Economy: The Growth Plan 2022

Lord Eatwell Excerpts

Monday 10th October 2022 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, it was encouraging to hear the Prime Minister echo Keir Starmer’s conference speech, putting growth at the heart of the political agenda, but terribly discouraging that her policy for growth embodies the libertarian philosophy that she has soaked up at America’s libertarian think tanks.

Her libertarian economics has already been tried. Donald Trump’s Tax Cuts and Jobs Act 2017 cut taxes—notably for the better off—and funded the cuts by borrowing in excess of $2 trillion, arguing that these measures would increase investment, growth and incomes, so that tax cuts could pay for themselves. Well, it did not work. Investment increased temporarily but then declined. Lower taxes produced a barely perceptible increase in growth of 0.1 of 1%, and there was no increase in incomes to pay for tax cuts. The American experience confirms that libertarian economics is bad for business. Consider the most commercially successful innovation of modern times: the iPhone. Every significant technical innovation with the iPhone was made in the public sector, from the touch screen to internal electronics.

Growth demands innovation. Because returns are an unknowable future, innovative investment in new, untried technologies, or new products, accessing new markets, is always risky. That is why the state has such an important role to play, funding the risk-taking that markets cannot handle. When public bodies created the iPhone technologies, they were taking risks that the market would not.

There remains Britain’s perennial problem of transforming invention into innovation into commercially viable products. Imitating best commercial practice in Europe and the US will help, but more is needed. We need to leapfrog our competitors by building a new financial and industrial system that faces up to competition today and beats the competition tomorrow. That is why Keir Starmer’s commitment to turn the UK into a green-growth superpower is so important. Britain has the science to produce green energy and to create the new technologies that will allow us to adapt to climate change. This is a challenge that cannot be met by shrinking the state. It requires a new entrepreneurial state underpinning the risks involved in providing the new goods and services that an overheating world will need.

The Prime Minister’s diagnosis of the need for growth is correct but, instead of tackling the problem with modern economic medicine, she plans to bleed the patient. I understand that the Prime Minister read politics, philosophy and economics—PPE—at Oxford. It is evident that she read too many Ps and not enough E.

Elections Bill

Lord Eatwell Excerpts

Lords Hansard - Part 2 & Report stage
Wednesday 6th April 2022 Lords Chamber

[Viscount Stansgate (Lab)]

My Lords, I rise to say three things. First, I am pleased to see the Minister back in his place and I hope he has recovered. Secondly, I am pleased that the noble Lord, Lord Woolley, has made another journey from Cambridge to be with us tonight. Thirdly, I agree with him that we should make history and I urge the House to vote for this amendment.

[Lord Eatwell (Lab)]

My Lords, I was struck by the argument from the noble Lord, Lord Rennard, that one does not have to opt in for taxation. I think he is arguing for “no taxation without representation”, a slogan which if recognised in the past might have eased some pain which a British Government suffered.

At the end of the debate in Committee, I put it to the Minister that someone should turn up at a voting booth with a British passport and a driving licence and would then be denied the right to vote. She replied, “Of course, that person’s not on the register.” That seemed to illustrate the total folly of the current restrictive register, and the wisdom of the amendment tabled by the noble Lord, Lord Woolley, which I urge everyone in the House to support and so maximise the number of people who are engaged in the civic process of voting in this country.

[Lord Stunell (LD)]

I want to support what the noble Lord, Lord Woolley, has said, and perhaps try to pre-empt the Minister in her reply. In Committee, two reasons were given. One was a mitigation that HMRC in fact informs those who receive new national insurance numbers of their right to vote, which started in September last year. That is excellent and if HMRC can inform them, I am sure they could send the form to go with it. The noble Baroness also said:

“Automatic registration would threaten the accuracy of the register and … enable voting and political donations by those who are ineligible”.—[Official Report, 23/3/22; col. 1058.]


There is a measure of disconnect between the Government’s approach to this issue and their approach to overseas voters. Will the Minister consider whether it would not be sensible to go one more step with HMRC and to link their policies for overseas voters with the domestic voting system?

Elections Bill

Lord Eatwell Excerpts

Lords Hansard - Part 2 & Committee stage
Wednesday 23rd March 2022 Lords Chamber

[Lord Stunell (LD)]

First, it is important to establish that there is a problem. I quote from the briefing supplied by the Electoral Commission to your Lordships on these amendments:

“There is more that could and should be done to modernise electoral registration processes in Great Britain, to ensure that as many people as possible are correctly registered.”


I believe I heard the Minister make the same point—that he believes it good public policy to get people registered. The Electoral Commission’s most recent estimate is that

“between 8.3 and 9.4 million people in Great Britain who were eligible to be on the local government registers were not correctly registered”.

As the noble Baroness, Lady Bennett, said, those figures were collected in December 2018. It says there are another 360,000 or more people in Northern Ireland not correctly registered. It also made the same point as the noble Baroness, Lady Bennett:

“Our research found that young people, students and those who have recently moved are the groups that are least likely to be correctly registered.”


Courtesy of the noble Baroness, Lady Whitaker, I would say that Travellers are very much in that group of under-registered people.

The Electoral Commission has published feasibility studies which identified that there is potential to evolve the current system. Those studies are reflected in the amendments before your Lordships today. Amendment 141 is one route to it—the two are not exclusive but it is one route—and Amendment 144B is another, to which we have added our names as well. It provides simply that, when a person is issued with a national insurance number, they receive their application for the electoral register.

The Electoral Commission makes two more points in its briefing:

“the education sector … could help EROs identify attainers and other young people. Also, data from the Department for Work and Pensions could potentially be used by EROs to register young people to vote automatically when they are allocated their national insurance number ahead of their 16^th birthday.”

I do not want to frighten the Minister; the Electoral Commission is not suggesting that they would vote from their 16th birthday but simply that, as attainers, that would be an appropriate time for them to apply to be put on as an attaining voter.

At least in theory, I think we are all in favour of all qualified UK citizens being on the electoral roll and we would all say that we would like them to exercise their vote. This legislation increases the number of people eligible to go on that register by virtue of what the Bill proposes to do in relation to overseas electors. We will debate that shortly.

Clearly, the Government do not have a problem with having a larger voting roll. They share the Committee’s view that it is desirable, in principle, that all eligible people should be on the roll, and yet, so far, they have been extremely resistant to doing that, as far as attainers in particular are concerned. In the light of the evidence that the Electoral Commission has produced, that it is a significant number and that there are solutions, and in a situation where the Minister has in front of him two amendments proposing practical ways to solve that problem, I hope that in winding up he will be able to say that he will take this back, give it further consideration and perhaps produce an appropriate government amendment on Report.

[Lord Eatwell (Lab)]

My Lords, the noble Lord, Lord True, has made two sets of powerful arguments about the right to vote. First, he made a series of powerful arguments in favour of photo identification as a right to vote and, just now, he talked about the rights and responsibilities of citizens with respect to prisoners’ right to vote. Would an acceptance of this amendment not represent some consistency, and a rejection of this amendment represent some very clear inconsistency in the following sense? What would the Minister do about a situation where someone turns up at a polling station with a British passport and a British driving licence on which their address is registered, and they are then refused the right to vote? They will have complied with everything the Minister argued for in the discussion of identification, but they will be denied the right to vote because of a variety of complexities that still bedevil our registration system.

Surely it is appropriate that there are democracies—Norway, Australia—in which a presence on the register and the right to vote are automatic and ensured by modern data systems that can easily do the job. Surely, if he has a degree of consistency in his arguments about this Bill, the Minister will support these amendments.

[Lord Scriven (LD)]

My Lords, throughout Committee I have kept coming back to the impact assessment. Right there on the front page of the impact assessment it says:

“What are the policy objectives of the action or intervention and the intended effects?”


It is:

“To ensure that those who are entitled to vote should always”—


always—

“be able to exercise that right freely, effectively and in an informed way”.

That is the intended consequence, the stated intention of the Bill before us: that those who are entitled to vote

“should always be able to exercise that right”.

People cannot exercise that right if they are not on the electoral roll. It is an absolute condition of always being able to exercise that right.

