Financial Services Bill

Lord Tunnicliffe Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Baroness Kramer (LD)]

My Lords, the two amendments in this group are significantly different from each other, so I am afraid that I will have to address each one separately, starting with government Amendment 14. We obviously support this step, but some comments need to be made. First, the very fact that legislation has to be passed for these financial transactions to be captured by the regulator demonstrates some of the flaws in the whole approach of using a regulatory perimeter as the mechanism for deciding which activities are regulated or not.

The buy now, pay later industry has been growing at an astonishing rate over the last several years. The largest player is Klarna, which I think was valued in its last funding round at $31 billion—three times its value six months earlier. That gives noble Lords the idea of the pace. Anybody who wants to look up buy now, pay later on the internet will find company after company. This issue has galloped away without the regulator becoming involved. It suggests to the Government that some real rethinking needs to happen, given the pace of innovation that we now see generally in finance.

Secondly, I was concerned by some of the language the Minister used when talking about this as a relatively low risk and rather benign form of financing. There is no free lunch. There is no such thing as a delayed payment that does not have an interest cost embedded in it. I understand that with buy now, pay later, it is the retailer that pays fees to the intermediary providing the advance payment. Those costs then fall on everybody buying products from that particular company. We get to the point where you are a fool if you pay up front, because within the cost of the product is embedded an element of financing that is falling on you. If you are a bit like me, you see the price and you pay it, but I know that I am paying more than I should because I am picking up the cost of financing that has been given to other people using the buy now, pay later product. There certainly is cost embedded in all of this; it is not a free lunch.

Martin Lewis gave evidence to MPs in December, pointing out that this is a product very much targeted at the under-30s, although I know that Klarna disputes this. It is having the impact of getting them into debt. Again, I looked to a quote from Jane Clack, a money adviser at the debt advice firm PayPlan. She was talking about what had happened over the two-year period. She said:

“This form of introduction to credit … supports the ‘I want it now’ purchases of items people may not be able to afford. We have seen a worrying increase in the number of young people contacting us for free debt advice. It now makes up more than a fifth of our total client base.”


This is a mechanism that is getting a lot of young people into overpurchasing and consequently into debt. Indeed, the advertising on websites directed at retailers, encouraging them to sign up to buy now, pay later firms, tells them that the average spend will go up by 20% if they sign up to a buy now, pay later scheme because individuals feel, “My goodness, if that’s all it costs I can spend even more.” Noble Lords can see the pattern that is developing. Frankly, there is a lot of risk associated with all this, and I hope it is with that perspective that the whole consultation will go forward and regulation will be structured.

I say this because we went through the same process in this House of saying “it is largely benign” when we looked at payday lending. That was the argument made by the regulator. If this House remembers, the regulator had the power to take action in a serious way against abusive payday lenders. It showed a light touch because it saw payday lending as relatively benign. It was only when this House forced the regulator’s hand by passing regulation that required it to start using interest rate caps that that industry was brought under control. Indeed, most of the players instantly disappeared, because without the abusive part of their activities the other part could not be sustained. This issue should be taken very seriously by the regulator, which should not get caught up in the idea that this is low risk or in some way benign. I am always troubled when I hear that something is interest free. No, it is not; the interest is differently packaged.

On Amendment 35, I continue with apologies from my noble friend Lady Tyler, who is the former chair of the Lords Select Committee on Financial Exclusion. As the Deputy Speaker said, she is speaking in Grand Committee and has had to scratch here. She very much appreciates the spirit of the amendment of the noble Lord, Lord Holmes, but I will quote a sentence from the speech she wrote that I think captures the fundamental issue: “What is still missing is an overarching strategy and responsibility across government, regulators and industry proactively to promote financial inclusion.” In a way, that is the issue that the noble Lord, Lord Holmes, is picking up and addressing and that I hear echoed in the words my noble friend would have used.

The noble Baroness, Lady Noakes, made the case that the Bank of England is really not the place to have a basic bank account, and I want to pick up on this important issue. The current high street banks that provide basic bank accounts do so, as the noble Baroness said, reluctantly. It does not make any sense in the context of their business plan, their overheads or the clientele that they want to build.

There is an important strategy that could be addressed, certainly by the PRA, along the lines of, “As a condition of your banking licence, perhaps you don’t have to provide a basic bank account, but you do need to support the civil society groups that can service this excluded community”—because that is a community that often needs a detailed helping hand. That is one of the reasons why opening a basic bank account at the Bank of England would not get people in that community very far. Typically, they are people who need particular services and particular kinds of support to become financially included, and to get the advantages that come with being financially included in our modern society.

That takes me to the issue raised by the noble Baroness, Lady Neville-Rolfe; it is a canard that needs to be captured very quickly. The Community Reinvestment Act in the United States, to which she referred, was passed in 1977. It was not a play into the sub-prime mortgage crisis. I lived in Chicago in those years, so I know that it came about as a civil rights Act, because disadvantaged communities—primarily black ethnic communities—had been literally red-lined by all the major banking players, which would take deposits from them but would never lend back to support mortgages or businesses. It was a crucial Act that completely changed the nature of financial inclusion in the United States, and it was probably one of the most important pieces of legislation there. I have always regretted that we have not picked up its themes and extended them here, because it created a layer of community banks and credit unions that serviced this community, and did so very well throughout the years of recession.

The sub-prime crisis was, on the one hand, sheer fraud—as I think the noble Baroness, Lady Neville-Rolfe, knows—and, on the other, the packaging up of fraudulent loans into portfolios against which securities were then issued on the grounds that diversification within the portfolio removed the risk. This was not a case of lending into communities in the responsible way driven forward by the Community Reinvestment Act. I hope that we will pick up the lessons of that Act, because in the United States people are not unbanked and excluded to the extent and breadth that they are here in the UK.

[Lord Tunnicliffe (Lab) [V]]

My Lords, the Government’s response to the Woolard Review was swift and positive. As doubts remained over exactly when and how Ministers’ promises on buy now, pay later products would be delivered, this Bill appeared to us to be the perfect vehicle—although, sadly, the Treasury initially disagreed with that view. In Grand Committee the Minister stressed the complexity of the issue, and the need to work with the industry to get the scope of future regulation right.

Of course we agreed on the necessity for the Treasury and the FCA to get this correct, and we are realistic about the difficulty of striking the right balance. As I have said before, we would not wish forthcoming regulatory changes to impact on the availability of certain short-term payment agreements, such as for gym membership or sports season tickets, which have proved to be relatively low risk. We also recognise that there is a growing market for buy now, pay later, and that many of the people using such services experience no problems with them. Indeed, we are grateful to the providers that have engaged with us in recent weeks and shared their ideas on next steps.

In March the boss of Klarna expressed disappointment about the concerns voiced about buy now, pay later products. He said he was “emotionally upset” by comparisons with the former payday lender Wonga. I am sure that this was not aimed at your Lordships’ House, but let me be clear that we recognise the differences. However, just because two business models vary, that does not mean that we cannot and should not learn lessons from past regulatory failure. These products may not have interest charges attached to them, but that does not mean they are risk free. That was recognised by Chris Woolard in his review when he warned that there was significant risk of consumer detriment if the market continued to grow at pace without the implementation of appropriate consumer protections.

In his recent comments, Klarna’s boss acknowledged that his firm had made mistakes, particularly in relation to how it had advertised its products in the past. Such self-reflection is hugely important, and I am sure that advertising is one of the areas that will feature in the future regulatory framework.

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[Baroness Kramer (LD)]

My Lords, I will be very brief. In Grand Committee I gave a precis of some of the experiences of would-be students who had been deterred from going on to higher education or who had done so but then had to limit their life and activities as students because every single penny was hard to come by. As a consequence, they really did not benefit from so much of what is on offer in higher education.

I do not think that I can add anything to the incredibly powerful words of my colleagues, my noble friends Lord Sharkey and Lady Sheehan. I completely support the action that they contemplate but do so in the great hope that the Government will now make a statement that will make it unnecessary for the House to divide.

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the noble Lord, Lord Sharkey, for moving this amendment, with support from my noble friends. As I noted in Grand Committee, the Labour Party has long supported facilitating access to sharia-compliant financial services, and we therefore backed previous powers for the Government to act on the provision of appropriate forms of student finance.

As outlined both in Grand Committee and again today, the wait for the introduction of sharia-compliant finance products has been lengthy. I will not repeat the timeline cited by others but will say that we were unconvinced by the Minister’s response to the earlier amendments of the noble Lord, Lord Sharkey. Of course, we accept that there is complexity involved, but, in my experience, such challenges can be overcome when there is genuine ambition to find a solution.

