Financial Services and Markets Bill [HL]

Lord Altrincham Excerpts

Report stage
Wednesday 9th September 2026 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I declare my interests as chair of the ownership dividend inquiry into employee ownership and as director of Valloop Holdings Ltd.

Amendments 63 and 66 address a structural flaw in financing employee ownership, co-operative and mutual transitions—a problem sharpened by recent tax changes and incoming Basel prudential rules. Amendment 64 concerns the systemic misuse of Section 166 investigations. In the interests of time, I have not split this rather diverse group. Amendments 63 and 66 would not mandate outcomes; they would simply require regulators to consider a distinct exposure class and review lending to these entities. The PRA already possesses the power to do this, just as it does for infrastructure, but this asset class is too niche to attract regular focus without a push, so this is my push.

The Government’s manifesto commits to doubling the co-operative and mutual sector. Yet reducing capital gains tax relief for employee ownership trusts has already drastically reduced conversions. Basel 3.1 compounds the damage. Removing the SME supporting factor increases risk weights under the standardised approach used by challenger banks—the very lenders willing to finance these transactions. The large IRB banks could theoretically model lower charges but generally will not incur the cost for such a small market.

The result is clear: funding these transitions will become harder, if not impossible. Yet these business models carry lower default rates, higher survival rates and greater economic resilience. These are prudentially relevant characteristics that justify differentiated treatment, just like infrastructure, green mortgage or project finance do. Recognising this profile is cost-neutral, Basel-compatible and entirely within existing regulatory powers. Without it, I suspect that the Government’s own policy commitments will fail.

I turn to Amendment 64. Section 166 powers were designed for serious exceptional concerns, allowing regulators to appoint a skilled person—typically an expensive consulting firm—to investigate a business. As the noble Lord, Lord Altrincham, and I set out in Committee, Section 166 has suffered severe mission creep. It now seems to be used routinely, disproportionately and beyond its intended scope. These reviews impose high costs, disruption and management distraction on firms, often for issues that supervision could and should handle.

My amendment would restore the original statutory boundary. It would ensure that Section 166 is deployed only where there is material risk of detriment to regulatory outcomes and where its use is strictly proportionate, having regard to the burden on the firm and whether normal supervisory tools would suffice. The House must signal that regulators cannot delegate routine supervision to high-price firms at the expense of regulated businesses. I intend to seek the opinion of the House. I beg to move.

[Lord Altrincham (Con)]

I thank the Minister for hosting this second day of Report with such grace. I will focus my remarks on Amendment 64, to which I added my name. I am very grateful to the noble Baroness, Lady Bowles of Berkhamsted, for bringing this important issue before the House again.

“Section 166 review” is the name given to FCA investigations. These investigations were originally quite rare, but dozens are now launched every year and they are paid for by the target firms. These investigations are expensive and time-consuming. They can have a rather arbitrary regulatory purpose and are somewhat unconstrained. This regulatory power can be exercised without a statutory threshold requiring the regulator first to demonstrate that the matter is sufficiently serious and that using this particular tool is proportionate.

We hear consistently from firms that Section 166 reviews are increasingly becoming the norm rather than the exception. Without a degree of restraint or oversight, these powers may create regulatory uncertainty. Our amendment would not prevent the regulators acting where there is a serious problem, nor would it remove Section 166 from their toolkit. It would simply mean that such a costly and burdensome power is used proportionately where it is genuinely warranted. I very much hope that the Minister will accept the amendment, but if the noble Baroness, Lady Bowles, decides to test the opinion of the House as she has indicated, we will support her.

[Lord Pitt-Watson (Lab)]

My Lords, this group raises two important but distinct questions: how the prudential framework should treat lending that supports employee ownership, co-operatives and mutuals; and when regulators should use skilled person reviews under Section 166 of FSMA. The Government have carefully considered the case made for each amendment, but do not believe that these changes should be made through legislation.

Amendments 63 and 66 seek to create a bespoke prudential framework for lending to co-operatives and mutuals, including through lower risk weights. The Government recognise the valuable contribution that co-operatives and mutuals make to the UK economy and are undertaking a multiyear programme of work to support the growth of the sector. This includes making amendments to the Building Societies Act 1986, which we debated last week, to align it with company law and give societies greater funding flexibility.

However, prudential capital requirements should reflect the underlying risk of a lending activity rather than the ownership structure of the lender. Prudential requirements are generally set by the Prudential Regulation Authority through its rules, rather than being prescribed in legislation. This allows the framework to respond to evolving risks and market developments, while operating within a statutory framework established by Parliament. The Prudential Regulation Authority has clear statutory objectives and is accountable to Parliament for the exercise of its functions. It is therefore the appropriate body to assess risk characteristics and determine the appropriate prudential treatment of different exposures. The Government therefore do not consider it appropriate to prescribe preferential prudential treatment for particular business models through legislation. Such decisions should remain matters for the independent Prudential Regulation Authority. For these reasons, I am unable to support these amendments.

Turning to Amendment 64 concerning Section 166 skilled person reviews, I agree that these reviews should be commissioned only where appropriate and proportionate. However, the Government are not persuaded that a further statutory threshold is necessary. As we discussed in Committee, regulators already consider the circumstances of the firm, the costs involved and the availability of alternative supervisory tools before commissioning a skilled person review. The FCA and the PRA have established supervisory processes for doing so. Requiring the regulators to satisfy an additional statutory test could delay supervisory action and make it harder to intervene before problems occur that could damage the interests of consumers or affect the functioning of markets.

I know that a concern has been raised about there being more and more Section 166 reviews. I reassure noble Lords that the FCA’s use of skilled person reviews has been broadly consistent over the past 10 years. In 2025-26, only 31 were commissioned, which is the second-lowest usage since 2016. I am happy to send the figures to Members if they are interested.

In their letters to me, which have been shared with interested Members and laid in the Library, both regulators set out details of their approach to delivering proportionality, with the FCA explaining how its approach to supervision is proportionate, risk based and targeted. They also commit to ongoing engagement with parliamentary committees on their approach. I hope that this reassures the noble Baroness about the process and proportionality of Section 166 reviews and therefore ask her not to press her amendments.

Financial Services and Markets Bill [HL]

Lord Altrincham Excerpts

Report stage
Monday 7th September 2026 Lords Chamber

[Lord Hunt of Wirral (Con)]

I support the noble Baroness, Lady Hoey, and the noble Lords, Lord Weir of Ballyholme and Lord Empey. In doing so, I declare my interest as past chairman of the British Insurance Brokers’ Association and a practising solicitor in the City of London.

