Trade Unions (Permissible Means of Voting) and Employment Rights (Unfair Dismissal) (Amendment) Order 2026

Lord Davies of Brixton Excerpts

Wednesday 22nd July 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

I need to declare an interest because yesterday morning, in the post, I received my ballot paper for the election of the general secretary of my union. I looked at it. Of course, I will be voting —I will not tell your Lordships for whom—but it seemed absurd that I could do it only by post.

I can pay my income tax online. I can tax my car. I can book airline tickets. I can pay my gas bill. I can—regrettably—pay my speeding fines. I can vote in building society elections. I can check I am registered to vote—so online is involved in elections. I can apply for a postal vote. I can correspond about any responsibility I have to participate in jury service. I can undertake DBS checks—highly sensitive, highly secret. I can do all these things online, so why does this particular ballot that I have on my desk at home have to be done by post?

Famously, gamblers have a “tell”—someone blinks and you can tell what is happening. The Opposition have kindly put their tell in the amendment and in the speech of the noble Lord, Lord Sharpe of Epsom. What they are against is the exercise of democratic rights by free associations. They want to make it harder, they want to slow it down and they want to make it more expensive. That is the tell. This is antiquated, old-fashioned anti-trade union prejudice. That is at the heart of it, and that is what we learned from the noble Lord’s speech.

I will comment briefly on the speech of the noble Lord, Lord Frost. He talked about a “flexible labour market”. We know what that is code for from the Conservative Party and former members of it. It is about making life tough for trade unions and for rank-and-file employees, who wish simply to exercise their democratic right to run their own free association in the way they want. The more we facilitate that, the better.

Mini-tender Offers: Protection for Shareholders

Lord Davies of Brixton Excerpts

Wednesday 15th July 2026 Lords Chamber

[Lord Stockwood (Lab)]

The noble Baroness raises important points. There are two distinct answers to the question. On access to data, the courts have declared that a regulated entity, which any financial promotion has to go through, has to approve that offer and say whether it is for proper business or proper promotion. What we are talking about is an assessment of whether the offer is appropriate, which would be an assessment made by the FCA itself. Companies can apply to the courts to refuse access where they believe that the use of that data is not for a proper purpose. That is what happened in this case. Whether access should be granted is ultimately a matter for the courts. Shareholder registers and the ability to access them are also important for the issuers of those shares. Whether it is for a proper use has to be approved by a regulated entity.

As to whether it is below market price, we have to be careful about what a fair assessment of a market price is, depending on the liquidity of that asset. We need to assess this case to see whether it is an outlier or something specific to our market details, but I believe it is correct for the courts to decide whether it is for a proper commercial purpose.

[Lord Davies of Brixton (Lab)]

To broaden the issue slightly to investors getting advice from AI apps, such as Gemini, ChatGPT and Claude, do these apps owe the client consumer duty?

Financial Services and Markets Bill [HL]

Lord Davies of Brixton Excerpts

Committee stage
Monday 6th July 2026 Grand Committee

[Lord Davies of Brixton (Lab)]

The noble Lord makes a compelling case, but can he say what is meant by “facilitate” in the amendment?

[Lord Mackinlay of Richborough (Con)]

Facilitating means merely that any financial institution registered with the FCA in this country would have to use the IHT423 procedure—it could not say no. At the moment, we have a framework that is purely discretionary. In my professional life every single institution has always said yes, but obviously there are some out there which are saying no. So I want to put the facilitation not as a facilitation of choice but a facilitation of “must” on the request of an executor. There is no risk here. The risk is that either the funds remain in an investment account or they are in the account of HMRC, which, the last time I looked—despite my being a chartered tax adviser—is a safe place for people’s funds to be.

Financial Services and Markets Bill [HL]

Lord Davies of Brixton Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Tyler. I had the equal pleasure of serving alongside her during her excellent chairing of the Financial Exclusion Committee.

As the noble Baroness rightly identified, since we published our report, financial exclusion—or a lack of financial inclusion—has persisted. She rightly identified the Government’s financial inclusion strategy. There are a number of good things in it, but I ask the Minister: why was it so light on the potential role that fintech, as well as broader technologies, could play in addressing some of the elements of financial exclusion? It was largely silent on those issues.

I shall speak to Amendment 104 and all the other amendments in my name in this group. Similarly, I suggest having a financial inclusion objective and detailed reporting requirements therein. We have the Financial Inclusion Commission, which has some excellent members, but financial exclusion persists.

It is right to have our financial services regulator further empowered to be the lightning rod and the focus for this whole question of financial inclusion. To talk about the principles again, the Government are keen on growth, but financial inclusion does not run counter to that growth or the international competitiveness objective. Financial inclusion is essential to it: enabling people to have financial services and be financially included is likely to increase digital inclusion and social inclusion, as employees become self-employed and the employed become economically active. I ask the Minister: are these things—enabling and empowering financial inclusion—not what any Government should be about?

I suggest a financial inclusion unit for the FCA, so that it can be a powerhouse for innovation and research and a real regulator and driving force for financial inclusion. When the Minister comes to respond, can he identify how financial inclusion has changed in the almost two years of the current Government? Is it not time for greater focus and effort on this most significant of issues?

In many ways, the most significant issue when it comes to financial services is enabling and, in reality, empowering everybody to have a fair go, and to become active and enabled in our economy and our society. Amendment 161 builds on this, but in the specific context of broadening data-sharing requirements—always on a consenting and empowering basis—to look again at what we can do with new technologies. Let us look at other sources of data such as rental history, which can be so helpful in enabling financial inclusion—but currently are far from happening, never mind becoming the norm—to support those millions of individuals. Where is innovation when it comes to financial inclusion? Does the Minister not agree that these amendments would enable the Government to have a human lead on these technologies, with a far greater chance of much greater financial inclusion for all citizens?

My final amendment goes to KYC, or what passes for it. In many ways, you can see this within financial inclusion, where all too often, in whichever context one considers it, “know your customer” means almost completely the reverse or nothing of the sort. Does the Minister not agree that it is time to look again to innovation and the technologies that can be deployed to give us effective KYC and AML? Or does he believe that, because one is able to put a gas bill in paper form in front of a financial services business, it shows just what an upstanding citizen you must be and gives all that is required on KYC and AML? It is so gravely in need of transformation. We have the tools and technologies to achieve this, which would also add to significant financial inclusion. I look forward to the Minister’s response.

[Lord Davies of Brixton (Lab)]

This is an important and interesting debate. I want to draw attention to and base my remarks on Amendment 95, which refers specifically to the poverty premium in insurance. This is a theme that runs across financial services. It perhaps does not get the attention it deserves, because one of the main reasons for financial exclusion is of course poverty, and poverty is clearly an issue where the Government have a clear and central responsibility.

In practice, the approach taken by the FCA has been to use the obligation for the consumer duty as the primary vehicle for dealing with the poverty premium. The FCA has directly linked the consumer duty to the poverty premium, with the argument that firms are required to deliver good outcomes for retail customers and ensure that products and services offer fair value. The FCA has not itself specifically tackled the poverty premium head on; in effect it has passed the responsibility to providers.

The most obvious manifestation of the poverty premium arises with premium finance, whereby people have to pay premiums by instalments over the year instead of paying a lump sum at the beginning of the year. The terms on which they are financed have been open to significant criticism. People think they are paying the contributions monthly but, in practice, someone lends them the money to pay the initial contribution and they repay that loan over the year. There is a widespread lack of understanding that, in fact, they have two contracts: the insurance contract and the loan contract. The terms of that loan contract have been called into question. Figures from the FCA suggest that about four-fifths of customers in financial difficulty use premium finance and that, in 2024, 60% of motor insurance customers and 41% of home insurance customers paid by instalments because they could not afford to pay annually. There is probably a series of people who fail to do the sums and just pay monthly because that looks easier.

