Declining Birth Rates

Lord Wilson of Sedgefield Excerpts

Thursday 4th June 2026 Lords Chamber

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

I thank my noble friend Lady Nargund for introducing this debate, which is very important to the long-term future of the country. The contributions we have heard show that it is a very complicated issue which is determined not just by one factor. A lot of factors are involved, and as the noble Baroness, Lady Neville-Rolfe, has just said, this is happening globally as well.

On the global aspect, birth rates are declining in Japan, Korea, across Europe and in every other advanced country. A declining birth rate in an ageing population represents one of the most significant challenges we face. The trends will shape the future size and composition of the workforce, increase pressure on public services, and have important implications for economic growth and the sustainability of public finances, not just in this country but in all the countries affected. As I have said, and as my noble friend Lord Davies made clear, the issues we face are very complicated, ranging from the impact of low birth rates on the workforce to the cost of pensions for the elderly. Even social media has an important impact on trends and demography.

These pressures reinforce the importance of maintaining a strong and productive economy. Economic growth and rising productivity will be essential in ensuring that the United Kingdom can continue to fund high-quality public services while supporting long-term fiscal sustainability.

Several noble Lords rightly highlighted the implication for the labour market. I just point out one statistic, which I find interesting: there were only two peacetime years in the past 150 years when average annual employment was higher than in 2025. The UK employment rate is in the top half of OECD economies and is above the G7 average.

We are providing support for those who wish to remain in or return to work, including parents, older workers and those currently economically inactive. The Government also recognise the importance of life-long learning, workforce flexibility and ensuring that people contribute to society throughout their lives.

Noble Lords spoke about the wider pressures facing younger generations. Decisions about having children are deeply personal. However, the Government recognise that factors such as housing affordability, childcare costs, job security and broader economic confidence can all shape those decisions. That is why supporting families and improving economic opportunity remains important, not only for individuals and households but for the long-term resilience of the economy.

The debate underlined that there is no single policy solution to demographic change. I will spend the rest of my time answering the questions raised by noble Lords in this short debate. I will try to answer them all, but we will write to the noble Lords in question on the ones I do not get round to.

The noble Baroness, Lady Nargund, and the right reverend Prelate said that equal and fair access to fertility treatment should be recognised as an economic priority. Fair access is a priority for the Government, and we recognise that access to NHS-funded fertility services currently varies across England. Commissioning decisions are made by integrated care boards based on local clinical need and are informed by national guidance. The Government are committed to improving fair and equitable access to fertility services, recognising the significant emotional and health impacts of infertility.

On social care, which was mentioned by the noble Baronesses, Lady Nargund, Lady Hamwee and Lady Thornton, and others, following the 2025 spending review there will be an addition £4.6 billion of funding available for adult social care in 2028-29 compared to 2025-26. This will enable an increase in the NHS’s minimum contribution to adult social care via the better care fund, in line with the DHSC’s spending review settlement, and some £500 million to begin implementing the fair pay agreement in 2028-29.

The noble Lord, Lord Hobby, and the noble Baronesses, Lady Nargund and Lady Neville-Rolfe, asked how importantly the Government regard this and whether there will be a cross-government, cross-departmental approach. The Government are committed to ensuring that the right structures are in place for co-ordinating their response to the challenges posed by an ageing society. Boosting economic growth is central to this response, and the Prime Minister recently announced a number of changes to the Cabinet committee structure, including establishing a Growth and Living Standards Committee, which provides terms of reference to consider many of the issues raised in the debate.

The noble Lord, Lord Hobby, raised the issue of rising unemployment. The Government inherited a level of young people not in education, employment or training that was far too high—12.6% in the second quarter of 2024. In March, the Government announced £1 billion more to unlock 200,000 new jobs and apprenticeships for the next generation, as part of a new deal for young people.

The noble Lord, Lord Hobby, also mentioned the Milburn review, the final report of which will be published this autumn. We take very seriously the issues raised in that review, and I know we will concentrate on that once the final report has been issued, some time in September or October.

The noble Lord, Lord Hobby, again, mentioned the Milburn review, which we all agree is very important going forward. The noble Baroness, Lady Finlay, mentioned commitments by the Government to kinship care. I will pass on her comments to the DWP and the relevant departments, but I can tell her that the Government are committed to tackling child poverty and improving outcomes for low-income families. Scrapping the two-child limit is just one way in which the Government are tackling the root causes of child poverty, and the child poverty strategy was published in December last year.

The noble Baroness, Lady Thornton, raised issues around social care. The autumn 2025 Budget confirmed that millions in England will see the cost of their prescriptions frozen to 2026-27. The Budget also confirmed that the NHS neighbourhood rebuild programme will deliver 250 new neighbourhood health centres. The Government’s 10-year health plan is committed to shift care from hospitals to community by establishing a neighbourhood health service that will bring care closer to home. Of course, the Casey review into all of this is very important.

The noble Baroness, Lady Nargund, raised housing and affordability. Noble Lords highlighted the relationship between housing and declining birth rates; the Government recognise that economic security includes access to stable and affordable housing, which can influence long-term family-planning decisions. The amount of money announced in the Budget for social housing is significant. I have got a minute to go.