The amendments before us are absolutely bang on the money, in terms of what the intended policy of the Bill is in the impact assessment. As citizens of this country, we are all given automatic rights and responsibilities. Through that, we get certain certificates or automated numbers. We get our national insurance number automatically. We do not have to apply; it is automatically granted to us at 16. As the noble Baroness, Lady Chakrabarti, said, we are registered for taxation automatically. We get our NHS number automatically. If noble Lords asked the vast majority of the public if they would object to being automatically registered, I have seen no evidence that says people would reject that proposition. Whether people then go to vote is down to the politicians to encourage them, enthuse them and get them to the polling station.

The very fact that the Government’s policy is to “always” ensure that people are able to exercise their vote in an automatic, easy and effective way means that these amendments should be accepted by the Government. If they are not, I would ask the Minister to explain why not having automatic registration, and keeping what is on the face of the Bill, would actually meet their objective to

“ensure that all those who are entitled to vote should always be able”

to do so.

--- Later in debate ---

[Baroness Scott of Bybrook (Con)]

No, I think we will deal with that later—but if we do not deal with that today, I shall make sure that the noble Lord gets a note on it, because I do not have a list of them to hand.

We have no plans to introduce automatic registration, and I request that the amendment is withdrawn.

[Lord Eatwell (Lab)]

Could the Minister address the inconsistency to which I referred—that someone with a British passport and a British driving licence, obeying the requirements in this Bill for identification for voting, could be denied the right to vote because they are not registered?

[Baroness Scott of Bybrook (Con)]

No, because they are not registered. You cannot just have anybody walking into a polling station with some pieces of paper or a passport and saying that they have the right to vote. They have to register to vote.

[Lord Eatwell (Lab)]

So the Minister is saying that a British passport and a driving licence are random pieces of paper. Is that how she is referring to them?

Elections Bill

Lord Eatwell Excerpts

Lords Hansard - Part 2 & Committee stage
Thursday 17th March 2022 Lords Chamber

[Lord Scriven (LD)]

My Lords, I have listened to this debate with a sense of bewilderment and admiration, but I am still not clear what the imposition of compulsory voter ID is going to solve. As the noble Lords, Lord Grocott and Lord Woolley, made very clear, there has been one conviction.

While everyone has been getting passionate, I have been a bit of geek over the past couple of weeks and have read the impact assessment, so I want to go through why these amendments in the names of the noble Baronesses, Lady Hayman and Lady Meacher, and the noble Lord, Lord Woolley, are so important. If the Government decide to go down this path, even though they have not been able to determine that there is a need for it, the costings they are using must be absolutely watertight, otherwise people will find it hard, or sometimes impossible, to get this compulsory photographic ID.

The noble Baroness, Lady Noakes, said that we should not worry because it is £3 per person. She has clearly not read the impact assessment. That is not for every voter. Under the Government’s own impact assessment, it is for those who do not have the ID that is required who will need voter ID. According to the Government’s impact assessment that is 0.1% to 0.4% of voters. That works about at £150 per card, at the Government’s best estimate, to determine a problem that no one can quite work out what it is about.

The Government also say in the impact assessment that the degree of certainty on the final scope of all the costs—the £180, the £230 and the £1 million that have been determined—is so unknown that the costs are preliminary and further work will be needed. Too true that further work will be needed. If you get down to the details, the costs just do not stack up. On basic things, the Government are saying that the poll card that we all get will have to go from A5 to A4, yet they say that the postal cost is 80p. A4 is a large letter—so the costs have not been worked out. If these costs were presented by any person doing a basic business studies degree, perhaps at Cambridge with the noble Lord, Lord Woolley, they would get F or F-minus.

The Government have assumed this from one study in Woking. I have no problem with Woking—I am sure it is a very nice place—but it is not demographically made up of the rest of the country, and you cannot work out that what happened in Woking is going to happen in every community across this country. The Government have taken the average cost in Woking, taken it across every constituency in the country and averaged it out.

So let us look at some of the costs and resources. The Government have worked out that every constituency will need 1.64 machines to print these things. What nonsense is 0.64 of a machine? They have worked out the cost of 1.64 machines for each local authority. A number of people have said, quite rightly, that extra polling station clerks will be needed. The Government’s impact assessment says that: one for every two polling stations. I worry about the poor polling clerks in my city of Sheffield and in my ward who are going to have run three miles between polling stations. This is absolute nonsense.

PACAC has been really clear on this. A survey has been done by the Government. It is referred to in the impact assessment, but it does not give the results. The Government say that only 4% of people will need these, but, when asked, 31% of the public said that they would need them, want them or ask for them. PACAC is right to say that, for every 1% extra of the population who asks for one, it is a £10.2 million cost. As PACAC says, 31% takes it up from £150 million to £450 million.

I know that the Minister will say that it will all be guaranteed under the new burdens process. Under that process, there is meant to be a new burdens assessment with the impact assessment. I ask the Minister where that is, because I have not been able to find it. It does not seem to appear. I speak as a former leader of a council and declare my interests as a vice-president of the Local Government Association. If this kind of nonsense accounting is going to be the basis of the new burdens, I can tell you that you will have polling clerks running between polling stations and 0.64 of a machine. It does not stack up.

That is why these amendments are vital. We need proper accounting, proper costs and proper assessments, and then, and only then, will these cards be introduced—if they are to be introduced—speedily and in a timely way, with councils having the resources to deliver the very things which the Government say are required.

[Lord Eatwell (Lab)]

My Lords, there is a great temptation to stray into clause stand part issues, which we shall debate later, and it is unavoidable in the context of these amendments and of our first discussion of this issue. I was struck, as I think all of us were, by the speeches by the noble Lord, Lord Woolley, and the noble Baroness, Lady Verma. Both spoke in favour of greater participation and greater involvement. I say “hear, hear” to that.

What we are discussing is an additional requirement to vote. At Second Reading, a number of noble Lords—for example, the noble Lord, Lord Hannan—reflected on voting in jurisdictions which have identity cards and said that this was no big deal: you go along with your identity card, you vote, and it is all quite normal. Of course that is so, because that is not an additional requirement to vote; it exists in the society in general for other purposes. What we have here is an additional requirement—an additional impediment to the participation which the noble Lord, Lord Woolley, and the noble Baroness, Lady Verma, seek.

That additional impediment will inevitably reduce participation—by how much we can debate. There have been a number of studies, including the evidence which the noble Lord, Lord Woolley, cited and the study by the Rowntree trust, as to the degree to which participation may be reduced. We can disagree as to which study is the more accurate and the more satisfactory, but it is impossible to argue that this will not reduce participation. That is the true cost of these measures—not the financial cost so much, but the true cost.

In what I call his precautionary mode, the noble Lord, Lord True, at Second Reading—

[Lord Hayward (Con)]

The noble Lord spoke about reducing turnout. Can he identify the evidence that shows that the introduction of ID in Northern Ireland has now reduced turnout?

[Lord Eatwell (Lab)]

I refer the noble Lord to the evidence mentioned by the noble Lord, Lord Woolley, and the study by the Rowntree Foundation. I am quite willing to believe—

[Lord Woolley of Woodford (CB)]

To answer the noble Lord’s question, I was citing the review of voter ID from the local elections in 2019. It is difficult to judge what happened in Northern Ireland, but it is easier to judge what happened with these pilot projects in England. That is what the Government set out to look at—to see what happened when people showed up. The Government now want photo ID but, in the pilot projects, it was both photo and non-photographic ID, and that caused significant problems. Imagine if it was just one type—photographic ID, for example—that could double the problem. Bear in mind that people have to be more driven to vote in local elections, where the rates are a lot lower than in general elections—they have to be motivated to go to the polling booth. Then they are told they do not have the right type of ID, whether it is photographic or non-photographic, and so they have to go home and get the right one, and they do not return—they could not be bothered. The danger is, as has been argued, that potentially hundreds of thousands of people will have that encounter and not return.

