Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Wednesday 28th January 2026 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025.

Relevant document: 47th Report from the Secondary Legislation Scrutiny Committee

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, financial services are a key driver of growth in the UK. Embracing innovation is essential to sustaining the UK’s position as a leading global financial centre. As noble Lords will be aware, crypto assets’ usage has grown rapidly in recent years, and crypto assets are increasingly intertwined with traditional financial services. It is important, therefore, that the UK has a clear, proportionate and robust regulatory framework to oversee this emerging market.

This instrument establishes a comprehensive regime for crypto assets within the Financial Services and Markets Act architecture, ensuring that crypto assets are subject to regulations consistent with the framework that applies to other financial services. Taken together with detailed rules being developed by the Financial Conduct Authority, this framework will strengthen consumer protection, help tackle market abuse and provide the certainty that firms need to invest and grow in the UK.

There are already laws in place focused on addressing the most immediate risks from crypto assets, including anti-money laundering requirements and financial promotion rules. However, most crypto asset activities have not, to date, been subject to broader financial service regulations, including matters such as conduct and prudential requirements. Stakeholders and consumers have been calling on the Government to deliver a clear and comprehensive regime for crypto assets. The Treasury consulted on this regime in 2023, and in October 2024 the Government committed to implementing a regime largely in line with those proposals. The instrument before the Committee delivers on that commitment.

Specifically, the regulations would amend the 2001 regulated activities order to define crypto assets that would be within the scope of the regime, termed “qualifying crypto assets”, and to specify the new activities that will be regulated. Firms seeking to carry on those activities in the UK or deal with UK customers will be required to obtain authorisation from the FCA and comply with its rules, or risk committing a criminal offence. The new regulated activities are: issuing qualifying stablecoin in the UK; safeguarding the qualifying crypto assets and relevant specified investment crypto assets; operating a qualifying crypto asset trading platform; dealing in qualifying crypto assets as principal or agent; or arranging deals in qualifying crypto assets and qualifying crypto asset staking.

The instrument also uses the new designated activities regime to establish frameworks for public offers of qualifying crypto assets and their admission to trading on relevant platforms, alongside a market abuse regime tailored to crypto assets. Public offers of qualifying crypto assets will be restricted unless certain conditions are met. Firms will be required to publish disclosure documents so that investors have the necessary information when they are considering purchasing crypto assets, with clear rules around liability and compensation where information is untrue or misleading.

The market abuse provisions define “inside information” and prohibit insider dealing—the unlawful disclosure of inside information and market manipulation —thereby supporting market integrity and protecting UK consumers. The provisions would take effect from 25 October 2027. This timetable allows the FCA to finalise its detailed rules and guidance this year, and it gives firms time to familiarise themselves with the new rules and seek authorisation ahead of the enforcement date.

Noble Lords will know that the Secondary Legislation Scrutiny Committee raised this measure as an instrument of interest in its 47th report, published on 15 January. I am grateful for the consideration the committee has given this legislation. It noted some important points that I would like to reiterate here. First, on the costs to firms of the new regulations, the Government have published the de minimis assessment of the impact of the changes. The Government have taken a proportionate approach to the crypto asset regulatory regime to help manage the impact on firms. On FCA resourcing, the regulator confirmed that it has been increasing resources over the last few years to ensure that it has the right regulatory, technical and industry expertise needed to deliver the regime. Finally, the committee asked about the implementation timeline. As I said, the regime will be in force in October 2027, and the FCA expects the application period to be open later this year.

These regulations will raise standards, strengthen consumer protection, help prevent market abuse and support responsible growth in the UK’s digital asset sector. I beg to move.

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[Baroness Neville-Rolfe (Con)]

I was thanking the Minister for his response to the scrutiny committee’s concerns. I also thank the noble Baroness, Lady Kramer, for her well-informed insights, as usual, and her correct reference to risk. I very much look forward to the Minister’s response on that point.

While the Official Opposition are supportive of the direction of travel, we believe that the drafting is flawed. My noble friend Lord Holmes of Richmond explained that well; he called it a “wrinkle”. Fortunately, following the debate in the other place, I believe that the Minister and his crypto asset team have agreed to look into this with interested parties and that a follow-up meeting is planned between the Minister and our shadow Minister. I say at the outset that this is most welcome.

Crypto assets such as Bitcoin are commodities. They are bought and sold in anticipation of changes in value, much like shares or bonds. Stablecoins are different. They are backed by a fiat currency and act as a proxy for that currency. As such, stablecoins sit within the payment system and should be regulated as part of it. The draft instrument establishes the regulatory framework for crypto assets in the UK, including stablecoins. What we are therefore debating is critical to the delivery of the Government’s stated ambition for the UK to become a global hub for digital assets and blockchain technology—although I believe that the vast majority of such assets are held in the United States at present.

Equally, according to Bitpanda and Opinium, one in five adults in the UK has invested in crypto assets, and 40% of them are under 35. The possibility of high returns seems to be the main motivator, with portfolio diversification also being important. According to the same survey, the prime reason for transferring crypto is for the purchase of goods and services.

The Government’s policy note accompanying the original draft of these regulations made clear that it was published to identify errors or oversights that could lead to unintended consequences. My concern today is that such an oversight remains, so the instrument fails to achieve its stated aim.

A thriving digital asset market requires an effective form of digital cash. There are three such forms: central bank digital currencies, tokenised commercial bank deposits and regulated stablecoins. All three should be able to operate seamlessly alongside traditional fiat money with regulations that reflect how each functions in practice. The Bank of England has recognised that regulated stablecoins could deliver faster, cheaper and more functional payments, both domestically and across borders, as part of a multi-money system alongside commercial bank money. If we fail to regulate stablecoins in a way that reflects the real-world function, we risk losing ground to other jurisdictions. If using stablecoins means facing new regulatory hurdles, they simply may not be used.

In the UK, we have a long history of encouraging innovation in a regulated financial services sector. This record and the ability to innovate is vital to both growth and stability. With the current wording of the instrument, the UK could see the prize of innovation slipping away. Will the Minister comment on that concern?

The Government have attempted to address the problem in the context of payments by importing an existing exemption for the purchase of goods and services. However, that approach is ill suited to stablecoins and fails to provide clarity for all participants, particularly those who convert fiat into stablecoin and back again. Without certainty for these actors, the payment system may not be able to function effectively. A clearer approach would be a bespoke exemption for stablecoins or the use of an existing definition that captures payment activity within payment services regulations. I would be interested to hear about the current direction of travel on these various ideas.

Before I conclude, I would be grateful if the Minister would reflect on a number of broader questions that arise from this statutory instrument and the wider regulatory architecture within which it sits, and let me have a response—either today, which would be ideal, or in writing. I was very grateful to the Minister for the helpful letter he sent me following our last financial services discussion in Grand Committee. He will be aware that the House of Lords Financial Services Regulation Committee is planning an inquiry into crypto assets, so these questions are important, and the answers might be helpful to the debates that that committee will have.

First, how confident are the Government that the regulators are striking the appropriate balance between their statutory objectives for consumer protection, market integrity and financial stability, while also enabling the growth and innovation in our financial services sector that I think we both want? Given previous concerns that our regulatory system can at times err on the side of excessive caution, are the Government satisfied that the framework will not result in valuable crypto-related activity being driven offshore?

Secondly, how big is the risk of fraud, and what is being done to combat it? The noble Baroness, Lady Kramer, rightly talked about the danger of scams. Although she was less concerned about individual consumers, whom she sounded as though she felt were reasonably well protected, she made a very important point about scams hitting SMEs.

Thirdly, turning specifically to stablecoins, how significant do the Government believe sterling-denominated stablecoin activity could become in the United Kingdom? Does the Minister have concerns about potential disintermediation from the regulated banking sector and any consequent implications for banks’ capacity to lend to the real economy? If so, how do the Government intend to balance the imperative of supporting economic growth with the opportunity to foster innovation?

Finally, what steps are being taken to improve public understanding in this area? There is evidence that some young people are engaging with cryptocurrencies in a highly speculative manner, while others are deterred entirely by a lack of accessible information. Does the Minister share my concern that the continued absence of meaningful financial education within our various education curricula leaves many citizens ill equipped to make informed decisions in what is now an increasingly complex financial landscape?

We are united in our desire for the UK to do well in this field. It seems that the technical flaw, of which my noble friend Lord Holmes of Richmond also spoke, can be corrected, although I assume that this would have to be done by an amending SI rather than the withdrawal of the SI under discussion. In any event, I look forward to the Minister’s response to this and to the other questions that I have set out. This is an important area, and it is right that we take the time to scrutinise the intentions and effects.

[Lord Wilson of Sedgefield (Lab)]

My Lords, I thank noble Lords for their contributions. This has been an interesting debate. There are a lot of questions on this and I will do my best to answer them—I have been making notes. I may not get to respond to them all but, if I do not, as before, I will scour through Hansard and respond accordingly.

I welcome what the noble Lord, Lord Holmes, said about this going in the right direction, although there might be one or two problems—a wrinkle—that the department will probably look at and try to iron out, if they exist. We welcome the feedback. This SI enables the FCA, we believe, to respond nimbly to emerging demands. This is an area of continuing development. We will keep the regime under review, but we are not proposing to alter the instrument at this stage of the legislative programme.

Stablecoin and bitcoin are treated the same. It is right to note the difference between stablecoin and other more volatile crypto assets and to recognise the potential for stablecoin to play a significant role in payments. While stablecoin and other crypto assets are different in some ways, they share many characteristics and, therefore, risks. Regulating stablecoin in line with other crypto assets is, in many circumstances, the right approach. For example, firms dealing in or safeguarding stablecoin should be subject to similar rules as those for firms dealing in or safeguarding other crypto assets.

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[Baroness Kramer (LD)]

My issue on this is related but slightly different. If we are dependent on dollar stablecoin for international trade, which is the direction of travel, and the US Government decide that they do not like either a policy that we have or a piece of trade, they can, through the companies that sit behind that stablecoin, in effect shut us down and cut us out. That is a very different set of circumstances from those in which we live today, where they might want to do that, but they cannot. They may try to make banks act in the way that they want, but they would have a far more challenging job in doing that. I am just concerned that that thinking is not embedded in the way that we are structuring this and doing the regulation. That is my concern. I see the plumbing advantages of stablecoin, but I worry about where the power levers are set. I cannot see that this addresses any of that.

[Lord Wilson of Sedgefield (Lab)]

That is a very important question about monetary sovereignty. While most stablecoins today are US-denominated—I think about 99%—and issued overseas, this instrument lays the groundwork for a thriving ecosystem, including UK- issued pound-denominated stablecoins. The Government are considering the regulators’ proposals on stablecoin-backed assets that include UK government debt. The Treasury will assess the fiscal implications and benefits of stablecoins in this context, and I think the Treasury is well aware of the noble Baroness’s concerns. It is something that we take very seriously, and we will probably hear more about that as time goes on.

The Government are committed to ensuring that the UK remains an open and connected financial centre, as we need to be in a globalised economy, and to upholding its commitment to international regulatory standards. We are working with the transatlantic taskforce on all these issues to enhance US-UK collaboration. We are aware of the issues that the noble Lord raised on capital markets, and the taskforce will explore options for short to medium-term collaboration on digital assets, additional opportunities for wholesale digital markets innovation and ways to improve links between our capital markets to enhance the growth and competitiveness of both UK and US markets.

On the specific quote used by the noble Baroness, Lady Kramer—

“same risk, same regulatory outcome”—

we think that this instrument allows the FCA, as the regulator, to set appropriate and detailed rules addressing market risks. We therefore do not believe that we have the same regulations as always for the risks.

Noble Lords asked whether there is a problem with the anti-money laundering requirements and whether this instrument goes far enough to look after consumers. To be clear, the Government are not weakening the anti-money laundering requirements; for example, they will continue to apply to crypto asset firms exactly as they do today. This legislation goes further by introducing a robust financial service regulatory regime that will require all firms offering crypto asset services, either in the UK or for UK consumers, to be authorised and regulated by the FCA and to comply with comprehensive conduct and prudential rules.

It is fair to say, I think, that this SI goes a long way to help to protect consumers. The creation of a register of authorised crypto asset firms will make it easier for consumers to identify legitimate firms. The requirement for those firms to comply with the comprehensive conduct regime will reduce the risk of poorly run firms and bad practice resulting in consumer harm. By defining and prohibiting market abuse—as well as placing an obligation on firms to put systems in place to prevent, detect and disrupt such abuse—this instrument will improve the integrity of crypto asset markets and lead to better consumer protection.

Also, the regime will leave the UK well-placed. There was a question about what Europe is doing as well. We continue to co-operate internationally with our partners, including the EU; we also continue to watch the development of the digital euro with great interest.

