Loan Charge

David Davis Excerpts

Thursday 18th January 2024 Commons Chamber

[Sir David Davis (Haltemprice and Howden) (Con)]

In the interests of time I will try not to repeat all the self-evident truths that have been stated throughout this debate. The right hon. Member for East Antrim (Sammy Wilson) made a characteristically fluent exposition of the case. Everyone, from him through to my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg), reiterated essentially the same point: all of a sudden, in the last few weeks, the public have become aware that huge state or quasi-state organisations put their own interests ahead of the interests of the public and, unfortunately, that is not abnormal behaviour. The right hon. Member for East Antrim quite rightly characterised that as being repeated in a high-handed and insensitive way by HMRC but, frankly, I think he understated the point.

Why do I think that? Because HMRC has referred itself to the Independent Office for Police Conduct over those 10 suicides and some other attempted suicides and self-harm. When dealing with Government Departments, that is as close as we get to a confession. Those at HMRC know they have done wrong, and they have known it for some time. They have known that the consequences of this have led to death and enormous harm to people, yet they have continued to do the same thing over and again. How on earth do they justify that when they look at themselves in the mirror?

The only thing I can come up with is that HMRC thinks this is a deterrent. Clearly, it will not raise that much money—three quarters of people will go bankrupt —so maybe it is a deterrent. If it is, that brings us to the next question that the right hon. Member for East Antrim raised: why does it not go after the promoters? The promoters exacted 18% to 20% of the incomes of these people in carrying out this scheme, so there is a large sum of money there—someone said hundreds of millions. It may even be that the victims of the scheme—that is the right word—thought that was the tax deduction, because it was of that order of magnitude. Why has HMRC not done that? We know that many of the organisations using those promoters and contractors were state organisations, including HMRC itself. That might be a reason—it does not want to embarrass itself. It might be because of that that it is complicit in covert advice to those contractors at the beginning. It is entirely possible that HMRC approved it, and those documents are hidden away in HMRC.

What is the answer? My right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) was not quite right in saying that HMRC is completely protected. There is one body—the Public Accounts Committee—that can get at this. One of the things that should come out of this debate is that the Public Accounts Committee should look at the documents —not the numbers—associated with those early contracts and see why they were done. That would be one way to get past the assertion made by my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) that we cannot deliver a practical outcome. That is one practical outcome that we can deliver.

The second practical outcome we can deliver among ourselves is to address the fact that this is retrospective taxation. As my right hon. Friend the Member for North East Somerset rightly pointed out, our country does not believe that people who undertake behaviour that is not illegal at one point in time should be prosecuted if it becomes illegal in future. That applies in spades to taxes.

One of the things I wanted to do early on in our collective campaign was to move a motion in the House at the beginning of the Budget, under the general motion that is normally put, explicitly to ban retrospective taxation. Let us guess what happened: since then, the Treasury has not moved a general motion. We always get narrow finance motions, which makes it difficult to change anything. I wrote to the Procedure Committee, which I gather is still concerned about this, to ask it to request the return of the general motion at the beginning of the Budget. Then, we could actually put it to the House. Back in those days, we probably did not have the 100-plus supporters that we now have. Today, we could probably carry that motion. I ask everyone taking part in this debate to support that—I might write around and ask everyone—and to write to the Procedure Committee to try to get that corrected. We can use our right of initiative, which we do not have much of anymore, to stop this explicitly.

[Kirsty Blackman (Aberdeen North) (SNP)]

I agree entirely on the amendment of the law resolution. In fact, whenever I have spoken on a Finance Bill since it stopped being common practice to use it, I have said that we should have an amendment of the law resolution. I appreciate what the right hon. Gentleman says about the Procedure Committee. As a member of the Committee, I can tell him that we have looked at this but, ultimately, it is the responsibility of the Government to make the change—they need to table the amendment of the law resolution. The previous Chancellor was clear that it was a small, technical change that he would not make.

[Sir David Davis]

Forgive me, but I have been here a long time. The Procedure Committee can do it—it can put it to the House and seek a Back-Bench motion. Guess what? We can move Back-Bench motions that instruct the Government. Some may remember that we did it on prisoner votes, and we won that day. It is about time that we exerted our own rights in this House on this matter.

The last point I want to make is that this whole thing was, if not precipitated, then certainly made worse by the 1999 move by the Government with what is now known as IR35. The complex rules associated with the IR35 triggered part of this behaviour pattern. What is interesting is that the behaviour of HMRC on IR35 pretty much mirrors its behaviour on the loan charge.

A large number of people out there, one of whom is in the Gallery today, have been oppressed by HMRC, frankly. They have an argument over money, let us say £70,000. They win in the first tribunal, so HMRC appeals. They win in the upper tribunal, so HMRC appeals again and takes them to court. The court, of course, then sends them back to the beginning and they do it again.

The House will remember a previous Backbench Business debate when we started the action against SLAPPs—strategic lawsuits against public participation—in which oligarchs use their huge financial power to destroy people. What is HMRC doing? Precisely the same thing. The Government are now moving to stop oligarchs doing what they do themselves, so we need to look at that too. IR35 is a disgrace. When a state organisation with infinite resources—actually, your tax money and mine—uses that power to overrule and reduce the ability of ordinary citizens to protect themselves, I am afraid it is behaving in a way similar to how countries behind the iron curtain used to behave.

[Greg Smith]

My right hon. Friend’s powers of forensic analysis are second to none, but does he agree that it is actually slightly worse than that? He is entirely right in what he says, but there are also cases, particularly for those affected by the loan charge, where people have allowed themselves, against their better instincts and judgment, to make a false confession of guilt. They have gone through the process and ended up having to pay an extortionate amount of money and think the matter settled; then, HMRC has come back and gone after even more.

[Sir David Davis]

Yes, my hon. Friend is right. I am afraid that one of the characteristics of miscarriages of justice—I have forgotten who raised this point earlier, so please forgive me for not referencing them—is that the victim at the beginning is probably the most unpopular person in society. They are thought to be guilty and may even doubt themselves over whether they have made a mistake. These people, by and large, have been compelled to do what we are talking about. They have been offered a job on these terms only, so they have had no choice, but then they think, “Well, maybe I should have known.” Then, like the sub-postmasters, they are persuaded by the people dealing with them that they are the only one.

Until our campaign started, all these people felt that they were the only one, or one of a few nasty tax evaders—not tax avoiders—so they gave in. Of course, it is like the Gestapo: confession never saves you; it is a step to execution. That is how it works, I am afraid. That is true of all big organisations full of people who are well-intentioned, but who defend the institution. That is why, answering my right hon. Friend the Member for North East Somerset, it goes on through Government after Government after Government. It is not the Ministers who do this, but the members of the institution.

[Sir Iain Duncan Smith]

I get all of that and my right hon. Friend is right, but there is a peculiarity about HMRC, with its powers and lack of accountability. It does not publish accounts, and Ministers come and go; they do not really run that Department. That really is the issue. Bad as it might be elsewhere, it is astonishingly bad now because of HMRC’s behaviour.

[Sir David Davis]

My right hon. Friend the Member for North East Somerset listed a few of the other cases, from Hillsborough onwards, so it does come back to that. Even the Department for Work and Pensions, the Department my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) used to run, has its own police force, in effect, and its own prosecutors. That is one of the clues. This will come back time and again with HMRC and others. He is right that we need to hold this organisation to account. It serves the people, not the Government of the day. This Parliament is the institution that serves the people and, starting with the Public Accounts Committee, we should be holding HMRC to account, but there are many others who should get involved.

