Debates between Lord Sikka and Baroness Penn during the 2019 Parliament

Mon 18th Dec 2023
Tue 4th Jul 2023
Finance (No. 2) Bill
Lords Chamber

Committee negatived & 3rd reading
Mon 6th Feb 2023
Wed 25th Jan 2023
Financial Services and Markets Bill
Grand Committee

Committee stage & Committee stage & Committee stage
Wed 13th Jul 2022
Energy (Oil and Gas) Profits Levy Bill
Lords Chamber

2nd reading & 3rd reading & 2nd reading & 3rd reading
Thu 7th Apr 2022
Wed 3rd Mar 2021
Financial Services Bill
Grand Committee

Committee stage & Lords Hansard
Thu 28th Jan 2021
Financial Services Bill
Lords Chamber

2nd reading (Hansard) & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 2nd reading

Homelessness

Debate between Lord Sikka and Baroness Penn
Monday 18th December 2023

(5 months, 1 week ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the right reverend Prelate mentioned many different factors that go into this problem. One was the affordability of private rented sector accommodation, so I am sure he will welcome the fact that in the Autumn Statement we committed to increasing local housing allowance rates. Charities and other organisations do great work in this sector, and we will also continue to support them in their work.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, more than 300,000 people, including 140,000 children, are homeless in England, one of the wealthiest countries on this planet. Can the Minister tell the House why the Government’s policies continue to fail to reduce the number of homeless people in England?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, this problem requires many different responses. I have talked about the work we are doing to prevent homelessness, for example through working with landlords, and what we are doing to increase local housing allowance rates to make the private rented sector more affordable. Ultimately, we also need to increase the supply of housing. We are doing that through building more houses. We have delivered larger numbers of houses in recent years than in many years before and are delivering the right mix of houses built for rent, for social rent and for affordable ownership, as well as houses in the private sector.

General Elections: Party-political Spending

Debate between Lord Sikka and Baroness Penn
Wednesday 29th November 2023

(5 months, 3 weeks ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, all political parties should seek to abide by the rules and, if they have not, they should definitely return the money that they owe.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, general election spending is funded by big corporations and the rich. They do not actually donate money; they invest—they expect a return. In the interests of transparency, would the Minister consider introducing a law to require political parties to state what returns they have promised and to whom?

Baroness Penn Portrait Baroness Penn (Con)
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I completely reject the premise of the noble Lord’s question. We have transparency in our system so that people can see who donates to political parties. The alternative to donations to political parties is government funding of political parties and campaigning. That is not something that we on these Benches wish to see.

Authorised Push Payment Fraud Performance Report

Debate between Lord Sikka and Baroness Penn
Tuesday 14th November 2023

(6 months, 1 week ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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As I have said to noble Lords, through the Online Safety Act, platforms and services in scope will be required to take action to tackle fraud where it is facilitated through user-generated content or via search results. They must take preventive measures to prevent fraudulent content appearing on their platforms and swiftly remove it if it does. Additionally, there will be a duty on the largest social media companies and search engines to prevent fraudulent adverts on their services. Ofcom has the power to fine companies failing their duty of care up to £18 million or 10% of annual global turnover, so there will be accountability in the system for online companies too.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, only 59% of the stolen money has been returned to customers, according to the PSR report. Can the Minister explain what pressures there are on bank directors to, as it were, take care of the customers’ interest? The regulators seem to be incredibly complacent that over 40% of the money still has not been returned. Is it not really a case of restructuring the FCA and the PSR, to ensure that customer representatives have the majority of the seats on the boards of those regulatory bodies so that they can get the protection they need?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I believe that an alternative route forward is already in train: the mandatory reimbursement requirement, which will apply across all payment service providers. As I said, there is currently a voluntary approach in place; a mandatory approach will ensure a much more consistent response for consumers when it is introduced next year.

Finance (No. 2) Bill

Debate between Lord Sikka and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I was speaking about the difference between changes to any scheme and abolition of the status altogether, but I would say that there is a high degree of uncertainty about the impact of changes made in this area.

Finally, I turn to the pension tax changes made through this Bill and the Budget, which many noble Lords have spoken about. To respond to the noble Lord, Lord Eatwell, I was not implying that only the most highly skilled and productive workers benefit from these changes, but many of them will. They have been designed in response to feedback from the NHS in particular that there was an impact on retention of the most skilled staff.

Regarding the suggestion that a doctors-only change could have been implemented instead, unlike more targeted policies, the Government have considered a range of options to address this issue over a number of years. One of the elements which means that a more targeted approach would not be appropriate in these circumstances is the time it would take to implement. These changes could be implemented quickly, from April 2023, minimising the risk of early retirements in the NHS before any changes take effect.

In the Statement taken before this debate, we heard about the pressures on our NHS workforce and the pressing need to address those immediately. If we were to take a targeted approach to one profession—NHS doctors—we may well come back to the same issue, as the same issues are faced by employees in other sectors, such as air traffic controllers, the police, the Armed Forces and senior teachers. To introduce targeted measures for each profession would not be an effective way to deal with challenges across those different workforces.

The Government are aware of the concern raised by the noble Lord, Lord Eatwell—

Lord Sikka Portrait Lord Sikka (Lab)
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I am grateful to the Minister for giving way. Will she take up my challenge and tell me which of the big four accounting firms, with strong court judgments against them in the cases brought by HMRC, has been investigated, fined, disciplined or denied government contracts because they are peddling tax abuses? If the Minister cannot name such a firm, can she tell me why the Government are soft on tax abuses by big accounting firms?

Baroness Penn Portrait Baroness Penn (Con)
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I think one of the reasons why I frustrate the noble Lord in this area is that the Government do not normally comment on individual taxpayers. On his more general point, the Government have taken action to tackle tax avoidance and evasion over many years and to reduce its incidence in our economy.

Finally, I turn to the impact of the change to the annual allowance and its potential inheritance tax impacts. Noble Lords are right that the annual allowance has meant that there has been a limit on how much individuals can put into their pensions and therefore pass on. The Government are aware of concerns that some may be using their pension pots to reduce future inheritance tax liabilities, rather than for their purpose: to fund their retirement. As with all taxes, the Government keep the rules under review.

Income Tax Threshold

Debate between Lord Sikka and Baroness Penn
Tuesday 4th July 2023

(10 months, 3 weeks ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, of course, the Government want to bring taxes down. It is worth reminding noble Lords that since 2010 we have nearly doubled the personal allowance and, this year, around 30% of those with income are projected to pay no income tax at all. In our current circumstances, we need to be fiscally responsible, and the best tax cut we can give people is to cut inflation.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the income tax threshold and personal allowances are frozen at the April 2021 level until 2027-28. At that time, the real value of the personal allowance—to which the Minister just referred—will be less than it was in 2013. As a result of government policies, an additional 4.2 million people are expected to pay the basic rate of income tax this year; that is, 20% plus national insurance of 12%. Can the Minister explain the rationale for extra taxes on the poorest, already hit hard with negative wage rises and rising bills? How does the Government’s hiking of the taxes of the poorest reconcile with their levelling-up, or is it squashing-down, agenda?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I could not disagree more with the noble Lord. On the personal allowance, the increases we have seen under this Government since 2010, even with the freeze in thresholds, will be more than if it had been raised in line with inflation. We have put in place unprecedented support for people after the two major shocks of Covid and Russia’s invasion of Ukraine. We need to consolidate our public finances in the face of that and it is right that everyone contributes. We have looked to change corporation tax rates while protecting the smallest businesses, and we have frozen tax thresholds. We brought down the additional rate threshold at the Autumn Statement 2022, which is a sign of those with the broadest shoulders bearing the biggest burden.

Corporate Profits: Inflation

Debate between Lord Sikka and Baroness Penn
Thursday 29th June 2023

(11 months ago)

Lords Chamber
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Lord Sikka Portrait Lord Sikka
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To ask His Majesty’s Government what assessment they have made of the extent to which increases in corporate profits have contributed to inflation.

Baroness Penn Portrait The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
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My Lords, UK inflation has been affected by global factors, including Russia’s invasion of Ukraine which has affected energy and food prices. The UK is not alone in facing these challenges: advanced economies across the world are feeling the impact of inflation. That is why halving inflation is one of the Prime Minister’s top five priorities, as a staging post to returning inflation to the 2% target. Evidence that corporate profits play a role is inconclusive.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the Minister is in total denial of reality here. The pandemic of profiteering is driving inflation. The IMF and the ECB have said so, but the Government are in denial. Look at the accounts of banks, oil and gas companies, supermarkets, food, internet and mobile phone companies, and others, and you will see that their profits have doubled within the last couple of years. The Government have a whole array of policy options, including price controls, windfall taxes, prosecution of profiteers, and breaking up oligopolies to encourage more competition to curb profiteering, but they choose to do absolutely nothing. Can the Minister explain what assessment the Government have made of the corrosive impact of profiteering on people’s standard of living and what they will do about it?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I note that the noble Lord referred to the recent IMF analysis, which looked at the euro area. The Governor of the Bank of England recently said that it does not see a higher trend in non-North Sea corporate profits. Of course, we have the energy price levy in place with respect to North Sea corporate profits, but we keep it under close scrutiny. I am sure the noble Lord will be pleased to know that, yesterday, the Chancellor of the Exchequer met with the main regulators and agreed a new action plan to ensure that consumers are being treated fairly and to help those struggling to meet their bills.

