United Nations Relief and Works Agency

Lord Bates Excerpts

Monday 19th November 2018 Lords Chamber

[Lord Polak (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I remind the House of my non-financial registered interests.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the cessation of US funding for UNRWA could worsen the humanitarian situation in the Occupied Palestinian Territories and threaten regional security. Her Majesty’s Government continue to support UNRWA and have helped to reduce its immediate financial shortfall through increased UK funding and proactive lobbying.

[Lord Polak]

I thank my noble friend the Minister for that reply. Just this weekend, while we were all focused on local matters, the UN singled out Israel for criticism. Why did the UK vote for all nine one-sided resolutions, unlike the United States, Canada and Australia? Perhaps after 29 March we will be able to create and pursue our own policy. While UNRWA provides important health and other services, it refuses to help resettle the Palestinians and even refuses to take off its list some 2 million Palestinians living in Jordan. Does the Minister agree that UNRWA, which was born in 1949, is now outdated, does not provide value for money, and continues to perpetuate the problem? Is it not time, together with our allies, to find, create and follow a new and modern programme of aid and development for the benefit of the Palestinian people and all the peoples of the region?

[Lord Bates]

It is time that there was a peace process and for the parties to the conflict to come to the table and start to negotiate to resolve these matters regarding refugees. UNRWA provides essential healthcare to some 3 million people in the region, along with essential education for 525,000 people there. The United Kingdom Government are not going to walk by on the other side when people are in need.

[Lord Collins of Highbury (Lab)]

I thank the Minister for that response, which is absolutely right. The noble Lord, Lord Polak, made a point about what more we can do, which I found really interesting because the last time that the Minister responded on the issue of the importance of UNRWA he recognised that we could not do this on our own. We have to work with our partners, particularly our European partners. Is there not an opportunity to focus more on inter-community activity and on economic activity which can build a sustainable economic environment in the Palestinian territories?

[Lord Bates]

The noble Lord makes a good point and we are very much with him on that. The situation in Gaza is appalling. Youth unemployment is running at around 70%. That was one of the reasons we decided to double the amount of economic development assistance that we give to the Occupied Palestinian Territories. The sum will go up to some £38 million over the next five years. We need to work with our partners across a whole range of areas, and our European friends and colleagues are very important to this process. It is also incredibly important that we leverage our influence with our United States friends. That has been done by our Foreign Secretary in a meeting with Jared Kushner. Moreover, the Minister, Alistair Burt, was in the region over the weekend with Jason Greenblatt, who is the special representative for the area for the US President. We will continue to work on all those fronts.

[Baroness Northover (LD)]

My Lords, given the importance of UNRWA and the unpredictability of President Trump, what plans do the Government have to fund UNRWA in 2019-20? Given its importance for the education of Palestinian young people, does the Minister agree that cutting its funding would be very short-sighted?

[Lord Bates]

We need to acknowledge that the US felt that it bore a disproportionate share of the funding in providing one-third of it; it wanted to see that broadened out. Something good that we have been involved and instrumental in was a meeting in the margins of the UN General Assembly, where we sought to assemble people and work with colleagues across different groups in which we are influential to raise additional funding. That meeting raised an additional $122 million; that was not sufficient to remove the shortfall because $64 million still remains, As well as voicing criticism and concern, some of those around the world who expressed concern need to dip into their pockets.

[Lord Kirkhope of Harrogate (Con)]

My Lords, does my noble friend agree that there is deep concern about the way in which some of the facilities provided by UNRWA in the Gaza Strip are abused by Hamas? It uses schools and other facilities to disguise the storage of weapons and builds tunnels underneath those facilities, apparently without any kind of recrimination. Does he not think that this is inappropriate and puts in peril UNRWA’s work in the community?

[Lord Bates]

We and UNRWA take all those concerns extremely seriously. When issues such as the content of school textbooks have been raised, they have been thoroughly investigated. When the principles of non-violence that the Palestinian Authority signed up to are questioned, that ought to be raised with UNRWA. Ultimately, the only way forward in the long term is for all parties to come together and begin a peace process that can resolve the refugee situation and territorial claims.

[Lord Anderson of Swansea (Lab)]

My Lords, there are many legitimate concerns about UNRWA. Since there is a funding gap, is there evidence that other countries will follow our example, such as our partners in Europe and the Arab countries in particular?

[Lord Bates]

As the noble Lord will know, we are one of the largest funders. The UN General Assembly margin meeting that I mentioned raised $122 million, some of which is yet to hit UNRWA’s bank account. It is important that people honour their pledges. It is also important for other countries to step forward and support UNRWA, not only on its financial needs but through wider support for moving towards a Middle East peace process.

[Baroness Tonge (Non-Afl)]

My Lords, can the Minister explain why the Government of Israel, as the occupying force in Palestine, are not required to pay for, or at the very least contribute to, the cost of UNRWA?

[Lord Bates]

I cannot give an adequate answer to that at present. The situation is incredibly complex, but the only way forward is for people to agree a peaceful resolution on a two-state solution based on the pre-1967 borders with agreed land swaps, a fair settlement for the refugees that are there and an agreement on Jerusalem as a shared capital for the two nations.

[Lord Foulkes of Cumnock (Lab)]

My Lords, there were also reports in the papers that the British Government would follow President Trump and withdraw from another UN organisation, UNESCO. That was done by Mrs Thatcher’s Government in 1985 and there were huge outcries in the universities, the arts and elsewhere. Can the Minister give us an assurance that these reports are not correct and that the United Kingdom will not withdraw from UNESCO?

[Lord Bates]

Yes, I am happy to give the noble Lord the reassurance that he seeks on UNESCO. It is very important, whether we are talking about UNRWA or UNESCO, that we remember that we are also talking about British taxpayers’ money. It is absolutely beholden on us to ensure that that money is spent as widely as possible for the benefit of those in need and not wasted in any way.

Development Co-operation: European Union

Lord Bates Excerpts

Wednesday 14th November 2018 Lords Chamber

[Lord McConnell of Glenscorrodale]

To ask Her Majesty’s Government when they will publish plans for future development co-operation with the European Union.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

The White Paper and technical notes published on external security in the summer set out our vision for a future partnership with the EU on development co-operation. We have proposed a co-operative accord to cover development co-operation and international action. Our future relationship will be different and focused on areas of mutual interest. We remain open to pooling resources and expertise with the EU to maximise the combined development impact where it makes sense to do so.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, I am sure the Minister shares my understanding that continuity in development programmes is essential, both for impact and for the professional skills that can be involved, particularly if the capacity is being built on the ground in developing countries. Continuity in the programmes that we either currently share with the EU or fund through it will therefore be essential through the so-called transitional period. I would therefore welcome an assurance from the Minister that, first, those who are poorest and living in conflict around the world will be at the heart of our decision-making in this partnership over the coming months and, secondly, the Government will publish more detailed plans in advance of the end of March 2019 for how these programmes will be financed in future.

[Lord Bates]

I am very happy to give that assurance. In fact, it is an assurance that has already been given in the White Paper, which refers on page 68 to our,

“commitments to continue to work together to address global development challenges, supporting a cooperative accord between the UK and the EU on the development and external programming”.

I should say that, as the Minister who has the privilege of attending the Foreign Affairs Council on development, I find that on virtually all the issues that we are raising in discussion we have absolutely common approaches and agendas. Both the EU and the UK are major actors on international development, peace and security, migration issues and humanitarian response, and we want to ensure that that continues—this is not a political point, it is a humanitarian one—for the people that the noble Lord has referenced and that we all care about.

[Viscount Hailsham (Con)]

My Lords, I say to my noble friend that now that the facts are becoming clearer than they were in June 2015, a more informed choice is now possible. Given that, is the best way forward not to ascertain public opinion by holding a further referendum, the question in which should be whether to remain in the EU on existing terms or to proceed in accordance with the proposed deal?

[Lord Bates]

There has been a referendum and 17.4 million people cast their opinion in it. There has subsequently also been a general election in which over 580 of the 650 Members of the House of Commons were elected on platforms to respect that referendum. What the Government are now doing is seeking to implement it.

[Lord Collins of Highbury (Lab)]

My Lords, I know the Minister shares my concern that the EDF represents best value. This country was instrumental in terms of humanitarian development, but the fact is that that is at risk if we do not reach an agreement. What contingency plan is there for, and what consultation are the Government having with all the NGOs about, a no-deal Brexit? What are we doing to ensure that we do not face a cliff edge, and that those least able to defend themselves are protected?

[Lord Bates]

On the specific point that the noble Lord raises, in the event of no deal then we have already said that we will guarantee the funding for projects that are already under way. However, that is of course not what we are working towards. The EDF is the essential development framework that underpins the Cotonou agreement. We are party to that, and the Prime Minister has been very clear that as we leave the EU we will honour our obligations. That applies especially to the world’s poorest.