I have given a completely different speech from the one I intended to give, because everybody else said everything before I rose, but I will finish with a point I certainly wanted to make. The BBC once referred to me as an old war horse, so I will give the Minister some old war horse advice, having been there once or twice myself. One of the lessons of the last few weeks is that Ministers—junior Ministers in particular—are very easily led to give dead bat answers in the Chamber. They are the answers handed to them by their officials, and they have no other answers to give, unless they want to end their career on the spot—I have done that twice, but never mind. This is not about his answers today, but the simple truth is that unless he wants to be seen in the same light as Ministers in the past—maybe he wants to be a future leader of the Liberal Democrats—he needs to go back to his Department and say, “I want to see the truth. Here are the things you’ve done. Why did you not tell the House of Lords why you are not pursuing the promoters of these schemes? Why did you tell people you only go for half their disposable income when you’re not doing that?” Get the answers, Minister. Then, when you next come back to the Chamber—and you will have to come back to the Chamber again—you can give us the truth.

[John McDonnell (Hayes and Harlington) (Lab)]

Like everyone else in the Chamber today, I have constituents who have been affected in a way that is incredibly distressing, so I understand completely the howls of outrage sounding across the House today. I want to deal with process, though.

Some hon. Members here took part in the debate in 2018. I would like people to read the speech made in that debate by my hon. Friend the Member for West Ham (Ms Brown). I was the shadow Chancellor then, and she was in my shadow Treasury team. Speaking from the Opposition Front Bench, she set out exactly case after case, as hon. Members have done today, but there was one additional case we drew on which has not been mentioned today—a case in which, because of cuts to local councils and elsewhere, staff had been laid off and then rehired on this basis by public bodies, which was particularly shocking.

Let me read the ministerial response that was given then, because I think we should learn from it. The then Economic Secretary said:

“Although…I have tremendous sympathy for those facing large tax bills, it is unfair to let people get away with not paying the tax they owe. There is support for people who have used the schemes and now find themselves in difficult situations, which require those affected to approach HMRC and bring the matter to a close.”—[Official Report, 20 November 2018; Vol. 649, c. 295WH.]

That was the ministerial response. I do not think we can tolerate a similar ministerial response today, because that led to immense human suffering, including, as some have said, some people losing their lives. Many of them did approach HMRC and they did try to negotiate deals, but there was no element of clemency and no understanding of the individual plight of those people. As a result, many of our constituents suffered badly.

I just want to move on and try to get some resolution. I hope that we and the Government can agree today on review. That review should be immediate and time-limited in months, not years. It should be truly independent, with its independence assured by the victims. It should propose a specific range of resolutions, which will have to include some element of compensation for what people have suffered. The review should look at where the compensation should come from. I think it should come not from from other taxpayers, but from a levy on those who promoted the schemes, and perhaps some elements of the finance and accountancy sector that were involved up to their necks, to be frank. That is my first point.

I also think that we need to review our own role in this, and in what has happened over time. I agree with the right hon. Member for Haltemprice and Howden (Sir David Davis) that not only should the Procedure Committee examine the House’s role, but the Public Accounts Committee should look into how we have arrived at current situation.

Let me give two examples of the background to all this. HMRC has come in for considerable criticism today, and I agree with much of it. What I say now is not in mitigation of HMRC’s role, but an attempt to gain some element of understanding of what has been going on there. HMRC is, rightly, under pressure from all of us, on both sides of the House, to tackle tax avoidance and evasion. Some of us have led campaigns over the last 20 years or so to try to get HMRC to work on that effectively, and I pay tribute to the Government for putting it under pressure to tackle the tax gap. They were the first Government to identify a tax gap of £38 billion, or whatever the amount is; I disagree with the figure, but at least we have a target to aim for. However, at the same time, over those 20 years, both parties have excelled in a Dutch auction to establish the extent to which HMRC’s staff levels can be cut.

I can understand a wish to reduce staffing, but there are better ways of doing it, and for a while the way in which it was done at HMRC was fairly brutal. That resulted in redundancy schemes whereby a whole wave, a generation, of expertise was lost, and it had an effect on the culture of HMRC. According to my understanding, HMRC looked for short cuts and a way of meeting the demand for it to tackle tax avoidance and evasion and the tax gap, and I think that this was one of the short cuts that it invented. In latter days, there would probably have been wiser heads in HMRC itself to suggest that this was not the route to go down because it would bring about more problems than solutions. However, a culture of secrecy and protectionism has developed in HMRC, and we need to understand that if we are to tackle this properly as an institutional failing.

Secondly, we need to look at the role that the House played. I have been going back to the year 2017, and trying to remember what was happening in the House at that time. Some Members will recall that there was not a normal process for the Finance Bill, because the right hon. Member for Maidenhead (Mrs May), who was then the Prime Minister, having assured us all that there would not be a general election—I think she assured us of that five times in the House—went for a walk in Wales, came back, and declared an election. So the finance measures were thrown into the wash-up procedure, which, as Members will know, means political parties sitting down to decide what measures are urgent and must be passed. It was agreed that the Finance Bill would go through in a single day, and as a result of that, this measure was introduced. I should like the Public Accounts Committee and others to look at how that process worked and how it did not work.

The right hon. Member for Haltemprice and Howden made an extremely valid point, which we made about every Finance Bill, or Budget Bill, that came forward. When the Government introduced the “no amendment to law” procedure, that tied the hands of the House when it came to what it could open up, what debates it could have and what amendments it could table. That was introduced by—

[Sir David Davis]

Hammond.

[John McDonnell]

Yes, by Lord Hammond. I think it was almost unprecedented. As I say, it tied the hands of the House, even when it came to further investigating issues relating to the Budget and Finance Bills.

I also think that we need to look at the process whereby Ministers and Opposition are able to question impact assessments and how they are developed, as well as the independence of those assessments. I still find it problematic that impact assessments are prepared largely by the Department and the ministerial team that are promoting the legislation involved, rather than its being done independently. Had there been an independent impact assessment in this case, and time for a proper debate and for amendment as well, the House would probably not have agreed to take this course. When I look back, I think that the implications should have been drawn to the attention of the whole House. The impression given was that this would be focused on a small number of “hard case” tax avoiders or evaders, and their scheme promoters.

[Sir David Davis]

I agree with nearly everything that the right hon. Gentleman is saying, but why can we not address it now? Why can we not go back and put it right?

[John McDonnell]

The point I am making is about enabling us to do that. I hope that some of the lessons being learned are learned not just by the whole House but by the Government as well, whichever party is in power. As soon as we introduce measures to fetter the role of individual Members of the House or the House as a whole, we open up the opportunity for mistakes to be made, because policies are not tested effectively in democratic debate in this Chamber.

I welcome the fact that reviews are to happen, but believe they should happen as a matter of urgency, if for no other reason than because I do not want to be here again in a few years’ time—we are now in 2024, and I do not want to be here again in 2026, 2027 or 2028—and find that we are in the same situation as we were in 2019. I do not want to find that more people have suffered and, worryingly, that more people may not be with us as a result of this because they have taken their own lives.

There is an element of urgency about rectifying this issue, and doing it with compassion and, in many instances, with clemency. That will enable us to focus properly on tackling tax avoidance and evasion, and also the institutional arrangements that exist to enable that to happen. We need to have a thorough debate in the House about our regulatory mechanisms, especially with regard to the accountancy and finance sector.