Both noble Baronesses asked about parliamentary scrutiny, in essence. We believe that this instrument sets out a clear regulatory framework that will ensure that the Government’s aims and objectives for the sector are reflected in the regulations’ final rules. Giving the FCA flexibility on the detail of the regime will allow it to respond nimbly to developments in this fast-evolving sector; that said, Parliament will be able to hold the regulator and government to account on an ongoing basis using the regime, once it is live, through normal means such as requiring attendance at Select Committees. Also, should it become apparent that the regime is not working as intended, the Government will have the option to return to Parliament and amend the framework under which the FCA operates.

Someone asked what the impact on small businesses will be. The impact assessment published alongside the instrument sets out the impact that the Government expect the regime to have on all businesses, including small businesses. The FCA has existing duties to consider the most appropriate way of implementing this regime.

I hope to get through all noble Lords’ questions. As far as our people know, in terms of what is regulated, firms authorised for the new crypto asset activities will appear on the FCA register in the same way as firms authorised for traditional financial services activities.

As far as payments are concerned, I think stablecoin was mentioned. Government work is under way in order to take forward broader work to modernise assimilated law on payments, including to ensure that the UK’s payments regime is fit for tokenised payments such as stablecoin. That work is ongoing.

We all know about the opportunities for cryptocurrency. We cannot disinvent it. We have to make sure that it works for the British economy and the British people; and that people are protected. This SI lays down a framework so that consumers can be protected.

I turn to the two final questions. The Government are committed to making the UK a world-leading destination for digital assets. Our regulatory regime has been developed through extensive engagement with industry and international partners, ensuring it is both internationally competitive and aligned with global standards. This legislation will support UK growth by giving crypto asset firms the regulatory certainty needed to invest here and drive innovation in our financial services sector. So, in answer to the question of the noble Baroness, Lady Neville-Rolfe, we do not think that this is too restrictive.

Finally, on financial education, which we are all keen to see in our schools and broader society, the Government want people to have the confidence and skills they need to manage their money. The Money and Pensions Service, an arm’s-length body of government, provides free, impartial guidance to consumers at every stage of their financial lives. More widely, the Government are taking steps to improve financial education. In November, we set out our plans for all school children in England to receive financial education. This reflects the Government’s wider commitment to financial literacy and building a population better able to make informed decisions about financial products.

I hope I have hit all the questions. If I have not done so, we will go through Hansard and get back to noble Lords about what perhaps we have missed out.

[Baroness Neville-Rolfe (Con)]

The Minister’s reply was extremely helpful. One thing I am a little uncertain about relates to the Treasury, or the crypto assets unit, looking at the possible wrinkle or flaw that my noble friend Lord Holmes mentioned. If that led to a change in the SI, my understanding is that it would not come back here. That is because, in answer to the question of the noble Baroness, Lady Kramer, the Minister explained that this is a ground-breaking SI and after that, because it is important to be flexible, the FCA would make any changes. Assuming that is right, this is a plea from us for an update as to the progress of those discussions when they have taken place. My understanding from our shadow Minister in the other place was that discussions were ongoing on this matter, which he was extremely grateful for. It would be useful for us to know the final outcome of those. If a small change has to be made to the regulations, I am sure we will be supportive.

I am delighted to hear about financial education. I look forward perhaps to giving the Minister a cup of tea and learning a bit more about that on a future occasion because it goes beyond the framework of today’s discussion. On SMEs, it is not only that we want the Government to think about them, which they are obviously doing, but to make sure that the scam issue with SMEs is part of either the Government’s or the FCA’s thinking. It is an important matter for struggling small businesses in the country. We do not want that issue to go further. I am happy to agree to the passing of this statutory instrument and thank the Minister and the Treasury for all the work that they have done in this area.

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If this regulation of itself causes and impacts double regulation, how are the Government looking at ensuring that that will not become an increasing issue as we go through other aspects of this environment? In essence, what work and focus is being done to ensure that double regulation does not happen as a consequence of this regulation, and, more generally, to have that assurance that it will not happen as a consequence of the various parties that are doing effective work in this space? The potential always is either that it will be double regulation or that there will be gaps.

[Lord Wilson of Sedgefield (Lab)]

On the question of what can be described as the wrinkle, I hope that, if there is any slight issue with all of this, we will try to work it out in regulation; however, the FCA is looking at it, and that might be the way to do it. Obviously, as I said earlier, if something needs to be changed, we have the right to bring it back to Parliament and have another go, basically; that may include further legislation.

On double regulation, in terms of the Government’s view of the Bank of England’s consultation on systemic stablecoin, the Government recognise that facilitating stablecoin innovation is important for UK competitiveness. The Treasury and the Bank of England are maintaining close, ongoing dialogue on the legal and regulatory treatment of stablecoin in support of the Government’s objective to make the UK a global destination for digital assets.

The main point is that we want this sector and these regulations to do several things: grow the economy; be flexible enough to change when they need to change; and look after the consumer. We are building on regulation that may have been there, as far as the consumer is concerned—on money laundering, for example—and we will go in that direction, but we will work very closely with the industry so that we have something that is suitable for both the consumer and the industry. This is a sector that we would like to see thrive; as I said, you cannot disinvent it, so we need to make it work for us.

Motion agreed.

Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Monday 8th December 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, I will also speak to the Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025. That order, which the Secondary Legislation Committee has identified as an instrument of interest in its 41st report, will bring the provision of environmental, social and governance ratings, commonly referred to as ESG, within the regulatory parameters of the FCA. Regulation will raise standards, enhance investor confidence and reduce the risk of greenwashing. It has strong support from across the financial sector.

I will outline the importance of ESG ratings and their role. ESG ratings encompass a range of products that seek to assess the ESG profile, characteristics, risk exposures or impacts associated with the company, fund or other financial instrument. ESG ratings are widely relied upon by investors to guide investment decisions, in line with sustainability risks, opportunities and preferences. Of the £10 trillion-worth of assets under management in the UK in 2024, half had integrated ESG factors into the investment process. More than 5,400 firms were using ESG ratings during that period.

Work with the ESG ratings market has developed rapidly and without formal oversight. This has prompted concerns among stakeholders regarding transparency, governance, internal control and potential conflicts of interest within ESG ratings providers. In response to these concerns, the International Organization of Securities Commissions published recommendations for ESG ratings and data providers, emphasising the need for higher standards and appropriate oversight. The Government have acted swiftly to deliver progress on this important agenda. The consultation was issued by the previous Government in June 2023, and this Government ensured that the consultation response and draft legislation were published for technical comments as part of the Chancellor’s first Mansion House speech in November 2024. That draft has since been refined into the instrument before the Committee today.

I now turn to the instrument itself. It establishes a new regulated activity: the provision of an ESG rating where that rating is likely to influence the decision to make a specified investment. Providers of ESG ratings will therefore be required to obtain authorisation and will be subject to supervision by the Financial Conduct Authority. Recognising that ESG ratings are provided by a range of different persons, the scope of the regulated activity is designed to be proportionate to the risk of harm to avoid dual regulation and to maintain consistency within the existing regulatory framework.

The regulation contains specific exclusions to give effect to this—for example, where a firm provides ESG ratings as part of another regulated activity. To uphold the integrity of the UK market and ensure a level playing field, the ESG ratings provided to a UK customer by an overseas provider will fall within the scope of the regulated activity, except where such ratings are provided without remuneration or financial incentive.

The Government remain committed to open, competitive and internationally connected financial markets. In that context, further consideration will be given to market access arrangements for overseas ESG ratings providers. To allow sufficient time for industry engagement while ensuring timely implementation, the FCA launched its consultation on the specific regulations for ESG ratings providers on 1 December following the laying of this instrument on 27 October. The FCA’s consultation has been welcomed by industry, and its rules will be designed to be proportionate and tailored to address harms while protecting innovation, in line with the regulator’s secondary growth and competitiveness objective.

This legislation forms a central element of the Government’s agenda to promote growth in the UK sustainable financial market—one of the priority areas identified in the Financial Services Growth and Competitiveness Strategy.

I turn to the Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025. This technical instrument makes changes to support reforms to UK banking regulation. It will keep our legislation on financial services effective and assist the Treasury in applying the FSMA model of regulation to set a prudential framework for banks. The instrument does not introduce any new regulatory requirements for firms.

Noble Lords will be aware that banks are required to follow a set of prudential regulations to manage their risk appropriately and maintain adequate levels of capital to protect against any losses. In addition, the biggest banks are required to hold additional loss-absorbing debt to ensure that they can be allowed to fail without the need for taxpayer-funded bailouts, as we saw in the global financial crisis.

A significant amount of prudential regulation is set out in the Capital Requirements Regulation, or CRR, which formed part of domestic law during our time as an EU member state. Following our exit from the EU, the Government have been tailoring the existing financial services framework to the UK’s needs. This includes the CRR, which will be removed from the statute book and largely restated in the Prudential Regulation Authority’s rulebook, providing more flexibility and allowing the PRA to set the relevant requirements. To do this, legislation has been passed to revoke the CRR, notably the Financial Services Act 2021 and the Financial Services and Markets Act 2023. Subsequently, this July the Government made commencement regulations to revoke certain articles of the CRR, with effect from 1 January 2026.

In that context, the Government have brought forward these technical regulations to make a small number of consequential amendments to pieces of legislation that refer to specific CRR articles, to ensure that the broader legislative framework remains coherent. Specifically, they amend the Banking Act 2009 to ensure that definitions relating to share capital instruments in banks’ own funds reflect the revocation of certain CRR articles. They also make changes to secondary legislation concerning bank resolution, the bank levy and financial conglomerates to reflect the revocation of certain CRR articles.

In summary, while this statutory instrument is technical in nature and does not introduce any new rules, it is nevertheless a necessary step in continuing the reforms to our banking regulation and ensuring that our regulatory framework remains coherent. I beg to move.

[Lord Jones (Lab)]

My Lords, surely these instruments must be welcomed, and surely we all want a smarter regulatory framework. I thank the Minister for his helpful and concise outlining of the regulations and the order. There is a lot of business ahead and time is of the essence, so my brevity is guaranteed.

One can only welcome the policy context as stated at paragraph 5 of the helpful Explanatory Memorandum. Can my noble friend the Minister or his department say what the Prudential Regulation Authority is? In particular, can he perhaps give some detail on how big it is and who sits on it? Who chairs it and, on the presumption that the chair is full-time or part-time, is he or she salaried and how much are they paid? Are all the PRA membership paid or are they voluntary? How often does the PRA meet? The department may not give answers now but if not, might the Minister reply by letter?

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[Baroness Neville-Rolfe (Con)]

My Lords, I, too, rise to speak to the two statutory instruments: the Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025, and the Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025.

I am content with the second of these instruments, but I have some broader questions which it may be helpful to address first. My first question is a repeat of one posed in the summer. How is the Treasury getting on with the post-Brexit regulatory changes for which it is responsible? The answer in the summer was that 51% of assimilated law from the retained EU law and assimilated law dashboard had been dealt with. It seems extraordinary not to have completed this task more than nine years after the vote on Brexit. A second question is, now that we are no longer bound to match the EU, have we taken advantage of the obvious opportunities? I highlight helping smaller financial service providers and banks, addressing the perennial problem of finance for SMEs, and encouraging innovation. I look forward to hearing from the Minister on this, and on the progress of the Government’s financial services growth and competitiveness strategy, including the welcome announcement on 4 December on plans to lower barriers to authorisation for new firms.

That brings me to how our onshored EU law is being replaced by regulator rules, and how Parliament can maintain proper oversight of it. Can the Minister tell us how the Treasury and the regulators are co-ordinating the mapping exercise from the EU’s capital requirements regulation provisions into our PRA rulebook? In particular, how are the Government assuring themselves, and by extension this House, that the cumulative effect of these changes will preserve and enhance the safety and soundness of firms—a concern of the noble Baroness, Lady Kramer—and the competitiveness of the UK as a financial sector, which, given its sheer scale, is critical to the future of our country? The noble Baroness explained the importance of continued parliamentary involvement, rather than leaving everything to the regulators and their rule books. Does our Financial Services Regulation Committee, with its distinguished membership, perhaps have a role to play?

As we move further into the FSMA 2023 framework, what is the Government’s plan for post-implementation review? I know from my business experience that for success, implementation far outweighs strategy. Will the Treasury undertake a structured evaluation of whether the shift from detailed retained law to rules made by the regulator is delivering the outcomes envisaged by Parliament: high standards of prudential regulation, clear and accessible rules for firms, and a regime that supports innovation and growth? The noble Lord, Lord Jones, said he wanted to see a smarter regulatory framework, and I will be interested in the Minister’s reply. These are, I hope, constructive and broadly supportive questions.

