Building Societies Act 1986 (Amendment) Bill

Lord Livermore Excerpts

2nd reading
Friday 10th May 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I congratulate my noble friend Lord Kennedy of Southwark on his opening speech and pay tribute to him for not only sponsoring this Bill but his lifetime of commitment to building societies, mutual and friendly societies, credit unions and the wider co-operative movement. I note that some of the principles of this sector are democratic member control, autonomy and independence—not, perhaps, principles you might always associate with a Chief Whip.

I also congratulate my honourable friend in the other place, Julie Elliott MP. Drafting a Bill that generates strong cross-party support and, hopefully, becomes law, is the result of tremendous hard work, working painstakingly over many months and engaging constructively with civil servants and Ministers. I know that she has worked closely with Labour’s sister party, the Co-operative Party, and the wider mutual sector, including the Building Societies Association and Nationwide.

We enthusiastically support the Bill. As my noble friend Lord Kennedy set out in his opening speech—and as the noble Lord, Lord Naseby, said—modernising the legislation around building societies is long overdue. The Bill would enable building societies to compete on a level playing field with banks. It would cut red tape by removing outdated corporate governance requirements, which building societies face but banks do not. Crucially, it would also support first-time buyers by enabling building societies to lend more.

Building societies direct a greater proportion of their lending to first-time buyers than any other part of the financial services sector; it accounts for over 55% of their lending. They supported 70,000 first-time buyers in the first three-quarters of 2023 and a total of 360,000 first-time buyers since 2020. That is over £63 billion provided to help people buy their first home.

That is why the Bill is so important: it will empower societies across the UK to raise more funds. It could unlock billions of pounds of additional lending capacity, helping families and boosting the UK’s future prosperity and economic growth. For example, every £10 billion of new lending capacity secured through these changes potentially supports an additional 20,000 first-time buyers.

Building societies have never been more important in the UK’s economy and public life. During the cost of living crisis, many families have needed to use their savings in the face of rising energy costs and food prices. But building societies have continued to support people to save, bucking the trend of the decline in saving balances that we have seen across the wider sector. In the first nine months of last year, they attracted £18.9 billion in cash savings, supporting people to build financial resilience during this difficult period.

That is why Clause 1 is so important: it allows building societies to exclude funds accessed from the Bank of England in stress scenarios, types of loss-absorbing debt instruments, and sale and repurchase agreements from the funding limit. It will level the playing field with banks and provide that extra level of protection for building societies during difficult times, so that they can continue to support their members for many decades to come.

In recent years we have seen many building societies adapt to new challenges and adopt exciting technologies and digital ways of working. During the pandemic, Leeds Building Society, finding that requests for mortgage deferrals had increased to 2,000 a day, increased their use of robotic automation technology to create a fully automated web form for customers. At Nationwide, a team of mortgage, technology and AI specialists trained the society’s virtual assistant to handle common Covid-related mortgage queries. Principality Building Society has delivered an online mortgage payment holiday service, in partnership with the fintech company Podium Solutions. The service allows members to access a mortgage holiday repayment calculator to better understand their mortgage outcomes.

These are examples of why the changes introduced by Clause 2, which would allow real-time virtual participation in annual general meetings, are long overdue. Building societies have proven time and again their ability to innovate and adapt to changing consumer behaviours. There is no reason to subject the sector to outdated restrictions that do not apply to the wider financial services sector. Likewise, Clause 3 paves the way for reducing the administrative burden of executing documents, with similar provisions already in place for banks.

Labour has long called for modernisation of the Building Societies Act to level the playing field with the wider financial services sector. Indeed, it was a key commitment in our financial services review published earlier this year. We believe that more can be done to unleash the full potential of building societies and the wider mutual sector. That is why our financial services review set out Labour’s pledge to double the size of the co-operative and mutual financial services sector in government.

I once again congratulate my noble friend Lord Kennedy on his opening speech and thank him for his sponsorship of the Bill. It is a vital and important step forward, and we gladly give it our full support.

Bank of England (Economic Affairs Committee Report)

Lord Livermore Excerpts

Thursday 2nd May 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I congratulate the noble Lord, Lord Bridges of Headley, on his opening speech. I thank him and the Economic Affairs Committee for their report into an independent Bank of England. It is a pleasure to speak in such an illustrious debate today, alongside so many distinguished and genuinely expert noble Lords. It was a particular pleasure to listen to the noble Lord, Lord Lamont of Lerwick, whose reforms as Chancellor laid some of the groundwork for independence. I join others in also congratulating the noble Lord, Lord Moynihan of Chelsea, on his maiden speech.

