Defence Funding

Lord Naseby Excerpts

Thursday 16th May 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

Of course, I do not have the answer to those questions because the Government are not intending to issue defence bonds. However, the noble Baroness mentioned one of the rationales for issuing green gilts—ensuring that the City of London is a global financial centre—and she is absolutely right. Indeed, we are the No. 1 financial centre for green finance.

[Lord Naseby (Con)]

Is my noble friend aware that investment in good defence companies is entirely compatible with ESG? Will she ensure that our fund managers in the City take a copy of what she has stated today?

[Baroness Vere of Norbiton (Con)]

I am very happy to reiterate what I said about the Government’s commitment to the defence industry, ensuring that it receives the amount of private sector investment it needs. My noble friend may have seen that, to that end, there was a joint government/ Investment Association statement to fund managers that gave exactly the clarity he seeks.

Building Societies Act 1986 (Amendment) Bill

Lord Naseby Excerpts

2nd reading
Friday 10th May 2024 Lords Chamber

[Lord Naseby (Con)]

My Lords, it is a particularly exciting morning as far as I am concerned. I got up, the sun was shining; I then heard that, thanks to my Government, we are out of recession; and the icing on the cake is this particular Private Member’s Bill. It is a very exciting Bill because the building society movement is a dynamic element in our society. We see that at every level today and, as we move forward, I reflect a little on the fact that I took through this House one of the few other mutual Private Members’ Bills in my more than 25 years in this part of our Parliament, the Mutuals’ Deferred Shares Act. That was done with the support of the Government of the day, as this one has been, and that is very exciting.

I had the privilege, as noble Lords will know, of doing my national service training as a pilot in Canada. It was the first time, as a young man, that I took out a very small savings account, in the depths of the prairies just outside Moose Jaw, with a credit union. That was my first experience and I was delighted, when I was elected as the Member for Northampton South, to find that there was an active credit union there as well. Of course, the building societies themselves are much more than those relatively smaller areas of the mutual savings market. I had the privilege of being chairman of the Tunbridge Wells Equitable Friendly Society, now the Children’s Mutual, and that element too needs some help in the future.

The important part of this Bill is that the Building Societies Association has been lobbying for changes for some considerable time. I say a huge and sincere thank you to my noble friends on the Front Bench: my noble friend Lady Penn when she was there and now my noble friend today. They have both listened and have now acted, and that is a huge step forward for the whole mutual movement. When we look at the market on the ground, yes, it has been a difficult time for the United Kingdom, but which is the sector of the savings market that is not closing branches and making life very difficult for the citizens of the United Kingdom? The one area that is not closing branches is the building societies.

I happen to bank with the Nationwide, which is the biggest of them, but there are a considerable number of building societies, all of which are really active in the savings market. I say well done to them for coming through this difficult period. If we look at mortgages in recent times that are helping younger couples get on the housing ladder, we see that the vast majority come through the building societies movement. I do not need to go through the Bill in any detail. I will just thank my noble friend on the Front Bench and His Majesty’s Government for picking up what has been quite a long journey to get to this stage, and my noble friend on the Opposition Bench for his skill in taking the Bill through and for paying tribute to the Member of Parliament in the other place for picking it up as well.

All I will say, finally, is that the Bill has my wholehearted support and I will do anything possible at any time, any hour, to make sure that it gets on the statute book.

Overseas Territories: Tax Haven Status

Lord Naseby Excerpts

Monday 26th February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

The Government absolutely recognise their crucial role in stemming corruption; we work very closely with the overseas territories on all sorts of issues when it comes to illicit finance. I refer the noble Baroness to the Written Ministerial Statement from my honourable friend in the other place, the Minister for the Americas, Caribbean and the Overseas Territories; in that is a helpful summary that sets out where each of the overseas territories is in relation to introducing a public, accessible register of beneficial ownership.

[Lord Naseby (Con)]

My Lords, I declare an interest as I have family living in the Cayman Islands. Is that particular territory not a good example that others should follow? It has a well-regulated jurisdiction with a tax-neutral framework, which supports taxes being paid where the profits are made. It has signed up to and is approved by FATF, on anti-money laundering, and also has a positive rating on the OECD Global Forum. Against that sort of background, does it not demonstrate that territories such as Cayman that are close to us have got their house in order? And, yes, against that background one would hope that any that have not would follow suit.

[Baroness Vere of Norbiton (Con)]

I am grateful for my noble friend’s support for the Cayman Islands, but it is just one of the many different overseas territories. Not wishing to detract at all from his words, I would say that the Cayman Islands is doing well, but I think it can do better. For example, the beneficial ownership register that the Cayman Islands is planning to put in place will still have a legitimate interest access filter. We believe that that is an interim step, and we would like to see fully open registers of beneficial ownership as soon as that can be implemented.

