Bank of England and Financial Services Bill [Lords]

Charles Walker Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 19th April 2016 Commons Chamber

Brought up, and read the First time.

[Mr Charles Walker (Broxbourne) (Con)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Natascha Engel)]

With this it will be convenient to discuss the following:

New clause 10—Debt management plan charges—

(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) After section 137FBB insert—

“137FBC FCA general rules: debt management plan charges

(1) The FCA must make general rules in relation to debt management plans.

(2) The rules must specify that—

(a) if a majority of creditors agree to a creditor fee arrangement, then all creditors shall be bound by the arrangement;

(b) a creditor fee arrangement may subsequently be varied by the agreement of a majority of creditors; and

(c) a creditor fee arrangement and any variations must take the form of a written contract executed by a majority of the creditors and must be distributed to all creditors upon completion.

(3) In this section—

“creditor fee arrangement” means an arrangement whereby the fees incurred as part of the debt management plan are paid by the creditors, calculated either as a fixed amount, a percentage of the amount owed to them or a combination of a fixed amount and a percentage; and

“a majority of creditors” means a subset of creditors where the amount owed to them is more than half of the total amount owed.”’

New clause 14—Combating abusive tax avoidance arrangements—

‘(1) Section 3B of the Financial Services and Markets Act 2000 (Regulatory principles to be applied by both regulators) is amended as follows.

(2) At the end of subsection (1) insert—

“(i) combating abusive tax avoidance arrangements.

(1A) (a) in observing principle (i), the regulators must undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance, including measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.

(b) in this section “beneficial ownership of trusts” includes ownership of any equitable interest in a trust including being an object of a discretionary trust, power of appointment or similar arrangement as well as any vested interest under a trust;

(c) “control of shareholders and ownership of shares in companies using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA” shall include control by any person with control over a voteholder in a company as defined in Part VI Official Listing s.89F of the FSMA (2000) as applied mutatis mutandis to this context, whether directly or indirectly, and whether alone or in concert with some other person.”’

Amendment 1, in clause 24, page 20, leave out lines 5 to 10.

Amendment 8, page 20, line 10, at end add

“and insert—

‘(6) Where the authorised person mentioned in subsection (5) is a relevant authorised person, as defined under section 71A of the Financial Services and Markets Act 2000, subsection (5)(d) does not apply and subsections (7) and (8) do apply.

(6A) If the FCA satisfies itself that a person (P), who is a senior manager in relation to a relevant authorised person, is guilty of misconduct by virtue of subsections (5)(a)-(c), then P shall be guilty of misconduct, subject only to subsection (8).

(6B) But P is not guilty of misconduct by virtue of subsections (5)(a)-(c) and (7) if P satisfies the FCA that P had taken such steps as a person in P’s position could reasonably be expected to take to avoid the contravention occurring (or continuing).””

Amendment 2, page 20, leave out lines 22 to 27.p

Amendment 9, page 20, line 27, at end add

“and insert—

‘(6) Where the PRA-authorised person mentioned in subsection (5) is a relevant authorised person, as defined under section 71A of the Financial Services and Markets Act 2000, subsection (5)(d) does not apply and subsections (6A) and (6B) do apply.

(6A) If the PRA satisfies itself that a person (P) who is a senior manager in relation to a relevant PRA-authorised person is guilty of misconduct by virtue of subsections (5)(a)-(c), then P shall be guilty of misconduct, subject only to subsection (6B).

(6B) But P is not guilty of misconduct by virtue of subsections (5)(a)-(c) and (7) if P satisfies the PRA that P had taken such steps as a person in P‘s position could reasonably be expected to take to avoid the contravention occurring (or continuing).”

Amendment 10, in schedule 4, page 62, line 2, leave out paragraph 18.

[Mr Walker]

New clause 9 is designed to prevent the restriction or withdrawal of banking services from perhaps tens of thousands of people. Those people include soldiers and others serving in the armed forces, judges, civil servants, trade unionists, and local councillors and their officials. Those people, along with their families and associates, are deemed to be “politically exposed persons” for the purposes of the fourth money laundering directive, which is due to be transposed into UK law by no later than June 2017.

The scope of new clause 9 is straightforward. It is designed to ensure that when that money laundering directive is transposed into UK law, reasonable regard is given to the parts of the directive that deal with proportionality. The new clause makes it clear that prior to the enactment of the directive, the Financial Services and Markets Act 2000 will be amended so that the Financial Conduct Authority will be required to publish clear guidance to the banks defining what it deems to be proportionate. New clause 9 also makes regulatory provision for PEPs who believe that they have been treated unreasonably by their banks to ask that their case be adjudicated by the FCA.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I congratulate the hon. Gentleman on introducing the new clause. I understand from what we heard during today’s topical questions that it is likely that the Government will accept it, so he is obviously in the right area. Is he worried that banks are acting in advance of the measure and that there is quite a lot of evidence that they are already gathering information about ordinary, law-abiding members of the public and using it as an excuse to restrict their banking activities?

[Mr Walker]

The hon. Gentleman makes a valid point. Banks are de-risking very aggressively at the moment and we need to inject some proportionality into their actions. I believe that the new clause will go some way towards achieving that.