This report from the Economic Affairs Committee marks the 25th anniversary of Bank of England independence, which the committee described as an appropriate time to review the operation of the framework first set out in the Bank of England Act 1998, taken through the House of Commons—as her excellent speech reminded us—by my noble friend Lady Liddell of Coatdyke. I consider it a privilege to have worked in the Treasury for the Chancellor who introduced operational independence with respect to monetary policy. The committee quotes Gordon Brown’s reasoning for this move:

“we will only build a fully credible framework for monetary policy if the long-term needs of the economy, not short-term political considerations, guide monetary decision-making. We must remove the suspicion that short-term party-political considerations are influencing the setting of interest rates”.

Those words, as the noble Lord, Lord King, made clear, have proved to be correct.

As a result, there is now a broad consensus in favour of retaining independence, and it has become one of the most enduring reforms of the new Labour Government. Indeed, in the Government’s response to this report, the current Chancellor stated that he remains

“fully committed to monetary policy independence”.

The committee’s report bears out this consensus, while rightly acknowledging that external factors, such as globalisation, have contributed to favourable conditions over this period. The report states:

“For much of the past 25 years, the enhanced credibility of monetary policy brought about by independence has contributed to a low inflation environment. The absence of political interference is seen by many as a major component of stable inflation expectations”.


The report also confirms that the majority of expert witnesses who gave evidence to the inquiry were clear that independence has been a significant factor in promoting price stability. I am therefore pleased the committee concluded it has a

“strong view that independence should be preserved”.

I regret, however, that this view was not shared by all former Prime Ministers. Liz Truss, who is currently on a book tour, stated in an interview with LBC radio on 15 of April, that interest rate setting is “a political decision” that

“should be in political hands”.

In a world of unparalleled complexity and uncertainty, it is institutions which can provide the stability of direction, co-ordination and appropriate incentives for sustained economic success. For much of our history, the strength of our institutions has bestowed credibility in international markets and underpinned our economic success. Politicians who undermine those strengths play a dangerous game.

As the noble Lord, Lord Gadhia, said, we saw the consequences of exactly that in the aftermath of the disastrous mini-Budget in September 2022, with its programme of unfunded tax cuts, amidst a concerted effort to undermine our independent economic institutions. Markets spiralled, the pension fund industry came close to collapse, and the Bank of England had to step in to restore calm. Those events dramatically altered the economic fortunes of our country. In October 2021, the Bank of England base rate stood at 0.1%. In little over two years, that rose to 5.25%. In October 2021, debt interest was forecast to cost £29 billion this year; that figure now stands at £82 billion.

The last Labour Government introduced Bank of England independence, and the next Labour Government will maintain it. It is Labour’s view that the Bank’s Monetary Policy Committee must continue to have complete independence in the pursuit of its primary objective of price stability. A Labour Government would retain the 2% inflation target, while the Financial Policy Committee will continue with its core objective of financial stability.

The Economic Affairs Committee’s report raises a number of key issues, which it believes need to be addressed. The first of these concerns the interaction between fiscal and monetary policy, where the committee believes clear lines of responsibility and effective communication are required between the Bank and the Treasury. I note that the Bank of England Act sets out that, subject to the Bank’s objectives to maintain price and financial stability, the Bank should support the economic policy of His Majesty’s Government, including their objectives for growth and employment.

With respect to fiscal policy, Bank of England independence reflected an understanding that politics will always present a powerful temptation to pursue macroeconomic policies that may not be in the medium to long-term national economic interest. Similar logic applies to the concept of deficit bias. Politicians may be tempted to put off necessary fiscal decisions or to ignore the long-term consequences of policy choices. It remains true, as Gordon Brown said, that in a modern economy

“the discretion necessary for effective economic policy is possible only within a framework that commands market credibility and public trust”.

That is especially true if the Government are to be able to take urgent, discretionary action when crisis strikes.

Far from wanting to “see the back of” the Office for Budget Responsibility, as some now advocate, the next Labour Government will strengthen the OBR with a new fiscal lock, guaranteeing in law that any Government making significant and permanent tax and spending changes will be subject to an independent forecast from the OBR. We will not waver from strong fiscal rules. In line with the committee’s call for accountability to Parliament, the new fiscal lock and fiscal rules will be put to Parliament to agree.

