Nuclear Test Veterans
Lord Tunnicliffe Excerpts(1 year, 5 months ago)
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Baroness Neville-Rolfe (Con)
I can certainly confirm that no information is withheld—transparency is very important in this area. Any medical records taken before, during or after participation in the nuclear weapons tests would be held in individual military records in the government archives. Where a veteran is still alive, they can request personal data relating to them as a subject access request. In relation to the Atomic Weapons Establishment, veterans may need to make a freedom of information request, which has been the subject of questions—but nearly all or most of the information is readily available, and it is key to make a subject access request to the MoD.
Lord Tunnicliffe (Lab)
The way in which the Minister is answering these questions leaves me very uncomfortable. Is there a member of the Government to whom a veteran can turn and be guaranteed that they will be helped through the process of gaining this information? They were exposed to dangerous radiation, not of their own choice but because they were soldiers at the time—quite properly, but they must now be aided. Many of them are quite old and really need forceful help to solve these problems.
Baroness Neville-Rolfe (Con)
I very much agree that the veterans, because they played such a valuable role in developing our nuclear deterrent, which has kept Britain safe for decades, need to be helped. That is why I have given the assurances that I have in relation to my colleagues at the Ministry of Defence—and, of course, work in the veterans area is co-ordinated by Johnny Mercer, the Veterans Minister. It depends a little on what colleagues require, but of course the Government are here to help on these important issues.
Coronavirus Grant Schemes: Fraud
Lord Tunnicliffe Excerpts(2 years, 10 months ago)
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Lord Tunnicliffe (Lab)
My Lords, last week, the Government objected to the £4.3 billion figure quoted in various news reports. In many senses, we would be delighted if the extent of fraud arising from the Government’s coronavirus support scheme was smaller than first thought. Is the Minister able to provide a more accurate or precise figure today? If not, how will the department calculate this and when can we expect to see the correct sum?
In looking ahead to this UQ last Thursday, the Minister did not answer my question about fairness. Is he able to comment today on why the Government expect working people to cancel out these losses? That would be bad enough in normal times, but is surely worse when families face an unprecedented cost-of-living crisis.
The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)
I thank the noble Lord for his important question. I am here to defend the Government’s record in the deployment of counter-fraud measures over the last two years or so. However, I will only be able to do that in part. The assertion made by the Economic Secretary to the Treasury in the Commons debate last week that the priority was speed of distribution of funds is absolutely correct, but what has followed has been nothing less than desperately inadequate. Given the time available, I will focus on one or two emblematic failures, but these issues run far wider.
The oversight by both BEIS and the British Business Bank of the panel lenders of the BBLS has been nothing less than woeful. They have been assisted by the Treasury, which appears to have no knowledge of, or little interest in, the consequences of fraud to our economy or society. Much store has been given to the extra money allocated to HMRC, but it took a year to happen, and this department was already the most competent and well-funded in that discipline; whereas at the beginning of Covid, BEIS had the grand total of two counter-fraud officials on its staff, neither of whom were experienced in the subject. They refused to engage constructively with the counter-fraud function that sits in the Cabinet Office, has considerable expertise and reports directly to me.
Schoolboy errors were made: for example, allowing more than 1,000 companies to receive bounce-back loans which were not even trading when Covid struck. They simply failed to understand that company formation agents hold in stock companies with earlier creation dates. I have been arguing with Treasury and BEIS officials for nearly two years to get them to lift their game; I have been mostly unsuccessful.
We move now to a new and dangerous phase: banks’ ability to claim on the 100% state guarantee for non-payment. We do this without implementing a standard bar of quality assurance on what we expect as counter-fraud measures; we know that we have serious discrepancies. For example, three out of the seven main lenders account for 87% of loans paid out to companies already dissolved. Why is the ratio so skewed? Two of the seven account for 81% of cases where loans were paid out to companies incorporated post-Covid, as I referred to a moment ago. One of the seven accounts for 38% of the duplicate BBL application checks that were not carried out after the requirement was enforced. Bizarrely, it took six weeks to get the duplicate check into place, during which time 900,000 loans, or 60% in total, were paid out, bearing in mind that some £47 billion has been paid out.
If only BEIS and the British Business Bank would wake up, there is still time to demand data and action on duplicate loans. Why will they not do it? Despite pressing BEIS and the BBB for over a year, there is still no single dashboard of management data to scrutinise lender performance. It is inexcusable. We have already paid out nearly £1 billion to banks claiming the state guarantee. The percentage of losses estimated to be from fraud rather than credit failure is 26%; I accept this is only an early approximation, but it is a very worrying one. I will place in Hansard a copy of my letter to the chairman of the British Business Bank, sent on 16 December, addressing some of these points. I have still not received an answer.
I have at least four differences of opinion with Treasury officials: first, on urgent improvements in lender performance data, I simply want the bar to be set at what the best of the panel banks can deliver—to repeat, there is not even a common definition of fraud to trigger the payment of the guarantee; secondly, far greater challenge of lender banks when we uncover inconsistency in data; thirdly, educating Treasury officials as to why reliance on audits is far too reactive and generally happening well after the horse has bolted; fourthly, a failure by Treasury or BEIS officials to understand the complete disjunction between the level of criminality—probably hundreds of thousands of pounds—and enforcement capability. For example, NATIS, a specialist agency, can handle around 200 cases a year; local police forces might double that.