New clause 9 inserts into the Bill a process of adjudication. If a politically exposed person believes that they are being treated unfairly—being denied access to banking services—they can take their concern or complaint to the FCA, which can then adjudicate. The FCA can decide whether banks are interpreting the directive over-aggressively and, if they are, levy a fine on them for doing so. The new clause has nothing to do with reducing accountability; it is about increasing proportionality, which is the right thing to do.

Why is new clause 9 needed? It is needed because it is clear that in interpreting the fourth money laundering directive, banks are making no distinction, when determining who is a politically exposed person, between PEPs drawn from the corruption hotbeds of Nigeria, Russia and parts of the subcontinent, and those drawn from developed democracies such as ours that have high levels of scrutiny and accountability.

[Mr Stewart Jackson (Peterborough) (Con)]

May I put on record the thanks of all of us in the House to my hon. Friend for his diligence, focus and tenacity in bringing this massively important issue to the attention of the Government and for what we hope will be a satisfactory conclusion today? Does he agree that the collateral damage of some of the precipitous action of the banks has been a big impact on people’s families and, as a corollary, their future credit worthiness?

[Mr Walker]

My hon. Friend makes a good point. As I said, the banks have acted very aggressively, and I shall return to that point in a few moments.

May I thank the Economic Secretary for her time and patience in dealing with this matter? I have been speaking to her about it for four months, and I admit that I have got a little over-excited on occasions. However, she has always maintained high levels of good humour and patience, for which I thank her. It is important to put that on the record.

At this late stage, without the intervention of new clause 9, the directive risks blighting the lives of decent people. They are not just people working in public life and service but, as my hon. Friend the Member for Peterborough (Mr Jackson) pointed out, their partners, spouses, children, parents, siblings and in-laws. The directive is not proportionate.

Even more worryingly, the directive covers the close associates of politically exposed persons. I am aware that one such close associate is a member of the press lobby. He had some problems with an individual savings account and was subject to close questioning by his bank. When he asked the person on the other end of the phone why the bank was conducting itself in such a way, the response was, “Because we understand that you are an associate of the Prime Minister.” Even the media are caught up in this directive, or rather the banks’ de-risking in preparation for its introduction.

The Financial Action Task Force, whose guidance underpins the directive and is repeatedly referred to in it, states:

“For close associates, examples include”—

the House needs to listen carefully to this because it is quite an odd paragraph—

“the following types of relationships: (known) (sexual) partners outside the family unit (e.g. girlfriends, boyfriends, mistresses); prominent members of the same political party, civil organisation”—

that could be the National Trust—

“labour or employee union as the PEP; business partners or associates, especially those that share (beneficial) ownership of legal entities with the PEP, or who are otherwise connected”.

My fear is that, without clear Government-backed FCA guidance, as provided for in new clause 9, the banks, in their rush to de-risk, will continue to draw on the work of the Financial Action Task Force. The Financial Action Task Force states in paragraph 37 of its 2013 guidance:

“there should be awareness that middle ranking and more junior officials could act on behalf of a PEP to circumvent…controls. These less prominent public functions could be appropriately taken into account as customer risk factors in the framework of the overall assessment of risks”.

[Sir Greg Knight (East Yorkshire) (Con)]

The case that my hon. Friend makes is overwhelming. Will he tell the House whether he is aware of anyone who is opposed to what he is trying to do?

[Mr Walker]

I am sure that there will always be people who are opposed to what I am trying to do. That is the nature of society—we live in an open society in which people have different points of view on many issues. The fourth money laundering directive should be about capturing bad people in its scope, not capturing all people. If everyone is thought of as bad, it is very difficult to identify who is actually breaking the law. We want to go after the law breakers, not those people who, by accident, are described or identified as PEPs by banks in this country.

[James Cleverly (Braintree) (Con)]

Does my hon. Friend share my concern that the rush to implement these actions ahead of the directive indicates a desire by the banks to take what seems to be decisive action against a group of people who are quite easy to target, and that the banks will be less keen to take that action against people who are harder to track down? [Interruption.]

[Mr Speaker]

Order. I know the fondness of the right hon. Member for East Yorkshire (Sir Greg Knight) for live music, and it is a fondness that I share, but there are limits.

[Mr Walker]

I thought that rather complemented the intervention from my hon. Friend the Member for Braintree (James Cleverly)—it was almost like an opera singer opening his lungs.

My hon. Friend makes a very good point. Banks need to invest their resources, time and energy in going after high-risk people. Banks know which people are high risk. To be perfectly honest, whatever people in this country think about their Members of Parliament, trade unionists, council officers and leaders, Assembly Members and Members of the Scottish Parliament, they are, in the main, not bad people indulging in money laundering. I am not saying that there will not be a bad apple, but those people do not present the real and current risk. Banks’ energies should be focused not on chasing after the good, but on chasing after the very bad.

The Financial Action Task Force catch-all that says that even middle-ranking people can be involved in money laundering basically puts everyone above grade 7 in the civil service in the frame. Think of people in a Government-backed organisation or trade union regional organisers. If banks follow the FATF guidance, those people could be deemed to be politically exposed persons, so not only their banking facilities, but those of their families and associates, could be withdrawn or curtailed.