The Minister previously said that the Department for Education is faced with designing a system in which students

“do not receive any advantage nor suffer any disadvantage through applying for alternative student finance.”—[Official Report, 8/3/21; col. 558GC.]

That is indeed a challenge, but it is one that I am sure can be met.

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We have a long evening still ahead of us. As I said, this is a very useful group of amendments, and I hope the Government will take seriously the content of each of them and find a way to turn concern into action.

[Lord Tunnicliffe (Lab) [V]]

My Lords, the issues covered by this group are wide-ranging in nature but all important. Amendments 16 and 25 return to issues that we explored in Grand Committee, while the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Young of Cookham, have found interesting ways to bring important issues to our attention.

The noble Baroness, Lady Meacher, made a convincing case for the need to reform how bailiff activity is regulated. One interesting thing about the Covid-19 pandemic has been its ability to make us look at long-standing issues in a new light, and issues of personal debt are no exception to that. It is promising that both sides of the argument—bailiffs themselves and charities providing advice to those with problem debt—seem to agree on the need for change. This is not a common occurrence, and it provides an opportunity that I hope the Government will seize in the weeks and months ahead.

I know that my noble friend Lord Stevenson, working alongside the noble Baroness, Lady Meacher, has been pushing on this in the background in the hope that the Ministry of Justice can provide a more meaningful response than we had in Grand Committee. What we really need is for the department to identify an appropriate legislative vehicle for this matter. We very much hope that this will be signposted in the document promised for later this year.

Amendment 26 seeks to broaden the scope of the Financial Ombudsman Service to allow potential customers to submit complaints against financial services firms. This is a fair question to ask: clearly the noble Lord, Lord Leigh, is not satisfied with the previous answer to it. On day 1 of Report, we passed an amendment that would enable the FCA to impose on regulated financial services entities a statutory duty of care towards customers. We hope that, despite their misgivings, the Government take this forward, as we believe that new consumer-centric working practices could negate the need for a proportion of complaints to the ombudsman.

Amendment 27, tabled by the right reverend Prelate the Bishop of St Albans, is not only an impressive interpretation of scope, but raises important questions in relation to the tools available to those experiencing issues with problem gambling. Labour has previously been critical of the Government’s lack of urgency in launching reviews and introducing legislation and regulation. That process is now under way—indeed, I believe that the initial call for evidence has now closed. It is clear to all colleagues that the current regulatory regime has serious shortcomings. Without seeking to pre-empt the outcomes of the DCMS-led review, I hope that the Minister can demonstrate that the Government will take the right reverend Prelate’s suggestions on board.

Finally, Amendment 37C raises what looks to be an important issue in relation to certain payments made from child trust funds or junior ISAs on behalf of children with learning difficulties. I do not believe that we have touched on this issue previously, so I hope that the Minister will commit to a future discussion with the noble Lord, Lord Young of Cookham, and my noble friend Lord Blunkett.

[Lord True (Con)]

My Lords, this has been a long and important debate, which I found to be of great interest. As many will know, I am not responsible for the grouping of amendments. That is not a matter for the Executive; it is a matter for the House. However, following on from the noble Lord, Lord Addington, I feel a little like the “MasterChef” hopeful who presents his dish to the judges and is told that there are too many things on the plate. There are different issues conjoined here: the important issue of the behaviour of bailiffs—as, being an old boy, I still call them—credit card applications, gambling protection and child trust funds in the case of incapacity. It is a diverse group of amendments, but they all relate to the protection and fair treatment of consumers and, as we have heard today, of the most vulnerable people in society. I will try to respond to each of them, but I am not certain that I will be able to satisfy every hope of everyone who has spoken. I hope, however, because I am confident from the discussions that I have had with colleagues in different departments—I come as an outsider to this—that I can assure your Lordships that my perception is that the Government are positively engaged on all these fronts and are listening, have listened and will listen.

Amendment 16, from the noble Baroness, Lady Meacher, and others, would commit the Government to making the activities of enforcement agents—also known as bailiffs—in relation to taking control of goods a regulated activity under the Financial Services and Markets Act 2000. The Government understand the importance of debts being enforced in a fair and proportionate manner. Since Committee, I have had the great advantage of speaking directly to the noble Baroness and others, including the noble Baroness, Lady Morgan, and the noble Lord, Lord Stevenson of Balmacara, along with my colleague, my noble friend Lord Wolfson from the Ministry of Justice, which is the department with responsibility for the regulation of enforcement agents. I know that my noble friend Lord Wolfson and the Minister of Justice have heard the arguments of noble Lords. I can reassure the House that the Ministry of Justice is currently reviewing the case for strengthening the regulation of the enforcement sector. As we have heard, that would be widely welcomed, as representatives from the enforcement and debt advice sectors have united to form a working group, led by the Centre for Social Justice, to consider how an independent oversight body could raise standards in the sector. The Government welcome this.

The Ministry of Justice recognises the important momentum of this development and looks forward to continuing to engage with the working group on its proposals for an enforcement conduct authority. The Ministry of Justice has also assured me that it would want to work closely with the working group to monitor the operation of the enforcement conduct authority and will review its operation within two years. At that point, it will consider whether there is a case for legislation to provide statutory underpinning to the body if necessary, as some noble Lords have argued. I stress that the Ministry of Justice will look to work with the enforcement authority as soon as it is established to assess what can be done to improve standards on the ground. It does not see the two years as a target: it would be willing to review the authority operation and consider legislation before the two years if necessary. I hope that that has reassured noble Lords that the Government take this offer from industry very seriously.

On the amendment itself, it would by default require the FCA to act as the regulator of enforcement agents unless its functions were delegated to another body within two years following the passage of this Bill. As I set out in Committee and in the valued exchanges that I have had with noble Lords involved, I think that there is now agreement—indeed, that has been expressed by the noble Baroness, Lady Meacher, and others—that the FCA would not be the right body for such a function. I must underline that the Government’s view on this will not change between now and Third Reading. We do not believe this Bill to be the right legislative vehicle for any changes to the regulation of enforcement agents. I hope that, having heard the assurances that I and my noble friend Lord Wolfson have given, noble Lords will withdraw the amendment and continue to engage with the Government as we go forward.

My noble friend Lord Trenchard asked about the use of the Corporate Insolvency and Governance Act moratorium to give UK companies a formal breathing place in which to pursue a restructuring plan in case of indebtedness. The power is working as intended. A handful of firms have already successfully applied to use the moratorium under the Act. As government support and regulatory easements come to an end, we expect the number of firms using the moratorium to increase. The new restructuring plan is also being used to good effect with Virgin Atlantic and other large firms using the new tool to recapitalise balance sheets.

Amendment 26 from my noble friend Lord Leigh of Hurley seeks to expand the jurisdiction of the Financial Ombudsman Service to include potential customers. I am grateful to my noble friend for his characteristic persistence on this important issue and I know that he is keen to make sure that the regulatory system ensures that others are not faced with the same potential risk of fraud that he experienced. As I sought to reassure noble Lords in Committee, it is already the case that both customers and potential customers of a firm can seek redress through the FOS scheme under the FCA’s existing rules, notably rules in the FCA dispute resolution handbook.

If we have understood the specific case correctly, my noble friend was the unfortunate victim of attempted fraud and did not intend to be a customer of the firm. He was therefore not a potential customer as defined by the relevant rules that cover people seeking to be a customer. As I said in Committee, I assure the House that had this incident led to financial loss or to my noble friend being pursued for a debt that was not his, he would have had recourse to the FOS and been supported by the current regulatory framework.

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[Baroness Kramer (LD)]

My Lords, I shall be extremely brief. It is absolutely clear that bills of sale legislation is fraught with problems both legally and practically, including allowing goods to be repossessed on a single default, and giving no protection to purchasers who unwittingly buy goods subject to bills of default. The Government promised us reform, and they had a draft Bill from the Law Commission in 2017, but then they changed their mind and decided not to legislate. If they can change their mind once they can change it twice, so I hope they will now change their mind again, and take action.

[Lord Tunnicliffe (Lab) [V]]

My Lords, I shall be brief in responding to the amendment, which was ably introduced by my noble friend Lord Stevenson of Balmacara. We are grateful to the Minister and officials for their time discussing this and other consumer issues during the passage of the Bill. Those meetings have been useful, particularly for better understanding the numbers of people affected by financial agreements enabled by the antiquated bills of sale Acts referenced in the amendment. We understand that the Government cannot simply accept the amendment, because of the complexity of the issue and the scope for unintended consequences. Normally we would roll our eyes on hearing that phrase, but, as my noble friend noted, this amendment was tabled as a means of starting a conversation. We hope the Minister can give a strong commitment from the Dispatch Box that the Treasury will undertake a proper review of this part of the credit market, and will have regard to the earlier Law Commission recommendations when deciding on a policy response.

