Financial Assistance to Ukraine Bill

Lord Purvis of Tweed Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 15th January 2025 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow the noble Lord with his very considered remarks, most which I agree with entirely. His points reflected the three words that I thought could sum up this debate—the need for urgency and clarity, and at scale. These are the priority areas where we would wish to see the Government continue to move. Notwithstanding, as my noble friend Lady Smith said, that we support the Government’s work on this entirely, those aspects, the next steps on how we are going to be moving at pace, will be of fundamental importance.

We are still technically debating the regret amendment from the noble Lord, Lord Blencathra. As a long-standing former Minister and Chief Whip, he knows that this is a Budget Bill and that he cannot amend it in this place, but, as anybody who has seen the speakers’ list will know, he also knows how to get the last word. I commend him for that, because these Benches agree with the thrust of his argument. If there is anything that we can do to help him persuade his noble friends on the Front Bench to support our positions on seizure, he can count on our support.

The debate also had the outstanding maiden speech by the noble Baroness, Lady Batters. My former constituency was on the north side of the border, so I used to deal with NFU Scotland rather than the NFU. I recall that at my first meeting with NFU Scotland as a brand-new Member of the Scottish Parliament, I thought that I had listened attentively, but it was rather complicated, with lots of very difficult, technical words. I jotted them down, but at the end, I went home and had to ring up the then president of NFU Scotland, who was the noble Baroness’s counterpart. I said, “I’m really sorry. I’ve looked at my notes and can’t now remember what the animal disease or the animal medicine is, because the words are so complicated”. He said, “Jeremy, you don’t need to understand what we say; you just need to understand that you do what we say”. With the clarity of the noble Baroness’s contribution, I hope that Ministers will do what she says in this House, and she is most welcome.

The sober element of this debate was the recognition that the toll on the Ukrainian economy and country has been enormous. We often try to get a picture of what the toll is on the Russian economy; sometimes we get information showing that there is a significant toll on it from our sanctions and from external actions. The news, which I think was from just last week, that one rouble is now worth less than one US cent is one illustration that a toll is being taken, but as my noble friend indicated, there is still too much sanction circumvention and there are still too many areas where the Russian economy is gaining—whether it is the shadow fleet, which we are still seeking to pursue, or other elements of avoiding sanctions. Constant work is of fundamental importance in this area.

I have previously raised something with regard to British Overseas Territories which I hope the Minister will be able to clarify. How are we ensuring that all the actions and all the work that we are doing are consistent across all parts, including the overseas territories?

With regard to the impact on Ukraine, it is now estimated that there has been well beyond £500 billion of war damage. That is just a modest estimate by the World Bank. It is inconceivable that Russia will voluntarily pay compensation, so any thought that if it retrieves assets, they will voluntarily be used for some form of reconstruction in a ceasefire agreement is for the birds. A fundamental question therefore needs to be asked: why would we not use the entirety of the assets for the reconstruction purposes which we know Russia will deny in the future? Given that Ukraine is suffering a budget deficit of well over £10 billion and that, in context, it allocates more than £40 billion—about half of its entire budget—to the defence sector, which shows the scale of what Ukraine is having to do, timing is of fundamental importance, as well as scale.

It is welcome, of course, that there is the G7 consensus on this, but it was agreed in June last year to use the profits on immobilised assets. It was in January last year, when we were in Grand Committee on the Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations, that I called on behalf of these Benches for the equivalent of what the Bill is now. The timing is of importance, but it is also not just about the cost of recovery and contributing to Ukraine now; it is also an argument about accountability.

Our friends in Canada have passed legislation. Given the other debates that we have secured, including in the other place on 6 January this year, as the noble Lord, Lord Browne, and my noble friend indicated, and given the points that my honourable friends in the Commons made in Committee of the whole House on the Bill, the argument is not simply about funding Ukraine’s efforts now for its economy and the war. It is also about ensuring that there is Russian accountability. If part of the argument is that the Putin regime should be held to account for what it is doing, why would it then be able to profit and, in effect, have assets back and be able to use them?