The FCA has found that the cost of premium finance has fallen since 2022, and made it clear to firms that they are under a clear requirement to ensure that fair value is offered. There is a technical problem here in that, as well as the financial issues, with some forms of insurance there is an underwriting issue. It is possible to argue that someone who pays monthly is not in the same underwriting position as someone who pays yearly. It is very difficult to pin down that aspect of the issue. The FCA accepts that this poverty premium exists and believes that some of the premium finance provides a poor product. It has accepted that

“financial regulation cannot tackle financial exclusion or the related ‘poverty premium’ alone. We must work together across government, regulators, industry and consumer groups”

to deal with it.

The Financial Inclusion Strategy published in November refers to the issue, and we now have the FCA’s 2026 insurance priorities, which include expanding access to insurance as a central priority and emphasise the importance of helping vulnerable groups. However, the campaigning group Fair by Design has argued that the FCA is not doing enough to deal with these issues. It points out that the FCA has said that it has the tools to deal with this but, in practice, is just leaving it to the individual companies to act responsibly.

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[Baroness Donaghy (Lab)]

My Lords, I am tempted to say, “What she said” and sit down, but I want to emphasise the unanimity of the Committee on this crucial issue. Some of us think that the FCA has too much to do anyway. Some of us—probably fewer—think that successive Governments have used the regulators as a heat shield and that perhaps the balance has gone the wrong way.

Not to repeat the examples that have been given, the noble Baroness, Lady Kramer, mentioned the five-year strategic plan of the FCA. For some of us it was a glossy PR exercise. Examples have been given, naming and shaming. It took at least two meetings and several bits of correspondence before the FCA even hinted that it might have done it slightly differently had it given some consideration to what it did. In that case, you might argue that it was about a deregulatory issue, trying to hold companies to account. Our committee thought that it had gone too far.

One final example is the issue of cost-benefit analysis, which the Minister used on the first day in Committee. We tried very hard to pin down how the FCA conducted cost-benefit analysis and what was happening to the panels. We heard that they were work in progress. Had the panels met? No, they had not met. What approach did the organisation have to analysing cost-benefit analysis? I am sorry that the noble Lord, Lord Sharkey, is not here as he is the expert on the granularity of analysing cost-benefit analysis. It was a poor show. I am sure that it is working to improve, as it is improving in a number of other areas, but it is extremely important that the work of Parliament should not be inhibited by an attempt to tidy up regulation—which is in fact setting aside protections.

The Minister, on the first day in Committee, used the phrase “modernise protections”. I am sure that he meant to say, “Modernise the transparency, modernise the complexity and modernise the general approach so that people can understand them”. I hope that he did not mean “modernise protections” in the sense of setting them to one side.

[Lord Davies of Brixton (Lab)]

What she just said.

As the final representative of the committee in this Committee, I agree with what the other members of the Financial Services Regulation Committee have said. It is important. I remember sitting across the Room some years ago when the idea was being discussed. It is worth recalling that the original idea was, I think, a Joint Committee of both Houses but, for whatever reason, the Commons decided that it did not want to adopt that approach. I think there are rules about criticising what the other House does, but there is no doubt that the only effective manifestation of the belief that this sort of work is required has been the work of that committee. It is particularly important that we do not lose something that we achieved through cross-party agreement.

[Baroness Bi (Lab)]

My Lords, I declare an interest as chair of Norton Rose Fulbright. Some of my firm’s clients are regulated by the FCA and the PRA. I am not a member of the Financial Services Regulation Committee, which is why I am probably breaking what I have heard as unanimity by speaking in favour of Clause 17 remaining part of the Bill.

I note that the current accountability framework, including the role of the committee, was created only three years ago, pursuant to the Financial Services and Markets Act 2023 following Brexit. Before that, we have to remember that we were content with what was probably pretty limited oversight by the European Parliament, so hearing about the importance of very detailed parliamentary oversight when it comes to looking at every proposal that the regulators might have is a relatively new innovation for us.

I do not think it unreasonable for the Government now to consider how well that post-Brexit system has been working and to propose changes to a regime that the committee itself has criticised as overly complex and difficult to navigate. I note that the noble Baroness, Lady Noakes, commented at Second Reading how difficult it had been to hold the regulators to account under the current system. I am therefore curious about why noble Lords are keen to preserve a status quo that is far from ideal.

There has been significant opposition to Clause 17 and concern about the effect it could have on parliamentary oversight, but I am not convinced that that reaction is warranted. I do not think Clause 17 is a retreat from scrutiny, but it is looking to make it more targeted and effective by merely removing the obligation on the regulators to consider every step they take by reference to the eight FSMA regulatory principles for every day-to-day function. The obligation to notify all those processes to the parliamentary committee does not always lead to the kind of analysis or response and targeted feedback that we have been discussing. That volume of information that the regulators are producing has not led to a better system.

The result is that that documentation requirement has become a burdensome compliance exercise and not truly analytical. The Government’s consultation confirmed that the information produced is too granular to support effectively an overall assessment of regulatory performance, and nearly three-quarters of those who responded to that consultation were supportive of or broadly sympathetic to the approach the Government are proposing, and these are the customers, the regulated body, of the people that the FCA and the PRA are supposed to protect.

We should also acknowledge that Clause 17 does not abolish the Section 3B regulatory principles. The FCA and the PRA will continue to be bound to have regard to those principles when they are preparing or revising their five-year strategy plans, for which they will be held accountable not just by the parliamentary committee but by society as a whole. Those strategies will be subject to consultation and will create a public benchmark against which the regulators’ subsequent rule-making can be assessed and progress against the stated strategy can be monitored, in their annual reports if nothing else. I am not referring just to the glossy brochure that we have heard about.

It is also important to note that Clause 17 does not alter the requirement for the regulators to consider and document to the committee how they are pursuing their statutory objectives. In the case of the FCA, so much of the focus is on the competitiveness and growth objectives. That gives the committee a powerful accountability tool. There is nothing to stop the committee calling them in whenever it likes to talk to them about how they are meeting those objectives in line with the principles.

The requirement of the regulators to present their analysis to the committee on each of the eight regulatory principles in relation to each consultation is disproportionate. Its removal does not reflect a material dilution of the regulators’ obligations because the substantive matters of concern continue to bind the regulators in any event. Is it necessary for the committee to be involved in all the detailed work that the regulators need to do in order to exercise proper parliamentary oversight in what we all accept is a fast-changing financial services market in a post-Brexit regulatory environment where the FCA and the PRA now bear responsibility for significantly more rules than was contemplated when Section 3B of the original FSMA 2000 was drafted?

As a common law legal system, it is right that the Government ask the regulators to comply with broad principles and hold them accountable for the outcome without requiring parliamentary oversight of all operational steps and without expecting the regulators actively to consider and document their analysis of how they have complied with each principle every time they exercise their general functions, however routine they are. I know that there is a discussion about the system being modified and improved through this Bill, but that is not what we have at the moment.

The committee’s mandate is to scrutinise whether the UK’s regulatory framework and regulators operate effectively. That requires the committee to have access to meaningful information and a coherent standard against which to test the regulators’ conduct. The long-term strategy provides that broad standard, and the committee will still receive consultations and examine how individual proposals advance the strategy that the regulator has publicly committed to. Its constitutional role could therefore be strengthened rather than rendered ineffective. Clause 17 keeps the Financial Services Regulation Committee’s oversight where it should be: on the substance of regulatory performance, the delivery of publicly stated strategies and the real-world impact of regulation. It also frees the regulators from unnecessary procedural burden, so that they can focus on regulating well. The mechanism does not have to be the same as before, and keeping Clause 17 could materially improve it.