The second issue identified by the committee’s report concerns the Bank’s remit, an issue raised by many noble Lords today. The committee believes that the widening of the remit to include climate change, for example, risks jeopardising the Bank’s ability to prioritise its primary objectives. I respectfully disagree. Monetary policy and financial regulation cannot stand still in the face of new risks, not least those posed by climate change. The European Central Bank’s Isabel Schnabel has set out the implications of climate change for monetary policy: losses that could translate into the balance sheets of financial institutions and reduce the flow of credit; impacts on labour productivity and health-related inactivity, which could lower the equilibrium real rate of interest and constrain the space for conventional monetary policy; and the impact of supply-side shocks on prices. Given the onus to mobilise investment to achieve the energy transition, those challenges are especially acute.

As the noble Baroness, Lady Lane-Fox of Soho, said, macroeconomic policy has an important role to play in our climate transition. Labour has set out plans to require financial institutions and FTSE 100 companies to publish their carbon footprints and adopt credible 1.5 degrees-aligned net-zero plans. We disagree with the current Chancellor’s decision to downgrade the emphasis put on climate change in the remits of both Bank committees. The next Labour Government will reverse these changes at the first opportunity, because there can be no durable plan for economic stability, and no sustainable plan for economic growth, that is not also a serious plan for net zero.

The committee’s inquiry also examined the possible introduction of a central bank digital currency. Here, Labour recognises the growing case for a state-backed digital pound to protect the integrity and sovereignty of the Bank of England and the UK’s financial and monetary system. We fully support the Bank of England’s work in this area. The committee’s report rightly raises a number of public policy issues that could arise, including issues such as threats to privacy, financial inclusion and stability, which we too want to ensure are effectively mitigated in the design of any such digital currency.

The final issue raised by the committee’s report is accountability, referred to by several noble Lords, including my noble friend Lord Chandos and the noble Lord, Lord Macpherson of Earl’s Court. I very much welcome the Chancellor’s commitment, in his response to this report, to send copies of remit letters to the chairs of your Lordships’ Economic Affairs Committee and the Treasury Committee.

I again thank the noble Lord, Lord Bridges of Headley, and the Economic Affairs Committee for their report. Throughout this debate, we have heard about the damage that inflation can do to family finances. The Bank of England therefore plays a crucial role in our nation’s economy. Some 25 years since independence, this report provides a valuable basis for debate.

Road Pricing

Lord Livermore Excerpts

Monday 29th April 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

As I said at the outset, the Government have no plans to consider road pricing. Therefore, I cannot give my noble friend that assurance, because it would be purely hypothetical.

[Lord Livermore (Lab)]

My Lords, the state of Britain’s roads has been described as being at breaking point. A recent survey suggests that local roads are in their worst condition for more than 30 years, and the backlog for repairs has risen to a record high. The AA estimates that pothole damage is costing Britain’s drivers nearly £500 million every year. Is the Minister aware of figures compiled by the LGA that show that Labour councils invest 83% more per head on road maintenance than Conservative councils?

[Baroness Vere of Norbiton (Con)]

What I can say is that this Government have invested significantly in local highway networks. For example, since 2015, we have invested £11 billion and, as part of Network North, £8.3 billion has been earmarked for local road maintenance over the next 11 years.

Start-up Companies: Tax Incentives

Lord Livermore Excerpts

Monday 29th April 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

London remains one of the leading financial centres in the world. The Government are incredibly focused on our domestic equity markets to ensure that they meet our ambitions of ensuring we have capital available to small companies. My noble friend will know that the noble Lord, Lord Hill, did a review into UK listings and we are taking forward his recommendations.

My noble friend will also know that the Government are proceeding through looking at all our regulation to ensure that it is fit for purpose for the UK and UK listings under the smarter regulatory framework. He will also have seen the reforms announced by the Chancellor in Edinburgh and at Mansion House. We are seized of the opportunity we have with domestic equity markets, whether they be for large cap or small cap companies. However, we recognise that there are things we can do to make them better.

[Lord Livermore (Lab)]

My Lords, speak to any SME owner or business network and you will hear concerns about HMRC: contact wait times of over an hour, backlogs to review tax credit applications, delays of eight months to claim tax reliefs and phone lines closed for an entire summer. Tax incentives are a lifeline for many young companies. With nearly 50,000 SMEs reported to be in financial distress, does the Minister believe the problems at HMRC are now hindering economic activity?

