Wagner Group: Sanctions Regime

Margaret Hodge Excerpts

Wednesday 25th January 2023 Commons Chamber

[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.

[Dame Margaret Hodge (Barking) (Lab)]

I have to say that I had never seen such a case of lack of professionalism, lack of integrity and lack of accountability as this one. It absolutely astounded me: I thought it was unbelievable.

Let me say to the Minister that in terms of the way in which such matters are decided, this is not an isolated case. Petr Aven, for instance, has been given a licence, and according to the press it is thought that he will be able to spend up to £600,000 a year on so-called household expenses which include buying and selling Bentley cars and other luxuries. That is just outrageous. By the time the sanctions stop, the resources—the sanctioned assets—will have disappeared.

Let me also say to the Minister that this issue of individual confidentiality does not play here. The Foreign Office publishes a list of the names of the individuals concerned. I therefore think that we have the right to know what went wrong in this particular case, and that the Minister should report to Parliament. I welcome the fact that a review of the OFSI regime is taking place, but that too should be reported to Parliament.

Finally, may I ask the Minister for a commitment that the legal fees general licence will not be rolled over beyond its expiration date of 27 April 2023?

[James Cartlidge]

I have previously answered an urgent question, tabled by the right hon. Lady, on a matter relating to dividends in Russia, and—again—I respect her consistency in respect of a range of points that relate to this issue in one way or another. However, as she knows, I cannot go into the details of the specific case that she has mentioned. There are all kinds of reasons for that, and I think it important that we preserve it. I may be wrong, but I suspect that it would continue under any future Government, because there is very good reason for it. That is why we talk about the sanctions regime in aggregate rather than discussing individual confidential cases.

If we take the overview, we see that this country is doing everything possible. Our position on Ukraine is that we are not directly deploying our armed forces into the theatre, so we have to use every other lever at our disposal, including sanctioning more than 1,200 individuals and 120 entities and freezing assets worth £18 billion. It is a very ambitious sanctions regime, and we should be proud of what we are doing as a country to support Ukraine. We have played a key role in helping it to withstand the Russian invasion, although of course we recognise there is more to do.

Oral Answers to Questions

Margaret Hodge Excerpts

Tuesday 20th December 2022 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

A happy Christmas to everybody.

The latest estimate that I have seen is that the Government’s failure to clamp down on tax havens in our overseas territories and Crown dependencies has cost us £65 billion—almost half what we spend on the NHS, or a third of our education budget. Does the Chancellor agree that our public finances would be in a far better shape, our taxes would be far lower and our tax system would be far fairer if we had cracked down on our tax havens?

[John Glen]

We always need to be vigilant about tax evasion and work closely with the overseas territories and Crown dependencies on those matters. A lot of progress on registers has been made in recent years, and more is due to be made. I will continue to reflect carefully and work with the Economic Secretary on further improvements to get things to where they need to be.

Russia: UK Companies

Margaret Hodge Excerpts

Wednesday 7th December 2022 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on continued involvement by UK companies in Russia.

[The Exchequer Secretary to the Treasury (James Cartlidge)]

I am grateful to the right hon. Lady for her question.

The UK and international partners have moved in lockstep since the invasion to impose the largest and most severe economic sanctions that Russia has ever faced, designating more than 1,200 individuals and over 120 entities. That includes a ban on new outward investments in Russia, and £18.4 billion-worth of Russian frozen assets reported to the Government. On Monday, in alignment with coalition partners, we banned the import of Russian oil and oil products into our markets. In conjunction with partners, we have prohibited UK ships and services from the maritime transportation of Russian oil unless the price paid is at or below $60.

The Government do not comment on individual commercial decisions. The process of divesting themselves of assets in Russia will be complicated for companies, which need to ensure compliance with financial sanctions. However, since Russia’s illegal and unprovoked invasion of Ukraine, we have seen commitments from many firms and investors to divest themselves of Russian assets.

The Government have been clear that we support further signals of intent to divest of Russian assets. In March this year, the then Chancellor—now the Prime Minister—said he welcomed

“commitments…made by a number of firms to divest from Russian assets”,

noted that he

“supports further signals of intent”,

and said that

“there is no case for new investment in Russia.”

That remains the Government’s position.

[Dame Margaret Hodge]

Mr Speaker, thank you very much for granting this urgent question. I thank the Minister for his reply. However, after listening to it, I would simply say to him that the Government have constantly talked about taking back control, and if there is one issue on which they should take back control it is this: ensuring that no British company invests in Russia.

Today is the 286th day of Putin’s invasion of Ukraine. In February, three days after the war started, BP said it

“will exit its 19.75% shareholding in Rosneft”,

Russia’s main oil company. Despite this promise, BP remains one of the largest shareholders. According to the excellent research by Global Witness, it is set to receive £580 million in dividends on the back of bumper profits fuelled by the war. Does the Minister agree with me that it is utterly shameful that a large, publicly listed British company profits from the sale of oil that is funding Putin’s war?

Does the Minister further agree with the words of Mr Ustenko, President Zelensky’s economic adviser? He wrote to BP and said:

“This is blood money, pure and simple, inflated profits made from the murder of Ukrainian civilians.”

BP’s claim that it is locked in as a shareholder is both laughable and easily solved. To put this into perspective, BP’s dividends are equivalent to over one quarter of the total military and humanitarian aid provided by the UK Government to Ukraine.

Does the Minister agree with Mr Ustenko that BP and any other company still invested in Russia’s fossil fuels must donate the entirety of its wartime profits to the victims of the war? Does he further agree that it is our duty to ensure that companies are not damaging Britain’s national interest? Will this Government therefore work to persuade BP to donate the entirety of its Russian dividends to the reconstruction of Ukraine, and if that fails, will the Minister commit to acting and forcing it to do so through a special windfall tax?

