Draft Immigration (Persons Designated under Sanctions Regulations) (EU Exit) (Amendment) Regulations 2022
(2 years ago)
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The Parliamentary Under-Secretary of State for the Home Department (Miss Sarah Dines)
I beg to move,
That the Committee has considered the draft Immigration (Persons Designated under Sanctions Regulations) (EU Exit) (Amendment) Regulations 2022.
It is a huge pleasure to serve under your chairmanship, Mr Hollobone. The statutory instrument amends existing regulations relating to the immigration consequences for someone who is designated or sanctioned for immigration purposes under the Sanctions and Anti-Money Laundering Act 2018—the sanctions Act, as I shall now refer to it. I will start by setting out some background to the immigration sanctions, also known as travel bans, with which these regulations are concerned.
The UK is bound by travel bans imposed by a resolution of the UN Security Council and can impose its own travel bans under the sanctions Act. In the vast majority of cases, travel bans are imposed on individuals who are outside the UK and have no connection with the UK. A travel ban has an effect on a person’s immigration status: subject to the UK’s obligations under the European convention on human rights and the refugee convention, they cannot enter or remain here. The Immigration (Persons Designated under Sanctions Regulations) (EU Exit) Regulations 2020 provide a mechanism for a person who is lawfully in the UK to make a human rights or protection claim before a travel ban made under the sanctions Act impacts their immigration status. They are exempt from the effect of the travel ban while the claim is considered, and refusal of such a claim gives rise to an in-country right of appeal before the immigration and asylum chamber of the first-tier tribunal.
Where a person is not subject to a travel ban but is making a human rights or protection claim under the immigration rules, they benefit from similar protection. However, in contrast to the exemption provided to sanctioned persons, they cannot leave the UK or the common travel area and return simply on the basis of a claim lodged before their departure. We are therefore in the perverse situation in which someone subject to a travel ban benefits from more generous protection than someone who is not.
The purpose of these regulations is to align the approach and correct the anomaly. The Government have considered how to address it and have concluded that it is right that people lawfully in the UK when a travel ban is imposed under the sanctions Act are exempt from its effect while their human rights or protection claim is considered. However, when a sanctioned person leaves the UK, that exemption should end. Any action taken in respect of the person’s immigration status will be in accordance with our international obligations. The regulations therefore ensure consistency across the immigration system, and that the effectiveness of our domestic sanctions regime is not compromised. I commend the regulations to the Committee.
Holly Lynch (Halifax) (Lab)
It is, as always, a pleasure to serve under you in the Chair, Mr Hollobone. I do not think we will be detaining the Committee quite that long.
I thank the Minister for her comprehensive explanation of the regulations’ purpose, which is to correct what might best be described as a glitch in the operation of immigration sanctions or travel bans in respect of individuals based within the UK. The Home Office has identified that discrepancy, which has led to the entirely perverse situation in which people subject to a travel ban have more rights than those who are awaiting a decision on a human rights or protection claim and are not subject to sanctions.
The roots of the issue date back to the passage of the 2018 Act and regulations under that Act that were made in 2020, so it took the Government quite some time to become aware of the problem, which begs the question how and why the discrepancy first came to Ministers’ attention. The Government point out that in most cases, people subject to travel bans are not in the UK and do not have any significant connection to the UK. The number of people likely to be affected by these regulations is therefore small. The intention of the regulations is to rectify the error, and the hope is that in doing so, they will also help to strengthen the operation of UK sanctions regimes in the future. I am sure we can all support that. On that basis, the Opposition support this statutory instrument.
Miss Dines
I am grateful to have had this considered—albeit rather short—debate. I am also grateful for the Opposition’s support.
There might have been some delay, but the immigration rules are complex and it is right to make sure that everything is looked into appropriately. Travel bans are used to restrict the movements of those whose behaviour is considered unacceptable by the international community; those who are associated with regimes that threaten the sovereignty or independence of neighbouring countries; those who would seek to do us harm; those who seek to shelter themselves or their ill-gotten gains in other countries; and those whose aim is to profit from human suffering.
The UK does not ignore its international obligations. Those subject to a travel ban who claim a real fear of persecution or a breach of their fundamental human rights have the opportunity to make a claim before we take action to remove them from the UK. They have a statutory right to appeal against a decision to refuse their claim, and if the appeal succeeds the travel ban does not apply, meaning that they will not be removed or required to leave. But it cannot be right that when sanctions are be imposed on someone, they can then come and go as they please, abusing our hospitality. Should they choose to leave the UK without resolution of their original claim, they should not find themselves in a more generous position than others.
As I set out, the regulations simply provide consistency while maintaining the effectiveness of the sanctions regime and complying with our international obligations. I commend the regulations to the Committee.
Question put and agreed to.
Draft Parliamentary Works Sponsor Body (Abolition) Regulations 2022
(2 years ago)
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The Leader of the House of Commons (Penny Mordaunt)
I beg to move,
That the Committee has considered the draft Parliamentary Works Sponsor Body (Abolition) Regulations 2022.
It is a pleasure to serve under your chairmanship, Mr Sharma. I thank all hon. Members for struggling against the weather to be in today.
The draft regulations were laid before the House on 22 November and will give legal effect to a decision of both Houses to take a new approach to the parliamentary building works. I am grateful for the way in which the Office of Speaker’s Counsel has worked with my officials to draft the regulations and for the ongoing advice that I have received from the restoration and renewal directors and the delivery authority.
In June, both Houses passed motions to endorse the House Commissions’ report recommending a revised mandate for the restoration and renewal programme. Changes to the governance arrangements will continue to ensure that, as provided for in the Parliamentary Buildings (Restoration and Renewal) Act 2019, Members of Parliament, peers and others who work in this place will be consulted fully on the works. I, alongside other members of the client board, which is responsible for making critical strategic choices related to R and R, will take into account the principles agreed by both Houses to deliver a value-for-money approach to the programme, prioritising the work of this place and public safety. It is vital that all members of the parliamentary community feel that they are engaged with on the parliamentary building works, and I am confident that the new arrangements will deliver.
The draft regulations, which are made under section 10 of the Parliamentary Buildings (Restoration and Renewal) Act, will abolish the sponsor body, which will be replaced by an in-house governance structure. The statutory responsibilities and other functions of the sponsor body will transfer to the corporate officers of the House of Commons and the House of Lords. I have consulted the corporate officers and Commissions of both Houses, in accordance with section 10(8)(a) of the Act. Both corporate officers have consented to the transfers to them under this statutory instrument in accordance with section 10(3) of the Act. The corporate officers will share joint responsibility for the parliamentary building works and, at least once a year, will prepare and lay before Parliament a report about the carrying out of the works, detailing the progress towards their completion.
Alec Shelbrooke (Elmet and Rothwell) (Con)
On that important point about keeping Members up to date, the annual report is useful, but will there be the ability to have interim reports along the way? For example, during Her late Majesty’s funeral, New Palace Yard was able to be put together very quickly and has now been taken apart again. One just wonders what the works programme is. Rather than wondering all the time, will it be possible to have interim reports, so that Members can understand what work is taking place, rather than having to wait on an annual basis?