[Baroness Sheehan (LD)]

My Lords, development policy in the EU is evolving and proposals for the multiannual financial framework 2021-27 include a single instrument to cover all development aid, called the neighbourhood development and international co-operation instrument, which has worldwide coverage. As a member state, we have had a hand in designing it. Have mechanisms been built in to that framework to give third countries an equal voice in shaping strategy and oversight of funds, and do they allow programme delivery by UK NGOs, which are widely regarded as being among the best in the world?

[Lord Bates]

I absolutely agree with the latter point about the importance of our British NGOs and that they should continue to have access to those funds. Yes, we are participating in the discussion which the noble Baroness referenced. We have said that we want to participate, we want to be able to work in areas of common interest, but changes need to be made not just on our side but in how the EDF and Heading 4 funds operate to allow us to participate as a third country. If we are to do that, we have been clear that it is only right to look after the interests of the British taxpayer, so we should have some say in how the funds are overseen, and that UK entities should be able to bid for them, as she suggests.

[Lord Howell of Guildford (Con)]

My Lords, regardless of the Brexit outcome, the European partnership agreements are immensely valuable to many smaller island states, including many in the Commonwealth. Can the Minister assure us that, whatever happens, we will manage a smooth transition and enable those partnerships to continue, which have helped many small and very vulnerable states in the past?

[Lord Bates]

My noble friend is absolutely right. The trade preferences element of the economic partnerships have already been covered by legislation which we passed in this House in September on taxation and cross-border trade. We are currently negotiating seven economic partnership arrangements impacting on 29 countries. When the Prime Minister was in Africa, she announced the first, which had been agreed with the Southern African Customs Union and Mozambique. We are working to achieve more, because we passionately believe that one of the best routes out of poverty is trade, prosperity and giving people free access to our developed markets. That will continue to be the policy of Her Majesty’s Government.

[Lord Alton of Liverpool (CB)]

My Lords, as the Minister looks at future markers for development, with the approaching 70th anniversary of the Universal Declaration of Human Rights, will he look particularly at Article 18 and what it has to say about the right to believe, not to believe or to change belief? Professor Brian Grim says that those countries which respect those things become the most prosperous. How, therefore, do we justify spending £2.8 billion over the past 20 years in a country such as Pakistan which, as the case of Asia Bibi has shown, has no regard for minorities or the rule of law?

[Lord Bates]

My Lords, that is the reason why that funding predominantly goes to the education of young girls in Pakistan which, we hope, will contribute to change in future. I hope that the noble Lord will welcome two major initiatives announced following the Prime Minister’s commitment to act in this area. The first was the appointment of my noble friend Lord Ahmad as the Prime Minister’s special envoy on freedom of religion or belief, and the second was a meeting at the Foreign Office last week, where we announced the successful bidders for a £12 million DfID fund to promote freedom of religion and belief. That shows how clear and committed the Government are from the very top.

Economy: Budget Statement

Lord Bates Excerpts

Tuesday 13th November 2018 Lords Chamber

Moved by

[Lord Bates]

That this House takes note of the economy in the light of the Budget Statement.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, just under two weeks ago the Chancellor of the Exchequer set out the autumn Budget to show the British people that their hard work is paying off: eight straight years of economic growth, with more than 3.3 million more people in work, wages growing at their fastest pace in almost a decade and debt beginning to fall—an economy that is back on its feet again and fit for the future. This Budget signals that austerity is coming to an end but maintains fiscal discipline. This Budget rewards the British people and their cherished public services but reminds us that financial discipline must still prevail.

Let me first set out the forecast contained in the Office for Budget Responsibility’s Economic and Fiscal Outlook. The UK’s economic outlook continues to exceed expectations, and the OBR expects growth to be resilient across the forecast period, improving next year from the 1.3% forecast at the Spring Statement to 1.6%, then 1.4% in 2020 and 2021, 1.5% in 2022 and 1.6% in 2023. The Budget forecast, taking into account all announcements made since the Spring Statement, shows the deficit down from almost 10% before 2010 to less than 1.4% next year under this Government and falling to just 0.8% by 2023-24. Borrowing this year will be £11.6 billion lower than forecast at the Spring Statement—just 1.2% of GDP—and is then set to fall from £31.8 billion in 2019-20 to £26.7 billion in 2020-21, £23.8 billion in 2021-22, £20.8 billion in 2022-23 and £19.8 billion in 2023-24, its lowest level in over 20 years.

So we meet our structural borrowing target three years early and deliver borrowing of just 1.3% of GDP in 2020-21, maintaining £15.4 billion headroom against our 2% fiscal rules target. We are no longer borrowing at all to finance current spending, and the OBR confirms that our national debt peaked in 2016-17 at 85.2% of GDP, and then falls in every year of the forecast period from 83.7% this year to 74.1% in 2023-24.

Due to the hard work of the British people and this Government’s prudent public finances, we can provide additional support for public services in the spending review. The Prime Minister announced the single largest cash commitment to our public services ever made in peacetime by the Government—an £8.4 billion five-year deal for our precious National Health Service. As the Chancellor made clear, we are delivering this historic £20.5 billion real-terms increase for the NHS in full over the next five years.

As we have been remembering this past weekend, the bedrock of this nation’s security is a strong defence. Our Armed Forces are a vital pillar of the UK’s past, present and future. This is why the Budget commits an additional £1 billion to the Ministry of Defence to cover the remainder of this year.

The Budget also made provision for £400 million in-year capital payment to schools.

Along with investing in our vital public services, this year’s Budget includes a record set of spending commitments focused on boosting industry and our world-breaking technologies: with £1.6 billion of new investment to support our modern industrial strategy, ranging from nuclear fusion to quantum computing; £150 million for fellowships to attract the brightest talent to these shores from around the world so that our scientific research can continue to lead the world; and our commitment to infrastructure, including expanding the national productivity investment fund once again to more than £38 billion by 2023-24, so that over the next five years, total public investment will grow by 30% to its highest sustained level in 40 years.

As we finalise our departure from the EU and deliver a deal that secures Britain’s future trade, we must unleash the investment that will drive our future prosperity. So the Budget increases the annual investment allowance from £200,000 to £1 million for two years, delivering on a long-standing ask of the British Chambers of Commerce. Other initiatives also boost this country’s businesses, such as targeted relief for the cost of acquiring intellectual property-rich businesses, and a permanent tax relief for new non-residential structures and buildings.

Backing business means backing every type of business: large and small; online and offline. But we must also recognise that there is one part of our economy that is currently confronting that challenge in spades: our high streets. The Budget provides £675 million of co-funding to create a future high streets fund to support councils to draw up formal plans for the transformation of their high streets. The fund will invest in the improvements they need and facilitate redevelopment of underused retail and commercial areas into residential purposes.

We will consult on how modernisation of the use classes order and compulsory purchase order regime can help to facilitate the transformation of the high street. We went further by committing to ease the burden of business rates. At the next revaluation, in 2021, rateable values will adjust to reflect changes in rental values, but I want to help retail businesses now. So for the next two years, up to that revaluation, for all retailers in England with a rateable value of £51,000 or less, business rates will be cut by a third. That is an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes.

We are increasing the transforming cities fund to £2.4 billion and providing an additional £90 million to trial new models of smart transport. We are funding 10 university enterprise zones. There is £115 million for digital catapults in the north-east, Northern Ireland and the south-east and for the medicines discovery catapult in Alderley, £70 million to develop the Defence and National Rehabilitation Centre near Loughborough, £37 million of additional development funding for the northern powerhouse rail project, and £10 million for a new pilot in Manchester to support the self-employed to acquire new skills. Here, in our capital, we are supporting the delivery of a further 19,000 homes by improving the Docklands Light Railway with housing infrastructure fund money.

The decisions announced in this Budget mean, in 2020-21, an additional £950 million for the Scottish Government, £550 million for the Welsh Government and £320 million for a Northern Ireland Executive.

As well as backing all parts of the United Kingdom to invest and grow, we will make sure that British workers are equipped with the skills that they need to thrive and prosper. We have introduced a new system of T-level vocational training, we have put the first £100 million into a new national retraining scheme, and through the apprenticeship levy we are delivering 3 million high-quality apprenticeships. That system is paid for by employers, and it has to work for employers. The Budget recognises this and announces that, for smaller firms taking on apprentices, we will halve the amount that they must contribute from 10% to 5%. In total, this is a £695 million package to support apprenticeships.

As our economy evolves in the digital age, so must our tax system, to ensure that it remains fair and robust against abuse, and raises the revenues that we need to fund our public services. That is why we are proposing in the Budget a ground-breaking digital services tax to ensure that large digital firms pay their fair share of tax to support our public services. The employment allowance was introduced to incentivise businesses to take on employees, but at a flat rate of £3,000 per employer, it does not provide any real incentive for larger employers. So from April 2020, we will target it at small and medium-sized businesses with an employer’s national insurance bill of less than £100,000 a year.