[James Cartlidge]

I am grateful to the right hon. Lady and pay tribute to her for her long-standing record of holding Governments to account on issues such as sanctions and international finance—I was previously Justice Minister when we had the strategic lawsuits against public participation issue. She has been very active, including across party lines.

I entirely understand why people feel so strongly on this subject, and I feel strongly too—what Putin has done in Ukraine is appalling—but I am not going to comment on a specific UK company or taxpayer or their commercial decisions. I have set out the range of measures we are taking, and it is important to stress that while we all want companies that have committed to divesting to do so, there are of course issues. I do not say this with specific prejudice to any individual, firm or company, but, for example, should a firm divesting from Russia by selling its shares sell them in such a way that they returned to an individual entity that was sanctioned, there would rightly be condemnation of that. This is not a straightforward process—and I repeat that I do not say that in reference to any specific company.

I totally agree that we should do everything possible to support the people of Ukraine, and we can be very proud of the enormous effort our country has made. The right hon. Lady rightly talked about our duty, and I believe we have a duty to support Ukraine. We are second only to the United States in the amount of aid we have given to the people of Ukraine, now totalling over £6 million, and, as I understand it, we have been training its soldiers—22,000 of them—since 2015. This country has done its bit in relation to Ukraine. We are proud of that, and of course we want to do more and go further, which is why we work with our partners; that is why only on Monday we announced a decision in partnership with G7 states and Australia in relation to Russian oil across the piece. We have a record of taking decisive action, and in terms of the Treasury, of the most powerful sanctions against Russia on record, which is hitting its economy. We of course have no dispute with the Russian people, who will feel the impact of that, but we are doing everything possible, bar direct military action, to support the people of Ukraine.

Autumn Statement

Margaret Hodge Excerpts

Thursday 17th November 2022 Commons Chamber

[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.

[Dame Margaret Hodge (Barking) (Lab)]

The Chancellor claimed in his statement that he was being fair and protecting the vulnerable. I think that those claims were false and that his measures simply entrench inequality. Freezing income tax bands hurts low earners much more than high earners, and the real-terms cuts to public services hit the poorest and the most vulnerable. He had choices. Why could he not tax income enjoyed from wealth at the same rate as income earned from work? Why could he not reform national insurance so that high earners and people of pensionable age pay a fair contribution? Why did he not address the inequities of the council tax system, whereby a Hartlepool homeowner whose property is valued at £150,000 pays more in council tax than a Westminster homeowner whose property is worth £8 million, and why oh why did he not insist that His Majesty’s Revenue and Customs does something about the £14.4 billion that it loses every year through avoidance and evasion? Does the Chancellor accept that his callous cuts and harsh hikes will do nothing to fix our unfair tax system?

[Jeremy Hunt]

I have enormous respect for the right hon. Lady, but I do not think that those comments really did her justice. These were £11 billion of spending increases for the NHS and schools, which will make an enormous difference to schools and hospitals in her constituency, as they will in mine. On many of her points, I have some agreement with what she said, and we have actually moved in her direction—on wealth taxes, for example. This is, I think, the biggest ever fall in the capital gains tax allowance. It is a very big change. With respect to high earners, we have had a big tax increase for anyone on the 45p rate—£1,000 a year for anyone on over £150,000—and we are publishing distributional analysis that shows the impact of all these decisions, which shows that the biggest gainers are people on low incomes.

Economic Update

Margaret Hodge Excerpts

Monday 17th October 2022 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I think the country is feeling a sense of relief that trickle-down economics this time has been so quickly abandoned, but there was one element in the mini-Budget that the new Chancellor did not address: investment zones. We have great evidence all over the place about how, as a mechanism for encouraging growth, jobs and prosperity, that has failed from the Thatcher years onward. All that happens is that they are incredibly expensive, we lose income from them, they only lead to the transfer of jobs from one poor area to another, and they are a massive opportunity for every kleptocrat, oligarch and criminal to launder money into the UK. Will the Chancellor abandon that policy, too?

[Jeremy Hunt]

I have a great deal of respect for the campaigning the right hon. Lady has done over many years against people illicitly hiding wealth and not paying their share of tax. I totally support the benefits that investment zones can bring, but we will implement that policy in a way that learns the lessons of when similar models have been tried in the past and we will make sure they are successful.

The Growth Plan

Margaret Hodge Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

My hon. Friend will know that, through growth, we will get more tax receipts, which will actually reduce the net debt to GDP ratio over the medium term. That is 100% what we are focused on. He is right that in the past we have tended to reduce expenditure on capital projects. We must not do that in the future if we are to pursue our levelling-up goals.

[Dame Margaret Hodge (Barking) (Lab)]

We expect our Government to implement policy based on evidence. As a student of history, the Chancellor will be familiar with Anthony Barber’s disastrous economic experiment in the 1970s. It was the same thing: low tax, deregulation and a desperate quest for growth. All that did was lead to the Barber boom, followed by a big crash and a three-day working week—it turned to bust. The Chancellor is risking all our livelihoods, he is risking our economy and he is risking our public finances on the altar of a discredited ideology. A tsunami of tax cuts and giveaways to 80,000 Conservative members who voted the Prime Minister into office, with little for the 80% of Britons who are struggling and facing a tough winter ahead, is outrageous. According to Einstein, insanity is trying to do the same thing over and over and expecting different results. Can the Chancellor not see that his Budget is madness?