We have campaigned within the broking community for proper regulation of claims management companies for a very long time. Therefore, BIBA was particularly disappointed that this Bill did not address the problem, which is urgent. Average motor claims costs in Northern Ireland have tracked more than 30% higher than in England and Wales since 2021. The figures given by the noble Baroness bear that out. There is a need to do something about this problem. I agree with noble Lords who have spoken that this is a great opportunity for the Government to put right the anomaly. Claims management companies add between 15% and 30% to a total claim by taking a percentage out of compensation that does not reach the claimant. We must keep reminding ourselves of that.

This amendment would be a practical, targeted correction alongside the Bill’s wider focus on consumer protection, redress and better regulation.

[Lord Altrincham (Con)]

My Lords, notwithstanding the anomalies that have been discussed—there are significant anomalies in insurance in England as well—we have some concerns about this amendment. It would hand the Treasury very extensive powers to act through secondary legislation, including the ability to amend primary legislation. We have raised concerns consistently in Committee and on Report about the use of broad, delegated powers of this kind. The same concerns apply here. Regulations being subject to the affirmative procedure provides a degree of parliamentary scrutiny. However, it does not alter the fundamental point that Parliament will be delegating significant legislative discretion to the Treasury before the detailed regime on any transitional arrangements has been set out.

[Lord Pitt-Watson (Lab)]

My Lords, Amendment 16 would give the Treasury the power to extend regulation of claims management activity to Northern Ireland through secondary legislation. I am aware of the concerns relating to high insurance costs across the UK and would be supportive of action to tackle these where we can, but we should not rush to regulate without clear evidence.

The Government’s Motor Insurance Taskforce has examined the drivers of motor insurance costs, including claims-related costs and market practices. This work has not identified clear evidence that claims management companies are a primary driver of higher premiums in Northern Ireland. Moreover, any proposal in this area would also need careful engagement with the Department of Finance in Northern Ireland and proper consideration of the devolution implications. I therefore ask the noble Baroness to withdraw Amendment 16.

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[Lord Altrincham (Con)]

My Lords, these amendments reflect a number of important concerns about the proposed transfer of anti-money laundering supervision to the FCA. We do not believe that each of these points requires legislative commitment. However, we have also been made aware of serious concerns from industry about how this transition is being communicated and how the new regime will work in practice.

These concerns include the governance arrangements following the transfer of the timetable and the transitional process, the maintenance of professional standards, proportionality, and the extent to which the FCA will retain specialist expertise needed to supervise highly technical sectors such as accountancy, legal services and trust and company service provision. There are also legitimate questions about the practical support available to firms, the likely cost of the new regime and whether smaller firms in particular will face disproportionate burdens.

This is why our Amendment 93, in my name and that of my noble friend Lady Neville-Rolfe, covers a transfer of AML supervision. Parliamentary and entire industry oversight of these changes will be vital in making sure that this new architecture works in the way the Minister wants.

The common thread running through our amendment and the other amendments in this group is therefore a sensible one. If the Government are going to centralise this responsibility within the FCA, they must demonstrate that the FCA is genuinely equipped to undertake it, and provide clarity to industry about how this process is going to be practically achieved. That means not simply having the formal regulatory powers, but having the right people, the right sectoral knowledge, appropriate transitional arrangements and a clear understanding of how supervision will operate across the country.

Industry is concerned about these questions, and those concerns should be taken seriously. I therefore hope the Minister can make a firm commitment today to provide considerably greater clarity about how this transfer will be implemented, how professional expertise, standards and proportionality will be maintained, and what firms should expect during transition.

[Lord Pitt-Watson (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Kramer, for tabling these amendments concerning the implementation of the reform of the UK’s anti-money laundering and counterterrorist financing supervisory regime. The points everyone is raising about the implementation of this needing to be well done are extremely important, as is the comment made by the noble Lord, Lord Altrincham, about parliamentary oversight of what is taking place here.

Amendments 26 and 27 concern support for firms and implementation planning. Amendment 26 would require the Treasury to publish and lay an assessment before Parliament, including a comparison between the education, guidance and compliance assistance currently available to firms and the support that will be provided by the FCA. The Government recognise the concern that professional services firms should continue to receive clear guidance, appropriate support and access to sector-specific expertise following the transition to the FCA.

Existing provisions in the money laundering regulations, which require supervisors to provide information about money laundering risks to supervised populations, will apply to the FCA in relation to its expanded responsibilities. The FCA already has significant experience of providing AML/CTF information and guidance to a large and diverse supervised population. For these reasons, the Government do not believe that a statutory assessment is necessary.

Amendment 27 would require the Treasury to publish a statutory timetable for implementation. While we do not believe such a requirement is necessary, the FCA has provided some additional clarity on the expected implementation timetables. The current expectation is that the first businesses will begin to be supervised by the FCA before the end of 2028. Further onboarding will take place in phases, with the broad aim that all firms within scope will be supervised by the FCA by mid-2030.

Implementation should proceed only when the necessary preparations are complete. This includes ensuring that appropriate systems and effective information-sharing arrangements are in place, supervisory staff are adequately trained, and sufficient clarity is provided to firms about the future regime. Retaining flexibility will allow the Government and the FCA to respond to stakeholder feedback and lessons arising during the transition.

Existing supervisors will continue to supervise firms, taking enforcement action where necessary and maintaining standards until the FCA assumes its new responsibility. The Office for Professional Body Anti-Money Laundering Supervision, OPBAS, will continue to oversee the existing professional body supervisors during that period. The FCA is already engaging with professional body supervisors and HMRC on information-sharing and data-sharing arrangements.

Amendment 28 concerns professional expertise. The Government fully recognise that effective supervision depends on supervisors understanding the sectors they regulate. Legal services providers, accountancy firms and trust and company service providers have different business models, risks and regulatory arrangements.

Of course, the FCA already supervises a large and diverse population, including many smaller firms, and has extensive experience applying a proportionate, risk-based approach across different business models and firm sizes. The FCA’s independent Smaller Business Practitioner Panel also provides direct insight into the perspectives and challenges facing smaller regulated firms.

This reform is not about applying a banking-style or one-size-fits-all supervisory model to professional services firms. The future regime will be proportionate and risk-based and establish a more consistent and effective framework, while recognising the different characteristics and risks of those sectors.