We probably know—the noble Lord, Lord Kempsell, perhaps alluded to this—that there is a distinct incentive for Putin to have some form of ceasefire: to pause, recoup and then string this on. There is therefore no long-term security, and if part of the funds are simply being immobilised so that the profits from them can be used rather than the asset value itself, then unfortunately there is an incentive for Putin not to have a long-term solution. I suspect that that is why there is a last-ditch attempt in the last days of the Biden Administration, as CNN reported yesterday, for them to move towards the seizure aspect. I hope that the Minister might have an opportunity to respond to that.

To help us understand the position—this is where clarity comes in—I hope that the Minister will be able to look kindly on what my honourable friend James MacCleary put forward as an amendment to the Bill. It was to seek government reports: an immediate report but also, for clarity, a report regarding our

“share of the principal loan amount”

and what is able to be seized, if we had the intent to do that. There are ways in which the Government could demonstrate more clarity—as the United States has done, having been asked by Congress, and as Canada has done—as to what the scale of the opportunity is.

Perhaps the Minister could clarify another question for me. How much of what has been committed so far under the G7 programme has been disbursed? My understanding is that, as reported, the US committed £20 billion as a portion to the World Bank in December but that only £1 billion has been disbursed. I wonder what the status is likely to be for when the disbursements will be in place, especially the UK contribution. If the intent of this fund is for the purchase of munitions on a very urgent military operation, it goes without saying that any delay to the disbursement is not to the advantage of our Ukrainian friends and allies.

Let me close by reiterating what my noble friend Lady Smith said at the outset. We believe that it should be the UK’s intent that we move on this, as far as seizure is concerned, and that it is unjustifiable that these assets should be utilisable by Russia in the future. Russia’s actions should not be forgiven by it being able to recoup assets which we have found justifiably should be frozen. Those assets should be seized at pace and at scale and be used for the defence of Ukraine and as part of its reconstruction. That would also show accountability for those terrible crimes that Russia has inflicted on Ukraine.

[Lord Livermore (Lab)]

My Lords, it is a privilege to respond to this Second Reading of the Financial Assistance to Ukraine Bill, and to the regret amendment tabled by the noble Lord, Lord Blencathra. I join others in congratulating the noble Baroness, Lady Batters, on her incredibly powerful maiden speech. She brings a wealth of experience to your Lordships’ House, particularly on agricultural and rural issues, and is widely respected for her stewardship of the National Farmers’ Union. We might not always agree, but I very much look forward to her further contributions in debates such as this.

I am grateful to all noble Lords for their contributions and for the unity the House has shown in supporting Ukraine. I am very grateful in particular to the noble Baronesses, Lady Neville-Rolfe and Lady Smith of Newnham, for their support for the Bill. Many noble Lords have spoken movingly about the ongoing plight of the Ukrainian people in the face of Russia’s illegal invasion. It is important that we keep them in our minds today as Ukraine endures a third winter at war. The consequences of Putin’s war are profound: thousands dead and wounded, families torn apart, and enormous damage wrought to Ukraine’s infrastructure and economy that will take many years to rebuild. Despite the carnage that the Russian war machine has wreaked, including scores of innocent civilians killed and thousands of communities devastated right across the front line, the spirit of the Ukrainian people endures, and their resolve to defeat Putin’s army remains undiminished.

In case it needs saying, I profoundly disagree with the contribution from the noble Lord, Lord Balfe. I am heartened by the fact that there has otherwise been near uniform support across your Lordships’ House. The Government’s position remains resolute: Putin must fail, and we must stand with Ukraine for however long it takes, including by working with our G7 allies as part of this scheme. The Government will continue to stand with Ukraine as it wages this fight for freedom. That is why, to date, the Government have provided £12.8 billion in combined military, humanitarian and economic support to Ukraine. The UK has also introduced the most wide-ranging sanctions regime ever imposed on a major economy, depriving Putin of vital finance for his war machine.

My noble friend Lord Beamish asked about circumvention of sanctions, which the noble Lord, Lord Purvis of Tweed, also mentioned. The Government are assessing and enhancing the UK’s sanctions enforcement. This includes working with international partners to build capacity and technical expertise within our own systems and to improve sanctions compliance in their private sectors, as well as deploying increased UK sanctions resources across our overseas network. This is a fight not only for Ukraine’s territorial integrity and the safety of its people but for the future of Europe’s collective security and prosperity. That is why the Prime Minister has committed to providing £3 billion annually to support Ukraine for as long as it takes.

