Financial Services and Markets Bill

Debate between Lord Lilley and Baroness Altmann

Committee stage
Tuesday 7th March 2023 Grand Committee

[Lord Lilley (Con)]

We ought to allow the industry to invest as long as we are phasing out demand. If it invests too much, it is its problem. If it invests too little, it is our problem.

[Baroness Altmann (Con)]

My Lords, I declare my interests as set out in the register. I support many of the amendments in this group. My Amendment 241A is in this group. I have added my name to Amendments 201 and 237, which require FCA guidance about long-term returns for occupational pension investors. I think that is very important when considering climate change and is very relevant to the remarks of my noble friend Lord Lilley. I have also added my name to Amendment 235 as I think it is equally important for institutional investors in the UK to be equipped with some green taxonomy so that we have some standards by which we can measure the impact of climate investment.

As regards the issues raised by my noble friend, particularly, perhaps, in relation to Amendment 168, when I read that amendment it seems to me to be calling for a review. It calls for the FCA to review and perhaps guide pension schemes and insurance companies, which have very long-term liabilities, on assessing the long-term risks of investing in assets such as fossil fuels. There is a widespread opinion suggesting that over the long term, whether that is 20 years or 30 years —those timescales are relevant for Solvency II and the annuity books of insurers, for example—there is a significant danger in relying on the continued thriving of those large energy companies.

It makes sense. We have been taken by surprise too many times in the financial world by supposedly very small long-term risks which materialise in a cliff-edge event that people had not been prepared for. Whether or not the review concludes that there should be any change, it is appropriate that this review should be carried out, so I support the amendment, but I understand the points made by my noble friend. Perhaps, on a shorter-term timescale, given the need for fossil fuels and the work that is being done by those large companies to try to transition to more green energy, that is an issue that needs to be carefully weighed up by any investor who is considering the potential returns from their investment.

In the interests of time, I will now speak to my Amendment 241A. I hope that my noble friend will be interested in this amendment and, indeed, that other Members of the Committee might consider that there is merit in this proposal. It is a relatively modest reform. It would be deregulatory. It supports the transition to net zero and nature preservation and it would encourage innovation. I hope it would garner more of our domestic institutional asset base to be used for the kinds of investments that all of us who are concerned about the long-term impact of human activity on the climate and nature would want to see happen.

I thank the Public Bill Office and Susannah Street, as well as Peers for the Planet, for their assistance in trying to ensure that the amendment is in scope of the Bill, which was quite a feat. It is a probing amendment; I am not wedded to the wording, but the principle of the proposal would make it easier for funded occupational pension schemes to join together to establish fund managers under a lighter-touch regime that already exists in order to invest in and support climate and nature protection. We all know that there is a growing need to find the funding to rebuild, repurpose or have new infrastructure for low-carbon and nature-friendly projects. Indeed, nature’s impact on and interaction with climate change and net zero is increasingly recognised. These issues feature in the other amendments I have attached my name to, so I hope that the scientific and political consensus that we need urgent action might help my noble friend and the Committee recognise that this could be a win-win for pension funds to get better long-term returns, for pensions to be perhaps better than they otherwise might be, and for the economy.

Much of the investment needed to reach net zero will be in very large long-term projects. It is not always easy to find the money. Normally, perhaps, with a Government who were in a much stronger fiscal position than most western Governments now are, we might look to the majority of this being funded by government, but that is less likely at the moment. Yet we have in this country this enormous pool of long-term assets that is currently being encouraged to invest in assets with a much lower expected return or so-called safe assets—gilts and corporate bonds, for example—shunning long-term growth with equities and projects such as the one I have in mind for this type of approach. Only 100 schemes or so have more than £5 billion worth of assets. Even with the kind of forecast consolidation, it is unlikely that we will have very many of the £5 billion-type scale that is normally suggested to be required to put forward a prudent, risk-diversified portfolio of such infrastructure and other protective investments.

My amendment would facilitate asset pooling for the smaller pension funds as well, so they can all join together in FCA-authorised investment managers specifically for pools of pension assets to benefit from and contribute to the benefits for green growth and sustainable long-term returns for the specific purposes set out in proposed new subsection (3) of my amendment. The Local Government Pension Scheme is already starting to do this, but private schemes would have to use commercial fund managers, which often either deters such investing or incurs much higher costs, whereas big schemes such as USS and NEST are already looking to invest or have the expertise to do so, but they are not joined with the smaller schemes.

I hope that the currently existing lighter-touch regime that the FCA offers in its occupational pension scheme firm rules, which currently apply only to fund management firms that are wholly owned by one pension fund, could be applied to a combination of pension funds that are investing for their own purposes in the various schemes that belong to it. It is not commercially available or available to other members of the public, but it is for long-term pension investing.