Oral Answers to Questions

David Davis Excerpts

Tuesday 19th December 2023 Commons Chamber

[Laura Trott]

The hon. Lady will have heard my answer to a previous question where I stated that we have put billions of pounds of extra money into local government this year to cover pressures. We recognise that those pressures are real, which is why the provisional settlement proposes an above-inflation rise for next year.

[Mr David Davis (Haltemprice and Howden) (Con)]

A fortnight ago, Kaye Adams, a TV presenter, won her case against His Majesty’s Revenue and Customs on IR35 status. Despite the fact that she won her first tax tribunal on the issue, HMRC took her to either a tribunal or court four times over a nine-year period, forcing her to spend £200,000 in legal fees. HMRC spent many times that, using two King’s counsel at the last hearing alone. This was over a net tax bill of £70,000. There is no conceivable economic case for that. What HMRC is trying to do is move the guidelines by coercing Ms Adams and using her as an example to intimidate other self-employed workers to give in to HMRC’s bullying. This is a disgrace. It has gone on for too long. The 2021 revisions were inadequate and ministerial oversight is too weak. When will the Government review IR35 and, ideally, abolish it?

[Nigel Huddleston]

It is our duty to ensure that everyone pays the right tax under the law regardless of wealth or status. We note the decision of the tribunal and will carefully analyse the outcome before considering the next steps, but the off-payroll rules ensure that people who work like employees, but through their own limited company, are taxed like employees, creating a level playing field for other workers.

Oral Answers to Questions

David Davis Excerpts

Tuesday 5th September 2023 Commons Chamber

[Andrew Griffith]

The right hon. Member makes a significant contribution to the debate about the nation’s pension funds. Our objective to increase investment—to drive increased returns for pension savers, but also to benefit the wider economy—stops short of mandating. There is a philosophical difference between this side of the House and the Opposition. We do not believe it is right for the Chancellor to tell pension funds where to invest, but it is our job to knock down barriers, frictions and impedances to pension funds investing in brilliant British companies.

[Mr David Davis (Haltemprice and Howden) (Con)]

The Economic Secretary told my hon. Friend the Member for North Warwickshire (Craig Tracey) that he is going to underwrite the statutory right of access to cash, but 6,000 bank branches will have closed by the end of the year, leaving only 4,000 in place, and 15,000 ATMs have closed in the last five years. How is he going to make sure that this actually happens, rather than it just being an empty promise?

[Andrew Griffith]

The FCA has significant sanctions in respect of the closure of ATMs that would leave communities without the right of free access to cash. On the closure of bank branches, we are seeing a significant change, and I hope my right hon. Friend would respect the fact that technology is changing and consumer patterns are changing. During the recess, I had the privilege of visiting the excellent community banking hub in Brixham, which I think is a brilliant opportunity. There should be more than 100 on their way, and that is my objective.

LIBOR Fixing: Conduct of Investigations

David Davis Excerpts

Tuesday 23rd May 2023 Commons Chamber

[Mr David Davis (Haltemprice and Howden) (Con)]

The story that I will tell this evening starts with understandable public anger at the failure of both business and state during the 2008 financial crisis and the massive institutional failures to bring real villains to justice. The regulators, the US Department of Justice and the Serious Fraud Office rushed to assuage that anger and deliver convictions but failed to do the work necessary to properly fulfil their task. Instead, they effectively delegated investigation to the banks, allowing them to offer up middle-ranking scapegoats so that they could avoid prosecuting the directors of disaster who actually ran the banks.

While the real villains got off scot-free, the scapegoats, including some whistleblowers, faced coercion and injustice. Their lives were destroyed by a totally inadequate regulatory and judicial system. In British courts, critical evidence was concealed. In America, the DOJ used tactics that amounted to judicial blackmail. The result was serial miscarriage of justice: 37 people were prosecuted, 19 convicted and nine jailed simply for doing their jobs. Their prosecutions were prompted not by complaints from victims but by a political and tabloid firestorm. How did this happen? Most of the critical data and facts that I will cite come from a seven-year evidence-gathering exercise by Andrew Verity, the BBC’s economics correspondent, who will be publishing a book on the subject shortly. I am grateful to Mr Verity for sight of his work and data.

In 2010 to 2012, the LIBOR scandal first came to light. It was reported that bankers at major financial institutions had colluded to manipulate the London interbank offered rate—LIBOR. Many leading banks were implicated, including Deutsche Bank, Barclays, Citigroup, JPMorgan Chase, and the Royal Bank of Scotland. LIBOR is an index designed to measure the interest rate at which major banks are lending money to each other, covering 10 currencies and over several different terms. It is calculated daily using estimates submitted by major banks of the rate at which they could borrow money at approximately 11 am. LIBOR was used worldwide as a reference for financial instruments including commercial loans, mortgages and student loans. At its peak, it underpinned $350 trillion of financial instruments. Now, its reputation is shot, and it will be replaced next month by the secured overnight financing rate, which is calculated instead by the Federal Reserve—notably, not in London.

After the credit crunch, there were persistent rumours of banks submitting estimates below available market rates—the nickname for it is “lowballing”—and there is no doubt that that was happening. In late October 2008, not long after Lehman Brothers collapsed, Chase New York had been pressured by the Fed to offer loans at a time when no banks wanted to. The actual rate it offered was 4.68%, but on that day its dollar LIBOR submission was 3.25%. That was an enormous difference of 143 basis points—a basis point is one hundredth of 1%—but 3.25% was typical of the LIBOR submissions that day. Now, 1.43 percentage points, or 143 basis points, may seem tiny, but for a bank loan of £100 million such a difference means nearly £1.5 million less in interest—a serious market distortion, undoubtedly harmful, particularly to small banks. Many knew it was happening, but few could, at least publicly, say why.

Then, in early 2010, Gary Gensler, head of the US Commodity Futures Trading Commission, was played a recording of a conversation between two London employees of Barclays bank, Peter Johnson and his boss Mark Dearlove. Johnson was responsible for Barclays’ dollar LIBOR submissions. The conversation Gensler was hearing followed several others in which Johnson, known as PJ, complained that other banks’ submissions were way below the conceivable market rate. PJ had been resisting senior level instructions to lower Barclays’ rate to stay “in the pack” of other banks. Indeed, his honest submissions—honest submissions—sometimes embarrassed Barclays by making others think they were paying unusually high rates.

The first voice on the tape was Dearlove’s rather cut-glass diction. He said:

“The bottom line is you’re going to absolutely hate this...but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our LIBORs lower.”

Johnson protested:

“So I’ll push them below a realistic level of where I think I can get money?”

Dearlove came back:

“PJ, I’m on your side, 100 per cent…These guys don’t see it. They’re bent out of shape. They’re calling everyone from Diamond to Varley.”—

the senior directors—

“You and I agree it’s the wrong thing to do…These guys have just turned around and said, ‘Just do it’.”

What the whole recording revealed was two Barclays employees agreeing to rig LIBOR, albeit reluctantly and albeit instructed by the British state, through the top leadership of Barclays.

The LIBOR investigation began once Gensler at the CFTC heard that recording. He had a crime on his hands, as it were, but it was not bank directors and executives, or senior Bank of England and Whitehall officials who would be pursued. Prosecutors increasingly switched their focus away from the state-sponsored lowballing it discussed and towards something wholly different: requests from traders to LIBOR submitters for high or low settings that would protect their trading positions.

The regulators had outsourced their investigations to external lawyers hired by the banks themselves. Most of their evidence was collected by the bank investigators, particularly evidence passed from Barclays’ investigators to the CFTC, but those lawyers made fundamental errors. Most notably, for Barclays and UBS, they did not examine crucial documents, including the emails of senior executives—the real bosses. This was the first instance of a common theme: the scapegoating of low-ranking bankers by prosecutors, courts, directors and executives. Once the scandal became a news item, Barclays sacked low and middle-ranking employees like PJ who were involved. Their legal support was sharply cut off.