Amendment 29 is on supervisory fees. All businesses, particularly smaller firms and sole traders, want assurance that the future regime will remain proportionate and that firms will not be required to pay excessive supervisory fees. The FCA will consult on the design of its future fee model before assuming responsibility for these sectors. The Government expect fees to be proportionate and consistent with the FCA’s wider fee framework, where smaller firms generally face lower costs than larger firms. The detailed fee structure will depend on the final supervisory model and is therefore better developed through consultation.

Finally, Amendment 30—

Taxation (Energy and Vehicles) Bill

Lord Altrincham Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 14th July 2026 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I thank all noble Lords who have spoken in this debate and the Minister for his usual courtesy in hosting it and for his explanation of the rather undefined windfall tax that my noble friend talked about. In particular, I note the lively contributions of my noble friend Lord Fuller and the noble Lord, Lord Sikka, who both touched on the fraught areas of contracts for difference and high wind—perhaps the Minister could comment on that.

As we have discussed, the Bill contains some small and mainly useful welcome measures. The Government’s recognition that more must be done to support small businesses is also a step in the right direction. However, the difficulty we see is that, while such measures may have a place as emergency, short-term relief, as the previous Government recognised, they cannot form the basis of a sustainable, long-term economic strategy.

More widely, noble Lords will be aware that the interim report of the Timms review of disability benefits spending was published last week, and it showed that spending is forecast by the Department for Work and Pensions to rise to more than £41 billion by 2031 on that benefit alone. As my noble friend and other noble Lords have made clear, the Office for Budget Responsibility has warned that taxes will have to rise or spending will have to be cut if we are to avoid an unsustainable path for debt. The tax rises that this Government have already imposed are themselves becoming unsustainable: they are penalising businesses, tourists, publicans, workers and those who want to come to this country to generate wealth, investment and employment.

A more sensible approach would be to take steps to increase domestic energy supply from the North Sea, to support growth and to ensure that any tax reliefs are matched by credible reductions in spending. The Government’s net-zero approach has weakened our domestic energy industry and left us increasingly dependent on global supplies, including from countries that continue to support Russian oil. In the latest round of sanctions, the Government left open a loophole for Russian oil that is refined into diesel and jet fuel in third countries. Indeed, we are now in the extraordinary position of relying on adversaries, and on global supply chains shaped by them, to meet demand that we could and should meet through domestic energy production. That is bad for our economy and has led to a degree of industrial collapse, as noted by my noble friend Lord Redwood. It is bad for our energy security and our standing in the world.

What we need from this Government is a serious plan to address the underlying problem. Spending must be brought under control—and quickly—if we are to keep public finances within the bounds of sustainability. Welfare would seem an obvious place to start, but any new Government will need the political courage, discipline and authority to deliver reform at the scale required. The wider economic challenge facing the Government will become only more serious if this is the approach that the new Administration, under the incoming Prime Minister, take to the economy, energy security and fiscal policy.

Spring Forecast Statement

Lord Altrincham Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I thank the Minister for his patience and care in listening to this debate. I declare my interest as a director at South Molton Street Capital. I thank the noble Lord, Lord St John, for speaking in our debate this evening, and for his work for this House and our country.

We are privileged to have the Minister with us, because he has been central to the Government’s economic policy and his words carry weight. He has been extremely active from the beginning of this Session. I remind everybody that the first Bill of the Session was to strengthen the powers of the OBR—that was before my noble friend Lord Redwood joined us, when the OBR was quite popular with the Government and possibly with Parliament, though maybe that is not so true anymore. We took that through as the first Bill of the Session. The timing of this evening’s debate is quite interesting because we are towards the end of the Session and we can take a view among us on where the Government’s economic strategy is. It will be particularly interesting to hear the Minister’s responses to the questions and topics raised this evening.

You do not need to be in this debate in the House of Lords to know that unemployment is moving up quite a bit. All noble lords will have family members—children, grandchildren, nephews and nieces—and maybe friends and neighbours, and will know that people in their 20s are seeing a dramatic fall away in jobs at the moment. We might start there. Some of that is part of the NEETs problem, which goes back to the previous Government and seems to have started growing around the time of Covid, but some of it is a new area of graduate unemployment, with people in their 20s unable to start work and their careers. It is a profound economic challenge, because if they are not starting in their careers then they may never start in their careers, and there may be a huge economic consequence from that. I therefore start by asking the Minister to give us some insight into what we can say to people in their 20s who are failing to get a job at the moment, and to their families, and to comment on what the Government might be able to do about that.

Perhaps we all share some responsibility for this situation. The Government would tend to blame the previous Government, but, in doing that, it is implicitly to acknowledge that government policy affects employment. Putting aside the important point that government needs to work with the private sector and the private sector creates jobs, the sheer scale of government in this country at the moment is important. Where we have taxed GDP, as mentioned by my noble friend Lord Horam, at 36% of GDP, while the spend of the Government is over 40% of GDP, they are crowding out the private sector to an extent. Therefore, whether it is that the Government can create the economic demand that is sometimes referred to on the government side as coming from public spending or whether in fact the Government create a tremendous amount of waste and misallocation of resources—potentially in healthcare, energy or wherever—what the Government do is extraordinarily important because of their scale.

In addition to that, the Government have chosen policies with important objectives, but the short-term outcomes have been unemployment. The Government have chosen, one after another, Bills that have an important element of job destruction, whether in workers’ rights or minimum wage or national insurance increases. The Government are choosing a form of policy-driven unemployment. It is almost as though the Government have a revealed preference for unemployment at the moment. That needs an important response, but it is only barely being responded to at the moment by the Government, while the numbers are moving up quite fast.

The Government might hope that unemployment is cyclical or a blip, given that there are a few things going on around the world and a few problems in energy and all the rest of it. But the OBR—which, as I say, was rather popular but is now not so popular, and has made some observations that are really quite unhelpful—has chosen this delicate moment to say that perhaps unemployment at the level we have currently is structural. If unemployment is suddenly becoming structural at 5.5%, that is a huge issue.

As the noble Lord, Lord Skidelsky, pointed out, you have to read the stuff twice to try to understand what the OBR is saying. It uses language such as “equilibrium” levels of unemployment. What that really means is that this is the minimum level baseline of unemployment and we have reached a structural change and need to work on unemployment from here. A specific question for the Minister is whether this is the Government’s position as well. Do the Government believe that unemployment at the current level is the structural level? Could the Government comment on the OBR’s forecast? I am not expecting them to agree with the OBR—they do not have to worry about that—but could they comment on its forecast that unemployment is going to pass 7% and assure us that that is not the case and is not in their plans?