[Baroness Vere of Norbiton (Con)]

I think the noble Lord has conflated a number of issues there into one thing. HMRC is an enormous organisation that deals with many types of individuals and corporates. Companies can contact HMRC via the corporation tax helpline—that phone line has not been closed at all—where they can get general advice on R&D or on EIS.

HMRC has also set up non-statutory advance assurance services for both elements under debate today. It means that companies can get in touch with HMRC before they make an application to make sure that, when they do make an application, it gets through first time—and, as I said in my opening answer, HMRC is working to its aims.

Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024

Lord Livermore Excerpts

Tuesday 26th March 2024 Grand Committee

Let us be clear about what this SI is saying. It is saying that the conditions of being unduly burdensome and/or not achieving intended purpose may be dropped at the absolute discretion of the PRA. That means that the PRA may decide to grant waivers in cases in which the rules are not unduly burdensome or are, in fact, fit for purpose. If this is to be the case—and I understand that it is—then some reassurances would be very welcome. Could the Minister confirm to the Committee that, whenever this new unconditional power is used, the PRA will publish, alongside the waiver, a statement saying what problem is being addressed, what benefits are expected to arise, why this use is proportionate and why the powers in Section 138A of FSMA were not used?

[Lord Livermore (Lab)]

My Lords, I am grateful to the Minister for introducing this SI, which delivers on one of the aims of the smarter regulatory framework, in that it will allow the Prudential Regulation Authority to disapply or modify the rules in the Financial Services and Markets Act in response to changing market conditions or emerging risks, and to facilitate innovation. We supported the principle behind this SI during the passage of the Act last year; as such, I have just a few questions.

First, can the Minister confirm how many times the existing power under Section 138A of FSMA has been used by the regulator in each of the past three years? Is there a forecast for how many times the new procedure is expected to be used in each of the next three years?

Secondly, the Explanatory Memorandum accompanying the SI notes that PRA decisions under this new mechanism will be challengeable in the Upper Tribunal, as the Minister noted. Is there any estimate of the potential caseload that may result from this new system? Can she confirm how long the Upper Tribunal is likely to take to determine challenges, and at what cost to applicants?

Thirdly, can the Minister confirm that, in considering an application to flex the rules, the regulator will remain bound by its objectives around financial and market stability? Finally, the impact assessment accompanying the SI talks of familiarisation costs for businesses. Are there any similar resourcing implications for the PRA? Are any additional positions needed at the regulator to deal with potential additional workload?

I am grateful to the Minister in advance for her answers. I take this opportunity to wish her and the noble Lord, Lord Sharkey, a happy Easter.

[Baroness Vere of Norbiton (Con)]

My Lords, I too wish all noble Lords a very happy Easter—there is one more day to go, I believe. I am grateful to both noble Lords for their contributions to this short debate. I have the answers to nearly but not quite all of their questions. I am disappointed in myself, but never mind; we will keep going.

I would like to go back to first principles. This was raised by the noble Lord, Lord Livermore, and to a certain extent by the noble Lord, Lord Sharkey. The PRA is governed by its core objectives, which are set out in law. There are two primary statutory objectives for the PRA: a general objective to promote the safety and soundness of PRA-authorised firms and an insurance objective to contribute to securing an appropriate degree of protection for those who are, or may become, insurance policyholders. Underlying that, FSMA also sets out two secondary statutory objectives for the PRA on effective competition, aligning to international standards and promoting growth in competitiveness. That is our starting point; that is the PRA’s job, per se. In taking a decision to disapply and modify rules, it must do so in that context.

The noble Lord, Lord Livermore, asked how many times Section 138A has been used in the last three years. I do not know, but I will write on that and explain what has happened to date. I will also write about the caseload and what we expect for the timeline in court. I do not anticipate that it will be enormous. With much of this regulatory behaviour, where there are disputes regulators will try to mediate wherever possible.

Turning to why the PRA would decide to disapply or modify rules, it is about getting greater flexibility to allow the system to work more effectively within the statutory objectives set out in FSMA. The provision does not direct a regulator as to how it should decide, because these are independent regulators. When this part of FSMA 2023 was debated, it attracted no debate at all, so I had therefore expected that noble Lords were very much onside with the powers we had given to the PRA, or potentially to the PRA, via this statutory instrument. It will be for the relevant regulator, in this case the PRA, to set out its policy for the disapplication or modification of rules. Noble Lords may have seen that it has already started to do this.