I would be grateful if my noble friend considered this modest reform, or, if she feels that there is some flaw in the wording of the amendment that could be changed and still facilitate this, I would be happy if she, or indeed any other noble Lords, wanted to meet to discuss it. As I said, it is deregulatory, it supports the aims of net zero and nature preservation, it would encourage innovation and it should provide better diversification and therefore long-term risk reduction for a number of occupational pension schemes which otherwise could not take advantage of it.

Energy Bill [HL]

Debate between Lord Lilley and Baroness Altmann

Committee stage
Monday 16th January 2023 Grand Committee

[Baroness Altmann (Con)]

I thank my noble friend for giving way. I have listened carefully to his arguments and would like to ask him whether he is excluding the other risks associated with fracking. Whether or not there are earthquake risks, surely we have the pollution of the groundwater, the toxic chemicals being released, the ground level ozone, air pollution and the use of large volumes of water in a country which had water shortages not that long ago and indeed where the geography seems to be rather different from that in other countries where fracking has been so successful.

[Lord Lilley (Con)]

I have good news for the noble Baroness, because those issues were covered in Shale Gas Extraction in the UK: A Review of Hydraulic Fracturing, produced by the Royal Society and the Royal Academy of Engineering. We are all constantly urged to follow the science, so let us follow the science in that review. She discussed water, and according to the review:

“Overall water use is important. Estimates indicate that the amount needed to operate a hydraulically fractured shale gas well for a decade may be equivalent to the amount needed to water a golf course for a month”.


That seems something with which we can probably cope. She then discussed the possible results leading to the pollution of aquifers. The review says:

“Concerns have been raised about the risk of fractures propagating from shale formations to reach overlying aquifers. The available evidence indicates that this risk is very low provided that shale gas extraction takes place at depths of many hundreds of metres or several kilometres.”


In the UK’s Bowland shale, it would be kilometres deep. The review continues:

“Geological mechanisms constrain the distances that fractures may propagate vertically. Even if communication with overlying aquifers were possible, suitable pressure conditions would still be necessary for contaminants to flow through fractures.”


When you have a kilometre or more of stone—impermeable rock—bearing down, you could not get a better seal.

Nevertheless, we do not have to worry about scientific analysis and theory, because we have practical experience. Over a million wells have been fracked in North America; not a single one has resulted in a building falling down from tremors or in a single person being poisoned by contaminated aquifers. So we are bound to conclude that lots of people have been spreading the sort of scaremongering that would make anti-vaxxers blush—even Andrew Bridgen would probably blush if he heard some of the stuff that has been put out by the friends of the noble Baroness, Lady Bennett, at their various camps around every conceivable attempt to get fracking going. We should rely on the science and the scientific reports and regulate the industry well, as we have done in the past.

Northern Ireland Protocol Bill

Debate between Lord Lilley and Baroness Altmann

Committee stage
Monday 7th November 2022 Lords Chamber

[Lord Lilley (Con)]

I am grateful to the noble Lord for sidestepping the question by saying that he does not need to answer it because there is an article in the protocol that means you do not have to answer on what happens when there is a conflict between two international obligations. Clearly, however, the Government and many noble Lords from the Province who have spoken think that there is a conflict and it cannot be solved just by invoking Article 16. If it can, fine; that is wonderful.

The other related question that we have not had a response to is the point made by the Lord Chancellor in the other place that Article 1 of the protocol specifically says that in the event of a conflict between the Belfast agreement and the protocol, the Belfast agreement takes precedence. I have not heard any response to that, nor to the point, which I might be alone in making, that the whole protocol is intrinsically temporary. We know that because the EU told us that it could not enter into a permanent relationship with us because we were then a member state and it could not, under Article 50, enter into a permanent relationship with a member state; it could be only temporary and transitional. That is why the protocol itself contains provision for it to be superseded, but I have heard no response to that point from anyone.

[Baroness Altmann (Con)]

I heard the responses given to my noble friend so far, which he seems reluctant to accept. If he does not agree that the Article 16 process would be a way of resolving some of these conflicts that have arisen and caused problems, in what way does he feel that the passage of the Bill would itself resolve those conflicts, or indeed support the Good Friday agreement?

[Lord Lilley (Con)]

I certainly do not say absolutely that Article 16 is not the way to proceed, but I have spoken to lawyers much respected by people in this House—unfortunately I do not have their permission to give their names—who told me that we should not go down the Article 16 route because it would be a nightmare.

Shortage of Workers

Debate between Lord Lilley and Baroness Altmann

Wednesday 6th July 2022 Lords Chamber

[Baroness Altmann (Con)]

My Lords—

[Lord Lilley (Con)]

My Lords, does the Minister accept that a general shortage of labour is a symptom of excess demand? You cannot assuage that by importing labour from abroad for the simple reason that workers not only produce but consume goods and services. The extra demand they create exactly equals the extra demand they assuage.