I turn to the instrument on ESG ratings. As the Minister has said, this market has grown rapidly in recent years without formal regulatory oversight. That has inevitably led to concerns being raised around transparency, governance arrangements, internal controls and potential conflicts of interest for ESG rating providers. Both the International Organization of Securities Commissions and the OECD have recommended that national authorities bring greater scrutiny to bear on this part of the market, and I suppose that the UK was bound to fall into line. I understand the need to ensure that ratings are given in a proper way for market integrity, although I regret that the market has not sorted itself out voluntarily—though that may be difficult, given that so many territories are involved.

I am not convinced about the evidence base for intervention, in terms of harms caused by incorrect ESG ratings. I also question why the Government have defaulted to bringing organisations into the FCA’s sphere using the Financial Services and Markets Act 2000 rather than the simpler and less costly designated activities route, which the 2023 Act created. Why have the Government not started with making ESG ratings a designated activity to see whether that could cope with the issues satisfactorily? The Explanatory Memorandum simply asserts that full regulatory oversight is necessary. This is against a background of an

“entrenched culture of risk aversion”

and regulatory complexity, in the words of the House of Lords Financial Services Regulation Committee. I believe that the FCA route on ESG risks adding such needless complexity. I am sure that the Minister will want to answer this point. The Prime Minister has focused as recently as last week on the importance of growth and lighter regulation, which, as the Minister knows, I welcome. Is there a left hand/right hand issue underlying today’s apparently technical discussion? Is this use of the 2000 Act rather than the 2023 Act the direction of travel for the future? Will that deliver the simpler, smarter regulation that many of us crave?

For similar reasons, I am cautious about the state telling the market whether such ratings ought to be used at all. Companies and investors must remain at liberty to make a business decision on whether ESG ratings add value to their processes. In my view, it is not the role of government or regulators to favour particular investment philosophies or to promote one set of metrics over another. Against that background, can the Minister confirm that it is not the Government’s intention that the FCA, through its supervisory expectations or guidance, should in practice encourage or pressure firms into using ESG ratings or into favouring particular ESG ratings providers or methodologies? In other words, can the Minister assure the Committee that the regime is about the integrity of the ratings, where they are used, rather than about mandating or promoting their use?

In the same vein, can the Minister say what safeguards will be in place to ensure that ESG ratings are not indirectly hard-wired into other parts of the regulatory framework—for example, into prudential rules, disclosure regimes or stewardship expectations—in a way that would amount to de facto regulatory endorsement of specific ESG approaches without further and explicit parliamentary scrutiny? The Minister mentioned that this ESG instrument has been supported by business. Which businesses? Did they include SMEs and their representatives?

I end with a thank you. It is helpful that the Government regularly come to the House and explain the purpose of the panoply of financial regulations that are being made. This is a major constitutional and regulatory transition—hence it is right that we have the chance to examine carefully each step in the process, its progress and its broader impact. The sunlight of transparency makes for better government and better regulators.

[Lord Wilson of Sedgefield (Lab)]

My Lords, I thank noble Lords and noble Baronesses for the one or two questions that I have been asked. I will do my best to get through them all; I very much doubt that I will, as they came thick and fast, but, obviously, we will scour Hansard and respond by letter to anything to which I do not respond.

First, I thank my noble friend Lord Jones for his questions about the PRA. There were some questions about its consistency and how it works institutionally; I can write to him about that. The PRA produces an annual report in which all the costs and everything else that my noble friend asked about are laid out, but, if the answer is not in there, I am sure that we can come back with an answer to his question. I am pleased that he welcomes the statutory instruments that we have here.

The noble Baroness, Lady Kramer, asked a lot of precise questions, which I will try to answer. The main thing I took away from what she said was partly to do with parliamentary oversight: whether we have forgotten what happened in 2008 and why we are essentially allowing the regulators to take over on prudential regulation. Basically, we are revoking the capital requirements regulations, allowing the PRA and FCA to set rules relating to the prudential regulation of banks. Parts of the CRA were revoked in July 2025 and this will come into force on 1 January next year. This SI makes consequential amendments relating to the parts of the CRA revoked in July. This is necessary to ensure that the statute book functions properly, and there is nothing in this SI that is additional to what was there before. Obviously, the Leeds reforms and the Basel 3.1 reforms will ensure that these transitional measures will work into the future.

I turn to the questions from the noble Baroness, Lady Neville-Rolfe. On adjusting to being outside the EU, it has been nine years since the referendum; we have been in power for just over one of those years, so the question is what happened in the previous eight years to get us to the position where the noble Baroness thinks we should be.

There were also questions about cutting regulation on firms by 25%. This Government are committed to cutting administration. The Financial Services Growth and Competitiveness Strategy set out the Government’s plans to stabilise the streamlined regulatory framework for sustainable finance, prioritising policies that will have the greatest impact. This SI is one of those priorities. It improves clarity around the ESG rating methodology, giving investors greater confidence in their decisions. It will also promote more accurate understanding of how companies are evaluated. That is why the sector itself has been strongly supportive of the proposed regulations: 95% of those consulted supported them. In the Mansion House speech in November 2024, the Government published the consultation response and draft legislation, and we are now following on from that. Some 5,400 UK financial services firms now use ESG ratings.

As far as the international context is concerned, the EU will regulate ESG rating providers from July 2026. I believe that two or three other countries—Japan, Hong Kong and Singapore—have a code of conduct on this, and I think India is taking a similar approach.

Both noble Baronesses raised the Government’s delegation to the FCA of rules about transparency. What we have done is in line with the UK’s general approach to financial services regulation. This is founded on the Financial Services and Markets Act 2000, under which Parliament sets the overall policy framework, with the detailed regulatory requirements set by the expert independent regulators. The regulators are required to conduct an open and transparent consultation process, which includes undertaking a rigorous cost-benefit analysis before introducing new rules. The regulators are also required to keep their rules under review and to provide clarity and transparency to stakeholders now and when the rules are reviewed. They must also stay within the parameters of the statutory requirements.

As far as parliamentary scrutiny is concerned, the FCA is an independent body. It is a non-governmental public body and its independence as a statutory regulator is vital to its role. However, it is fully accountable to the Government and Parliament as to how it exercises its functions. This accountability is critical in ensuring that the FCA is advancing the objectives that are given to it by Parliament. Senior representatives of the FCA regularly give evidence to parliamentary committees. The Financial Services and Markets Act 2023 introduced secondary growth and competitiveness objectives for the FCA. This creates a clear legislative framework for the regulator to follow.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

I thank the Minister so much for saying that he will look at the details—we asked a lot of detailed questions—and follow up, as he has done on previous occasions. That is extremely helpful and much appreciated.

I want to come back on a couple of points which might be the subject of correspondence. First, on the pace of change, this 51% and how we are getting on, I appreciate that we were in power for a lot of the time. However, there is a common wish that the regulatory regime should be up to date. We did a lot of work and some of that the Government have, fortunately, moved forward with. How are we getting on?

Secondly, I focused on small business because smart regulation is so important to small business. The Minister did not talk much about that. Could he follow up a little more on the good things that I think are planned? On ESG, he mentioned the number of firms. Does that mean that there is a de minimis rule with ESG? If so, I would be interested to know whether small companies are not covered by this regulation—or will they get a lot of extra burdens as a result of rules that are not that relevant?

The Minister did not really answer on why we are using the 2000 Act rather than the 2023 Act. The Treasury has done it this way for this instrument, and I understand that. I am interested to understand why it is being done that way and whether there would be a quicker, smarter approach using the powers in the 2023 Act as well. But with that, I thank the Minister for his full and helpful reply.

[Lord Wilson of Sedgefield (Lab)]

In response to that, we are using the legislation that we are using essentially because it is the appropriate piece of legislation that we need for what we are introducing today, but I will obviously give her a fuller answer on why that is. As far as small businesses are concerned, 5,400 UK financial service firms used the ESG ratings in 2024. The FCA analysis said circa 80 providers are active in the UK ESG ratings market, with potential growth of up to 150 providers. Globally, the top five providers represent 75% of the market. That is the make-up of the industry. As to whether the small companies were consulted, we can get that information to her.

[Baroness Neville-Rolfe (Con)]

I am interested in the impact of the regulations on the financial services people less than on the ESG companies themselves. The ESG companies are providing services. Some of them will be small firms; that is fine. In terms of growth and innovation—the sort of objectives that are rightly set out in the strategy—is that holding back London in an inappropriate way?

[Lord Wilson of Sedgefield (Lab)]

I do not think that it is holding back London and the City of London in any way whatsoever. What is important is that we have the right regulation on this. The consultation that we took part in was not just among the regulators; it was with trade bodies et cetera. It was a wide consultation. I am sure that I can get a more detailed response on the consultation to the noble Baroness.

Motion agreed.

Barnett Formula: Wales

Lord Wilson of Sedgefield Excerpts

Wednesday 12th November 2025 Lords Chamber

[Lord Wigley]

To ask His Majesty’s Government whether they plan to review the Barnett Formula to ensure needs-based funding in Wales.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

The Barnett formula is a key part of the arrangements for pooling and sharing risk and resources across the UK. It is simple and efficient and provides a clear and certain outcome. The inclusion of a needs-based factor in the Barnett formula ensures that it accounts for the high relative needs of the Welsh Government and funds them above Wales’s independently assessed level of need compared with equivalent UK government spending in England.

[Lord Wigley (PC)]

My Lords, when the Barnett formula was first established, more than 100,000 people worked in coal and steel in Wales; that is now down to under 5,000. Does the Minister recall Lord Barnett admitting that his formula was outdated, with the consequent underfunding of Wales hidden by European regional grants, which have now ended? Has the Minister seen Cardiff University’s recent report stating that Wales receives far less than its population share of funding for reserved functions such as justice and railways, calling for the tripling of the Senedd’s borrowing capacity and for full income tax devolution? If the Minister cannot commit to a needs-based formula, will the Government at least now take the opportunity to give the Senedd parity of financial powers with those that the Scottish Parliament now has?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question. The Barnett formula does reflect the higher level of needs in Wales. A 5% needs-based factor in the formula ensures that Wales receives fair funding. It is the biggest uplift since 1998, when devolution started. As far as the railways are concerned, the UK Government are responsible for heavy railway infrastructure across England and Wales—it is devolved, I believe, to Scotland—so spend money on railways in Wales, rather than funding the Welsh Government to do so. This is consistent with the funding arrangements for all other policy areas reserved in Wales. Wales continues to benefit from rail investment. At the 2025 spending review, the Chancellor announced an investment in Welsh rail of at least £445 million.

[Baroness Wilcox of Newport (Lab)]

My Lords, the UK Government have given the Welsh Government the largest financial settlement in the history of devolution, nearly £5 billion extra to spend on public services in the next three years—not supported in the Senedd by Plaid Cymru. Does the Minister agree that it was most positive to hear the Deputy First Minister telling the Senedd last Tuesday that Ministers had

“secured an agreement with the UK Government”

to further explore the Barnett formula?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness for that question. It is true that the UK and devolved Governments have agreed to undertake joint working to look at ways of improving the operation of the Barnett formula, to report at the next meeting of the finance Interministerial Standing Committee, expected in early 2026. Just to reiterate, they have had a 20% uplift in their budgeting from the Barnett formula, which is equivalent to £4 billion this year.

[Lord Forsyth of Drumlean (Con)]

My Lords, does the Minister recognise that this is not actually about the amount of funding going to Wales but about fairness? I draw his attention to the 2009 report of this House’s Select Committee on the Barnett Formula, which clearly showed that Wales loses out and that we should move to a funding system based on need. Surely that would be fairer to the people of Wales. Simply citing numbers does not deal with the problem, which is the basic unfairness in the way the Barnett formula has operated towards people in Wales.

[Lord Wilson of Sedgefield (Lab)]

I think it is fair to reiterate to the noble Lord what I have already said: Wales is receiving a massive uplift in its budget via the Barnett formula. It is the biggest increase since 1998, and I think we should welcome that. As I said earlier, we are looking at the Barnett formula again, with the devolved Administrations, to find other ways we can improve it and make it work better.

[Lord Brennan of Canton (Lab)]

My Lords, the noble Lord, Lord Wigley, for whom I have a great deal of respect, neglected to mention, when he talked about the report A Decade On: Reforming Wales’ Fiscal Framework, recently published by Cardiff University, that it described tax devolution and the extra needs-based formula that was negotiated by Mark Drakeford as Finance and First Minister as an “unequivocal budgetary success”, because it has added £1 billion by 2027-28 to the Welsh budget. However, while making that point, I also emphasise to my noble friend the Minister the need for extra flexibility on borrowing. I very much hope that will come out of these discussions.