Penny Mordaunt
I note what my right hon. Friend said and I reassure him about that. On the next steps of the programme, starting next year, there will be much greater consultation with Members about the shape of the works and our plans. I know that Members are keen to ensure that we have good oversight of what is happening, and that the right level of expertise is involved in the project. I want to provide some reassurance on that.
First, the staff team working on the sponsor body will be brought in-house as a joint department, which will be accountable to the corporate officers. Secondly, I emphasise that the draft regulations will make no changes to the delivery authority—its role is unchanged. That ensures that the programme retains its valuable experience and expertise. In fact, the regulations will allow for greater co-ordination and engagement between the Houses and the delivery authority, which could in turn allow for the delivery of restoration works much sooner. The regulations will not alter the role of the Parliamentary Works Estimates Commission, which will continue to scrutinise estimates. This statutory instrument is vital to ensuring that this historic and iconic building is restored, while making sure that we deliver for the British taxpayer. Our commitment to ensuring good value for money is reflected in section 2(5) of the restoration and renewal Act.
I reassure Members that the House’s important role in this project is not diminished by these regulations. Under section 7 of the Act,
“No Palace restoration works, other than preparatory works, may be carried out”
until Parliament has approved the Delivery Authority plans for those works. In addition, any proposals that would significantly affect the design, timing or duration of the parliamentary building works would still need to be approved by Parliament. Bringing this project in-house is an opportunity, as the new governance structure should improve accountability and engagement with Parliament by allowing close interaction with, and feedback from, the views of the commissioners. I ask the Committee to support the instrument so that we can take this project forward.
Thangam Debbonaire (Bristol West) (Lab)
It is a pleasure to serve with you in the Chair, Mr Sharma. As I am sure everyone in this room knows, there is an ever-increasing need for urgency when it comes to restoration and renewal, so I welcome this opportunity to at least keep things moving by giving legal effect to resolutions passed in both Houses earlier this year. That is what we are doing: we are just considering the governance structure of the works. As shadow Leader of the House and, therefore, a member of the Commission, I will be supporting the order. However, I do so not because I am happy about where we have got to, but because we have to get a move on.
In my view, it is at least partially on the Government that we are in this position. In 2018, the Commons and the Lords agreed that work was pressing, and rightly concluded that that work should be undertaken by a statutory sponsor body and delivery authority. Since then, various right hon. and hon. Members—not exclusively, but in large part, from the party of Government—seem to be working to undermine the progress of those works, spending time wrangling with the experts instead of working with them to secure the future of the building and the safety of the people in it, and coming up with wizard wheezes that only remind one of what happened in the mid-19th century after the 1834 fire. A previous generation of parliamentarians—none of them qualified—decided they knew best, and would tell engineers what to do. We ended up with the situation we are in now, with substantial flaws in the current building.
We must follow the evidence and the advice of experts. Importantly, we must also heed the wisdom of colleagues such as my right hon. Friend the Member for Alyn and Deeside, who has put in the hard yards—nay, years. I think he has sat on every single Committee over the past 12 years to try to get the parliamentary community to recognise that, yes, maybe we are the generation of MPs that will have to put up with work-arounds and moving out of Parliament to enable those vital works to start. We are doing so for future generations, to make sure that this incredible place, with so much history in it, continues to be a living place of work, not either a dangerous wreck or just a museum.
Delay, asking for new assessments, and the further delay resulting from those assessments brought about a loss of confidence in the previous process, as well as ever-increasing estimates of times and costs. There is a complicated story behind why that happened, which I hope will one day be written, but the independent expert panel tasked by the Commissions to assess the situation concluded that the previous model was unlikely to be viable, and that doing nothing was also not an option. There is no doubt that large-scale works are needed, and I put on record that the longer those works get put off, the more expensive they become. We have already spent a lot of money not getting very far, as the delays exacerbate problems. Costs never go down as a result of waiting.
Members need to engage when we have consultations. I know that Members are busy, and I know there are so many things to call on our attention, but I have been in many consultation events in this place where the number of colleagues who turn up to take part is very, very small—smaller than the number of fingers on half a hand—and I am sure my right hon. Friend the Member for Alyn and Deeside has, as well. If the consultation is at the wrong time or in the wrong place, Members need to try to find other ways to engage.
I will continue to press every single structure involved in this process to make use of every single method they have to consult with Members, but we have to try to meet the project halfway, otherwise this place could really turn into a disaster. We have asbestos, leaks, wires, plumbing that nobody knows the function of, and buildings at risk of fire and flood. It is testimony to the hard work of House staff and contractors that we have not yet witnessed a catastrophic failure of the building, as has been seen in other buildings around the world, such as Notre Dame. However, at some stage, that hard work just will not be enough.
There are opportunities for us to offer apprenticeships and revitalise craft training across the UK through this R and R project, and for patriotic pride. People already feel that pride when they turn up to see Big Ben again, and they will feel it when they see a parliamentary estate that is the iconic building for democracy and British soft power that it can be, given the attention it so badly needs. We need to pass this regulation today so that we can get a move on, but we also need right hon. and hon. colleagues from across the House to do everything they can to support it.
I will finish with one question for the Leader of the House: can she assure us that the Government will do everything they can to support, not frustrate, any future progress, and that we will get estimates and progress on business that needs to come before the House in as speedy a manner as possible, so that we have as little delay as possible? Every single day that goes by puts the building and the hard-working staff who work in it—never mind us; this is an issue of workers’ rights—more at risk.
Mark Tami (Alyn and Deeside) (Lab)
I should say that I am currently a member of the sponsor body, although not for much longer. As my hon. Friend the Member for Bristol West said, I have had the pleasure or the misfortune—whichever way you want to look at it—to sit on, I think, every single Committee that has looked at this process since it began.
I used to work with a colleague who, when he was given legal advice he did not like, would tell us to get another lawyer, and would keep doing so until he got the answer he wanted. That really sums up where we are today. The sponsor body was given a task, and I think it carried out that task very well. The problem is that certain individuals in this place—I will not name them—did not like that, and they did not like what the sponsor body came up with. I think the sponsor body was very honest, and did a hell of a lot of work on this project, but it is not going to be a quick project; it is not going to be a cheap project; and it will be a project where, whatever people want, we will end up having to move out of this building. The fact is that some people do not want to move out, and now, after years of work and hundreds of millions of pounds, I would say that we are back at the beginning again, but I think we are actually further back than when we started.
We also need to remember why the model of the sponsor board and delivery authority was chosen in the first place. Following on from the Olympic model, recognising that this was not going to be a project that could be delivered in one term of a Parliament and that colleagues and views change from one election to the next, we needed a structure that took the project away from us tampering and changing our mind on everything. As my hon. Friend has said, the danger is that we do not actually get anywhere with this, because it is always too difficult for one Parliament to do it.