Energy Profits Levy

Debate between Lord Sikka and Baroness Penn
Tuesday 7th February 2023

(1 year, 3 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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Renewable levies have helped drive the successful track record I referred to earlier, but we are always conscious of consumers’ bills rising. That is why we have put in the significant support that we have.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, unlike those of many other countries, the UK version of windfall tax, which the Government like to call the excess profits levy, excludes excess profits made at forecourts, at refineries and through trading, otherwise known as speculation. Can the Minister explain why these exemptions were created?

Baroness Penn Portrait Baroness Penn (Con)
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The profits levy builds on the specific tax regime we have in place for oil and gas production in the UK. Perhaps I can reassure the noble Lord that the 75% headline tax rate applied to the sector is one of the highest among comparable North Sea basins, which include Norway at 78%. Other comparable regimes include the Netherlands at 65% and Denmark at 64%.

Financial Services and Markets Bill

Debate between Lord Sikka and Baroness Penn
Lord Sikka Portrait Lord Sikka (Lab)
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I am encouraged by the Minister’s determination to tackle fraud. Can she answer the three specific questions I asked? First, can she give us a commitment that a copy of the Sandstorm report in relation to BCCI, which is now more than 30 years old, will be placed in the Library of this House? Secondly, can she make a statement now or come to the House soon to tell us why the Government covered up criminal conduct by HSBC in the US and how many other instances there are of that kind of cover-up?

Thirdly, in this country we have virtually eliminated the risk of bankruptcy for major banks and insurance companies. That then raises questions about the pressure points on directors to behave and act honourably. Fines are fairly puny and have not made much of a difference. Personal prosecutions of directors of banks hardly ever take place, and neither do they face any personal fines. Can the Minister explain what the pressure points are on the directors of major financial institutions to act with honesty and integrity?

Baroness Penn Portrait Baroness Penn (Con)
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I am afraid I will not be able to address the noble Lord’s first two points, but I will happily write to him. On his third point, I referred to the fact that, as part of the Economic Crime and Corporate Transparency Bill, we are looking to take forward the issue of corporate criminal liability and the offence of failure to prevent fraud, which would strengthen action in the areas he talks about.

I was talking about our work with other sectors. My noble friend Lord Northbrook and the noble Lord, Lord Sikka, raised the issue of online fraud. There is an intention to bring forward a tech sector charter with industry, to include public and private actions to drive down fraud in this area. Of course, fraud has been brought into the scope of the Online Safety Bill to better protect the public from online scams through, among other measures, a new stand-alone duty requiring large internet firms to tackle fraudulent advertising, including that of financial services.

The Government also recognise the particularly devastating impact that fraud can have on the elderly and the most vulnerable people in society and on people’s mental health. They have taken various steps, including banning cold calls from personal injury firms and pension providers and supporting National Trading Standards to improve the quality of care available to vulnerable fraud victims. More broadly, the FCA’s guidance on vulnerability explores how firms can understand the needs of vulnerable customers. This includes those who are older or have mental health conditions and sets out how the sector can provide targeted services for this cohort, including in the context of fraud. Where firms fail to meet their obligations to treat customers fairly, the FCA will take further action. I hope noble Lords are assured that further work is being taken forward on data sharing and on supporting older people and those with mental health conditions who are victims of financial fraud.

The noble Lord, Lord Davies of Brixton, mentioned measures in the Online Safety Bill, as have I. I have also mentioned the measures in the Economic Crime and Corporate Transparency Bill and revisions to the Data Protection Act. I am cognisant of the need to ensure that this work is well co-ordinated and that the progress we are making in other Bills is co-ordinated with the work we are doing on this issue more generally.

I turn finally to Amendment 217. Currently, the proceeds of such fines imposed by the courts must, by law, be paid—

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Baroness Penn Portrait Baroness Penn (Con)
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With apologies, the lack of redress is around the right to private action. I will come to that point and, when I have said my piece, the noble Lord can intervene, if it is not sufficient.

Amendment 231 from the noble Lord, Lord Sikka, is similar in intention and would introduce a statutory duty of care owed by authorised persons to consumers. Again, this proposal was considered by the FCA, and it sought views from stakeholders through its consultations. As noble Lords have noted, this issue has been under consideration for some time. In its 2019 feedback statement on a duty of care and potential alternative approaches, the FCA explained that most respondents, including industry stakeholders and a number of consumer groups, did not support a statutory duty of care. Of course, the two subsequent consultations were undertaken by the FCA in response to the amendment put down by Parliament and included in the Financial Services Act 2021.

The new consumer duty comes into force on 31 July for new and existing products. It represents a significant shift in regulatory expectations, and there is a large programme of work under way within the sector to implement it. It would be wrong to seek to replace it now or seek to duplicate it with an additional statutory duty of care before it has been given a chance to succeed.

Amendment 229, along with Amendment 76, seeks to attach a private right of action to the consumer duty. This is an issue that the FCA has considered and consulted on extensively as it developed the consumer duty.

Lord Sikka Portrait Lord Sikka (Lab)
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Could the Minister clarify something? If I buy a bar of chocolate, the producer owes me a duty of care and, if I get injured, I have a right of redress. If I buy financial services, why can I not have the same rights?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the concept of a duty of care in financial services may be different to the concept of a duty of care in other contexts. This was considered very carefully and consulted on by the FCA in 2019 and in 2021. It considered these questions and the issues we have discussed in the Committee today.

Financial Services and Markets Bill

Debate between Lord Sikka and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I will begin by speaking to government Amendments 26 and 191 to 195 in my name, and Amendment 27, tabled by the noble Baroness, Lady Kramer. As she described very well in her contribution, CCPs are a type of market infrastructure and play a vital role in promoting financial stability in markets.

Government Amendment 26 will allow the Bank of England to extend a firm’s run-off period to the temporary recognition regime from a maximum period of one year to a maximum period of three years and six months. This will ensure that overseas central counterparties, or CCPs, within that run-off can continue to offer services to UK firms during that period.

While the UK was an EU member, access to overseas CCPs for UK firms was determined centrally by the EU. Following the UK’s exit, the Government put in place a new process to tailor access to the UK market, together with a temporary recognition regime, or TRR. The TRR allows UK firms to continue to use overseas CCPs while the Treasury and the Bank of England make equivalence and recognition decisions in respect of those CCPs. Once made, these equivalence and recognition decisions will provide the basis for long-term UK market access for overseas CCPs.

The TRR was accompanied by a year-long run-off regime, intended to ensure that CCPs that leave the TRR before it expires, without gaining recognition, can slowly and safely unwind transactions with UK members before exiting the UK market. Remaining within the TRR requires CCPs to take a number of steps, including submitting an application for recognition to the Bank of England by 30 June 2022. While the majority of CCPs in the TRR did this, a small number did not apply for recognition by that deadline and have consequently entered the run-off regime. UK firms therefore stand to lose access to these CCPs at the end of June 2023 under the current arrangements.

Amendment 26 will allow the Bank of England to extend a firm’s run-off period to the temporary recognition regime from a maximum period of one year to a maximum period of three years and six months. This extension is appropriate as the Government understand that some of the CCPs in the run-off may wish to apply for recognition in future. A temporary loss of access for UK firms to these CCPs would be highly disruptive. The extension therefore provides time for CCPs in the run-off regime who wish to apply for recognition to do so and ensures that the relevant CCPs can continue to offer services to firms during that period. It also ensures that, where necessary, UK firms can wind down their exposure to CCPs, leaving the run-off state in a safe and controlled manner.

Amendment 27 from the noble Baroness, Lady Kramer, seeks to remove proposed new sub-paragraph (3), which makes it clear that the Bank of England can vary any decisions it has already made on the length of the run-off period for a particular firm. I understand that this is a probing amendment to understand how that works. However, the Bank already provides dates by which these firms must exit the run-off, in line with the existing one-year limit set in legislation. This amendment extends the limit set in legislation and then gives the Bank the power to vary those dates under it. It is important for the Bank to set the exact date on which a particular CCP will exit the run-off in order to carefully manage the process for the reasons the noble Baroness points out. The run-off period for a firm cannot be more than the three years and six months specified in this legislation.

The Bank can specify a period shorter than this for a particular CCP. This does not affect the equivalence process as described by the noble Baroness. Equivalence is a separate process managed by the Treasury where the Treasury determines that an overseas jurisdiction is equivalent to the UK’s regime based on an assessment of the jurisdiction and its regulatory regime. Amendment 26 therefore allows the Bank to set specific dates for when CCPs will exit the run-off, with a maximum period set in legislation, which the Bank is currently responsible.

Briefly, Amendments 191 to 195 to Schedule 11, which introduces a special resolution regime for CCPs, are technical amendments which will ensure that Schedule 11 functions as intended and reflects the original policy intent, by correcting drafting and clarifying the scope of certain provisions.