HMRC: Tax Returns

Lord Naseby Excerpts

Wednesday 10th January 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

First, let me clarify that I am not defending Fujitsu or any other software— I am not sure where the noble Lord got that from. It is the case that more people will be filling in self-assessment tax returns, but it is also the case that, given the current figures, it seems that people are perfectly capable of doing so. By 1 January, 6.49 million people had completed their self-assessment tax return; that is 200,000 more people than last year and well over half of those whom we would expect by this stage, so at this current time we are not seeing a significant drop-off of people being unable to fill in a tax return.

[Lord Naseby (Con)]

My Lords, is my noble friend aware that, having seen the Question on the Order Paper, I contacted a number of professional accountancy firms to ask them whether the returns from HMRC are comparable to last year or not? The consensus appears to be that HMRC is running at least four to six weeks behind last year. Is there a particular reason for this?

[Baroness Vere of Norbiton (Con)]

No, and I would be very happy to look at any evidence that my noble friend has. My understanding is that, for more complex tax matters which require the intervention of an HMRC adviser, those tax returns are dealt with within about three months.

Co-operatives, Mutuals and Friendly Societies Bill

Lord Naseby Excerpts

3rd reading
Friday 16th June 2023 Lords Chamber

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

My Lords, in these few brief remarks, I pay tribute to the Bill’s sponsor in the other place, Sir Mark Hendrick, the Member for Preston. I also pay tribute to Peter Hunt, Mark Willetts and all the team at Mutuo, an organisation that has done fantastic work in the co-operative sector over recent years and had many bits of legislation passed. They have done a wonderful job, and we thank them very much for all their work.

The Bill is passive: it requires no co-op, mutual or friendly society to do anything whatever, but it enables them to take action, if they want, to protect their organisations and prevent unwanted attempts to demutualise. So it is a welcome piece of legislation. I thank the Government and the Opposition for their support, and the noble Lord, Lord Naseby, for his support on these matters over many years. I also thank the Treasury and Treasury officials for their support. I beg to move.

[Lord Naseby (Con)]

My Lords, this is a vital Bill for the mutual movement of the United Kingdom. It prevents any predator trying to take away the capital put in by individual members of the society, and it is absolutely vital that this goes through. I recognise that another element sitting on the statute book that complements the Bill is the Mutuals’ Deferred Shares Act 2015, which I had the honour of taking through this House some time ago. I say to my noble friend on the Front Bench that we in this country now have a huge opportunity to benefit in the same way that Canada and Holland have from the mutual movement. It is ready to move forward, and we now look to His Majesty’s Government to implement the Bill and take the mutual movement forward. I particularly thank the noble Lord on the Front Bench on the other side of the House for all that he has done to take it this far.

[Lord Fox (LD)]

My Lords, briefly, it is a pleasure to follow the noble Lord, Lord Naseby, whose speech I agree with completely. The noble Lord, Lord Kennedy, and his colleagues should be congratulated on bringing forward the Bill. It is a passive Bill, and it is no reflection on him but, sadly, it is too late: too many mutuals have been cashed in, with the current generation benefiting from the prudence of past generations. Anything that we can do to halt that decline is excellent. Turning to the Front Bench, I think that this is an important sector that has largely been undervalued over past decades. Taking the theme of the noble Lord, Lord Naseby, I think this is an opportunity to kick off with this sector of our economy and perhaps grow it and make it more valuable, which it undoubtedly has the potential to be.

Mortgage Market

Lord Naseby Excerpts

Wednesday 14th June 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I hope the noble Baroness will take some comfort from the fact that mortgage arrears and repossessions remain below pre-pandemic levels. I reassure her that, if a borrower falls into financial difficulty, guidance from the FCA requires firms to offer tailored support and deal fairly with customers facing difficulties in meeting their payments. The Government also have a range of schemes in place to support borrowers, not least the support for mortgage interest scheme.

[Lord Naseby (Con)]

As my noble friend knows, the mortgage market is affected by interest rates, both the current rate and, even more importantly, the forecast rate. Is she aware that the pricing of housing is falling UK-wide, and falling extensively, partly because of mortgage costs but partly because of reasons that are nothing to do with mortgage cost: the policies of the Secretary of State, Mr Gove, which are very anti big builder? They are also causing difficulty in the rental market.

In that situation, with growth just showing the ability to come through, which is very encouraging, and with wages just beginning to show some positive response to the situation, is it not time that the Bank of England—although we are not responsible for it—recognise that rates should be held for the moment and allow the market to settle? Given the two factors I have mentioned—growth growing and inflation falling— I hope the interest rates recommended by the Bank of England will fall.

