Brexit: Customs Procedures

Lord Bates Excerpts

Monday 15th January 2018 Lords Chamber

[Lord Berkeley]

To ask Her Majesty’s Government what are the plans, timescale and budget of Her Majesty’s Revenue and Customs to develop and implement paper-free customs procedures for just-in-time freight between the European Union and the United Kingdom after Brexit.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government have been clear that their priority is to ensure that international trade can move as freely and be as frictionless as possible after we depart the European customs union. Precise arrangements are a matter for negotiations. The Government recognise that many business sectors operate complex supply chains that are sensitive to administrative burdens and delays and are exploring the implementation of a technology-based solution that would allow trade to flow more smoothly across borders.

[Lord Berkeley (Lab)]

I am grateful to the Minister for that Answer. He will recall that a few weeks ago Monsieur Barnier told representatives of the industry that they should prepare for a cliff-edge Brexit even if that did not happen because it would be prudent to do so. I heard the same message from him earlier in the year. Is the Minister aware of 77 different examples of industry sector data that come from Customs? I have put a copy in the Library in case the Government do not have that information. Surely, alongside industry helping itself, it needs to have detailed discussions with the Government on each sector and each means of transport, particularly for the time-sensitive stuff, so that when this happens there is no hold-up. I hope the Minister can give us some confidence that that will happen.

[Lord Bates]

I can certainly give noble Lords that confidence. As one would expect, the Treasury and HMRC have had over 300 meetings with trade bodies and officials about preparedness. We have our own customs data service—the electronic response that we believe will be ready by January 2019 to take the strain. There is also potential for a back-up system alongside the existing chief system that is in operation. We believe that a lot of work has been done. There is a lot of work for the ports to do as well in terms of their own inventory systems. But as 99% of customs declarations are done electronically at present, there is a great opportunity for us to advance that part of the way we do business to ensure a frictionless way of transacting business going forward.

[Lord Bradshaw (LD)]

The logistics industry is one of the most efficient parts of our economy, mainly in road haulage but also in warehousing just-in-time distribution. Industry would be severely handicapped if supplies did not arrive at the factory gate or in the shops absolutely on time. Have the Government had detailed discussions with the Freight Transport Association, the Road Haulage Association and the ports authority to work out what would happen if things do not work as the Government hope they will?

[Lord Bates]

Those are exactly the types of conversation we are having. Noble Lords would expect us to have those conversations and we are having them. We have a cross-government border planning group planning for that type of evaluation. But on just-in-time, a lot of the goods come from outside the European Union area. The UK has had great success and has been a prime target for foreign direct investment into the European Union because of the efficiency and speed with which those goods are cleared. We need to ensure that that is now extended to goods coming from within the EU as well.

[Viscount Waverley (CB)]

My Lords, in declaring a pending declaration, is it anticipated that the UK’s system will be capable of integration into a wider, regional or global single window and of preventing fraudulent declaration of shipping data from third-party sources within global supply chains?

[Lord Bates]

That is a really good idea. There are some opportunities coming here. The noble Viscount will be aware that HMRC is moving to a making tax digital platform for VAT declarations. That type of joining up of the customs data with VAT will be something that could augment further trade with the rest of the world.

[Lord Hamilton of Epsom (Con)]

Will my noble friend confirm that the United States is a major export customer for this country with which we have no free-trade deal? There seems to be no hold-up in sending goods to America.

[Lord Bates]

Some 18% of our goods go to the United States. It is a very important market for us. Also, we are seeing significant investment from the United States into the UK. In the technology sector, Apple is coming here. Bloomberg is expanding its operations here, as is Facebook. There is a great opportunity for Britain to have a lead in technology and trade.

[Lord Davies of Oldham (Lab)]

My Lords, is the Minister aware that Parliament needs to be kept very fully informed about developments in this area? There is no way that Parliament can speak on behalf of industry and the workers in industry without a clear understanding of where the Government are at on these issues. Will he therefore recognise that there is an element of concern that the cross-border trade Bill, which is at present before the other House, may well be defined, in the way the Government have drawn it up, as a money Bill? Therefore, this House, with its expertise, will have a very limited ability to express its views on such matters.

