House of Lords
Monday 17 October 2022
Prayers—read by the Lord Bishop of Oxford.
Oaths and Affirmations
Several noble Lords took the oath or made the solemn affirmation.
We are working with the food industry to ensure that it is easier for people to make healthier choices and increase progress on the reformulation of foods. In addition, there is a range of support to help children living with obesity and being overweight to achieve and maintain a healthier weight.
I thank the noble Lord for that very brief Answer. I wondered whether, in the current spirit of U-turns, the noble Lord could tell the House whether the Government will reverse their initial idea of reviewing the policies agreed by the previous Tory Government to ban two for the price of one offers on unhealthy food and to restrict advertising of foods high in fat, sugar and salt to kids during the times they watch TV. Health campaigners and medical professionals have called the possible reversal of this decision staggering and an incredible blow to the health of this country. I would be grateful for anything the noble Lord could add.
I thank the noble Baroness for bringing this issue before us. I know that she is a passionate campaigner in this area, with a strong track record. I like to believe that we have had a multi-pronged strategy, because this is a complex area. Look at the four areas the OECD recommends in terms of addressing this complex issue. First, on information and education, we have been working very strongly on education programmes, labelling and the traffic lights, and with menus and restaurants. Secondly, on increasing healthy choices, again, we have worked with industry on recipes. Thirdly, on modifying cost, obviously the sugar tax has shown big reductions there. Lastly, on the restrictions on promotions and placements, again, 1 October saw us change the way items are presented to take away some of the problems of pester power. There is a big formulation of approaches. It is probably appropriate at the moment, with so much going on, that we seek to review their success. I know that the delay in the timings is all about giving ourselves that opportunity.
My Lords, could the 40 million people in this country who are obese or overweight be encouraged to become familiar with the medical fact that, if they were to make do with one less meal a day, it would help their health and the NHS and they would live to a normal age not plagued by dozens of very unpleasant diseases?
I thank and agree with my noble friend. He is correct. The cost of obesity to the NHS amounts to around £6.5 billion a year; obviously, this is in addition to not being very good for the people concerned in terms of healthy lifestyles. That is why we have a programme of action, as I outlined. This is something we feel it is important for us to get on with, not just for children but, as the noble Lord referred to, to help adults in this area as well.
My Lords, last year, the Government published a report on the promotion of food. I shall quote a few sentences from it:
“Although promotions appear to be mechanisms to help consumers save money, data shows that they increase consumer spending by encouraging people to buy more than they intended to buy in the first place … The latest data shows that we buy almost 20% more as a direct result of promotions. Consumers typically do not stockpile these extra purchases to take advantage of the lower price, instead they increase their consumption.”
It went on to say that the latest data
“shows that shoppers who buy more of their food and drink on promotion tend to purchase more HFSS”—
high-fat, sugar and salt—
“products, in greater volume, and are more likely to be overweight or living with obesity.”
Does the Minister agree with this analysis, published by his Government last year? If so, what are the Government doing about it in policy terms?
I thank the noble Lord. The figures to which he refers are a mixture of the pricing of these so-called “buy one, get one free”-type promotions and their positioning in a supermarket. In fact, the data shows that as much as a 50% increase in sales can be driven by where these promotions are placed in a supermarket. That is why the focus now is on what changes will be made on 1 October to reduce the purchase of a lot of the types of food groups we are talking about by moving them away from prominent areas. Once we see the results of those changes, we will be in a position to review some of the pricing and promotions to which the noble Lord refers.
My Lords, this morning, this month’s Chancellor reversed nearly all last month’s Chancellor’s tax changes. Meanwhile, increasing levels of childhood obesity are adding considerably to the cost to the NHS of treating conditions such as diabetes. Can the Minister confirm the commitment to the soft drinks industry levy, which has been successful in reducing the level of sugar in soft drinks and provides funds for sporting activities in schools and school breakfast clubs?
My Lords, as the House will be aware, the tax on sugar in drinks has reduced consumption of sugar by 44%, so I totally agree with the sentiment. We have been successful in this. We are looking to improve in the area of sugary food, where we have managed to reduce some of that content by as much as 13%.
My Lords, has the Minister seen the startling statistics showing the number of economically inactive people aged 50 and over, much of which is caused by ill health, with obesity thought to play a major role. Given that, why on earth do the Government need to fudge around and review? Why do they not get on with an assertive campaign to tackle obesity?
I do not believe that we are fudging around. Noble Lords will see some very firm action. If the noble Lord goes into the supermarkets today, he will see a very big difference in how you see the food. There are big changes. I totally agree on the importance of this. I was the lead NED of the DWP, so I know how many inactive people there are in the workforce and how much better it will be for them and the economy if we can get them active and into work. I completely agree with the sentiment and the action that we are taking to drive it forward.
My Lords, the National Food Strategy to tackle obesity, the new tobacco control plan and the health disparities White Paper were key to the Government’s aim to level-up health. The most recent NHS Providers report found that 95% of trust leaders said that the cost of living had either significantly or severely worsened health inequalities in the local area. Given the worsening situation, can the Minister confirm when the health disparities White Paper will be published? If not, can he point to what else the Government are doing to reduce inequalities in health?
I thank the right reverend Prelate. I agree with the sentiment of the question. We see figures whereby, as I am sure we are aware, the least deprived people will have half the levels of obesity of some of the more highly deprived ones. On education and the need to look at those inequalities, I agree. I cannot yet commit to a date when the inequalities report will be published; I do not have that information. However, as soon as I know, I will let the House know.
My Lords, this Government have done two things which cannot be criticised. One is to appoint my noble friend as a Health Minister; he is a welcome addition to this House. The second is to junk the ban on junk food advertising. There is no evidence that junk food advertising has an impact on obesity. It is an anti-growth measure that restricts our broadcasters’ ability to generate revenue. For as long as he is in his post—the next six or so days—I hope that he maintains this policy.
I thank my noble friend for his warm wishes and his wishes for my longevity in this position. I agree that on the scale of carrot and stick with these sorts of measures, we come down much more towards the carrot and the use of education to promote the right sort of food, rather than the stick, and that is what we are seeing in terms of results.
My Lords, analysis of the national child weight management programme by the Local Government Association has found that not only are the Government heading towards missing their goal of halving child obesity by 2030 but, on current trajectories, childhood obesity is increasing. Do the Government remain committed to their target and if they are, what will they do differently?
My understanding is that the figures for childhood obesity have been fairly flat for a number of years, apart from for the year of Covid, when they all went up. The year after that, they came down again. To me, that demonstrates the importance of free school meals and the action we are taking there for people to have good, calorific and sensible types of food. We have seen significant reductions in childhood obesity in the last year. To my mind, what is important in all this is the emphasis we are putting on the free school meals programme. We have the highest ever number of people on free school meals, up from 15% in 2015 to 23% today. Part of that is free school meals for all infant schoolchildren, so that we can make sure that their food is as healthy as possible.
Armed Forces: LGBT Veterans
My Lords, service personnel discharged or dismissed in respect of their sexuality retained their accrued pension rights. The Ministry of Defence and Office for Veterans’ Affairs have jointly commissioned an independent review into the impacts and implications of such discharge or dismissal, and insights into the experience of veterans and the recommendations that the review provides will be carefully considered by the Government when considering how to address the legacy of LGBT historic hurt. The review underlines the Government’s unwavering commitment to our veteran and LGBT+ community.
I first pay tribute to my noble friend for facing up to the terrible injustice that gay servicemen suffered for so long. In a debate nearly a year ago, she said that the Government intended to
“swiftly put in place a series of steps to address past wrongs.”—[Official Report, 2/11/21; col. GC 348.]
The review now being carried out by the noble and learned Lord, Lord Etherton—the best possible person for the task—is a hugely important step. But should the Government not start paying full pensions, without further delay? Did they note the comments from Fighting with Pride, the charity that supports LGBT veterans, in January:
“Thousands of LGBT+ veterans still live in shame and poverty”?
Is it not the Government’s task to address this as rapidly as possible?
Many in your Lordships’ Chamber will have much sympathy with what my noble friend is saying. I observe that the Armed Forces Pension Scheme is not concerned with the terms and conditions of employment surrounding the circumstances of dismissal; that is to do with the environment in which Armed Forces personnel were engaged and served. There is no provision in the Armed Forces Pension Scheme that is discriminatory on the basis of a member’s sexuality, and it is not possible in law to amend the scheme rules so that they have retrospective effect.
At the heart of the review by the noble and learned Lord, Lord Etherton, is consideration of the impact of the policy observed by the Armed Forces between 1967 and 2000 on Armed Forces personnel who were dismissed on the grounds of sexuality. As my noble friend observed, the noble and learned Lord, Lord Etherton, is ideally placed to carry out this review. We look forward to his conclusion and recommendations, which we will consider very carefully.
My Lords, I first raised this issue with the Defence Select Committee in 1991. Some 31 years later, we are still waiting for this grave injustice to be addressed. While I wholly support the important review by the noble and learned Lord, Lord Etherton, I ask the Government to think again and take immediate and specific action to address this issue of pensions faced by an ageing population.
Relatedly, when will the Government commence provisions in Part 12 of the Police, Crime, Sentencing and Courts Act 2022 to allow service personnel and others who were prosecuted on the grounds of sexual orientation to gain the justice they deserve?
I pay tribute to the noble Lord, Lord Cashman, and to my noble friend Lord Lexden for their unstinting commitment to these issues. To start with the first part of the noble Lord’s question, I do not think there is much I can add to what I have already said to my noble friend. It is within the scope of the inquiry by the noble and learned Lord, Lord Etherton, to look at all the impacts on personnel who were dismissed. They may include social, family and financial impacts. That is why it is very important that we let the noble and learned Lord conduct his inquiry and then observe his recommendations.
On Part 12 of the Police, Crime, Sentencing and Courts Act 2022, the scheme is led by the Home Office and the MoD. We are committed to bringing those provisions into force as soon as possible. Officials are already working on the necessary technical criteria—and they are fairly complex—to ensure that the legislation ultimately works as smoothly as possible. We expect to launch the extended scheme in the first quarter of 2023.
My Lords, two factors in particular will impede progress on this area. One is that we have incomplete military records, often completed in code and with euphemism. We also know that former military staff are overrepresented in the homeless population. Will the Government please ensure that the review by the noble and learned Lord, Lord Etherton, can have access to specialist historians who are adept at reading military records, and that they are enabled to work with a vast range of LGBT and homelessness charities to track down the people who have suffered the worst effects of this policy?
I can tell the noble Baroness that the call for evidence that commenced in August has been extended to 1 December to provide the fullest opportunity for people to contribute. The review team continues to meet stakeholders. The chair has been meeting senior veteran charity officials and senior military officers to gain their insight. The team has also been investigating historical records to develop an in-depth chronology of the ban. The efforts to obtain testimony and make sure that the review is fully informed are very extensive.
My Lords, my question is further to that asked by my noble friend Lord Cashman and the similar question asked by the noble Lord, Lord Lexden. Similar to the decision to pay interim compensation to the victims of the infected blood scandal while that inquiry continued because of the urgency of the case, is this not a case where a presumption in favour of generosity should be made so that compensation can be paid in some form to the victims of this dreadful decision now? The moral case is plain and Ministers, including our Minister, have repeated it. Surely the MoD’s own records would make such a restitution relatively easy to administer.
In fact, we do not have the numbers. That is one of the difficulties. As the noble Lord is probably aware, in the early 2000s, the MoD settled a number of claims from former members of the Armed Forces who had been dismissed for being LGBT. The compensation awarded to claimants consisted of damages for loss of earnings, loss of pension and injury to feelings.
We must not pre-empt what the noble and learned Lord, Lord Etherton, is undertaking. We should leave him as an independent reviewer to carry out his full scope of inquiry, analyse the responses, come to conclusions and decide what recommendations are important for the Government to look at. There is a need for consistency in how we seek to redress these issues.
My Lords, the Minister has told us that the report by the noble and learned Lord, Lord Etherton, is due in May next year. At the moment, it is a stain on our country that thousands of LGBT servicepeople were discharged from service prior to 2000. Can she confirm that, when that report is published next May, the Government will respond to it quickly, take account of whatever the noble and learned Lord, Lord Etherton, comes up with, and that we right this wrong?
I reassure the noble Lord that the Government have undertaken to look very closely at the recommendations of the report by the noble and learned Lord, Lord Etherton. As has been indicated to previous questioners, there is a desire on the Government’s part to rectify what has been wrong. No one is disputing that a wrong took place. However, we want to address it extensively, sympathetically and consistently.
My Lords, the Government’s decision to ask the noble and learned Lord, Lord Etherton, to conduct this review was rightly widely welcomed, as have been the campaigns by my noble friend Lord Lexden, the noble Lord, Lord Cashman, and others in your Lordships’ House. What are the Government doing to get the message out to encourage the largest number of people possible to come forward to inform that review? Are they satisfied that good numbers are already doing so?
I can say to my noble friend that widespread information has been provided about how to give evidence and where the portals are to provide that evidence—it might be in person, virtually or by written submission. I understand that the review has already received more than 500 responses from across the whole of the UK. Indeed, we expect numbers to exceed 1,000. That is indicative of a very healthy level of interest and a very welcome willingness to contribute to the review process.