[Lord True (Con)]

My Lords, again I thank all those who have spoken in this slightly shorter debate. I thank the noble Lord, Lord Stevenson of Balmacara, very much for his continued engagement with all aspects of the Bill and with the underlying issues of credit—on which he has long been such a distinguished advocate—and for his interest in this issue. I hope I will be able to give him an assurance that he will find satisfactory.

First, however, I must respond to my noble friends Lady McIntosh of Pickering and Lord Holmes, who asked about the Law Commission report. The noble Baroness, Lady Kramer, also alluded to it. I set out in Committee the reasoning behind the Government’s decision not to take forward their proposed goods mortgages Bill, which had followed from the Law Commission report, in 2018. That Bill would have repealed the bills of sale Acts and replaced them with a new goods mortgages Act, and it was the result of the Law Commission’s report on bills of sale, to which my noble friends referred.

However, when the Government consulted on the proposed goods mortgages Bill, the consultation responses—not all of them, I confess, but the serious responses—showed that while there was broad support for the proposed approach set out in the Bill, some stakeholders raised significant concerns about the degree of consumer protection afforded by the proposed regime. Furthermore, there was a risk that a more modernised, streamlined regime for consumers could lead to more consumers using goods that they already owned as security for a loan, which is inherently a higher-risk form of borrowing. Given the concerns raised in the consultation and the shrinking size of the market, the Government decided not to take forward the goods mortgages Bill. Still, I highlight again that the use of logbook loans has fallen substantially and continues to decline: the number of bills of sale registered at the High Court has fallen from 52,000 in 2014 to just 3,758 in 2020—and a little higher the previous year. Obviously, we will watch this figure.

A number of other points were also raised in Committee. The noble Lord, Lord Stevenson, raised the cost of logbook loans. It has been suggested that some of these loans have very high interest rates. There is already a power for the FCA to cap the cost of all forms of credit, including logbook loans. It will use that power where it thinks it is necessary to protect consumers. Most recently, it capped the cost of rent-to-own products in March 2019.

My noble friend Lady McIntosh questioned in Committee why a model that used hire purchase could not be used for logbook loans. Hire purchase is a financing option that allows borrowers to hire a car and then gives them the option to buy it by the end of the contract. This model would be inappropriate for borrowers who already own their vehicle, as ownership of a vehicle should automatically revert to the borrower when they have repaid their loan.

I turn to the amendment itself. As I explained in Committee, it is likely to have unintended consequences that could lead to a greater risk of detriment, particularly to borrowers. The repeal of the bills of sale Acts would not necessarily prevent this type of credit being offered. Rather, it would remove the statutory framework that governs this type of credit, which could inadvertently lead to a greater use of such lending through the removal of some of the frictions to which some who have spoken have alluded—“frictions” is a polite Treasury word—that the bills of sale Acts impose. Given that, the Government do not believe that repealing the bills of sale Acts would be an effective way of increasing protection for borrowers. Furthermore, the Government do not believe that it would be proportionate to introduce new legislation to specifically implement a replacement for the bills of sale Acts, given the continued decline in their use.

However, I recognise the strength of the feelings of the noble Lord, Lord Stevenson, on the subject of logbook loans, and I have heard the echoes that his resounding voice has provoked. I understand that he wants to know what plans the Government have to review the regulatory treatment of logbook loans. I have had the opportunity to discuss this issue with the noble Lord. As we look beyond the Covid-19 crisis, the Government are keen that work should progress to consider reform of the broader consumer credit regulatory framework to ensure that it remains fit for purpose. That is a substantial piece of work. As part of it, I can give the noble Lord the specific assurance that he asked for: the Government will consider the extent to which that regulatory framework can provide robust protections for logbook-loan borrowers and third parties who may unknowingly buy a car subject to a logbook loan. On that basis, I hope the noble Lord will feel able to withdraw his amendment. I have every confidence that, even if he does, he will continue to knock at the Government’s door.

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[Baroness Kramer (LD)]

My Lords, I think the case has been extremely well made. I usually really respect the opinions that the noble Baroness, Lady Noakes, puts forward, but it seems to me that she completely fails to understand the circumstances that led these people into being mortgage prisoners. They took out loans under credit checks and it was entirely appropriate, but the banks from whom they borrowed the money crashed in the 2008 financial crisis, largely through poor regulation, which lies at the Government’s door, not the door of those who took out mortgages. People with absolutely identical credit profiles who took out their mortgages with a bank which did not crash have had many opportunities to refinance, which is normal in the life of the mortgage. A standard, typical bank knows that it will vary the characteristics of its mortgage over the life if that option is sought by the mortgagee.

The group of people who took out their mortgages with banks that crashed in many cases found that those mortgages were stripped out as part of the asset rescue process that the Government went through, and the Government then sold those mortgages to completely inappropriate buyers under inappropriate terms in order to get the maximum return. I understand their motivation—maximum return for taxpayers—but they removed all of the normal relationships and embedded rights in those relationships that a mortgagee has when they take out a mortgage with a viable financial institution.

The noble Baroness treats many of those mortgage prisoners as people who are now of poor credit. These are people who have aged—we all do that. The mortgage that we take out at the age of 30 is not the same one that we would be able to take out at the age of 55, because we have got older and our career profile is different. Some of them have become ill, and therefore had reduced earning capacity. Any standard bank dealing with a mortgagee in those circumstances makes adjustments. Mortgage prisoners are not able to seek such adjustments and they have been left in dire circumstances.

The fault lay with the Government when they sold mortgages under inappropriate terms to inappropriate buyers to manage them. It treated them as though they were abstract assets, rather than a special category which has a lot of convention embedded in it, in order to maximise their sale. I very much hope that the Government will realise that they have a responsibility. They took those additional revenues, they took the benefit of selling off those mortgages under terms and conditions that they should never have permitted, and they now need to offset that by stepping forward and making sure that those mortgage prisoners can have the same access to flexibility that would have been theirs had they taken that loan out with a financial institution that did not collapse in 2007-08.

[Lord Tunnicliffe (Lab) [V]]

My Lords, this is an emotive issue for a lot of people. Although we recognise that the Government have taken steps to help a proportion of so-called mortgage prisoners to access alternative products, so far, we have not been satisfied with either public or private assurances received on this matter. We are familiar with the Government’s view of the importance of market freedoms and the need to keep interventions to a minimum. However, despite the initiatives that we will hear about from the Minister shortly, the fact is that the market is failing a substantial number of people.

Budget Statement

Lord Tunnicliffe Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, this has been an interesting and wide-ranging discussion. I welcome and congratulate those who have made their maiden speeches today.

In recent days, much has been made of this Chancellor’s supposed departure from the Osborne economics of the early 2010s. We have seen the former Chancellor criticise the planned increase in corporation tax, while others have rightly observed that the freezing of personal tax allowances will reverse the recent trend of taking low earners out of income tax altogether.

However, when we look at this Budget in the round, it is striking just how similar it is to the austerity Budgets of the Conservative and Liberal Democrat coalition Government. This is backed up by the IFS, which, as others have noted, believes that the Chancellor’s spending plans are likely to be undeliverable, at least not without inflicting considerable pain on individuals, families and public services.

We recognise the difficult economic situation the country faces because of Covid-19. After all, the Government’s mismanagement of the pandemic saw the UK experience the worst downturn of any major economy. Rather than use this Budget to plot a route to strong, sustainable growth, the Government have instead chosen to implement cuts and continue perpetuating the myth that the country’s finances operate in the same way as those of the average household.

Although some lessons appear to have been learned in relation to the phasing out of coronavirus support, Mr Sunak has pushed through a council tax hike and confirmed a cliff-edge withdrawal of the universal credit uplift. These decisions will leave many struggling at a time when we should be lifting people up, not forcing them back to the insecurity of the past. In the words of the Resolution Foundation, our upcoming economic recovery

“will not feel like a recovery for millions of households.”

As is often said, politics is about choice. Sadly, while the Government can find cash for Downing Street makeovers and lucrative contracts for firms run by Conservative donors, we are told that the country cannot afford to uphold its moral duty to our hero nurses in the NHS or those in desperate need in places such as Yemen.

