National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Sharkey Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

Moved by

[Lord Sharkey]

3: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”.(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means—(a) a provider of education or childcare to children under five years of age—(i) registered in England in the early years register maintained by the Office for Standards in Education, Children’s Services and Skills,(ii) registered in Wales with Care Inspectorate Wales, or(iii) registered in Scotland with the Scottish Care Inspectorate;(b) a university;(c) a provider of further or higher education;(d) a registered charity;(e) a housing association;(f) a small or micro business, as defined by section 33 of the Small Business, Enterprise and Employment Act 2015; (g) a town council;(h) a parish council;(i) a business in the hospitality sector.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statement
This amendment provides that certain specified employers would continue to pay contributions at the current rates. The specified employers include early years settings, universities, charities, and small businesses.

[Lord Sharkey (LD)]

My Lords, this amendment, in the names of my noble friend Lady Kramer and myself, adds to the list of exemptions from the proposed increase in employer national insurance contributions. I thought I would make that clear at the outset, although I see that the noble Lord, Lord Eatwell, is temporarily not in his place.

The arguments in favour of the nine proposed exemptions in this amendment were discussed in some detail in Committee. What the nine exemptions have in common is that they protect services that are vital to community life and are likely to suffer grave damage if the higher employer NIC is introduced. These services include early years education, charities, housing associations and town and parish councils. Each of these organisations makes a vital contribution to our communal life, and they also have in common the fact that most have no—or no significant—money. The proposed ENIC increase will inevitably reduce the critical services they provide, in many cases to the most disadvantaged in our communities.

The list of exemptions in our amendment also includes further and higher education, and I declare an interest as a member of council at UCL. Both our FE and HE institutions are in grave financial difficulties. This has been true for many years for our somewhat neglected FE sector and is now also obviously true for our higher education sector. The country’s future prosperity and its prospects for growth depend very largely upon these sectors being properly and sustainably funded. If we want a skilled and upskilled workforce, then FE colleges have a vital and irreplaceable role to play, but to play that role they need adequate funding.

I did ask, in Committee, about the funding arrangements for the FE sector. The Minister replied last week. He noted, by way of preamble, that the Government would

“provide support for departments and other public sector employers for additional employer national insurance contributions”.

He does not say what “support” means. He does say that the Autumn Budget provided an additional £300 million in revenue for funding for FEs for the financial year 2025-26

“to ensure young people are developing the skills this country needs”.

He does not say to what extent this will mitigate the imposition of the higher employer national insurance contribution. Could I therefore ask him again to tell us, when he replies: what percentage of the increase in the employer national insurance contribution will be mitigated by the allocation of funds from this £300 million, both in the short term from April to July this year and in the academic year 2025-26?

The Minister’s reply to my Committee stage question also includes a mention of the rise of £285 per annum in student fees chargeable by HEIs from the academic year 2025-26. This will not be enough to sustain our higher education sector. As I mentioned in Committee, our universities are already showing signs of deep financial distress. I noted then that nearly three quarters of institutions are expected to run deficits in the next academic year, and 40% have less than a month’s liquidity. I also noted that three Russell group research-intensive universities—Cardiff, Durham and Newcastle—had joined the long list of universities cutting jobs and costs. Now, Edinburgh has joined them in also announcing cuts, and I hear that at least one eminent university is close to breaching its banking covenants, with all the usual consequences. It is no surprise that it is estimated that 10,000 jobs will go this year.

This is a genuine crisis and it is made worse by the proposed increase in employer national insurance contributions. This new ENIC levy completely wipes out and more any net increase arising from the increase in student fees. The UK has four of the world’s top 10 universities and 16 of the world’s top 100 universities. We absolutely need to have our universities prosper and to be sustainably funded if we are to continue to be a world-class centre for education and research and to contribute to the growth that we so obviously need. Our amendment would, at least, prevent the already perilous situation from getting worse while the Government devise a new and sustainable funding arrangement.

Our amendment also excludes any SMEs and the hospitality sector from the rise in ENICs. SMEs are the wellspring of our economy and of its future. Some 60% of all jobs are provided by SMEs and these companies, almost by definition, are those that will have most difficulty absorbing the proposed rise in the ENIC rates. Significant job losses are inevitable. This matters not only because any job lost is regrettable but because SMEs are the engines of growth, renewal and innovation in our economy, and they create the jobs. Large corporations may be easier for government and Whitehall to deal with, but they are, and have been for a long time, net destroyers of jobs.

Many of the jobs created by SMEs will, of course, be in the hospitality sector, which this amendment also excludes from the proposed rise in contributions. Many of those jobs in the hospitality sector—currently around 350,000—are held by people under 25. For many, this will be their first job and the first step on a career ladder. To keep all these young people in employment after the proposed ENIC rise would nearly double the employers’ costs from £82 million to £153 million. We should protect these young entry-level employees from job losses by exempting their employers from the proposed NIC rise. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I will speak to Amendment 8 in my name and Amendment 41 in my name and that of the noble Lord, Lord Alton of Liverpool. This is the first time I have taken part on Report but I sat and listened carefully to the entire debate on the first group, which covered a lot of the issues that relate particularly to Amendment 8.

Amendment 8 has a very simple and clear purpose, even though the technicalities are quite technical. It aims to delay for one year the introduction of the raised level of national insurance for all registered charities. Other amendments in this group deal with smaller charities and others with groups of organisations, many of which may be charities, but this is an exemption for one year for all charities.

I want to take on a couple of points made by the noble Lord, Lord Eatwell. I am not quite sure which amendments he was counting in his 38, but I strongly assert that neither Amendment 8 nor Amendment 41 could in any way be described as a wrecking amendment, because they do not affect the Government’s long-term economic policy or plans. They mean that for one year the Government would not receive, in their own estimate, £1.4 billion.

I tabled the same amendment in Committee and did not get an answer from the Minister to my question; I would be interested to hear any response tonight. It was on a point raised in the first group of amendments. If charities go under or are forced to slash their services, how much are the Government going to have to fund through other means—through social care, government provision or whatever mechanisms? I do not have the capacity to put a figure on that, but it seems likely that there may not be very much difference between those two figures.

I tabled this in Committee because of the CEO of a fairly large charity with whom I happened to be having dinner. We were not having a deeply political, detailed discussion. She simply said to me, “If I just had one year to sort this out, I would have half a chance”. It is interesting that the noble Lord, Lord Clarke of Nottingham, who is not currently in his place, said in the debate on the first group that so many organisations— I think he was specifically referring to charities—were encountering this unexpected expense. It is the suddenness and the lack of a chance to think, “Can we shift some money into fundraising to increase the funding stream so that we can cope with this down the track?”. That is what this amendment seeks to do.

I find myself in quite an unusual position as a Green, saying that I have put forward this really moderate, reasonable amendment that is quite small in scale compared with some of the other things we are discussing here. But it is a really practical step to attempt to protect charities and all the essential services.

We heard so much passion from people who are directly involved in delivering these services from charities. I am not going to repeat that long list now, but I will just raise one point—I do not think it has been raised up to now—on the place of charity shops on our high streets. They are already struggling. We are already seeing significant closures of charity shops, faced with rising energy costs and—no one is complaining—rising staff costs due to the increase in the minimum wage. If we further hollow out our high streets by losing those charity shops, that too will have all sorts of costs that in one way or another the Government are going to have to pick up.

So that is Amendment 8. I gave notice that I was going to see how this evening went. I am currently feeling inclined to test the opinion of your Lordships’ House on it.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate.

I will first address the amendment from the noble Baroness, Lady Neville-Rolfe, which seeks to increase the employment allowance for early years providers. The Government recognise that early years providers have a crucial role to play in driving economic growth and breaking down barriers to opportunity. We are committed to making childcare more affordable and accessible. That is why we committed in our manifesto to delivering the expansion of Government-funded childcare for working parents and to opening 3,000 new or expanded nurseries through upgrading space in primary schools to support the expansion of the sector. Despite the challenging fiscal circumstances the Government inherited, in the October Budget the Chancellor announced significant increases to the funding that early years providers are paid to deliver Government-funded childcare places. This means that total funding will rise to over £8 billion in 2025-26.

The amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, would exempt providers of higher and further education from changes in the Bill. The Government of course recognise the great value of UK higher education in creating opportunity, as an engine for social mobility and growth in our economy and in supporting local communities. We will provide support for departments and other public sector employers for the additional employer national insurance contribution costs. This funding will be allocated to departments, with the Barnett formula applying in the usual way. In answer to the noble Lord, Lord Bruce, it is for devolved Governments to make their own decisions on how that money is allocated.

I say to the noble Lord, Lord Sharkey, that all additional cost pressures will be considered as part of the spending review. The Autumn Budget provided an additional £300 million of revenue funding for further education for the financial year 2025-26, to ensure that young people develop the skills this country needs. This funding will be distributed specifically to support 16 to 19 student participation. Approximately £50 million of this funding will be made available to general further education colleges and sixth-form colleges for the period April to July 2025. This one-off grant will enable colleges to respond to current priorities and challenges, including workforce recruitment and retention. The remaining £250 million of funding will be made available in 16 to 19 funding rates in the academic year 2025-26, with the aim of ensuring that all 16 to 19 providers are funded on an equitable basis from 2025 to 2026. Furthermore, the Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement, a major reform to student finance which will expand access to high-quality flexible education and training for adults throughout their working lives.