Noble Lords can see that it is my deeply held conviction that the current state of affairs is not acceptable. Given that I am the Minister for counter-fraud, it feels somewhat dishonest to stay on in that role if I am incapable of doing it properly, let alone of defending our track record. It is for this reason that I have, sadly, decided to tender my resignation as a Minister across the Treasury and Cabinet Office with immediate effect. I would be grateful if my noble friend would pass this letter to the Prime Minister at his earliest convenience. It is worth saying that none of this relates to far more dramatic political events being played out across Westminster. This is not an attack on the Prime Minister, and I am sorry for the inconvenience it will cause. Indeed, I think any Prime Minister should be able to reasonably expect that the levers of government are actually connected to delivering services for our citizens.
I hope that, as a virtually unknown Minister beyond this place, giving up my career might prompt others more important than me to get behind this and sort it out. It matters for all the obvious reasons, but there is a penny of income tax waiting to be claimed here if we just woke up. Total fraud loss across government is estimated at £29 billion a year. Of course, not all can be stopped, but a combination of arrogance, indolence and ignorance freezes the government machine. Action taken today will give this Government a sporting chance of cutting income tax before a likely May 2024 election. If my removal helps that to happen, it will have been worth it.
It leaves me only to thank the noble Lord, Lord Tunnicliffe, for his courteous but attentive role as shadow Minister of my portfolio, and to thank noble friends, many of whom I know will carry on their scrutiny of this important area. Thank you, and goodbye.
Devolved Governments: Public Expenditure
Lord Tunnicliffe Excerpts(2 years, 11 months ago)
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Lord Agnew of Oulton (Con)
I think the noble Baroness makes a very good point. I will suggest to the relevant Ministers that the work on the fiscal framework, announced in October, includes a review of the points raised.
Lord Tunnicliffe (Lab)
My Lords, building on that point, is not the problem that the UK Government are in no position to lecture others—whether it is the National Audit Office, influential think tanks or others? We regularly hear of cases where Ministers have exercised poor judgment when spending public funds. The most recent example was the quiet announcement that the Treasury does not intend to chase down an estimated £4.3 billion fraudulently claimed from coronavirus support schemes. Why did the Government not listen to Labour’s warning about potential fraud earlier in the pandemic, and why will family units have to pay the price for the actions of fraudsters through upcoming tax increases?
Lord Agnew of Oulton (Con)
The noble Lord raises a very good point. I believe that I will be coming back on Monday to deal with an Urgent Question on this specific subject. I would remind noble Lords that these schemes were stood up at an incredibly fast pace to protect the productive capacity of this country. Yes, the fraud losses are extremely frustrating but, if we had not got that money to the business community as quickly as we did, we would have seen a lot more damage to our economy.
Money Laundering
Lord Tunnicliffe Excerpts(2 years, 11 months ago)
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Lord Tunnicliffe (Lab)
My Lords, the Minister’s colleague, the noble Viscount, Lord Younger, said during our proceedings on the NICs Bill:
“In the last three years, we have recovered over £550 million from the proceeds of crime, charged over 100 people with money-laundering offences, and seen over 75 people convicted for money laundering.”—[Official Report, 10/1/22; col. GC 113.]
That is a pathetic figure—or at least it feels like one. In his original Answer, the Minister indicated that assessments had been made over three recent years. What he failed to do was tell us what the answer was. Could he provide the answer so that we can judge the success so far and see whether the right resources and energy are being devoted to this issue?
Lord Agnew of Oulton (Con)
My Lords, if we were to go the very top-down figures, which are ultimately the most important, I would look at the tax gap, which we have been very successful in closing over a number of years. In 2005-06, the gap was 7.5%; in the last year for which figures were available, 2019-20, it was down to 5.3%. That is of course against the enormous headwinds of the build-up of hot money around the world. I would therefore be more optimistic and say that we are making good progress.
Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021
Lord Tunnicliffe Excerpts(3 years ago)
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Lord Tunnicliffe (Lab)
My Lords, I am grateful, as ever, to the Minister for introducing this latest set of Treasury regulations. These are not the first changes to arise from the Financial Services Act 2021, but this SI represents the biggest amendments to and revocation of the capital requirements regulation—the CRR—since that parent legislation passed. Many of the changes are to facilitate the implementation of certain Basel III standards from 1 January 2022. As the Minister and the Explanatory Memorandum noted, the UK played an active role in negotiating this reform package.
As we discussed at length during the passage of the parent Act, the Prudential Regulation Authority—the PRA—has taken responsibility for updating parts of the CRR through its regulatory rules. That such changes are being made at arm’s length might still rankle with some—the noble Baroness, Lady Kramer, reinforced that point—but that was the Treasury’s determination and it is the framework that we must operate under.
Other changes made by the instrument are designed to facilitate the implementation of the investment firms prudential regime—the IFPR—by the Financial Conduct Authority. That new system will ensure tailored regulation of non-systemic investment firms outside the scope of the CRR. The Explanatory Memorandum notes that although the FCA has introduced most of its IFPR rules, some more are required before the regime goes live on 1 January 2022. Can the Minister confirm whether these additional rules have been finalised and published since the SI and EM were laid? If not, does the FCA have an estimate of when they will emerge?
Could the Minister also outline what parliamentary engagement has been undertaken on the CRR and the IFPR reforms? Given the highly technical nature of these regulations and the various regulatory rules that must be read alongside them, is the Minister confident that everything is present and correct? This might at first glance feel like a trivial question but, as a veteran of dozens of EU exit SIs, it is vital that we have confidence in this process.
