Financial Services Bill

Lord Bishop of St Albans Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[The Lord Bishop of St Albans]

My Lords, it is right to underline the importance of the financial services sector in our country and the huge contribution it makes. There are many laudable things in this Bill: the strengthening of money laundering regulations; encouraging saving; and the creation of parity between white collar crimes, such as market manipulation, and general fraud by extending the maximum sentence.

I was disappointed, however, to hear that the Commons amendment exploring the whole issue of ethical investment with reference to genocide did not make it into the Bill. I understand the Government’s reservation—they do not want to politicise the FCA. Nevertheless, I hope that “global Britain”, as laid out by the intentions of the Bill, will also be very much “ethical Britain” as we place ourselves in the world under the new freedoms that we have. I also note, with other noble Lords, the concern that there seems to be so little clarity on the question of parliamentary scrutiny. I am sure we will return to this as the Bill passes through your Lordships’ House. Of course, fundamental to this whole future is that the FCA is adequately resourced to fulfil its task.

I touch on just one major issue, which takes up a major part of the Bill: the Gibraltar authorisation regime. The issue of Gibraltar’s lower corporation tax rate of 10% was raised during the Commons Report stage as a significant issue, and it is one that warrants raising again. During his evidence session, the Minister said that corporation tax rate was not a factor in relocation to Gibraltar. While I recognise that relocation can be costly and that operating in London has many benefits not offered by Gibraltar, nevertheless there are significant tax advantages.

This has become all too clear in another area of work that I have raised repeatedly in your Lordships’ House—the issue of the tax avoidance of many companies, including gambling firms, which are a particular focus I have had. For example, in 2019, the Daily Mail revealed that 32Red, based in Gibraltar, paid just £812,000 in corporation tax over a 10-year period—an effective UK tax rate of 3%. William Hill, with its six subsidiaries in Gibraltar, is expected to pay 12% in corporation tax in 2020. Ladbrokes Coral is not required to disclose its tax rate, but one of its two licences to operate in the UK is registered in Gibraltar. While these relate particularly to a very focused area of my interests, of course this mechanism applies equally to financial firms.

These arrangements predate our departure from the EU and, given the likelihood that Gibraltar continues to be used in this matter, I am not placing the blame on this new Financial Services Bill. However, during the progress of this Bill, there will be an opportunity to examine again what the appropriate rules would be, particularly within the financial sector, to prevent Gibraltar being simply a place where firms and companies are reducing their tax bill. Will the UK Government commit to publishing an annual report assessing the consequences of the Gibraltar authorisation regime on tax receipts from the financial industry, as well as outlining how they intend to work with the Gibraltarian authorities to ensure there is a fair tax settlement for both territories?