[Lord Eatwell (Lab)]

As I was saying to the noble Lord, an accurate study to achieve a careful assessment of the impact of any measure would have to take into account all the circumstances of the time. Over time, there will be a change in circumstances, and therefore the gross figures may appear as if there has been no impediment. However, if you disaggregate the components of the motivations to vote, it is difficult to believe that the introduction of a new requirement or impediment has a zero effect.

[Baroness Noakes (Con)]

Does the noble Lord believe that this will be a permanent or a temporary effect? As my noble friend Lord Hayward said, voter ID has existed in Northern Ireland for a very long time, introduced by the Labour Government. There has been no evidence of a reduction in voter turnout and, importantly, there is a higher degree of satisfaction with the integrity of elections in Northern Ireland than in England and Wales. I think we ought to ground ourselves in facts—not pilots or the studies by the Rowntree Foundation, but facts.

[Lord Eatwell (Lab)]

I think the noble Baroness would agree that the electoral issues in Northern Ireland are rather different from those in the rest of the United Kingdom.

As I have just said, studying a phenomenon over time requires a careful disaggregation of the effects. Looking at the gross numbers does not tell you anything. Specific studies which carefully disaggregate the impact of particular measures are necessary. I find it difficult to see how one can sustain the argument that introducing a particular impediment to vote will have a zero effect.

As I was about to say, at Second Reading the noble Lord, Lord True, in what I call precautionary mode, referred to locking your door to prevent burglaries even though your house has not been burgled. However, it is striking that if you go to the Isle of Sark, where there are no burglaries, no one locks the door. It is the presence of burglars that encourages people to lock their door. If the incidence of fraud is one, as the noble Lord, Lord Woolley, told us, and the cost now is £180 million, or whatever the number is, to prevent one occurrence, is that value for money?

--- Later in debate ---

[Baroness Scott of Bybrook (Con)]

My Lords, that is if anybody goes back because they have not been intimidated into not going in the first place, I have to say. I respectfully say that this is something that we simply cannot ignore—

[Lord Eatwell (Lab)]

Will the noble Baroness explain the relationship between intimidation and the intimidating need to get photo ID?

Elections Bill

Lord Eatwell Excerpts

Lords Hansard - Part 2 & Committee stage
Thursday 10th March 2022 Lords Chamber

[Baroness Noakes (Con)]

At the end of the day, there is a requirement for Parliament to agree. That is an important part of the framework. It is not something the Executive can do alone. It would need to become a parliamentary approved statement and, as we discussed earlier, it must be approved by both Houses of Parliament.

My second point is that we should be absolutely clear that strategy and policy statements are not directions. No power of direction exists for the Electoral Commission, and Clause 14 does not create one. Noble Lords would be rightly concerned if Clause 14 created a power of direction in relation to the Electoral Commission. I think that the Electoral Commission was just plain wrong, in its written briefing, to claim that it would be subject to government direction as a result of Clause 14.

I regret to say that the noble Lord, Lord Butler of Brockwell, for whom I have the highest regard, was also wrong, when he spoke on the first group of amendments, to assert that this statement amounts to a direction. It does not. Directions are very clear in what they can force public bodies to do. This does not force anything. The only requirement, as we have heard, is in new Section 4B for the Government to “have regard to” the statement. We discussed that in the first group of amendments, and the noble and learned Lord, Lord Judge, has made some comments on the ineffectiveness of that, because it does not refer to other things which it could “have regard to”. It does not trump the commission’s statutory objectives; it does not compel the commission to do anything at all, or to take account of anything else.

We must keep all this in proportion. It is an additional thing for the Electoral Commission to take into account; it does not replace all the existing law relating to the commission. This is the formulation used for all existing regulators, and I believe it is the right approach to protect regulatory independence. As I said, no concerns have been expressed to date about the independence of any of the regulators subject to statements.

The important thing is that the commission has to report on what it has done in consequence of the statement. In practice, as we will see from the way in which the statements tend to align with what the independent regulators are doing, statements generally reinforce what those bodies are doing, and relatively new information beyond what would be included in the annual report comes as a result of those statements.

However, it is important that the independent regulator explain any divergence from the Government’s priorities as approved by Parliament. For example, if the Government said that their priority was to improve democratic participation, not just generally but for particular groups, we would want to know what the commission had done about that and whether it had had any impact. That really does not threaten independence.

I believe that transparency and accountability are what the strategic and policy statements are really all about, and why they are useful. One element is for the Government to be transparent about their policies and priorities, because they have to set them down, get them consulted on and then have them approved by both Houses of Parliament. The regulators then have to be transparent in reporting on what they have done in respect of those priorities—or whether they have done nothing at all. That allows them to be held to account by Parliament—in the case of the Electoral Commission, through the Speaker’s Committee. I hope noble Lords will see that this legislation is not the monster they have created in their own minds. In fact, it can be seen as a very positive development for improving transparency and accountability. I hope we will allow these clauses to stand part of the Bill.

[Lord Eatwell (Lab)]

My Lords, I regret that, like the noble Baroness, Lady Noakes, I was unable to attend the Second Reading debate. At the time I was on an aeroplane returning from work in the United States. However, I have read the full proceedings in Hansard with great care and I feel appropriately informed.

Moreover, some time spent in the United States has also given an added perspective on some of the measures in the Bill, for there is about it a definite odour of the Donald J Trump playbook. There is the whiff of voter suppression in the extra requirements being added for access to the franchise. There is a distinct stench of the politically partisan in the measures that undermine the independence of the Electoral Commission. But perhaps the strongest stink arises from changes in the franchise being imposed by the current majority party, without pre-legislative scrutiny or a Speaker’s Conference. This strikes at the foundations of our constitution, written and unwritten.

I predict that in due course, much as the late Enoch Powell predicted, Mr Johnson will be defeated in an election—and then there will be a, perhaps minor but none the less significant, online campaign claiming that the election was stolen or rigged. While it would be unfair to claim that the noble Lord, Lord True, had planted the seeds of such a threat to our democracy, he will have added a little natural fertiliser. In his speech introducing the Bill at Second Reading, he made much of the precautionary principle, and of taking steps to protect the integrity of elections from potential, if as yet hypothetical, threats. He did not, however, extend his precautionary principle to the measures in Clauses 14 and 15 that, as the Public Administration and Constitutional Affairs Committee stated, risk undermining public confidence in electoral outcomes by diminishing the independence of the Electoral Commission, both in perception and in reality.

As the late Lord Hailsham famously observed, this country is governed by an elected dictatorship. A Government with a substantial majority in the other place can do virtually what they please. That is why this House, with its, let us say, peculiar composition, has a particular responsibility to protect the constitution, written and unwritten, against partisan proposals by the governing party. Here, the discussion by the noble Baroness, Lady Noakes, of statements for regulators gives us a valuable insight, because, in this case, the statement is made by the regulated entity. It is as if one of the broadcasters could have a statement telling Ofcom to what it should have regard. The Secretary of State is a political figure. In the electoral arena, he is a regulated entity. He should not be in a position to provide advice of any sort to the regulator.

As the noble and learned Lord, Lord Judge, said at Second Reading,

“there is a constitutional necessity, in a system of democracy based on universal suffrage, that any electoral commission should be wholly and totally independent”.—[Official Report, 23/2/22; col. 239.]

By rejecting these clauses and affirming the independence of the Electoral Commission, this House will make a vital commitment to free and fair elections.

[Lord Rennard (LD)]

My Lords, in considering the Government’s plans to take more direct control of the Electoral Commission, we should go back to considering the consensus that existed when it was established. In 1998, the Committee on Standards in Public Life, then chaired by the late Lord Neill of Bladen, proposed the creation of an

“independent … Election Commission with widespread executive and investigative powers”.

Introducing the resulting legislation, the then Home Secretary, Jack Straw, explained how the commission would

“undertake its key role at the heart of our electoral arrangements”.

He emphasised that

“the commission must be as independent of the Government of the day as our constitutional arrangements allow, and it must be answerable directly to Parliament and not to Ministers”.

On behalf of the Conservative Opposition in the other place, Mr Robert Walter, then said:

“The Opposition have always made it clear that we support the recommendations of the Neill committee and that we shall support the legislation that implements the report”.—[Official Report, Commons, 10/1/2000; cols. 42-109.]


