Bank of England Levy (Amount of Levy Payable) Regulations 2024

Baroness Vere of Norbiton Excerpts

Tuesday 27th February 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Bank of England Levy (Amount of Levy Payable) Regulations 2024.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, these draft regulations will ensure the implementation of the Bank of England levy following the passage of the Financial Services and Markets Act 2023, which made provision for the replacement of the cash ratio deposits scheme with this levy. Currently, the Bank of England’s monetary policy and financial stability functions, including work on resolution, international policy, financial stability and strategy, and risk and monetary analysis, are funded by the cash ratio deposits, or CRD, scheme. Under the scheme, banks and building societies with eligible liabilities greater than £600 million are required to place a proportion of their deposit base with the Bank of England on a non-interest-bearing basis. The Bank of England invests these funds in gilts and the income generated is used to meet the cost of its monetary policy and financial stability functions.

However, due to lower than expected yields from gilts, the CRD scheme has not generated sufficient income to fully fund the Bank’s policy functions. The shortfall has been funded by the Bank’s capital and reserves. Alongside this, the scheme has led to higher than expected deposit sizes and a lack of certainty for deposit payers.

Following a review of the scheme, the Government set out their intent to replace the CRD scheme with the Bank of England levy. This will provide greater certainty to firms on their contributions, create a simpler and more transparent funding mechanism for the Bank and ensure that the shortfall in funding is addressed moving forward. Sections 70 and 71 of the Financial Services and Markets Act 2023 amend the Bank of England Act 1998 to make provision for the replacement of the CRD scheme with the Bank of England levy.

The instrument under consideration by the Committee today makes provision for the eligible institutions that do not have to pay a levy, how the cost is apportioned between the eligible institutions that do have to pay it and how appropriate adjustments will be made for years in which there is a new levy payer. The instrument does not set the overall amount of the levy. The Bank determines which of its policy functions will be funded by the levy and the amount that it reasonably requires in conjunction with the funding of those functions for the levy year.

Under the regulations, the new levy year will begin on 1 March 2024, to align with the Bank of England’s financial year. An indicative timeline for the levy year is included in the Bank of England’s levy framework document. This sets out that the first invoice will be issued to firms in July 2024, with payment due in August 2024. This payment will cover the 2024-25 levy year.

Under the levy, for each year, the Bank of England will estimate the amount it needs to meet its policy costs. It will add any shortfall from the previous year and deduct any surplus. This is the anticipated levy requirement. The Bank will require institutions to submit data about their eligible liabilities and will usually take an average of the data provided between 1 October to 31 December in the previous year to calculate an institution’s eligible liabilities.

If an eligible institution has an average liability base up to and including £600 million, it will not pay any levy that year. If the institution’s average liability base exceeds £600 million, it will obviously pay the levy. This is the same as under the CRD scheme, therefore ensuring that the levy is fair as only the largest institutions, which benefit most significantly from the Bank’s monetary policy and financial stability functions, will pay. The costs that an institution will pay under the levy will be apportioned according to the size of the institution’s eligible liabilities, meaning that larger institutions pay a larger share of the costs. This is the same as under the CRD scheme and ensures that there will be no relative winners or losers under the new levy.

If an institution did not meet the threshold for paying the levy in the previous year but it does for the current year, the regulations stipulate that this firm will be treated as a new levy payer. The SI allows the Bank to treat new levy payers differently so that they contribute to the estimated policy costs for that specific year, and do not have to contribute to any shortfall from the previous year or gain any benefit from any surplus. This is a fair and proportionate approach.

This SI delivers a fairer and more transparent funding mechanism for the Bank of England’s policy functions. The regulations have been widely consulted on and the levy is supported by financial firms. I beg to move.

[Lord Sharkey (LD)]

My Lords, it is obviously unacceptable that the Bank of England should be making a loss on its supervisory activities regarding the banking sector. We are happy to support this SI’s correction of that situation.

Before we allow the Bank to charge companies more, should we not ask ourselves whether there are any efficiencies that could or should be made in the Bank’s supervisory routines and systems? Could the Minister say whether the Bank has asked itself that question? If it has, perhaps the Minister could tell us what the answer was and how it was arrived at. If it has not asked the question, why not?

We note that the consultation on the levy produced only one relevant response—from, we assume, UK Finance. This response made five points; the Bank addressed four. The first was the rate of selldown of the Bank’s gilt portfolio. The concern appeared to be that this selldown would significantly increase the Bank’s costs and therefore the levy required. The Bank seemed to think that this was not an issue, but its explanation seemed very complex. May I ask the Minister for a “beginner’s guide” explanation? Is the industry right to worry about the levy increases potentially arising from a gilts selldown and, if not, why not?

The second point raised in the consultation response seemed the most important. The respondent suggested that the non-bank financial institutions, NBFIs, could in future be added as eligible levy-paying institutions in Schedule 2ZA to the Bank of England Act 1998. These NBFIs certainly seem large enough to be added. At the Managed Funds Association Global Summit in Paris in May last year, it was estimated that NBFIs now represent about 50% of global financial assets.

Addressing this point, the Bank simply says that the formal review referred to in paragraph 14.1 of the EM

“is expected to include assessment of which institutions are regarded as eligible to pay the Levy”.

I note the words “is expected to”. I also note that this review is five years away. Is not the growing size of the NBFI sector a reason for the Bank’s supervisory oversight to be much more extensive? Is it not simply unfair that NBFIs should get a free supervisory ride?

The third issue raised in the consultation and addressed by the Bank was the desirability, for planning purposes, of a five-year budget plan to help institutions plan their own budgets. The Bank has agreed to consider what is a perfectly reasonable request, but can the Minister say when it will have a substantive response to that comment from the consultation?

The fourth issue concerned the reference period; the Minister has mentioned this. The Bank concluded that the proposed reference period—the same period used for the PRA levy—is the appropriate one. Speaking of the PRA, can the Minister explain to us how the Bank of England levy and the PRA levy work together, as well as how double-charging is avoided?

Finally, why does this SI contain no coming-into-force date or commencement provisions?

[Lord Livermore (Lab)]

My Lords, we fully support the replacement of the current cash ratio deposit and the proposed mechanics of the levy. We therefore support this statutory instrument.

I have only one question, related to the timing of this measure. As I am sure the Minister would agree, providing the banking sector with certainty is essential to securing the confidence needed to incentivise investment in the real economy. Can she therefore provide clarity on when this SI will come into force?

[Baroness Vere of Norbiton (Con)]

I am grateful to noble Lords for sharing their thoughts on this SI. It is a simple switchover from one scheme to another, but I recognise that there are points that deserve a bit more insight. I hope that, by the end of my closing speech, I will have an answer to the question about the coming-into-force and commencement date, including why that has not happened.

I turn to the comments from the noble Lord, Lord Sharkey. He made good points about the amount of money that will be spent on these policy functions. I asked the same question. It is clear to me that the Bank of England is independent and sets its own budget but does so in a prudent way. Each year, as I said in my opening remarks, the Bank determines the scope of the policy functions that should be funded and, therefore, what the total levy will be. However, the Bank’s policy costs to be recovered through the levy will require approval by the Bank’s Court of Directors, which is a bit like its board, I suppose, and which is responsible for the efficient use of funds—not only those raised by the levy but across the whole of the Bank’s budget.

The levy will also feature as part of already established arrangements for regular discussions between the Bank and the Treasury covering the Bank’s financial position. The Bank continues to be accountable to Parliament in respect of its finances and budget in various ways, including but not limited to through its annual report and accounts—some significant detail about this will be set out its report and accounts—and through regular public appearances by governors and members of the court before the Treasury Select Committee.

I will now embark on a guide to the cost of transition; let us see how we do. When the Bank moves from the CRD scheme to the levy, institutions will get their deposits back as there is no longer a legal basis for the Bank to hold deposits. Through this, a total of £13 billion in cash ratio deposits will be returned to firms. They will be returned as remunerated reserves as the Bank intends to hold on to the gilt portfolio that it has purchased under the scheme and allow this to roll off naturally. This is the most appropriate course of action; I suspect that that also means it is the cheapest. It means that, during a transition period, the Bank will need to pay a bank rate on the remunerated reserves. This is a policy cost that will be covered by the levy. The cost of the transition between the CRD scheme and the levy per year will depend on the rate at which the legacy CRD gilts mature or are sold. This is because the income available from the legacy CRD gilt portfolio will reduce the amount being recouped by the Bank under the levy.

Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024

Baroness Vere of Norbiton Excerpts

Tuesday 27th February 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024.

Motion agreed.

Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024

Baroness Vere of Norbiton Excerpts

Tuesday 27th February 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, these two sets of regulations are made each year to set the national insurance contributions—NICs—rates, limits and thresholds and to update tax credits, child benefit and the guardian’s allowance. First, the Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024, which I will refer to, if I need to, as the social security SI, sets the NICs rates, limits and thresholds of a number of NICs classes for the 2024-25 tax year with all limits and thresholds remaining fixed at their existing level. The regulations also make provision for a Treasury grant to be paid into the National Insurance Fund, if required for the same tax year, which is a transfer of wider government funds to the National Insurance Fund, and for the veterans employer NICs relief to be extended for a year until April 2025. The scope of the regulations under discussion today is limited to the 2024-25 tax year.