Moving on, the Treasury has, in its Explanatory Memorandum, pointed to the existence of accountability frameworks for the PRA and the FCA. However, in doing so, it neglected to mention the unease that has been expressed about this by several colleagues across your Lordships’ House. At the time, it was suggested that concerned colleagues may find comfort in the ongoing future regulatory framework review process. Some has indeed been found in the proposals outlined in measures 6 and 7 of Command Paper 548 to introduce statutory requirements for the PRA and FCA to notify relevant parliamentary committees of their consultations and provide written responses to any representations made. If adopted, these steps would mirror several of the key asks in our previous amendments. Nevertheless, as always, the devil will be in the detail. While it may not be strictly relevant to this SI, can the Minister outline the anticipated timescale for the review? When is the Treasury likely to come forward with the resulting legislation?
Another concern around CRR and IFPR rule-making was the extent to which the regulators would have regard to the steps needed to tackle the climate crisis. The Government eventually conceded that the PRA and the FCA should have regard to the 2050 net-zero target, but this requirement takes effect only on 1 January —that is, after most of the rules have been published and at the same time as they enter into force. Can the Minister outline what steps, if any, have been taken by the regulators to ensure that green issues have been considered as part of the current exercise, in so far as it is possible within the Basel III framework? Can he also explain how he envisages the new duty operating in practice? What kinds of regulatory changes would he expect to see as a result of that concession having been made?
There is a perception—I have outlined my concerns before—that while the Chancellor likes to talk green, he is somewhat less keen on acting accordingly. Many firms in the financial sector are cognisant of the need to make their business practices more sustainable. Some have acted as outriders, setting ambitious targets and creating interesting schemes for change. However, more needs to be done. A voluntary approach to things such as investment in fossil fuels will get us only so far. Some will do the right thing but others may see opportunities to gain competitive advantage. If, by the time we get to the next financial services Bill, these kinds of issues have not been adequately addressed by the PRA and FCA, can the Minister commit the Treasury to taking action?
Implementing Basel III and IFPR is one thing, and we do not oppose these regulations’ small part in delivering those reforms. However, meeting the challenges of the future is another matter and it is not yet clear that we are on the right course.
Lord Agnew of Oulton (Con)
I thank noble Lords for their contributions today. Some important points have been raised during the debate. I will attempt to answer them but there may be one or two where I will have to write.
To start, my noble friend Lord Naseby asked about impact assessments. A de minimis impact assessment has been published alongside the instrument. As the equivalent annual net direct cost is less than £5 million, the only direct costs to businesses in scope of the instrument will be approximately £900,000. This is for provisions relating to the securitisation regulation.
Regarding the amendment to Article 2(12)(g) of the securitisation regulation, including all the FCA investment firms in scope of due diligence requirements, the net impact to firms is expected to be £900,000 per annum, based on the relevant firms investing in 20 securitisation positions per year. This figure represents the aggregate compliant costs for firms that are being brought within the scope of the due diligence requirements. This figure has been calculated from information provided by the FCA and industry; the calculation is based on the type of investment firms on which the amendment has an impact, the estimated number of such firms and the estimated cost of complying with the due diligence requirements.
The noble Baroness, Lady Kramer, asked about future regulatory reform and parliamentary oversight. The Government and the regulators are committed to ensuring that Parliament has the opportunities it needs to scrutinise the PRA’s rules and respond to anything raised. The Government consider that Parliament has a wide range of powers to request information and conduct effective scrutiny of the regulators, including through the Select Committee system. To support this work, the Government have proposed formalising through statute the mechanisms through which the regulators provide information to Parliament to ensure that it has the information it needs to undertake this scrutiny.
The noble Lord, Lord Tunnicliffe, asked me to outline what parliamentary engagement has been undertaken on both the CRR and IFPR reforms. Ultimately, it is Parliament that sets the regulators’ objectives. It is of course right that Parliament has an appropriate opportunity to scrutinise the work of the regulators and their effectiveness in delivering the objectives that Parliament has set them. The regulators committed to sending their consultations and draft rules on Basel and the IFPR to Parliament during the passage of the Financial Services Act earlier this year.
Consultation on these changes started in December 2020, so there has been plenty of time for Parliament to review and report on it, including through the Select Committee process. The PRA and the FCA also published their near-final rules over the summer to provide ample time for familiarisation well in advance of this debate. As part of the ongoing future regulatory reform, as I have mentioned, we have proposed formalising through statute the mechanism through which regulators provide information.
The noble Lord, Lord Tunnicliffe, and my noble friend Lord Naseby asked whether the detail of this instrument and the accompanying rules set by the regulators are present and correct. The answer is yes. Treasury officials have worked extensively with their counterparts at the regulators to ensure that the changes mesh and make a cohesive whole. Where appropriate, both the Treasury and the regulators have consulted on the measures implemented through this statutory instrument. The noble Lord and my noble friend also asked whether the IFPR rules have been finalised and published since the SI and EM were laid. I can confirm that the FCA has now published all the IFPR rules, including the final outstanding set of rules, which were published on 26 November.
I thank the noble Lord, Lord Tunnicliffe, for his assertion that two of the measures in the recent financial future regulatory framework review consultation provided him with some comfort on the question of the regulators’ accountability to Parliament. He also asked about the timescales of the review. The Government published their consultation on 9 November, with a closing date for responses of 9 February next year. We will bring forward further detail on our approach to implementing the proposals in the review in due course.
The noble Lord asked me to outline what steps, if any, have been taken by regulators to ensure that green issues have been considered as part of their rule-making processes. He is of course correct to say that the Financial Services Bill 2021—now an Act—was amended to include
“have regard to the net-zero carbon target”,
which will apply after 1 January next year. This means that the PRA does not need to have regard to climate change considerations in making the Basel III rules, nor the FCA in making the IFPR rules, for 1 January. This was done to ensure that there is no delay in implementing the Basel III and IFPR reforms. It will be for regulators to determine how the new duty will operate in practice. The Government anticipate that it will function in much the same way as other similar obligations did during the PRA’s implementation of the Basel III standards, such as the need to have regard to the ability of firms
“to continue to provide finance to businesses and consumers in the UK”.