I will make some progress, as I was not planning to speak for so long. Once a PEP, always a PEP. Although article 22 of the directive states that after 12 months have passed from the point at which the politically exposed person has left office, a bank can decide that that person is no longer a PEP—that sounds like good news—it goes on to say that banks will

“be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk specific to politically exposed persons.”

That is the lobster pot from which few will escape. Banks are risk averse, so they will feel that it is much better to keep someone as a PEP indefinitely than to take the risk of downgrading them to the status of a normal customer unless they are obliged to do so.

Forget people serving in public life; let us think about those who have left it. Without the protections and guidance in new clause 9, ex-Army officers, ex-judges, ex-trade union representatives, ex-community leaders, volunteers and ex-members of political parties, and former Members of Parliament could be denied the opportunity to serve on charitable and company boards because their presence would confer the status of politically exposed person on the rest of the board. That status is best avoided by individuals who are not yet stigmatised. If conferred, such a status could lead to a withdrawal of the relevant charity or company’s banking services. This is not supposition and I am not making this up. Along with the restriction of banking services, the closure of personal accounts and the blackballing of family members, it is happening now. In accepting new clause 9, the Government will enshrine in an Act of Parliament that banks have a legal duty to act proportionately and in accordance with FCA guidance, and that is the correct thing to do.

Oral Answers to Questions

Charles Walker Excerpts

Tuesday 19th April 2016 Commons Chamber

[Mr Gauke]

Let me be absolutely clear with the House that we are not talking about quarterly tax returns. This is not about having to do a full tax return but about reporting; indeed, the purpose of the changes is ultimately to reduce the burden on businesses. It will start to be introduced in 2018. I hope that we will set out further information about the plans in the coming weeks. The intention is to ensure that we reduce the tax gap and, ultimately, help businesses to comply with the tax system.

[Mr Charles Walker (Broxbourne) (Con)]

I thank the Chancellor and the Economic Secretary for their good humour in their dealings with me over the past few days. This afternoon I will be moving new clause 9 to the Bank of England and Financial Services Bill. Are the Government now minded to accept new clause 9?

[Mr Osborne]

It is quite right that we take action against money laundering. That cannot only be done in this country—it needs to be done internationally. We should focus our effort, our resources and the force of the law where the risks are greatest. Like other Members of Parliament, I have been concerned that banks are at risk of going too far and being disproportionate when applying their rules to politically exposed persons in Britain, and their families in particular. I have written to the chief executives of the individual banks. My hon. Friend has worked with us on this issue and has tabled his new clause. We are happy to accept it because we are all trying to achieve the same goal.

Equitable Life

Charles Walker Excerpts

Thursday 11th February 2016 Commons Chamber

[Bob Blackman]

I agree wholeheartedly with the hon. Lady. We now know how many victims there are, and what the payouts have been. For with-profit annuitants, 38,135 victims have received £336 million, and those payments will continue over the next few years. However, 890,472 victims have received only 22.4%, and it has been difficult for members of the scheme to understand the basis on which that has been delivered. As has been mentioned, the Government said that they could not afford all that money to pay people out, but people who are in that position will need compensation over several years. They do not need all the money to be put into the scheme upfront; they need it to be spread over a number of years while they are pensioners. As the economy recovers, the Government should supply additional funds, as the Treasury can afford it, to top up the scheme and ensure that those who suffered relative loss receive the full compensation package due.

[Mr Charles Walker (Broxbourne) (Con)]

My hon. Friend mentions the hundreds of thousands of people who are waiting for full compensation. How much additional money does he feel that the Government will have to come up with over that compensation period?

[Bob Blackman]

We must find a further £2.6 billion to meet the commitment that all of us signed up to. Those of us who made that pledge said that we wanted full and fair compensation, and the Chancellor made it clear at the Dispatch Box that that was the figure, although he was only able to come up with £1.5 billion at the time. The shortfall is now £2.6 billion. I could go through a whole list of other things that the Chancellor has found money for but that have perhaps less merit than the plight of those elderly people who invested their money.

I do not expect the Minister suddenly to say, “Don’t worry, we’re going to provide all the money. Here it is”—it would be good if he did—but the Chancellor will be at the Dispatch Box on 16 March to deliver the Budget, and I hope that he will announce further compensation for the pre-1992 trapped annuitants so that they receive full compensation. I also hope he will confirm that none of the money that has already been pledged will be clawed back at the end of the scheme, and that further moneys will be made available as and when that is allowed in the Treasury forecast.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Damian Hinds)]

This is an extremely important subject, and I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing the debate and bringing it to the Floor of the House today. His tireless work and that of other colleagues has been of great importance to many of our constituents. There are many human stories, and we have heard a number of them today from colleagues across the House. I am grateful to have the opportunity both to set out what this Government have done to address this long-standing issue and to set the record straight on some of the background.

Equitable Life has been a very sorry tale, and we all share sympathy for those affected by it. As the motion notes, this Government have taken action to resolve the long-standing issue, which is something that previous Governments failed to do, as noted by my hon. Friends the Members for Eddisbury (Antoinette Sandbach) and for North Devon (Peter Heaton-Jones).