NICs are social security contributions. They allow people to make contributions when they are in work and to receive contributory benefits when they are not working—for example, after they have retired or if they become unemployed. NICs receipts fund these contributory benefits, as well as supporting funding the NHS.

I will begin with NICs for employed and self-employed people. The primary threshold and lower profits limit are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 NICs respectively. At Autumn Statement 2022, the Government announced their intention to maintain the primary threshold’s alignment with the income tax personal allowance, with both rates being fixed at £12,570 until 2028.

Fixing the primary threshold at £12,570 does not affect an individual’s ability to build up entitlement towards contributory benefits, such as the state pension. For employees, this is determined by the lower earnings limit, which will remain at £6,396 per annum or £123 per week in 2024-25, and for self-employed people by the small profits threshold, which will remain at £6,725 in 2024-25. Fixing these thresholds will mean that more low-earning working people will gain entitlement to contributory benefits and build up qualifying years for their state pensions.

The upper earnings limit, the point at which the main rate of employee NICs drops to 2%, and the upper profits limit, the point at which the main rate of self-employed NICs drops to 2%, are aligned with the higher rate threshold for income tax at £50,270 per annum. It was announced previously that these thresholds would be fixed until April 2028 as part of the Government’s commitment to supporting the public finances.

These decisions are starting to pay off, with inflation falling, growth more resilient than expected this year and debt forecast to reduce. This makes it possible to return some money to working taxpayers, while keeping the public finances on track. As part of the Government’s long-term plan to grow the economy and reform the tax system, we are cutting taxes for 29 million working people. From 6 January 2024 onwards, the main employee rate of national insurance contributions was cut from 12% to 10% and, from 2024, the main rate of class 4 NICs for the self-employed will be reduced from 9% to 8%. These cuts have already been legislated for.

At Autumn Statement 2023, the Government also announced that, from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay class 2 but will continue to accrue and receive access to contributory benefits, including the state pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the state pension, through a national insurance credit, without paying NICs as they currently do. Those with profits under £6,725 who choose to pay class 2 NICs voluntarily to get access to contributory benefits, including the state pension, will be able to continue to do so.

Turning to employer NICs, the secondary threshold is the point at which employers start paying employer NICs on their employees’ salaries. At Autumn Statement 2022, the Chancellor announced that this threshold will remain at £9,100 in 2023-24 and will be fixed at this level until 2028. This supports the public finances while ensuring that the largest businesses pay the most. The employment allowance, which the Government raised from £4,000 to £5,000 in April 2022, means that the smallest 40% of businesses with an employer NICs liability pay no employer NICs at all. The employment allowance supports our smallest businesses to grow by helping them with employment costs. The thresholds for employers of employees eligible for NICs relief—the relief for employers of under-21s, under-25 apprentices, veterans and new employees in freeports and investment zones—have also been fixed in these regulations at their 2023-24 levels.

The majority of national insurance contributions are paid into the National Insurance Fund, which is used to pay state pensions and other contributory benefits. The Treasury has the ability to transfer funds from wider government reserves into the National Insurance Fund. The regulations also therefore make provision for a transfer of this kind, known as a Treasury grant, of up to 5% of forecasted annual benefit expenditure to be paid into the National Insurance Fund, if needed, during 2024-25. A similar provision will be made in respect of the Northern Ireland National Insurance Fund. The Government Actuary’s Department report, which was laid alongside these regulations, states that the Treasury grant is not forecast to be required in 2024-25, so it is being legislated for as a precautionary measure, because the Government consider it prudent to make provision at this stage. This is consistent with previous years.

The regulations also make provision for the NICs relief for employers of veterans to be extended for a year until April 2025. This measure means that businesses pay no employer NICs on salaries up to the veterans’ upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civilian role. This relief is part of the Government’s commitment to make the UK the best place in the world to be a veteran and it is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer.

I will refer to the second statutory instrument, the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024, as the “tax credits SI”. The Government are committed to delivering a welfare system that is fair for claimants and taxpayers, while providing a strong safety net for those who most need it. These regulations will ensure that the benefits for which Treasury Ministers are responsible and that His Majesty’s Revenue and Customs delivers are uprated by inflation, in April 2024. Tax credits, child benefit and guardian’s allowance will increase in line with the consumer prices index, or CPI, which had inflation at 6.7% in the year to September 2023. Uprating by the preceding September’s CPI is the Government’s typical approach.

In summary, the proposed legislation fixes all the limits and thresholds for NICs at their 2023-24 levels for the 2024-25 tax year. It makes provisions for a Treasury grant, extends NICs relief for veterans’ employers and increases the rates of tax credits, child benefit and guardian’s allowance in line with prices. This legislation enacts announcements from the Autumn Statement and previous fiscal events. I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I will make a couple of brief points about child benefit. While of course I welcome the inflation-proofing after all the speculation there has been about it, it is important to put on record that it still represents a cut in the real value of child benefit since 2010, according to the Child Poverty Action Group, of which I am honorary president. Even allowing for this uprating, child benefit needs to rise by 25% to restore its real value.

I can remember when child benefit was introduced. I was working at the Child Poverty Action Group at the time, and child benefit replaced personal tax allowances as well as the family allowance. The Conservative Party then accepted the argument that child benefit should be thought of as, in effect, a tax allowance for children and treated the same as personal tax allowances. An increase in the real value of child benefit now could represent an effective way to target a tax cut on those below the tax threshold, whose needs are the greatest. Given that there is all this speculation about tax cuts, that would be my recommendation.

I realise that this is not part of the SI that we are debating, but the speculation that the Chancellor is also looking, for the Budget, at the high-income charge on child benefit is relevant. The threshold has not been uprated since the charge was introduced in 2013, so fiscal drag means that a growing number of basic rate taxpayers are now affected, whereas it was originally intended purely for those who are considered better off. Could the Minister give us an update on the numbers who have been pulled into the charge—perhaps not now, because I recognise that she may not have the figures here, but in a letter, because it would be good to know where exactly we are at?

Personally, I would like to see the end of the high-income charge on child benefit, because it compromises important principles of universality in child benefit and of independent taxation, as the Women’s Budget Group pointed out. At the very least, the threshold should be restored to its original value. I hope the Minister will convey that message to the Treasury.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, in the 2022 Autumn Statement, the Chancellor announced that national insurance contribution thresholds that are in line with income tax will be fixed at their 2023-24 levels until 2027-28. As the Office for Budget Responsibility pointed out at the time, the freeze to national insurance thresholds and limits meant that

“all the main personal tax thresholds are now frozen in cash terms across our entire forecast period”

through to 2027-28.

Those freezes to allowances, limits and thresholds provide the context for the debates that we now frequently have about the rising tax burden. As Paul Johnson from the Institute for Fiscal Studies said, the changes made at the 2023 Autumn Statement

“won’t be enough to prevent this from being the biggest tax-raising parliament in modern times”.

The fact is that, after 25 tax rises in this Parliament alone, the tax burden remains on course to reach its highest-ever level at least since the Second World War. One of the central reasons for that is the freeze on income tax and national insurance thresholds through to 2027-28. This fiscal drag means that, on average, personal taxes will go up by £1,200 per household even after the 2% cut to national insurance.

To take one example, the impact of the Government’s freezes to thresholds on low and middle earners is stark. As the noble Lord, Lord Sharkey, mentioned, consumer finance expert Martin Lewis recently said that, even with the reduction in national insurance, people on incomes of between £12,500 and £26,000 will be worse off, looking at this year in isolation, as a result of threshold freezes and fiscal drag. Does the Minister agree with Mr Lewis on that point?

The Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations set the annual rates of working tax credit and child tax credit and the weekly rates of child benefit and guardian’s allowance for the coming financial year. Amid a damaging cost of living crisis, we support the increases, as any help for people who are struggling in the face of persistently high energy, food and housing costs is particularly needed. It is welcome that these social security payments are being uprated by the usual amount, September’s inflation figure. Months of uncertainty about the Government’s plans caused enormous anxiety at a time when household budgets were stretched to breaking point.

My noble friend Lady Lister spoke expertly about child poverty, as she always does. We know that 8 million households received their final means-tested cost of living payment this month. That support has been critical for millions across this country, including many children. I would therefore be grateful if the Minister could say what assessment the Government have made of the impact that the end of the cost-of-living payment will have on levels of child poverty.

[Baroness Vere of Norbiton (Con)]

I am grateful to all noble Lords who have taken part in this short debate today. I will try to get through as many questions as possible—there are definitely one or two to which I do not currently have the answer, but I will do my best.

Turning to the points raised by the noble Baroness, Lady Lister, I recognise that she has been working in the field of child poverty, child benefit and child benefits more broadly for a long time and brings with her an awful lot of expertise. She focused very much on child benefit. I would say that child benefit is just one of many interventions that the Government can and do make to help families. There is a range of different supports, and she will have seen that at spring Budget 2023, the Chancellor announced that the Government will extend the free hours offer so that eligible working parents in England will be able to access 30 hours of free childcare per week for 38 weeks per year from when their child is nine months old to when they start school.