Financial Services and Markets Bill [HL]

Lord Davies of Brixton Excerpts

Committee stage
Monday 22nd June 2026 Grand Committee

[Lord Ranger of Northwood (Con)]

My Lords, I will make my first contribution to this Bill. This is also one of my first in Committee, so I beg noble Lords’ forgiveness for any errors I will make. I do not have vast experience in the banking sector, but I have spent almost 25 years in technology, during which I worked with a number of firms in the banking sector.

I support the comments from my Front-Bench colleague, my noble friend Lady Neville-Rolfe, and from the noble Lord, Lord Blackwell, on the impact of this broad-ranging Bill. Later, I will comment more on the technology aspect, but at this point I highlight that, as we move forward, a degree of regulatory burden is continuing to build, especially for the future of banking around fintech, innovators, start-ups and scale-ups, a world I have worked in significantly. I look at this Bill through that lens, seeking to understand what we are doing around the posture we are requesting from these new future banking institutions, as they see different requirements from different regulators based on a loose—or, sometimes, as in the case of this Bill, unclear—focus. I say that because we are hearing that from the industry.

The past couple of years have required significant consultation on start-ups and scale-ups, particularly in the area of digital assets. Regulators have undertaken extensive questioning of the industry, but there seems to be some gap between parliamentary oversight and regulatory direction. That has been fed back and has resulted in ad hoc approaches to intervention with regulators from parliamentarians, industry bodies and even parliamentary groups—I co-chair the APPG on Digital Markets and Digital Money—in order to provide a certain level of input about what the industry, particularly the digital asset industry and digital start-up banks, may be considering. There is a huge opportunity in this Bill to understand how we would like to set out frameworks and risk management for the future, but there is also considerable risk—as was mentioned by my noble friend Lady Neville-Rolfe—around where we lose oversight and potential control at this critical time.

[Lord Davies of Brixton (Lab)]

I will speak just briefly. I find myself in the unusual situation of agreeing with the noble Baroness, Lady Noakes, on the role and functioning of the Financial Services Regulation Committee, of which I am a member. The committee was created to undertake a particular task, and what is in the Bill makes that task virtually impossible. We very much hope that the Minister will listen to what the committee has said on this subject.

[The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)]

I thank noble Lords for the opportunity to set out the Government’s position on this important set of issues and for the constructive nature of the debate so far. Before we start, my interests are set out in the ministerial register. I invest in a number of funds that are regulated by the FCA.

I start by addressing why Clause 1 and Schedule 1 should stand part of the Bill. The case for reform is straightforward. The Consumer Credit Act—the CCA—is more than 50 years old and was enacted long before the creation of the FCA. It no longer delivers as it should for today’s consumers, who engage with modern products in an increasingly digital world. It too often results in people being sent lengthy, complex documents that they do not read, do not understand and cannot use with confidence. It is important to say that one in seven adults has literacy skills at or below those expected of a 9 to 11 year-old and 34% of adults have poor or low levels of numeracy involving financial concepts, yet the CCA regime means that some of the information provided on credit cards requires a far higher reading age.

Debt advice charities have criticised the way in which the CCA requirements often result in borrowers being sent arrears notices even when they have agreed a repayment plan, causing confusion and alarm. To address the point raised by the noble Baroness in her amendments, this demonstrates that it is not just the content of the arrears notices that is the problem but the inflexible legislative triggers that mean they must be sent even when there is no clear purpose and they cause more harm than good. There are many more examples of where the CCA results in poor outcomes for consumers and anachronistic procedures for lenders.

That is why this Bill continues the work that began in 2012 of repealing this outdated legislation so that it can be replaced with updated rules that better meet the needs of consumers and are fit for the digital age. The Government strongly believe that those replacement rules should, in the main, reside in the FCA rulebook, not in primary legislation. The FCA has extensive experience in developing firm-facing rules for retail markets, including mortgages, insurance and investments. Its rule-making approach is underpinned by consultation and consumer testing so that protections remain robust, proportionate and relevant. The FCA’s new rules for buy now, pay later, which come into force next month, demonstrate what a modern, FCA rules-based regime can deliver for consumers.

I have heard the concerns of some noble Lords that the Bill does not set out how the repealed provisions of the CCA should be replaced and that this has been left to the FCA to determine at a future time. While I appreciate that concern, this is entirely consistent with the model of regulation established in the Financial Services and Markets Act 2000. These provisions sit in the CCA only because this model of regulation did not exist in 1974. Parliament has already vested the FCA with significant responsibilities in this space, objectives that include a primary consumer protection objective, powers to allow it to fulfil its role and a comprehensive system of transparency, governance and oversight.

Parliament will have a key role in scrutinising the FCA as it makes these replacement rules. The FCA is required to advance its objectives through its rules, including its consumer protection objective. The FCA is required to consult, to conduct a cost-benefit analysis on rule changes and to submit copies of those consultations to the relevant parliamentary committees. They include the Financial Services Regulation Committee, ably chaired by the noble Baroness, Lady Noakes.

The FCA has a comprehensive set of enforcement powers that will help it to ensure compliance with its rules and to act decisively where firms are failing to comply. As well as ensuring that an expert body with the right objectives, powers and resources can fulfil this function, this approach ensures that the rules can adapt as needed in the future to stay current and respond to future trends.

The noble Baroness, Lady Neville-Rolfe, asked when Parliament will see the replacement rules and how the transition period might work. The FCA will set out the detail of the new rules through its normal rule-making process. Repeal of legislation will be commenced only once the relevant FCA rules are in place. The Bill contains a power for HMT to allow for an orderly transition. In practice, Parliament, consumer groups and stakeholders will see the FCA rules at consultation stage before the new regime takes effect. I am aware that some noble Lords have tabled amendments to strengthen parliamentary scrutiny further. The Government believe that the current arrangements work effectively, but I look forward to debating them in more detail later. CCA reform is an important opportunity to create a clearer, more flexible and more accessible framework that better reflects today’s consumer credit landscape.

The noble Baroness asked what rights and protections will remain in legislation. Where rights and protections require legislation to work, they will remain in legislation. Criminal offences will remain, so canvassing to minors and doorstep selling will remain in legislation, along with other key protections such as Section 75.

The noble Baroness, Lady Neville-Rolfe, also asked about the impact on smaller firms, as the FCA replaces parts of the Consumer Credit Act. I can assure her that the aim of the reform is to create a more proportionate set of regulations for all firms, including smaller lenders. Everyone will benefit from this modernised regime.

I hope I have provided the Committee with some assurances that the CCA reforms are vital. I ask the noble Baroness, Lady Neville-Rolfe, to withdraw her amendment.

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[Baroness Kramer (LD)]

My Lords—

[Lord Davies of Brixton (Lab)]

Sorry. Were you winding?

[Baroness Kramer (LD)]

Yes.

[Lord Davies of Brixton (Lab)]

I just wanted to say that I have a lot to say on the Financial Ombudsman Service but I shall save it all for group 6.

[Baroness Altmann (Non-Afl)]

My Lords, first, I declare an interest, which perhaps I should have done at the beginning. I am a director of a pension company that is regulated by the FCA. I apologise for not having declared that earlier.

I will reflect on an issue that could arise because the Financial Ombudsman Service is in charge of complaints about pensions. We know that many people who are taking out pensions products may have problems that do not become apparent to them for six or 10 years or beyond. Perhaps we could consider an amendment that would carve out the extent to which the Financial Ombudsman Service deals with a pension complaint in relation to this element of the Bill.