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for that question. I like to think that all the avenues of approach he has mentioned will be looked at and discussed at the ministerial meeting at the beginning of next year. It is also important to point out that there is direct funding to Wales, which includes 160,000 workers in Wales who have benefited from a direct pay rise due to the increase in the minimum wage and the national living wage.

[Baroness Kramer (LD)]

My Lords, each of the four nations operates a different and independent NHS computer system, which means that doctors struggle to get information on cross-border patients in England and Wales. Will the Government now recognise the seriousness of this issue and adapt the Barnett formula, which stands in the way of providing the funding to remedy this situation?

[Lord Wilson of Sedgefield (Lab)]

The noble Baroness raises a very important issue, and I hope it is something that the ministerial meeting at the beginning of next year will look at. I like to think that all aspects of the Barnett formula, including the issues that the noble Baroness has raised, will be looked at in the round, because obviously we want to see efficiency in all our public departments.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, Professor Holtham’s independent review, published in June this year, suggested that Northern Ireland’s needs-based factor might be higher than the 124% used in the current formula. We are all aware that the Barnett formula for the three nations and regions is deeply unfair. Therefore, will my noble friend, in talking with the Chancellor and Treasury colleagues, give adequate reflection to the need for a total review of the Barnett formula to reflect the need for needs-based assessment and also for fairness and equity?

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for that question. I repeat that this is the largest spending review settlement received by the Northern Ireland Executive in real terms since devolution started in 1998. The Northern Ireland Executive are receiving at least 24% more per person than equivalent UK government spending in the rest of the UK, an average of £19.3 billion per year between 2026-27 and 2028-29.

[Baroness Neville-Rolfe (Con)]

My Lords, does the Minister agree that the immediate issue in Wales is not the mechanism by which funds are now allocated but how effectively those funds are spent in Wales? The Welsh Government’s record of waste, inefficiency and misplaced priorities has deprived the Welsh people of value for money and of a really strong NHS, despite the record levels of funding that the Minister has pointed out.

[Lord Wilson of Sedgefield (Lab)]

I would dispute what the noble Baroness has just said—I do not recognise that picture of what is going on in Wales. Obviously, the increase in the amount of funding that will go to Wales through the Barnett formula is welcome. As I pointed out, there is more direct funding to Wales as well, such as the £80 million for port investment to support floating offshore wind developments in Port Talbot, and £160 million each over 10 years for investment zones in Cardiff city region and Wrexham and Flintshire. There is a lot going on in Wales, there is a lot to be proud of, and there is a lot for the Welsh Government to boast about.

[Baroness Bennett of Manor Castle (GP)]

My Lords—

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

The strengthened representation and increased democracy we are about to see in Wales with the Senedd elections under the new system surely add further weight to the needs-based argument of the noble Lord, Lord Wigley, for looking again at improving the Barnett formula for Wales. Should the elected people closest to the voters, truly representing them, not have adequate resources to deliver on their aspirations?

[Lord Wilson of Sedgefield (Lab)]

To repeat what I have said before, Wales and the other devolved authorities have done really well out of the Barnett formula this time around. It is the biggest increase in their funding from the Barnett formula since 1998. The money is there and it is up to the elected Assembly to decide how it is going to spend it, so that democracy is there. All I can say is that the best result we could get at the next election is a Labour Assembly.

Public/Private Partnerships: Shares

Lord Wilson of Sedgefield Excerpts

Monday 3rd November 2025 Lords Chamber

[Lord Brooke of Alverthorpe]

To ask His Majesty’s Government what steps they are taking in consulting on, revising and updating public/private partnerships with shares open to the public.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, the 10-year infrastructure strategy set out our approach to private finance and infrastructure through a variety of available models and approaches. Public/private partnership models are one mechanism available to bring in private finance to infrastructure projects. The strategy set out the circumstances in which the Government will consider PPEs. The Government will always consider carefully which model is most appropriate for a project on a case-by-case basis to ensure value for money.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, since I tabled this Question, my noble friend Lord Livermore has been appointed Labour’s national campaign co-ordinator for next year’s elections. I am sure that everyone would wish to congratulate him on that, even in his absence. He is now, of course, in a unique position: not only is he campaigning but he is within the Treasury. If he can spend a little time on looking more at the public/private partnership models, and if we could revise, update and extend them to include individual citizens’ contributions and people’s investments in them, rather than it simply being large capital investment, I think that he would find that they would attract greater interest. As he comes to campaigning, he could advance in Scotland a major PPP project, one in Wales, and one for every county and shire around the country as part of this programme.

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for his question and I will pass on his good wishes to my Treasury colleague, whose full attention is on organising for next year’s elections but also on his duties in the Treasury. As I said, the Government will always consider carefully which model is most appropriate for a project on a case-by-case basis to ensure value for money. Matching the right private finance models to projects ensures that the project benefits from efficiencies. Investment trusts already open the door to retail investment in private assets such as infrastructure, but we are going further. By moving the long-term asset funds into the stocks and shares ISA from April next year, the Government will give more people access to long-term investment opportunities and the higher returns they can bring.

[Lord Forsyth of Drumlean (Con)]

My Lords, does the Minister agree that where public/private partnerships have gone wrong is in there not having been people in the public sector with the procurement skills and knowledge to get a good deal, and the private sector has run rings around them? If we are going to go ahead, can we look at the way in which we carry out procurement and bring in the expertise required to match that in the private sector?

[Lord Wilson of Sedgefield (Lab)]

I agree with the noble Lord and accept his point of view. There have been a lot of benefits from public/private partnerships in the past—they have invested in many schools and hospitals, where pupils and patients have benefited—but we need to look at how we reform public/private partnerships and make them fit for the future. Obviously, the National Infrastructure and Service Transformation Authority, which was set up in 2020, has a great part to play in that.

[Baroness Kramer (LD)]

My Lords, first, we on these Benches join in the commiserations with the noble Lord, Lord Livermore. Does the Minister agree that for a successful PPP, in addition to the key point made by the noble Lord, Lord Forsyth, not only is an educated public sector negotiator is required but clearly defined projects that will not undergo variances, and financing, in essence, set out up front and not used as a back-end bargaining tool? Does he agree that these and the other lessons that we learned before mean that there are relatively few projects that will meet the criteria for a public/private partnership?

[Lord Wilson of Sedgefield (Lab)]

We will look at public/private partnerships in the future. We are looking at them in a limited way for neighbourhood health centres, for example, and public estate decontamination projects, but we need certainty over future funding, which is why we have committed over the next decade at least £725 billion of investment in infrastructure so that we can ensure growth.

[Lord Young of Norwood Green (Lab)]

My Lords, I have had some experience of this, given that my union was involved when BT was privatised in 1984. That was a successful public/private partnership; it is a shame that today there is such scepticism. Of course, it requires the Government to be capable of ensuring a successful negotiation, but it also needs to ensure that the people involved—in my case, it was the union members—get a good deal, and they did get a good deal: for every share they invested, they got two shares back. The reaction from Eurostar is interesting. Virgin Trains is trying to run another train service through the tunnel. What is the reaction of Eurostar? It is to find every legal means possible to oppose it. It does not seem to me to be a good approach. As long as we are going to benefit, and as long as we are going to get growth and productivity, it seems to me that public/private partnerships are a good idea.

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for that question; it is very good of him. As I said, we will look into how we ensure that public/private partnerships work in the future for the benefit not just of customers but of the Government and the taxpayer. We need to ensure that we move forward on this so that everybody is part of the success story, which I think they can be if it is done right.

[Lord Fox (LD)]

My Lords, I am somewhat confused by the dissonance between the Minister and the aforementioned noble Lord, Lord Livermore. When I questioned the noble Lord, Lord Livermore, on the same subject, he said that the Treasury was working on appropriate contract models. The Minister seems much more reticent about the future role of public/private partnerships. Is the Treasury in favour of them and actively seeking ways of making them work for the public, or is it sort of waiting for them to come along?

[Lord Wilson of Sedgefield (Lab)]

I thank my noble Lord for that question. I think I will leave off there; obviously, we have the Budget in three and a half weeks’ time and other announcements will be made then. We want to make this a success for the public, and that is why from next April we are going to open up stocks and shares ISAs to long-term asset funds so that everybody can benefit.

[Baroness Neville-Rolfe (Con)]

My Lords, there is a shortage of capital for public projects, so permitting the public to provide some more of that capital is very sensible. The recently opened Thames Tideway tunnel is a very good example of a public/private partnership: it was on time and on budget with a good independent board. However, the shareholders were companies such as Dalmore Capital UK and foreign investors, and not individuals. Will the Government work up ideas drawing on this and on overseas success to allow us to attract more public finance from a larger number of corporate and individual UK shareholders? Might that include the type of populist share sales beloved of Baroness Margaret Thatcher?

[Lord Wilson of Sedgefield (Lab)]

I was agreeing with some of that until it got to the very end. I thank the noble Baroness for her question. Obviously, we need to look at this closely. We want to open up public/private partnerships, where they are to happen, to investment from consumers and shareholders, but we need to wait until the Budget to find out exactly what is going to be done.

[Lord Mohammed of Tinsley (LD)]

My Lords, I join the noble Baroness, Lady Kramer, in wishing the noble Lord, Lord Livermore, all the best for the task he has in hand—it is going to be a very difficult one. In terms of public/private partnerships, what lessons can be learnt from what happened in Sheffield with the tree debacle? Will the Government use that as a case study of how not to go about a public/private partnership?

[Lord Wilson of Sedgefield (Lab)]

We will look at all avenues to improve any potential public/private partnership. There are obviously lessons from the past that we can draw on. I do not know the specific case that the noble Lord mentioned, but Ministers will look at this in the round. They are advising potential organisations on public/private partnerships and looking at legacy PFIs and what more they can do to help those PFIs to be managed, so there is a lot going on. We all want this to succeed and we need to draw on lessons from problems we have had in the past.

[Lord Watts (Lab)]

My Lords, does the Minister agree that, where the Government have to bail out the private sector, they should seek to get a stake in shareholding so that they can be paid back at an appropriate time? Too many private sector companies have enjoyed lots of money from the public but have never paid it back.

[Lord Wilson of Sedgefield (Lab)]

My noble friend raises an interesting question. I am sure that is something the Treasury will look at in the next few weeks before the Budget and after.

Financial Services and Markets Act 2023 (Mutual Recognition Agreement) (Switzerland) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Tuesday 21st October 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Financial Services and Markets Act 2023 (Mutual Recognition Agreement) (Switzerland) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, these regulations are a vital step in implementing the UK’s commitments under the Bern Financial Services Agreement, signed with Switzerland in December 2023. This agreement is a landmark in our financial services relationship, reflecting the UK’s status as a leading global financial centre and our long-standing ties with Switzerland.

The purpose of these regulations is straightforward. They create a legal framework to allow Swiss investment service firms to supply certain cross-border services directly to UK clients, including sophisticated and high net worth individuals, without the need for UK authorisation.

This new market access is based on mutual recognition. This means that each party recognises the other party’s regulatory and supervisory regimes and deems that the other party’s regulatory and supervisory regime achieve equivalent outcomes to its own. These outcomes relate to market integrity, financial stability and the protection of consumer and investors.

Mutual recognition is underpinned by enhanced supervisory co-operation between the Swiss Financial Market Supervisory Authority, or FINMA, the Financial Conduct Authority, the Bank of England and the Prudential Regulation Authority. For UK insurers, the Swiss offer under the BFSA allows them to provide certain insurance services directly to Swiss clients, including sophisticated and high net worth individuals, without the need for Swiss authorisation, subject to the same principles of mutual recognition and supervisory co-operation.

To ensure this new access is safe and well-managed, the regulations also equip our financial regulators—the Financial Conduct Authority, the Prudential Regulation Authority, and the Bank of England—with new powers and duties. These include the ability to request information from Swiss firms, intervene if risks to UK consumers or financial stability arise, and oversee an orderly wind-down of Swiss firms’ UK activities if the agreement is terminated. The FCA is also required to maintain a public register of Swiss firms operating under the agreement, ensuring transparency for UK clients.

The regulations also establish enhanced co-operation arrangements between UK and Swiss regulators, including a formal memorandum of understanding. This will support regular information sharing, joint supervisory work and effective dispute resolution. The FCA and PRA will work closely with their Swiss counterparts to address any risks or issues that may emerge.

Importantly, these regulations do not diminish the UK’s high standards of consumer protection, market integrity or financial stability. Safeguards are in place to allow UK regulators to act swiftly and decisively if a Swiss firm’s conduct threatens our financial system or clients. Swiss firms will remain subject to supervision by the Swiss regulator, but UK authorities retain the right to intervene where absolutely necessary and if co-operation with the Swiss regulator has failed. These are backstop powers and will therefore be used only as an absolute last resort.