[Lord Bates]

As the noble Lord will know, those are technical matters; it is officially for the Speaker in the other place to determine what is a money Bill and what is granted a certificate. On the importance of that Bill and debating it, he is certainly right. In the other place, the Treasury Select Committee and the Public Accounts Committee have been looking at and probing the system’s readiness, as they should. We published a trade White Paper, which had a tremendous amount of feedback that we have incorporated and learned from. We have also published working papers on future partnerships that we have shared with our European colleagues because we want to make sure that the borders work well together.

[Lord Newby (LD)]

My Lords, the Minister implied in his Answer that because additional requirements were to be dealt with online, there would be no additional cost. Those of your Lordships who have done things online find this a somewhat dubious assertion. Does he accept that for small businesses even doing business with Norway now, which is inside the customs union, involves a significant amount of additional time and that if we are not within the customs union, and certainly being outside the EU, small businesses will need to spend much more time filling in customs forms online? For many, that will make the difference between trade being viable and not viable.

[Lord Bates]

We have to try to reduce that. The fact that manufacturing output is now in its fastest growth period for 23 years and unemployment at its lowest level for 42 years shows that businesses—the majority of which in this country are small businesses—are doing well in this environment. This was a particular consideration of the making tax digital discussion that we had: obviously, we believe that technology does not impinge on small businesses to a degree that reduces their competitiveness. We believe technology can enhance competitiveness, not reduce it.

Disaster and Emergencies Preparedness Programme

Lord Bates Excerpts

Monday 18th December 2017 Lords Chamber

[Baroness Sheehan]

To ask Her Majesty’s Government what assessment they have made of the Disaster and Emergencies Preparedness Programme.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, DfID has monitored and assessed the disasters and emergencies preparedness programme through annual reviews, which are publicly available, and an external evaluation was conducted. Based on this information, the core part of the programme will run its course and end in March 2018, as planned, and the innovation window will run its course and end in March 2019, again, as planned.

[Baroness Sheehan (LD)]

I thank the Minister for his response, but does he agree that the disasters and emergencies preparedness programme has shown that investing in preparing for humanitarian disasters is a lot more effective than responding in a hurry? I am glad that he has cleared up some of the confusion about when the programme will end. What might be replacing this very cost-effective programme?

[Lord Bates]

The noble Baroness is right: UNICEF and the World Food Programme have identified that every £1 spent in preparedness can save £2 in humanitarian assistance. It is absolutely right that we are spending approximately £175 million this year on resilience and prevention programmes. We looked at the specific DEPP programme she mentions. It was very complex in how it delivered. The overheads were quite high at about 25%. We have said that we would like to take a good look at it again to see whether we can deliver a more effective programme, but our commitment to preparedness and humanitarian intervention remains absolutely the same.

[Lord Collins of Highbury (Lab)]

My Lords, the key feature is that the World Humanitarian Summit said that this a priority area. Irrespective of the outcomes of the specific programme, how will DfID approach this subject in its priorities? Will it comply with the World Humanitarian Summit and develop programmes? Tell us exactly how we will continue to make the savings that he described.

[Lord Bates]

We will certainly do that and comply with the Grand Bargain—we were a driving force behind it. That is why we have set out that preparedness and resilience ought to be a key part of the UN’s mission. We have said that and withheld a proportion of its core funding to ensure that it lives up to it. That is also why we are the largest contributor to the UN Office for the Coordination of Humanitarian Affairs and the central emergency relief fund. We recognise the importance of that and will continue to live up to our obligations.

[Baroness Falkner of Margravine (LD)]

My Lords, I think the Minister said that the programme will end in March 2018—in other words, in a few months. How many of their 45 NGO partners in this programme have the Government consulted, and did they consult them in writing or orally? Finally, I understand that the external evaluation was conducted by the Harvard Humanitarian Initiative. Is that report available for public assessment? If not, when can we expect to see it?

[Lord Bates]

On the last point about the Harvard review, yes, we have it on DevTracker, which is a website for all contracts: all the reports are listed there. On the 45 NGOs that play an important part in delivery, DfID chairs that committee, so they were informed at the meeting in October or November. We underscored our commitment to this area and the significant amount of money we are putting in to humanitarian response, but also underlined to them our concern about some of the overhead costs that might be attributed to the complexity of the scheme as it currently stands.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend take back to his department and the whole DfID team that the loss of Rebecca Dykes in these circumstances is felt very deeply? Can we pay tribute to the work that she and all the DfID team do, often in very dangerous circumstances, particularly at this time of year, for humanitarian purposes?