Colleagues have said, “We need to deliver it quicker, and we need to spend less money.” I would like to see how we square that circle. However, the decision has been made, so we are where we are. We will probably regret what we are doing today; I think bringing the project in-house is a mistake. Certainly, if we look at the many projects that have been delivered in-house, it is not a great record of success in terms of cost and time, but we are where we are.
I have one final point, which is on engagement. I have chaired many sessions, and we all know what we are like in this place: we all say we want more engagement—we want people to talk to us more—but we do not turn up to the meetings, because we have got something else to do. That is the reality of the situation: the decision has effectively been made, but I fear we will rue that decision.
Penny Mordaunt
I thank colleagues for their contributions, and particularly the shadow Leader of the House for the collaborative way in which we have worked on these matters together. I echo her thanks to all Members who have been to many meetings over many years and spoken to many colleagues to get us to where we are today. I think this is a move motivated by wanting some pragmatism and granularity to the schedule of works. It will mean we can be more creative in how we do the works. I do not think work that has been done to date will be wasted. A huge amount of survey work has been done, and that will help inform options next year, which will form the basis of the consultation with Members.
If we have some granularity in the programme, we will find that we do have other options, which are very difficult to assess at the moment. We might have a different approach to some of our recesses. We might use some of the new technology we used during covid, such as the remote voting system, which cost £1.3 million and was used for eight days. We will have more options and more flexibility going forward.
Critically, as the right hon. Member for Alyn and Deeside points out, it is about maximising value, not just controlling costs. I can give the hon. Member for Bristol West the reassurances she seeks. I hope I have given her that impression in the meetings we have been in together. We want to get a move on, and we do understand the concerns. It is why we have prioritised safety at the heart of our approach, as she will know. We are custodians of this incredible building, and we need to safeguard it.
Thangam Debbonaire
I thank the Leader of the House for giving way on that point. Will she concede that at some point, as my right hon. Friend the Member for Alyn and Deeside said, we are going to have to move out? The nature of what is underneath us and all around and the connectedness of the two buildings means that even the option that has been touted by many people—that the Lords move out and that we move over there—is just not viable. We made enough fuss when some steps were missing a ramp last summer. It is not like just having builders in to put a new carpet down at home. Will she acknowledge that we are going to have to move out at some point?
Penny Mordaunt
I do not want to pre-empt the work that is being done next year, but the hon. Lady is right. I am very sceptical about us being able to dislodge their lordships for starters. Although there will be things that can be done to work around and bypass systems while they are worked on, we obviously have to take into account noise, disruption and a whole raft of things. I think the majority of our colleagues want to minimise the amount of time we are out of the building. Of course they do. I think the problem that happened with what she refers to is that, quite rightly, people were given a task, but the conclusions people came to were too far adrift from the expectations.
I think there is a way through this, but unless we change the approach, get granularity in so we can see the schedule of works that needs to happen, and unless we can get into that Chamber and have a proper survey done, we will not move forward fast. That is our shared aim, and I think that is where we will get to. The right hon. Member for Alyn and Deeside, who has put in more hours than most on this, rightly notes that today we are just implementing a decision of both Houses. I want to make progress, and I want people to be prepared when they are considering standing for election and when colleagues are considering re-standing that they know what future Parliaments will look like in this place. I think we will be helping ourselves.
Penny Mordaunt
I completely agree. That is why I made that point. What we are doing with this new governance structure places them at the heart of this. They should be at the forefront of our minds, and they also need to be consulted as we are getting the more granular programme together.
Finally, though I was not directly involved in it, I think lessons have been learned from the experience of the Elizabeth Tower and other projects that have been brought in house. We are getting some very good external expertise into these governance structures, and greater oversight, scrutiny and audit is of course to be welcomed. I thank all right hon. and hon. Members for being here today. We are delivering on the will of both Houses of Parliament, and I will do my utmost, working closely with the shadow Leader, to ensure the pragmatism that we all want to see is brought to fruition swiftly.
Question put and agreed to.
Draft Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2022
(2 years ago)
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The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)
I beg to move,
That the Committee has considered the draft Non-domestic Rating (Chargeable Amounts) (England) Regulations 2022.
This statutory instrument delivers a transitional relief scheme to protect properties from large increases in their business rates bill when new property valuations come into effect on 1 April next year. That will help about 700,000 businesses with about £1.6 billion of relief over the coming three years. The scheme, which is a significant part of the measures on business rates announced by my right hon. Friend the Chancellor of the Exchequer in the autumn statement, will cap bill increases after the revaluation by a set percentage every year. That will give more certainty; and for the first time—and particularly importantly—it will ensure that 300,000 business rate payers with falls in rateable value will see a full and immediate fall in their bills on 1 April.
As the Chancellor set out in the autumn statement, a revaluation will take place. Such revaluations are a necessary part of the proper administration of the business rates system. By updating valuations, we ensure that they reflect market conditions. The new set of rateable values, which were published in draft last month, will be applied from 1 April. That revaluation will build on measures already in the system to help ratepayers. Hon. Members will likely be aware that there is already substantial support through, for example, small business rate relief, which ensures that about 700,000 of England’s 2 million properties pay nothing at all.
However, we recognise just how challenging conditions are, including on high streets. Without intervention at this revaluation, business rate bills in England would have increased by, on average, 20% in 2023-24. To avoid that, we are providing a further package of support, worth £13.6 billion of taxpayer subsidy over five years. That will include a freeze on the business rates multiplier, to protect ratepayers from the full effects of inflation. That is worth £9.3 billion of taxpayer subsidy.
Many ratepayers will see their property values either fall or increase moderately at a revaluation, but we recognise that inevitably some properties have much greater swings in rateable value, which can result in a significant change to the final bill. That is why, in addition to freezing the multiplier, and the additional support for high streets, we are putting in place a more generous transitional relief scheme. These regulations will implement that transitional relief scheme.
As I say, the scheme, at £1.6 billion of the total £13.6 billion package, will help about 700,000 ratepayers to transition to their new bills. Unlike previous schemes, it will not require ratepayers to wait years to see the benefits of falling valuations. The results of the Government’s recent transitional relief consultation were published alongside the autumn statement and clearly showed businesses’ preference for the type of scheme that we are putting in place. We have listened, and are delivering significant reform to transitional relief by removing the system of downward transition, under which caps on increases were funded by restricting falls in bills. We are scrapping that cap, and there will be a full and immediate fall from 1 April 2023.
Nevertheless, under current law—specifically, section 57A(10) of the Local Government Finance Act 1988—we are required, when making these regulations, to have regard to the object of ensuring that they are self-financing. In other words, until and unless section 57A(10) has been changed, the regulations must include provisions to fund the relief. To meet that legal requirement and to adhere to the spirit of what we intend to do here, we have included in the regulations a supplement of 3.3p on every £1 of rateable value to be paid by ratepayers in 2027-28. If, as we are currently required to do, we must include funding in the regulations, we consider that to be the fairest and most reasonable option, as it allows businesses five years to recover from current economic circumstances before having to meet the cost of transitional relief. It also allows those for whom there will be reductions the full benefit of the new valuations immediately.