[A noble Lord]

You do not have to use it.

[Lord Wilson of Sedgefield (Lab)]

I will do my best. The right reverend Prelate commented that family hubs will draw on what we know works from Sure Start, and the Best Start in Life programme will provide essential support for parents and families. The Government are committed to providing funds for all local authorities to deliver Best Start family hubs to a total amount of £500 million.

In response to the comments of my noble friend Lady O’Grady, it is difficult to make meaningful comparisons between different countries where state pension schemes are concerned. The UK has one of the most generous approaches globally to uplifting pensions, because no other country has the triple lock. The noble Baroness, Lady Hamwee, spoke about the UK’s immigration system; it is geared towards supporting businesses and accessing high-skilled overseas workers who boost the supply of skills and talent in the UK.

One of the big issues that the noble Baroness, Lady Neville-Rolfe, mentioned was the pension situation. The Government are legally required to review the state pension age every six years to ensure that it is fair and sustainable. We announced the launch of the third review of the state pension age in July 2025, alongside the Pensions Commission, so I think it is fair to say that we are doing a lot in this regard. There is obviously more to do. It is a very complicated issue but I hope that, in future, we will be able to have another debate on this in this Chamber. It is something that is very important and complicated, and there are no easy answers.

Money Laundering and Terrorist Financing (Amendment) Regulations 2026

Lord Wilson of Sedgefield Excerpts

Monday 18th May 2026 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Money Laundering and Terrorist Financing (Amendment) Regulations 2026.

Relevant document: 57th Report from the Secondary Legislation Scrutiny Committee, Session 2024-26

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

I beg to move that the Committee considers this package of changes to the money laundering regulations. They are aimed at improving the effectiveness of the UK’s anti-money laundering and counter-terrorist financing regime.

The money laundering regulations sit at the heart of the UK’s preventive, risk-based approach to tackling illicit finance. They ensure that the UK’s modern and open economy cannot be exploited by criminals seeking to hide the proceeds of their crimes. By requiring banks and other regulated businesses to take reasonable, proportionate steps to detect and prevent money laundering and terrorist financing, the regulations protect the integrity of the UK’s financial system.

However, as new technologies emerge and criminals find new ways in which to launder illicit funds, the regulations must evolve with them. The changes before the Committee represent a significant update to the regime. They ensure that the regulations are focused on the highest-risk activities and threats to the UK system, while closing loopholes and making the regime clearer and easier to use.

This SI reflects the Government’s determination to ensure that regulations strike the right balance between managing risk and enabling growth, as set out in the modern industrial strategy and the regulation action plan published last year. These changes are part of a broader push under the economic crime plan 2023 to 2026 to build a more effective system that turns the tide on dirty money, including major changes that the Government are making to improve our anti-money laundering supervision regime.

Progress is already being made. In the year ending December 2025, there were 8,486 prosecutions for money laundering as a principal or non-principal offence, a 19% increase compared with the previous year. In the year ending March 2025, £285 million of criminal assets were recovered, a 15% rise compared with the previous year, with £47 million in compensation paid to victims out of confiscation order receipts—a six-year high.

I am aware that the Secondary Legislation Scrutiny Committee raised concerns about the timeliness of this legislation in its 57th report. I am grateful to the committee for its input. However, it is important to recognise the complex nature of some of the measures in the SI. Following the public consultation, further technical discussions with industry and anti-money laundering supervisors were necessary on a number of measures, including in relation to bank insolvency, pooled client accounts and crypto assets. I know the Committee will appreciate the importance of getting the drafting right first time to avoid unintended consequences.

This SI consists of measures on four core themes: making customer due diligence more proportionate and effective; strengthening system co-ordination; closing gaps in coverage; and reforming registration requirements for the trust registration service. There are also additional minor and technical changes that serve to improve consistency and ensure the UK complies with the standards set by the Financial Action Task Force, the global standard setter on anti-money laundering.

I turn first to the measures on customer due diligence. These aim to ensure the checks required on customers are proportionate to the risks. This includes the removal of the requirement for regulated businesses to apply enhanced due diligence checks on countries listed by the Financial Action Task Force as jurisdictions under increased monitoring. These are countries found by the FATF to have strategic deficiencies in their regimes. The FATF does not require these checks, and permitting more flexibility here recognises that being linked to a listed jurisdiction does not automatically make a customer high risk. The Government estimate that this change alone will generate savings of £178 million per year for regulated firms, which can then be reinvested in higher-value compliance activity that identifies genuinely suspicious activity. Other changes on customer due diligence include important measures to increase the availability of pooled client accounts for businesses with a legitimate need, and to facilitate continued access to banking services for customers in the event of a banking insolvency.

I turn to the system co-ordination. The SI makes changes to strengthen co-operation and information-sharing between anti-money laundering supervisors and other public bodies such as Companies House, which plays an increasingly integral role in the UK’s defences against illicit finance. To close gaps in coverage, the SI brings the activity of selling off-the-shelf firms within the scope of regulated activities. The SI also makes changes to ensure owners of crypto asset firms do not escape fit and proper checks by the Financial Conduct Authority.