We cannot resolve the productivity challenge or deliver the high standards of living that the British people deserve without fixing our housing market. The Budget extends first-time buyers relief to all first-time buyers of shared ownership properties valued up to £500,000. It also makes this relief retrospective, so that any first-time buyer who has made such a purchase since the previous Budget will benefit. The focus on £500 million of investment for the housing infrastructure fund will unlock a further 650,000 homes; the next wave of strategic partnerships with nine housing associations will deliver 13,000 homes across England; and up to £1 billion of British Business Bank guarantees will support the revival of SME housebuilders.

The Government are continuing to roll out universal credit, which delivers long-overdue reforms to the welfare system. However, the Government recognise the genuine concerns raised in many places, including in your Lordships’ House, about the programme. This particularly focuses on the implementation and delivery of universal credit. It is an enormous undertaking, and we have been clear that we want the migration process to be as smooth as possible. This is why the Budget introduced a package of measures, worth £1 billion over the next five years, to aid the transition. We have listened to the concerns about the rates and allowances within the design of the system. In response, work allowances in universal credit are being increased by £1,000 per annum, at a cost of £1.7 billion annually once rollout is complete. That will benefit 2.4 million working families with children, and people with disabilities, by £630 per year. Universal credit is here to stay, and we are putting in place the funding it needs to make sure it is a success, because we ardently believe that work should always pay.

Under this Government, the poorest 20% have seen their real incomes grow faster than the richest 20%, and the proportion of jobs that are low paid is at its lowest level for 20 years, thanks to the national living wage introduced by a Conservative Government in 2016. From April, this will rise again, by 4.9%, from £7.83 to £8.21 per hour, handing a full-time worker a further £690 annual pay increase and taking his or her total pay rise since the introduction of the national living wage to more than £2,750 a year. We accept the Low Pay Commission’s recommendations on national minimum wage rates and will support young people and apprentices with further above-inflation increases. The Low Pay Commission’s current remit is for the national living wage to reach 60% of median earnings by 2020, subject to sustained economic growth. Next year, we will give the Low Pay Commission a new remit, beyond 2020. We will want it to be ambitious, with the ultimate objective of ending low pay in the UK. We will also want to be careful, protecting employment for lower-paid workers, so we will engage responsibly with employers, the TUC and the Low Pay Commission itself over the coming months, gathering evidence and listening to their views to ensure that we get it right.

As well as making work pay, we want working people to keep more of the money that they earn. When we came into office, the personal allowance was £6,475 and the higher rate threshold was at £43,875. In April, the Chancellor raised this figure to £11,850 and the higher rate threshold to £46,350, as steps towards our manifesto commitments of £12,500 and £50,000 respectively by 2020. The Budget met our manifesto commitment a year early, and it committed to raising the personal allowance to £12,500 and the higher rate threshold to £50,000, before indexing both in line with inflation from 2021 to 2022. That is a tax cut for 32 million people: £130 in the pocket of a typical basic rate taxpayer, meaning that, since 2015, we have taken 1.7 million people out of tax altogether and nearly 1 million people out of higher rate tax.

How successful our future is depends on how successfully our country comes together and faces the challenges and opportunities that lie in wait. More than ever, it has shown the British people that their hard work has resulted in better living standards, a stronger economy and better and more sustained funding for our great public services. As we prepare to leave the European Union, this Budget lays the foundation for an economy that is fit for the future, and I commend the Statement to the House.

--- Later in debate ---

[Lord Bates]

My Lords, I begin by mentioning a moment of cross-party consensus. The noble Lord, Lord Davies, began his speech by saying that this had been an excellent debate, and I want to endorse that wholeheartedly from the Government Benches. It has indeed been an excellent debate.

It was particularly helpful, as we sat through the long hours of the debate, to hear such thoughtful contributions on the long-term issues faced by this country. I think here of the contribution on adult social care from my noble friend Lady Eaton, on which the noble Lord, Lord Kerslake, came in; the noble Baroness, Lady Jolly, referring to the funding of mental health care and how assets could be used in that context; the noble Lord, Lord Gadhia, discussing the unwinding of quantitative easing and the role of potential funding mechanisms for that, a suggestion shared by the noble Lord, Lord Macpherson; my noble friend Lady Neville-Rolfe talking about how to reintroduce dynamism into the retail sector; the noble Lord, Lord Shipley, contributing on the issue of housing, born of his great experience in that area; and my noble friend Lady Stroud, speaking also from experience, commenting on pathways out of poverty. I pay tribute to all that she has done over many years in raising this issue and seeking those pathways and ladders out of poverty for the poorest in our society. The noble Lord, Lord Leigh, made an interesting contribution on productivity measures in the information age—he shared that element of the debate with the noble Lord, Lord Skidelsky—and how we effectively measure productivity in the new economy. The noble Baroness, Lady Byford, talked about the future of the rural economy and gave a picture of the potential effect of AI, even in farming. The noble Baroness, Lady McGregor-Smith, continued on the theme of technology and spoke about how we create an economy that is fertile ground for tech start- ups in this country. It has been an excellent debate.

In the debate I was struck by a number of revelations. The outstanding opening speech of the noble Lord, Lord Fox, will be great news to Mrs Fox because my noble friend Lord Wakeham will report back on it. To add to Mrs Fox’s joy, I echo the fact that it was a very good speech. If my noble friend Lord Wakeham happens to know Mrs Bates, perhaps he might offer a similar view about my contribution. One of the most intriguing contributions was the revelation from the noble Lord, Lord Macpherson, who played a distinguished role in the Treasury, serving as Permanent Secretary to three Chancellors at least—perhaps more—of his insight into that fateful Budget for those of us on this side of the House when VAT was applied on fuel. John Major was opposed to that measure and it is reassuring to know that the reason it could not be changed was not because of opposition from the Chancellor but because the Red Book had already gone to the printers. Having suffered severely at the general election that followed on from that issue, I would have offered my services to make manuscript amendments to every copy that had been produced at that time.

This is the third time I have participated in these debates—my noble friend Lady Neville-Rolfe has done more—and I was momentarily heartened when the noble Lord, Lord West, began his speech by saying, “I am not going to be asking for more ships”. We all breathed a sigh of relief at that point, but then he went on to ask how the money would be spent. I shall come back to that in a minute. Another thing I have learned from doing these debates is that when the noble Lord, Lord Skidelsky, whose reputation in the field of economics I have great admiration for, says that he gives the general thrust of the Budget a broad welcome, I know that is when I start quaking in my boots and hope that a flow of paper will come from the far end of the Chamber to help me out.

There has been a great number of contributions to the debate, and I will try to get through as many of the specific questions raised as possible in the time that I have. The noble Baroness, Lady Jolly, began by asking whether £2 billion is enough for mental health. Funding for mental health will grow as a share of the overall NHS budget over the next five years. The NHS will invest up to £250 million a year by 2023-24 in new crisis services for that purpose.

My noble friends Lord Wakeham and Lord Flight and the noble Lords, Lord Macpherson and Lord Shipley, touched on stamp duty land tax. My noble friend Lord Flight was particularly critical of the impact it was having. We reformed stamp duty in 2014 to improve the fairness and efficiency of the tax. The Government continue to support first-time buyers, including by increasing the price at which property becomes liable to stamp duty to £300,000 at the Autumn Budget 2017. This relief means that 80% of first-time buyers will no longer pay stamp duty.

The noble Baroness, Lady Byford, and the right reverend Prelate the Bishop of Chelmsford called for further action on plastics and food waste. The right reverend Prelate declared his passion for the flat white, which henceforth will be in a reusable cup. Defra will be publishing resources on its waste strategy in 2019, which will set out the further actions we intend to take. He also asked about what more we are doing for the environment, as did several noble Lords, including the noble Lord, Lord Hain. The Budget announced a £350 million industrial strategy transformation fund to support businesses in transitioning to a low-carbon future and action on single-use plastics as part of the Government’s wider strategy to address plastics waste, with further detail to be set out in the resources and waste strategy later this year. Subject to consultation, a tax on plastic packaging will be introduced from April 2022. It is not right to say, however, that coffee cups are so rarely recycled. However, there is no practical way to apply the tax to just hot drinks. It would have to be levied on all types of disposable plastic cups, which at this time would not be effective in encouraging reuse.

I pay tribute, as did the noble Lord, Lord Davies, to my noble friend Lord Higgins. The making of his 60th speech on the Budget is worthy of celebration. It is a diamond jubilee. I was going to say it was a diamond speech to go with that anniversary, but we all appreciate the assiduousness and the service he has given to scrutinising the public finances and fiscal measures over the years, in this House, of course, and in the other place as chair of the Treasury Select Committee.

My noble friend Lord Higgins also asked me a specific question about the change to probate fees, as did my noble friends Lord Northbrook and Lady Altmann. I will attempt to respond to it. Charging fees is an essential element of funding an effective, modern Courts & Tribunals Service, thereby ensuring and protecting access to justice. We are introducing a more progressive fee for obtaining a grant of probate, lifting 25,000 estates annually out of the need to pay a fee. The proposed fees range from £250 to £6,000, in line with the value of the estate. No estate will pay a greater fee than 0.5% of its value.