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[The Lord Bishop of Manchester]

My Lords, it is a great honour to follow the noble Baroness., Lady Tyler. As I listened to her speech, I was crossing off most of the things that I was going to say, because she said them much more eloquently than I could have, and I am thankful for that. We need to be able to provide everybody with the best possible services, locally available. As the noble Baroness said, when people are at their most vulnerable, at the most crucial moments of their lives and taking the big decisions, being face to face makes all the difference.

I gather that an article in the Spectator says that Bishops do not mention the word Jesus enough when we are speaking in your Lordships’ House—well, I have just covered that one, for Hansard’s benefit. In my theology, when God had something really important to do, He did not send an email or text message or put writing in the sky. He sent a person, in Jesus Christ, to meet other human beings face to face. We lose face-to-face services at our peril.

Occasionally, yes, I am involved with the closing of a church. But very few churches, certainly Anglican ones, have been closed in England over the past 40 or 50 years, because we recognise the importance of providing face-to-face encounters for people to meet other people. While I appreciate that we do not want to overregulate, I feel that, as I said at Second Reading, making face-to-face banking services available to people when that is what they need, because they have a big decision and are feeling vulnerable, gains priority over the convenience of the banks. They might pass some small costs on to the rest of us, and it might affect the bonuses that some bankers get and the shareholders’ dividends at the end of the day, but that is a price to pay for seeing that everybody is included in the banking world.

[Lord Davies of Brixton (Lab)]

I shall speak to Amendment 23 in the name of my noble friend Lord Sikka. He very much regrets not being able to be here, but I hope that the Minister will still respond to the point that it raises.

The key issue is that there is a public service element in banking. It goes beyond commercialism; it is reasonable to ask that the review which is taking place should consider that issue, and specifically whether it requires an amendment to the Bill to effectively pre-empt the issue and say that villages, towns and districts need some form of banking services. I think there could well be broad agreement on that—the issue is that banks are competitive commercial organisations and so are not going to do it. They will do it only if there is some sort of collective scheme, funded by a levy, that provides good services for people where they live. I very much enjoyed the contribution of the right reverend Prelate, and indeed churches have closed down far less frequently than banks and post offices. I hope my noble friend will respond positively to that point on the public service element.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I speak for the first time in Committee on my third Financial Services and Markets Bill. I reflect on the curious circumstances in which we find ourselves and offer reassurances to those who do not like Clause 3 in particular. Surely under the new regime, which we expect to see in a month or so, we are unlikely to see the Bill in anything like its current form given that it aims overall to deliver the so-called Leeds reforms of Chancellor Reeves. Those intend to give the financial sector a boost of growth, at an inevitable cost to the real economy—a boost to London and the tax havens at a cost to the rest of the country—and to reduce the regulations which were brought in as protections for all our security after the last financial crash. However, there is still a point in all of us going through the Bill in detail as we are doing now, because we are also making bids for what a future Government will look like.

On that basis, I will speak in particular to Amendment 22, in the name of the noble Baroness, Lady Tyler, and Amendment 23, in the name of the noble Lord, Lord Sikka. We are expressing very important issues, as the right reverend Prelate put so well. He was speaking about religion but also about humanity and human need, which these amendments particularly address. Your Lordships do not need to listen to me with my radical voice; reading around this, I found an article in March from the Civil Service Pensioners Alliance. It quoted figures which state that about 53 bank branches close each month, and pointed out that this was forcing older people in particular into digital exclusion, stripping away their independence and leaving them highly vulnerable to scams. No one has yet brought that up, but speaking to local persons in a local branch can be an important prevention against scams, and there is also the premium on having to pay more for things because you are poor.

Picking up the point made by the noble Baroness, Lady Tyler, the pensioners alliance talks about circumstances of bereavement or the need for a power of attorney, which are circumstances that can happen to any of us. They will continue to happen, and technology cannot make them disappear. On that, I take issue with a couple of points made by the noble Baroness, Lady Noakes. The noble Baroness said that we can get rid of branches when cash users drop to an insignificant number. First, we should not be treating anyone in our society as insignificant, but more broadly, that assumes that we are heading—both as individuals and collectively—only in one direction. You may, at a certain age, be able to cope very well with digital banking and be perfectly comfortable with it, but that is not to say that later in life you might not want to use a different system. You might not be able to see the screen of your phone or manipulate its buttons, or you might not be able to hear on the telephone anymore. At that point, cash being available is an absolutely crucial thing.

Finally, I will pick up a point from the noble Baroness, Lady Noakes, which the right reverend Prelate also discussed. It is not the case that customers have to pay for the provision of these services. I point out that the big four UK lenders made £14 billion total profit in the first quarter of this year, and their profits last year were £46 billion. The financial sector depends on government support to survive. That is a licence, and we can comment on the conditions under which that licence is held. If this legislation goes forward, surely we can add a provision on local banking services—having a person to speak to when you really need it. Whatever future legislation comes in, there clearly needs to be action in this area.

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Moved by

[Lord Davies of Brixton]

31: Clause 6, page 5, line 10, leave out from the second “the” to end of line 16 and insert “end of the period of ten years beginning with the act or omission to which the complaint relates, determined in accordance with the rules (which may provide for different times in relation to different cases).
(1B) Among other things, rules made under sub-paragraph 13(1) must provide in specified circumstances for the applicable time limit to end at a later time where—(a) in the opinion of the Financial Ombudsman, the failure to comply with that time limit was due to exceptional circumstances;(b) the complainant only became aware (or ought reasonably to have become aware) of material facts or detriment to them relating to the act or omission complained of after the expiry of that time limit.”Member’s explanatory statement
This amendment amends Clause 6 to ensure that the ten-year longstop is the default position for Financial Ombudsman complaints, in line with the preferred option in the Impact Assessment and as opposed to the six-year provision in current FCA rules (DISP 2.8).

[Lord Davies of Brixton (Lab)]

This extensive group of amendments is focused on the role and functioning of the Financial Ombudsman Service—the FOS. We have already had a taste of that debate with group 2, but I am concerned that there is not going to be enough time for me in my 15 minutes—perhaps the Whip is already thinking that I should get on with it—and I will not be able to finish it all. I have said that I will take the opportunity, if I have not been able to ask my noble friend the Minister all the questions that I want within my allotted time, to ask further questions when we get to Clause 8 stand part.

This group of amendments deals with three issues: time limits for taking cases to FOS, the proposed system for the referral of issues to the FCA and, significantly, the changes to the “fair and reasonable” test. This is a lot to deal with, and in fact it is about the interaction between these three different changes. They might appear separate, but their overall impact has led to real concern that the interests of consumers are not being given sufficient attention.

I must pay tribute to the support that I have received from the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services, of which I am vice-chair, as well as Which? Money and Fairer Finance. They have all expressed concerns that consumers’ interests are being adversely affected, and those concerns most definitely need to be addressed.

Starting with Clause 6 and my Amendment 31, I am concerned about the changes to the 10-year longstop on complaints to the Financial Ombudsman Service. The case for some kind of time limit is not unreasonable in itself. Firms do not wish to face indefinite exposure to complaints about events that happened decades earlier, and I understand why the Treasury wants certainty on that point. But Clause 6, as drafted, creates a hard structural barrier that applies regardless of when the consumer could reasonably have known they had grounds to complain. That is the flaw. It is not that a longstop exists; it is that it takes no account of discoverability. That matters most for long-term products such as pensions and mortgages, areas where I have personal and professional experience and where consumers often do not find out for years, sometimes decades, that they have been poorly advised or missold something.