Although Equitable Life remains a going concern and continues to trade, its problems in the 1990s and at the turn of the century caused a great many of its policyholders to suffer financial and emotional distress. Many different factors contributed to the losses suffered by policyholders. The ombudsman’s 2008 report established the part played by the then Government.

When we came to government, we committed to implement the ombudsman’s recommendation that the Government should make payments to Equitable Life policyholders in recognition of the part that was played by the Government at the time. We took swift action, introducing the Equitable Life (Payments) Bill in 2010, with payments starting to be made to policyholders in June 2011, six months after the Bill received Royal Assent.

[Mr Charles Walker]

My hon. Friend knows that the thrust of this afternoon’s debate is a request for additional money to be made available on top of the money that has already been earmarked for compensation to Equitable Life policyholders. Will the Government be able to find additional money?

[Damian Hinds]

I will have to disappoint my hon. Friend, because the public finances remain in a very difficult state. Although the economy and our public finances have improved compared with where they were, money is still extremely tight.

We established a set of rules for the payments, based on the Government’s full acceptance of the parliamentary ombudsman’s findings. The scheme was based on the assumption that all policyholders considered the incorrect regulatory returns when making their investment and would have decided not to invest in Equitable Life had those returns been correct. Obviously, those are quite conservative assumptions. The Government used the ombudsman’s findings to calculate the resulting individual loss by assessing the Equitable Life returns against those of comparator companies. That led to an assessment of the loss from Government maladministration of £4.1 billion.

Despite the constraints facing the public purse, the 2010 spending review announced that up to £1.5 billion would be made available for payment to eligible policyholders. Out of that sum, following consultation, we decided to pay the with-profits, or trapped, annuitants in full. As a result, this group of policyholders will receive an annual payment for life, and the actuarial assessment of those payments is that the Government will be making payments to this group well into the next decade and probably beyond.

The total cost of those payments is assessed to be around £625 million—though that is dependent on how long policyholders live. Importantly, the £100 million contingency fund, to which my hon. Friend the Member for Harrow East referred, is an accounting provision to provide a safety net in case the annuitants live longer than the central forecast. The remaining £775 million of available funding was distributed pro-rata to other policyholders on the advice of an independent commission, and that resulted in a figure of 22.4 pence in the pound of their relative loss.

Of course I know that that was deeply disappointing to many, but these were difficult decisions that were taken in the light of the position of the public finances. As I said just now in reply to my hon. Friend the Member for Broxbourne (Mr Walker), public finances remain in a very difficult position, and we have to take decisions in the interests of overall fairness to all taxpayers.

Domestic Politically Exposed Persons: Money Laundering Rules

Charles Walker Excerpts

Wednesday 20th January 2016 Commons Chamber

[Mr Charles Walker (Broxbourne) (Con)]

It is a great honour and privilege to have secured tonight’s debate. I note that it follows on from the proceeds of crime debate, so it is both appropriate and timely.

It is a truism that international money laundering is a serious crime, and the UK Government are right to want to both persecute and prosecute those responsible. The legislation contained in both the third money laundering directive and the soon-to-be-introduced fourth directive is wide in its scope and is being aggressively applied by the banks. Although my debate deals specifically with politically exposed persons, my concerns can be more widely read across to the many law-abiding professional people in this country who are experiencing difficulties with their bank or in opening a new bank account.

In setting out the scene for tonight’s debate, I thought it would be helpful if I defined what a politically exposed person is in relation to the Money Laundering Regulations 2007. The regulations transpose the third money laundering directive into UK law. I will quote from the 2005 report of Joint Money Laundering Steering Group. This is a direct quote from its guidance:

“Senior political figure is a senior figure in the executive, legislative, administrative, military or judicial branches of a government (elected or non-elected), a senior figure of a major political party, or a senior executive of a government-owned corporation. It includes any corporate entity, partnership or trust relationship that has been established by, or for the benefit of, a senior political figure.

Immediate family typically includes the person’s parents, siblings, spouse, children, in-laws, grandparents and grandchildren where this can be ascertained.

Close associate typically includes a person who is widely and publicly known to maintain a close relationship with the senior political figure and includes a person who is in a position to conduct substantial domestic and international financial transactions on his or her behalf.”

Those definitions are reflected in the Money Laundering Regulations 2007, which were introduced pursuant to the third money laundering directive 2005. Importantly, however, although banks are choosing to apply the legislation to holders of domestic UK office, these people are specifically excluded from its scope.

Schedule 2 to the Money Laundering Regulations 2007 defines a PEP as being an individual, including their immediate family members or associates

“who is or has, at any time in the preceding year, been entrusted with a prominent public function by:

(i) a state other than the United Kingdom;

(ii) a Community institution; or (iii) an international body.”

It therefore specifically excludes Members of Parliament serving in the United Kingdom Parliament. In addition, the Joint Money Laundering Steering Group guidance for the UK financial sector states that the definition of a PEP used by banks

“only applies to those holding…a position in a state outside the UK”.

However, UK banks have consciously chosen to adopt a broader definition of a PEP, which also includes customers who hold political office within the UK. Banks argue that this is desirable in advance of the introduction of the fourth money laundering directive, due to come into force in 2017, which, unless amended, will apply to domestic politically exposed persons.