However, the Government’s intention—subject to the will and approval of Parliament—is that no business will ever have to pay the supplement in 2027-28. We intend to bring forward primary legislation to reform transitional relief so that the Exchequer shoulders the cost of capping bill increases after a revaluation. As soon as parliamentary time allows, we propose removing section 57A(10) from the statute book forever and then cutting the supplement out of the regulations. This is a fundamental reform of the system that supports business. What we propose today will allow us to obtain immediate and important benefits for businesses from next year, while still being able to resolve the broader matter in the future, when parliamentary time allows.
The upward caps provided for by the scheme will support those ratepayers facing larger increases in their bill. For example, in the first year of the revaluation, the transitional relief scheme has caps on increases of 5% for small properties, 15% for medium properties and 30% for large properties. It is important to note, however, that the caps included in the draft regulations are before any changes in the bill from other reliefs and supplements, such as the 1.3p paid by larger properties on the higher multiplier and the 2p supplement to fund Crossrail in London. The caps will also rise with inflation in 2024-25 and 2025-26, and of course bills can change for other reasons unrelated to the revaluation—for example, because of property improvements.
The precise increase in bills next year and in future years will vary depending on the circumstances of each ratepayer and, in later years, inflation. The caps will ensure, however, that large increases are staggered, and that ratepayers have time to adjust to their new bill. Transitional relief will be calculated automatically by local government and applied to bills without ratepayers having to apply. Nevertheless, we have also included transitional relief in the gov.uk rates estimator, so that ratepayers can go online to check whether they will receive transitional relief ahead of receiving their bill next year.
As we might expect, properties of different sizes will get different caps to better protect those businesses that are less able to adapt. Overall, we estimate that the transitional relief scheme will support about 700,000 ratepayers as they transition from 1 April. That includes the more than half a million small properties that will benefit from transitional relief in the first year of the scheme.
Few people welcome revaluations, but they are a necessity. They rebalance the burden of business rates across the tax base, ensuring a fair distribution. Clearly, however, in this economic climate, some ratepayers need support to transition to their new bills. This statutory instrument, along with the wider support package announced by the Chancellor, provides the support that businesses need to manage the revaluation with greater certainty. I commend the draft regulations to the Committee.
Sarah Owen (Luton North) (Lab)
It is a pleasure to see you in the Chair, Mrs Murray. I welcome the opportunity to speak on this legislation, which will touch businesses in all our constituencies. Unfortunately, however, the Opposition would not vote with the Government in a Division, because we do not believe that the regulations go far enough. I will put on the record some points about the difficulties facing businesses and the local authorities attempting to support them.
On Saturday 3 December, we all celebrated Small Business Saturday, which is an opportunity to focus on independent traders who are making a big impact with little resource. All year round, however, my colleagues and I hear about the struggles of small businesses in our communities. Our high streets are already struggling as a result of the pandemic, and from the decade of under-investment before that.
As a result of climbing energy bills, the cost of goods rising with inflation, and stagnant wages driving consumer caution, businesses are desperate for a dramatic package of support. Tinkering with business rates, which is what this legislation does, is not what they want or need. Labour has a plan to back business by bringing business rates in line with the needs of the modern economy.
We are committed to cutting rates immediately for small firms, and they should be given any discount they are owed as a result of the revaluation at the nearest opportunity. To give the sector the stability and reassurance that it needs, and that I am sure we all want to see, we will bring in an annual revaluation of business rates, rather than holding ad hoc revaluations as the Government do, and as is outlined in the regulations. Under our model, the heavy burden of taxes will move from small and medium-sized enterprises and high-street businesses to online giants, which have, for far too long, got away with contributing far too little to our economy.
When Labour gets into government, it will deliver the transformation that businesses deserve, but we need an urgent increase now in the threshold for small business rates relief from £15,000 to at least £25,000. That discount for small and medium-sized enterprises would be a vital boost at this vulnerable moment. It would be funded by increasing the digital services tax for online business grants. That is just a taster of what could have been. I would be grateful for the Minister’s assessment of the financial health of SMEs compared with, for example, global tech companies, and would like to know why increases in the digital services tax have not made his priority list. The burden of business rates is disproportion-ately heavy on small businesses. Our hard-working high-street entrepreneurs are being driven into the ground, while the profits of major corporations soar.
This legislation, being at an early stage, will not arrive soon enough to allow businesses and local authorities to plan sufficiently for the year ahead. In July, the Local Government Association responded to a Government consultation by saying that
“any transitional arrangements for 2023, whether part of the formal scheme or supplementary, should be announced no later than autumn 2022 when the draft list and provisional multiplier are announced.”
It is not contentious to say that 12 December is beyond what we conventionally consider to be autumn. Councils will not have adequate time to consider and communicate the changes before they become law. Were the time and effort required for local authority staff to adopt the new process factored into the timetable for the legislation?
It is not just the billing authorities that need to prepare for the new non-domestic rates. Such financial and administrative overhauls can be costly for many of the individuals and groups paying the new rates. The LGA has highlighted the need for councils to be compensated for the cost of staff time, and for potential new technologies, involved in the revaluation of rates and in bringing in the transitional scheme. It is welcome that the Government have already announced that administrative costs for local authorities will be covered, as with previous schemes, under the new burdens doctrine. However, the insufficient time to input these changes will still cause problems that council staff do not need. For their peace of mind, will the Minister confirm that no further reliefs will be announced ahead of the new financial year starting on 1 April 2023?
We will not vote against the legislation. However, the Government clearly have work to do to catch up with the needs of small and medium-sized businesses, and to match what Labour’s fair taxation strategy offers those businesses, so that we can regenerate our high streets.
Peter Aldous (Waveney) (Con)
It is a pleasure to serve with you in the Chair, Mrs Murray. I was not planning to speak today; I am actually a late substitute for a colleague. However, given that I am leading a Backbench Business debate in Westminster Hall tomorrow on business rates and levelling up, it is appropriate to say a few words.
First, I support the Government’s measures. It is right that a revaluation should take place next year. As the hon. Member for Luton North said, there is a need to carry out valuations more regularly. They should take place annually. My warning is that the last valuation date was April ’21, when we were in the middle of covid. We could argue that certain premises were virtually unlettable on that date, and I sense that there will be quite a lot of angst and appeals submitted by businesses. To overcome that concern, it is important that the Valuation Office Agency works with them, and is as transparent as possible. Secondly, we now have a business rate system with 12 forms of relief and support. Although they are all welcome, the system is becoming incredibly complicated. It needs root-and-branch reform.
The end of transitional relief is good news, because previously if a business was on a declining high street—there are lots of those around the country—although its rateable value would go down, it would not get the immediate benefit, because that would be transitioned in over a period of years. It is quite right that the Government should scrap transitional relief.