The Budget largely skipped consideration of several of the key issues facing our country: strengthening our economic foundations; protecting family finances; and fixing the social care crisis. Let us not forget that, when he stood on the doorstep of No. 10, the Prime Minister told us that he had a plan for social care. Where is it?

This is not a levelling-up Budget. It is an austerity Budget that will damage our economy and our society.

Financial Services Bill

Lord Tunnicliffe Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Baroness Kramer (LD)]

My Lords, I spoke at length on the previous group, so I am going to pay penance and try to be much briefer on this one, even though this is an issue that I also care about passionately. I do not think I can start without acknowledging all the incredible work done by the noble Lord, Lord Stevenson, in this arena. He has genuinely moved the issue on by sheer determination, a baton now picked up by the noble Baroness, Lady Coussins.

The statutory debt repayment plan element of the debt respite scheme needs to come into effect as soon as possible. I suspect that we all acknowledge that, but the impact of Covid makes it more important than ever. When we talk about a timetable—I am thinking of the speeches by the noble Baronesses, Lady Morgan and Lady Ritchie—we know that a group of people who will probably never have experienced financial difficulties will now be drawn into a system where they are overwhelmed by their debts. One can see that this is an opportunity for the less scrupulous to take advantage. Even those who regard themselves as perfectly professional and ethical will look for weaknesses in the system in order to get paid. There is pressure on both sides. I have therefore added my name to Amendments 52 and 67.

The noble Lord, Lord Lucas, raised a number of interesting issues but he can probably take comfort in the fact that there is a sort of Scottish template, if you like, in that experience in Scotland will help to make sure that the programmes in England—I assume this covers Wales as well—will benefit and learn any necessary lessons. That should remove a lot of the anxiety and some of the teething problems.

The amendment in the name of the noble Baroness, Lady Meacher, is completely new to me. It seems entirely logical that we should have a proper framework of oversight for bailiff enforcement.

I also strongly support Amendment 111, in the name of the noble Lord, Lord Holmes, to bring lead generators for debt advice and debt solution services under FCA regulation. I have worked on many financial services Bills over the years, particularly on the consumer side, and it is almost breathtaking how many people and groups are totally unscrupulous and use any opportunity to gouge people when they are anxious and worried. One can just see the exploitation that could happen here. I ask that the issue be taken more broadly, that the FCA go on the front foot and anticipate where unscrupulous individuals might try to exploit the situation, and that we see if we can to some extent head it off at the pass. We are quite good at doing something when thousands of people are complaining that they have been taken advantage of; it might be very useful if we turn that around and try to anticipate where trouble could come from and see whether we can deal with it.

The issues have been so well laid out by others that I will not repeat them, but I join in asking the Government to respond to these amendments, particularly those on the timetable, with some very strong assurances at the very least.

[Lord Tunnicliffe (Lab) [V]]

My Lords, we have spent an hour and a quarter debating a clause that is two thirds of a page long in a 182-page Bill. This, at first sight, might seem unreasonable, but when you look at the clause from the point of the view of the individual citizen, it is probably one of the most important in the Bill, so it is right that we have done so. There are an amazing 19 amendments to this clause, which would normally imply concerted opposition. In fact, that has not been the mood of the debate at all.

To sum the clause up, it has dealt well with one of the concepts, but we have too little detail. My noble friend Lord Stevenson of Balmacara seems in many ways to have been the father of this concept, and I congratulate him. We have adjacent desks, and I have seen him busily dealing with issues such as this. His two amendments seek to flesh out how the clause would bring in proper regulation, a degree of reasonableness and recognition of the role of bodies related to national and local government; they also address the importance of protection from bailiffs, and funding.

The noble Baroness, Lady Coussins, brought in the idea that we must have a hard deadline, and the noble Lord, Lord Holmes of Richmond, introduced the concept that we need advice for individuals. A timetable of December 2024 was gazumped by the noble Baroness, who suggested instead May 2024. It is important that the funding issues be addressed, especially if this fine concept is improved, because it could always go wrong if they are not faced up to. Again, this brings home the importance of regulation.

Finally, we have the 11 amendments from the noble Lord, Lord Lucas. I hope he will not mind me saying that they are very “Lord Lucas-like”, with each small detail adding value to this legislation. I say that in order to illustrate that most of the amendments are complementary.

I ask the Minister to recognise the degree of clear, cross-party consensus on this important clause. Many people have urged him to make concessions. My experience is that Ministers making concessions on the hoof is considered rather dangerous; hence, this is unlikely. But I do strongly urge him not to reject too many of these ideas. His brief probably says that the wording will not work. Wording never works when it is from the Back Benches, but the ideas work, and these ideas are powerful and need to be taken account of. I hope there will be a further round of conversations before Report, and that the Government will come back with a composite proposal that improves this important clause. I fear that if that does not happen, we will spend a lot of time on Report, and there will be a more muscular approach from those who tabled and who support these amendments.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, the noble Baroness, Lady Noakes, and I very rarely seem to agree on the types of issues covered in this amendment, but on this one we are totally of one mind. I am very grateful because I tried to write an explanation of how this process would work and it was so inferior. The noble Baroness, Lady Noakes, not only explained it very clearly, step by step, but included numbers, which makes it much more evident.

I think there must be some misunderstanding. As the noble Baroness, Lady Noakes, explained, it is perfectly normal for an originating company to sell off the loans it has, sometimes because it can sell them to someone who has a different funding profile or a different tolerance for the average duration of the book of loans being sold, or because somebody may take a different view on how many of the loans will pay in full, pay in part or default. It is a perfectly standard process and provides liquidity to the market. As the noble Baroness, Lady Noakes, said, if an organisation had to keep all the loans it generated on its books and could not sell them off, it would find very quickly that it was constrained in doing any new business. That would be hugely damaging to many of the people who go out and borrow. It tends to be a completely different business that will buy loans in the secondary market.

The question that underpins this is: is the Statutory Debt Repayment Plan right and fair when it is put in place? If that is true, it should not matter if the money is paid to the originating company or to the secondary buyer. Within the portfolio, there will be some people who can and do meet the full obligations of the Statutory Debt Repayment Plan, and surely that is appropriate. There will be others who fail and end up in bankruptcy, and whoever is holding the loan will lose out.

My question is whether there is any read-over from the kind of issues we have had with mortgage prisoners. It is important that where there are expectations about how the original lender will behave, they are carried over to the secondary lender. For example, if the original lender is quite likely to offer an alternative loan or new terms and conditions or whatever else, you would expect to see that reflected in the secondary lender. I would not want a situation where the secondary lender was able to levy additional charges or put additional costs on the borrower that would not have been expected by the original lender but perhaps are not covered in the minutiae of the contract.

Otherwise, the honest truth is that I just do not understand this amendment. I am absolutely certain that it completely seizes up any possibility of having a secondary market, and the people who will pay the greatest consequence for that are those who need to go out and borrow from time to time and are at the margins of being appropriate borrowers.

[Lord Tunnicliffe (Lab) [V]]

My Lords, I think this debate brings out the fact that we do not fully understand this area. There is obviously a case for a great debate. We are, sadly, going to see many more people in heavy, chronic debt and we will see people—to use a colloquial term—fall apart. When people have debt and cannot see how they are going to cope, they lose their equity in society.

Perhaps I am being unfair, but I see a conflict here between people—human beings—and loan books and technocrats. That is not a very useful comment. I cannot argue that this particular amendment should be pressed, but the debate about it brings out that we almost certainly do not have all the mechanisms, and the understanding of the human beings involved, to face the many more people who will be in chronic debt when we, who are not in that situation, are talking about the Covid crisis being over. Those people need society’s help, and for them to have that, we need a much better understanding of the impacts on those people and how we can make sure that the excesses of the people who hold the books are restrained.

Financial Services Bill

Lord Tunnicliffe Excerpts

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

[Lord Tunnicliffe (Lab) [V]]

My Lords, I begin by thanking the Minister and his officials for their early engagement on this legislation, which is both wide-ranging and highly technical. I very much hope that this spirit of co-operation will continue throughout the Bill.

In recent times, our consideration of financial services matters has been restricted mainly to a raft of EU exit statutory instruments. As joyous as those debates were, this Bill provides a welcome shift in focus. It is a rare opportunity to review and revise the sector’s regulatory architecture, to ensure it is fit for purpose in the post-Brexit world.

As others have noted, financial services make a significant contribution to the UK economy in several respects: economic output, contribution to the Exchequer and the provision of skilled jobs. Despite recent capital movements to places such as Frankfurt, London remains one of the main global hubs of financial activity. The Chancellor has spoken of his wish to make London the world’s pre-eminent financial centre and, through our consideration of this Bill, we will be passing judgment on whether—and how—that ambition can be achieved.