I turn to the amendments tabled by the noble Baronesses, Lady Kramer, Lady Neville-Rolfe, Lady Bennett and Lady Sater, and the noble Lords, Lord Sharkey and Lord Leigh of Hurley, which seek to exempt charities from the changes in this Bill and increase the employment allowance for them. The Government of course recognise the important role that charities play in our society and the need to protect the smallest businesses and charities. That is why we have more than doubled the employment allowance to £10,500. This means that more than half of businesses, including charities, with national insurance liabilities will either gain or see no change next year.

As I have noted previously, it is important to recognise that all charities can benefit from the employment allowance. The Government also provide wider support for charities via the tax regime, with tax released for charities and their donors worth just over £6 billion for the tax year to April 2024. The noble Lord, Lord Leigh of Hurley, again asked me to cost his amendment; as I said in Committee, it is not for the Government to cost amendments that do not reflect government policy.

I turn to the amendments and proposed new clause tabled by the noble Baroness, Lady Neville-Rolfe, exempting providers of transport for special educational needs children to and from their place of education from the changes in this Bill and requiring the Government to publish an impact assessment on this topic. In the Budget and the recent provisional local government finance settlement, the Government announced £2 billion of new grant funding for local government in 2025-26, which includes £515 million to support councils with the increase in employer national insurance contributions. This additional funding has been determined based on a national assessment of the costs for directly employed staff across the public sector. However, this funding is not ring-fenced and it is for local authorities to determine how to use it across relevant services and responsibilities.

Furthermore, the Government are providing a real-terms increase in core local government spending power of 3.5% in 2025-26. To support social care authorities to deliver these key services, we announced in the provisional local government finance settlement a further £200 million for adult and children’s social care. This will be allocated via the social care grant, bringing the total increase of this grant in 2025-26 to £880 million. This means that up to £3.7 billion of additional funding will be provided to social care authorities in 2025-26.

On the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, seeking to exclude town and parish councils from the employer national insurance rate change, the Government have no direct role in funding parish and town councils and are therefore not providing further support to them for the employer national insurance changes.

Finally, on the proposed new clause tabled by the noble Lord, Lord Bruce of Bennachie, requiring the Government to publish an assessment of the impact of the Bill on the Scottish public sector, as I have set out previously, the Government have published an assessment of this policy in a tax information and impact note. This clearly sets out that around 250,000 employers will see their secondary class 1 national insurance liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change.

The OBR’s economic and fiscal outlook also sets out the expected macroeconomic impact of the changes to employer national insurance contributions on employment growth and inflation. The Government and the OBR have therefore already set out the impacts of this policy change. The information provided is in line with other, similar tax changes and the Government do not intend to publish additional assessments. We will of course continue to monitor the impact of these policies in the usual way.

In light of the points I have made, I respectfully ask noble Lords to withdraw their amendments.

[Lord Sharkey (LD)]

I thank all noble Lords who have spoken in this debate. I was particularly taken by Amendments 4 and 5 in the name of the noble Baroness, Lady Neville-Rolfe, and I am glad that she will divide the House. We will support her when she does. I was less taken by the Minister’s response, and still I note the lack of a definitive answer to my question on the percentage relief to FE funding.

Having listened to speeches from all parts of the House, rescuing vital and vulnerable sectors from the increase in employers’ national insurance contribution seems to me almost a duty. I would like to test the opinion of the House on Amendment 3.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Sharkey Excerpts

Committee stage
Wednesday 29th January 2025 Grand Committee

[Lord Howard of Rising (Con)]

As my noble friend says, you get a knighthood—possibly even a barony. If you get something wrong, throw more money at it until it becomes an embarrassment that can no longer be hidden and hushed up. HS2’s original budget was £37.5 billion. Only when the estimated cost has risen to £90 billion—and counting—is the project being reined in. The idea of spending £100 million on a bat shelter defies the imagination. I mean: who could have thought of that one?

As economists are being quoted, might I quote Professor Milton Friedman? He said:

“If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand”.


What the Government should do is what anybody in this Room, faced with the same problem in their own life—too much spending and not enough income—would do: cut spending to solve the problem. Given that that is unlikely to happen, will His Majesty’s Government carefully consider what they are doing and try to reduce some of the negative consequences of this increase in national insurance for employers? A sensible first step would be to prepare a proper impact assessment for those small companies, often described as the engine of the economy.

[Lord Sharkey (LD)]

My Lords, we have a lot of sympathy for the amendments in this group. My noble friend Lady Kramer has added her name to Amendment 22.

It is absolutely right that we should be concerned about the effects of the proposed NICs rise on small businesses. These businesses are at the heart of our economy. As the noble Lord, Lord Ahmad of Wimbledon, said several Prime Ministers ago:

“There are over 5.7 million Small to Medium Enterprises in the UK. They are the engine of growth in our economy, driving innovation and greater productivity, finding solutions and creating jobs”.


In fact, our SMEs provide 16.6 million jobs—60% of the total number in the United Kingdom. Their total turnover is estimated at £2.8 trillion. They are in many ways more important than much larger businesses—certainly when it comes to providing jobs—but they are probably more vulnerable than large businesses to these NIC changes, with less ability to absorb increased costs. The SME landscape is very varied, but it seems vital for us to be able to assess the likely effects of the proposals before us on different sizes of SMEs.

That is why I note in particular Amendment 33, in the name of the noble Baroness, Lady Noakes. As she explained, this amendment proposes an impact assessment of the provisions in Clause 2 on employers with an annual turnover of less than £1 million, less than £5 million and less than £10 million before the changes in the clause can be brought about; these are probably the sizes of business that are most likely to have difficulty dealing with the additional costs imposed by this Bill. It would have been good to have had such an impact assessment before these debates, but Amendment 33 would go some way to putting that right, as the noble Lord, Lord Londesborough, remarked—pace the charge of underspecification from the noble Lord, Lord Eatwell. Perhaps the Minister could provide us with more granular estimates of the effects of Clause 2 on the smaller SMEs even if he cannot, or will not, provide us with the traditional, full and necessary impact assessment.

--- Later in debate ---

These amendments would help to bring the Bill in line with government action in favour of young people. They would help the Government to stabilise the labour market, given other economic pressures, and of course help young people to develop a prosperous future. I ask the Minister to consider these amendments carefully.

[Lord Sharkey (LD)]

My Lords, these amendments address very important issues. As noble Lords who attended the Committee last week will be aware, we on these Benches have taken an approach to the Bill aiming to exclude certain sectors from the Government’s rise to employers’ national insurance contributions—sectors that we feel will be particularly impacted by the change.

The amendments in this group follow the same structure as our earlier amendments, exempting employers of young people in various age groups from the proposed rise in employers’ national insurance contributions. We touched at least tangentially on that and on some of the concerns raised about youth employment when we debated amendments last week, tabled by my noble friend Lady Kramer, relating to part-time workers and to the hospitality and tourism sectors. For many young people, part-time work is the entry point into the world of work. A career in hospitality is often the first step on the career ladder for many young people entering the job market.

According to data commissioned by that well-known authority, the British Beer & Pub Association, pubs currently provide jobs for more under-25s than they ever did, with 350,000 people in employment in that sector. The association estimates that, to keep employing that same number of under-25 year-olds, the NICs liability for employers will increase from £82 million to £153 million.

I shall not repeat the points made in our debate last week, but I urge the Minister to address further some of the possible unintended consequences that the measures in this Bill might result in, as employers in these sectors look at ways in which to offset the additional costs that they will have to endure—perhaps instituting hiring freezes or freezing pay rates—and especially and specifically the impact that will have on young people seeking to enter employment for the first time. An impact assessment would have been very helpful, as would the application of the mechanism contained in Amendment 33 from the noble Baroness, Lady Noakes, which we discussed earlier this evening.

In the regrettable absence of an impact assessment, it would be entirely proper to postpone the NIC provisions until the Government make more age threshold granular data available to help to assess the effect of the measure on young people. I heard the Minister’s unequivocal refusal to provide any more impact assessments, and I expect that we will hear it again in Committee and on Report.

[Lord Blackwell (Con)]

My Lords, I want to add to the comments made by my noble friend Lord Altrincham in introducing these amendments. He spoke of a large number of young people who are not in economic activity, full-time education or training. Labour market statistics are notoriously difficult to interpret, as we know, but, if you take the unemployment rate he quoted—around 14%—we know that, in addition, a worryingly large number of people in this age group are also on long-term sickness benefits. All of them could be in productive work, with the right support and encouragement.

A number of Members of this Committee are also members of the House of Lords Economic Affairs Committee, which recently did a review of this area. Some of the evidence that we took made the point that, once a young person moves on to long-term benefits without ever having had meaningful employment experience, it becomes increasingly difficult for them to get work. They become stranded in a benefit life, which is not only wasteful for them but a huge cost to the taxpayer.

In stressing the importance of making it economically attractive for employers to take on young workers such as these, I wonder whether the Government should consider going further than these amendments: not just retain the existing levels of national insurance contributions for employers for this age group but reduce the national insurance contributions of young workers to give an additional incentive to help them, at this early stage in their lives, into a meaningful working career.