On Amendments 21 to 25 and 41, tabled by the noble Baroness, Lady Worthington, the Government believe that effective commodities markets regulation is key to ensure that market speculation does not lead to economic harm. This is a lesson we all learned from the food crisis in the 2000s, and the Government remain committed to the G20 agreement that sought to address that.

However, the current regime, which we have inherited from the EU, is overly complicated and poorly designed. The application of limits to close to a thousand different types of commodity derivative contracts is far too broad. It captures many instruments that are not subject to high levels of volatility or speculation, and therefore unnecessarily undermines trading and liquidity in some contracts. Since the UK left the EU, the EU has significantly reduced the scope of its regime to only a handful of contracts—just 18—and no other major jurisdiction applies position limits as widely as the current UK regime.

To ensure that the regime is calibrated correctly, the Bill makes trading venues responsible for setting position limits. As some in the Committee have noted, they are well placed to ensure limits apply only to contracts that are subject to high volatility. However, the Bill empowers the FCA to put in place a framework for how trading venues should apply position limits and position management controls. As part of this, the FCA will continue to require trading venues to set position limits on contracts which pose a clear threat to market integrity. The FCA has confirmed that agricultural and physically settled contracts, among other highly traded contracts, will continue to be subject to position limits, in line with the UK’s G20 commitments, and therefore consistent with international standards.

The FCA will also retain its ability to intervene directly to set position limits if it believes it is necessary. However, Amendments 21 to 25 would require the FCA to instead continue setting position limits on all commodities that are traded on a venue or economically equivalent over-the-counter traded derivatives. This would place unnecessary restrictions on investors, to the detriment of all market participants, and would place the UK at a disadvantage compared to other international financial centres, such as the EU and the US, which apply restrictions to contracts that genuinely pose a risk of volatility. It would change existing market practice that has been shown to work effectively.

I will address more directly a number of the points that the noble Baroness, Lady Worthington, raised. On how to manage the “conflict of interest”, as she put it, for trading venues, as I said, under the measure in the Bill the FCA will establish a framework that will govern the way venues set and apply limits. The FCA will also have powers to intervene and require venues to set limits on specific contracts that pose a risk to market integrity.

On the FCA’s information-gathering powers, in particular in relation to over-the-counter trading, the FCA will have more powers to request information from any participants about contracts it is considering applying limits to. This includes, but is not limited to, over-the-counter contracts. I assure the noble Baroness that over-the-counter contracts will remain in scope as the FCA will have the ability to set limits. This means that over-the-counter traded agricultural products will remain in scope.

The noble Baroness also asked how, given that the FCA often participates in international fora, exchanges will be plugged into them. Market participants, including exchanges, are often invited to participate in round tables organised by international bodies, such as IOSCO, to discuss specific regulatory issues. They can also respond directly to consultations.

I hope that provides some reassurance to the noble Baroness on some of the specific questions that she raised.

Lord Sikka Portrait Lord Sikka (Lab)
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I thank the Minister. Unless she is going to in a moment, she did not specifically refer to Amendment 41. What it proposes is very reasonable, for two reasons. First, the information that the noble Baroness, Lady Worthington, requests is costless. It is readily available within the organisations. Secondly, if we go back to the last crash, one of the complaints about Bear Stearns was that it made almost 100% of its income from risky speculation, but the breakdown of that income was not available. Therefore, the creditors and other stakeholders were unable to make an assessment of the likely continuation of that income or the risks attached. This kind of disclosure gives us insights into the risks and enables market punters to make their own predictions about future cash flows and riskiness, and it is all costless. Therefore, it is hard to see what objections there can be to this disclosure.

Financial Services

Debate between Lord Sikka and Baroness Penn
Wednesday 11th January 2023

(1 year, 4 months ago)

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Baroness Penn Portrait Baroness Penn (Con)
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We absolutely recognise the importance of cash to the people the noble Baroness mentions. As she says, it is for shops and other service providers to determine how they accept payments, but we are legislating to protect access to cash through the Financial Services and Markets Bill. That should help those shops and service providers which wish to continue to accept cash to do so, because we are focusing on this from both a consumer and a wholesale perspective.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, if I understood the Minister correctly, she said that the consultation, or the rules, on bank branch closures are being strengthened. May I ask her to consider three facts? First, there is absolutely no consultation between banks and customers before a branch is closed. Secondly, banks do not publish details of their financial calculations to show whether a branch should be closed or not. Thirdly, people do not have the opportunity to object and vote against a bank’s decision. In light of that, what is any guidance worth?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, what I actually said is that the FCA guidance on bank branch closures has recently been strengthened. I do not recognise the picture the noble Lord paints. Firms are expected carefully to consider the impact of planned closure on their customers’ everyday banking and cash access needs and to consider alternative arrangements. The strengthened FCA guidance has specifically looked at enhancing protections for consumers who rely on those branch services. For instance, there are examples of banks placing people in those branches to ensure that they can help their customers to access banking through digital means such as mobile or online banking. There is also the rollout of Post Office banking hubs to provide more in-person services to customers.

Financial Inclusion in England

Debate between Lord Sikka and Baroness Penn
Wednesday 30th November 2022

(1 year, 5 months ago)

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Baroness Penn Portrait Baroness Penn (Con)
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I am afraid to say to my noble friend that I do not recall the farthing myself. The Government had a consultation on cash and digital payments in 2018 and the responses strongly supported not changing the denominational mix of coinage at that time. However, as with all areas of policy, we keep this under review.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I have met many people who are visiting pawnbrokers, putting down their everyday things just to get a few pounds to enable them to survive. They are paying interest rates of 160% upwards. Does the Minister consider that to be affordable? If not, what is she proposing in order to help these people?

Baroness Penn Portrait Baroness Penn (Con)
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I do not consider that to be affordable at all. We are taking a number of actions in this area. We work closely with Fair4All Finance, the organisation set up to distribute funding from dormant assets. One of its projects is working on the no-interest loans pilot scheme to try to provide a different route and access to credit for those who need it. At the Autumn Statement, we heard from my right honourable friend the Chancellor the action we are taking to direct our support this winter and next year to the most vulnerable households.

Financial Markets: Stability

Debate between Lord Sikka and Baroness Penn
Thursday 3rd November 2022

(1 year, 6 months ago)

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Baroness Penn Portrait Baroness Penn (Con)
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I do not believe that that characterisation is right. Ensuring that we have a strong financial services sector also benefits many other parts of our economy in terms of access to capital, and many other things. It does not need to be at the expense of the rest of our economy. It strengthens the rest of our economy.

Lord Sikka Portrait Lord Sikka (Lab)
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The Minister referred to £100 billion of tax from the finance industry. That is misleading, because it includes things such as the VAT collected by the finance industry, which is borne by customers; PAYE, which is borne by employees; and national insurance, part of which is also borne by employees. Surely that £100 billion number needs to be corrected.

Baroness Penn Portrait Baroness Penn (Con)
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No, it is correct. The noble Lord seems to know how it is composed, so we are transparent in how that number is reached. I would like to make a little progress.

Private Equity: Economic and Social Risks

Debate between Lord Sikka and Baroness Penn
Thursday 21st July 2022

(1 year, 10 months ago)

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Baroness Penn Portrait Baroness Penn (Con)
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I will have to check that point for the noble Lord and get back to him in writing. From memory, action has been taken but I would want to check whether it was specifically against private equity companies or private equity-backed companies, rather than more broadly. I will also acknowledge, later in my speech, that there are instances where the laws and regulations have not always worked well, and where there is more progress to be made, such as in our audit reforms.

In addition, many private equity firms have voluntarily taken action to improve their disclosures by signing up to Sir David Walker’s Guidelines for Disclosure and Transparency in Private Equity. Private equity-backed companies above a certain size that volunteer to sign up to these guidelines agree to disclose information comparable to that published by listed companies in the FTSE 250. These regulations and guidance aim to ensure that private equity firms’ involvement in UK companies is in the best interests of the company and its employees in the long term. To further support this, the Government have reviewed the legislation on limited partnerships and intend to introduce measures in this parliamentary Session that will increase the transparency of the ownership and activities of these structures.

Transparency is important, and it is vital that investors and all those who depend on the largest companies can rely on the information they publish. That is why the Government are taking further action in this area, which aims to protect the UK economy against risks to jobs, pensions and suppliers from unexpected company collapses. Under the Government’s recently announced audit and corporate governance reform plans, the definition of a public interest entity will be expanded to cover virtually all types of company with a turnover of more than £750 million and more than 750 employees. This means that large private equity-owned companies will be subject to enhanced disclosure obligations relating to resilience and other matters. They will also be subject to stronger audit rules and the new, strengthened regulator will have powers to sanction directors for breaches of duties relating to reporting and audit.