While we often speak of London or the City, it is important to remember that financial services firms employ hundreds of thousands of staff across the country. Banking, insurance and other financial services have a significant impact—mostly positive, but sometimes negative—on the lives of consumers in every corner of the UK. A further task of ours is to make sure that this legislation works for them, as well as the firms themselves.

We may be more than a decade on from the global financial crisis, but this debate has highlighted that the events of that time remain at the forefront of our minds. Given the severe economic and social costs that came out of past regulatory failure, that is only right. It speaks to the points that I have just raised, that is, the importance of ensuring an appropriate balance between flexibility and responsibility.

Central to achieving this balance is the topic of oversight and scrutiny. As far as I can see, and as other noble Lords have observed, this Bill is severely lacking. Several fundamental regulatory changes are proposed in the Bill, yet, in many cases, there is no scope for formal parliamentary scrutiny. The Treasury has not always availed itself of the opportunity to attach scrutiny procedures to existing processes that could benefit from them.

I am sure that the Minister will assure us that the parliamentarians will be able to feed into and keep abreast of consultations and other policy exercises. To avoid any doubt, we clearly would not wish to unduly impinge on the independence of the Financial Conduct Authority, the Prudential Regulation Authority and other key actors. However, half of the delegated powers in this Bill go directly to regulators, and not even one of those has a formal parliamentary process attached to it.

I would not go so far as saying these proposals amount to deregulation, but I do believe that there is an absence of proper oversight and scrutiny mechanisms could lead us down a dangerous road in the future. As my noble friend Lord Eatwell, who will join us during later stages of the Bill, notes, the language used in the Bill’s supporting documents is, in places, worryingly reminiscent of the early 2000s.

It seems to me that, at the very least, regulators should be required to engage meaningfully with Parliament as a matter of course. It means more than periodically publishing reports or giving evidence to committees after important policy changes have been enacted. In the other place, arguments were put forward that Parliament should have a role in approving new rules before they take effect. I am sure we will explore this further.

Given the level of interest in this topic, I hope we can work collaboratively across your Lordships’ House to ensure improvements are made. In an ideal world, the Minister would work with us. However, if the Government remain unconvinced of our arguments, we reserve the right to ask MPs to think again. After all, we were told time and again that leaving the EU would see power returned to Parliament. Let us ensure the promise is upheld.



I am sure there are many of us who were hoping never to utter the word “Brexit” ever again. However, this Bill is inherently linked with the outcomes of the Brexit process. Therefore, as we progress to Committee, we will need to examine forensically the gap between the Government’s many commitments on financial services and the suboptimal reality the sector faces. Even if the Government seal a memorandum of understanding in March, access to EU markets will be well below what they have been. Why has the Prime Minister fallen so far short of his promises?

I am conscious that noble Lords are eager to hear from the Minister, so I will be brief in outlining other areas of concern. We expect important debates on the shift from LIBOR to SONIA and all that entails. Several noble Lords mentioned additional steps that could help to tackle money laundering and other forms of financial crime. It is important that we get this right. As I have mentioned, we need to ensure that consumers are properly protected from unscrupulous practices. On this last point, we will seek to table amendments that require proper regulation of the “buy now pay later” firms which appear to have grown exponentially during the Covid-19 pandemic. A review is under way in this area, but Labour believes that more urgency is required, especially if we are to avoid a repeat of the social problems that resulted from the past behaviour of certain payday lenders.

We look forward to working with colleagues on all Benches to hold the Chancellor to his word on greening finance. The Government have made a range of broader commitments, domestic and global, on climate change and it is vital that our legislation reflects the urgency of the situation.

This has been a very good debate, graced by two excellent maiden speeches. I congratulate the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent contributions. It has been both a good debate and a surprising one. There has been a remarkable level of consensus running through the discussions, and I believe that that consensus means that the Bill is going to be much amended before it is sent back to the other place. I particularly think that the whole issue of accountability and scrutiny of the regulation-making powers is crucial and has to be further considered. I think the noble Baroness, Lady Noakes, got it right—it is not often I agree with her—and the words “accountability deficit” are crucial.

I recommend that the Minister ponders carefully what he hears in the subsequent days of debate in Committee. The best way forward will almost certainly be through negotiated agreement to reintroduce a satisfactory level of accountability and scrutiny.

Customs Miscellaneous Non-fiscal Provisions and Amendments etc. (EU Exit) Regulations 2020

Lord Tunnicliffe Excerpts

Tuesday 19th January 2021 Grand Committee

[Baroness Ludford (LD) [V]]

My Lords, I come to this subject with some degree of trepidation, because although I have focused for many years now on the overall shape of the UK-EU relationship, I am no expert on either trade processes or Northern Ireland. But I do know that there has been a great deception: the pretence that the EU ease-of-trade cake could be had as well as eaten, and the preposterous notion that leaving the single market and customs union meant a slashing of red tape. For here we are, facing reality—or rather, our benighted businesses face the reality of reams of form-filling, cost and delay. This reality is not “teething problems”; it is, as Michel Barnier reminded us, the new normal.

As my friend in the other place, Stephen Farry of the Alliance Party, said:

“Deeper challenges lie with Brexit itself and the nature of the UK-EU trade deal. They are being manifested across the UK. Northern Ireland is not alone in that respect.”


By that, of course, he means that Brexit entails friction across the UK; there is no escaping that fundamental truth. He went on to say:

“However, there are issues arising from the specific terms of and operational decisions around the Northern Ireland Protocol”,


because the protocol is a much blunter means to address the challenges of intra-UK trade post Brexit than the backstop.

The subject matter of this statutory instrument is paperwork for trade between Northern Ireland and Great Britain. People in Northern Ireland, both businesses and consumers, are suffering from what Ministers like to call “teething problems” but are in fact intrinsic to the arrangements that they have negotiated. Movement of goods across the Irish Sea is subject to red tape— customs safety and security procedures, including, in most circumstances, entry summary declarations, economic operator registration, enforcement powers and penalties for failure to comply—to address the different regimes applying in Northern Ireland and Great Britain. But the Government have behaved badly by not only stalling on a trade deal until 24 December for press management reasons, but denying for so long the reality of the fact that border controls had shifted to the Irish Sea. Because of those two factors, they failed to prepare properly.

Who can forget—the noble Lord, Lord Dodds, reminded us and I will do so again—that, in November 2019, the Prime Minister told businesses in Northern Ireland that they would “absolutely not” have to fill in extra forms, and that if any of them were asked to fill in such paperwork, they should telephone him

“and I will direct them to throw that form in the bin”.

I understand that, even today, Northern Ireland Secretary Brandon Lewis has claimed that empty shelves in Northern Ireland are due to coronavirus challenges, not Brexit. The continued tendency to bluster on this subject is deeply unhelpful. As my noble friend Lady Suttie said on 6 January in a debate on the Trade Bill:

“We are now beginning to see the realities of barriers to trade and of what the BBC has described as the ‘internal UK border’. We are also witnessing the consequences of doing a deal so much at the last minute that proper preparation for the business community in Northern Ireland was not really an option.”—[Official Report, 6/1/21; col. 173.]


The least the Government can do now is TO consult properly, actually listen, and be prepared to amend where they can if mistakes have been made—subject, of course, to the constraints of the withdrawal agreement and protocol and the trade and co-operation agreement.

I will say a brief word about timing. As the noble Lord, Lord Dodds, said, we are told in paragraph 3.1 of the Explanatory Memorandum:

“This instrument is being laid using the urgent procedure under the European Union (Withdrawal) Act 2018. The regulations introduced by this instrument will come into force at the end of the transition period.”


Obviously, they have been in force now for 19 days, so this debate is—how shall I put it?—not before time. The regulations arise solely out of the withdrawal agreement and its protocol on Northern Ireland, but those were agreed almost 11 months before this draft was tabled on 22 December, so why did it take so long?

I want principally to ask about consultation. Section 10 of the Explanatory Memorandum has quite a lot of blurb on the subject, including this:

“Consultation on the practical implications of the Protocol has taken place with businesses. Throughout the transition period, the NI Stakeholder Engagement Team (NISET) have consulted with a wide range of businesses and representative bodies who would be impacted.”


The following paragraphs elaborate. This general assertion may well raise the eyebrows of parliamentarians in both Houses on relevant committees, all of whom have complained vocally about the paucity of consultation over the past year. However, paragraph 10.1 of the Explanatory Memorandum makes the astonishing statement:

“No formal consultation regarding this instrument has taken place.”