But not all faced the same treatment. Dearlove, for example, heavily supported by lawyers paid for by Barclays, pointed out that the instruction to lowball had come from the Bank of England and Whitehall. His case was immediately dropped like a dangerous hot potato, which it was. People at the top were attempting to shift the focus from lowballing to those skewing the rate to protect trading positions. But while submissions only changed by one or two basis points in response to trader requests, state-sponsored lowballing often meant understating LIBOR by 50, 100 or 150 basis points—comparatively enormous. That reflected a difference between the two practices that many failed to understand. Lowballing involved setting unambiguously and hugely inaccurate rates, but the so-called skewing only involved accommodating trader requests by selecting high or low rates from the tiny range of interest rates that banks were actually offering. Prosecutors mistakenly persuaded themselves there was only one accurate LIBOR rate each day, from which submitters should never deviate.

No such single rate existed. Banks could borrow at a small range of different rates, any of which could be described as accurate. With no rules about selecting from that range, submitters quite reasonably chose the accurate rates that helped their banks’ trading positions. This was not considered improper at the time, either by the submitters and the traders, or by the regulators and the central banks. It was normal trading practice that the LIBOR system was designed to accommodate.

However, the British courts later prosecuted low-ranking traders based on a sweeping ruling by the Court of Appeal that no commercial interest could ever be considered in LIBOR setting. The actions of those traders were then retrospectively declared illegal. Lives were destroyed because of the total misunderstanding of how LIBOR and business worked.

The ruling was thoroughly and unambiguously contradicted by a ruling in the US appeal courts last year. Indeed, the Serious Fraud Office initially struggled to find any plausible legal basis on which to prosecute. The submitters could not be prosecuted under laws such as the Fraud Act 2006—that required victims, false statements such as inaccurate LIBORs and potential gains for the perpetrators. None of those existed, at least not for the trader requests.

The SFO instead chose the vaguer common law offence of conspiracy to defraud. That required proving only two things: there was “dishonesty” and an agreement had taken place. However, the lowballing ordered by bank executives seemed to meet all the requirements under the Fraud Act, as well as conspiracy to defraud. It seemed a clear instance of commercial influence over LIBOR submissions, and far larger in scale. But the SFO preferred bending the law to prosecute low-ranking employees rather than pursuing top-level executives. It had access to all the material that Mr Verity has obtained, which points to the top, but it did not pursue it. For years, it failed even to interview the key executives.

Many traders initially admitted wrongdoing to prosecutors—admissions that later hurt them at trial. Tom Hayes initially admitted dishonesty to the SFO, but that is no real indictment on his cause. A shadow hung over the proceedings that motivated many who co-operated: the prospect of extradition to the United States. If they were extradited, acquittal was near impossible. More than 90% of prosecutions in the US end in a plea bargain. Most of the rest are found guilty. In the US, white collar criminals who pleaded not guilty were threatened with up to 30 years in jail without early release or any other arrangement, alongside violent criminals and drug lords and in unpleasant conditions. A plea bargain that guarantees a reduced sentence to a couple of years in an open prison is irresistible by comparison.

It was a form of judicial blackmail that forced defendants to admit to things that they had not done. British defendants such as Tom Hayes wanted to avoid that at all costs, and the only way was to be prosecuted in Britain instead, which necessitated telling the SFO one crucial lie: he pleaded guilty to acting dishonestly. Hayes changed his mind and decided to fight the charge, only after realising how much he would need to falsely implicate others, and when the sheer absurdity of the charges against him became clear. But Hayes’ judge, who described the case as open and shut before the trial began, ruled that no commercial interest could ever be legally considered by submitters.

The Court of Appeal upheld that absurd ruling, providing the legal underpinnings for later convictions. If applied consistently, Barclays directors, Bank of England officials and the British Bankers Association would all have been implicated. They had all effectively instructed lowballing or misreporting. But the ruling has never been applied to those at the top. Instead, Hayes got a 14-year sentence—more than an average manslaughter sentence—for something previously considered normal practice.

The SFO approached other traders for testimony to buttress its case, but everyone had engaged in the same behaviour that Hayes was accused of, because they said it was normal commercial practice. But the SFO saw no reason to stop. Instead, it found John Ewan from the BBA and Saul Haydon Rowe to act as expert witnesses. They testified that derivatives traders could never request changes to LIBOR submissions. Yet, as the SFO knew, Rowe was not an expert on LIBOR. In another trial, Ewan would contradict himself by saying it was permissible to submit LIBORs within the market range for commercial reasons. That is not to mention the fact the BBA itself had encouraged banks to adjust LIBORs in the past. An abundance of evidence that would have shown that what Hayes was doing was normal, and permitted by regulators and central banks, was either suppressed or not disclosed.

The theme repeated itself throughout the trials: important evidence was withheld, and the evidence offered came from non-experts or people who knew about or had condoned the behaviour. The same would happen in trials relating to Euribor—the Euro equivalent of LIBOR. The founders of Euribor had written rules for submissions when they launched the benchmark, and were willing to testify that commercial influence was welcome, expected and allowed for, but the judge refused to hear the evidence and ruled it was impermissible for submissions to be influenced by trading positions.

Not everyone faced that kind of trial. A recent judgment in America casts doubt on every conviction that relied on sweeping rulings about commercial influence. In January 2022 a US Appeal Court ruled, in US v. Connolly and Black, that trader requests—the basis for every single conviction—were not illegal. That shatters the foundations underpinning the ruling by the UK Court of Appeal.

The ruling was made by the Appeal Court for the Second Circuit, the circuit that includes New York and that would have judged an enormous volume of alleged financial crime. That court had a very high degree of financial expertise and we should place significant weight on its expertise. The ruling makes Britain a global anomaly—the only place where traders were locked up for something wrongly and retrospectively declared illegal. Indeed, the French, German and Japanese authorities never considered trader requests a crime, and even refused British requests to extradite traders.

These miscarriages of justice are scandalous, but perhaps just as serious was the attempt by the British and American establishments to hide their involvement in similar behaviour and their failure to apply the law equally and fairly. At its worst, it involved potential perjury in key trials. At other points, it involved possibly misleading a Committee of this House.

In 2012, the then deputy governor of the Bank of England told the Treasury Committee he had learned of lowballing only in “the last few weeks”, yet there appears to be damning evidence that that was untrue, including meetings, phone calls and sworn testimony to US authorities. It was also claimed there were no Bank of England instructions to change LIBOR submissions, but evidence uncovered by Mr Verity suggests that is also untrue.

The explanation offered to the Committee, that a misunderstanding caused traders to believe the Bank had instructed lowballing, is undermined by evidence that bankers had already received instructions prior to that “misunderstanding”. If it was a misunderstanding, no attempt seems to have been made to rectify it. Moreover, the recording of Mark Dearlove and Peter Johnson that I quoted earlier was not shown to the Treasury Committee, despite Barclays knowing about it at the time. It was exposed only in 2017 by the BBC’s “Panorama”. If it had been shown, it would have thrown doubt on any denials about Government pressure.

Several people who could have contradicted evidence before the Committee were never called to give evidence, such as Mark Dearlove and Peter Johnson, the two people on that tape recording; traders and submitters, who could have revealed information about any instructions; and the senior Whitehall officials behind much of the pressure, including Gordon Brown’s policy chief and the second permanent secretary to the Treasury.

