Bank Accounts

Lord Livermore Excerpts

Wednesday 19th July 2023 Lords Chamber

[Baroness Penn (Con)]

FCDO colleagues have not raised this with me but if there is an issue, I will be more than happy to sit down with other departments and discuss what we can do about it.

[Lord Livermore (Lab)]

My Lords, access to financial services should of course never be determined by a person’s political views, but just as those with assets of £1 million should not unduly be denied a bank account with Coutts & Co., so those with substantially less should not be denied access to basic banking services. Yet the Financial Conduct Authority estimates that more than 1 million people in the UK have no bank account and one in four people will experience financial exclusion at least once in their lives. The Government recently overturned Labour’s amendment to the Financial Services and Markets Act to require the FCA to have regard to financial inclusion. Do the Government now regret that decision?

[Baroness Penn (Con)]

My Lords, I absolutely agree about the importance of financial inclusion, and we have seen significant progress on that issue in recent years, including through establishing provision of basic bank accounts. That means that anyone in society, whatever their means, has the right to access banking, and we will continue to promote access through our work on financial inclusion.

Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023

Lord Livermore Excerpts

Wednesday 12th July 2023 Grand Committee

[Baroness Kramer (LD)]

My Lords, I confess that usually when I speak on a statutory instrument I am trying to look for why it really should have been in primary legislation, not secondary. In this case, this strikes me as a genuine SI. It is almost a moment of great excitement.

I am very happy to say that these Benches support this measure, which, as the Minister says, enable trading standards to investigate more effectively illicit tobacco sales by small operators and retail outlets and to refer evidence of contraventions to HMRC for action, with potential penalties up to £10,000. We know from past surveys that some 18% of tobacco sales have been illegal. That leads me on to a series of questions to the Minister for further clarification.

At this time of cost of living pressures, some people will be tempted to buy cheaper, illegal or illicit cigarettes. I ask the Minister: is illicit activity increasing now at this time of increasing cost of living pressures, or are we continuing to see a diminution? I would be interested to know what the impact is and whether there has been any significant change that requires aggressive action.

When will the relevant guidance for businesses be published? I do not believe that is available yet. Indeed, when will the sanctions be implemented? Perhaps the Minister could give us some sense of the timetable. There is also no statutory review clause, so how will we know how effective these new powers are? If the powers are granted but are generally not used, I think the Minister knows that potential offenders will feel doubly empowered by new rules that then turn out to have no teeth, so it seriously matters that we track this. When we are tracking, will there be any measures to let us estimate the deterrence effect of the measure? That is probably one of its most important aspects.

Behind illegal sales by small and local outlets there is sometimes just a very small-scale operation, but at times it is very much linked to organised crime on a major scale. How is that link going to be investigated as trading standards becomes more engaged in this process?

The sale of tobacco to children is obviously a serious concern to all of us. Are outlets engaged in underage sales to be a particular target? Will there be any prioritisation, as far as the Minister is aware? Will enforcement involvement include the sale of non-compliant tobacco, blunts and shisha, which have sometimes been seen as a way to manoeuvre around the rules in the recent past?

The tobacco industry has a history of offering to help, or provide intelligence to, local trading standards. I have to say that civic society groups that are attempting to decrease smoking tend to view that with deep suspicion as a conflict of interest, designed to basically push tobacco sales from the illicit side but into legal purchasing rather than discouraging purchasing as a whole, and to improve the industry’s general standing and reputation. I wonder how that is going to be handled.

Does this measure also impact on non-compliant sales of e-cigarettes and vapes? We know these products are increasingly being targeted at non-smokers and youngsters, even though we have little information at the moment on what the effects are of the long-term usage of e-cigarettes and vapes.

