Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
My Lords, I remind your Lordships that if there is a Division in the Chamber the Committee will adjourn for 10 minutes.
Housing: Leasehold Reform
Baroness Maddock
To ask Her Majesty’s Government what plans they have to reform leasehold legislation.
Baroness Maddock (LD)
My Lords, in preparing for this short debate I have, as usual, been grateful to the House of Lords Library for its research. I am also grateful to the Consumers’ Association’s Which? and to the liberal think tank, CentreForum.
The previous occasion on which I spoke about leasehold reform at any length was during the passage of the Commonhold and Leasehold Reform Act 2002. However, in 2014, further reform is still needed and is very much a live concern for the millions of people living in leasehold properties. The issue continues to be raised in both Houses of Parliament.
Leasehold is the norm for many people, particularly those living in urban areas. The majority of new homes being built are flats, bringing the whole matter of leasehold further to the fore. The current system vests too much power in the hands of freeholders. As a Liberal, I always want to devolve power to as many people as possible, so I want to see leaseholders having a proper say in the management of their homes.
What is the problem? England and Wales are almost unique in operating a system of leasehold tenure on many bought properties. The system is aimed mainly at the need to ensure the upkeep and management of communal areas and, sometimes, to enforce positive covenants affecting all the residents. CentreForum’s report, Reforming Leasehold for the 21st Century, described leasehold as a “quasi-feudal system”.
One of the biggest problems is that most freeholders do not manage the properties themselves but employ management agencies to carry out their duties. These agencies have no legal responsibility to the leaseholders, and therefore have very little incentive to provide a reasonable service. In addition, these management agencies face very little competition. If leaseholders are dissatisfied with the services provided by these agents, there is nothing that they can do unless they can persuade the freeholder to make a change. The right to manage is a little known provision which allows leaseholders to manage a group of properties without having to buy the freehold. However, it requires 50% of leaseholders to support such a move. CentreForum suggests that, to encourage the take-up of this system, service charges should include information about the right to manage.
Usually, leaseholders have little or no contact with the freeholder; everything is done through the agents. There is an option to take cases for change to the leasehold valuation tribunal, but it can be a very time-consuming process and there are issues around costs. One of the big problems that often face leaseholders is unexpected major works. Leaseholders can find themselves in severe financial difficulty simply because the owners—or, very often, the managers—decide, for example, to replace all the windows, with little notice or consultation, leaving leaseholders with an unexpected major bill.
Which? Money highlighted other areas of concern in a 2011 article based on consumers’ evidence. One such area was the cost of insurance. Which? Money had unearthed examples of leaseholders saving up to 60% on their insurance premiums simply by cutting out the middleman and arranging their own cover. There have been suggestions that managing agents take a cut on arranging insurance and that they are not interested in getting a good deal. There is a lot of evidence around this and I am sure that my noble friend Lady Gardner will highlight some of these issues. In short, however, a lack of transparency around charges and no independent regulation has meant that there is very little pressure on agents to give leaseholders a fair deal.
As I indicated in my opening remarks, more and more people are living in leasehold properties than ever before. In 2012, an estimated 5 million people were living in 2.5 million leasehold properties in England and Wales. An estimate of the total charges they are paying comes to about £2.5 billion. In the 10 years to 2012, the number of cases of dissatisfaction that leaseholders have taken to the leasehold valuation tribunal has increased by 400%.
Has anything been done to assist leaseholders? During the passage of the Enterprise and Regulatory Reform Act 2013, the coalition Government accepted arguments that stronger protection was needed for leaseholders. I am pleased that, as a result, all letting and management agents now have to belong to a recognised redress system—I expect the Minister will give us an update on that. Also, the Leasehold Reform (Amendment) Act 2014 became law last month. It was a private Member’s initiative that the Government supported, which removes the requirement for a tenant to sign any notice of claim to a new lease in person. This is particularly helpful to anybody with a disability.
I am also aware that the Government committed to spending up to £2 million every year between 2011 and 2015 on a tenant empowerment programme for tenants in social housing. The Minister will no doubt expand on this when she responds. I know too that the Government have asked the Office of Fair Trading to undertake a market study into property management services. However, it is very disappointing that the study will not include an assessment of the legal framework that underpins freehold and leasehold management arrangements in England and Wales. The study also excludes local authority and social housing; the reason given for this by the Government was, they said, because registered social landlords will be responding to the needs of residents. I wonder if that is really a good enough reason, particularly when you can now find—in new developments—private ownership, shared ownership and social housing all in one building. I will be interested in the Minister’s comments on this.
We should be particularly concerned about elderly leaseholders. Most sheltered housing developments are sold on a leasehold basis. What assessment have the Government made about how well this sector is functioning? There is quite a lot of anecdotal evidence on this subject but there is a serious lack of authenticated facts. I wonder how the Government are keeping track of what is actually going on in the area of leasehold.
What could we be doing now? The Liberal Democrats have supported the creation of a national register of landlords; without the knowledge of who is leasing property, it is very difficult to take action against rogue and dodgy landlords. We also need to create greater drive towards the use of commonhold, which was introduced more than 10 years ago, particularly given the make-up of our housing stock. The main problem is that commonhold is not available unless 100% of owners agree—this is, of course, difficult to achieve. During the passage of the 2002 Act, I supported my noble friend Lord Goodhart in his lead in moving that the threshold be reduced to 80%. Meanwhile, CentreForum has proposed that, in order to build a critical mass of commonhold properties and to establish the system as part of the norm, all new blocks of flats built after 2020 should be sold as commonhold. As I indicated earlier, we should definitely also have better promotion of and information about the right to manage for people living in leasehold accommodation.
Lastly, it would be good to look at helping leaseholders when they are charged by the freeholder when they want to make improvements. The freeholder can receive a second benefit from this because, invariably, the improvements increase the value of the property. When the lease is then renegotiated or sold at a higher value, the freeholder benefits. CentreForum has proposed that the right to charge for permission to make improvements should only be available when the freeholder can prove that the charge requested would reduce the value of the property.
This is an important area and my noble friend Lady Gardner will give us a lot more vital information about it. I am disappointed that people who I know care about this subject have not been able to be with us for this debate. I hope that, when the Minister responds, we will not hear too many excuses for why we cannot take action in this important area of property ownership.
Baroness Gardner of Parkes (Con)
My Lords, I have asked many Questions in your Lordships’ House but the only Question I have ever asked in all those years on which there was not a single supplementary from any part of the House was about leasehold. No one knew what I was talking about. As I came out into the Lobby after the Question a number of people came up to me and said, “I would have loved to have come in on your Question but I had no idea what it was about”. That is still the problem with leasehold: people really do not understand it until they are already caught up in it, particularly if they are caught up in it in the wrong way because they did not look at the lease before signing it or they were so thrilled with what they found that they put aside any worries about the future. However, it is important that we all begin to understand it more. It affects more than 5 million people, mostly in London but all over the country. Even in political terms, people should be aware that 5 million votes are worth having. It is important.
My interest is declared in the register: I have owned a leasehold flat for a good many years. I bought it for the day when I could not manage stairs—but I still have not got there. At the time, all those years ago, we had a residential porter who took any parcels, let people in and did all sorts of useful things. What happened? The head lessee became a person who was interested only in making a profit out of it. They decided that the flat which the caretaker was living in was too expensive for that money to be wasted like that, so they fired the caretaker and now have someone who comes in for two or three hours a day and the money from that is now in the head lessee’s pocket. There has been too much of this profiteering at the expense of residents in these blocks. For years we had a qualified building surveyor who would look at the block and decide what should be done. No one ever looks at it now and it is ready to disintegrate if they do not get something done pretty quickly.
Important issues arise all the time. There are more than 2 million leaseholders who pay, in all, over half a billion pounds annually in service charges. That is a lot of money. Who is holding the money and how secure is the fund? Many of these issues have now been addressed by the fact that we are to have a redress scheme. I ask the Minister to confirm that that will be in place soon. The process of implementation has been a bit slow when you think about how long ago we passed the scheme.
Transparency is perhaps the biggest problem for everyone. People do not know what they are being charged for and whether or not it is legitimately required. In the block to which I referred, where I have a flat, they organised a new insurance policy without consulting anyone. Whereas last year residents of flats had to pay an excess of £250 on any claim, this year the excess has gone up to £2,500. The head lessee, who had the policy, has renegotiated it without any consultation so that every tenant in the flats will be liable for so much money that he will have to pay very little at all because we will be paying for it in the £2,500—a tenfold increase. I think that that is very unreasonable.
In 2009, in supporting better regulation, the British Property Federation drew our attention to the fact that Sections 152 and 154 of the 2002 Act were due to be in force at that time. They are still not in force. I ask the Minister what is happening with those sections. They are protective provisions and, as they are part of our law, they should come into force.
Leaseholders are entitled to know how their money is spent and transparency is one of the major issues. Sir Peter Bottomley has done quite a lot in the Commons on this issue. People are entitled to ask questions and get answers that are honest and can be established. There have been too many occasions—cases on the record—where people have found that they are making payments for things such as service charges but half of that money goes into the pocket of the head lessee or freeholder, who has made a deal with or even owned the builders or insurance company used. It is all quite wrong that that sort of thing should be happening and that leaseholders do not get honest answers when they ask about it. It is all being covered up all the time.
In 2007, Mark Prisk—a previous Housing Minister—put down an amendment to the then Consumers, Estate Agents and Redress Bill. He talked about “rogue” and “unscrupulous” agents and how the industry,
“now handles over £12 billion of people’s money annually”—[Official Report, Commons, Consumers, Estate Agents and Redress Bill Committee, 24/4/ 07; col.191]—
and so on. I am therefore glad that, last year, we at least agreed the amendment to the Enterprise and Regulatory Reform Act which has brought in registration of managing agents. Although that will be very welcome, I ask the Minister to confirm that it is still online to come in this year. It really has been a fair time already. There are good agents but protection for leaseholders is at a pretty low level and, as I said, there is no protection until that comes in, along with a redress scheme, which will be very valuable.
As the noble Baroness, Lady Maddock, said, I am a great supporter of commonhold developments. Leasehold property exists only in the UK and Hawaii. It is therefore pretty rare, and I do not consider it acceptable. However, the point about the 100% requirement is that 100% of the people in an existing block of leasehold flats need to want to change. That is very wrong. I have had Parliamentary Answers from different Ministers at different times which say that, “Yes, it is wrong and it should not be; it is impossible”. They say it is impossible to get 100%, and I am quite sure that that is right. All you have to have is a rogue landlord paying one person to abstain or deny and you have lost your 100%. A simple majority would be all right, but even a bit more than that might be possible. There are so many of these blocks where people live overseas and getting hold of them is not easy.
Baroness Gardner of Parkes
My Lords, please excuse me if I repeat something that I said earlier because running in and out does not help. It is high time that we had a consolidation Act. Since 1985 we have had about a dozen new housing-related Acts—I have been in the House since 1981 so have participated in every one of them—and each one has changed parts of the previous one. It has reached the point where even solicitors specialising in these matters have to consult Act after Act to be sure of the present legal position. The law should be clear, simple and capable of being understood by ordinary people. The Government should ask the Law Commission to review all these property Acts with a view to consolidating them. It would be better for the country and better for everyone. However, the Law Commission does nothing unless the Government ask it to because the Government have to meet the costs. The Law Commission does nothing now under any other circumstances.
Having served on an industrial tribunal for 20 years, I am a great believer in the tribunal system. Something has gone very wrong with leasehold valuation tribunals since the basic £500 maximum that you were asked to pay has been changed to a £500 minimum to bring your case at all, and with possibly very heavy costs after that. We also have the practice, which I have mentioned in the House before, whereby, win or lose, the head lessee or freeholder charges his costs in the tribunal back to the leaseholders. That was never the intention. The intention was that a leaseholder would not normally have to meet any costs and this would be a basis on which everyone could present their own cases. There is now a new tribunal system, as from last October, and I think we will be hearing a lot of dissatisfaction about this very shortly.
Rereading Hansard from the time made me wonder where the leaseholder tribunals went so wrong. The intention was for this to be a simple and inexpensive system. I am really quite surprised to find problems because I drew attention to the possible dangers at the time and half those dangers have arisen. Leasehold property has really complex arrangements. I would like to see it abolished but, on the other hand, that is a long way off. Every little bit of progress helps and it is important that we press on and teach people more about what it is all about.
Lord McKenzie of Luton (Lab)
My Lords, I should draw attention to my interests, as recorded in the register, as the owner of a leasehold property.
I begin by congratulating the noble Baroness, Lady Maddock, on securing this debate, if not the usual channels on its timing. We might have been advantaged if we had enjoyed the benefit of the seminar kindly organised for next week by the noble Lord, Lord Best, although we should thank him for circulating the related information from Which?.
We should also congratulate the noble Baroness, Lady Gardner, on her continuing display of expertise and persistence in this area, and indeed on educating noble Lords, including me, over the months and years.
One of the recent questions posed to the Minister at the other end and reiterated today by the noble Baroness, Lady Gardner, was whether the Government have any plans to consolidate the current legislation relating to leasehold and commonhold interests. Given the plethora of legislation touching on these issues, this does not seem an unreasonable request. Of course, we have added to that legislation recently but in a helpful way through the Leasehold Reform (Amendment) Act, which has made easier the processes of collective enfranchisement and leasehold extension. Consolidation would not just be a matter of legislative tidiness; it could contribute to addressing one of the oft-cited bugbears about the sector, which is that it is complex—it has been described as quasi-feudal today by the noble Baroness, Lady Maddock—and is not always fully understood by those who engage in it or, seemingly, by their advisers.
We have also added to the body of law via the Enterprise and Regulatory Reform Act, mentioned by other noble Lords, concerning access to redress schemes relating to letting agencies and managing agents. This was successfully campaigned for by my noble friend Lady Hayter and others, and eventually accepted by the Government. Like other participants in this debate, perhaps I may ask the Minister to give us an update on where these matters currently lie. The redress schemes are not a substitute for proper comprehensive regulation but are a step along the way.
Our deliberations are also taking place in advance of the outcome of the OFT market study into residential property management services, including, I understand, circumstances where the freeholder is a local authority or a housing association. We support this market study and await its outcome later this year, but our preference would have been for a wider study to encompass letting agents and indeed an assessment of the legal framework which underpins freehold and leasehold arrangements in England and Wales. It is this legal framework and the intermediaries that it can engender which are the source of the problems that are oft-cited and have been referred to in our brief debate today.
The typical arrangements are familiar to us all. Leaseholders have the right to occupy and use a flat, including subletting, for the term of the lease. They would generally be responsible for everything within the four walls of the property. The structure, land and communal parts will be owned by the freeholder, who will typically meet the related maintenance and repair obligations and other services via a managing agent, with recharges to the leaseholders by way of a service charge. As we have heard, the managing agent has no legal responsibility to the leaseholders. These flows and relationships are at the heart of the debate that we are having today.
Of course, there are variations on these arrangements, with leaseholders collectively owning the freehold through a collective enfranchisement arrangement. Do the Government consider that there are any residual barriers to these rights being used effectively?
There is also commonhold, which has also been referred to—a system of ownership which allows individuals to own properties with common ownership in perpetuity and collectively to control their management. However, as Which? points out, this has not taken hold as a form of ownership. It muses that this may be because developers have an interest in both developing and then managing leasehold property. The 100% requirement for converting existing leasehold properties to this basis would seem unduly restrictive in practice. We support Which?’s desire for this issue to be covered by the market study.
Whatever the precise formulation, we know that the residential leasehold market is huge. The Association of Residential Managing Agents—ARMA—estimates that there are between 1.6 million and 1.8 million flats in England and Wales. Some estimates put that figure considerably higher: 5 million was the figure referred to before. Given the inexorable growth of the private rented sector and the buy-to-let market, those numbers look bound to increase. We have heard that currently leaseholders might spend in the region of £2.5 billion a year in service charges. In terms of market concentration, ARMA claims over 300 corporate members that, between them, manage around 900,000 flats. About a dozen members are national companies with major portfolios of between 20,000 and 100,000 units. These numbers illustrate why the market study is appropriate.