[Baroness Penn (Con)]

My Lords, interest rate decisions remain a matter for the independent Monetary Policy Committee of the Bank of England, but I say to my noble friend that high inflation is also bad for the economy. To have high growth we must first have low inflation, so we absolutely support the Bank of England in its task of pursuing the 2% inflation target and the difficult decisions it will have to take to achieve that.

Financial Services and Markets Bill

Lord Naseby Excerpts

Report stage
Tuesday 13th June 2023 Lords Chamber

Finally, there is the behaviour of banks and how fraudsters pick up on it quickly. The instance that was brought to my attention was the behaviour of banks divesting themselves of accounts. Fraudsters were using this, saying “Pay this genuine-looking invoice, but the bank has closed down my normal account so please pay it into this other account”. Since there are so many instances of banks divesting themselves of people who they find slightly a nuisance or whatever, that rings true, and it helps the fraudster to con the person into making a payment to another account. I think that those kinds of things that underlie the statistics also have to be looked at. I hope that the Government can ensure that it is not just bald statistics that are now disguising the deterrent effect.

[Lord Naseby (Con)]

My Lords, this amendment has to be seen in the context of the statement by the Payment Systems Regulator on 7 June, which was only a few days ago. It seems to me that that is the key starting point. I say to my noble friend on the Front Bench that that statement is enormously welcome. It states clearly that:

“For the first time, our new reimbursement requirement will introduce consistent minimum standards to reimburse victims of APP fraud”.


I do not want to detain the House by going through some of the detail of that because that is not what we are doing here today, but it seems to me that that is a significant step forward.

Secondly the PSR says quite clearly:

“We are increasing protections within Faster Payments”,


and that is also a key issue. There is a timeline in the statement which states that there will be consultation on:

“The allowable claim excess that Payment Service Providers can charge”.


That is to be done in August and the whole lot will be finished by October. I wish it were to be done a little quicker, but it seems an excellent start.

The only part of the amendment which I think is extremely valuable is the one-year report. Frankly, with the volume of illegal activity that there is at the moment, if it were me—and I was the marketing director at a couple of the companies I used to work for—I would not wait a year; I would like to see what happens within the first six months of the new regime being in place. Later on, you can decide if there is some consistent reason that you move to a six-month situation.

Finally, I would like to know exactly what the starting point was before the new regulations came in. At the moment, I do not know that we have any official statistics. We may do and, if so, it would be very helpful to the House to know, not necessarily at this moment but in the near future, the starting point for the number of these terrible situations that people are being faced with today.

[Lord Livermore (Lab)]

My Lords, the Payment Systems Regulator is now putting in place requirements to ensure more consumers will receive a refund if they fall victim to authorised push payment scams. This is very welcome. Many banks have already taken steps to make customers aware of the risk of scams, but the sophisticated nature of many such scams means there is a need for even stronger efforts to prevent fraud occurring in the first place. Not all of the detail is yet settled, with consultation on key aspects of the new scheme to follow later in the year, but we hope the Minister can give an indication of the levels of protection likely to be offered.

We welcome the tabling of Amendment 94 by the noble Lord, Lord Vaux, which we understand to be a probing text. As the new system beds in, it will be vital for banks and other financial institutions to collect data and share that with the regulator, in order to inform future changes to guidance and regulation. The amendment also proposes public reporting of data to enable consumers to see which institutions have a good or bad track record. This is an interesting idea and we look forward to hearing the Minister’s response on this specific point.

While APP scams fall within the financial services realm, anti-fraud initiatives cut across departments and legislation. That is why one of our priorities for the Online Safety Bill is to ensure robust media literacy provisions, so internet users are able to better identify which articles, websites or emails are legitimate. With a significant amount of financial fraud taking place online but with the limited scope of that Bill, we hope the Minister and her department will engage with the Online Safety Bill as it approaches Report stage. Scams cause a significant amount of emotional distress, as well as coming with financial costs, so we hope that the Government and the regulators will do everything possible to keep ahead of the curve.

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[Lord Clarke of Nottingham (Con)]

I will not make a speech giving my experience of American Express, but it is remarkably like that of my noble friends Lord Trenchard and Lord Forsyth. I decided that I could not be bothered with such outrageous burdens being placed on me. Having had my card from some time in the 1970s, I have allowed them to cancel it. Having heard of my noble friend’s experience, I am rather glad that I just let it go and reverted to using my Barclays visa card on all occasions.

[Lord Naseby (Con)]

I will take my noble friends’ points further. My experience was identical to that of my noble friend Lord Forsyth. Frankly, I have cancelled the whole thing; Barclaycard does a far better job.

[Viscount Trenchard (Con)]

Both my noble friends have a much more sensible approach to this matter.