In other words, despite the somewhat diversionary wording of the rest of Section 10, the nub is that, on these nuts and bolts, there appears to have been no consultation. Can the Minister tell us why that is so, and what he defines as “formal” in this context? Are the Government in fact saying that no consultation took place at all on the specifics covered by this statutory instrument?

I am afraid that the Government’s attitude is revealed by Section 12 of the Explanatory Memorandum, as also quoted by the noble Lord, Lord Dodds, where it is claimed:

“There is no, or no significant impact on business… The provisions do not introduce any requirement beyond what has already been agreed, or is a necessary consequence of what has been agreed in the Protocol.”


Surely, however, when it comes to trade, the devil is in the detail—otherwise why would there have been such uproar in the last 19 days leading, in the case of Scottish fishermen, to lorries in Westminster? If we are not to end up with the Northern Ireland Secretary blaming Northern Irish businesses for not filling in the right forms, as the Prime Minister has done with regard to exporters from Great Britain, careful consultation is essential.

These regulations are about goods moved from Northern Ireland to Great Britain, but I hope the Minister can tell us how the Government intend to consult properly not only with Northern Irish businesses but with those GB businesses with whom they are trading, and to learn from all their experiences ahead of the end of the three-month grace period, which extends only until the end of March. While the subset of challenges arising from the operation of the protocol, rather than from Brexit itself, relates in large part to very tight timescales for implementation and poor information, there is also a problem of lack of engagement from companies based in Great Britain about trade with Northern Ireland. What preparations are the Government taking now to ensure that current issues and problems do not reoccur after 31 March?

Lastly, can Minister explain how businesses will feed into the complicated and not very transparent governance arrangements for both the protocol and the trade and co-operation agreement, for example in the specialised committee for SPS measures?

In conclusion, Northern Ireland has been described by Professor Katy Hayward of Queen’s University Belfast as,

“this small but fragile region on the periphery of both”,

the UK and the EU. It is incumbent on the Government, for not only economic but political reasons, to take the greatest care not to put any more strain than the act of Brexit already regrettably does on this “small but fragile region”. Given the failure to consult specifically on this instrument, I am not persuaded that the Government are acting accordingly.

I hope that the Minister can give an assurance that, when there are structural problems that can be addressed only through flexible solutions being agreed by the UK Government and EU institutions, the Government will not be shy of arguing for those flexibilities. That does not mean invoking Article 16 of the protocol. Those pushing for such a remedy are offering a populist, ineffective and false solution. No major business organisation in Northern Ireland or beyond is calling for Article 16 on safeguards to be invoked. Outside the protocol, much unfinished business is still to be done to maximise potential to the Northern Ireland economy. The list includes access to EU free-trade agreements, which is particularly important to the agri-food sector; transit from Great Britain to Northern Ireland via the Republic of Ireland; data adequacy; the future of the all-Ireland service sector; and many others. We in my party, with our Alliance friends, will continue to raise these issues.

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the Minister for introducing this instrument, and to other noble Lords who have participated in this debate. As has been noted, the instrument was made in December under the urgent procedure. That is rarely desirable but, as the Explanatory Memorandum notes, it could not be laid until after the Taxation (Post-transition Period) Bill had received Royal Assent. We were all somewhat surprised when the Government announced that Bill at short notice, in a manner that suggested that they had only realised its necessity at the last minute. I hope that the Minister can assure us that, with a UK-EU trade deal now provisionally applied, we will return to the normal ways of conducting business.

While not directly relevant to this SI, conversations with colleagues have alerted me to the laying of other made-affirmative EU exit instruments over the Christmas period. In some cases, they appeared despite strong assurances that the relevant departments had concluded all their so-called day-one critical business well in advance of the House rising. Again, we understand the need of recent times. Going forward, however, we can all agree that fast-tracked primary legislation and the use of made-affirmative instruments should be far rarer than we have become accustomed to. I look forward to hearing the Minister’s thoughts on that.

Turning to the contents of the instrument, the Minister outlined the various changes introduced. They have, of course, now been in force for a little over two weeks. We would not have opposed this instrument had it been laid before Christmas and, given the legal chaos that would have resulted from this SI lapsing in February, we will certainly not do so today. I hope that the Minister can shed a little light on the operation of Regulation 5, which allows penalties to be applied if a business fails to comply with requirements in Regulations 3 and 4. Can he confirm the approach that the Government will take with such penalties? Given the lack of notice that many businesses have had, and the difficulties that some have experienced with the technological side of things, will there be a degree of leniency when determining whether to issue fines? If so, for how long? If not, will any special guidance be issued to those who consider appeals?

It may seem a minor point, but paragraph 3.2 of the Explanatory Memorandum notes that this instrument amends several small errors in the 2019 SI. On the one hand, we are glad that these errors were spotted and corrected before the end of the transition period. However, it is slightly concerning that such deficiencies still existed as late as 10 days before the end of the transition period. Is the Minister confident that the department’s chapter in the statute book is now as it should be, or can we expect further correcting SIs in the future?

While these provisions are not necessarily directly responsible, it is fair to say that certain aspects of trade between Great Britain and Northern Ireland have not operated as seamlessly as we had hoped. As my noble friend Lady Smith of Basildon noted during the repeat of an Urgent Question last week, the Government were warned well in advance of the potential for many of the difficulties that we have witnessed.

To put technical regulations in place is one thing—the sheer number of SI debates I have taken part in suggests that there is no shortage of technical regulations—but ensuring that IT systems work and that businesses are fully prepared for new ways of working amounts to a very different task. These are areas that we probed for many months, only to be told that we had no reason to worry. Regrettably, that complacency has resulted in difficulties for businesses on both sides of the Irish Sea. I end, therefore, by asking whether the Minister could use some of his speaking time to provide a general update on the situation regarding GB-NI trade.

Economic Update

Lord Tunnicliffe Excerpts

Tuesday 12th January 2021 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, as ever I am grateful to the Minister for putting this Statement on the record and leading our scrutiny of it. The picture painted by the Chancellor yesterday was a bleak one. Given that his personal brand centres on optimism, it is clear why he has resisted appearing before the Commons until now. Before turning to yesterday’s Statement, I gently say to the Minister that announcing £4.6 billion of expenditure via a Written Ministerial Statement last week was wrong. I hope he will assure us that both Houses will receive verbal updates in future.

As outlined in the Statement, economic performance in 2020 was understandably poor by conventional standards. The Minister will doubtless disagree with me, but this was arguably exacerbated by the stop-start nature of the Government’s response to the pandemic. The outlook for the economy this year and beyond is equally worrying. Even with nifty accountancy tricks, the projections fall far short of where we would like to be. I have commented previously about the speed at which the OBR predicts annual economic growth will flatten out at an unremarkable 2%. I have regrettably seen and heard nothing from the Government which resembles a plan for addressing that concern. We recognise, as we have at all stages of the Covid-19 crisis, the colossal scale of state intervention over recent months. It has been unprecedented, but there is no doubt that challenging times call for such measures.

The Minister will know that we are fast approaching a calendar year since the first national lockdown and the launch of various economic measures that accompanied it. Despite the passage of so much time, current support still falls far short of the Chancellor’s pledge to do “whatever it takes” to help the nation through these tough times. The Government say that not every job can be saved, but more could have been rescued had Mr Sunak provided greater certainty on employment support last year rather than trying to extricate himself from it at the earliest opportunity—in the face of all available evidence. As sure as night follows day, the U-turn came, but the harm had already been done. It is ironic that he now appears to champion the furlough scheme as one of his greatest achievements.

We needed swifter intervention in the creative industries, to support hospitality firms and supply chains, and to support the aviation sector. Despite their worth to our economy, many unanswered questions remain about the future of these sectors. Ministers have shamefully refused to address well-documented shortcomings of the Self-employment Income Support Scheme, where arbitrary criteria have left millions relying on universal credit, which is already insufficiently generous and at risk of a significant cut from April. We would have accepted a declaration of intent in the event of full details not being ready; as it happens, we did not get even an acknowledgement of the problem.

The Chancellor could and should have used yesterday’s Statement to outline his plans for addressing these issues and many more, including backing local authorities rather than forcing them to raise council tax. Compliance with guidance on self-isolation is believed to be heavily influenced by an individual’s financial circumstances. The Chancellor knows this yet failed to announce new incentives to help people do the right thing. His Statement was also a missed opportunity to provide much-needed additional help for the homeless, who have, tragically and literally, been left out in the cold. Can the Minister shed any light on why these issues were not directly addressed in the Statement? Can we expect them to be addressed soon, or will the Government continue to hide behind flimsy and unsubstantiated claims?