In this House, the noble Lord, Lord Bassam, introduced the legislation. He said that

“the commission will need to be seen to be scrupulously independent both of the government of the day and of the political parties”.

The consensus about the essential independence of the Electoral Commission was backed on that occasion by the late Lord Mackay of Ardbrecknish, a greatly respected Member on the Conservative Benches at the time. He said that

“there should be an electoral commission”,

but:

“There must be no possibility of the commissioners being \ As currently drafted the provisions in Part 3 of the Bill are not consistent with the Electoral Commission; cols. 1088-95.]


This principle of the Electoral Commission’s independence from the Government of the day survived five general elections. No previous Government before this one sought to change that principle. So I ask why, if we could not have “Tony’s cronies” overseeing the work of the Electoral Commission, we should then have Michael Gove overseeing it? To have any government Minister of any political party setting the overall strategy and policy for the Electoral Commission effectively ends its independence.

Since the last general election, the Conservative Party has been subjecting the Electoral Commission to undue pressure. In August 2000, the then Conservative Party co-chair Amanda Milling wrote in the Daily Telegraph that, if the Electoral Commission failed to make changes,

“then the only option would be to abolish it.”

That sounds pretty much like a threat to me. An independent election watchdog should not operate under such threats—not in a democracy.

--- Later in debate ---

[Lord True (Con)]

Yes, my Lords, new Section 4A(3)(b) allows the statement to contain—I am repeating what the noble Lord has just read out for the Committee; I am trying to help the Committee by doing so—any information considered appropriate, such as information

“about the roles and responsibilities of other persons.”

This could include other bodies with which the EC has relations, for example. The commission cannot be held responsible for the functions of other bodies which might be mentioned. New Section 4B(2) is disallowed from the commission’s duty to

“have regard to the statement when carrying out their function.”

New Section 4B(3) says:

“Subsection (2) does not apply to information contained in the statement by virtue of section 4A(3)(b).”


It is therefore intended specifically, for the reasons that the noble Lord puts forward, for that provision in the Bill.

The Government are clear in their submission that a statement will not undermine the commission’s other statutory duties. It could be used to provide guidance in areas where the commission is exercising the significant amount of discretion it is afforded, and will continue to be afforded, in terms of activity, priorities and approach.

More generally, statutory consultation in applicable circumstances, and the required approval of the UK Parliament when a statement is created or revised, will ensure that the Government consider the UK Parliament’s views and will give Parliament, including your Lordships’ House, the final say over whether the statement takes effect. This measure will improve the commission’s accountability to this Parliament and ensure that Parliament remains firmly in control of approving any statement.

I turn to the amendment relating to Clause 15. The purpose of Clause 15 is to expand the remit of the Speaker’s Committee on the Electoral Commission, a statutory committee which is chaired impartially by the Speaker of the other place. Its existing remit is limited to overseeing the commission’s finances, its five-year plan and the appointment of Electoral Commissioners. In expanding the committee’s remit, so that it may examine the commission’s performance of its duties to have regard to the statement, the Government are seeking to extend Parliamentary accountability of the commission to the Speaker’s Committee. This will enable the committee to perform a scrutiny function similar to that of Parliamentary Select Committees, allowing it to retrospectively scrutinise the commission’s activities in light of its duty to have regard to the statement. This power will sit alongside the committee’s existing statutory duties, which we are not amending in any way.

For clarity, Clause 15 will not enable the committee, any more than the Government, to direct the commission’s decision-making. The commission will remain operationally independent and continue to be governed by the commissioners. For completeness, this clause also gives the Speaker’s Committee powers to request relevant information from the commission

“in such form as the Committee may reasonably require”,

while ensuring that the commission is not required to disclose information that

“might adversely affect any current investigation”

or that

“would contravene the data protection legislation.”

This is important in protecting the commission’s ability to investigate, and also the interests of those who may be under investigation. For the reasons that I have set out, we contend that this clause will actually improve the commission’s accountability to Parliament, while respecting the regulator’s operational independence.

Those are the reasons why the Government think that these clauses are proportionate and reasonable, and I urge that your Lordships do not seek to remove these clauses from the Bill.

[Lord Eatwell (Lab)]

My Lords, the Minister suggested that he did not use the precautionary principle in his speeches at Second Reading. At col. 314, he drew a direct analogy between the need for photographic evidence to vote and locking a door to prevent burglars. Is not that the precautionary principle?

[Lord True (Con)]

No, it was a humorous remark for the Committee. The precautionary principle is one that the European Union applies in considering legislative activity; it is not a principle that I espouse and not one that I endorsed in the speech.

Budget Statement

Lord Eatwell Excerpts

Wednesday 3rd November 2021 Grand Committee

[Lord Eatwell (Lab)]

My Lords, a Budget provides insight into the Government’s overall economic strategy and into how the Government think the economy works. Many commentators have suggested that this Budget represented a fundamental change in economic policy by the Conservative Party: the age of austerity was banished, replaced by the era of big-state, tax-and-spend Conservatism. The Chancellor himself has seemed to many to be confused, on the one hand declaring triumphantly that

“The Conservatives are the real party of public services”,


while at the same time as he raised the tax burden to a record level he argued both that “government should have limits” and

“My goal is to reduce taxes”.


Then there are the repeated references to the need to reduce the public debt, even as government borrowing rises to record peacetime levels.

It is not hard to identify the source of the Chancellor’s dilemma. It is the pandemic. On his own Budget he confessed:

“I do not like it, but I cannot apologise for it: it is the result of the unprecedented crisis we faced and the extraordinary action we took in response.”—[Official Report, Commons, 27/10/21; col. 286.]


The Chancellor was forced into measures that he did not want to take because the pandemic laid bare the economic and social consequences of the Conservative austerity years. The decade-long destruction of the nation’s social capital in care, education, local authority services and the National Health Service has been cruelly exposed. Something had to be done.

Yet Mr Sunak’s big spending will not restore the real per capita spending on social care to the level of 2010. His big spending on “family hubs” will not make good the Conservative destruction of Sure Start. His big spending will barely restore resources per student in state schools, as we have just heard, to the level of 2010. His big spending on the NHS will not approach anywhere near the rate of growth of spending on the health service under Tony Blair and Gordon Brown.

To add to the destruction of social capital, there is, as the OBR details, the loss of output as a consequence of the Chancellor’s beloved Brexit—4% scarring of GDP year after year. That means an annual loss of around £30 billion in tax receipts year after year.

Forced to do what he adamantly insists he did not want to do, it is no good looking there for the clues to his longer-term economic thinking. Unfortunately, the Chancellor did not make his economic case any clearer by his terminology, with his characterisation of government borrowing as “immoral” and his pursuit of an economy fit for a “new age of optimism”. This is not the language of economics and economic policy. It is the language of the hedge fund lunchroom after a good lunch.

None the less, I believe that there is a clear economic perspective to be detected in the Budget speech and the Charter for Budget Responsibility. The charter includes falling public sector net debt, a target to balance the current budget, a cap on public sector net investment and a cap on welfare spending. The persistent reference to net debt is a distinguishing feature of the speech. The Chancellor quoted approvingly the Prime Minister’s argument that

“higher borrowing today is just higher interest rates and even higher taxes tomorrow”—

a statement that even a passing acquaintance with our economic history would demonstrate to be palpably false. For the Chancellor, government borrowing is not part of the overall design of macroeconomic management; it is a burden, a limit on the passage to the smaller state that is his ultimate goal.

Yet the experience of the pandemic suggests something quite different: borrowing has not been a burden. Government spending, necessarily increased to deal with the economic shock of the pandemic, was paid for by higher borrowing, ultimately financed by the Bank of England. The Bank of England’s share of government debt has risen sharply, from 23% at the end of 2019 to 34% today. When he sums up, will the Minister explain in what way this increased holding of gilts by the Bank is a burden? Will he explain how it will lead to

“higher interest rates and even higher taxes”?