Maintaining international pressure on Putin also requires working in close partnership with G7 allies. The Bill before your Lordships’ House does just that. It would unlock £2.26 billion of new funding for Ukraine, backed by profits generated from immobilised Russian assets as part of the G7’s extraordinary revenue acceleration loans to Ukraine scheme. The scheme demonstrates our shared commitment and solidarity in the face of Russian aggression and will provide approximately $50 billion of additional funding overall to Ukraine, taking account of the combined contributions of our G7 allies.

The noble Baroness, Lady Smith of Newnham, asked whether the Chancellor of the Exchequer raised Ukraine with her counterparts during her recent visit to China. In China last week the Chancellor was clear that, although we must co-operate in areas of mutual interest, we will confidently raise concerns where we disagree. She expressed her real economic and trade concerns with the Chinese, including on economic security. We have secured China’s commitment to improving existing channels so that we can openly discuss sensitive issues and our economy. If we do not engage with China, we cannot express our very real concerns.

The noble Lord, Lord Banner, suggested that we are not meeting or matching our words with actions, a sentiment echoed by the noble Baroness, Lady Wheatcroft. The UK has already provided £12.8 billion of military, humanitarian and economic support to Ukraine since the war began. We are committed to providing a further £3 billion of military aid each year for as long as it takes. This is a significant investment. The new spending the Government are committing as part of the G7 scheme is in addition to these existing commitments and is proportionate to our GDP share within the G7 and the EU.

The noble Baronesses, Lady Smith of Newnham and Lady Wheatcroft, and the noble Lords, Lord Banner, Lord Purvis of Tweed and Lord Kempsell, asked why the Government have not gone further by seizing Russian sovereign assets in the UK. This is also the focus of the regret amendment tabled by the noble Lord, Lord Blencathra. I fully understand that strong views exist on this issue, and I assure noble Lords that we will continue to actively consider all possible lawful avenues by which Russia can be made to meet its obligations to Ukraine under international law. I of course agree that Russia must pay for the damage it has caused in Ukraine. However, the Government believe that any action taken should only be in tandem with the G7. It is in this spirit of collaboration that we have agreed the extraordinary revenue acceleration loans to Ukraine scheme, and we continue to work closely with our G7 partners. Our focus now is on delivering this scheme rapidly to provide the immediate support that Ukraine requires.

The noble Baroness, Lady Anelay of St Johns, asked whether I am instinctively in favour of going further. I can only say that I am in favour of considering all legal routes. She also asked about those legal routes that we have taken. Due to Euroclear’s unique business model as an international central securities depository, it is able to generate extraordinary profits on the holdings of these assets, which legally accrue to Euroclear rather than to Russia. We do not believe the specific circumstances that provide profits generated in this way can be emulated in the UK as we do not believe that any UK-based financial institutions employ this business model. The UK is not required by the Ukraine loan co-operation mechanism to provide any extraordinary profits made from assets held in the UK; we are simply providing a financial contribution to that scheme.

The noble Baroness, Lady Neville-Rolfe, asked whether the UK’s contribution to this scheme will count towards the NATO target of spending 2.5% of GDP on defence. The UK’s contribution will be provided to the Government of Ukraine as a loan from the UK Government to spend on military procurement; it is not direct UK defence spending. The £2.26 billion loan will therefore not count as NATO-qualifying UK defence spending; it will be in addition to current NATO- qualifying UK defence spending. The noble Baroness also asked when the Government will meet this target, as did the noble Baroness, Lady Smith of Newnham. The Government have made a clear commitment to spend 2.5% of our GDP on defence, and this commitment has not changed. We will set out the pathway to 2.5% at a future fiscal event.

I will touch briefly on the nature of the UK’s contribution to this G7 scheme. The funding we are providing will be used for budgetary support earmarked for military procurement, bolstering Ukraine’s capacity for self-defence and providing vital equipment and support to the front line. As my noble friend Lord Beamish said, this funding is additional to the £3 billion of bilateral military support which the Government have committed to providing for as long as it takes. The Bill’s sole purpose is to provide the Government with the spending authority to deliver our contribution to this scheme, or any subsequent arrangements that supplement or modify it. It is not designed to facilitate any other spending on Ukraine or spending for any other purpose. The Bill enables the Government to sign the loan agreement with Ukraine and begin disbursing funds to it.