I turn finally to the trust registration service. The SI makes a number of changes to close loopholes that could be leveraged to obscure asset ownership, improve transparency of beneficial ownership of trusts with significant UK connections and refine registration requirements for other types of trust.

The implementation of these measures will be swift, with the majority of measures coming into force 21 days after the SI is made. There are limited exceptions to this, such as for the measures on crypto assets, where a longer implementation period is necessary to give regulated businesses sufficient time both to adjust their systems and processes and to align with the introduction of the new financial services regulatory regime for crypto assets, which will come into force in October 2027. Safeguards have been built into the SI to mitigate risks in the interim period.

In conclusion, these regulations strengthen the UK’s defences against illicit finance by better targeting high-risk activity and closing loopholes in the regime. I beg to move.

--- Later in debate ---

I close by returning to the central point. These regulations are welcome in so far as they reduce unnecessary compliance burdens and make targeted improvements to the existing framework, but they do not answer the wider question. The fight against money laundering and terrorist financing is vital but, if the system designed to prevent financial crime ends up driving out of our banking system charities, lawful individuals and small businesses—I know people running small businesses who are certainly not engaged in financial crime but have run into trouble in setting up accounts—it is not working as well as it should. I hope that the changes will ameliorate matters but I urge the Government not only to proceed with the sensible elements of the regulations before us but to look again at the wider regime, including its costs, its complexity, its unintended consequences, its enforcement and its impact on ordinary customers and businesses.

[Lord Wilson of Sedgefield (Lab)]

My Lords, I thank the noble Baronesses for their questions. They were many in number so we will scour Hansard and, if there are any that I do not answer, we will of course respond with letters.

I turn first to the points made by the noble Baroness, Lady Bennett; I hope to cover them all, though not necessarily in the order in which she made them. She mentioned enhanced due diligence as far as high-risk jurisdictions, especially the likes of Russia and China, are concerned. The money laundering regulations contain specific provisions requiring enhanced due diligence in relation to geographic risk, which are unchanged by this SI. Firms must still assess and manage geographic risk as part of their overall risk-based approach and apply EDD wherever high risk is identified, in line with the requirements set out in the regulations. Firms will be expected to consult government guidance, such as the National Risk Assessment of Money Laundering and Terrorist Financing 2025, which provides a more UK-focused, nuanced and sector-specific view of the risks. Jurisdictions that present a risk in the UK but are not currently listed by the Financial Action Task Force, such as Russia, China and the UAE, are referred to in the national risk assessment for the UK.

On the changes to the due diligence requirements, some countries on the FATF’s increased monitoring list are recognised as presenting more of a regional risk than an international one, perhaps due to the lack of specialised and international-facing financial sector or strict currency controls. The Financial Action Task Force recommends enhanced due diligence to be mandatory only for countries on the separate “call for action” list, which will continue to be the case following this change.

The noble Baroness asked a question on asset recovery. The 2026-29 ECP will set out the Government’s next whole-system approach to tackling economic crime. It will consolidate key strategies, including the fraud and anti-corruption strategies and the forthcoming anti-money laundering and asset recovery strategy, into a single coherent framework for delivery. The plan will focus on strengthening cross-system prioritisation and deliver grip and the long-term funding and capabilities needed to respond to evolving economic crime threats.

On reforms to the trust registration service, the Government are making targeted changes to particular categories of trusts to ensure that requirements to register remain proportionate to the risk. Recognising that registration must be proportionate to risk, certain types of trusts are excluded from the requirement to register on the grounds that they either pose an inherently low risk of money laundering or are already regulated elsewhere.

On the database for trust registration, trusts are frequently established for legitimate and highly personal reasons, such as to hold assets for children or vulnerable adults. The Government believe that placing the information held on the trust register into the public domain would infringe the privacy rights of individual beneficial owners, the vast majority of whom are not involved in any money laundering activities. The information held on the register is available on request to law enforcement agencies and other relevant parties to assist with anti-money laundering investigations. The Government believe that this approach strikes the right balance between the conflicting demands of transparency and privacy.

The noble Baroness, Lady Bennett, made a point about stamp duty reserve tax. In taking a risk-based approach, the Government consider that the role of stamp duty reserve tax in enabling and detecting money laundering or terrorist financing is not proportionate to the administration placed on trusts by this requirement. The current regulatory framework focuses on those entities with significant links to the UK. The Government consider that a liability to stamp duty reserve tax is not, in isolation, indicative of a significant link to the UK. Entities with significant links to the UK are more likely to be those with significant property assets or liabilities for income, capital gains and inheritance tax. The collection of stamp duty reserve tax is already administered by the Government, and the sale of shares already sits within a broader regulatory environment.

I welcome the approval of the general thrust of the SI from the noble Baroness, Lady Neville-Rolfe. She raised several issues that I hope I can answer. The money laundering regulations form a core part of the UK’s defence against economic crime. They aim to ensure that attempts to launder money through banks and other regulatory businesses are prevented or detected and flagged to law enforcement. The SI is part of a wider suite of government action on money laundering and economic crime in general. This includes the publication of the National Risk Assessment of Money Laundering and Terrorist Financing 2025 in July 2025, the delivery of two economic crime plans—2019-22 and 2023-26—with a further economic crime plan in the pipeline, the new anti-corruption strategy in December 2025, the new fraud strategy in March 2026 and anti-money laundering supervision reform.