The pandemic is but one example. Another is the approach to net zero. The Treasury’s new document Net Zero Review, published in October, argues that, if the Government borrowed to fund some of the transition to net zero, the burden of expenditure would fall on future generations. What would be the greater burden on future generations—that the Government borrowed to fund net zero or that the Government did nothing and net zero was not achieved? I believe that the answer is obvious.

The problem is not government borrowing, as Mr Sunak thinks. It is the use to which money is put in the context of overarching economic goals. The composition of the funding of government expenditure, whether by taxation or borrowing, should be part of overall economic management of current levels of demand, as in the pandemic; the attainment of medium-term growth objectives, as in the transition to net zero; the investment in social capital, as in health and education; and policy on the distribution of income. Mr Sunak has a plan: it is to cut taxes and cut borrowing. The result, as the OBR makes clear, is that, once output has returned to pre-pandemic levels, the rate of growth falls to around 1.5% a year, which is totally inadequate to meet the needs of demography and climate change.

In the Financial Times, Martin Wolf argued that

“low growth … makes all policy options painful: with slow growth in revenues and strong pressure for higher spending on health, social care and pensions, either taxes must rise as a share of national income or the rest of public spending is mercilessly squeezed.”

The Chancellor, Wolf goes on, failed

“to show how the growth strategy, taxation and the ambitious climate goals fit together.”

The Chancellor provided a forceful rejection of Wolf s argument, asking,

“do we want to live in a country where the response to every question is ‘What are the Government going to do about it?’, where every time prices rise, every time a company gets in trouble, every time some new challenge emerges, the answer is always that the taxpayer must pay? Or do we choose to recognise that Government has limits? Government should have limits.”—[Official Report, Commons, 27/10/21; col. 286.]

That is a moral clarion call for the new austerity.

The Chancellor concluded by laying out his economic vision with this statement:

“Borrowing down, debt down: proving once again it is the Conservatives, and only the Conservatives, who can be trusted with taxpayers’ money.”—[Official Report, Commons, 27/10/21; col. 276.]


The problem is that this Government cannot be trusted with the economy.

Critical Benchmarks (References and Administrators’ Liability) Bill [HL]

Lord Eatwell Excerpts

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, first, I declare an interest as a recent chairman of the Jersey Financial Services Commission and therefore a financial services regulator.

I begin by congratulating the noble Lord, Lord Altrincham, on his maiden speech and welcome him to the small club he sees around the Chamber of people who have an almost obsessive interest in the details of these financial matters. I hope he will continue to contribute to our proceedings on these matters. It is nice to grow the club a little.

I say to the Minister that I think that the very last sentence in the Bill has it wrong. It should say “This Act may be cited as the Critical Benchmarks (Inspired by Baroness Noakes) Act 2021.” I congratulate the noble Baroness, Lady Noakes, who brought forward these issues so strongly in the discussions in Committee on what is now the Financial Services Act 2021, on seeing that the important points that she made at that time have been noted and have been taken up to a considerable extent.

This is a Bill with but two substantial clauses, both of which are eminently sensible in the context of the complexities associated with Libor transition. But one of them, Clause 2, may well cause collateral damage. I will focus my remarks on Clause 2, but will first comment briefly on Clause 1. This is an entirely sensible clarification of the interpretation of references to a benchmark in a contract where the FCA seeks to replace Libor. The clause provides legal certainty in a variety of circumstances and is thus to be welcomed. Let us now turn to Clause 2.

The Libor story has, from the outset, been a story of the professional creation of risk. First, there was the scandalous gaming of Libor, which created market risks, which have been widely debated; now, there is the replacement of Libor, which itself creates risks because new benchmarks are untried, their relationship to events and financial markets is as yet untested, and the insertion of new benchmarks into existing contracts will be problematic and will typically result in revaluation of those contracts, resulting in gains for some and losses for others. Then there is the issue of timing, raising by the noble Lord, Lord Sharkey. Further, in those cases in which it is impossible to replace Libor, the imposition of a synthetic Libor will potentially result in asset revaluation, again precipitating gains and losses. This replacement issue was referred to by the noble Baroness, Lady Kramer, who asked about the mechanism for how synthetic Libor is to be created and questioned the cliff edge. These are all risks which have been created by the replacement of Libor.

It is not just a question of the creation of risk; it is also a story of the transfer of risk from professionals who create it to others. And not just to fellow professionals who may lose out in traded positions but to firms of all sizes—small, medium and large—to municipalities and to ordinary people, typically via their pension funds or mortgage contracts. This transfer of risk is a serious market inefficiency; the risk is imposed on someone who had nothing to do with its creation. Losses are suffered because of the actions of others.

That is why, as a financial services regulator for many years, I am allergic to the awarding of legal immunity to those who create the risk. The existence of legal immunity not only allows the risk creator to escape scot-free but creates a moral hazard, because the creator of risk suffers none of the adverse consequences that stem from his or her actions. Because of that, there is an obvious incentive to create even greater risks. Equally abhorrent, the legal immunity provided leaves no possibility of redress for those who have suffered losses because of where the risk has ended up. Legal immunity is, therefore, in the words of 1066 and All That, “a Bad Thing”, to be introduced only in extremis. Indeed, this case is in extremis, but it has other aspects that I wish to refer to.

Clause 2 of the Bill creates a legal immunity. It would grant the administrator of a critical benchmark immunity in circumstances where the administrator acts in accordance with requirements imposed by the FCA. The situations in which this is anticipated to happen are quite abnormal, because they arise from the peculiar circumstances created by the demise of Libor and the complexities involved.

As we have heard, legal immunity is provided in circumstances in which, in a very limited number of cases—the so-called tough legacy contracts—it is not practicable to replace Libor as the contract benchmark and the FCA has decided to require the administrator of the benchmark to use or change the benchmark in a specific way, particularly using synthetic Libor. In other words, immunity is provided to eliminate the possibility that the administrator of the benchmark might be subject to legal action as a result of complying with statutory requirements imposed upon it by the FCA.

By the way, in parenthesis I should add that I think it entirely correct that the Bill does not extend the safe harbour to acts taken by an administrator on his or her own discretion.

So far so good: we would not expect someone to suffer claims for damages for doing what their regulator has instructed them to do. But other people are suffering losses as a result—perhaps small firms, perhaps pension funds, perhaps individual non-professional investors. What about them? Who should be liable? The noble Lord, Lord Agnew, referred to these people collectively as bringing forward “unmerited and vexatious claims”. How does he know they are unmerited and vexatious at this stage?

So, who is going to be liable? Since action has been dictated by the FCA, should the FCA be liable? Of course not, because as a regulator it already has legal immunity with respect to regulatory action, and that makes sense. The regulator is required to meet its statutory responsibilities, and it would be surely unreasonable for it to be subject to legal claims for doing what, by statute, it is required to do, so that would seem to be the end of the matter—hard luck on those who suffer losses. But I suggest that there are aspects of this case that make it rather different.

The transition from Libor, and the introduction of synthetic Libor, arise from the behaviour of those miscreants who, in 2012, were discovered to have gamed Libor. Those who may be suffering losses are doing so because of the ramifications of those illegal acts. Unfortunately, there is no prospect of redress from the miscreants, but the core issue remains: surely, it is unreasonable and unfair, in solving our problems, to shift risk on to retail customers. Why should they suffer loss as a result of the need to fix the system to prevent the repetition of illegal acts? I put it to the Minister that this is the sort of legislation that gives the financial services industry a bad name: it is always the retail customers who take the losses, not the professionals. How does he propose that those who suffer losses should be compensated—or is he happy to leave them to their fate?

I have worked as a financial services regulator for nearly 30 years. I thought myself unshockable, but I was shocked, as was the noble Baroness, Lady Kramer, by the revelations around the gaming of Libor. As the noble Lord, Lord Altrincham, said, Libor was the bedrock of the UK financial system. The noble Lord, Lord Moylan, referred to Libor as the meat and drink of financial services. I think all speakers recognised that serious injury was done to the reputation of UK financial services by those actions. This Bill is part of the effort to repair that injury. However, this cannot be done, it seems to me, when the Bill imposes unrecoverable losses on retail investors. I really feel that it is incumbent on the Minister to tell the House this evening how the Government intend, while offering legal immunity to the administrator, to offset this collateral damage.

