Small Business, Enterprise and Employment Bill
Debate between Lord Naseby and Lord Phillips of Sudbury
Lord Phillips of Sudbury (LD)
My Lords, my name stands with that of my noble friend Lord Watson of Invergowrie on these amendments. He has introduced them with great panache, and I do not have a great deal more to say but I think that the issues are so important that a few more points are necessary and worth while.
First, I shall give the House some of the facts that point to the scale of the problem of fraud and tax avoidance, which I do not think many of our fellow country people understand. My noble friend Lord Watson and I have been hugely helped by the Anti-Corruption APPG of this House, which, in turn, has been supported by Global Witness and Christian Aid, and a wonderful job they have done. One of the statistics they have produced for us—I think that Transparency International has had some part in this as well—is that the best estimate is that $21 trillion to $32 trillion of private financial assets rest in tax havens, and that 20% to 30% of that huge corpus of assets is corruptly diverted. Of that, they reckon that $120 billion to $180 billion per annum, which is far more than the entire global aid budget, is diverted unlawfully from developing countries. This is a rather poignant day on which to say that, as the Bill concerning the 0.7% contribution to aid has just been passed.
Another fact which I find rather depressing because it affects the UK is that it is reckoned that the Crown dependencies and overseas territories are host to one-third of all the world’s shell companies. On top of that, more than 36,000 properties, which are mainly in the most expensive parts of this wonderful city, are owned by overseas owners but are placed in shell companies in tax havens, 38% of them in the British Virgin Islands, 16% in Jersey, 9.5% in the Isle of Man and 9% in Guernsey. In addition, the World Bank’s review of the 200-plus biggest corporation corruption cases shows that 70% use shell companies as their vehicles of fraud. Therefore, the background to this amendment could not be more important and striking.
At this point, I have to own up to something from my dim and distant legal past. In the mid-1960s I was what was then called a tax mitigation lawyer. I notice a groan from behind me.
Lord Phillips of Sudbury
Yes, another lawyer. However, it is very striking because that was in the mid-1960s. In fact, the last case I did was just after the first Rossminster scheme was launched on the British public. Some of your Lordships may remember those schemes. They were the first of the hyperartificial—I would say hyperludicrous—schemes. I remember putting this to the best tax chambers in London at the time. I asked them, “Would you kindly advise my client via me? Is this scheme a runner?”. Back came the answer, “These chambers will not handle any cases relating to the Rossminster scheme because we view it as anti-social”. It is extraordinary to think of barristers saying that and I am not sure that they did not use the word “immoral”. But my goodness, the world we now inhabit is very different. The demoralisation—that is a useful word to use—of this country and indeed the entire world is really depressing because it has given rise, gives rise and will continue to give rise to an ever increasing number of really shameful frauds conducted by some of the biggest and best companies and banks in this country and everywhere else in the globe. It is very sobering to recollect that we are still a good deal less corrupt in our financial dealings here than virtually every other financial centre in the world.
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.
Lord Naseby
Can my noble friend honestly say that it will not affect small businesses? “Small business” is in the title. Every single small business in this country—not the micros but almost every other small business—is going to have to register, and that is going to cost it a considerable amount of time, money and resources. So how can he possibly say, “Well, it’s not going to affect any of them. It’s only going to be the great big national companies and other big companies that are manoeuvring things internationally”? He is talking rubbish, is he not?
Lord Phillips of Sudbury
I did not say that it would not affect them at all; I said that it would affect very few of them to a significant degree, and I stick by that. I have been a small and medium-business lawyer for most of my life, and I can say that these companies will not be significantly inhibited by these provisions or be faced with significant costs.
Lord Naseby
I am sorry to interrupt my noble friend again. He may have been a lawyer periodically dealing with a few small businesses; nevertheless, the chambers of commerce and others say exactly the opposite to what he is saying. Surely they know better than some lawyer working part time on small businesses.
Lord Phillips of Sudbury
I would not deny for a minute that they know better than the description the noble Lord gave of me. I just repeat that I do not think it will seriously inhibit the small or medium-sized company that operates in a straightforward fashion in this country. I am confident of that.