I echo the other remarks of my noble friend Lord Forsyth, whose Amendment 101 I was minded to support. I too am most grateful to my noble friend the Minister for listening to the opinions of your Lordships expressed in Grand Committee. I added my name to Amendment 227 in Grand Committee, tabled by my noble friend Lady Noakes. Her amendment was debated on 13 March alongside Amendment 215, tabled by my noble friend Lord Moylan and other noble Lords. I would have added my support to my noble friend Lord Moylan’s Amendment 105, but it was too popular and there was no room.

My noble friend the Minister will recognise the disproportionate difficulties which UK PEPs must endure as a result of the money laundering regulations 2017. On balance, I would have preferred to be excluded by virtue of being a UK citizen, but my noble friend has decided that exclusions will apply to domestic PEPs, which does not sound so nice, but will achieve the same outcome.

Unfortunately, it will take years for British citizens resident abroad who are connected to UK PEPs to be released from similar regulations in many different jurisdictions. For example, my son has found it impossible to be appointed as a bank account signatory in Taiwan and South Korea. However, my noble friend the Minister’s amendment should make the life of UK PEPs easier. I am interested to see whether, in a year’s time, the amendment proposed by my noble friend Lord Moylan will be the triumphant, most successful and best one of these. In any event, I am most grateful to her for taking up this point, as she said she would.

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[The Earl of Erroll (CB)]

My Lords, I should like to add to this because I have had enough trouble with the PEPs issue for a long time. First, I thank the noble Lord, Lord Moylan, for explaining an important point about why I can get no information from Northern Trust on administering an investment trust in which my wife owned shares in Ireland. We had to get probity in Ireland, but the trust will still not release the money and will not say why. I am getting an absolute blind spot. Even Barclays, which wants money over here to pay off something does not seem to be getting any joy. I suspect that it is because the trust is not allowed to tell us that we are under investigation. That is wrong. If there is a problem, we could unlock it if the trust could just say, “We are trying to investigate this because we think we have to”.

I personally find it offensive that I am deemed to be a risk and a crook. I thought that in this country we were innocent until proven guilty. Actually, this is the other way around. Just because I happen to be a Member of the House of Lords, it is assumed that I am corrupt. This has caused a lot of problems for me and my family, but I am not going any further into detail. We have heard good stories from others, but I do not understand why we are PEPs. I have no access to government contracts and there is no reason to bribe me, sadly. I do not understand the logic behind that, and something should be done. The classification of PEPs should be looked at and revised because a lot of other people who are not PEPs are in places handling government contracts. As far as I know, they are not under permanent scrutiny, so I think you have got the wrong people and it is a nightmare.

[Lord Naseby (Con)]

My Lords, the noble Lord, Lord Eatwell, mentioned the Crown dependencies. I want to ask my noble friend on the Front Bench about the position of the British Overseas Territories.

[Baroness Chapman of Darlington (Lab)]

My Lords, I accept that we are politically exposed people—of course we are—and we can be bribed, so it is right that there are rules around this. This topic has attracted a lot of interest throughout the passage of the Bill, along with a number of questions and debates. I completely understand why that is.

While the enhanced checks faced by politically exposed persons are often onerous, as we have heard—all power to the elbow of the noble Viscount, Lord Trenchard; well done to him for finding the names of two actual human beings to speak to at American Express, and I hope he gets his situation resolved—it is vital that this country maintains strong anti-money laundering regulations and acts in a manner consistent with international standards. Unfortunately, to an extent that involves us, but I think the Government’s amendments in this group do what is needed in making the distinction, as do many other jurisdictions, between domestic PEPs and those from other countries, which is consistent with the Financial Action Task Force guidelines.

We welcome the support for the amendments from the noble Lord, Lord Forsyth, and my noble friend Lady Hayter of Kentish Town, both of whom have raised this issue consistently for some time. Most of all, though, it is right that we thank the Minister for bringing the amendments forward. She has worked hard to try to resolve colleagues’ concerns on this issue, and we hope that those will be dealt with by the upcoming changes to the regulations and the accompanying guidance.

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[Lord Naseby (Con)]

I declare an interest as trustee of the Parliamentary Contributory Pension Fund. As a trustee, but also on my own behalf, I have no concern about pension funds being incentivised. We are there, as trustees, to look after our pensions in the future. Incentives are one thing, but, as a trustee, I am not sure I want to be dictated to and told I have to consider high-growth funds in particular.

When I look at proposals from our fund managers, I look at the return expected over a period of time. Obviously, we are long-term investors, and it may be that a firm has the potential to be one that produces excellent returns. I do not think, on the whole, that pension funds are there to help smaller and newly created firms grow. On the other hand, I can say quite honestly that proposals are in front of us in relation to infrastructure which have considerable merit. I suspect that positive decisions will follow in due course. I ask my noble friend and the Opposition to bear that in mind.