The rules around money laundering are a mess. I know this; the Government know this; the Chair of the Treasury Select Committee knows this; and the principals of many small and medium-sized businesses in my constituency and in others know this. The position of the UK banking sector, in its aggressive application of money laundering rules to domestic politicians, to their extended families and—I now fear—more widely to many of our law-abiding constituents, is known, in banking parlance, as de-risking.

What are the practical consequences of de-risking? In regards to the teenage children of MPs, it amounts to intrusive demands for information. One 18-year-old was recently contacted by her bank demanding that she produce personal information or face losing her banking facilities. This demand included information about her occupation, her employer’s name and address, details of any residential addresses she used and how much time she had spent at each address and information about regular sources of funds, such as income, student loans and funds from her parents.

A Back-Bench colleague, who agreed to be interviewed by his bank, was required to answer questions about his account dating back 25 years. This colleague is yet to turn 50.

[Fiona Mactaggart (Slough) (Lab)]

The regulations have affected me, as a Back-Bench Opposition MP. I have been involved in family charitable trusts where my fellow trustees have said, “Please Fiona, you can’t play a role in this philanthropic enterprise. Setting it up would be too complicated because you’re a politically exposed person.”

[Mr Walker]

The right hon. Lady’s timing is prescient, because I was about to say that some colleagues had been denied places as charity trustees or board members, simply because the charity could not deal with the financial compliance required to make the offer of the voluntary position worth while. These colleagues want to give their time and experience for free.

Another example of heavy-handedness concerns colleagues who retain a link with their professional practices. De-risking by banks means colleagues are struggling to open company bank accounts, often despite being required to do this by their own professional regulator, in order to look after and protect client moneys. In another case, a colleague’s 81-year-old father was summoned for an interview by his bank to verify his details and sources of wealth, despite his having been with the bank for more than 50 years.

Other colleagues have been asked to provide details of their parents’ financial assets, such as property, share and cash holdings. A son-in-law of a Back-Bench MP who owns his own business was recently informed that he had been identified as a politically exposed person and was required to provide details of his business’s transactions, as well as information about his personal account. In a similar vein, a Back-Bench MP’s son was required to provide information about his wife and details about her parents—his in-laws.

The actions of banks are, at best, highly intrusive and, at worst, in danger of restricting the ability of honest people, such as sons, daughters, brothers and sisters, to raise the money required to invest in and grow their business.

[Pauline Latham (Mid Derbyshire) (Con)]

We were recently contacted by a bank that we have been with for more than 40 years asking for proof of our address. It beggared belief, as it had managed to send us statements for the whole of those 40-odd years. I said, “Well, don’t you know where we live?” It said, “You’ve never proved it.” This is taking it to the most stupid nth degree, and it has to stop.

[Mr Walker]

My hon. Friend’s intervention brings me nicely on to the next part of my speech. The aggressive application of de-risking by the banks comes despite assurances from Lord Deighton, the then Commercial Secretary to the Treasury, to his colleagues in the other place, on 14 October 2014, when he said—I quote again I am afraid—that

“while UK parliamentarians are not currently considered to be “politically exposed persons”—or PEPs—domestically, revised global standards to which the UK is fully committed will require that they are treated as such. These global standards require enhanced due diligence and ongoing monitoring only when the business relationship is assessed as high risk. The UK will make representations when negotiating the fourth money laundering directive to ensure that it reflects these standards.”

Lord Deighton went on to say:

“The key here is in the approach of the banks in doing their due diligence appropriately. The main feature of these arrangements is that domestic PEPs should be assessed in terms of their level of risk, and in the main UK parliamentarians should be assessed as low risk and, frankly, treated in precisely the same way as any other customer. The problem is when banks do not apply the right kind of risk-based assessment and instead revert to inappropriate box-ticking approaches.”—[Official Report, House of Lords, 14 October 2014; Vol. 756, c. 114.]

What is now obvious is that the banks have not paid the blindest bit of regard to the entreaties of Lord Deighton. In advance of the fourth money laundering directive, they have decided to apply the rules with no regard to any assessment of risk. This should come as no great surprise. The financial crisis that the banks sprung on us in 2008 clearly demonstrated that they have no, or at best a limited, understanding of risk.

[Heather Wheeler (South Derbyshire) (Con)]

I apologise for being detained at the very beginning of this debate.

Would my hon. Friend be as surprised as I was to be phoned up by a bank that I had banked with for over 30 years to be told that I was high risk, that the bank would not deal with me any more and that it was closing my account? That was a phone call I received in my parliamentary office. Subsequently, a second bank has written to tell me that it is closing my bank account—with no explanation whatever.

[Mr Walker]

That is an outrageous act by banks. The banks would argue that they are not public utilities, but my response would be that they are, because it is taxpayers and us who have bailed them out. They have a responsibility to behave responsibly, whether it be to Members of Parliament, small businesses or our constituents.

We are now faced with the somewhat laughable situation that not only Members of Parliament are being assessed as high risk in regards to money laundering, but their extended families are, too. On the basis of this Chamber alone, that puts nearly 10,000 people in the frame.