So it is not only about cash payments which come in the form of child benefit; and it is also the case that, looking at where we are now compared with where we were back in 2010, for example, we have made progress on poverty. The Government feel that the best way to get people—and children in particular—out of poverty is by living in homes where people are able to work. We know that there are now just under 1 million vacancies, and our approach is very much to try to get people into work, particularly full-time work, to reduce the risk of poverty. That is why our intervention in childcare is so important. We know that in 2021-22, children living in workless households were five times more likely to be in absolute poverty after housing costs than those where all adults worked. The latest available data shows that in 2021-22, there was only a 5% chance of children being in absolute poverty after housing costs where both parents worked full time, compared with 52% where one or more parents in the couple was in part-time work only. That is why our focus on all sorts of different interventions to support the family is really important.

The latest statistics show that, in 2021-22, there were 1.7 million fewer people in absolute poverty after housing costs compared with 2009-10, including 400,000 fewer children. We are heading in the right direction but, of course, we must continue to do further work in this area. I welcome the work that the Government have done on universal credit: it is a very good set of reforms that endeavours to support people when they need it most to help them back to work.

The noble Baroness, Lady Lister, mentioned the high-income child benefit charge. I am pleased that she agrees about the principle of individual taxation—I know that many people would like to put it on household income, but that would mean a change of thinking at the Treasury about how one taxes individuals. The adjusted net income threshold of £50,000 ensures that the Government support the vast majority of child benefit claimants. I will write to the noble Baroness if I have information about how many lower-rate taxpayers have been pulled into that area—but we are talking about a threshold of £50,000, which is a fair amount of money.

The noble Lord, Lord Sharkey, asked a number of questions, some of which I caught but some of which my brain did not quite catch. I will write to him, but, on the Treasury grant, as I said in my opening remarks, the Government are just being prudent by including it in the statutory instrument. At this moment, the Government Actuary report forecasts that the balance of the NIF will be £80.9 billion at the end of 2024-25, which is a significant surplus.

The GAD also projects that the NIF will be in overall surplus until at least 2028, but the balance can fluctuate because it will depend on economic factors and policy changes—for example, what might happen with increases to the state pension. The Government have increased the state pension by 8.5%, in line with inflation and the highest element of the triple lock. So I will write to the noble Lord on the threshold at which the Treasury would intervene—but we are not expecting to at this moment in time. We monitor the balance of the NIF very closely and we stand ready to include a top-up grant, should we feel that the forecast for that particular year gives the impression that it might be needed.

The noble Lord talked about veterans. The Government obviously keep all taxes and reliefs under review. We have decided to extend this for another year, and the cost of that extension is approximately £5 million for the next year. But it is also fair to say that the Government regularly conduct research and evaluation as part of their role in keeping policies such as this relief under review. When an evaluation is complete, it will be published in due course and decisions can then be taken at that point.

The noble Lord, Lord Livermore, mentioned the current economic climate, without mentioning the unprecedented economic shocks that the UK economy has had to weather. Of course, the response to this was often deemed to be insufficient by the party opposite, so I am not entirely sure where we would be had it been in power. I suspect that we might be in an even more sorry economic state, because we are now turning a corner. We are absolutely seeing really positive change in our economy, and I believe that will continue.

It is worth looking at the broader impact of the freezing of the NICs threshold, alongside income tax. Quite frankly, when many people get their payslips, they just look at how much money they gave the Government. They do not necessarily focus on whether it is NICs or tax; it is just money they do not have and cannot spend because the Government are spending it for them.

But, since 2010, the Government have improved the lot of lower-earning people. We have nearly doubled the personal allowance since 2010, and it is 30% higher in real terms. That ensures that some of the lowest earners do not pay income tax. Indeed, around 30% of people do not pay income tax at all. This has also meant that it is estimated that over 3 million people will be taken out of tax by 2023-24, compared with the threshold rising in line with inflation from 2010-11. So the Government have increased the thresholds by more than inflation over a very long period of time, which has really benefited the lowest earners.

Given these unprecedented economic shocks, the Government have had to take difficult decisions, which I believe are bearing fruit. I hope that other noble Lords can recognise that. It remains the case that a UK employee can earn more money before paying income tax and social security contributions than an employee in any other G7 country. Let us not fall into the trap of thinking that we are massively overtaxed in this country.

As I say, we see the economy turning a corner and inflation falling. We hope that we can return some money to taxpayers, because I agree that it is not a comfortable feeling knowing that, in the past, we have had to raise taxes to help the nation get through the unprecedented economic shocks that we have weathered. However, now that we are in slightly sunnier uplands, I hope we will be able to do more in future. I will write with further responses to questions which I have not covered but, for the meantime, I commend this instrument to the Committee.

Motion agreed.

Overseas Territories: Tax Haven Status

Baroness Vere of Norbiton Excerpts

Monday 26th February 2024 Lords Chamber

[Baroness Chakrabarti (Lab)]

My Lords, in polarised times, I look across and see the significant space where the temperate voice of our friend Lord Cormack ought to be. We will all miss him. I beg leave to ask the Question standing in my name on the Order Paper.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, the UK has not made any recent quantitative assessment of the economic benefits of the overseas territories to the UK, but we continue to support the territories to build vibrant and sustainable economies, including through encouraging greater links to the UK economy. The overseas territories are an integral part of the British family. The elected Governments of inhabited overseas territories are responsible for fiscal matters, including tax, and are committed to upholding international tax standards.

[Baroness Chakrabarti (Lab)]

I am grateful to the Minister, if not exactly any the wiser. Last November, the UN General Assembly voted overwhelmingly in favour of a new framework convention on tax justice. His Majesty’s Government were among a small club of rich countries that voted against. Now that that Motion has been so overwhelmingly carried, and there will be negotiations for a treaty to deal with tax avoidance and evasion in the world, will His Majesty’s Government engage?

[Baroness Vere of Norbiton (Con)]

As the noble Baroness will know, there is an enormous amount of work going on at the moment around international tax. That has been led by the OECD and the inclusive framework, involving 130 countries and jurisdictions from around the world working on two pillars: one for the greater share of group profits to be taxed in market countries, and the second a global minimum tax, where all profits will be subject to a 15% minimum effective tax.

[Baroness Kramer (LD)]

My Lords, from these Benches I join in with the shock and sense of loss at the death of Lord Cormack. He was such a big figure in this House and I know it is a very personal feeling for many of us sitting here, as well as for those across all Benches.

On 8 February—this month—a jury in Florida found the former Premier of the British Virgin Islands guilty of drug trafficking and money laundering while in office. Do the Government understand that that kind of corruption would have been much more difficult had there been in place the long-promised public register of beneficial ownership? The Government had guaranteed to this House that it would be in place for all overseas territories by the end of last year. Where are we in this process, and do the Government recognise their crucial role in stemming corruption?

[Baroness Vere of Norbiton (Con)]

The Government absolutely recognise their crucial role in stemming corruption; we work very closely with the overseas territories on all sorts of issues when it comes to illicit finance. I refer the noble Baroness to the Written Ministerial Statement from my honourable friend in the other place, the Minister for the Americas, Caribbean and the Overseas Territories; in that is a helpful summary that sets out where each of the overseas territories is in relation to introducing a public, accessible register of beneficial ownership.

[Lord Naseby (Con)]

My Lords, I declare an interest as I have family living in the Cayman Islands. Is that particular territory not a good example that others should follow? It has a well-regulated jurisdiction with a tax-neutral framework, which supports taxes being paid where the profits are made. It has signed up to and is approved by FATF, on anti-money laundering, and also has a positive rating on the OECD Global Forum. Against that sort of background, does it not demonstrate that territories such as Cayman that are close to us have got their house in order? And, yes, against that background one would hope that any that have not would follow suit.

[Baroness Vere of Norbiton (Con)]

I am grateful for my noble friend’s support for the Cayman Islands, but it is just one of the many different overseas territories. Not wishing to detract at all from his words, I would say that the Cayman Islands is doing well, but I think it can do better. For example, the beneficial ownership register that the Cayman Islands is planning to put in place will still have a legitimate interest access filter. We believe that that is an interim step, and we would like to see fully open registers of beneficial ownership as soon as that can be implemented.

[Lord Collins of Highbury (Lab)]

My Lords, I associate myself with the comments in relation to Lord Cormack. One thing he was incredibly powerful about was encouraging others, particularly on the parliamentary fellowship across this House. He was a great person who will be sadly missed.

Perhaps I might pick up the Minister in relation to the timescale for registers of beneficial ownership. We have had some progress, I am not denying that, but the British Virgin Islands and others have got timetables that talk about five years. What are the Government doing to support these overseas territories to implement these registers in a speedier and more thorough fashion? Support is needed as well.

[Baroness Vere of Norbiton (Con)]

I absolutely agree that we need to support the overseas territories. We have the skills, capacity and capability to do that, and that is what we do—but recognising that the relationship with each of them can be very different. They have elected Governments of their own. Those Governments are responsible for their domestic affairs. The noble Lord mentioned timeframes of five years. The British Virgin Islands, which I admit is probably towards the end of introducing the beneficial ownership registers, is looking at putting a framework in place no later than quarter 2 of 2025.

[Lord Watts (Lab)]

My Lords, can the Minister explain why, at a time when British people are paying more tax than they ever have done, the richest people in the world and in this country are avoiding tax altogether—people such as the part-owner of Manchester United, who now apparently wants the taxpayer to give him billions of pounds to invest in his business? Where is the fairness in that?

[Baroness Vere of Norbiton (Con)]

Obviously, I cannot comment on any individual’s tax affairs, but it is the case that overseas territories are non-sovereign jurisdictions. They have a unique relationship as part of the British family, but they set out their own tax legislation within their own legal structures and it is certainly not for the UK Government or Parliament to drive a coach and horses through that.