I will also comment on the proposed new subsection (3) on consultation. In addition to the parties listed, I would like to see the trade associations of, for instance, investment trusts, the associations of fund managers and a number of other organisations in the financial world which group together. If we are going to help our country in terms of growth, consultation should be with those at the coalface and those varying funds, et cetera.

I have reservations. I understand the driving force behind the amendment, but it does need some refinement before it is considered as a possible way forward.

[Baroness Hayman (CB)]

My Lords, I support this amendment, which fits very well alongside the discussions we had on the fiduciary duty of pension fund trustees. I will not push those amendments to a vote, but the work being done, as the Minister described, on having a clear and close look at the fiduciary duty for pension fund trustees would complement this amendment. I do not think it is threatening in any way to pension fund trustees; it is very carefully framed and asks the Treasury to publish a review on incentivisation. It is perfectly possible, in the words of the noble Lord, Lord Naseby, to fine-tune it after the review—that is the purpose of the consultation.

This amendment is worth while. The noble Baroness, Lady Chapman, referred to the UK Infrastructure Bank and its recognition of nature-based projects and types of infrastructure as assets that could be invested in. I was involved in that amendment, on which the Minister, in her usual helpful style, listened and took action. I hope that she will similarly recognise the virtues of this proposed new clause and I support the amendment.

Financial Services and Markets Bill

Lord Naseby Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

[Lord Naseby (Con)]

My Lords, I would just like to refer back to the fact that from 1992 to 1997, I had the privilege in the other place of being Chairman of Ways and Means and Deputy Speaker. At that time, I received considerable briefing from the Officers of the House and other senior parliamentarians, and the procedure we have in Amendments 116 and 117 is, in my judgment, entirely appropriate in instances where a Bill of what I might refer to as super-national importance is going through. I cannot think of any Bill at this stage in a Parliament that is more important than this one. We have the whole of the City of London in favour of the principle of the Bill. That is absolutely fundamental to the success and growth of our nation, and to have the financial sector behind it, alongside His Majesty’s Government, seems to me entirely appropriate. Here, we have a situation that may occur—I hope it does not. However, if it is felt strongly by parliamentarians that something that His Majesty’s Government and Ministers are bringing forward should go through the super-affirmative procedure, that is to be welcomed and recognised. If it does—and I assume it would go through—all that does is strengthen the Government of the day, which is why I very much support this amendment.

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[Baroness Drake (Lab)]

My Lords, I declare my interests as trustee of DB and master trusts. I will speak to Amendment 93. Government Amendment 4 is welcome because it recognises the necessary direction of travel on disclosure requirements on sustainability, but the problem is that it is not sufficient. It gives the Treasury the power to issue a policy statement on SDRs and to require the regulators to report against this, but the FCA does not have the powers to actually implement SDRs. As Amendment 93 proposes, there is a need to give the FCA the power to publish guidance on how asset managers must consider the long-term consequences of any decision; consider the impact of climate, nature and society on their investments; consider the impact of their investments on climate and nature; and publicly report on their considerations.

It is interesting that the explanatory statement accompanying the published government amendment states that it supports

“the regulation of disclosure requirements relating to sustainability”

by requiring the FCA not only to have regard to Treasury policy but to inform a policy statement by the Treasury. It is difficult to see how the FCA could optimally inform Treasury policy if it does not set guidance on expected content and open reporting by asset managers on the impact of their investment decision-making.

Confusion among fiduciaries about the extent of their duty to consider such impacts is not limited to occupational pension schemes; it runs across the length of the investment chain. The FCA has broad powers to issue guidance under Section 139A of the Financial Services and Markets Act 2000, but there is still an ambiguity. Amendment 93 gives the FCA the explicit power to issue guidance on the disclosure of considerations of sustainability impacts as a core part of the investment managers’ duties. This is not inconsistent with the existing duty on trustees, in Regulation 2 of the occupational pensions investment regulations, to report on how they have complied with the Section 35 duties of the Pensions Act 1995.

The proposed FCA guidance is not legally binding: regulated firms would be free to diverge from it, but there is an expectation that they would need to explain why they have done so. There is a need to apply the guidance to contract-based personal pension schemes as well, to avoid the risk of regulatory arbitrage between a weaker FCA regime and a more robust TPR disclosure regime.

The concept of fiduciary duty borne by those responsible for the best interests of pension scheme members is evolving, and, as we heard, the Government’s updated green finance strategy of 2023 includes a commitment to review pension trustees’ fiduciary duties and stewardship activities. That trustees must act in the best interests of scheme members must not be a principle in doubt or, indeed, overridden. The key issue is what “acting in savers’ best interests” means in law for fiduciaries, and the extent to which it includes stewardship and ESG engagement. If fiduciaries ignore the impacts of investment strategies on society, climate and nature, or vice versa, those major externalities will eventually impact them at a later date.