In leading off the debate, the noble Baroness, Lady Smith of Basildon, was concerned that 84% of the benefit of tax cuts goes to the top half of earners. The income tax system is highly progressive. The top 1% of income tax payers are forecasted to pay nearly 28% of all income tax in 2018-19—a higher proportion than in any year under the previous Labour Government.

The noble Lord, Lord Livermore, and my noble friends Lady Altmann and Lord Suri were concerned about the impact of Brexit. They raised a number of concerns; I will not attempt to turn this into a debate on Brexit because there will be many more opportunities for that. I assure them that the Chancellor has established a £15 billion fiscal headroom to be kept aside for Brexit contingencies. With a good deal, which we all hope for, that money can be invested in public services.

The right reverend Prelate the Bishop of Chelmsford and my noble friend Lady Stroud talked about the moves on universal credit and gave some insights. I join my noble friend Lady Stroud in paying tribute to Baroness Hollis. For a brief and painful time, I was the Lords spokesman for the DWP until I put in a plea to the Chief Whip and anyone else who would listen to move off to the Department for International Development—or anywhere else—to get me out of her line of fire. The power of her delivery was incredibly effective; she always narrowed things down from the big picture and the big numbers to individual families and cases, which made what she did so powerful. I take the point made by the noble Lord, Lord McKenzie, that if she were privy to this debate, she would be urging for more and pointing out where more needed to be done.

Some noble Lords referred to comments made on this side in relation to universal credit. A couple of responses from the Resolution Foundation were cited. Its director, Torsten Bell, said that the Budget will benefit some families because it includes giveaways on both the benefits side and the tax side. He went on to say that the Chancellor has delivered a,

“very welcome … £630 boost to low-income families”,

on universal credit. This will mean that the Government’s flagship welfare reform,

“is now more generous than the benefit system it is replacing”.

The noble Lord, Lord West, asked about the increase in defence spending. In the Budget, we invested an additional £1 billion in defence. Page 76 of the Red Book highlights how that will be spent. Of course, that comes in addition to the £1.8 billion announced in the Spring Statement, which will be for defence but will also include maintaining the pace of the Dreadnought programme to ensure our continuous at-sea deterrent.

[Lord West of Spithead]

I also asked whether this presaged the Treasury’s acceptance that it will use central fund money to fund the capital cost of the Dreadnought programme, which had been agreed until 2010 when it was cancelled by Chancellor Osborne.

[Lord Bates]

Can I write to the noble Lord on that, just to make sure that I get it absolutely right? I will certainly undertake to write to him and place a copy in the Library.

The noble Lord, Lord Shipley, asked about Help to Buy and questioned its effect on house prices. He also questioned why the scheme had been extended. Housing developers need notice of any changes, and ending the scheme abruptly in 2021 could disrupt housing supply. Instead, we will have a two-year transition period.

My noble friend Lady Altmann asked about pensions. Some people who earn between £10,000 and the personal allowance are missing out on tax relief on their pension. To date it has not been possible to identify any straightforward or proportionate means to align the effects of the net pay and relief at source mechanisms more closely for the population. The Government are already committed to ensuring that we can deliver a modern digital tax system to make it more effective, more efficient and easier for customers to comply and to reduce the amount of tax lost through avoidable error. This may present opportunities to look afresh at the two systems, and I welcome my noble friend’s continued engagement in this important area.

My noble friend Lady Byford asked about digital infrastructure top lines. The Government are committed to 15 million premises being connected to full-fibre broadband by 2025, with nationwide coverage by 2023.

My noble friend Lord Northbrook struck a chord with a number of noble Lords, including the right reverend Prelate the Bishop of Chelmsford, when he talked about the delay in the introduction of the measure on fixed-odds betting terminals. I know that it is a contentious measure. Fixed-odds betting terminals have been in operation since 2001. We undertook the review. It has now been decided that the maximum stake will be cut from £100 to £2, which is extremely welcome. There has been a well-argued debate in the other place on the timing of that. The Chancellor has set out his proposal for it to be in the autumn of next year. To counter that, there has been a proposal that it should be earlier. However, whether it is in the spring or in the autumn, the reality is that, after many years, that welcome change will be brought in to help alleviate the deleterious effects of that side of the gambling industry.

My noble friend Lord Horam talked about the importance of growth in raising all boats and solving all problems. We agree with that and we need to do more to address that issue.

I was with my noble friend Lord Northbrook almost all the way through his excellent speech until he trespassed on the holy ground of the international aid budget, at which point I broke away a little, because that 0.7% is a badge of hope to the world—I see it day in, day out around the world. We live in a world where 29,000 children under the age of five die every day from completely preventable diseases, which makes us realise that, whatever the demands we face in this country, there are some immense needs around the world, and we have rightly been recognised for introducing that and standing by it.

My noble friend Lady Altmann asked what we are doing for skills. We have funded a £20 million skills pilot to help workers develop digital skills. The noble Lord, Lord Kerslake, asked about measures for local authorities in the short term. The spending review will set budgets from 2020-21 onwards, but the Chancellor used the Budget to announce additional funding to support services. This includes an additional £240 million in the current year.

The noble Baroness, Lady Smith, and the noble Lords, Lord Fox and Lord Macpherson, asked about the effect of ongoing spending on unprotected areas. The Government have been clear that the NHS is their number one spending priority, with an £84 billion increase over the next five years. The noble Baroness also mentioned policing. Police funding was protected in real terms in the 2015 spending review. The 2018-19 settlement gave an additional £450 million to police forces.

The noble Lord, Lord McKenzie of Luton, asked which taxes had helped to recover the more than £185 billion in tax. Since 2010, the Government have secured and protected more than £185 billion of tax that otherwise would have gone unpaid. The noble Lord, Lord Gadhia, asked about PFI and an infrastructure bank. We already have a range of financing support options to deliver infrastructure, including the UK Guarantees Scheme and the British Business Bank.

My noble friend Lady McGregor-Smith talked about the importance of corporate tax revenues and rates for encouraging start-ups, as did my noble friend Lord Wakeham. It is great that we have seen the corporation tax rate fall from 28% to 19% today, and have legislated for it to fall further to 17%.

My noble friend Lady Neville-Rolfe asked what we are doing to increase productivity. The national productivity investment fund has been increased from £31 billion to £37 billion, driving key investments to boost productivity and innovation. I have been given a highly technical note on the points made by the noble Lords, Lord Gadhia and Lord Macpherson, on quantitative easing. In the interest of time, I may write to them on that and place a copy of the letter in the Library.

I have to mention my noble friend Lady Noakes, simply because I noticed from social media that she asked whether I would be listening to her, so I have to show that I did—it is easier for me than replying on social media. My noble friend and the noble Baroness, Lady Kramer, talked about the disguised remuneration loan scheme. There are a number of points here—I think that my noble friend, for whom I have great respect, covered most of them—but HMRC actively encourages anybody who is worried about being able to pay what they owe to get in touch as soon as possible. I will undertake to take her concerns back to the Treasury and respond to them.

I want to end on a note of optimism. I share with the noble Baroness, Lady Smith, that desire for optimism: my blood group is B positive and I like to think that I do not disappoint, so I just say to the noble Baroness that employment is at record levels and wages are growing at their fastest rate for 10 years. Income inequality is at its lowest level since the 1980s. The number of people living in workless households is at a record low. Unemployment is at its lowest level since 1975. Some 1.74 million people have been taken out of tax. We have the highest sustained level of public investment of all time. We have doubled the amount of free childcare. Debt is falling as a percentage of GDP. The deficit is down by four-fifths. The income of the lowest-paid 20% is growing faster than that of the highest-paid 20%. We have seen the largest peacetime increase in spending on the NHS in its 70 years and in the public record. Forbes has declared that the UK is the number one place to do business in the current year, despite all. Exports are at record levels— £620 billion and rising. Some 2,265 overseas investments have been made in the UK. Britain’s hard work is paying off and our economy is fit for the future. I commend the Statement to the House.

Motion agreed.

India: Scavenging

Lord Bates Excerpts

Tuesday 6th November 2018 Lords Chamber

[Lord Harries of Pentregarth]

To ask Her Majesty’s Government what representations they are making to the government of India about the continuance of manual scavenging.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, Her Majesty’s Government are not presently making representations to the Government of India on manual scavenging. The Department for International Development has been working to eradicate the abhorrent practice for many years. Advocacy organisations that have received DfID support have helped to strengthen the manual scavenging Act 2013, and DfID’s urban work is supporting sustainable, safe and clean cities for all. The UK is exploring the possibility of further work to eradicate manual scavenging.

[Lord Harries of Pentregarth (CB)]

I thank the Minister for his reply. The Government of India have indeed passed the manual scavenging Act 2013, but still 800,000 Dalits—the former “Untouchables”—are trapped in this degrading occupation and far too many deaths occur among them. Since January 2017, for example, there has been one death every five days among those cleaning out the public sewers by hand because of the toxic fumes. So will Her Majesty’s Government encourage the Indian Government, first, to implement the law that they have passed and, secondly, to devote some of the vast resources and technical ingenuity shown, for example, in the space programme to developing mechanised methods of cleaning out the public sewers?