As I said, there is a need for root-and-branch reform. We look around for the holy grail of an alternative to business rates. I do not think that it exists, because from any Government’s point of view, it is a tax that yields a lot of money to the Treasury—probably £25 billion to £30 billion. It is much easier to collect than other forms of taxation, because ultimately people pay the local authorities, and it is difficult to avoid, because people cannot magic away their building. That said, the danger is that business rates do not reflect the profitability of a business.
The appeal of a digital tax, which the hon. Member for Luton North mentioned, is obvious, but the people we want to pay it would find ways of not doing so; we therefore would not get the full £25 billion to £30 billion. In the longer term, we need to build on the measures that the Chancellor introduced in his autumn statement; that includes getting the uniform business rate for everyone back down below the 50p-in-the-pound mark, probably towards the 30p-in-the-pound mark, which is where it was when the uniform business rate, in its current guise, came in during the early 1990s.
We then need to move towards annual reviews. That means digitising the Valuation Office Agency and making it far more transparent. Then the system will be more dynamic, and able to respond to the different, changing circumstances in the volatile economy that we have at the moment. I support the measures. The Chancellor grasped the nettle by the stem, but this should be only the start of significant root-and-branch reform, which we can bring in relatively quickly—by, I suggest, the spring Budget.
Karl Turner (Kingston upon Hull East) (Lab)
I do not intend to detain the Committee long, but I felt that I should speak briefly. Businesses in my constituency recognise that it is the Labour party that is on the side of business, especially small businesses and high-street businesses. They recognise that the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), and indeed the shadow Minister, my hon. Friend the Member for Luton North, recognise the injustice in business rates and want to right that wrong. There is no doubt that entrepreneurs are being punished, especially high-street businesses. It is time for the Government to recognise that we need a fairer system of business taxation that would address those wrongs. Sadly, it is clear from the Minister’s comments that that will not happen until a Labour Government come to power.
Lee Rowley
I am grateful for all the contributions. I will take each in turn, starting with the questions and comments of the hon. Member for Luton North, who spoke on behalf of the Opposition. It is perfectly clear that there is a difference of view on how to approach the issue, which we will debate both in this place and elsewhere. The Government are trying to make progress by moving from a five-year cycle to a three-year cycle, which is a step forward; by putting in significant support and taxpayer subsidy in acknowledgement of the fact that there have recently been real difficulties, given the economic circumstances; and by giving businesses certainty, based on the existing processes, models and business rate scheme that they are familiar with.
The hon. Lady said that the measure does not go far enough, but if nothing else, £13.6 billion of taxpayer support is being provided to ensure relief for the businesses and properties that need it most. She pointed out that there are significant challenges for small businesses. We have accepted that all the way through covid and beyond; it is one of the reasons why many small businesses do not pay rates today, and why this additional relief is being provided at the same time. I cannot concur that the measures are tinkering; there is substantial support and relief, and a substantial change with regard to downward relief, in the regulations, on which we must either agree or vote. There will be an immediate benefit to businesses and properties that will see business rate reductions from 1 April next year.
The hon. Lady talked about the structure of tax policy—a subject that was similarly highlighted by my hon. Friend the Member for Waveney. Although I am not speaking for the Government on tax policy—I will allow the Treasury to do that—my hon. Friend made a number of salient and important points about online businesses and the potential for tax policy to move in that direction. It is important to put on the record that as a result of the revaluation, the properties that most online businesses use—big warehouses—will attract a substantial increase in business rates; the average increase will be 27%. If that is the prospectus on which an evaluation is being made, it should go at least some way to alleviating concerns.
The hon. Member for Luton North asked about small and medium-sized enterprises. We obviously take into account all the impacts on all businesses, including SMEs, as best we can. We are particularly cognisant of the importance of SMEs not just on our high streets, but across the economy, and we have brought forward packages that try to reflect and recognise that. She also asked about councils’ staff time. As she will know, local councils are used to making changes such as this; they have great expertise in doing so. We are grateful for the work that they do, but there will also be a new burdens assessment, and additional staff, support and funding will be provided, should it be proportionate to do so.
My hon. Friend the Member for Waveney made a number of broad points. I look forward to the debate that he is leading tomorrow, in which he will give these matters greater scope. I accept the challenge that my hon. Friend issued on the date of revaluation; his point is understood, and it is one of the reasons why substantial relief is being brought forward. I am grateful for his welcome of the downward relief and its immediacy from April next year.
I am grateful for the comments of the hon. Member for Kingston upon Hull East. I will allow the party political broadcast to stand; all I say is that we do not agree. We in the Conservative party are bringing forward a substantial amount of relief and a substantial change; our party has always been on the side of businesses, and will continue to be, whenever it has the privilege to serve in government. I am grateful for your time, Mrs Murray, and for the opportunity to make the case for the Government. I commend the statutory instrument to the House.
Question put and agreed to.
Draft Restriction of Hazardous Substances in Electrical and Electronic Equipment (Exemptions) (Fees) Regulations 2022
(2 years ago)
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The Committee divided: - Ayes: 9 / Noes: 1 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rebecca Pow)
I beg to move,
That the Committee has considered the draft Restriction of Hazardous Substances in Electrical and Electronic Equipment (Exemptions) (Fees) Regulations 2022.
It is, as ever, a pleasure to serve under your chairmanship, Mr Hosie. We will endeavour to get on with this statutory instrument at full speed.
The Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations 2012, also known as the RoHS regulations, restrict the use of 10 substances that were commonly used in the manufacture of electrical and electronic equipment, but which have now been proven to cause harm to the environment and to animal and human health. This is particularly the case when products become waste, with the potential for those harmful substances to be released into the environment or in the workplace of those working in the waste treatment sector.
Businesses can apply for exemptions from the RoHS regulations if they need to use any of the restricted substances above the permitted threshold limits in order for products to function safely and reliably, and any such exemptions apply to the product, rather than to the specific organisation that applied for the exemption. The exemptions largely fall into three categories: lighting, medical devices—for example, the use of lead in emergency defibrillators—and control instruments, such as those used in explosive devices in mining.
When the UK was a member of the European Union, applications for exemptions and for the renewal of exemptions were submitted to and considered by the European Commission using derogated powers in the RoHS directive. On leaving the EU, that function was transferred to the Secretary of State by the Hazardous Substances and Packaging (Legislative Functions and Amendment) (EU Exit) Regulations 2020, bringing with it new freedoms to determine the outcome of applications as they apply to Great Britain.
The draft SI before the Committee makes provision to transfer the costs of undertaking the necessary technical appraisal and public consultations associated with that appraisal from the taxpayer to business. This approach is entirely in keeping with the requirements of the Government’s “Managing Public Money” principles, and the charge is set on a cost recovery basis. Such an approach is common practice in circumstances in which industry is required to apply for registrations, authorisations and licensing in order to comply with the regulatory requirements.
The fee will be £39,721 per application—very specific, but carefully calculated—and it will be payable on exemption applications received from 6 April 2023. Most of the cost reflects the cost to the Government of contracting technical specialists to undertake a technical appraisal for each application, because, as Members can imagine, they are very specific uses and require a lot of technical expertise, depending on the use. It is important that a full technical assessment is made when assessing applications to use restricted substances above the permitted levels, because of the risk of significant harm to human health and the environment. Crucially, the technical assessment will include an in-depth analysis of any potentially less harmful substitutes that could be used, to enable the sector to make an objective determination on an application.