Net-zero Emissions Target

Lord Eatwell Excerpts

Monday 11th October 2021 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, I cannot speak to the detail of the Budget in a few weeks’ time, but we have a strong message, which we have been consistent with over the last few years. We have made clear, for example, the recently announced emissions trading scheme, which provides a clear road map for heavy users of carbon. We are about to introduce the plastic packaging tax, which again is clear, for industry to get behind. We will continue to send those messages, but I think they are pretty clear. Indeed, we are seeing dramatic change by business. For example, coming up to COP 26, three huge companies have made very strong commitments: GSK, Hitachi and Microsoft have all committed to get to net zero in the next few years.

[Lord Eatwell (Lab)]

My Lords, in the development of environmental fiscal policy, do the Government accept the fundamental principle that the polluter pays?

[Lord Agnew of Oulton (Con)]

My Lords, ultimately, that has to be the direction of travel for us, but we cannot get there overnight. To implement that sort of stringent regime now would dramatically increase costs, which would then come back to consumers in other ways.

Health and Social Care Levy Bill

Lord Eatwell Excerpts

2nd reading & Order of Commitment discharged & 3rd reading
Monday 11th October 2021 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, I am grateful to the Minister for his brief introduction to the Bill.

The key promise of what he has described as the permanent new role for the Government, as expressed in the Bill and accompanying documentation, can be described as the introduction of the health and social care levy, which will mean that, between 2019 and 2025, the NHS England budget can increase by 3.9% per year in real terms. That is slightly above the long-run average of 3.6% in UK health spending. However, it is well above the 1.2% per year seen in the Conservative austerity years from 2010 to 2019, in which the share of GDP spent on the NHS fell year after year, leaving the NHS severely weakened when the pandemic struck. However, even this new higher rate of investment in the NHS will be well below the average of 6% per year seen under the Governments of Tony Blair and Gordon Brown.

It is useful to start from the fact that the Bill consists of three semi-independent strands woven together. First, there is the introduction of a new hypothecated tax: the health and social care levy. Secondly, there is the predominant alignment of the base on which the new tax is charged with the present tax base of national insurance contributions. I say “predominant” because the levy is also to be funded by the extension of NICs to those over 65 and by the dividend tax promised in the Budget later this month. Therefore the tax base is potentially malleable: it need not be NICs and it is not entirely NICs even at the beginning. Thirdly, there is the transitional arrangement of raising overall taxation in 2022-23 via the one-year increase in NICs—the transitional year.

To assess the true impact of the Bill it will be helpful to deal with these three strands of the Bill in order, beginning with the first strand: the new hypothecated tax. It is well known that hypothecation is a dirty word in the Treasury. National insurance contributions, for example, are not allocated uniquely to national insurance, and the road tax is not used for the upkeep of roads. Yet here we have a substantial increase in taxation that is, we are assured, pre-allocated to health and social care. Given the historic experience with other fictional hypothecation, it is reasonable to ask: for how long will this last? It is noticeable that Clause 4 allows the Treasury to use the levy to make different provision for different purposes, not necessarily the purpose described by the noble Lord. The only conclusion can be that this is a grudging and perhaps temporary hypothecation—a temporary uplift in NHS spending sufficient to buy political time as NHS waiting lists reach all-time highs. Can the Minister make it crystal clear: is this hypothecation here to stay or is it a temporary political expedient?

Once introduced, taxes tend to rise, so does the Minister expect an expanded role for this new hypothecated funding of health and social care? Or does the Minister agree with the assessment of the Institute for Fiscal Studies that

“In the short run, the additional revenues may be spent on boosting spending on health and social care. In the longer-run, the hypothecation is an illusion”?


If for now we accept the Government’s commitment to hypothecation, what is the rationale for the second strand: basing the levy predominantly on the NICs base rather than any other tax base? It is, after all, obvious that this will solely impact individuals whose income is mainly made up of earnings or profits, as opposed to other forms of income such as property income, pension income or savings.

When the Minister replies, will he explain why the levy does not cover income from buy-to-let properties? Why does the levy target the 17% of pensioners who work, while allowing wealthy pensioners receiving income from other sources to escape scot free? And why does the levy fall on low-paid workers?

Given the evident unfairness, I find the Government’s attempts to justify the distributional impact of the levy in the document entitled Illustrative Analysis of the Impact of “Building Back Better: Our Plan for Health and Social Care” a disturbing insight into Tory instincts where the NHS is concerned.

It is customary for the Treasury to accompany fiscal changes with an analysis of the distributional consequences of those changes: the impact on the poorest 10%, the next poorest 10%, and each decile up to the wealthiest 10%. Here, for the first time, the Treasury presents the impact of the levy on individual social groups together with what it believes will be the consequential spending on healthcare from which that social group would benefit. In other words, payment of the levy by a given group and the provision of healthcare to that group are linked. It is but a short step from this approach to the idea that payment for healthcare and receipt of healthcare should be linked—a negation of the fundamental character of our NHS, in which funding and the delivery of care have never, before this document, been linked. I hope that when the Minister sums up, he will disown the document.

I turn to the third strand: the impact of the increase in NICs and the dividend tax from their introduction in April next year. The policy paper published by HMRC on 9 September sketches—the appropriate word for something that is very limited—the various impacts that the Government have considered. For example, HMRC refers to the impact on households:

“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”


This is not the Opposition speaking, it is HMRC. On business, the Government tell us:

“This measure is expected to have a significant impact on over 1.6 million employers who will be required to introduce this change.”


On the economy as a whole, HMRC says:

“The measure is anticipated to have a significant macroeconomic impact, with consequences including but not limited to for earnings, inflation and company profits. Behavioural effects are likely to be large, and these will include decisions around whether to incorporate or not, and business decisions around wage bills and recruitment.”


That is all rather serious stuff. Will the Minister tell us what steps are being taken to offset the impact on those who HMRC says are just about managing financially and who will see their disposable income reduced? Is he content to serve in a Government who wilfully introduce extra taxation that they acknowledge will hit those who are just about managing while at the same time cutting universal credit? Is he proud to be doing this to those who are suffering in-work poverty?

What of the impact on those 1.6 million employers—many of whom, as HMRC says, may well be reassessing business decisions on wage bills and recruitment? Will the Minister tell us exactly what the Government anticipate will be the scale of the impact on recruitment? Does he agree with the assessment of the Federation of Small Businesses that the levy will result in 50,000 fewer jobs being created? Does he agree with the Institute of Directors, a well-known left-wing organisation, which argues that:

“This is an extraordinary time to be adding additional burden to business and the cost of employing staff”?


Where are we to find the Government’s assessment of the impact of these measures on earnings, inflation and company profits? We have been offered none. However, the Institute for Fiscal Studies has again commented that:

“Following a rise in income tax of £8 billion and in corporation tax of £17 billion in the March Budget… the Chancellor has announced a further tax rise of £14 billion… which if delivered will raise the tax burden in the UK to the highest-ever sustained level.”


When the economy is struggling to recover from the pandemic, when the furlough scheme has ended, when business support has ended, leaving small and medium-sized companies with debt-laden balance sheets, when output is barely back to pre-pandemic levels and is hampered by serious supply chain problems and fuel shortages, the Government raise the tax burden to the highest-ever sustained level. Does the Minister consider that in this critical recovery period, the introduction of a levy that will have “significant macroeconomic impact” is quite such a good idea?

Finally, we come to the most important question of all: will it work? A fundamental issue must be the division of revenues between the NHS and the social care providers. As has been made clear, spending will be heavily weighted towards the NHS in the first three years, and then perhaps there will be some crumbs for social care. How can the Minister really pretend that this is the plan that the Prime Minister promised two years ago? To quote the Institute for Fiscal Studies once again:

“While the precise path for spending—and hence for the availability and quality of care—is unclear, it is clear that the extra funding will not be sufficient to reverse the cuts in the numbers receiving care seen during the 2010s”—


the great austerity period.

