment which succinctly encapsulates, without being prescriptive, the issues the FCA must address in facing the difficulties created by the replacement of Libor: continuity of contract and reconciling the damages. Unlike Amendments 4 and 5, Amendment 6 incorporates those. I express strong support for Amendment 6 and recommend it wholeheartedly to the Government. In terms of the buffet approach, it is the healthy option.

[Baroness Penn (Con)]

Noble Lords will remember from previous stages that the Bill provides the FCA with the powers to manage an orderly wind-down of a critical benchmark such as the Libor benchmark.

In 2015, the Financial Stability Board recommended a transition away from certain interest rate benchmarks, including Libor, to alternative rates based on active and liquid underlying markets. In 2017, the FCA secured agreement from the panel banks that contribute to Libor that they would continue submissions until the end of 2021, providing time for firms to move away from use of the Libor wherever possible.

However, it has been clear for some time that there will be certain “tough legacy” contracts that will be unable to transition away from Libor in time. It is for the benefit of these contracts that the Bill grants the FCA the power under Article 23D of the Benchmarks Regulation to direct a change in how a benchmark is calculated, so that the benchmark can continue for a limited time after banks stop providing their contributions. The Bill therefore represents a critical step in providing for a smooth transition away from Libor, mitigating the risk of the financial instability and market disruption that could be caused by a disorderly transition or end to Libor. It has been widely welcomed by the financial services industry and internationally.

The proposed amendments seek to supplement the Bill’s provisions, reducing further the scope for uncertainty, contractual disputes or litigation between parties over the reference to a benchmark within a contract where the FCA has directed a change in the methodology on which the benchmark is calculated. Amendment 4 seeks to provide for contract continuity where the FCA uses its Article 23D power to impose a change in the methodology of a critical benchmark, providing that parties must interpret references to that benchmark in their contracts as references to the revised benchmark. Amendment 5 seeks to reduce the scope for litigation where the FCA has exercised its Article 23D power on a critical benchmark, providing a safe harbour for the use of that benchmark.

As stated in Committee and in the other place, the Government are committed to ensuring that an appropriate framework is in place for the orderly wind-down of Libor. We take this matter very seriously. As my noble friend Lady Noakes noted, the Government’s consultation on this issue has only recently closed, on 15 March. The consultation responses have underscored that there are complex and wide-ranging policy and legal considerations that must be fully understood before taking any further action on this issue. That range of considerations and views has been illustrated by the range of views expressed in this evening’s debate, but my noble friend Lady Noakes is correct to say that the industry has indicated, including through its responses to the consultation, that it is supportive of the approach set by the Government in the consultation.

Financial Services Bill

Baroness Penn Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the noble Lord, Lord Holmes of Richmond, for tabling this group of amendments, which deal with various aspects of fintech. His contributions on this Bill have been thoughtful, and nobody should be surprised by him pushing this agenda today, given his role as co-chair of the relevant APPG. As other noble Lords have mentioned, this debate is a topical one, following the publication of the Kalifa review on fintech last month. We welcome that review and hope that the Government will support our world-leading fintech sector to continue innovating and do so in a way that spreads opportunity to all parts of the country.

When we refer to things being life changing, we often do so in a hyperbolic manner. However, it is no exaggeration to say that technological innovation in the financial services sector has fundamentally altered our understanding of and everyday experiences with money. The pace and scope of change has been incredible; the journey from cheques to mobile phone payments, for example, has been a swift one. Many young people conduct virtually all their banking activity online through the apps of high-street banks or using entirely digital services such as Monzo. Elsewhere, terms such as crowdfunding and crypto currency have become common parlance, with the emergence and increasing use of new technologies, including artificial intelligence and blockchain. The possibilities are almost beyond comprehension.

Taken collectively, the noble Lord’s amendments point to the crux of the issue: how can we maximise the opportunities that undoubtedly exist in the sector while guarding against the risk inherent in the use of new technologies and working practices? Artificial intelligence is an interesting case in point. AI tools, which are regularly deployed in a number of sectors, have the potential to assist with a variety of issues which we have covered in previous debates, such as identifying fraudulent or otherwise suspicious transactions. However, Amendments 112 and 118 refer to some of the ethical considerations that arise from automated decision-making.

