Defence Funding

Lord Wallace of Saltaire Excerpts

Thursday 16th May 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

The Government have published figures in accordance with the OBR forecasting period, which sets out exactly how this uplift will be met. The OBR forecast goes out to 2028-29, and obviously the uplift goes out further than that. For example, in 2028-29 there will be an extra £4.5 billion, which will be met through an increase of £1.6 billion in R&D spending and £2.9 billion from reducing headcount in the Civil Service to the pre-pandemic levels of 2019.

[Lord Wallace of Saltaire (LD)]

Can the Minister reassure us that it is the Treasury’s view that an increase in defence expenditure to 2.5% of GDP is compatible with the promise of further tax cuts, without further cuts in other public spending areas?

[Baroness Vere of Norbiton (Con)]

I can assure the noble Lord that this has no impact on our ambition to further cut taxes in future. We want to end the unfairness of double taxation of work—we have cut employees’ national insurance contributions by a third—so we do not see that this is incompatible.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2023

Lord Wallace of Saltaire Excerpts

Wednesday 19th July 2023 Grand Committee

[Lord Wallace of Saltaire (LD)]

My Lords, we come to this with several of us having been involved in the economic crime Bill and the National Security Bill, in which we touched on a number of related issues. Some of us, indeed, complained when the economic crime Bill was before us that there was a tendency in that Bill to treat economic crime as if it was entirely domestic, when anyone who knows a small amount about the subject knows that all serious economic crime is transnational and that one has to co-operate actively with other countries to combat it.

There was no reference to the FATF in the discussions on the economic crime Bill, but I thank the Treasury very much for the extensive briefing that my noble friend Lord Fox and I were given the other week on the FATF. It was extremely helpful and detailed, and showed how actively some parts of the Treasury are engaged in—one has to say this in the light of the comment by the noble Lord, Lord Vaux—trying to make the FATF work, or work better.

The FATF is a large, multinational organisation. I used to teach a course in international relations when I was an academic at the London School of Economics. I had to explain that it is a miracle that any international organisation works, because the difficulties are so intense. One has to recognise that there are limits to how far you can get agreement when you have as many member states as the FATF has, many of which are autocracies and systemically corrupt themselves. This creates considerable difficulties.

I was struck, as was my colleague and noble friend Lord Purvis, by the oddity that we have of course regained our sovereignty by leaving the dreadful European Union, which produced regulations that we had to adopt, only to align ourselves entirely with a much larger, looser and more opaque organisation, the FATF, in which we apparently follow what the noble Lord, Lord Vaux, described as its idiosyncratic listings. As I understand it, this is the grey list rather than the blacklist. I will talk a little about who is on the list.

There are two UK overseas territories on the list, which are listed as third countries. I point out to start with that the idea that an overseas territory is a third country is incompatible with the definition of a British Overseas Territory. That corresponds to the deep ambiguity with which the relationship between His Majesty’s Government and the overseas territories is carried on in so many different areas. It is, one would have thought, a scandal of British governance that there are overseas territories on the grey list. When I mentioned some issues to do with Gibraltar on the economic crime Bill, I rapidly received a communication from the Gibraltar Government. I am sure that the noble Lord, Lord Vaux, will shortly receive one in his turn. I understand that the fact that Gibraltar is still on the list relates more to delays in carrying a number of things through the Gibraltar Government than to the depths of the problem. The Cayman Islands, I suspect, is a more serious problem.

The Gibraltar Government said to me, “You have to understand that it is very much part of our position that we are entirely independent in how we carry through our adoption of these various new proposals”. As far as international illicit finance is concerned, the Treasury should be concerned that several British Overseas Territories—not just these two—have some things to answer on this area. They benefit from UK sovereignty and the UK system of law. In turn, that puts obligations on them to follow much more closely than some do, some of the time, British standards in this respect.