Industry stakeholders, including TheCityUK, have welcomed the agreement and these regulations as a positive development for cross-border financial services. They provide greater certainty and flexibility for firms, while maintaining robust oversight and protection for UK consumers.

In summary, these regulations deliver on our international commitments, strengthen our financial services partnership with Switzerland, and ensure that new market access is accompanied by appropriate regulatory powers and safeguards. I beg to move.

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[Baroness Neville-Rolfe (Con)]

My Lords, this statutory instrument gives legal effect to the mutual recognition agreement between the UK and Switzerland known as the Bern financial services agreement. As the Minister has so clearly outlined, the agreement enables the UK and Swiss financial firms to provide services to each other’s markets, particularly in wholesale sectors, such as investment services, insurance and banking, without needing to establish a local presence or duplicate regulatory approvals.

The UK’s position as a global financial centre depends on maintaining strong transparent relationships with trusted international partners. We therefore welcome this agreement with Switzerland, developed on our watch. Mutual recognition, when accompanied by effective supervision and regulatory co-operation, can deliver meaningful benefits to both markets. Under this agreement, Swiss firms will be able to operate in the UK under the supervision of Swiss regulators, with the FCA and PRA granted powers to step in if issues arise—as the Minister explained. The same applies to UK firms offering services in Switzerland.

With that in mind, I would be grateful if the Minister could address the following points. First, I would like to probe the Swiss end. Has Switzerland yet put in place what is needed there to allow UK firms to benefit from mutual recognition? If not, when will this be done? What are the nature and scale of benefits to the UK financial institutions? That seems an important point.

Secondly, turning to our end, how confident are the Government that UK regulators have the necessary tools to monitor Swiss firms’ activities and act swiftly if concerns emerge? What protections are in place for UK clients—not only high net-worth individuals but small firms—should something go wrong?

Thirdly, on timing, why has it taken nearly two years from signing the agreement in December 2023 to putting this framework in place? Has there been a problem with the regulators not being ready or is the Treasury not working at pace?

I was grateful for the reply of the noble Lord, Lord Livermore, to my Question on 16 September, reporting that, by July this year, 51% of assimilated EU law—most of it in financial services—had been repealed, amended or replaced. This was a much lower figure than I had hoped for, given the importance of financial services to growth. I am not sure whether the Swiss regulations—the one set that we are debating and the negative set that is not being debated—will be included in the count in that definition, but the point about pace generally is important. The Official Opposition have been supportive of the transformation process, and there is no excuse for delay.

No doubt the Minister will respond on some of the reservations of the noble Baroness, Lady Bennett, and perhaps explain how things have improved in Switzerland over time. But I note that there will be information sharing as part of the deal, which is important. However, how will Parliament be kept informed of the operation of this agreement, particularly in the event of regulatory diversion or dispute, or a bad case of the kind that was asked about?

In conclusion, we support efforts to deepen co-operation with trusted international partners in financial services, but it is vital that it is done without compromising consumer protection or financial stability, and that it delivers the trading benefits that we all hope to see. I look forward to the Minister’s response, ideally today but otherwise in writing.

[Lord Wilson of Sedgefield (Lab)]

I thank both noble Baronesses for their comments on this SI, which were gratefully received. This is an important SI because it is all about growth and building a relationship with a trusted trader in Switzerland that we can build on into the future.

On security and trust, the UK and Switzerland have a strong and established relationship in financial services, and last year we increased the number of transactions et cetera by 27%, and the amount by £4.9 billion. I cannot give a figure for how that is going to extrapolate into the future, but we are doing this to make it easier to have growth. Those figures will hopefully improve—they will improve, in my view—over the coming years.

In response to the noble Baroness, Lady Bennett, the agreement includes, for us, robust safeguards. Swiss firms must be authorised and supervised by FINMA, and the UK regulators retain powers to intervene if risks arise, including restricting activities and managing wind-downs, which both noble Baronesses raised. The FCA and the PRA act swiftly in urgent cases and collaborate closely with Swiss authorities. These measures ensure that, for UK consumers, market integrity and financial stability remain protected, while enabling the benefits of cross-border market access.

How they will be held to account was another issue raised by both noble Baronesses. Regulators will be held to account through clear statutory duties set out in regulations requiring transparency in their actions and co-operation with His Majesty’s Treasury. Their decisions, such as interventions against Swiss firms, are subject to oversight and include the right of affected firms to refer matters to an independent tribunal. The FCA public register will provide visibility of Swiss firms’ activity, supporting scrutiny by clients and stakeholders. Regular engagement with industry and reporting to the joint committee further ensures regulators’ accountability in implementing and managing the agreement. On the anti-money laundering aspect that was raised, Swiss firms will still need to comply with the UK anti-money laundering regime that we have in place.

On timing, it has taken two years—longer than that, actually, because the negotiations have been going on for a few years. Ultimately, we want to get this right. It is not just us but Switzerland that wants to get this right. There are two different kinds of regimes that have to agree this. After it was agreed by the Swiss Parliament, they had to allow 100 days for a potential referendum to be held. It was not held—it was not called for, so it did not take place—but that is 100 days of that two year period that the noble Baroness mentioned. International agreements often take time. We have to get it right.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

I will ask a fairly technical question, so I will entirely understand if the noble Lord wishes to write to me about it. In his response, he said that this SI avoids duplicating regulatory burdens, but he also said that the Swiss companies would be covered by our anti-money laundering laws. As I referred to in my original contribution, my understanding is that transparency is avoided under Swiss law. I do not claim to be an expert on Swiss law; obviously I am taking advice here. Article 47 of the federal Act on banks and Article 127 of the direct federal tax Act effectively allow Swiss institutions to avoid scrutiny and reporting. But we are then saying that this will have to be covered by our anti-money laundering laws. As I said, I am not expecting the noble Lord to give me a response now, but could he commit to write to me about that issue of transparency and anti-money laundering, as well as how we can avoid duplication and ensure that we have our own anti-money laundering regulations?

[Lord Wilson of Sedgefield (Lab)]

Obviously, I will write with further detail but, as I said, the regulators will be held to account for what they do. This requires transparency—that is one of our stipulations—but I can write to the noble Baroness with further detail about that.

[Baroness Neville-Rolfe (Con)]

I am grateful to the Minister for explaining the scale of the opportunity to date and, therefore, our ambition for more; this is very good news. I am not sure that it has been quite quick enough for me—from May 2024 to today seems like quite a long time—but, of course, the Government are new and have been very busy with many things, so it is understandable.

Perhaps I could just come back to the point about parliamentary scrutiny. The Minister mentioned a Joint Committee; I am not sure which Joint Committee that was. Clearly, it is important that parliamentarians should be able to see the progress of important financial agreements such as this. I am not quite sure what the mechanism is. Is there an annual report from the FCA that covers this? That would be the FCA and the PRA. I am interested in how parliamentarians will be able to scrutinise this. What will be the best approach?

--- Later in debate ---

[Lord Wilson of Sedgefield (Lab)]

I will write to the noble Baroness with a fuller answer to her question.

Motion agreed.

Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Wednesday 3rd September 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

In moving these regulations, I shall speak also to the Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025.

These two technical instruments make practical changes that allow the Government to complete reforms to banking and wholesale markets regulation. Collectively, they ensure that our legislation for financial services remains effective and brings these areas of regulation in line with the model of regulation set by the Financial Services and Markets Act 2000—the FSMA model. The instruments do not introduce new burdens or policy for firms, and the changes have been widely supported by industry.

The Financial Services and Markets Act 2023 repealed assimilated law relating to financial services, subject to commencement by the Treasury. This approach allows our expert and independent regulators to replace detailed rules currently set in legislation with flexible, UK-tailored standards.

I will first address the Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025. Noble Lords will be aware that banks are required to hold capital buffers, in addition to minimum capital requirements, to ensure that they have sufficient capacity to absorb losses while continuing to lend to the economy, even in times of stress. This short, technical instrument updates references to the capital buffer regulations in other legislation now that the underlying regulations have been restated through the powers in the Financial Services and Markets Act 2023.

The process to bring the capital buffer regulations in line with the FSMA model does three things. First, it revokes the 2014 capital buffers regulations—a piece of assimilated law that, under our FSMA model of regulation, is better situated in regulator rules. The Government are therefore replacing some of the revoked provisions with rules designed and maintained by the Prudential Regulation Authority and have restated a limited number of regulations that need to remain in legislation, with some operational improvements.

Secondly, it gives the Prudential Regulation Authority additional flexibility in setting two capital buffers that are derived from rules set internationally by the Basel committee: the capital conservation buffer and the global systemically important institutions, or GSII, buffer. Those buffers will now be set through PRA rule making rather than through legislation, upholding international standards while increasing the flexibility of regulation.

Thirdly, it preserves in legislation the policy frameworks of the two capital buffers that are set by the Bank of England’s Financial Policy Committee—the counter- cyclical capital buffer and the other systemically important institutions buffer—which will ensure that the FPC has a clear statutory basis on which to deploy these tools. It also makes operational modifications to improve the effectiveness of the framework by, for example, allowing the FPC to set the countercyclical capital buffer off-cycle, rather than being restricted to its quarterly setting, in case of a financial system emergency.

--- Later in debate ---

While we do not oppose the passage of these instruments, we are very glad of the opportunity to take part in this serious scrutiny in the interests of financial stability, innovation and growth. As a closing question, will the Minister say how far through the statement of EU law in financial services His Majesty’s Treasury has now got? It is a process that His Majesty’s Opposition support, and it would be good to know how much longer it will take to get to the end, much though I enjoy the opportunity to debate these statutory instruments.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baronesses for their questions and remarks on what are really technical issues. There is no real policy change, but the issues are none the less important. As the noble Baronesses said, one of the key issues is that we want to ensure that the economy grows. As far as our financial regulation infrastructure is concerned, it is always welcome to have heard from the IMF that the architecture that we have now is some of the best of its kind in the world. The IMF also endorsed the Government’s fiscal plans as striking

“a good balance between supporting growth and safeguarding fiscal sustainability”.

In answer to the noble Baroness, Lady Bennett, the Government are committed to upholding financial stability, which is a prerequisite of our position as a leading global financial centre. This is about rebalancing our approach to risk and pushing back on some of the mission creep that we have seen over the past decade. There is scope to do this while continuing to protect financial stability, and obviously we will always keep this under review, which was one of the noble Baroness’s questions.

The noble Baroness, Lady Kramer, asked about parliamentary scrutiny and how Parliament will continue to scrutinise what the FCA and the PRA are going to do. They are independent non-governmental organisations and their independence is vital to their role. However, they are fully accountable to the Government and Parliament for how they exercise their functions, and this accountability is critical to ensure that they are advancing the objectives given to them by Parliament and performing at the optimum.

There were other questions about whether we are giving regulators too much power. We do not believe we are. We have a flexible system. Some of it is still going to be in legislation; some of it is going to be in regulation. The flexibility is there to ensure that the one thing that we create is growth in the economy. To the noble Baroness, Lady Neville-Rolfe, I say it helps to deliver growth because growth is our ultimate ambition. To achieve this, the Government have announced the most extensive package of financial service reforms in over a decade. Reform will unlock growth by increasing the global competitiveness of the sector, reducing unnecessary regulatory burden, spurring the sector’s confidence and boosting innovation and opportunities, which is one of the issues that the noble Baroness raised. Obviously, it is about flexibility, and we need to ensure that we remain flexible in our approach to these regulations and continue to keep them under review.

We believe that these technical statutory instruments do that. It will be for the FCA and the PRA to decide how to streamline and improve their rulebooks. The FCA has already published a discussion paper seeking views on organisational and conduct rules that could be removed or simplified. It has also announced work to review who can be treated as a professional investor, another key plank of the current framework.

I hope this answers many of the questions that were asked. If there are any that I have left out, I am sure that we can write to noble Lords.

[Baroness Neville-Rolfe (Con)]

That was extremely helpful, especially the direction of travel in terms of reform. I would be very interested to know what the growth questions to the PRA and the FCA were. The letters were written last autumn. The Minister has repeated the vision, as it were, and has talked about flexibility, which can be very useful. If the Minister could reflect a bit further on that and on transparency—emphasised by the noble Baroness, Lady Kramer—that would be great. Are the regulators being transparent in the way that they move forward? That is another way that we are able to feed in and criticise if we are not happy.

My other point perhaps goes wider than this debate, but I asked how the Government were getting on with the process of making these post-EU regulations. I do not know whether the Minister can answer that now, but if not, it would be helpful to hear separately on that.