The response to the scandal was itself scandalous. Every part of that public response—the convictions, parliamentary investigations and decisions not to investigate—were, at best, extremely questionable. I intend to write to the Metropolitan police asking them to review the evidence in order to examine whether any perjury has occurred. I have already written to the Chair of the Treasury Committee and the Speaker to consider whether the House was misled, and whether a new inquiry is needed.

[John McDonnell (Hayes and Harlington) (Lab)]

I thank the right hon. Gentleman for bringing this scandalous miscarriage of justice before the House. The House will have the opportunity to listen to Andy Verity when he comes to the Commons on 6 June, as well as some of those who were prosecuted. I suggest the right hon. Gentleman holds off from writing to the Metropolitan police until we confirm there will be a Select Committee inquiry. From the evidence available to us, it is clear that the House was misled, and I would not want a police inquiry to impede a House inquiry before we get the full evidence. We need an assurance from the Select Committee that it will seek Treasury officials, Treasury Ministers, Bank of England officials and all those regulatory bodies that were involved in this egregious miscarriage of justice, where people have suffered greatly as a result of what clearly appears to be not just the House being misled, but a conspiracy among them as well.

[Mr Davis]

This is not the first time that the right hon. Gentleman and I have worked together on a miscarriage of justice, and I will defer to his wisdom on this. Given that it has been a decade, I do not think that a three-month or six-month delay in writing to the Metropolitan police would necessarily be a bad thing. I am happy to wait until the conclusion of any Select Committee hearing and any report that might be produced. I will no doubt hear from the Select Committee Chairman in the coming weeks.

The former Lord Chancellor, Lord Mackay, who has seen this, has said that the whole affair presents a “serious challenge” to the “fairness of our system”, and that the question of law after the US judgment is more than worthy of consideration by the UK Supreme Court. Nine people were jailed for LIBOR rigging, and each one of those cases is a potential miscarriage of justice. Those people lost their careers, their reputations, their savings and their marriages. Their families’ lives were destroyed. Their cases demand a proper re-examination, preferably by the Supreme Court. The only other solution, as the right hon. Member for Hayes and Harlington (John McDonnell) said, is a fresh look at the entire affair. A fresh parliamentary inquiry, with the protection of parliamentary privilege, would help to ensure that the truth comes out and that British justice is finally applied equally to all.

Wagner Group: Sanctions Regime

David Davis Excerpts

Wednesday 25th January 2023 Commons Chamber

[James Cartlidge]

I think that the hon. Gentleman submitted a similarly worded urgent question this morning, and obviously I respect that point, but there are no gymnastics here; I am merely setting out the position.

The hon. Gentleman asked about legal advice and so on. Within the sanctions regime broadly, because we are a country with the rule of law and everyone has a right to legal representation, it is possible for frozen assets to be used to pay for that legal representation. This is about sanctioned individuals. The Office of Financial Sanctions Implementation grants licences to allow sanctioned people to cover their own legal fees provided that the costs are reasonable. I should make it clear that decisions on the issuance of licences for legal fees are not, and should not be, political, and are largely taken by officials in line with standard practice. As I said a few moments ago, we are not aware of a case relating to legal fees under any of the sanctions regimes in which a Minister took the decision.

[Mr David Davis (Haltemprice and Howden) (Con)]

I welcome the Minister’s assertion that there is to be a review of this approach, but I ask him to make it quick. Even the Treasury’s press release today indicates a level of misunderstanding on the part of the officials, claiming a fundamental or absolute right to legal representation. Of course you have a right to representation if you are defending yourself in court, but there is no fundamental right to use legal representation to destroy someone else and shut down free speech.

[James Cartlidge]

As my right hon. Friend knows, I responded to his Backbench Business debate. He has been incredibly consistent in calling for actions on these points, and I respect that very much. However, I do think that the right to legal representation is a fundamental tenet of our democracy, which can mean—I am not commenting on the specific case—that individuals whom we find distasteful have a right to legal representation. Let us not forget that even at the Nuremberg trials, people who had committed the most heinous crimes in the history of the western world were legally represented.

Landfill Tax Fraud

David Davis Excerpts

Thursday 12th January 2023 Commons Chamber

[Mr David Davis (Haltemprice and Howden) (Con)]

As we have come to expect, the right hon. Member for North Durham (Mr Jones) made a wise, insightful and pretty comprehensive speech. He is right to say that we have both struggled, over more than a decade, to get the Government and their agencies to take this issue seriously. He has covered ground thoroughly, but let me see if I can reinforce his points without too much repetition.

The right hon. Gentleman spoke of the Public Accounts Committee’s estimate of the near billion-pound cost to the Exchequer each year—he quite rightly referred to it as a finger-in-the-ear exercise. I have been a PAC Chairman, and I know how that sometimes happens. That is an under-estimate. We have signals all over the place of how big this really is. Last weekend’s Sunday Express said that £200 million in landfill tax had gone uncollected in 2019-20 alone—that is, again, an under-estimate, even in HMRC’s own figures.

The right hon. Gentleman said pretty plainly—and I agree—that HMRC does not want to big up this issue and make a big thing out of it, but it admits that at least £850 million has not been collected in five years. It has gone straight into the pockets of some of our most dangerous criminals. If £1 billion was not collected from, let us say, the bankers, legal people or some other such group, there would be uproar. But here, it is not being collected from criminals, and the matter just goes by.

The right hon. Gentleman made the point about the money being funnelled into criminal enterprises, and he was quite measured in his language. He referred to the type of criminals we are talking about—the Niramax directors and associate directors, one of whom, as he said, was jailed for 15 years for manslaughter. Frankly, I was quite surprised that the charge was not murder, because it was a man behaving in a random way over a personal argument and deciding to kill the other person who was involved. That is the sort of character we are talking about. An associate director went to prison first for a machete attack and then later on for drugs. That reinforces the point that the right hon. Gentleman made about drugs, prostitution and all the nasty underbelly of society—all the nasty criminal activity—being funded and supported by the problem we are talking about. We need to bear in mind more generally when we discuss waste crime that these are not just small-time wheelers and dealers. They are not the Harold Steptoes of today; they are very big wheels, in criminal terms, and very nasty people indeed.

Waste crime has blighted many of our constituencies—it has certainly blighted Haltemprice and Howden—for many years. That is where the concern first came from in my case, as I think it did in most others. Some time ago, in the middle of battles over the Gilberdyke site in my constituency, one of the sites that Niramax has an interest in, someone from south-west England involved in legitimate waste disposal asked to see me. Since it was such a big and recurrent issue, I said, “Yes, okay, come to see me.” He came to my home and, in essence, told me that the north-east of England was rife with waste crime and was known for it. That was what he argued to me. He did not know whether it was an accident of history or whether it was because the Environment Agency was somehow corrupt or involved, or for whatever reason not doing its job.

That was five years or more ago. To be frank, the story was so extraordinary that I thought it was an exaggeration. I am sorry to say that I was wrong. That person was describing pretty accurately what we have discovered in our joint endeavours over time. For too long, the Environment Agency has not been meeting its legal and community obligations, and HMRC has not been enforcing its. I must be clear that not all operators in the waste industry are criminal enterprises—that is anything but the case—but the clear inaction of our agencies has emboldened the dangerous individuals that do run such criminal enterprises.

[Mr Kevan Jones]

I agree with the right hon. Gentleman that not all operators involved in the sector are criminals, but there is evidence that in some cases—that of Niramax and others—contracts were procured by using threats and intimidation after people had signed up to contracts to freeze out legitimate operators and lock in people who were perpetrating waste crime.