The PRA and the FCA are aware of the need to respond to the potential risks posed by climate change. For example, on 28 October, the PRA published its second climate change adaptation report, finding that under the existing regulatory capital framework there is scope to use capital requirements to address certain aspects of climate-related financial risks. This and future work will no doubt feed into how the PRA sets its rule from 1 January 2022.
Money Laundering and Terrorist Financing (Amendment) (No. 3) (High-Risk Countries) Regulations 2021
Lord Tunnicliffe Excerpts(3 years ago)
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Lord Purvis of Tweed (LD)
My Lords, we support this measure and, as the Minister outlined, while this is an uncontroversial measure with regard to Mali, Turkey, Botswana and Mauritius, it is one element of a much wider agenda on which the UK has an opportunity to lead—and in many areas it is, working very closely with our key allies. The timing is, probably by accident, relevant. It is between the debate on the Statement, when we discussed human trafficking and the linked crime of smuggling, and change to the proscription of a terrorist organisation, so it is linked.
The noble Baroness, Lady Williams, mentioned organised crime offences in the Balkans. When I served on the Select Committee on International Relations and Defence, we carried out an inquiry into the Balkans, and I visited. We identified that one of the biggest interests of the UK in the region is organised crime and the finance connected with it. When I visited the Sahel and looked at some of the smuggling routes, I was told by British officials that this industry equates to £10 billion-worth of organised crime. It is on an awful, industrial scale.
We have debated Afghanistan and will again next week. Some 95% of the heroin on the streets of this country is from Afghanistan. More people die every year than died in Afghanistan as tragic British military casualties of that conflict. All of them are connected with a considerable amount of money. None of those awful activities, which lead to tragic victims and innocent deaths, can be separated from those who are party to this and who launder some of the proceeds and facilitate some of this activity.
Therefore, we support the work of the Financial Action Task Force, our security services, the Treasury, the Bank of England and all the agencies who have to work forensically to tackle this awful use of what are often very technical, legal, financial and bureaucratic mechanisms to hide criminal activity.
I press the Minister specifically on a connected issue, which is what the Government say they intend to do, which is to have a public register of beneficial ownership of property. We know that, because of the openness of the property market, especially in our cities and especially in London, this has been an area of concern. Prior to the pandemic, Transparency International identified 87,000 properties in England and Wales that are owned by anonymous companies registered in tax havens. We have seen in the Pandora papers that UK property remains a popular way to wash dirty money, and there have been cases, of which we are all aware, where that has led to actions. That demonstrates the clear need for a public register, so, in supporting what the Minister is doing, I would welcome his comments on when the Government will make good on their promise in this area.
Lord Tunnicliffe (Lab)
My Lords, on the face of it, the regulations before us are very straightforward. The Financial Action Task Force has updated its list of high-risk countries, and we are mirroring those changes in our legislation. We have supported such instruments in the past and will continue to do so.
Paragraph 3.3 of the Explanatory Memorandum outlines the usual justifications for this instrument being laid under the “made affirmative” procedure. We accept the arguments, but it is a pity that the urgency in laying these SIs is not always matched when it comes to the Government’s wider efforts to crack down on money laundering. Although it is true that the task force has given the UK a good rating in general terms, we know that concerns have long been expressed about the UK’s supervisory regime. As my colleague Pat McFadden said in the Commons, the Treasury itself has conceded that FATF sees our systems as “only moderately effective” and that the international body also believes that there are
“significant weaknesses in the risk-based approach to supervision”
in the UK.
The UK is understandably a target for illicit funds, given the size and global status of our financial services sector. The Magnitsky case is a well-known example of funds being funnelled through UK institutions, but we know it is not the only one: that much has been seen with the recent publication of the Pandora papers. The Financial Conduct Authority is reportedly running several active investigations in this area. We wish it well with those probes and hope that any wrongful behaviour is punished in an appropriate way.
The Minister said yesterday that, despite the lack of criminal convictions secured through FCA action, the body is nevertheless taking robust action. He pointed to the imposition of a number of major fines in recent years, such as those against Standard Chartered. However, it is not clear that these punishments are changing behaviour or preventing the recurrence of bad practice. On Monday, Minister Whately outlined some of the limited examples of government action. We welcome the allocation of funds to this fight, but it is hard to take seriously her claim that everything possible is being done to make the UK
“a hostile place for illicit finance and economic crime”.—[Official Report, Commons, 16/11/21; col. 532.]
Many of the initiatives cited have been announced and re-announced without meaningful action following. For example, Companies House has been given an additional £63 million of funds to assist with its reform, but there is little sense that the changes being made will empower that body and lead to better outcomes.
Minister Whately also failed to provide clear justification of the UK Government not classifying countries such as Russia and Afghanistan as high risk. It is true that this instrument is designed solely to administer the task force list, but does the Treasury not see a case for taking action of its own where UK interests are at stake? We await with interest the outcome of the task force’s ongoing analysis of recent events in Afghanistan. It will be interesting to see whether that country is added to the list when we consider the first of these SIs in 2022 but, on Russia, I will simply repeat one of Pat McFadden’s questions: do the Government really not judge Russia to be as big a risk as some of the countries listed in these regulations?