Applications for exemptions are typically submitted by industry rather than by individual businesses, because exemptions are granted to products rather than to the organisation that submits the application. Historically, most applications for exemptions are made by trade bodies on behalf of a sector, and we anticipate that this collaborative approach will continue, with associated costs being spread across the relevant sector.
I stress that the fee is being charged strictly on a cost recovery basis that reflects the appraisal work undertaken. The amount payable will be regularly reviewed to ensure that it is correct. I hope that the introduction of an application fee will encourage industry to fully explore the use of less hazardous alternative substances, which we are constantly driving for, before submitting future exemption applications.
Hon. Members do not need me to remind them of the potentially harmful effects of lead and mercury on human health and the environment. We need to minimise their use. In line with published guidance, there is no need to conduct an impact assessment for the draft regulations, because any direct impact from them is judged to fall under £5 million a year. Because they alter existing policy, the draft regulations were subject to consultation, and unsurprisingly those likely to be subject to an application fee in the future did not support the proposals. Our proposals are entirely consistent with managing public money principles, but in response to those who raised concerns, we have committed to considering the merits of recognising exemption decisions taken by other jurisdictions that have similar RoHS legislation to the UK. Any such recognition would be subject to consultation.
The territorial extent of the draft regulations is Great Britain. They are considered a reserved policy. The devolved Administrations were engaged in the development of the policy and are content. The RoHS regulations fall within the Northern Ireland protocol, and businesses placing products on the Northern Ireland market are therefore bound by EU exemption decisions, and under unfettered access provisions can subsequently supply those goods freely to the GB market. That does not represent a loophole, as the Secondary Legislation Scrutiny Committee suggests. It is about ensuring that businesses in Northern Ireland can freely trade within the UK. I commend the draft regulations to the Committee.
The Chair
Order. I will suspend the sitting for the duration of the votes. We are expecting three Divisions, so let us be back here at approximately 6.45 pm.
The sitting suspended for Divisions in the House.
Ruth Jones
It is still a pleasure to serve under your chairmanship, Mr Hosie, and it is very good to be with colleagues on this cold winter’s evening as another piece of delegated legislation—on this occasion, the draft Restriction of Hazardous Substances in Electrical and Electronic Equipment (Exemptions) (Fees) Regulations 2022—is brought to the House. Week in, week out, we gather to debate legislation that Ministers bring to a delegated legislation Committee of Members of Parliament. This reflects a growing trend in the approach taken by Ministers to introducing policy and making things happen.
You will be pleased to hear, Mr Hosie, that I do not plan to speak for long, because this is a technical change. We will not oppose the regulations, but when we were part of the EU, applications relating to hazardous substances were dealt with in Brussels and so did not attract an application fee. Therefore this measure will be very new for our businesses to deal with, and they will be doing so in the most difficult of economic climates at this time.
The regulations make provision for the charging of fees in connection with the exercise of a function conferred on the Secretary of State by the Hazardous Substances and Packaging (Legislative Functions and Amendment) (EU Exit) Regulations 2020. It is worth spending a moment on the application fee of £39,721 because, as the Secondary Legislation Scrutiny Committee’s report says, it is a “surprisingly precise” figure. I would be grateful if the Minister could provide us with some clarity on where this surprisingly precise figure comes from, what the breakdown of the figure looks like and what steps were taken to lessen the burden on businesses. Does she see that figure coming down in the years ahead? On the payment of charges, I hope she will be able to explain what support businesses will be provided with. Will there be a payment plan to mitigate the impact of one large payment in one go? What does the payment process look like, and will officials be working actively and proactively with businesses?
There is a clear mention of partial refunds in regulation 5 of the SI and the SLSC’s report, so will the Minister set out how any refund process will work? What does the phrase “reasonable costs” mean, and what could its definition be? Like all the businesses that will be affected by these proposals, the Opposition want to know what considered the “reasonable costs” are that the Secretary of State may take into account.
It is important to note that here we are again addressing the impact of our departure from the European Union, and I urge Ministers to think carefully about the issues that need to be addressed across a number of important areas. I gently suggest to the Minister, with the season of good will in mind, that Ministers should perhaps look at introducing a detailed Department for Environment, Food and Rural Affairs-specific Bill so that we do not have to do government by delegated legislation. That would ensure that we could give all DEFRA-related business a chance to be scrutinised on the Floor of the House and, importantly, to give it the focus that it deserves. I recognise that some legislation will be very detailed and specific, but the draft SI before us almost makes the point for us.
Scrutiny takes many forms in many different rooms in this place but for a Department such as DEFRA we need big and bold legislation that reflects the Department’s importance and its responsibilities. We all know that consultation forms a key part of scrutiny, so I would be grateful if the Minister could set out why the consultation period was only a short six weeks. That is surely unusual for DEFRA, and I would be grateful if she could explain why the consultation period was so short.
It is clear that action on hazardous substances and the wider issues associated with packaging have to be part of a wider, clearer and genuinely ambitious plan to save our country. We have the technical legislation before us tonight, but we need a real plan and a real programme if we are to show the global leadership that so many people expect from us as a nation. As we discuss the draft regulations, we can only conclude that that programme needs to be one that does not see its targets move further and further down the line.
There are a few final points to pick up, and I hope the Minister will be able to address them in her winding-up speech. First, can we have an example of an exemption in the context of the draft SI and of whether it is possible for a business to move away from the use of hazardous materials? What support will be provided to businesses to do that, and is it something that certain businesses could do if the Minister commits to support them with the help of her excellent officials?
Secondly, the draft SI would not be a Brexit-related piece of legislation if we did not speak about Northern Ireland, so will the Minister set out what it means for the protocol discussions? How, if at all, will this proposal affect the internal integrity of and settlement in our United Kingdom? We cannot afford to do one thing with one hand and then do something else with the other. If the Minister was on the streets of Belfast and was asked what the proposal will mean for Northern Ireland, I wonder what the answer would be.
Lastly, no equality impact assessment has been carried out for the draft SI. I appreciate that the Minister explained why in her opening remarks, but this is a wider point. Will she set out why there is not a consistent approach to equality impact assessments? It should be a rule, and I look forward to hearing more from the Minister on this point.
We will not oppose the draft regulations tonight. However, as I wish all Members and the Minister a very happy Christmas, I look forward to getting back to business after the festive season, in the long battle to save our planet and protect our environment.
Steven Bonnar (Coatbridge, Chryston and Bellshill) (SNP)
It is a pleasure to see you in the Chair, Mr Hosie. I thank the Minister for setting out the Government’s position on this required SI, which is further Brexit red tape and puts new costs on businesses at a financially difficult time. That is not something that we in the Scottish National party will support.