“Thus, while more people will become entitled to financial support as a result of the reforms planned”,


as the Minister told us,

“many people with care needs not considered severe enough will continue to miss out.”

In fact, the focus of what has been announced is almost entirely on changing who pays for care rather than directly addressing the growing problem that too few people are getting the care they need in the first place.

In his introduction to Build Back Better: Our Plan for Health and Social Care, the Prime Minister writes:

“We will bring the health and the social care systems more closely together”.


Over the weekend, there have been suggestions in the press that the Government are planning to create a national care service, integrated in some way with the NHS. If this is so, will the Minister tell the House what will be the role of the levy? Will it be raised further for what will be an expensive operation? Will hypothecation be extended?

I am afraid that the Bill is a typical example of ill-thought-through legislation, rushed through Parliament to spare the Prime Minister political embarrassment. If this was a plan ready more than two years ago, why the need for fast-track legislation? The explanation given by the Government is, I am afraid, disingenuous:

“The legislation is required to be in place for the 2022-23 tax year, which starts on 6 April 2022. The increase in National Insurance rates for that year will require changes to be made to the systems of employers and HMRC … it is important for both those employers and HMRC to have as much time as possible to implement the changes.”


All this amounts to saying that, even though the Government have announced the policy, with great fanfare, uncertainty about whether it will be put into effect persists, halting action until the relevant legislation is passed. In other words, a Government with a majority of 80 in the House of Commons are uncertain whether they can pass a money Bill. Pull the other one.

The rush was clearly designed to limit the time for proper scrutiny of the Bill and its many implications—scrutiny that your Lordships’ House can provide this afternoon. With that proper scrutiny, it will be evident that the provisions in the Bill are ill-thought-through and unfair, and will have potentially serious macroeconomic consequences.

[The Deputy Speaker (Lord Haskel) (Lab)]

My Lords, the noble Baroness, Lady Brinton, is taking part remotely. I invite the noble Baroness to speak.

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[Lord Agnew of Oulton (Con)]

I respectfully disagree with the noble Baroness on that. Your Lordships are having a much more detailed debate on health reform very shortly, so I am sure that will be teased out in those discussions.

The noble Lord, Lord Lipsey, asked about the White Paper. As I said, we certainly hope to see that out in the next few weeks.

The noble Lord, Lord Desai, asked about the taxation of carried interest and private equity firms, but I suspect he was being slightly disingenuous as he knows we are not extending this to capital gains tax, only to dividends. No doubt there is a separate debate to be had on that, but at the moment it is a capital gain.

The essence of this debate is the fairness of the way the tax is being structured—

[Lord Eatwell (Lab)]

It is fortunate that the Minister just brought up once again the issue of fairness and the discussion of it in the House. At the beginning of his speech, he referred to the proportion of the total raised from—I think he said—the top 14% of payers. This is a completely bogus statistic and has nothing to do with fairness. Let me give him an example. Let us suppose that someone earns £1 million and there is a 10% levy. They pay £100,000 on the levy and have £900,000 left. Then let us suppose that someone earns £10,000 a year—they would still be caught by this levy, by the way—and, to keep the numbers easy, that they still pay 10%. Their income has gone down from £10,000 to £9,000 and, as Marcus Rashford has said, they are choosing whether to eat or to stay warm. To understand fairness is to understand the impact on individuals of the measures taken. Using these absolutely bogus numbers, which are not at all representative of fairness, simply distorts and degrades the debate.

[Lord Agnew of Oulton (Con)]

I take on board the noble Lord’s points, but the reality is that the highest-paid in this country are paying the largest contribution to this tax and indeed PAYE itself. I accept entirely what he says about the impact being disproportionately greater on poorer people, but that is why we have designed the structure to protect as many people as possible. As I mentioned in my opening comments, some 6 million people will not be subject to this at all, and we have kept 40% of smaller businesses out of it. Those on higher earnings will pay a lot more, and that is an important principle, but I absolutely accept the point he made.

I am grateful for the opportunity to explain the Bill and address the issues that have arisen today, and I now commend the Bill to the House.

Financial Services Bill

Lord Eatwell Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Baroness Kramer (LD)]

My Lords, we do not oppose this amendment, particularly as we have the safeguard of the GDPR in place. However, I want to make one comment. One of our major frustrations with the regulator is how slow it has been to pick up on issues—how much information seems to have come its way that there is wrongdoing, yet all its actions seem to be delayed. We went through example after example of that in Grand Committee, Blackmore and London Capital being just two of the latest examples, and I think I have even missed two more scandals that have occurred in the last couple of weeks. I hope there are some other ways in which we can put pressure on the regulator to act and to do so in a more timely manner, and that it will not see this extension as an opportunity to relax and allow more time to pass before it begins to take action when it is needed.

[Lord Eatwell (Lab)]

My Lords, this seems to be an entirely sensible modification of an overly restrictive time limit on prosecutions for market abuse, and the Minister has certainly made a strong case.

I have one question associated with the Government’s note that accompanied the amendment. The Government stated that they had not found any clear rationale for the five-year limit applying in EU law and could see no reason for maintaining it in UK law. They said they understood that it had also been raised as an issue by EU regulators and they were considering a change to their law. Given that the EU is also considering a change, why have the UK Government not co-ordinated the change in our law with theirs? Is it not the Government’s “go it alone” approach that has been so damaging in the quest for equivalence? Could the Minister outline how the Government’s current stance on this change fits with the Memoranda of Understanding on trade in financial services with the EU?

[Baroness Penn (Con)]

My Lords, I thank noble Lords for their remarks in support of the amendment. As I have said, I recognise that the amendment has been tabled at a late stage of the Bill and that it would have been preferable to have included it earlier. However, as it seems the House agrees it is important that the FCA is able to effectively pursue its investigations into potentially criminal conduct, it is right that we make this minor change to ensure that it can continue to effectively identify, investigate and prosecute complex cases of market abuse. I reassure the noble Baroness, Lady Kramer, that this will not be seen as an opportunity by the FCA to take its foot off the pedal in such cases, but where it is undertaking this work it is essential that it is able to continue if the case spans a period of longer than five years.

To the question asked by the noble Lord, Lord Eatwell, the Government are committed to co-operation with the EU but it is now responsible for its own law and is aware of this issue and we are responsible for ours. As I set out in my opening remarks, without action now in this Bill the time limit would come to bite in July this year, and there is therefore an urgency with which we need to act. While we will continue to co-operate with the EU, it is right that we take this opportunity to address what we view as an unnecessary restriction on the retention of data.

--- Later in debate ---

I very much look forward to the Minister’s comments. The letter from the Economic Secretary included a “must have regard to”—a useful phrase. Regard must be had to parliamentary responses to consultations. We can argue about whether the consultation process is sufficient or adequate, but that phrase is only in a letter; it is not in the Bill. I wonder why the Government are not willing to put some of the commitments that they are willing to describe either on the Floor of the House or in letters, into a form that could go on the face of a Bill, and so give this House confidence that the direction of travel is a direction that we can live with.

[Lord Eatwell (Lab)]

My Lords, I would like to begin by acknowledging the considerable efforts that have been made by the noble Earl, Lord Howe, to provide greater insight and information in the form of letters from the CEOs of the FCA and PRA, and to encourage the Economic Secretary to the Treasury to provide his letter today, all of which have enhanced and coloured this debate. These letters have been quoted by many speakers. I am most grateful to the noble Earl for his strenuous efforts and commitment to making this legislation useful.

In Committee, we had some valuable debates on parliamentary scrutiny and the activities of the financial services regulators that dealt with the important point that those activities are now entirely repatriated from the European Union. It is clear, as Sam Woods, the CEO of PRA, states in his letter to the noble Earl, Lord Howe, that

“it would seem natural to us that, if some rulemaking responsibilities previously conducted at EU level move to us, Parliament might choose to evolve the way it scrutinises that activity.”

Mr Woods is entirely correct, as the debate this evening has demonstrated.

The role the European Parliament has in the development of financial regulation reflects the EU’s preference for embedding high levels of technical detail in EU primary law. It has been made clear by the Treasury, notably in the consultation document on the regulatory framework review, that the approach to be developed in the UK is to be quite different. It is to be a principles-based approach, in which

“the setting of regulatory standards is delegated to expert, independent regulators that work within an overall policy framework set by Government and Parliament.”