As a result of these audit and corporate governance reforms, private equity-backed firms will have to publish information about the risks they face and the steps they have taken to prevent fraud, and disclose their realised profits and losses which are the basis for dividend payments. The Government recognise that instances of asset stripping do occur, to the detriment of creditors, employees and wider stakeholders. That is why, in 2018, the Government committed to delivering new powers to better enable insolvency practitioners to reverse transactions that have unfairly extracted value from companies prior to formal insolvency proceedings. The Government’s reforms will enhance the transparency requirements for our largest companies as well as the tools our insolvency practitioners can access. This is designed to ensure that large UK firms will not be able to dish out dividends when they are on the brink of collapse.

To address the point made by the noble Viscount, Lord Chandos, about the creditor hierarchy for small traders, the hierarchy that currently exist in insolvency law—

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the Minister has referred a number of times to distributable profits. A distributable profit can be calculated only if there is a notion of capital maintenance in financial reporting. There is no clear notion of financial reporting in international accounting standards. It is a mishmash of maintenance, money capital, real capital, physical capital—any number can be dreamed up.

In addition, we do not have a central enforcer of company law in this country at all. A number of companies have paid their dividends illegally. In yesteryears, I asked questions, and I persuaded some Members of this House and the other place to ask questions as well, about this. The Government were unable to name where the buck stops. Who exactly is responsible for enforcing the part of company law relating to distributable profits and payment of legal dividends?

Baroness Penn Portrait Baroness Penn (Con)
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The noble Lord is right that different aspects of our company law regulation and financial services regulation belong to different regulators. The point I was trying to make to noble Lords was that the extended and enhanced obligations that public companies currently face will be extended to those large companies in private ownership. That will enhance the transparency and regulation that they are subject to and, although it does not change those existing regulations, I hope that will none the less be welcomed.

I was talking about the creditor hierarchy, which has been well established for many years and is common among most international jurisdictions. Promoting the ranking of one group of creditors will mean that other creditors get less, and it would impact the positive environment that the UK economy creates for lending to business. With that in mind, any proposed change to the creditor hierarchy should only ever be considered with the utmost care.

I understand noble Lords’ concerns about recent high-profile cases where significant losses have occurred to creditors such as employees or small traders, including cases where the taxpayer has had to fund the continuation of vital services and where losses may have resulted from misconduct by the directors of those companies. I hope noble Lords will understand that it is not appropriate or helpful for me to refer publicly to individual cases, some of which may still be under investigation by various regulators or investigatory bodies, or where proceedings may be under way or in contemplation. However, I reassure noble Lords that the Government keep the insolvency and corporate governance frameworks under constant review. This includes learning lessons from such cases and, where necessary, the Government will take action to improve or strengthen those regulatory frameworks.

The noble Lords, Lord Sikka and Lord Tunnicliffe, both raised concerns about the evidence base for private equity’s impact on our economy, specifically in relation to risks to financial stability. I agree with them on the importance of evidence and note that the Financial Policy Committee is responsible for identifying, monitoring and taking action to address systemic risks to UK financial stability. The FPC achieves this, in part, via the identification and assessment of risks and stresses in its biannual Financial Stability Report, published most recently on 5 July.

Both noble Lords also mentioned the Financial Services and Markets Bill. The noble Lord, Lord Tunnicliffe, is right about its heft and, without going into detail, I am sure the Government will welcome noble Lords’ scrutiny of the Bill when it comes to this House. They will have the opportunity to table amendments in the usual way, but perhaps I can provide some words of reassurance to your Lordships on that Bill. It aims to make the UK one of the most competitive places in the world to do financial services business. However, I think the noble Lord talked about better regulation rather than deregulation; that is the spirit and aim with which the Bill is being taken forward, and the UK has a strong record in delivering that.

Both noble Lords also raised concerns about carried interest and the tax treatment of debt compared to equity. The Government believe that the UK’s approach to the taxation of carried interest, which is comparable to that of other jurisdictions, strikes an appropriate balance. The existing rules reflect both the nature of carried interest as a reward and the importance of maintaining the UK’s competitiveness for fund management.

As with other costs in relation to debt versus equity, debt interest is generally deductible as a business expense. Again, the UK is not an outlier in allowing groups to deduct interest in the calculation of taxable profits. Meanwhile, the UK has wide-ranging interest restriction rules that ensure highly leveraged groups deduct only a proportion of their worldwide third-party net interest expenses, equal to the UK’s share of the group’s worldwide profits. There are many reasons, other than the tax deductibility of interest, why companies may favour debt over equity financing. These include lower costs, easier access, greater flexibility and non-dilution of capital.

Noble Lords asked about takeover powers and what consideration the Government have given to enhanced takeover tests for large companies. As an open economy, overall we welcome foreign trade and investment where it supports UK growth and jobs and meets our stringent legal and regulatory requirements. The details of mergers and acquisitions are primarily a commercial matter for the parties concerned. However, the Government acknowledge that there are instances where such transactions might result in concerns for consumers and the economy more broadly. That is why there are established processes for considering whether there are specific public interest reasons for Ministers to intervene in mergers under the Enterprise Act 2002. These are limited to matters relating to financial stability, media plurality and public health emergencies.

The National Security and Investment Act 2021, which came into force in full in January 2022, introduced mandatory notification and clearance requirements for certain acquisitions in 17 sectors of the economy, including parts of the UK’s critical national infrastructure and advanced technology sectors. This brought further improved security to British businesses and people.

I am conscious of the time, but I have one more point to address. The noble Lords, Lord Sikka and Lord Tunnicliffe, mentioned the establishment of ARIA. Earlier this week, the Business Secretary appointed the new CEO and chair of ARIA. These appointments will now drive forward the final steps in setting up the agency, ensuring it is best placed to fulfil its objectives of enabling exceptional scientists and researchers to identify and fund transformational research that leads to new technologies, discoveries, products and services. As part of finalising the set-up, careful consideration will be given to the most effective funding mechanisms for the agency to have at its disposal.

I close by praising the support that private equity provides to UK businesses and agreeing with the noble Lord, Lord Sikka, that we must be conscious of the economic and social risks that can arise. I emphasise that the Government understand the consequences that can arise from malpractice in private equity. The ongoing reforms and regulation involving private equity-backed businesses, alongside the upcoming audit and insolvency reforms, are designed to address these issues. In doing so, we will work to ensure that the UK economy continues to be open, competitive and above all fair to those whose jobs and livelihoods depend on it.

Energy (Oil and Gas) Profits Levy Bill

Debate between Lord Sikka and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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I believe she was comparing that Government to this one. This Government have legislated for our net-zero targets—the first major country to do so. We have decarbonised further and faster than our G7 counterparts, and we have shown global leadership on climate change and wider nature and biodiversity through our chair of the G7 and COP 26. I know that noble Lords will continue to push the Government to do better, go further and do more. That is absolutely right and appropriate. The noble Baroness believes in effective campaigning; I am not sure that an effective way to campaign is not to recognise some of the progress made on the journey.

The noble Lord, Lord Tunnicliffe, said that investment will be subsidised in the tax system at a rate of 20 times the incentives available to renewable energy schemes. We do not recognise these figures. Oil and gas companies within the ring-fence regime are already paying tax on their profits at more than three times the rate of other companies, so any tax relief is reducing a higher tax bill. Although oil and gas companies save an additional 45p in tax for every £1 they invest—91p in total from the levy—they will pay tax at 65% of remaining profits. In contrast, outside the oil and gas ring-fence regime, profits on companies such as those in the renewables sector are taxed at 19%. So if a company made £100 in profit it would pay £65 in tax in the oil and gas regime but only £19 if it were outside the regime. If it then reinvested £25 of that profit, an oil and gas company would still pay more than twice the tax of a normal company—just over £42 compared with just under £13 for a company outside the regime.

The noble Lords, Lord Sikka and Lord Teverson, expressed concern that a large proportion of the estimated £5 billion of revenue raised in the first 12 months of the levy being in place would be lost to the investment allowance. I reassure noble Lords that the £5 billion estimate is net of the effect of the investment allowance.

Lord Sikka Portrait Lord Sikka (Lab)
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Will the noble Baroness tell us the cost of giving this 80% investment allowance? She said that the £5 billion is net; what would it have been without that, so that we know what the cost is?

Baroness Penn Portrait Baroness Penn (Con)
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I will come on to that in just a minute. Relatedly, I was just about to answer the question about whether the money going into the tax relief might be dead weight, in that the investment would have happened anyway. The Government expect the combination of the levy and the investment allowance to lead to an overall increase in investment.

In relation to the noble Lord’s question, the OBR will take account of this policy in its next forecast. I think we will see some more detail from its assessment then. I hope that the net additional investment that we expect from the design of the levy provides some reassurance to my noble friend Lord Moynihan.

The legislation also includes an anti-avoidance provision to prevent any recycling of existing assets getting the allowance. I think that is about the targeting of the allowance and avoiding dead-weight costs, rather than not being supportive of the general concept of recycling assets.

Lord Sikka Portrait Lord Sikka (Lab)
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I appreciate the point the noble Baroness made about recycling, but there is nothing whatever in the Bill to prevent an oil and gas company leasing a used asset, saying that it is a new investment and claiming this allowance. That asset need not even be owned by a company in the UK—the lessor could be somewhere else in an offshore tax haven. It could be an affiliate of the same company that pays, acquires a right and then uses it. The Bill does not prevent that, does it?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the investment allowance has been carefully designed to ensure that it incentivises investment but does not provide relief for investment that would have taken place otherwise.

