Small Business, Enterprise and Employment Bill

Debate between Lord Forsyth of Drumlean and Lord Phillips of Sudbury

Monday 9th March 2015 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, I am most grateful to my noble friend for giving way. I confess that I have not followed these proceedings at earlier stages of the Bill and perhaps he can help me out. He is describing a very undesirable situation. However, as these provisions apply only to companies which are registered at Companies House, why will the criminals and bad guys not operate in other jurisdictions, and how is adding so much cost and burden to honest small businesses justified in that context?

[Lord Phillips of Sudbury]

I think that we need a short debate to answer the question that my noble friend poses. However, I think that the general feeling is that small companies will not be hurt by these provisions. It is these extraordinarily obtuse long chains of shell companies, sometimes in as many as 13, 14 or 15 tax havens, that are the object of this exercise.

--- Later in debate ---

[Lord Phillips of Sudbury]

I have a huge amount of sympathy with the noble Lord pointing out the hypercomplexity of this. I can only say to him—I must also put it in the context of having worked in this field for more than 50 years and having been a non-executive director of more than 15 SME companies—that I do not think there is any real prospect of an innocent SME going about its business falling foul, let alone criminally foul, of this law. However, I accept that the whole Bill is of near barbaric complexity and I do not know how we get round that. I am afraid that the price for the scandalous intentional misbehaviour of large and some small entities is invariably paid by the innocent.

Perhaps I may try to return to my story. As I said, there is a real demoralisation particularly of the business world but also of our whole society which we need to take intense notice of. We are at a tipping point in terms of the common good. The publicity of some of these awful cases is universal now, so that more and more of the richest people and companies, in terms of the money they have, are seen to be getting away with murder—as the man in the street would call it—in terms of paying tax. That is totally antipathetic to the good and fair society that we seek to create and help in this House. It is a total denial of fairness and duty.

These provisions are very modest but will enable the authorities, in particular the tax and fraud authorities, to grapple with some of these very expensively advised entities and the chains that they establish around the tax havens of the world, without one arm being tied behind their back. We all know that the authorities are ludicrously understaffed in comparison with the private sector—I am talking about the irresponsible part of the private sector—although that is another issue which has to be dealt with another day. I hope that my noble friend will be able to reassure the House that this will not be yet another statute that lies gathering dust on the shelves of Whitehall, but that there will be a practical and rigorous enforcement of the provisions inserted here.

Finally, without the limited transparency that is afforded by Amendments 36, 37 and 38, the authorities will not be able to get at the malefactors any more than they have thus far. I think I am right in saying that not a single bank director has been prosecuted since the collapse of 2008, during which period tens of thousands of our fellow countrymen and women have been prosecuted before magistrates’ courts. We must stop that, as it is profoundly demoralising for this country. We must give the authorities the tools to do their hugely difficult job. The fact that we are the first country to introduce a PSC register is something that the Government should be congratulated on. I commend the Prime Minister, because it is not easy in his party to say some of the things that he has said. The noble Lord, Lord Watson of Invergowrie, mentioned one of those things, but I particularly like what he said to the G8 in 2013. The point he made and the language he made it in were absolutely right. The Prime Minister said that,

“companies should know who really owns them, and tax collectors and law enforcers should be able to obtain this information easily”—

for example, through central registries—

“so people can’t avoid taxes by using complicated and fake structures”.

Bang on. All this series of amendments does is lend a few practical teeth to that sentiment. I hope that this commends itself to the House and the Government.

[Lord Forsyth of Drumlean]

My Lords, I will speak briefly against this amendment. Of course, no one could dispute the intention behind it. If the intention is to stop criminal activities and tax evasion—and I make a distinction between tax avoidance and tax evasion; when we are talking about criminal activities, we are talking about tax evasion—no one could dispute it. However, it rather seems like a sledgehammer to crack a nut, or perhaps a sledgehammer aimed in the wrong places. The impact assessment undertaken by the Department for Business, Innovation and Skills of the proposals as they already stand says that almost £1 billion will be added to the costs of small businesses, which the noble Lord, Lord Phillips, tells us is not really significant. I wager to suggest—

[Lord Phillips of Sudbury]

I am grateful to the noble Lord for giving way. I do not think that he will find in that impact assessment any attempt to assess the cost of the amendments that we are talking about in this group. I will leave it at that.