In seeking more productive investment by the finance sector, the Government should acknowledge that pension funds are not the only decision-maker or the beginning and end of the problem; asset managers have an equally key role to play in managing impacts and considering the long-term consequences. Amending FCA regulation powers to guide open reporting on these matters will encourage investment away from environmentally and socially damaging activities, and towards supporting efficient transition to net zero, nature protection and healthy societies, in a way that is in the savers’ best interests and that supports the successful transition of the wider economy.

Guidance from regulators is required along the length of the investment chains as risks become more acute. Pension schemes contract with fund managers to manage assets. If schemes are expected to consider the sustainability of their investments, they need fund managers to support them by undertaking that activity too. Trustees’ ability to discharge their ESG and stewardship responsibilities to greatest effect has a dependency on how regulators expect asset managers to discharge their duties. Expectations placed on pension funds and asset managers are a complement to, not a substitute for, government policies on efficient transition to a sustainable economic future. Government regulations that perversely drive greenwashing or green asset bubble risk are equally unsustainable.

The Government want to see more productive investment by the financial sector, but mandating how citizens’ private assets are invested would displace trustee fiduciary duty with state control of private assets, inviting litigation and risking impacting public attitudes to private saving. But, in giving the FCA power to guide the content and require open reporting on sustainability, Amendment 93 can assist confidence in aligning members’ best interests with increasing productive investment. I commend it to the House.

[Lord Naseby (Con)]

My Lords, I welcome Amendment 4. Having listened to my noble friend on the Front Bench in Committee and subsequently, I know that she played a major role in this absolutely vital amendment coming forward.

The noble Baroness, Lady Wheatcroft, was quite right. Let us reflect on two key areas where we desperately need the SDR policy statement. First, in terms of the energy market, is the national grid. Today, all sorts of decisions have to be made by the energy market, whether on nuclear, solar or whatever else. People in that market want to know at what point the national grid will be in a position to be connected to them—that is absolutely key to sustainability.

Secondly, in my judgment, the public in general are confused and have no understanding of what they should do about making their contribution to net zero with the condition of their property. Some of us had a good briefing on that situation from the building society movement today. We must address this. But the principle is here, and I thank my noble friend on the Front Bench for how it has come forward.

I declare an interest as a trustee of the Parliamentary Contributory Pension Fund. Noble colleagues will not be members of it unless they have been in the other place or are ministerial colleagues. Nevertheless, I can assure anybody who knows anything about that particular area that, in my judgment, our fund—given the care and attention paid by its chairman and the members in terms of the time put in freely and the trouble that is taken to ensure that we listen to asset managers, question asset management and challenge the advisers we have—is aware of government policy, whatever it may be. Yes, we welcome guidance and particular in- depth information. But—and this is a very big “but” in capital letters—our primary duty is to the membership and the beneficiaries, and we must never forget that. We are not there to take risks, unless we really have to take them, and we debate these issues.

All I will say in relation to the forestry dimension is that I do not welcome that particular one more than any other. I want concrete material that is of benefit to those who are the beneficiaries. With that, I do not think that I need to say any more.

Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023

Lord Naseby Excerpts

Tuesday 2nd May 2023 Grand Committee

Finally, I shall make a more general observation about consumer protection. The SI before us will regulate promotion but will not educate, inform or warn. The FCA website tries to do those things. I would be interested know what the traffic to those FCA website pages is and how it measures their effectiveness. When I looked at them, they seemed to me to be a little overcomplicated and perhaps rather difficult to understand. It would be better to be more direct and, more importantly, to have an effective outreach and education campaign that does not chiefly rely on visits to the regulator’s website. I am sure that the Minister has noticed that many tokens are obviously directed at young people, who are perhaps not the most natural or frequent visitors to the FCA’s site and are probably most at risk in making token purchases. I would be grateful for the Minister’s thoughts on the matter. Finally, I repeat that we support both the SIs we are discussing.

[Lord Naseby (Con)]

My Lords, I am going to talk to the crypto assets SI only. This is a vital SI at this point in time. I am delighted that the objectives are,

“improving consumers’ understanding of the risks associated … and ensuring that cryptoasset promotions are held to the same standards as for broader financial services”.

The taskforce reported way back in 2018 and, my goodness, the world has changed dramatically since then. Paragraph 7.3 of the Explanatory Memorandum records what happened to the market a few months ago. Recent failures happened in November and, for all we know, there may be some just around the corner.