The Explanatory Notes accompanying the Bill suggest that allowing complaints years later creates problems with data retention. I do not think that holds up. The appropriate rule, rule 9.5.2 in the FCA’s Conduct of Business Sourcebook, sets out the record-keeping requirements for firms that give personal recommendations on certain pension-related transactions. The rule as it stands requires firms to retain their records that were the basis of a personal recommendation indefinitely in cases of pension transfers, pension conversions, pension opt-outs and FSAVCs—which, for those who are not up on the jargon, are free-standing additional voluntary contributions. For other types of advice, COBS sets shorter retention periods, but these four pension categories are singled out precisely because of the long-term nature of the harm that can arise and, originally, because of the personal pensions misselling scandal of the late 1980s and early 1990s, a scandal that is too often forgotten but that led to £13 billion being paid in compensation.

The practical significance for the Clause 6 argument is that the justification for 10 years does not stand up. Firms advising on pension decisions are already legally required to hold the records, so the 10-year rule does not serve that data problem. The “indefinitely” formulation is worth noting. Most compliance obligations come with a defined shelf life, so the fact that the FCA made an exception here reflects a considered regulatory judgment that pension transfer advice is different from other forms of pensions advice. The consequences can take many years to materialise, and records need to be available when the problems are eventually seen.

Of course, I am most familiar with the issue in relation to pensions, but it is not just about pensions: endowment mortgages are a good past example where problems that arose for which compensation had to be paid were found outside the 10-year period. For the very products most exposed to long-delayed discovery of harm, firms already have the data that they need to defend themselves—they have to have the information that is being required.

It is worth asking how this is being played out against real cases. I believe, and I would be interested in a response from the Minister on this, that if a strict 10-year limit without proper exceptions had been in place during the PPI scandal, it would have blocked the mass redress exercise altogether. The worst mis-selling happened between 1998 and 2005, but public awareness did not peak until after 2011.

This was not a case of deliberate concealment; it was total misunderstanding and wishful thinking on the part of the people being sold to, but compensation was still due. A rigid longstop could well have disqualified millions of older claims in law before most of the consumers involved would have known that they were affected. I would be grateful if the Minister could say how these new arrangements will affect such cases and, as I mentioned, endowment insurances, appropriate personal pensions and the discretionary commission scandal in car finance, which is more recent.

As it stands, Clause 6 gives the FCA a power to create exceptions to the 10-year limit, but the legislation does not say what those exceptions must be at a minimum, so there is no statutory obligation on the regulator to build in protection for the consumers most likely to need it.

My amendment goes further than that in the name of the noble Lord, Lord Sharkey, by writing two specific circumstances into primary legislation itself, rather than leaving them to be worked out later in the FCA rules. First, it is just cases where the consumer faced exceptional circumstances, such as serious ill health or other incapacity, so people will know that they have a special claim in those circumstances. Secondly, there are cases where the consumer could not reasonably have known about the financial detriment within the 10-year window. These could be exercised on a discretionary basis, but my argument essentially is that those cases should be laid down in statute. It does not preclude the possibility of other exceptions being made, but for consumers it is a question of trust, and that trust requires consumers to know that those exceptions will be available. Putting these exceptions in the Bill removes the ambiguity, gives firms the certainty that they are after and makes sure that deserving consumers are not shut out of redress by an accident of drafting rather than a deliberate policy choice.

On Clause 8 and the powers of the ombudsman, I want there to be a proper debate about what is actually being changed here, and I look forward to guidance from my noble friend the Minister. The question underneath this debate is a simple one. What is the ombudsman for, and why do we have one, instead of just relying on the courts for people to get good tests? For the FOS, the “fair and reasonable” test is not something that has been put in and invented by the FOS itself; it comes from Section 228 of the Financial Services and Markets Act 2000 and provides that:

“A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case”.


What the test displaces is important. The court applies the law strictly: the relevant statute, regulations, contract terms and case law. That is what the courts do. The ombudsman is not bound to decide a case the way a court would. That is the whole point of having the ombudsman—it is not a court that is able to take a view as to what in the overall circumstances is fair and reasonable.

--- Later in debate ---

[Baroness Kramer (LD)]

For absolute clarification, “fair and reasonable” must be interpreted by the FOS as a standard that is met if there is compliance with FCA rules. I just want to understand because we can then go back historically and see where FCA rules might not have been perceived as fair and reasonable. It is interesting.

[Lord Davies of Brixton (Lab)]

To pursue that, are we being misled by the use of the word “rules” here? There is guidance as well as rules. The principles are not rules, but the principles have to be followed, and they include things such as treating the customer properly. Is that right? There are some general principles within what the FCA lays down—

[Baroness Kramer (LD)]

I am not sure that is what the legislation says; I think it says “rules”.

--- Later in debate ---

[Lord Stockwood (Lab)]

I will take the opportunity to write because this definitely needs clarification. The note that I have says that in cases where the omission being complained about is governed by FCA rules, if the firm has met its obligations under those rules, the FOS will be required to find that it acted fairly and reasonably. All the FCA’s handbook is relevant here, including the principles for businesses and, therefore, the consumer duty. There will be coherence between those determinations but only when the FOS believes that the fair test has not been met can it challenge the FCA. I will write to noble Lords because this is an important point that needs a definitive answer. I apologise for that.

On Amendments 37, 42 and 43, as I have set out, the reforms to the FOS’s fair and reasonable test are designed to preserve the FOS’s existing discretion in areas not covered by FCA rules. The Bill specifies the matters that the FOS must take into account when making determinations, taking this out of FCA rules and making it subject to parliamentary oversight. The matters listed include the law, relevant guidance, codes of practice and further materials published by the FCA or other regulators. This provides greater clarity around how the FOS makes its decisions. As I explained earlier, the Government’s view is that where there are relevant FCA rules, there are benefits from ensuring that FOS decisions are consistent with them. I will write to clarify further in case I have created confusion in this conversation.

On Amendments 38 and 41, the Government recognise the important role the FOS plays within the wider financial services regulatory environment. The reforms included in the Bill are about making sure that the FOS and the FCA are able to carry out their respective roles effectively, co-operating where necessary but maintaining their separate responsibilities. These amendments would go further and require the FCA to become involved in the determination of individual complaints. This is a role that the FCA is not designed or equipped to undertake. It is, and should continue to be, the role of the FOS as the independent, impartial dispute resolution service.

Turning to Amendments 39 and 40, the Government’s review of the FOS concluded that the “fair and reasonable” test works well in the majority of cases to enable a quick and fair resolution of complaints. Removing the “fair and reasonable test”, as proposed by these amendments would undermine the FOS’s quick and informal role and put in its place a more legalistic approach based on strict adherence to the FCA’s rules. This could introduce additional costs and delays, and reduce the FOS’s effectiveness as an accessible and simple alternative to the courts.

I turn to Clause 7 and the new referral mechanism, which will require the FOS to seek a view from the FCA where it considers that a matter relating to a complaint may indicate ambiguity in the FCA’s rules or have wider implications for consumers and firms. As well as enabling the FOS to make decisions that are consistent with FCA rules, the referral process will ensure that systemic questions and issues are identified at an early stage and the FCA can consider whether a regulatory or supervisory intervention may be appropriate, rather than continuing to consider each individual complaint separately. Alongside the new reporting requirements provided for in Clause 9, this will improve understanding of the FCA’s rules and the standards expected of firms, in turn improving confidence in financial services and ultimately reducing the number of consumers who experience poor treatment, which all noble Lords will agree is preferable to providing redress after the fact.

Given the important role that the FOS plays, this is a clearly a matter of huge interest, and there is a range of views on exactly what the best system would look like. Notwithstanding that, I will write on the specific things that I might have caused confusion about.