The Government have a target to make the country free of tobacco smoking by 2030, and we support their goal of achieving a smoke-free generation. Smoking, as the Minister has said, remains a leading cause of premature death and is related to many severe and chronic illnesses and damages lives, as well as being a drain on the NHS. However, the pace of decline in smoking that followed the 2007 ban on smoking in English pubs and clubs has dwindled. How much is this measure expected to focus on reducing overall smoking? I confess that there is always a slight suspicion when HMRC is involved that the focus will be more on increasing revenues to HMRC than on reducing the overall activity—in this case, just moving it from the illicit arena into the legal arena.

If the Minister could add a little more enlightenment, we on these Benches are happy to support the statutory instrument.

[Lord Livermore (Lab)]

My Lords, we support this measure. I shall reiterate a couple of facts mentioned by the Minister. Smoking is the biggest cause of preventable death in the UK. It accounts for some 76,000 deaths each year, with half of all smokers dying of a smoking-related illness. It is estimated that smoking costs NHS England over £2.5 billion every year. Alongside high-level policy, such as the smoking ban introduced by the last Labour Government in the Health Act 2006, evidence suggests that high duty rates have had a positive impact by reducing the number of people who start smoking and increasing the numbers seeking to cut down and quit.

With 21% of cigarettes sold in the UK currently illicit, clearly the illegal trade in tobacco products undermines these important contributions to public health. It deprives the Exchequer of vital revenue and reduces the deterrent effect of high duty rates. We therefore support harsher penalties for those who seek to avoid paying such duties and commensurate powers for trading standards to tackle those who procure, supply and distribute illegal tobacco and profit from the illegal trade.

I would like to ask the Minister three questions. First, she mentioned that the combined application of fines, powers to seize illicit products and the new sanctions is designed to have a deterrent effect on retail outlets and street-level distributors. This point was also made by the noble Baroness, Lady Kramer. Are there any plans to communicate these powers to potential offenders so that the deterrent effect might be enhanced? Secondly, where illicit product is sold through retail outlets, what data exists on whether the owner of a retail outlet is aware of such sales versus illicit sales carried out surreptitiously by an employee, and therefore whether enforcement measures are always correctly targeted? Finally, what communication, co-operation and co-ordination exists between HMRC and the Border Force to tackle the supply of illicit product at source?

[Baroness Penn (Con)]

My Lords, I thank both noble Lords for their contribution to this short debate. I am afraid that the speed of our debate might mean that I will need to write to them regarding some of their questions. I will address the ones I can.

The noble Baroness, Lady Kramer, asked whether the cost of living pressures have caused an increase in the illicit market. My understanding is that there has been a negligible increase in it. Some smokers are switching, for example, to hand-rolling tobacco from ready-made cigarettes to save money. That is the kind of behaviour shift we are seeing.

As for when we will be implementing the provisions provided for in the two statutory instruments, trading standards will start work on 20 July when the tobacco tracking and security SI commences.

Regarding the types of tobacco that will be covered, I can say that the tobacco track and trace system applies to only cigarettes and hand-rolling tobacco, but this makes up approximately 97% of the tobacco market. The system and the penalties are intended to be extended to other tobacco products, such as cigars, cigarillos and shisha, but that will be from May 2024. There is a plan to extend over the remaining market.

Both the noble Baroness, Lady Kramer, and the noble Lord, Lord Livermore, asked about the deterrent effect. We should see a decrease in the current tax gap for tobacco duty. We anticipate that we will see an increase in compliance activities undertaken by trading standards. The visibility of businesses selling illicit products being penalised will have the deterrent effect that both noble Lords asked about.

Tackling this issue at the smaller scale, where trading standards visits premises—the noble Baroness, Lady Kramer, also talked about links to more organised crime—will continue to be a focus. Activity in that area is driven by HMRC, which is the delivery partner, rather than trading standards.

The noble Baroness asked whether outlets engaged in underage sales will be targeted under this measure. My understanding is that, in each local area, trading standards looks at the priorities for targeting enforcement activity. It has powers when it comes to underage sales. The effect of this SI is to ensure that trading standards can make use of the enforcement mechanisms under track and trace, in addition to its powers on underage sales, plain packaging and other consumer issues. The priorities for trading standards visits are set locally, rather than nationally.