This goes back to the issue of transparency and ensuring that the public, and of course the industry too, are aware of what is going on. A whole series of industry consultations takes place whenever the use of 138BA is anticipated. Not only was the Section 138BA issue subject to consultations in 2020 and 2021, when we were developing and finalising our approach to the smarter regulatory framework, but, more recently, and more specifically, the PRA issued consultations on statements of policy. What happens is that the PRA says, “Okay, this is what we’re going to do. We’re going to put out a statement of policy”—for example, it has done it on Solvency II matching adjustments. The industry will then contribute to that, and it will go on to use whatever rules and regulations it now feels the industry agrees is appropriate.

So far, I think there have been two specific consultations and also a more general consultation by the PRA, basically saying, “Every time we do this, we will put out a statement of policy. Industry, do you think this is the right approach and the right thing to do?” So, I believe there is quite a lot of information being published around this. Obviously, it is not only for the industry to scrutinise that; it will be for others to scrutinise it as well, to ensure that we are not exposing our economy to detriment or, indeed, impacting our financial stability. That all seems fairly appropriate, straightforward and transparent.

The noble Lord, Lord Sharkey, asked about the Solvency II matching adjustment. It is our view, and I believe the view of the PRA, that it would not have been possible under 138A, because one of those two conditions would have had to have been met, and one could potentially say that it has not been. Is it unduly burdensome? I am not sure that it is, because it is more of an adjustment that annuity providers can use to secure more proportionate capital requirements. That is not a burdensome or non-burdensome issue; it is just that there is an opportunity to release capital by taking a sensible regulatory decision around matching.

The same goes for models as well. For example, in certain circumstances it may be the case that an institution’s model is better than the standard model that one tries to apply to the whole industry. If it can reassure the regulator that the model is robust, then, again, those might be the sorts of elements that one can put in to firm-specific changes to regulation. However, I fear that this will be returned to by the PRA over the coming years as we deal with assimilated law.

During the passage of FSMA 2023, we did say that we wanted agile regulators that are able to regulate and to change things according to risk. In this case, that will be by an individual organisation. But, as we go through and look at all the assimilated law that we dealt with under FSMA, some of it will then be able to fall away, because provision is available under 138BA that will be able to fill the regulatory gap that was previously occupied by that specific piece of regulation, but was then switched over to PRA rules and the way that it then chooses to put those into place. Again, this was the approach that was agreed during the passage of FSMA.

Sadly, I do not have anything on the PRA’s resources. I suspect that it has been gearing up for this for quite a long time; as I said, it has already started getting to work on consulting. Obviously, without the powers, it is unable to issue any firm-specific disapplications or modifications, but I will certainly write to the noble Lord if I get anything further on this matter. I have a few things to write on.

Credit Card Invoices

Lord Livermore Excerpts

Tuesday 26th March 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, we discussed last week concerns that the new generation of touch-screen card readers lack essential accessibility features needed by blind and partially sighted people. Looking into this further, it seems that these readers can also come with other issues, whereby if they are not correctly configured, the only description of transactions that appears on statements is the name of the machine manufacturer rather than the retailer you shopped with. Can the Minister see a case for steps to ensure payment devices are correctly configured, so that transactions can be more easily traced?

[Baroness Vere of Norbiton (Con)]

I agree with the noble Lord that those payment machines should be correctly configured. When customers realise that there is a problem, they must raise it with the bank, which will then be able to take further action. It is the case that if there is any suspicion of fraud—whether using a credit card or a debit card—the customer can get their funds back.

HMRC Self-assessment Helpline

Lord Livermore Excerpts

Tuesday 26th March 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, on Tuesday 19 March, HMRC announced that it would close its self-assessment helpline for half the year. The very next day, following a U-turn by the Chancellor, HMRC announced that this closure would not go ahead. When was any Treasury Minister first informed by HMRC of its decision to close the helpline? Reports of the Chancellor’s U-turn referred to a “pause”—what criteria will be used to decide whether, and when, HMRC will proceed with its planned closure of the helpline?

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, I do not have the details of who was told at what stage, but even though HMRC is a non-ministerial department and has a close relationship with the Ministers with oversight of HMRC, operational decisions are taken by HMRC’s management. The decision on the helpline followed two trials last year, the evaluations for which were published, showing that closing access to those helplines for certain people had no adverse effects at all. A commitment has been made that the helplines will remain open over the year ahead, but we are focused on listening to feedback and ensuring that as many people as possible can make the transition to online services, which have a far higher customer satisfaction rate than the phone lines.