In common with all parts of the population, Members of Parliament can, of course, do bad and stupid things. That has always been the case and always will be the case. When it comes to our elected politicians, however, it is impossible to imagine a more scrutinised group. Not only do we have to register details of our commercial activities with the Register of Members’ Financial Interests—under pain, in extremis, of being dismissed from this place if we fail to do so—but we have the likes of The Daily Telegraph, the Daily Mail and Channel 4’s “Dispatches” breathing down our necks in the hope of catching the slightest whiff of wrongdoing.

Indeed, it often comes as a great disappointment to our pursuers that so few of us cavort with international despots and criminal masterminds. The much less glamorous truth is that most Back Benchers indulge in far more mundane but worthy pursuits, such as trying to sort out our constituents’ housing and street-lighting problems. Indeed, the tiny fraction of Back-Bench colleagues who lead altogether more politically racy lifestyles are well known to the media, with their activities well reported. It must be remarked, “Oh, what a friend the banks’ compliance departments have in Fleet Street and the House of Commons Press Lobby.”

That, of course, leaves Ministers, but again the Executive discretion Ministers have in relation to contracts is minimal. The tendering process is conducted by civil servants, with the Minister passed a single name to sign off on or, if they are lucky, perhaps the option of two names, with the chance to exercise a smidgeon of discretion given only under the careful watch of the permanent secretary.

In concluding my comments, I say this to the Minister and the banks: regulation needs to be proportionate to the risk.

[Craig Mackinlay (South Thanet) (Con)]

I would like to put my experience on the record. The 81-year-old mentioned in my hon. Friend’s speech a few moments ago was indeed my father. He has been with the same bank for over 50 years. He was asked into the bank to answer detailed probing questions about his banking and other activities. Understandably, my father told the bank that he was not going to do so. As for my own experience, I had a two-hour interview with a banking institution that required information about everything about every bank account I have owned for the last two years. This is simply over-gold plating, and we are seeing it too often in the money laundering regulations.

[Mr Walker]

I thank my hon. Friend for his useful intervention. In response, I would say that regulation needs to be proportionate to the risk, with the highest-risk bank customers attracting the most scrutiny from their compliance departments and the Financial Conduct Authority.

It may well be the case that intelligence suggests that an individual MP is up to no good, and, of course, that MP should be investigated thoroughly, but the banks and the FCA seem to be eschewing an intelligence-led approach in favour of an unfocused tick-box exercise.

[Karl MᶜCartney (Lincoln) (Con)]

My hon. Friend is making an excellent speech. Can he tell us whether every bank and every Back Bencher has been affected? I ask because, at present, one party seems to be, shall we say, over-represented in the Chamber.

[Mr Walker]

Colleagues are naturally reluctant to talk about the issue, but I can tell my hon. Friend that this applies to every bank, although some are worse offenders than others. The banks that I have come across are HSBC, Lloyds, the Halifax and Barclays, but there will be others.

[Pauline Latham]

NatWest.

[Mr Walker]

My hon. Friend mentions NatWest. I think that all banks are conducting their business in this way.

[Jake Berry (Rossendale and Darwen) (Con)]

And Coutts.

[Mr Walker]

My hon. Friend has given another example.

If the banks’ tick-box approach is replicated throughout their wider compliance operations, it suggests that they do not have a clue what they are doing, or where the risk actually lies within their customer base. Of course, a less charitable interpretation of their conduct would be the suggestion that they have a very good idea of where the money laundering threat lies in their business, but the cost in lost fees of addressing that threat, and the consequential deterring of high-net-worth individuals as clients, is greater than the cost incurred through the occasional regulatory fine. Far better for the balance sheet to make a great deal of noise—noise that both dazzles and impresses the regulator and makes the lives of law-abiding minnows difficult—than to actually engage in the hard and costly yards of nailing the serious bad guys.

The money laundering regulations need to be revisited. Their purpose is to target despots and dictators, not law-abiding citizens. They are being disproportionately applied. Today I am discussing politically exposed persons, but tomorrow I could just as easily be discussing the aggressive application of these requirements in relation to my constituents, their businesses and their families. The Government must act now to end this nonsense across the piece.

Let me leave Members with this thought: if everyone is under suspicion, no one is a suspect.

Tax Fairness

Charles Walker Excerpts

Tuesday 12th March 2013 Commons Chamber

[Mark Reckless]

I am grateful to my hon. Friend. He speaks about a person’s “principal residence”, so I assume that he would allow them to remain exempt from capital gains tax, notwithstanding the £2 million-plus property that they live in.

[Mr Charles Walker (Broxbourne) (Con)]

If it is somebody’s principal residence that will be taxed if it is worth more than £2 million, does my hon. Friend think that the threshold will be £4 million for husbands and wives who are living together in a home?

[Mark Reckless]

Who can tell with these things? My hon. Friend the Member for Bristol West (Stephen Williams) has given assurances, but the policy proposals that I cited have been submitted to the federal policy committee of his party. It is difficult as an outsider to judge how formal and important that is, but there are clearly Liberal Democrats who are talking about a broader tax on wealth and capital, including on jewellery. I think that would be a mistake.

It is unfortunate that the Opposition with this motion and our friends on the Liberal Democrat Benches have become so focused on the arbitrary sum of £2 million. The Government are doing very good things in raising tax from people who own high-value properties but have not been paying their fair share of tax. The Opposition and the Liberal Democrats seem to want to confine their efforts to rein in tax avoidance to those who own houses worth more than £2 million. I and my Conservative colleagues do not understand why we should be concerned about tax avoidance just when a person’s house is worth more than £2 million.