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

Lord Sharkey Excerpts

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I thank the Minister, the Economic Secretary to the Treasury and their teams for their engagement with us on this short but complex Bill. The input from the Ministers and their teams has unravelled a lot of that complexity and answered a lot of questions. We broadly support the Bill.

The need to replace Libor has been well flagged. As the Minister has noted, the FSB made it clear in 2014 that the continued use of Libor represented a potentially serious systemic risk. It made this judgement in response to cases of what it described as “attempted manipulation” of the rate

“and declining liquidity in key interbank unsecured funding markets.”

The imminent end of Libor has already been well flagged, at least to major players. Ideally, the Ibors would be replaced by risk-free rates, such as SONIA, but it has been obvious for some time that there would be existing, continuing contracts that would be unable to transition easily or in a timely fashion—or, perhaps, at all—to the new RFRs.

As the Minister has explained, the provisions of this Bill enable the FCA to address the problem. It gives powers to the FCA to allow, for some as yet unspecified categories of tough legacy contracts, continued use of synthetic Libor after the demise of the index at the end of this year. The Bill also provides some narrowly drawn legal protections for the administrators of the synthetic Libor.

It is worth noting that the Bill does not include in its scope the synthetic Libor mechanism itself. There has been no parliamentary scrutiny of this mechanism. Consultation is not the same as, or equivalent to, parliamentary scrutiny. It is regrettable that Parliament has not had the opportunity to scrutinise this mechanism and its likely consequences, or any alternative mechanisms, such as the linear transition mechanism mentioned in paragraph 28 of the FCA’s recent technical note. There is a very large gap in our scrutiny system where financial affairs are concerned. The exercise of unscrutinised power by the FCA illustrates the need, once again, for a dedicated financial affairs select committee.

The measures in the Bill are intended to produce an orderly end to the existing regime and to provide a temporary bridge for some exceptional contracts. I have been impressed by the depth and quality of the work that has gone into preparing for transition and for creating the synthetic Libor. I have no issues with the fundamentals of the proposals, but some questions remain, and I would welcome the Minister’s clarifications.

The first question is to do with timing. Why was the end of this year chosen as the cut-off point? What discussions have we had with the US authorities about synchronising our moves away from Libor? Would it not have been better and simpler to act together and give more time for contracts to be transitioned, reducing the number of those moving to a synthetic Libor substitute.

My second question is also to do with timing—in this case, the timing of the formal announcement of who may use synthetic Libor. As things stand, the FCA’s consultation on the matter does not close until the end of this month. Only after that will the FCA issue a formal policy paper setting out the rules for qualifying for the use of the synthetic Libor. That is two months before the general expiry of Libor—not long to prepare if the rules do not allow your contract to qualify. Why has it been left this late?

When I asked the Minister about this in our meeting on Monday, he pointed to the fact that the enabling powers in the Financial Services Act 2021 became active only in April. But we had been preparing this transition for long before that, and the Government cannot seriously have expected their proposals to have been overturned during the passage of that Bill. Surely, it would have been possible to at least have the consultation ready to go as soon as the Act was passed, or even to consult as it was being debated—something the Government have done in the past. I know the FCA has signalled that the rules may allow wide but time-limited scope, but can the Minister reassure us that it does not foresee the disruptive exclusion of significant tough legacy contracts from the synthetic regime?

My next question is about the absence of safe harbour provisions. The narrow immunity on offer to the administrator may not, of course, prevent an outbreak of lawsuits. New York has dealt with this problem more comprehensively than we propose to do by adopting safe harbour provisions.

During the Report stage of the Financial Services Bill 2021, the noble Baroness, Lady Noakes, who I am glad to see in her place, proposed, in Amendment 6, such a safe harbour provision. The Government rejected the amendment, and the Minister explained why, saying:

“Amendment 6 may seem to solve those problems by seeking to give the Treasury powers to make regulations providing for contract continuity and safe harbour through secondary legislation, having had more time to consider these matters. The Government are of the view that, if legislation were needed to address this, it should be in the form of primary legislation. Further legislation providing for safe harbour, as proposed by these amendments, while consistent with the provisions already in the Bill, may be considered by some parties to represent a significant intervention in the contractual rights of parties using critical benchmarks. Primary legislation would therefore be preferable, to provide all parties with an appropriate level of transparency. Crucially, given the volume and value of contracts impacted, making such a provision in secondary legislation would carry a risk of legal challenge to the Government’s exercise of their powers. Any such challenge could bring further uncertainty and disruption, which is precisely what these amendments are seeking to mitigate.”—[Official Report, 24/3/21; col. 923.]


That was not a rebuttal of the notion of safe harbour. It was simply an explanation of why primary legislation would be a better way of achieving it. Well, we are now discussing primary legislation. Did we consider using safe harbour provisions similar to those adopted in New York and, if we did, why we chose not to use them? Did Her Majesty’s Government identify any benefits provided by the safe harbour approach that would not accrue under our scheme?

Next, there is the issue of a possible cliff edge at the end of the year. In the first Peers’ meeting with the Economic Secretary to the Treasury, we were told that there may be a difference of 10 basis points between the old Libor and the first runs of the new synthetic Libor. The very helpful FCA technical note on the end of year impact says in paragraph 23:

“We do not know precisely or with certainty what the difference between synthetic LIBOR on 4 January 2022 and panel bank LIBOR on 31 December 2021 will be.”


Does this not raise the possibility of significant market disturbances and disputes? The mechanisms proposed for generating synthetic Libor outputs have been published by the FCA in its draft notice of 29 September. Can the Minister say whether these mechanisms for determining synthetic Libor can be adjusted to produce a smoother, less step-like transition, if this looks to be desirable? If that cannot be done, can the Minister say what reactions he expects in the markets as a result of a variation of 10 basis points or more at the beginning of the new year. Can he also say what a realistic upper bound of this differential might be?

I have one further question: will there be some contracts which will never be able, or will decline, to transition to RFRs? If there are, what characterises them? Do we have any idea of how many there might be in number and value, and what does the FCA propose to do about them?

I realise that I have asked a lot of questions. I entirely understand if the Minister does not have time to answer them all this evening, but I would be very grateful for a written response before we get to Committee.

Financial Services Bill

Lord Sharkey Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

Moved by

[Lord Sharkey]

15: After Clause 40, insert the following new Clause—
“Access to Sharia-compliant financial services including student finance
(1) Within six months of the passing of this Act, the Treasury must make provision by regulations to facilitate the availability of Sharia-compliant financial services in the United Kingdom, including availability to students who are eligible for the Government’s student finance provision of Sharia-compliant finance products for paying tuition fees and for student maintenance on equitable terms with students accessing the Government’s student finance provision.(2) Regulations under this section are subject to the negative procedure.”

[Lord Sharkey (LD) [V]]

My Lords, Amendment 15 is in my name and those of my noble friends Lady Sheehan and Lady Kramer, and I am grateful for their support.

The amendment addresses the issue of the provision of sharia-compliant student finance, of which there is none. Because Islam forbids interest-bearing loans, that prohibition is a barrier to our Muslim students going on to attend our universities. We debated this extensively in Grand Committee so I will not rehearse the arguments in detail, but I will remind the House of the timescale involved.

The problem became clear in 2012 when tuition fees were significantly increased, and it became worse when maintenance grants were replaced by maintenance loans. In 2014, the Government published their report on the consultation that they had undertaken. That consultation had attracted 20,000 respondents, a record at the time. The Government acknowledged that the lack of an alternative financial product to conventional student loans was a matter of major concern to many Muslims. The report also identified a solution: a takaful, a well-known and frequently used non-interest-bearing Muslim financial product. The Government explicitly supported the introduction of such a product.

That was seven years ago. There is still no sharia-compliant student finance available, nor have the Government ever offered a detailed reason for this long delay or indicated when it might come to an end. As I mentioned in Grand Committee, I have repeatedly asked the Government the reasons for this lack of action. I have never had a substantive response. There was no substantive response from the Minister in Grand Committee a month ago and no explanation for the delay nor any indication of a date by which the takaful would be available. There was absolutely no sense of urgency. It was as though the plight of these Muslim students was not really important or worth taking seriously.

I made the point that I had written to the Minister on 4 January this year asking for a report on progress and making some suggestions. There had been no response by then, and there was no response until 5.15 pm yesterday evening, 14 weeks after my email. The Minister of State for Universities apologised for the three-month delay without offering an excuse or an explanation and her reply was completely formulaic, containing no substantive answers. It contained no indication of when sharia-compliant student finance would be available. I was struck by the casual contempt for our Muslim community that this response so clearly signalled—an absurdly unfriendly and unfeeling response with no attempt to reassure or comfort the Muslim community. In fact, if you look at the Government’s record on all this, it is very hard to see it as anything other than discrimination against our Muslim community—not just discrimination but a failure to engage and to explain.

Our amendment would oblige the Government at last to fulfil the promise they made to the Muslim community in 2013. It would oblige the Secretary of State to facilitate the availability of Sharia-compliant financial services for students who are eligible for conventional student finance on equitable terms with students accessing these conventional products, and to do so within six months of the passing of this Act so that the next Muslim student cohort did not have to face a conflict between faith and education.