[Kwasi Kwarteng]

No, I think it is perfectly sane to want to grow the British economy by creating incentives. The Barber boom—the right hon. Lady is a student of history—was driven primarily by very loose monetary policy. It was essentially a demand pump-priming experiment. This is the opposite of that. What we are trying to do is create incentives and look at supply-side reform. It is a completely different model.

Finance (No. 2) Bill

Margaret Hodge Excerpts

Committee stage
Wednesday 1st December 2021 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I find the Minister’s introduction quite extraordinary, given that money laundering, fraud and economic crime are on the rise even on the National Crime Agency’s own figures. Has she had regard to the revelations in, most recently, the Pandora papers or the FinCEN papers, where it is seen that Britain, more than any other jurisdiction, is at the heart of economic crime, fraud, corruption and money laundering?

[Lucy Frazer]

The right hon. Lady is very committed and has done a lot of work in this area, but I would point out that the Government have introduced a number of measures to tackle fraud. Since 2010, the Government have introduced more than 150 new measures and invested more than £2 billion extra in HMRC to tackle fraud, and that action has so far secured and protected more than £288 billion-worth of revenue. This is money that would otherwise have gone unpaid.

We recognise there is more to do. Although most promoters of tax avoidance schemes have been driven out of the market, we know a determined group remains. The Bill addresses that group by disrupting their business models, by providing taxpayers with more information on schemes and by targeting offshore promoters. The Bill also takes steps to combat electronic sales suppression and tobacco duty evasion, ensuring everybody pays their fair share.

This Government have a strong record of tackling both economic crime and non-compliance in the tax system, and the Bill builds on the steps we have already taken to protect UK security and prosperity.

[Dame Margaret Hodge]

There is a difference between the action taken on tax avoidance and the growth of economic crime, money laundering and all that goes with it, such as the funding of terrorism and drug smuggling. I have become far more concerned about that in recent years, because Britain has become the jurisdiction of choice. Although I accept that action has been taken and that HMRC officials are working hard to tackle tax avoidance, can the Minister really justify that the work is sufficient when big tech companies such as Amazon and Google get away with paying such minuscule amounts of tax on the profits they make in this jurisdiction?

[Lucy Frazer]

The right hon. Lady conflates a number of points. She knows that HMRC and the Serious Fraud Office play an important role in cracking down on crime. Work is ongoing, and the Bill does two things: it introduces the economic crime levy, which will bring in £100 million; and it tackles promoters who sell schemes. We have an economic crime plan that has a large number of measures that address this area in broader terms.

Clauses 53 to 66 introduce the new economic crime—anti-money laundering—levy. As I mentioned, the levy will aim to raise about £100 million per year. Funds raised will help to support action to combat illicit finance in the UK while providing the Government with greater scope to tackle emerging risks and improve enforcement across the economy.

The levy will take effect from April 2022, with the first payments collected in the financial year 2023-24. The levy will be paid as a fixed fee, based on a business’s UK revenue. It will be collected by one of three statutory anti-money laundering supervisors: HMRC, the Financial Conduct Authority or the Gambling Commission. We have ensured that it is those with big pockets that will pay the levy. Larger firms will be making this contribution. Small firms with an annual UK revenue of below £10.2 million will be exempt. Out of approximately 90,000 anti-money laundering regulated businesses, about 4,000 organisations will be in scope. It is expected that the levy fees will not be more than 0.1% of a business’s UK revenue.

On new clauses 5, 12 and 15, which would require the Government to review clauses 53 to 66, that includes evaluating whether the levy is operating effectively, its impact on the tax gap and its effectiveness in achieving its objectives under different levy rates. The Government have already agreed to conduct a wide-ranging review of the levy by the end of 2027 and to publish an annual report on the levy, which is expected to provide a breakdown of how the levy will operate in the forthcoming year, including the levy rates. The Government also already publish information year on year on the tax gap, including the parts of it that relate to avoidance and evasion, and these figures bear witness to the Government’s successes over time in driving down the amount of tax lost to avoidance and evasion. An additional review would not add value and I urge Members to reject these clauses.

Let me now turn to clauses that clamp down on promoters of tax avoidance, the first of which is clause 84. It allows HMRC to petition the courts to wind up a company or partnership that promotes tax avoidance schemes when it believes it would be in the public interest to do so. By removing those businesses, we will hamper promoters’ ability to sell dubious avoidance schemes, and we will provide vital protection to taxpayers and the tax system. This power uses Insolvency Act 1986 procedures and maintains all current safeguards, including the right to make representations during the court hearing and the right to apply to the court to rescind the winding-up order or to stay the winding-up process. This is a firm but proportionate approach.

Clause 85 allows HMRC to share information about promoters and the tax avoidance schemes they recommend, as well as those connected to them. The measure will allow HMRC to tackle promoters who tout these dubious schemes. Under this measure, HMRC will be able to publish promoters’ details on gov.uk and in other appropriate places. It will also be able to contact taxpayers and other interested parties directly. These steps will allow taxpayers to better understand the risks of tax avoidance schemes and to steer clear of them. I recognise that this is a significant change, but legitimate businesses and individuals have nothing to fear, and the legislation has been carefully designed with safeguards in mind. For instance, HMRC will be required to offer all those it intends to name a 30-day opportunity to make representations as to why they should not be mentioned.

[Dame Margaret Hodge]

I welcome these attempts to secure responsible behaviour on the part of promoters. Does the Minister agree on the issue of personal services companies, which are being used now in a way that Parliament never intended? We always wanted plumbers to set up new businesses, but we did not want MPs to use personal services companies to avoid tax. Does she agree that it would be appropriate for HMRC to bear down on the abuse of personal services companies? Will she be bringing forward further legislation to ensure certainly that MPs do not take advantage of what has become a tax avoidance scheme?