My Lords, building on all the work that we have done to date, we will continue to support people to move into and progress in work. Unemployment is at a near low of 3.5%, so our efforts have to date been working. Our comprehensive labour market offer gives claimants the best possible chance to be financially independent. We are investing £900 million in each year of the spending review into our work coaches, who are fundamental to help move people from welfare to work. As noble Lords all know, we are raising the administrative earnings threshold, strengthening the support we give to claimants, and setting very clear work expectations of claimants and a very clear outline of what we will do to help them.
That is helpful, but there is a severe labour shortage in this country. I hope that my noble friend will be able to tell me the exact number of people who are on out-of-work benefits within the working age population. Estimates vary but in some areas it is one in five people; in some cases one in four people is on out-of-work benefits. Of course, many people are disabled and need support, but the coalition Government of the Conservatives and the Liberal Democrats got a lot of people back into work with support. At the moment, the number of people on out-of-work benefits is rising at a time of labour shortage. What more can the Government do?
My noble friend makes many important and accurate points. As of February 2022, 5.18 million working-age adults, or 12.7% of the GB working-age population, were receiving out-of-work benefits, the largest category being UC out-of-work or no work-related requirements. We are trying to reduce the flow into unemployment and inactivity by supporting disabled people and people with long-term health conditions; prevention and retention work, including launching a national information and advice service to help employers, because it is only employers who create jobs so they are the ones we need to work with to move people into work; and our interventions that I have already described, including large-scale trials of additional work coach support for the 2.8 million customers with health conditions.
My Lords, as the noble Lord acknowledged, many of those in receipt of out-of-work benefits are not in a position to take paid work because of, for instance, caring responsibilities or long-term incapacity. Given the evidence of the dreadful hardship they are already experiencing, will the DWP do all it can to ensure these benefits are uprated in line with inflation next year and are not subject to further cuts, as has been rumoured?
Please believe me when I say that we all understand the desire for benefits to be uprated in line with inflation. I have to wait until the Secretary of State carries out her review, which will be announced to the House on 25 November. We will work with people with really bad conditions and real difficulties to see whether they can move into work, but they will be dealt with compassionately and carefully.
That was the exam question. As my noble friend knows, the Restart scheme gives jobseekers out of work for nine months more intensive support to find a job. It has achieved more than 226,000 starts. The issue my noble friend raised concerning whether they are still in work six months later is really important. I do not have those statistics but I will go back to the department, find out whether we have them and, whether we have them or not, I will write to her and put a copy of the letter in the Library.
Does the Minister believe the Government are doing enough to remove the barriers that prevent people working? For example, carers are finding it more and more difficult to get any support, and when they do, they are faced with huge bureaucracy. Childcare is unaffordable even when it is available, which is not much of the time. Transport can be very expensive and inaccessible to certain groups of the population. Does the Minister agree that getting people back to work is much more about removing barriers, rather than imposing more punitive conditions on the already poor and vulnerable?
Let me start by saying that the intention behind our efforts is not to issue punitive measures. Let us clear this up right now: as I have always said, sanctions are imposed only if there is no good reason for people not to take up an opportunity offered to them and they can do it. Some 98.9% of sanctions are down to the fact that people fail to turn up for interview, and the minute that they ring up to book the next appointment, the sanction is reviewed. At the DWP we do not go to work in the morning saying, “How many people can I sanction today?” That is just not the line. The noble Baroness raised a point about childcare, and it is number one on my list. I have just come back from the G7 where I spoke to my colleagues in Australia and Canada who have made enormous strides in improving childcare. The noble Baroness can take it from me that I am on the case.
My Lords, the number of people available for work is reducing primarily because of the increase in ill health in this country, as the Minister conceded. What discussions is her department is having with the Prime Minister, the Treasury and the Department of Health about how we start taking measures that will improve health in this country and move us away from being one of the unhealthiest countries in Europe?
I am not aware of any discussions with the Prime Minister, who probably has enough on her plate at the moment. We are well aware that the longer people have health problems—the longer they exist—the more difficult it is. We are working hand in glove with the Department of Health and with psychologists and psychotherapists to help people who have depression and anxiety. I have found that the best way to stop people losing their job because of mental health issues is to make sure that we work with the doctors so that when they give them their antidepressant prescription, they send them to us quickly and we can get them back to work sooner rather than later.
My Lords, the high level of youth unemployment is due to the fact many 18 year-olds leave school without any technical or data skills. The Minister’s department announced last week that there are 1.4 million job vacancies in this country. We lack skilled workers, and we will not get more skilled workers until the Government accept that there must be high-quality technical education in all of our schools alongside academic subjects—and that they have not changed.
I completely agree with my noble friend, and we need to take this up with the Department for Education, which has responsibility for this. My noble friend has been a long-time champion of technical and higher education. I will speak to my colleague in the Department for Education, write to my noble friend and place a copy in the Library.
My Lords, in response to an earlier question the Minister rightly said that many people are sanctioned and deprived of their benefits because they fail to turn up for an interview. I happen to know that a good proportion of those people—parents with sick children, for example—are denied benefits because of a failure of somebody in the department. The child wakes up sick in the morning, the parent phones in and says, “I’m sorry, I can’t make the interview; please hand on this information”, it is not handed on and they are sanctioned. This happens time and again. Will the Minister accept that this is the case and look into it?
My Lords, the Minister mentioned people with ill health. The group falling out of the labour market fastest are the over-50s, and the ONS has found that more than half of over-50s who have left the labour market since the pandemic have done so because of physical or mental ill-health. What is the Minister’s department doing to target over-50s who have left the labour market, who are much needed out there and who want to get back into work? Some of them are not technically unemployed; some are not even getting benefits. What are jobcentres doing about those people?
We have our programme for over-50s and our over-50s champions. If somebody over 50 is on a benefit, they will be engaged with a work coach, who will have to identify the barriers and put interventions in place to overcome them. People not involved in benefits will get a mid-life MOT and direction to Jobcentre Plus.
Housing: Leasehold Properties
My Lords, home ownership provides people with greater control over their own homes and lives. We are committed to creating a housing system that works for everyone. This includes our programme of reform to improve leasehold. Following the introduction of the ground rent Act in June, we are due to bring forward further leasehold reforms later in this Parliament, helping millions of households genuinely to own their own home.
My Lords, I have raised leasehold issues many times in the Chamber in recent years, and the response I receive is never unsympathetic to the problems of this tenure. The frustration is that, despite this, not a lot is happening. I ask the noble Baroness, who I warmly welcome to her new job as a Minister, what we are going to do to move things forward. I will come back month after month and take every opportunity I can until we finally get some real action on this and the change that the Minister has promised finally happens.
The noble Lord is right: I answered a Question from him not many weeks ago. I have spoken to myself a great deal since that time, as I promised. Noble Lords have to understand that these are very complex and technical issues. The reform will be felt for generations to come, so we need to take time and care. We have made very clear—it is in our manifesto—that we will bring further leasehold reforms in this Parliament. To move things on, I hope the noble Lord opposite will agree that we should meet and talk about what are the important parts of leasehold. I am happy to open that meeting to others in the House, because I know how important it is for noble Lords.
Can the Minister confirm that the recommendations from the Government’s own working group on regulation of managing agents will see the light of day in these new reforms? Managing agents look after nearly all the 5 million or so leasehold properties, and their quality and performance vary from the excellent to the dreadful. Will we see these regulatory measures, as recommended by that working group, in the new legislation?
I thank the noble Lord for the work that he did on that group. The Government are making sure that tenants and homeowners are protected from abuse and poor service; it is happening—we know that. This includes raising professionalisation and standards among property agents, protecting consumers and defending the reputation of good agents. There are many good agents out there and they have to be protected from the actions of rogue operatives. The Government welcome what the industry itself is doing; it has set up a code of practice for property agents. We will work continually, keeping our eye on the working group on the regulation of property agents, chaired by the noble Lord, Lord Best, but also working with the industry to ensure that it continually improves best practice.
My Lords, I wish that the Minister, who I welcome to her position, would recognise the urgency of leasehold reform. I have had a letter from leaseholders in a single block who have themselves had letters from their freeholders listing their liabilities as a consequence of the building safety scandal. The liabilities are an astronomical, unbelievable £3.4 million—for a single block. The developer responsible may pay some of those costs but certainly not all of them. The leasehold model is broken and urgent action is needed to reform it—abolishing it would be a preferable way forward. I recognise that the Minister wants to make a difference but please can she help these leaseholders?
I obviously cannot comment on a particular instance. I would like to have more information; if the noble Baroness would like to write to me, we will meet and I will look into it. That is not what should be happening. Leaseholders should not be paying; it should be others who are paying. We made that very clear in the Building Safety Act.
My Lords, the Government promised to make this whole system fairer, faster, easier and cheaper, yet somehow it has absolutely stalled. It is fair enough to have meetings; that is wonderful and very fair of the Minister. At the same time, “before the next election” may be a rather difficult timetable to be sure of. Can the Minister please get some sort of date—some idea—of when this will happen? There is urgency; I ask as a leaseholder.
Some of the companies issue contracts in which the small print declares that their leaseholders will be liable for any costs that the companies might incur if they are called before a tribunal. Does this have any legal sanction and, if it does, can steps be taken to prevent this happening?
I am not sure what the noble Lord is talking about. If he is talking in particular about leaseholders with a freeholder who does not have a managing agent, that can often be quite difficult. The Government are looking at that; we are looking at suitable legislation slots so as to have something in place if they do not employ a managing agent. If I am wrong on that, perhaps the noble Lord could write to me and I will answer.
Is the Minister aware that, notwithstanding the appalling situation of housing in England, there is one part of the United Kingdom where it is even worse? The First Minister of Scotland refuses to visit the Homeless Project Scotland in Glasgow, students are sleeping in hotels and on the floor, and the housing policy in Scotland is engineered by two Ministers who are eccentric members of the Scottish Green Party. Is that not a ridiculous thing? This minority party is driving the policy in Scotland and causing so much hardship.
My Lords, we are continually looking at how we can support the rented sector through this particularly difficult time. On Section 21, as the noble Baroness probably knows, the Prime Minister has said that she will not change her decisions on that either.
My Lords, with dramatically escalating service charges nationally aggravating the position, is not the answer greater transparency over leasehold, freehold and sub-lease title issues more generally? Transparency alone can often solve problems where landlord anonymity hides accountability. If that is combined with the rolling-up of lease liability payments pending payment on the death of a lessee under the debenture arrangements I proposed on 20 June, it would ease the problem. Will the Government please look at what I am proposing?
The law is very clear that service charges must be reasonable, as in Section 19 of the Landlord and Tenant Act 1985. Leaseholders can apply for a First-tier Tribunal for a determination on this. The Government are also committed to ensuring that service charges are, as the noble Lord says, transparent and that there should be a clear route to challenge or redress if things go wrong. We will continue to work on that for the people affected.
House of Lords: Appointments
Private Notice Question
My Lords, the Government have no plans to change the status of the House of Lords Appointments Commission, which should continue to play its very important advisory role. Appointments to the House of Lords are a matter for the Prime Minister, and it is for the Prime Minister of the day to advise the sovereign on appointments to the Lords. The list issued on Friday was made by the Prime Minister on the advice of the former Prime Minister, Boris Johnson.
My Lords, that is a disappointing reply. Does the Minister remember that the all-party committee which I set up when I was Lord Speaker in 2016, under the noble Lord, Lord Burns, proposed a maximum for the House of Lords of 600 Members? The latest list brings the total not to 600 but to 825, with resignation honours still to come. Also, on this occasion, the system has enabled the appointment of a new Peer who had quite falsely attacked a distinguished Member of this House as a paedophile. Surely there is no reason why an individual who made such an untrue allegation should be rewarded by a peerage. Is not the truth that the present appointments system cries out for urgent reform?
I start by making the general point that, given retirements and other departures, some new Members are essential to keep the expertise and outlook of the House of Lords fresh. The Burns report had longer-term proposals to maintain a steady-state size. Those still require further thought and engagement, particularly with the House of Commons, given the constitutional implications. Theresa May’s Administration in 2018 did not sign up to the Burns recommendations, but there is a Conservative manifesto commitment to look at the role of the Lords.
On the other point that my noble friend Lord Fowler raised—if I may still call him my noble friend—the nomination for the appointment of the individual he referred to is a matter for the leader of the Labour Party, Keir Starmer, to answer for. Obviously the HOLAC provides advice on nominations for all life Peers, including those recommended by UK political parties, to ensure the highest standards of propriety. That was applied in the usual way.
My Lords, listening to the Minister, we accept that the appointment of new Members is important to refresh skills, talents and expertise as others depart from your Lordships’ House. However, the Burns report, as indicated by the noble Lord, Lord Fowler, showed a road map towards a smaller and therefore more effective Chamber.
Let us look at the facts over the last few years. David Cameron appointed more Peers per year than any other Prime Minister ever, with a far greater proportion to the government parties. Boris Johnson then made him look like an amateur. There have been so many resignations from the Government Front Bench in the last two years that, even with the higher number of Conservative appointments, we have had an extra 10 appointments on the Conservative Benches purely to fill ministerial posts following resignations.
Your Lordships’ House has regularly expressed its concern and its support for the Burns report. This must be the first time ever that the House of Lords has called for reform and it is the Government who are blocking it. With the talk of another list about to be sent our way, courtesy of the former Prime Minister’s resignation list—I do not know if there will be any further ones—is it not time to stop, pause and have a genuine discussion about a sensible way forward?