The scope of the study is about determining: whether managing agents and freeholders have the same interests as leaseholders in keeping down maintenance costs and buildings insurance, and how best value can be achieved; whether leaseholders can sufficiently influence the appointment of managing agents or the extent of their services; whether the market for managing agents is competitive and whether there are practical barriers to switching providers; whether the choice of contractors to provide services is influenced by financial commissions—with insurance in particular—and associated company agreements; and whether there are barriers to leaseholders exercising their right to manage their own property. It touches on a number of the key issues and effectively considers the extent to which the lack of statutory regulation can exacerbate market deficiencies.
A number of other important issues have been highlighted but are not covered. There is the broad issue of the advice that consumers get about owning leasehold property, especially around the length of the lease, the ground rent, restrictive covenants and how service charges are determined. Again, as Which? pointed out, it would be helpful if the market study covered the effectiveness of the leasehold valuation tribunal and the government-funded leasehold advisory service, particularly in circumstances where the number of cases before the tribunal has increased dramatically. Obviously, one clear way to improve standards in the sector—a matter we were working on before the last general election—is a regulatory regime for managing agents. At present, anyone can set up as a managing agent without any relevant qualifications or experience.
Perhaps the Minister could say why the Government consider that a satisfactory state of affairs. What are the problems for government in requiring all managing agents to meet minimum standards of competency and professionalism, to have to declare all commissions received and to follow a code of conduct, particularly on the issue of transparency, which has been raised? Would the Minister accept that that would be an effective way of tackling inflated service charges and challenge connected company exploitation? We should applaud the efforts of ARMA in introducing a voluntary scheme as a step along the way to statutory regulation.
The focus of my presentation so far has been on the relationship between leaseholders and freeholders and their responsibilities and obligations—effectively the leaseholder as the customer. It is impossible to consider comprehensively the issue of leasehold reform without reflecting on the private rented sector more generally where the tenant might be seen as the customer. These relationships will sometimes be between tenant and freeholder, and sometimes between tenant and leaseholder, and thereby governed to an extent by the lease. As the Government acknowledge, the private rented sector comprise some 16.5% of all households, amounting to some 3.8 million homes in England, including some 1.1 million families with children. It is bound to grow and play an important role in meeting housing need.
We want to see a private rented sector that provides decent, safe, and secure homes at a price that people can afford. However, at present too many landlords prey on vulnerable tenants and too much of the private rented stock is non-decent. This undermines the work of the majority of landlords who strive to do the right thing. That is why we wish to develop a national register of private landlords—it is good that we have common cause with the Liberal Democrats, at least on that—designed to assist local authorities in their work, as well as helping HMRC, for example, push back against tax evasion in this sector.
We know that the leasehold/freehold divide has been a source of tension over many years. It is true that legislation over the decades has improved statutory rights for lessees but there remain serious practical issues which regulation can and should address.
Baroness Stowell of Beeston (Con)
I am grateful to my noble friend Lady Maddock for securing this debate this afternoon. Although there have been very few speakers in today’s debate, we have covered quite a bit of ground. I will certainly do my best to respond to all the points that have been raised. However, I may need to supplement my response with a letter and I will do that if necessary.
The noble Baroness, Lady Gardner, estimated that there were about 5 million leasehold properties in England. The Government estimate 3 million, but that certainly makes up a significant proportion of the housing market. I should declare from the start that I am an owner-occupier of a leasehold flat and I understand, as someone living in a property that is part of this regime, that it can be a complex and technical legal system. I certainly recognise along with others who have spoken today that it can cause problems for leaseholders and freeholders alike. But not everyone who owns a leasehold property experiences a lot of problems. What is important is that we strike the right balance in a way that recognises and protects the rights and interests of both leaseholders and freeholders and that we make sure that these rights are kept up to date with changing realities without making things more complicated, burdensome or expensive.
As the noble Lord, Lord McKenzie, just acknowledged, where we can make changes that are perhaps small in and of themselves, we do so where we think that that will be beneficial to people. The most recent example was when the Government supported a Private Member’s Bill that cleared up an important anomaly. Until that Bill, leaseholders who were unable personally to sign certain legal forms could not extend their leases or take part in buying the freehold. That small change will make a big difference to many elderly or vulnerable people, who will be able to appoint someone to sign on their behalf in the future.
My honourable friend and colleague the Housing Minister, Kris Hopkins, is already aware of some concerns about the leasehold sector that have been raised with him by Members of the other place. He is keen to listen to concerns, hear what people have to say and explore whether there is any possibility of addressing problems within the sector. Today’s debate is timely and I intend to report back to him on the points that are raised.
In addition to responding to the questions that have been asked, I think that it is important to remind noble Lords what the Government have done and are doing to make sure that the system is working effectively, that it is—to refer to the point powerfully made by my noble friend Lady Gardner—simple to understand and that it delivers high standards and easy access to remedies when things go wrong.
First, perhaps I may highlight the complexity. It is important to remind noble Lords that to help leaseholders to navigate the leasehold system, the Government provide access to free, independent legal advice and information through the Leasehold Advisory Service. My noble friend Lady Gardner of Parkes, as well as my noble friend Lady Maddock and the noble Lord, Lord McKenzie, sought to draw some comparisons with commonhold. They highlighted what the Commonhold and Leasehold Reform Act 2002 offered as an alternative to leasehold for properties such as flats.
In the past few weeks, in answering different questions and responding to a couple of debates on this topic, I have studied more about this subject than ever before and have improved my understanding. It is important to make the point that, when buying a property or a home in a building that is shared with other properties, it is difficult to conceive of a system that will be perfect and address everybody’s competing needs and rights. Although commonhold certainly offers some advantages, it also has some disadvantages. When people own leasehold properties, it is possible for them to challenge some of the decisions which are put forward and which may affect them, whereas once you are in a commonhold situation, it is very difficult, if you are in a minority, to challenge decisions made by the majority of commonholders in that block.
My noble friend referred to conversion from leasehold to commonhold and asked why that has not happened so far. We do not have any plans to review the rule that requires a 100% sign-up to commonhold from the different property owners in a block. We think that that is right, and it was debated in great detail during the passage of the legislation. As someone who owns a property in a block, I feel that, if such a significant change were proposed, everybody with a property in the block would want the decision on it to be unanimous.
As we know, commonhold rather than leasehold is also available as the tenure for new constructions, but there has not been a great deal of take-up on that. One thing that I can claim a little credit for is that I have asked my department to press a bit harder, through the forum that it holds on a regular basis with the construction industry, in exploring why the industry is not pursuing commonhold as an option.
While I am on the subject of commonhold and conversions, I should respond to a point made by the noble Lord, Lord McKenzie, about barriers to collective enfranchisement. That is obviously a slightly different arrangement, going from leasehold to freehold. Collective enfranchisement requires a number of criteria to be met, but these protect the interests of both leaseholders and freeholders. We are not aware of any residual barriers to collective enfranchisement at present.
I move on to the costs associated with leasehold, which is often raised as a concern for leaseholders, and it has certainly been raised by noble Lords today, in the context of public sector—that is, local authority—landlords where people have bought a former local authority property. We have recently consulted on proposals to cap excessive service charges for leaseholders living in former local authority properties whose landlords—that is, local authorities—benefit from Decent Homes funding, and we will be responding to that consultation shortly. We certainly remain open and receptive to further proposals to make sure that public sector leaseholders have fair and reasonable charges. My noble friend Lady Maddock asked about the OFT market study on property management services and I can confirm that it includes management in local authority and other social sectors in its work.
We are running out of time rapidly. This is such a wide and diverse topic that I cannot do it justice in the time available.
On the quality of service provided through managing agents, codes of practice have to be approved by the Secretary of State, and my department is currently working with the Association of Retirement Housing Managers and the Royal Institution of Chartered Surveyors on updating the codes. We also support initiatives to raise standards and the quality of service across the residential leasehold management sector. We welcome the self-regulatory scheme being introduced by the Association of Residential Managing Agents to raise the professional standards of its members. We will be watching with interest to see how effective and successful it is.
On the right to manage, I say to my noble friend Lady Maddock that 4,000 right-to-manage companies are registered at the moment, but her point about raising leaseholders’ awareness of this option is interesting and I have taken particular note of it.
Transparency and the information that is available to leaseholders is an important issue, which was raised by all noble Lords. Where leaseholders do not already receive service charge information as a condition of their lease, they have a legal right to ask for a summary of the relevant costs from their landlord. However, some interesting points were made on transparency and I shall reflect on them further.
My time is up, but as I have a few minutes left and have some issues to address before the next debate is due to start—
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
For the information of the Committee, the next debate will start at 3 pm.
Lord Hunt of Kings Heath (Lab)
My Lords, we had a communication from the Government Whips’ Office that these debates were to be rolling, because of the vote.
Baroness Stowell of Beeston
My sincere apologies to the Committee. That is my mistake completely and I offer my apologies. I have gone over my time. There is a considerable amount more information that I can provide, which I will do in a letter to follow up this debate.
The key point that I want to make in conclusion is that, while we do not have plans to reform the legislation in this area, my honourable friend the Housing Minister is very interested in the concerns that are being raised and we certainly look forward to hearing further following the meeting that will be chaired by the noble Lord, Lord Best, which was referred to. I am grateful to all noble Lords for their patience today.
Abortion
(10 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Knight of Collingtree
To ask Her Majesty’s Government what steps they intend to take to investigate reported law breaking by those carrying out terminations of pregnancies.
Baroness Knight of Collingtree (Con)
My Lords, normally, when a Bill has been debated, taken through Committee and approved by both Houses, it is signed by the Queen and becomes an Act. After that, those breaking it will face possible arrest, fines or even imprisonment—unless it is the Abortion Act 1967. I well recall its passage; there were firm reassurances that its strictures would not permit abortion on demand. Today, more than 7 million abortions later, we have exactly that. So much has the Act been watered down and its safeguards ignored that it is now being quoted to warn those who will soon vote on euthanasia. It is an apt comparison because both deal with life and death. The warning is that the triple lock of the Falconer Bill is modelled on the wording of the old 1967 Act and will turn out just as ineffective.
The Abortion Act is four pages long and contains only seven sections. At least four seem to be broken regularly, yet it is impossible to get details of investigations into this law-breaking or about any resulting prosecutions. Section 1 lists a vital condition on which abortion became legal: that two doctors must see and examine the patient and certify that the operation would be legal. The object of that was to ensure that—on such a serious matter as the death of a child—a second opinion had been sought and two doctors separately concurred. Last year, the NHS’s own inspectors found bundles of forms signed by doctors in 14 hospitals, certifying that they had seen and examined the patient. Their medical and independent judgment agreed that she met the conditions for a legal abortion. All these doctors lied. I understand that there were 76 of them. They had neither seen nor examined the woman; they and the doctors who subsequently performed the abortion broke the law. Falsifying official forms is perjury.
Never, until now, has it been acceptable to pass the job of dealing with law-breakers from the British courts to those representing the professions or trade unions of the very people breaking the law. The GMC dealt with that case, which would have been fine if it had just been a question of medical ethics but it was not—it dealt with the law of the land. The medical profession is now saying that since it thinks that a second opinion is unnecessary, it will not seek one. Surely it must be Parliament, not doctors, that decides what the law says. The Act is unequivocal: involving two doctors is its first condition. Nowhere does it give a proviso that any part can be ignored if anyone disagrees.
Section 1 also rules that no abortion is legal unless the woman’s heath or mental state would be at risk without one, or if her existing children faced physical or mental abnormalities of some kind if she did not have it. Are such judgments routinely made? I have met and talked to a number of girls who have had a termination. Not one has ever been able to tell me of tests or questions about that, or checks on their children’s likelihood to be made ill, mad or slightly mad. Very few of those I spoke to had any children at all.
Then there is Section 4, giving everyone the right to refuse to take part in an abortion if they have a conscientious objection. That is the law. The truth is that the NHS does not and will not employ any midwife who has such an objection. A very senior doctor in this House told me only last week that large numbers of them have emigrated. I have never heard even a whisper of any legal action against those who break Section 4. Why is that? The Act certainly does not deny a conscientious midwife the right to a job.
What investigations are being done on allegations and evidence that abortions happen because the unborn child is a girl? Last week, the Prime Minister stated firmly and clearly that that was illegal. If it is, surely checks should be going on into whether these reports are true. I wonder whether his statement was based on the words of my noble friend Lord Howe:
“Abortion on the grounds of gender alone is illegal … The Abortion Act is very clear on that point”.—[Official Report, 12/2/14; col. 639.]
I have checked the Act a number of times and all the amendments very carefully. There are no such words or clarity in the whole lot of them. It would amaze me if there had been, for none of us dreamed then that it would become possible to know the sex of an unborn child. The noble Lord, Lord Steel, would never have sanctioned gender abortions.
Abortion law surely lacks clarity on matters that need to be clear. Furthermore, it suffers from those who play with words to the extent that it permits terminations that were never intended to be legal. In no way do I seek in the debate this afternoon to discuss the right and wrongs of abortion—there are many different views in this House on that. I do not mean to go into any of that. All I ask is that the law, as passed by Parliament, should be clear and upheld. Surely that is not an unreasonable request.
Lord Gordon of Strathblane (Lab)
My Lords, I start by thanking the noble Baroness for securing this debate. She will forgive me if, for reasons of time, I am not more fulsome in those thanks. I also thank the staff of the Library, who have produced a very helpful briefing note.
Debates on abortion are fairly rare, for the obvious reason that they are seldom debates. Discussion is polarised between those who regard abortion as a form of retrospective birth control and those on the other side who regard it as a form of anticipatory infanticide—and never the two find common ground. I hope that today might be an exception, because I think we are all united that abortion for gender selection reasons is wrong—the question is what we do about it. The noble Baroness has already quoted the noble Earl, Lord Howe, and Ministers in the other place, and it is clear that the Department of Health has echoed that point of view. In fairness to the former Director of Public Prosecutions, who has so far refused to prosecute anyone, it is worth while quoting what he says in defence of the department:
“I am bound to observe that the limited medical guidance; the approach apparently endorsed by the HAS/1 form that an abortion can be performed without either medical practitioner having actual direct contact with the woman requesting an abortion; and the past practice of pre-signing HAS/1 forms present real difficulties in bringing a prosecution of doctors for failing to carry out a sufficiently robust risk assessment of their patients in cases such as these. Whether the current arrangements should be altered or tightened is, of course, a matter for others”.
I hope that we will discuss today how we can address those legitimate points raised by the DPP. It would be helpful if the Minister would indicate that the practice of pre-signing forms will be outlawed from now on, and confirm the figures as regards doctors actually seeing a patient before signing an abortion form. Questions on this issue were asked in the House of Commons by Sir Edward Leigh in successive months—I think on 13 January and 13 February. On one occasion he was told that only 46% of doctors had seen the patient in these circumstances. He was subsequently told that the Government did not have the figures because they were not available. Will the Minister clarify whether the figures are available?
I hope we are all in agreement that the real problem is that Section 1(1)(a) is so widely drafted that it permits abortion on demand. That was certainly not what the promoters of the 1967 Act wanted. However, on the other hand, some Members of the House of Lords may want that now, in which case I hope they will bring forward legislation and introduce that measure by the front door, not the back door.
Lord Ahmad of Wimbledon (Con)
I remind noble Lords that this is a time-limited debate and that all speeches should be limited to two minutes.
Baroness Barker (LD)
My Lords, I thank the noble Baroness, Lady Knight of Collingtree, for initiating the debate. This is a subject on which she and I hold very different views, but I admire the vigour with which she pursues her very strongly held convictions.