I very much hope that when the Minister responds he will be able to do better than Minister Donelan. I hope he will be able to tell the House when the Government will introduce the sharia-compliant student financial product. I hope he will set a date that will allow the next cohort of devout young Muslims to go on to university. If the Minister cannot do that—if he cannot say when he will fulfil his Government’s 8 year-old promise to our Muslim community—I will seek to test the opinion of the House. I beg to move.

[The Deputy Speaker (Baroness Fookes) (Con)]

My Lords, the noble Lord, Lord Stevenson of Balmacara, has withdrawn so I call the noble Baroness, Lady Sheehan.

--- Later in debate ---

[Lord True (Con)]

My Lords, I am grateful to all those who have spoken in this short debate. As has been said, Amendment 15 seeks to require the Government to make regulations to facilitate the availability of sharia-compliant financial services in the UK, including a sharia-compliant student finance product, within six months of the passing of the Bill.

Institutions across the United Kingdom have been providing sharia-compliant financial services for nearly 40 years, and the United Kingdom is the leading western centre for Islamic finance. I do not believe that anyone would dispute that the United Kingdom is a world leader in this area. This Government continue to promote the growth of this sector, supporting domestic financial inclusion and our connections with key markets abroad. With respect, I think that, in this context, the charges from the noble Lord, Lord Sharkey, of “casual contempt” for the Muslim community and of discrimination were a little misplaced.

Student finance is not regulated by the FCA. I did, however, listen very carefully and respectfully to the noble Baroness, Lady Sheehan, who spoke from a position of personal commitment. I can assure the noble Baroness and the noble Lords that the Government wish to extend the reach of the student finance system so that everyone with the ability to benefit from higher education can do so. That is why we have legislated to make a system of alternative payments that is compatible with Islamic finance principles possible.

As I said in my remarks in Committee, a range of complex policy, legal and systemic issues need to be resolved before a Sharia-compatible product can be launched. Despite these challenges, the Department for Education has been working with specialist advisers to establish an appropriate product specification that meets the requirements of Islamic finance.

I also heard the concerns raised in Committee, and by the noble Lord, Lord Sharkey, again today, that it is not clear enough when the Government will take the next step. Since Committee, when I was concerned to hear those criticisms, I have discussed the matter with the relevant Minister in the Department for Education. Based on this, I can report that this matter is being considered as part of the wider review of post-18 education and funding.

I hope, therefore, that noble Lords will appreciate that it is not the right time to act until the wider strategy on post-18 education has been settled. I appreciate that some noble Lords, including those who have spoken, would like to see faster progress here—the question of when was put. I am able to reassure the House that there will be an update on this work as part of the review of post-18 education and funding when it is published, which will be at the next multi-year spending review. The Government will conduct the next spending review later this year. Further details on the nature of that spending review will be set out in due course.

On that basis, and with the commitment to progress as part of the review, I hope that the noble Lord will accept the assurance that the Government are committed to making progress on this very important issue and feel able to withdraw his amendment.

[Lord Sharkey (LD) [V]]

I thank all noble Lords who have spoken in this brief debate and I thank the Minister for his response. I point out, however, that we legislated to take powers to do this four years ago. Nothing has happened since. I remind the Minister, too, that the Help to Buy system was up and running within five or six months—and that was Islamic finance.

I also note that references to the post-18 education review seem to me—and have always seemed to me, as I said in my letter to the Minister, to which I did not get a response—completely irrelevant. We want students, Muslim or not, to be treated equally. If there is a change, after the post-18 Augar review, to the way that student finance happens, it should apply to Muslim and non-Muslim students equally: there should be no need to wait to establish the principle that Muslim and non-Muslim students should have equal access to finance. There is no need to wait.

I note, finally, that the promise of an update is not a promise to do anything at all, and does not even come close to setting a date by which these cohorts of Muslim students can gain access to finance and go on to university. In the Minister’s response there was no promise and no clarity, just talk of commitment. But after 13 years of this promise, talk of commitment is not enough, and I wish to test the opinion of the House.

--- Later in debate ---

[Lord Davies of Brixton (Lab) [V]]

My Lords, these amendments are all on the same broad theme. As the previous speaker mentioned, there is a broad consensus that something needs to be done to provide a formal role for parliamentary scrutiny in the work of financial regulators. I do not want to detain the House, but I will take the opportunity to emphasise points that I have made at earlier stages. The basic question, to me, is: who regulates the regulators? The question is why we should trust the regulators; the answer is openness and engagement. Clearly, we have a particular interest here but can, I believe, contribute massively to the work of the regulator.

For us to raise these issues is not to question the expertise or good will of the people who serve on the regulators’ boards or work in their offices. It is simply wrong to assume that, once appointed, they can be left to get on with the job. As is apparent in the debate, there is clear consensus about the need for scrutiny. That is not contested. Obviously, there are clear reasons why they would benefit—the expertise of this House is a factor—but my particular concern is to establish systems that minimise the risk of regulatory capture. This is the experience, widely found, whereby regulators tend to become dominated by the interests they regulate and not by public interest.

I emphasise that this is not about corruption; it is more, in my mind, a social and cultural problem. I do not think the concept, in theory, is contested. The answer is to strengthen and develop the widest possible involvement of all sorts of bodies in the work of the regulators. Clearly, Parliament has a particular role and these amendments explore possible approaches to it. I hope the Minister can say a bit more than what was in the letter. Does the Minister consider regulatory capture to be something that occurs, and where the systems that are established address it and minimise the risk?

[Lord Sharkey (LD) [V]]

My Lords, I will speak to Amendments 18, 19 and 20 in this group. I support them all but prefer the more prescriptive Amendment 20. In these matters, it seems to me that ambiguity is not our friend. Wide latitude in interpretation can easily frustrate intent. As my noble friend Lady Bowles has so forcefully explained, that intent here is to ensure that Parliament has some effective scrutiny role in the activities and rule-making of the PRA and the FCA, by requiring that the information Parliament may need to do this is properly supplied. At present, this is absent or insufficient or likely to be post hoc and ineffective.

This is a specific example of a much larger problem in the relations between the Executive and the legislature. There is an increasing tendency for the Executive to bypass, or try to bypass, Parliament or to reduce scrutiny to formulaic rituals with no real influence on outcomes, such as our SI procedures. The seriousness of this tendency has been commented on fairly widely and frequently in the past few years.

--- Later in debate ---

Moved by

[Lord Sharkey]

21: After Clause 40, insert the following new Clause—
“Interest rates for mortgage prisoners
(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 137FD insert—“137FE FCA general rules: interest rate for mortgage prisoners(1) The FCA must make general rules requiring authorised persons involved in regulated mortgage lending and regulated mortgage administration to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and to ensure that mortgage prisoners can access new fixed interest rate deals at an interest rate equal to or lower than an interest rate specified by the FCA.(2) In subsection (1)— “mortgage prisoner” means a consumer who cannot switch to a different lender because of their characteristics and has a regulated mortgage contract with one of the following types of firms—(a) inactive lenders, or firms authorised for mortgage lending that are no longer lending; and(b) unregulated entities, or firms not authorised for mortgage lending and which contract with a regulated firm to undertake the regulated activity of mortgage administration;“new fixed interest rate deals” means the ability for the consumer to fix the rate of interest payable on a regulated mortgage contract for periods of 2 years and 5 years;“Standard Variable Rate” means the reversion rate which is a variable rate of interest charged under the regulated mortgage contract after the end of any initial introductory deal.(3) The general rules made under subsection (1) must set the level of the cap on the Standard Variable Rate at a level no more than 2 percentage points above the Bank of England base rate.(4) The general rules made under subsection (1) should make new fixed interest rate deals available to mortgage prisoners who meet the following criteria—(a) are up to date with payments or have aggregate arrears of no more than one monthly payment in the past 12 months,(b) have a remaining term of 2 years or more,(c) have an outstanding loan amount of at least £10,000, and(d) have not received consent to let the property.(5) When specifying the interest rates for new fixed interest rate deals required by subsection (1) the FCA should specify rates for a range of Loan-To-Valuation (LTV) ratios taking into account the average 2-year and 5-year fixed rates available to existing customers of active lenders through product transfers.(6) The FCA must ensure any rules that it is required to make as a result of subsection (1) are made not later than 31 July 2021.””Member’s explanatory statement
This new Clause would require the FCA to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and, under specified circumstances, ensure their access to fixed rate interest deals.

[Lord Sharkey (LD) [V]]

My Lords, Amendments 21 and 37B are in my name and those of the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady Kramer, and I am very grateful for their support. I declare an interest as co-chair of the APPG on Mortgage Prisoners. The plight of these mortgage prisoners was discussed extensively—

[Baroness Penn (Con)]

My Lords, due to the technical issues that the noble Lord, Lord Sharkey, is having, I suggest that we adjourn for five minutes until a convenient moment after 8.28 pm.

--- Later in debate ---

[Lord Sharkey (LD) [V]]

I was saying that we have made no progress in Committee on the mortgage prisoners problem, and the situation seems frozen. On the one hand, there are 250,000 mortgage prisoners, subject to real, undeserved and unwarranted financial pressure, which is likely to increase when Covid concessions lapse or are withdrawn. On the other hand, the Government and the FCA seem intent on minimizing the problem and are engaged in what seem to me to be futile and unproductive arguments with the mortgage prisoners over exact figures.