[Lord Bates]

The noble and right reverend Lord is absolutely right to raise the importance of this issue. It is inextricably linked to the caste system in India, and we have made consistent representations about the treatment of minorities. We believe that the manual scavenging Act, which provides for compensation, as well as education and retraining to help people into better jobs, is the right way forward and that it should be upheld. We will continue to work for that across all the areas in which we are involved in the Indian subcontinent.

[Lord Collins of Highbury (Lab)]

My Lords, I am slightly disappointed by the Minister’s response because this is one area where we should be making strong representations and advocacy. We have the 2013 Act and the 2014 decision of the Supreme Court setting levels of compensation, yet every five days someone is killed in these terrible conditions. Surely that is a strong basis on which to make representations to the Indian authorities about this appalling situation.

[Lord Bates]

I do not want to give the impression that we are passive on this. We recognise that it is outrageous that this practice still happens in a civilised country such as India. That is why we funded some of the advocacy groups that helped strengthen the manual scavenging Act. We now want to see it implemented. A range of programmes we are involved with in India covers areas such as providing better sanitation and better rights for women, children and minorities to get them the help they need—but responsibility for the implementation of that law must rest squarely with the Government of India.

[Baroness Sheehan (LD)]

My Lords, India is seventh in the world GDP ranking. It has the laws in place to tackle the loss of life in this most dehumanising of ways of making the most basic living we can imagine. In the Minister’s view, what is the reason for the lack of urgency by the Government of India in bringing an end to such a monstrous method of eking out a living?

[Lord Bates]

It is inextricably linked to the caste system, as we have said. The economy of India is one of the fastest-growing in the world and, in all likelihood, will become the third-largest economy in some 10 years. It is still presently home to one-third of the world’s poor, and 600 million people do not have access to basic sanitation.

[Lord Alton of Liverpool (CB)]

My Lords, notwithstanding the 2013 legislation, the caste system and untouchability predate partition. Scavenging and degrading labour have persisted right across the Indian subcontinent, including in Pakistan. Is the Minister aware that, only last week, a 13 year-old was excluded from a classroom because he had touched the water supply in that classroom? He was beaten and his mother was told he had no place in that school because he was only fit for menial and degrading jobs. Is not this issue of untouchability also to be seen in the case of Asia Bibi, who has spent nine years in prison having touched the communal water supply in her village? She has been exonerated by the courts in Pakistan, yet is still held in custody and not allowed to leave that country. We have spent £2.8 billion over the past 20 years on overseas aid to Pakistan—that is £383,000 every single working day. What difference is that money making to the treatment of minorities and the abolition of things such as caste?

[Lord Bates]

It is making a big difference. I am certainly aware of these cases, because the noble Lord has made me aware of them, and I am grateful to him for that. We are looking at them and following up. The reality is that both Pakistan and India are signatories to the Universal Declaration of Human Rights. That has some very specific language in Article 18, which talks about recognising that all people are equal and that discrimination is against the law. It is also against their constitutions. We need to work with the Governments of these countries to ensure that they uphold the very laws they have—and we will continue to do that.

[Lord Cormack (Con)]

My Lords, yesterday the House was reminded of the immense contribution from the Indian subcontinent in the war that ended 100 years ago on Sunday. Would it not be entirely appropriate to rescue these people who are mired in filth by taking a new initiative to mark the centenary of the end of the First World War?

[Lord Bates]

It is an interesting point. I attended, perhaps with the noble Lord, a lecture here last week on that contribution. I think that something like 1.3 million people were involved and 74,000 lost their lives. We remain open to whether further work needs to be done. I would be very happy to engage in a dialogue with noble Lords who have an interest in this area to see what shape that could take.

Yemen: Famine

Lord Bates Excerpts

Tuesday 6th November 2018 Lords Chamber

[The Earl of Sandwich]

The Earl of Sandwich to ask Her Majesty’s Government what steps they are taking to help end the famine caused by the war in Yemen.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, Sir Mark Lowcock, UN Under-Secretary-General for Humanitarian Affairs, recently warned the UN Security Council of the “clear and present” danger of famine in Yemen. Famine has not yet been declared. The UK is providing £170 million this year to feed millions and to treat malnutrition. Ports are open and there is food in the main markets. We are working with the Central Bank of Yemen to reverse the currency devaluation so that food is again affordable.

[The Earl of Sandwich (CB)]

My Lords, I thank the Minister for that. It is quite true that food is reaching maybe 8 million people, and that is in spite of the blockade, which is a year old today. But this war is not going anywhere. The port of Hodeida is still besieged; the peace process has completely stalled; half the country’s health facilities no longer function; there is cholera; and 2 million young mothers and children are malnourished. What more can our Government do to end this near-catastrophe?

[Lord Bates]

It is a catastrophe at the present time. What is happening there is a manmade disaster and, yet again, where there are manmade conflicts and wars, women and children are the first to suffer as a result. The situation is intolerable and we are working across a range of different headings. The only solution is for the parties to the conflict to come to the negotiating table. We thought that we were getting close to that in Geneva, through the work of Martin Griffiths, the UN special envoy. However, one party did not turn up for that set of dialogues. The Foreign Secretary has indicated that discussions are under way with the UN Security Council to see what more can be done. In the meantime, we continue our efforts to work through international agencies to relieve some of the suffering. But ultimately, that suffering will be halted only when the conflict stops.

[Lord Robathan (Con)]

My Lords, in this catastrophe, as my noble friend so rightly calls it, what has the response of Iran been, in this very difficult and complex situation, to the overtures for peace from the UN? We know well what the Saudis do, but the Iranian influence there seems to be somewhat more hidden.

[Lord Bates]

My noble friend raises an important issue. Some of the armaments that have been fired, including ballistic missiles, have been traced back to Iran. Essentially, if we are going to address the humanitarian crisis, which is the urgency, all parties to the conflict need to get round the table and, rather than seeking to apportion blame, seek to find a solution that provides a de-escalation of the situation, leading to a ceasefire.

[Lord Collins of Highbury (Lab)]

My Lords, events in Turkey are influencing the situation, and no doubt the US initiative on peace is an important one. But it has to be sustainable peace. The Minister has mentioned that some parties are not participating, but how closely are we in contact with the US authorities to make sure that any peace deal that is made is sustainable and that all parties will be properly involved?

[Lord Bates]

We are in very close contact on this. As the noble Lord knows, we are the penholder at the UN Security Council on this issue. My right honourable friend Alistair Burt is doing a terrific job in trying to get the parties moving through dialogue and debate. Yesterday, the Foreign Secretary made an announcement that might be helpful for the UK’s discussions with the UN Security Council, in which he said:

“For too long in the Yemen conflict, both sides have believed a military solution is possible, with catastrophic consequences for the people. Now, for the first time, there appears to be a window in which both sides can be encouraged to come to the table, stop the killing and find a political solution that is the only long-term way out of disaster. The UK will use all its influence to push for such an approach”.


That is a strong statement and we look forward to it being implemented.

[Baroness Sheehan (LD)]

My Lords, over the past weekend, fighting has escalated around Yemen’s key port city of Hodeida, with more than 150 combatants killed. Given that 80% of international aid comes through the Hodeida port, what impact might this have on the 8 million people at risk of starvation due to the looming famine? Does the Minister agree with his colleague, and former Secretary of State at DfID, that our support for the Saudi-led coalition means that the UK is complicit in the starvation of children in Yemen—those are his words?

--- Later in debate ---

[Lord Bates]

The last point is a very serious charge, which I do not accept. As the noble Baroness will know, the coalition in Yemen is operating under UN Security Council Resolution 2216. As I said before, there is no doubt that the situation is absolutely intolerable and we need to get everybody to the table. Our Secretary of State for International Development, Penny Mordaunt, played an instrumental role in breaking the blockade of the ports to allow food in through speeding up the UN verification and inspection process, and we will continue to do all that we can to ensure that help gets to those who need it.

[The Lord Bishop of St Albans]

My Lords, what representations have Her Majesty’s Government made to the KSA and UAE about the use of British-built military hardware, which some people are really concerned could be used for, as is being alleged, war crimes?

[Lord Bates]

We have made very strong representations on that. That is why a joint centre was established to improve how targeting was done in a way that minimised civilians and in which allegations of breaches of international humanitarian law could be investigated and reports published. That is one way in which we seek to do that, but ultimately this will be solved only by the parties to this conflict coming around the table, allowing a ceasefire and allowing humanitarian agencies freedom to be able to address the catastrophic situation on the ground.

Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Lord Bates Excerpts

Tuesday 6th November 2018 Lords Chamber

Moved by

[Lord Bates]

That the draft Regulations laid before the House on 9 October be approved.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, this SI also forms part of the work being delivered to ensure that there continues to be a functioning legislative and regulatory regime for financial services in a scenario where the UK leaves the EU without a deal or an implementation period.