[Lord Wilson of Sedgefield (Lab)]

I do not know exactly where we are with working our way through the EU regulations et cetera and decoupling where we think it is necessary to decouple. I am sure that we can write in some respects. I am sure that we will be doing it diligently in the best interests of the UK and our international standing. On the other issues, I should have mentioned the Leeds reforms which were mentioned on 15 July. The changes will help UK banks to compete internationally and provide the vital investment required to drive growth in the economy. We are implementing the Basel III.1 arrangements on international banking by delaying investment banking requirements until 2028 and implementing other requirements in 2027 and communicating that the Treasury will avoid ring-fencing and that the PRA will undertake a review and report by early 2026. There is a lot going on in this area. The Leeds reforms are critical to that. What drives all this is the fact that we are pursuing growth. That is the one thing that we want to achieve.

[Baroness Neville-Rolfe (Con)]

I support the objective of growth. I used to be a Treasury Minister and I know that the Treasury will move forward, but it would be good to get this process done.

[Lord Wilson of Sedgefield (Lab)]

I welcome the Opposition’s support.

Motion agreed.

Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Monday 14th July 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, the Government have committed to achieving clean power by 2030 and the contracts for difference—CfD—scheme will play a key role in achieving that ambition. The clean power action plan, published in December last year, outlined several key reforms to the CfD scheme ahead of allocation round 7 opening this August. Following a robust public consultation process, we published our consultation response, which set out that legislative changes are needed to enable the Government to reach clean power 2030 and enable a fair price for consumers.

The draft SI will enable changes to the allocation process to ensure that our clean power 2030 ambitions are met and that consumers pay a fair price. It amends the Contracts for Difference (Allocation) Regulations 2014 budget publication process and the information that the Secretary of State will have access to during the allocation round. With access to anonymised bids and by changing the budget publication process, the Secretary of State will be able to set budgets for CfDs that maximise good value capacity deployment for clean power 2030 and avoid the outcome seen in allocation round 6, where an unspent budget for fixed-bottom offshore wind meant that a potential opportunity to secure additional projects at a good price was lost.

These amendments mean that the Government can bring forward renewable capacity that represents value for money, which will benefit consumers by moving the country away from volatile fossil fuel prices. The instrument also amends regulations to enable the costs of the clean industry bonus to be included in the Ofgem price cap. There needs to be a specific provision in the relevant regulations that allows the CIB to be counted as a specific bill cost as part of wider CfD costs. This is a technical change; the rest of the CIB regulations are already in place. It will ensure that the price cap captures all the relevant factors that might impact on it.

These draft regulations represent an important step in ensuring that we achieve clean power 2030 and protect bill payers now and into the future. They make the necessary amendments to enable the CfDs to adapt as we head towards clean power 2030. This will enable us to maximise renewables deployment at a fair cost to consumers. I beg to move.

[Lord Frost (Con)]

My Lords, I declare an interest as an unpaid director of the campaign group Net Zero Watch. I think the Secretary of State for Energy is at the moment giving a Statement in the Commons on the state of the climate and energy in which he promised—or, at least, briefed—that there would be some radical truth telling. It may be useful to do a bit of that ourselves in this discussion. In particular, there are two areas of concern before I come on to the detail of this instrument.

First, the Government’s policy is based on the incorrect belief that renewables are cheaper than gas. There are different figures out there, of course, but independent commentators show that if you include all the subsidy costs, grid balancing costs and capacity market costs, onshore wind is about twice as expensive per megawatt hour as gas, offshore wind is two and a half times as expensive, and floating offshore is three times as expensive. Even solar, which is perhaps the most of viable of any of these renewables, is 50% more expensive. That is the first incorrect belief.

The second incorrect belief is that prices will go down rather than up, which has been very well debated recently. According to data from the International Energy Agency, Britain had, as is well known, the most expensive industrial and domestic energy prices in 2023. The data for 2024, in so far as we have it, shows that we have the most expensive industrial energy prices in Europe, and now only the fourth most expensive domestic energy prices. However, gas prices are about average for Europe, which strongly suggests that, contrary to everything that is said, gas prices are not driving the high costs. In fact, it is the subsidy, the balancing costs, the capacity market and the inflated capital costs—all of which, by the way, the OBR predicts will increase rather than decrease over the next few years. All those are driving higher prices.

The Government have to pretend to believe the things that I just outlined; I do not know whether they really believe them, but they certainly have to pretend to. The problem is that doing so makes it difficult to run a proper renewables policy, and that is why AR6—allocation round 6—was such a fiasco. As the Explanatory Memorandum says, AR6 constituted a

“budget underspend for offshore wind”.

Alternatively put, renewables producers would not supply at the prices that were offered, so there was an underspend. If renewables are as cheap as the Government say they are, why should that be the case?

Therefore, the Government badly need AR7 to be a success. They need this vast expansion of renewables, whatever the cost, if they are to decarbonise by 2030. But developers are getting cold feet; we saw it in AR6, and we have seen the cancellation of projects since then. Hence this statutory instrument is a different approach. It is very complex and obfuscatory, in the way we have come to expect, and there are many technicalities, but the core of it, as various commentators have set out, is that instead of setting a budget and seeing what capacity the Government can get for the money, they are setting a capacity ambition, seeing what bids come in and then seeing what they have to pay to get that capacity. That is why the Secretary of State needs this anonymised data early and why they need to delay publishing the budget until all this has been assessed. The Government hope that no one will notice what is going on if it is done in this technical way in the statutory instrument, but I am afraid it is a scandal, because we will see prices and budgets go up, and we will not get a proper explanation for it.

I have two other points to make on the instrument. The consultation on it, which the Minister referred to and described as “robust”, involved developers, electricity traders—I quote the Explanatory Memorandum—

“businesses operating in the offshore wind sector”

and “environmental groups”. Those, of course, are all producers. What about actual businesses that have to use energy or electricity and have to deal with the increased energy costs and complexity that come as a result? We know what the consequence is and we know why they did not consult them. It is because they know that prices will go up. We know that because, in the industrial strategy announced a couple of weeks ago, the Government have had to pick sectors and subsidise their energy costs to make their operations viable.

My second point is about the security risk of all this. We all saw what happened in Iberia a couple of months ago as a result of excessive reliance on renewables. The Government say that they are investing in nuclear, gas and, to the extent they can, storage, but, of course, none of this will be ready by 2030.

I shall finish with three questions. First, can the Minister tell us how much the Government expect to spend on the AR7 budget? If prices are falling, why will it not be less than AR6? Can he tell us how much consumer prices are expected to fall as a result of the constant fall, as we are supposed to believe, in the cost of renewables? Secondly, if they did not consult consumers of electricity on this SI and the new methodology, can they commit to doing so in future on similar instruments? Thirdly, can the Government tell us how they expect to fill the gap in production that renewables create before the new gas, nuclear and storage come online well after 2030?

--- Later in debate ---

[The Earl of Effingham (Con)]

My Lords, I thank the Minister for setting out the purpose of this instrument. These regulations make what may be described as technical adjustments to the CfD regime. However, in practice, they signal significant changes to the principles that underpin the scheme’s operation: transparency, predictability and fairness. The CfD mechanism has been a cornerstone of our low-carbon transition, driving record levels of renewable deployment, while securing value for consumers. That credibility depends on its rules being clear, impartial and competitively neutral.

This instrument makes three changes that in His Majesty’s loyal Opposition’s view merit particular scrutiny. First, as highlighted by my noble friend Lord Frost, it allows the Secretary of State to view anonymised bid data before finalising the budget for an allocation round. This breaks the long-standing principle that all participants bid on a level playing field based on pre-published terms. Ministerial discretion inserted into the process after seeing how the market has responded risks undermining confidence in the integrity of the auction.

Secondly, as also flagged by my noble friend Lord Frost, by delaying the publication of the final budget until after that review, the Government will have the ability to shape outcomes post hoc. However well-intentioned, that is potentially a slippery slope. It introduces uncertainty, opens the doors to perceived political interference and may ultimately deter long-term investors who value predictable rules-based frameworks.

Thirdly, the decision to reclassify the costs of the sustainable industry reward so that they are now recovered through Ofgem’s price cap means that these costs will be passed directly on to consumers. At a time when the cost of living is rising and households are under pressure, the perception is that a stealth measure introduced without full parliamentary scrutiny or a fully transparent impact assessment should not be made. What safeguards will be put in place to ensure that this new discretion over budgets does not distort the process or erode trust among participants? Has the department undertaken any modelling of how these changes might affect bidding behaviour, strike prices or project delivery timelines? What assurances can be given to consumers that the inclusion of new costs in the price cap calculation will not place additional upward pressure on their energy bills?

In conclusion, although these changes may be framed as flexible and technical, they represent a shift in the balance of power from an impartial auction model to one in which Ministers can influence the outcome after bids have been seen. That raises fundamental questions about fairness, efficiency and consumer protection. We urge the Minister to explain why such discretion is necessary and how its use will be accountable to Parliament.

[Lord Wilson of Sedgefield (Lab)]

My Lords, I thank noble Lords again for a good debate, with some incisive observations made by noble Lords opposite. This Government are steadfastly committed to deploying renewables in order to achieve our ambition for clean power by 2030 and to protect bill payers both now and in future. The instrument under discussion today will enable us to adapt CfDs so that they can support the delivery of our ambition for clean power by 2030 at the lowest cost to consumers.

Having said that, let me respond to the questions posed by the noble Lord, Lord Frost. In an unstable world, the only ways both to guarantee our energy security and to protect bill payers permanently are to keep energy bills down for good and to speed up the transition away from fossil fuels towards home-grown, clean energy. During periods when wholesale electricity prices are higher than the fixed CfD strike price awarded, generators pay the difference back into the scheme, which can help reduce energy bills. This happened when wholesale electricity prices spiked during the energy bill crisis of 2022-23; over that winter, CfD payments reduced the amount needed to fund government energy support schemes by around £18 for a typical household. The budget underspend that has been referred to is a result of the allocation—

--- Later in debate ---

[Lord Wilson of Sedgefield (Lab)]

To continue with my response to the noble Lord, Lord Frost, on the budget underspend referred to as a result of the allocation round process, budgets had previously been set without knowing how much capacity can be procured, creating uncertainty around the renewables capacity and the price at which it can be secured. These reforms respond to that challenge. The parameters for allocation round 7 will be published in the coming weeks. As part of our consultation process, we engaged with consumer groups to ensure we obtained a wide range of views on the impact of these changes.

The noble Lord mentioned that the Secretary of State is giving a Statement today. I also draw the noble Lord’s attention to a speech the Secretary of State gave at the recent Global Offshore Wind conference, where he noted the importance of securing fair prices for consumers through AR7 and beyond.

To answer the points from the noble Earl, Lord Russell, to ensure value for money, we have consulted on several reforms for AR7 so that competitive tension is maintained. The response to this consultation will be published soon. We will also publish our auction parameters in the coming weeks, which will aim to ensure consumers get the most value from this round. We will review the specific policy after the conclusion of AR7 and inform stakeholders of our use of these powers for future allocation rounds.

In answer to the noble Earl, Lord Effingham, key parameters such delivery years and strike prices will be published before the opening of the allocation round. Developers will still have the key information they need to submit their minimum viable bid. We will be publishing how we intend to use these powers for AR7 in the forthcoming government response, alongside other measures to drive value for money.

The playing field remains level. The auction will remain entirely impartial, and bids seen will be entirely anonymous. This allows current powers to revise the budget to be used in a targeted and careful manner, with specific consideration given to the cost to consumers.

On the noble Earl’s point about transparency, this proposal has been subject to a full consultation in which the Government engaged with consumer groups, developers and other key stakeholders. We also published our impact assessment for these regulations in May alongside our response. The key considerations for the CfD are set out in the Energy Act. They will still be to ensure that costs to consumers are minimised, that we have security of supply and that we decarbonise the electricity system.

The draft regulations before the Committee today will enable the Government to achieve clean power by 2030 at a fair cost to consumers.

Motion agreed.

Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Thursday 5th June 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, financial services fulfil a vital role for people and businesses across the UK and the Government are committed to ensuring high standards of customer protection. These regulations form part of this commitment by strengthening protections for customers, including consumers, businesses and charities, when their bank accounts or other payment services are terminated by their provider.

While decisions to terminate services are generally commercial decisions, customers must be treated fairly. Noble Lords will be aware that concerns have been raised in this area over recent years. This has included concerns about services being terminated on the basis of customers’ lawful beliefs and political opinions. The Government are clear that customers should not see services terminated due to lawful freedom of expression. There are already laws that prohibit providers discriminating against UK consumers on these grounds. However, in other areas existing legislation does not always provide appropriate protection and is not sufficiently clear.

Currently, payments legislation contains no obligation on providers to explain why they are terminating payment services, making it difficult for customers to understand the reasons for terminations, rectify issues or know whether to bring a complaint against their provider’s decision. Furthermore, the current requirement that providers must give customers at least two months’ notice does not always provide customers sufficient time to manage the impacts of a termination and, where needed, find an alternative provider. These regulations make changes to address these issues.

