Financial Assistance to Ukraine Bill

Richard Foord Excerpts

2nd reading
Wednesday 20th November 2024 Commons Chamber

[Richard Foord (Honiton and Sidmouth) (LD)]

I pay tribute to the hon. Member for Amber Valley (Linsey Farnsworth) for her excellent maiden speech. She spoke movingly and touchingly about her father and about dementia, and it is a theme that we must come back to in this House. It is really profound. I also share her admiration for Nigel Mills, who was an excellent predecessor, and she was very magnanimous in her comments about him. I will be sure to see her in the Tea Room to hear more about Derbyshire. Hopefully, she will not be dictating that I drink a Mojito, because I cannot bear them.

I understand that the Financial Assistance to Ukraine Bill is being steered through the House by the Treasury—quite right too—but I think it would be worth my saying at the outset why the Bill is a positive development in security, defence and foreign affairs.

In December 2021, amid the build-up of Russian troops on the border of Ukraine, Vladimir Putin wrote two letters. He wrote one to the United States and one to NATO. His demands included a Russian veto on NATO membership for Ukraine and the implied removal of US nuclear weapons from Europe and the withdrawal of multinational NATO battalions from Poland and from the Baltic states of Estonia, Latvia and Lithuania. That would have been completely and utterly unacceptable, and we can only surmise why he might have wanted NATO to act in this way. It is because once ground is taken it is that much harder to take back. Offence is so much more costly than defence.

It is to the issue of costs that we must now turn. The purpose of the Bill is to support the $50 billion G7 initiative launched in June, which represented a co-ordinated effort by the G7 and the EU to support Ukraine. However, with Hungary potentially blocking concerted EU action, I welcome the provision in the Bill that will ensure that future financial assistance extends to any changes in subsequent arrangements, in case we can reach broader consensus later. It is crucial that we collaborate with our EU partners to swiftly advance the agreement.

The Minister talked about the UK being a first mover in this space, which is very welcome, although states such as Estonia, Finland and Czechia worked on it prior to us, and Canada has been a driver of it too. The UK’s £2.26 billion contribution to the G7 arrangement reflects our GDP share, but as a leader in supporting Ukraine, I feel we need to go beyond simply a proportional share. After all, doing so could provide support for Ukraine in place of some taxpayers’ money. It is welcome that the UK is contributing £3 billion annually, and the Government have pledged to maintain that for as long as it takes, but as Zelensky said, why should western taxpayers foot the bill when frozen Russian assets could be confiscated and given for use by Ukraine? The Bill is a positive step, but we should talk about not just future profits generated from frozen Russian assets, but the principle—the assets themselves. The approach set out today uses only a fraction of the $300 billion available, much of which is held at Euroclear central securities depository. To support Ukraine effectively, we must go further. We should repurpose all these assets—not just the profits, but the principle.

Some critics argue that confiscating the funds would pose legal risks. They talk about sovereign immunity—an argument that is also used by some who oppose the prosecution of leaders for the crime of aggression—but sovereign immunity should also apply when thinking about the sovereignty of states. Legally, we have to think about how Russia violated international law. It violated the UN charter and blatantly breached the charter’s principle of state sovereignty. It is estimated that Russia has already caused £400 billion worth of damage—that is what will be required to rebuild Ukraine—and Russia will ultimately have to pay to make good that damage, but what use will the frozen assets be to Ukraine if Ukraine no longer exists? The goal cannot be only to rebuild Ukraine from the rubble, but to help Ukrainians prevent their country from turning to ash.