The alleged 0.4% premium paid by mortgage prisoners above the average SVR illustrates the point. We do not only believe the figure to be wrong for the reasons that I set out in Committee, which were not refuted by government; we also believe that such discussions are very largely a distraction and lead nowhere. SVRs are not the norm in mortgage lending but are the literally inescapable norm for most mortgage prisoners. Only around 10% of customers with active lenders pay these high SVRs, and more than 75% of those who do switch to new and much lower fixed rate deals within six months of moving to an SVR. Mortgage prisoners have been stuck with usurious SVRs for over 10 years.

Solving the mortgage prisoner problem certainly requires reducing this usurious SVR, but it also requires giving the mortgage prisoners access to normal fixed-rate mortgage deals. I regret to say that there has been no real progress in either of these areas. In all the discussions about the problem, I have never heard the Government admit responsibility for causing it in the first place. I have heard repeated assertions that the Government are trying to find a solution. I have heard John Glen, the Economic Secretary to the Treasury, say that he remains open to considering practical solutions, and I know that the Chancellor told Martin Lewis that he would keep working on the issue and was committed to finding a workable solution.

However, I have heard no admission from the Government that they caused the problem in the first place—and no admission of moral responsibility for devising a proper, just and timely solution. Certainly, nothing so far proposed or actioned has delivered effective relief to the 250,000 prisoners. I again make the point that these people are not the authors of their own misfortunes: the Government are.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, once more we will need a brief adjournment due to technical issues. I beg to move that we adjourn until 8.30 pm. Or do we have the noble Lord?

[Lord Sharkey (LD) [V]]

Yes.

[Baroness Penn (Con)]

Ignore me. Please go on, Lord Sharkey.

[Lord Sharkey (LD) [V]]

Thank you. I think I was talking about Amendment 21 being prescriptive; it sets out exactly what must be done and by whom.

It has two sections. The first reduces the currently usurious SVR paid by mortgage prisoners by capping it at two percentage points above the bank rate. This is what, in the end, Martin Lewis thought was necessary. He said:

“Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All-Party Parliamentary Group on mortgage prisoners is pushing it.”


He also said:

“This would provide immediate emergency relief to those most at risk of financial ruin … No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”


This is all necessary, but not sufficient. SVRs are not the normal basis for mortgages, as I have already mentioned. What is needed is access to fixed-rate mortgages, as provided by normal active lenders to 90% of mortgagees. The second part of Amendment 21 sets out how that is to be done.

This is, of course, all very prescriptive, and we understand the Government’s reluctance to write such details into the Bill. That is why we have also tabled Amendment 37B. This amendment takes a simpler and non-prescriptive approach. It places the obligation to fix the problem squarely on those who caused it—the Treasury. It is explicitly fuelled by the overwhelming and undeniable moral responsibility that the Treasury has for the terrible situation in which mortgage prisoners have long found themselves. The amendment sets out what must be achieved to relieve mortgage prisoners, by whom and by when, but it does not say how. It leaves that entirely for the Government to work out.

Amendments 21 and 37B give the Government a clear choice. Amendment 21 prescribes a detailed method of solution; Amendment 37B says what the Government must achieve but leaves the mechanism to them. The Government caused the mortgage prisoner problem, which has caused and continues to cause much suffering to many families. I hope that the Government will recognise their moral responsibility and adopt Amendment 21 or Amendment 37B.

This has all gone on much too long, and it has caused, and continues to cause, far too much misery and desperation. If the Minister is not able to adopt either amendment, or give equivalent assurances, I will test the opinion of the House. I beg to move Amendment 21.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I speak in support of the amendments just proposed by the noble Lord, Lord Sharkey, which I have signed. One’s heart goes out to him—it must be very difficult to make a speech of this complexity and passion with all these breaks. Despite the technical difficulties, however, he has made the case for action very well, and as co-chair of the all-party parliamentary group on these issues he is very well briefed on the situation faced by these fellow citizens of ours, and the extra costs that they face. It is indeed a very difficult situation, and one hears a lot of despair when one talks to these people.

I am sure that when he responds the Minister will, as the noble Lord, Lord Sharkey, hinted, dwell at length on the numbers of this group in various categories. There is of course a debate on how the prisoners can be split up—I think that the only thing that we agree on is that the total is probably about 250,000. As with the noble Lord, Lord Sharkey, however, my argument is not about the numbers. Simply put, it is clear that a significant number of people, through no fault of their own, cannot exercise the choices about their mortgage that the rest of us can. While some would argue that this is the direct fault of the Government, I think that someone needs to take responsibility for providing a fair outcome for those who are in a position to take advantage of it.

As the noble Lord, Lord Sharkey, says, this group of amendments offers two options: one that focuses on what the FCA might do within the parameters set by the Bill and another—37B, a late amendment that we drafted for Report—that suggests that the Treasury might wish to take powers to act in the way that is most suitable for it. Both have merits, in their ways. As the noble Lord, Lord Sharkey, said, they have detailed implications that need to be followed through carefully. My preference would be for Amendment 37B, for the very good reasons set out by the noble Lord, Lord Sharkey. If, as he said he might, the noble Lord decides to test the opinion of the House, we will support him.

--- Later in debate ---

[Lord Sharkey (LD) [V]]

I thank everybody who has taken part in this extensive debate. I particularly thank the noble Baroness, Lady Bryan, for her powerful contribution and her clear understanding of the problems that mortgage prisoners suffer, and have suffered for so very long.

I was sorry to hear the Minister again talk about the 0.4 percentage points and assert that it was a meaningful figure. At this point in the debate and at this time of the night, all I can do is say that we disagree fundamentally with his analysis. We think it is completely wrong and we think we have the evidence to show it is.

In some ways, more important than all that is that the tenor of the debate, or the tenor of the contributions made by the Minister and the noble Baroness, Lady Noakes, was notable for the fact that they do not assume any kind of responsibility on the part of the Government for the situation these people find themselves in. There is no hint of moral responsibility and no sense that, really, it is up to government to find the solution. As it happens, the noble Baroness, Lady Noakes, finished her speech, I think, by recommending that we leave all this to the FCA and the Treasury to find a solution. The fact is that we have left it to the Treasury and the FCA to find a solution, and they have not found a solution at all.

Nothing in the Minister’s speech suggests that a solution is on the horizon. He talked about the loosening of the affordability checks, but I repeat what I said in my speech: so far, the loosening of those affordability checks has helped 40 households. He had the opportunity to try to correct that figure; he did not take it. It is 40 households so far. This is not the solution, and nothing else is proposed by the FCA or the Treasury to solve the problem that still exists.

I conclude by saying that it is the Government who have caused this problem; it is the Treasury. There is a moral responsibility. People’s lives are ruined, have been ruined and will be ruined if this situation continues. It may be that the proposals we have put forward are not perfect—although I certainly dispute that they amount to significant market distortion, if any—but, nevertheless, they would bring relief to these people. There are a lot of them, they are in bad shape and their lives are difficult, and it is no fault of their own. I would like to test the opinion of the House.

--- Later in debate ---

Moved by

[Lord Sharkey]

25: After Clause 40, after “business,” insert “consumer protection,”

[Lord Sharkey (LD) [V]]

I will be brief. Amendment 24 continues the themes underlying Amendments 18, 19 and 20, proposed by my noble friend Lady Bowles. The amendment concerns the provision of vital information, as did those amendments. The noble Baroness, Lady Neville-Rolfe, has explained the purpose of her amendment with her usual force and clarity, and I agree with every word she said.

The assessment of impact is essential to proper scrutiny, but it seems to me that there is an omission in the noble Baroness’s amendment. Amendment 24 requires the Treasury to

“publish an annual report on the impact of measures taken by the FCA, PRA and the Government … particularly on small business, innovation and competitiveness.”

The amendment does not include consumer protection in this list. My Amendment 25 simply inserts this alongside the other particularised areas.

Consumer protection is already an objective of the FCA. The Financial Services Act 2012 inserted new Section 1C, which sets out that the “consumer protection objective is”, rather unsurprisingly,

“securing an appropriate degree of protection for consumers.”

The same Act also imposes an obligation on the FCA to promote competitiveness, one of the specified categories in Amendment 24 of the noble Baroness, Lady Neville-Rolfe. This obligation is qualified and, in some ways, secondary to the consumer protection objective. The Act says that the promoting competitiveness requirement has to be “compatible with the advancement” of consumer protection. Both are important and seem to me to merit the same standing in Amendment 24.

I recognise that the PRA has no such direct obligation to consumer protection. However, its general objective is set out in Section 2B inserted by the 2012 Act, and it clearly implies an element of consumer protection. The Government themselves have a clear interest and involvement in consumer protection directly, if they consider it necessary.

Consumers need protection, perhaps now more than ever: scams multiply, malfeasance grows and people lose their pensions and life savings. The resourcefulness and inventiveness of the dishonest seems to know no bounds. Just as it is important to know the impact of measures taken to regulate financial services in general, and on small businesses, innovation and competitiveness in particular, so it is important to know the impact of measures taken to protect consumers. There are already many of these measures and there will be more as new ways of fleecing consumers are devised. We need to know what we are doing in combating them all—what works and what does not. Amendment 25 would enable this in the way proposed by Amendment 24. I beg to move.