However, it is also evident from that consultation document that in respect of parliamentary scrutiny, there has been an important—shall I say—oversight or error. As was made clear in that document, the FCA and the model of regulation introduced by that legislation continue to sit at the centre of the UK’s regulatory framework. However, it is FiSMA that sits at the centre. FiSMA is the model of regulation that was introduced, but it was produced in 2000, when the UK was a long-standing member of the European Union and UK politicians participated in the scrutiny of financial regulation at EU level. The noble Baroness, Lady Kramer, has emphasised this point.

The Treasury has failed to take into account the need for a different domestic approach to democratic scrutiny now we have left the European Union. Simply reproducing the structures that have worked for the past 20 years, as is done in chapter 3 of the consultation document, is just not good enough. This was the key issue debated on Second Reading and in Committee.

Powers returned from Brussels need to be redistributed between Parliament and the regulators. The nature of that redistribution is at the heart of our discussion. In the regulatory model adopted by the UK, an increase in the powers of the independent regulators is inevitable and necessary, as I agree they are best placed to take on the many technical functions previously handled at the EU level. But the inescapable conclusion is that this increase in regulators’ powers will need to be accompanied by new checks and balances. The role of Parliament in this new setting is what is at issue in these amendments.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, given the hour I shall also be very brief, but I have to say I rather like the amendments in this group. I like Amendment 24, as amended by Amendment 25—I do not care if it is a separate chapter. But it is quite dangerous to get tangled into issues around competitiveness without making sure there is a lens on consumer protection at the same time. Many small businesses fall into the consumer category in reality, certainly the micro end of small businesses.

What I like about this amendment is: what you measure, you manage. We are so constantly focused on change, new regulation and new rules, without ever going back and looking at the consequences of what we have done and trying to identify what worked, what did not and where the gaps are. It seems that this proposal goes absolutely in the right direction.

There is something interesting in Amendment 37 because one of the big questions that has never been answered is: how does our financial services industry impact on the real economy, in contrast to something much more circular within the financial services economy? I do not think that one is good and the other bad but they are very significant questions, particularly in a country where we have such a dominant investment banking culture, which does not necessarily provide a wide range of relevant services to a great deal of our economic base—particularly our small business base. There is a very interesting question wrapped up in all of that. The approach of saying “We need to look at this in a serious and consistent way, perhaps regularly” strikes me as important when feeding the strategy which then informs the way in which the regulator, the Treasury and the Government behave.

[Lord Eatwell (Lab)]

My Lords, Amendments 24 and 25 develop the notion of an information system—the information that will be provided by the FCA, PRA and the Government to feed into an assessment of the performance and impact of the financial services sector and the regulators. Amendment 37 goes much wider, as one might have gathered from its presentation, seeking to make, or ask for, a general economic assessment of the role of financial services generally within the UK, particularly the impact of the various regulators and the Treasury.

One of the themes particularly around the discussion of Amendment 37 was that this is not done. There are shelves of academic books that do this, and there are libraries of this material, but what has not happened is that it has not been brought together and assessed in a decision-making environment on a regular basis. The problem with Amendment 37 is that it asks the FCA and the PRA to—to use a phrase that has become popular today—mark their own homework. They are not really the right people to assess themselves; there are plenty of research institutes around this country that do a first-class job of assessing exactly these issues. However, we have not brought them together very well. What is so valuable about Amendments 24 and 25 is that they are targeted on that bringing together—bringing information into what I have called the “New Scrutiny”.

I would be interested to hear the Minister reflect, when he sums up, on the information role that is represented by the amendment of the noble Baroness, Lady Neville-Rolfe, and the role that that sort of information system will play in our regulatory future.

[Earl Howe (Con)]

My Lords, Amendments 24, 25 and 37 return to an issue that I know is of keen interest to many in this House. They seek to introduce requirements to publish reports on the impact of financial services regulation and to undertake assessments of the impact of the financial services sector on the UK more broadly.

The noble Baroness, Lady Bennett of Manor Castle, many not feel able to assent to what I am about to say, but, as we consider this topic, we should remind ourselves of the vital role that the financial services sector plays in our economy, employing more than 1 million people nationwide. It is also a critical source of tax revenue, which has proved especially important during these difficult times. We can argue about how we should calculate the precise amount of such revenue, but, by any measure, it is very substantial. We also should not forget the role that the sector plays in enhancing the nation’s standing abroad. The UK exported over £50 billion-worth of financial and insurance activities in 2019, a trade surplus of £41 billion.

Amendment 24 would require the Government to publish a report on the “impact of measures” taken by the FCA, PRA and the Government to regulate this most important financial services sector. In particular, it seeks understanding of the impact of measures on small businesses, innovation and competitiveness. Amendment 25 would add “consumer protection” to the list of things that the Government would be required to report on.

Lest there be any doubt, the Government are wholly committed to ensuring that the financial services sector supports competition, innovation and competitiveness. I hope that this is evidenced by the last set of remit letters issued to the FCA and the PRA by the Chancellor, which requested that the regulators have regard to these three priorities when advancing their objectives and discharging their duties.

In respect of reporting, the FCA and the PRA both have a statutory objective to promote effective competition. What does that involve? It involves promoting a financial services framework that supports new firms to enter the market and grow, promotes innovation and allows successful, innovative firms to grow and thrive. Those, surely, are the key aims for the sector when we talk about effective competition.

I remind my noble friend Lady Neville-Rolfe that both regulators are obliged to prepare annual reports that analyse the extent to which their objectives, including this competition objective, have been advanced that year. Those reports are in turn laid before Parliament for scrutiny. Moreover, I should say to her that, under the Financial Services and Markets Act, the FCA and the PRA are required to publish cost-benefit analyses when proposing new rules. The regulatory initiatives grid, a relatively recent innovation, sets out the regulatory pipeline that allows the financial services industry and other interested parties to understand and plan for the timings of initiatives that may have a significant operational impact. The grid is published at least twice a year, so Parliament has a forward look at upcoming proposals in a material and transparent way.

Turning to my noble friend Lady Neville-Rolfe’s point about small firms, in my letter to her of 2 March, I set out the Government’s actions to support smaller innovative firms to grow to their full potential, including through the FCA’s regulatory sandbox and our support for the fintech sector. The amendment would therefore duplicate reporting obligations and arrangements that already exist.

I should also note the new accountability frameworks that the Bill puts in place for prudential measures. These require the FCA and PRA to have regard to UK competitiveness, among other things, when making rules to implement Basel or the investment firms prudential regime. Furthermore, the regulators will then be required to report on how having regard to competitiveness has affected their proposed rules.

On consumer protection, which is the subject of the amendment, let me first reassure noble Lords that the protection of consumers is at the heart of our existing regulatory framework. The FCA has an operational objective to secure an appropriate degree of protection for consumers and is required under the Financial Services and Markets Act 2000 to consult a consumer panel on the impact of its work. The panel ensures that consumers play an integral role in the regulator’s rule-making and policy development.

The FCA has repeatedly demonstrated its commitment to consumer protection. One of the key areas of focus in the FCA’s Business Plan 2020/21 is,

“ensuring…that the most vulnerable are protected”.

The FCA has also recently published guidance on how firms can treat vulnerable customers fairly. As consumer protection is one of the FCA’s statutory objectives, as set out in FSMA 2000, the FCA must already report on how consumer protection has been advanced in its annual report, as outlined earlier. Therefore, as with a previous amendment, the amendment would duplicate reporting that already exists. As regards the PRA, it is important to remember that it already has an important role in protecting consumers indirectly by promoting the safety and soundness of PRA-authorised firms. This means that consumers are protected from the significant distress and suffering caused by disorderly bank failures.

I now turn to Amendment 37, which would require regular reports on the impact of the financial services sector on a range of topics, including economic development and regional inequality. I have already set out some examples of the overwhelmingly positive impact that the sector has on jobs, productivity and tax revenues across the whole UK.