Pension Funds: Use of UK-listed Investment Companies

Lord Davies of Brixton Excerpts

Tuesday 9th September 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I take this opportunity to pay tribute to her expertise and the consistency of her campaigning in this area. I fully understand the points that she is raising and recognise the important role that investment companies play in providing access to private markets. She talked about the recent Mansion House accord. I hope she agrees that the industry is moving in the right direction in diversifying its investments in the Mansion House accord, with 17 of the largest workplace pension providers having voluntarily committed to investing at least 10% of their defined contribution main default funds in private markets by 2030, with at least half of that invested in UK private assets.

I understand the noble Baroness’s concern about the scope of the proposed reserve power in the Bill. The approach that we have taken quite deliberately is to ensure that the powers are suitably targeted and contain guard-rails. They are not intended to be open-ended but should be capable of serving as a backstop to the commitments that pension providers themselves have made through the Mansion House accord and will be used only if we consider that the industry has not made sufficient progress on its own. None the less, I am grateful to the noble Baroness for her constructive engagement on this issue and happy to continue to discuss it with her. As we take the Bill through Parliament, her representations and those of the wider sector will be considered alongside our broader policy objectives. Our aim remains to ensure that the reserve power is effective and proportionate, and delivers for pension savers and for the UK economy.

[Lord Davies of Brixton (Lab)]

I express my support for my noble friend on the points made by the noble Baroness. There is an issue here that needs to be resolved. There is also a broader issue that I ask my noble friend to respond on: the use of private equity funds in pension schemes. To put it mildly, private equity has a mixed record. A blanket approval for the involvement of private equity in providing pensions has all the makings of a forthcoming disaster.

[Lord Livermore (Lab)]

I am grateful to my noble friend for his thoughts on that matter. I do not necessarily agree with him about private equity’s role in pension funds. It has an extremely important role in investing in the infrastructure and fast-growing companies that we want to see so that the UK economy can unlock that kind of investment. As for its inclusion in the Mansion House accord, he will be aware that this is an industry agreement and that the Government are not participants in it.

Financial Services Reform

Lord Davies of Brixton Excerpts

Wednesday 23rd July 2025 Lords Chamber

[Lord Livermore (Lab)]

As the noble Earl says, the Bank of England has operational independence to achieve the inflation target set by the Government. We absolutely support it in the work that it does to do that. However, it is absolutely the case that the Government’s fiscal policy has created the space for the Bank of England to cut interest rates. At the risk of repeating an old favourite of ours, if we still had a £22 billion black hole in the public finances, it would not have had the space to do that. It is obviously right that fiscal policy and monetary policy work together.

[Lord Davies of Brixton (Lab)]

I think it is worth reminding the House that I spent my entire working life in the financial services industry in one form or another, and I am afraid to say that my practical experience of the industry has made me a sceptic of much of the promotion provided by it telling us how it will do the economy a favour. Does my noble friend agree that there are potential downsides to the financialisation of the economy that seems to lie behind these proposals? We need to realise that there is a form of resource curse in overfinancialising the economy. There is also a dynamic within the industry driven in large part by the inevitable asymmetry of information. You can provide all the education and explanation that you wish, but there will still be this asymmetry of information leading to a succession of scandals. There is a dynamic in the industry—in personal pension scandals, endowment scandals and the Northern Rock scandal there was a dynamic that has to be recognised.

Finally, I am concerned that, in the Statement, the Government appear to be giving people financial advice. I am sure my noble friend will deny that that is what they are doing, but saying that the Government are going to get people better financial returns is a very dangerous path to go down. Does my noble friend the Minister accept that there is a need for robust safeguards for ordinary investors? I press him to accept that those appear to be contemplated by some of those commenting on these proposals. Significant weakening is a grave danger to the economy and individuals.

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question, and I pay tribute to his experience in the industry that he outlined. I do not agree with his view of the industry. I am incredibly proud of the financial services sector in this country: it makes a massive contribution to our economy, and it is incredibly important that we enable it to grow and that that growth feeds through to the real economy so we can see the investment in the real economy that we want to see.

My noble friend talks, perfectly correctly, about finding the right balance between risk and growth. As I say, we are not dismantling any of the architecture that was put in place in the aftermath of the financial crisis, and it is quite right that we do not do that, but we believe that the pendulum has swung too far towards regulating only for risk. It needs to regulate not just for risk but for growth, and that is the right thing to do.