All of this feeds directly into the wider economic decline highlighted today in this debate. Energy costs are rising, hence my noble friend Lady Neville-Rolfe mentioned the North Sea, along with my noble friends Lord Redwood, Lord Patten and Lord Lamont. We need to address what happens in oil and gas. Unemployment is rising, as mentioned by the noble Lords, Lord St John, Lord Bilimoria and Lord Skidelsky. The welfare bill is spiralling, mentioned by my noble friend Lord Horam, and growth is stagnant, mentioned by my noble friend Lord Massey, yet we have a Chancellor who delivers a Spring Statement devoid of any measures to turn this around. I cannot resist mentioning it again, but the Spring Statement was compared by my noble friend Lord Patten to the empty quarter in Saudi Arabia. That is a very unkind way of putting it, but I think we know what he means.

The picture is set to worsen, with looming economic headwinds, driven by the deeply uncertain and escalating situation in the Middle East, fast approaching, yet the response from the Treasury remains complacent, falling far short of the seriousness that this moment demands. I agree with the comments made by the noble Baroness, Lady Kramer, about the Treasury at the moment. Our borrowing now exceeds that of Greece and debt is set to rise in virtually every year of the OBR’s forecast period. We are living on borrowed money, paying a mounting premium simply to service our debts, while what limited resources remain are channelled into areas that do little to drive growth or productivity. Worse still, instead of backing enterprise and rewarding work, this Government are increasingly choosing to subsidise inactivity, paying more and more people to remain outside the workforce.

Several noble Lords commented on savings and pensions. It is important that we touch on this, albeit this is running in parallel Bills on the timetable at the moment, because it is of profound importance due to the enormous amounts of unfunded pension liabilities we have. The Government are not merely making life harder for those trying to begin their careers; they are also making it harder for those trying to secure dignity and security in retirement. As many noble Lords will know, the Government’s Pension Schemes Bill will do nothing to confront the fundamental challenges of pension adequacy. At the same time, the national insurance Bill actively discourages pension saving. But the picture becomes even more troubling. From 6 April 2027, as the noble Lord, Lord Liddle, and the noble Baroness, Lady Fairhead, described—and it was a central piece of the Finance Bill Sub-Committee report—most unused pension funds and certain death benefits will be brought within the scope of inheritance tax.

Incidentally, as a marker for the extraordinary work of the noble Lord, Lord Liddle, on the Finance Bill Sub-Committee, it is worth pointing out that the agricultural and business property relief issues were dealt with earlier in the sub-committee’s work. There was a quiet word from the chairman—possibly in Cumbria—to senior people in the Government and adjustments were made. Unfortunately, we did not get to inheritance tax until later, which may be why that is still outstanding. The chairman was remarkable in escalating those issues. Through our work on the Finance Bill Sub-Committee, serious concerns have been raised about the consequences of this change. It risks deterring long-term pension saving and could create deeply punitive practical effects, forcing executors to use estate cash, sell assets or even borrow simply to meet inheritance tax liabilities.

Auto-enrolment has been one of the great policy successes of recent decades, as the Minister and the noble Baroness, Lady Sherlock, have recognised. However, as the Institute for Fiscal Studies has made clear, the system works only if people contribute beyond the statutory minimum. Without doing so, many will simply not accumulate enough to live on in retirement. Yet the Government have brought forward a pensions Bill that says nothing about adequacy, a national insurance Bill that discourages saving and inheritance tax changes that penalise those who have saved responsibly throughout their lives to secure a decent retirement. I remind the House that the inheritance tax changes come in from April next year and will cause tremendous disruption and unhappiness. In other words, those who do the right thing—who work, save and plan responsibly for the future—are the very people whom this policy framework, which the Government have chosen to create, ends up punishing. Perhaps the Minister could comment on the Government’s attitude to pension savings. We look forward to his response.

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Altrincham Excerpts

Committee stage
Tuesday 24th February 2026 Grand Committee

Moved by

[Lord Altrincham]

6: Clause 1, page 2, line 26, leave out “£2,000” and insert “the amount calculated under subsections (5) and (6)”
Member’s explanatory statement
This amendment and another in the name of Baroness Neville-Rolfe would uprate the £2,000 cap by the percentage change in the consumer price index during the period before 2029-30, and would require the cap to be uprated by the same percentage as the change in the consumer price index each year thereafter in Great Britain.

[Lord Altrincham (Con)]

I thank the Minister for his customary courtesy in hosting our Committee and for his patience with us as we move to group 3. I will open on this group, which is on contribution limits and indexation, and comment on those after the Division.

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[Lord Altrincham (Con)]

I thank noble Lords for their patience. I will resume the opening of group 3, on contribution limits and indexation, and will comment on Amendments 6, 13, 19 and 25 in my name and that of my noble friend Lady Neville-Rolfe. We also have a wide range of other amendments, many of which speak to the same set of concerns. I will not address the other amendments in this group in great detail, therefore, but I want to note that I am glad that the same issue has been largely echoed not only on this side of the Committee but across it.

We have already debated the principle of whether this measure is wise, but even those who are broadly sympathetic to the Government’s intentions ought to look carefully at what will happen if the £2,000 cap is left to stand unindexed year after year. The answer is that the Government will end up taxing people twice: once through the cap itself, and again through the quiet, insidious effects of inflation. The Government have chosen £2,000 as their figure. Let us take them at their word that this is intended to protect those on low and middle incomes while bearing down on very high earners; that is what the Minister has told us, in effect, and we should judge the policy against its stated purpose.

The problem is this: a cap that is not uprated in line with inflation does not stay in the same place. It moves, and in one direction only, pulling more and more people into its reach as wages and prices rise while the threshold stays frozen. We have seen this story before in our tax system. We know precisely how it ends. Fiscal drag, by any other name, is still fiscal drag, and, when it operates on a cap that limits pension saving, it is particularly harmful.

Consider an employee today contributing 5% or 6% of a salary that sits just at or above the threshold. Over three years of even modest inflation before the cap comes into force in 2029, then year after year thereafter, that same real-terms contribution will be clipped a little further each time. The worker has not become richer in any meaningful sense. They have simply been caught by a fixed line in the sand that the Government have chosen not to move. A number of different options set out in this group could mitigate this, such as raising the cap by different amounts or applying a percentage. I would like to hear from the Minister what impact these would have. For now, I believe that our amendment on uprating by CPI is the most realistic, but all have some attraction.