[Lord Hannan of Kingsclere (Con)]

My Lords, has the Minister’s department carried out any assessment of how much higher tax rates would be in the rest of the world if there were not competition from these lower-tax jurisdictions to keep us in check?

[Baroness Vere of Norbiton (Con)]

I am afraid I have to say to the noble Lord that we have not carried out that assessment.

[Lord Sikka (Lab)]

My Lords, on 8 June, the Treasury Secretary in the other place said:

“HMRC plans to calculate and publish a new stand-alone”


estimate of the

“offshore tax not being correctly reported”

by individuals

“next year, for the ‘Measuring tax gaps’ 2023 edition”.

Well, that hat has already been published, but there is still no estimate of the offshore tax gap. Can the Minister explain why the Government are so relaxed about offshore tax avoidance?

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

The Government are not relaxed about offshore tax avoidance. We maintain that all tax avoidance needs to be stamped out, which is why we work so very closely with the overseas territories on tax avoidance, anti-money laundering and counterterrorism finance, including with registers of beneficial ownerships. We have very good relationships. We meet with our colleagues frequently to discuss how to put things in place such that they are implemented as quickly as possible.

[Lord Hamilton of Epsom (Con)]

My Lords, does my noble friend accept that, if some of the overseas territories ceased to be tax havens, they would become an even greater burden on the British taxpayer?

[Baroness Vere of Norbiton (Con)]

As I said in my opening remarks, we encourage the overseas territories to develop sustainable and successful economies. As I also said, they are responsible for setting their own tax rates, and we will think about how future tax rates may change. It is also the case that tax rates will be underpinned by, in particular, pillar 2, which will be implemented via domestic rules across all overseas territories where it is relevant.

Finance Bill

Baroness Vere of Norbiton Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 21st February 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That the Bill be now read a second time.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, it is a pleasure to open this debate on the Finance Bill. As I explained during a memorable debate in your Lordships’ House last year, the Autumn Statement was designed with three purposes in mind: “to drive growth” across the economy, to create jobs, and to ensure that hard-working people can keep more of what they earn.

As many noble Lords will know, since the beginning of 2023 we have been working on five priorities. Three of those priorities are economic: to halve inflation, grow the economy and reduce the national debt. I will outline our current economic picture in more detail shortly. A year on from when we set out these priorities, I am pleased to report that there has been some significant progress.

Inflation has fallen from 11.1% to 4%, and this has led to two positive outcomes: wages are rising faster than inflation, and mortgage rates are starting to come down. On growth, like some other similar economies, the UK faced challenges at the end of 2023, but overall the economy was larger at the end of the year than at the start. The Bank of England and the IMF forecast growth to increase over the next few years. Finally, our national debt is on track to fall as a share of the economy.

The Government proposed at the Autumn Statement to put money back in people’s pockets, cut taxes and “back British business”. That is why the National Insurance Contributions Act has reduced national insurance from 12% to 10%, delivered a tax cut for 29 million working people, and saved the average worker £450 a year. But I recognise that times are still far too tough for far too many. That is why we need to stick to our plan, so we can deliver the long-term change our country needs to deliver a brighter future for Britain, and improve economic security and opportunity for everyone.

As part of delivering our broader long-term plan, we need to deliver our Autumn Statement commitments. This Finance Bill does exactly that. First, it will support British businesses by allowing them to invest for less. Secondly, it will support employment, by ensuring that hard work pays, through reforms to our pensions system. Finally, its measures will improve and simplify our tax system, ensuring that it is fit for purpose. Indeed, the Finance Bill covers 36 different measures in total, some more technical than others.

Before I delve into the specifics of these measures, I will first outline some of the economic context behind this Finance Bill. As noble Lords will be aware, inflation—and the subsequent impact on the cost of living—has been the Government’s key challenge since Vladimir Putin’s illegal invasion of Ukraine in 2022. Therefore, it is significant that, as I noted previously, inflation has more than halved, from 11.1% in late 2022 to 4% in February. Our key priority remains getting inflation back to the 2% target, to drive sustainable growth. The recent GDP figures are a reminder that, while inflation has more than halved from 11% to 4%, wages are rising, mortgage rates are falling and taxes are being cut. But we are not out of the woods yet; there is more to do. The OBR has projected that the 2023 Autumn Statement policies will have “lasting supply-side effects”. Combined with policies from the Spring Budget in 2023, this approach will permanently boost output by 0.5% by 2028-29.

I will now outline the measures in the Bill which will back British business, reward work, and support a modern and simpler tax system. I turn to the suite of measures to back British business. First, we will make full expensing permanent, thus allowing businesses to invest for less. As a result, firms will save £10 billion a year—the most generous plant and machinery capital allowances of any major economy. This will drive 0.1% GDP growth over the next five years, and that number will increase to 0.2% every year over the longer term. It is forecast to unlock an additional £3 billion of investment per year.

The Government’s second measure recognises the importance of research and development. R&D is important because of its dual role: driving economic growth and bringing benefits to wider society through innovation. Therefore, we will merge two government programmes: the R&D expenditure credit scheme and the small to medium-size enterprises scheme. This will have two key impacts: it will simplify the system and provide greater support for UK firms to drive innovation. These changes will apply from 2024 onwards. I note that the Government have consulted widely on proposed changes to the R&D tax credit system over a considerable period. We have decided to proceed with an April 2024 implementation date to move the system to a more stable footing at the earliest opportunity.

In the Bill we have gone even further, by introducing greater support for loss-making R&D-intensive SMEs. In addition, we will also lower the R&D intensity threshold required to access this support to 30%. As a result, around 5,000 extra SMEs will now be covered by the support and will receive £27 per £100 of qualifying R&D invested.

I note that noble Lords on the Economic Affairs Finance Bill Sub-Committee want us to simplify this scheme further by bringing it within the merged scheme at a higher rate of relief. It is worth being aware that the intensive scheme will share many of the merged scheme’s rules, including on subcontracting, albeit with a different rate mechanism given that the merged scheme is above the line. While there is potentially an option to simplify in the future, further work is needed to establish how that would operate while still targeting the scheme effectively.

These measures will significantly increase support to firms’ R&D efforts by about £280 million per year by 2028-29. We will also extend the sunset clause for two more programmes: the enterprise investment scheme and the venture capital trust scheme. Both will be extended to 6 April 2035, providing support to young companies in their endeavours to raise capital.

The UK’s creative industries grew 1.5 times faster than the wider economy between 2010 and 2019. It is therefore right that the Government offer them their fullest support. That is why we will reform tax reliefs to refundable expenditure credits for the film, TV and video games industries. In addition, we have designed targeted measures to boost investment in three areas: animated film, animated TV and children’s TV programmes. These areas will now be eligible for a 5% uplift in tax relief to a 39% credit rate.

This Government believe that hard work must be appropriately rewarded. That is why we are using this Bill to legislate for the abolition of the lifetime allowance. The OBR estimates that this will retain 15,000 workers annually in the UK labour market. The British Medical Association described it as

“potentially transformative for the NHS”,

because many of the individuals will be highly skilled, including senior doctors. We will effect this transformation with the right incentives. The removal of pension tax limits will motivate individuals to work harder for longer so that they can reap the rewards in future years.

Finally, I turn to measures in support of the third objective of our Finance Bill, a simpler and modernised tax system. This Bill, as I previously mentioned, makes full expensing permanent, which is a huge simplification for larger firms, but we are also supporting more than 4 million smaller, growing traders by expanding the “cash basis”. This will simplify the process for them to calculate their profits and pay income tax. We have closely consulted industry and, as result, the Government will legislate to remove three of the main restrictions on using the cash basis, completely removing limits on the size of businesses able to use the basis, interest deductions and the loss relief available.

We must also make sure that HMRC delivers on its strategic objective to collect the right tax at the right time. The Bill will deliver this by enabling HMRC to reduce the off-payroll working PAYE liability of a deemed employer which is responsible for ensuring that PAYE is calculated and sent to HMRC correctly. This will apply where that engagement was incorrectly treated as self-employed for tax purposes.

Of course, we need to ensure that UK plc is following, adopting and influencing developments on taxation on the global stage. That is why in the spring we legislated to implement OECD pillar 2 in the UK. This built on a historic international agreement to a two-pillar solution to the tax challenges of a globalised digital economy. This Bill goes on to make technical amendments to the main pillar 2 rules, as identified from stakeholder consultation, and ensures that the UK remains consistent with the latest internationally agreed guidance.

We will also take forward other technical measures, such as improving the data HMRC collects from its customers. These will result in a trusted, modern tax administration system. However, a simple, modernised tax system must also be fundamentally fair. Therefore, this Bill will create a criminal offence for promoters of tax avoidance specifically where persons continue to promote a scheme after the receipt of a stop notice. The Bill will also ensure that HMRC is empowered to respond more quickly to tackle promoters of tax avoidance. It will do so by introducing a new power for HMRC to bring disqualification action against the directors of companies involved in promoting tax avoidance. The scope of that power will include being applicable against those who control or exercise influence over a company.