In this instance, the SI will fix deficiencies to legislation on the UK’s deposit guarantee scheme and in certain areas of financial services legislation such as the Financial Ombudsman Service, to ensure that they continue to operate effectively post Brexit. The approach taken in this legislation aligns with that of other SIs being laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit but amending it where necessary to ensure that it works effectively once the UK has left the EU.

Deposit guarantee schemes are an integral part of enhancing financial stability. They protect people’s savings and deposits up to a certain level if their firm fails. Many noble Lords will be familiar with the Financial Services Compensation Scheme, known as the FSCS. It is the UK’s deposit guarantee scheme, which compensates savers up to £85,000 per person when their bank, building society or credit union is unable to repay their deposit.

The EU deposit guarantee schemes directive, which was adopted in the UK in 2014, sets the level of deposit protection across the EU at €100,000 and empowers the European Commission to review the protection level every five years. Non-euro countries can convert the €100,000 into the equivalent amount of their national currency. The directive also stipulates that deposit guarantee schemes such as the FSCS protect their members’ deposits in other member states. This means, for example, that a UK bank’s operations in the EEA will be FSCS-protected, and vice versa—when an EEA firm fails, the customers of its UK business are protected by the relevant EEA scheme.

An administrative arrangement in the directive builds on this co-operation. Currently, if an EEA-authorised firm were to fail, the FSCS would administer compensation to UK depositors on behalf of the EEA protection scheme. This occurs only after the EEA scheme has provided the FSCS with the funds to be transferred. In a no-deal scenario, the UK would be outside the EEA and outside the EU’s legal, supervisory and financial services regulatory framework. The Deposit Guarantee Scheme Regulations 2015, which were part of the UK’s transposition of the directive, need to be updated to reflect this and ensure that the provisions work properly in a no-deal scenario.

These draft regulations make two amendments to the Deposit Guarantee Scheme Regulations 2015. They will transfer the power to set the maximum deposit protection level from the EU to the United Kingdom’s Prudential Regulation Authority. This approach retains the principles of the current arrangement by giving the power to a technical body that is best placed to make that judgement. The PRA is the appropriate body to take on this role as it has the required level of technical expertise and resource to do such a task. Indeed, it already has an existing role under the EU framework in setting the sterling deposit protection level in accordance with the EU level.

This arrangement also mirrors the domestic process for setting the coverage level for insurance and investments whereby the regulators are responsible for making a technical judgment, balancing factors such as consumer protection, financial stability and costs to firms. However, given the importance of deposit protection for the wider economy and the public interest, any changes to the protection level will be subject to approval from the Treasury. In addition, the Prudential Regulation Authority is required to consult on any changes to the level.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, unlike with the previous SIs, I feel that I actually understand what the regulations do, and the Minister has said nothing to shake my faith in that belief. They seem to have fallen within the overall government assurances, in introducing no policy change but smoothing the scenario, and I have nothing more to add.

[Lord Bates]

I suppose it passes as a small victory for the Front Bench when it is said that they have not actually said anything to shake the confidence of the spokesman for Her Majesty’s loyal Opposition. That is how we want to keep it: we want to keep the confidence of all parties that we are prepared and ready for all eventualities through this complex process of negotiation.

The noble Baroness, Lady Kramer, asked for some points of clarification. She asked how the €100,000 actually corresponds across. She said that there had been a devaluation of sterling, but that was not an instrument of government policy; it may be something that happened over time, as currencies fluctuate. The Prudential Regulation Authority already has a role in setting and keeping track of that link between the guarantee sums, and we envisage that that will continue. She asked how the Financial Services Compensation Scheme protection will be affected in general by EU exit and whether anyone will lose. The SI does not deal with consumers who are protected by the FSCS. However, I can confirm that FSCS protection for customers here in the UK being served by businesses of a UK-authorised firm will not change as a result of exit. What will change is deposit protection for customers in the EEA who have business with EEA branches of UK firms in future. It will be the relevant EEA authorities who are responsible for ensuring that these customers are protected. Details of the scope of FSCS coverage are set out in the rules by the PRA and the FCA.

The noble Baroness asked about our plans to keep ourselves in line with the level set for deposit guarantees. There are no plans for the coverage level to depart from the current level. The PRA stands ready to review in the event of any urgent circumstances which make such a review necessary. With those brief clarifications, I thank noble Lords again for their contributions.

Motion agreed.

Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018

Lord Bates Excerpts

Tuesday 6th November 2018 Lords Chamber

Moved by

[Lord Bates]

That the draft Regulations laid before the House on 24 July and 5 September be approved.

Relevant document: 1st Report from the Secondary Legislation Scrutiny Committee (Sub-Committee B), considered in Grand Committee on 30 October

Motions agreed.

Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018

Lord Bates Excerpts

Tuesday 6th November 2018 Lords Chamber

Moved by

[Lord Bates]

That the draft Regulations laid before the House on 9 October be approved.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, these statutory instruments form part of the work being delivered to ensure that there continues to be a functioning legislative and regulatory regime for financial services in a scenario where the UK leaves the EU without a deal or an implementation period. In this instance, they will fix deficiencies in UK law relating to the regulation of e-money institutions, payment institutions and account information service providers, and make transitional provisions.

The approach of the European Union (Withdrawal) Act is to maintain existing legislation at the point of exit, to provide continuity. While the fundamental elements of current financial services legislation will remain the same after exit, it still needs to be amended to ensure that it works effectively once the UK has left the EU. This is the approach that has been followed here.

EU directives on payments and electronic money, implemented in the UK through the Payment Services Regulations 2017 and the Electronic Money Regulations 2011 respectively, as well as the EU’s directly applicable credit transfer and direct debits in euro regulation, collectively create the regulatory regime applying to payment institutions, electronic money institutions and account information service providers, and set the rules for facilitating payments and issuing electronic money for these institutions. Given that the UK would be outside the EEA, and outside the EU’s legal, supervisory and financial regulatory framework in a no-deal scenario, the existing legislation needs to be updated to reflect this, and amended to ensure that its provisions work properly in this scenario.

Furthermore, in a no-deal scenario, the UK will no longer automatically maintain participation in the single euro payments area. The single euro payments area—hereafter abbreviated as SEPA—enables efficient, low-cost euro payments to be made across EEA member states and non-EEA countries which meet the governing body’s participation criteria. As such, it represents a key enabler of trade between the UK, other current EEA member states and non-EEA participants. The Government therefore intend to retain relevant EU law in such a way that it maximises the prospects of the UK maintaining participation in SEPA in a no-deal scenario.

These SIs therefore will make amendments to retained EU law related to the Payment Services Regulations 2017, Electronic Money Regulations 2011 and the EU’s credit transfer and direct debits in euro regulation, to ensure that they continue to operate effectively in the UK once the UK has left the EU, and to maximise the prospects of the UK maintaining participation in SEPA.

In setting out the Government’s approach to these issues, I will first outline the approach taken in the draft Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018. I will then outline the approach taken to the draft Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018. I will finally set out the interaction between the UK’s future participation in SEPA and the provisions made in both SIs.

The Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018, which amend the Payment Services Regulations 2017 and the Electronic Money Regulations 2011, make the following principal amendments. First, this SI creates a temporary permissions regime for payments firms. If the UK leaves the EU without a deal, there will be no agreed legal framework on which the passporting system for EEA payments firms, implemented under the payment services regulations, can continue to function. As a result, any references in UK legislation to the EEA passporting system would become deficient at the point of exit, and firms from the EEA would not be legally able to operate in the UK. To correct this deficiency, this SI would create a temporary permissions regime akin to that contained within the EEA passporting rights SI for firms regulated under the Financial Services and Markets Act.

Secondly, this SI makes changes to ensure the continued effective safeguarding of consumer funds. The Payment Services Regulations require payment institutions and electronic money institutions to safeguard consumer funds—to protect consumer funds—if an institution becomes insolvent. If the payment institution or electronic money institution enters insolvency, the consumer funds would be paid out in priority to other creditors.

The most prevalent method used to safeguard funds is for the firm to hold them in a segregated account with a credit institution. A significant number of UK firms hold safeguarding accounts in the rest of the EU. These firms will still be able to do so once the SI comes into force, but they will also have the option of using safeguarding accounts based elsewhere in the world, subject to adequate guarantees of consumer protection. This is in line with existing practices for protecting client assets in investments.

Thirdly, this SI removes current provisions which require supervisory co-operation with EU authorities. In a no deal scenario, it would not be appropriate for UK supervisors to be unilaterally obliged to share information or co-operate with EU authorities. As such, current provisions requiring co-operation and information-sharing with the EU have been removed. However, this will not preclude UK authorities from sharing information with EU authorities if appropriate, as the existing domestic framework for co-operation and information-sharing with countries outside the UK already allows for this on a discretionary basis.

Finally, the electronic money, payment services and payment systems regulations transfer functions currently carried out by EU authorities to the appropriate UK bodies. Under the payment services directive, implemented by the Payment Services Regulations, the responsibility for drafting regulatory technical standards currently sits with the European Banking Authority. In line with the Government’s cross-cutting approach on the transfer of functions, this SI ensures that these functions are transferred to the appropriate UK body. In this case, that is the Financial Conduct Authority. Once the SI comes into force, the FCA will update its handbook and relevant binding technical standards to reflect the changes introduced by this SI and address any deficiencies due to the UK leaving the EU.