On the last point, it is a long-standing convention that individuals can be nominated for an honour in recognition of their public or political service and Prime Ministers can draw up resignation lists after leaving office. This has been the case under past Governments across the political spectrum. I point out regarding the numbers that, after a long period of Labour government, there were very substantial numbers of Labour Peers. The Conservative voice in this House is still underrepresented and has been for some time.
We try our best to represent this side of the House—politely—but the Conservative Party has been the largest party in the 2010, 2015, 2017 and 2019 parliamentary general elections. In the 2019 general election, the Conservatives won 56% of seats, yet, as of August 2022, the Conservative Party still had only 33% of the seats in the Lords. There were 249 Conservatives out of 757 Peers. Noble Lords opposite may not like these numbers, but they are a reality, and they need to understand the position.
My Lords, this House rightfully dislikes personal attacks. However, on the question of Tom Watson, I say that he did not just attack a Member of this House under parliamentary privilege; he also destroyed the lives of Harvey Proctor, who lost his house and his job, Lord Bramall, who died under suspicion of a completely false charge, and Lord Brittan, who I saw in his dying days and who was deeply depressed by these completely false accusations against him. While this nomination was from the leader of the Opposition, very surprisingly, I regret that it was not vetoed by the Prime Minister. This appointment is a stain on the House and an absolute disgrace.
I thank my noble friend for drawing those points to the attention of the House. In respect of today’s Question, I say that the commission’s role was to provide advice, and this was duly provided in the usual way. However, we have heard what my noble friend had to say.
My Lords, I draw the House’s attention to my previous role as a past chairman of the House of Lords Appointments Commission. It is the responsibility of the individual party leaders to assess the suitability of their individual nominations to serve in your Lordships’ House. Does the Minister believe that the adoption of common criteria to make that assessment of suitability might achieve a greater degree of consistency and confidence in those nominations?
My Lords, as I said, the commission is an independent advisory committee, and the Government consider its advice carefully in whatever form it is given. The Prime Minister is democratically accountable and must have the final say on appointments. Of course, we are all due to debate my noble friend Lord Norton’s Private Member’s Bill, and while the Government have reservations about it, we welcome that opportunity.
My Lords, my recollection of the negotiations between 1997 and 1999 is that there was a general agreement that there should not be a majority for any group in this House and that this House should have a different composition from the House of Commons. I understood the Minister to be arguing that this House should have the same composition as the House of Commons. In the not unlikely event that a different Government appear after the next election, how does the Minister suggest her preference for how a majority for the new Government should be achieved? Should there be a voluntary retirement of, say, 60 or 70 Conservatives, or should there be the appointment of enough additional Members to give the new Government their majority, resulting in a steady increase in the number within the House?
I explained the situation about the 33% share that troubled us on this side of the House. The noble Lord’s other question is highly speculative. In addition, one can look back at the past as to what changes must be made when Governments change; I have already referred to that. We must now make sure that we are refreshing the House with new people right across the House. There are opposition and government Peers on the list; I welcome that and look forward to working with the new Peers.
The Minister should have had rather more statistics at her disposal when she was briefed for this Question, particularly on the balance between government and opposition Peers. I remind her that, in the 13 years of Labour Government, the biggest gap was that the Labour Government had 26 more Peers than the official Conservative Opposition. I will not go through the list of years, but I can certainly tell her that the Tories had more Peers than the Labour Party during most of the years of the last Labour Government. The current gap between this Government and the Opposition is that there are 83 more government Members than there are opposition Members. The Government still manage to lose a lot of votes, by the way, but that is not down to numbers. It is high time that the Appointments Commission saw, as part of its remit, the need to examine the effect of each list as it comes along on the balance of party strength in the House of Lords, because this Government, under successive Prime Ministers, have been abusing the appointments system.
My Lords, I always enjoy the lessons in history from the noble Lord, Lord Grocott, but I am a simple person and the simple fact is that former Prime Minister Tony Blair appointed 374 Peers to this House. That is reflected in many of the people on the Benches opposite who contribute to debates in this House.
My Lords, in December I shall complete five years on the House of Lords Appointments Commission, so I have dealt with some of the cases that have been raised today. I have to say to the House that we have struggled with some cases because our remit, as the House will be aware, has been to look only at propriety and not at suitability. My noble friend will be aware of the letter sent by our chair, the noble Lord, Lord Bew, to the leaders of both the Conservative Party and Labour Party only last week, suggesting that our remit should now include a test as to whether the candidate meets the seven Nolan principles. That would give us much more ability to make the most suitable of choices. Technically, every year we are allowed to appoint two Cross-Benchers, although we do not always meet those criteria, through no fault of our own. In recent years, when I have been involved in the selection of two Cross-Benchers, the standard and diligence with which we select people is much higher than for those coming forward on a prime ministerial list.
Obviously, I thank my noble friend for her service on the commission, which is very important. I remember that, before the commission was set up, a lot of questions were rightly asked if you had the honour of having a peerage conferred on you—in my case, by Her late Majesty the Queen. I repeat the point that individuals are nominated in recognition of their contribution to society and their public and political service. Peers are appointed to contribute further to public service, for example, and in this House it is right to have a variety of people coming forward. That helps us right across the House. I often have a number of battles with my good and noble friend Lady Jones in the Green Party—she and I joined on the same day—and I look forward to continuing to have a very diverse House.
My Lords, the Minister did not address the point put so powerfully by the noble Baroness, Lady Browning. The Minister said earlier that all appointments went to the House of Lords Appointments Commission, which is absolutely correct, but the degree of scrutiny that the commission can give to nominees is grossly different between political recommendations and appointments to the Cross Benches. Does not she accept that not being able to scrutinise recommendations on whether the people recommended are, first, suitable and, secondly, committed to playing a part in the work of your Lordships’ House is one of the main obstacles to any sort of public trust in the system that we have at the moment?
It is a very good thing that we have the Appointments Commission. It is an independent advisory committee, which has been set up and does its job. As I said at the beginning of this small debate, I do not think that the time has come to change that arrangement. The Prime Minister is democratically accountable for appointments, and they should not be determined by an unelected body to a greater extent than they are.
Social Housing (Regulation) Bill [HL]
Order of Consideration Motion
That the amendments for the Report stage be marshalled and considered in the following order:
Clauses 1 to 13, Schedule 1, Clause 14, Schedule 2, Clauses 15 to 30, Schedule 3, Clauses 31 to 33, Schedule 4, Clauses 34 and 35, Schedule 5, Clauses 36 to 39, Title.
Merchant Shipping (High Speed Craft) Regulations 2022
Motor Fuel (Composition and Content) (Amendment) (Northern Ireland) Regulations 2022
Motions to Approve
My Lords, I beg to move the two Motions standing in my name on the Order Paper en bloc.
Terrorism Act 2000 (Alterations to the Search Powers Code for England and Wales and Scotland) Order 2022
Motion to Approve
My Lords, on behalf of my noble friend Lady Vere, I beg to move the Motion standing in her name on the Order Paper.
Health and Social Care Levy (Repeal) Bill
Second Reading (and remaining stages)
My Lords, I am pleased to open the debate on this Bill. The health and social care levy was announced only last September and then made its way through Parliament to become the Health and Social Care Levy Act 2021. This Bill, if passed, repeals this legislation. I intend to set out the background to this, the consequences of this Bill and to provide some reassurance on its impact.
First, I shall make a few comments about the events which have taken place over this weekend and this morning, which provide a backdrop to this legislation. The Government, as we are aware, have a new Chancellor who, with the backing of the PM, has continued to emphasise the importance of achieving economic growth, not for its own sake but because of the benefits it will bring to communities across the country: higher wages, better public services and greater opportunities for all.
As the Chancellor has set out this morning, there can be no economic growth without fiscal credibility. That is why the Government are acting decisively today to get the public finances under control. As well as confirming that we will not proceed with the planned reduction of corporation tax from 25% to 19%, the Chancellor has set out further steps this morning to support confidence and, vitally, stability. The Chancellor is setting out further details in the other place shortly and a Statement will follow here, in discussions with the usual channels.
It is in the whole country’s best interests for the Government to act decisively, at scale, to regain the confidence and trust of financial markets. On 31 October, the Government will publish a credible plan to get debt falling as a share of the economy over the medium term, backed by the judgment of the independent Office for Budget Responsibility. For that plan to be credible, there will be more difficult decisions to come across tax and spending. The Chancellor has made a promise that, in doing so, we will always act in line with our values, seeking to protect vulnerable families and back businesses at the same time. The repeal of the health and social care levy should be viewed, therefore, in the context of this continued commitment to support families and businesses.
The levy was originally introduced to help put the NHS and adult social care on a sustainable footing. However, given the financial pressure on households, it is right now to reverse the levy. There is a reasonable question to be asked about the long-term impact on health and social care. Overall funding for health and social care services will be maintained at the same level as if the levy were in place.
The Deputy Prime Minister and Secretary of State for Health and Social Care recently set out details of her priorities for the health and social care sectors in the booklet Our Plan for Patients. The Government will seek to expand on this in due course. The Deputy Prime Minister’s plan includes a £500 million adult social care discharge fund that will help people out of hospitals and into social care support, while providing support to the social care workforce.
Noble Lords will forgive me if I briefly touch on how we got here. The health and social care levy was originally announced last September, as I mentioned earlier. The Health and Social Care Levy Act 2021 made its way through Parliament soon afterwards and received Royal Assent on 20 October. The levy had two key elements: first, a temporary increase in national insurance contribution rates of 1.25 percentage points for the 2022-23 tax year; then, from April 2023, a formal legal surcharge of 1.25%, which would also affect those working over the state pension age. As a result of this Bill, neither of those will now happen. To be clear, this Bill repeals that legislation, reversing the temporary NICs increase from 6 November 2022 and ensuring that no new levy comes into force in April 2023.
What does that mean for people around the country? All employees earning more than the annual equivalent of £12,570 and self-employed people earning more than £11,908 in 2022-23 or £12,570 in 2023-24 will benefit. The average saving is around £330 in 2023-24, with an additional average saving of around £135 over the remainder of this year. Some 60% of businesses, 920,000 of them, will see an average tax cut of £9,600 in 2023-24.
I note that businesses which benefit from the employment allowance already pay no national insurance contributions at all. The employment allowance was increased from £4,000 to £5,000 in April 2022, meaning that businesses and charities which had employer NICs bills of £100,000 or less in the previous tax year can claim up to £5,000 off their employer NICs bill. Thanks to the employment allowance, a further 20,000 businesses will be taken out of paying NICs altogether in 2023-24.
Taking into account the threshold changes made earlier this year, almost 30 million people will be better off by an average of over £500 in 2023-24. I realise that that is quite a lot of detail to digest, but the bottom line is this: reversing the levy delivers a tax cut for 28 million people worth, on average, £330 every year. It also delivers a tax cut for nearly a million businesses, in turn boosting economic growth, as I said at the beginning. Crucially—
If I may finish my remarks, as they are nearly finished, that would be very helpful. I encourage the noble Lord to ask some questions during the debate.
Crucially, as I said earlier, reversing the levy has no bearing on the funding of health and social care services, because the Government will maintain funding at the same level as if the levy were remaining in place.
To conclude my opening remarks, the Government’s reversal of both the levy and the temporary NICs rise will make a significant difference to the lives of millions across the country. It will also have no impact on the provision of health and social care services. The Chancellor has promised that we will continue to support families and back businesses; we will keep those promises. I beg to move.
My Lords, I declare an interest as a vice-president of the Local Government Association. I am opening from the Lib Dem Benches today to focus on the health and care sectors, their need for core funding and the current crises they are facing—not least, as we need to remember, that people are dying waiting for ambulances or in ambulances outside A&E, and that those fit to leave hospital cannot do so because the care they need is not available, whether in a care home or through domiciliary care, where staff deliver care to people in their own homes. My noble friend Lady Kramer will focus on the Treasury mechanisms when she speaks later.
The journey of the Conservative Government since 2015 is from being a party that used to pride itself on being economically responsible to one now deemed by the public to be unfair and irresponsible, with crises happening so fast it is hard to keep up. Indeed, Wikipedia has recently had to put up a notice on the page called “2022 United Kingdom government crisis”. Underneath, it says:
“This article is about the mass resignation of ministers from the Johnson government in July 2022. For the Truss government crisis resulting from the September 2022 mini-budget, see ‘September 2022 United Kingdom mini-budget’.”
Before today’s debate, we had to wait until 11 am this morning to hear whether the Health and Social Care Levy (Repeal) Bill would indeed be debated today in your Lordships’ House. I do not think it is surprising that we are debating it, but we were all told that we had to wait to hear what the new Chancellor had to say. The former Chancellor, the IEA, the TaxPayers’ Alliance and even the Prime Minister now seem to be pushed sideways by the appointment of Jeremy Hunt. As we start this debate, the PM should be in the Commons responding to an Urgent Question—but she is not.
The Minister referred to the context for the original Bill. All stakeholders in the NHS and social care recognised that our social care system was fundamentally broken and had been for some decades, not least because of the very poor levels of funding for state-funded social care. The result of this was the escalating care fees for self-payers but continued very low pay for front-line staff—whether nurses, care assistants, supervisors or allied healthcare professionals—because of the public funding provided for them.
Things are so bad now that a care worker with five years’ experience is paid 7p an hour more than care workers with less than one year’s experience. The average care worker is paid £1 per hour less than healthcare assistants doing a very similar role in the NHS. As a result, the NHS is now directly recruiting staff from our already depleted care sector, and staff turnover in the sector is 29%. Your Lordships’ House has often discussed the problems of the NHS workforce, but social care is even worse off.