The delays are further evidence that claims of an oven-ready deal and Brexit ease were simply not true. Continued transitions and uncertainty could have been avoided had we not left the single market, and it is important that we point that out. Brexit is not working: it is bad for Scotland, bad for business and bad for the rest of the UK. For the reasons I have set out, we will oppose the draft SI.
Rebecca Pow
I thank the shadow Minister, the hon. Member for Newport West, for saying that she and her team will support the draft regulations. As ever, she asked some pertinent questions.
Quickly, the fee is, yes, very particular, because it has been specifically worked out. The majority of the cost relates to the technical appraisal I mentioned, which is undertaken by a specialist consultancy following a competitive tender. Obviously, the public procurement rules will be followed. That assessment is extremely important.
The hon. Lady mentioned the fact that, if the costs fell below expectations, a refund would be made. That might happen if, for example, this did not take long—a quick decision might be one reason for thinking about refunding money. However, all that is for consideration when the process arises.
On the consultation, six weeks is completely appropriate, given the simplicity of the policy. Officials have done a great deal of engagement with stakeholders. I think workshops met more than 250 businesses at more than 100 events, so a huge amount of engagement has gone on.
The Northern Ireland protocol was mentioned. We do not believe that the draft SI will have any impact on Northern Ireland business or on trade with Northern Ireland, because those businesses will continue to be bound by the EU RoHS legislation. They have unfettered access to Great Britain.
I am looking for a bit of inspiration, in case I left anything out on the issue of refunding costs, but I believe I have pretty much covered it. Guidance will be out in the new year.
The hon. Member for Newport West raised an equality issue. No equality impact assessment was necessary, because we judged that the provisions would not adversely impact on the disadvantaged groups covered by the equality legislation.
Ruth Jones
The Minister laid out what will happen in future. How will she communicate that to businesses, which are anxious about having to pay thousands of pounds without knowing what the money is going on? How will she communicate with people in a clear and timely manner?
Rebecca Pow
It is important to keep our businesses on board and to engage with them, as has been done all the way along. Guidance will be issued in the new year, so all should become clear.
The hon. Lady asked about exemptions. It is interesting that I asked many of the same questions myself. In terms of the products that the substances covered would be used in, there might be teeny-weeny amounts of mercury, for example, but above the amount that might normally be used. However, these products are considered so important that exemptions are granted. Previously, that happened under the EU gold standard system; now it will happen under our replica system—it is a replica, but it also gives us flexibility, so there might be other opportunities.
Mercury, to give two small examples, is used in insect traps and in forensic testing to check for counterfeit money. It is also used for lots of functions in healthcare, such as in intravascular ultrasound imaging systems. Lead and hexavalent chromium are used in civil explosives—in mining and quarrying—as I mentioned. Obviously, we always push for substitutes to replace them that are not harmful—that is always a top criterion.
To the point about keeping in contact with industry—inspiration has appeared in the form of a note—I stress that officials are in constant contact. It is so important to bring the industry on board. Officials have had two meetings with the trade bodies just today, before this Committee, so I think we can be sure that that will continue. As the shadow Minister said, that is important.
The draft regulations remove a cost from the taxpayer and place it on the businesses that are set to benefit from the exemptions to the substance restrictions set out in the RoHS regulations. As I mentioned, almost everything would be done through trade bodies, so lots of businesses will be supported by one trade body. Our proposals are based strictly on a cost-recovery model and reflect the principles of managing public money. I commend the draft regulations to the Committee.
Question put.
Draft Public Contracts (Amendment) Regulations 2022
(2 years ago)
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The Parliamentary Secretary, Cabinet Office (Alex Burghart)
I beg to move,
That the Committee has considered the draft Public Contracts (Amendment) Regulations 2022.
It is a pleasure to serve under your chairmanship, Mr Pritchard.
This statutory instrument has two functions. First, it amends domestic public procurement regulations to ensure that changes in calculation of VAT in the valuation of contracts do not place undue burdens on contracting authorities. Secondly, it ensures that NHS trusts and NHS foundation trusts are treated consistently for the purpose of applying certain obligations that promote transparency. This SI will only implement changes to the lower-value thresholds in the Public Contract Regulations 2015 and, therefore, only impact on the regulation of lower-value contracts. The amendments are necessary in order to address the impact of the new requirement to include VAT in the assessment of contract value. The change to how VAT is considered in estimating the value of a contract was a result of the UK joining the agreement on Government procurement, or GPA, as an independent member following EU exit.
Although the other thresholds increased as a result of applying GPA methodology to account for currency fluctuations in the last two years, the lower thresholds were not. In effect, that resulted in a reduction to those thresholds. This had the effect of bringing more contracts into scope for publication under the below threshold regime, causing additional burden on contracting authorities. This instrument will rectify this discrepancy by raising the lower threshold for central Government authorities from £10,000 to £12,000. For sub-central authorities, it will be raised from £25,000 to £30,000. This will ensure that the thresholds effectively remain the same once contract values are calculated, inclusive of VAT, thus avoiding bringing additional low-value contracts within the scope of the below threshold regime.
Turning to the second function, this instrument also provides that NHS foundation trusts are to be treated consistently with NHS trusts and be regarded as sub-central authorities. It seemed inappropriate to the Government that NHS foundation trusts should be held to central Government thresholds for publication when NHS trusts are not. These regulations will rectify this by applying the same threshold to NHS foundation trusts as the one currently observed by NHS trusts.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
It is a pleasure to serve under your chairship, Mr Pritchard. I thank the Minister for his opening remarks.
As the Minister outlined, this statutory instrument has been introduced to correct an inconsistency arising from the UK’s exit from the EU and our joining of the World Trade Organisation’s agreement on Government procurement as an independent entity from 1 January 2021. As a consequence of that change in relationship, new thresholds were agreed for the public contracts that are subject to a full range of procurement regulations in the UK. These new thresholds include a change to how we calculate public contracts to be inclusive of VAT, effectively reducing the real-terms value where public contracts are subject to regulation.
The Public Procurement Regulations 2021 brought into force new thresholds for fully regulated public contracts. They also introduced a new VAT calculation method, which is relevant to the Public Contracts Regulations 2015. However, an inconsistency in the SI meant the threshold for compliance with certain requirements—for instance, inclusion on the Contracts Finder—were not adjusted, despite being made significantly lower in real terms by the inclusion of VAT. Given the reference to the new VAT regime in the explanatory memorandum, it appears the Government did not intend to bring these thresholds down in the Public Procurement Regulations 2021. This begs the question: why has it taken the Government nearly a year between the introduction of the new regulatory scheme on 1 January 2021 and their attempt to fix this inconsistency? Surely, the extra regulatory burden should have been made clear to Ministers swiftly after this change and a solution could have been presented earlier.