My noble friend and those who decide these things are absolutely right that the FCA should now be involved. However, I, too, question whether the four-month gap after the SI is passed is really necessary. In today’s modern world, I would have thought three months would be the absolute maximum—if even that long is needed. We also know, as highlighted in paragraph 10.3, that since the publication of this SI, the Government have recognised

“that risks to consumers have increased”

and they are still increasing.

I am no longer involved in the world of advertising and promotion, but I was in a previous incarnation. People are extraordinarily creative when it comes to financial promotion. Direct mail, in all its varying forms, and telephonic communications, in all their current sophisticated manners, are a very difficult area to control and to have a regime for. Therefore, His Majesty’s Government must look at this very carefully, take the best advice of those doing the communicating—I hope my noble friend has access to the genuine people who are communicating—and look at what developments are happening in communication. In paragraph 13.4 the Government quite rightly say that they do

“not have an estimate of the number of small or micro businesses in the UK that are liable to be affected by this measure”.

I know from experience that number is growing. Therefore, this is needed urgently. Again, I emphasise that four months is a little too generous.

Finally, I see in paragraph 14.3 that the Minister with responsibility for small business, enterprise and employment has claimed that this SI does not need a review clause. If there is a market that really needs a review clause, this one is a wonderful case history. I cannot believe that we really believe that. It is up to His Majesty’s Government to decide at what stage there should be a review, which is entirely right, but this is a market that needs to be kept in total focus, otherwise things will go wrong again.

[Lord Tunnicliffe (Lab)]

My Lords, I am grateful to the Minister for introducing these orders. Let me also express thanks to the Secondary Legislation Scrutiny Committee for flagging the orders as instruments of interest in its 36th report of the Session. As the Minister outlined, the first order brings crypto assets into the regulatory regime for financial promotions. This is not the first time we have debated the risks associated with crypto assets, and I doubt it will be the last.

As the Explanatory Memorandum notes, crypto assets have been subject to severe market instability in recent years. Some assets have seen significant reductions in their value, and we have also witnessed the failure of several high-profile firms, including the bankruptcy of FTX late last year. With that instability in mind, we welcome any steps to reduce the risk posed to consumers, particularly through the misleading advertising which seems to have become commonplace as crypto popularity has soared.

However, this order is only one piece in an increasingly complex regulatory puzzle, with supplementary steps being taken through other vehicles, including the ongoing Financial Services and Markets Bill. I hope the Minister can provide assurance that the Treasury and the regulators are moving as quickly as they can in this area. Financial regulation is iterative and new measures need to be properly consulted on, but the Minister will understand concerns that remaining regulatory gaps will continue to be exploited. The implementation period for this measure has been shortened, which appears to be a sensible step. Can the Minister comment on the likely implementation period for related future measures?

The Explanatory Memorandum helpfully explains the exemptions granted to UK-based businesses on the FCA’s anti-money laundering register. However, the SLSC’s comments on the exemption raise an important question: if it is intended to be temporary, why has no end date been specified? I appreciate that this order is part of a bigger package but, in the interests of good legislating, can the Minister identify at what point a review of the exemption is likely to be carried out?

Finally on this topic, the Minister will be familiar with the suggestion that the Government regulate stablecoins in a similar way to bank deposits—that is, protect funds under the Financial Services Compensation Scheme. What consideration, if any, is the Treasury giving to that proposal? If the Government do not plan to take that approach, how will the Treasury and the FCA ensure that consumers are aware that their stablecoins holdings are not protected?

The second order relates to commodity derivatives and emission allowances, specifically when relevant firms will need to be authorised as investment firms. The Explanatory Memorandum promises

“a simpler and therefore lower cost regime”,

with the EU-derived markets in financial legislation regulations rolled back in favour of a new principles-based approach, to be implemented by the FCA. Again, this is part of a broader reform package being undertaken by the Treasury, with part of that package contained in the Financial Services and Markets Bill.

We recognise that the current ancillary activities test is too complicated and burdensome. However, can the Minister outline the proposed timelines associated with these changes, with a particular focus on the FCA’s creation of the new regime? As with crypto assets and many other areas of financial regulation, the FCA is being left to do a lot of heavy lifting but questions remain as to whether current parliamentary oversight of the financial regulators is sufficient. I realise that there are ongoing discussions on this subject between the Minister and interested colleagues across the House, but does she feel that we are getting any closer to a satisfactory outcome? While the risks associated with changes to these elements of financial regulation might be low, that should be as much a judgment for legislators as it is for Ministers and regulators. I hope that we will be able to achieve consensus on that matter as the aforesaid Bill proceeds to Report.

We support the passage of these orders but, as I am sure the Minister will acknowledge, they do not offer the final word on either subject. These are small pieces of a much bigger, more complicated puzzle. I hope that she will be able to speak to that bigger picture in her response and provide both answers and reassurance around some of the issues raised in this debate.