All this is primarily because the Government’s historical allocation to local government to fund the fees for those who cannot pay for themselves has slipped very badly. It has got so bad that most domiciliary workers are not paid for driving between clients, which results in these dedicated staff receiving less than the living wage simply because of the time it takes to travel. Three years ago, the Government agreed that it was inappropriate to allocate care packages of 15 minutes because it is almost impossible for a carer to get a client up, wash them and prepare their breakfast in that time, but they persist because there is not even enough funding for these basics. Care assistants leaving the care sector are receiving even higher wages in hospitality and retail. As a statement on our priorities as a country, that is shocking.
When the levy was announced earlier this year to great fanfare, it was recognised that at last there would be a mechanism to start to remedy this. Whether that mechanism, through national insurance, is the right one is not for debate today, because the Government chose that route earlier this year. There was one caveat, which the then Secretary of State outlined. For the first three years, the NHS would receive the proceeds of the national insurance levy to help it catch up post-pandemic, and an interim grant would be paid to the care sector to help develop its workforce and start to address the funding gap, but most of that would not kick in until after this year.
Therefore, in the mini-Budget in September, the then Chancellor—they move so quickly these days; we are now on the fourth since July—said:
“I can confirm that the additional funding for the NHS and social care services will be maintained at the same level.”—[Official Report, 23/9/22; col. 938.]
However, a briefing from the NHS Confederation says:
“Details remain unclear, but the approximate £2 billion the Treasury had allocated for the NHS to pay for their own employer National Insurance contributions to the new levy, will be reallocated. Part of this money will go towards the new”
half a billion pound
“Adult Social Care Fund announced yesterday by the new health secretary Thérèse Coffey.”
But this is smoke and mirrors. The £500 million is also covering winter costs, which were inexplicably left out of the NHS budget in March for this financial year, whereas there has been winter pressures money for the preceding five years. That left an enormous hole at a time when the NHS has been facing pressures at the level of the usual winter season right throughout this summer. This is not new money. Had the announcement not been made by the Secretary of State for Health and Social Care, it would have been an unforgivable dereliction by the Government. Worse, Health Service Journal reported on 6 October—so, after the mini-Budget—that increases in inflation will force the NHS to drastically scale back services. It faces £20 billion in efficiency savings because of the cost of goods and services.
Even worse, the day before, 5 October, Health Service Journal reported that the Government’s own new ground-breaking integrated care systems, which took over from clinical commissioning groups on 1 July, are already in deficit. Two out of three ICS funding plans are already in deficit because of the impact of inflation, Covid costs—which were not funded in the Budget for this year, despite numbers rocketing up to 200,000 new cases a day last week—and the increased spend on agency staff because of the continued struggle to retain and recruit staff across the NHS.
The funding from this levy was intended to help reduce the backlog of cases initially. When identified in the spring, the formal backlog was just over 5 million patients, including those with suspected cancers and other time-critical illnesses. Because of the pressures this summer in the NHS, not least due to the wave of Covid we had, last week it was announced that the waiting lists are now at 7 million. We should forget any idea that funding is available to reduce this significantly; it is not going to happen.
Today, the new Chancellor said that savings would be required from every department on top of the positions that they find themselves in now. For the NHS and Social Care sector, this is in direct contradiction to what his predecessor said a bare three weeks ago—and, frankly, a bit of digging showed that it was not quite the promise that Mr Kwarteng had made. Indeed, the Minister made that promise at the Dispatch Box just now.
The Minister and the Treasury try to reassure us that the consequences of this Bill are neutral. That is not the case. In the words of the letters that banks used to send out to clients about cheques, “The words and the figures do not agree”. Those fighting on the front line of our NHS and social care sector know this, and so do the public. The question is, does the Treasury understand the pressures that the NHS and the social care sector will face, not just because of, but partly because of, the repeal of this levy?
My Lords, I speak with some trepidation, as I am not sure whether the Bill is still government policy; it may well have changed since this morning. I gather that Jeremy Hunt has already won the Chancellor of the week competition so he may well be moving on.
When the Health and Social Care Levy Bill had its Second Reading in this House on 11 October 2021, the then Minister said that the levy was part of the plan to tackle “the NHS backlog”. Since then, as the noble Baroness, Lady Brinton, mentioned, the NHS England waiting list has grown to 7 million people. Of course, that Minister, the noble Lord, Lord Agnew, became so disenchanted with the Government’s policies and practices that he resigned, so we do not know whether the Government stick to any of these promises; certainly, the NHS queue has increased. I hope that the Minister can answer a number of questions.
It was claimed that the £12 billion originally associated with this levy would be used to fund social care and the National Health Service. Can the Minister confirm that that £12 billion will still be provided in real, not just cash, terms? On 7 September, the Health Secretary said:
“Instead of having, in effect, a ring-fenced levy, we will be funding”
health and social care changes
“out of general taxation, so the investment going to health and social care will stay exactly the same.”
That is a highly ambiguous statement. It does not say whether that investment or funding will be the same in real terms or just nominal terms.
Of course, the NHS needs proper funding. Can the Minister explain when the queue of 7 million people will be reduced? In each of the 12 years that the Government have been in office, that queue has increased. It is part of the austerity measures that the Government have introduced. Between 2012 and 2019, 334,000 people died because of austerity. There is no record of any previous Government killing so many of their own people at the altar of economic ideology. Will the Minister tell us now that there will be no more austerity measures for the National Health Service and that this Government will not kill their own citizens any more? That is unacceptable.
At the end of 2021, the EU divorce bill stood at £36.7 billion. That was after paying £10 billion in 2020. Of course, we all remember Ministers telling us at the time of the Brexit referendum that vast amounts would be saved by coming out of the EU and that this would boost the NHS. Does the Minister agree that that was a complete lie and misinformation, because the Government have not properly funded the NHS? Hopefully the Minister can tell us how much has been saved by coming out of the EU and how much of that has gone to the National Health Service and social care.
The Government’s spin machine is promoting the view that the repeal of this levy will somehow promote growth, although no evidence has been provided to support that. Contrary to the numbers cited by the Minister earlier, let me cite for him an alternative analysis of the benefits of this levy repeal. The poorest tenth of the population will gain just £7.66 a year. The second-poorest tenth will gain £37.36. Then, it is £73.33, £143.52, £247.59, £375.89 and so on. The richest tenth will gain £1,802 a year from the repeal of this levy. That is wrong. Some 21 million adults will gain absolutely zero from this repeal because they are surviving, not living, on an income of less than £12,570 a year.
The gains to the poorest have already been wiped out by government-engineered inflation, wage freezes, higher energy, food and water bills, and higher mortgage charges and rental costs—and let us not forget the stealth taxes that the Government have imposed by freezing personal allowances and income tax thresholds. As usual, they are looking after the rich and nobody else. They could have reduced the rate of VAT to help the poorest, but they have chosen not to. They could have calibrated the repeal of the health and social care levy in such a way that the poorest received the most benefit, but the poorest are just ignored; they simply do not really count.
The Government should have taken the opportunity to reform national insurance contributions, a highly regressive tax, but again they have chosen not to. After this Bill is enacted, most employees on incomes of between £12,571 and £50,270 will pay 12% of it in national insurance. Incomes above that will incur a charge of only 2%. This is highly regressive and ensures that low and middle-income workers pay a disproportionately high percentage of their income in national insurance, compared to people with vastly higher incomes.
I am sure the Minister will defend the Government continuing to shower gifts upon the richest, but I remind him that in open letters and seminars in this building, patriotic millionaires have urged the Government to tax them more. Therefore, why will the Government not tax the rich more? Why will they not increase their national insurance contributions and help the people at the bottom? The recipients of dividends and capital gains, generally the richest in the country, use the National Health Service and social care but will pay zero national insurance.
Why are the recipients of capital gains and dividends let off making even one pennyworth of a contribution to national insurance? What is the case for that? It would be nice to hear from the Minister on that. Why are the Government giving them a free ride on contributions? By charging national insurance on dividends and capital gains, the Government could raise £15 billion. Why is that opportunity being shunned? I hope that the Minister will answer these questions.
My Lords, I welcome the Minister’s opening remarks on the Government’s economic policy. The Chancellor should be congratulated for restoring a more sensible fiscal policy and a modicum of calm to the gilts market, and for listening to his Treasury officials.
Returning to the Bill before us, the health and social care levy has few friends, so I will probably make myself unpopular by speaking in its defence—a defence less of its detail, which I will come to, and more of the principle behind such a levy. On a day when the Chancellor has rightly unpicked much of his predecessor’s mini-Budget Statement, he may have missed a trick in not keeping this levy in place. It is worth revisiting why it was introduced.
There are massive spending pressures on the National Health Service and the social care system. Those have not suddenly gone away over the last few weeks. Indeed, judging by the length of waiting times, they have got worse. We are still dealing with the aftershock of coronavirus, which exposed the weakness of the social care sector. The fact is that this country delivers social care on the cheap. We rely on underpaid workers and a thinly capitalised private sector. It is no wonder that its shortcomings have been exposed. It is also unrealistic to expect doctors, nurses and care workers to accept cuts in their real wages year after year. Above all, the much-awaited demographic timebomb is already upon us. The old-age dependency ratio is set to rise inexorably in the decades ahead.
I sometimes wonder whether the Government read the Office for Budgetary Responsibility’s Fiscal Risks and Sustainability report. It was published as recently as July. If Mr Kwarteng had read it, perhaps he would still be in post. It shows health and social care projections rising from 9.7% of national income in 2026 to 10.2% in 2031, to 11.9% in 2041 and to 13.7% in 2051. That is an increase of 4% of GDP, which is the equivalent to £100 billion a year in current prices.
Meanwhile, much of the tax base is eroding. We no longer have substantive oil revenues and tobacco duty revenues are rightly in decline. As the country moves from petrol-fuelled cars to electric vehicles, fuel duties are likely to decline. In the end, the best way of raising revenues is to rely on the big taxes: income tax, national insurance and VAT. We can all fantasise about getting more tax from the rich, and I certainly support having a go at that, but actually it needs to come from the taxes that everybody pays.
The health and social care levy is based on national insurance. It is therefore likely to be a buoyant tax. It also has the positive feature of linking the raising of revenue to increasing expenditure. Now is not the time to go into a long discourse on hypothecation. I am not in favour of hard hypothecation; that was tried with the road fund before the war and it did not work: it created rigidities in the public finances. But it is important that taxpayers understand why their taxes are rising. Linking increased tax to increased spending, as Gordon Brown did in his 2002 Budget and Mr Sunak did in 2021, ensures that higher spending is funded and sustainable, and a tax increase is more acceptable.
In my view, it is inevitable that the health and social care levy will be resuscitated at some point. When it is, I would recommend a different tax base. The problem with national insurance is that it is paid only on employment income. It is not payable on rents, dividends or pensions, however well off the pensioner is—and old people are exempt altogether. The big change in income distribution in my lifetime is that old people are less likely to be poor than younger people.
It is right that the tax burden should be shared across the generations. Mr Sunak tried to put right some of the anomalies in national insurance, but he did not put right all of them. I strongly recommend that any future levy is based on the income tax base and not the national insurance base. Indeed, the whole issue would be made much simpler if national insurance and income tax were fully integrated, although, having explored that for many Chancellors, I will not hold my breath.
Meanwhile, we are burying the levy. I recognise that I am one of the few mourners, but I am confident that, whatever the Government and Opposition are saying now, one day it shall rise from the dead.
My Lords, I have some technical questions about the implications of repealing this levy, but they prompt more significant questions about the sustainability of health and social care funding, as other noble Lords have already suggested. The sustainability of health and social care is hugely important to me, not just as a former Government’s Chief Nursing Officer, but as a bishop. This is about funding a service well with a long-term view, so that those who work hard to care for us have the resources to do the job. This is about the fact that every person is of great value in God’s sight and should be treated with dignity and equity. This is about a thriving economy because, without a healthy population, we will not have an economy that grows.
When the levy was introduced, the then Financial Secretary wrote to the Treasury Select Committee to justify it, saying that
“it would not be possible to fund this from existing tax revenues, nor would it be responsible to fund it through borrowing.”
This uncertainty about the direction does not inspire confidence that the Government have a sustainable plan to fund health and social care. If repealing this levy will not affect health and social care funding, can the Minister guarantee that a detailed breakdown of how this tax cut will be funded will be set out clearly?
As we have already heard, departments have been asked to double their efforts to make savings on spending. Presumably, this will include the Department of Health and Social Care. In that context, how will spending on health and social care be maintained? The Secretary of State announced £500 million for the health plan for patients. Is this additional funding, or will it be absorbed into the cost of maintaining the level of spending in the department after cutting this levy?
If we are concerned about the sustainability of health and social care funding, we must be even more concerned about the sustainability of the workforce. They are the bedrock of this sector. The noble Baroness has already mentioned the social care workforce. There is a very serious issue, particularly around retention. The Nuffield Foundation’s recent research stated that 40,000 nurses have left the workforce this year. The Government responded to the BBC by saying that they were already half way to meeting the target of 50,000 additional nurses in the NHS. I am not sure that this is being felt in the NHS, nor that the loss is being kept up with. Almost as many nurses are leaving the sector as are joining, resulting in the loss of valuable expertise. This is an inefficient and expensive approach to staffing, and one that sees people as expendable.