I have listened carefully to the representations. The Government’s view is that the reforms set out in the Bill strike an appropriate balance, improving the clarity and consistency of redress arrangements while allowing the FOS to continue to make fact-specific decisions on individual complaints. They ensure that both the FOS and the FCA are equipped to fulfil their respective roles and responsibilities so that consumers can have confidence in the key financial services on which they rely, and so that firms understand what is expected of them and can act on it. I therefore ask the noble Lord to withdraw the amendment.

[Lord Davies of Brixton (Lab)]

As one always says in this situation, I will read what the Minister said with care. I have to admit that I was a little disappointed on the “fair and reasonable” test, but on close analysis it may prove to be better. In particular, I hope I will have a copy of the letter. It is clear that the rules include the principles, such as:

“A firm must observe proper standards of market conduct”.


Is it the ombudsman who would decide what was the proper standard of market conduct, or is that one of the issues that will have to be referred to the FCA? I am not expecting an answer now, particularly as—

[Baroness Kramer (LD)]

I have a question for the noble Lord, Lord Davies. My understanding of the principles is that they sit at the top, and the rules are derived from them. But this is a focus on the rules, so it is only as derived. I do not know, and we will get an answer.

[Lord Davies of Brixton (Lab)]

That is what the Minister will need to make clear in the letter. I urge him to make that point clear. Who decides whether the principles have been followed—or is that one of the issues that have to be referred to the FCA under Clause 7?

On time limits, I am disappointed that the Minister did not address the specific cases that I addressed. Some figures were provided—I will start a war on people providing figures in this sort of debate, because they whistle past your ear and it is very difficult to make a quick assessment. The problem is the counterfactual: if the existing system did not exist, would those same figures apply? The Minister has effectively said that, under this change of rules, some people who previously would have received compensation will not do so. That is absolutely clear from the Minister’s statement, and that is reasonable because the providers will save an even larger sum of money. But of course that is under the existing system. We have to think about what those figures would be under the new system.

Again, I hope the Minister will write to me about the specific examples, which could be large sums of compensation—in the case of inappropriate personal pensions, £13 billion was paid in compensation. Would that have been possible under the revised rules? I say that because £13 billion is quite a figure to miss out on for ordinary policyholders. I beg leave to withdraw the amendment.

Amendment 31 withdrawn.

Financial Services and Markets Bill [HL]

Lord Davies of Brixton Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

There is a thought experiment, a century old, that I think should be made compulsory for every financial regulator, every market reformer and, frankly, every politician who has uttered the word “modernisation”. It comes from GK Chesterton, writing in 1929. He is writing about why he was a Catholic, but he makes a critical point that applies more generally. Imagine you come across a fence in the road and cannot immediately see why it is there. The modern, progressive, efficient temptation is to conclude that because you cannot see the purpose, there is no purpose, and to tear it down. Chesterton’s counterpoint is simple and devastating: do not touch it until you understand why it was put there, because someone at some point thought hard enough about this road to put a fence on it. Only when you know why are you entitled to remove it. This is Chesterton’s fence and I hope people will understand its relevance to this Bill.

The timeline of financial markets is littered with wreckage where it was decided that a fence was no longer required. We have experienced a cycle of financial disaster, followed by stronger regulation, followed by the growth of complacency, followed by demands to remove restrictions on markets, followed by injudicious deregulation, followed by yet another disaster. We are seeing this playing out in real time with, appropriately enough, ring-fencing. After 2008, the Vickers commission recommended that retail banking be ring-fenced from investment banking, rebuilding in modified form something close to the fence that had existed back before big bang in 1986. But within a decade, within living memory, pressure has built to weaken the rule. The fence looks costly and complicated. The arguments are familiar: the fence is inefficient and other jurisdictions do not have it, affecting our competitive position and putting London at a disadvantage.

These are precisely the arguments that preceded the events of 2008. The fence was built because we had just watched what happens without it. Now we have this Bill, and I am pleased to see that the Government are not unaware of the need to maintain consumer protection. The Explanatory Notes state the need to make changes

“without compromising on core consumer, prudential and market protections”.

They also state the aim of

“ensuring that consumers continue to have access to effective redress”.

I thank my noble friend the Minister for his clear statement in introducing this Bill, in reply to questions asked by me and other Members, that consumer rights will be protected. Nevertheless, while I trust my noble friend, our aim during the passage of the Bill will be to verify that these aims are achieved.

We must all be concerned, therefore, that not everything in this Bill has been welcomed by organisations representing consumers, not least the Consumers’ Association itself. Given its record of defending consumer rights, it is worth highlighting some of its concerns.

First, there are the changes to the Financial Ombudsman Service that will restrict consumers’ access to timely redress. To my mind, the proposals too closely mirror what the industry has proposed without providing the adequate supporting evidence to move in that direction. The Treasury’s own assessment of the FOS is that it functions well in the majority of cases. This is a poor basis for such a fundamental reform. Secondly, the Consumers’ Association has concerns that the Bill removes enforcement sanctions under the Consumer Credit Act 1974 without introducing equivalent replacements and shifts other protections from statute into Financial Conduct Authority rules, which have not yet received any consultation. A third problem is the new 10-year time limit on FOS complaints. It is totally unsuited to financial products, a large proportion of which are long term, typical of mortgages, life insurance and pensions. The concerns of the Consumers’ Association are far from trivial and will have to be addressed in Committee. I look forward to the debates.

The Government have been clear that the legislation is driven by an economic argument to foster growth in our world-leading financial sector, but there is also a compelling case, made clearly by my noble friend Lord Pitt-Watson, that effective consumer protection has an economic rationale as well. It is a sector that requires consumer confidence and trust. Financial services are unlike other markets: products are complex, time horizons are long, and the information gap between the provider and the consumer is substantial. In those circumstances, consumer protection is not an impediment to a well-functioning market but a key to that market functioning properly. Remove the fence without checking why it is there, and the likely result is not greater efficiency but the familiar cycle of mis-selling, scandal and declining consumer engagement with the very products that are supposed to serve their financial interests. A reform agenda framed around growth should therefore be cautious about weakening conditions that make sustainable growth in financial services possible.

Employment Rights Bill

Lord Davies of Brixton Excerpts

Report stage
Monday 21st July 2025 Lords Chamber

[Lord Hendy (Lab)]

My Lords, the purpose of this amendment is to probe the extent to which the new category of seafarers, “GB-linked ships’ crews”, should benefit from other employment rights apart from the one bestowed by the Bill, which gives them a right in relation to consultation over collective redundancies, as a consequence of the P&O Ferries scandal. I understand that there have been discussions between the unions representing these seafarers and the ministerial team. In the light of that, I shall leave it to the Minister to set out the situation. I beg to move.

[Lord Davies of Brixton (Lab)]

Having raised these issues at the beginning of Committee, I just want to say that, following the favourable response of the Front Bench to the idea of arranging a meeting at which they can be discussed, I very much look forward—at least, I hope I can—to the reply of my noble friend the Minister.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank my noble friend Lord Hendy for moving his amendment.

Amendments 123 and 124 in my name relate to Clause 54, which provides powers to make regulations giving effect to two named international conventions and to give effect to international agreements as they relate to maritime employment. I thank the Delegated Powers and Regulatory Reform Committee for its thoughtful consideration of these powers, and its recommendation to amend the procedure for new Section 84A(2) from first-time affirmative to affirmative for all uses. I wrote to the committee on 7 July, setting out our response in full.