[Lord Bates]

We can certainly do that. It is obviously a very distressing time for Becky’s family but also for the people who worked with her. It reminds us of the sacrifice made by over 1,200 DfID personnel who work around the world, often in the most difficult and dangerous environments. The family have asked that we respect their privacy at this time and allow the facts to be established. We will of course recognise that wish.

[Lord Berkeley (Lab)]

My Lords, as the Minister will know, disasters and emergencies happen in the UK as well. Has he looked at what would happen to the Isles of Scilly, which are served by one 40 year-old ferry half the year round, if something happened to that ferry? What might be the contingency plans?

[Lord Bates]

The noble Lord has caught me out. I did not have the Isles of Scilly in my brief. If he had gone for Antigua and Barbuda, I would have been able to answer him. I am happy to look into that and respond to his question.

Tackling Financial Exclusion (Financial Exclusion Report)

Lord Bates Excerpts

Monday 18th December 2017 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I join other noble Lords in paying tribute to the noble Baroness, Lady Tyler, for how she introduced the debate and join in the wide praise that she received from across the House for how she conducted the committee. The remark of the noble Lord, Lord Kirkwood, that it was a highlight of the week and that it was sad when it ended stands in stark contrast to my recollection of sitting on some committees in your Lordships’ House. I, too, look forward to the next one the noble Baroness will chair.

I say at the outset that we take this report extremely seriously. It was well researched, there was some incredibly important evidence in it, and it was well presented. That was a very important element. It has been a very important part of the Government’s strategy.

The noble Lord, Lord Tunnicliffe, was notable in using the curate’s egg argument about our response. Before I turn to some of the areas that he focused on, in which we have not done very well, for recollection, refreshment and the record let me just say what we have done. We have announced the financial inclusion policy forum; I shall come to more details on that later. We have the Minister for Financial Inclusion, Guy Opperman, who has been recognised for the work he has done. We announced changes in the Budget to universal credit totalling some £1.5 billion. We have introduced the Financial Guidance and Claims Bill, which my noble friend Lord Young took through this House with characteristic skill. He managed to ensure that, in the best traditions, it left in better shape than it arrived. It also left with the commitment to breathing space for debt, introduced at Third Reading. The Financial Conduct Authority has produced its Financial Lives Survey; financial inclusion is a key part of our digital strategy; and the FCA has taken robust action on rent-to-own schemes. We have introduced the rent recognition challenge, encouraging fintech firms to address the issue of credit histories for those who rent properties, as opposed to those who have mortgages. These are in addition to basic bank accounts and payday lending caps, which I will come to later. It is a vast agenda to cover in the short time available to me.

The breadth of the challenges of financial inclusion and financial capability is significant. The noble Baroness, Lady Tyler, spoke about the elderly; my noble friend Lord Patten spoke about geographic exclusion. The noble Lord, Lord McKenzie, spoke about debt; the noble Lord, Lord Fellowes, spoke about rural bank networks. My noble friend Lord Holmes spoke about digital inclusion; the noble Lord, Lord Empey, spoke about gambling and addiction. The right reverend Prelate the Bishop of Birmingham spoke about the role of faith communities in responding to it. My noble friend Lord Northbrook spoke about mental health; the noble Baroness, Lady Lister, spoke about domestic violence and universal credit. The noble Viscount, Lord Brookeborough, spoke about the difference between capability and inclusion and the importance of education; my noble friend Lord Shinkwin spoke about cancer support. My noble friend Lady Altmann spoke about pensions and the noble Lord, Lord Kirkwood, mentioned insurance. The noble Lord, Lord Tunnicliffe, referred to general vulnerability. I will try to make as much progress as I can on that agenda in the time available and seek to address the specific points raised by noble Lords.

In their response to financial inclusion, Her Majesty’s Government use the World Bank’s definition, which is,

“financial inclusion means that individuals, regardless of their background or income, have access to useful and affordable financial services”.