We are in the midst of a cost of living crisis, of which the health and social care workforce are at the centre. They are not exempt because they look after us. In fact, they are feeling some of the worst effects. One in four hospitals has food banks set up for nurses. The NHS Providers report on the rising cost of living said:
“Increasing numbers of nurses and other staff, particularly in the lower pay bands, are finding they are unable to afford to work in the NHS.”
It cannot be overstated how difficult things have become. Can the Minister say what is being done to make sure that we have a sustainable workforce? Only with this will we find that health and social care funding is sustainable.
One of the most effective ways, perhaps, to ensure the sustainability of health and social care funding is to reduce the need for it. The Government have not confirmed whether they will publish the long-awaited and desperately required health disparities White Paper. There are rumours that they are stepping back from the tobacco control plan and obesity strategy. What are the Government doing to reduce health inequalities? Health and social care funding is only sustainable if the need for these services is reduced.
I started by speaking about values. I am grateful that the Minister mentioned some of the values behind the Government’s objective for this Bill, including the flourishing of the economy not for its own sake but for the most vulnerable. Forgive me: I am concerned that, without a long-term plan for sustainable funding for health and social care and plans that ensure effective public health to reduce health inequalities, it will in fact be the most vulnerable who will suffer.
We need a sustainably funded health and social care system that has the resources to invest in good and equitable health and social care, but also in public health. Surely this is the bedrock of a flourishing community and economic growth.
My Lords, I do not know what set that phone off. There is no need to drown me out just because I am going to speak.
This has been an enjoyable debate for those of us who think that the scrapping of the levy is a disaster. I particularly enjoyed the speech of the noble Lord, Lord Macpherson, and all the wisdom he brings to these matters from his experience in the Treasury. I had a rather wicked thought that the Government could consider one more U-turn when they read his remarks: on the sacking of Sir Michael Scholar, the splendid Permanent Secretary at the Treasury, no doubt because he suggested that there were some things wrong with the Government’s proposals. If they had listened to Sir Michael they might not be in this complete and utter mess today.
Sorry; I know Michael better than Tom. I thank the noble Lord for that correction.
Let us be in no doubt: this Bill is another U-turn, not by the Truss Government—they have got in so many—but on this Conservative Administration’s policy. The levy was brought in by the Johnson Government as a way of funding the changes they wanted to make in health and social care, which I will speak more about later. The contributions will now be frozen under this legislation, if it goes through Parliament. That means that there will be more spend, less tax and another mighty addition to the fiscal deficit. I hope, for the Minister’s sake, that the markets are looking elsewhere today—they have plenty to look at.
The revenue to pay for the extra spending has been ditched, but I wonder what will happen to the Government’s policies that these contributions were supposed to fund. In particular, what will happen to the Government’s scheme to introduce a cap on what individuals have to pay for social care? Will this be another U-turn? Has the cap passed on? Is it no more? Has it ceased to be, expired and gone to meet its maker, as with Monty Python’s parrot?
In fact, I would be very pleased if the cap was a victim of the Government’s unwillingness to put up national insurance contributions. The cap has three enormous flaws in today’s circumstances. First, it adds hugely to the fiscal deficit—according to Library figures, £13 billion a year. That is not a small number. I know that we get used to billions these days, but £13 billion is a substantial sum of money to be added to the deficit as a result of giving up this increase. The more the fiscal deficit goes up and the more the markets are scared of it, the more we have a problem. We know what will happen, broadly: fuel prices will go down and interest rates will go up. Most mortgage holders will be struck with a further blow to their pockets when they are reeling from the cost of living crisis. You honestly could not make it up as a policy. That is one reason against the cap: it is jolly expensive.
The second reason is more obscure: the scheme that the Government have come up with is unworkable. They are going to trial it in one or two areas. Local authorities, quite rightly and quite reasonably, are screaming at the cost and unviability of it. The Government might have to drop it simply because it does not work. Funnily enough, that might suit them rather well: they do not want to ditch it and admit to yet another U-turn; if it has to go for administrative reasons, that is a better excuse than the fact that they have an unworkable scheme to get out of—it is also now unaffordable.
Thirdly—my noble friend Lord Sikka and others have referred to this—what gets me about the cap is this: it is exactly the same as the income tax changes made in the mini-Budget. It is a simple way of taking money from the poor and giving it to the rich. Only half of those needing care have to pay for it themselves; the rest are funded one way or another by the Government or local government. It follows that only the better-off half of the population will benefit from this cap, but it gets worse. Take just the richer half—nobody who is not in the richer half gets anything. The poorer half of that group will do much less well than the richer half of the group. That is especially so because—noble Lords will remember the row we had about it in this House and in the other place—the Government are insisting that any money local authorities have paid towards people’s care should be knocked off the cap. So here we have small amounts of money going to the poorer, but what a bonanza for the rich. Be you a millionaire, a multi-millionaire or billionaire, the maximum you have to pay for your care is capped at £86,000—and you can keep the rest. If you get better, you can go out on your yacht again, and even if you do not get better, when you die you will have all the more money to leave to your kids.
This is not a sensible priority because there is an enormous problem with social care at the moment. It is not so much a problem of who pays for it as who gets it. Noble Lords will have seen the utterly terrifying report last week from Skills for Care. It is an official government policy. It shows the deepening shortage of care workers and the grotesque underpaying of social care workers—they are hopping off from their care shifts, doing some of the most intimate and desirable things a human being can do, to go to the tills in the supermarket. Those are real problems and they are leading to real suffering for real individuals who need care. To prioritise over that necessity giving more money to the poor old rich so they do not have to fork out for their own care makes no sense. It is genuinely immoral.
I will summarise my argument so far:
“returning contributions to their previous level is regressive … It benefits higher earners more, both in cash terms and proportionally, than lower earners. It benefits the poorest not at all.”
That is the admirable Paul Johnson from the Institute for Fiscal Studies, who knows of what he speaks.
For all those reasons I hope that, when the Minister rises tonight, he will announce that the cap is dead and gone. I noticed he did not refer to the cap once in his speech. He said that funding would be maintained, which is a very different thing. If he meant that funding on care would be maintained rather than funding on this blessed cap, I would be very pleased, although I expect that when he replies—the Minister is a most able master of this House—he will say that the Government have no plans to get rid of the cap. It is a useful Civil Service phrase that has no content whatever because if the Government do not have plans now they can develop them tomorrow if they need them. I expect the Minister to say that the Government have no plans to abolish the cap. That does not stop them later on taking measures to abolish the cap. This is at a time when we are going through huge public expenditure cuts. This is a huge addition to public expenditure that has to be met and which makes cuts in other things more strict.
However, it is perfectly possible that the markets will deal with this when they see how the Government are squandering money on this handout to the rich. The markets, although populated by rich people, know the political disadvantages of assisting them, and may well smell a rat here. Alternatively, the Government could go ahead with this ill-designed cap, which would show what the mini-Budget has already demonstrated: that this Government are concerned only with how much money they can stuff into the pockets of the rich.
My Lords, at 11 am today, sitting on the number 29 bus, I flicked over to my favourite live blog to follow the speech of our newly minted Chancellor, the fourth in four months. As was noted widely over the weekend, if you are looking for some good news, it is only two more Chancellors until Christmas.
It was an historic event, but not in a good way—an emergency mini-Budget delivered not to the House of Commons but by broadcast from the Treasury. I was particularly attentive because I wanted to know whether this debate would happen today. After three years in your Lordships’ House, this was another new procedural question arising—there is always one: how late can the Government pull a Bill from the Order Paper? The Energy Bill, on which so many in your Lordships’ House and the NGO community had been labouring mightily, just disappeared from our lists over the Summer Recess. The Schools Bill, to which many stood in opposition—including, honourably, many on the Government Benches opposite, including several former Secretaries of State for Education—until the Government pulled the entire first, main section of the Bill, also appears to have gone west. Would the health and social care levy Bill go the same way? Well, we are here now and have just heard the Minister speak in favour of it, so obviously it has not—not today, anyway—which is, in its own way, very telling.
Tax cuts, to which the current Prime Minister was so attached and on which she ran her entire campaign among the 100,000 or so Conservative Party members who got to decide the direction of the Government, nearly all disappeared. In the Chancellor’s own words:
“We will reverse almost all the tax measures announced in the Growth Plan”.
That means, again in his own words,
“no longer … proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.”
That means that cuts announced last month—on the basis of which some people may have made important economic decisions such as applying for a mortgage; or, in the case of small businesses focused on tourism, for example, decisions about their future business plans—have gone “puff”.
As the First Minister of Scotland, Nicola Sturgeon, said today in setting out an independence plan for Scotland, the UK
“does not offer economic stability”.
The Minister might like to comment on that quote.
It is clear that these are all, broadly speaking, impacts that affect not householders but businesses. Of course, we are also seeing the scaling back of the energy bill support. It is the changes to health and social care and support for households struggling with the cost of living that have been abandoned. It is a measure of who those in charge do and do not value. I say “those in charge” because I do not really know whether I should call them a new Government. It is hard to say, although—for anyone who missed it—Downing Street has just issued a press release saying that Liz Truss is still in charge. But will she be doing Prime Minister’s Questions in the other place on Wednesday? That is not a question to the Minister, just a question out to the ether.
The Health and Social Care Levy Act received Royal Assent on 20 October 2021. This Bill, almost exactly a year later, repeals it. They say a year is a long time in politics, but these days 48 hours is an age.
The Bill maintains a legislative basis for keeping tax receipts collected under the provisions of the former Act until early November 2022. As always, the very useful House of Lords Library briefing notes that the Bill has been fast-tracked to give employers enough time to implement the changes to national insurance rates planned to be effective from 6 November this year. The Health and Social Care Levy Act 2021 was fast-tracked for similar reasons, so we have had a seesaw in respect of which businesses, particularly small and medium-sized enterprises, must be struggling to keep up.
I come to my main area of concern with this Bill. I note that the Treasury factsheet says that
“funding for health and social services will be maintained at the same level as if the Levy was in place.”
That is, I think, a promise from the previous Chancellor—it is hard to keep up—not the current Chancellor. Can the Minister confirm that the briefing also fits with this?
I shall skip over some points so as not to cross over with what others have said, but I want to highlight what the noble Lord, Lord Sikka, said in a direct question to the Minister: “That was £12 billion a year ago. Is the spending for the NHS going be maintained in real terms?” I also highlight and strongly agree with points made by the noble Baroness, Lady Brinton, and the right reverend Prelate the Bishop of London about the extreme strain under which our NHS and social care systems are suffering with the current levels of spending.
Sticking for a moment with the specific Treasury elements, I note that the Institute for Fiscal Studies, responding to today’s Statement, said that
“it remains hard to see where significant spending cuts could come from.”
As the noble Lord, Lord Sikka, said earlier, austerity has killed. Two separate studies in the British Medical Journal and from the Institute for Public Policy Research, using different methodologies, came to very similar figures when covering the period from 2012 to 2018: respectively, 120,000 and 130,000 excess deaths, in which both studies said austerity had to be considered a significant or causal factor.
I should perhaps declare my position, as did the noble Baroness, Lady Brinton, as a vice-president of the Local Government Association. We have seen local services, particularly local government services, cut to the bone. Infection has already set in, with closed libraries and community centres struggling to survive—those very same libraries and community centres that we are hoping will be warm banks to keep people alive this winter. I am aware that the Minister may not be able to comment on what cuts are coming, but it would be nice to get some reassurance on which essential services we will see maintained.
I want to pick up on a point made by the noble Lord, Lord Macpherson, who was following what might be described as Treasury orthodoxies. There are some Treasury orthodoxies that, I agree with Liz Truss, need to be busted. The noble Lord suggested that it would be nice to tax the rich and multinational companies, “But it is all too hard; they’ll just escape it.” The first thing we need to do is to get a Government who want to tax rich individuals and multinational companies and to put that money into the NHS; alternative money to that which we are taking away from government funding today. There are other alternatives: a wealth tax, a land value tax—land, of course, cannot run away—higher corporation tax. These things are indeed possible.
I want to make two brief final points. First, there has been very little discussion during our current scramble of the fact that the new Chancellor is indeed a former Secretary of State for Health. Little attention has been paid to this point. Phrases such as “a safe pair of hands” have been bandied around. We might need to look back and make a comparison with what happened from 2012 to 2018 with our National Health Service, and the discussion and the debates as we undid many of the things done in those years in the Health and Social Care Act.
Finally, I raise the point covered extensively in Oral Questions today: the fact that we have an extraordinarily parlous state of public health as huge numbers of people, particularly those over 50, are unable to take paid employment, even though they wish to, because of their health conditions. If we do not provide funding for the NHS and social care, that situation will surely only worsen. It seems unkind to ask Ministers for assurances at this moment—how can they give them?—but I will ask the noble Viscount this: does the Treasury acknowledge that the state of public health, the NHS and social care are acutely important to the state of our economy?
My Lords, honestly, what a mess. This is really ludicrous. Some 371 days ago, we had the Second Reading of the Bill that became the Health and Social Care Levy Act 2021, and today we have the Second Reading of the Health and Social Care Levy (Repeal) Bill. This is no way to run a taxation system. The changes which have taken place do not justify the time that this House has had to spend on dealing with what was always going to be a fool’s errand. I have taken the opportunity to reread the debate that took place 371 days ago, when it was explained in enormous detail why that Bill was a bad piece of legislation. The Government would have been helpful to all of us if they had simply said. “You’re right, this legislation should not proceed.” We could have saved time then and now.