Given the complexities of administration already discussed—and apparently reflected in compliance costs in the years running up to the introduction of this new regressive tax—there may be a case here for providing for sensible indexation from day one. When we reformed salary sacrifice in government, we decided to continue it uncapped for pension purposes for a very good reason: we need to incentivise people to pay into their pensions to improve retirement adequacy and, indeed, to build a habit of saving. Sadly, the Bill goes in the opposite direction.

I appreciate that pensions adequacy will be debated more fully later on in our proceedings, but it is too important not to be addressed at this stage. If an increasing number of people find themselves caught by a cap as they sacrifice what are, in real terms, ever more modest sums through salary sacrifice, the inevitable consequence will be a reduction in retirement saving, affecting, as we have already discussed in Committee, people on modest earnings or, as the noble Lord, Lord Londesborough, mentioned, the cohorts over £25,000. Absent any uprating mechanism, the policy will steadily draw in those on lower and middle incomes, penalising individuals, in effect, for doing the responsible thing and saving for their retirement. As we made clear at Second Reading, improving retirement adequacy ought to be a central objective of government policy, not something undermined by it.

We must also be candid about the long-term implications. When people save less today, the shortfall does not disappear; it re-emerges later as a greater pressure on the state and, ultimately, on future taxpayers. I remain unconvinced that the Treasury has properly grappled with these behavioural and fiscal consequences, and the increasing cost of unfunded future retirement liabilities. The Government are taking significant risk with long-term savings behaviour by making even marginal changes, as was noted by my noble friend Baroness Altmann, or the expected behavioural changes by employees and employers noted by the OBR. I look forward to the contributions from other noble Lords with amendments in this group and the response from the Minister. I beg to move.

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[Lord Livermore (Lab)]

My Lords, I am grateful to noble Lords who have spoken in this debate.

First, I will address Amendments 6, 10, 11, 13, 19, 22, 23 and 25 in the names of by the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord Altrincham and Lord Londesborough. These amendments seek to uprate the cap by the percentage change in the consumer prices index or the retail prices index. The Government agree on the need to keep the level of the cap under review to ensure that it continues to meet its policy objective: keeping the cost of salary sacrifice tax reliefs on a fiscally sustainable footing while protecting ordinary workers. However, we disagree with the approach set out in these amendments because it would be inconsistent with the approach taken in respect of other pension tax reliefs, which are not routinely indexed with inflation.

For example, in 2023, when the previous Government made changes to the annual allowance, they increased it by a set amount rather than indexing it; the annual allowance was otherwise not routinely uprated or index-linked. The Government are taking a pragmatic, balanced approach to ensuring that the cost of tax relief on salary sacrifice pension contributions remains fiscally sustainable. The future level of the cap in the next decade and beyond is for future Budgets in those decades.

This leads me on to Amendments 7 to 9, 20 and 21 in the names of the noble Baronesses, Lady Neville-Rolfe, Lady Kramer and Lady Altmann, and the noble Lords, Lord de Clifford and Lord Londesborough. These amendments seek to increase the cap beyond £2,000. It is important to consider the level of the cap in the wider context of the objectives of this change, which are about keeping the tax system on a sustainable footing while protecting ordinary workers. Without reform, the cost of this tax relief is now set to almost treble in cost, from £2.8 billion to £8 billion, with the vast majority of the benefit going to higher earners because around 62% of salary sacrifice contributions come from the top 20% of earners. Although some tax experts have called for pension salary sacrifice to be abolished entirely, the Government are taking a more measured and pragmatic approach.

As I said earlier this afternoon, the £2,000 cap protects 74% of basic rate taxpayers using salary sacrifice. This means that three-quarters of those earning up to £50,270 a year who use salary sacrifice will be protected by the cap. Almost all—95%—of those earning £30,000 or less who use salary sacrifice will be entirely unaffected by the changes. Some 87% of salary sacrifice contributions above the cap are forecast to be made by higher and additional rate taxpayers. Increasing the level of the cap in the way proposed by these amendments would cost additional money and would undermine the objective of putting this tax relief on a sustainable footing for the future. Such changes should also be considered in the wider context of pension tax relief, which amounts to more than £70 billion each year; that spend will be entirely unaffected by this legislation.

In the light of the points I have made, I respectfully ask noble Lords to withdraw or not press their amendments.

[Lord Altrincham (Con)]

My Lords, as many noble Lords have made clear in their remarks on this group, the policy as currently drafted operates as a rather untargeted tax. Introducing indexation by RPI or CPI—described by the noble Baroness, Lady Kramer, as the goose and gander amendment—would be a straightforward and proportionate step that the Government could take now to mitigate what I can only assume is an unintended consequence. We on these Benches would also support the higher limits proposed by noble Lords and noble Baronesses today to mitigate behavioural changes that may undermine the objectives of this initiative or the Bill entirely.

The Minister has heard a range of constructive proposals this afternoon as to how this issue might be addressed. I very much hope he has listened carefully to the strength of feeling across the Committee and that he will give serious consideration to adopting one of these solutions. I beg to withdraw the amendment.

Amendment 6 withdrawn.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I will try to be speedy. The amendments in this group in various ways would require that the work to assess the impact of the Bill on pension savings and pension incomes is done and put before Parliament. My Amendment 28 would make this a responsibility of the Government. Amendments 29 and 30 in the names of the noble Baronesses, Lady Altmann and Lady Neville-Rolfe, would require an independent review. These three amendments have different degrees of detail and emphasis, but I suspect they can easily be redrafted to cover all the key elements.

It seems to me that behind all these amendments sits a basic question: did the Government do their homework? If they had, they could pretty much hand us everything we have requested tomorrow morning. I fear that this has been another off-the-hoof policy where the Government poorly understand the consequences, and I think that needs to be exposed and dealt with. It is true that implementation of the policy is not until 2029, probably the other side of another general election, but, frankly, that is not an excuse for doing this wrong, for not having the evidence and for not making it available. That is what I think every amendment in this group seeks to achieve in a different way. I beg to move.

[Lord Altrincham (Con)]

My Lords, Amendment 30 has a simple purpose: to ensure that before the Act is commenced there is an independent review of its impact on pensions adequacy—which we have been talking about again and again through this Committee—saving behaviour and on those repaying student loans, and that Parliament must see the findings before the provisions take effect.