The noble Baroness, Lady Neville-Rolfe, asked specific questions about how disbursals from the fund will work—a point also raised by noble Lord, Lord Kempsell. The Government intend to begin disbursals early this year to ensure the funding supports our Ukrainian allies as soon as possible. We intend to disburse the UK’s £2.26 billion loan in three equal tranches over three financial years, starting in 2024-25. The G7 has agreed that all funds from this scheme will be disbursed by the end of 2027, although we plan to begin disbursals much sooner.

To further address the points raised by the noble Baroness, Lady Neville-Rolfe, this is a bilateral loan whose parties are His Majesty’s Treasury and the Ministry of Finance of Ukraine. The Government have begun talks with their Ukrainian allies to agree the terms of the provision of this funding. We do not intend for there to be geographical restrictions on where funds may be spent, and are instead ensuring that the purchase of much-needed vital military equipment is prioritised. There will be opportunities for the UK defence industry to benefit where this provides good value for money for the UK and for Ukraine. The Government are aware of the corruption risk in Ukraine and we are taking steps in our loan negotiations to mitigate it. I cannot comment on these negotiations in detail as they are still ongoing.

On the UK being repaid for this loan, as my noble friend Lady Goudie said, under the terms of the scheme the UK will be repaid by the extraordinary profits generated from immobilised Russian sovereign assets in the EU on a six-monthly basis as they accrue. The EU has already enacted the necessary regulation, known as the Ukraine loan co-operation mechanism, which will distribute the profits. This came into effect on 29 October 2024.

My noble friend Lord Browne of Ladyton spoke about international support for Ukraine, and the noble Baroness, Lady Neville-Rolfe, asked about the United States’s contribution to the scheme and the approach that will be taken by the incoming Administration. Although it would be wrong to speculate on any policy decisions that the incoming Administration may make, the UK Government have welcomed sustained bipartisan US support for Ukraine, which has been key in the international effort.

In answer to the noble Lords, Lord Balfe and Lord Purvis of Tweed, the US has already dispersed its $20 billion contribution to our financial intermediary fund at the World Bank. The EU has already passed and implemented its legislation, which covers all the European countries listed by the noble Lord, Lord Balfe.

[Lord Purvis of Tweed (LD)]

My point was less about the US providing $20 billion to the World Bank; my question related to how much Ukraine has actually received.

[Lord Livermore (Lab)]

I do not have that information to hand, but I will happily check for the noble Lord.

The noble Baroness, Lady Neville-Rolfe, asked whether the UK’s contribution to the scheme would increase if the United States or another participant chose to withdraw. I can confirm to noble Lords that this would not affect the UK’s contribution, which will remain at £2.26 billion. We are clear that that is the right and balanced approach, reflecting our fiscal pressures and Ukraine’s needs. The £2.26 billion figure is also proportionate to our GDP share within the G7 and the EU. We will of course continue to co-ordinate with G7 partners on the scheme going forward.

The noble Baroness, Lady Anelay of St Johns, asked for an update on the proceeds from the sale of Chelsea Football Club. The Government are working hard to ensure the proceeds from the sale reach humanitarian causes in Ukraine as quickly as possible. The proceeds are currently frozen in a UK bank account while a new independent foundation is established to manage and distribute the money. Creating an organisation of this scale is complex and officials continue to hold discussions with relevant parties to reach a resolution. As you would expect, we must review the details of any such arrangement to maintain the integrity of our sanctions regime.

In conclusion, we must ensure that Putin has no path to military victory in Ukraine. That means continuing to provide military and economic support to enable Ukraine to defeat Putin’s war machine. The combined $50 billion of new funding, delivered together with our allies in the G7 and backed by profits from immobilised Russian assets, will provide a crucial boost to Ukraine as it continues its third winter at war. It represents an investment not only in Ukraine’s future but in the security and prosperity of Europe more widely, and it demonstrates the shared resolve of the international community in the face of ongoing Russian aggression. I welcome the fact that noble Lords from all sides of the House have been united in saying that we must stand with Ukraine for as long as it takes. This Bill will allow us to honour that commitment.