The noble Baroness, Lady Kramer, asked about e-cigarettes and vapes. Track and trace does not apply to them but, as she may be aware, we have a call for evidence open at the moment that focuses particularly on the use of vapes among underage consumers or children, which will look at that issue more closely.

On the question of the public health benefits of this measure versus revenue protection, they are mutually reinforcing. Illicit tobacco can have health implications, because it is not subject to the same health and safety regulations as legitimate products. It has been found to contain arsenic, mould and rat droppings, for example, so that issue is at play. The availability and affordability of tobacco products also impacts on smoking rates, which is why the duty that we have in place helps to reinforce our strategy to stop smoking. Making sure that people do not engage in the illicit market also reinforces that strategy.

I will not pretend that protecting the duty owed to the UK Government is not an important objective for HMRC; it is one that we continue to support. However, it mutually reinforces the wider ambition for England to become smoke-free by 2030. As I said, the Department of Health and Social Care announced a package of measures to cut smoking rates, acknowledging that we need to go further in this space. They include expanding access to new treatments, rolling out a national incentive scheme to help pregnant women quit, and using a new approach to health warnings.

I am conscious that I have not answered all noble Lords’ questions, but I undertake to follow up in writing. There is broad support for the SI, but I am sure that the answers to those additional points will help your Lordships to understand how it will have the impact that we all hope it will have. I therefore commend this instrument to the Committee.

Gross Domestic Product: Wales and the UK

Lord Livermore Excerpts

Thursday 6th July 2023 Lords Chamber

[Baroness Penn (Con)]

The classification of these matters is for the ONS, and I shall get the ONS to write to the noble Lord.

[Lord Livermore (Lab)]

My Lords, the Government’s approach to levelling-up funding has forced local authorities throughout the UK to compete in a process that lacks any published criteria. In the second round of allocations earlier this year, local communities across each of the four nations of the UK, including Wrexham, Moray, Bolsover and Belfast, each had bids rejected without any public explanation. Ahead of the third round of levelling-up funding, will the Minister work with ministerial colleagues, the devolved Governments and local authorities to improve the transparency of the bidding process so that cities, towns and villages across the UK can have access to funding that is both fair and seen to be fair?

[Baroness Penn (Con)]

Just to reassure the noble Lord with regard to Wales, in the first two rounds of the levelling-up fund, £330 million has been invested so far. That exceeds the commitment that 5% of those funds would be invested in Wales, but we always seek to improve our processes around those issues, and I shall happily commit to working with colleagues in the Department for Levelling Up to make sure that we build on the success that we have had so far with this fund.

Finance (No. 2) Bill

Lord Livermore Excerpts

Committee negatived & 3rd reading
Tuesday 4th July 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the Spring Budget that this finance Bill seeks to implement was billed as a “Budget for growth”, yet growth in the UK is barely above 0%, the UK remains one of only two G7 economies to be smaller than before the pandemic, and productivity growth in the UK is the second lowest in the G7. Now, despite growth flatlining, the UK economy is already overheating. Inflation is stuck at 8.7%: the highest in the G7 and the highest in the UK since 1990. Core inflation last month rose to 7.1% —a 31-year high—while in other advanced economies, including in the eurozone and the US, it has started to fall. With growth stalled, one of the Chancellor’s most senior economic advisers has even now called on the Bank of England to “create a recession” to deal with the UK’s persistent inflation problem—a far cry from a Budget for growth.

Last autumn, the Government’s disastrous mini-Budget sent markets into meltdown. Since then, things have only got worse. Today, with inflation higher for longer than in similar economies, the two-year gilt yield stands at 5.38%—a new 15-year high, and above its US equivalent. It is the hard-working people of this country who are paying the price. Interest rates have risen 13 times to a 15-year high of 5%. The average two-year fixed-rate mortgage has increased from 2.6% to well over 6%, and average mortgage costs will this year increase by £2,900 per year. These increases in mortgage payments come after 13 years of low growth and stagnant wages, the biggest fall in living standards since records began and 25 tax rises in this Parliament alone—increases that have pushed the tax burden to its highest level for 70 years.