In a recent piece for the House magazine, and again in his opening remarks, the noble Lord issued a challenge to the Government that they should take steps now to foster the potential for our fintech sector or risk losing talent to our competitors, falling behind in the global tech arms race and, ultimately, having to play catch-up. I am not necessarily convinced of the case for legislative requirements for reports and reviews on these issues. The noble Lord is right to seek more information on the Government’s intentions. If London is to be the world-leading financial centre that the Chancellor and many others would like it to be, how do the Government plan to strike the balance that I spoke of previously? In striking that balance, how do Ministers plan to ensure that consumers and citizens are placed at the heart of a digital finance package? With technology touching all our lives, it is only right that we should all reap the benefits of change. However, as I mentioned previously, we must also take steps to identify and mitigate the risks.

There is probably far more that could be said than time allows. I look forward to seeing how much ground the Minister is able to cover.

[Baroness Penn (Con)]

My Lords, I am grateful for this opportunity to discuss the important issue of the use of technology in financial services and how technological developments will continue to impact the sector. The UK has been independently ranked as one of the best places in the world to start and grow a financial technology, or fintech, firm. I reassure my noble friend Lady McIntosh of Pickering that, as the Chancellor set out in his November speech on the future of financial services, we are not complacent. We want to build on this strength and use technology to deliver better outcomes for consumers and businesses and make the most of the job opportunities that this sector presents.

Many of the questions raised by the adoption of cutting-edge technology apply across the whole economy, not just to financial services, so although I am sympathetic to the purpose behind a number of the amendments—ensuring that the UK embraces the opportunities that new technology can bring—I am not convinced that they are the best route forward at this time.

Financial Services Bill

Baroness Penn Excerpts

Committee stage
Monday 8th March 2021 Grand Committee

[Lord Eatwell (Lab)]

My Lords, this request for a review of short selling is essentially a request to focus on just one of the aspects of the financial markets today that may contribute to enhanced instability in times of stress. It is not just short selling that involves the sale of borrowed assets—this is what the repo market, for example, is all about. The repo market was central to the dangerously short-term funding of the banking sector in the run-up to the financial crisis of 2007-9.

Of course, short selling is prominent because it is a factor in falling markets, when money is being lost, as opposed to similar practices in rising market bubbles, when money is being made. Of course, the short sellers sometimes get their comeuppance, as has been mentioned by several noble Lords in reference to the case of GameStop. The fundamental question is not whether short selling is a process that can be abused—of course it can. What is important is whether the very existence of the practice contributes to market instability and risk or, as has also been argued, to price discovery and greater liquidity.

Those questions may be asked of many practices in our financial markets today, and, at a time when the UK is rethinking its economic and financial future after leaving the European Union, perhaps the time is right for such a wider review of permitted practices. This could begin with consideration of the impact of trading in borrowed assets—as well as, of course, naked transactions—in forward markets.

Since the liberalising years of the 1970s and 1980s, a wide range of these market practices have developed, with potentially serious destabilising consequences—indeed, we have seen these. As such, does the Minister agree with the many noble Lords who have argued that it is time to stand back and think through whether matters have gone too far, are just right or have not gone far enough? Perhaps such a review is too specific for the regulatory framework review that is going on at the moment because, after all, that is about the framework. However, it is necessary to consider, from time to time, practices that will inevitably have downsides but may also have upsides. That sort of consideration should not be delayed at a time when market regulation is changing significantly, with the exit from the European Union.

[Baroness Penn (Con)]

My Lords, it is important to stress, as a number of noble Lords have done, that short selling is a legitimate investment technique that can contribute to orderly and open markets supporting many consumers. Taking short and long positions can ensure that investors are able to manage risk and volatility in their portfolio, particularly during uncertain times; for example, if a firm has purchased a large number of shares, that firm might want to short some of those shares if they have a volatile price.