These amendments will change the parliamentary procedure applicable to regulations made under the power in new Section 84A(2) of the Merchant Shipping Act 1995, giving effect to international agreements as they relate to maritime employment. The amendments mean that all uses of the power to give effect to future or unspecified international agreements will now be subject to the affirmative procedure, and not just the first use. They will mean that Parliament has greater oversight of these agreements and amendments to them.

I turn to Amendment 122A tabled by my noble friend Lord Hendy. The amendment would specify that the statutory rights to which shore-based workers in the UK are entitled also apply to ships’ crews working aboard services that enter ports in Great Britain 120 or more times per year, or that operate

“between a place in Great Britain and another place in the United Kingdom”.

The scope of services covered follows the approach taken in Clause 29, where the Government have sought to ensure that those employed aboard these services are captured by the requirement to provide proposed notification of collective redundancy.

I thank my noble friend for this amendment on the application of employment rights to seafarers, and the maritime trade unions for their continuing engagement on these issues. I hope to be able to provide some clarity today, but we can also commit to continuing ongoing discussion about how we can ensure that seafarers are receiving robust protections.

The Government want to see stronger employment rights for seafarers. That is why, in addition to the broader changes to employment rights, we have included a package of maritime-specific measures in this Bill. As my noble friend knows, we are closing the loophole that meant that P&O Ferries could avoid prosecution for failing to provide advance notice of proposed collective redundancies. We are also providing powers for a mandatory seafarers’ charter, which will allow us to set a higher minimum standard for wages and for how long seafarers can spend at sea without a break. This will establish a level playing field that will help prevent the undercutting of working conditions in the way that P&O Ferries sought to do.

The new power to give effect to the Maritime Labour Convention, and other international agreements as they relate to maritime employment, is also important. Where international agreement is needed to improve protections, we can implement those changes.

Employment Rights Bill

Lord Davies of Brixton Excerpts

Committee stage
Monday 16th June 2025 Lords Chamber

Moved by

[Lord Davies of Brixton]

264: Schedule 7, page 262, line 27, at end insert—
“Pensions Act 2004
26A Section 259 of the Pensions Act 2004 (Consultation by employers: occupational pension schemes).” Member's explanatory statement
This amendment, together with another amendment to Schedule 7, seeks to include employer obligations to their employees relating to pensions within the scope of legislation subject to enforcement under Part 5.

[Lord Davies of Brixton (Lab)]

My Lords, it is a real pleasure to come on to the subject of pensions at 10.30 pm. However, I know not to try the patience of my noble friends or even the noble Opposition. In truth, the amendment, although it comes up here and refers to enforcement and the fair work agency, is really about the place of pensions within the Bill. My contention is that pensions are not given adequate consideration, and I am using this as a mechanism to press my noble friend the Minister to expand on how the legislation will reflect on pensions.

Of course, we get the Bill. One wonders how legislators coped before the introduction of “word search”, because there are 300 pages, 157 clauses and 12 schedules; and a use of word search tells us that “pension” appears 19 times in such a massive piece of legislation, and quite a few of those are where it forms part of “suspension”. The Bill fails to give any serious consideration, as far as I can see, to the place of pensions as an important element in the terms and conditions of employment.

That is where I started from. I looked at particular ways that pensions should be addressed in the Bill. The amendments we are considering now—Amendments 264, 265 and 324—are tabled as a sample to press my noble friend to explain.

Amendments 264 and 265 relate to Schedule 7 and enforcement of labour legislation. There is labour legislation on pensions: there are obligations on employers to consult trade unions in certain circumstances—that is covered by Amendment 264. Amendment 265 in effect applies to automatic enrolment, where it is an inherent part of the labour contract that people have that pension. Enforcement agents are going into companies. If they are going in, it seems a wasted opportunity if they do not check for compliance on these particular issues as well as the other issues specified in the Bill. At heart, my amendments are a request for my noble friend to explain whether these issues and pensions more generally should not be included throughout the Bill.

My Amendment 324 appears very late on; it has been promoted from the “miscellaneous and general” part of the Bill. It seeks a definition of “remuneration”, which appears 75 times in the Bill but is not defined anywhere. It could well be defined by other legislation and judgments in the courts, but there seems to be a total lack of consistency. I could point to particular judgments and international standards where remuneration is defined in one way or another, but there is no overall consistency. Yet remuneration is clearly a crucial part of the Bill and there is a lack of clarity about what it means. I really hope that it is obvious; I am raising the issue only because I want the Bill to include pensions. You cannot understand someone’s remuneration if you do not know what pension they are being offered; it is part and parcel of the package. To look at some elements but not pensions seems wrong.

I urge my noble friend to make a positive response that the Bill will be looked at in detail again for places where pensions should have their proper role. I beg to move.

[Lord Hunt of Wirral (Con)]

I always have tremendous respect for the noble Lord, Lord Davies of Brixton, in particular his knowledge of pensions, because he, like me, is an actuary. Whereas he is a true actuary, I am just an honorary fellow of the Institute and Faculty of Actuaries, so I always respect his views.

I am not sure there is very much I can say in intervening between him, his Secretary of State and the Minister. All I will say is that his amendments represent a shift from a consultative culture to a more legalistic and punitive model. That would be a shift at great cost. Like him, I believe that people are entitled to proper pensions and proper security. Like him, I fought on many occasions to ensure that that is an enforceable right.

I do not want to anticipate what the Minister will say, but we have to consider the employer’s perspective. We all want to see businesses offer generous, flexible benefit schemes—things such as pension contributions, healthcare and travel allowances—but if those are brought into tight regulatory definitions and packages, and enforcement frameworks, I worry that some employers might feel discouraged from offering them at all. I await the response of the Minister.

[Lord Leong (Lab)]

My Lords, I thank the noble Lord, Lord Hunt, for his contribution, and my noble friend Lord Davies of Brixton for tabling Amendments 264, 265 and 324.

I respect my noble friend’s concern for upholding rights relating to pensions. The power in Part 2 of Schedule 7 would allow us to extend the fair work agency’s remit to cover enforcement of pensions legislation in the future, but it would not be appropriate to make this expansion to the fair work agency’s remit at this time. Changing how pensions are enforced would be a significant undertaking, requiring careful consideration, consultation and planning, not least regarding how the fair work agency would interact with the current Pensions Regulator. Therefore, I must respectfully resist these amendments.

Amendment 324, also in the name of my noble friend Lord Davies of Brixton, seeks to ensure that pension arrangements are covered by the definition of remuneration. While I understand my noble friend’s concern here, this amendment is not necessary and its introduction would have far-reaching implications across the Bill. While pension arrangements are already covered by some of the provisions in the Bill, it brings forward issues around sectoral collective arrangements, which I am sure my noble friend would not want to frustrate. So while I appreciate the intentions of my noble friend Lord Davies of Brixton, I respectfully ask him to withdraw Amendment 264.

[Lord Davies of Brixton (Lab)]

I thank my noble friend the Minister for his remarks. I am unpersuaded but, at this stage, I beg leave to withdraw the amendment.

Amendment 264 withdrawn.

Employment Rights Bill

Lord Davies of Brixton Excerpts

Committee stage
Tuesday 13th May 2025 Lords Chamber

[Baroness Coffey (Con)]

My Lords, I rise to speak to Amendment 73 in my name regarding SMEs and an SSP rebate scheme. I have made a drafting error by calling it four days when it should have been three days, in compliance with the law today.

Occupational health is a key factor in both helping people to stay in work, to try to prevent some of the illnesses, and to get back into work quickly, and for some time it has been a key part of the strategy of a successful business to do that. But I am also very conscious that SMEs in particular are not always well displaced currently to access, which is why expanding that capability has been a key part of DWP’s more recent strategies, which the present Administration have continued.