Pensions adequacy is one of the central long-term economic challenges facing this country, and under the Government it is set to get far worse. The Institute for Fiscal Studies’ report Adequacy of Future Retirement Incomes: New Evidence for Private Sector Employees could not be clearer. On current trends, around four in 10 private sector employees saving into defined contribution schemes are projected to undershoot the Pension Commission’s replacement rate targets. Even using a far more modest minimum living standard benchmark, a substantial minority are not on track to reach it.

The IFS also makes a crucial point that, since the Pensions Commission report 20 years ago, lower returns on saving and longer life expectancy mean that the savings rates required to hit adequacy benchmarks are higher than previously thought. In other words, the adequacy challenge has intensified, not diminished. Yet what are the Government doing in the Bill? They are altering one of the key mechanisms through which many working people build their retirement savings without any independent assessment of what that will mean for adequacy.

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Altrincham Excerpts

2nd reading
Wednesday 4th February 2026 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for leading this debate and for his customary courtesy in listening to all the observations of noble Lords. There is a common observation that there is nothing new in tax. Maybe this Bill is a small Bill; the noble Lord, Lord Davies, says it is a trivial matter that does not really need our scrutiny. Nevertheless, it is a moment in taxation when we are taxing savings—

[Lord Davies of Brixton (Lab)]

I actually said that I was looking forward to discussing it further in Committee. It certainly does require our attention.

[Lord Altrincham (Con)]

I stand corrected.

This is a moment in taxation when we move towards taxing savings. It is against a backdrop in which policy has been relatively settled in this area in recent years. There was an understanding that we need to provide private sector pensions. Quite broadly, there was cross-party support for auto-enrolment; it has been quite successful. Against this background of a degree of consensus, we are now introducing—in a small but nevertheless important way—the taxation of savings. We made the changes towards auto-enrolment not just for social benefit reasons but to protect the state. It is important to remember that we are doing this also because the liability for retirement is falling on the state, and it became urgent to do something about this and to make sure that there was private provision to offset this rising cost.

With this Bill, we find ourselves at a moment when the tax system begins to eat itself. It would be illusory to suggest that there will be any gains from taxing savings, because the liability that will accrue to the state will likely be greater. That is because the returns to invested pensions over time will, in almost all cases, exceed the growth of the state, as the noble Lord, Lord Davies, knows from his time in pensions, and it is the growth of the state that provides the tax income that can support people. So the gap will be very wide if people do not save in private sector pensions.

That is the unfunded liability that stands behind this tax change. That liability could be very wide for the cohorts who are affected by this: middle-income earners who might have 30 more years of saving. Quite small amounts accumulating over 30 years can make an enormous difference to their retirement: it is enormously important. But, in the absence of those savings, regrettably, the state will be exposed. Therefore, the Government need to tread very carefully when making these changes, because the credit of the Government rests on securing some stability to future liabilities. Growth in this area of future liability is extremely important for investors in our bond market, and we need to make sure that they do not feel that there is a rebalancing here towards current taxation income against liabilities in the future.

I turn to the themes that have been raised so far, starting with fairness. As my noble friend Lady Neville-Rolfe explained, the Bill is, in practice, aimed not at higher earners but at earners around the middle of the income distribution. Among this group will be a large number of younger workers, already taxed quite heavily, and among them graduates required to repay the student loan. This initiative is a quite specific transfer from the young to the old. These groups are being encouraged to behave responsibly—as the noble Lord, Lord Londesborough, mentioned—and to put aside savings.

For employees, the Bill raises fundamental questions of fairness and coherence. Two individuals may arrive at precisely the same level of pension saving yet be treated very differently for national insurance purposes, depending solely on how that saving is structured. Direct employer contributions remain exempt, while salary-sacrificed contributions above the threshold do not. This difference undermines neutrality in the tax system and distorts incentives away from arrangements that many workers actively rely on to manage affordability and long-term planning.

Quite a few noble Lords mentioned complexity. We should also consider the burden on employers, particularly those operating within tight margins and employing large workforces. Professional advisers in the pensions and benefits sector have warned that increased payroll costs and added administrative complexity may prompt businesses to reconsider pension enhancements and lead to a contraction of workplace pension ambition itself. That was mentioned by my noble friend Lady Altmann.

Businesses that have structured remuneration packages in good faith around existing rules now face not only higher contribution costs but a new layer of administrative complexity. The introduction of a £2,000 cliff edge creates a compliance burden that is wholly disproportionate to the revenue that it is said to raise. For many firms, this is a material increase in payroll expenditure. There is good evidence that employer costs could account for a substantial share of the projected yield.

We have already seen the dampening effect of recent national insurance increases on recruitment and wage growth. To compound that pressure risks discouraging the forms of workplace pension generosity that public policy has long sought to encourage.

The distributional effects further complicate matters. For those earning above the higher earnings threshold, portions of what is, in essence, deferred income are drawn back into the national insurance net at marginal rates aligned with current earnings. The result is a reclassification of pension saving itself. Contributions made today attract national insurance, while withdrawals in retirement continue to attract income tax. Although these are different fiscal instruments, the policy makes pension saving resemble present consumption rather than deferred provision, creating the perception and often the reality of taxation both on entry and exit. This matters because the architecture of pension policy rests upon encouraging individuals to defer consumption, to assume responsibility for the later years. The messaging around this is sensitive, as my noble friend Lord Leigh mentioned.

The Government keep changing pension policy, so we might expect taxpayers to become better at adjusting behaviour. In this case, we have heard that some employers are encouraging employees to increase salary sacrifice now, which will of course reduce tax receipts in the short term and may reduce student loan repayments. The younger cohorts have learned to adjust their student loan repayments using the salary sacrifice scheme. Taxpayers may be hoping for a policy change later and would be rational in expecting some adjustment here, particularly for graduates. Given this uncertainty, we are asking for an independent assessment of the policy.

We have already witnessed the economic cost of uncertainty generated by repeated speculation and late clarification in fiscal policy. To proceed now with a measure that introduces fresh complexity and perceived inequity risks compounding that loss of confidence at precisely the moment long-term saving most requires reassurance.

Tax Increases

Lord Altrincham Excerpts

Thursday 10th July 2025 Lords Chamber

[Lord Livermore (Lab)]

It is 3% in the next Parliament. I think those commitments are for the Parliament after next.