I will pick up on a couple of further points from the noble Lord, Lord Teverson, who had a few questions. To clarify, the allowance does apply to new as well as existing fields. It will not apply to carbon capture, usage and storage, as it applies only to upstream activities, and carbon capture, usage and storage is not an upstream activity. However, it would apply to the decarbonisation of those upstream activities. I hope that makes sense.

On energy storage, the Government published an energy security strategy in April to increase domestic energy production and accelerate the move away from gas towards low-carbon energies such as nuclear, renewables and hydrogen. It builds on delivery over the past decade, including giving the go-ahead to the first nuclear power plant in a generation and a fivefold increase in renewables. The Government will ensure a more flexible, efficient system for both generators and users by encouraging all forms of flexibility, with sufficient large-scale, long-duration electricity storage, to balance the overall system by developing an appropriate policy to enable investment by 2024.

The noble Lord, Lord Tunnicliffe, asked about the £400 energy discount and whether that may apply to second homes. The Government’s intention is for the Energy Bills Support Scheme to reach as many households as possible from October, while minimising the administrative complexity of the scheme. We consulted on the basis of delivering the £400 via domestic electricity meter points. While he is right that some households have second homes or multiple meter points, it will be important to balance this against the timely and efficient delivery of the scheme. I know noble Lords have expressed concern about the targeting of the support that the Government will provide. I just say that, in contrast to calls from other Benches—for example, around a different route, which could be to reduce VAT—the flat-rate payment provides a better targeted level of support to those households that are most vulnerable. I think that is something that we should support.

The noble Baroness, Lady Kramer, asked for reassurance that the proceeds of the levy will go towards support with the rising costs of living. As her noble friend said, the support announced this year is worth £37 billion. Our estimate for the first year of the levy is around £5 billion. While there is not a direct ring-fence, it was announced at the same time as the additional measures in May, which were about £12 billion of that £37 billion. The extra support that the Government are giving people actually outweighs the revenue being raised from this levy. The distributional analysis published alongside the May package shows that it was highly progressive, and around three-quarters of total support will go to vulnerable households. As noble Lords will also know, we made it clear at that point that next April’s uprating of benefits will use the normal September CPI—as we expect that level of inflation to be higher than it will be the following April—to account for ongoing high energy costs for those households on the lowest incomes.

The noble Baroness, Lady Kramer, the noble Lords, Lord Tunnicliffe and Lord Teverson, and others asked about energy efficiency. I talked about the £37 billion of cost of living support, and I reassure noble Lords that the Government are spending £6.7 billion in this Parliament to improve energy efficiency and decarbonise heat in buildings. Over the next three years, the Government are investing a further £1.8 billion on low-income household energy efficiency, on top of the £1.2 billion spent since 2020. This will improve around 500,000 homes, saving households on average £270 a year on their energy bills long term, at current energy prices.

Some £471 million has been spent to date on the social housing decarbonisation fund and sustainable warmth programme, estimated to save households an average of £350 to £450 a year on their energy bills. We are also consulting on expanding the energy company obligation to £1 billion per year for improvements to fuel-poor households. The Government agree with noble Lords about the importance of improving energy efficiency, as well as providing immediate support to households with the cost of living.

I cannot answer the question from the noble Lord, Lord Teverson, on the coal mine in Cumbria, or all the questions from the noble Lord, Lord Sikka, but maybe I will write to them both and copy in all noble Lords so that they get satisfaction on those points.

Tax Cuts: Fiscal Impact

Debate between Lord Sikka and Baroness Penn
Wednesday 13th July 2022

(1 year, 10 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I think my friends in the other place are doing a good job of campaigning themselves. My understanding is that, although VAT receipts are higher, the fact that individuals are spending more of their money on things such as energy, which have a lower rate of VAT, means that the latest OBR forecasts saw overall government receipts from VAT reducing in the next year.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the contenders for the Conservative Party leadership, which include the Chancellor, have promised tax cuts adding up to £235 billion, without any consideration of their funding or the consequences of such cuts. Will the Minister publish a list of the courses the Chancellor has attended on economic literacy?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, as I said, the Government do not produce fiscal forecasts, the OBR does, and it produces forecasts based on government policy.

Financial Inclusion

Debate between Lord Sikka and Baroness Penn
Monday 11th July 2022

(1 year, 10 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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I agree with the sentiments expressed by my noble friend. Access to capital is something that should be offered to the widest range of people so that they can benefit from it.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the biggest barriers to financial inclusion are poverty and regressive taxation which robs people of disposable income. Some 14.5 million people already live in poverty. The poorest 10% of households pay 47.6% of their income in direct and indirect taxes, compared with 33.5% by the richest 10%. Can the Minister explain how and why the Government have created this shameful position of exclusion?

Baroness Penn Portrait Baroness Penn (Con)
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I say to the noble Lord that the £37 billion of financial support offered to people this year to support them with the high costs of living has been targeted at those on the lowest incomes and those least able to pay. So the Government have taken progressive measures to help protect people against rising costs of living.

Dasgupta Review

Debate between Lord Sikka and Baroness Penn
Thursday 7th April 2022

(2 years, 1 month ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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Absolutely. On the international stage, for example, the UK Government have committed to spending at least £3 billion over the next five years on nature and nature-based solutions in developing nations. Through our G7 and COP 26 presidencies, we have ensured that nature has stayed on the global agenda, and we have got commitments from other countries to embed climate change and nature into economic and financial decision-making. Those are just a few examples of concrete action which we are taking on this agenda.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, a key message from the Dasgupta review is that we need to change our measures of economic success. That cannot be done without replacing the shareholder-centric model of corporate governance with a stakeholder model of corporate governance. Can the Minister explain what changes the Government are considering to the model of corporate governance, and what alternative measures of economic success they propose?

Baroness Penn Portrait Baroness Penn (Con)
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I do not think that the Government agree with the move towards a stakeholder governance structure for businesses, but the noble Lord is right that, in our financial system, we need to make the decision-making with transparency on the impact of investments on our economy. We set out a green finance strategy in July 2019 that addresses all sorts of aspects of that, from developing a green taxonomy to having nature-related financial disclosures in our finance system. Overall, the Government are committed to the UK becoming the world’s first green global financial centre.

Covid-19: Financial Support Schemes

Debate between Lord Sikka and Baroness Penn
Wednesday 6th April 2022

(2 years, 1 month ago)

Lords Chamber
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Lord Sikka Portrait Lord Sikka
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To ask Her Majesty’s Government what assessment they have made of the possible losses arising from fraudulent use of (1) furlough support, (2) the Bounce Back Loan Scheme, and (3) other COVID-19-related financial support schemes.

Baroness Penn Portrait Baroness Penn (Con)
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The Government take fraud extremely seriously and have been consistently clear that fraud is never acceptable. The latest estimates are set out in the department’s 2020-21 annual report and accounts. Updated estimates will be published in the next few months in the 2021-22 annual report and accounts. The Government are investing in tackling fraud and error across these schemes. Most recently, the Chancellor announced an additional £48.8 million for a new package of measures to tackle fraud.

--- Later in debate ---
Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, under this Government, we now have the highest level of taxation and fraud. Annual fraud is between £29 billion and £52 billion. Last year, the government counter-fraud function classified £219 billion of the £387 billion of Covid-related financial support as “high or very high” fraud risk. Will the Minister tell the House how much is now classified as high or very high fraud risk and when an independent investigation into the Government’s failure to apply proper due diligence checks will commence?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, as I said to the noble Lord, updated estimates from the Government will come out in this year’s annual accounts. However, I have two points to make to the noble Lord. The first is on the scale of support that this Government put in place during the Covid-19 pandemic, which safeguarded 12 million jobs and more than 1 million businesses, which might not otherwise be here. Secondly, I referred in my Answer to the extra money for a new package of measures to tackle fraud. That includes setting up a new public sector fraud authority. One of the roles that it will focus on is understanding and measuring the losses around the Covid-19 spending, so that we can learn lessons for the future.

Economy: Spring Statement

Debate between Lord Sikka and Baroness Penn
Thursday 31st March 2022

(2 years, 1 month ago)

Grand Committee
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, on public sector pay, of course there is a process to be gone through. The Government set out the parameters that the pay remit bodies then go away and look at and make recommendations to the Government. We are at only the beginning of that process and we will see those recommendations in the summer.

I was just saying that the Government will continue to keep the situation under review, recognising the high level of current uncertainty, including monitoring the ongoing impact of the Russia-Ukraine conflict on the economy, and will be ready to take further steps if needed. That may be pertinent to the noble Baroness’s point.

The noble Lords, Lord Davies of Brixton and Lord Sikka, raised the issue of pensioners in particular. I can confirm to the noble Lord, Lord Davies, that when the Chancellor was asked at the Treasury Select Committee a very direct question about whether he would guarantee the triple lock for pensioners this year, he was crystal clear that he would. On the value of the state pension more broadly, since 2011, when the triple lock was put in place, the value of the basic state pension has increased by £2,050 and is now at the highest level relative to earnings in 34 years.