Further to that objective of fairness, our next measure under this objective will amend the construction industry scheme to reduce the scope for tax fraud in that industry. To do so, the amendment will add VAT to the gross payment status test. This means two things: VAT compliance will now be checked as part of this process and HMRC powers to remove gross payment status will be enhanced. We will also legislate to confirm that, in line with the retained EU law Act, where UK law is incompatible with EU law, UK VAT and excise law will prevail. This measure also ensures the stability of the VAT and excise regimes while providing legal certainty for business following the changes in the retained EU law Act taking effect. This protects billions of pounds for the Exchequer.

This Finance Bill delivers some of the Chancellor’s key announcements at Autumn Statement 2023. As I have set out, it backs British business, rewards hard work and supports a modern and simpler tax system. I beg to move.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

My Lords, I had better intervene quickly, before that continues. I am grateful to my noble friend, but I am sure he is well aware that that was not the usual procedure.

I am very grateful to all noble Lords who have taken part in the debate this evening. It has been a spirited debate, as ever, and I can definitely say at the outset that I am unable to agree with everything that has been said—by some noble Lords more than others, and by one or two almost entirely. But let us leave it at that.

There have been many excellent contributions and points raised. I am very grateful to the noble Lord, Lord Davies, who kicked off the debate with some wonderful tax questions about pensions. Clearly, the issue around pensions catching up with the personal allowance is not something that I can comment on now, but it is something that people are aware of and it will be addressed over a period of time. It is the case, too, that many political parties are committed to the triple lock. Pensioners whose sole income is the new state pension and who do not have deferred or received protected payments currently do not pay any income tax, as noble Lords will know. This year we provided the biggest ever cash increase to payments—a 10.1% rise.

The Government have doubled the personal allowance since 2010, ensuring that those with the lowest incomes do not pay income tax at all. Many noble Lords are concerned about the level of the personal allowance. I believe that over the longer period of time, looking back to 2010, there have been significant increases, such that 30% of people do not pay tax at all. I accept that, given external headwinds, certain decisions had to be made—and were made quite rightly—to freeze the personal allowance over a period of time. However, it is one of the goals of this Government that, as we return to the sort of growth that I think all noble Lords would like to see, it would be a possibility in future that we would be able to address how those personal allowances are going to change over time.

If a person has to pay tax that cannot be collected through PAYE, whether because they have no employment or they have an occupational private pension, and they are not already a self-assessment taxpayer, HMRC may issue them with a simple assessment to explain what tax they owe and how to pay it. That would be well in advance of any payment being needed. But, of course, that assumes that personal allowances and the state pension collide in future. I would not want to say that that is the case, but it is an issue that people are aware of.

The issue around the tax threshold freezes comes up quite a lot in your Lordships’ House. I absolutely accept that we have had to make some incredibly difficult choices but, having done so, a UK employee can earn more before paying income tax and social security contributions than an employee in any other G7 country. We do not tax our employees as highly as other people do, and that is to our credit. We have taken a fair approach to repairing the public finances, so we have asked everybody to contribute a little through keeping tax thresholds fixed. However, that ensures that those with the broadest shoulders pay the most. As I say, now that inflation is falling and the economy has turned a corner, we must continue with our plan, and we can responsibly return some money to taxpayers to slightly change the shift and the amount of tax that people will now pay, versus what they were going to pay in the past. But it is important that we do that in a way that supports the work and grows a sustainable economy for the future. Prioritising those in work is the best way in which to get the economy growing and reducing national insurance contributions is the best way in which to target those individuals.

I will check through the comments made by the noble Lord—

[Lord Sikka (Lab)]

I am grateful to the Minister. Is she saying that we cut taxes for people? Earlier she mentioned 29 million people. Can she also confirm that 17.8 million UK adults with an income of less than £12,570 a year received a zero cut in national insurance or taxes in last year’s Budget?

[Baroness Vere of Norbiton (Con)]

Yes, but let us also remember that the national living wage has gone up by 25% in real terms since 2010. There are all sorts of different things that the Government have done to protect the most vulnerable; the noble Lord is picking on just one thing. We are always looking at the most vulnerable to ensure that, for them too, work pays. That includes lifting the national living wage.

[Lord Sikka (Lab)]

I am happy to respond to the Minister—this could get interesting. The £12,570 threshold —and, as I said, 17.8 million adults have less than that —is after taking account of the increases in minimum wage. Many people have zero-hours contracts, work part-time or are maybe on a pension. That is after taking account of all the increases that the Minister said have been handed out.

[Baroness Vere of Norbiton (Con)]

Does the noble Lord want me to give them a tax cut for taxes that they do not pay? I am not following here at all, but I am not willing to get into a long debate about this right now. The noble Lord may write, and I will respond, if he would like to get into that in detail, but I am not willing to get into the debate right now.

Moving on to other issues raised by the noble Lord, Lord Davies, I will write in more detail around the specific things; I was doing very well for 80% of his speech but I lost him towards the end, around the taxation of negative pension growth, or gains. I will write on that point.

The noble Lord, Lord Desai, noted that the Bill is too late. Obviously, this is beyond a humble Minister like me. The House authorities will have guided it through. I know that it took a while to get through the Commons, and we addressed it in your Lordships’ House as quickly as we could once it had finished in the Commons. I would like to push the blame down to the other place and leave it there. However, it is always our ambition to get our Finance Bills into and through Parliament as quickly as possible, because it is a really important thing that we do.

I suspect that, particularly as we go into the Spring Budget, there will be many more debates around growth. I say again that, since 2010, we have had the fastest growth of any European G7 nation. I also suspect that there will be counterarguments to that, and that those will continue. In many of these circumstances, particularly some of the points raised by the noble Lord, Lord Desai, it is just a case of economists not agreeing. Not all economists agree—it is an art, not a science. For those of us who studied economics at university, it is clear that there are sometimes fundamental differences, as noble Lords have said today. My noble friend Lord Leigh is also a very experienced person in these matters. As he pointed out, he does not agree with much of the analysis. Sometimes, that is the case.

I am incredibly grateful to my noble friend Lord Leigh, his committee and the officials for the report of their sub-committee. I reassure him that we take those reports very seriously. Officials read them to ensure that we take into account the considerations and the recommendations made. On research and development, I think he agrees with us that we want to keep things as stable as possible. We do not intend to make any further changes. However, there are a few small areas where we will continue to engage, and any changes will be done cautiously. We hear what he and his committee say, and we will consider it carefully.

My noble friend noted the issue around HMRC data and tax administration. The Government’s economic response to the coronavirus pandemic was made possible through the powerful use of all sorts of data. However, it highlighted that there are gaps in the data that HMRC holds. New or improved data collected by HMRC, such as detailed information on employee hours and start and end dates on self-employment, will help government to address some of the gaps, building a tax system which is more resilient. I reassure him that the Government are taking a proportionate response and collecting improved data in areas where taxpayers already hold it, to minimise administrative burdens. The existing safeguards are robust, well-established and well-understood. I reassure him that we expect all taxpayers to have this information already and be able to provide it to HMRC. HMRC will take a reasonable and proportionate approach to the application of any fees or penalties in this regard. These changes will not take effect before April 2025, to give the system some time to adjust.

My noble friend Lord Leigh also mentioned HMRC customer service. Noble Lords will have heard me say this before, and indeed I have had the discussion directly with HMRC: it acknowledges that its customer service levels are simply not as good as they should be. Levels on the phone and in the post are below service standards from last year. HMRC has been working very hard to improve services for those people who need to call, but encourages people to use the digital services as much as possible, as they can be very efficient and get very good ratings from customers.

My noble friend Lord Leigh once again brought up his minority sport—a very important sport—of EIS and VCT, and why these are being extended by regulation. He hinted about it being something to do with the Windsor Framework, the EU, Northern Ireland, and the trade and co-operation agreement, and he is right. These are important schemes, and the vast majority of UK subsidies will need to comply only with the UK’s domestic subsidy regime, as noble Lords would expect. The Windsor Framework also means that the EU-UK Trade and Cooperation Agreement will now serve as the primary framework governing subsidy control between the UK and the EU. For the EIS and the VCT scheme, we are engaging with the EU on approval for extension, due to Northern Ireland’s unique access to the EU single market. We are working to meet all relevant obligations. We believe that the systems are consistent with subsidy control principles and address evidence of market failure, and therefore we think those conversations will go well.

My noble friend mentioned the complexity of Pillar 2. I agree that it is complex and difficult to administer—it is necessarily complex, because of the wide variety of different corporate structures which exist. However, we are reassured that we have simplified processes as much as we possibly can, such that compliance from business will be at the sorts of levels that we want to see.

On stooge directors, as noble Lords would expect, these measures are targeted at the promoters of tax avoidance schemes. Stooges enable these promoters to hide their activities, and, frankly, that is not what we are after at all. The Government understand the need for strengthened HMRC powers to be proportionate and balanced. Those are the two words that are absolutely key. Nobody wants to put anybody in jail because they did something under the duress of somebody else.

The noble Lord, Lord Sikka, raised a number of points and many rhetorical questions, and, I suspect, lots of really good ideas for the Labour Party manifesto. I, unfortunately, cannot agree with much of what he said, particularly his insistence that the state needs to substantially increase investment which is traditionally private sector activity. The state does invest, but it invests in those areas where we feel it is right for the public sector to be investing. We believe that the private sector is much better at picking up that sort of investment.