[Lord Altrincham (Con)]

My Lords, with rather delicate timing, the OBR published its Fiscal Risks and Sustainability report on Tuesday. It used the word “daunting” for our fiscal sustainability outlook. It expects health-related outflows to fall a little, not overall but towards the levels of a few years ago. How will the Government explain to the OBR the positioning of the outlook for personal independence payments?

[Lord Livermore (Lab)]

The OBR is aware of the Government’s policy. It is for it to certify the costings of that policy in its next forecast. As I have said, we will ask it for that forecast in time for the annual Budget and make decisions based on that.

Finance Bill

Lord Altrincham Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 19th March 2025 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for listening so carefully to this debate and welcome the noble Baroness, Lady Caine. I was so pleased that she talked about politics at the table; it is a privilege for us that she has joined this House, and we look forward to hearing from her in future.

As the noble Baroness, Lady Penn, pointed out, we are looking at a Bill from a little while back. It went in the oven more than four months ago and comes to us like a slow-roast goose. Just before it went in, the OBR was allowed to have a look and, if noble Lords remember, was rather unkind. Very soon afterwards, public market investors took a look, sold off UK gilts—the 10-year gilt has not come back to the previous level—and said they did not want to see another goose any time soon. We already know what the public markets thought about this Finance Bill at the time. It is a reminder to us, with the perspective of time, of how important fiscal policy is and how impactful a Budget can be for jobs, investment and prices. This Budget will be remembered primarily for allowing, and partly driving, a degree of unemployment through policy. It will be remembered for its impact on jobs, for slowing private sector investment and for allowing a degree of tax migration, as raised by the noble Lord, Lord Leigh.

On jobs, the Government like to talk about growth—we all want to—but unemployment among young people is moving up sharply. There are 640,000 unemployed people under 24; that is the age group in which many are in education, but that number is approaching the cohort size of the age group. Their cohort sizes are smaller than ours were when we were young. There are at least 750,000 unemployed people under 28 and the unemployment rate for under-28s is in the mid-teens at the moment. It is going up sharply and has been doing so months ahead of this national insurance change.

The noble Lord, Lord Eatwell, always helpfully updates us in these Treasury debates with a little macroeconomic insight and reminds us that there might be public or fiscal demand and a stimulus in the economy. That might be true, but it is not particularly helpful for an unemployed 24 year-old and is not coming through any time soon. It is the Keynesian thing about imagining aggregate demand, the long-term future and what might happen on a macro level. It will not help unemployed young people today. It will not help an unemployed economics graduate, who might be rather disappointed with their status.

Thinking about employment, the only source of new growth is going to be from the private sector. The problem here is that the private sector is going to need the economy to be taxed a little less than it is currently. We have the tax to GDP ratio going through 38% to now 39%. This level of taxation on the economy may be the level where the tax yield can go no higher. We may already be at the limit of yield—not of tax rates or levels, but of the actual yield, the amount of money that the Government can take out of the economy, at this current time. The reason why that is so sensitive is that the tax system is very concentrated. We have 2 million to 3 million people in the country paying the large majority of all taxation—not just of income tax but of all tax—and the concentration is close to being around 2 million people. So migrations out of the country of higher rate taxpayers in the tens of thousands could be very dilutive to our tax base, which is why the comments of my noble friend Lord Leigh about non-doms really matter.

We asked the Minister a few weeks back if the Treasury had numbers on departures of wealthy people, and the reply was that it did not, because HMRC does not collect the data. That is a real shame, because we have had a problem with population forecasting in the UK. One of the reasons why the Government have had to recognise a higher population—another million people who need public services—is that there was an underestimate of the number of people in the UK. Now, we might be misestimating the population because of population movement out. It is very important that the Government have a good grip on this, and I wonder whether the Minister could comment on that.

On non-doms, the focus of the Government’s discussion has been on foreigners and their position in the UK, and my noble friend Lord Leigh asked some good questions about that, in particular whether the yield from non-doms of £13 billion over the next five years will be achieved. It seems most unlikely, but it would be helpful to have an update on that. Much more sensitive, and not commonly talked about, is the movement of doms, of UK taxpayers moving out of the UK. They are not non-doms, they are Brits, and they may also be moving in the tens of thousands. They are not in this same topic, so we need to get a grip of what is happening here.

For example, in the Budget, they moved the inheritance tax rules to a residency basis. The issue with being UK domiciled—which we all are in this Chamber—is that inheritance tax goes with domicile, so that, even if you leave the UK, you would still be subject to inheritance tax. Everything has been moved onto a residency basis, meaning that everybody in this Chamber, and everybody in the UK, who might choose to no longer be resident, would no longer be subject to inheritance tax. It creates a tremendous incentive for certain types of wealthy people to leave the UK. Would the Minister comment on this adjustment, and to what extent the Treasury has looked at what might happen to inheritance tax? As an aside, it is relevant to an issue that came up in the elections Bill a couple of years ago. We extended the franchise out for years and years, but part of the reason for that was that people were still subject to UK taxes. Now, we have brought the tax horizon right in. It is only at about six years, at the non-res limits, when people can leave the country.

Looking at investment and the private sector, my noble friend Lady Neville-Rolfe talked about the importance of investment in the energy sector. The Budget took another look at North Sea oil in the energy profits levy, and the Government’s position seems to be somewhat fluctuating. It would be helpful to get a comment from the Minister on where he thinks this is going. It is a fraught area of public policy and everybody can see that energy policy and dependence, or non-dependence, on oil is a difficult area. Whether or not the levy is useful in increasing taxation from North Sea oil, the shutdown process is now far advanced. That is important, because this Budget may have been the last time when the Government could moderate the shutdown of North Sea oil, in case policy was to change. A future Government, even this Government, might pause before shutting down North Sea oil, which still produces a million barrels a day of crude.

The shutdown is extremely bad news for the public exchequer, so when we accelerate the shutdown, we bring the decommissioning costs much closer. These are in the tens of billions, so it is not just that North Sea oil still employs tens of thousands of people in the country today, it is that decommissioning costs are very real. Perhaps the Minister could comment on expectations of the timetable for the shutdown, and whether decommissioning is coming sooner, or can be mitigated in any way? This is the issue of the full removal of all the oil rigs and the restoration of the seabed.

More broadly, the Finance Bill may have been a missed opportunity to improve the investment incentives into the UK economy. As mentioned by my noble friend Lady Coffey, there is also the importance of whether we could moderate stamp duty and taxes for the trading of small company shares, improve the allocation of DC pension funds into the UK—that is the issue of whether they are obliged to hold only public stocks—and accelerate the Solvency II changeover for insurance companies invested in the UK. I am sure that all of these will be dealt with by the Government in due course, but, to the extent that the Minister can make any comments on allocating or incentivising domestic investment, that would be helpful. It is important at the moment, because investment in the UK is going through a moribund period and some level of government support and encouragement is important.