To the contrary, financial exclusion means that individuals lack that access. When we consider this definition, it follows that the Government’s policy regarding financial inclusion must be focused on ensuring that there is an appropriate supply of useful and affordable financial services and products. The Government therefore work closely with the industry regulator, the Financial Conduct Authority, to ensure that appropriate action is taken when the market fails to supply such services and products.

Government policy on financial capability is distinct from the inclusivity agenda, as the noble Viscount, Lord Brookeborough, mentioned, and is focused on ensuring that appropriate information, guidance and advice is available so that members of the public are empowered to make decisions appropriate for them. This is a role that the new single financial guidance body is designed to address and I am pleased that the Financial Guidance and Claims Bill, which will put that new body in place, has progressed through this place and into the House of Commons.

The Government have aimed to boost inclusion and ensure the widest possible access to fee-free basic bank accounts. The nine largest personal current account providers are now legally required to offer these to customers who are unbanked or ineligible for a bank’s standard current account. The noble Lord, Lord Holmes, mentioned the importance of online savings. The Treasury publishes data on basic bank accounts annually to show how the market is developing. Last year’s data showed that there are now over 4 million fee-free basic bank accounts.

Another extremely important pillar of financial inclusion is addressing affordable credit. The Government have been active in ensuring that a functioning consumer credit market and a well-run regulatory regime are maintained by transferring supervision of the consumer credit market to the Financial Conduct Authority and legislating to require it to introduce a cap on the cost of payday loans, a fact recognised by the right reverend Prelate the Bishop of Birmingham and the noble Baroness, Lady Tyler, in her introduction. It is worth pausing to remember that that cap has had an immediate effect. There were 4.2 million payday loans approved in the first six months of 2014. In the first six months of 2015, after the cap was introduced, that had reduced to 1.18 million. That means that 760,000 borrowers have been able to save some £150 million per year, money that has gone back into the pockets of the poorest in our society. A feedback statement published by the FCA in July has found the cap to be successful and it will consult on further interventions in spring 2018.

Finally, the Government are encouraging innovations in financial technology to promote financial inclusion. A recent example is Fintech for All, a nationwide competition launched in September 2017. Two winners were announced at an awards ceremony held on 15 November. The noble Lord, Lord Empey, is right about the incredible wealth of expertise that we have in the City of London, just a few miles from this place. That expertise in fintech is also found in other major financial centres around the UK, such as Edinburgh, Leeds, Newcastle, Manchester and Birmingham. The noble Baroness, Lady Tyler, referred to the technology involved in bank accounts and particularly whether, rather than reducing vulnerability, it might lead to further vulnerability and potential exclusion for the elderly, those in rural communities where broadband and internet access is not as great, and people with disabilities. We need to keep a focus on that area.

The noble Viscount, Lord Brookeborough, predicted all the answers which I might give on education. My heart sank as he ran through them all, because it was exactly what was in my speech—so I hesitate to reiterate it. However, I put on the record that the new national curriculum in England, taught from September 2014, made financial literacy statutory for the first time for 11 to16 year-olds. However, to improve financial education we need to look to other organisations beyond what is provided in the school curriculum. A wide group of organisations can have a role to play. Various community organisations and families have a responsibility in this area as well. The right reverend Prelate also referred to the excellent work of organisations such as Christians Against Poverty, with which I have had some contact, and the role that they play in education. If it is all about inclusion, it stands to reason that none of us is free from the responsibility to engage with this matter and ensure that people get the education they need. That is why the Government have ensured that financial education for children and young people remains a focus of the new single financial guidance body, with the aim of bringing together funders and providers of initiatives across the UK to maximize impact.

The Select Committee has made a number of recommendations on access to welfare, including the abolition of the seven-day waiting period at the start of universal credit. The noble Baroness, Lady Lister, and the noble Lords, Lord McKenzie and Lord Empey, all welcomed this as far as it went—I accept that—and acknowledged that it was a step in the direction for which they have diligently argued for some time. The comprehensive, wide-ranging package, worth £1.5 billion, will ensure that claimants of the benefit get more money sooner, while retaining the principle of which the noble Lord, Lord Empey, spoke in favour.