I have much respect for the noble Viscount, but in his opening remarks he referred to tax cuts and in the accompanying paper, the Government refer to making employers better off. This is nonsense when it is not a reduction in taxation but not proceeding with an increase. Indeed, the Government have told us many times over the past few days—before they reversed direction—that the change in corporation tax was not a tax cut; it was not proceeding with an increase. Perhaps the Minister would do us the respect of not attempting to tell us that this is a tax cut.
There is only one qualification to that, because this tax has been in force for some months already and around £10 billion has been raised through the levy. Can the Minister give us a clear assurance that that £10 billion has augmented the resources available to the National Health Service? I suspect that it has not made an iota of difference but it would be interesting if the Minister could give us some guidance on that.
I reread the debates on the previous Bill. The Minister speaking from the Dispatch Box was, of course, the noble Lord, Lord Agnew of Oulton. He told us that the Bill was required to
“tackle the NHS backlog, put the adult social care system on a sustainable long-term footing and end the situation in which those who need help in their old age risk losing everything to pay for it”—[Official Report, 11/10/21; col. 1657.]
Can the Minister assure us that those three objectives will still be met and, if he can, why was the Act required in the first place?
There are two points I always want to make on Bills affecting national insurance. I am still a believer in a national insurance scheme funded by contributions which pays for adequate benefits on retirement, in sickness and on unemployment. This was the vision based on the Beveridge report enacted in 1948 by the Labour Government. I am still a believer and the problem over many years has been that national insurance contributions have been seen as a too-ready source of money—“We need a bit of money, let’s get it from national insurance.”
There was always a National Health Service element in contributions, which is part and parcel of the scheme. However, the way in which it is employed—I hesitate to say “prostituted”—to create additional resources destroys the basis of the scheme, which I think the public in general still support. It is interesting that we still talk about national insurance. The Treasury still sees national insurance in a different light from other forms of taxation. I am in favour of a social care levy. We can get into an interesting discussion on hypothecated taxation, and it is all a bit of a nonsense because you can always change the rules as long as you have hypothecation. Either you make social care an integral part of national insurance or it is paid for by a separate social care tax, which could be spread more widely on the tax base. It is worth making the point that the original national insurance scheme had a Treasury supplement for this very reason—so it could be supported by taxation more generally. That principle has been lost.
Finally—again, I always make this point—we have significant changes to the funding of the national insurance scheme. There is a National Insurance Fund, and we should not make changes without a report from the Government Actuary on the impact of these changes on the fund, now and in future.
My Lords, this levy came into force under the then Chancellor Rishi Sunak in spring this year. I agree with other speakers that this feels like a lifetime ago; it was three Chancellors ago. We opposed it then because it was the wrong tax levied on the wrong people; I say this to the noble Lords, Lord Macpherson and Lord Lipsey. For me, that is the fundamental reason for opposing this. I was rather interested that when the noble Lord, Lord Macpherson, praised the idea of the national insurance levy and suggested it might come back in the future, what he described was basically income tax and nothing to do with the character of the national insurance levy. It almost makes my point for me so, although he did not intend to, I thank him for that.
For years now, Conservative Governments have been shifting the tax burden away from unearned income—a source of income primarily for wealthier individuals and the elderly—to earned income. When this levy was introduced, it fell on those earning over £9,500 per year, which is well below the income tax threshold of £12,500 per year. It excluded earnings over £50,000 per year; it excluded earnings by pensioners and all unearned income. It also fell on businesses, despite the hardships post Covid, whether they were profitable or not. When this was introduced, it had a whole series of damning characteristics.
There have been so many twists, turns and U-turns since then, and we have heard about them in this debate. However, I remain very glad to see the back of this levy, which is now so complicated, confusing and different from standard national insurance, and yet still remains less progressive than normal income tax.
I also agree with those who say that it is very important to establish that the cancellation of this levy must not mean a £12 billion cut in funding for health and social care services. The Minister sought to give us that assurance, but you could tell from the general response that there was concern about quite what the phrasing meant. As so many have said in this debate, the IFS has identified that public services are in a fragile state, particularly in the health and care system.
Both my noble friend Lady Brinton and the right reverend Prelate the Bishop of London raised the issue of uncertainty: how on earth unfunded costs in the sector were going to be dealt with, the spectre of constantly increasing waiting lists and what the consequences would be. The noble Lord, Lord Sikka, hit the nail on the head by asking whether this equivalent funding—which, in a sense, could be in nominal terms rather than real terms—would enable us to keep up with the original intent of increased funding in real terms, or whether there would be in effect a row back from the original intent, by funding constraints, to nominal terms.
Hypothecation in this country is really no more than smoke and mirrors. I pick up the point of the noble Lord, Lord Davies of Brixton: there is a real role that could be played by a national insurance scheme if its true integrity were protected. In the UK, hypothecated revenues—and certainly those from this levy—were simply intended to reduce the amount of general taxation used to fund health and social care. The levy was a rather cynical strategy to find a more palatable way of taxing, tugging at the heartstrings of our affection for the NHS and social care. Initially, it was very notable that the tax take was coming, to a significant degree, from very low earners. So the levy’s primary purpose was to give the then Chancellor leeway to cut income taxes just before the next general election. It would have made him a hero of the Tory right, because cuts in income taxes always help the highest earners the most. To anyone who doubts that, I give them an illustration: the 1p cut in the basic rate of income tax—which we now hear is scrapped—would have provided, on average, a gain of £125 a year for basic-rate taxpayers but a gain of £377 a year for all higher-rate taxpayers. So the shift from income tax to this rather strange national insurance levy certainly played into that agenda of delivering for those in the higher income brackets.
Like everyone else in this Room, I have very little idea of what comes next. I agree with those who think that it should be a general election, but realistically it probably will not be. I say to the Government that they absolutely need to bring forward a plan that is not driven by ideology—we see that so much in the social care and health sector. We need real answers, real funding and some degree of certainty. I pick up the issue raised by the noble Lord, Lord Lipsey, on the funding for the cap on social care: is that still in the frame or is it disappearing from the frame? These are the kinds of questions that must be answered with real clarity.
I fully accept that Covid and Russia have created global problems, but our crisis is significantly homemade. The IFS estimate is that at least a quarter of the rise that we have seen in interest rises has been attributed to our own ability to shoot ourselves in the foot, including that appalling mini-Budget. Although many of the relevant people are not in the Room today, I must say that I have never heard so much hokum on what creates growth than we heard from the Conservative Benches in the debate on the economy last week—although I acknowledge a few brave Conservative speakers who chose fact over fantasy. We really are now past the time of playing ideological games; people are genuinely hurting, and we must have, in the plan that now comes forward, a real basis both to protect people and to grow the economy. It must be one that stacks up in the real world and not just in the ideological world.
My Lords, I am grateful to the Minister for introducing this Bill, and to the other noble Lords who have contributed to this debate. It is somewhat natural that the debate has strayed beyond the narrow measures in the Bill before us; that is an inevitable consequence of the chaos that we have seen in recent days, with the departure of one Chancellor and the unprecedented Statement from his successor. If it had not been for the explicit commitment to continue with this U-turn, I would have been tempted to ask the Minister whether he was completely sure that the Bill remains government policy. It does—and, for reasons I shall come on to, I am pleased this measure is one of the few to survive the shambles that has been the mini-Budget.
The Chancellor may not have said it in his Statement this morning but let us be under no illusion: this was, at long last, an admission from the top of government that the recent economic crisis was made in Downing Street. Liz Truss may have thrown her first Chancellor under the bus on Friday, but we must remember that it was she who proposed much of the mini-Budget during the recent leadership election. She created it, she endorsed it and she defended it, and no amount of spin can change that—and the public, who are paying higher mortgage bills as a result, will not forget it.
On the subject of spin, the Prime Minister has been keen to present Labour’s support for this legislation as an endorsement of her discredited economic policies. It is anything but. We back this Bill because it will put money back into the pockets of working people, at a time when they need it most. It is money that should never have been deducted from pay packets in the first place. Labour has always opposed the Conservatives’ national insurance hike. We support the repealing of the 2021 Act because it should never have reached the statute book in the first place.
Noble Lords will remember the Labour Party spending much of 2021 warning that, with a cost of living crisis brewing, this legislation was the wrong policy at the worst possible time. Many Back-Bench Conservatives privately agreed; their postbags had convinced them of the very serious financial struggles being faced by their constituents. Crucially, this was all brewing long before Putin’s invasion of Ukraine and its impact on energy prices. Those MPs agitated behind the scenes, but the former Prime Minister pressed on regardless, and the current Prime Minister supported him every step of the way. As a member of Johnson’s Cabinet, she was an enthusiastic supporter and staunch defender of the very levy that she is now scrapping.
The NICs rise was never the right way to address issues with our health and care systems. However, the NHS and social care are, under the Conservatives, at breaking point. The need to support them is clear. Several NHS trusts have declared major incidents or introduced special measures in recent weeks, and we are only just into the autumn. Although Covid infections and admissions are increasing, we have not yet encountered a significant wave of coronavirus or flu. There is, unfortunately, a chance that both—a so-called twindemic—will hit at once.
Why are hospitals and other NHS settings struggling so badly right now? Despite the incredible efforts of doctors and nurses, the NHS has the longest waiting lists since records began. Thanks to successive Health Secretaries undermining the strong record of the last Labour Government, waiting times are up across the board: in A&E; in urgent referrals; for routine treatments; for GP appointments; and for ambulances. This is, in part, because of the Conservatives’ recruitment and retention crisis. They cut bursaries for nursing courses and wondered why so few people wanted to train. They work doctors and nurses to the point of physical and mental exhaustion and wonder why staff leave their posts. They refuse to reform GPs’ prohibitive pension arrangements and wonder why they opt not to return to the profession or commit to extra hours. Labour has a plan to expand the NHS workforce, so that our beloved health service has the doctors and nurses it needs. Rather than taxing working people, we will scrap the controversial non-dom status and use the proceeds to fund thousands of additional nursing and midwifery placements, and to double the number of medical students.
Despite Boris Johnson’s very first address as Prime Minister promising a plan for social care, we have seen things worsen. The sector is desperately in need of extra staff, yet is haemorrhaging personnel to supermarkets and other businesses which pay higher wages. Hospitals are increasingly unable to discharge patients with care needs, blocking beds that are so badly needed to clear backlogs or improve A&E waiting times. This is not a new phenomenon; it has been happening for years. The fact that it is still happening points to another example of Conservative failure to grip the problems facing our country.
Among other things, a Labour Government will ensure that care workers get the pay they deserve. That will not only help to alleviate the staffing crisis but lead to better outcomes for patients. Until then, and following the passage of the Bill, who or what will pay for the Government’s health and social care policies? The Treasury expects the funding which replaces the levy to come from general taxation, although Ministers have acknowledged that additional borrowing may be required in the short term. Will the Minister outline how much higher the cost of borrowing is at present, compared to the weeks or months before the disastrous mini-Budget? We may have seen the markets responding relatively positively to today’s announcement, but we know that recent events have increased the effective cost of borrowing.
The Chancellor acknowledged earlier that growth requires “confidence and stability.” It is increasingly clear that the Conservative Party, with a fourth Chancellor in four months and a third Prime Minister in just over three years, is unable to provide either. We welcome this specific U-turn, but the truth is that the Government have lost all credibility. It is not for today, but there are serious questions for the Government to answer about their climbdown on energy, which will cause alarm in households across the nation. Shelving the mini-Budget was not supposed to involve shelving the two-year energy commitment too. We will support the Bill, but this whole episode demonstrates that only Labour offers the leadership and ideas that Britain needs to fix the economy and get us out of this mess.
My Lords, despite the challenging environment I said I was pleased to open the debate and I am very pleased to close it. I thank all noble Lords who have contributed this afternoon, and I will do my best to respond. As noble Lords might imagine, I may not be able to answer all questions, some of which will be due to what is happening or has happened over the past few days, but I shall have a go.
First, I noted the strong remarks of the noble Lords, Lord Macpherson and Lord Lipsey, on keeping the levy. I make no bones about it; the decision has been made to reverse the levy and make it up through general Treasury funds. A number of noble Lords, including the noble Lord, Lord Lipsey, the noble Baronesses, Lady Bennett, Lady Brinton and Lady Kramer, and the right reverend Prelate the Bishop of London asked about the amount that the Treasury has set aside in place of the levy and—the real question—whether it is based on real terms. It will be in cash or nominal terms. This is because the budgets were announced last year at the spending review and are now fixed on that basis until 2024-25. I hope that helps to answer that question. The bottom line is that reversing the levy delivers a tax cut for 28 million people worth, on average, as I said at the beginning, £330 every year.
I will respond to a number of questions raised by noble Lords, including the noble Baroness, Lady Kramer, who is absolutely right that we have to continue to bear in mind—as I do—that very many people are suffering at the moment, not just with their bills but mentally, which puts a huge strain on the National Health Service. I will make a few remarks about the NHS, which remains a vital sector in our country.
The noble Lord, Lord Macpherson, said that we should keep the levy; the general thrust of his remarks was that there should perhaps be, alternatively, a rise in income tax. The tax cut is designed to support people and businesses, with an average saving of £330 for people next year. As I said at the beginning, 920,000 businesses will save an average of about £9,600 in 2023-24. To reiterate, I say that the Chancellor has acted to demonstrate fiscal credibility. Further detail may come out on 31 October.