Electronic Payment Devices

Lord Livermore Excerpts

Tuesday 19th March 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I am grateful to the noble Baroness for her question. Unfortunately, it goes slightly beyond my briefing today, but I will write.

[Lord Livermore (Lab)]

My Lords, I pay tribute to my noble friend Lord Blunkett and the noble Lord, Lord Holmes of Richmond, for their work to improve accessibility in financial services for blind and partially sighted people. As ever more transactions become cashless, every customer must have confidence in the payment systems used. Can the Minister outline what, if any, regulations assist for the manufacturers and providers of touch-screen payment devices? Why does regulation not seem to have kept pace with this move towards touch-screen technology?

[Baroness Vere of Norbiton (Con)]

Regulations that were introduced at any particular point in time have become out of date very quickly. Underpinning the work we are doing is the Equality Act 2010. The whole point about having an independent regulator in the FCA is that its rules can change quickly. The FCA issues guidance which sets out how financial services organisations need to ensure that people with disabilities, who may be more vulnerable, get the support they need. That is better than regulation: having the FCA as an independent regulator is more agile than having straight government regulation.

Spring Budget 2024

Lord Livermore Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, it is a privilege to take part in this debate on both the Spring Budget and the national insurance contributions Bill, and to listen to and learn from contributions from so many genuinely expert noble Lords. I join others in congratulating the noble Lord, Lord Kempsell, on his excellent maiden speech, bringing his valuable first-hand experience of policy-making to your Lordships’ House. I look forward to his further contributions.

The Budget was delivered against the backdrop of an economy that had fallen into recession. Its context was an economy that is now smaller than when the current Prime Minister took office. It revealed forecasts for an economy that, rather than bouncing back, will do little more than bump along the bottom this year.

In his Budget Statement, the Chancellor set out his own definition of economic success—the yardstick by which he wishes to be judged. He said he wanted

“not just higher GDP, but higher GDP per head”.—[Official Report, Commons, 6/3/24; col. 837.]

How should we judge the Government against this measure? In the past year, GDP per head shrank in every single quarter. In fact, the latest ONS figures show that it has fallen for seven consecutive quarters. In per capita terms, our economy has not grown since the first quarter of 2022. As my noble friend Lord Eatwell observed, that is the longest period of stagnation that Britain has seen since 1955.

This year, GDP per capita is again set to shrink, not grow. As a result, it will be lower at the end of this year than it was at the start of this Parliament. In the Budget, we learned that forecast GDP per capita growth has been revised down in four of the next five years—not perhaps the success the Chancellor was looking for.

Many noble Lords mentioned the comparative performance of the UK economy, including the noble Lords, Lord Lamont of Lerwick, Lord Tugendhat and Lord Sherbourne of Didsbury, and the noble Baronesses, Lady Goldie and Lady Lawlor. Our country has undoubtedly gone through a difficult time these past few years, and the origins of many of the crises we have faced are, of course, global: pandemic, war, and the energy crisis. But other countries have also experienced those shocks. If the UK economy had grown at the OECD average since 2010, it would now be £140 billion bigger than it is today. That is equivalent to £5,000 per household every year and would mean an additional £50 billion in tax revenues to invest in our public services.

Why have we fared so much worse? Because each time a crisis has hit, Britain has found itself acutely exposed due to the choices this Government have made over 14 years: the austerity mentioned by the noble Lord, Lord Skidelsky, which choked off investment; then Brexit without a plan; and then the disastrous mini-Budget, which crashed the economy, sending interest rates soaring to a 15-year high, and saw mortgage payments rise by an average of £220 every month.

Yet, having crashed the economy, the Government seem not to have learned the lessons and are now apparently intent on re-running the disastrous Liz Truss experiment. As my noble friends Lady Lister of Burtersett and Lord Davies of Brixton said, at the end of his Budget Statement the Chancellor, reiterated by the Prime Minister as recently as today, announced a £46 billion unfunded plan to abolish national insurance contributions. Both the Prime Minister and the Chancellor have repeatedly refused to explain how this will be funded. Will it be paid for by yet more tax rises for working people? The Chancellor refused to rule out raising income tax to pay for it when asked to do so by the Treasury Select Committee. Will it be paid for by higher borrowing? Or will it be paid for by cutting spending on vital public services—our schools, hospitals and police?