The noble Baroness, Lady Tyler, spoke about the importance of leadership. As regards our response to the committee’s proposal on the Financial Inclusion Policy Forum, this initiative was designed to drive better co-ordination and engagement across government and with the sector to address the problem of financial exclusion. The forum’s objective is to bring together Ministers in government departments with a remit to promote financial inclusion, regulators, especially the FCA, and key stakeholders working in their own capacity to address financial exclusion. It will be jointly chaired by the Economic Secretary and the Minister for Pensions and Financial Inclusion and support government leadership and collaboration with the sector, report on initiatives by both government and regulators, and monitor progress. I take the point made by the noble Lord, Lord Kirkwood, who wondered how that choreography might work. Across government there is a general feeling that interministerial groups work particularly well in getting not just Ministers but officials together to make sure that they work in a constructive way going forward. My noble friend Lord Patten said that it was not just central government that was key to this; he mentioned the importance of local government as actors in this regard.

We were pleased with the unanimous support that the financial forum initiative received. I would like to mention in particular the support of the independent Financial Inclusion Commission, which stated that the forum is,

“a further indication that the government is taking the issue of financial exclusion seriously”,

and that it has,

“a vital role to play in making this a country that works for everyone”.

That struck a chord with not only the noble Lord, Lord Kirkwood, but, I guess, in Downing Street as well. We welcome this endorsement and look forward to the forum being set up in the first quarter of 2018. Further details about its membership and the date of its first meeting will be published soon.

I turn to some of the specific questions raised in the time I have available. The noble Baroness, Lady Tyler, and my noble friends Lord Holmes and Lord Shinkwin asked about the adjustment practices for disabled consumers. The FCA’s handbook requires firms to identify particularly vulnerable customers and to deal with them appropriately. In addition, like all service providers, banks and building societies are bound under the Equality Act 2010 to make reasonable adjustments, where necessary, to the way in which they deliver their services.

The noble Baroness, Lady Tyler, asked when the forum would meet, and whether the minutes would be published. The forum will meet every six months. It will bring together regulators and Ministers in government departments with a remit to discuss and promote financial inclusion. More details on the membership of the forum will follow early in the new year. The agenda will be published and we will make decisions on what happens with the minutes and make announcements on that in due course.

The noble Lord, Lord Empey, asked about Recommendation 21, which was about payment of housing benefit direct to landlords. We have listened to the concerns and will look to make it easier to set up and manage payments to landlords under universal credit. New guidance will be issued to staff to ensure that claimants in the private rented sector who have managed payments to landlords for their legacy housing benefit are offered this option when they join universal credit.

My noble friends Lord Shinkwin and Lord Holmes referred to the duty of care, as did my noble friend Lady Altmann. The Government recognise that there are very different views on the merits of introducing a duty of care for financial service providers and, as with any policy, we want to ensure that these are carefully considered and taken into account. The Government believe that the Financial Conduct Authority, as the UK’s independent conduct regulator for the financial services industry, is best placed to evaluate the merits of a duty of care for financial service providers. In this context we welcome the Financial Conduct Authority’s commitment to publish a discussion paper on the subject.

On access to banking, which was raised by my noble friends Lord Fellowes and Lord Patten, decisions on opening and closing branches and agencies are taken by the management team of each bank on a commercial basis and government does not interfere in these decisions. However, earlier this year the UK’s bank and building societies and the Post Office reached a new agreement which means that 99% of personal customers and 95% of business customers can do their day-to-day banking in post offices—be they sub-post offices or Crown post offices. At the Budget, the Economic Secretary to the Treasury also wrote to the Post Office and, through UK Finance, the banking industry, to ask them to raise wider awareness of these Post Office banking services.

The noble Lord, Lord Empey, referred to credit unions. I note his suggestion that the Government be supportive of increasing the level of long-term investment capital into credit unions. As set out in the Government’s response, long-term investment capital is important for all businesses, including credit unions, to help them to maximise their potential. However, as credit unions are in principle self-capitalising institutions, the Government do not intend to lend directly to credit unions. The Government welcome private sector involvement in this area: for example, Lloyds Banking Group has a scheme that offers funding to help credit unions to improve their capital position.