[Lord Forsyth of Drumlean]

The noble Lord is absolutely right, because this is not the Government’s proposal—which is why I am against his amendment. He said in his speech that it would not be very much extra without actually telling us how much extra it would be. We already have £1 billion being added to the costs of small and medium-sized businesses at a time of great stress in our economy and when we are desperate for them to grow and create wealth. Yet here we are asking people running small businesses to fill in forms, and if they fill them in inaccurately, they will find themselves committing a criminal office.

[Lord Phillips of Sudbury]

I am most grateful to the noble Lord for giving way a second time, and I promise not to intervene again—but that is not so. He should take account of the fact that if we were to recover even 20% more of the tax that currently is not paid but should be, many billions of pounds will redound to the benefit of SMEs as well as of everyone else.

[Lord Forsyth of Drumlean]

I am not sure which bit the noble Lord was saying was not so. He may very well be right in his assertion—although I doubt it—that the Government will collect more money, but that does not help the small business man who is faced with these additional costs, for whom there is no benefit whatever. They already struggle to fill in their VAT forms and their surveys on this, that and the other while trying to run their businesses. This would add a very significant burden.

Financial Services (Banking Reform) Bill

Debate between Lord Forsyth of Drumlean and Lord Phillips of Sudbury

Tuesday 8th October 2013 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, I did not speak at Second Reading because I could not stay for the wind-ups, but listened to most of that debate. I should like to press my noble friend on his logic. He says that we cannot have some body to police or check up on the regulator. I am very surprised that my noble friend Lord Blackwell, with whom I am normally absolutely on the same square on most issues, says that we must trust the regulator. There was a reason we got into this mess and, by the way, we still ought to have a proper inquiry into what the regulator was doing and how the crisis happened in the first place. The very last thing I feel like doing is trusting the regulator.

We have also seen the regulators going off to work for the banks at, no doubt very appropriately, very high salaries to help them with their compliance and operation of regulation. Let us face it, I am not sure where I stand on the notion that we should trust the regulator on this matter. Like the noble Lord, I was prepared to go along with ring-fencing but could not see how it could work. But it certainly is not going to work if you have very clever people in the banks and at the regulator, but no one is actually breathing down the regulator’s neck. That seems to be the lesson that we can learn with absolute clarity from the previous experience.

I have to say that my noble friend’s logic was, “We can’t possibly have the regulator being subject to second-guessing all the time. How are they going to be able to carry out the agreed policy?”. As has repeatedly been said in a number of speeches, this is an experiment because it is part of a compromise to try to get the banks reasonably on board and to proceed on the basis of consensus.

In my seven years—perhaps it was nine years—working in an investment bank, I learnt that investment bankers are extremely adept at getting between the wallpaper and the wall. If they can find a way to get around something, they will. That is their job and how they make money and resources. The notion that if we have ring-fencing there will not be lots of clever people finding very good schemes to get around the intention of it and that the regulator will stand up to them, especially if we are in a period of prosperity, flies in the face of the experience that we have had.

It is essential to have someone independent of the regulator looking at this relationship and seeing if it is working. They should report to Parliament, with Parliament ready to enforce separation if it is required. It is by putting their feet to the fire in this way that we can be sure that they realise that it is in their interests to make this ring-fence procedure work. Without that, it will not work and we will be back to where we were before you can say “renewed prosperity”.

My noble friend uncharacteristically showed a lack of logic in what he was saying. If he wants the House to commit itself to this policy, he needs to address this basic question of who will guard the guardians.

[Lord Phillips of Sudbury]

I have a lot of sympathy with what my noble friend has said. However, on my noble friend’s thesis, there is the problem that if you have a regulator of the regulator, you should have a regulator of the regulator of the regulator. At some point you have to put some trust in someone. As he has said, bankers are adept at getting around any set of regulations. Is there not a point at which you have to have trust?

[Lord Forsyth of Drumlean]

I agree, but all questions can be reduced in that way—reductio ad absurdum. On that basis, we would get rid of Parliament, which ultimately is the regulator of the regulator. The regulator is accountable to Parliament. We are dealing here with day-to-day very complex circumstances. In this great House we have many experienced people. In my view, the banking commission has done a brilliant job, as has the Treasury Select Committee in many respects. I think all of us would agree that that was appropriate and that that job has been done. However, as I understand it, in the particular instance of deciding whether this ring-fencing experiment will work, here we are talking about the need for some kind of process which will scrutinise that and will report on an informed and an in-depth basis. That is why I support the amendment in the name of the noble Lord, Lord Turnbull, which seems a sensible course of action.