As I said earlier, we are privileged to have a significant financial services sector in this country. Lots of talented people, both regulators and people in the sector, work night and day to detect and stop economic crime and obviously we support them in their endeavours. However, the fact remains that, despite the efforts of individuals, the UK Government’s regulatory framework of choice is seen by the international community as insufficient. As a global leader in financial services, we have a responsibility not only to replicate international initiatives but to lead them from the front. I hope the Minister can outline today exactly how the Treasury intends to do this.
Lord Agnew of Oulton (Con)
I thank noble Lords for their contributions and I will try to answer the queries raised.
I turn first to the noble Lord, Lord Purvis, and the register of overseas entities’ beneficial ownership. The Government remain absolutely committed to these reforms. When implemented, this register will be an important new tool in our wider efforts to tackle economic crime and will be complemented by the broader powers we are now proposing for Companies House. Once implemented, the register will be one of the first of its kind in the world. That is good news for the UK, maintaining our global leadership role on corporate transparency and enhancing our already strong reputation as an honest and trusted place to do business. The Bill will reflect the pre-legislative committee’s recommendations to ensure that the legislation is as effective as possible in tackling the use of UK property for the purposes of money laundering. I cannot give the noble Lord a precise date, but I am the counter-fraud Minister and I am pressing hard to get that commitment, because I share his concern on this important additional weapon in our arsenal.
I turn to the number of important points raised by the noble Lord, Lord Tunnicliffe, and will try to address as many of them as possible. In terms of the views of FATF, the UK has achieved the best ratings of any country assessed so far in this round of its evaluations, outperforming other states who are at the forefront of tackling money laundering and terrorist financing. I must stress that we are not complacent, and I take the noble Lord’s challenges and criticisms very seriously. The Government will continue to enhance our response to illicit finance as new risks and methodologies emerge.
The UK continues to be guided by FATF standards in our domestic response to money laundering and terrorism financing. Our strategy for combating these crimes is set out in the Economic Crime Plan. This plan contains 52 actions, and its comprehensive agenda will ensure that the UK maintains its global leadership. Key actions include the reform of the suspicious activity reporting regime and improving the supervision of anti-money laundering compliance in the regulated sector. We have made progress in delivering on the Economic Crime Plan, with 24 of the actions complete and a further 10 implemented and being undertaken as an ongoing activity.
In terms of the weakness in the RBA to supervision, the FCA is changing its risk-based approach to anti-money laundering supervision by implementing new data-driven analytical tools and a targeted modular supervision model. This means it will be better placed to balance the two perennially competing aspects of any regulatory oversight regime—depth and breadth—to make the supervisory approach more bespoke, flexible and targeted. The FCA expects firms to implement their obligations effectively and has taken meaningful and impactful enforcement action against firms who failed to implement effective systems. As committed to in the Economic Crime Plan, the Treasury is undertaking a review of the UK’s anti-money laundering regulatory and supervisory regimes. The review will consider the structure of the UK’s supervision regime and the role and powers of the Office for Professional Body Anti-Money Laundering Supervision. We will publish a report setting out the findings of the review and intended next steps in June 2022.
I turn to Companies House reform. The Government have issued their response to the corporate transparency and register reform consultation of last September and set out their plans to reform Companies House and strengthen the UK’s ability to combat economic crime. The reforms are significant and will deliver alongside other broader reforms to clamp down on the misuse of corporate entities. They will deliver more reliable information on the companies register via verification of the identity of people who manage, control or set up companies. There will be greater powers for Companies House to query and challenge the information submitted to it, and the removal of technological and legal barriers to allow enhanced cross-checks on corporate data with other public and private sector bodies.
The noble Lord specifically asked about Russia and Afghanistan. The high-risk third countries list is only one of the tools that the Government have to signal to the private sector which jurisdictions are currently at risk. We also have the national risk assessment of money laundering and terrorist financing, which advises firms where they should take extra caution in building business relationships, given cross-border money laundering risks. The money laundering regulations require firms to consider geographical risks so, regardless of listing, firms have to be nuanced and risk-assess their business relationships taking into account credible sources.
In the FATF assessment of Russia, the judiciary’s lack of independence and corruption were both highlighted. For example, FATF noted that levels of corruption are high in Russia. This is why we are at the forefront of global actions spanning operational policy and diplomatic communities to target the money launderers and the enablers who underpin corrupt elites and serious organised crime. To go back to the point made by the noble Lord, Lord Purvis, there is a horrible interconnection with what is happening with the migrant boats. If they get 50 people on to one of those boats at £2,000 each, that is £100,000 and it probably costs them £1,000 to buy the boat, so the noble Lord is completely right. That is why we are not in any way complacent about this.
Some of our response will be visible through law enforcement policy and international engagement. Other options will be less visible but no less impactful. Our response continuously evolves with the threat. In relation to Afghanistan, our engagement with the private sector tells us that there is already a very high level of scrutiny of money laundering, terrorist financing and sanction evasion risks. The presence of sanctions entities in Afghanistan and its potential money laundering and terrorist financing risks have been well-publicised, with alerts from UK supervisory bodies and other credible sources available for the regulated sector to draw on to assess the risks.
The noble Lord asked how we intend to lead the fight from the front. We are trying to lead by example and our freely accessible public register of company beneficial ownership is one of the most open and extensively accessed company registers in the world. The UK has been at the forefront in delivering greater corporate transparency. We have led international reform efforts. This year, we used our G7 presidency to agree landmark commitments to implement and strengthen beneficial ownership registries, securing commitments from countries such as the US, Canada and Japan which had not previously been made.