Spending public money is about priorities; it is about making choices to spend wisely and tax fairly. That is important at any stage for any Government, but in the middle of a cost of living crisis, when household budgets are stretched and mortgage payments are rising relentlessly, after 13 interest rate rises and 25 tax rises, it is more important than ever that we see a fair tax system and a plan to raise the living standards of everyone, in all parts of our country.

Let us look at the priorities for this Government, as revealed by what is included in, and what is absent from, this finance Bill. Although the Bill contains no mention of introducing stealth tax rises for working people, as my noble friend Lord Sikka observed, we know that is exactly what the Government are doing. We know that, in the Budget of March 2021 and the Finance Act that followed it, the then Chancellor, now the Prime Minister, froze the basic rate limit and personal allowance for four years. In the recent Autumn Statement of 2022 and in the Finance Act that followed, the current Chancellor extended those freezes by a further two years. Now, following this Budget, the Office for Budget Responsibility has made it clear that the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to its level in 2013-14.

We called for the freeze in fuel duty and the provisions to ensure that large multinationals pay a minimum level of 15% tax in each jurisdiction in which they operate, so we of course welcome those measures, but while the tax burden for working people is up, other important measures we have been calling for to make the tax system fairer are nowhere to be found in this Bill. There is nothing to close the loopholes in the windfall tax on oil and gas giants, which we have been urging the Government to do for so long. We pressed for an extension of the energy price freeze for many months, and we were glad that the Government followed our lead in the Budget, but it is wrong to still leave billions of pounds of windfall profits for oil and gas giants on the table when those windfalls should be helping support families through the cost of living crisis.

Also missing is any action to tackle non-dom tax status. We believe that those who make Britain their home should pay their taxes here. That patriotic point should be uncontroversial. Yet, while families across the UK face higher taxes year on year, the Government are helping a few at the top avoid paying their fairer share of tax when they keep their money overseas. The non-dom rules that allow this to happen cost more than £3 billion every year. Ending that outdated, unfair loophole and replacing it with a modern system could fund measures to strengthen our NHS, childcare and the economy.

So there are no measures to reduce the tax burden on working people and no measures to make the tax system fairer. Instead, the Government chose to abolish the lifetime limit on tax-free pension savings. In the middle of a cost of living crisis, this giveaway for the very wealthiest costs £1.2 billion, benefits only those with the biggest 1% of pension pots and increases the value of a £2 million pension pot by some £250,000. As my noble friend Lord Eatwell said, it also opens up an inheritance tax loophole, whereby it is now possible to accumulate unlimited sums within a pension fund and pass them on entirely free of inheritance tax.

The Minister said that this measure was necessary to keep doctors working rather than retiring early, but, as the noble Baroness, Lady Kramer, said, the Government could have introduced in this Bill a targeted scheme to do just that. Indeed, that is what the current Chancellor suggested less than a year ago. The British Medical Association has said that a scheme targeted at doctors could be introduced at a fraction of the cost.

The Government claim that their policy is about keeping people in work. Yet, as Paul Johnson, the director of the Institute for Fiscal Studies, says, it will cost in the region of £100,000 per job retained, and as the Resolution Foundation says, it may

“actually encourage some people to retire earlier than they otherwise would have done”.

The Government’s approach and the choice they have made fails the test of providing value for money. In the middle of a cost of living crisis, a blanket giveaway for some of the very wealthiest in our country is simply the wrong priority for more than £1 billion of public money every year.

That same failure to spend public money wisely is evident again in this Bill’s proposal to reduce air passenger duty for domestic flights. Again, at a time when public finances are under severe pressure, when household budgets are stretched in all directions and when the cost of inaction on climate change grows by the day, it is baffling that this is the Government’s priority for spending public money.