As my noble friend Lady McIntosh of Pickering ably set out, the UK’s regulatory regime for short selling is predominantly set out in the short selling regulations, which were introduced in 2012 to regulate short selling practices while safeguarding companies and the financial system. Among other things, it requires persons to notify the FCA of the size of their short positions in shares traded on a UK trading venue. It also gives the FCA various powers to intervene in response to exceptional circumstances that pose a serious threat to financial stability or market confidence in the UK. These include requiring the notification or disclosure of short positions, as well as restricting short selling to periods of up to three months. Furthermore, the FCA can temporarily prohibit or restrict short selling when the price has fallen significantly during a single trading day relative to the closing price of that instrument on the previous trading day. This regime is working as intended, providing the necessary safeguards to allow the operation of a fair and effective market. The Government continue to work closely with the regulators and market participants to monitor the effectiveness of the entire regulatory regime to ensure that legislation continues to be fit for purpose and delivers on its objectives, in particular to support economic growth and maintain financial stability.

As my noble friend Lady McIntosh of Pickering noted on the example of GameStop, the UK short selling regime was not breached because it does not apply to shares admitted to trading on US trading venues. Furthermore, the regime that I have just set out that applies to short selling would mean that in such a scenario in the UK the FCA would have been able to identify short positions building up and would have been able effectively to engage with the firms holding the short positions in that case.

I am not sure that I recognise the characterisation of the Bank for International Settlements’ report set out by my noble friend Lady McIntosh of Pickering, but I will happily write to her on that matter.

A number of noble Lords have spoken, from different perspectives, in favour of a review of short selling. In response to a number of direct questions about what jurisdictions such a review would look at or whether it would look at relaxing or shoring up such regulations, at this point the Government do not see this issue as the most pressing area of financial services regulation to look at. We see no need to conduct a review of this legislation at this time, so I ask my noble friend Lady McIntosh to withdraw her amendment.

[Baroness McIntosh of Pickering (Con) [V]]

I am grateful to the Minister and to all those who have contributed. I recognise the role that the noble Baroness, Lady Bowles, played in the adoption of the current EU regulation. I am grateful to my noble friend and others who set out the arguments on one side or the other. I have a great deal of sympathy with my noble friend Lord Holmes of Richmond and his earlier amendment calling for a review of all financial regulations and regulators’ rules, and I note that my noble friend Lady Penn does not see the need for this at present.

This is something that I will personally continue to monitor. I have no doubt that my noble friend Lady Noakes, who speaks with great authority and expertise on these issues, and my noble friends Lord Sharpe and Lord Trenchard would prefer that many of the regulations would just go away, but I am rather pleased that they are not going away for the moment. My concerns have been addressed to a great extent. I will continue to support my noble friend Lord Holmes’s call for a further review of all these practices. I am grateful to have had the opportunity to debate these issues and I beg leave to withdraw the amendment at this stage.

--- Later in debate ---

Amendments 91 to 98 not moved.

[Baroness Penn (Con)]

My Lords, this may be a convenient moment for the Committee to adjourn.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

That concludes the work of the Committee this afternoon. As always, I remind Members to sanitise desks and chairs.

Financial Services Bill

Baroness Penn Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Lord Tunnicliffe (Lab) [V]]

My Lords, despite various initiatives to encourage the emergence of challenger banks and local and regional institutions, barriers to entry remain high and the UK does not have a very positive story to tell. If they were provided with the right regulatory framework, an expansion in the number of local and regional banks could play an important role in addressing local inequalities, building financial inclusion and increasing the proportion of lending going to the real economy SMEs. It is important not to look at this as a zero-sum game; it is not, or at least should not be, a choice between supporting either big corporates or small banks, but rather about creating a financial services ecosystem that covers everybody’s needs.

These amendments seem benign. Nevertheless, banking is a risky activity. It is a funny business: it goes out of its way to look respectable and sound, but, as we know, it is extremely frail. In the financial crisis of 2008, the country almost came to a position of collapse—much closer than we seem to remember. Only through decisive action by the Government of the time, and by other overseas Governments, were we saved from a serious financial crisis that could have crippled the world.