We are trying our best to support the Government as they tackle this pandemic, and will continue to do so. However, to rebuild public confidence in their response, we need greater honesty, accountability and consistency. The arrival of multiple vaccines against this coronavirus is crucial in our fight to overcome it, but we are still getting different messages and timeframes depending on which member of the Cabinet we hear from. Whether it is in respect of the number of Covid-19 infections and deaths, the state of our economy, the struggle to end inequality or even Brexit disruption to supply chains at border crossings, Ministers warn almost daily, apparently without contrition, that things are likely to get worse before they get better.

We understand that the new strain required changes to plans over Christmas, but, as with the furlough U-turn, clarification came much too late. Despite that experience, the Government have set themselves the target of schools returning after the February half-term and life beginning to look more normal by Easter. Does the Minister stand by these dates? If it transpires that they will be missed and children will remain at home, will the Government look for additional help for teachers and a legal right for parents to request paid, flexible furlough? Can the Chancellor announce future financial support at the earliest opportunity, to give businesses and workers maximum certainty?

[Baroness Kramer (LD) [V]]

The Chancellor has once again responded to a long-term economic crisis with only very short-term measures. The evidence from the Resolution Foundation of sharply growing inequalities is scary, frankly, as low-income families have to spend more to survive the pandemic. Will the Government at least make permanent the £20 uplift in universal credit?

Economic recovery cannot take hold before the summer even with a successful vaccine rollout, so will the Government now extend furlough, SEISS, the loan and various other support schemes at least to July, if not beyond?

Why have the Government continued to exclude 3 million of the self-employed from help, especially now that the Federation of Small Businesses has devised a scheme that avoids the risk of fraud? The FSB has also pointed to the recapitalisation crunch that could destroy businesses in 2021. Where is the long-term economic plan for recovery that businesses need to enable them to hang in, protect jobs, invest and grow again?

Taxation (Post-transition Period) Bill

Lord Tunnicliffe Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 16th December 2020 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the Minister for introducing this Bill and to all noble Lords who have taken part in this debate. Before I turn to my broader contribution, I welcome the noble Lord, Lord Sharpe of Epsom, to your Lordships’ House and congratulate him on his maiden speech. He gave an interesting insight into his career, and I share with him the belief that a varied career in different areas adds a roundness. I also congratulate him on his refreshing optimism. I say that because, as far as I can tell, apart from that expressed by the noble Baroness, Lady Pidding, his was the only optimism in the House today. Concern over the Bill varied from “chaotic” in my noble friend Lord Hain’s case to more careful concerns, but even those whose concerns were least had issues with the lack of detail.

The noble Baroness, Lady Kramer, was the first to bring up the issue of international reputation, and I thought the comment of the noble Lord, Lord Bruce, that we were alienating everybody was very insightful. The final step in alienation was the announcement of our gunboat proposals. Surely, somehow, we have to learn that if we are to live with our neighbours, it makes quite a lot of sense to be polite when we talk to them. There was also an almost universal welcome for what is not in the Bill, particularly the “notwithstanding” clauses.

When reviewing proceedings from the other place, I was struck by how few of the speakers focused on the detail and how many saw it as an opportunity to air other concerns and grievances, particularly in relation to the Court of Justice of the European Union. Our debate has been just as wide-ranging, which is perhaps inevitable given the recent twists and turns in the trade negotiations.

The Bill has been presented as an essential piece of the jigsaw to ensure readiness for the end of the transition period—an event that will take place just over two weeks from now. As the shadow Chancellor made clear, we support the timely passage of the Bill, as it is important to minimise any disruption. This does not mean, however, that we endorse the Government’s approach to the negotiations on our future relationship with the EU. Given the importance of this legislation, it is disappointing that it was published so late in the transition period and received such little consideration in the Commons. It seems it was held back specifically to give the Government the option of breaching an international agreement, which reflects just how poorly this entire process has been managed.

Thankfully, a deal was done on implementation of the Northern Ireland protocol, but not before the Government had ordered their MPs to put controversial clauses back into the United Kingdom Internal Market Bill. As my colleague, Pat McFadden, said in the other place:

“It is one thing to play ping-pong with the House of Lords, but quite another to play ping-pong with yourself.”—[Official Report, Commons, 9/12/20; col. 925.]


The decision finally to drop the offending provisions from both Bills is a relief on many levels, particularly for those among us who care about the UK’s standing in the world. Far from providing the certainty that businesses and consumers need, this is yet another framework Bill that leaves much of the detail for later. We will have to wait for the Treasury to bring forward the full details of customs and excise duties, for example. Colleagues of mine in the Commons fought valiantly to get precise dates from Ministers but none were forthcoming. Can the Minister offer anything new on timings and sequences for the forthcoming regulations? If they will not be in force on 1 January, does that mean that some duties will be applied retrospectively? What forbearance might companies expect, given these extremely tight timelines?

Another area where we have had little detail is that of customs agents and intermediaries. Several weeks ago I asked the noble Lord about progress towards recruiting 50,000 new customs staff, a commitment which is frequently mentioned by Ministers when they discuss Brexit preparedness. The Minister helpfully clarified that these are industry recruits rather than civil servants, and, like colleagues across government, he was unable to provide figures. Indeed, he referred to the oft-cited 50,000 figure as

“a bit of a finger in the air, to be honest”.—[Official Report, 19/11/20; col. 1602.]

Now that a little more time has passed, is he able to confirm today which way the wind is blowing on that matter?

In the Commons, the Exchequer Secretary pointed to the free-to-use Trader Support Service as evidence of the Government’s support for business. Some 18,000 firms were said to have signed up for this tool. Can the Minister confirm what proportion of businesses which regularly move goods to Northern Ireland this represents?

As a result of the recent Joint Committee outcome, we now have a trusted trader scheme, providing a grace period for supermarkets. While this represents a significant step forward, again, it has come incredibly late in the day. The Northern Ireland Retail Consortium has long expressed concern about business readiness for these changes, while the Food and Drink Federation has voiced what many are thinking: that the process has been a shambles. Even with this agreement, the absence of an overarching trade deal would increase costs for businesses and communities in Northern Ireland. Returning to my point about the early clauses of the Bill, we cannot be sure what these costs will be until the Treasury publishes further information. Can the Minister confirm that, when fleshing out the detail, the department will remain mindful of Northern Ireland’s economic position vis-à-vis the rest of the UK?

We had all, parliamentarians and the public, hoped to have clarity on trade agreements long before now. Indeed, we expected to be dealing with the implementation legislation this afternoon. I had certainly not anticipated the possibility of taking my turkey out of the oven while the Government are still cooking their so-called oven-ready deal. Even at this late stage, and with festive good cheer in mind, let us hope the Prime Minister will finally deliver on his pledge to the British people, enabling us to focus on other issues as we move into 2021.

Customs Safety and Security Procedures (EU Exit) Regulations 2020

Lord Tunnicliffe Excerpts

Thursday 10th December 2020 Grand Committee

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the Minister for introducing this latest statutory instrument from Her Majesty’s Revenue and Customs. Having dealt with the issue of imports three weeks ago, we now turn to the export of goods. As he outlined, HMRC is establishing a new power, described as a “contingency option”, to temporarily waive the requirement for pre-departure declarations if it is felt that this will lessen the disruption at the border. This power would also allow temporary change to the time limit for submission of these declarations. As with the import measures discussed previously, the potential grace period is limited to six months, which is designed to provide time for hauliers and ports to adjust to the realities of life outside the EU and beyond the transition period.

Paragraph 7.4 of the Explanatory Memorandum notes that there are potential risks to border security if these powers are used. Can the Minister explain the process that HMRC will use in relation to this contingency measure? Can he confirm whether that process has been decided? The phrasing of the Explanatory Memorandum suggests that it is in progress, but that would be surprising, given that the power will be available to Ministers in just three weeks’ time.

Given the risks involved, it is doubtful that the Government would want to extend the power beyond the envisaged six months. However, if HMRC were to decide to extend the intended sunset, would that be done by a further statutory instrument? While there may be a rationale for making it available, this unilateral power will get us only so far; it may help to limit disruption on the roads of Kent, but the problem will merely be shifted to the other side of the English Channel, where other forms will be needed for goods to move any further. This represents as much of a change to current arrangements as the need for pre-departure safety and security declarations, which have hitherto not been required under the terms of the Union customs code. It is regrettable that the haulage industry and others have not been afforded more time to prepare themselves for these new processes; it is worth remembering that such an option was on the table, only to be rejected by No. 10.