I think my noble friend is wrong to say that we are in any way giving financial advice. We are trying to put in place what has been called a targeted support framework that enables people to access the help they need to make the right financial decisions for them, and that will be ready to support consumers by ISA season next year. It would enable authorised firms, not the Government, to proactively suggest appropriate products or courses of action, using limited information about a customer and their circumstances. That could include helping people to make decisions about how to access their pension, supporting people with excess cash savings to consider investing for the first time. I cannot believe that anyone would think that was anything but a good idea.

Winter Fuel Payment

Lord Davies of Brixton Excerpts

Thursday 12th June 2025 Lords Chamber

[Lord Livermore (Lab)]

One thing that was ill-thought-through was the Liz Truss mini-Budget and the £22 billion black hole in the public finances, which is why we had to take the action that we did. It might be nice if the noble Lord took some responsibility for what we inherited. As I said already, when we came into office, we had to take a number of very difficult and urgent decisions to put the public finances back on a firm footing. That involved difficult decisions on welfare, on tax and on spending, and one of those was means-testing the winter fuel payment. We have listened to the concerns about the level of the means test and we are now able—all the while still means-testing the winter fuel payment, because that is the right thing to do—to extend eligibility so that this winter, all pensioners with incomes up to and including £35,000 will receive it.

[Lord Davies of Brixton (Lab)]

My Lords, I start by wishing my noble friend the Minister best wishes for his birthday today. He has the special treat of an Urgent Question and a Statement on the spending review—what more could anyone ask for?

I very much welcome the decision to reintroduce the winter fuel payment. In answer to the Question, my noble friend said that anyone with income above £35,000 would not receive the payment. There is one problem with that, in that some forms of income are not taxed. Someone with a substantial cash ISA—I understand that there is a Member on the Liberal Benches who has £1 million in his ISA; he has made no secret of it, and presumably receives a very substantial income—with a taxable income of less than £35,000, would presumably still receive the winter fuel allowance, or is some step going to be taken to avoid that problem?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question and for his birthday wishes—that was very kind of him. Obviously, we had to achieve the right balance between a simple system to administer and getting the support to those who need it most. The system that we have come up with sticks with the existing rules of the tax system and, I think, achieves the right balance, as I described.

Winter Fuel Payment

Lord Davies of Brixton Excerpts

Tuesday 10th June 2025 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, as someone who has spoken from these Benches against this proposal, I very much welcome the Government’s decision. The way the change has been characterised is a bit misleading. Does the Minister not agree that this represents a rejection of means testing and a return to universal benefits, with, quite rightly, the cost being handled for those on high incomes through a redistributive tax system?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his support for the change—I was going to say in the means test, and that is obviously exactly what his question is about. I am not sure I am expert enough to engage in a debate with him about the definition of a means test. Clearly, we are raising the level at which pensioners are entitled to and benefit from this policy. As he says, it will be paid universally to all pensioners, and those with an income over £35,000 will have the winter fuel payment recovered by HMRC through the tax system.

Mansion House Accord

Lord Davies of Brixton Excerpts

Wednesday 14th May 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. This commitment is voluntary and led by the industry, because the industry knows and is choosing to do this—because the evidence shows that higher-growth assets can boost returns to savers over time, as the noble Baroness, Lady Neville-Rolfe, said, in line with international counterparts, such as in Canada and Australia. Their pension funds and the levels of private asset allocation in those schemes is far higher. Pension savers will benefit from this accord through diversified savings, with potentially higher returns.

[Lord Davies of Brixton (Lab)]

My Lords, I thank my noble friend for his replies and for the Statement in the Commons. I understand why my noble friend and the Minister in the Commons avoided tackling the issue of mandation, even though there was clearly a Treasury-inspired leak about the issue on Monday. Does my noble friend understand that with mandation of investment policies, should the Government consider it, comes responsibilities, with effectively the Government having to guarantee the returns or benefits on members’ benefits.

[Lord Livermore (Lab)]

I am shocked that my noble friend uses the word “leak”—I have no idea what he is talking about. As I have said, it is important that this is a voluntary commitment and that it delivers the investment promised for the UK economy. As I say, funds are voluntarily—it is industry led—choosing to do this because evidence shows that high-growth assets can boost returns over time, and we are confident that the schemes are now moving in the right direction. But equally, as I say, the pension schemes Bill will have more details in it about how these developments will be monitored over time to make sure that that change is delivered, because in the end what we all want to see is higher levels of investment.