--- Later in debate ---

All the topics raised in these amendments are ones that the Treasury and the regulators consider every single day when making financial services policy. I can also assure the House that the Government are committed to ensuring that the sector has a positive impact, not only for consumers but for the economy as a whole. Given all this, I ask that these amendments be withdrawn.

[Lord Sharkey (LD) [V]]

My Lords, I find myself agreeing with both the noble Baroness, Lady Neville-Rolfe, and the noble Earl, Lord Howe, and so I have nothing more to say except to beg leave to withdraw Amendment 25.

Amendment 25 (to Amendment 24) withdrawn.

Financial Services Bill

Lord Sharkey Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Sharkey (LD) [V]]

My Lords, I shall focus my remarks chiefly on Clauses 3 and 5, and on Schedule 3. Before I do so, I should congratulate the Government on the speed with which they are addressing the matter of Gibraltar’s financial services industry. The Bill has 183 pages, and over 50 of them are devoted to Gibraltar.

With two important and welcome exceptions—debt respite and Help to Save—the rest of the Bill deals with technical and complex matters. In doing so, it raises profound questions about parliamentary scrutiny and the desirability of embodying an international competitive element in our financial services regimes.

Clauses 3 and 5 contain provisions to allow the PRA and the FCA effectively to make law by making rules without any parliamentary scrutiny. Clause 3 lists the provisions of the CRR that the Treasury may revoke by regulation. The list runs to 42 items, all of them significant. Clause 3(4) makes these revocations conditional on their being or having been adequately replaced by general rules made or to be made by the PRA, or to be replaced by nothing at all if the Treasury thinks that is okay. As things stand, it looks as though the Treasury is the sole judge of what may or may not be an adequate replacement. In any event, Parliament is bypassed. There is no provision for parliamentary scrutiny of these new rules, which have the force of law, but these rules can and will reshape critically important parts of our financial services regimes. Clause 5 takes the same lawmaking-by-rule approach to the regulation of credit institutions. Again, there will be no parliamentary scrutiny of these rules.

The Government have acknowledged the need for a discussion about the role of parliamentary scrutiny in the post-Brexit repatriation of powers previously exercised by the EU directly to our regulators without stopping en route at our Parliament. In March of last year, the EU Sub-Committee on financial services, of which I was chair, wrote to the Government about the issue, as the Minister has mentioned. In his response, the Economic Secretary to the Treasury noted that we had highlighted that

“delegating more powers to the financial regulators will require enhanced parliamentary oversight of their activities.”

There is now an open Treasury consultation on the future of financial services. The call for evidence in this consultation contains 17 key questions. Three of these relate to the issue of parliamentary scrutiny. They are: through what legislative mechanism should new financial regulations be made?; what role does Parliament have to play in influencing new financial services regulations?; how should new UK financial regulations be scrutinised? The consultation closes on 18 February. In practice, it means that the Bill will have left this House by the time the consultation results are available to us. In any case, HMT has indicated that the results will inform yet another consultation, later in 2021, in which the Government will set out a package of proposals. By that time, of course, the provisions in this Bill will have become law and there will no longer be an opportunity for real parliamentary scrutiny of the legally binding rules they will generate.

The Minister emphasised in his closing remarks on Report in the Commons that this Bill is

“just one part of the wider long-term strategy for financial services.”—[Official Report, Commons, 13/1/2021; col. 398.]

Given the narrow and technical scope of the current contents of this Bill, I was glad to hear that, and take it to mean that a second and more comprehensive financial services Bill is in prospect. But the fact is that, by the time we get round to that, the “making laws by rulemaking” procedure will have passed into law. Parliamentary scrutiny of the new rules as laws will have been avoided. We will want to return at later stages to the question of what we can do about this bypassing of Parliament in such critical areas.

I turn briefly to Schedule 3 and the insertion of new Part 9D into the already overloaded and much-amended FSMA 2000, and in particular to new subsection 1(b) of Clause 144C. This seemingly innocuous subsection could bring about radical change in our regulatory regimes. It introduces as a “have regard” in the PRA’s making of CRR rules the notion of international competitiveness for our regimes. This is a highly contested area and the idea has been opposed by many leading figures, including from the party opposite, as being likely to promote conflicts of interest. We will want to examine this in detail at later stages.

During the passage of the Bill through the Commons, there was some discussion of more directly consumer-facing measures. These included imposing a duty of care on the financial services industry and providing significantly more relief for those mortgage prisoners trapped by the Treasury’s dereliction and carelessness in selling on mortgage books to unregulated entities. We will want to return to these issues later in our consideration of the Bill.

We will also want to discuss extending the FCA’s perimeter to take in more of the SME lending market. This is particularly urgent given the terrible position that many SMEs find themselves in as a result of Brexit and Covid-19. We will also want to debate the issue of preserving access to cash in the Covid and post-Covid world. I look forward to the Minister’s reply and to our future debates.

European Union (Future Relationship) Bill

Lord Sharkey Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Lord Sharkey (LD) [V]]

My Lords, this is a bad deal, a bad Bill and a bad way of dealing with Parliament. The deal and the Bill do not address the major component of our national commercial life, our service industries, as was pointed out by the noble Baroness, Lady Donaghy. The Bill is hastily put together and contains at least one howler about IT systems, as was pointed out by the Times. There will be others buried in the detail—detail we are not allowed to scrutinise.

The Bill also contains the mother of all Henry VIII powers in Clause 29. This gives Ministers carte blanche to amend laws without going anywhere near Parliament. The time given to parliamentary scrutiny of this Bill is effectively zero. We could easily have extended the transition period to allow proper consideration. Choosing not to do this was a deliberate political decision to bypass Parliament.

The Hansard Society, of which I am a former chair, published a note on the Bill this morning. It describes Parliament’s role in scrutinising the Bill and the TCA as a “farce”. It concludes that:

“Parliament’s role around the end of the Brexit transition and conclusion of the EU future relationship treaty is a constitutional failure to properly scrutinise the executive and the law.”


This matters not just because the devil is in the detail, as always; it matters because this bypassing of Parliament is directly contrary to the professed aim of Brexit to take back control of our laws—for laws to be determined by the UK Parliament.

As things stand, the Bill will receive Royal Assent today without any effective scrutiny at all. This is an exercise in executive power and not parliamentary lawmaking. It is hard to see who really gains from the Bill and agreement, apart from a faction within the Conservative Party. Certainly, the country as a whole will not gain; the economy will shrink. Our fishing industry feels betrayed. Our car makers will struggle, as cumulation becomes more difficult to work around. And our vital services industries, the engines of our prosperity, will lose out.

The Government have pointed to the tariff-free and quota-free access to EU markets as a sign of success, but that takes no account of the huge additional burden of red tape that will fall upon our businesses. Anyway, all this access is conditional. If the EU does not like our regulatory regimes, it can impose tariffs as it chooses. If sovereignty is to have any real meaning, it must mean parliamentary sovereignty and not executive fiat. If it is to mean that, Parliament must reassert its right and duty to scrutinise and amend. We need to decide how we do that.

Inflation

Lord Sharkey Excerpts

Monday 1st July 2019 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I was until today a member of the committee that produced this report. I record my thanks to the noble Lord, Lord Forsyth, for his wise and tolerant chairmanship, and also join him in thanking our clerk, our committee assistant and in particular the departing policy analyst, Ben McNamee.

Inflation may be—although I doubt it after listening to this debate—a simple concept. However, as this debate has demonstrated and as the committee very soon learned, measuring it is a far from simple exercise. Discussion of what these measures should be and of their relative merits can quite quickly become highly technical and apparently abstract, but what we agree inflation to be obviously has an enormous impact in the real world. That is why it is important to try to maintain some common-sense understanding of what is going on. Decisions made about how to measure inflation should be widely accessible to scrutiny and debate, not just confined to a priestly caste of economists, bankers and statisticians. Our report tried to help with that, and I will focus on just a couple of the major issues we discussed.

The first is whether the RPI is irretrievably flawed and should be abandoned, as the UKSA and the ONS had decided. As we have heard, the committee thought not. We acknowledged, as had the UKSA and the ONS, that the index was clearly flawed as a result of an untested and underplanned methodological change introduced by the ONS in 2010. I should say in passing that I was very surprised by the apparently casual way in which this change was implemented, and even more surprised that there was not an early attempt to rectify an obvious mistake. After all, the impact of the change was more or less immediately obvious. In December 2009, the RPI was about half a percentage point higher than the CPI, and in December 2010 it was nearly 0.9 percentage points higher. Nowadays, the RPI continues to run between 0.8 and one percentage point above the CPI.

This matters not only because it is the wrong number but because this wrong number has very significant real-world consequences. It has been a gift, as we have heard, to the holders of RPI index-linked bonds—a gift of around £1 billion in extra interest every year—and it has punished those people whose payments are linked to the RPI. Annual rail fare increases and the interest on student loans are examples of this.

You might reasonably have thought that it would be obvious that the mistake in calculating RPI should be fixed, but listening to the arguments for and against repairing the index was at times like listening to a theological dispute between medieval schoolmen. One of our colleagues, who is no longer in his place—the noble Lord, Lord Lamont—compared the whole thing unfavourably to listening to the arguments in the Council of Trent.