Specifically, the regulations will amend the Payment Services Regulations 2017 to require providers to give customers a longer notice period of at least 90 days before terminating a payment services contract and a sufficiently detailed and specific explanation so the customer understands why it is being terminated. Providers must also advise the customer of how to complain to their provider and of any right they have to complain to the Financial Ombudsman Service. The regulations also clarify ambiguities in legislation to ensure that these new protections are applied consistently. There are some exceptions to the new requirements, mainly so that providers can continue to meet other legal requirements.

Lastly, the regulations make equivalent changes to the Payment Accounts Regulations 2015 so that people who apply for and use basic bank accounts will benefit from the new rules. These changes will increase transparency for customers, ensuring that they understand providers’ decisions and have more time and information to make a complaint or find an alternative provider. The changes will take effect from 28 April 2026 and apply to the termination of payment services contracts that are concluded for an indefinite period and entered into on or after that date.

I know that the Secondary Legislation Scrutiny Committee raised this measure as an instrument of interest in its 25th report, published on 15 May. I am grateful for the consideration the Committee has given this legislation, and I shall respond to the points it raised.

First, the Government acknowledge that there have been concerns about customers being debanked on the basis of their lawful beliefs and political opinions, and that this formed part of what initially led to a review of legislation in this area. Since coming into office, this Government have taken a fresh look at the issue from a broader perspective. As I said earlier, providers are already prohibited from discriminating against UK consumers based on their lawful beliefs and political opinions, but there are shortcomings in wider legislation that governs how providers terminate payment services contracts. The Government are therefore taking a wider approach to strengthen legislation and to enhance fairness and transparency for all customers more generally.

Secondly, regarding the length of the 90-day notice period and the implementation period for the instrument, the Government’s approach is based on extensive engagement. We have sought to balance strengthening the protections for customers with minimising the burdens on firms.

In conclusion, these regulations would make important changes to ensure that customers are treated fairly, while respecting providers’ rights to make commercial decisions. I hope that the Grand Committee will endorse these reforms. I look forward to the debate and beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I welcome the opportunity to speak on this statutory instrument in this brief debate. We note that these regulations build on previous legislation and arise from a consultation that began under the previous Conservative Government in July 2023.

I agree with the Minister that the extension of the minimum notice period for contract termination from two months to 90 days is a prudent and welcome measure. Even more significant is the requirement for payment service providers to provide detailed and specific reasons for termination, thereby enhancing transparency and fairness and discouraging needless debanking; we all saw the unfortunate effect of Coutts’ closure of Nigel Farage’s account. Additionally, informing customers of their right to complain to the Financial Ombudsman Service is a useful safeguard.

I have two problems with these regulations. First, I am concerned by the wide-ranging exemptions to the new rules—“exceptions” is probably the right word. These include the anti-money laundering requirements and the suspicion of serious crime, as well as the possible commission of a public order or harassment offence. These are substantial exceptions that could be the subject of unfair debanking, with the accused unable to know what it is claimed he or she has done wrong. I therefore welcome the change in the threshold from “reasonable belief” to “reasonable grounds to suspect” for serious crime exceptions following consultation, but I wonder whether this is enough.

I should add that small and medium-sized businesses are not exempted from the new requirements. What targeted support or guidance will be provided to help these providers manage the increased compliance burden? These measures could cause problems for businesses already under pressure from NICs and the prospect of new regulation. We all want fairness but the net cost to businesses is £6.4 million a year, by the normally prudent Treasury estimates. This means a net present value of minus £55.4 million.

In the light of this, how do the Government plan to monitor and evaluate these regulations over time to ensure that the extended notice periods and disclosure obligations generally lead to better outcomes for consumers, rather than creating additional administrative burdens for the suppliers of financial services? Can the Government also clarify how conflicts between these termination requirements and other legal obligations on payment service providers will be managed, especially where other laws might take precedence? What mechanisms will be in place to resolve such conflicts fairly and transparently?

Secondly, the main problem for consumers of payment services is not being able to secure a bank account at all. I know this from my own family’s experience of being denied banking, reducing the scope for moving to a different, more competitive bank. This is on grounds such as being a publicly exposed person, which is our experience; selling arms, which it seems wrong to exclude given our growing defence needs; or ungrounded fear by the provider of money laundering. What is the Government’s position on this difficult area of securing a bank account?

I look forward to the Minister’s response and to continued engagement with the Government and regulators to ensure that these important reforms deliver tangible and lasting benefits for payment service users.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness for her speech and those questions. These are important regulations which clarify the situation we have lived under over the last few years, as far as this issue is concerned.

On the several points and questions she has raised, I will answer the last one first, which was about access to banking services. The Government recognise the vital role that financial services provide; that is why we have introduced these new rules. The Government are focused on account closures as a priority. We continue to monitor wider access to bank account provision but recognise this is largely a commercial matter. Some 120 banking hubs have opened; another 200-plus will be opened in the next few years. That is not the limit or the target; it could go beyond that, but it depends on what LINK, which provide them, wants to do. It is, obviously, an ongoing issue. We want to ensure everybody has access to them.

On the new requirements that the noble Baroness suggested, there are important public policy reasons for the exemptions, which are necessary to enable payment service providers to continue to discharge other legal obligations or manage complex scenarios—for example, in relation to financial crime.

On the question of whether we will publish guidance, the Financial Conduct Authority, as the relevant regulator, will update the guidance to reflect the legislative changes. The Government have worked closely with industry, law enforcement and regulatory partners to ensure that expectations of payment service providers are clear.

With that, I think I have covered all the questions. I conclude by saying that the Government are committed to ensuring high standards of customer protection and financial inclusion across the financial services sector. These regulations make important changes but address long-standing concerns about protection given to customers when their bank accounts or other payment services are terminated by their providers. This increased amount of notice and transparency will make it easier for customers to understand and manage the impact of their provider’s decisions, and to make a complaint or find an alternative provider where necessary. The changes will help deliver fairer outcomes and support the Government’s ambitions to deliver for working people. I hope the Committee will join me in supporting the regulations.

[Baroness Neville-Rolfe (Con)]

My Lords, I was a little disappointed about the response on two points. One is on this business of small and medium-sized businesses. The Minister rightly referred to the FCA as the body that is responsible for guidance. It is supposed to care about small businesses and growth, following the letter that the Chancellor wrote to them. The Minister mentioned that there are more small and new businesses in the pipeline; that is good news. Small business spectacles are important, both for financial service providers and, indeed, for unfortunate customers who are trying to get bank accounts.

That was the second point: perhaps it was not possible as I did not give notice of the question, which is not the subject of these regulations, but he did not inform us as to what the latest is on helping people to open a bank account. His objective is the same as mine: to make sure that everybody can do that. He may know from discussion with other parliamentarians that the publicly exposed person issue has been a big one, and there are other issues. I would be interested to be referred to an update on how we are getting on on getting people to open bank accounts. It is important, in societies, for people to have bank accounts and not to be excluded. It is a great pity that it is so difficult, if you are a publicly exposed person, to move banks. That seems unfortunate.

[Lord Wilson of Sedgefield (Lab)]

I think these regulations help clarify all that. As far as small and medium-sized businesses are concerned, the Treasury Select Committee published figures in 2024 on the termination of business accounts in 2023. They were sourced from eight UK banks. The Treasury estimates that, on average, around 64% of business accounts were terminated due to suspicious activity or financial crime, due diligence or fraud, 10% were terminated because of dormancy and less than 1% for political exposure or other issues. We can all amplify the politically exposed people, and we know it is important, but the vast majority of closures and issues that we have are with financial crime and due diligence.

On the other question, we all want everyone who wants to have a bank account to have one. The decision to provide banking services is generally a commercial one by providers. I have already mentioned that 120 to 150, I think, banking hubs have been opened already, and a lot more will be opened. It is not a target. Once we get there, we can probably open more, but that has to be in consultation with the industry. The Government want to ensure that customers are treated fairly when providers decide to withdraw those services. We are focused on account terminations as a priority, given the material impact that a loss of banking services could have on a business already in operation. More widely, the Government continue to monitor evidence in relation to accessing banking services and welcome the FCA’s work in this area.

[Baroness Neville-Rolfe (Con)]

My Lords, I am reassured. It is good to have the figure for politically exposed debanking of 1%, although the significance depends on the total figure for the number of cases. It is more about when people are trying to get bank accounts. I think that the Farage event has led to a degree of understanding that it is important not to debank people who are already customers. What I think is less well understood is how when people who are, for example, politically exposed try to get a bank account, they have difficulties. I hope the regulators such as the FCA think about this because we want to try to make sure that people can have proper bank accounts. If there is any more material on that side of things, I give notice that I would be very interested in it, though I appreciate that I sprung this question on the Minister today although it is not the subject of the regulations.

[Lord Wilson of Sedgefield (Lab)]

I think increasing the time period from 60 days to 90 days and banks now having to write to the customer to say, “These are the reasons why we have this issue with your bank account” and, where it is appropriate and where they can, having to say that they can refer it to the ombudsman all helps. Obviously, this will be kept under review, but I think it is an important improvement on where we were in previous regulations.

Motion agreed.

Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025

Lord Wilson of Sedgefield Excerpts

Thursday 5th June 2025 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025.

Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

My Lords, the regulations being introduced today will remove the time limit on a temporary exemption which pension funds currently have from clearing standardised over-the-counter derivatives contracts, such as interest rate swaps, through a central counterparty. This means that the exemption will continue indefinitely, ending the need for the Government to renew it every two years if we conclude that this is necessary. The draft regulations will help UK pensioners by supporting pension funds’ ability to invest in assets which generate returns for their benefit. Maintaining the exemption is also in line with the Government’s priorities to increase productive investment by pension funds to support economic growth.

Central counterparties, or CCPs, are a type of financial market infrastructure used by firms to reduce risks when trading on financial markets. They sit between the buyers and sellers of financial instruments, providing assurance that contractual obligations will be fulfilled. They do this by collecting collateral, known as margin, from all their users that can be used to cover any shortfall if a default occurs. The process of transacting through a CCP is known as clearing. In 2009, G20 countries agreed that certain standard derivatives contracts should be cleared through CCPs to help reduce risks in the financial system. In the EU, this was implemented through legislation and is known as the clearing obligation. At the time, it was decided that pension funds should be exempted from this obligation. This was because of the particular challenges that pension funds would face in meeting CCP margin requirements.

CCPs require variation margin, collateral which covers price movements on derivatives contracts, to be posted in cash. Pension funds do not usually hold large cash reserves, as they invest the large majority of their resources in assets, such as gilts and corporate bonds, to provide returns for pension holders. This means that meeting the requirement to post variation margin in cash can be more difficult for pension funds to meet than for other firms. Requiring them to clear their derivatives could cause them to increase their cash holdings, reducing their investment in other assets and their ability to generate returns for future pensioners. The UK assimilated the clearing obligation and this exemption in UK domestic law through the European Union (Withdrawal) Act 2018. The exemption was initially designed as a temporary measure, but it has since been extended several times. The Government currently need to lay secondary legislation every two years if we conclude that it is necessary to extend the exemption.

The Government extended the exemption most recently in June 2023 and noted that it would be desirable to put in place a long-term policy approach to remove the need for future temporary extensions. That is what these draft regulations seek to achieve. The Treasury has since conducted a review of the exemption, working closely with the UK financial services regulators. The review also gathered input from industry stakeholders through a call for evidence which was launched in November 2023. The review found that requiring pension funds to clear derivatives could potentially bring financial stability benefits, such as reducing counterparty risk, and could enhance resilience to shocks by increasing pension funds’ cash buffers.

However, the review also identified concerns from some market participants that removing the exemption could increase pressure on the liquidity management of pension funds, particularly under stressed market conditions, which could increase financial stability risk. The review also found strong evidence that pension funds would need to hold more cash and reduce investment in more productive assets if the exemption were removed. This could reduce their returns, potentially impacting the retirement benefits of future pensioners. This would be inconsistent with the objectives of the Government’s wider growth reforms—including the pensions investment review, the final report of which was published last week, which seeks to unlock productive investment by pension funds to support economic growth.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for bringing this important debate before the Grand Committee today. While technical in nature, the debate strikes at the very heart of our pensions system. It concerns the management of risk, the generation of returns for pension schemes and the financial security of our country. Derivatives play a crucial role in the operation of pension funds. They allow for efficient exposure to asset classes without necessitating the purchase of the underlying assets. They enable tactical asset allocation decisions to be executed more swiftly and cost-effectively than physical rebalancing and, through leverage, they offer the ability to increase market exposure without tying up significant amounts of capital. I know all of this from my experience as a trustee of the Tesco pension fund some years ago. Above all, derivatives are essential because pension funds face long-term liabilities that are highly sensitive to changes in interest rates, to inflation and to currency fluctuations.