The right reverend Prelate the Bishop of Birmingham wanted us to recognise the important contribution that charitable organisations make in tackling exclusion, and I am happy to do that. I can give one example, of LifeSavers, which works with local credit unions to help savings clubs in schools. The initiative, developed by the most reverend Primate the Archbishop of Canterbury and Young Enterprise to start savings discussions in primary schools—which I am sure the noble Viscount, Lord Brookeborough, will welcome—introduces the benefits of savings at a very early age. The Government have contributed £600,000 to this initiative.

As regards the timetable for the Financial Conduct Authority’s publication of its recommendations under the high-cost credit review, the FCA published a feedback statement in July 2017 which showed that the cap on payday loans has been successful. Consumers now pay less. In respect of the high-cost credit market, it identified specific concerns in rent to own, home-collected credit and catalogue credit, and identified issues in arranged and unarranged overdrafts. Having investigated the issues, the FCA will consult on any necessary intervention in spring 2018.

I am conscious that I am out of time and that there are many other issues. With the permission of your Lordships, I will review the official record of the debate and, if I have failed to respond on any matters, I shall write accordingly. However, I hope that the noble Baroness, Lady Tyler, might recognise that, while we have not gone all the way to the destination which she and her committee set out, we have taken some important first steps along that road to financial inclusion for everyone.

Paradise Papers

Lord Bates Excerpts

Thursday 14th December 2017 Lords Chamber

[Lord Anderson of Swansea (Lab)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and have no interest to declare.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

Very good. My Lords, HMRC takes allegations of non-compliance on tax seriously regardless of where it takes place in the world. HMRC is looking closely at all the information the ICIJ has publicly released in the Paradise papers to see whether they reveal anything new that could add to its existing leads and investigations.

[Lord Anderson of Swansea]

My Lords, the Government may be looking closely, but they have been looking closely at this issue for a long time with very limited action. When will the Government accept that there is deep anger among taxpayers in this country about the revelations that the rich and powerful are able to get away with aggressive tax avoidance, and that transparency is the best antidote? Will they give a fixed date by which the overseas territories and Crown dependencies will have to open a public register of the beneficial ownership within their jurisdictions?

[Lord Bates]

The noble Lord is right that we have been looking at this for a long time, but we have also been acting for a long time. Since 2010, we have introduced almost 100 measures that have raised £160 billion in tax revenue. That is more than the combined health budget for England, Wales, Northern Ireland and Scotland. We have one of the lowest tax gaps in the world—certainly the lowest on record in this country. We have been working very hard and taking this very seriously and will continue to do so.

As regards the overseas territories and Crown dependencies, again, this has been taken very seriously. Just two weeks ago at the joint ministerial council, the Prime Minister stressed the importance of this. We already have central registers in four of those authorities, including the Cayman Islands, Bermuda and Gibraltar. Montserrat and Anguilla will have registers by April of next year. The Turks and Caicos Islands have been particularly affected by the hurricane, so they have been given a little extra time, but we are very clear that action needs to be taken.

[Lord Thomas of Gresford (LD)]

My Lords, the Council of the European Union, meeting in Brussels a week last Monday, issued its blacklist of tax havens. Its conclusions reveal that a number of British dependencies and overseas territories on the grey list have entered into commitments with the EU to implement tax good governance principles. Specifically, Bermuda, the Cayman Islands, Guernsey, the Isle of Man and Jersey have undertaken to address concerns about their tax regimes, which produce profits without real economic activity. Do the Government support the EU in this initiative, and will they impose the same sanctions on non-compliant countries after Brexit as the EU proposes?

[Lord Bates]

We certainly support the work that ECOFIN has undertaken in producing this report. We have been at the forefront of the whole process. We recognise the statements on, and identification of, those jurisdictions that are co-operative. That is an important point to stress: none of the Crown dependencies or overseas territories was listed as non-co-operative; they were all on the co-operative list. Areas in which the Council wants activity to take place have been identified, and we fully support that.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, the disinformation generally surrounding this issue is just staggering, as is the conflation of illegal tax evasion, lawful tax avoidance and money laundering. Does my noble friend agree, particularly in light of his previous answer, that the new gold standard of proactive reporting and transparency in favour of tax authorities in respect of the capital and income of any legal person, trust or individual using its financial services industry, is in fact the Cayman Islands?