[Mr David Davis]

The right hon. Gentleman is right, and I will come back to the incentives—both criminal and legal—that are built in against legal operators.

The right hon. Gentleman also spoke about the powerlessness of communities. Again, I can exemplify that point. We thought we had scored a victory by taking the Niramax associate Transwaste to court over the Gilberdyke site and winning our case that it had breached a whole load of conditions. We won the case, but did my constituents see any improvements? No. Were the problems addressed in court fixed or enforced by the agencies? No. Did the behaviour of the operators improve? No. The courts proved powerless and so the community certainly felt powerless, again because there was no proper enforcement. That goes back to the point that the right hon. Gentleman made in response to the hon. Member for Bristol East (Kerry McCarthy) that this is not primarily about changing the regulations or the law, but about changing the mode of operation of the agencies involved.

Precisely because they cheat and evade payment of landfill tax, criminal companies can undercut other businesses, picking up waste and charging a pittance for it, knowing they will make up for it in illegal returns. In the case of Gilberdyke, locals reported that lorries were flooding the area from Wembley, south Wales, south-west Scotland and Manchester. It is expensive to transport this stuff. Why would it be transported that far unless there were some enormous unfair—not to mention illegal—advantage for the operators? That is what is going on there.

Some of my constituents who are very qualified people monitored that site and estimated that between £50 million and £60 million in landfill tax was being evaded while those lorries were flooding the area. That is at one site alone. This activity involves the destruction of my constituents’ quality of life and the destruction of the local environment, all in pursuit of illegal profits, yet so little action is being taken.

The right hon. Member for North Durham quoted the Public Accounts Committee saying about the Department for Environment, Food and Rural Affairs in October last year that

“the approach to large parts of waste crime is closer to decriminalisation.”

I make the point, as a past Chairman of the PAC, that the PAC is careful about what it says about Government operations. It is careful that it is factually based, and it bases everything on the National Audit Office reports and so on. For the PAC to accuse an agency or Department of effectively decriminalising something as serious as this is in itself an enormously powerful and worrying statement. That quote will strike a chord with those of us who have had to observe the appalling weak record of enforcement of the Environment Agency, even with legal operators, frankly. We are not talking about legal operators today, but even with legal operators, the Environment Agency is weak, let alone those who need to be cracked down on. That fact, again, is reinforced by the data. The number of prosecutions for waste crime generally—not tax evasion, but waste crime generally—have fallen by more than 90% since 2007-08. As the right hon. Gentleman said, there have been no prosecutions whatever for landfill tax fraud.

With Operation Nosedive—like the right hon. Gentleman, I wondered about the name, where it came from, and whether it was making a prediction about its own success—I have to say that its failure was written in from the beginning. It was a failure from the start. HMRC, the Environment Agency and the Crown Prosecution Service were simply not working together properly to investigate and prosecute the gangsters. They simply were not doing the job as a coherent group of people. The NAO told me that HMRC and the CPS admitted as much, and that is why no prosecutions were taken forward. The problem is that this failure and the ongoing increases in the rate of landfill tax mean that illegal profits are only increasing. Given how landfill tax is structured, if evasion is not stopped, then every time landfill tax goes up to improve the environment, the criminal is actually incentivised more by a bigger comparative advantage against the legitimate operators.

[Aaron Bell]

The story of Niramax seems to foreshadow much of my experience in Newcastle. The Minister will appreciate, as an economist, that Gresham’s law says that bad money drives out good, and is that not exactly what is happening in the waste sector? Legitimate firms are being driven out of the sector, with the result that more and more criminals are acting in the sector, making it harder for people to dispose of their waste legitimately, even if they want to.

[Mr Davis]

That is absolutely correct. I am sure Gresham did not have in mind blackmail and threats as well, which also come into it when the operation becomes criminal rather than legal. The joint failure of HMRC and the Environment Agency led to theft from the public purse—it is as simple as that—the devastation of public spaces, and the undermining of public confidence in this whole policy area. Ostensibly, the issue is that HMRC is focused on the collection of tax, while the Environment Agency is following a remit to manage waste. That is the excuse given, if you like. Frankly, it is extraordinary that the Environment Agency would not collect data on a tax designed to incentivise good waste operation. That is its purpose, so why on earth is the Environment Agency not monitoring that carefully? If it is not working, it is a failure of its own remit.

[Kerry McCarthy]

I am finding what the right hon. Gentleman has to say very interesting. In the past, I have asked questions about the Environment Agency’s role. It is meant to have a role in enforcing the waste hierarchy, in which things going to landfill should be at the bottom. The Environment Agency should be incentivising recycling, reuse or not creating waste in the first place. Does he agree that we need a fundamental overhaul so that the Environment Agency is properly resourced and there are incentives and disincentives so that the waste hierarchy is proper observed?

[Mr Davis]

I agree with the aims the hon. Lady describes, but I am not sure whether this is a resource issue for the Environment Agency—I think there is a resource issue in other areas. If the Environment Agency does its job right first time, that is it dealt with. To bring it down to the microcosm of a single waste tip, if it does not enforce the first, second or third complaint, it will have hundreds and thousands of complaints, and its time will be sucked into dealing with them. To some extent there may be a resource issue, but a bigger issue is, straightforwardly, to do with management and the determination to make the industry obey the rules and to spot such things as tax evasion. If tax evasion takes place, the whole structure she describes disappears. The cheap operator who is not paying taxes gets all the business, and therefore nothing is pushed to a better waste outcome. I take her point, but in many ways management is more important.

[Mr Kevan Jones]

On that point, does the right hon. Gentleman agree that the big disconnect is between the policy that everyone wants to support—more recycling—and not only how it is enforced but how it is monitored? The best example is Scotland’s zero waste strategy. It sounds great, but waste is being shipped across the border to the north-east of England and other sites in the UK, and there is no monitoring of that. Exporting waste from Scotland to landfill sites in the rest of the UK will not meet the environmental standards that the policy aims to achieve.

[Mr Davis]

I agree. Exporting from Scotland to England will not help at all, so the right hon. Gentleman is exactly right.

We have a ridiculous co-ordination problem in the midst of all this. The NAO told me that Operation Nosedive failed for a variety of reasons, but ultimately it was felt that defence lawyers for the criminals would be able to exploit all the weaknesses of co-ordination and data in the system. Frankly, it is galling that criminal charges could have been held back by the bureaucracy and box-ticking approach of Government Departments effectively, which were stepping on each other’s toes rather than working together.

Waste crime and landfill tax fraud are cheating the taxpayer out of hundreds of millions of pounds a year, and it is time we got serious about that. Thanks to the NAO, we know that every single year, waste crime in general costs £900 million—the PAC said £1 billion—which is a very, very large number. We should not lose track of the fact that that is an annual cost. And that is without, as it turns out, the costs in Scotland, Wales and Northern Ireland. We do not have the hon. Member for Strangford (Jim Shannon) in his place to raise a point about Northern Ireland, but there are costs there, too. In the current climate, I can only imagine the uproar if that occurred in any other situation.

The right hon. Member for North Durham touched on the importance of HMRC’s joint unit for waste crime. The Government would like to claim it has been a success—indeed, after the first year they said it was a success—but I have to tell Members that I cannot see a single sign of success. It is shameful, frankly. This is where I agree with the hon. Member for Bristol East (Kerry McCarthy) that this is a resource issue. We absolutely need to ensure that, unlike at HMRC before, there is the right legal advice at every stage, the right data at every stage and the right investigative capability at every stage, so that, rather than saving £10,000 here and £10,000 there only to lose £3.5 million on a failed case or £1 billion a year on the system as it is, we actually deal with the issue. The current strategy is penny wise and pound foolish, and in that respect she and I agree.