[Lucy Frazer]

Of course, HMRC has a duty to look into all tax matters. I wonder whether the right hon. Lady was present for the previous debate, in which we talked about why we are introducing the increased social care levy in respect of the payment of dividends. One of the reasons that I pointed out was to ensure that people did not take advantage of being paid by a company through dividends rather than paying income tax.

New clauses 7 and 14 seek to require the Chancellor to publish a review on the impact of clause 85. New clause 7 would require the commissioning of an independent assessment of the information published by HMRC about disguised remuneration loan schemes. Such a review would consider HMRC’s approach to what is referred to as the loan charge scheme and consider recommendations for altering that approach. Under the new clause, the Government would be required to state to the House their response to the recommendations.

The Government already regularly review and report on their progress in tackling disguised remuneration, including on action taken against those who promote tax avoidance schemes. For example, only yesterday, HMRC published its annual report on the use of marketed tax avoidance schemes and earlier this month it published its annual report and accounts. The information is therefore already in the public domain and will be updated in future. The Government introduced the loan charge to tackle the use of disguised remuneration schemes and it has already been the subject of an independent review that concluded less than two years ago. The Government accepted all but one of that review’s 20 recommendations. A further review is therefore unnecessary and I urge Members to reject the new clause.

New clause 14 states that any assessment

“must include consideration of the impact of the publication of a register of overseas property ownership upon the promotion of tax avoidance”.

The Government continue to make progress on work to set up a public register of beneficial owners of overseas entities that own UK property. That will enable us to combat money laundering and achieve greater transparency in the UK property market. The Government remain committed to those reforms, so the new clause is unnecessary and I urge Members to reject it.

Clause 86 allows HMRC to seek a court freezing order to freeze a tax avoidance scheme promoter’s assets. This would happen when HMRC has applied or is about to apply to a tribunal in England and Wales to charge a penalty. The measure will make sure that promoters face the financial consequences of their actions.

Clause 87 mirrors for Scotland the provisions in clause 86, clause 88 does the same for Northern Ireland, and clause 89 provides for some definitions and interpretations. The clauses I have outlined target the most persistent promoters, who repeatedly go to extreme lengths to sidestep the rules and frustrate HMRC’s efforts to tackle their behaviour.

Clause 90 introduces a new penalty that is chargeable on UK-based entities that facilitate tax avoidance schemes that involve offshore promoters. It aims to deter the enabling of such schemes by UK entities by imposing a penalty of up to 100% of the total fees earned by all those involved. This significant penalty reflects the seriousness of such behaviour.

Clauses 27 and 28 relate to the diverted profits tax, which was introduced in 2015 to target large multinationals that try to avoid tax by redirecting their profits away from the UK. The tax has been hugely successful in its main aim of changing corporate behaviour; in fact, it has helped to secure £6 billion in extra taxes to fund our public services.

Clause 27 will ensure that the UK can meet its tax-treaty obligations by allowing HMRC to implement a mutual agreement procedure decision to alter a diverted profits tax charge, should that situation arise.

Clause 28 introduces technical amendments to ensure that the diverted profits tax legislation operates as intended. First, it will ensure that HMRC cannot issue a corporation tax closure notice until after the diverted profits tax review period has ended. This means that the taxpayer must resolve their profit diversion before a diverted profits tax charge can be displaced. Government amendments 2 and 3 ensure that the clause applies as intended to those diverted profit tax cases where a foreign company has structured its UK activities to avoid them meeting the definition of a permanent establishment. This is in line with the Budget announcement. Secondly, this clause will extend the period in which a taxpayer can amend their own company tax return to obtain relief from diverted profit tax.

--- Later in debate ---

If the Government are serious about this, they will bring the Bill forward now. They control the time; they are the Government; they alone can do this. The delay can only lead one to wonder who benefits from it: could it be the same oligarchs who fill the coffers of the Conservative party?

[Dame Margaret Hodge]

I will speak to new clause 15, which stands in my name and those of right hon. and hon. Members from across the House, and I rise in support of new clause 5, which was moved so eloquently by my hon. Friend the Member for Ealing North (James Murray). New clause 15 is complementary to the first part of new clause 5.

I shall start by making a general observation. It seemed to me, when the Minister spoke, that either she does not completely understand what is going on in the world of economic crime, particularly in relation to the UK’s position on that; or there is a deliberate attempt by the Government to downplay it so that they do not take the very necessary action that is available and, as SNP Members and the Labour Front Benchers said, is probably as oven-ready as any legislation that we have. The Government are simply choosing not to implement it.

I will give an example of how the impact of economic crime is filtering and seeping into our politics. There are two Russian kleptocrats, Viktor Fedotov and Alexander Temerko—both of whom have questionable backgrounds and whose money has questionable origins—who are involved in a company called Aquind, which is trying to build an energy cable from Portsmouth to France. It is a controversial proposal. As for the origins of the money that they are using to fund this project, for me, it is money that has probably been stolen from the Russian people. That is really where that money comes from.

What is particularly disturbing is that when we look at the accounts of Aquind, the company, and the donations being given by one of the individuals, Alexander Temerko —the other one hides himself—to Conservative parties and to Conservative Members of this House, we see that it is enormous. There is a bit of time this afternoon so I am going to take the liberty of reading through the list. The right hon. Member for South West Surrey (Jeremy Hunt) has received money on a number of occasions from Aquind. The right hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) has received money from Aquind of Russian origin. The hon. Member—

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

Order. I will just check that the right hon. Lady has informed other Members that she was going to mention them.

[Dame Margaret Hodge]

Thank you, Dame Rosie; I have not, because I did not realise that there would be so few people in the House this afternoon that I would have the opportunity to do so.