We are having this debate at least in part because of the ongoing campaign by the Daily Telegraph and the sting operations which it has mounted in support of that. Noble Lords will have seen the briefing from the Library. I think it is evident from that that the law is being upheld and that the DPP has yet to find a case where the law has been broken in this regard. It is also clear that the professional bodies—the GMC and the BMA—are dealing toughly with any professional about whom there is the remotest suspicion that they may not be upholding the law in full.
I want to make just one simple point. The NHS is under enormous pressure, particularly as regards maternity services. Given that, there is a legitimate question as to whether or not it is necessary to continue to require two doctors to authorise a procedure in this regard. I am not asking for the law to be changed on the basis of opinion but rather that research is done—that is, comparative research with regard to other countries where the authorisation of two doctors is required—to see whether scarce resources could not be used more effectively in advancing the healthcare of women and children. I am not asking for the law to be changed in any other respect. I think the other four criteria that have to be met should remain. I simply question whether, in this day and age, it is still necessary for two doctors to make that decision.
Baroness Hollins (CB)
My Lords, as a mother with daughters and granddaughters, I find it unbelievable that aborting on grounds of female gender is not explicitly illegal; it certainly seems discriminatory.
As immediate past president of the BMA, I quote its guidance that,
“it is normally unethical to terminate a pregnancy on the basis of fetal sex alone, except in cases of severe x-linked disorders”,
which, of course, affect the male foetus.
The Minister recently stated that updated guidance is being prepared for abortion providers to make it,
“abundantly clear that gender selection is illegal”.—[Official Report, 12/2/14; col. 639.]
However, guidance alone is not legally binding. The Royal College of Obstetricians and Gynaecologists’ clinical guidance on induced abortion notes:
“Services should identify issues which make women particularly vulnerable”.
The RCOG includes domestic abuse and gender-based violence here and goes on to recommend that women should be referred to appropriate support services. Do we know whether this actually happens?
In January, the Independent attributed a reduction of between 1,400 and 4,700 expected live births of girls in the UK to sex-selective abortions. The Minister has in a previous response questioned the statistical analysis of the data, raising doubt about the Independent’s conclusion that sex-selective abortions are being performed. However women’s rights groups such as Jeena International and Karma Nirvana, which represent some of Britain’s minority women, are clear that gender abortions are happening here in the UK and that numbers are far from insignificant.
The reports available suggest that this is predominantly a cultural problem. Does the Minister agree that analysing the data regionally and by ethnicity could alert us to areas of concern? Will the Minister advise whether the Government would consider changing secondary legislation by amending regulations, thus providing clarity about the illegality of this apparently growing practice?
The Lord Bishop of Leicester
My Lords, whatever our differing positions on the ethics of abortion, it must be a matter of widespread concern if there is the appearance of a long-standing gap between the spirit of the Abortion Act and the interpretation of the law. This is a matter of particular interest to many in the churches because of a theological commitment to the sanctity of human life, including potential human life.
Two particular areas of concern have been brought to my attention and I want to raise them briefly. The first is gender-selective abortion, which is a matter of great sensitivity, not least in cities such as Leicester, where I come from. Will the Minister help us by commenting on the implications of the press reports and indicating whether evidence to the effect that this is happening is available to the department?
Secondly, abortion on the grounds of serious handicap or disability is currently the subject of some renewed debate raising concern that it is contrary to the spirit of equality legislation as undermining the status and role of disabled people in society. Will the Minister comment on the concern that while foetuses are not afforded legal personhood the law on this is somewhat incoherent as foetal deaths prior to 24 weeks are classed as miscarriages but must be registered as stillbirths after that? Will he comment on the recommendations in last year’s report by the Pro-Life APPG on abortion on grounds of disability which included recommendations for either reducing the upper time limit on abortion on grounds of disability from birth to make it equal to the upper limit for able-bodied babies or repealing Section 1(1)(d) of the Abortion Act altogether?
Lord Mackay of Clashfern (Con)
My Lords, I am grateful to my noble friend for raising this debate. I want to deal very briefly with two points. First, I have seen it suggested that abortion on the ground of sex selection is lawful, or not unlawful, in this country. I do not believe that is correct. The law is quite clear that an attempt to procure abortion before the Act was unlawful and now the Act allows abortion to be lawful on four grounds, none of which is sex selection. Therefore it is absolutely clear that the law prohibits that as a ground of abortion in this country.
Responsibility for seeing that the law is observed in this area, as in other areas, is with the prosecuting authorities, including the police and the DPP. The DPP has drawn attention to difficulties in relation to the arrangements that have been sanctioned by the Department of Health in this connection. My noble friend Lord Howe may have some comment to make on that. I cannot see how a medical practitioner could pre-sign the form in a way that conforms with the statute. My noble friend said that the law is construed in such a way as to allow abortion on demand, but the law does not do that at all. It is quite wrong to suggest that the signing of the form could be done responsibly without proper knowledge of the situation of the patient at the time.
Baroness Rendell of Babergh (Lab)
My Lords, I thank the noble Baroness, Lady Knight, for introducing this debate. Worldwide, women are still not the favoured gender. When my husband was in the Royal Navy and was stationed in Hong Kong soon after the end of the Second World War, he saw the bodies of drowned baby girls floating in the harbour. This was long before the arrival of the cheap ultrasound machine which is imported from China to India. Two thousand female foetuses are aborted every day in India.
This is not new. Demographic statistics first collected in the 19th century in some Indian villages show that no girl babies were found alive. A girl is regarded as a drain on a family’s resources. Some are killed before or after birth to avoid paying a dowry when she would have married, and some because parents lose a potential pension when a daughter leaves her home to join her husband and she can no longer care for them in their old age.
There are now reports that sex-selective abortion is happening in the UK. A study by University of Oxford academics has suggested that Indian women in the UK were aborting more female than male foetuses between 1990 and 2005. That is so concerning that the Council of Europe has suggested that member states stop giving parents information on the gender of unborn babies until late in pregnancy. Such preference for sons over daughters has tipped the natural 50:50 balance in some ethnic communities.
Will the noble Earl give an assurance that the Government take this matter seriously and will he undertake to keep it under close observation, bearing in mind that unsafe abortion results in 47,000 deaths worldwide?
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I would also like to thank my noble friend Lady Knight of Collingtree for instigating this debate, but I am coming from a slightly different angle. At a time when medical science is advancing by the month and extremely pre-term babies who are born before 28 weeks are able, through intervention, to survive, we must maintain a respectful balance between terminations and live births.
Statistics from the World Health Organisation show that in England in 1995 the survival rate of very premature babies was 40% and in 2006 it was 53%. The survival rate increases by 9% for each week after 24 weeks. However, knowing these statistics will not diminish the anxiety caused to the mother whose baby has been predicted to be premature.
The issue of terminations on the basis of the predicted sex is a product of the advance of medical science. When I was pregnant, ultrasound scans were not routine. This meant that the baby’s sex was a wonderful surprise at birth. Nowadays, scans are routine and offered at 12 and 20 weeks. It is now possible to see what the sex might be. Some parents do not wish to be told, but others are told.
Perhaps a more ethical way would be not routinely to offer knowledge of the sex of the child except where medical reasons, certainly not social reasons, might require it. For some parents with a family of all girls or all boys, the temptation to know and perhaps terminate could be overwhelming. We should not put such temptation in their way.
As a society, we must maintain a strong balance where the survival of premature births is always ahead of the length of gestation at which termination can take place.
Lord Singh of Wimbledon (CB)
My Lords, as a Sikh, I am totally opposed to abortion on any grounds except that of real and serious danger to the mother’s health, and it is important that those who facilitate gender-selective abortions should be punished with the full rigour of the law. However, laws cannot create good behaviour; they can only define the boundaries of unacceptable behaviour. We must also look to education in tackling negative and outmoded cultural practices.
The Sikh religion is not a religion in which “thou shalt” or “thou shalt not” are strictly imposed; Sikh teachings are couched in terms of gentle guidance about what we should or should not do to lead a responsible life. One of the few exceptions is a total condemnation of female infanticide. Sadly, this was all too common in the India of 500 years ago and was linked to the inferior status of women throughout the world.
From the very start of the religion, Guru Nanak taught the dignity and complete equality of women. Sikh women have always been able to lead prayers and occupy any religious position. The 10th guru, Guru Gobind Singh, gave women the name or title Kaur—literally, “princess”—to emphasise their dignity and complete equality. A Sikh woman does not have to take her husband’s name but remains an individual in her own right.
Despite the clarity of such teachings, negative sub-continent culture for some, even in the Sikh community, leads to discrimination against women and girls. Perversely, it is women who are often responsible, with mothers lavishing extra attention on male children. Even in the West today, a new birth is frequently accompanied by a joyous cry, “It’s a boy!”. It is not so long ago that the birth of a girl to royalty was greeted as a national calamity, on a par with the loss of a test match.
We all have to work much harder to fight gender discrimination and gender prejudice through tighter laws and education.
Baroness Tonge (Ind LD)
My Lords, I, too, welcome the debate secured by the noble Baroness, Lady Knight. Whatever our personal position on abortion, I hope that we all want it to be carried out within the law. All providers of abortion services are tightly regulated and monitored by the Care Quality Commission, which makes unannounced inspections of all providers at least once a year. If doctors are carrying out abortion for any reason outside the law, they should be prosecuted. There is no question about that. Sometimes there may be a sound medical reason for an abortion to be carried out which, to a non-medical person, may appear to be outside the law. These cases, which are rare, should also be properly investigated. New guidelines are being drawn up by the Department of Health and they should clarify these cases, especially making it clear that abortion on grounds of sex alone is not legal.
I support the call by my noble friend Lady Barker for only one doctor to be involved. I do so because it seems to me that it would make the responsibility his or hers alone. There would be no buck-passing and it would make the law far easier to interpret, as well as making it better for the health service and for the patient.
However, attempts to criminalise doctors and prevent access to abortion services, which have recently been escalating in this country, must stop. The Abortion Act is there to prevent malpractice. Personally—I have to say this—I still think that a woman’s right to choose what she does in this situation should be sacrosanct. Whatever our personal point of view, like Queen Elizabeth I, we should not seek to look into other people’s souls or to impose our ethical stance or religion on others.
Lord Patten (Con)
My Lords, allowing sex-selective abortion would mean that the UK was sleep-walking into a full-blown eugenic society, flying full into the face of humanity and the gift of life. Gender-selective abortion, which is highly discriminatory against females, is not prohibited by any Act or any other legislative instrument nor, for that matter, would be abortion by selection on grounds of likely height, appearance or whatever, which forms of cosmetic abortion could follow.
Neither ministerial exhortation, codes of practice nor medical professional self-regulation will stop this. Only the Government can. Therefore, there is a very urgent need for secondary legislation to do the job—to make clear the illegality of all these practices—as the issue will surely blow up in the Government’s discomfort zone if it is not punctured soon, as the Prime Minister has pointed out and sensed, I believe.
Exactly the same goes for foetal pain at 20 weeks-plus, in relation both to the provisions of the Abortion Act and current legislation against the wilful infliction of pain contained in Section 134 of the Criminal Justice Act 1988, which enacts the UK’s commitment under the UN Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment. By sheer coincidence, I happen to have taken that Bill through all its stages in another place. Will my noble friend the Minister act on these two issues?
Baroness Flather (CB)
My Lords, I have looked forward to this opportunity to say some things that are very dear to my heart. First, millions of girl babies have been aborted in North India, and the difference between the numbers of girls and boys in two states, Punjab and Haryana, is ridiculous. In Punjab it is 10% and in Haryana it is 11%. Bearing that in mind, it leads us to the conclusion that this must never, ever be allowed in this country. Secondly, whatever the noble Lord, Lord Singh, says, Punjab is the homeland of the Sikhs. He once said to me, “What a pity the Sikhs don’t know how good their religion is”. It is a wonderful religion, but they do not follow it. There is a lot of discrimination, which is not unusual, as we know. In Gujarat, not so long ago—this is current, I am not talking about 500 years ago—they used to drown girl babies in buckets of milk saying that they were drinking the milk. There have been such terrible things happening in countries to get rid of girl babies.
I wrote to Jeremy Hunt, and I received a reply from Dame Sally Davies, the Chief Medical Officer, from which I quote two parts. The first is that, “The CPS concluded that the two cases did not provide a clear basis of finding for a gender-based abortion” and secondly, this part is in bold, “The law is clear that termination of pregnancy on grounds of gender alone is illegal and this decision does not alter that”. We can take comfort from that. We have had a bit of debate that should not have happened today about whether there should be abortion at all, or at what stage there should be abortion. I think that it is a woman’s right to have family planning and, if she does not want a baby, not to have it. It is a human right; women have very few human rights and this is an important one.
Baroness Perry of Southwark (Con)
My Lords, as we are so close to the end of the debate I will not try to repeat the excellent arguments that have been made, not least by my noble friend Lady Knight in her excellent introduction. It might be well to reflect for a minute on abortion itself and the experience of abortion. I have never forgotten one young woman of 18 years of age, whose boyfriend had insisted that she have an abortion because he wanted no part of a baby, telling me what it was like. I had tears in my eyes, as she had in hers, as she told me how the whole night before her abortion she had tried to talk to her unborn baby and explain to it why it was necessary that it should die and how awful she felt when the morning came and she had to say goodbye to the baby that she would never meet. That is the reality of the personal experience of abortion.
What struck me most, looking at the excellent statistical analysis that was given to us by the Library, was that more than a third of women who appear for an abortion are on their second, third or even more. Why is it that they are not given—at the first experience of abortion at least, if not earlier in their lives—better instruction about how to prevent a pregnancy in the first place? We have failed disastrously when there are so many ways of a woman exercising birth control. When we have a morning-after pill, why is it that so many women find themselves with unwanted pregnancies? This is perhaps a failure of what is done in school but it is also—it seems to me—crucially a failure of what happens when a young woman presents herself for the first time for an abortion. She should at least be given good instruction about how to prevent it happening again. In the wider discussion of the appalling custom of aborting little girls, we should think more on the general issue of abortion itself.
Lord Alton of Liverpool (CB)
My Lords, since the 1967 Abortion Act came into force on 27 April 1968, there have been more than 7 million abortions—around 600 every working day. I have some questions for the noble Earl.
As the law does not permit abortion on demand, and abortion was supposed to be a rarity, how in particular does the Minister explain the 66,000 repeat abortions last year—37% of the total—and the fact that, in some cases, individuals have had as many as nine repeat abortions? How does he explain that the majority of abortions are approved by doctors who have never even met their patients? Does he believe that Parliament and the law intended babies to be aborted after up to 40 weeks’ gestation on grounds such as having a cleft palate—breaking our laws on equality and discrimination? Does the noble Earl believe that Parliament wanted an estimated 4,700 girls to be aborted as just another choice, adding to the 160 million girls aborted worldwide?
Non-binding guidance is clearly not enough. Will he therefore amend the HSA1 and HSA4 forms to ensure that the two doctors required by law to authorise abortions only do so having directly asked whether the abortion is on the grounds of gender? On page 8 of its leaflet, Britain’s Abortion Law: What it Says, and Why, BPAS, which undertook 54,478 abortions last year with public money, asked:
“Is abortion for reasons of fetal sex illegal … ?”.
It then provides the answer, “No”. Why has the Minister not required BPAS to remove that advice? In a world in which we have such a low view of the intrinsic value of every life, what is being done to bring to book, using the Human Tissue Act, those National Health Service trusts that have been burning the human remains of aborted and miscarried babies to heat National Health Service hospitals?
These brief questions illustrate why the legislation needs, as the noble Baroness, Lady Knight, has told us today, careful review and amendment. Can the Minister think of a single comparable piece of legislation which has had such far-reaching consequences but has never been subject to post-legislative parliamentary scrutiny? Why does he think that is and will he ask the Secretary of State to consider allowing it?
Lord Campbell-Savours (Lab)
My Lords, we have half an hour left of this debate, and I wonder whether I could speak very briefly in the gap and ask a question.