Money Laundering
Lord Tunnicliffe Excerpts(3 years ago)
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Lord Agnew of Oulton (Con)
My Lords, it is a harsh judgment to say that we are a honeypot for international money launderers. We are one of the largest financial centres in the world, so the volume of money passing through our system is colossal. We have been judged by the FATF as one of the most effective regulators of this area in the world. We have the second- highest level of fines so far. As I mentioned in response to earlier questions, we continue to review the situation carefully. For example, at the moment we are looking at Companies House legislation to make sure that registrations there are more carefully vetted.
Lord Tunnicliffe (Lab)
My Lords, 10 December 2021 will be the fourth anniversary of the Government’s United Kingdom Anti-Corruption Strategy, which in 2017 committed to bringing forward a draft Bill in that Session of Parliament
“for the establishment of a public register of beneficial ownership of overseas legal entities.”
Are Her Majesty’s Government still committed to such a Bill? If so, when will we see it?
Lord Agnew of Oulton (Con)
My Lords, we are certainly committed to that. I am afraid I cannot give a date yet. As the noble Lord will know, we are trying to put a huge amount of legislation through both Houses, but we recognise that it is a priority. In February this year the economic crime plan was set out. It listed seven priorities, and dealing with the issues he referred to is included there.
UK Cash Network
Lord Tunnicliffe Excerpts(3 years, 1 month ago)
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Lord Agnew of Oulton (Con)
My noble friend asks important questions. On access to cash, as I said in earlier answers, the Government are committed to legislating to protect access to cash and ensuring that the UK’s cash infrastructure is sustainable in the long term. In answer to my noble friend’s second question, the Government are undertaking a wider financial services future regulatory review, which aims to build on the strengths of the UK’s existing framework as set out in the Financial Services and Markets Act 2000. An initial consultation exploring these issues and a proposed approach was published by the Treasury in October last year, and we had 120 responses. We will publish a second consultation with detailed proposals shortly.
Lord Tunnicliffe (Lab)
My Lords, the noble Lord, Lord Holmes of Richmond, is right to keep up the pressure on this important issue. The problem to date has been the lack of ownership, with the Treasury urging action from a variety of regulators and public bodies, none of which has a whip to crack when providers leave town. The recent consultation sought to place overall responsibility with the Financial Conduct Authority. Is this still the Treasury’s preference? If so, when and how will this be enacted?
Lord Agnew of Oulton (Con)
My Lords, the Government’s consultation set out proposals for the Financial Conduct Authority to become the lead regulator for oversight of the retail cash system, including having responsibility for monitoring and enforcing new legislation and cash access requirements. In adopting this approach, the Government intend that the Payment Systems Regulator and the Bank of England continue with their existing functions with regards to cash. Co-ordinated actions by the FCA and PSR on cash as part of the Covid response have shown that joint working between the regulators at both strategic and operational levels is working.
Budget Statement
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Lord Tunnicliffe (Lab)
My Lords, I, too, thank the right reverend Prelate the Bishop of Newcastle for her speech and her contribution to our Chamber over the years. I particularly liked her focus on education as a key issue for our society to regard. I wish her well for the future. We are probably forgetting what our Chamber was like when we had only male bishops. Everything from the reading of the psalm to the breadth of speeches has improved as a result of our women bishops.
As ever, I also admire the detailed response to the debate from the noble Baroness, Lady Kramer. Unfortunately, I am not so skilled, so I just marked every speaker as favourable, neutral or unfavourable. I hate to share with the Minister that I came out with 20 unfavourable, three neutral and three favourable, so I wish him luck.
Despite the Chancellor’s upbeat delivery during last week’s Autumn Budget Statement, the reality facing many low-income and middle-income households is far from optimistic. In recent years, we have become accustomed to single-year spending decisions, rather than the usual multi-year settlements. Committing to certain courses of action was deemed too complicated, but the Chancellor’s new fiscal rules have afforded him the luxury of a longer-term view. This spending review contains caveats, especially on issues including overseas aid spending, but it at least gives us, especially those responsible for planning and delivering public services, an idea of what is to come.
The detail of the Red Book fails to live up to the cheerful tone adopted by Mr Sunak. Following last week’s Statement in the other place, the Resolution Foundation promptly warned that millions are facing a “grim reality”. The Institute for Fiscal Studies sees “real pain” arising from the double whammy of high inflation and personal tax increases. Wider circumstances, including the ongoing energy crisis, mean that the cost of living is likely to skyrocket in the coming months. Despite this, we saw no meaningful measures to support crucial parts of the industry in the long term or to help bill payers in the short term.
The change to the universal credit taper rate, which is expected by 1 December, will provide some assistance to certain households. However, its impact will be felt differently depending on an individual’s circumstances. Some will recoup what they have lost through the withdrawal of the £20 weekly uplift, where others will just lose out. A single unemployed person aged over 25 will go from £411 per month to £324. I do not know many people in this House who could contemplate living on £324 a month. It is a matter of £20 a week. Most people in this House—perhaps not all—losing £20 a week would not notice it. I certainly would not. However, we always have to bring our minds back to the fact that these policies will have a real, serious impact on real people. This is an unkind and, indeed, almost vicious move. The concept that if you threaten people with getting poorer, they are more likely to work, is simply unrealistic, unfair and cruel.
We welcome the increase to the national living wage, but it falls short of Labour’s commitment to at least £10 per hour. Working families must also wait until April and the actual benefit—if there is one, given rising costs—will be marginal.
Overall, households will be paying an astounding £3,000 a year more in tax than when Boris Johnson became Prime Minister, yet many of our public services are simply not up to scratch.