When looking at a bunch of amendments like this, one might be tempted to say that the PRA’s general objective will look after us, and one should remember that its general objective is promoting the safety and soundness of PRA-authorised persons. However, if these amendments were to become a trade-off between the amendments and the PRA’s general objective, that would be a step too far in the safety of the banking structure. Accordingly, I hope that the Government will have listened to the suite of sensible ideas expressed today but judge it as an overall package of goods and bring forward some proposals that capture the best without endangering the banking system. My noble friend Lord Stevenson brought up the fact that individuals desperately need a safe and orderly form of low-cost credit, and that is equally true of SMEs.

[Baroness Penn (Con)]

My Lords, as has been set out, this grouping considers issues relating to competition and proportionate regulation in support of increased competition. Increasing competition in banking has been a priority for government under successive Prime Ministers; this can be traced back to the immediate period following the financial crisis and, indeed, the work of the Independent Commission on Banking and the Parliamentary Commission on Banking Standards, of which I know noble Lords in this Committee were members.

Amendment 29 seeks to ensure that the FCA and PRA give due consideration to competition in exercising their duties and apply their rules and regulations proportionately to different-sized firms. It is important to note that the FCA and PRA are already required to consider competition as part of their statutory objectives. It was essential to put competition at the heart of the post-2007 financial crisis regulatory reforms. For the FCA, this is one of the three operational objectives and, for the PRA, it is a secondary objective—secondary to its safety and soundness objective. Since being given their competition objectives, both the FCA and PRA have taken significant actions to improve competition in UK financial services.

I shall give some examples. First, the new bank start-up unit was set up in 2016 as a joint initiative of the PRA and FCA to make the process of setting up a new bank in the UK more straightforward. Since it was launched, 20 new banks have been authorised, and the PRA continues to ensure that steps are taken to ensure that it is acting on its competition objective. For example, it consulted in summer 2020 on its approach to new and growing banks and, in November 2020, announced its intention to consider a more proportionate prudential regime for smaller banks, which promotes growth. Secondly, the FCA launched its regulatory sandbox in 2015, the first of its kind globally. This sandbox enables businesses to test innovative propositions with customers, improving the range of services and products available to UK customers. The FCA also recently launched a new digital sandbox to allow early stage firms access to data, which enables them further to develop their innovative ideas.

To give some more examples, the current account switch service, or CASS, was introduced in 2013 to allow customers easily to switch account provider when they see a better deal. As of September 2020, customers have switched over 6.8 million times using the service. The Payment Systems Regulator has been created to ensure fair and competitive access to central payment systems so that payment systems work in the interests of the businesses and customers that use them, and an SME credit data-sharing scheme has been introduced to make it easier for challenger banks and alternative finance providers to check the creditworthiness of businesses, improving their ability to lend to SMEs. I hope that reassures noble Lords that competition is already a key priority for this Government and is being properly considered by regulators.

Amendment 43, in the name of the noble Baroness, Lady Kramer, would remove existing capital requirements for banks with assets below £100 billion. As she has already explained, the intention of this amendment is to ensure that the rules on capital requirements for these smaller banks would be replaced by PRA rules with more proportionate requirements. The Government are committed to supporting more proportionate regulation for small and medium-sized banks and enhancing competition in financial services. The delegation of the relevant prudential requirements in this Bill will allow the PRA to introduce proportionality in its implementation, where appropriate.

--- Later in debate ---

[Lord Eatwell (Lab)]

My Lords, the Libor scandal has precipitated a regulatory nightmare. How is the FCA to fulfil its statutory responsibility to ensure that markets function well when one of the foundation stones of those markets, the Libor benchmarks, are to be discontinued and replaced by untried underpinning?

The change in benchmarks is not only a problem for individual contracts, it is a systemic risk that the measures in the Bill do not—the FCA itself admits—entirely mitigate. To quote the FCA:

“Where parties to contracts referencing LIBOR cannot reach agreement on how those contracts would operate in the event of LIBOR’s cessation, discontinuation could cause uncertainty, litigation or loss of value because contracts no longer function as intended. If this problem affects large volumes of contracts it could pose risks to wider market integrity of contracts/financial instruments.”


The section in the Bill dealing with benchmarks attempts to limit the potential damage. The FCA describes one area of potential damage in these terms:

“This is to cater for a scenario where either a benchmark administrator informs the FCA of its intention to cease publication of a critical benchmark, or where contributors to the benchmark have notified the administrator of their intention to withdraw submissions to the benchmark before the relevant provisions in this Bill are commenced.”