The noble Baroness, Lady Boycott, asked specifically about food insecurity for the poorest households.

Lord Sikka Portrait Lord Sikka (Lab)
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On the state pension, I referred to the median figures, which are half the national minimum wage. Does the noble Baroness consider that a state pension of half the median wage is adequate for millions of our senior citizens to live on?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I make two points. One is that we have been increasing the value of the state pension, as I just said. Secondly, for those who rely solely on the state pension for their income, there is pension credit in addition. We are doing a lot of work to drive an increase in the take-up of pension credit so that people who are entitled to that extra support access it.

On food insecurity, the latest statistics from the DWP on households with below-average income, which came out today, show that the percentage of individuals in food-insecure households fell from 8% in 2019-20 to 6% in 2020-21. I completely acknowledge that that is still too many and that, of course, the nature of those statistics means that they lag behind by a year. I have already mentioned the household support fund that the Government have put in place but, beyond that, we have increased the value of Healthy Start food vouchers and are investing more than £200 million a year from 2022 to continue our holiday activities and food programme, which already provides enriching activities and healthy meals to children in all English local authorities.

The noble Baroness, Lady Boycott, asked about BOGOF promotions. We recognise that there will be costs to businesses associated with implementing this policy. However, the cost of obesity to individuals, society and the NHS is significant; the benefits of reducing calorie intake across the population are therefore substantial and outweigh the costs of that policy.

In the longer term, we can best support people to cope with the rising cost of living by helping them into work—not just into jobs but into better-paid jobs. The noble Lord, Lord Bird, talked about long-term investment in social programmes. In July 2020, the Government launched their plan for jobs, which is one of the most comprehensive and ambitious plans in the world, to protect, support and create jobs across our country. That plan is working, as demonstrated by unemployment falling for 12 consecutive months back to below pre-pandemic rates.

The Government have been building on the measures announced in the 2021 spending review to support people in finding work and increasing their earnings. We will spend more than £6 billion on labour market support over the next three years. That includes extending for a further 12 months the Department for Work and Pensions’ train and progress programme, whereby those on universal credit can spend up to 12 weeks in training, or up to 16 weeks in training in subjects with skills at boot camps, instead of eight weeks. That will allow those who have recently become unemployed or are at risk of unemployment to retrain into priority sectors.

Further, we have doubled the number of work coaches in the system to 27,000 and we have the KickStart scheme, which has supported 130,000 young people into KickStart jobs. We have also announced more than £1.1 billion of funding over the next three years for programmes that enable people with disabilities or long-term health conditions to find and sustain employment. This includes continuing the Access to Work scheme, which offers financial and practical assistance in making workplace adaptions, and the work and health programme, which provides tailored support for individuals to overcome their specific obstacles to employment.

Beyond this, in terms of support for wages, the Government have introduced the national living wage. As I said, this will increase in April by 6.6%. There is also a new in-work progression offer. This means that, for the first time, people who are on universal credit and are already in work can access individualised work coach support that focuses on helping them to increase their earnings and progress in their jobs. The other element to support that progression is investment in skills. We will invest £3.8 billion in skills in England by 2024-25.

The point about investment in skills allows me to touch on another point made by the noble Lord, Lord Bird, about the importance of education. It is absolutely essential. In the House, we dealt with the skills Bill as part of the Government’s plans to ensure that technical and further education get the support in this country that they rightly deserve. This week, we published the schools White Paper and the SEND Green Paper, which focus on improving educational outcomes for children. We have narrowed the attainment gap for children in the poorest households but there is so much more to do. The noble Lord, Lord Macpherson, talked about the need for long-term action in this area, building cross-party alliances. I do not pretend that there is agreement on all aspects of our plans but, on skills and education, the policies we have designed and the Government’s approach are definitely in that spirit.

This brings me to the question of public sector spending and the comments of the noble Lord, Lord Hain, who talked about cuts to public spending. I have to disagree with the noble Lord. The spending review in 2021 set departmental budgets up to 2024-25 and, based on these plans, total departmental spending is set to grow in real terms by 3.7% a year on average over this Parliament; that is £150 billion in cash terms and an increase of £88 billion in real terms.

I will address the point made by the noble Lord, Lord Davies, about the GDP deflator. Of course, the GDP deflator is a broader measure of inflation than CPI, which just measures the inflation felt by consumers. Government operates across the whole of the economy and therefore it is appropriate to use the wider measure of inflation. This is the measure that is always used to look at these questions.

The noble Lord, Lord Hain, also questioned whether, as we meet our fiscal rules, we should use the additional headroom to allow people to keep more of the money they earn, and suggested that we might have set our priorities in the wrong place. I disagree with the noble Lord; I think his own Front Bench may disagree with the noble Lord also. It is partly for this reason: the size of the state is expected to grow to 41.3% of the economy in 2024-25—up from 39.9% in 2007-08. So, when we are in a position to do so, we should look at cutting taxes for ordinary working people to put more money back into their pockets.

On the subject of spending, the noble Lord, Lord Macpherson, raised defence spending. He will know that defence spending has been prioritised by this Government. In the spending review 2020, the MoD was awarded the largest sustained spending increase since the end of the Cold War. Underpinning that spending review decision was The Integrated Review of Security, Defence, Development and Foreign Policy, which recognised that Russia remained

“the most acute threat to our security”

and that:

“NATO will remain the foundation of collective security in … the Euro-Atlantic”.


I was previously accused of being complacent on this subject, and I reassure noble Lords that I and the Government are not. All I would say to the noble Lord, Lord Macpherson, is that we are only five weeks into the conflict in Ukraine. I think it is something that will develop and unfold over a longer time period, so I caution against changing long-term plans and decisions based on the length of experience so far.

I turn to a subject where I agree with many noble Lords: the question of growth. The noble Lords, Lord Desai, Lord Horam, Lord Macpherson, Lord Hain, and others all pointed to the fundamental need to get more growth into our economy. That is why the second part of our tax plan is focused on exactly that.

On infrastructure, we have launched the UK Infra- structure Bank and confirmed a total of £100 billion of investment in economic infrastructure over the spending review period. On skills, I have already referred to the important investment we have made, including things such as the lifelong learning entitlement and the development of skills bootcamps. On innovation, we are increasing public investment in R&D to £20 billion by 2024-25 and we are focused on boosting small and medium enterprise productivity through the help to grow scheme. I could go on, but I am conscious of time.

Many noble Lords asked about the 1p cut to income tax in 2024. We have had a wider debate in this Committee about the merits of taxing earned versus unearned income. As the Government’s tax plan made clear, we want to spread the proceeds of growth. That is why the tax cut applies to a broad set of taxpayers. I am very aware of the concerns about how we are treating earned versus unearned growth. As I assured noble Lords yesterday, the tax cut does not apply to dividend income. Dividend tax rates will rise as planned this April and not reduce in 2024.

The Government have also taken significant steps to ensure that rental income is taxed fairly, including restricting the finance cost relief so that landlords can no longer get relief at the marginal rate if they are a higher or additional taxpayer. Purchases of additional properties are also subject to higher additional rates of stamp duty.

The noble Lord, Lord Sikka, raised the question of charging national insurance on capital gains. He will be well aware of the history of national insurance contributions as part of the UK’s social security system. That system is based on a long-standing contributory principle around paid employment and self-employment, with employers, employees and the self-employed paying towards the protection of those who have been in the labour market. That is why NICs focus on the tax base that they do.

The noble Lord, Lord Turnbull, talked about housing wealth funding social care, while the noble Lord, Lord Davies of Brixton, asked me yesterday whether there are any plans to change NICs treatment for the self-employed. I was clear to him then that the Government do not have any plans in this area. The proposal to use housing wealth to fund social care was included in the Conservative Party manifesto but was not welcomed by any party—perhaps including the Conservative Party—in that election. I do not make that point flippantly; it is important that policies put forward to be delivered, particularly as we discuss them in the unelected House, have the consent of the public. If we want to enact change, ultimately, we need people’s support for those changes. Some of the debates that we have today ultimately translate into broader debates across the country.

I heard the points that the noble Baroness, Lady Kramer, made. I hope she will forgive me for pointing to the fact that it was a Lib Dem policy to raise the income tax threshold to £10,000 while adding a penny to national insurance to pay for the NHS. I might be out of date on their approach now but that is worth bearing in mind.

Underlying a lot of this debate are the choices that the Government have made.

Baroness Penn Portrait Baroness Penn (Con)
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I absolutely agree with the noble Lord. That is why I tried in my speech to point to all the investment that the Government are making in helping people to move out of poverty and have a better life than they otherwise would.

In fact, the noble Lord’s point about the choices we have made in this Spring Statement and overall as a Government is a good one. I pointed to the distributional analysis published with the 2022 Spring Statement. Our modelling shows that the poorest 66% of houses receive more in public spending than they contribute in tax and, on average, households in the lowest income decile will receive more than £4 in public spending for every £1 that they pay in tax. The impact of government policy since the 2019 spending round on the bottom four deciles is expected to be worth more than £1,000 a year, while there has been a net benefit on average for the poorest 80% of households.