Lord Popat
It happens that way in the Chamber, where we give four minutes, but not in the Grand Committee Room.
The Deputy Chairman of Committees (Baroness Andrews) (Lab)
I think we can allow the noble Lord to speak very briefly.
Lord Campbell-Savours
I want to ask this very simple question. It has been drawn to our attention by the noble Baroness, Lady Knight of Collingtree, that pre-signed forms have been found. Is it a breach of the law to sign those forms and, if it is, should prosecutions be brought in such circumstances?
Lord Hunt of Kings Heath (Lab)
My Lords, this is an important debate. I share the concerns of the noble Baroness, Lady Knight, about the Assisted Dying Bill, but I do not accept the link she has made between that Bill and the 1967 Abortion Act. I speak as someone who has always supported that Act, but I find termination on the grounds of gender to be absolutely abhorrent, and I hope the noble Earl can clear up the issue of the interpretation of the 1967 Act. Can he say whether he agrees with the interpretation given by the noble and learned Lord, Lord Mackay of Clashfern? As I understand it, the essence of what he said is that the 1967 Act permits abortions only under the specific circumstances as set out in that Act. Therefore, it does not allow for an abortion to be performed on the basis of not wanting a child of a specific gender. It would be very helpful if the noble Earl could really clarify that point.
I also want to ask about the decision of the independent prosecutors in the case mentioned by the noble Baroness. I well understand that the Attorney-General does not want to second-guess the decisions of the independent prosecutors and I have read the subsequent explanation of the Director of Public Prosecutions, but would like the noble Earl to clarify whether he thinks, in the light of that, that any further clarification is required. We have heard about the pre-signing of HSA1 forms. Can the noble Earl confirm that, following the investigation by the Care Quality Commission, those organisations that were found to be pre-signing those forms were ordered to stop this practice? Is he confident that providers are now complying with the Abortion Act?
Finally, does he agree that we need to challenge discriminatory attitudes towards women and girls and should not be frightened of that challenge? Will the Minister say what efforts the Government will make on education in this area and specifically among some communities in this country?
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
My Lords, it is right for me to begin by thanking my noble friend Lady Knight for her powerful contribution to this important and emotive subject. I express my appreciation to all speakers in this debate. A large number of points have been made and questions have been asked, so I hope noble Lords will forgive me if I do not manage to answer all of them. I undertake to do so, in so far as I do not cover the points in my speech, in a subsequent letter.
The Abortion Act 1967 sets out the terms under which abortion is legal. Since it was passed in 1967, there has been a long-standing tradition that any legislation on this issue is put forward from the Back Benches and is subject to a free vote. I was asked by the noble Lord, Lord Hunt, and others whether the law needs clarifying in the light of events and the statement from the Crown Prosecution Service, which my noble friends Lady Barker and Lady Tonge asked about, making changes to the law. Clarification of the law remains a matter for Parliament, not for government. I say to my noble friend Lord Patten that there is no scope for secondary legislation to amend the grounds on which abortion takes place. It would be a matter for primary legislation.
It is vital for everyone, regardless of their views on abortion, to be assured that the law on abortion is operating as Parliament intended. This is particularly important for clinicians directly involved in certifying and performing abortions who need to know that they are operating within the law and for women seeking an abortion who need access to safe, legal, high-quality abortion services.
The Chief Medical Officer has written twice to all doctors involved in abortion provision to remind them of the need to make sure that they work within the law at all times. It is also important for doctors to be able to explain and evidence their decisions and to record how they have formed an opinion on whether grounds for abortion are met. A number of noble Lords, including my noble friend Lady Knight, raised the issue of doctors forming an opinion on grounds for abortion without seeing or examining the woman. Since the Abortion Act 1967 was passed, the law has required that two doctors certify in good faith that there are lawful grounds for any abortion, and that must be based on understanding the facts of a woman’s case whether or not they personally see or examine the woman.
My noble friend Lord Gordon asked whether we can provide figures for the number of abortions performed without a doctor seeing or examining the woman. I am advised that we do not have figures for that. The 46% figure quoted was wrong, I am sorry to say, and was withdrawn by the department. It is not possible to quantify the figure, but I can say to the noble Lord, Lord Campbell-Savours, that forms being pre-signed is a clear breach of the law and if it is found to be happening, a prosecution should be brought.
I can say to the noble Lord, Lord Gordon, that the Care Quality Commission will continue to cover this issue as part of its inspections and compliance action will be taken against any provider where there is evidence of pre-signing. The CQC has put in place information for its staff to help identify if pre-signing or other instances of non-compliance are taking place to make sure that they would be picked up during inspections.
My noble friend Lady Knight and a number of other speakers expressed concerns about gender-selective abortions, particularly the abortion of foetuses simply because they are female. My right honourable friend the Prime Minister has referred to this practice as “appalling”. The Government’s view has been clearly stated on many occasions—that abortion on grounds of gender alone is illegal. My noble friend Lady Knight stated that the Act is not clear on this point. I confirm to the noble Lord, Lord Hunt of Kings Heath, that the grounds for abortion are set out in the Abortion Act 1967. It is true that these grounds make no reference to gender. While there is an extremely limited number of circumstances in which gender may be a factor in considering other grounds—for example, a gender-related abnormality—the department has made a number of recent public statements through the CMO letters, Answers to Parliamentary Questions and media lines, stating our view that abortion on grounds of gender alone is illegal, and we firmly stick by that view.
Analysis conducted by the Department of Health indicates that birth ratios—that is to say, the ratio of boys born as compared with girls—in this country are within normal limits. This is true for the population overall, and is also true for births to women born abroad who now live in this country. This analysis was first conducted and published in May 2013. This is being updated and we intend to continue to conduct a similar analysis on an annual basis, because we regard this issue as extremely important. We are determined to monitor the situation regularly and remain vigilant. I am also aware that some individuals and organisations have offered anecdotal evidence of gender-selective abortions taking place. I urge anyone who thinks that the law may be being broken to contact the police with their evidence.
The noble Baroness, Lady Hollins, and the noble Lord, Lord Singh, may be interested to know that Department of Health officials recently met representatives from Gina International. The meeting was very useful and Gina International has been signposted to relevant organisations, including abortion providers, with which it can discuss its concerns. The meeting concluded that both sides share the same aims—namely, to spread the message that abortions on the grounds of gender alone are illegal.
The Daily Telegraph first brought this issue to light during its investigation in February 2012. I am aware that the announcement in September 2013 that the Crown Prosecution Service declined to prosecute two of the doctors involved in this issue has been disappointing for some. In explaining why it felt that prosecution was not in the public interest, the Crown Prosecution Service noted that it could be difficult to determine whether doctors had worked within the Act in forming an opinion in good faith. It felt that further guidance to doctors on this issue would be helpful for doctors themselves, as well as for any authority who may need to investigate an allegation of poor practice or lawbreaking. The department therefore intends to issue further guidance for doctors, which will set out the Government’s interpretation of the law on gender-selective abortions, as well as further information about reaching and recording an opinion formed in good faith. We intend to issue this guidance shortly.
I say to the noble Baroness, Lady Hollins, that we believe that the department’s analysis, which is based on birth registrations, is more accurate than the Independent’s analysis, which was based on household composition. The department’s analysis showed that birth ratios were within normal limits.
All abortion providers must be registered with the Care Quality Commission, and independent sector providers must also be approved by the Secretary of State for Health. In order to be approved, independent sector providers must adhere to the required standard operating procedures. There has been considerable concern that the consultation that the department has recently completed on updating these procedures has somehow changed the legal position on abortion. As I have highlighted, the legal requirements on abortion are set out in the 1967 Act. Nothing has changed. A response to the consultation will be published once all the responses have been analysed.
Lord Patten
My noble friend, for whom I am full of admiration in every way, has said that the law forbids abortion on grounds of sex selection, and forbids pre-signing. However, there has never been a successful prosecution or, indeed, a prosecution of any sort. It seems to me that nothing at all is actually being done.
Earl Howe
I shall copy all letters to all Peers who have spoken in the debate. My time is now running out but I know that concerns have been expressed, not least by the noble Lord, Lord Alton, about the way that foetal remains are sometimes disposed of. A recent investigation by the Channel 4 “Dispatches” programme examined this issue. The type of situations highlighted in the programme, where foetal remains were incinerated rather than buried or cremated in line with what the woman would have wanted, are totally unacceptable. Any such practices should cease immediately. A letter has gone to all trusts to make that point emphatically clear.
My noble friend Lady Bakewell asked about hospitals revealing the sex of the foetus at routine ultrasound scans. Disclosing the sex of a foetus is a local decision and should be based on clinical judgment about the certainty of the assessment and the individual circumstances of each case. It is not something that the Government can mandate from the centre.
My noble friend Lady Knight asked about the NHS not employing midwives who would not be willing to perform abortions. The Act allows professionals, including midwives, to opt out of participation in any treatment to which he or she has a conscientious objection. That conscientious objection should not be detrimental to the careers of health professionals. I think I am over my time.
Earl Howe
Sorry, I will carry on. The noble Lord, Lord Alton, made some powerful points about repeat abortions. We are working to reduce repeat abortions through promoting access to the most effective methods of contraception following abortion. Care pathways should be in place to contraceptive services following any abortion.
The noble Lord, Lord Hunt, asked about recording the sex of a foetus on the HSA4 form. We have no plans to record the sex of the foetus on the form. It is not usually possible to identify the sex of a baby until the second ultrasound scan, which takes place at around 18 to 21 weeks’ gestation. In 2012, nearly 98% of abortions were performed before 18 weeks’ gestation, so the gender of the foetus is not known for most abortions. I strongly agree with him that a challenge to attitudes and discrimination against women is a good thing. That is what our parliamentary system is based on. I will write to him further on that, as I will on the question of education.
I close by emphasising again that we are not complacent on these issues. We remain and will continue to be very vigilant.
Lord Popat
My Lords, I suggest we take a break for five minutes in view of the fact that we do not have all the speakers for the next debate.
EU: Money-laundering Directive
(10 years, 8 months ago)
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Lord Willoughby de Broke
To ask Her Majesty’s Government whether they support the inclusion of private trusts in the draft provisions of the Fourth Money Laundering Directive.
Lord Willoughby de Broke (UKIP)
My Lords, I am grateful for the opportunity to draw this matter to the attention of the Committee. I must start by declaring an interest. My farm, on which I scratch a living, is run under a parliamentary trust with trustees who are properly named and all the accounts are in order, as far as I know.
Having got that out of the way, I should say that this debate is about the amendment which the European Parliament recently passed in plenary session to support the amendments to the fourth money-laundering directive inserted by the European Parliament’s Economic and Monetary Affairs Committee. This recent amendment means that companies and, crucially, trusts will have to be listed in public registers in EU countries. This amendment goes well beyond the scope of the original draft directive published by the European Commission last year. That required privately owned companies and trustees of express trusts to maintain records of the identities of their beneficial owners. However, at that stage, the directive required the information to be made available to competent authorities and obliged entities only—that is, law enforcement bodies and persons conducting due diligence. The original draft did not envisage public registers and did not even mention trusts.
The important point to underline is that under the third money-laundering directive, which was implemented in UK law by the Money Laundering Regulations 2007, there is already a legal requirement to identify the beneficial owners of trusts, companies and foundations and their trustees. Indeed, HMRC already requires that any person concerned with the making of a settlement must make a return under declaration S218 stating the names and addresses of the settlor and the trustees of the settlement. The tax authorities already have all the tools they need to ensure compliance with those money-laundering regulations.
Individuals at law firms to whom I have spoken in preparing for this debate have repeatedly made the same point. The existing “know your client” rules—noble Lords will be familiar with the tedious requirement to produce your passport and utility bills when you do business with a company with which you have done business for 30 or 40 years—already make that point. All intermediaries, whether financial or solicitors, already have a legal duty to report to the authorities anyone attempting to use a trust for illegal purposes or they face a fine and even imprisonment. Those rules have been deemed completely adequate by successive British Governments who have never attempted to introduce this sort of intrusive law which is being put forward by the European Parliament.
Why are we now faced with this wholly unnecessary and intrusive directive? It is principally, I think, because of the ignorance and misconception about trusts in the rest of the member states of the EU whose legal systems are based on civil law, not common law. That encompasses 26 of the 28 members of the EU. Civil law countries do not have trusts in their legal systems, so they do not understand the centrality of trusts in English law. Oddly enough, it was a French legalist, Monsieur Pierre Lepaulle who, talking of trusts, wrote:
“The trust is the guardian angel of the Anglo-Saxon, who accompanies him everywhere, impassively, from the cradle to the grave”.
In the EU, there is a complete misconception of the use of trusts, evidenced by the very strong support in the European Parliament for this amendment. Trusts are seen as vehicles for tax fraud—corporate or individual—and as the preserve of the rich, thus a higher risk to Governments in terms of tax evasion.
The truth could not be more different. Trusts in England and Wales are mostly used in mundane and practical situations. Let me give some examples: the co-ownership of land, the administration of deceased estates, the protection of children during minority, the protection of vulnerable and handicapped people, retirement pension schemes and employee share-ownership schemes. Most UK charities are structures as trusts. According to the Law Society, there are well over 1.5 million trusts in Britain, so the requirement of this amendment for a national public register of trusts, their beneficiaries and trustees will have far-reaching and potentially damaging consequences.
The Englishman’s home has traditionally been his castle. This will no longer be true. This proposal will threaten individuals’ and families’ basic rights to confidentiality in their private affairs. Publicly accessible registers of private individual’s affairs can well present risks for those who are named in them, for example by being targeted by financial criminals. On that, I want to draw noble Lords’ attention to the “Panorama” programme on 28 February, called “Kidnapped, Betrayed by Britain”, in which the journalists on the programme investigated the disappearance in Dubai of a British businessman. According to that investigation the British authorities handed over thousands of pages of confidential documents to the Iranian authorities without informing the British businessman involved and ignoring the warnings that their actions posed a risk to his safety. He was kidnapped, disappeared and is presumed dead. Now, that is probably a little extreme but it shows that there are risks in making these registers public to anyone at all. The Latvian rapporteur who introduced this amendment said after the vote in the European Parliament that it was,
“a good day for law-abiding citizens, but a bad day for criminals”.
No, it was a bad day for individual freedom and a good day for Governments with their insatiable appetite for intruding into the private affairs of their citizens.
I understand that the Government oppose this amendment. Indeed, the Prime Minister wrote a letter on 13 November last year to—wait for it—his Excellency Herman Van Rompuy, President of the European Council, informing him that:
“It is clearly important we recognise the important differences between companies and trusts”.
He went on to say:
“I look forward to looking properly at the arguments around trusts and other legal arrangements”.
Judging from the vote in the European Parliament, that letter had about as much success as John Major’s letter to Jacques Santer’s Commission in 2000 on the working time directive. Both letters were instantly consigned to the waste paper basket. So much for our strong voice in Europe—more a muffled squeak—and our seat at the top table.
Could the Minister tell the House how the Government will deal with this matter when it comes to the Council of Ministers in May? Is he able to give some hope to the millions of people who will be affected by this measure, who use trusts routinely and legally, that their private affairs will not be open to any inquisitive individual at the click of a mouse? This amendment is unnecessary and intrusive. It should be consigned to the same WPB as our Prime Minister’s letters.
Lord Dykes (LD)
My Lords, I am tempted to think that the noble Lord, Lord Willoughby de Broke, is a little overanxious about this matter. That will perhaps come out later on in this debate. However, he made some points that I am tempted to agree with on the background to this. It is a very complex and vast area, and it has dragged on for quite some time.