While we need action to make the tax system fairer, a proper plan for growth is the only long-term, sustainable way to make our country more prosperous and the British people better off. The UK has the lowest investment as a percentage of GDP in the G7, so it is disappointing that, as the Office for Budget Responsibility reveals, this Bill’s changes to corporation tax and allowances will make no difference whatever to medium-term levels of business investment. Rather than a long-term permanent change, these changes are for only three years. As a result, they only bring forward investment rather than increasing its overall level. The Government’s policy paper on temporary full expensing, published on the day of the Budget, makes that clear. It says:

“This measure will incentivise businesses to bring forward investment to benefit from the tax relief”.


Meanwhile, the OBR forecast makes it clear that business investment between 2022 and 2028 is essentially unchanged as a result of these measures. If anything, there is a very slight fall. That cannot be good enough. That is why, as part of Labour’s mission in government to secure the highest sustained growth in the G7, we would review the business tax system and set out a clear road map to provide certainty and boost investment. We believe that the UK’s long-term underperformance on capital investment needs long-term measures as part of a tax framework that supports and incentivises investment.

A fairer and more certain tax system, underpinned by a long-term economic plan, is crucial to helping businesses invest and grow, but an ambitious plan for growing our economy must go further, and we have made it clear that this would be Labour’s first mission in government. At the heart of our plan to grow the economy, create jobs and wealth and make everyone in our country better off is the partnership we would build between government and business. We understand, as do businesses, that growth comes from the Government supporting private enterprises to succeed in the industries of the future. That is why we would support growth in the digital economy and the life sciences, update our planning system to remove barriers to investment and improve access to capital for new and growing businesses. We would make sure that government and business work together and invest together for the good of everyone in every region and nation of the UK.

Our country needs a fairer tax system after 13 years of low growth and 25 tax rises that have pushed the tax burden to its highest level in 70 years. Britain’s businesses need stability and certainty in order to boost investment, create jobs and grow our economy. Our economy needs a credible, ambitious plan for growth that gets us off this path of managed decline, provides security for family finances and makes people across Britain better off. That it does none of these things is perhaps the greatest failure of this finance Bill and the Budget it seeks to implement.

Corporate Profits: Inflation

Lord Livermore Excerpts

Thursday 29th June 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I have to disagree with the noble Lord. The higher rates of inflation that we see are seen in countries across the world. I believe there are nine EU countries with higher headline rates of inflation than the UK, and more than half of EU countries have higher rates of core inflation than the UK. The noble Lord talked about the importance of productivity to our future economic well-being; I could not agree more. We need greater investment to drive greater productivity, and we would not see that with the kind of policies advocated by the noble Lord, Lord Sikka, such as windfall taxes and other measures that would deter investment from our country.

[Lord Livermore (Lab)]

My Lords, to follow up on the Minister’s answer to my noble friend, as she said the IMF has described so-called greedflation as a Europe-wide phenomenon, yet despite the Prime Minister promising to halve inflation, Britain continues to be an outlier. The UK has the highest inflation in the G7. Last month, core inflation increased to 7.1% in the UK—a 31-year high—while in other advanced economies, including in the eurozone and the US, it has started to fall. The Government often argue, as the Minister has this morning, that responsibility for the UK’s persistently high inflation lies in global factors, but do these figures not tell us that it actually lies much closer to home?

[Baroness Penn (Con)]

I am afraid I am going to have to disagree with the noble Lord. I will not cite again the figures I gave to the House a moment ago. We have heard about the IMF in this Question today. Despite the challenges we face after the pandemic and Russia’s invasion of Ukraine, the IMF has noted that the UK has taken decisive and responsible steps to tackle inflation, and all major forecasters expect inflation to fall this year. We cannot be complacent about that, and that is why this Government’s number one priority is to bring down inflation.