There are also genuine concerns about pensions that need to be addressed. National insurance contributions determine people’s entitlement to the basic state pension, as well as other contributory benefits. If national insurance contributions are scrapped, how will working people know what their future entitlement to the state pension is? If the plan is instead to merge national insurance and income tax, what will this mean for pensioners’ tax bills, including the taxes they pay on their savings?

The Government’s previous reckless and unfunded tax plan crashed the economy, and working people are still paying the price. Taxes are still rising, prices are still going up in the shops and mortgages are still higher. Britain cannot afford to repeat that ill-fated experiment. We support tax cuts for working people, but in order to be sustainable and genuinely make people better off, they must be fully costed and fully funded. This is an irresponsible, unfunded spending commitment without any plan to pay for it, and which risks crashing the economy all over again. And once again, it will be working people who pay the price.

Many noble Lords focused today on the cuts to national insurance contained in the Bill that we are also debating, including the noble Lords, Lord Macpherson of Earl’s Court, Lord Young of Cookham, Lord Horam and Lord Northbrook, and the noble Baronesses, Lady Goldie and Lady Noakes. We have been consistent over the course of this Parliament in saying that taxes on working people should be lower. Two years ago, when the current Prime Minister tried to increase national insurance, we opposed it. We supported the last cut to national insurance, and we support the measures announced in the Budget, contained in this Bill, to bring it down by a further 2%.

Ministers have previously been rebuked by the chair of the UK Statistics Authority for repeatedly making misleading claims about their record on tax. So let us be clear: these measures come in the context of a rising, not falling, tax burden. The tax burden is now set to rise every single year for the next five years, rising to the highest level in 70 years, making this the biggest tax-raising Parliament since the Second World War.

While the cuts in national insurance are welcome, they are more than eclipsed by the tax increases the Government have previously announced. Tax thresholds are still frozen, increasing taxes by £41.1 billion over the forecast period, creating, as my noble friend Lord Sikka pointed out, 3.7 million new taxpayers by 2028-29. As a result, for every £10 the Government are taking in higher tax, they are giving only £5 back, and by the end of the forecast period, the average family will be £870 worse off. As Paul Johnson, the director of the Institute for Fiscal Studies, has said:

“This remains a parliament of record tax rises.”


As the Resolution Foundation has said, this will be the first Parliament ever to see living standards fall.

Having spent years defending the indefensible, in the Budget the Government belatedly performed a welcome U-turn and recognised the importance of closing the non-dom tax loophole. We have long made the simple patriotic argument that, if people make Britain their home, they should pay their taxes here too. In the Budget, the Office for Budget Responsibility confirmed that the steady-state revenue raised by the non-dom policy is £3 billion per year. So why did the Government not U-turn sooner? My right honourable friend the shadow Chancellor first called for that loophole to be closed two years ago, meaning that we have missed out on £6 billion in tax revenue—money that could have been invested in our public services.

If further proof were needed that Labour is winning the battle of ideas, it is the further extension of the time-limited windfall tax on the oil and gas producers. Yet, even now, the Government have still left gaping loopholes, meaning that many energy giants will still pay less in tax.

We are under no illusion about the scale of the challenge we may inherit, nor the scale of the task of rebuilding our economy and our country. Labour’s economic plan will be built on the pillars of stability, investment and reform: stability, guided by strong fiscal rules and robust economic institutions; investment, brought about in partnership with business through a new national wealth fund to invest in the industries of the future; reform of our planning system and the skills system—and a genuine living wage.

In contrast, the stark reality of this Budget is clear: taxes rising, living standards falling, growth stalling. The harsh reality the Government must face is that the damage is done. Nothing they can do now will compensate for the fact that people are worse off: working people paying more, pensioners paying more, homeowners paying more.

The questions people ask ahead of the next general election are simple: are they and their families better off after 14 years of this Government? Do our schools, hospitals, police or transport work better than when this Government came to office 14 years ago? Frankly, does anything in our country work better than it did 14 years ago? The answers are always a resounding “No”. Only Labour can provide the change our country so desperately needs.