We do not oppose the simple addition of 20% to the threshold, as laid out in the procurement policy note on these changes of December 2021, as the suggested method of calculating the extra VAT. But it is noteworthy that the thresholds for full regulation only increased by just under 13%. Will the Minister inform the Committee as to the rationale for the different levels of increase between these two thresholds? I understand the desire to reduce Government burdens by increasing these thresholds, so we do not intend to oppose this SI today. But it is important for the Government to consider that some of the increased scrutiny will have been especially welcomed by small and medium-sized businesses, who will find these smaller contracts more desirable. For example, the publication of more opportunities on Contracts Finder provides a good chance for businesses to find and bid for smaller bits of work. The requirement for authorities to pay suppliers within 30 days is also welcomed to give businesses the certainty they need to pay day-to-day bills on time. I look forward to discussing the wider issues around procurement during the Commons stages of the Procurement Bill, so I will end my remarks for today and await the Minister's response.
Alex Burghart
I thank the hon. Lady for her brief remarks. The difference in the increase is obviously because both have increased in line with VAT, which is 20%. With that, I hope the Committee will join me in supporting this SI.
Question put and agreed to.
Draft Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022
(2 years ago)
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The Minister for Security (Tom Tugendhat)
I beg to move,
That the Committee has considered the draft Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022.
It is very nice to serve under your chairmanship for the first time, Mrs Murray. The amendment is a relatively simple one, and I hope it will be relatively uncontentious: it allows the declaration for defence against money laundering suspicious activity reports, known as DAMLs, to be raised from £250 to £1,000. Doing so makes eminent sense, partly because of the increasing cost of everyday items, but also because of the need for us to have a system that is able to check the genuine threats to our money laundering regime, rather than simply keeping an eye on absolutely everything that might happen to be going on.
Every DAML is submitted to the National Crime Agency by a person proposing to deal with suspected criminal property that may make them liable for money laundering under the Proceeds of Crime Act 2002; that DAML would make sure that that person is avoiding liability. Clearly, if someone is paying their rent or taking part in an ordinary transaction, we are not trying to criminalise every transaction, but to make sure that we have a proper awareness of what is going on and what could pose a threat. That is why I believe that we must raise the threshold to £1,000, because the vast majority of DAMLs do not provide law enforcement with asset seizure opportunities—opportunities to take money away from criminals. Instead, they place a regulatory burden on businesses such as banks to submit, place a burden on law enforcement to review, and create a delay for customers, who must often wait seven days for their transactions to process. I think there is general agreement with that.
Holly Lynch (Halifax) (Lab)
It is a pleasure to serve under you as Chair this afternoon, Mrs Murray, and I thank the Minister for his opening contribution. As he has said, the regulations will increase the threshold amount specified in section 339A of the Proceeds of Crime Act 2002 from £250 to £1,000. In practice, this will increase the value of transactions that a bank or similar firm can carry out in operating an account for a customer without committing one of the main money laundering offences laid out in POCA. By doing so, the Government seek to reduce the number of ineffective defence against money laundering suspicious activity reports, while also improving the effectiveness of the anti-money laundering system and enabling law enforcement to focus on—as the explanatory memorandum says—
“opportunities that lead to asset seizure”.
We are keen to support these measures, which seek to enhance the quality of suspicious activity reports coming from the private sector and hasten their utilisation by law enforcement. However, I am keen to probe whether we are satisfied that that is what the regulations will do in practice. We appreciate that increasing the threshold will hopefully lessen the burden on the NCA’s UK Financial Intelligence Unit, but is the Minister not concerned that these measures will inadvertently increase the prevalence of so-called smurfing among criminals, a potential problem raised with us by the Royal United Services Institute? Through that practice, money laundering payments are broken down into smaller amounts under the threshold, specifically to evade law enforcement.
Moreover, reducing the reporting burden on businesses for low-value money laundering will not necessarily mean that businesses are somehow mandated to redirect their resources towards detecting or reporting on high-value suspicious and criminal activity. The main argument for the change seems to be an attempt to prevent the Financial Intelligence Unit from being overwhelmed, rather than there being no intelligence or criminality below that threshold. I understand that in recent years, there has been an exponential increase in the number of reports that the UKFIU has had to deal with. It now receives over 400,000 reports per annum, which we can appreciate is a massive challenge for a unit with only 200 members of staff.
In its 2020 report, the UKFIU recorded a 20% increase in the total number of SARs, and an 80% increase in defence against money laundering SARs from the previous year. The explanatory memorandum states that only 2% were refused consent in 2019-20,
“of which only 1,062 progressed towards asset denial.”
Of that 2%, how many of those would have no longer been captured under the changes?
In its May 2022 follow-up report into the UK’s mutual evaluation report, the Financial Action Task Force noted continued concerns about the under-resourcing and IT constraints of the financial intelligence unit, including its failures to meet the target of 200 staff that the task force recommended more than 15 years ago.
Our noble friends in the other place have already considered these regulations, and Lord Sharpe of Epsom told Members, who asked him about resourcing of law enforcement on this crime type, that 75 additional officers were being recruited to the UKFIU, which we welcome. He told the Committee that 45 of those officers were already in post, and the milestone for recruiting the remaining 30 is at the end of this financial year, 2022-23. That was on 24 November, so can the Minister update us on whether any further progress has been made?
I will make the point again that we recognise these changes will tighten up the information being provided to the FIU, but we are not entirely convinced that the changes amount to an overall enhancement of the money laundering framework that we must have in place if we are to drive this out of our economy.
John McDonnell (Hayes and Harlington) (Lab)
I just want to place on the record my reservations about this measure. I think lifting the threshold to £1,000 is untoward when we know the scale of fraud that is taking place. I am concerned that minimising the multiple transactions is a way of getting round this. In addition, I am anxious about the flow of intelligence that comes from some of the lower-level frauds that are detected. That could flow into tracing higher-level frauds.
Tom Tugendhat
A quick note on the staffing: 45 officers are already in post, and no doubt the others will come onstream very soon, because that milestone is extremely important for making sure that we have properly recruited for 2022-23. So I can update clearly on that.
There will of course be a constant review of the number of officers we keep in post in order to make sure that we have proper staffing for the requirements. As the hon. Member for Halifax can see, we are increasing numbers because the demands are great. I understand the point made by the right hon. Member for Hayes and Harlington about staffing, and I completely agree—
Tom Tugendhat
Please pass on my thanks to the right hon. Member for Hayes and Harlington for his kind note, Mrs Murray. He wants to speak in the debate in the Chamber, so I completely understand why he is not here. His points, which I was going to address before we were interrupted, are entirely valid. He asked about the change from £250 to £1,000. The reality is that we are overloading the system. It is true that we can constantly hire more people, but we need to use them to analyse the data, not overload the system with smaller transactions. That is why the request to raise the threshold has been put before Parliament today.
I think this is an important, sensible adjustment, and we will keep it under review. As the right hon. Gentleman said, there is a broken windows theory that goes along with this: smaller crimes can lead to larger ones. The UKFIU is keeping an eye on the build-up of transactions, and not just the absolute numbers, so in different areas it will be aware of how these elements are going. I appreciate Members’ comments—I understand the spirit in which they are raised—and I entirely respect their positions. However, in order to achieve the aims that we are all seeking, this is a sensible amendment to the existing regulations, and no doubt it will be kept under review should the situation change.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022.