At Budget 2025, the economic crime levy, which is paid by businesses regulated under the money laundering regulations, was raised to generate an additional £110 million for initiatives to tackle economic crime. In my opening speech, I mentioned some of the benefits from what we have achieved and are going on to achieve. The Government have committed to recruit 475 new roles by September 2026 to help clamp down on money laundering; £284.5 million of criminal assets were recovered in the year to March 2025; and there have been nearly 8,500 prosecutions and 3,892 convictions for money laundering as a principal and non-principal offence. This is a big increase, of nearly 20%, from before.

On refusal to open bank accounts, the FCA requires banks to treat customers and prospective customers fairly, to take proportionate and non-discriminatory account opening decisions and to apply the consumer duty across the full onboarding journey. Where someone is dissatisfied with how a decision has been handled, they can complain to the firm and escalate the matter to the Financial Ombudsman Service, which can assess whether the firm has acted fairly. In addition, where an individual is denied access to a standard current account, the UK’s nine largest personal current account providers are legally required to offer basic bank accounts.

I turn to derisking and bank account closure. Economic crime, including money laundering, poses a rapidly growing and increasingly complex threat to the UK’s national security and prosperity. It fuels the serious organised crime that damages the fabric of society. In the face of this threat, the Government believe that due diligence checks, applied proportionately, are an essential tool to protect firms and their customers from fraud and other financial crime, as well as assisting law enforcement in investigating criminal activity.

On the SRA and sanctions, the original consultation received hundreds of responses. The legal sector, as the noble Baroness pointed out, expressed some concerns, but changes made following the technical consultation are expected to address most of those. Financial services and most other sectors have welcomed the shift away from tick-box compliance, particularly the reforms to increase flexibility around enhanced due diligence. Civil society and anti-corruption organisations supported the measures to close loopholes and improve system co-ordination, while expressing measured concern about EDD changes. A recent blog by Spotlight on Corruption stated that most of the measures in the SI were “unambiguously positive”.

On debanking, banking services fulfil a vital role for millions of people. The Government have legislated to ensure customer protection in cases where their bank account is terminated by the provider. Payment service providers are required to give customers at least 90 days’ notice before closing their account under new rules which came into force in April 2026. Providers will also need to provide a clear explanation to customers in writing so that they are able to challenge decisions, such as through the Financial Ombudsman Service.

I turn to the difficulties facing SMEs in accessing a bank account. Access to banking services is obviously vital and the Government have introduced new rules to require banks to give customers 90 days’ notice. These new rules will ensure more transparent and predictable access to banking, and the Government will continue to monitor wider access to bank account provision.

On the difficulties facing charities in accessing a bank account, charities and community groups make a valuable contribution to society. UK Finance, banks and charity representative groups have worked together to provide the voluntary organisation banking guide, aimed at supporting charities and community groups to access banking services. We will continue to monitor wider access to bank account provision while recognising that it is largely a commercial matter.

The noble Baroness mentioned defence companies and their access to bank accounts. Access to finance is a significant issue for defence firms, particularly SMEs. No company should ever be denied access to financial services solely on the basis of its work in the defence sector. The banking sector should never take a blanket approach to any one sector. The Government are actively engaging with banks to ensure that they understand the importance of the defence sector. The FCA has worked to understand why banks might close or reject accounts. Where it has found areas where firms need to improve customer outcomes, the Government expect firms to consider its findings.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

I have just been musing on something that the noble Lord said that I think I wrote down correctly: namely, that stamp duty reserve tax liability does not indicate a significant link to the UK. We need to consider that statement in the context of how much UK infrastructure and its essential services have been privatised. I am thinking of water companies and infrastructure construction: indeed, large-scale defence companies in foreign ownership. I will understand if the Minister wants to write to me. I am not necessarily asking for a direct answer now, but what provisions do the Government have to make sure that this weakening of the regulation does not open up the ownership of some of those things that in the current geopolitical climate are of grave concern from a security aspect?

[Lord Wilson of Sedgefield (Lab)]

First, this is not a weakening of the regulation but a balanced approach that we take in this whole area. I will set out the arguments in greater form for the noble Baroness and write to her with the specifics.

[Baroness Neville-Rolfe (Con)]

I come back to the issue of debanking. The Minister said some very useful things. This is debanking. We talked about defence companies and I look forward to hearing the results of that active engagement. I have talked in the APPG to individual defence companies that have had difficulties in this respect and we need to be supporting our defence companies, especially the innovative ones, given the change in the nature of weapons and so on at this difficult time.

The banks are required to offer basic banking and give 90 days’ notice if they want to close an account. When you are given notice of the closing of an account, you then have to go to another bank and go through the whole system of being approved by it. I have tried to set up a new bank account at Metro to complement my account with one of the major four banks. Frankly, I gave up. Once you are in the system, it is absolutely fine. My bank knows about me: I have been banking there for years. But, if you try to go to a new bank, it is quite complicated: a lot of questions are asked and you give up.