Note that this is a plausible scenario in the FCA’s view.

How is it to be met? Among other measures there is the totally unrealistic proposal in Clause 9(3) that the FCA

“compel the administrator to continue publishing the benchmark”.

I cannot think of anything more likely to precipitate the systemic events that the FCA wishes to avoid. Then, remarkably, it amends Article 22(b) so that the FCA must provide

“a written notice stating that it considers that the benchmark is not representative of the market or economic reality that it is intended to measure or that the representativeness of the benchmark is at risk”.

What do we think that would do to the markets?

Despite the attempts in the Bill to deal with the cessation of the publication of a benchmark, there is, as the House of Commons Library notes suggest,

“risk of legal challenge and prolonged market uncertainty”.

That is the core of the problem that the Libor scandal has precipitated. I admit that the clauses in the Bill do their best to mitigate the risk, but even the authors of this section know that there is no entirely satisfactory solution. All they can do is cross their fingers and hope for the best.

The greatest risks are in retail markets: the ordinary family investor or, more pertinently, the ordinary family’s pension fund and, as the noble Baroness, Lady Kramer, said, small companies. They are the ones who are really at risk. There is nothing in this Bill to protect retail customers from that risk. When the Minister replies to this debate, perhaps she could reflect on the protection that should be provided for retail customers should the worst fears of the FCA be realised.

Amendment 44 in the name of the noble Baroness, Lady Noakes, seeks further to strengthen the defences against the plausible scenario by introducing continuity of contract when a benchmark is changed. This is an undoubtedly worthwhile addition to the armoury. It does not prevent adverse market reaction and loss of value—that problem remains—but at least continuity of contract will be there.

As I see it, Amendment 45 removes protection from the retail customer by preventing

“claim or cause … or liability in damages”.

This may well be unfortunate. The noble Baroness referred to claims companies. Pernicious though they may be, they were often the only recourse of the retail customer. As I understand it, the administrators of benchmarks could implement these changes themselves because powers that are given to them under Article 23D, where they are granted discretion, allow them to implement changes themselves, without concern for any consequent damages inflicted on holders of particular financial instruments. While I understand the thinking behind this safe harbour, I fear that it stands in stark contrast to the lack of protection for retail customers. Having read this section of the Bill carefully, I feel that the benchmark consultation is clearly necessary. The problems have not as yet been solved.

[Baroness Penn (Con)]

My Lords, as this debate has illustrated, when you hear about Libor it is hard not to think about the benchmark’s manipulation in the wake of the financial crisis. However, since then there has been substantial reform to the regulation of benchmarks and significant improvements have been made to the governance and controls around the submission and administration of Libor itself.

As a result of declining activity in the wholesale lending market that Libor seeks to measure, in 2015 the Financial Stability Board recommended a transition away from certain interest rate benchmarks including Libor to alternative rates based on active and liquid underlying markets. As Andrew Bailey remarked in his speech on Libor wind-down last summer,

“Public authorities and market participants … have … been working together to transition away from reliance on Libor for a number of years.”


It remains of the utmost importance that firms continue to prioritise the move away from the use of the Libor benchmark where possible. We need to reduce the number of contracts that refer to the Libor benchmark as much as possible before the agreement between the FCA and panel banks to continue submissions to Libor to facilitate this transition ends. For most Libor currencies, that is the end of this year.

However, it has been clear for some time that there will be certain tough legacy contracts that will not be able to transition away from Libor in time. In May 2020, the Working Group on Sterling Risk-Free Reference Rates highlighted the need for legislation to support these contracts. Without government intervention, parties to these contracts would be left without a means of determining contractual obligations when panel bank submissions cease, resulting in significant disruption.

Shortly after that, the Government announced their plans to give the FCA the powers to manage an orderly Libor wind-down through this Bill in a manner that protects consumers and market integrity. This includes legislation to deal with these tough legacy contracts. The UK was the first country to set out an appropriate regulatory framework to manage the wind-down of critical benchmarks, and this legislation has been very well received by industry.