The latest manifestation is the massive vote in the European Parliament in favour of really significant action in this regard. All member Governments are obliged to respond, and there will be meetings in May and subsequently. Eventually, I presume, the new directive will come from the Commission. That will take time to unfold. Most countries already have some clusters of cultures in these matters of declaration, tax information and all the rest of it. However, once again there is obviously a difference between the UK and Ireland and the others in these general matters relating to trusts. The trust is a particularly Anglo-Saxon vehicle, so one has to bear those things in mind when trying to formulate coherent legislation.
The will of the European Parliament cannot just be laid aside, as it were. The vote was very emphatic. It was not only the numbers but also what was said in both the committees and the debate in plenary, with great emphasis that there was now a need to take action in this field and to establish coherence and equivalence between what the EU does as a collective, the worldwide anti money-laundering legislation of one kind or another and the international move to try to get everybody dealing with these matters in a similar way. It is a vast world problem. The noble Lord, Lord Willoughby de Broke, spoke quite rightly of the very honourable trusts that there are, particularly for young people, and all the rest of that paraphernalia we have of legal protection and that background. None the less, the worldwide money-laundering offence is vast, as we know. Member Governments of the EU, as well as authorities elsewhere and the world institutions, are trying to deal with these matters and work together. It is understandable that new legislation is needed.
The United Kingdom already has strong legislation on this. To my mind, it would be very reasonable and essential for HMG to say that the directive provides the broad outline of background permissibility of the legislation, and then each country will introduce its own Bill, becoming an Act after that, in its own way. I live in France as well, so I declare that interest. The law there is extremely different, but none the less aims for the same things. The French have a deep suspicion of this offshore money that is laundered by criminals, terrorists and gangsters of one kind and another in highly organised large international movements of people, moving large amounts of money. That has to be taken care of and followed up vigorously and with energy.
I believe that trusts must be included. However, the Government, in one of the recent ministerial letters on the subject, said with some justification, rather along the lines of the Prime Minister’s letter, that the Government do not believe that trust registries would necessarily be an effective option in addressing the risk associated with trusts. So I think there is a case, to some extent. Not being an expert I have to put in phrases such as that to limit my own operational ignorance of the details of these matters, although I was a City person for many years and saw the nasty side of some of these things from a distance from time to time.
That is an important question and perhaps the Minister will be able to help us in this debate by saying how the Government would deal with the specific question of trust registries—in the sense already implicit in the draft legislative proposal from the European Parliament, with its massive vote backing it up, as we know, that one should provide in public the minimum amount of detail to give satisfaction in the sense of revealing that it is not laundered illegal money, if that can be done.
Equally, to leave out trusts would be wrong, because obviously lots of villains would immediately switch from companies to trusts. You have only to go to some of the many tax havens that our own empire, rather more than others, unfortunately left as a legacy—rather more than France, which quite rightly takes a very dim view of tax-exile territories. That is where these things occur. The banks themselves have worked on an international comparison and co-operative effort, which is gaining strength all the time, and now includes Switzerland, Luxembourg and Lichtenstein, to try to deal with illegal, laundered money. This is gangster and terrorist money and illicit illegal money of other similar kinds. That background is helpful, too, and I wish the Government well in eventually dealing with this matter in terms of domestic legislation.
Will the Minister help us with one or two points that arise from this legislation? On the question of trusts, it says:
“If the beneficial ownership information of companies but not trusts is made public, the latter will become—
as I suggested earlier—
“the default alternative means to undertake the same criminal activities which the new company rules seek to prevent”.
Is a specific mechanism possible to deal with that particularly immediate problem?
I agree very much with the MEP Judith Sargentini when she says that:
“If we had decided to leave trusts out of the scope of the new legislation, then it would immediately have made them the perfect vehicle for criminals wishing to avoid taxation and launder their illegal money through the financial system”.
When considering the eventual directive that will come out of this legislative proposal, which will take some time, it is necessary to deal with that important problem.
I am also concerned about the phenomenology of the risk assessment procedure and I would be grateful if the Minister could help us there, too. The Explanatory Notes state that the risk assessment should cover at least the following aspects: the overall extent of money laundering and the areas of the internal market that are at greater risk; the most widespread means used by criminals to launder in illicit proceeds; as well as the recommendation to the competent authorities on the effective deployment of resources. The evaluation, by the way, should be done every six months. That may be quite difficult to keep to, although I do not wish to sound complacent about this desperate international problem—we will see.
The document further asserts that, to keep everything in proportion and targeted, member states could adopt, or retain in force, stricter provisions in the field covered by this directive to prevent money laundering and terrorism financing, provided that such provisions are in full compliance with Union law. There will, of course, be variations in the national legislation of each member state.
I exclude the two Irelands from my next comment because they, again, would need different treatment, and there is a historical British taxation background in both those countries. However, the culture of the member states that came in in 2004 will be somewhat different in many cases from that of member states which joined the Union prior to 2004.
Finally, I quote again from the Government’s response contained in the excellent House of Lords Library briefing pack, for which I thank the Library staff. It states that,
“while the Government remains broadly supportive of the Commission’s proposals, there are a limited number”—
The Deputy Chairman of Committees (Baroness Andrews) (Lab)
I am so sorry to interrupt, but there is a Division in the Chamber. We will adjourn for 10 minutes.
Lord Dykes
I was just about to finish by asking the Government three quick questions. In the Minister’s letter of 13 December 2013, which I was referring to, the Government broadly supported the Commission’s proposals but a limited number gave cause for concern. I am deliberately not including the gambling points; I am leaving those out because I think that they are empirically rational and sensible. First, what does the Minister estimate will happen when the ECOFIN meeting takes place? What will be agreed? Presumably it will need far longer than that to agree the total package.
Secondly, would the Commission’s proposal discontinue third-country equivalence listing as established under the third money-laundering directive? That needs further explanation.
Finally, the Commission intends—this is in the Explanatory Memorandum of the European Parliament’s legislative proposal—to complement the current proposal by strengthening the EU’s repressive response to money-laundering. Consequently, there is a plan to propose criminal law harmonisation for this offence based on Article 83(1) of the TFEU. That also needs more explanation because there are arguments for and against that concept.
Lord Phillips of Sudbury (LD)
My Lords, this is an interesting debate and we should thank the noble Lord for introducing it. It concerns a series of issues that are still very much in the air because, as I understand it, the European Parliament has approved the directive but has made amendments to it. One of those amendments is of particular concern; namely, that the right of access to the information has been widened from “competent authorities” such as Governments and “obliged entities” such as banks, lawyers and so on to the general public. I think that the noble Lord, Lord Willoughby de Broke, is particularly concerned about it. I wanted to make that clear because there is a long way to go. Negotiations will be held between the Parliament, the Commission and the Council of Ministers, and then it will come here. Being a hoary old lawyer, I am cautious about being at all definitive until I see the final wording and have the opportunity to discover precisely what the disclosure requirements will mean.
I think that the noble Lord, Lord Willoughby de Broke, has somewhat exaggerated the potential breach of privacy. Charities, for example, are themselves public bodies. They comprise the biggest body of trusts in the country and, since they are essentially public bodies, there is no earthly reason why any aspect of their affairs should not be made public. However, I do accept the position with regard to family trusts. Here I should say that I spent several years during the late 1960s and early 1970s dealing with a great deal of family and business work that involved a considerable amount of trust work, particularly with what are called discretionary trusts. I am well aware of the background to those sorts of trusts and why they have a particular relevance, as has been explained to us.
However, I must also be plain. I am deeply concerned about the continuing decline in public trust which I am afraid is afflicting virtually every aspect of our establishment. Perhaps, mercifully, only the judiciary is free of public suspicion and mistrust. One institution after another has lost credibility. I need not go through all the institutions in our country, but it is necessary for us to remember that we ourselves have contributed to the decline in public trust through the events of a few years back, which the public have certainly not forgotten. That want of public confidence, if you like, is now being played on. I do not say this with any disparagement, but UKIP is definitely plugging into that sentiment, just as I believe Alex Salmond and his Scottish colleagues are doing north of the border.
I understand perfectly why there is disaffection and disconnection between the body politic and the ordinary citizen. However, one crucial, central element of that is corruption—using that word in its broadest sense—by big business, particularly among the banks, which frankly has been stupendous, and in the other areas I have touched upon. I want to see a radical attack on corruption, and anything that weakens the ability of the prosecutorial authorities to deal with this corruption must be remedied by us here in Parliament.
I am not as big a fool as to believe that passing laws is a substitute for achievement on the ground; indeed, in this area, I am afraid, the gulf between legislation and implementation is tragically wide, which is something that this House really has to concentrate on in the coming months and years, because what is going on is a farce. Look at Her Majesty’s Revenue and Customs: it had 96,000 staff in 2005 but by next year that will be down to 56,000. Even if you are inclined to believe that there is a great deal of inefficiency et cetera, that is way beyond anything that is at all compatible with the need of the country to see tax avoidance in particular, and fraud in general, dealt with.
Just before he retired, I had lunch with Richard Alderman, the former head of the Serious Fraud Office. He was almost crying into his soup, telling me that he had met one of his former senior staff the month before to find this gentleman bewailing the fact that he had left the SFO and rather wishing he was back rather than being employed by a firm of American lawyers in London at 500% of his salary. At the Serious Fraud Office, as at HMRC, the senior cadres of people are so far outgunned by their opposites in big business, particularly the banks, that it is not just David and Goliath, it is David without his sling against Goliath. It is not a joke. It is a scandal and we should be ashamed of it.
I want ultimately to see the fine print but at this moment I am definitely in favour of strict disincentives for fraudulent activities—money-laundering or anything else you can name—utilising the trust mechanism. I am too experienced a lawyer and know just how convenient the trust is in nefarious activities, precisely because it is informal, fluid and has little statutory law bureaucracy around it.
We all know that the extent of tax evasion has dispirited this country. In the excellent report put out by our colleagues in the Select Committee on Economic Affairs in July last year, Tackling Corporate Tax Avoidance in a Global Economy, the public were able to read about Amazon, Starbucks, Thames Water, Vodafone, Cadbury before being taken over by Kraft—would not its Quaker forefathers just fall out of bed?—and, of course, Google. Citing just the example of Google, the report tells us that in the years between 2006 and 2011 in the United Kingdom, it generated £80 billion of business and paid—can your Lordships believe it?—£16 million tax. It is conceivable that that was done legally but the truth is that most tax avoidance is fraudulent when done on a major scale.
What are we doing vis-à-vis foreign so-called investors? The crooks from across the world come to this country, but why do they come? It is on record, if noble Lords doubt it. Look at the Migration Advisory Committee report from February this year. The principal reason that the big crooks bring their black money to London is because it is safe here.
Noble Lords should consider, too, the rights that anybody who invests £1 million in government bonds for five years and spends 180 days a year in this country acquires. He or she, and their families, have indefinite leave to remain in this country, while knowing that they will not pay tax on their rotten money, because they make damn sure that they do not. They will not use lawful means, most of the time. The sort of people we are talking about are driving up central London property prices so that decent, ordinary Londoners cannot get near staying in London and have to get out of the city in order to live. That is all part of a world that we have to deal with, and part of dealing with that world is to attack trusts.
Lord Pearson of Rannoch (UKIP)
My Lords, I declare an interest in that I set up a family trust in 1984. It is on the point of expiry, so it is not much of an interest.
I intervene briefly to press the Minister for detail on a question put by my noble friend Lord Willoughby de Broke. In view of the letter from the Prime Minister that my noble friend quoted, can the noble Lord confirm that the Government remain unhappy with this latest intrusion by the EU into our national life? If that is so, will the Government advance the doctrine of subsidiarity? Does the noble Lord not agree that this sort of thing should be left to our national Parliament and that this would be rather a good opportunity to test that doctrine, useless though it has always proved in the past?
Failing that, what chance do the Government think they have of avoiding this directive? Could the noble Lord tell us, just for the record, whether the eventual decision will be taken by majority voting or whether the Government can, in fact, block it? I look forward to the noble Lord’s answers.
Lord Watson of Invergowrie (Lab)
My Lords, I am grateful for the opportunity to speak in the gap. I apologise for not having put my name down, but I was not sure I could be here this afternoon. The noble Lord, Lord Willoughby de Broke, alluded to the maxim of an Englishman’s home being his castle. Perhaps it is because I am not an Englishman that I do not completely subscribe to his views, but I do subscribe to the maxim that there is quite a lot to be said for having nothing to hide and therefore nothing to fear. I am concerned that he made virtually no mention in his remarks of the issue of money-laundering, and I thoroughly agree with the noble Lord, Lord Phillips of Sudbury, that it is actually a very important issue. Whether or not it is more important than trusts, I will leave for others to decide, but it is very important that we grasp this issue. I spoke at some length on this during the passage of the Financial Services (Banking Reform) Bill last year, as indeed did the noble Lord, Lord Phillips.
I see that the Government have committed to creating a public register of the beneficial ownership of companies. That is a step forward, but if beneficial ownership does not include trusts then, as I think the noble Lord, Lord Dykes, said, that opens up such an obvious route for criminals to avoid taxation and launder their illegal money in various ways through the financial system. That is surely something we must seek to avoid if at all possible. I note that the directive has strong support from the bigger EU member countries. I know that will not cut much ice with the noble Lords, Lord Willoughby de Broke and Lord Pearson, but it is none the less important, and I see that the resolution was passed very decisively when it came up for consideration.
I accept that a majority of trusts are set up for entirely legitimate purposes, but the small percentage which abuse the law can have, and often have had, devastating impacts. The opaque corporate ownership structures which are often used allow such crimes as money-laundering, tax evasion, sanctions busting, trafficking of arms, drugs or humans, terrorist financing, bribery and other forms of corruption. Those are surely not issues that we can treat at all lightly. If transparency around trusts is not guaranteed, their illegitimate use is likely to increase significantly, which is a big issue. A public register could distinguish between low and high-risk trusts, with the former being exempt, to avoid unnecessary regulation. Will the Minister give us his view on that point when he replies? I very much hope the Government will eventually support this directive.
Lord Davies of Oldham (Lab)
My Lords, I congratulate the noble Lord, Lord Willoughby de Broke, on introducing this debate. The degree of sharp interest shown by all noble Lords in this issue may have surprised him. Passion has been aroused, and so it should be. It is interesting that it has been identified that the evils that the Government should address are tax avoidance and money laundering. We were also greatly concerned about money flowing towards terrorist activities. That agenda has come very much to the fore over the past decade. If we are not concerned about those issues and whether our law is adequate to control them as best as it can, we are clearly not playing our full role in the public interest.
I congratulate the Government on the work done last year. It is quite clear that they are already committed to creating a public register of the beneficial ownership of companies and therefore a substantial part of the issue is being tackled. I am quite sure that all parties subscribe to that position, with the notable exception of the party that is exceedingly well represented in this Room but is not normally well represented in Parliament by elected Members. Although this issue is complex, the Government have made some considerable strides, and it is clear that we have a slightly more difficult issue, which the noble Lord, Lord Dykes, identified, because of our common law than is the case with countries on the continent. We will wrestle with these issues.
Trusts fit into a very distinctive and different pattern compared with organisations elsewhere, but the point is obvious. If trusts are not included in the legislation, they will become the default mechanism whereby all miscreants will carry on their practices. We know that they go on to a significant extent and that the wider public out there expects Parliament to tackle these issues once they have been revealed. It is therefore of the greatest significance that we keep the momentum up. I understand entirely the anxieties of the noble Lord, Lord Willoughby de Broke, but they are overwhelmed by the need of our society for protection against proven misdemeanours in the use of companies and trusts.
I should emphasise that this is not a new issue. Some people will defend freedom to the nth degree and say that you should not intrude upon private arrangements. Between $8 million and $10 million was secreted away in trusts by an individual, General Pinochet. I doubt whether many people in our country think that he was entitled to the privacy vouchsafed to him at that time; nor should we underestimate the dangers that are implicit in defective and ineffective law. That is why we have to tackle these difficult issues, and I am glad that noble Lords today have pressed the Minister with clear questions about the difficulties that have to be overcome.