This all links to what the Minister is trying to do, which is to make it easier for citizens who do not necessarily have a good credit record to have a bank account, because it is important for them to be able to operate an account, save, have a card and so on. I wanted to emphasise that point and say that the Government’s work is important. If more progress is made in that area, I should be very interested to hear about it.

[Lord Wilson of Sedgefield (Lab)]

In response to the noble Baroness, there is the 90 days’ notice and the access to basic bank accounts, et cetera. There is ongoing work in this area. I can write to her and let her know exactly where we are up to in all of this, so she will have some awareness of where the Government intend to go.

Motion agreed.

Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Lord Wilson of Sedgefield Excerpts

Wednesday 11th March 2026 Grand Committee

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

My Lords, I am grateful to the noble Baroness, Lady Noakes, for introducing this report and to the noble Lord, Lord Forsyth, the outgoing chair and now the Lord Speaker. Having been on the receiving end of some of his incisive questions in the Chamber, I can just imagine what he was like as the chair of the committee when it was taking evidence. I also thank all noble Lords for their comments and contributions, which were thorough, thoughtful, instructive and thoroughly knowledgeable.

I reiterate the strong alignment between this committee’s conclusions in the report and the Government’s perspective and actions. The Government are committed to ensuring that the secondary growth and competitiveness objectives are comprehensively embedded in both the PRA and the FCA, and we strongly welcome the thorough and incisive scrutiny of the committee, holding both the Government and the regulators to account.

As the Economic Secretary to the Treasury said in a letter to the committee of 2 September:

“There is strong alignment between your recommendations and the wide-ranging package of reforms announced by the Chancellor”.


The noble Lord, Lord Pitt-Watson, is right that we are on a journey on this—this is not our final destination. Things are going to develop and evolve, and it will be great to continue this dialogue.

A considerable amount of ground has been covered today. I will try to address specific points raised by noble Lords in the time remaining. Before I do, I will speak about the financial services growth and competitiveness strategy and the actions that the Government are taking forward to facilitate the growth of the sector and to ensure that it is supporting growth in the wider economy. I will do my best to answer all the questions but, if I cannot or if there are some that I have not answered, I will write to noble Lords.

Since the launch of the strategy in July 2025, the Government have worked with the regulators to deliver key milestones, including: launching the Office for Investment: Financial Services, a dedicated concierge service for international financial services firms seeking to establish or grow their presence within the UK, which several noble Lords mentioned; launching the joint FCA and PRA scale-up unit, which will make it simpler for scaling firms to get timely responses and expert support; commissioning the Financial Services Skills Commission to produce a report on skills needs; and the FCA approving both the London Stock Exchange and JP Jenkins to operate PISCES platforms. I believe the first trading event will take place by the end of this month.

In addition, the Treasury and financial regulators are working hard to support delivery of the Government’s regulation action plan, where the Government have committed to cut the administrative burden of regulation by 25% by the end of this Parliament. The Treasury is continuing to hold the regulators to account, including through biannual ministerial reviews of the regulators’ performance.

Noble Lords have pressed the Government on the evidence linking growth in financial services to growth in the wider economy. The Government agree on the importance of having a substantial evidence base. That is why, in developing the financial services strategy, the Government took steps to build this evidence base, setting out their analysis and methodology in the strategy’s technical annex.

The Government remain committed to building this evidence base and continue to work with industry, academics and other public authorities to do so, including through regulator-led research projects and competitions. It remains a high priority for the Treasury’s Areas of Research Interest, its published list of the main research questions facing the department.

The committee has highlighted specialist lenders and their importance in providing lending to SMEs. The Government share the committee’s ambition regarding the role of the finance sector in funding the real economy. Specialist lending plays a role in supporting competition, resilience and choice. The Government have taken steps to ensure that the regulatory framework supports this, working closely with the Bank to explore further reforms to the ring-fencing regime to make lending to innovative SMEs more commercially viable. Through the Basel III.1 reforms, the Government have also worked closely with the PRA to ensure that overall capital requirements for SME lending do not increase so that the sector can continue to support UK SMEs and help them to grow and be successful.

The Government have a strong relationship with the financial service regulators, and they are working together closely so that the Government can hold them to account for delivering the shared growth mission. Remit letters and ongoing engagement at all levels allow the Government to ensure that the regulators have appropriate regard to the Government’s economic policy, particularly the growth mission. There is a very strong level of engagement and a shared ambition between the Government and the regulators to support growth, and we will continue to work closely together to deliver on this shared ambition.

The Government agree with the committee that it is important to have metrics to monitor the regulators’ impact on growth. The regulators have now published two years’ worth of data against the growth metrics. It is vital that the regulators are held to sufficiently challenging targets for determining authorisation applications while also maintaining robust processes. That is why the Government have proposed new authorisation deadlines and will legislate for them when parliamentary time allows. I am pleased to see that the regulators are already starting to report against these new deadlines, with the FCA doing so in February and the PRA doing so very soon. The UK regulators’ reporting framework is among the most comprehensive in the world. I assure the committee that the Government will continue to scrutinise their performance and how it is changing over time, and I invite Parliament and other stakeholders to do likewise.