My noble friend Lord Holmes and the noble Viscount, Lord Trenchard, asked about synthetic Libor. The proposed legislation does not prescribe what a synthetic benchmark might look like but allows the FCA flexibility and discretion as to what methodology change it might choose to impose. For example, the FCA could use this power to direct a change to Libor’s methodology so it is no longer reliant on panel bank submissions. The FCA has recently consulted the market on its proposed policy approach to using this power.

Turning to the amendments, Amendment 44 would require that where the FCA has used the powers given to it in this Bill to impose a change in the methodology of the benchmark, that new benchmark must be interpreted as the same benchmark in any contracts which reference the original benchmark. Amendment 45 seeks to reduce the scope for litigation where the FCA has exercised this power.

Since the introduction of this Bill, the Government have received representations from some key industry participants, highlighting a residual risk of disruption and potential litigation that they are concerned would remain even once the FCA has exercised its powers under this Bill. This risk is separate from the wider risks and impacts on markets that would materialise if the Government had not introduced legislation under this Bill, and it is this potential residual risk that these amendments seek to address. I appreciate noble Lords’ interest in this important issue and I reassure them that the Government are committed to looking at it and, if necessary, providing industry with any reassurance it needs. But I will now turn to the two fundamental reasons why we are unable to accept these amendments.

First, critical benchmarks such as Libor are widely used in a diverse range of products and contracts across the economy, so any action of the kind proposed in this amendment would affect a wide range of individuals and businesses. This must be taken into account before determining whether and how to act. As the noble Baroness, Lady Kramer, and the noble Lord, Lord Eatwell, have described, this would impact people outside the financial services industry.

Secondly, these amendments would intervene directly in private contracts, restricting the ability of contractual parties to seek legal redress were they to disagree with the imposition of synthetic Libor. I am sure that noble Lords agree that any such interference would need to be carefully considered and designed to be as narrow and targeted as possible while achieving the intended effect. It is therefore critical that the Government consider to the greatest extent reasonably possible the full range of Libor-referencing contracts and the impact any legal provisions, such as the ones proposed in these amendments, would have on parties to these contracts before deciding how to proceed on this issue.

For example, I am concerned that Amendment 45 would provide wide legal protection to parties using the revised benchmark against all forms of claim or causes of legal action associated with the exercise of the FCA’s Article 23D(2) power, as opposed to a more targeted form of legal protection. I have not yet been convinced that such a wide-ranging legal protection is appropriate, and it could have serious and significant unintended consequences.

For these reasons, the Treasury published a consultation specifically on this matter on 15 February, which is currently open for responses. This will allow us to properly consider these issues with the benefit of feedback from a broad range of Libor users. As the consultation is still open, I cannot say at this stage whether the responses provide evidence that a provision of this nature is necessary, or how such a provision should be structured, but I reassure noble Lords that the Government take this matter very seriously. Guided by the evidence gathered through this consultation, the Government will be well placed to decide if an intervention along the lines that these amendments intend is appropriate. I therefore ask that these amendments be withdrawn.

[Baroness Noakes (Con)]

My Lords, I start by thanking all noble Lords for taking part in this debate; I think all have supported my Amendment 44 on continuity of contract, and I think the noble Lord, Lord Eatwell, expressed some concerns in relation to Amendment 45, which dealt with safe harbour.

It is worth re-emphasising a point made by my noble friend the Minister: we should not confuse what happened with the Libor manipulation scandal—which was dreadful and affected not just the London market but the New York and other markets—with the reasons for withdrawal of Libor. As my noble friend has said, these were much more technical reasons regarding the suitability, durability and stability of Libor as a benchmark going forward. It is a more technical issue than harking back to the fact that it had been manipulated prior to the very significant improvements in benchmark administration that came about as a result of the benchmarks regulation.

Financial Services Bill

Baroness Penn Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 24th February 2021 Grand Committee

Amendment 27 not moved.

[Baroness Penn (Con)]

My Lords, I suggest that this is a convenient moment to conclude our debate in Grand Committee today.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

That concludes the work of the Committee this afternoon. The Committee stands adjourned, and I remind Members to sanitise their desks and chairs before leaving the Room.