It is hugely welcome that the Government are bringing in the anti-avoidance measure of a 15% tax when homes that are worth more than £2 million are enveloped into a company, which is generally done for the purposes of tax avoidance. However, I am not entirely clear why we are doing that only for homes worth more than £2 million, except for the fact that that is the arbitrary number that has been chosen by the Liberal Democrats for such taxation. [Interruption.] The Opposition are calling out, but they did nothing about this matter for 13 years. It is a huge improvement that this Government are dealing with tax avoidance using properties worth more than £2 million.

--- Later in debate ---

[Sheila Gilmore]

The point I was going to make in relation to the matter that was, after all, raised in an intervention is that if everybody moved successfully and reshuffled, there would be no saving, and that is odd because a saving is wanted. It is in that context that people are saying, “What sort of fairness is it that imposes such a great burden of trying to effect economic recovery on those who are least well off? Could we look at other measures to show that we really are all in this together?” That is where the mansion tax comes in.

The mansion tax enables us, in part, to really feel—as a community and as a country—that people are bearing a fair share of the burden. We have heard a lot about tax avoidance and tax evasion. It worries me greatly that the justification given for removing the 50p rate of tax is that people are not paying it. Instead of looking at why people are not paying it, and whether anything could be done to ensure that it was paid, we again hear, “Actually, we’ll just take it away because they aren’t paying it.” That is not a good message to put out.

We have also had reference—in relation to the mansion tax, Mr Deputy Speaker—to not wanting to have such a competitive tax regime that we risk people fleeing our shores. Reference was made to the PricewaterhouseCoopers report about competitive tax rates. There is an interesting coda to that report from some of those who were surveyed. The question then becomes: will the increased competitiveness lead to increased investment in this country, because that is what is really important? Many of the tax people thought it was crucial to turn improved tax relief on capital expenditure into investment in this country, and that it should be the No. 1 priority for the UK. In 2010, the Chancellor abolished capital allowances for investment in his first year in office. Perhaps he would like to look at the whole report, and not just the parts that suit him.

An argument has been made—as it always is with regard to rates and council tax—about people who are asset-rich and income-poor. It is usually raised as a reason for not putting up council tax banding, for example. In the old days, it was used as a reason for not making changes to the rating system. Yes, we can all come up with examples of people who are in that position. Usually, the example is a widow who cannot afford to pay. However, we cannot design our entire system of taxation around that, and there are ways it can be mitigated, as there are with council tax. If someone is genuinely as income poor as has been suggested, they would—at least until the Government decided to change the rules on council tax benefit—have been eligible for assistance with their council tax. There are always ways to help such people.

Earlier, I made what to some people might have seemed an unfair comparison. We were being asked to think about the widow who might struggle with a mansion tax. The 60-year-old widow I referred to is being asked to pay £13 per week out of an income of £71 a week, and the answer is that she should take in a lodger. If we want to be fair to both groups, we have to treat them with equal compassion.

[Mr Charles Walker]

As the hon. Lady will know, property values vary across the United Kingdom. A £2 million house in London may be the equivalent of a £500,000 or £750,000 house in Edinburgh. For the sake of fairness, does she think that there should be an additional tax on properties worth more than £750,000, so that people really do feel that we are all in it together and that this proposed tax will not just be borne by London and the south-east?

[Sheila Gilmore]

I am not convinced by that argument. If we were to enter into that, we would have do so in ways that I suspect the hon. Gentleman would not find particularly palatable.

There is nothing inherently wrong in levying a mansion tax. All the arguments made about the 50p tax do not apply to the same extent, because buildings do not disappear and cannot be shuffled around. It is a way of generating income and bringing in more tax revenue so that we can do all the things we want with public services, or, as we suggest, enable low-paid earners to have a 10p tax rate. Just because a mistake was made previously does not mean that we should not again consider a 10p tax.

Scotland Bill

Charles Walker Excerpts

Monday 14th March 2011 Commons Chamber

[Ann McKechin]

I beg to move amendment 68, page 18, line 11, after ‘may’, insert

‘after consultation with such persons as Scottish Ministers consider appropriate’.

[The Temporary Chair (Mr Charles Walker)]

With this it will be convenient to discuss the following:

Amendment 69, page 20, line 5, after ‘may’, insert

‘after consultation with (a) Scottish Ministers, (b) the Scottish Parliament and (c) such persons as it considers appropriate’.

Amendment 70, page 20, line 21, leave out subsection (4).

Government amendments 61 and 62

Amendment 43, page 20, line 35, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 44, line 38, at end insert—

‘(6A) For the purposes of subsections (4) and (5)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendment 63

Amendment 47, clause 29, page 23, line 12, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 48, line 28, at end add—

‘(7) For the purposes of subsection (4)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendment 64

Amendment 49, clause 31, page 24, line 8, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 50, line 8, at end add—

‘(5) For the purposes of subsection (4)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendments 65 and 66

Government new clause 18—Orders

[Ann McKechin]

I am speaking to amendments 68, 69 and 70 and I wish to put it on record that the wording of those amendments was suggested by the Law Society of Scotland. I shall speak to the amendments first and then to the clause stand part—with your agreement, Mr Walker. I have a substantial number of questions to put to the Government about the implementation of this important clause.