It is clearly the case that people enter trusts, particularly family trusts, on the basis of an understanding of privacy. It may therefore be necessary for the Government to tackle trusts in more than one category: those that are capable of being used for nefarious purposes and those that clearly come into the common category of a very large number of people who are merely seeking to safeguard relationships in their family and their resources. However, there is no alternative. We particularly need international action because, whatever we do, if it is not carried out by other advanced economies, all our efforts will be insignificant. Automatic exchange agreements, which would leave the miscreants concentrating on the weakest link in the chain, the country that they identify as being least able to enforce such agreements and implement them, would be used. Financial tax laws are all voluntary. We have nothing that is compulsory, which is what this directive and the amendments are directed at.
I recognise that this is a complex issue and that the Minister is bound to indicate that there are areas in which it is more straightforward to act than in others, but we should bear in mind the strength of the majority opinion in this debate, which has been very forcibly expressed, that we cannot have a situation where the significant holders of real wealth are able to avoid their obligations to the wider public and to the consumers and nations that they serve. It is important that we have legislation that carries out the action that we all regard as essential.
Lord Willoughby de Broke
My Lords, some noble Lords, including the noble Lord, Lord Watson, and to a certain extent the noble Lord, Lord Davies, have missed the point that I was trying to make. There are already, under the Money Laundering Regulations 2007, absolute requirements on financial intermediaries and lawyers to report to the relevant authorities if they suspect that there is any illegal use of trusts. They already have the weapons; the idea that there is absolutely no legislation to deal with trusts is entirely misplaced.
Lord Newby (LD)
My Lords, I thank the noble Lord, Lord Willoughby de Broke, for introducing this debate and all noble Lords for their contributions. I will try to answer some of the broad concerns expressed and lay out the steps that the Government are taking to ensure the effective and proportionate treatment of trusts under the fourth money-laundering directive.
Proposals for the directive are aimed at improving the transparency over who owns and controls companies and legal arrangements, such as trusts. The World Bank estimates that between 2% and 5% of global GDP is subject to money laundering, with some estimates showing that global illicit outflows from developing countries dwarf the amount that they receive in official development assistance. Furthermore, the UN Office on Drugs and Crime estimates that less than 1% of that is currently being seized or frozen. Tackling these illicit flows was therefore a key priority for the UK’s presidency of the G8 last year. As the Prime Minister said at the October 2013 Open Government Partnership summit,
“transparency needs to extend beyond the public sector and into the private sector ... but there are also many wider benefits to making this information available to everyone. It’s better for businesses here ... developing countries ... and ... the more eyes that look at this information the more accurate it will be”.
That is why the UK has committed to establishing the world’s first publicly accessible registry of company beneficial ownership.
The EU’s fourth money-laundering directive is an opportunity to build on that momentum. The directive seeks to implement the revised standards of the Financial Action Task Force and the European Commission’s review of the implementation of the third money-laundering directive. We are committed to ensuring that the directive implements the FATF standards in full. As the Prime Minister wrote to European Heads of Government last year, our first collective step should be to mandate public central registries of company beneficial ownership as the benchmark for transparency of ownership and control. At the same time, the UK recognises that it is equally vital to prevent the potential misuse of trusts and similar legal arrangements.
The FATF sets the global standards to improve the transparency of the beneficial ownership of corporate and legal entities, including companies, and legal arrangements such as trusts. In setting those standards, the FATF recognises that preventing the misuse of trusts is critical but also explicitly recognises that trusts are different from companies. In particular, it is vital to understand that, unlike companies, common law trusts, such as those established under English and Welsh law, are not created by the state. Furthermore, trusts, unlike companies, are used for a range of purposes, such as benevolence, inheritance, protecting vulnerable people and family support. As such, the implications for privacy are far greater, and trusts therefore warrant different treatment.
Measures placed on trusts must therefore be different from those that apply for companies in order to be proportionate and effective. The Government support a mandatory requirement for trustees to know the beneficial ownership of their trusts. That, together with tax reporting to HMRC, to which the noble Lord, Lord Willoughby de Broke, referred, and future automatic exchange of tax information agreements, will offer more transparency on trusts than ever before. In particular, through automatic exchange agreements, financial institutions will report information to national tax authorities on trusts holding accounts with them where the beneficiary is a resident of a partner jurisdiction. That information is then automatically shared with the partner jurisdiction. There are already 44 signatories to this international standard on automatic exchange, which creates a web of information exchange that will provide greater transparency on trusts than ever before.
This approach provides a proportional and effective means of enhancing transparency on trusts holding financial assets, given that they pose the greatest money- laundering risk. The Government oppose the mandatory registration requirement for trusts, which, together with the creation of central registries of trusts, was recently adopted as the European Parliament’s position on the directive. Given the transparency afforded by automatic transfer of information agreements, we consider registration of trusts to be a disproportionate approach and, in particular, one which undermines the common-law basis of trusts in the UK. As such, we continue to work with other member states, civil society and the private sector to ensure effective treatment of trusts.
Beneficial ownership has proved to be the most contentious issue in discussions over the fourth money-laundering directive. We are under no illusions about the challenges ahead. Following agreement between member states, negotiations to reach a mutually agreed final text with the European Parliament are likely to be challenging, given the position adopted by MEPs, as has been described. I assume that among the small minority of those who voted against this directive was a full turnout of the British UKIP contingent.
What happens next is that we are working with the Council presidency and other member states to agree a compromise that would limit the scope of obligations on trusts to those holding financial assets, which the UK would satisfy through existing reporting obligations for trusts holding financial assets, domestic reporting requirements and automatic exchange of tax information agreements. Such a compromise would complement the UK’s advocacy of ambitious action on company beneficial ownership. Of course, such an approach would exclude, for example, wills from the implementation of the directive, as wills do not form that category of trust.
Negotiations are ongoing, and we expect the Greek presidency to seek agreement among member states over the next few months. The subsequent Italian presidency would then seek the conclusion of the directive during the second half of 2014, in co-operation with the European Parliament. In answer to the noble Lord, Lord Pearson of Rannoch, the decision in the Council will be by qualified majority vote.
A number of questions were asked of me—
Lord Pearson of Rannoch
Before the Minister leaves that point, it might be a good place to press him on the famous doctrine of subsidiarity. In view of the difference between our system and the other systems in Europe, would it not be a good idea to use subsidiarity?
Lord Newby
My Lords, the approach I set out would mean that we would have a different way of reporting the majority of trusts. Therefore, there would not be a common system across the EU. The Government’s view is that it is very important that, across all the EU, there is a requirement for both companies and trusts to be more transparently described than they are at the moment. That is why we put a huge amount of effort into pursuing the concept of the mandatory requirement on beneficial ownership of companies. We want to ensure that, as far as possible, information about trusts that could be problematic for money-laundering purposes will be more generally available. Our proposals would do that in respect of the UK without having a full mandatory register in the same way as we propose for companies. We accept that there is a difference in nature between the two, but we think we can have the best of both worlds by having that difference of approach between them.
In response to the question from my noble friend Lord Dykes, trusts would not become default alternatives to companies because there are the requirements to report financial information to HMRC and to pay tax where appropriate and also for the automatic exchange of information where the beneficiary is a foreign national.
Lord Phillips of Sudbury
Would the requirement on the trustees and trust extend to revealing who the beneficial owners are?
Lord Newby
I am not sure I can give my noble friend a definitive answer now. I may be able to, but in any event I will write to him about that.
My noble friend Lord Dykes referred to the challenges of making a risk assessment in this area. Of course, it is almost an impossible task. I do not think that the risk assessment is a key part of the process. We do it because we have a broad sense of what the risks are, without being able to get to the nearest pound or euro.
In answer to my noble friend Lord Phillips’ earlier question, I should have been clearer: the answer is yes.
My noble friend Lord Dykes also asked about third country equivalence. Commission proposals do not include provisions for listing of third countries as having equivalent money-laundering or terrorist-financing regimes. Under the third money-laundering directive, this proved to be a problematic process, and the white list of equivalent jurisdictions was difficult to keep up to date. The FATF peer reviews of member states heavily criticised this white-listing process, and we support the Commission’s view.
My noble friend Lord Phillips of Sudbury discussed the reductions in HMRC staff. It is not a question of whether they are more efficient at doing the same jobs. The truth is that the way in which we manage the tax affairs of the vast bulk of individuals and companies is now online. A huge number of staff whose jobs were essentially related to dealing with paper are no longer necessary. The reduction in staff is largely in response to changed circumstances. I remind my noble friend that we put in an additional almost £1 billion in this Parliament for staff working on tax avoidance and evasion. That has already generated several million pounds-worth of additional revenue beyond what we believe would otherwise have been obtained. There has been a change in gear, if you like, in the way that HMRC operates.
To sum up, given that my time is very brief, the UK is leading from the front on an agenda that places a practical emphasis on transparency and accountability. The Government are working to ensure that the EU shows similar ambition on what is a cross-border issue, with serious implications for developed and developing countries alike. We want the outcome to be fair and proportionate, but we also require it to be effective. That is what we are working towards and what I am optimistic that we will achieve.
Ukraine
(10 years, 8 months ago)
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Baroness Falkner of Margravine
To ask Her Majesty’s Government what is their assessment of the political situation in Ukraine.
Baroness Falkner of Margravine (LD)
My Lords, I start by thanking the several noble Lords who have taken a Thursday afternoon out after a long week to take part in this debate. I will not have an opportunity afterwards, so I thought that I would get in my appreciation of this fine attendance on an important matter here and now.
In 2014, as we look back on the centenary of the Great War, a plethora of new books reminds us that events can be overtaken by miscalculation compounded by misunderstanding. When tactics supersede strategy, an inevitability takes hold. Against the memory of those historic events, it is important neither to underestimate the events in Ukraine of the past few months nor to overstate parallels with the Cold War or other analogies. At this point, we cannot know where the invasion of Ukraine by Russia will lead us.
However, we can be sure of certain things: whether this is an act of historical significance is not in doubt. It has marked a change in the world order. In the past 20 years there has been a debate about the change in power politics, evidenced in the demise of bipolarity, with unipolarity and the US moving to hegemonic status after the demise of the Soviet Union. Alongside this has been the challenge to its neighbours posed by the rise of China and, in response, the US pivot to Asia.
The question in international relations scholarship in the past decade has been whether we are seeing the emergence of a multi-polar world, but one where essentially western norms and values have prevailed, with buy-in from emerging powers into “western” institutions, or whether we are living in “no one’s world”, as described by the American academic Charles Kupchan, where no single overwhelming power is dominant and norms are in a state of flux.
The events leading up to 27 February, when Russia invaded and seized Ukraine’s Crimean peninsula, seem to point in the direction of a passing of the old order, or indeed, in the words of the Economist, the forming of a disturbing “new world order”. The invasion of a sovereign country other than as an act of self-defence or under international humanitarian law, sanctioned by the international community, cannot be a light thing, even when carried out by a former superpower wielding a United Nations Security Council veto.
The excuses given by Mr Putin in drawing parallels with NATO actions in Kosovo are absurd. In Kosovo, there was grave and present danger of a severe humanitarian catastrophe after evidence of widespread ethnic cleansing in the immediate region. Attempts were made to seek consensus in the UN Security Council but, in the face of a Russian veto and after some deliberation, it was decided to take action through NATO.
Even more absurd are Russia’s claims that the Government in Ukraine are illegitimate and that, hence, Russia will not enter talks. In Ukraine, after months of ongoing protests against the elected Government and more than 100 people killed—mostly at the hands of state security snipers deliberately shooting to kill—it was the Parliament which, on 20 February, approved a resolution calling for a return to barracks of the military and a ban on firearms. Once the police and military conformed with the vote in Parliament, Mr Yanukovych and his allies decided that the game was up and fled to Russia. On 22 February, the President was deposed for abandoning his duties and an acting President was appointed. From that point, it took a mere five days for Russia to take Crimea.
This is not the first time that an elected Government have been driven from office, and it will not be the last. Only a deaf and blind leader can cling on to office when all around him see evidence of egregious corruption, human rights abuses and kleptocratic governance. Of course it is preferable that there be constitutional measures, such as votes of no confidence, to oust those who command no support, but the fact remains that Yanukovych lost the support of his own majority in Parliament.
I turn to the here and now and the consequences of the events of the past few weeks. The most immediate are for the people of Ukraine. They have 40,000 Russian troops massed at their border with full logistical back-up support for invasion, including military hospitals. The threat is palpable. According to NATO, a Russian invasion could be accomplished in between three and five days, with the potential to take Moldova and Transnistria as well.
Alongside that are Ukraine’s economic woes. Without deep and structural reform, and with sovereign default on the horizon, the EU offer of a $15 billion loan is welcome. Ukraine’s currency fell by 30% between November and late February, and the Government are now running out of funds to cover public employees’ salaries. Although it is entirely understandable for the IMF to seek to protect its funds from corruption by sticking to its stringent conditions and reform agenda, it is surely somewhat dangerous for the fund and the EU to dither while Russia destabilises the interim Government from within, as well as starving them of energy.
I hope that the Minister will be able to tell us what conversations the Government are having with the IMF about a speedy allocation of funds and whether the UK is having conversations with the German Government about additional bilateral loan guarantees by those countries within the EU which can give—a coalition of the more solvent, perhaps, rather than a coalition of the willing.
There is also the present question of the Ukrainian elections on 25 May. What arrangements are being drawn up with the OSCE for the elections, which are now only some five weeks away? There has been gnashing of teeth in European capitals about the Kerry-Lavrov talks. In my book, they are a welcome development. They are less neo-imperialism and perhaps more pragmatism. EU foreign policy co-ordination is still embryonic. I experienced that myself last weekend at the Königswinter conference in Cambridge, where my German colleagues took a rather different view. “Our histories are different”, they said, “hence the lack of an EU strategic Russia policy”.
For Ukraine, after the formation of a new Government, it is imperative that that Government build a consensus for enhanced protection for minorities and entrench it constitutionally with strengthened regional autonomy. It is a relatively new state, and centralised structures seldom work when there is significant diversity in the population. Alongside Ukraine, we, the international community, should not write off Crimea. There is a tendency among policymakers to write off a land grab by Russia. There is an element of fuzzy historical referencing accompanied by a shrug of the shoulders.
I make it clear that I am not advocating a NATO invasion to free Crimea, despite the illegitimacy of its referendum and return to Russia. There has been a change to the territorial integrity of a sovereign state by its neighbour. Should that situation be accepted unchallenged, it presages similar attempts across the world. There will be few countries with minority populations across borders which cannot but worry about the consequences that will flow from Crimea. So every instrument of negotiation from asset freezes to sanctions and a recalibration of hard power as deterrents must be employed to sanction the aggressor.
The costs will be borne by us all, the Russians as well as the EU states, but the upholding of international law through sanctioning an aggressor may be the lesser cost in the long run. If by demonstrating that there is a united response from the West a negotiation can indeed be brokered with Russia along the lines that Crimea be reinstated within Ukraine, with an agreement that Ukraine be not given NATO membership for a period, that would appear to be the minimum acceptable outcome.
In concluding, I return to my opening remarks about the importance of upholding international law. Assurances need to be credible to be worth the paper they are written on. One casualty of the Crimean invasion is that there is less confidence in the West’s assurances in a post-Crimea world. This will undoubtedly affect our efforts to curb nuclear proliferation but will also diminish the West’s standing in a host of other matters.
Without being slavishly pro-American, there are many in the UK and Europe who have regretted the US’s increasing isolationism. Indeed, it was notable that last week was President Obama’s first visit to Brussels since his first election in 2008. While we have welcomed the closer trade links to flow from TTIP and, belatedly, a new emphasis on EU-US co-operation across foreign affairs generally, the events of the past few weeks, too, have illustrated the importance of hard power as a deterrent. It is evident now that we cannot neglect any of these aspects of power politics; it is better to learn those lessons now than allow an orderless world to emerge. I look forward to the Government’s response to these challenges.