Some argue that confiscating the assets could destabilise global markets, or deter other nations from holding reserves in western financial institutions in the future, but those fears are overstated, and need to be weighed against the risk of doing nothing. The dominance of western financial systems remains robust. Alternatives such as China’s renminbi lack the stability and scale of the US dollar. Cryptocurrencies are too volatile to be a viable alternative, so the risk of inaction should be thought of in terms of what has happened in global markets since the full-scale invasion of Ukraine in 2022. There was a very wobbly period, including here in the UK with the Liz Truss mini-Budget, which was partly about supporting people with their energy bills. At the time, the Government felt that they had to provide such support because of the rise in the price of gas caused by Russia’s illegal invasion of Ukraine. Again, we cannot just suppose that doing nothing will have no consequences. There are concerns that confiscation could reduce our leverage in future peace negotiations, but this war first needs to be won. This is not the Gulf war in 1991 when frozen assets were used to compensate Kuwait; this war is still not determined.

Other states considering investing in western institutions have nothing to fear if they have no intention of invading their neighbours. As things stand, Russia has shown little interest in meaningful dialogue. To simply wait and keep the assets as a negotiating tool is naive and defeatist. By repurposing the assets now, we not only support Ukraine’s immediate needs, but reinforce the principle that aggression must not pay and that nuclear sabre-rattling is completely unacceptable.

As the Liberal Democrat spokesperson, my hon. Friend the Member for Lewes (James MacCleary), said, the geopolitical context underscores the urgency of the moment. Trump commented in March that he sees US isolationism as attractive. When talking to the hon. Member for Clacton (Nigel Farage) on GB News, he said,

“We have an ocean in between some problems… a nice big, beautiful ocean.”

With the United States facing questions about whether its support for Ukraine could be reduced or even diminish, we need to think further about what more we can do with our European allies. Acting now to unlock the full potential of Russian assets would provide Ukraine with a financial lifeline insulating it from shifts in political will elsewhere in the world.

The Bill highlights the importance of collaboration with our European partners. As the shadow Chief Secretary to the Treasury, the hon. Member for North Bedfordshire (Richard Fuller), pointed out, UK taxpayers have already contributed over £12 billion in aid to Ukraine since February 2022, but our absence from EU defence frameworks limits our ability to co-ordinate effectively with those European allies. We could use some of the confiscated frozen assets to support joint procurement, perhaps associating with some of the frameworks, such as the European Defence Agency. Shared management of those confiscated funds would ensure transparency, accountability and maximum impact. The future profit funds, suggested as a base for the Bill, are scheduled to be disbursed between December 2024 and 2027. That timeline does not match the urgency of Ukraine’s need.

Just last weekend, we saw Russia’s largest attack on Ukrainian infrastructure in months. Russia launched 120 missiles and 90 drones. Three weeks ago, the Finnish Government took a bold step by confiscating $4.5 billion in Russian assets, making Finland one of the first countries to take decisive action. The Finnish confiscation must surely be hitting Russia where it hurts, and we should follow the examples set by Finland, Czechia and Estonia, working together to confiscate those Russian assets—including the principal, not just the interest.

The stakes could not be higher: Ukraine’s fight is a fight for eastern Europe and the west more broadly. It is a fight for the principles of democracy, sovereignty and international law that underpin global peace and security. I welcome the Bill, but it is vital that the provisions align with the goal of confiscating all Russian assets to support Ukraine financially. Let us rise to the challenge, demonstrate solidarity with Ukraine, and show leadership on the global stage and unwavering friendship to our European allies. By collaborating with those European allies to confiscate Russian assets, we can help pave the way for an outcome that makes it plain to any Government who are watching that aggression does not pay.

--- Later in debate ---

[The Economic Secretary to the Treasury (Tulip Siddiq)]

It is a pleasure to close this debate on what remains a very important and pressing issue. As Ukraine enters yet another difficult winter, I am proud of the consistent support that this Government have shown through not just our £2.26 billion ERA contribution, but the long-term commitments we have made to supporting Ukraine’s capacity for self-defence.

I join the Opposition spokesperson, the hon. Member for North Bedfordshire (Richard Fuller), and my right hon. Friend the Chief Secretary to the Treasury, along with my hon. Friends the Member for Burton and Uttoxeter (Jacob Collier) and for Gateshead Central and Whickham (Mark Ferguson) in saying how proud I am that there is unity across the House in standing shoulder to shoulder with Ukraine at this very difficult time. This is a complex issue, and I will try to answer the questions posed by the Opposition and my hon. Friends. If I have missed out anything, I am happy to write to Members.