It seemed clear to us that some of the technical arguments, about the use of the Carli formula, for example, had been going on for a very long time and were unresolved—and perhaps even unresolvable. However, it seemed that the arguments in favour of repair carried significantly more weight than those against. This was in part because the arguments against seemed based very largely on a misreading by the ONS of its statutory duty and on its reluctance to take into account the widespread and continued use of the RPI.

The noble Lord, Lord Forsyth, explained our collective view of the ongoing misinterpretation by the ONS of its statutory duties under the Statistics and Registration Service Act 2007, and I will not repeat his arguments. However, I will say that the UKSA/ONS position on this strikes me as simultaneously cowardly and ludicrous. In essence, the ONS is saying that it will not ask the Bank for permission to repair the RPI because it thinks, correctly, that the Bank would have to ask the Chancellor and that he would say no. The Chancellor himself dealt with that when he gave evidence to us, as the noble Lord, Lord Forsyth, recounted. We believe that the ONS has a legal duty to ask for authority to repair, and we strongly believe that, when asked, the Chancellor should agree.

The second major issue we focused on was whether there was a need for multiple indices to measure consumer price inflation. We thought not. Some witnesses, including the UKSA and the RSS, defended the practice. Others, including the Bank of England, saw the case for a single index. They felt that it was not obvious why two were needed and that having multiple indices caused confusion and was counterproductive. In addition, of course, the existence of two indices has allowed the Government to indulge in the rather disgraceful game of index shopping, using the lower CPI for payments out and the higher RPI for receipts in. This is, at the very least, inconsistent and incoherent, as well as obviously unfair and, unfortunately, widespread. I am glad to see that the Government have made some moves towards fairness and consistency and we encourage them to go further and faster. In fact, I urge the Government to move as quickly as possible towards the use of a single consumer price index. As we recommended in our report, we believe that the Government should eventually choose between a repaired RPI and the updated CPI.

As the noble Lord, Lord Forsyth, explained, there has been no formal response to our report, which was published six months ago. The National Statistician, who retired yesterday, without a proper successor in place, said in March that UKSA would respond in April—and it did, on 30 April, as did the Treasury on the same day. They both said that this was an important issue which required further consideration—in the same words—and that they would respond,

“as soon as it is practicable to do so”.

Not “in due course”, “shortly” or “soon”, which are the usual qualifications, but an entirely unexplained new kind of delay: as soon as it is “practicable” to do so. Can I ask the Minister—well, perhaps not. I wanted to ask what this means. What is making a response impracticable? How long is this impracticability expected to last? We currently have no idea when we might expect the usual formal written response.

So, in the absence of a response, and while the UKSA and the Treasury are considering how to respond, could I ask the Minister a couple of questions? First, does the Minister agree that the ONS has a legal duty to request the repair of RPI? The Minister will know that the Chief Secretary to the Treasury, talking of the proposal to repair RPI, told the committee:

“I am suggesting it is the role of the ONS to put forward that proposal”.


My second question, therefore, is: in light of this, what can be done to avoid this damaging and faintly ridiculous impasse caused by Sir David Norgrove’s assertion that he can read the Chancellor’s mind?

Small and Medium-sized Enterprises: Mistreatment

Lord Sharkey Excerpts

Thursday 27th June 2019 Lords Chamber

[Lord Sharkey (LD)]

My Lords, the report we are considering has already attracted a lot of comment—all of it unfavourable. The chair of the TSC said:

“This long overdue report will offer no solace to those who suffered from the disgraceful actions of RBS’s GRG”.


Kevin Hollinrake, co-chair of the APPG on Fair Business Banking, said that the report is a,

“complete whitewash and another demonstrable failure of the regulator to perform its role”.

The SME Alliance said that it was deeply disappointed with the regulator. The Times of Friday 14 June said that the report was,

“a masterful study in pointlessness”,

an insult to victims, and that it demonstrated a,

“sloppiness that underlines the paucity of the FCA’s investigation”.

Last Friday’s Financial Times was also critical. It said that the,

“report into the GRG scandal at Royal Bank of Scotland, which found that nobody was to blame, is a scandal in itself”.

None of this criticism is surprising or ill-founded. The whole sorry history of the GRG and RBS is littered with failures. The first failure was within the GRG. My noble friend Lady Bowles listed these failures and their dreadful consequences. The second failure was within RBS, and extends to board level. Promontory, talking about the issues of malpractice and mistreatment, says explicitly that,

“we view these issues as part of an intentional and coordinated strategy … to focus on GRG’s commercial objective and to place inadequate weight on the interests of its SME customers”.

Promontory explicitly implicates the bank itself—RBS—in these failings. It concludes:

“It is clear that the bank was aware, at least in part, of some of these failures but, it would appear, chose not to prioritise action to overcome them”.


In other words, the GRG was systematically ripping off some of its vulnerable customers and the bank knew this but did not intervene.

This is a gross failure of responsibility on the part of RBS, or at least very clear evidence of complete incompetence—and it gets worse. From April 2009, RBS had adopted a group-wide policy on the FCA’s treating customers fairly principle. This applied to GRG. Promontory notes:

“Despite this, we did not see how GRG management would have been able to satisfy itself that the TCF had been properly implemented and embedded in GRG. In our view, it was not”.


Presumably, either RBS was aware of the failure and did nothing, or it was unaware of it. Either way, there are surely grounds for resignations or sackings.

The third failure is therefore that of the regulator, the FCA. I say this with some reluctance. I have been an admirer of Andrew Bailey and believe that the FCA has become a significantly improved regulator under his leadership, but this belief has been tested of late, what with the LCF and the Neil Woodford affairs on top of the GRG debacle. Now we have the FCA’s report on the GRG affair, which reads as a rather desperate attempt at exculpation. It is clear that the FCA has acted late, reluctantly, defensively and very weakly. I agree with Kevin Hollinrake that the report is a whitewash. It is also an evasion of responsibility. The FCA report fails to discover—or declines to name if it has discovered— those in the GRG in RBS responsible for the malpractice and mistreatment of SMEs and the breaching of the TCF principle.

It is clear, on the one hand, that terrible things happened and, on the other, that nobody was named, punished or sanctioned. Then there is the question of the fit and proper test. The FCA report states on fitness and propriety:

“While those directly affected might think the conduct of senior management was deficient in GRG, we do not believe we would have reasonable prospects of bringing successful prohibition proceedings against any member of senior management”.


That is not only weak but unevidenced. It is either false or, if true, a perfectly clear illustration of the gulf between ordinary, common-sense language and its interpretation by the FCA. The proven persistence, scale and damage of GRG’s malpractice must surely be evidence that those responsible are absolutely not fit and proper persons in any reasonable sense of the words. If the FCA persists in its refusal to use its fit and proper person powers, the Government should ask it to rethink the whole regime. Does the Minister agree?

Perhaps the most worrying aspect of the FCA’s report is on page 73, where it discusses what, had the SM&CR been in place, it could have done about GRG. It reaches the feeble conclusion:

“We cannot say whether we would have been able to bring successful cases against RBS senior management had the SM&CR been in force”.


What does this say about the effectiveness of the SM&CR? Does it mean that the equivalent of GRG’s malpractices, if carried on now, could not lead to the punishment of individuals? What is the Government’s view on that?

This has been a sorry tale of malpractice. There has been wrongdoing but no consequences for the wrongdoers. There has been some compensation for victims, but not nearly enough. There is no clarity about whether our regulatory regime could have prevented this malpractice or could in future prevent such malpractice. There are questions as to whether the fit and proper test is in itself fit for purpose.

Promontory recommended that the FCA should work with the Government to extend the protections available to SME customers. Is that in fact happening and, if so, what progress has been made? Finally, does the Minister agree with the chairman of the Treasury Select Committee, who said that the FCA’s ruling showed that the regulators should be given powers to regulate commercial lending:

“Otherwise, scandalous events such as those at GRG could recur”?

Breathing Space Scheme: Consultation Response

Lord Sharkey Excerpts

Wednesday 19th June 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare my previous interest as a former chair of StepChange, the debt charity. I thank the Minister for repeating this Statement, and I am very happy to hear what he had to say. I have campaigned for both these changes in policy for a number of years, and it is astonishing to hear them being announced today. What on earth will I do with my time?

The Minister will recall the discussions we had during the passage of the Financial Guidance and Claims Bill when he was the co-pilot, as he described it. We worked closely with the Government to try to get a breathing space scheme into scope. We did not succeed then, and the worry was that although these two measures were in the Conservative Party manifesto, they might, like so many other good and necessary policies in recent years, fall under the Brexit behemoth, but here we are. I welcome the excellent progress made on this issue.

I was interested to hear that the Minister making the announcement in the other place revealed that this is an issue close to his heart. I think everyone who has seen at first hand the hardship that problem debt can cause realises that it places a heavy burden on households and can lead to family breakdown, stress and mental health issues. It was good to hear the Government accept that it is wrong to assume that overindebtedness is simply a product of feckless people taking out too much credit. Many hard-working families struggle to meet essential bills and can end up owing money to multiple creditors in the public and private sectors. My experience in StepChange was that the majority of the 500,000 or so people who contacted the charity each year had successfully managed their finances for many years before illness or another unexpected factor tipped them into unmanageable debt, which they desperately wanted to repay.