As I said, it remains incredibly important to support the NHS. However, as the new Chancellor said very frankly this morning, an ongoing efficiency and reprioritisation review has started, covering all departments. Although I have not heard what he said in the Chamber, I suspect it was with the same frankness. He also said that there could be cuts. However—I do not know whether he said this, but I will—the NHS is incredibly important, so we have to bear in mind that juxtaposition. There may or may not be further announcements on 31 October; I really have no idea about that.
The noble Baroness, Lady Brinton, and the noble Lord, Lord Sikka, asked further questions about the NHS. To paraphrase, they stated that it is at crisis point and it is not even winter. The levy has been reversed, but the overall level of funding for health and social care services will be maintained, as I said earlier, at the same level as if it was in place. The Deputy Prime Minister and Secretary of State for Health and Social Care has set out more detail on her priorities for health and social care in Our Plan for Patients. The money will go to the NHS, as I think noble Lords asked.
As I made clear at the beginning, it will be in nominal or cash terms.
Further to the theme of health, picking up a very fair question from the noble Baroness, Lady Brinton, on why we are not increasing spending on health and social care, I say that the Government are committed to taking a responsible and disciplined approach to spending. The Government will continue to ensure that we deliver social care reforms and that the NHS gets the resources to tackle the elective backlog, reduce A&E waiting times and support its workforce. I very much listened with care to the important points she raised, particularly about ambulance waiting times. I know there is more.
The noble Baroness and the right reverend Prelate the Bishop of London also raised workforce issues. We absolutely recognise the challenges faced by the sector and are responding to them. As part of Our Plan for Patients, the Government announced a £500 million adult social care discharge fund to help people out of hospitals and into social care support. The fund will bolster the social care workforce and target the areas facing the greatest challenges, freeing up beds for patients who need them.
There is more. We are all aware of the shortage of nurses and other NHS staff, and there needs to be a sustainable workforce, as the right reverend Prelate picked up on. Although I do not have all the answers today, I reassure the House and those Peers who have raised it that this is a very important matter. As we are on the subject, I think the right reverend Prelate has raised the health disparities White Paper twice today, as I think it was also in a Question earlier. I do not have an answer to that, but her question was very clear: where are we on this? I need to write to her to give her chapter and verse on that.
I want to say a little more about ambulance waiting times, because I do not think I answered the noble Baroness, Lady Brinton, fully. Again, as set out by the Secretary of State for Health and Social Care in the plan for patients, the Government are improving ambulance response times by taking steps to reduce the time lost to ambulance handover delays, facilitating ambulance trusts to support each other during the busiest periods, and exploring a new ambulance auxiliary service. This is supported by other measures in the plan, such as recruiting more 111 and 999 call handlers to answer patient calls more quickly and opening up 7,000 extra beds this winter. I hope that goes a little way to answering that; the noble Baroness has probably heard these answers before, but they are what they are.
The noble Lord, Lord Sikka, asked why the additional rate of NICs is so low and why it is not a progressive tax, and I will do my best to answer that. The personal allowance, as he will know, is set at £12,570 this year, with income tax rates increasing from 20% to 40% for earnings above £50,270 per year—which is the higher rate threshold, as he will know—and to 45% for earnings above £150,000 per year. After the levy is reversed, employee NICs rates will decrease to 12%, and to 2% for earnings above £50,270 per year. Taking NICs and income tax together, this means an overall progressive rate structure of 32%, and then 42%. I will have a bit more to say about this in a moment, but on the question about the rich paying more, or too much, the top 10% of earners are estimated to pay over 60% of all income tax in 2022-23, so I really do not believe that his remarks are quite as they seem.
I am grateful to the Minister for giving way. Of course, the rich will pay more in tax, because of the maldistribution of income. They are sitting on a bigger share of income, which is why they pay more. According to the figures produced by the TaxPayers’ Alliance—the head of which is now an adviser to the Prime Minister—the bottom 10% of earners are paying over 47% of their income in direct and indirect taxes, and the top 10% are paying only 33.5%. You cannot just say that the rich are paying more. Of course, they will pay more, because of the maldistribution of income—will the Minister address that?
I do not believe the noble Lord and I will agree on this. It could be that we write a letter to spell out exactly what we mean by this, because I have spelled out the facts. To say a little more on this, cutting NICs from November will provide an average tax cut of around £135 for workers this year, and £330 next year. Taking into account the increase to NICs thresholds in July and the levy reversal, almost 30 million people will be better off by an average of over £500 in 2023-24. So, this directly affects lower economic groups rather than the higher ones. I think there is a lot more I could say in a letter because, as I say, I do not think that the noble Lord and I will end up agreeing on this particular matter.
This is an interesting question. I do not want to take up the time of the House but I think the two noble Lords are talking right past each other. One is basically saying that the rich pay 60% of all income tax, but they receive far more than 60% of all income, so I think that is the issue that links the comments between them. Perhaps the letter might deal with that.
If I may answer that first, that would be sensible. The noble Baroness makes a helpful point and it would be helpful to give detail in a letter; it is more appropriate to give that sort of detail in a letter where we have the technical detail involved. I hope that will be helpful all round.
I will pick up another point from the noble Lord, Lord Sikka, about the so-called regressive theme: why do NICs not apply to unearned income—why can people with unearned income pay less tax than those with earned income? I will try to answer that, although it may have to be included in the letter. National insurance contributions are part of the UK’s social security system, as the noble Lord will know. The system, based around the long-standing contributory principle, is centred around paid employment and self-employment, with employers, employees and the self-employed paying towards the protection of those who have been in the labour market. Payment of NICs builds an individual’s entitlement to claim contributory benefits, which then replace earnings in certain circumstances—for example, if someone is unable to work or is retired; that is the theme behind it. Unearned income is generally excluded from liability for NICs as it is not derived from paid employment.
I thank the noble Lord, Lord Tunnicliffe.
I will go into a deeper and important issue, which was raised by a few Peers but in particular the noble Lord, Lord Sikka, with regard to what we are doing to help the poorest. It is important to broaden the scope of this debate. As I said earlier, we understand that many people across the UK are very worried about the cost of living and are seeing their disposable income decrease as they spend more on the essentials, which of course include energy. That is why we have taken decisive action to get households and businesses through this winter and the next while ensuring that we act in a fiscally responsible way.
I will not go through everything because the House will know about the energy price guarantee, which means that a typical UK household will pay no more than £2,500 a year on its energy bill. That is in addition to the £400 discount already announced through the energy bills support scheme, and we also have the energy bill relief scheme, which will provide a discount on wholesale gas and electricity prices. In short, therefore, these measures will save the average household around £1,000 per year from October, so that protection is there in that respect.
The noble Lord, Lord Davies of Brixton, basically stated that the levy was not a tax cut and went on to say that the funding has not supported the HSC—health and social care—levy. However, it is a tax cut for people and businesses this year, who are already paying an extra 1.25%. The average saving for people is £135 this year, and I believe it has helped the NHS, particularly in helping it through the recovery from Covid.
I was grateful for the remarks the noble Lord, Lord Tunnicliffe, made. My remarks now also take into account the points raised by the noble Baroness, Lady Brinton, and, once again, the noble Lord, Lord Sikka. The comments were broader, on the capacity of the NHS, current Covid infections rising and waiting lists generally, as well as NHS recruitment and retention, which I touched on slightly earlier, and, crucially, the adult social care sector. The 2021 spending review allocated £188 billion in total to the Department of Health and Social Care, which includes helping to tackle elective backlogs in the NHS and plans to spend £8 billion by 2024-25; these were raised during the debate. That includes an 50,000 extra nurses in the NHS. The Government accept in full that this year’s recommendations from the independent NHS pay review bodies are in stone—a pay rise, that is, for over 1 million staff.
On the social care side, the Prime Minister and the Secretary of State for Health and Social Care announced a £500 million adult social care discharge fund; I have mentioned it at least twice in this debate, I think, but it is worth mentioning it again. This will bolster the social care workforce, which the noble Lord, Lord Tunnicliffe, raised as a concern. It will also help people out of hospitals and into crucial social care support.
In what was a rather downbeat speech, if I may say so, the noble Baroness, Lady Bennett of Manor Castle, raised issues including stability, businesses and individuals who are not able to make decisions, and spending cuts and austerity. As always, I listened to what she said. My response is that the Chancellor has taken swift action today precisely to ensure that the country’s economic stability is sound and to show commitment to sound public finances. That is very important. This matter will be discussed further when the Statement is made to the House. I say again that spending restraint is needed. Departments have been asked to find efficiencies. Priority will be given to those at the vulnerable end of society.
The noble Lord, Lord Tunnicliffe, spoke about fiscal sustainability. He asked whether I could outline how much higher the cost of borrowing is at present compared with in the weeks and month before—as he put it—the disastrous mini-Budget. The Government are taking action to assure the markets of their credibility and reduce the amount of borrowing needed. In his Statement today, the Chancellor made it clear that the UK’s public finances must be on a sustainable path in the medium term.
I will finish on this note: to state the obvious, as we all now know, the Chancellor will publish his medium-term fiscal plan, including a fully costed plan, on 31 October. I will leave it there. Once again, I thank noble Lords for taking part in this short debate.
I listened carefully to the Minister’s response. He did not respond to the points made by the noble Baroness, Lady Kramer, and the noble Lord, Lord Lipsey, about the social care cap, which is terribly important but has been absolutely invisible. I have heard no announcements from either the most recent Chancellor or the new one. The problem is that the Government planned to introduce legislation via regulation to allow people to have money given to them for social care because of the cap that was being set in place. Because this Bill focuses only on national insurance contributions, it is not at all clear what is happening with that cap. If the cap continues, local government in particular will be in even more of a crisis because a large part of the levy was to fund the new social care cap. If you take away the income but do not change the system for local government, it will have a large black hole. I would be grateful if the Minister could add that point to his increasingly long letter.
I thank the noble Baroness for that. I know that I cannot give a full answer, partly because we have a new Chancellor, but I can perhaps be a little helpful in saying that we have provided councils with £1.6 billion each year in new grant funding to meet core pressures in social care and other services; that is the largest annual increase in more than a decade. I can tell that this may not satisfy the noble Baroness entirely so I will add whatever I can to my increasingly long letter.
I have a question that is easier, and which may not need to be added to the letter. Does the Minister acknowledge that the Treasury sees that the overall state of public health, the health of the nation—which addresses issues such as obesity, the rate of diabetes and heart disease, and issues such as poor housing contributing to asthma—is an economic issue for the UK?
I most certainly acknowledge that and of course agree with the noble Baroness. The challenge for any Government is that there are a whole range of priorities, including defence and all other departments, but I cannot disagree with her; these are all very important. There are so many other priorities but, essentially, I agree with the noble Baroness.
Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.
Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2022
Motion to Approve
My Lords, the instrument before us was laid on Tuesday 19 July 2022, under the powers provided by the Sanctions and Anti-Money Laundering Act 2018, also known as the sanctions Act. The Joint Committee on Statutory Instruments published its 12th report of the 2022-23 Session on Friday 14 October. The committee reported the instrument for two reasons: one for defective drafting and another relating to one of the sanctions regimes to which the amendment applies—the Burundi (Sanctions) Regulations 2021. I will address each of these briefly in turn.
First, the JCSI raised concerns about the absence of definitions on sanctions in the new information provisions. It is not satisfied that the drafting of the new regulation clearly achieves the stated policy to limit the functions in question to those imposed under the relevant instrument. We are considering the most appropriate way to address the committee on that point.
The second aspect flagged to us by the committee relates to the Burundi (Sanctions) Regulations 2021, which was originally laid in December 2021 to replace the Burundi (Sanctions) (EU Exit) Regulations 2019. The replacement regulations were made to reflect the 2020 Burundi elections and the peaceful transfer of power. As noble Lords may recall, the 2021 regulations were debated but they were not approved by resolutions of both Houses within 28 days, and therefore ceased to have effect on 23 January 2022. This was in accordance with Section 55(3) of SAMLA. Having carefully considered the consequences, the FCDO concluded that the 2019 regulations have not been revoked by the 2021 regulations and therefore remain in force. The Joint Committee on Statutory Instruments accepted this conclusion.
The UK Government continue to monitor developments in Burundi and to keep the sanctions regime under review; we are currently considering a 2022 regulation. We thank the committee for its detailed feedback and continued engagement on the FCDO’s sanctions legislation, which we continue to bring forward at pace. I also take this opportunity to thank those across your Lordships’ House for the continued support for amendments brought forward by His Majesty’s Government to update the sanctions regime throughout this Session.
Sanctions form a key pillar of our foreign policy. It is essential that our sanctions regimes are maintained and updated appropriately, so that we can respond at pace to the activities of malign actors around the world. Indeed, we have recently shown the strength and utility of our sanctions in our response to Vladimir Putin’s invasion of Ukraine and Russia’s crimes against the Ukrainian people.
The legislative instrument that we are debating today updates all our sanctions regimes, including those we are required to implement due to our UN obligations, as well as our autonomous UK regimes. These regulations ensure that crypto asset businesses fall within the scope of financial sanctions reporting requirements, strengthening our ability to respond to emerging threats and evolving global standards.
Specifically, the regulations require crypto asset exchanges and custodian wallet providers to report to the Treasury if they encounter any designated persons in the course of business or if they are holding any frozen assets on behalf of customers who are designated. Crypto asset businesses are also required to report any suspected breaches of financial sanctions.