What I can say is that 24 Members of Parliament—all of them Conservative Members, many of them Front-Bench Members, some of them with ministerial positions—have received money from Aquind or from Alexander Temerko. I can also tell the House that further parties have received such money and that some former MPs and local parties have received money. I hope that is in order, and thank you for correcting me, Dame Rosie. The impact of economic crime and economic activity on our politics is a worrying trend that has been growing exponentially over recent years.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I am listening with rapt attention to my right hon. Friend’s remarks. Does she not think it strange that there is a Member of the House of Lords with very close connections to Russia—indeed, he is a Lord of Hampton and of Siberia—but we never hear from him and he is never seen? Whatever the story is of great interest in Russia, he is never on the media in this country.

[Dame Margaret Hodge]

My hon. Friend makes a really important point.

I think, having taken guidance from you, Dame Rosie, that I am at liberty to mention the political parties. Am I correct?

[The First Deputy Chairman]

The right hon. Lady can mention former Members and the location of political parties. What she cannot do without having informed them previously—it would be very discourteous—is to refer to existing Members of the House.

[Dame Margaret Hodge]

I am very grateful for the advice you have given me, Dame Rosie. I apologise, and I will write to the Members I had mentioned before you drew that to my attention.

If I can mention the political parties, they are those in Reading West, The Wrekin, Staffordshire Moorlands, Morecambe and Lunesdale, North Somerset, Great Yarmouth, Selby and Ainsty, Northampton North, Colchester, Daventry, Corby, Vale of Clwyd, Berwick-upon-Tweed, Richmond (Yorks) and North Swindon. If I can mention the former MPs, and these are quite important, there is one in particular—the former MP for Stockton South, James Wharton, who was of course very involved in the campaign—

[The First Deputy Chairman]

Order. I have a little further clarification. If any of those Members are in the House of Lords, it is not in order to refer to them. I know it is quite complicated, but it is best to get it right.

--- Later in debate ---

[Dame Margaret Hodge]

Well, I will also write to that individual, having transgressed. I apologise for that, Dame Rosie. I think I am okay on the other two: one is Guto Bebb, the former MP for Aberconwy, and the other is Mark Field, the former Member for Cities of London and Westminster.

I read out that list partly because we have the time to do so, but also to demonstrate how absolutely critical it is, I say to the Minister, that we start tackling economic crime seriously in this country. If we do not, we are in danger of allowing this to seep into our politics and seep into the public domain, and far from being a trusted jurisdiction, we will become a jurisdiction that is not very different from others to which we all too often preach that they should tackle the corruption endemic in their Administrations—we will become one of them.

Just to put that further into context, we are now the jurisdiction of choice for far too many kleptocrats, far too many criminals, far too many people who avoid tax and far too many people who launder money. Money laundering in itself is an activity that leads to the funding of terrorism, drug smuggling and all sorts of other crimes that we and the Government ought to want to bear down on in a very firm way, but we are just not doing so. The National Crime Agency has a figure of £100 billion that it thinks is laundered into the UK each year, but I think that is a very conservative estimate. It is probably plucked out of thin air a little bit, and I think the real or true figure is probably much greater. We only have to look at Moody’s credit rating, on which we have gone down a notch. One of the reasons for that happening is that it has argued there has been a

“weakening in the UK’s institutions and governance”.

To come back to my new clause 15, it is partly about our enforcement agencies, but it is also about the way in which all Government agencies tackle economic crime here.

The evidence of the toothlessness and the timidity of our enforcement agencies is overwhelming. In part, that is because of the regulatory framework in which they have to operate. As I have said time and again from these Benches, that deregulation started under the Conservatives and was continued by the Labour Government. Both parties take responsibility for that deregulation, and it is now time to revisit the issue and toughen up the regulations, so that we have an appropriate regulatory framework that can tackle not just tax avoidance and evasion, but the growth of the economic crime that is so insidious.

There is also pathetic enforcement by all our agencies. In part that is due to a lack of money, but I also believe that a lack of political will lies at the heart of it. We have only to look at the United States, ironically, which has a strong and clear resolve that it will pursue those guilty of financial crime and fine them heavily. Let me provide two examples of that. In 2019, the USA pursued and secured 25 penalties, which gave a total of $2.29 billion in revenue secured back to the public purse. In the UK, in the same year, we pursued and secured only 12 penalties, totalling £338 million.

Let me take one example of a British bank, Standard Chartered. In 2019, it was fined in both the USA and the UK, not only for its poor anti-money laundering controls, but for breaking sanctions in relation to Iran. Here in the UK, the Financial Conduct Authority fined it a total of £102 million. In the USA—this is a British-based bank, not an American bank—it was fined £842 million. There is just a different approach between the USA and the UK in pursuing those who are guilty of economic crime and should be paying back to the public purse. Our role in money laundering and economic crime is growing. It is not just economic crime here in the UK; it is economic crime facilitated by the UK because of our regulatory framework.

The hon. Member for Glasgow Central (Alison Thewliss) spoke about Companies House, which is a vital ingredient in the leaks of all the documents we get. Someone can pay £12 to form a company in the UK. Endless people from all over the world use UK formation to form shell companies, which they then use to create complex financial structures that will facilitate money laundering and economic crime. We have seen that in a regular flow of leaked documents, and I will talk about two. The Financial Crimes Enforcement Network files came out in 2020, showing that $2 trillion was moved by global banks in just under 20 years between 1999 and 2017. That movement gave rise to suspicious activity reports, which banks have to provide to the American authorities when they have a red flag about a transaction. More UK companies were cited in that tranche of leaks than companies from any other country, showing the concentration of economic crime in the UK. Indeed, 3,267 of the companies cited were UK shell companies.