These instruments are vital in managing such risks, especially in an uncertain and volatile world. Interest rate swaps hedge against fluctuations in interest rates that affect the valuation of liabilities. Inflation swaps protect against unexpected shifts in inflation, which is especially relevant where pensions are index-linked. Currency forwards and options manage foreign exchange risk where assets or liabilities are denominated in non-sterling currencies. It is the management of risk more than anything else that justifies their inclusion in the portfolio strategies of pension funds and, as the noble Lord, Lord Davies of Brixton, said, the level of risk is materially increased by this regulation. He also rightly referred to the Pension Schemes Bill, which has only just been published. I am afraid that due to other commitments, I have not yet had time to study it.

Since the European Market Infrastructure Regulation was introduced in 2012, pension funds have been granted an exemption from the central clearing obligation, recognising their unique challenge in meeting margin requirements as central counterparties. Pension funds operate on a long-term, illiquid investment model, and this fundamentally mismatches the short-term, high-frequency liquidity demands of CCPs, particularly under stressed market conditions.

Will the Minister outline the contingency plans in place should the absence of mandatory clearing suddenly appear to increase the risk of counterparty defaults?

I have to say that the exemption from these insurance-type arrangements of a CCP carries its own risks. The Government bear a heavy responsibility to maintain confidence in a financial system upon which livelihoods depend. The government review mentioned by the Minister concluded that removing the exemption could impair the ability of pension funds to invest in productive assets. That must be weighed carefully against the imperative of effective risk management. Can the Minister clarify how bilateral arrangements will be monitored for resilience, given that derivatives are no longer subject to central clearing? He talked about keeping this under review, which I think was helpful.

Our financial markets are deeply embedded in the global system. Can the Minister explain how this move aligns with international financial regulatory frameworks and, indeed, with the EU and US, which have slightly different rules from the UK? Furthermore, has the Minister assessed the potential reputational impact on the UK’s standing in international markets, particularly in the context of post-G20 commitments to mandatory central clearing, which the Minister referred to? Finally, will the Minister publish the underlying risk analysis or cost benefit assessment that supports the decisions to go for an indefinite extension period? Without such transparency, it is difficult to understand how the Government have reached their conclusion and indeed why they have chosen this policy path.

The current impact assessment states that the measure

“mitigates the risk of disruption to the market”

that might occur if pension funds were required to restructure their investment strategies “at short notice”. This would be ahead of the exemptions expiring, which happens to be 18 June—the week after next. However, this is a narrow, short-term cost analysis. I am interested in the wider picture of longer-term cost versus the benefits of alternative systems, so I very much look forward to the Minister’s response on whether he is willing to publish his cost-benefit assessment or, perhaps, to say bit more about the detail.

I urge the Minister to engage deeply with the concerns raised and to provide reassurance that the Government’s decision rests on a sound and transparent evidential foundation. We are dealing with an important subject and a risk that, as I am sure we all agree, needs to be properly managed in the interests of UK plc.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness, Lady Neville-Rolfe, and my noble friend Lord Davies of Brixton for their contributions and questions. First, to answer them both, one thing that the Government are after is growth, obviously, but the other thing is financial stability; both of their contributions referred to that. This is a key priority for the Government. However, the evidence on whether removing the exemption would generate direct financial stability benefits was mixed. For example, some responses to the call for evidence noted that removing the exemption could make stress events worse by increasing liquidity pressures on pension funds. In contrast, the Government found strong evidence that pension funds would need to hold more cash and reduce investment in productive assets if the exemption were removed.

On the other issues, such as how the underlying risk will change and how we will keep that under review, the statutory instrument provides long-term clarity for market participants, which is very important in terms of the policy position. This will help with long-term planning of investment strategies by pension funds to meet their future liabilities. As I have noted, the Government will keep this policy under review in co-ordination with the UK regulatory authorities. If there are changes to market dynamics or wider government reforms that have a material impact on the value of mandatory central clearing for pension funds, the Government may reassess this issue.

On the increased burden on pension funds, this policy maintains the status quo. Removing the exemption would have placed more strain on pension funds. This gives assurance to the pension markets around the long-term consistency in our policy approach.

Finally, on the international market, our market is different from those of the EU and the United States as far as pensions are concerned. The response to the call for evidence indicated that the UK defined benefit market is structurally different from that of other jurisdictions, such as the US and the European Union, so it is appropriate that we take a different decision on this issue. The Government are committed to maintaining our high standards of regulation and financial services, including adhering to relevant international standards, where appropriate. In the US, pension schemes tend to be of shorter duration. There is also a larger and more diverse corporate bond market, which can be used for hedging; this means that the derivatives are used less there than they are in the UK.

I hope that these answers are what noble Lords are looking for.

[Baroness Neville-Rolfe (Con)]

That is very helpful—particularly on the international side. One does need to look at this in an international context; nowadays, we are so aware of the ups and downs of global markets. However, the Minister did not answer the question about the impact assessment. It may be that he does not have an answer today, but this is something that I am often concerned about because I think that good cost-benefit analysis is vital to good government. I made the point that the cost-benefit analysis that we got was a rather short-term thing; it would be very helpful to have a response on that.

[Lord Wilson of Sedgefield (Lab)]

Basically, what we are doing is maintaining the status quo. Things have been like this for several years now; we are just ensuring that the status quo continues into the future. We will review it if we need to, such as if the dynamics in the market change, but what we are offering is consistency for the industry. That is an important aspect of this statutory instrument.

Motion agreed.

Devolved Authorities: Use of Resources

Lord Wilson of Sedgefield Excerpts

Wednesday 23rd April 2025 Lords Chamber

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

The UK Government primarily use the Barnett formula to calculate the devolved Governments’ block grant funding. This funding is not ring-fenced, given the devolved Governments’ full flexibility to allocate it across devolved areas according to their own priorities and local circumstances. The devolved Governments are accountable to their parliamentary legislatures and, ultimately, their voters for their decisions. The recent settlement is 20% more funding than equivalent UK government spending in other areas of the UK. These settlements are the largest in real terms since devolution, totalling £86 billion. This Government are securing Britain’s future through the plan for change, which is delivering security and renewal by kick-starting economic growth to put more money into working people’s pockets and the NHS and to secure our borders.

[Lord Foulkes of Cumnock (Lab Co-op)]

I am grateful to the Minister for a helpful response, but is he aware that the Supreme Court case on the definition of gender is just the latest of 10 court cases which the SNP Scottish Government have taken there, costing over £7 billion? Surely something can be done to make sure that they spend UK taxpayers’ money on things such as the city growth deals and replacing the Grenfell-style cladding on the 5,000 premises in Scotland where people’s lives are still in danger.

[Lord Wilson of Sedgefield (Lab)]

I thank my noble friend for that question. I want to focus on the big issue that is confronting this country—whether it is Ireland, Scotland, Wales or England—which is growth. My noble friend pointed out that the city region and growth deals are funded by the UK Government. The Scottish Government are receiving £119 million in 2025-26 for city and growth deals. The Government confirmed at the Autumn Budget that investment in the Argyll and Bute growth deal will continue to be available and will be supported by a rigorous value-for-money assessment as part of the review. The £25 million Argyll and Bute growth deal was signed in March 2025. There are other elements to growth in Scotland: one of the main ones is that GB Energy will be based in Aberdeen.

[Lord Wigley (PC)]

My Lords, I welcome the statement made by the Minister that it is indeed for the devolved authorities to spend the money that they receive in accordance with their own priorities. He mentioned the Barnett formula; will he admit that whereas it may be working very well for Scotland, it is not working well for Wales, and it certainly needs to be reconsidered? Will the Government please address that?

[Lord Wilson of Sedgefield (Lab)]

Because of the Barnett formula, Wales receives 15% more than the average for the rest of the UK. We also need to point out some of the advantages of the Welsh and UK Governments working together. Under the AI opportunities action plan, Vantage Data Centers, which is working to build one of Europe’s largest data centre campuses in Wales, announced plans to invest £12 billion, providing 11,000 jobs across Wales. There are also expected benefits in direct payments for 150,000 workers in Wales through the minimum wage rise. There are 2.1 million people in Wales who will benefit from the extension of the 5p cut in fuel duty.

[Lord Forsyth of Drumlean (Con)]

My Lords, will the noble Lord—I appreciate he is new to his post—take time to read the Select Committee of this House’s report on the Barnett formula? From that he will find that Wales is indeed badly treated, and no Government have actually done anything about it. On the main point of the Question, which is the right of devolved Administrations to spend the money that is allocated to them under the formula as they choose, that is an important part of devolution, which the noble Lord was very keen on. Had it not been for that, the Scottish Government would not have been able to waste tens of millions of pounds on ferries that do not work—money which would otherwise have been spent on the health service.

[Lord Wilson of Sedgefield (Lab)]

The Barnett formula does succeed in delivering for our nations around the country. It is fair to say also that the settlement this year is the largest that has been delivered since devolution.

[Lord Bruce of Bennachie (LD)]

My Lords, since the establishment of the Scottish Parliament, the proportion of income raised from taxes on Scottish citizens has risen from under 10% to around 40%. The Scottish Finance and Public Administration Committee has agreed that accountability and scrutiny need to be improved. I suggest that it might be to great mutual benefit if the Public Accounts Committee in the Commons and the Constitution Committee in this House reach out to relevant committees in the Scottish Parliament and the other devolved assemblies to see how they can improve financial scrutiny and accountability across all our parliaments, because none of it is as good as it should be.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question. I think there is nothing wrong and probably everything right with parliaments across the UK working together to deliver better for their citizens. I think that is probably a welcome suggestion.

[Lord Inglewood (CB)]

My Lords, following the question asked by the noble Lord, Lord Wigley, about Wales being short-changed by the Barnett formula, is it not also the case that the north of England is in the same way?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question because it gives me the opportunity to talk about the excellent work that the Labour Mayor of the North East is doing, in the form of Kim McGuinness. At the centre of her project for the north-east are growth, delivering better public services and ensuring that the growth that happens in this country and our region where I belong is there for all the people. I lived through the 1980s. I know what happened to areas such as the Durham coalfield. Now that the region is united to speak up as one, that can be only for the benefit of all the people who live there.

[Baroness Neville-Rolfe (Con)]

My Lords, achieving value for money ought to be a priority for any Government, whether national, regional or local, especially a Government committed to growth. So I come back to the point mentioned by the noble Lord, Lord Foulkes of Cumnock: do the Government consider that the SNP Scottish Government’s actions on trans rights represented a good use of taxpayers’ money?

[Lord Wilson of Sedgefield (Lab)]

I appreciate the question that the noble Baroness has asked, but I think that the one thing that should focus our minds, besides the outcome of what the Supreme Court said, is what the Scottish Government should do, and we all should be doing, in the best interests of all the Scottish people. That must be to secure growth to make sure that the support that we have for our cities, our people and the NHS is for all the people in Scotland. It would be great to see the Scottish Government and the UK Government work closely together to ensure that that happens.

[Lord Jones of Penybont (Lab)]

My Lords, as the former head of a devolved Government, at a time when co-operation between Governments across this island was rare and when a UK Government towards the end of their life became very fond of imposition through the UK Subsidy Control Act and the UK Internal Market Act, I welcome the new relationship between London and Cardiff. With that in mind, will the Minister outline what the UK Government are doing, working with the Welsh Government, to deliver for the people of Wales?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for that question. I have already mentioned some of the things that the Labour Government have done, but two areas that might be of interest to the House are what is happening in Port Talbot, and the electric arc furnaces. In the Autumn Budget 2024, the UK Government confirmed £80 million funding for the Port Talbot transition board. The funding will support local businesses that are heavily reliant on Tata Steel, and their primary customers. On 11 September last year, this Government announced that they had agreed an improved deal with Tata Steel towards the transformation of Port Talbot steelworks. This improved deal secures 5,000 jobs, ensures that workers have enhanced support during the transition period and delivers a 1.5% reduction in the UK’s greenhouse emissions.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I run a charity in Scotland, and if somebody gave me £119 million, I would be expected to account for how I spent that money. So, going back to the Question asked by the noble Lord, Lord Foulkes, can the Government do anything that does not interfere with how the devolved Administrations choose to spend their money but requires them to report transparently on what it is they have spent it on?

[Lord Wilson of Sedgefield (Lab)]

The UK Government and the Scottish Government need to work closely together on this issue. Obviously, we cannot get involved in how devolved Barnett money is being used, but there is ring-fenced money that has been allocated to Scotland, I think somewhere in the region of £119 million, and we need to ensure that it is spent properly, at the appropriate time, and gives value for money.