With this announcement today, the Government have taken a significant step which will do a huge amount to encourage people to seek the free professional advice they need timeously when problem debt occurs. The combination of the breathing space and the statutory debt recovery scheme will support those who have the capacity to repay their debts but lack the knowledge and expertise to deal with their multiple creditors. It will allow them to do so in a way that will repay much more to creditors and in a shorter time. This system has worked for many years in Scotland, and it is good to see that pioneering approach being extended to England and Wales, and hopefully to Northern Ireland in due course.

The detail of the government response has only just gone up on the website and there is a lot to take in, but I would like to make a few points. I worry that the breathing space period of 60 days may not be long enough in practice, and I am sure that this will be something we will need to come back to, but I think the best thing is to begin with that length and review it in the light of experience. It is good that the protections include the freezing of further default interest, charges and enforcement action once somebody has taken the first step of seeking debt advice. We are delighted that government debt will be included in both schemes. In particular, this should give some protection to many people against the rather aggressive action that is sometimes taken by bailiffs collecting council tax arrears.

The introduction of a special version of the breathing space for people experiencing a mental health crisis is most welcome. It is good that there is not going to be a public register, with all that that might bring in terms of unsolicited approaches to those on it from unscrupulous third parties. I think the Government have taken the right decision about a private register. We are sad that we will not see the breathing space scheme until 2020 and will not see the statutory debt management recovery scheme until 2021 or later, but I hope that HMT will do what it can to expedite both schemes. We certainly stand ready to help if that is required.

I have some reservations about the suggested level of the statutory fair share element in the SDRP. The current scheme agreed with large creditors is much higher than the 9% suggested in the Treasury’s response. However, I am aware that there is a broader discussion on comprehensive debt advice funding being worked on by the new Money and Pensions Service.

I will conclude by discussing two other issues. Unmanageable personal debt is a by-product of many factors, but most are linked to the health of the economy. Lack of affordable credit, slow wage growth, growth in zero-hours contracts and changes brought in by the gig economy all play a part. In addition, it is incontestable that the introduction of universal credit is causing strain and stress here. While this new policy is welcome—and it is—other issues need to be addressed. Does the Minister agree?

Finally, while it is true that the Government have acted to correct abuses in the consumer credit market, high-interest loans are still being made to people who cannot afford to repay them. Banks are not averse to making punitive charges for temporary overdrafts. Guarantor loans are a current concern, and it is a matter of considerable regret that the Government have not taken action to outlaw logbook loans. In relation to the latter, will the Minister agree to meet me to discuss how we might progress the Law Commission draft Bill on goods mortgages, which would inter alia have the effect of repealing the Victorian legislation that gives rise to these bans?

[Lord Sharkey (LD)]

My Lords, I thank the Minister for repeating the Statement. We on these Benches very much welcome the introduction of the breathing space and the statutory debt repayment schemes, although we do have a few questions about execution.

To debtors, this reform may seem to have been quite a long time coming: I can recall discussions in Parliament in 2015, as well as outside long before that. The proposal was, of course, included in the Conservative Party’s 2017 manifesto. Many people and organisations have played a part in getting us to this stage. I particularly want to mention StepChange and the noble Lord, Lord Stevenson of Balmacara. The critical point in getting the Government to do something arose during the passage through this House of what is now the Financial Guidance and Claims Act 2018. The amendment to the Bill by the noble Lord, Lord Stevenson, about breathing space now appears as Section 6 of the Act. This section encouraged and enabled the Government to do what they have announced today.

Turning to the schemes themselves, we are pleased that the Government have in most cases followed the advice they were given in the consultation—which seemed to be a model of its kind, unlike some of the other consultations that the Minister and I have had to discuss in this Chamber. We believe that the eligibility criteria for the breathing space scheme are broadly right, although we have doubts about the restriction to only once in 12 months. We encourage the Government to think again about this and—as they say they are minded to—to include provision for joint debts to qualify for inclusion in the scheme.

We are also happy to see that local and central government debts are to be included in the new scheme and very pleased to see the inclusion of small sole-trader debts, which we think is a vital element. We especially welcome the unlimited extension and repeated entry to the scheme for those in mental health crisis.

The Government’s very helpful consultation and policy response paper does qualify the inclusion of universal credit advances and third-party deductions from universal credit. The document is very vague about the timing of their eventual inclusion. I ask the Minister to give the House a little more detail and encourage him to speed up the process of including these two elements.

When it comes to which ongoing bills should be paid during the breathing space, I think that the Government have it about right in giving debt advice agencies the discretion over whether to remove people who do not keep up specified ongoing payments from the scheme.

Debt and debt repayment continue to be severe problems for millions of people in this country. As the Minister noted, the Money and Pensions Service has estimated that around 9 million people are overburdened with debt. We also now know that real incomes have started to fall again.

The Government’s proposals are a significant step forward in addressing problem debt, and we welcome them. However, we are disappointed with the timetable for the introduction of these measures. Early 2021 seems a very long way off—probably an intolerably long way off if you have unmanageable debt. All the Government’s proposed measures can be introduced by SI. Parliament is not currently overpressed with business. Why can we not use some of that time to bring forward the implementation date?

[Lord Young of Cookham]

I thank both noble Lords for their generous welcome to the announcement, in particular the noble Lord, Lord Stevenson. I remember the forceful case he made during the passage of the Financial Guidance and Claims Bill, drawing on his experience in StepChange, which drew on research showing that schemes such as this stop people getting into a cycle of debt and end up with the creditors getting more than they would, had such a scheme not been available. As the noble Lord, Lord Sharkey, said, his amendments to the Bill enable us to make progress. As he said, I was a co-pilot with my noble friend Lord Freud on the Bill—the two intellectuals Freud and Young took that Bill through the House.

I take the point from the noble Lord, Lord Stevenson, about 60 days possibly being not long enough. He will know that that is more than the six weeks pledged in our manifesto and more than the six weeks available in Scotland. We believe we have that right. I agree entirely with what he said about the Insolvency Service’s register being private and not public. I take his point, which was also made by the noble Lord, Lord Sharkey, about trying to speed things up.

I take the point that the 9% top slice that the agencies will get is less than the 13% currently available, but by contrast this is guaranteed in a way the 13% might not be. Also, we believe it will be on a much broader base. Of course we will keep the revenue stream under regular review, but we think we have it about right.

On loans, the FCA has announced a tough new package of measures on high-cost credit. It has the powers to introduce caps, but perhaps I can make more inquiries about that specific point. I have no hesitation in agreeing to a meeting with the noble Lord, Lord Stevenson, which I welcome. Perhaps it would make sense to involve the Economic Secretary to the Treasury, who has prime policy responsibility for the subject matter.

I am grateful to the noble Lord, Lord Sharkey, for his welcome of the scheme. The once-only ability to go into the breathing space does not apply to those with mental health problems. We wanted the first time to have a sustainable, long-term solution to the debt problems and there was an anxiety about the possibility of abuse if people could go on applying. We will look at that. He has a valid point about joint debts. Likewise, often a small trader’s personal finances are inextricably involved with the business. It makes sense to have eligibility for small traders up to the VAT limit.

On universal credit, any overpayments will be stopped immediately, although there is an IT issue that prevents the same process being applied to other payments. Perhaps I could write to the noble Lord, but the objective is to address those IT problems as soon as possible.

Finally, the noble Lord mentioned the timetable. This was raised in the other place. He might have followed the exchanges. The Economic Secretary said that he had had discussions with his officials to try to drive the timetable through as quickly as possible. There are some IT issues about making sure the public sector interface with the Insolvency Service can react to people entering and leaving the breathing space. We want to get it right, but I will certainly tell the Economic Secretary that both noble Lords expressed anxiety about the timetable and asked whether it could possibly be accelerated.

Banks: Cash Withdrawals

Lord Sharkey Excerpts

Tuesday 11th June 2019 Lords Chamber

[Lord Young of Cookham]

My noble friend is quite right; they are used not just for cash withdrawals but often for deposits or balance queries. I very much hope that banks respond to my noble friend’s suggestion that if they have to close the last branch in a town or village, they ensure that they leave behind a free-to-use ATM that will replace at least some of the facilities that it used to provide.

[Lord Sharkey (LD)]

My Lords, at the end of March there were 924 deprived areas without access to free-to-use ATMs, and this was a 12-month high. On 1 April LINK promised to address the problem by increasing payments to operators. It also said that if that did not fix the problem in two months, it could directly commission free-to-use ATMs in these deprived areas. The two months are up. Have the increased payments worked? Has LINK commissioned any free-to-use machines in these 924 deprived areas?

[Lord Young of Cookham]

The noble Lord is quite correct that LINK is directly commissioning ATMs in areas that do not have one but need one. If he has a particular area in mind that needs an ATM but does not have one, I am sure he will let LINK know. The company has tried to ensure the viability of free-to-use ATMs in deprived areas by increasing the transaction fee that the ATM owner gets to £2.75 per transaction, against the standard fee of 25.9p. LINK’s policy is that where it has to shrink the estate, it does so by removing ATMs that are close to another one—73% are within five minutes’ walk of another one—but maintaining free-to-use ATMs in remote or deprived areas.