National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Lord Davies of Brixton Excerpts

Friday 25th April 2025 Lords Chamber

[Lord Davies of Brixton (Lab)]

It is a great pleasure to take part in this debate. It is a bit like the Economic Affairs Committee 2024-25 reunion tour, with added guest stars. I was a member of the committee, and preparing for the debate gave me an opportunity to reflect on what we achieved—or what I achieved, I suppose. I give great thanks to the chair of the committee, the noble Lord, Lord Bridges of Headley, who was an excellent chair who encouraged the full participation of members. I have no criticism of him at all. The committee was extraordinarily interesting—the members of the committee as much as the witnesses. We received formal evidence from witnesses but not from members of the committee, even though some committee members knew a lot more than the witnesses.

I am happy to add my name to the report, but that does not necessarily mean that I agree with everything in it. Another tribute to the noble Lord, Lord Bridges, is that he was assiduous in making sure that my views were made clear, even if they were not always successful. The key issue for me is that the committee did not say we were facing an inevitable crisis; it said we had a choice, expressed in terms of the state doing less or in increasing taxes. An increase in taxes was not ruled out by the report; it was in the report as a choice and, speaking for myself, that is the choice that I would make. There is actually a third choice that we did not consider, and I regret that we ruled it out: that we should borrow even more. I slightly regret that we did not explore that in more detail. We said, “We’re not interested in listening to the views of people who promote modern monetary theory” and we did not really hear from them. I think they may provide valuable insights, even if I do not necessarily agree with all their conclusions.

A big loss in this debate is, of course, my noble friend Lord Layard, who was a valuable member of the committee. He was assiduous in making the point that, with increasing demand for public services, with people getting older and improvements in medical technology, and with increasing demands for higher standards of public service, there is inevitably going to be an increased role for the state and for public expenditure within the total economic budget. In and of itself, increasing levels of public expenditure is not a cause of concern; it is a reflection of the needs of a modern society.

The standout for me within the evidence we received was from Professor Stiglitz, who raised the issue of investment. We rather kept out of the issue of investment because it was so big, but he asked what counted as investment. He gave the example of nurses’ training. Is that an investment? For the Government it is not, but in fact we need investments of that type and the narrow terms of investment that we see defined in the Chancellor’s letter do not reflect the changing needs of what we need from public services.

Spring Statement

Lord Davies of Brixton Excerpts

Thursday 27th March 2025 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords—

[Lord Kennedy of Southwark (Lab Co-op)]

We will hear from the noble Lord, Lord Wigley, next and then from my noble friend Lord Davies of Brixton.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I am not in charge of the Chancellor’s correspondence unit, so I cannot say whether that letter has been replied to. I am also not responsible for appointing MPs to ministerial positions, so I cannot answer that point either.

What I can tell the noble Lord is that, as a result of the measures announced in the Spring Statement yesterday, £58 million of additional Barnett consequentials will be provided to the devolved Governments in 2025-26, £16 million of which will go to the Welsh Government. The UK Government have already made considerable progress on growth in Wales, including by confirming the Wrexham and Flintshire investment zone and designated tax sites in both the Celtic and Anglesey freeports, and by supporting steel communities through the Port Talbot Tata Steel transition board and providing £25 million of additional funding to the Welsh Government to keep coal tips safe.

[Lord Davies of Brixton (Lab)]

My noble friend will be aware that the two key figures projected in the OBR report are the future course of income in the form of taxation and expenditure. There is a high degree of uncertainty about both those projections, and yet under our fiscal rules, the Government are using the difference between those two highly uncertain figures as the control variable, causing an incredible degree of uncertainty. That is what the rules require. Does my noble friend share my surprise that using this highly uncertain figure is an appropriate basis on which to take away benefits from hundreds of thousands of people and put them into poverty?

[Lord Livermore (Lab)]

I hope my noble friend is not following the path of Liz Truss and the party opposite by criticising the OBR, because that is not a sustainable basis on which to build economic policy. The Chancellor has been clear that the fiscal rules are non-negotiable, and the OBR has confirmed that the Government are on track to meet them. On the wider policy of welfare reform, as I have said before, the system was unsustainable. It had the wrong incentives, and it is important that we get people back into work, because that is the best route out of poverty.