Formation agencies are one of the things that we do not regulate properly. We do not enforce the legislation strongly enough, and four formation agencies had created more than half of those UK shell companies. The sort of thing that happens is that a limited liability partnership is established and registered at the Belgian address of a dentist. A young worker in north London was paid £800 a month for his flat’s address to be used for the registration of companies, and when he gave up doing that, the same address was used by a cleaner who worked in Leicester. Underlying that is one example when J. P. Morgan allowed a company to move more than £1 billion through a London account. It later emerged that that company was probably owned by a mobster on the FBI’s “Ten Most Wanted” list. That is the sort of facilitation of economic crime that we allow to happen.

I do not want to take too much of the House’s time, but I turn to the Pandora papers, the largest cache of documents we have ever received. Again, the UK lies at the heart of everything that was revealed in those papers. Others have talked about the secret property transactions that have taken place, with £4 billion identified in the Pandora papers. There are more UK citizens than citizens of any other country cited in that tranche of leaks. The relationship between the UK and our tax havens is central to the facilitation of economic crime, and again we see the weak and toothless enforcement agencies.

That brings me to our new clause 15. The evidence for the need for well-resourced and determined enforcement is overwhelming, but the money to be raised by the levy is woefully inadequate. As the Minister said, it will be £100 million. I had a meeting recently with personnel from major banks who are responsible for implementing anti-money laundering provisions. They said that they—the regulated financial sector—spend £49.5 billion on financial crime compliance. That gives us an idea of how little our £100 million raised from the levy is.

We must act within the constraints of the Bill in tabling new clauses, but we think £100 million is a pittance. Far more should be raised—it should be doubled or tripled—and I think that case would be made if a review were undertaken. If the Minister is confident that she is right—if she is confident about everything she said in her opening remarks—she will not shy away from a review that could then be considered in the House. I often think that Ministers should think about propositions that are tabled; they should not just reject them because they are not their ideas, but should really consider whether they are worthwhile on their own grounds. In this case, I urge the Minister, if she is really committed to tackling economic crime, money laundering and the rest, to do something.

I suppose the only thing I would say about the new levy, while I welcome it, is that for the first time ever we see the Treasury agreeing that there should be a hypothecation of tax to spend on a particular issue. I always thought it was Treasury orthodoxy that there should be no hypothecation. In this case, we have broken that orthodoxy; the money is going to be spent on fighting money laundering. I welcome that change. I hope to see it in other areas where a hypothecated tax could do a lot to create a fairer society.

I also think that the bands are unfair. Why should a company with a revenue of £10 million pay £10,000, while a company with a revenue of £1 billion pays only £250,000? We need a more progressive system that reflects the revenue that these companies get.

Simply increasing the levy is not enough; there have to be other measures. We need to put a cap on the potential costs of litigation that the enforcement agencies will engage in. All too often, the potential cost to an agency stops it taking action that would bear down on economic crime. We have seen that with unexplained wealth orders, where the agencies started off with a great burst of energy, and then when they lost one case and got a huge bill, they stopped doing anything. We could do away with the entitlement to secure costs, except in cases where there is no reasonable justification to prosecute. I think we could provide a financial incentive to the enforcement agencies to litigate by saying that any money that they raised through action could come back to them to be used.

All that could be reviewed, and the level of the levy could be increased. I would be really heartened if, just for a change, Ministers listened to the strength of the argument and accepted new clause 15, with its cross-party support. Then, hopefully, we could come back and see who is right and who is wrong.

[Lucy Frazer]

I will take a few moments to respond to some of the points raised in the debate on this group, starting with those made by the hon. Member for Ealing North (James Murray). I am very grateful for his welcome of the economic crime levy. He asked for a review, but, as I mentioned, we have already committed to a review. A review will take place by the end of 2027.

Working People’s Finances: Government Policy

Margaret Hodge Excerpts

Tuesday 21st September 2021 Commons Chamber

[Bridget Phillipson]

I am grateful to my hon. Friend. I pay credit to her for all the work that she has been doing to highlight these issues and the impact on families and children, and the much bigger economic impact when we do not get our childcare system right in this country.

Three thousand childcare providers have closed since the beginning of 2021 alone, denying families access to the childcare that parents need and denying children access to the early education that sets them up for life. Why is that? One major reason, as the Early Years Alliance has highlighted, is that information released through freedom of information requests makes it clear that Ministers have been knowingly underfunding early years providers, driving up costs while driving down quality. Childcare should be a vital part of our national infrastructure that should help our whole economy to grow and to recover. Yet, as my hon. Friend points out, Britain has some of the highest childcare costs in the developed world. Childcare must be affordable and accessible to families. If more people can work, our collective output will be greater. It is right for children, it is right for families, and it is right for our economy.

Incomes are going down, prices are going up, taxes are rising, rents are up, the cost of childcare is up, and petrol and diesel are more expensive again too. I represent a seat where there are no passenger rail services. If people live far from their jobs, they drive to work or get the bus. Fuel prices feed fast enough into the squeeze on living standards, and last week petrol was over 135p a litre. It is more than £10 more expensive to fill up the average tank than it was when the spending review was agreed in November. That makes an enormous difference to families when every single penny counts.

Incomes are down, prices are up, taxes are rising, rents are up, the cost of childcare is up, fuel is up, and rail fares are set to rise too. My hon. Friend the Member for Oldham West and Royton (Jim McMahon) has set out the next steps we expect in the Government’s hammering of working people. With rail prices tied to July RPI inflation, and with inflation as high as it is, the cost of season tickets will rocket by almost 5% for long-suffering rail users next year—the biggest single increase in a decade. Again, it is not just the leap now but the decade of complacency before that tells the full story. The average commuter faces paying almost £3,300 a year for their season ticket—50% more than when the Conservatives came to power in 2010. Average fares have risen nearly three times faster than wages, and they are on course to rise again.