[Lord Bates]

The Cayman Islands has work to do, as have all jurisdictions to meet the standards that have been set down. However, it is true to say that with its centrally held register, the Cayman Islands at the moment is going above and beyond what is required by the Financial Action Task Force. We are absolutely resolute about making sure that all UK citizens pay all tax due by them, wherever it is held in the world. That is a very important commitment, and we intend to ensure that all jurisdictions hold to it.

[Lord Davies of Oldham (Lab)]

My Lords, given the level of public shock at what was revealed in the Paradise papers, the Minister’s answers today follow the same emollient pattern of recent years, in which it has been said, “We are doing what we can and we are getting certain proceeds”. Yet, the Paradise papers reflected that a whole range of individuals and companies owe tax on a massive scale, and are putting themselves under the jurisdiction of these islands and escaping taxation that is owed to this country. I ask the Minister to respond to my noble friend’s Question with the degree of forthrightness it demanded.

[Lord Bates]

The question was about a public register. The UK is the first major economy to issue a public register of foreign-owned companies. We are leading in this; it was a landmark commitment given at the global Anti-Corruption Summit, which David Cameron initiated. So far, it is not required to make sure there is a public register in other jurisdictions. It has to be available to tax authorities and to security authorities in the case of counterterrorist finances. That is what is happening in those jurisdictions at present, but there is still more to do and we are far from complacent.

[Lord West of Spithead (Lab)]

My Lords, does the Minister think the problem might go away because we have responsibility for defence and security of our overseas territories but so few ships that we cannot do it? If we are unable to defend them, maybe they should no longer be British Overseas Territories.

[Lord Bates]

The overseas territories and the Crown dependencies are a very important part of the British family and will be a very important part of global Britain going forward. It is important that, as part of that family, everybody works together to ensure that people who have assets held overseas make sure that they report them in an accurate and timely way to the tax authorities of their countries.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Bates Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 6th December 2017 Lords Chamber

[Lord Collins of Highbury (Lab)]

My Lords, I note that the Minister was about to stand up but I cannot allow him to jump in so soon.

I congratulate the noble Lord, Lord Hodgson, on moving this amendment. I was disappointed that the noble Lord, Lord Faulks, was not present but he has done a grand job and a very persuasive one. Like my noble friend, I congratulate the former Prime Minister, David Cameron, on initiating consideration of this issue. We are talking not just about government policy but about a government commitment. The noble Lord, Lord Hodgson, is absolutely right—there is no better place than this Bill for this commitment to be delivered. That is why we wholeheartedly support this amendment.

I am glad that the noble Lord, Lord Bates, will respond to the amendment because he knows only too well the cost arising from this money flooding into London. We talk about the impact on London property prices and about corruption but we know that the poorest countries lose an estimated trillion pounds a year through tax evasion and corruption. The poorest in our world suffer as a result. That is why we must see the Government deliver on this solid commitment. My noble friend gave clear examples of what is happening and we have received briefs from Transparency International, but you have only to look down the river from the Terrace here to see St George Tower, a fantastic round tower. Two-thirds of it is in foreign ownership and a quarter is held through offshore companies based in tax havens. We only have to look there to see what is going on. This was a commitment of the former Prime Minister and it is an appropriate Bill. The commitment was that it would be introduced by April 2018.

We have heard how long it is since the consultation was concluded. The sad fact that the consultation has not been published is a bit of an indication about the timetable for any proposed legislation. We have an opportunity here and I hope the noble Lord, Lord Bates, will take it up. In previous Committee sittings we heard from the noble Lord, Lord Ahmad, about how he has been in listening mode and will take the opportunity to take this away. This is a perfect example of how we can deliver on a clear commitment made by the former Prime Minister.

Regarding commitments, at the Anti-Corruption Summit there was also a commitment to update the anti-corruption strategy by the end of 2016. That strategy is now long overdue. I hope the Minister will take the opportunity to say how the Government are committing to this general, overall strategy, because all these things are linked. I look forward with interest to hearing from the Minister how this commitment will be met.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, my noble friend Lord Hodgson began his remarks by welcoming me as a fresh face to this topic. That will probably turn out to be classic understatement, but I am delighted to be here on a very important topic.