In the case of the Bank of England, why did it allow interest rates to remain so low when it could see a housing bubble and an asset bubble being formed? Even the former governor, who is now a Member of this House, has acknowledged that and has said publicly that it is very difficult when everyone is making lots of money and the whole consensus is that we have abolished boom and bust. It is very difficult for a regulator to stand up to that, especially if Ministers are egging them on and in their speeches are saying the same thing.

If the purpose of this exercise is to say, as we always say, “What went wrong? What are lessons that we need to learn?”, this amendment points to one of the clear lessons that we need to learn. I am disappointed that my noble friend does not see that.

Syria and the Use of Chemical Weapons

Debate between Lord Forsyth of Drumlean and Lord Phillips of Sudbury

Thursday 29th August 2013 Lords Chamber

[Lord Forsyth of Drumlean]

My Lords, it is a great pleasure to follow the noble Lord, Lord Thomas. I confess to speaking in this debate with some apprehension. My knowledge of foreign affairs is limited to a short period when I was the parliamentary private secretary to Geoffrey Howe, now the noble and learned Lord, Lord Howe of Aberavon. I remember that the noble Lord, Lord Wright, was the Permanent Secretary and the patience with which he chose to educate me.

This debate is an object lesson for people who say that the House of Lords is a waste of time and a waste of space because if any of us was unsure, the quality of the speeches we have heard has been very compelling. I find myself very much in sympathy with what the noble Lords, Lord Wright, Lord Kerr and Lord Dannatt, said.

I do not know how many people were listening to the “Today” programme this morning, but Nick Robinson opined that we were in a period of great uncertainty and difficulty because it appeared that Parliament was dictating to the Government—shock, horror. Not even the BBC seems to realise that the Government are accountable to Parliament. I hope that the Government will have listened to the debate and the points that have been made in this House. It shows how far things have gone.

[Lord Phillips of Sudbury]

I cannot resist just very briefly telling the noble Lord that I met Nick Robinson coming in and I did say to him, “How on earth did you get through that programme without mentioning that we were having a debate in the House of Lords as well?”.

[Lord Forsyth of Drumlean]

Clearly he thinks that that is not as much of a crisis. I very much doubt that any of the speeches that have been made today will be featuring on the “Today” programme tomorrow.

I think that my noble friend Lord Howard, who is not in his place, was a little unfair in describing the leader of the Opposition as playing party politics. When I heard on the radio that the Prime Minister and President Obama were going to launch an attack, I was filled with dismay. The contributions that have been made by the Opposition—which is their duty—have helped to make us all think twice about the issues. Of course, I absolutely agree that the use of chemical weapons is a moral question. But it is also a moral question to use high explosives to destroy women and children and inflict pain and suffering—all the events that are going on in Syria. Surely the moral question is: what can we do to bring this to an end and to end the suffering? For the life of me, I do not believe that bombing Syria is going to make things any better or any easier or advance that cause. The consensus that we have heard today has been very much along these lines.

Of course, I accept the intelligence that has been given. I was actually against the Iraq war. I could not understand why, if Saddam Hussein had chemical weapons, he would not produce some of them and say, “There you are. Take them away and destroy them”. I think he got himself into a position where he claimed he had them but could not save face by then saying, “Actually, I was lying”, so we got into a position where everybody believed he had them and we went into a disastrous war with him.

If your Lordships will permit me to tell one story that had a heavy influence on my opposition to the Iraq war, I went to climb a mountain behind K2 in the far north-east of Pakistan on the borders with China and India. We had 40 Sherpas. They came from a village without television or radio; they were carrying 20 stones at 19,000 feet; they had no education and an average life expectancy of 35. Their hostility to the Americans astonished me. They thought that the Americans acted only in their own interests and took more than their fair share of the world’s resources. I thought, “Where is this coming from?”. This was in the summer before 9/11. When we had shock and awe, I kept thinking, “Thank goodness they do not have televisions”, and, “How many people around the world are going to be radicalised by this action?”.

It defies common sense to say that if we were to bomb Syria it would not result in radicalisation. I do not know where the Joint Intelligence Committee gets its view that this would not happen. We have considerable Muslim populations in this country and elsewhere in Europe. It would be an act of supreme folly. By the way, we have not got any money to be spending on these missiles. If we have the money, let us spend it on providing aid and support to the victims of this conflict and in trying to get agreement.

I have one final point. It worries me that we are getting so far away from the Russians and Chinese. I read in the newspapers that the Russians are describing us as “monkeys with hand grenades”. This is deeply worrying. This thing is not going to be resolved without Russia being on board. As has been repeatedly said, the Middle East is in an explosive situation. We need to make friends with the Russians or at least find a way of working with them. If we fire these missiles, we will make that absolutely impossible.