Sickness rates are significantly lower in the private sector than in the public sector, but what is common to both is that there is an increasing prevalence of the primary reason for sickness pay: people being off sick due to mental well-being. I am conscious that this is often not an easy situation to challenge or interact with if you do not have the experience to do so, and that is why increasing occupational health is needed.

Why is occupational health so relevant to this? It used to be the case that with statutory sick pay you could reclaim from the Government the amount of money that you had paid out. You might have paid out a lot more—100% of earnings or similar—but all businesses used to be able to get a rebate for the statutory sick pay element. I know that because I used to fill out the claims myself when I was working in industry. Over time that was whittled down, and it was finally abolished in 2014. Instead, the Government at the time created the Health and Work Service, which was designed to be referred to by SMEs for people who have been ill for a few weeks—again, almost as a provision facilitated by government.

One of the challenges is that this is continuing to be part of an issue. Many businesses, particularly small businesses—certainly in submissions made to me—are particularly worried about this starting from day one of people being unwell. As a consequence, it is important that we should investigate the opportunity to get a rebate scheme for SMEs to try to keep the status quo as it is today.

It is in the interests of government to support SMEs. As we have already heard, the statistics show that, unfortunately, payroll employment is falling. When in office I was very pleased that we saw it increasing. Indeed, I am certain, in wanting the Government to succeed in their ambition to get to 80% employment rate, that they need SMEs to be taking on people to work. As I have explained, I do not think the Bill will help with that, but one modest way to go towards alleviating some of the issues would be to introduce a straightforward rebate scheme for SMEs.

[Lord Davies of Brixton (Lab)]

I speak in support of my noble friend Lady Lister of Burtersett, and in support of more being done on statutory sick pay. I welcome the Government’s commitment to strengthen statutory sick pay by removing the lower earnings limit and the waiting period, but they must go further to ensure that people with mental health problems have a secure safety net when they need time off work, and a pathway back into work when they recover.

The UK has one of the least generous sick pay schemes in the OECD in terms of rates and length. It forces people to remain in work while they are unwell, which risks them becoming more unwell and eventually falling out of work. Because statutory sick pay is inadequate, people who rely on it often carry on going into work when they are unwell. This can risk them becoming more unwell, to the point where they fall out of employment altogether. We need a sick pay system that provides real security, is more compassionate, gives people the time they need to get better and supports them to return to work when they are ready.

Reforming statutory sick pay is beneficial to the economy, to businesses and to people with mental health problems. As my noble friend has emphasised, presenteeism—going to work when unwell—is costing UK employers £24 billion a year, according to figures produced by Deloitte. It reduces productivity and business competitiveness, as well as aggravating a person’s illness. Introducing a flexible statutory sick pay model that allows for partial payments alongside wages would help people to gradually return to work after a period of sickness, or allow them to reduce their hours when needed without being signed off completely. Not only is this beneficial for the employer, as employees are able to return to work sooner part-time, but it keeps the employee connected to their workplace and reduces the likelihood that they will fall out of employment altogether.

Extending the length of statutory sick pay being paid from 28 weeks to 52 weeks will enable more people to stay in employment, reduce rehiring costs for businesses and prevent people falling out of employment and needing support from the benefits system. Ultimately, we need to see a higher level of statutory sick pay, and I see no reason why, when you are sick, you should get any less than the national minimum wage.

[Baroness Noakes (Con)]

My Lords, my main concern with the changes to statutory sick pay in this Bill is the impact on smaller businesses, which is why I support the amendments in this group in the names of my noble friend Lady Coffey and the noble Lord, Lord Fox, which provide for rebates for SMEs. Of the two amendments, I prefer that of my noble friend Lady Coffey because it clearly undoes the harms that Clause 10 will cause.

I could not find much data on how much businesses actually pay in statutory sick pay, but I suspect that, unless an employer is unlucky enough to get an employee who has long-duration sickness, most will be paying relatively little at present, because absences are mainly for less than four days. What the data does show is that most sickness absences are for minor illnesses, which are unlikely to exceed three days. The average days lost per worker per year in 2023, which is the most recent data I could find, is just short of eight days. Among smaller and micro-businesses, that falls to around five days.

Extending the days for which payment is made is likely to increase the number of days lost to sickness, as the current incentive to work if the illness is mild will simply disappear. The Government say they have no idea what the behavioural impact of the changes will be—whether positive or negative—but I am prepared to bet that there will be far more short-duration absences, which will qualify for statutory sick pay, than there were before.

If I am right that most SMEs do not currently pay much in the way of statutory sick pay, the changes in the Bill will straightforwardly increase their costs. An average small business of between 10 and 49 employees has about 20 employees, which means that the average for a small business will be to pay for at least 100 days of sickness that they do not currently have, which would amount to around £2,000 in additional costs each year, even if no additional sick days were taken, which I doubt. That is not a huge amount per business, but it adds up to many billions of pounds across the whole economy. It also, of course, comes on top of the jobs tax and the very significant increases in the national minimum wage, which leads me to the likely real consequences of this change on top of the others. Put simply, SMEs will not hire workers unless they absolutely have to. We can already see evidence of that from the surveys of smaller businesses and in the weakening labour market—my noble friend Lord Sharpe of Epsom gave us an up-to-date view on that. It is only going to get worse.

Furthermore, all those groups that we as a nation want to get back into work, in particular those who are long-term sick, will simply not be attractive to employers. Any hint of an illness record in a job applicant’s background will count against them, because no employer would want to take on the additional costs that would automatically come with that employee.

I am sure that I do not need to remind the Committee that SMEs employ nearly half the private sector work- force. A reluctance to hire among SMEs will kill growth and opportunities for many of the groups that we need to be employed in this country. There is a simple way to solve this problem, set out in Amendments 73 and 74. The Government would be wise to go down that route.

Employment Rights Bill

Lord Davies of Brixton Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Lord Davies of Brixton (Lab)]

I congratulate the noble Baroness, Lady Morrisey, on raising an extremely important issue which I hope we will pursue in detail during the progress of the Bill. I welcome the Bill, and I congratulate my noble friend the Minister on her introduction of this important, excellent and timely legislation. I could spend my whole four minutes pointing out the Bill’s excellent content; I hope she will forgive me for raising three issues which the Committee will need to look at closely.

First, I will go through the Bill line by line, as they say, to check that pensions are given their due place within the legislation. Secondly, on statutory sick pay, I urge all noble Members to read the excellent briefing from Mind pointing out the importance of statutory sick pay in tackling the scourge of mental ill-health, particularly the way it should be structured to facilitate return to work, removing cliff edges.

The third issue which we will need to look at carefully in Committee is Part 3, the section on collective bargaining. Although the word “negotiating” appears in the introduction to each clause, I still need to be convinced that the provisions within each one deliver the grounds for proper negotiating. It is quite clear that it does not fulfil the definition of “free collective bargaining”, and we are going to need to look at that in some detail.

I heard the comments from the noble Lord, Lord Londesborough, at the beginning of the debate. I want to contest the idea that it is only those who have been successful in business who know anything about how the economy works. I stand on this side of the Chamber surrounded by giants of the trade union movement. As a former lowly assistant at the TUC, I am staggered by the quantity of expertise and knowledge that is available to speak in support of this Bill.

Of course, it is not just the general secretaries or the senior officials but the whole layers of paid and lay officials who work on behalf of their members. That does not get the publicity that it should, but they work tirelessly on behalf of their members. It is that experience in companies, in undertaking day-to-day industrial relations, which has informed this Bill. That is why it will be a success. People suggest that it is going to be against economic growth, but economic growth depends on workers. It depends on them having good conditions of work and security—that is why the Bill is in favour of economic growth.