While we do not oppose this instrument, we remain deeply disappointed and troubled by the Government’s handling of the ongoing negotiations with the EU. They are now operating to a deadline of Sunday but, given the nature of the briefings last night, it is hard to be optimistic. We must therefore assume, as this SI does, that there will be no trade agreement. Let us not forget that, over three years ago, the former International Trade Secretary told the nation that the task of negotiating a comprehensive trade deal with the EU would be

“one of the easiest in human history”.

Since then, every deadline set by the Government for either a withdrawal agreement or a trade deal has been missed. Before leaving for his last-ditch dinner in Brussels yesterday, the Prime Minister pre-emptively sought to blame the EU for supposedly negotiating in bad faith. However, while the Government may not like its contents, the EU’s mandate is consistent with the political declaration signed by the Prime Minister in October last year.

The Minister is no doubt familiar with the reasonable worst-case scenario outlined in a Cabinet Office document earlier this year. A leak of that document has allowed all noble Lords to find out just how severe disruption could be in the event of no trade agreement. On exports, it warns that between 40% and 70% of trucks travelling to the EU might not be ready for new border controls; flow across the short Channel could be reduced to between 68% and 80% of normal levels; and queues on the roads of Kent could reach 7,000 trucks, equating to a two-day delay.

This is not what we were promised. At no point have the public been warned of the potential issues with imports if there is no trade deal. The document states that the flow of medicines and medical products could be reduced to between 60% and 80% of normal levels for a period of three months. Food supplies could be threatened, with low-income groups disproportionately impacted by price hikes. There is even a warning that some local areas could experience disruption in fuel supplies.

The Prime Minister promised the nation an oven-ready deal, not an outcome that prevents shops from stocking oven-ready meals. To avoid the chaos envisaged by the leaked document and this SI, it is vital that he gets his act together and secures a trade deal by Sunday.

Spending Review 2020

Lord Tunnicliffe Excerpts

Thursday 3rd December 2020 Grand Committee

[Lord Tunnicliffe (Lab) [V]]

My Lords, this has been an excellent debate, with a range of thoughtful contributions. While we have had several Treasury Statements in recent months, there has not been an opportunity either to look at the economy in the round or to hear from such a range of voices. The Back-Bench contributions may have been short in length, but the Minister has been left with plenty of questions to answer, as well as constructive ideas to take back to the Treasury.

This is the second spending review in a row to duck the challenge of setting out a medium-term plan for the UK economy. While the past two years have been highly unusual in several respects, that makes it even more important to have sight of a comprehensive action plan. We have known for some time that this exercise would be lacking in this respect, which is a disappointment when so many—ourselves included—have spent so long calling for a proper economic strategy.

Why does this matter? When they come under legitimate scrutiny, this Government often seek to turn the tables by asking why others will not simply follow their lead. The reason is simple: confidence. In cases where opposition parties, NGOs and the public have had confidence in the decision-making process, they have lent their support. However, it feels as though major policy and procurement decisions are being taken increasingly on the fly, without due process. Where this happens, it is simply not possible to have confidence in the Government.

The Chancellor’s failure to use this opportunity to present a proper economic vision further undermines confidence. That such a plan is needed is beyond doubt, particularly when looking at recent growth statistics and the OBR’s new forecasts. The UK has suffered the worst downturn of all the G7 nations. On Wednesday, the OECD forecast that our recovery will take longer than that of the rest of the G7. Even before Covid-19, the economy was posting disappointing GDP growth figures, and the OBR predicts that we will return to annual growth of less than 2% in just a few years’ time.

The Government’s failure to address structural economic problems over their decade in office means that we are stuck in a rut. This exercise both reflects and exacerbates the lack of certainty around our economic future. With just weeks until the deadline for a deal with the EU, we still have no idea whether there will be one and, if there is, what it will look like. The lack of detail and forward thinking is also a result of the Chancellor’s continued refusal to formulate an ambitious green agenda to bolster British manufacturing and create millions of new, well-paid and sustainable jobs. We need a genuine plan that matches the ambition shown by several other major economies, not just catchy headlines and soundbites.

The Minister will no doubt point to various initiatives announced last week, including the so-called levelling-up fund, as evidence of a grand plan. However, given the short-term nature of this spending review, those initiatives are unlikely to deliver the boost that our economy so desperately needs. It is also hard to have confidence in the new schemes that we have been offered, given recent experiences with both the towns fund and the procurement of PPE and medical supplies. We need government funds invested in the communities where they will make the greatest difference, rather than where senior Ministers believe they can produce a political dividend at the next election.

I am afraid to say that this spending review fails on several other important fronts. The decision to freeze the pay of many key workers who have helped to get the nation through the pandemic is, quite frankly, a disgrace. Not only does it contradict the Government’s warm words from earlier this year; it will also leave less in people’s pockets and, by extension, in the tills of businesses up and down the country. This is a time to boost consumer confidence and spending, not suppress it.

I very rarely agree with the former Prime Minister, David Cameron, but I refer noble Lords to his recent comments on the importance of the statutory commitment on overseas aid. The decision to undermine this requirement will be a real knock to those countries that rely on our assistance to address their social, economic and environmental challenges. Following the recent United Kingdom Internal Market Bill debacle, I also worry that this announcement will further undermine our reputation among international partners.

Local authorities can have no confidence in the Government’s response to their ongoing plight. They were promised the money that they needed to get through Covid-19, yet the reality has been very different. Ministers have attempted to play city regions and councils off against each other, which has done little for public morale or to foster the kind of collaborative spirit that we need between different levels of government. Rather than working with the Local Government Association and others to address long-standing concerns properly, we have instead seen the announcement of limited grant funding coupled with greater flexibility to increase council tax. This may plug gaps for now, but again, there is no comprehensive and sustainable vision for the future.

Sectors hit disproportionately hard by the pandemic and the restrictions that it has necessitated, such as hospitality, needed additional help in last week’s Statement. We support the tier system but we have always said that it must operate alongside appropriate support for those most affected. Earlier this week, we heard that some pubs in tiers 2 and 3 will receive a one-off grant. This amounts to yet another last-minute and reactionary announcement, rather than giving businesses the tools that they need to rebuild. Given the number of areas in tiers 2 and 3 and the likelihood that restrictions will continue for months rather than weeks, it is disappointing that the Government’s wider support programmes have not been reformed to address long-standing shortcomings. The self-employed and the self-isolating have also been let down.

Rather than making the £20 universal credit uplift permanent and extending it to recipients of legacy benefits, the Chancellor instead looks set to axe it from April 2021. Confidence in universal credit has been close to non-existent for some time, with its initial record of delays being replaced by a string of other problems. Once again, there has been an opportunity for action to improve the social security net for all. Sadly, Ministers have not made the responsible and proactive decision to take that opportunity.

The test for this spending review was for it to provide evidence of forward movement, instil confidence in the Government’s handling of the economy and signal a future centred around recovering jobs, retraining workers and building business. It failed all these tests. We are lagging behind our peers, yet key questions have been left unanswered for another year. Unless urgent action is taken, we cannot make our country the best to grow up and grow old in.

Wales: Customs Sites

Lord Tunnicliffe Excerpts

Wednesday 25th November 2020 Lords Chamber

[Lord Agnew of Oulton (Con)]

I agree with the noble Lord, which is why we have made the decision to move at pace to acquire the site on the island of Anglesey. That will bring jobs to the island and will ensure that security checks are as close to the port as possible.

[Lord Tunnicliffe (Lab) [V]]

My Lords, at all stages of the Brexit process we have urged the Government to formalise their engagement with the devolved Administrations, for example by putting the Joint Ministerial Committee on a statutory footing. Ministers said that this was unnecessary, yet the Welsh Government say that Whitehall made a formal approach regarding an inland site to serve Holyhead only in August. Why do the Government find it so hard to work constructively and proactively with others? Does it stem from the Prime Minister’s recent and very damaging comments on devolution?

[Lord Agnew of Oulton (Con)]

My Lords, I want to reassure the noble Lord that we have had extremely collaborative and constructive discussions with the Welsh Administration; indeed, it was only yesterday that I agreed with the Welsh Minister to go for the site for which we agreed the verbal heads of terms yesterday. I gave that choice to the Welsh Minister and I was delighted when he agreed with the proposal that we put forward to him. So we are working very closely with the devolved authorities, and, as I say, with Wales in particular I have had a very constructive relationship.