Lord Giddens (Lab)
My Lords, I congratulate the noble Baroness, Lady Falkner, on having secured this debate. The situation in Ukraine remains extremely dangerous. The prime risk in my estimation is probably not further Russian invasion, although no one can write that off, of course, but a scenario in which events get out of control in ways that no one intended.
For the people of Ukraine, this is a time of hope, yet the problems to be coped with are just awesome. “Hope for the best, but plan for the worst” is the motto adopted by Ukraine’s new Minister for the Economy. It will not be political reform alone but the interaction of political and economic change that will determine which of these outcomes is most likely.
Simon Tilford from the Centre for European Reform has made a telling comparison of the diverging economic fortunes of Poland and Ukraine during the past 20 years. The Polish economy in 1990 was only 20% larger than the Ukrainian economy, but by 2001-02 it was fully three times as big—a quite extraordinary statistic.
I want to argue that three basic structural dilemmas will have to be resolved during the next two or three years in Ukraine if there is to be political and economic stability. First, how will the economic shock effects of the IMF’s reform package be managed politically? That package involves radical public sector reforms, higher oil and gas prices and a swathe of job losses. There will be an awful lot of pain before there is any discernible gain, and somehow that will have to be managed. Secondly, the presidential election is in late May, as the noble Baroness has indicated. How can progress towards democracy be reconciled with technocratic control imposed externally, because that is how it is going to have to be? We have seen from the example of Greece how such a process fosters extremism even in established democratic states, and Ukraine is not, of course, an established democratic state—far from it. Thirdly, devolution from Kiev is certainly necessary, but how will it be achieved without stoking up the forces of separation in areas with a high proportion of Russian speakers?
As noble Lords know, the Russian version of federalism for Ukraine is intended to dismember the country. What role will the UK Government seek to play in helping to resolve these core dilemmas, without which substantial progress in Ukraine is impossible? Does the Minister accept that a more integrated EU foreign policy will be needed in future, going beyond that established in the Lisbon treaty? One of the main things that has changed is that there is now an arc of instability going all the way round from the top of the eastern border of Europe, through the Middle East and north Africa and going below north Africa. That situation was quite unanticipated and is going to involve quite a reorganisation of political leadership on the part of the EU and the US to cope with it. I welcome the Minister’s views on that.
Lord Chidgey (LD)
My Lords, I, too, congratulate my noble friend on securing this debate and giving us another chance to look at these issues, which are obviously very serious. Prior to the recent vote of the UN General Assembly condemning Russia’s invasion of Crimea, it transpired that several countries were threatened with retaliation if they voted against Russia. The resolution was passed by 100 votes to 11, with some abstentions, in spite of the threats of retaliatory measures, such as expelling migrant workers, aborting gas supplies or imposing trade bans. Afterwards, a spokesman at Russia’s UN mission denied any threats had been made, saying:
“We never threaten anyone. We just explain the situation”.
To me, that sounds like a Mafioso making you an offer that you cannot refuse.
At more or less the same time, Vladimir Putin’s previous chief economic adviser, Andrey Illarionov, tells us that Putin’s real aim is to create “historical justice” with a return to the days of Tsarist Russia, reconquering Belarus, the Baltic states and, of course, Finland. He warned that Putin protects what belongs to him and his predecessors—Tsar Nicholas II and Stalin.
So what are we going to do? I would like to make just two points in the three minutes that I have. First, I have to say that I agree entirely with our Prime Minister when in the Hague last week he said that it was our,
“duty to embrace the new technique”,
of shale gas to reduce dependence in Europe on Russian energy, calling it a “wake-up call”.
In our earlier debate in this House on Ukraine, I called for the UK to believe the science and not to be persuaded or dissuaded by the politics. Natural gas was the origin of the crisis in Ukraine. Russia keeps Ukraine and much of Europe dependent on gas at prices just low enough to disincentivise fracking of shale gas. State-run media and propaganda continually spread disinformation critical of fracking and supportive of opponents to the process. As the president of the Association of Liberal Democrat Engineers and Scientists, I can say that its position paper on shale gas is absolutely on the button. There is no doubt that for the foreseeable future gas has to be the fossil fuel of choice, producing less carbon dioxide per unit of energy than the others. We agree totally with the conclusion of the Royal Academy of Engineering and the Royal Society that,
“the health, safety and environmental risks associated with …fracking … as a means to extract shale gas can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation”.
So I ask the Minister if she could confirm in her reply that the Government are poised to remove potential legal barriers to the exploration and development of shale gas deposits in the UK and that the proposed growth Bill, which I believe will be in the Queen’s Speech, will include measures to change trespass laws to prevent landowners denying access needed to assess prospective shale gas fields.
My second point is that the UK must act in the financial sector, not just in response to President Putin’s actions but to restore a somewhat tarnished international finance sector. There has been a stream of allegations from sources in Ukraine that corrupt officials and business people have been laundering their funds through the UK, yet asset recovery has been insignificant compared with the problem. As a director of the advisory board of Transparency International, I am aware that the UK’s banking sector froze less than 1% of some £30 billion that the Russian Central Bank estimates left Russia as the proceeds of crime between 2010 and 2014.
Our financial authority believes that between £23 billion and £27 billion has been laundered through the City of London each year. The Anti-Corruption Foundation in Moscow has revealed corrupt activities regarding the Sochi Olympics and the Transnet Pipelines company, alone worth more than £12 billion.
My final point is that major changes are required if the UK is to detect, freeze and seize the corruptly obtained assets that are flowing undetected through the financial system. Clean up corruption in the City and hit Putin and his cronies where it hurts.
Lord Judd (Lab)
My Lords, this is an important debate. We are grateful to the noble Baroness who initiated it and indeed for the very wise things that she said in her own observations.
I suggest that we see this terrible crisis as symptomatic and that we take a moment or two to look at history. The story of the struggle for identity in Russia has gone on for centuries. Is it to be a Western-orientated power when the prevailing language is French in St Petersburg, or are we to search for the soul of Russia, never quite identified, somewhere behind?
In that context, the role of the “strong man” has become crucial. In Russia there is a KGB elite exercising ruthless power, and consequently there is a lot of corruption. What is happening now is not new in human history: it is in part a great diversion to keep the Russian public distracted from the injustices and imperfections of their own society. We have seen this in the erosion of human rights, in the curbing of the freedom of the media and in the oppression of civil society.
What Putin did in Crimea is obviously wrong; it was a blatant breach of the international rule of law. It is difficult, though, and we must all confess this, to think of any referendum organised in any other circumstances in Crimea that would have resulted in a different conclusion. We have to accept that, and that takes us into deep waters. When we preach about the virtues of self-determination and the rule of law, we need a little humility because the world looks at us and says, “Hey, hang on a moment. What about Iraq? There was no specific UN Security Council resolution”, “What about Guantánamo Bay, which is still operating?”, and, “What about rendition, whose issues are still unresolved?”. Yet we go around preaching as though we were the centre of virtue in the world.
We need to get back to a sense of the international struggle together to reassert the importance and indispensability of human rights and the international rule of law. No matter how terrible this crisis, it may give us a good opportunity to start rebuilding together. But we will not do that by preaching; we will do it by dialogue, conversation and engagement. However, we must stand firm. It is clear that we cannot just have a breach of international law as has happened on the Crimean issue. If we then move on to talk about sanctions, though, for God’s sake do not let us posture in a hollow way that is not credible. We have to see the sanctions through, even if that means facing up to the issue of the southern pipeline.
The paradoxes are also strong, and they need to be frankly put to the Russians. I was deeply involved in the whole story of the north Caucasus. There, the Russian line was that self-determination was not acceptable and they ruthlessly repressed it. Now we suddenly hear from them that self-determination is central to any way forward. Again, we must examine our own record. We did not speak out strongly enough on the north Caucuses, so where is our credibility here? We also have to look at our failure on issues of human rights and civil society in Russia to be anything but rather muted in our comments.
We must stand firm, but in a context of somehow rebuilding some kind of dialogue. To those who say that it is simply a matter of telling the Russians what they must do, I say that as we are not going to invade Russia or to go to war with Russia, how the hell are we going to get this right in the long run if we do not get into some sort of mutuality? That means that if the Russians suggest that it is appropriate to think of federation, we do not automatically dismiss it because the Russians said it but, in the context of the ethnic challenges, look at whether we have to examine the proposition.
Lord Dykes (LD)
My Lords, I very rarely disagree with the noble Lord, Lord Judd. I agree very much with his exhortation that we should not carry on preaching. Time is very short, so all I have time for is to refer to some aspects of the historical past and the United States’ policy on this matter because there were faults everywhere in the long lead up to what has happened.
I congratulate my noble friend Lady Falkner on launching this debate. I would embarrass her by commending the thoughtfulness and restraint she has shown on this matter in recent weeks. John McCain and other people would probably like a third world war—perhaps that is an unfair comment on John McCain, but there are some people who would relish the idea. They are a tiny minority, thank goodness, and most people are being very sensible and empirically restrained on this matter.
If you go back to the end of the Cold War, there is a link with the United States and the inconsistency of American leadership in these matters. It is no good us being slavish supporters of everything the United States does. That has been a great mistake for Britain. I hope we will get away from it if we become once again a self-confident member of the European Union. At the moment, we are in transition from nervousness to panic about UKIP and all that, but we need to get our self-confidence back and be a strong, active member of the European Union.
NATO is taking the lead. I think what has been done so far has been correct. Russia has quite rightly been condemned, but the inconsistency in America has been there. When the Cold War ended, we saw the reaction to the end of the Soviet Union. The humiliation that Russians experienced at that stage was enormous, but instead of us being sympathetic to that psychologically and supporting Russia as a great world country, even if not a leading world power, we were very aggressive and critical about Russia and all its aspects, particularly Russian civil society, and said that there was nothing good about Russia. Everything was wrong there and suspect, although there are things to worry about, as my noble friend Lord Chidgey said. I think the Russians probably expected us to do the same as them. They folded up the Warsaw Pact. We carried on with NATO. I think Putin also expected that NATO would finish, but we found artificial out-of-theatre excuses to carry on with NATO. These things have to be accepted empirically and objectively. I am not talking down our Western cause because that is the priority for all of us.
When the promise was made to Gorbachev, and I think repeated to Putin and to Yeltsin as well, that there would not be a NATO country next to Russia, that solemn promise was breached by the West and NATO. These things are facts. You can imagine that someone with the personality of Putin would react in the wrong way, aggressively, to those things, but I hasten to add that that does not condone what has happened in Crimea. The referendum is a reality. We have to accept it. If Russia were foolishly to go further than that into new territories or attack Ukraine, it knows that that would be madness. We hope and pray that this is the end of this affair, so far. It is not easy to see how it will work out in the longer term. There may be a reconciliation between the more democratic Ukraine and Russia as the end result. That would be a very good result.
The inconsistency of American policy in the Middle East peace process has allowed 35 vetoes since 1967 and has allowed Israel, a wonderful country with wonderful people but a lousy Government, to disobey international law all the way through and get away with it. Quite rightly, Saddam Hussein was expelled from Kuwait after one year by the international community. However, Israel has been in the Occupied Territories for nearly 50 years and nothing has been done about it. People notice these things. There is an idea that John Kerry will suddenly come along and say, “Well, I hope you didn’t notice what happened before but we’re now going to solve it”, but there is now a complete vacuum. Netanyahu will not co-operate. You have to have a sensible Government. It is no wonder that young Israelis have gone to live in Berlin: they are fed up with the situation in Israel with its extreme policy. Therefore, the United States’ leadership has been weak and inconsistent. It needs to be better in the future and then it can claim to be perhaps not the exclusive leading world power but a very important country.
Viscount Colville of Culross (CB)
I, too, thank the noble Baroness, Lady Falkner, for obtaining this debate. I was the BBC “Newsnight” producer in Moscow during the fall of the Soviet Union and I have been back to both Ukraine and Russia many times since then. Therefore, I share your Lordships’ great concern about the events that have been taking place. However, it seems to me that one of the battles on which we really have to concentrate is for the hearts and minds of the Russian-speaking people of Ukraine. If we can build a country which is politically and economically stable, as the noble Lord, Lord Giddens, mentioned, it will be a country in which all its citizens, including the Russian speakers, will want to live.
For the past 20 years, Ukraine has been increasingly dysfunctional—a trend which has accelerated in the past three years as corruption has extended into almost every aspect of Ukrainian life and there has been a destruction of the rule of law. We now have to channel the energies released by the events in February to create a democratically accountable Government who are supported by an independent judiciary and an accountable police.
The Ukrainian Government have set up an anti-corruption body, which is trying to think about how to introduce transparency into government. It is going to need a lot of support from our Government and the Governments of the EU. Open government depends on publishing reliable data about expenditure and income. An open procurement policy makes it harder to hide bribes and overprice contracts. I have spoken to DfID, which obviously has the gold standard on this and is well known for leading the way in open government and open contracts. It said that it has had someone in Kiev assessing the situation and looking at what can be done. I should like to ask the Minister what else can be done to make sure that DfID’s expertise can be rapidly deployed to help the Government in Ukraine to establish themselves as transparent.
One of the worst areas of corruption has been the subsidising of domestic gas prices so that they are eight times cheaper than those charged to industry. As a result, it is estimated that last year alone $2 billion-worth of fraud was perpetrated as gas was diverted towards business, with businessmen pocketing the difference. As the noble Lord, Lord Giddens, said, the IMF package includes a 50% rise in the cost of Ukraine’s domestic gas, to take effect from May. This will hit many people on low incomes very hard. The country has an average income of $6,500 a year and, without some kind of safety net, I am concerned that the price hike is going to stoke discontent and inflame the eastern provinces in particular. Surely western Governments can contribute to any safety net to help to smooth this transition period while the price rise takes effect.
A transparent Government and business sector are important, but they go hand in hand with the implementation of the rule of law. Ukraine’s 1996 constitution emphasises the importance of the rule of law and specifically states that all citizens are subject to universally applicable laws. However, for the past 20 years these laws have not been implemented by either the judiciary or the police. The trend over the past few years of President Yanukovych’s rule has been to incorporate the judiciary into the executive arm of the Government. One of the country’s leading legal experts said that court decisions were decided by a phone call from the presidential administration.
The EU countries of eastern Europe have huge experience of transforming the judiciary from being an organ of government and the Communist Party to being independent. After major reforms of the institutions and personnel, the judges in much of eastern Europe are exercising impressive independence. Surely we should ensure that this experience is shared with the Ukrainians to help them to build similar institutions.
Likewise, anyone who has been to Ukraine, which I have, and has suffered from the corruption of the police—particularly the traffic police—will know that the corruption is universal. Nobody trusts the police. They are there for their own good and not for the good of the law. That, I think, is the view of most people in the country. It is interesting to look at what has happened in Georgia, where they fired all the police force at the basic level, re-recruiting from universities and training them. They looked really carefully at the hierarchy. That has been quite effective.
Democratic accountability cannot be imposed on Ukraine from the outside. The Ukrainian people have to come together and coalesce around a determination to build a country worth living in. We in the West can do many things to help and advise the Ukrainians in this long and difficult task. I urge the Minister to ensure that our Government do everything they can to help this process.
Lord Skidelsky (CB)
My Lords, I, too, congratulate the noble Baroness, Lady Falkner, on having secured this very timely debate, although I fear that my analysis will diverge from hers and, indeed, from that of most other noble Lords who have spoken—not from all of them and not from all their analysis, but partly.
I want to make three points. First, it is a serious mistake that the West has refused to concede any form of Monroe doctrine to Russia, even in respect of countries which until very recently formed part of the historic Russian state. That is completely unrealistic. Rather, it has actively sought to prise those countries from Russia’s orbit, using as its instruments NATO expansion and financial and logistical support for Russophobe movements in newly independent adjacent territories, not excluding those groups tainted with extreme nationalism and anti-Semitism.