The noble Lord seemed to imply that the Government have done nothing against tax avoidance and that it is all terrible out there, etcetera. I am afraid that is just not right. The amount of money lost to the Exchequer from tax avoidance has fallen from £3.6 billion in 2010—to pick a year—to £1.4 billion in 2021-22. That is a significant reduction in the amount of tax avoidance. Again, I do not expect the noble Lord to agree with me. He went on to ask me for specific examples. HMRC already prosecutes promoters. Since 2016, more than 20 individuals have been convicted of offences relating to arrangements which have been promoted and marketed as tax avoidance. Our interventions are working, and there are interventions in the Bill to make our levers stronger. This Government do not tolerate tax avoidance and we will do whatever we can to stop it.

The noble Baroness, Lady Kramer, raised a number of issues. I have already mentioned thresholds; from the Government’s perspective, we understand what had to happen over that time. She raised the issue of public spending, which I note is going up in real terms by 0.75% over the forecast period. What slightly concerns me now is the question of where it would stop. If it is going up in real terms every single year, after how many years would we say that that is enough? However, I also put it to her that, as important as productivity is in the public sector, in the private sector you would not get away with the lack of focus on productivity. That is why the Chief Secretary to the Treasury is looking at a productivity review across all areas of government, to ensure that public spending is the right amount. At the end of the day, the best way to increase the amount of money that we have available for public spending is to grow the economy, and that is exactly what this Government are doing.

The noble Baroness mentioned productivity. It has been estimated that supply-side measures from the Autumn Statement 2023 could close up to half of our productivity gap with France, Germany and the US. We feel that we are making good progress, investing in the right areas to improve productivity.

The noble Baroness mentioned climate change, which is incredibly important. It is also interesting that she mentioned Labour in her appeal to keep climate change front of mind, because Labour still has its very unachievable climate plans, with now literally no funding. It used to have £28 billion of funding, which shadow Front-Bench Members managed to commit to over 300 times. Unfortunately, that £28 billion has now disappeared, but all the policy seems to remain in the same place. That goes back to the point that the noble Lord, Lord Livermore, made. Apparently, in the stability, investment and something else he said—their plan to deliver, which I am still looking for the detail on—all Labour policies will be fully costed, apart from those on climate change. Is that right? I am looking forward to it. I do not know; the £28 billion has disappeared but the policies have not.

The noble Lord asked me to commit to certain things for the Conservative Party manifesto, which I will not do, but the Government have just introduced permanent full expensing. It would be a great surprise to me if, all of a sudden, it were to disappear again, because we believe that it is a very valuable thing to do.

The noble Lord mentioned non-domiciled individuals. I, too, am very interested in that and will keep an eye out for how much money will be raised from the changes to non-domiciled individuals’ tax arrangements. I suspect that it will not be anywhere close to the amount of money that Labour platitudes and unfunded promises will need as we head into the election. But we believe that non-UK domiciled individuals play an important role in funding our public services through their tax contributions. The Government want the UK to be a destination that will attract talented people to work and do business, and that includes people from overseas. It is only right that those who choose to live here for a long time pay their fair share of taxes—namely, that they cease to become non-domiciled.

I believe that I owe various noble Lords a letter, which I will ensure gets to them as soon as possible. In the meantime, I commend the Bill to the House.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

UK Economy

Baroness Vere of Norbiton Excerpts

Wednesday 21st February 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the UK’s growth forecast was recently downgraded for every single year for the next three years. Debt is set to surpass £3 trillion for the first time ever. We are seeing the biggest ever fall in living standards and the tax burden is set to reach its highest ever level. Now, the ONS has confirmed that Britain has fallen into recession, with GDP per capita falling in every single quarter of the past year. Yet the Chancellor says, “Our plan is working”. Was it part of the Government’s plan, having spent 14 years in the economic slow lane, to now put our economy into reverse?

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

I absolutely believe that our plan is working. It is critical that we continue along the path that we have set out. One of the biggest challenges we have faced in this country over recent months is high inflation. That is the biggest barrier to growth and that is why halving it is still our top priority. Thanks to decisive action, supported by the Government, inflation has fallen. If one looks at what happens when inflation falls, one sees that interest rates can also fall, which will also mean that growth will begin to rise. The noble Lord mentioned growth. It is the case that the Government have very clear policies for growth. Noble Lords will discuss them with me shortly, as we debate the Finance Bill.

[Baroness Kramer (LD)]

My Lords, the Resolution Foundation has reported that GDP per capita is now 4.2% below its path before the cost of living crisis. That is the equivalent of a loss of nearly £1,500 per household. The OBR has said that we are set to see the biggest fall in living standards since 1950. Do the Government understand that, for ordinary people, their plan is delivering real day-to-day pain and often deprivation? Nothing she has said or proposes to do changes that, as she will see if she looks at the forecasts.

[Baroness Vere of Norbiton (Con)]

What is absolutely clear is that the forecasts show that the UK is forecast to grow, and very strongly. The IMF has forecast that we are to grow faster than Japan, Germany, France and Italy over the next five years. I absolutely accept that the economy has seen some very significant challenges over recent years, with global instability in Ukraine and in the Middle East, and the legacy of Covid. I was a Minister throughout that period, and at no time did I ever hear any ideas from the party opposite or the Liberal Democrats that would have put the economy in a better situation than it is in now. They called always for more spending, for longer periods. We must fix the issues that appeared, mostly due to external factors, which is exactly what we are doing. The economy is turning a corner—indeed, it has turned a corner, thanks to our decisive action.

[Baroness Falkner of Margravine (CB)]

My Lords, the Minister referred to global headwinds. Would she accept that an economy such as the United States has experienced exactly the same headwinds? Instead of opening our newspapers and reading that the Chancellor intends to give enormous universal tax cuts on 6 March, would it not be more sensible for the Government to acknowledge that the people who are hurting the most from the cost of living crisis are the people at the bottom lower income deciles? Those are the people who should be targeted for assistance if there is any money going.

[Baroness Vere of Norbiton (Con)]

Obviously, I cannot comment on any potential tax cuts. I am sure the noble Baroness will agree that the US has a very different economic structure from the UK and tends to offer slightly less support to those at the bottom end of the ladder. She mentioned those who are the most vulnerable. Personal allowances have gone up by 30% in real terms than in 2010. That means that 30% of people now pay no tax. We are focusing our interventions on people at the lower end of the income scale, but we are also focusing them on growing business.

[Lord Leigh of Hurley (Con)]

Would my noble friend agree that comparisons with the United States are not really appropriate, particularly given cheap energy costs in the States due to fracking, which we do not have? It might be better to compare us with European countries. Since 2010, the UK has had the fastest growth of any European G7 country—faster than Italy, Spain, Germany and France. Will she welcome today’s news that the budget surplus for net borrowing, excluding banks, shows a surplus for January of £16.76 billion, and today’s announcement that the UK purchasing managers index rose in January to 52.9? Rather than knocking the economy, let us celebrate the good news.

[Baroness Vere of Norbiton (Con)]

I agree with my noble friend—let us celebrate good news, and I believe there will be more good news to come. He mentioned debt. It is fair to reassure noble Lords that we are on track for debt to fall as a share of the economy. Public sector net debt as a percentage of GDP is expected to fall next year to the end of the forecast. If one were to exclude Bank of England debt, it will fall in the final year, and public sector net borrowing as a percentage of GDP is forecast to fall every single year. We also have the second-lowest debt as a share of GDP in the G7.

[Lord Sikka (Lab)]

My Lords, the Minister talked about curbing inflation. The Government have a very strange policy. I characterise it as somebody who has an ailment and goes to see their doctor, who dusts off a 100 year-old book in which, regardless of the reasons for the ailment, the answer is the same remedy. Whether inflation is caused by wage rises, inequalities or profiteering, it is the same policy: we must increase interest rates and force ordinary people to hand over their wealth to the banks. That is no policy, because it causes other ailments. Will the Minister tell us what other ailments have been caused by this remedy adopted by the Government?

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

As the noble Lord will know, interest rates are just one of the levers that the Bank of England has to influence inflation. The Government can also play a key role in tackling inflation —for example, by ensuring that public sector pay awards are kept within reasonable bounds.

[Lord Sikka (Lab)]

Can I have another bite here? The Minister said that public sector wages are within reasonable bounds, which suggests that the Government think wage rises are inflationary. But that does not apply to executive pay, profiteering, dividends or share buybacks—are they not inflationary as well? If they are, why are the Government not curbing them?

[Baroness Vere of Norbiton (Con)]

The noble Lord well knows that inflation is caused by a vast amount of different factors. When we announced our interventions at the Autumn Statement, the OBR said that they were not inflationary. That is another way in which the Government put downward pressure on inflation. As we have seen, the proof is in the pudding; we have gone from 11% in October 2022 to 4% in January 2024.

[Lord Berkeley of Knighton (CB)]

My Lords, I am glad that the Minister feels encouraged by the latest figures. Can she understand why some people who have inflated mortgages feel they have them because of the antics of Liz Truss and Kwasi Kwarteng—which is admittedly not the responsibility of the noble Baroness?

[Baroness Vere of Norbiton (Con)]

As the noble Lord will be aware, the reason interest rates are particularly high is to control inflation. The Bank of England now expects inflation to get back to the target of around 2% in the early summer. If that can happen, then of course interest rates would be able to come down.

[Baroness Lawlor (Con)]

Will my noble friend consider a longer-term anti-inflationary policy such as ensuring that the Monetary Policy Committee of the Bank of England, and the governor, build into their forecasting model a measure to take account of the growth in money supply each year?