I turn to the Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018. I propose that we consider the SI, which makes amendments to the retained EU credit transfer and direct debits in euro regulations 2012. This SI makes the following principal amendments. First, it introduces the concept of a qualifying area to which the SI applies. This qualifying area comprises the EEA and the UK. This means that the SI will apply to UK payment service providers’ euro-denominated transactions in the UK and EEA. This qualifying area is broadly aligned to the geographical scope of SEPA. It does not, however, include three existing non-EEA country participants within SEPA: Switzerland, San Marino, and Monaco. This is because the EU law does not include these three countries and therefore it is not possible to include them in UK law under the European Union (Withdrawal) Act.

--- Later in debate ---

[Lord Tunnicliffe]

I thank the noble Lord for that.

The Minister knows exactly what I am going to say. On page 6 of the Explanatory Memorandum, paragraph 12.6 and beyond states:

“An Impact Assessment will be published in due course on the legislation.gov.uk website … The Treasury’s decision to publish the regulations without a final Impact Assessment aims to ensure that industry and regulators have as much time as possible to familiarise themselves with the regulatory changes”.


The reason the Minister and I are familiar with those two paragraphs is that they have appeared in every Explanatory Memorandum on Treasury SIs so far; and on every SI so far, the Treasury has failed to produce an impact assessment, despite the fact that it is promised in the body of the document. For the life of me, I cannot see why it would bother, given that we will have approved the SI by the time it arrives.

Let me turn back to the good news for the Minister. We are certainly not going to challenge this SI. I echo the view of the noble Baroness, Lady Kramer: it is good to see, as far as one can because of the sheer complexity of it, that it sticks with the Government’s commitment to make only the necessary changes to have a smooth transition. I cannot detect any effort from the Government in this SI to try to introduce any policy changes.

[Lord Bates]

My Lords, I thank noble Lords for their questions and their scrutiny. The noble Lord, Lord Tunnicliffe, is typically assiduous, as he is on all these matters—he has even gone through the 1,569 pages of the FiSMA, which is some achievement. We appreciate that, and we appreciate the noble Baroness, Lady Kramer, stepping in for the noble Baroness, Lady Bowles, at such short notice. Let me start by dealing with as many of the questions for which it is possible to get immediate answers, and I will then review the debate and write to noble Lords if necessary.

All three noble Lords who contributed commented on what is happening with the impact assessments. Five impact assessments have been prepared across the financial services SIs. Noble Lords will be familiar with the process for this: they go before the Regulatory Policy Committee, which is the non-departmental public body under BEIS, and it assesses the impact of the regulations. What we are trying to do is save British consumers and businesses the costs that would come into effect were we to leave with no deal and not have these statutory instruments in place. That would imply a cost. We are not being as bold as to say that the effect of the SI is to make a saving, but that is the reason why the attempts to quantify this have been challenging. However, they are under way, as I said.

--- Later in debate ---

[Baroness Kramer]

The point that I was trying to understand is that we have two entities—company Y and subsidiary company Y—dealing with the same customer base, the same transactions and the same business. Is a mechanism included to enable a smooth transfer from one to the other, or do we have a potential hiccup of significance in place?

[Lord Bates]

We are trying to address that through the whole strategy of enhanced equivalence, which seeks to make sure that our regulations that we are introducing here are as compliant and consistent as possible with those that already exist and that we have transposed into UK law from the European Union. So we hope there would not be the potential for the hiccup that the noble Baroness referred to.

The noble Baroness also asked whether we could keep the cross-border payments regulation. The CBPR sets limits on charging for cross-border euro transactions. Were the CBPR to be automatically retained in UK law, it would be inoperable. Applying the CBPR to UK payment service providers making cross-border euro payments to the EEA would place obligations on them which they could not fulfil. These SIs are for a no-deal scenario. They do not prejudge the outcome of any future agreement.

On the safeguarding front, we believe that the most prevalent method used to safeguard funds is for firms to hold them in a segregated account with a credit institution. A significant number of UK firms hold safeguarding accounts in the rest of the EU and they will still be able to do so once this SI comes into force.

The noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, asked what happens if an EEA passporting payments firm does not apply to enter the temporary permissions regime. Firms should enter the temporary permissions regime which will allow them to continue to carry out their business as before, writing new contracts and servicing existing contracts. This will enable them to obtain UK authorisation and transfer business to a UK entity as necessary.

My noble friend Lord Kirkhope asked about the geographic scope of the SI. It is broadly in line with the geographic scope of SEPA. However, it does not include three existing non-EEA country participants within SEPA: Switzerland, San Marino and Monaco. This is because EU law does not include those three countries and therefore it is not possible to include them in UK law under the EU withdrawal Act.

The noble Baroness, Lady Kramer, and my noble friend Lord Kirkhope asked what the criteria are for participating in SEPA as a non-EEA country. A number of the provisions are here but I will not go into all the detail about the tests. However, for the record and in response to the specific questions, they will cover areas such as the capital requirements directives, the money laundering directives and the Rome convention on the law applicable to contractual obligations. Finally, they must demonstrate that all United Nations Security Council financial sanctions are implemented to the same extent as they are implemented and regulated within the EU itself

My noble friend Lord Kirkhope asked about the justiciability of part 2 statements. Part 2 statements made about these instruments are statutory requirements under the EU withdrawal Act and are intended to assist the House in considering the proposed exercise of the powers under that Act.

The noble Lord, Lord Tunnicliffe, asked what would happen to these SIs for a no-deal scenario in the event of a deal. I think I have covered that. The Government White Paper on the EU withdrawal agreement Bill states that provision may be needed to defer, revoke or amend SIs and that is likely to be included in the withdrawal agreement Bill.

My noble friend Lord Kirkhope asked me to explain the consequences of the sunset clause referred to in paragraph 7.4 of the Explanatory Memorandum. The power in the EU withdrawal Act to fix deficiencies in retained EU law falls away two years after exit day. This was debated during the passage of the Bill—now the Act—but instruments made during that two-year period will remain in force after it ends.

The power to revoke was addressed by my noble friend Lord Kirkhope and the noble Lord, Lord Tunnicliffe. This relates to the credit transfers and direct debits regulations. The entirety of credit transfers and direct debits in euro regulation would be revoked in those circumstances. The relevant articles of the Payment Services Regulations could be revoked via the negative procedure by statutory instruments.

I turn now to the question of the noble Lord, Lord Tunnicliffe, about what will happen if the UK is unsuccessful in its application to SEPA. I mentioned that UK Finance has submitted an application. SEPA enables efficient, low-cost euro payments to be made between participants. In the unlikely event that the UK does not maintain participation in SEPA, UK consumers would face higher transaction costs and longer transaction times when making euro payments. That is why we want these provisions in the event of no deal, but it remains the firm resolve of Her Majesty’s Government to seek a deal so that these no-deal scenario provisions are not required.

The noble Lord, Lord Tunnicliffe, asked about the criteria for participating in SEPA as a non-EEA country. I mentioned the criteria earlier in terms of capital requirements and anti-money laundering et cetera.

The noble Lord then asked about impact assessments. I began by explaining the situation there and where we are coming from. I would just add that we have prepared an impact assessment and hope to publish it shortly.

On the whole, these SIs will reduce significantly the costs to businesses in the event of a no-deal scenario; without them, the legislation would be defective and firms would be left to deal with an unworkable and inconsistent framework that would disrupt their businesses substantially. In making these changes, we have attempted to minimise the disruption to firms and their customers, as well as maintain continuity of service provision. That is the purpose of the SIs. I beg to move.

Motions agreed.

EU Travel: Insurance

Lord Bates Excerpts

Thursday 1st November 2018 Lords Chamber

[Lord Bruce of Bennachie]

To ask Her Majesty’s Government what advice they will provide to United Kingdom residents planning to book holidays in European Union member states commencing after the end of March 2019 regarding health and travel insurance.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the implementation period means that travellers can rely on arrangements currently in place until December 2020. The Government continue to strongly encourage all British nationals travelling abroad, including within the EU, to take out comprehensive travel insurance that covers their personal circumstances and meets their needs. In the unlikely event of no deal, travel insurance policies will remain valid. Customers concerned about their policy’s coverage should check their policy documentation or ask their provider.

[Lord Bruce of Bennachie (LD)]

With people planning holidays or other visits to the EU right now, airlines and ports are warning that there could be disruption, delays, cancellations and gridlock, and that could cause uncertainty over health and travel cover. Does the Minister acknowledge that this could lead to people finding themselves on the Continent without compensation for travel delays or cancellations or without health cover, and that that could be especially serious for vulnerable patients, such as kidney patients, who may be prevented from travelling? Can the Minister guarantee that the EHIC, of which 27 million are in circulation in the UK, driving licences and car insurance will continue to be fully valid after 29 March, and that losses arising from cancellation and disruption would not be deemed force majeure by insurers, leading to the denial of claims or big increases in premiums?