Alternative Investment Fund Designation Bill [HL]

Lord Livermore Excerpts

2nd reading
Friday 1st March 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, it is a pleasure to take part in this debate and to listen to and learn from contributions from many genuinely expert noble Lords. I congratulate the noble Baroness, Lady Altmann, on securing the Bill and pay tribute to her not only for raising this issue to the prominence it deserves in your Lordships’ House and for the hard work I know she has put in to get her Bill to this stage, but for her tireless campaigning on behalf of consumers, pensioners and investors, not just on this topic but on many others over many years.

In her excellent and persuasive opening speech, the noble Baroness made an extremely compelling case for action. I agree strongly with much of her analysis and many of the objectives of her Bill. I will briefly review some of the key points that underlie the Bill.

First, we have seen in the debate today a clear consensus on the importance of this sector to the UK economy. It makes up over 30% of the FTSE 250 and supports vital economic growth areas, as well as a wide range of environmental and social investments. It is also clearly a sector that we as a country should feel pride in. As the noble Lord, Lord Macpherson of Earl’s Court, and the noble Baroness, Lady McIntosh of Pickering, said, UK investment trusts are a long-standing British success story, offering for over 150 years access to ready-made portfolios which the vast majority of investors could neither put together nor manage themselves. The noble Baroness, Lady Bowles of Berkhamsted, who has highlighted this issue in your Lordships’ House several times already, today took us on a thorough and concerning tour from her own expert perspective of how we ended up where we are today.

It is clear from what we have heard in this debate that charges disclosure rules, derived from the EU, have been inappropriately applied to UK-listed investment trusts. As a result, those companies have been forced to show misleading information to investors, exaggerating the costs of holding their shares. Despite the Financial Services and Markets Act specifically empowering UK regulators to shape financial regulation in the national interest, this inappropriate application has made UK-listed investment companies appear misleadingly expensive for investors to hold.

This has likely given rise to three key consequences. First, it has contributed to UK investment trusts being starved of capital because waves of selling, lack of buyers and share price weakness have stopped capital raising for vital growth sectors, as UK investment companies suffer an exodus of capital from institutions and wealth managers.

Secondly, funding has materially declined as investors use non-UK-listed investments or riskier individual shares instead. This has exacerbated the UK’s shortage of an important source of growth capital for the very areas that we need the private sector and pension funds to support, since most investment trusts invest in real assets, including vital infrastructure projects such as schools, motorways, affordable housing, police and fire stations, and NHS hospitals. Taking the right action now could bring stability back to the investment trust sector and help to harness the power of UK pensions, ISAs and retail investments in order to better support the British economy.

Thirdly, UK-listed investment trusts have been made to look uniquely unattractive compared with our global competitors. Investors are needlessly switching out of UK markets, depriving consumers of dependable dividend-paying investments and denying them access to ready-made portfolios that could add diversification and improve their long-term returns.

The Financial Services and Markets Act specifically introduced the secondary competitiveness objective in order to speed up the pace at which regulators can act when UK competitiveness is under threat. Yet that does not appear to be happening here. Neither does it appear that the new consumer duty is being upheld, as the current system arguably misinforms consumers by exaggerating the costs involved and preventing them making properly informed decisions about what investments to buy.

Ultimately, the Bill of the noble Baroness, Lady Altmann, calls for the Government to act with urgency. That must be right. There is widespread and cross-party agreement, as reflected in the contributions we have heard in today’s debate, that these rules clearly are not working for UK-listed investment trusts. The ultimate responsibility for remedying that and making progress must lie with the Government.

We have been reminded during today’s debate that, in his most recent Autumn Statement, the Chancellor asked the FCA to take action to remedy the problem of charges disclosure regulations forcing investors to sell UK-listed investment trusts and driving pension funds to buy overseas investment companies instead. Since then, what has changed? It would appear that nothing has changed; in fact, the exodus of capital from the investment companies sector has actually accelerated. Having recognised that the rules guiding charges disclosures for UK-listed investment companies are misleading investors, the much-needed urgent change simply has not materialised. I would therefore be grateful if the Minister could set out when she responds to the debate the concrete steps that the Government will now take to remedy this problem. Action is needed; if the Government decide to take the appropriate action, we will support them in that.

I end by once again congratulating the noble Baroness on her Bill. It is a timely piece of legislation exposing a significant problem that has been left unsolved for too long, at considerable cost to both the sector and the wider economy. This Bill unarguably makes the case that urgent action is required. I hope that this debate, as well as the further passage of this Bill, will help to expose these issues and compel the Government and regulators to move further and faster than has so far been the case.