Co-operatives, Mutuals and Friendly Societies Bill

Lord Naseby Excerpts

2nd reading
Friday 24th March 2023 Lords Chamber

[Lord Naseby (Con)]

My Lords, I rise to support the Bill and congratulate all those who have been involved in its passage thus far. Mutuals have been part of my political life ever since I got involved in politics: I am member of the Co-op and bank with the Co-op, the NFU looks after my woodlands, and I remain actively involved in other aspects.

I had the privilege of being chairman of the Tunbridge Wells Equitable Friendly Society from 1998 to 2005, along with a man called David White. He and I created the brand of the Children’s Mutual, which was, in my judgment, the most successful unit to sell child trust funds. I am saddened that that very successful concept was replaced by the junior ISA, which did not have the same vision and excitement for young people. That is part of the history, really. I am currently one of the vice-chairmen of the All-Party Group for Mutuals.

I look particularly at Canada, where I have a brother, and at the huge success of the mutual movement there: it is growing, dominating the insurance market there, with a real mutuality of work on the ground. In a lesser sense, one sees the same in Holland and in Europe. I would like to see that happen in my country.

In today’s world, the mutual movement faces two challenges. One is how to utilise retained capital, which is addressed in the Bill, and the other is raising capital. The latter element took me into the legislative process in 2015, when I took a Bill through both Houses with the support of my noble friend on the other Bench—he is now not on the Front Bench, but nevertheless he has been hugely supportive, and I underwrite his involvement in the mutual movement.

I previously had a Bill called the Mutuals’ Redeemable and Deferred Shares Bill. That was to address the issue of raising capital. At that time, you had a situation where, of the five elements that make up the mutual world, building societies, credit unions and co-operatives had already been helped by the Chancellor at that time, but two had not: the mutual insurance companies and the friendly societies. My worry and theirs was that, if we did not do something, they would wither on the vine. Indeed, when one looks back, it was not so many years ago that the mutual insurers had about half the market; today, it is 10%, and I suspect that that is a little generous.

At any rate, that Bill was supported by Her Majesty’s Government, and I still pay tribute to the then Chancellor, Sajid Javid, who helped in taking the Bill through Parliament. We hit certain problems, particularly to do with the requirements of Solvency II and whether the capital raised would be eligible for tier 1 capital, which was absolutely vital for development capital. However, after much negotiating, we got to a situation where we had to remove one element, the redeemable element, because, basically, an election was coming.

When we got that on the statute book, we thought we had got a long way and that it was all going to happen smoothly. Lo and behold, it never happened, because it required a statutory instrument to implement the Act, and that was not made due to concerns at the time that issuing these shares would alter the tax liability of mutuals. So the Bill is still there as an Act. It is still sitting there and I hope something will happen about it, but I will come back to that in a second.

I now turn to the current bill. It is not a huge Bill; it is very much a focused Bill, and that is to its great credit. I praise Sir Mark Hendrick and others who have taken it thus far. The interesting part of what has been happening in the team that has been working on it is the letter—I cannot see the date on it—from Minister Andrew Griffith MP to Gareth Thomas MP, who is chairman of the All-Party Parliamentary Group for Mutuals. The last paragraph is absolutely key. It says:

“Going forward, the Government aims to develop a modern and supportive business environment to set mutuals up for future growth and success and is currently exploring the options for reviews of key legislation underpinning the sector. This will allow the appropriate time and space for engagement with mutuals and regulators to ensure there is consensus on the best way forward.”


That is a very exciting prospect.

I see my noble friend on the Front Bench. It has been a privilege to work with her on the Bill we are doing in the House at the moment on financial matters.

We also have a practical problem. I think every one of us has probably shopped at John Lewis. It is interesting that the chairman, Dame Sharon White, was deeply involved in the early stages of the child trust fund, so she must feel quite strongly that somehow she needs to find a means of recapitalising John Lewis. That is another challenge. Speaking personally, I think John Lewis is part of life in the United Kingdom, and I would like to see that organisation prosper. I think that should basically be at the back of His Majesty’s Government’s review of this whole area.

I read economics at Cambridge—I found a subject I was reasonably good at, having not been terribly academic at school. I was reminded, as it was quoted in the papers recently, that John Stuart Mill hoped that employee ownership would end the standing feud between capital and labour. That is the driving element that I feel as well. I will give this Bill all possible support and do anything I can to help it move forward, and anything I can to help His Majesty’s Government as they look at the broader aspect mentioned in the letter I quoted. I just remind my friend the noble Lord, Lord Kennedy, that when he supported my Bill he said it was the second time. This time it will be third time lucky, I hope. With that, I offer myself as a servant to do anything I can to put this Bill on the statute book.