[Matt Rodda (Reading East) (Lab)]

The right hon. Gentleman is making an excellent speech. Does he agree that the same principle applies—on a much smaller scale, admittedly—to local authorities, which are often inundated with nuisance fly-tipping? I realise that that is on a different scale to the issues he is describing, but it can nevertheless be very distressing for residents and small businesses across many parts of England.

[Mr Davis]

The hon. Gentleman is right. There is almost a generic problem with local authorities. They very often face problems that look intimidatingly large to them, and the temptation always is to penny-pinch—to spend just a little money to see if they can stop it. They fail, and the problem invariably grows. We see that time and again, particularly in this area. This is a separate issue really, but concerns about fly-tipping among the public are as great as they are about waste crime in general. The hon. Gentleman is dead right. My advice to local authorities is always to try and nip it in the bud, because if they are seen as a weak responder, the crime will come to them. That is what will happen.

[Matt Rodda]

I was not seeking to be overly critical of local authorities. I was trying to illustrate the wider point about the Government’s funding of them and some of their powers. We have had an issue with waste on many plots of land in the areas that I represent. Some of that is deposited by people just passing through. The powers seem to be a real challenge for local authorities. Perhaps he will say something about that.

--- Later in debate ---

[Mr Davis]

The hon. Gentleman is reaching beyond my level of expertise, frankly. My view is that this clearly is a systemic problem. There is either a funding shortage or a power or capability shortage. One or the other needs to be corrected, because the current system is not working. Anyone who lives in a rural area will see that we are dealing with a permanent nightmare—a running sore. I agree with the hon. Gentleman about its being systemic.

To come back to the waste crime issue, there is not just lack of funding or joined-up Government, but a lack of understanding of the problem. The NAO found that DEFRA and the Environment Agency are simply not collecting the data. They need to fully realise the extent of waste crime across the board. The NAO said:

“the waste crime data they currently collect do not give an accurate picture of actual incidence of waste crime because of under-reporting”.

That comes back to the finger-in-the-air guess of £1 billion. It is obviously bigger than that because the issues are being undermeasured. I cannot see how our agencies can get a grip of the problem if they do not even measure the size of it.

When I told one of my constituents about this debate, he told me how little faith he has in the Environment Agency. Frankly, I share his concerns. Before I came into the Chamber, I was sitting outside talking to colleagues. Four colleagues in a row said, “Yes, we have the same problem.” They are not here now, as they are off back to their constituencies, but they all have the same systemic problem that comes back time and again.

For too long, waste crime has gone unnoticed by Environment Agency officers. That begs the question, what is going on? Are they indolent? Are they incompetent? Are they involved? Are they being bribed? No. The simple truth is that they do not have the tools they need to do the job. We have created a system where our agencies are prevented from acting for fear of that action making the problem worse. If they want to take action on a company, they are terrified that they will bankrupt it and suddenly the taxpayer will be left funding the clean-up. There will either not be a clean-up or they will have to find millions upon millions of pounds. None of that needs to happen.

In summary, what we need is for the warrants, or the reserves required on the balance sheets of new waste operators, to be big enough to cover the cost of a clean- up in the event that they go bankrupt. Whether that is an insurance system, a reserve system or a warranty system, I do not know, but it has to be something like 10 times as big as what we currently have. The new joint waste crime unit needs dedicated funding from central Government of sufficient size.

We have a perfect environment. We have had the failure of Nosedive. We can see all the points of failure: unusually for HMRC, they are identified in the public domain, so we can design what is required for the joint unit. We need the Environment Agency to get out on the ground and collect the data it needs to help HMRC prosecute these gangsters. We need to ensure that they all get proper legal advice. One of the reasons Nosedive failed was that, if I remember correctly, three different lawyers were given to them by the Crown Prosecution Service over time. Eventually, when they hired a private lawyer, they got proper advice and decided they could not pursue it. That is saving tens of thousands to lose £3.5 million and to lose billions—it is penny wise and pound foolish. If the Government think this costs too much, they should just think of the consequences of failure.

I appreciate that the Minister will not be able to give instant answers today, but I ask him to go back to his Department and simply ask, why not? The right hon. Member for North Durham and I have proposed a variety of measures that will pay for themselves 1,000 times over, so why not take the action necessary? Why not save the taxpayer money and, most importantly of all, save our constituents from the disasters these people visit on us?

--- Later in debate ---

[Aaron Bell]

The right hon. Gentleman is absolutely right. With illegal landfill sites in particular, we can almost rely on there being a suspicious arson attack. Getting the fire services involved is often the quickest way to get these problems resolved, because operators know that they and not the Environment Agency will ultimately be the ones involved in cleaning up. My constituency also has a notorious illegal waste dump at Doddlespool farm; I do not want to detain the House for too long, but we have seen all these things going on, with all sorts of impacts on the environment from vermin and all the rest of it.

Fly-tipping is forecast to have probably the greatest overall financial impact, although it is very difficult to get the numbers. The national tax gap for HMRC overall is estimated at 5.1%, but the landfill tax gap was 17.1% in 2020-21 and in previous years it has been more than 20%. That is equivalent to £125 million, which is only a part of the overall billion-pound estimate of the cost of waste crime. That does not even really take into account the cost of fly-tipping; it is about tax that should have been collected but has not. Things that are completely illegal fall somewhat outside the tax gap calculations, as I understand it.

[Mr David Davis]

My hon. Friend has talked of perverse incentives. As far as I am aware—and, as I have said, I served as Chairman of the Public Accounts Committee for five years—this is the clearest example of a strong incentive for good policy turning into a strong perverse incentive against that good policy, off the back of enforcement. When the Treasury assesses how much it puts into enforcement, ought it not to take that full spectrum of effect into account?

[Aaron Bell]

I could not agree more. I cannot remember who it was who mentioned the Environment Agency earlier, but there has been a cultural problem with enforcement, and I should like to see HMRC step up and assist. There is a long tradition of the taxman being the man who catches perpetrators of organised and serious crime in the end, but it is not happening with waste crime. I shall say more about that later.

In a statement to the House on the 18th report of the Public Accounts Committee, my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) said that Jim Harra had assured the Committee that the tax gap was so large because the scope of landfill tax had been widened to include illegal waste sites. However, if fly-tipping were taken into account, it might be even larger. The summary of the report stated:

“Waste crime is known to be greatly under-reported, so the true scale and impact of the problem are even larger than official data suggest.”

As my right hon. Friend the Member for Haltemprice and Howden just pointed out, that is just the financial cost; we are not remotely taking into account the cost in terms of the impact on people’s quality of life. Perhaps if we do get a class action lawsuit, some financial numbers will be attributed to that in Newcastle-under-Lyme.

--- Later in debate ---

[James Cartlidge]

As I understand it, the figure is public—[Hon. Members: “It is now!”]—following robust campaigning by colleagues present in the Chamber.

Turning to the linked point about decriminalisation, I emphasise that most of HMRC’s work to tackle fraud makes use of civil powers. HMRC does use criminal powers selectively to focus on criminal investigations at the top end of the highest harm and the most complex organised crime and serious fraud. Just to underline that, in 2021 HMRC closed 700 illegal waste sites, including 200 high-risk sites—I say HMRC, but it might have involved the Environment Agency as well. Significant action was taken, but it was primarily civil in nature.