The noble Lord, Lord Hain, made an interesting comment about war bonds. There is another entity that needs investment, which is His Majesty’s Government. We might think, in a benign financing period, that His Majesty’s Government would always be able to raise debt. Other countries incentivise their citizens to hold government stock: Italy and Japan do. We might think creatively—it would be interesting if the Minister could comment on this—about whether we could incentivise British citizens to hold gilts. At the moment, our citizens are holding more than £1 trillion in cash. It is mostly in bank deposits, but also in other forms of savings. It is a meaningful amount of money that could be moved, somewhat, into government stock, and stabilise our own funding needs, which may be very challenged in the future because there is so much issuance coming from the United States and elsewhere. So we should at least think about how we might attract our own savers towards our own Government’s needs. Would the Minister comment on that?

Finally, I will say that the Budget is created within the constraints that the Government set themselves and are well publicised. But, in reality, the Budget comes within a financing envelope that is very constrained for the Government. Their room for manoeuvre is constrained. At the perspective of four months since the Finance Bill came out, now that we have had a little time to see this Budget, we can see that the Government went towards the edge of that envelope, and the economic consequences of going to the edge are, in a sense, all around us.

National Insurance Contributions: Hospitality Sector

Lord Altrincham Excerpts

Thursday 13th February 2025 Lords Chamber

Tabled by

[Lord Altrincham]

To ask His Majesty's Government what assessment they have made of the impact on the hospitality sector of the cost of the increase in employer National Insurance contributions, and the savings from the increase in employment allowance for the smallest businesses.

[The Earl of Effingham (Con)]

My Lords, on behalf of my noble friend Lord Altrincham and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

Mortgage Prisoners Inquiry Bill [HL]

Lord Altrincham Excerpts

2nd reading
Friday 7th February 2025 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I begin by recognising the work of the noble Lord, Lord Sharkey, in bringing forward the Bill, and bringing this issue to this House on multiple occasions on behalf of thousands of families who are affected by this issue. I also commend his efforts in his role as co-chair of the APPG on Mortgage Prisoners.

I declare my recent interest as a director of the Co-operative Bank, which has been mentioned, and indirect involvement in the events of 2008 and 2009 that saw the creation of UK Asset Resolution, which in turn sold on the mortgage books that concern the Bill. The Government were able to sell on the mortgage books because UK domestic mortgages were, for the most part, very secure. So many issues flowed from the financial crisis that there can be confusion as to the source of the solvency and liquidity problems, but for the large part, domestic mortgages were well managed, with low defaults, and that includes Northern Rock, which we just heard about.

Mortgage prisoners are individuals and families unable to secure better mortgage deals due to various factors, often through no fault of their own. Indeed, many endure financial hardship and live in fear of rising interest rates. This problem arose from a mixture of poor credit quality, pricing and inertia. Typically, mortgage prisoners are unable to switch mortgages to a better deal even if they are up to date with their payments. Most mortgage prisoners have a mortgage in a closed book of an inactive firm.

These mortgage borrowers were much more likely to have got a mortgage without proof of income or with an impaired credit history. They still, even today, have relatively high loan-to-value ratios after many years of house price inflation. They often have unsecured debt as well. Many have interest-only mortgages with no repayment plan. Ultimately, they tend to have to have higher risk characteristics than borrowers with active lenders.

The problem of mortgage prisoners is well documented. Mortgage prisoners are primarily a legacy issue stemming from the 2008 financial crisis and subsequent regulatory changes. Some lenders were forced to deleverage and they sold mortgages to third parties. They were under regulatory obligation to do so. Additionally, a significant number of mortgage prisoners are tied to inactive or unregulated lenders. These lenders do not offer new mortgage products, thereby leaving borrowers with few options to escape high rates even if they have a strong payment history.

The FCA implemented stricter affordability rules under the mortgage market review of 2014. Those changes were designed to prevent reckless lending and ensure that borrowers could afford their mortgages. Although the reforms were necessary to stabilise the market and were widely thought to be an appropriate regulatory response, it is understood that they may have may have inadvertently trapped some home owners into high interest deals.

I fully acknowledge the challenges these families face and share their frustration at this very long-running situation but I do not believe that an inquiry into the events surrounding the creation of mortgage prisoners, their consequences and any other relevant matters is necessary. That does not mean that inquiries are not important in exceptional circumstances. However, in this instance, an inquiry risks delaying meaningful progress, misallocating resources and offering little in the way of new insights.

Some progress has been made. The FCA has relaxed affordability checks for mortgage prisoners, allowing lenders to assess applicants based on their payment history rather than rigid affordability criteria. Under the previous Government, in 2019, the FCA introduced modified mortgage assessment criteria in an effort to allow certain groups of mortgage holders to switch to better deals. Inactive lenders and unregulated firms had to inform their mortgage holders of the possibility of moving elsewhere.

We have emphasised the role of the FCA in resolving this issue and have publicly acknowledged the challenges faced by mortgage prisoners. There were ongoing discussions about how to how to support borrowers trapped with inactive or unregulated lenders. We explored options to transfer these mortgages to active lenders or create mechanisms that allowed borrowers to access competitive rates. While there is more work to be done, the mechanisms for addressing the problem are already in place. Launching an inquiry risks diverting attention and resources away from those practical efforts.

The noble Lord, Lord Sharkey, has in the past proposed a price cap, and that could still be a way forward, perhaps by asking the banks to agree a price for a higher rate borrower and then allow the price to be a cap on any transfer—ideally, of course, at a competitive lower price. The FCA could, again, ask companies to write to mortgage holders with good credit history to jog them into applying for a standard mortgage, because there is inertia in this problem as well.

To conclude, an inquiry may seem constructive, yet it is a lengthy process and can often take months, if not longer, to complete, and requires significant resources. We do not want to risk delaying progress. Targeted interventions can provide relief to those affected without requiring an inquiry. By focusing on practical measures, we can ensure that resources are used efficiently and effectively. The previous Government understood the difficulties faced by borrowers who are not able to switch to a new mortgage deal. We continue to work with the FCA and the sector on this issue and carefully consider practical and proportionate solutions put forward. We hope that the present Government will do the same.