A Budget provides an unparalleled opportunity to examine an Administration’s priorities. While the Prime Minister may present himself as being on the side of ordinary people, last week showed that he is anything but. Taxes on working people are going up to the highest level in 70 years, while allowances or loopholes amounting to billions of pounds have been put in place for bankers and large corporations.
The fine print of the Red Book and its supplementary documents reveal some hidden hits to working people. Next April, many families will find themselves subject to yet another council tax bombshell, while there will also be a £1.7 billion stealth raid on the self-employed over the next five years.
Even in the cases where the Government wants us to think it has seen the light, the reality is very different. We welcome the speed with which the Government are amending the universal credit taper rate, but even this supposed concession gives rise to several questions. Recently, both Houses were asked to fast-track legislation for the health and social care levy—a further burden on working people—with minimal scrutiny on the basis that the Budget would come too late to allow HMRC to update its systems. How could HMRC have been deemed unable to implement its changes between November and April, yet the Department for Work and Pensions can make and publicise fundamental changes to the benefits system within four weeks?
We should also remember that the Government’s supposed generosity on universal credit was never their plan. Ministers insisted on scrapping the weekly £20 uplift despite overwhelming evidence of the severe hardship it would cause. They refuse to do anything about the five-week wait, even though that also pushes people into financial difficulty.
The Chancellor was almost gloating when noting that the cut from 63% to 55% equated to “the rate originally envisaged” by Iain Duncan Smith. Therein lies the problem. The idea behind universal credit was a good one. However, reducing the share of earnings that went into claimants’ pockets repeatedly came top of the list of cuts during the Conservatives’ austerity programme.
As we discussed during a debate secured by the noble Lord, Lord Bird, last week, poverty is neither new nor inevitable. It is, in many senses, a policy choice. Why, then, has it taken until now for us to see change? Ultimately and sadly, only two things secure action from No. 10: political benefit and disquiet on the Back Benches. The recent NHS levy Bill was rushed through to ensure minimal opposition from Back-Bench Conservative MPs, while the revised taper rate is a response to unease at the end of the £20 uplift. We have also seen it with sewage in recent times, with Ministers miraculously acknowledging public health and environmental concerns—not when they were raised in March 2020 but when 22 Back-Benchers rebelled and more threatened to.
The Office for Budget Responsibility’s analysis demonstrates what Labour has been saying for months: that the UK took the hardest economic hit during the Covid-19 pandemic and is seeing the slowest recovery among the G7 nations. Even departmental spending settlements are not all they seem to be. Yes, there has been a loosening of the purse strings, but the shadow of austerity still looms large over Whitehall. The Resolution Foundation notes that despite increases in budgets, only a third of the post-2010 cuts to unprotected departments’ real-terms per-person spending will be reversed by 2024-25.
Ultimately, this Budget fails Labour’s key tests, and according to recent YouGov figures, it falls short of the public’s expectations too. It hammers working people while giving banks a tax cut. It offers no concerted plan to shift the tax burden from working families to those with the broadest shoulders. It contains little to tackle the worsening cost-of-living crisis, nor puts the UK on the path to strong, sustained growth. There is nothing to cushion the blow of higher energy prices over the winter months. The OBR says that pay increases will be cancelled out by spiralling inflation and tax rises, probably in late 2023. Changes to universal credit will benefit only a third of claimants, leaving others facing difficult winters.
This Autumn Budget was an opportunity to tax fairly, spend wisely and grow our economy in a way that helps the environment and supports British business. As we have so often seen, the Government have ducked the challenge. Instead, they have prioritised narrow corporate interests and the management of internal party politics. This is no way of doing business and, regrettably, the people of this country will be worse off as a result.
Homes: Affordability
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Lord Tunnicliffe (Lab)
My Lords, I congratulate the noble Lord, Lord Bird, on securing this important and wide-ranging debate. That is the sort of formal thank-you that we normally have, but I think I join most noble Lords who heard his introduction in noting his powerful and emotional opening speech. I will return to the idea of the importance of emotion in decision-making.
The title of this debate is an indictment of the Government’s handling of our economy. It may be growing, but the nature of that growth is delivering increasing inequality, forcing more and more people into crippling, life-changing poverty. Yesterday, the Chancellor sought to paint an optimistic picture of the UK economy. That is his prerogative, but, for many, it has been a tough couple of years, and it is likely to be an even tougher winter.
While bankers and companies such as Amazon are handed new tax breaks, families face rising costs, high inflation and empty supermarket shelves. People are feeling the pinch and, despite their claims, the Government are not in their corner. We will have other opportunities to debate the Chancellor’s Autumn Budget, but there are a few key facts that are worth citing in the context of this discussion. GDP growth may have been revised upwards this year, but it has been downgraded for 2022, 2024 and 2025. Inflation is expected to peak at 4%, or a little more, over the next year, with this persisting for some time. The legacy of austerity is such that, despite increases in departmental budgets, around half will remain worse off than in 2010.
If growth is weak, inflation is high and public services are not properly funded, people will suffer. That is true in normal times, but even more so when one factors in the impacts of the three strands of the Motion tabled by the noble Lord, Lord Bird. Yesterday’s Autumn Budget was an opportunity to give those in need, in the words of the noble Lord’s publication, “a hand up”. Unfortunately, that opportunity was missed.
We welcome the announcement of certain initiatives, as well as the cut in the universal credit taper rate, which I will return to later, but they do not go nearly far enough. Millions of Britons are facing a lengthy cost of living crisis, and too many face the prospect of losing their home. This has been backed up today by the Institute for Fiscal Studies, which warned that low-income households will feel real pain in the months ahead.