On amendment 68, new section 80C empowers the Scottish Parliament to set by resolution the Scottish rate of income tax. This is an important power that is required to be exercised in accordance with the principles set out by the consultative steering group report published by the Scottish Office in 1999. These principles include accountability, openness and accessibility with a view to making possible “a participative approach” to “policy and legislation”. Accordingly, Scottish Ministers should, we believe, be required to consult those considered to be appropriate when proposing the resolution for the Scottish rate—much in line with existing practice of the Treasury here.

On amendment 69, new section 80G enables the Treasury to disapply or modify section 6 of the Income Tax Act 2007. This could involve issues such as gift aid relief or pensions relief. The order would be introduced in the UK Parliament and debated and passed or rejected in the UK Parliament. However, it could substantially affect the Scottish rate and Scottish taxpayers, as well as Scottish charities and pension funds, so we believe that Scottish Ministers and the Scottish Parliament should be specifically consulted prior to any amendment of these reliefs.

Finally, amendment 70 takes out subsection (4). We have concerns about the provision. Section 80G(4) provides that an order made under that section

“may, to the extent that HM Treasury consider it to be appropriate, take effect retrospectively”.

We believe that HM Treasury should, at a minimum, consult Scottish Ministers and the Scottish Parliament if retrospectivity is required. The Minister will not be surprised to hear me say that I think all Governments should avoid retrospective legislation whenever possible—unless there is a proven and specified need. We think that the case for retrospective application in this instance has not yet been made out.

The amendment is designed to probe this issue. The Scotland Office has indicated that the power would be used to make tax reliefs applicable retrospectively, but I suggest that this could be done either by regulation or statutory instrument. The clause enables a charging order to be made by the Treasury, which is a matter of concern to us. Any retrospective action by the Treasury could—I stress could—have a detrimental impact on individual taxpayers and on the Scottish parliamentary budget. I hope that when the Minister responds he will provide some assurance about the circumstances in which and when the Government intend to use this power. I hope he will confirm how limited the power will be when it comes to its practical exercise.

Paragraph 673 of the report by the Holyrood Committee asked a number of questions about residence. The question of residence is one about which most of the tax experts we consulted expressed some concern. I understand that there is no statutory definition of a UK resident taxpayer. This legislation, however, attempts to define by statute a Scottish resident taxpayer. Given that that is, in a purely technical sense, a subset of a UK resident taxpayer, I think the Minister would accept that it is unusual to have a fixed statutory definition within a floating definition. I would like to question him a bit further about how this will work in practice and what the levels of risk are in respect of the current application of the law.

Paragraph 673 of the Holyrood Committee report asks what “place of residence” means, as defined in clause 26, as it appears to be different from how residence is understood in other areas of tax law such as capital gains tax. Does place of residence imply ownership when juxtaposed against “main place of residence” in new section 80E(a), (b) and (c)? Place of residence and main place of residence are not defined in that new section, which I fear could present problems of interpretation. I would be grateful if the Minister clarified his understanding of the interpretation in this case.

How the tax is to be applied in practice is an important issue. The vast majority of Scottish taxpayers live the whole period of their lives in Scotland or live there for very substantial periods, and it is relatively easy to define who those people are. What about people working on board ships or on oil rigs, for example? What about members of our armed forces and what about those who are neither UK resident nor employed by non-UK employers? As I said, the Scottish taxpayer is defined by reference to an individual who is resident in the UK for income tax purposes. The current definition of UK residency lies in 86 pages of guidance that are the subject of frequent revision by HMRC. How, then, can the Government be confident that this definition is going to work? Do the Government agree with the Chartered Institute of Taxation that the introduction of a possible statutory residence test for the UK is now essential? Experts in, for instance, the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Federation of Small Businesses and CBI Scotland have expressed concern about the lack of a concrete definition. What are the Government doing to address those concerns expressed by professional experts? I understand that they are considering the issue. Will the Minister tell us whether they are likely to attempt to provide a better definition of a UK resident taxpayer in the Finance Bill that will follow next week’s Budget statement?

Autumn Forecast

Charles Walker Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

One of the primary tasks of the OBR is to assess whether we will hit the fiscal mandate. The very fact that the fiscal forecasts are not a matter of controversy in the House today shows what we have done to get the British public finances under control. The OBR assessed specifically the scenario that the hon. Gentleman volunteers and said that the fiscal mandate will be met under those conditions. In fact, rather perversely, that helps the fiscal forecasts because of the tax base being more focused towards consumption.

[Mr Charles Walker (Broxbourne) (Con)]

When the books are balanced, will the Chancellor seriously consider reducing the overall burden of taxation? Thanks to the efforts of the previous Government, it is far too high.

[Mr Osborne]

Of course, I am a believer in trying to reduce the tax burden and trying to reduce taxes. However, I have always believed that the best way to achieve that is from stable public finances, otherwise one cuts taxes one year and has to put them up the next. So I am a fiscal conservative with a small c as well as a tax-cutting Conservative with a big C.