[Lord Bates]

What the noble Lord has set out there is exactly what we wish to see.

[Noble Lords]

Oh!

[Lord Bates]

That is what we set out in the future relationship White Paper, where we say:

“The Government wants UK and EU nationals to continue to be able to use the European Health Insurance Card (EHIC) to receive healthcare”.


My noble friend Lord O’Shaughnessy has been party to publishing the Healthcare (International Arrangements) Bill to allow that to happen. We have also stated that we want to continue to have the same access for air flights and that we will grant permission for European airlines to travel to us. We would like to see that reciprocated. We would like to see reciprocated the passporting arrangements that we have offered and the temporary permissions regime. In all these things the UK Government have shown good faith in ensuring that all these arrangements are in place, and we now look forward to our European friends doing likewise.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the Minister said health insurance would remain valid. However, without the EHIC, people with pre-existing conditions may not be covered and then suddenly after 29 March those insurance premiums may not be valid. Maybe he could just check and clarify that, because without the EHIC a lot of other insurances do not cover existing conditions.

[Lord Bates]

The noble Baroness is absolutely right. That is one reason why we always advise people to take out comprehensive travel insurance, even when travelling within the EU, because the EHIC covers only the basic element. We have been very clear that that is what we want, that is what we propose to legislate to allow to continue and that is what we expect, but we urge everyone to check with their insurer what cover is provided.

[Viscount Waverley (CB)]

My Lords, will the Minister confirm two points, irrespective of the final outcome of the Brexit negotiations: first, the essential need for UK citizens passing the requisite number of days on the continent to register with the appropriate national authority—in my case, Portugal; and, secondly, that current OECD rules pertaining to residency will be adhered to post Brexit?

[Lord Bates]

Of course, there are different rules for different member states, as the noble Viscount will be aware. Our standard position is to encourage all people spending time resident in an EU member state to register with that member state. Normally that means going to the town hall or the local police station to be issued with a card. There is no reciprocal requirement for EU citizens to register here, but that is one of our settled status proposals for EU nationals post Brexit.

[Baroness Doocey (LD)]

Can the Minister confirm that guidance has been given to airlines to protect themselves from compensation claims by putting a disclaimer on all airline tickets dated after 29 March next year? Can he recall whether such guidance was mentioned during the leave campaign in 2016?

[Lord Bates]

I have received no evidence that that has been proposed, and it is something that the regulators would look at seriously if that were the case. We have been quite clear that we want those important travel agreements to continue. UK nationals make 50 million non-business journeys to the EU each year, and they spend about £24 billion. It is very important for the EU that that continues to work post Brexit.

[The Earl of Clancarty (CB)]

My Lords, is the Minister aware that not just individual travellers but schools are concerned about whether the EHIC scheme will continue past March next year?

[Lord Bates]

I understand that they might have concerns, but I hope that they would be reassured. Not just the White Paper but the joint statement made by the UK and the European Union last December stated that reciprocal healthcare would continue. The European Commission has hinted that it recognises that it is in its interests that it should continue. The only thing missing is a clear statement from the Commission that that is its intent, and that is what we want.

[Lord Berkeley (Lab)]

My Lords, is not the only safe and responsible thing for the Government to do to advise people not to book holidays that involve travel and accommodation after 29 March? With all the chaos going on, I cannot believe that insurance will cover every eventuality.

[Lord Bates]

I completely reject that. Many people look forward to their holidays. I am sure that next summer’s holiday will be one particularly enjoyed by those on our Front Bench. We want to take advantage of the wonderful holiday opportunities that there are in the European Union, we expect that to continue and believe that it will.

[Lord Cormack (Con)]

My Lords, before scare- mongering, should not the noble Lord, Lord Berkeley, realise that too many visitors to his lovely Isles of Scilly would ruin them?

[Lord Bates]

The point I was making in answer to an earlier question was that while 50 million from the UK travel on non-business flights abroad, 20 million come here. We want those good trading, friendship and family relationships to continue unhindered after Brexit day. That is why we are putting in place the technical notices, have put forward proposals and are bringing forward legislation.

Green Finance

Lord Bates Excerpts

Wednesday 31st October 2018 Lords Chamber

[Lord Teverson (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I bring to the House’s attention my non-financial interest as a trustee in the Green Purposes Company.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government place a high priority on green finance and take extremely seriously the UK’s position as a leading centre. To support these efforts, the Government will publish a green finance strategy in spring 2019. The strategy will set out the Government’s green finance ambitions as well as new actions that the Government will take to complement existing efforts.

[Lord Teverson]

I thank the Minister for that reply. In many ways, I welcome the Government’s enthusiasm in this area, but a great opportunity was lost this week in the Budget when the Chancellor did not announce that the UK would issue a green sovereign bond. If we exhort that corporate green finance bonds should be issued in this country, we should be an example and issue a green sovereign bond. Does the Minister get that?

[Lord Bates]

I get the question, but I do not necessarily agree with it. Green finance is exciting and is growing, and the City of London is at the forefront internationally. We are ranked third in the league table that the noble Lord mentioned, but first for the quality of the green finance. Our approach is that where the private sector—the City—provides leadership in developing these investments, that is the best outcome and the Government should support it through our strategy but should not necessarily participate and potentially crowd it out.

[Lord Gadhia (Non-Afl)]

My Lords, having dinner yesterday evening with the CEO of the London Stock Exchange, Nikhil Rathi, made me aware that green finance is one of its big priorities, including the establishment of a green sustainable investment centre. Will my noble friend join me in welcoming the development of green indices which can prompt institutional investors to shift their asset allocation to sustainable investments?

--- Later in debate ---

[Lord Bates]

I can see that the Chief Whip is taking note, as many of us were here until the early hours on the Northern Ireland legislation, so I hope my noble friend has not disclosed too much. The point on indices is right; I absolutely agree with that. The very fact that we are having this Question is because indices were produced and people could see where they ranked. The more that people see the data surrounding this, the more they can make informed decisions. That is why it was good that the Bank of England announced a couple of weeks ago that it is going to ask the Prudential Regulation Authority to ask banks and insurance companies to factor the climate into their investment decisions.

[Baroness Kramer (LD)]

My Lords, the Government will be aware from the Ernst & Young report that investment in green projects in the UK is down by nearly 70% this year. Does the Minister believe that that is in any way related to the Government’s decision to sell off the Green Investment Bank, which at one time provided essential seed money and leverage to give these projects lift-off?

[Lord Bates]

The investment going in is substantial. We are a leader in this area. Since 2015, the rate of emissions has fallen faster in this country than in any other G20 country, which we can be proud of. The fact that one in five electric vehicles sold in Europe is manufactured here in the UK is again something that we can be proud of, and we are investing heavily in that. We have a clean growth strategy, and an industrial strategy that has these issues at its heart.

[Lord Davies of Oldham (Lab)]

My Lords, the Intergovernmental Panel on Climate Change emphasised just how urgent it is for Governments to act. The Minister cannot produce the gloss that we are doing rather well on investment when we have slipped from first place to third, behind the Netherlands and Sweden. He has to recognise that there are aspects of government policy, such as fracking and the fact that the Government are reducing their subsidies for green energy—I will not mention Brexit at this stage—that must cause concern among investors and help to produce a rather more depressing picture than the Minister has suggested.

[Lord Bates]

I do not accept the picture that the noble Lord is painting. In the index that we are talking about, the City of London was ranked number one in the world for the quality of green finance offered—something that we can be proud of. It has gone down to number three in terms of penetration, but look at other financial centres: Paris was fifth, Frankfurt 21st, Tokyo 29th and New York 39th. The City of London is leading the global agenda on leveraging private finance to meet the challenges identified by the IPCC, and we should celebrate that.

[Viscount Ridley (Con)]

My Lords, could my noble friend enlighten us on what is a green technology and what is not? It would be very easy to get green finance for projects that burn wood to make electricity but impossible to get it for projects that burn gas to do so, even though burning wood produces at least twice as much carbon dioxide as burning gas. Why?

--- Later in debate ---

[Lord Bates]

Of course my noble friend has great expertise in this area—which is always code for saying, “That’s an awkward question”. He raises a pertinent point. When it comes to issues of green finance, it is important that we get the definitions right. That is why the British Standards Institute is looking to define the standard for qualifying for green finance, so that it can then be applied rigorously across the board to a range of investments and provide greater clarity and certainty for investors when making decisions.

[Lord Hayward (Con)]

In relation to the Global Green Finance Index, to which the original Question referred, does my noble friend agree that when the same survey identified those finance centres that are likely to do best in the next two to three years, the three that were cited were Paris, London and Luxembourg?

[Lord Bates]

That is why we are investing as we are. We had the Green Finance Taskforce, led by Sir Roger Gifford. That led to the announcement that we are going to set up a green finance institute to further enhance our leadership role. Next year we are going to launch the green finance strategy, which again will strengthen our ambition to provide global leadership in this important and growing area.