It is not just that families can afford less on food, energy, rent, childcare, travelling and commuting but that there is less to afford. Restaurants have closed. Shelves are empty. Shortages are real, and biting not just on families and their weekly shop but on our supply chains for industries too. What lies behind that? Not enough HGV drivers; long queues at our ports; more paperwork at the border; no agreement on food, animal and plant health standards when we left the EU; shortages of refrigerant, putting meat supply chains at risk: on issue after issue the Government were warned and warned again.

It is only three months since Ministers told the industry that concerns over HGV shortages were “crying wolf”. Last Christmas the roads around many ports were clogged for days. I meet businesses that have had to scale back ambitions for global expansion because it is not even worth their while sending goods to Northern Ireland any more. Again, these issues were not just foreseeable; they were avoidable. They were foreseen; they could have been avoided.

People are having less money to spend; having to spend more of what little they have paying more on tax, transport, fuel, rent and childcare; and having less in the shops than they can buy. There is a word for that: impoverishment. More and more people are being pushed into poverty. It is the policy of this Government to stand by and watch, and it will be the policy of the next Labour Government to turn it around.

[Dame Margaret Hodge (Barking) (Lab)]

I have listened very carefully to my hon. Friend’s really excellent exposition of a whole raft of issues that have challenged living standards, and what is interesting is that not one Government Member has got up to challenge any of the assertions that she has made. Does she agree that that demonstrates that they have nothing to say and that the slogans they use to try to describe their actions belie the truth of the increased division and poverty that they are creating?

[Bridget Phillipson]

I am grateful to my right hon. Friend, who did so much in government to tackle issues of poverty and of child poverty in early years, in particular.

Conservative Members will have heard the same from their constituents as I have heard from mine, which is that life is getting tougher and they just cannot understand why, in the face of rising cost pressures, the Government are putting up their taxes, cutting the support that is available and making life harder. My constituents simply cannot understand why the Government are prepared to stand by and allow that to happen.

--- Later in debate ---

[Mr Clarke]

We have always been clear, and it has long been the practice, that a proportion of social care bills are met through council tax, and that is the right thing to do. We are saying that, additionally, we need a credible solution to properly fund social care in the long term, so that people can have the dignity in their old age that they deserve. This is a complex and challenging area of policy. While we have stood up and said that we will do the difficult thing and actually increase taxes so that there is enough money for the system not to fall over, Labour simply plays politics with the issue. Voting against what was a progressive, broad-based tax increase to properly fund adult social care was an irresponsible choice, and in their hearts Labour Members must know it.

The new health and social care levy is a £12 billion a year injection into the NHS and social care that will benefit people of all ages and backgrounds. The decision to raise taxes was tough—of course it was; we believe in a low-tax economy—but it was the responsible thing to do given the impact of covid on the country’s finances. Most importantly, that decision was fair: the levy is progressive because those earning more will pay more, and businesses will share the burden.

[Dame Margaret Hodge (Barking) (Lab)]

I congratulate the right hon. Gentleman on his appointment. The point is not whether extra money needs to be raised to fund the NHS or indeed social care; the point is how it is to be raised. National insurance and council tax are regressive, not progressive, taxes, but there are alternatives such as reform of national insurance, looking at assets as well as income, or looking at regional differences. There is a whole raft of options that the Minister and the Government could have considered; why did they not do so? Why have they chosen a regressive system for raising additional money?

[Mr Clarke]

We did look at this, and Treasury analysis showed that lower-income households will be large net beneficiaries from the package announced by the Prime Minister, with the poorest households gaining the most as a proportion of income. This Government are unafraid to make tough choices in order to safeguard the nation’s finances. The difficult decisions that we have made to increase corporation tax rates and temporarily reduce overseas development assistance—which I know will be considered the right decision by my constituents on Teesside—are clear illustrations of our approach on this front.

As a final point, I remind Members that while we have taken extensive action to safeguard workers’ finances during the pandemic, our record of achievement stretches much further back. Indeed, according to official statistics there were 1 million fewer workless households at the end of 2019 than in 2010, while income inequality was lower going into the pandemic than in that year as well. In fact, over the past 11 years successive Conservative Governments have striven to keep the cost of living in check for millions of households.

Let me give the House some examples. Fuel duty has been frozen for 11 years in a row, cumulatively saving the average driver £1,600. The energy price cap has protected 15 million households in the two years since its launch. We have nearly doubled the personal allowance over the last decade, making it the highest basic personal tax allowance of all countries in the G20 and one of the most generous internationally. In combination, our changes to the national living wage, personal allowance and national insurance currently leave a full-time national living wage employee £5,400 better off in cash terms compared with 2010. I am proud of that, and I think all Conservative Members should be. These measures are just part of a record of achievement that has made a real and lasting difference to people’s lives.

Health and Social Care Levy Bill

Margaret Hodge Excerpts

2nd reading
Tuesday 14th September 2021 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I hope that the hon. Member for Yeovil (Mr Fysh) will join the Opposition in the Lobby tonight given what he has just said in his contribution.

We should give credit where it is due. We are starting a debate not on whether we can rescue our broken health and social care services, but on how we do so. These services were damaged not just by covid, but by a decade of savage cuts. Tragically, the Government are flinging away this once-in-a-lifetime opportunity to do something that will endure, that will tackle the underlying problems facing these critical services, and that will be fair to us all—whatever our age, wherever we live and whatever our income.