I turn to some of the questions that were asked. I will do my best to cover them all, and if I do not, we will write to the relevant noble Lords. The noble Baroness, Lady Noakes, raised the question of productivity and finance. The Government recognise the need to increase the amount of productive lending from the financial services sector to the real economy. Earlier, the noble Baroness cited the Bank of England’s December Financial Stability Report, in which the Financial Policy Committee of the Bank of England provides useful insights in this area. This also notes several actions the Government and regulators have taken to improve the supply of finance for productive purposes, including expansion of the British Business Bank’s financial capacity and reforms to the bank ring-fencing regime. However, I take the broader question around data in this area. I look forward to digesting the report by Positive Money and will write to the committee with further reflections subsequent to this debate.

On SME lending, the Government have increased the British Business Bank’s total financial capacity to £25.6 billion, a two-thirds uplift compared to previous years, and are reducing limitations on this funding, giving the bank more flexibility to address regional and sectoral gaps in SME finance. I think I have already mentioned the concierge service, which everybody in the committee today seems to welcome.

I move on to encouraging informed risk-taking. The UK will always uphold high standards, but a system has been created which at times has sought to eliminate risk-taking completely rather than managing it effectively, and this can hold back economic growth. We can grow only if we enable the UK’s financial services and markets to continue to serve a wide variety of people and firms. At Mansion House in 2024, the Chancellor set out that regulatory changes to eliminate risk after the financial crisis had gone too far and led to unintended consequences.

Metrics was another issue that was raised during the debate. The Government are committed to effective monitoring and evaluation of the strategy. In line with other sector plans that form part of the industrial strategy, the strategy sets out clear indicators focused on how growing the sector will support growth and investment across the UK, delivering security for working people and world-leading financial services to UK businesses and consumers. Because of the time lag in publishing data, the majority of metrics largely cover the period before the last election. However, since then, the Government have delivered a huge package of pensions reform to make sure that people have savings for their retirement and are investing in Britain, with the Pension Schemes Bill now making its way through Parliament.

The Government set out their vision for regulatory reform through their Regulation Action Plan, announced in March 2025. The RAP commits the Government to cutting the administrative burden of regulation by 25% by the end of the Parliament. The Department for Business and Trade has identified the administrative burden of regulation on businesses to be £22.4 billion each year, which means that the 25% target represents a £5.6 billion annual reduction in the administrative burden.

The relationship between the Government and the regulators was also raised. The Government and the regulators have a strong relationship and are working together to facilitate growth in line with the Government’s economic policy. The remit letters that I mentioned earlier are a key mechanism for the Government to issue strategic steers to the regulators to support the Government’s economic policy and promote competitiveness and growth. The Treasury makes recommendations to the regulators through the remit letters. The letters set out the Government’s economic policy, to which the FCA and the PRA must have regard. The letters must be sent by the Chancellor at least once a Parliament, and the regulators are required to respond to the Chancellor annually.

There was a question on pensions. I will do my best, but I know that we will be debating them on Monday. Why do the Government think that pension funds are so reluctant to invest in UK assets? It seems that the lack of focus on value in the pensions market means that schemes invest only in low-cost asset classes. Cost is an important factor but, ultimately, net returns matter most. Therefore, the Pension Schemes Bill is addressing this by enabling scale in the pension market and through the value-for-money framework, as bigger schemes are able to invest more productively, as we see in Australia and Canada, for example, focusing on asset classes with higher potential long-run returns to investment and growth, such as infrastructure and venture. The noble Lord will probably pick that up in the debate on Monday.

The noble Lord, Lord Eatwell, asked what the Government think about fintech struggling to raise money. The UK has the third-largest VC ecosystem in the world, which raised £23.6 billion in 2025, according to HSBC. We are third behind the USA and China. Although the UK has deep capital pools for start-ups, underpinned by generous tax reliefs, we recognise that there is further to go to support UK companies, including fintechs, to raise domestic scale-up capital. That is why, at the spending review, we increased the total financial capacity of the British Business Bank to £25.6 billion.

As mentioned in the EST’s letter to the noble Lord, Lord Forsyth, in December, the FCA has undertaken several projects to improve the evidence base on how the financial sector regulations can support growth. In particular, it is consulting academics on how the financial sector hubs across the UK can support regional innovation.

There was a point raised about AI and inward investment. The Government are committed to realising the investment opportunities from AI. In January last year, the Government announced that investment in UK data centres infrastructure has reached £39 billion. Since then, the Government have designated five AI growth zones across Great Britain, including two in Wales and one in Scotland, generating £28.2 billion in investment. In 2025 alone, UK AI firms have raised £4.8 billion.

On the regulation of cryptocurrency, which was raised by my noble friend Lord Eatwell, the Government recognise the transformative potential of digital assets. In February, we introduced an SI underpinning the regime that we want to see; the consultation on the rules and requirements laid out in the SI is at an advanced stage. The SI defines which crypto assets will be part of regulation—the qualifying crypto assets—and the new regulated activities. It also creates a definition for qualifying stablecoin as a subcategory of qualifying crypto assets.