Finance Bill

Lord Davies of Brixton Excerpts

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

[Lord Davies of Brixton (Lab)]

My Lords, I welcome the opportunity to contribute to this debate on the Finance Bill, particularly as it is the first such Bill from our new Government. I disagree with the noble Baroness, Lady Penn, about the usefulness of the debate; I have found it an ideal opportunity to raise issues. We have the ear of the Minister, who is sitting here and listening to every word we say. In practice, we could raise any issue we like; the breadth of the Finance Bill is such that we are not restricted to narrow topics. The ability to take part in this debate, albeit with a short period, I think is valuable.

The good news is that there is very little in the Bill about pensions, although this is the calm before the storm. We have the pensions Bill coming up and, presumably, in next year’s Finance Bill, there will be inheritance tax on unused pensions—perhaps the Minister could confirm that.

Three clauses in the Bill deal with pensions. The only material change is in Clause 34, which tells us that administrators now have to be resident in the UK. I am a bit surprised that that was not already the case, but can the Minister give us clue as to the ideas that lay behind that decision, because there is very little in the Explanatory Notes?

The main issue I want to raise, in the little time left to me, is the impact on recipients of the state pension of the decision to continue the freeze on income tax personal allowances until 2029, as the previous speaker mentioned. Successive Governments have decided to freeze the personal allowance. It is clearly a good way of surreptitiously increasing the tax burden without touching the standard rate. My main point is that we are storing up a problem for the future with frozen personal allowances, albeit up to 2028-29—I really should not believe rumours, but there are some rumours that maybe that would not be stuck to following the Statement that we expect next week, because it is a way of meeting the fiscal requirements. I ask the Minister: are the Government sticking to the decision to increase personal allowances at the end of the current freeze period?

The problem that I wish to highlight and bring to the attention of the Minister is the impact of frozen personal allowances, albeit up to 2029, coupled with a state pension most of which, for people on low incomes, is covered by the triple lock, so you have the frozen personal allowance and the state pension increasing faster than inflation. Using figures from the OBR, I calculate that the impact will be that by 2027-28 the new state pension will be greater than the personal allowance. I think pensioners should pay tax like everyone else, but the problem is that the state pension is not included within the PAYE system. As soon as the income of people on low incomes who depend mainly on the state pension passes the personal allowance, there will be a big political consequence. There will be no way to collect that tax from many low-income pensioners without sending them a brown envelope saying, “You’ve got to pay some money because you haven’t paid enough”. The political downside of that I urge my noble friend to appreciate.

For example, let us take someone on £15,000 a year: that is hardly a high income, but it is roughly £2,000 more than the personal allowance. They will be liable for 20% tax on £2,000, which is £400. As they are not part of the PAYE system, they will get that demand for £400 in a brown envelope at the beginning of the next fiscal year. That sounds like a political calamity to me, and I hope my noble friend will be seized of the importance of doing something to avoid this problem.

Pension Fund Reliefs

Lord Davies of Brixton Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am flattered to be referred to as the noble Lord’s noble friend, and I consider him to be a friend as well. I am more than happy to look at his ideas.

[Lord Davies of Brixton (Lab)]

I thank the noble Lord—my noble friend—the Minister for his replies. Will he agree that the best thing that pension funds, both defined benefit and defined contribution, could do to support the British economy is pay adequate and secure pensions? What plans do the Government have to ensure that that is the case?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. I of course agree that adequacy is an absolutely essential part of the pensions landscape. That is what phase 2 of the pensions review is designed to look at. The scope and terms of reference for phase 2 will be published in due course, once we have made fuller progress with phase 1.

Low and No-Tax Jurisdictions

Lord Davies of Brixton Excerpts

Thursday 30th January 2025 Lords Chamber

[Lord Davies of Brixton (Lab)]

I will speak briefly in the gap. I want to ask my noble friend the Minister about the measures that can be taken. The issue has been set out very clearly, but is the Treasury considering steps such as strengthening HMRC’s enforcement of transfer pricing? Is it considering the idea of withholding tax on intergroup payments and generally tightening its anti-enforcement rules?