I hope that the Treasury has an active dialogue with the FCDO, which is responsible for the overseas territories, and that it pushes the Foreign Office to ensure that the overseas territories do not, as they have in a number of other areas, say that they will meet British standards— I am talking about transparency in beneficial ownership —then spend much longer than we had anticipated bringing their domestic practices in line with what the UK Government recommend.

I follow my noble friend Lord Purvis in asking some questions about the UAE, which is a major financial centre and has close links with the UK. There are 100,000 British citizens living there, some of them wealthy expats. The fact that the UAE is also on the grey list is a matter of real concern. I am sure that the Minister is aware that the largest donation given to the Conservative Party in the first three months of this year came from someone whose financial interests are centred in Dubai; I understand that the donor is also the treasurer of the Conservative Party and a former Minister in an Egyptian Government. This is just one illustration of how we perhaps ought to pay more attention to the delicacy of our financial and political relations with the UAE. On the importance of Dubai and Abu Dhabi as financial centres, as well as the worries and proper concerns that one has about them, I, alongside my noble friend Lord Purvis, note that the Wagner Group has managed its various transactions and financial arrangements through Dubai; this is not something that we should be happy about at all.

There are a number of questions to answer here. I am grateful for the briefing on the FATF that the Treasury provided for us, but Parliament deserves to be told more about this murky area of finance in which not just the overseas territories but, dare one say it, sometimes our Crown dependencies are caught up and which we ought to be more actively engaged in cleaning up as far as we can.

[Baroness Chapman of Darlington (Lab)]

My Lords, I am aware that we always follow the FATF’s recommendations but, given what we have just heard, it is just as well that we have this procedure as an opportunity to ask the Minister about some issues of concern that arise from the recommendations we are considering. I will not repeat everything that has already been said, because immediately following this we have another SI that took three and a half hours to consider in the Commons and, looking around the Room, I anticipate that it may take a little while this afternoon as well.

This instrument is perhaps relatively straightforward, but I will highlight a couple of the points that have been made in which we are especially interested. On the issue of reputation and our overseas territories, the fact is that Gibraltar and the Cayman Islands are on this list. Do the Government think that this has any reputational impact on the UK? What is the Government’s assessment of that? When this issue was considered in the Commons, providing some kind of support or input from the UK to Gibraltar to move things along was discussed. I do not think that the Minister there gave a particularly expansive response at that point so it might be helpful, if there is an opportunity, to hear from the Minister here today whether a request has been made by Gibraltar and whether any input has been forthcoming from the UK.

I will leave it there for today, given the next SI that we will consider and the fulsome contributions that have already been made by others, which I know the Minister will answer fully.

Cross-Government Cost Cutting

Lord Wallace of Saltaire Excerpts

Tuesday 6th December 2022 Lords Chamber

[Baroness Penn (Con)]

I put it to the noble Lord that there is a cost to not having efficiency and value for money in our services. That means we can deliver less for people for the money that we are putting into them. We want to see it the other way around, and that is the aim of this review.

[Lord Wallace of Saltaire (LD)]

Does the Treasury consider capacity when enforcing efficiency cuts on other departments? Later this afternoon we shall discuss the National Security Bill, which has several clauses imposing a new foreign influence registration scheme, which will lead to a great surge in new submissions to the Home Office, which I suspect it does not currently have the capacity to cope with, so it will need to recruit additional civil servants. The Retained EU Law (Revocation and Reform) Bill will also impose new tasks as they are repatriated from tasks we used to share with our European allies. We know what happened when the Home Office cut police numbers and when the criminal justice system’s budget was cut: capacity decreased and the Government are now having to recruit additional police officers. Does the Treasury think about this or is it simply budget-cutting?

[Baroness Penn (Con)]

Can I reassure the noble Lord that these questions are considered in spending reviews? They are also considered as part of the process of collective agreement when new policy is made between the periods of spending reviews. The noble Lord mentioned the MoJ and the Home Office; they will grow by, respectively, 3.6% and 3.1% a year over this Parliament.