I have mentioned the regulatory metrics before, but there were other issues raised. Now that the regulators have published two years’ worth of data against their secondary objectives, the Government, industry and Parliament can begin to meaningfully scrutinise the regulators’ performance and how it is changing over time, as well as assess the appropriateness of the metrics themselves. As part of the 2025-30 strategy, the FCA is revising what growth metrics it will publish with more granular metrics, if appropriate. The PRA noted in its second report into the competitiveness and growth objective in 2025 that it would keep its metrics up to date and ensure that they remain “world leading”.

This leads us to international comparisons. The Government agree with the committee that there is a benefit to making international comparisons where possible. The Government’s aim is to ensure that the UK is a competitive jurisdiction for international financial services business. The regulatory environment plays an important part in that. We accept that there is more to do on this, and the Government remain committed to reducing the complexity and burden of regulation on business, including reducing the admin burden by 25%.

Another question from my noble friend Lord Eatwell was on what the Government think about the inadequacies of macroprudential regulations to address systemic crises. The Bank of England Financial Policy Committee is the UK’s dedicated macroprudential authority responsible for the health of the financial system as a whole. The International Monetary Fund has described the FPC as world class. It is equipped with an extensive set of macroprudential tools—for example, loan-to-income ratio controls in mortgage lending.

I agree with the points that have been raised on financial inclusion and education. The Government are putting more focus on helping young people to build strong financial skills and prepare for key money decisions in life. As part of the financial inclusion strategy, the Government committed to making financial education compulsory in primary schools in England through a new statutory requirement to teach citizenship. Alongside this, the Department for Education and the Treasury have committed to working closely together to improve the quality and reach of financial education in England. There will be a public consultation on the updated curriculum in 2026, with the changes in place for the first teaching in 2028.

The consumer duty was, I think, first mentioned by the noble Lord, Lord Johnson. The FCA wrote to the Chancellor in September with the results of its review into the application of the consumer duty, and it is updating its approach. The Chancellor asked the FCA to report back to her on how it plans to address concerns about the application of the consumer duty for firms primarily engaged in wholesale activity. The FCA has already committed to taking a number of actions, including refreshing some of the supervisory expectations and consulting on changes to the rules that help firms to distinguish between retail and professional clients.

I may not have covered all the questions, but I will write to noble Lords if I have not. I conclude by saying, in the time I have left—about 20 seconds—that we need to be optimistic as well. We have to bear in mind, and it is worth repeating, that the UK remains a top global financial centre and our regulators have an excellent reputation. The UK is the largest global net exporter of financial services, totalling £102.2 billion in 2025, which represents half of the UK’s services export surplus. The Global Financial Centres Index of 2025 ranks London in second place in terms of financial centre competitiveness, with Edinburgh and Glasgow also inside the top 40. The Government are committed to building on those strengths.

To conclude, I express the Government’s and my appreciation for the committee’s ongoing engagement. The Government will provide a further update in the summer of 2026, and we are committed to continuing this dialogue.

Crown Estate: Wales

Lord Wilson of Sedgefield Excerpts

Monday 9th March 2026 Lords Chamber

[Baroness Humphreys]

To ask His Majesty’s Government what assessment they have made of the impact of the activities of the Crown Estate on (1) the Welsh economy, and (2) household budgets in Wales.

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

The recently passed Crown Estate Act ensured that the Crown Estate can continue working in the best interests of Wales and the wider United Kingdom. The Crown Estate is key to the £1.4 billion of economic growth and more than 5,000 jobs that the Government want to secure from floating offshore wind in the Celtic Sea. It works closely with the Welsh Government to ensure that the offshore potential of this emerging sector benefits Welsh communities onshore.

[Baroness Humphreys (LD)]

I thank the Minister for that reply. However, the Crown Estate has removed the cap for offshore wind leases and is running uncapped auctions that force wind farm developers to pay extremely high fees simply to access the seabed. Can the Minister confirm that the fourth offshore wind leasing round generated more profit for the Crown Estate than all the previous rounds combined and that this system has inflated the cost of building offshore wind farms, with a consequent increase in electricity prices for household budgets in Wales? Is it not time for political oversight of the activities of the Crown Estate in Wales?

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Baroness for that question, but on the point about oversight, a Crown Estate commissioner with special responsibility for Wales will be appointed in due course. As far as offshore wind is concerned, for Wales a priority is to deliver certainty. Retaining the current model avoids fragmenting a cross-border Celtic Sea market and preserves investor confidence at a sensitive point for floating offshore wind. Further devolution would risk fragmenting the energy market, undermining international investor confidence and disrupting activity elsewhere in the Crown Estate.

[Lord Wigley (PC)]

Is the Minister not aware of the reply given by a Minister in the other place to the MP for Anglesey, Llinos Medi, when the Government confirmed that they had no assessment of how many jobs would come to Wales from the new offshore wind projects in the Celtic Sea and the Irish Sea? Is the Minister aware of the very real concern in Wales that these projects will be bypassing Wales’s supply chains, losing economic potential? Is it not necessary for power and authority over the Crown Estate to be transferred to the Welsh Government so that they get the priority that they deserve?

[Lord Wilson of Sedgefield (Lab)]

Offshore will create up to 5,000 jobs—on top of the 3,000 jobs that will be created by the building of small modular reactors on Anglesey. It will provide energy for 1.5 million households. We are aiming in the right direction. As far as the supply chain is concerned, we will be investing £50 million for a supply chain accelerator and up to £350 million for enabling port and supply chain infrastructure to come forward.