Lord Sikka Portrait Lord Sikka (Lab)
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I am grateful to the noble Baroness for giving way. It has been a long day and she has great powers of perseverance, which are all on display. She referred to capital gains. The point is that capital gains are not subject to any kind of national insurance, so zero is paid. The second point I made was when I compared a worker with £30,000 of gross income and a speculator with £30,000 of gross income, and the worker was paying £4,000 more in income tax and national insurance deductions than the speculator. What is the logic in taxing workers more and then having them queue up for universal credit and other benefits, or at food banks, in order to survive? What is the economic and social logic? I would be grateful for some discussion or explanation of that. Why are workers penalised with higher rates of taxes and deductions?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I understood the noble Lord’s points and attempted to describe why we have evolved a system of national insurance contributions that is separate from our income tax system. I am sure this will not be the last time we debate this subject, particularly with the noble Lord.

I was just talking about the choices we have made with this Spring Statement and since then. If you look at them in the round, they benefit the poorest households most. This Spring Statement recognises the impact of growing pressures on the cost of living. We continued with the health and social care levy because it will provide additional funding for the public’s priority of the NHS and, in time, as those reforms come on stream, for social care. I believe it was the right choice to do that and raise the thresholds for national insurance rather than to scrap or cut the health and social care levy altogether. If we were to do that, as advocated in the policy of the shadow Chancellor, because half the revenues from the health and social care levy come from the highest 15% of earners, a reversal would not be targeted at the lowest and middle earners.

The same goes for support to tackle energy bills. The shadow Chancellor has talked about scrapping VAT on domestic energy, which would also benefit high-income households most. There are choices to be made and they are really difficult—I do not shy away from that. But this Spring Statement provides a tax cut to support millions of people with the cost of living. We have set out how we plan to use taxes to support higher growth in this country in years to come and how, when we are on the path to that and to meeting our fiscal rules, we will share the proceeds of that growth.

I thank noble Lords for their patience with the length of my—

Spring Statement Affordability Test

Debate between Lord Sikka and Baroness Penn
Wednesday 23rd March 2022

(2 years, 2 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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As I say, my Lords, we have provided analysis in the round of tax and spending decisions taken by the Government since the 2019 spending review. That analysis shows that the combined impact of those decisions is progressive, with the largest burden placed on higher-income households as a proportion of their income.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, 6.2 million people in this country live on an annual income of less than £9,500. Today’s announcement gave them zero. Is that not a badge of shame for the Government? If so, what are they going to do about it?

Financial Conduct Authority: Financial Inclusion

Debate between Lord Sikka and Baroness Penn
Tuesday 22nd March 2022

(2 years, 2 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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The noble Baroness is right to raise the issue. The Government are taking a number of actions in this area. I previously referred to the pilot of a no-interest loan provision which the Government are supporting. They are also putting record financing into consumer debt advice to ensure that if people are in trouble, they get access to the help which they need.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I have a letter here written by the FCA chief executive to the Financial Services Consumer Panel, dated 20 October 2021. In it, the FCA chief executive associates financial inclusion with the expectation that

“Firms must pay due regard to the interests of its customers and treat them fairly.”


Given that almost every financial product has been mis-sold, and given that many banks have been engaged in money laundering, tax dodging and sanction busting, so that it is hard to find a pristine bank, how are the Government going to deliver fair treatment of customers, when the FCA’s fines are puny, and they have so far not secured better practice or behaviour.

Baroness Penn Portrait Baroness Penn (Con)
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I do not recognise the picture which the noble Lord paints. Our banks and financial services provide an essential service to people up and down the country. They were one of our essential partners in distributing the support we provided to businesses through bounce-back loans and other support packages throughout the pandemic. Yes, there have been certain problems in certain areas, which is why the Government are taking action—for example, on anti-money laundering legislation and counterterrorist financing legislation. I am afraid to say that I just do not agree with the noble Lord.

National Insurance Contributions

Debate between Lord Sikka and Baroness Penn
Monday 7th March 2022

(2 years, 2 months ago)

Lords Chamber
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Lord Sikka Portrait Lord Sikka
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To ask Her Majesty’s Government what assessment they have made of the impact of the planned increase in the rate of national insurance contributions on the poorest sections of society.

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the Government have published several assessments of the health and social care levy’s impacts, including distributional analysis of the tax and spending announcements’ combined impact, a technical annexe in our plan for health and social care, and a tax information and impact note. Some 6.1 million individuals earning less than the primary threshold, equivalent to £9,980 in 2022-23, will not pay the levy; the highest-earning 15% will pay over half the levy’s revenues.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, from next month, workers with earned annual income above £9,880 will pay national insurance at a rate of 13.25%. At the same time, 265,000 recipients of at least £65.8 billion of chargeable capital gains will not pay a penny, even though they use the national health service and social care. Does the Minister agree that this is outrageous and that this injustice should end as soon as possible?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, we have introduced the levy through the national insurance system—that is the system that we have used previously to fund improvements to the healthcare system and, in this case, the social care system. We have ensured that the levy also applies to dividend income, so that it reaches a wider number of people who will benefit from it.

Cryptocurrencies

Debate between Lord Sikka and Baroness Penn
Wednesday 2nd March 2022

(2 years, 2 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I have indeed read those comments by the Governor of the Bank of England. My noble friend is absolutely right that the situation is dynamic and the market in crypto assets is growing. That is why the Bank of England is monitoring crypto assets’ financial stability. It is also why the Cryptoassets Taskforce, the Treasury, the Financial Conduct Authority and Bank of England are taking an approach to regulate aspects of crypto assets, particularly those that pose the greatest threat to our financial stability.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, there is no specific tax legislation relating to cryptocurrency assets, so holders of them are instead covered by broader tax rules, which is highly unsatisfactory. How long do the Government need to deal with this problem?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, profits from trading in and gains from disposing of crypto assets are taxed in the same way and at the same rate as those from other assets, as the noble Lord says. HMRC’s Cryptoassets Manual is one of the most detailed publications from any tax administration and explains the tax consequences for different types of transactions involving crypto assets, for both businesses accepting them and individuals using them.

Windfall Tax: Oil, Gas and Energy Companies

Debate between Lord Sikka and Baroness Penn
Tuesday 22nd February 2022

(2 years, 3 months ago)

Lords Chamber
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Lord Sikka Portrait Lord Sikka
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To ask Her Majesty’s Government what consideration they have given to levying a windfall tax on the profits of oil, gas and energy companies.

Baroness Penn Portrait Baroness Penn (Con)
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The Government place additional taxes on the extraction of oil and gas, with companies engaged in the production of oil and gas on the UK continental shelf subject to headline tax rates on their profits that are currently more than double those paid by other businesses. To date, the sector has paid more than £375 billion in production taxes. All taxes are kept under review and any changes are considered and announced by the Chancellor.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the primary cost of producing oil, gas and green energy has hardly changed. Only the selling price has, resulting in excessive profits without any additional effort for the companies. A windfall tax is needed to help hard-pressed households. Why are the Government so wedded to their ideology rather than helping the people?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the noble Lord is correct to talk about price fluctuations in the sector, of course. In spring 2020, the price of oil crashed to below $20 a barrel. That year saw investment in the sector at an all-time low, so an abrupt tax change would create further uncertainty and potentially undermine significant investment in that sector. However, the Government remain committed to supporting households with the cost of energy and have set out plans to do so.

Enterprise Investment Schemes

Debate between Lord Sikka and Baroness Penn
Thursday 3rd February 2022

(2 years, 3 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My noble friend is correct about the success of the EIS scheme in terms of the amount of money raised. It is world-leading in that fact and has managed to do that under its current design. However, as I have said, I will take my noble friend’s request for a meeting back; we are always looking at what more we can do.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the Office of Tax Simplification has stated that the Government give more than 1,100 tax reliefs, most of which have not been quantified by HMRC. The National Audit Office cannot verify them. We have absolutely no idea whether they achieve the assumed economic objectives. When will the Government look into that?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the Government are confident that the Enterprise Investment Scheme and Seed Enterprise Investment Scheme we are talking about today are effective schemes that have proven to give much-needed support to many British businesses over many years.

Covid-19: Death Duties and Inheritance Tax

Debate between Lord Sikka and Baroness Penn
Thursday 24th June 2021

(2 years, 11 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the pension triple lock remains government policy and the state pension remains the foundation of the Government’s support for older people. I am not aware of any work looking at treating pensioners who choose to work after the state pension age any differently.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the problem with inheritance tax is that the rich continue to avoid it through the creation of a variety of trusts. Will the Minister explain why the Government have failed to close the loopholes associated with avoidance of inheritance tax?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, it is important to distinguish between the legitimate use of reliefs and those engaging in avoidance by bending the rules to gain a tax advantage that Parliament never intended. The Government have taken action in this area. Since April 2011, inheritance tax and trusts have been brought into the disclosure of tax avoidance schemes regime. This is to ensure that any new or innovative inheritance tax avoidance schemes involving transfers into trusts must be disclosed to HMRC.