[Baroness Vere of Norbiton (Con)]

I will take that idea back to the Bank of England.

[Lord Leigh of Hurley (Con)]

Does my noble friend agree that it is highly complimentary to Liz Truss and Kwasi Kwarteng to suggest that their actions are responsible for interest rates in every country around the world, which are broadly comparable to ours?

[Baroness Vere of Norbiton (Con)]

As I think I said earlier on in answering this question, all sorts of countries have faced the challenges that the UK has. There have been a number of countries, over the second half of 2023—either in Q3 or Q4—that saw a small technical contraction in their economy. Andrew Bailey, the Governor of the Bank of England, believes that the technical recession may already be over. I expect us to return to growth very soon.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024

Baroness Vere of Norbiton Excerpts

Wednesday 14th February 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That the Regulations laid before the House on 22 January be approved.

Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 13 February.

Motion agreed.

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024

Baroness Vere of Norbiton Excerpts

Wednesday 14th February 2024 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That the draft Order laid before the House on 18 December 2023 be approved.

Considered in Grand Committee on 13 February.

Motion agreed.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024

Baroness Vere of Norbiton Excerpts

Tuesday 13th February 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024.

Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, these regulations have been laid to amend the definition of high-risk third countries in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which I will refer to as the money laundering regulations.

The Government recognise the threat that economic crime poses to the UK and are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic costs through its links to serious and organised crime. It also undermines the integrity and stability of our financial sector and can reduce opportunities for economic growth and legitimate business in the UK. The Government are bearing down on kleptocrats, criminals and terrorists who abuse the UK’s financial and services sectors. The Economic Crime and Corporate Transparency Act built on the earlier Economic Crime (Transparency and Enforcement) Act to ensure that the UK has robust, effective defences against illicit finance.

The money laundering regulations are at the centre of the UK’s legislative framework for tackling money laundering and terrorist financing. They set out various measures that businesses must take to protect the UK from illicit financial flows, such as conducting enhanced due diligence—EDD—in certain cases. EDD is required to manage and mitigate the risks arising from certain high-risk transactions or business relationships. Businesses must consider a wide range of multiple different factors when deciding whether there is a high risk of money laundering or terrorist financing in a particular situation. They include risk factors associated with the customer, product, service, transaction and delivery channel, as well as any geographical risk factors.

The MLRs set out that firms should consider the risk posed by customers or transactions relating to any countries which have been identified by credible sources, such as the IMF or the World Bank, as lacking effective systems; countries with significant levels of corruption or other criminal activity; or countries subject to sanctions, embargoes or similar measures. As well as these examples, EDD is required in any other case which by its nature can present a higher risk of money laundering or terrorist financing.

The measures being brought forward today relate to another of the specific situations in which regulated businesses must apply EDD, being in relation to any business relationship or transaction with persons established in a high-risk third country—that is, a country identified as such by the Financial Action Task Force, or FATF.

The Economic Crime and Corporate Transparency Act changed how high-risk third countries may be defined under the money laundering regulations, and this statutory instrument simply implements this change. It removes the separate list of countries from Schedule 3ZA and replaces it with an ambulatory reference to those countries listed by FATF, which is the global standard setter for anti-money laundering and counterterrorist financing. This means that countries listed by FATF will automatically be in scope of obligations under the regulations.

By taking this approach, we will ensure that the UK remains at the forefront of global standards on anti-money laundering and counterterrorist financing. This protects the UK financial system from illicit finance linked to the jurisdictions being listed. Where countries have made significant progress to improve their defences, it is equally important that we recognise that and promptly remove them from the scope of high-risk countries in the UK.

Ahead of this update, the UK and the FATF lists were already aligned. Indeed, since the creation of the UK list in 2021, the Government have always updated it to reflect changes to the FATF lists, and that remains our policy. This SI does not, therefore, add or remove any countries from scope, nor change the obligations on regulated businesses. It delivers on government policy in a streamlined way and ensures automatic alignment with the FATF lists without the need for frequent but fairly routine secondary legislation. It also ensures that firms will be notified in a timely manner of updates to the lists and their obligations, staying up to date as the risks change.

This statutory instrument has been reported as an instrument of interest by the Secondary Legislation Scrutiny Committee, which noted that it reduces parliamentary oversight of the process of adding or removing countries, although I note that of course it is government policy and would have continued to be government policy to introduce an SI every time the list changes. Therefore, in a sense this is automating the process. However, the Government are committed to keeping Parliament informed and will submit letters to the Libraries of both Houses at the conclusion of each FATF plenary meeting, when countries made have been added to or, indeed, removed from the FATF’s lists.

I also assure noble Lords that if at any time the Government saw fit to deviate from the FATF lists, they retain the authority and autonomy to do so. In such cases, a statutory instrument would be brought before Parliament for consideration.

I conclude by noting that the measures in respect of high-risk third countries are an important mechanism to mitigate the risks posed by illicit financial flows from overseas. We will continue to use this and, of course, many other tools available to us to respond to wider and emerging threats from other jurisdictions, including by applying financial sanctions as necessary. These amendments will enable the money laundering regulations to continue to work as effectively as possible to protect the integrity of the UK financial system. I beg to move.

[Lord Sharkey (LD)]

My Lords, we support this very sensible SI and recognise the importance of the work FATF does in the fields of money laundering and terrorist financing. We recognise the importance of its lists of high-risk countries and the importance of the UK aligning itself with these lists, especially as they change from time to time.

Up until today, as the Minister said, we have kept ourselves aligned by using SIs to modify Schedule 3ZA to the MLRs. We have done this eight times; the last occasion was 8 January, a month ago. As the last of these SIs passed through the Commons, the Minister noted:

“I am aware that many noble Lords have expressed frustration at parliamentary time being taken up in the other place by such relatively routine matters to keep our high-risk third countries list aligned to the task force’s”.—[Official Report, Commons, First Delegated Legislation Committee, 8/1/24; col. 4.]


I do not know who those noble Lords were either. The Minister proposed a better way: the removal of the list in Schedule 3ZA and its replacement with, as our Minister said, an ambulatory reference to the FATF list itself.

This SI, which was debated last week in the Commons, does exactly that. It is true that it will undoubtedly save some parliamentary time, but it will remain important to ensure that all interested parties are aware of FATF list changes.

HMT issued updated guidance on high-risk third countries on 22 January. In passing, I should note that I could not find Russia on either list. Is that not a little odd? Coming back to the guidance issued by the Treasury, it would seem perfectly reasonable and not burdensome if HMT were to issue similar updated guidance after each of the three FATF plenary sessions that are held each year. Since Parliament will now lose an automatic mechanism for discussing changes to FATF lists, as the Minister said, I am very grateful for her confirmation of the commitments given to the SLSC to continue the practice of depositing in the Libraries of both Houses a summary of FATF meetings at which list changes are made and publishing an advisory note on the government website.

[Lord Livermore (Lab)]

My Lords, we support this SI. It is a common-sense approach to ensuring timely updates to the UK list of high-risk countries, and it retains the flexibility needed to ensure that other countries can be added via affirmative SI if that is deemed appropriate. I note that the Minister mentioned that letters will be placed in the Libraries of both Houses, but what mechanisms will exist under this new regime if noble Lords wish to raise questions or concerns about high-risk countries, should they have them?

I note that we debated the latest update to the list only a few weeks ago and that this SI does not make any further updates to the list of countries. I therefore have no additional questions.

[Baroness Vere of Norbiton (Con)]

My Lords, I am very grateful to both noble Lords for their support for this SI, which I believe is entirely sensible. One of the things that I was unable to bring out in the opening statement as to why I think it is so sensible is that one of the key things about us being aligned to FATF, and the timing of a country being listed by FATF and immediately going on to the list here, is that we can act globally and in a co-ordinated manner so that the international community can ensure that it acts together to magnify the preventive effects.

The noble Lord, Lord Sharkey, mentioned Russia. It is true that Russia is not currently on a FATF list as, of course, a cycle of mutual evaluations needs to be gone through. However, Russia is obviously subject to extensive sanctions by the UK. I think there is sometimes a little confusion about the money laundering regime and the sanctions regime. In the money laundering regime, you are regulated under the money laundering regulations. Therefore, as a regulated person you must do certain things. However, everybody needs to be aware of sanctions, sanctioned individuals and sanctioned organisations. Obviously, for Russia, that is quite significant.

That brings me on to notification. As committed to, we will place a letter in both Houses with a summary of the plenary and whether any countries have gone on or off any list. Perhaps we will provide a reminder to noble Lords as to who is currently on the two lists.

The noble Lord, Lord Livermore, asked how he could raise questions. I suggest that, in the first instance, I would write to the Minister. Obviously, one could use Parliamentary Questions, but a letter would be better and probably elicit a fuller response. If not, there is always the opportunity to request a meeting with the Minister. It is a very important issue and I do not think that there would be any reason at all for us not to agree to do that.

That is about keeping Parliament informed, but then, of course, the regulated organisations need to be kept informed as well. If, as a regulated organisation, you do not have a process for checking who is on or not on a FATF list, I am afraid you are not a particularly well-run regulated organisation. All sorts of different organisations are regulated, but they will have to have controls and processes in place. We would put a notice up, as we always do, in a specific place. Two things would then happen: the regulated organisation itself would see the update—I know that many thousands of them do—but the supervisors, who are the overarching body of the different types of regulated organisations, would also send out reminders to those organisations about any changes. So there are two lines of attack, but, frankly, it should be beholden on the organisation as a regulated body to keep itself in the loop.