Before I get into the nitty-gritty of the Bill, I pay tribute to my hon. Friend the Member for Amber Valley (Linsey Farnsworth) for making such a powerful maiden speech. I think I am right in saying that her late mother Margaret, David, Martin and all her children would be extremely proud of their extraordinary daughter, mother, stepmother and wife. I very much welcome this “vicious dictator” to the House. We need more of them in the women’s parliamentary Labour party, so I am pleased to have her here.

The hon. Member for North Bedfordshire asked about the timing of the release of the funds. We intend to begin spending the funds early next year to ensure that the funding supports our Ukrainian allies as soon as possible. We intend to do so in three equal tranches over three financial years, starting in 2024-25, and the G7 has agreed that all ERA funds will be given out by the end of 2027. He also asked about how the UK will be repaid. We are providing the funding as part of the wider G7’s extraordinary revenue acceleration loan initiative, which means that the UK will be repaid via the extraordinary profits generated from immobilised Russian sovereign assets in the EU. The EU has already enacted the necessary regulations to operationalise the Ukraine loan co-operation mechanism, which will distribute the profits. That came into effect on 29 October, as he is probably aware.

The hon. Member asked about what will happen to the UK if the loan is not repaid. The repayment will rely on profits continuing to flow from immobilised RSAs into the EU over multiple years. The UK and the wider G7 have committed to ensuring that Russian sovereign assets remain immobilised across our jurisdictions until Russia ceases its war of aggression and pays for the damage that it has caused to Ukraine, and G7 lenders have worked closely together to design the ERA in a way that allows for repayment in a scenario in which profits cease and Russia pays Ukraine. I hope that answers his question, but I can write to him if he wants more detail.

On NATO’s spending target, there is a clear commitment from the Government to spend 2.5% of our GDP on defence, which has categorically not changed. The hon. Member will have seen in our manifesto that we will set up a path towards spending 2.5% of GDP on defence, and this will be done at a future fiscal event.

The hon. Member asked about the total value of assets and private assets. Between February 2022 and October 2023, £22.7 billion-worth of Russian assets were frozen due to UK financial sanctions regulations—a marked increase on the figure of £18.39 billion that was provided in the Office of Financial Sanctions Implementation’s annual report in 2021-22. OFSI is currently analysing data on immobilised assets, and on the type and value of the assets.

Like many Members, the hon. Member for Lewes (James MacCleary) asked about the involvement of the ERA in asset seizure. I have to make it clear that the G7’s ERA scheme does not represent the seizure of Russian sovereign assets in any way; it is about using the extraordinary profits that the EU has set aside to pay a series of loans to Ukraine. He and the hon. Member for Honiton and Sidmouth (Richard Foord) asked about seizing Russian sovereign assets in the UK. Russia’s obligation under international law is clear: it must pay for the damage it has caused to Ukraine. The G7 agreement to use the profits from immobilised Russian sovereign assets for the loan is an important step towards ensuring that Russia pays. Although we continue to consider all lawful avenues by which Russia is made to meet its obligation to Ukraine under international law, it is important that the UK and the G7 remain focused on delivering the ERA and the benefit that it will give to Ukraine right now, because we are very conscious of the situation in which the country finds itself.

A few other Members, including my hon. Friend the Member for Leeds Central and Headingley (Alex Sobel), asked about the proceeds from the sale of Chelsea FC. The Government are working hard to ensure that the proceeds from the sale of Chelsea reach humanitarian causes in Ukraine as quickly as possible. My hon. Friend might know that the proceeds are currently frozen in a UK bank account while a new independent foundation is established to manage and distribute the money, but this is something that we are working on and we are trying to move it along as quickly as possible.