My hon. Friend the Member for Newcastle-under-Lyme continues to raise Walleys Quarry—

[Mr David Davis]

Will the Minister give way before he moves on?

[James Cartlidge]

I am now on Walleys Quarry, so I will stick with that. My hon. Friend the Member for Newcastle-under-Lyme will have anticipated that I cannot comment on ongoing investigations, but I can confirm that, as I understand it, the Environment Agency continues to regulate the operator closely and to consider appropriate action, in accordance with its enforcement and sanctions policy. While it sounds like there has been some progress, my hon. Friend is being a stalwart constituency MP and is a credit to his constituents. It is difficult for Ministers to go into the data at the Dispatch Box. He made points about the mental health impact and so on, and I sympathise with those who have experienced the impact at first hand.

I will now give way to my right hon. Friend.

[Mr Davis]

In a way, the Minister’s comments on Walleys Quarry reinforce the point. He says it is a difficult area to enforce in tax terms. I do not actually agree. I think a great deal more could have been done on the ground with Operation Nosedive in terms of physical investigation. Such things would not normally be undertaken, but that should have happened for something as big as this.

I reiterate the point I made earlier to my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell). The costs of the failure to enforce are financially enormous and socially disastrous, and serve to completely invert the purpose of the policy. The hon. Member for Cambridge (Daniel Zeichner) quoted the industry association and talked about an environmental catastrophe waiting to happen. No, it is an environmental catastrophe waiting to be discovered, because much of it lies underground in our constituencies. This is an area where a huge amount of resource is at play, and a huge amount of effort should be put into dealing with it.

[James Cartlidge]

I understand where my right hon. Friend is coming from. Speaking generally about all these cases and issues—I will go through all the points that have been raised as best I can, because he also talked about joint working and co-ordination—there is point of principle that we have to accept. We have a tax with a rate that incentivises a behaviour that is a positive policy goal, and that has been achieved to an extraordinary degree in the substantial reduction in waste going to landfill. Precisely because of that mechanism of a financial disincentive, there are some rogue actors—there will always be some—who want to take advantage.

All right hon. and hon. Members raised the point about data. I can confirm that the Government are committed to publishing an annual framework of indicators to track progress towards the objectives set out in the resource and waste strategy, including indicators of illegal waste sites, fly-tipping and littering.

The right hon. Member for North Durham and my hon. Friend the Member for Newcastle-under-Lyme both made points about what constitutes a fit and proper person. DEFRA recently consulted on reforms to the carrier, broker, dealer regime, and those transporting or making decisions about waste must demonstrate that they are competent to make those decisions. DEFRA anticipates phased implementation of the reforms from 2023-24.

Autumn Statement

David Davis Excerpts

Thursday 17th November 2022 Commons Chamber

[Jeremy Hunt]

I will write to the right hon. Gentleman on the latter point. On the mini-Budget, let me be very clear that I agree with its priority of growth and with the energy price guarantee, which has given relief to thousands of families, but I do not agree with unfunded tax cuts.

[Mr David Davis (Haltemprice and Howden) (Con)]

This is one of the most difficult circumstances in memory in which an autumn statement has been delivered, so I congratulate the Chancellor on a remarkably skilful statement. Of course, fiscal responsibility is incredibly important, but one of the risks that goes with it is that of worsening a recession, so it is particularly important that on small businesses, investment and innovation, he came up with a radical new agenda for growth. When he delivers his Budget in the spring—after, I hope, gas prices and financial markets have stabilised—will he reinforce that agenda for growth?

[Jeremy Hunt]

My right hon. Friend always speaks wisely on these issues. I think that if we are going to go to the British people as a party that can deliver a plan for our economy, they need to see that we have made progress in the growth agenda, and they need to see where this country is going to excel, not just in the next two years but in the next 20, 30 or 40 years. They will reward the party that demonstrates that it understands how to do that—that is what we do know.

Oral Answers to Questions

David Davis Excerpts

Tuesday 28th June 2022 Commons Chamber

[Mr Clarke]

We provide regular updates on the amount of money lost to fraud because all Members on both sides of the House want action to pursue perpetrators. We have shown our intention in this space with a series of targeted interventions against fraud, the most recent of which is putting in place the new Public Sector Fraud Authority, which goes live in July.

[Mr David Davis (Haltemprice and Howden) (Con)]

The laws around IR35 are loosely defined, and it looks as though Her Majesty’s Revenue and Customs is using the tribunals and courts to pin down the case law on it. The effect is that I now know of a number of people whose legal bills are many times what their original tax bill might have been. This is impoverishing them, and in some cases bankrupting them, and obviously it is terrifying them. Will the Chancellor institute a review of this procedure? Although it is important that HMRC raises all the money necessary, it should not do so by destroying lives.

[Lucy Frazer]

As my right hon. Friend will know, IR35 was brought in to ensure that people doing the same job paid the same tax. I understand that he would like to discuss some issues with me, and I look forward to doing that this afternoon.

Economy Update

David Davis Excerpts

Thursday 26th May 2022 Commons Chamber

[Rishi Sunak]

No, that is not how the household support fund works. It has always been the request of colleagues in this House and indeed councils for that to be discretionary. What we generally tend to do is provide guidance on the types of people that we expect to have support, but leave the ultimate decision to those in local authorities. In this instance, for example, the particular priority ought to be those who receive only housing benefit. The fund is more than sized to deal not just with those, but with others. Ultimately, though, we leave the discretion to local authorities, with guidance provided by my colleagues at the Departments for Work and Pensions and for Levelling Up, Housing and Communities.

[Mr David Davis (Haltemprice and Howden) (Con)]

May I give the Chancellor an unreserved welcome for the help for ordinary citizens? I think now, cumulatively, it is worth north of £35 billion all told. However, may I raise two concerns? First, he talked about the risk of excessive fiscal stimulus. How does he reconcile that with the fact that the latest figures show that we are taking more money out of the economy than we ever have in history? Secondly, on the windfall tax, it will raise a small amount of money. Stability of tax and low tax both encourage investment and growth. Is there not a risk that the Exchequer will lose more in growth than it will gain in the windfall tax?

[Rishi Sunak]

I thank my right hon. Friend for his question. With regard to the figures on borrowing and stimulus, we are still running a relatively significant budget deficit this year—forecast to be 4% back in spring—so I would not regard that as a particularly tight policy on the fiscal side, and we will add further support today. With regard to tax, it is important to continue to support investment. The way we have designed the energy profits levy, with a doubling of the investment relief, will mean that companies still have a very strong incentive to invest in the North sea.

Oral Answers to Questions

David Davis Excerpts

Tuesday 15th March 2022 Commons Chamber

[Rishi Sunak]

The forecast for the public finances will be updated next week. As for jobs, I am happy to confirm that, according to today’s figures, there are record numbers of people on payrolls, record numbers of vacancies, and, indeed, more people in work now than before the crisis—and the unemployment rate is now lower than, or at the same level as, it was before coronavirus hit.

[Mr David Davis (Haltemprice and Howden) (Con)]

The Government have repealed many of the powers in the Coronavirus Act 2020, but they have not repealed the Act itself. This means that the Treasury can still order Her Majesty’s Revenue and Customs to start support schemes such as furlough without recourse to Parliament. Control of expenditure is Parliament’s first responsibility, so are the Government going to repeal the Act in total, or will the Treasury take action to give the proper powers back to Parliament?

[Rishi Sunak]

I would be very happy to look into the matter that my right hon. Friend raises.