Mortgage Charter

Lord Livermore Excerpts

Wednesday 28th June 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, when the Chancellor made his Statement on Monday, he did so against a rapidly deteriorating backdrop for Britain’s mortgage holders. Interest rates have risen 13 times to a 15-year high of 5%, but inflation is stuck at 8.7%. The average two-year fixed-rate mortgage has increased from 2.6% to well over 6%. Average mortgage costs this year will increase by £2,900. Multiple lenders have withdrawn all new mortgage deals from the market, just as 1.5 million homeowners are set to come off fixed-rate mortgages.

The Resolution Foundation estimates that home owners will pay a combined total of £15.8 billion more in mortgage payments every year by 2026. Data from the Institute for Fiscal Studies shows that, on average, mortgage holders will see their payments rise by £280 per month, equivalent to 8.3% of their disposable income, with some 1.4 million people losing a huge 20% of their disposable income. The latest data from the Bank of England shows that the value of outstanding balances with arrears increased by 9.5% in the first quarter of this year. These figures all show the level of pain among mortgage holders, which will only grow in the months ahead.

We should, of course, remember that those who have bought their own homes have done nothing wrong. They have worked hard, saved for a deposit and taken pride in having a home of their own. But the security that comes with that has, for many, turned to dread, as month after month they receive a letter from their lender telling them their bills are going up by hundreds of pounds a month.

The Government often argue that responsibility for this rapidly deteriorating picture lies in global factors, yet the figures suggest a different story. The latest data show that a typical household in Britain is now paying over £800 more per year for their mortgage than in Germany, £1,000 more per year than in Ireland and £2,000 more per year than in France. The UK has the highest inflation in the G7, with core inflation last month rising to 7.1% in the UK, a 31-year high, while in other advanced economies, including in the eurozone and the US, it has started to fall. Food prices in the UK are currently rising 20% faster than in France, 30% faster than in Germany and more than three times the rate in the US.

Interest rates first spiked dramatically last autumn when the Government gambled with people’s livelihoods in their disastrous mini-Budget, sending markets into meltdown. Since then, things have only got worse, as the instability the mini-Budget created has continued. Now, with inflation higher for longer in the UK than in other similar economies, the two-year gilt yield today stands at 5.24%, a new 15-year high, half a percentage point above that at the time of last year’s mini-Budget, and above its US equivalent. Markets now see a 70% chance of rates over 6% by the end of this year.

In this context, with millions of home owners struggling to pay their mortgages and with private sector rents rising by more than 10%, the Government’s new mortgage charter is clearly necessary, but it is also clearly insufficient. It is insufficient because, while many banks and building societies are doing the right thing by their customers, a purely voluntary set of measures will leave more than 1 million households missing out on the mortgage support they need.

Last week the Labour Party set out proposals to help people across Britain who work hard, pay their mortgages and rents and are now being hit hard by rapidly rising payments. Labour’s measures are compulsory, across the board and required of lenders. We would require lenders to allow borrowers to switch to interest-only mortgage payments for a temporary period, or to lengthen the term of their mortgage. We would require lenders to reverse any support measures when the borrower requests it. Were we in Government, we would bring in a renters’ charter to end no-fault evictions and introduce four-month notice periods for landlords. It is also important to say that we should not see a big fiscal injection into the economy at this time. If that happened, interest rates would go up even more, crippling the hopes and opportunities of the very people we seek to help.

I therefore ask the Minister the following questions. The Chancellor said in his Statement that the voluntary measures would cover 85% of the mortgage market. That leaves more than 1 million families who are not covered because their lender has not signed up to this scheme. Will the Government now consider making the measures in their mortgage charter mandatory? The Chancellor did not mention renters in his Statement, but many are paying higher rents because their landlords’ mortgage costs have gone up. What plans do the Government have to help them? Despite recent increases in the rates that lenders are charging on mortgages, there has not been an equivalent rise in the rate they offer on savings. This gap has grown by more than 50% for two-year products. What action will the Government take to ensure that savers see the full benefits from higher rates, just as borrowers are feeling the full pain? Finally, why does the UK continue to have the highest inflation rate in the whole G7? I thank the Minister in advance for her answers to these specific questions.