My hon. Friend the Member for Halesowen (Alex Ballinger) asked whether this was an unlimited resource loan. The negotiations remain ongoing on the details of the loan terms, but I am focused on ensuring that there is limited impact on Ukraine’s balance sheet. My hon. Friend the Member for Macclesfield (Tim Roca) talked about the implications of the Trump victory for Ukraine. I cannot speculate on any policy decisions that the incoming Administration of President-elect Trump may make, but we have welcomed bipartisan US support for Ukraine, which has been key in the international effort. I feel that Ukraine’s security is vital for global security. If there are any other questions that I have not answered, I will write to Members. I am conscious of the time and I want to finish by thanking hon. Members across the Chamber for their contributions to the debate.

[Richard Foord]

I am grateful to the Minister for giving way. I have heard her say that at this stage the Government intend to work on the profits rather than the seized assets themselves, but will she undertake to talk to ministerial colleagues in Finland, Czechia and Estonia to find out how they have gone about seizing and using confiscated assets?

[Tulip Siddiq]

I have listened closely to what the hon. Gentleman has said, especially with regard to other countries, and I am happy to have conversations with ministerial colleagues across different countries and find out what they are doing. This is our position for now, but this is an ongoing situation and things will move. I am happy to speak to Ministers from different countries who are using assets differently.

The ERA is an innovative scheme. It will ensure that Ukraine receives vital support throughout 2025 and beyond. It will take the money generated from Russian sovereign assets and use it to support Ukraine in the best possible way. This is further proof for us that the G7’s support for Ukraine will not falter, and that the UK will stand shoulder to shoulder with Ukraine for as long as it takes.

I echo the comments of my hon. Friends the Members for Lichfield (Dave Robertson) and for Rushcliffe (James Naish) in thanking the people of our country for all the support that they have shown Ukraine. Madam Deputy Speaker, I hope you will indulge me for one minute while I say that my own constituents of Hampstead and Highgate have opened their doors for Ukrainian refugees, giving them their homes, community spaces and education spaces, and I particularly pay tribute to my local synagogue, South Hampstead synagogue, which is providing free English lessons for Ukrainian refugees. I was very pleased to meet those people in Parliament last week.

Question put and agreed to.

Bill accordingly read a Second time.

Financial Assistance to Ukraine Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Assistance to Ukraine Bill:

Committal

(1) The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee, on Consideration and on Third Reading

(2) Proceedings in Committee shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.

(3) Any proceedings on Consideration and proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings in Committee of the whole House.

(4) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on Consideration or to proceedings on Third Reading.

Other proceedings

(5) Any other proceedings on the Bill may be programmed.—(Anna McMorrin.)

Question agreed to.

Financial Assistance to Ukraine Bill (Money)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Financial Assistance to Ukraine Bill, it is expedient to authorise the payment out of money provided by Parliament of any sums required by the Treasury or Secretary of State for the purpose of providing loans or other financial assistance to, or for the benefit of, the government of Ukraine as a result of—

(a) the arrangements described as the Extraordinary Revenue Acceleration Loans for Ukraine announced on 14 June 2024 at the G7 summit in Apulia in Italy, or

(b) any subsequent arrangements that are supplemental to or modify or replace those arrangements.—(Anna McMorrin.)

Question agreed to.

Speaker’s Committee for the Independent Parliamentary Standards Authority

Ordered,

That Marie Goldman, Leigh Ingham, Gordon McKee, Charlotte Nichols and Jesse Norman be appointed to the Speaker’s Committee for the Independent Parliamentary Standards Authority until the end of the present Parliament, in pursuance of paragraph 1(d) of Schedule 3 to the Parliamentary Standards Act 2009, as amended.—(Lucy Powell.)

House of Commons Members’ Fund

Ordered,

That Holly Lynch, Sir Charles Walker and Peter Grant be removed as Trustees of the House of Commons Members’ Fund and Mark Tami, Chris Elmore and Dr Danny Chambers be appointed as Trustees in pursuance of section 2 of the House of Commons Members’ Fund Act 2016.—(Lucy Powell.)