[Baroness Jones of Moulsecoomb (GP)]

Have His Majesty’s Government asked the Crown Estate exactly how it helps to deliver their promise for a more environmentally conscious and greener Wales when it carries on handing out licences to marine aggregate dredgers to dredge in marine protected areas off Wales? Dirty seas deter tourists.

[Lord Wilson of Sedgefield (Lab)]

We have a very good relationship with the Crown Estate and work very closely with the Welsh Government. We will be appointing a commissioner to the Crown Estate to ensure that we have someone there who is prepared to look consciously at all the issues that affect Wales. We want to see a Welsh economy that is growing. One way of doing that is through investing in green industries, which I would have thought the noble Baroness would welcome.

[Baroness Kramer (LD)]

My Lords, to pick up the point made by the noble Lord, Lord Wigley, is the Minister aware that people in Wales are convinced, following conversations with the Crown Estate, that the overwhelming majority of new skilled jobs created by offshore in the Celtic Sea will go to outsiders, not to people in Wales, and that the supply chain will use a few Welsh companies but primarily suppliers from outside Wales? Therefore, can he talk to us about what the Government are doing to build the supply chain and the skills in Wales and to make sure that Welsh companies have a definite percentage of the new business and opportunities that are on offer?

[Lord Wilson of Sedgefield (Lab)]

The Crown Estate and the Government are particularly concerned about ensuring that we have investment in local supply chains, and we are going along with that in whatever we are doing. For example, as I have said, this £50 million is going to be invested in the supply chain accelerator. We are going to ensure that some of the money that will be generated from offshore wind goes into local communities. We are well aware of the issues, but we need to focus on the fact that we are heading in the right direction as far as green energy development is concerned.

[Lord Swire (Con)]

My Lords, when the Crown Estate had this windfall from its offshore wind bonanza, it was reputed to have said that it wanted a lot of the money to go towards good causes. Given that this will mean an explosion of overhead power lines in Wales and elsewhere in the United Kingdom, what discussions have the Government had with the Crown Estate about spending some of that bonanza on, where possible, burying these power lines?

[Lord Wilson of Sedgefield (Lab)]

The Government’s approach to burying these cables underground is well known, really, because, essentially, where we can do it, we will, in order to protect the local area. It is cheaper to put them overhead, but even if you bury them, there is still a lot of disruption to the local area with the kind of access you need to the cables themselves. It is not actually the answer to all our concerns. We know that we need to think about how we develop these pylons and whether we should lay the cables under the ground, but to do that is not the answer in all cases.

[Lord Hunt of Kings Heath (Lab)]

My Lords, does my noble friend agree that the events in the Middle East and the renewed shock to oil and gas prices show why we should be self-sufficient, which is why we should enormously welcome the development of offshore wind off the coast of Wales?

[Lord Wilson of Sedgefield (Lab)]

My noble friend is absolutely right that we need to think about energy security. One thing that is coming out of what is happening, tragically, in the Middle East at the moment is that, because oil and gas prices are set internationally, this impacts on every country’s economy. That is why we need to invest in the green economy, in nuclear, in wind turbines and in solar—so that we become independent. When issues such as this happen and when there are shocks to the international energy markets, we do our best to ensure that we are insulated from them.

[Baroness Neville-Rolfe (Con)]

My Lords, in my ministerial experience, the Crown Estate arrangements, in fact, worked pretty well. The Minister will be glad to hear that. But the more important question for the Minister today is: would Welsh households not have been helped by lower bills if Labour had not gone down the dangerous road of banning North Sea oil and gas? That looks even more irresponsible, with oil prices spiking because of the war in the Middle East.

[Lord Wilson of Sedgefield (Lab)]

Just to repeat my response to the previous question, we have to make sure that we are independent of these problems that we are facing. Rather than relying on fossil fuel, the prices of which are set internationally, we need to have home-grown green energy to ensure that we can resist these problems. I just want to point out one or two things about how we are helping people in Wales. We are cutting household energy bills, saving the average household £150. We have helped over 160,000 people with the minimum wage. We have increased pensions by 4.8%, and we have increased benefits for people out of work by 3.8%. The 700,000 pensioners in Wales are going to be better off because of this Government.

[Lord Griffiths of Burry Port (Lab)]

My Lords, when we had the misfortune of leaving the European Union, Wales lost a significant amount of money from its structural programmes. The then Government promised that that shortfall would be more than made up for; indeed, the phrase was “not a penny less”. We have been promised that that gap will be bridged from the prosperity fund, but the Welsh Government remain rather sceptical about that. Does the Minister recognise that there is a shortfall and are the Government prepared to do anything about it?

[Lord Wilson of Sedgefield (Lab)]

The best way to answer this question is to look at what we have actually done, with the spending review in 2025 and the spring forecast in 2026. The outcome of that points to additional funding, on top of the Barnett formula, et cetera, of something in the order of £1 billion to be invested in Wales. That is good for its economy and good for the people of Wales. If they want to see this continue, the best thing they can do is to vote Labour in May.

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

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?

--- Later in debate ---

[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.

--- Later in debate ---

[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.