The regulations also include new powers for public authorities to share financial sanctions information with the Treasury. This change ensures a wide range of persons and organisations, from regulators to local authorities, have a dedicated information-sharing gateway. They will no longer have to rely on gateways that are not sanctions-specific or on the Treasury’s powers to compel information from partners.
We hope that this will give organisations confidence to share information so that the Government can better pursue breaches and uphold the integrity of UK sanctions. These changes are possible thanks to the Economic Crime (Transparency and Enforcement) Act 2022, which amended the sanctions Act in March this year.
The regulations also make changes to our various sanctions regimes to update definitions and clarify intentions. These amendments ensure that the definition of “designated person” is consistent across regulations. They include a correction of the reporting obligations relating to the transfer of funds to a ring-fenced account. They clarify that, within the Libya sanctions regime, it is not a breach of sanctions to credit a frozen account with interest and specify that Treasury licences would be available for the purpose of satisfying prior obligations. They also correct acronyms which were entered incorrectly into the initial regulations or were missing, and update the name of the African Union peacekeeping force in Somalia.
These regulations will ensure that our sanctions continue to hold to account corrupt officials, abusers of human rights, and malign actors across the world, and that our UN sanctions regimes remain accurate. To conclude, these amendments mean that our sanctions regimes take account of the most modern financial services and prevent loopholes being exploited in the future. I welcome this opportunity to hear views on these regulations. I beg to move.
My Lords, I rise briefly to intervene in this debate on the point which the Minister helpfully set out in his opening remarks, one of the two issues raised by the Joint Committee on Statutory Instruments. This instrument amends the Burundi (Sanctions) (EU Exit) Regulations 2019 but, according to the legislation.gov.uk website—the definitive source—those regulations were revoked by the Burundi (Sanctions) Regulations 2021. Commercial websites on UK legislation also refer to the 2019 regulations having been revoked. That would make today’s proceedings a little odd, because we would be amending something that was no longer law.
However, this is not the case. As the department explained in its memorandum to the Joint Committee, although the revoking SI was debated in 2021, it was not approved by both Houses of Parliament within the required 28 days. Therefore, under the terms of the Sanctions and Anti-Money Laundering Act 2018, as a “made affirmative” instrument, it expired. The Joint Committee agrees with the department’s view that the original regulations have not been revoked and can therefore be amended tonight.
I raise this matter because it is important that affected citizens and businesses, and their lawyers, can establish with clarity what the law is or was at a relevant time. In this instance, the only sources to which you could have turned to find out—not only government but commercial sites—had got it wrong. I raise it as a warning of the pitfalls of complex legislation by statutory instrument—of which we have a lot coming down the track—and the need to be absolutely clear about what is and is not law in force. The committee has written to the hard-working team at the National Archives to ensure that the matter is put right there. The committee’s advisers should be commended for identifying it. It is important that we get these things right.
Not on behalf of the committee in any way, perhaps I could also raise the question that the Minister touched on: what is the Government’s current view of the relevance, purpose and desirability of sanctions against Burundi?
My Lords, I apologise if this is Burundi-specific. I would like to address to the Minister a particular point that has been drawn to my attention. He spoke about the economic crime Act and loopholes. Some people from overseas register a company, open a bank account through lawyers and then, when everything is in place, there is a transfer of shares to a party, which rather defeats the object of the exercise. I am sure that the Minister does not wish to go into detail about this today. However, would he care to reflect and pass on to his officials that, in the spirit of the economic crime Act, they might wish to address that situation?
My Lords, I point out that I am speaking as a winding-up speaker, just in case there is anyone else who is interested in speaking from the Back Benches.
The Minister has explained that this statutory instrument brings into the sanctions orbit both crypto asset exchanges and custodian wallet providers. We agree that that is necessary, but I would like to get some clarity from the Minister. Very few crypto asset exchanges are actually located in the UK—I was struggling to think of one. Some of the most popular, such as Binance, are registered in British Overseas Territories. Just to continue the example, Binance is one of the major exchanges and is registered in the Cayman Islands. What impact does this SI have on the regulation of these exchanges and wallet custodians? To stay with the Binance example, that organisation claims that it does not have the authority to sanction or freeze all Russian users’ assets, leaving the expectation that sanctioned individuals are freely using it under assumed or friendly names.
I would also ask how adequate resources are to make regulation and enforcement effective. As the Minister is aware, the FCA is underresourced and, frankly, demoralised. It does from time to time act against small organisations, which would seem to include misbehaving crypto exchanges, and I think that the crypto group in the FCA is actually one of its stronger sections. But the complexity and global nature of crypto makes it very tricky to supervise. The National Crime Agency has only 118 staff to cover all of the powerful and complex world of finance. Would the Minister consider giving the FCA and the NCA a share in the fines and confiscations from successful prosecutions, in order to build their capacity? Will further legislation come forward, despite the Conservative mantra of “deregulate, deregulate”, to deal with the dark side of the crypto industry, which has a real mix of responsible players and sheer anarchists, which obviously is an avenue for running sanctions that makes no use of the respectable exchanges and wallet custodians?
Will the Government also go after the enablers—the lawyers, accountants, property developers and others who facilitate sanctions-busting through a variety of routes? In a sense, I am picking up the point from the noble Viscount, Lord Waverley; he described one such route. These firms are a major part of the infrastructure of what is widely known, unfortunately, as the London laundromat. Would the Minister agree that we need a “failure to prevent” sanction to put genuine pressure on and change the behaviour of these enablers?
This statutory instrument—and this is true for upcoming legislation—still fails to give proper protection to whistleblowers or to champion follow-up on their disclosures, even though they are crucial to exposing wrongdoing, particularly in the areas of sanctions-busting, which crosses complex borders and is very hard to track through conventional routes used by regulators or enforcement agencies. This SI once again fails to include as whistleblowers the wide range of people who speak out, and it continues the limitation of the definition of whistleblowers to employees.
This statutory instrument gives confidentiality to disclosures made by employees to proscribed organisations; it lists a long list of proscribed organisations among its various regulations. But this kind of confidentiality is frequently useless. The identity of many whistleblowers is hard to hide, particularly when dealing with kleptocrats, oligarchs and authoritarian states, which, frankly, use all kinds of aggressive means to find the identity of those who have exposed them.
Under the current law, recourse for a whistleblower, who is at risk of retaliation, is to an employment tribunal. That hardly seems meaningful protection to someone whose income, family and life, very likely, are on the line. The Minister will be aware from his portfolio that far too many whistleblowing reports remain anonymous because people are terrified. The regulator then uses the fact that the report is anonymous, and therefore it cannot ask more questions of whoever has been doing the reporting, as an excuse not to follow up on the information that has been provided. Frankly, we have a very sorry track record in acting against these entities. The advice that has been given by so many in this field is, if you can, go to the Americans, because they will be fierce and they will act. That is a very sad story to tell.
I have a Private Member’s Bill that would create an office of the whistleblower to be a proper champion. It is an updated version of the Bill promoted by a Conservative MP, Mary Robinson, who chairs the APPG on whistleblowing, so I assure the Minister that there is no party-political issue here. In light of the Minister’s concern over sanctions and in catching people who bust sanctions, will he give us his support?
My Lords, I, too, welcome the Minister’s introduction of these regulations. I assure him and the Government of our continued support for these measures. In the debate that we had last week, we made our continued support absolutely clear.
There are a couple of points I want to focus on. These were raised by my honourable friend Stephen Doughty in the other place in relation to cryptocurrencies being used to evade sanctions and particularly how they can be used to inject capital into the democracies of the world for the purposes of swaying elections. During the Commons debate, Stephen Doughty asked why the Government have not yet sanctioned Tornado Cash and Blender, two cryptocurrency services already sanctioned by the United States. While I am pleased that the Minister confirmed that the Government are looking at sanctioning those two organisations, I hope the Minister can update tonight about when we can expect further legislation in this regard.
Just picking up the point made by the noble Baroness, Lady Kramer, the Minister in the Commons was unable to update the House on the steps taken to pursue greater global regulation of cryptocurrencies. I hope the Minister can tell us whether the United Kingdom mission to the United Nations has taken part in any discussions on this and whether the point was raised at the annual meeting of the IMF and the World Bank earlier this month, in addition to answering some of the other points that the noble Baroness has raised.
Since the invasion of Ukraine by Putin’s regime, there has been a huge increase in rouble to crypto trades resulting from individuals and businesses wanting to evade sanctions on cross-border payments. Will the Minister tell us what the Government are doing to monitor the providers used for these exchanges?
Finally, earlier this month the US Government fined Bittrex, a cryptocurrency exchange, for repeated violations of sanctions. Will the Minister tell us, specifically and in a more general sense, how we are working with the United States and other allies on investigations such as these so that we can ensure that our measures have full compliance? As the noble Lord, Lord Ahmad, repeatedly says, sanctions are not effective unless we act in concert with others, so I hope the Minister can respond on these points.
My Lords, I thank noble Lords who have contributed to this debate today. I will do my best to address the issues that were raised by noble Lords.
Crypto asset exchange providers and custodian wallet providers have been added to the definition of relevant firms in all UK sanctions regulations, and relevant firms must report certain information to the Treasury when encountering a designated person in the course of their business or where they become aware of a breach of financial sanctions regulations. Reporting obligations themselves have not changed.
The instrument that we are debating today strengthens our sanctions in two ways: first, the measure further supports the UK’s technical implementation of recommendation 15 of the Financial Action Task Force standards. It is the international standard-setting body for all anti-money laundering, counterterrorist financing and counterproliferation financing. Recommendation 15 requires the Government to ensure that certain financial sanctions reporting obligations are applied not only to financial institutions and designated non-financial businesses and professions but to virtual assets service providers. These regulations bring crypto asset exchange providers and custodians wallet providers into the scope of those obligations.
The second area in which this strengthens our regime relates to enforcement. The instrument seeks to address the risk of crypto assets being used to breach or circumvent financial sanctions. The definition of “relevant firm” now covers firms that either record holdings of or enable the transfer of crypto assets and are therefore most likely to hold relevant information.
I will address some of the specific points raised by the noble Baroness, Lady Kramer. I felt she made an interesting point about the possibility of the FCA and the NCA sharing the proceeds of fines to build up their capacity, and I will certainly convey that suggestion to my colleague in the other place. I believe the Office of Financial Sanctions Implementation has doubled in capacity this year, and we have seen that mirrored through the infrastructure we have to counter these forms of crime in the UK.
The noble Baroness gave a very effective plug for her Private Member’s Bill to protect whistleblowers. I will not pretend that I know chapter and verse of her Bill, but it certainly sounds sensible and worthy of serious consideration. I will also pass that to colleagues and do my best to ensure that it is treated with the seriousness it no doubt deserves.
The noble Lord, Lord Beith, asked a couple of questions about Burundi. As he acknowledged, the view—I think it is a consensus—is that the 2019 Burundi sanctions regulations remain in place. On the second point, the issue about guidance online has been brought to the attention of the FCDO. Colleagues in the FCDO are now working with those websites to ensure that the right guidance is available, so I think the point he made has already been registered in the Foreign Office by the relevant department.
The noble Lord, Lord Collins, repeated the question put to colleagues in the other place by Stephen Doughty in relation to two firms in particular. Although I do not have the answer for him now, I know that a letter is winging its way across to Stephen Doughty—I am told it will reach him this evening—and addresses the points he raised. I hope that is satisfactory. I will make sure that the noble Lord receives a copy of the letter.
The noble Viscount, Lord Waverley, made a number of interesting points. I flag to him that a new combating kleptocracy cell has been set up this year in the National Crime Agency. I hope it will be able to fulfil some of the roles and functions he outlined in his contribution.
I asked the Minister a general question about Burundi, to which the appropriate section of these regulations relates specifically. Bearing in mind that most countries reduced or ended their sanctions on Burundi earlier this year, what is the current Foreign Office position?
My concern in answering this question is that I never know where the line is drawn. We are not supposed to talk about individual or upcoming sanctions. My understanding is that this has been largely an academic issue—I really hope I am not crossing any lines here—and that, regardless of whether the regulations had been revoked, and we understand that they have not, it would have had no material impact on any company or individual. It is unfortunate and an error, but it has not had any real-world impact. I hope that addresses his question.
I thank the Minister for the responses he has given me so far, but I raised the issue of British Overseas Territories and cited the example of Binance, one of the largest crypto exchanges, which is based in the Cayman Islands, and how these SIs would impact that. If he cannot answer, I am perfectly happy if he comes back in written form.
I apologise for missing that question. The new sanctions automatically come into force in the overseas territories—all except Gibraltar and Bermuda—as soon as they come into force in the UK. As noble Lords would imagine, the UK’s Office of Financial Sanctions Implementation has for many years been engaging substantially and very regularly with the overseas territories and Crown dependencies to help support their development of compliance, enforcement and licensing functions. I hope that addresses the noble Baroness’s question.
It is the responsibility of the UK and our allies to ensure that our sanctions regimes are maintained and updated appropriately so that we can respond at pace to the activities of malign actors around the world. In co-ordination with our allies, we must and do continue to make sure that our sanctions regimes take account of the most modern financial services and prevent loopholes being exploited in the future. I am grateful to noble Lords for having indicated their support for this measure and once again thank them for their contributions.
Oaths and Affirmations
Lord Marlesford and Baroness Adams of Craigielea took the oath.
House adjourned at 6.12 pm.