G7 Global Tax Agreement

Debate between Lord Sikka and Baroness Penn
Tuesday 8th June 2021

(2 years, 11 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, we recognise that this represents the basis of a potential agreement and compromise between different countries, but obviously it is important that those countries have their say and their voice in the process. The fact that this is the first time the G7 have been aligned behind a set of parameters provides important momentum but there is more work to do.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I assume the Government did some economic modelling before entering into this agreement and making a written promise to abandon the digital sales tax upon the implementation of pillar 1. If so, when will the Government publish the details of their modelling so far so that we can examine their policy in detail?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the digital sales tax was always intended to be a transitional approach. The UK Government’s preferred solution has always been an international agreement. We are only part of the way through negotiating that but the agreement reached at the weekend represents important progress.

Financial Services Bill

Debate between Lord Sikka and Baroness Penn
Lord Sikka Portrait Lord Sikka (Lab) [V]
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The group of amendments which we just discussed focused primarily on economic crime. Matters such as tax avoidance and tax evasion have also been mentioned, which are often the domain of the accounting law firms, banks and others. The noble Baroness, Lady Noakes, is absolutely right in that accountancy trade associations, such as the Institute of Chartered Accountants, also carry out a variety of other regulatory functions; but the question is how well such functions are actually carried out. There have been a number of court cases brought, by HMRC, where the judges have held that the tax avoidance schemes were unlawful. I hope the Minister can help us by telling us whether, after those court judgments, even one big accountancy firm has been investigated, fined or disciplined by the Institute of Chartered Accountants or any other accountancy trade association. Even one example from the past 10, 20, 30, 40, 50 or 100 years will do.

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I would be happy to write to the noble Lord on his question. The debate focused on the role of these organisations in respect of their anti-money laundering supervisory functions. As I said to the noble Lord in my response, a review of the AML regulations will be published no later than 26 June 2022, with a call for evidence this summer. If he feels the need to input to that review, that would be very welcome.

Financial Services Bill

Debate between Lord Sikka and Baroness Penn
2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021

(3 years, 3 months ago)

Lords Chamber
Read Full debate Financial Services Bill 2019-21 View all Financial Services Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 13 January 2021 - (13 Jan 2021)
Lord Sikka Portrait Lord Sikka (Lab) [V]
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My Lords, I congratulate the noble Lord, Lord Hammond, on his excellent speech. I welcome him to the House and look forward to his wise words on many issues.

The Bill has many deficiencies. I have sufficient time to speak on only two matters. In the post-Brexit world, the UK needs to compete to attract business. A key requirement is to ensure that the UK is a clean place with robust regulators. However, the Bill does not do that. It should have been preceded by an independent public inquiry into the finance industry and its regulation.

Regulatory failures continue to make headlines. For example, Dame Elizabeth Gloster’s report on the collapse of London Capital and Finance found that the FCA’s supervision was “wholly deficient” and that its staff

“had not been trained sufficiently to analyse a firm’s financial information to detect indicators of fraud or other serious irregularity.”

The report concluded that the FCA failed to fulfil its statutory objectives. The FCA has also been criticised in a report on the collapse of the Connaught Income Fund, and the long-running saga of frauds at the Royal Bank of Scotland and HBOS are further evidence of the FCA’s failures.

Anyone tackling corrupt practices in the finance industry faces obstacles. In February 2017, the Thames Valley police and crime commissioner, Anthony Stansfeld, prosecuted six financiers, including a senior ex-HBOS banker. They were jailed for a total of 47 and a half years. After being shamed, the FCA in June 2019 fined Lloyds Bank £45.5 million. Thames Valley Police force spent £7 million on the prosecutions, but it has not really been compensated by the Government and thus the force has been disabled from mounting any further investigations.

The Conservative police and crime commissioner for Thames Valley has also sought to tackle other cases of financial frauds but has met political and regulatory opposition. On 8 February 2019, he told the London Evening Standard:

“I am convinced the cover-up goes right up to Cabinet level. And to the top of the City.”


That is a strong condemnation of the current regulatory arrangements. The recurring problem is that the regulators are too close to the industry and like to bat for the industry rather than protect people from malpractices. The Bill does not cleanse the finance industry or enhance protections for the people.

My second point relates to the Basel III framework which is implemented by the Bill and affects the calculation of minimum capital requirements and leverage ratios for banks. However, many of the problems highlighted by the 2007-08 crash remain unaddressed. The Government want banks to have more equity, but they have incentivised debt and high leverage, as the interest payments attract tax relief and enable banks to report higher returns to shareholders. Why have the Government not addressed this contradiction at the heart of the calculations of capital for banks?

Financial statements of regulated financial enterprises are based on international financial reporting standards—IFRSs, as they are commonly known. Their use was heavily criticised in the 2013 report by the Parliamentary Commission on Banking Standards. The IFRSs give management too much discretion and management has used that to massage financial statements, as was shown by Carillion, for example. The IFRSs have no clear concept of capital maintenance and therefore calculations of capital based upon accounting numbers are fundamentally flawed. On bank balance sheets, various transactions in historical costs, amortised costs, net realisable values, present values, fair values, market values and even internally generated numbers are all added up. The calculation does not yield any meaningful number for capital maintenance. Banks are currently neither maintaining money, nor real or physical capital, so why do the Government consider them to be a useful guide for regulators?

Neither the FCA nor the Prudential Regulation Authority sets accounting rules for financial enterprises, but they rely on whatever the Financial Reporting Council comes up with. They are storing trouble for the future. The bank financial statements are targeted at short-term shareholders, essentially speculators and capital markets. They do not tell the regulators anything about market interdependencies or systemic risks, all of which were the causes of the 2007-08 crash.

The UK regulators rely on external auditors, even though big accounting firms are unable to deliver honest and robust audits. All banks which crashed in the 2007-08 crash received unqualified audit reports. The Financial Reporting Council routinely laments that 25% to 50% of the audits conducted by the big four accounting firms are deficient. Yet, bizarrely, regulators rely upon auditors. Auditors owe a duty of care to the company but not to any regulator. Regulators do not have a statutory right of access to the auditors’ files or staff. That was one of the reasons why the Bank of England was unable to fully investigate audit failures at Barings, delivered by Deloitte and Coopers & Lybrand, a firm which is now part of PricewaterhouseCoopers. Yet no lessons have been learned. One must also ask whether the reliance on ex-post audits is wise in a world of instantaneous movement of money. Is it not time that the regulators took direct responsibility for auditing the financial statements of banks?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, perhaps this is an opportune moment to remind Back-Benchers of the advisory time limit of six minutes for speeches.

New Businesses: Capital Gains Tax

Debate between Lord Sikka and Baroness Penn
Wednesday 20th January 2021

(3 years, 4 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the Government absolutely realise the vital role that entrepreneurs and small business people play in the UK economy. We ensure that, in assessing any tax changes, the impact is analysed, including any behavioural impacts of those changes.

Lord Sikka Portrait Lord Sikka (Lab) [V]
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My Lords, I begin by drawing attention to my entry in the register of interests. Does the Minister agree that by taxing capital gains at the same marginal rates as income tax, the Government could end many tax avoidance schemes? Secondly, London and the south-east of England account for around 27% of the UK population but receive 50% of capital gains tax reliefs. What assessment have the Government made of the regional disparities created by their capital gains tax regime?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

My Lords, the Government are absolutely committed to levelling up across the UK, including by incentivising investment in areas outside London and the south-east. When it comes to capital gains tax and wider tax measures, the report by the Wealth Tax Commission actually found that, on a narrow definition, UK taxes on wealth are about average for G7 countries, and on a slightly wider definition, our taxes on wealth are among the highest of the G7 countries.

Tax Avoidance: Base Erosion and Profit Shifting

Debate between Lord Sikka and Baroness Penn
Monday 2nd November 2020

(3 years, 6 months ago)

Lords Chamber
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Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I assure my noble friend that pillar 1 remains the UK’s number one focus, partly so that we can achieve a multilateral agreement to replace the digital services tax, which was intended to be only temporary. We also recognise that a global solution will need to include outputs on pillar 2. We are working to ensure that these proposals, including the one referred to by my noble friend, are balanced and appropriately targeted, and have the support of all those involved in the negotiations.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I draw attention to my entry in the register of interests: I am an unpaid senior adviser to the Tax Justice Network. The OECD has released aggregate country-by-country data from 26 countries including the US, China, Japan, France and India. This suggests that there is considerable international consensus around transparency. The UK has blocked the OECD from releasing its aggregate data. It would be helpful to know why. Furthermore, the analysis of the OECD’s data shows that Bermuda, a British Overseas Territory, is responsible for $10.9 billion of tax avoidance and evasion. This is particularly hitting low-income countries. Why do the UK Government continue to indulge these fiddle factories?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

I am not aware of the particular issue that the noble Lord raises, but I will look into it and write to him. The UK is committed to progress on this initiative, which we started back in 2013 when we hosted the G20.