[Baroness Kramer (LD)]

My Lords, I rarely speak to such a thronged House. The number that we should focus on is core inflation, which removes the volatile issues over which we have little control and which has shockingly risen to 7.1%—a 31-year high, as the noble Lord, Lord Livermore, said. This number is key to interest rate rises and captures the sheer economic incompetence of the Government, as well as their wholly inadequate trade relationship with Europe post Brexit—the sharp drop in exports, British firms removed from supply chains, a collapse in business investment, the fall in sterling, customs friction driving up the cost of imports, labour shortages and incredibly low productivity.

Three groups of people will be particularly hard hit by the sharp and continuing rise in interest rates: mortgage holders with variable-rate or expiring fixed-rate mortgages, renters whose landlords face significantly higher mortgage costs and small businesses with short-term loan exposure. The mortgage charter will help some to push the pain into the future, but at a price. The hardest hit who face repossessions will feel the full force only after the next general election; I understand the Conservative strategy there.

Unlike this Government, I do not think it acceptable for the hardest hit, who face the destruction of their family finances, to take the bullet for the economy as a whole. Will the Government now put in place the emergency proposals that these Benches have made to assist those in the toughest position, who will get no help from the banks because they are regarded as unattractive customers? This is a voluntary system and the banks will use their standard approach of favouring customers with whom they want long-term relationships and denying opportunity to those with whom they do not.

Reversing cuts in the bank levy and the surcharge would do more than cover the cost of this, and I am with the noble Lord, Lord Livermore, in saying that the banks are really in a position of profiteering at this point because of their rejection of any pressure to share higher interest rates with their savers.

Inheritance Tax: Cohabiting Siblings

Lord Livermore Excerpts

Tuesday 20th June 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I am happy to look at the specific circumstance that my noble friend raises. I do not think the Government have an old-fashioned view of how families are formed in modern times; that is why the benefits of being able to pass on inheritance, if you are married, is also extended to those who are civilly partnered.

[Lord Livermore (Lab)]

At the last Budget, the Government abolished the lifetime limit on tax-free pension savings. In the middle of a cost of living crisis, this giveaway for the very wealthiest cost £1.2 billion and increased the value of a £2 million pension pot by some £250,000. It also opened up an inheritance tax loophole whereby it is now possible to accumulate unlimited sums within a pension fund and pass them on entirely free of inheritance tax. What assessment has the Treasury made of the number of very wealthy individuals who will now use pension funds as a vehicle for inheritance tax planning, and at what additional cost?

[Baroness Penn (Con)]

My Lords, I was disappointed that the party opposite did not support our changes to pensions, which were key for many public sector workers in respect of recruitment and retention for their posts. The primary purpose of a pension is to provide income or funds that individuals can draw on in retirement. If an individual dies before they get to use it for that purpose, we believe their beneficiaries should be able to have those funds, and that is why unspent pension pots do not normally form part of an individual’s estate. As the Chancellor said to the TSC after the Budget 2023, we will keep any changes to the lifetime and annual allowances under consideration and look at the impact.

Co-operatives, Mutuals and Friendly Societies Bill

Lord Livermore Excerpts

3rd reading
Friday 16th June 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I congratulate my noble friend Lord Kennedy of Southwark on the success of his Bill. I also congratulate Sir Mark Hendrick MP for steering it through the other place. I know that my noble friend Lord Kennedy has supported co-operatives for over 40 years, and I note that some of the principles of them are democratic member control, autonomy and independence—perhaps not principles you might normally expect to be championed by a Chief Whip, but my noble friend does so with ease. The Bill will help UK mutuals preserve their legacy assets for the purpose for which they were intended, maintain and encourage greater corporate diversity and build a more resilient economy—objectives on which I am sure we can all agree.

Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) (No. 2) Order 2023

Lord Livermore Excerpts

Thursday 15th June 2023 Grand Committee

I hope the Minister will help me through this, as I struggle to see where there are now realistic, meaningful limitations on HSBC’s ability fundamentally to avoid the application of the ring-fence to its activities, provided that it routes the funds through Silicon Valley Bank UK and also does not turn it into a retail bank, which I am sure is far from its intention.