The fact is that international law, of which we all speak and which we all of course support, is a necessary but not a sufficient condition of international order, and the West, which preaches it relentlessly, has ignored it whenever it has suited it to do so. I think that the West has never stopped to consider how its policies are viewed in Moscow, or indeed by most Russians, even those strongly opposed to the Putin regime. It is not just this one man who has power-mad ideas; his views on what western policy has been, certainly in the past 10 or 15 years, are strongly supported by most Russian people. I believe that the West made a historic mistake in not disbanding NATO after its work was done and replacing it with a new European security system which included Russia. These things are all coming home to roost.
Secondly, I have to ask what the purpose of sanctions is. Are they supposed to punish Russia for annexing Crimea or to deter it from future “escalation”? If the former, they are surely pointless, as the deed is done. Do the Government seriously expect that Crimea will be returned to Ukraine? It will not be. If the object is deterrence, what is it that Russia is to be deterred from doing? Can the Minister answer that without retreating into obfuscation?
The western response to the crisis casts Russia in the role of aggressor. However, I agree with Peter Lieven when he writes:
“The danger comes from the possibility of clashes between the Ukrainian nationalist and neo-fascist volunteers who led the overthrow of the previous government in Kiev and opposing Moscow-backed pro-Russian volunteers in the east of the country”.
In other words, the danger lies in the disintegration of the Ukraine state—a point that has been perfectly accurately made by other noble Lords. Peter Lieven adds that if they get out of hand, such clashes could lead to Russian intervention, war and the partition of Ukraine.
My final point is that, if we are seriously concerned to avoid such a disastrous sequence, we should not be calibrating our hard power instruments, as the noble Baroness, Lady Falkner, suggested, but working with the Russians to preserve a viable Ukrainian state. The Russians have presented their own ideas on how to do this, which should be seriously and urgently tested. Broadly, they propose a “neutral” Ukraine on the model of Finland and a federal state on the model of Switzerland. I think we have already had suggestions in this debate that have pointed in that direction. The first would exclude Ukrainian membership of NATO but not Ukrainian membership of the European Union. The second would aim to secure a new constitutional settlement through practical guarantees of minority rights. I will not go into that because I do not have time. Financial aid from both Russia and the EU would be conditional on Kiev’s acceptance of such a settlement.
Will such a sensible solution come to pass or will bloodshed, disintegration or something much worse come out of it? A sensible solution will probably not come to pass. I fear that we are too legalistic and moralistic to do what is required, but we can only hope for the best.
Baroness Morgan of Ely (Lab)
My Lords, the crisis in Crimea and Ukraine is probably the biggest security challenge we have faced in Europe for a generation. We hear from NATO sources that around 35,000 Russian troops are massed near the Ukrainian eastern border along with tanks and special forces. They have the logistical back-up to keep them there for some considerable time, and although we have heard recently that Russian troops are being withdrawn, we need to be on our guard to ensure that this is a significant pull-out of troops rather than a rotation of forces. Either way, we are a long way from seeing the end of this crisis and its consequences.
Putin’s speech on 18 March was unforgiving in its tone and aggression, but it is worth listening to it to gain an understanding of the sense that Russia needs to feel strong again and the humiliation that it felt after the break-up of the USSR. Of course, Russia would love to feel powerful again. Its initial moves to establish a new customs Eurasian trade bloc have been thwarted by the Ukrainian public, who made it clear that if there was a choice they would rather have a customs union with the EU. Russia has broken with the tradition that has developed since the end of the Cold War that assumes that disputes will be settled in Europe by diplomacy rather than military might. We were starting to be complacent in the belief that the only real currency of power in Europe was its economic rather than military might.
The crisis offers a test for two international organisations in particular—the EU and NATO. If they play it well, using deft and delicate diplomacy, we could see the situation settle. If they play it badly, it could have catastrophic consequences for Ukraine and the world.
The EU has now signed an association agreement with Ukraine promising co-operation and convergence over policy, legislation and regulation across a broad range of areas. Gradually and over time, therefore, the trade relationship between Ukraine and the EU—its second biggest trading partner after Russia and responsible for a third of Ukraine’s external trade—will be anchored in a market system that will insist on converging standards, both commercially and in terms of the values of the European Union such as democracy and the world of law. That pathway has started already. The EU loan was mentioned by the noble Baroness, Lady Falkner. I am very pleased that she initiated this debate, and I thank her for her insightful introduction. But in the long term, we should see economic stability in the country and the rule of law that the noble Viscount, Lord Colville, and my noble friend Lord Giddens talked about.
The EU has to act as one on the issue of Russia if it is to maintain any leverage. The energy vulnerability of the continent means that it can proceed only with extreme caution as 30% of its gas imports are from Russia. That is worth £60 billion to the Russian economy, so the EU has an important lever.
We do not need just to reset the energy market in the UK. We need to reset it in the EU as well. We have been talking about it for a long time. The initial energy debate in the EU started when Russia turned off the taps to Ukraine in the early 2000s. We have tinkered about with it, but we have not really taken the energy issue within Europe very seriously. This should be a call to action. However, we have to be very careful not to provoke Russia into isolation in Europe in the long term. Russia, understandably, does not want to feel hemmed in. That is why it is crucial that NATO desists from offering Ukraine full membership of the organisation. NATO promised Gorbachev, after German reunification, that there would be no future expansion to the east. That promise has been broken time and again. I am sure that many of the old Eastern bloc countries are quite pleased at the moment, especially those with Russian minorities, that that promise was broken, but we have to understand the importance of making sure that NATO does not welcome Ukraine as a full member.
In 2010, the Ukrainian Parliament voted to exclude the goal of,
“integration into Euro-Atlantic security and NATO membership”.
The two international organisations now need to show their mettle and their commitment to long-term stability in Europe in the forthcoming weeks. Yes, a strong message needs to be sent to Putin that tearing up international agreements and breaking international law is totally unacceptable and that there are and will be consequences, but we must be careful not to give any excuse for inflaming a situation that could lead to tragedy on our EU borders. If we manage that, we could end up with our ultimate goal: a democratic, open and liberal Ukraine, which is free from corruption and does not bully minorities, and a Russian neighbour that does not feel threatened by encirclement and will come to terms with the loss of empire. The Government continue to enjoy Labour support for the way they have handled this crisis so far.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)
My Lords, I start by thanking my noble friend Lady Falkner for organising this debate and for the opportunity to update the House once again on the political situation in Ukraine. I also thank the noble Baroness, Lady Morgan, and the Benches opposite for their support in what has been an incredibly difficult time in terms of ensuring that diplomacy succeeds.
As noble Lords are aware, this House last debated the ongoing crisis in Ukraine and Russia’s illegal and wholly unacceptable annexation of Crimea on 18 March, and I updated the House on 25 March in replying to a Question. Her Majesty’s Government, working in close partnership with the European Union and an incredibly broad range of allies from across the international community, have continued to take incremental steps to ratchet up the pressure on the Russian Government in response to their continued violation of international law. As my right honourable friend the Prime Minister said last week, their actions are a direct challenge to the rule of law around the world and should be of concern to all nations.
A great deal has been said in our debates about Russia’s motivation for the rapid illegal annexation of Crimea, Putin’s motivation and his view of Russia’s place in the world. Those matters have been discussed today. The noble Lord, Lord Howell, rightly said in a previous debate that Russia’s strategy belongs to the 19th century, not the 21st century. It cannot—it will not—go unanswered. However, our actions must, of course, be of this century: they must be measured, proportionate and always mindful of the need to encourage peace and stability rather than conflict. Our fervent wish for Ukraine, and for Russia, is that their peoples can live in a peaceful, stable and secure environment. Russia’s actions are achieving the opposite. Putin would have us accept that a historical mistake has somehow been corrected with the illegal annexation of Crimea and that it is the will of the Crimean people. However, this is not the view of Her Majesty’s Government or, indeed, of most of the free world. It was a land grab, achieved via a sham referendum under the threat of Russia’s military might. We must commend the Ukrainian Government’s restraint under such pressure.
I hear what the noble Baroness, Lady Morgan, said about Russia and isolation, but isolation in the global community is one of the levers that the international community has. The international community not recognising the illegal annexation of Crimea is a first step. A recent resolution at the United Nations General Assembly saw 100 nations affirm their commitment to Ukraine’s territorial integrity. Only a handful of nations voted with the Russian Federation against the resolution, including Zimbabwe, Cuba and the Democratic People’s Republic of Korea. I fear that Russian intransigence means that we must prepare for the long haul on this issue. We must show the strength of our convictions as a country, and with our allies, by maintaining our position and our actions. To this end, the Foreign Secretary met the Ukrainian Foreign Minister on 1 April to demonstrate UK support for Ukraine.
The European Council on 20 and 21 March announced further sanctions, bringing the total of those facing asset freezes and travel bans to 33. At the same Council meeting, the European Union, member states and Ukraine signed the political chapters of the association agreement, which again have been referred to today. That represents a very visible commitment on the part of the Ukrainian Government to a closer relationship with the EU, and to EU norms and values. For their part, the EU and member states’ signature of the association agreement represents their commitment to assist Ukrainian reform to make these aspirations a reality. To that end a proposal on a package of support potentially worth $14 billion to $18 billion will soon go to the IMF board.
NATO and Ukrainian Foreign Ministers met on 1 April in a further demonstration of international support for Ukraine. They agreed to suspend indefinitely all civilian and military NATO-Russia Council activity, except ambassadorial level dialogue and above. At this time of crisis it is absolutely right for us to step up activities that provide reassurance and confidence for NATO allies without provocation. NATO has worked hard to build a constructive relationship with Russia but Russia, through its actions in Ukraine, has forced us to step back from our previous level of engagement. As the Prime Minister made clear, it would be wrong for the G8 summit to go ahead in Sochi in June. G7 leaders will instead meet in June in Brussels, without Russia present. This demonstrates further the cost to Russia of its policy on Crimea.
It is tragic that Russia, so close culturally and ethnically to Ukraine and with whom it has shared so much history, should impinge on Ukraine’s sovereignty. We once more urge Russia, as we have done, to seek urgent ways to de-escalate the critical situation in Ukraine and to engage with the Ukrainian Government to address their concerns. We are concerned about the visit to Crimea by the Russian Prime Minister on 31 March, which was particularly unhelpful in relation to de-escalation. Solutions imposed at the point of a gun have no hope of resolving a crisis which can and should be resolved by diplomatic means. We are resolute in our determination to support the right of the Ukrainian people to make their—
Lord Skidelsky
Is the Minister really saying that the annexation of Crimea was against the wishes of the Crimean people and that, had they been free to do so, they would have overwhelmingly rejected it?
Baroness Warsi
What we have said consistently and in direct reply to that is that we cannot accept any referendum held with no preparation and down the barrel of a gun, without really an answer on that ballot paper to vote “no”, which were the two options given. If, in due course, there was a referendum appropriately held with the necessary constitutional backing in the right way that referendums are held, I do not think that anybody would dispute people having their right to self-determination. We are resolute in our determination to support the right of the Ukrainian people to make their democratic choices about the future of their own country. I think we would all agree that the way it was done was not acceptable.
Key questions to which noble Lords quite rightly returned are how we now frame our relationship with Russia and how to address Russia’s concerns about the intentions of the West. The crisis in Ukraine is the most serious test of European security so far this century. Russia’s actions cast a menacing shadow across the continent of Europe. Without swift and significant steps by Russia to de-escalate the situation, the Government remain resolute in determining that our relationship with Russia can be seen only through the prism of an illegal and ill-judged incursion into Ukrainian territory.
The actions we and our allies have taken are proportionate and it is clear that their impact is already being felt. Indeed, the noble Lord, Lord Skidelsky, asked about sanctions. The European Union has adopted unprecedented sanctions against Russia, including asset freezes and travel bans. Preparatory work is already under way for more far-reaching European Union sanctions, including economic and trade measures. These sanctions are a message and a warning to the Russian Government. We want Russia to enter direct talks with Ukraine and we will continue to work with our international partners to find a diplomatic solution to this crisis. These sanctions are a part of that.
The noble Lord, Lord Judd, spoke about the need for dialogue with Russia. We absolutely agree with that. The noble Lord is right: dialogue with Russia is key. We continue to engage with Russia to try to find a solution to the current crisis. My noble friend Lord Dykes said that we need to work towards a positive outcome. A positive outcome is an increase in democracy in both Russia and Ukraine. We are doing what we can to support that in Ukraine.
We continue to choose our actions with a long-term strategy in mind. As members of the EU, we have enjoyed the longest period of peace and stability in European history. Our NATO alliance has stood the test of time to become the most successful military alliance ever.
To echo the words of my right honourable friend the Foreign Secretary, we are not asking Ukraine to choose between Russia and the West. We are saying that Ukraine should be free to choose to strengthen links with either, both or neither, but only Ukrainians themselves can decide their future. However, we can give Ukraine the support that it requires. My noble friend Lady Falkner asked what conversations we had already had in relation to IMF assistance, for example. Ukraine and the IMF reached a staff-level agreement last week on a two-year standby arrangement, supported by the international community. That will potentially unlock $27 billion. The IMF contribution will be between $14 billion and $18 billion, depending on other bilateral and multilateral contributions. As I said earlier, the agreement is expected to go to the IMF board—the executive board—next week.
I think that the noble Lord, Lord Giddens, asked how IMF payments will be managed. I am sorry; I cannot read my own writing. We recognise that there will be pain in complying with the IMF conditions for assistance, including the need to increase domestic gas tariffs. The Government of Ukraine inherited a country in dire need of economic and political reform. The Government of Ukraine have committed to making this difficult reform and the UK and our international partners stand to assist in this. Of course, the conditionality of the IMF agreement is important because we know how many IMF programmes have in the past failed in Ukraine. Therefore, reform in relation to gas tariffs, governance and the financial sector are part of that package.
The noble Viscount, Lord Colville, asked about the role of DfID. The initial UK package of £10 million, which was announced a few weeks ago, is being put forward in co-ordination with DfID. We are working closely with international donors to see where expertise can best add value. DfID anti-corruption work is being done, in addition to the work being done by technical teams in Kiev, to identify where the UK can support energy and social reform sectors.
My noble friend Lady Falkner asked about arrangements for elections. The OSCE will monitor the Ukrainian elections which are due to take place on 25 May. About 100 long-term election observers are already in Ukraine. Short-term election observers will follow. The UK is contributing to the monitoring mission and is urging the Ukrainian Government to do all they can to ensure that the elections are free, fair and carried out in accordance with international norms.
The noble Lord, Lord Giddens, asked about devolution and Russian federalism. As I said, the future of Ukraine is for Ukrainians to decide. Russia should respect Ukraine’s sovereignty and not seek to impose systems of governance on it which are not agreeable to the Ukrainian people. I agree with the comments of my noble friend Lord Chidgey regarding work in relation to the energy sector. The Government are, of course, discussing plans on the exploitation of shale gas in the UK as we speak.
I agree with the noble Baroness, Lady Morgan, on the need for wider EU action. We task the European Commission to prepare measures which will bring far-reaching economic consequences if Russia takes any further steps to destabilise Ukraine and, by June, to produce a comprehensive plan to reduce Europe’s dependency on energy from Russia. However, I agree that more needs to be done, and it needs to be done quickly. My noble friend Lord Chidgey also spoke about corruption and tackling assets which could potentially pass through London. I have a comprehensive answer on that but, in light of the time, I will write to him giving a detailed response.
In conclusion, Russia does have a choice to make: to take the path of de-escalation or face increasing isolation and tighter sanctions. President Putin should take notice of the clear, united and resounding message emanating from every democratic Parliament, including, of course, the mother of all Parliaments here. I am grateful to noble Lords for their contributions in reinforcing that message today. Every diplomatic channel remains open. Nothing that has been done cannot be undone. We and our allies continue to urge Russia to show its strength in ending this crisis.