These shambolic proposals will not meet the needs of the elderly and disabled who depend on social care. They will not properly protect our NHS. They will further ravage struggling local authorities, and the tax proposals are needlessly regressive.

I wish to focus on the tax. The health and social care levy is an unfair hike that will hit younger working people the hardest.

[Taiwo Owatemi (Coventry North West) (Lab)]

Does my right hon. Friend agree that it is completely unfair that a graduate nurse who works a night shift as an Uber driver now faces a £12,500 tax hike over their working life due to this new levy? That is the reality facing many of my constituents. It is high time that we start calling this measure what it is. This is not a social care levy; this is the workers’ tax.

[Dame Margaret Hodge]

My hon. Friend makes the point very powerfully. I was going to illustrate it more generally by saying that families whose personal allowance will be frozen, such as the one she mentioned, and who lose the £20 a week from universal credit cuts—the very families that the Government proclaim they want to level up—will suffer.

Do not just listen to me. I am going to re-quote the quotation that my hon. Friend the Member for Ealing North (James Murray) used in his excellent speech. Listen to what the Government’s tax authority, HMRC, says:

“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”

Is that what the Government really want?

Half the revenue will be paid by people who are under 45, most of whom will be hit by a 10% rise in NICs. That is regressive. National insurance kicks in at a lower level of earnings than income tax. That is regressive. The self-employed pay a lower rate. That is regressive. Income from assets such as rent from property remain untouched. That is regressive. And squirreled away in the policy document, the Government say that they expect that

“demographic and unit cost pressures will be met through council tax…and long-term efficiencies.”

That means further cuts and a hidden hike of the outdated council tax—a tax that hits those in Barking and Dagenham harder than those in Kensington and Chelsea. That is also regressive.

I am rather tired of being told by the Government that there is no alternative. There are plenty. For a Government committed to fairness between individuals, fairness between generations and fairness between income secured through wealth as well as work, there is a raft of better ways to fund health and social care. Put a penny on income tax and equalise rates for dividend and income tax: £13 billion. Equalise capital gains and income tax rates: £14 billion. Or, as suggested by academics Advani, Summers and others, plug the unfair gaps in national insurance by extending it in full—not just the levy, but all of it—to all investment income and working pensioners: £12 billion. If we scrapped the upper earnings limit and equalised the rates of NICs paid between high and low earners, we would not just raise enough to meet roughly the same amount as the Government propose; we could cut the main rate of NICs by 1.25 percentage points.

This unfair plan is simply not fit for purpose. The numbers do not stack up. The poor will pay for the rich. The young will pay for the old. The struggling tenant will pay for the wealthy landlord. The asset-poor worker will pay for the asset-rich retiree. Make no mistake: these are political choices—choices that fail working people, fail our NHS and fail those in desperate need of quality social care. I cannot support them.

Finance Bill

Margaret Hodge Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

I will also bear in mind what you have said, Madam Deputy Speaker, and keep my comments fairly brief.

I wish to start with the words of the US Treasury Secretary, Janet Yellen. She said:

“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids…It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”

That is something that this Government ought to be getting behind, as it makes absolute sense. It is exciting to see that the Biden plan for a global minimum corporation tax rate is gathering pace. It is reported that the G7 is close to a deal, perhaps paving the way for an OECD deal later on in the year. The action is described in the Financial Times as

“the largest shake-up in corporate taxation for a century.”

As the shadow Minister set out, the Government have been ducking questions on this and ducking responsibility. It feels to me at the moment that an agreement will take place in spite of the UK Government’s hesitancy—less global leadership, more like pulling teeth. Why would the UK Government be in favour of the types of profit shifting that this international co-operation is trying to stamp out? Why would they let our businesses be undercut? Why would they forgo valuable tax revenues?

Our new clause 12 is asking the UK Government to prepare a report on an OECD agreement, which seems very much like the direction of travel, as it would cover 135 countries and the largest corporations in the world. It is important that the UK Government fully understand the impact of such an agreement on each and every part of these islands: on business investment, employment productivity, GDP growth and poverty. The impact of not reaching a deal has been included in new clause 12, too, as it is important that we can fully understand the impact should the UK pursue some kind of crazy isolationist stance against this global growing consensus.

The SNP has great sympathy with new clause 22 and amendment 31. Those using tax havens and with a history of corporate tax avoidance should not seek to obtain benefit from schemes intended to support businesses that already pay their fair share. I ask Treasury Ministers what safeguards they intend to put in place if they do not accept these sensible and logical amendments.

I am glad that, in Government amendment 2, there is some recognition of the issues facing those who have background plant and machinery in leased properties, allowing them to qualify for the super deduction. I remain hugely frustrated that there is yet to be any wider support and any wider recognition of the many businesses both involved in leasing and those that lease machinery themselves. I seek assurances from Ministers that they will continue to hold the door open on this issue and to look at it, because there are so many companies that would benefit from the super deduction if it were not for the fact that they have always leased machinery. They contribute hugely to the productivity of this country and there should be some recognition of that within the Government’s proposals.

[Dame Margaret Hodge (Barking) (Lab) [V]]

I wish to speak to amendment 31, which stands in my name and in the names of hon. and right hon. Members from across the House. I shall try to keep my comments brief, too. I will go back to first principles and try to convince Ministers that what we propose is simply fair, just and practical.

Eighty-five per cent. of the British public pay their tax without question through the pay-as-you-earn system. For many of those hard-working taxpayers really struggling to keep their families going, particularly after the pandemic, it is simply unconscionable to watch the big corporations that have made so much money during the pandemic—the Googles and the Amazons—continue to create financial structures that have no other purpose than to help them avoid paying corporation tax. Shifting their profits simply to avoid tax is not only unfair but utterly immoral.