[Lord Livermore (Lab)]

My Lords, in our debates on Report of the Financial Services and Markets Bill we discussed at great length the wider issues around ring-fencing. I said then that we fully support the steps taken by the Treasury, the Bank and the regulators in relation to Silicon Valley Bank UK. The system worked at pace to ensure that SVB UK could continue its operations.

Silicon Valley Bank UK serves a high concentration of life sciences and tech companies in this country, and those firms play an indispensable role in driving growth and innovation across our economy. We therefore recognise that granting an exemption to the ring-fencing regime for HSBC was necessary to guarantee the sale of SVB UK in exceptional circumstances.

However, I have three questions for the Minister. First, although it is welcome news that SVB UK will continue lending, it is clear that tech and life sciences firms need more options. What plans do the Government have to ensure that SVB UK is not the only way that such firms can access capital?

Secondly, the three conditions on SVB UK that have made this ring-fencing exemption possible appear to be sensible, but are there are any circumstances that could lead to additional conditions being imposed or to a reopening of the exemption in future?

Finally, the Government previously indicated that if parliamentary committees were to undertake an inquiry on SVB UK’s collapse or on wider issues with the banking sector, they would co-operate with that inquiry. Has there been any interaction on this matter, beyond March’s exchange of correspondence with the Commons Treasury Select Committee?

[Baroness Penn (Con)]

My Lords, I thank all noble Lords for their contributions. Although I think we all agree that the outcome reached with regard to Silicon Valley Bank UK was a good one, there are important questions about the process by which it was achieved and its implications.

The noble Lord, Lord Davies of Brixton, asked about lessons learned and, specifically, whether the regime worked as expected or as provided for when it was designed. Under the special resolution regime, various tools and powers are available to the Bank, the PRA and HMT to stabilise a failing institution. To deploy them, the authorities must be satisfied that: the bank is failing or likely to fail, by considering a number of factors, such as the value of assets and the ability to meet liabilities, as the noble Lord mentioned; outside the stabilisation powers, action will not be taken to prevent the bank failing; the exercise of the power is necessary, having regard to the public interest; and the objectives of the regime would not be better met by winding up the bank. Any use of the power that would entail risks to public funds must also be approved by His Majesty’s Treasury.

In the case of SVB UK, we can say that the powers were indeed used in a way provided for by the Banking Act 2009. The Bank of England, as the resolution authority, determined that the use of the private sector purchaser tool produced the best outcome, having regard to the special resolution objectives. In particular, it ensured that SVB UK’s customers were fully protected. As the noble Lord noted, the Treasury was consulted by the Bank of England before the private sector purchaser tool was exercised, as is also required by the Banking Act.

As I said, the authorities have a range of tools and options to choose from when deciding how best to manage a failing financial firm and contingency plan for a range of different scenarios. In choosing between the resolution tools set out in the Banking Act 2009, the Bank of England and the Treasury work closely together. The Bank is the UK’s resolution authority and is responsible for executing all stabilisation options provided for under the special resolution regime, with the exception of the temporary public ownership option, which is the responsibility of the Treasury.

Mortgage Market

Lord Livermore Excerpts

Wednesday 14th June 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, every day brings more bad news for Britain’s mortgage holders. Two-year fixed-rate mortgages are now approaching 6%, and HSBC and Santander are just two lenders to have withdrawn all new mortgage deals from the market. The average mortgage holder is facing an increase in payments of £2,300 this year alone and borrowers are now being warned that mortgage rates are set to rise even further.

Interest rates first spiked dramatically last year when the disastrous mini-Budget sent markets into meltdown, but the two-year gilt yield has now exceeded even those levels above its US equivalent. With 1.5 million home owners set to come off fixed-rate mortgage deals this year, facing severe increases in their repayments, why is UK inflation not falling as quickly as the Government promised and why is inflation higher for longer in the UK than in many similar economies?