Baroness Bowles of Berkhamsted (LD)

My Lords, I declare my interests as chair of the ownership dividend inquiry into employee ownership and as director of Valloop Holdings Ltd. Amendments 63 and 66 address a structural flaw in financing employee ownership, co-operative and mutual transitions—a problem sharpened by recent tax changes and incoming Basel prudential rules. Amendment 64 concerns the systemic misuse of Section 166 investigations. In the interests of time, I have not split this rather diverse group. Amendments 63 and 66 would not mandate outcomes; they would simply require regulators to consider a distinct exposure class and review lending to these entities. The PRA already possesses the power to do this, just as it does for infrastructure, but this asset class is too niche to attract regular focus without a push, so this is my push. The Government’s manifesto commits to doubling the co-operative and mutual sector. Yet reducing capital gains tax relief for employee ownership trusts has already drastically reduced conversions. Basel 3.1 compounds the damage. Removing the SME supporting factor increases risk weights under the standardised approach used by challenger banks—the very lenders willing to finance these transactions. The large IRB banks could theoretically model lower charges but generally will not incur the cost for such a small market. The result is clear: funding these transitions will become harder, if not impossible. Yet these business models carry lower default rates, higher survival rates and greater economic resilience. These are prudentially relevant characteristics that justify differentiated treatment, just like infrastructure, green mortgage or project finance do. Recognising this profile is cost-neutral, Basel-compatible and entirely within existing regulatory powers. Without it, I suspect that the Government’s own policy commitments will fail. I turn to Amendment 64. Section 166 powers were designed for serious exceptional concerns, allowing regulators to appoint a skilled person—typically an expensive consulting firm—to investigate a business. As the noble Lord, Lord Altrincham, and I set out in Committee, Section 166 has suffered severe mission creep. It now seems to be used routinely, disproportionately and beyond its intended scope. These reviews impose high costs, disruption and management distraction on firms, often for issues that supervision could and should handle. My amendment would restore the original statutory boundary. It would ensure that Section 166 is deployed only where there is material risk of detriment to regulatory outcomes and where its use is strictly proportionate, having regard to the burden on the firm and whether normal supervisory tools would suffice. The House must signal that regulators cannot delegate routine supervision to high-price firms at the expense of regulated businesses. I intend to seek the opinion of the House. I beg to move.