With that, I commend the regulations to the Committee.

Motion agreed.

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024

Baroness Vere of Norbiton Excerpts

Tuesday 13th February 2024 Grand Committee

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, this draft statutory instrument makes an update to financial services legislation to make operating a pensions dashboard service a Financial Conduct Authority—FCA—regulated activity. As noble Lords will be aware, the Government have long held the ambition of delivering pensions dashboard services to the public. It is vital that individuals can easily access and view data about their pension savings in one place and at their convenience.

Executed well, pensions dashboards can deliver significant benefits to consumers, providing better access to information about their pensions held in different schemes and putting information about private and state pensions in a single place. This will bring a step change in how people can engage with their pension savings and will finally allow them to have a fuller picture of them. Equipped with this information, individuals will be better able to plan for their retirement, find lost pension pots, seek financial advice and guidance at the right time and, ultimately, feel more in control of their pensions.

As noble Lords will be aware, the Government are supporting the development of the digital architecture needed to make pensions dashboards a reality, as well as facilitating the development of a government-backed pensions dashboard by the Money and Pensions Service. The Government are also supporting the development of private sector pensions dashboards. Different individuals will have different needs, and this will ensure that a range of platforms exist to meet them. However, the Government have been clear that this can take place only with a suitable and robust regulatory framework in place, recognising that consumers using pensions dashboards could be vulnerable to potential harms. It is vital that consumers are adequately protected.

During the passage of the Pension Schemes Act 2021, the Government were clear that the operation of pensions dashboard services should be brought within FCA regulation. This order amends the regulatory perimeter of the FCA to make operating a pensions dashboard service that connects to the Money and Pensions Service dashboard’s digital architecture a regulated activity. Once in force, this will have the effect that anyone choosing to operate a pensions dashboard service will need to be authorised and regulated by the FCA. Firms that are authorised by the FCA and granted permission to undertake the new regulated activity will have to follow the rules and guidance set by the FCA, which has the relevant remit and objectives to establish an appropriate consumer protection framework for pensions dashboards.

As noble Lords will be aware, the FCA consulted on the rules for pensions dashboards. The consultation, which closed towards the end of last year, set out a proposed approach to ensure that the new market for pensions dashboards does not introduce or amplify the potential for consumer harms. We will continue to work with the FCA in the coming months as the regulatory framework is finalised.

This statutory instrument delivers a key part of the framework that we are establishing to make pensions dashboards available to consumers. It is imperative that pensions dashboards operate within a strong regulatory framework, providing appropriate consumer protection so that the consumer benefits of dashboards can be realised. I beg to move.

[Lord Sharkey (LD)]

My Lords, we support this pensions dashboard SI, just as we supported the pensions dashboards project during the passage through the House of what became the Pension Schemes Act 2021. We continue to believe that the dashboards should deliver more information to the consumer in a comprehensive and easily understood way, and that this will make it easier to make better choices.

We understand that providing these dashboards, both for MaPS and for commercial suppliers, is a very complex undertaking. We were not terribly surprised by the delays the project has suffered but we would like some reassurance about progress from the Minister. The new connection date is set for 31 October 2026, but some services may be available before then. Could the Minister tell us when we may now expect the MaPS dashboard to be available to consumers, when we may expect commercial variants to be available and what services short of a full dashboard may be available sooner?

It would also be very helpful if the Minister could tell us when she expects the FCA rules that she mentioned, which were previously consulted on, to be published. It is hard to see commercial enterprises being able to finalise their own dashboards without sight of and understanding of the new FCA rules.

During the debates in the House on what is now the Pension Schemes Act 2021, many of us thought that the MaPS version of the dashboard should be allowed at least a year of operation before commercial versions were allowed to enter the market. Can the Minister tell us whether there is likely to be a period when the MaPS version runs alone?

We also debated the issue of allowing consumers to make transactions via commercial dashboards. Can the Minister say what the current position is? Will transactions be allowed?

The mechanics of the SI before us seem entirely straightforward and are clearly vital to consumer protection. We have no issues with either its purpose or its mechanism. We do have a couple of very minor and tangential questions. First, we are curious about the date of the SI coming into force. Why is it 11 March? Does that date have any particular significance?

The second question relates to the final sentence of paragraph 7.4 of the Explanatory Memorandum, which reads:

“Operating a dashboard may include taking regulatory responsibility for any third parties involved in connecting to MaPS digital architecture on their behalf”.


I would be very grateful if the Minister could unpack that a little. Perhaps she could give an example of such an arrangement. What circumstances would trigger the assumption of responsibility?

[Lord Livermore (Lab)]

My Lords, this SI makes good on a commitment given during the passage of what became the Financial Services Act 2021 to ensure that entities running a pensions dashboard will have to be authorised and regulated by the FCA. This is an important safeguard for pension holders and we welcome the SI, even if it has taken longer than expected to arrive and is not quite the final piece of the pensions dashboard puzzle.

In an age of scams, uncertainty about AI and increasing consumer concern about online safety, perhaps I might ask the Minister about technical safeguards that providers are expected to put in place. I understand that dashboards themselves will not store data, so there is no risk of mass collection. But if an app is not secure and someone is using a device infected with malware, for example, could bad actors still be able to view and therefore exploit data such as account names, numbers and balances? It would be helpful to know what specifications private providers will have to meet—or, indeed, whether the Government or the FCA will be setting any technology specifications at all.

Paragraph 7.1 of the Explanatory Memorandum to this SI states that the regulated entity will be responsible for the actions of third parties connecting to the Money and Pensions Service digital architecture on their behalf. In recent years, there has been a number of examples of websites or apps using plug-ins to process logins which it then turned out had been infiltrated and customer data breached. Are the Government satisfied that the FCA and dashboard providers will be on top of these issues and that they will go to the Information Commissioner if needed?

Although more guidance is being issued about pensions dashboards, it is still not clear when the Government expect the first products to be operational. Does the Minister have a specific target date in mind?

Finally, when this SI was debated in the Commons, the shadow Economic Secretary asked the Minister whether he could confirm whether pensions dashboards would be using the Government’s OneLogin service. The Economic Secretary said he would write on the matter but, as far as I am aware, has not yet done so. Does the noble Baroness have an answer to that point in her brief and, if not, whether she will commit to copying the Economic Secretary’s reply, when it comes, to the participants in this debate today?

[Baroness Vere of Norbiton (Con)]

My Lords, I am very grateful to both noble Lords for their contributions to this short debate on a topic of great interest to all of us pensioners. I, for one, am looking forward to being able to see whether I have any lost pensions that suddenly pop up on my dashboard and it turns out that I am a multimillionaire. I am not holding my breath.

However, I think all noble Lords recognise that it is an incredibly complex undertaking, and it is right that we take the time to ensure that it is done to the level that consumers will expect—particularly given the amount of data available out there relating to pensions. It must be safe and secure; pensions dashboards will allow users to search their pensions and view their data, and they will be connecting to potentially thousands of schemes offered by technologically advanced organisations in some circumstances, and in others, frankly, organisations that are not quite so advanced. It is those laggards that we need to make sure are up to scratch.

Essentially, we expect the digital architecture to facilitate the search of more than 71 million pensions records held by thousands of pension schemes and providers. Each of those—or many of them—will have different IT systems and ways of calculating values. Pulling all of that together is the complex thing behind this, but, as the noble Lord, Lord Livermore, rightly pointed out, we also have the issue of identity verification to consider, and various other critical elements of the ecosystem. Around that sit things such as standards and guidance to pension schemes, in order for them to be able to connect.

The timelines at the moment are that the DWP’s amending regulations came into force in August 2023. That set out a new connection deadline for schemes of October 2026. At the moment the DWP is engaging extensively with industry and has been since last year. It will issue guidance on a connection timetable in spring 2024.

The reason for the delay is that it is a slightly more complex technical issue and solution than initially anticipated. This became apparent once we were able to speak to industry stakeholders to find out how they store their data and present it to their pension holders. But I am convinced there will be a point when we get to the dashboard available point—DAP—at which stage the dashboard will be made publicly available. However, before the DAP can be reached, the Secretary of State for the Department for Work and Pensions will have to issue a notice. He or she will do so only after having regard to whether there is sufficient coverage on the dashboards, that the service is working effectively and that the overall user journey on the dashboard is positive. This will be informed by extensive user testing to ensure the success of the pensions dashboards services from the outset.

I think that it was the noble Lord, Lord Livermore—forgive me, I cannot remember—who asked whether MaPS would be first and then others would follow. In fact, it was the noble Lord, Lord Sharkey. It is too early to say now. Certainly, MaPS will be first, but we are not yet clear whether there will be other private sector providers ready to go at that time. There will not be a rush to try to get private sector providers there because, of course, the FCA is still working on its rules, and we will allow private sector providers only once the FCA has published its final rules. The applicants would need time to prepare accordingly, the dashboard architecture would need to be complete and the private operators would then have to have applied to the FCA, which would have gone away, checked the business model and looked at its usability—all of those things—before it would also be allowed to sit alongside MaPS. So it is too early to say whether a private sector provider would be launched at the same time.