Noble Lords may wonder why all this matters. We often discuss poverty as a concept, trading definitions and stats. Policy wonks compare relative and absolute poverty, while Ministers instruct officials to tweak the formulae. For those living in poverty, though, it is not an abstract concept; it is a hard slog, a cruel and daily reality.
Earlier this week, Channel 4’s “Dispatches” highlighted the plight of several families living in poverty and in poor-quality, overcrowded housing. It was hard hitting and made one wonder whether this is why Ministers are so desperate to privatise the broadcaster. The programme was a timely reminder of problems that have gone unresolved for too long: the sheer number of people trapped in emergency accommodation or on council house waiting lists, and the lack of quality and affordable properties in parts of the private rented sector.
We know these problems have been exacerbated by the pandemic, prompting the Government to step in with a range of Covid-19 economic support schemes. Many came with shortcomings, but at least they kept people in their homes. Now, the withdrawal of those schemes, as well as the removal of the £20 universal credit uplift, has come at the wrong time and is starting to bite.
But, again, I worry that we are falling into old habits and approaching this from the wrong angle. I want to read into the record the stories of two boys who featured in the Channel 4 broadcast earlier this week, to highlight the daily fear that young children are experiencing. Nine year-old Qasim lives in temporary accommodation with his dad and siblings. He is worried that his father does not have enough money when they go shopping and that if the family is made homeless, they will have to sleep in the car. Qasim struggles to sleep and fell behind with his schoolwork during lockdown. He is now attending catch-up classes but is worried about his future: “If I don’t learn, I may not be able to get a good job, and I might end up poor”.
Eight-year-old Kai doesn’t care that his mother, a care co-ordinator who has her income topped up by universal credit, has never been able to take him on holiday or to a restaurant to have macaroni cheese. He loves her dearly because she’s “trying to do her best” to provide for him.” He said, “I worry about my mum having less money because you can’t pay rent. It wouldn’t be fun living on the streets because you have to beg people for food, and they’ll say no”. These children are not asking to live a life of luxury. They just want the basic sense of security that so many of us take for granted, so they have room to grow as people and begin to get some enjoyment from life.
I was particularly struck by a tweet from Save the Children’s Kirsty McNeill, who said:
“Kids shouldn’t know where the family is on a housing waiting list, when pay day is, how much their school supplies cost. They should be dreaming about how they can cure cancer and be in the Olympics at the same time”.
The reality faced by Qasim and Kai, and many more besides, is the result of choices made by this Government. The Chancellor essentially confirmed this yesterday, when he said:
“do we want to live in a country where the response to every question is ‘What are the Government going to do about it?’, where every time prices rise, every time a company gets in trouble, every time some new challenge emerges, the answer is always that the taxpayer must pay? Or do we choose to recognise that Government has limits?”—[Official Report, Commons, 27/10/21; col. 286.]
Of course the Government do and should have limits. However, they also have duties, and I fear those duties are not being upheld. Too many people face a winter of great uncertainty. The Government are not wholly to blame, but their decisions have had, and will continue to have, a very real impact.
The decision to increase the national minimum wage to £9.50 an hour is welcome, as is the end of the public sector pay freeze. However, the IFS also warns that high inflation will cancel out much of the immediate benefit, meaning that millions will be worse off in the short term.
We also welcome the reduction in the universal credit taper rate, although it will not benefit all claimants, particularly the poorest, and its impact will very much depend on individual circumstances. Other fundamental issues remain with universal credit, and we hope that these will finally be addressed, sooner rather than later.
I am sure that the Minister will cite a variety of schemes and statistics in his response. However, I urge him and his ministerial colleagues to acknowledge the scale of the problem and the long-lasting impacts that poverty and homelessness—potential or actual—have on people across the country. The Government talk of improving life chances for all but, sadly, their record to date speaks for itself.
There is a fundamental problem about the issues that we are talking about. The problem to some extent is us. As the noble Lord, Lord Bird, said, the loss of £20 would be unnoticed in his life, and it would certainly be unnoticed in mine. We debate homelessness —this debate is about homelessness—but we think of it in terms of fears and as having to do with “them” or as so many per cent. As human beings, we often avoid thinking about unpleasant things.
Curiously, I have always been terrified of not having a roof, despite the fact that it has never been a real threat. I came from a poor household, but a poor household in the 1940s and 1950s was, in an important way, much richer: we were richer because we lived in a council house, with a secure tenancy and affordable rent. Despite being lowly paid, my father worked for the National Health Service as a porter and had a secure income. Throughout my life, I have always had a roof over my head and confidence; despite being fired a couple of times, even then I had sufficient reserves for it not to be a problem.
I invite people to think about how they would feel—I do not know why I think about this—if tonight was to be their first night on the streets; that they had done their best not to get into this situation, but somehow all their options have run out. Would it help to be told that it was their own fault? Somehow, we have this concept of the undeserving poor. When you are on the streets—it does not matter how you got there—it is an almost impossible position to climb back from.
Would it help being told that losing £20 a week would help, despite the cost of living shooting upwards, as though somehow making you poorer means you are more likely to get a job? I find that very difficult to believe. I draw no conclusions from this because I accept that this is complex, but we surely have to somehow feel the terror of homelessness and, as best we can, try to imagine what poverty is like to give this the weight it should have in our discussions.
It is crucial to recognise that these people exist. They may not vote, but they are citizens, and somehow, they cope—or do they? Google told me today, in my last dive into this area, that homeless men typically die aged 45. In the general population, the age for men is just over 79. So, these people do not cope, really, but they do cope night by night. I am not sure I could cope for a single night.