I first pay tribute to all noble Lords—in particular to the noble Lord, Lord Hodgson, for standing in for the noble Lord, Lord Faulks, and for the energy and commitment they have both shown on this topic over some time. I guess noble Lords will want to hear about the current position so let me get straight to it.

This amendment would set down in legislation a commitment made at the 2016 Anti-Corruption Summit, which the UK convened, to establish a public register of company beneficial ownership information for foreign companies which already own or buy property in the UK, or which bid on UK central government contracts. This was a point referred to by the noble Lord, Lord Rooker.

The Government remain committed to this policy and our intention is to act in this space; that intention has not faltered since the noble Baroness, Lady Williams, gave a commitment earlier this year. My noble friend Lord Hodgson is right to table this amendment—just as my noble friend Lord Faulks and other noble Lords are right to support it—to remind the Government of this commitment. I welcome him doing so.

The UK is a world leader in promoting corporate transparency. We legislated in 2015 to establish a public register of company beneficial ownership—that was how we described it, and it was actually done. We remain the only country in the G20 to have established such a register. The noble Baroness, Lady Bowles, said that the eyes of the EU are on us. I hope they are because we are leading on this; we are not following. We have recently expanded the register to include other forms of legal entity established in the UK, and we remain committed to this agenda.

Earlier this year, the Department for Business, Energy and Industrial Strategy published a call for evidence on the design and implementation of the register of overseas companies that own UK property. As that call for evidence noted, this register will be the first of its type in the world, reflecting the Government’s continued commitment to being a world leader in this area.

The innovative nature of the register does, however, bring with it issues of legal complexity. The Department for Business, Energy and Industrial Strategy has identified that it will require complex amendments to the existing company law framework in the UK, with new functions being delegated to the Registrar of Companies, as well as the three land registries in England and Wales, Scotland and Northern Ireland. I will ensure that the comments about downloads are relayed to the Land Registry. Consideration will also need to be given to the acquisition, use and processing of information.

In addition, a robust enforcement mechanism will be essential, and the Government propose to implement this via the land registration system. Careful consideration will be needed as to how this will be applied to new and existing landowners, while ensuring appropriate protection for third parties. It will also require consideration of the appropriate penalty regime to be applied to persons who fail to comply with the obligation to include the necessary details on the register. These and other issues relating to the operation of the register were raised by respondents to the Government’s call for evidence earlier this year. We have been considering these so as to inform the design of the register.

I make it clear that the Government remain committed to establishing this register and to fulfilling our commitment at the 2016 Anti-Corruption Summit. My noble friend Lady Williams reiterated this commitment yesterday, speaking at the inaugural Global Forum on Asset Recovery in Washington DC. The Department for Business, Energy and Industrial Strategy expects to respond formally to the call for evidence early in the new year. That response will focus, as did the call for evidence, on how the register will be established and not on whether it will be established.

So as to fully take account of the extensive work that the Government, private sector and civil society have already conducted, and continue to conduct, on the design of this register, it is right that we allow the Department for Business, Energy and Industrial Strategy to conclude the process that is already well advanced and to publish its response to the call for evidence early in the new year. This will ensure that the register is well designed, takes full account of the representations received and provides a legally robust mechanism for registering the beneficial owners of overseas companies that own UK property. So as to further inform the response from the Department for Business, Energy and Industrial Strategy, I will ensure that it is fully aware of the points made by noble Lords today in support of establishing the register.

I should add that earlier my noble friend Lord Ahmad gave a commitment to meet my noble friends Lord Hodgson and Lord Freeman and other noble Lords who are interested in this area to update them on matters and to get further information on what they would like to see.

I hope that I have given the Committee some reassurance on our intention to act and on the next steps that we have planned, and that noble Lords can have confidence that no provision is required in this Bill to secure the progress that my noble friends Lord Faulks and Lord Hodgson seek. Therefore, I ask my noble friend to withdraw the amendment.

[Lord Rooker]

I am grateful to the Minister and would like to add one point. All these properties have been purchased in this country, so there has been conveyancing and the involvement of estate agents. Looking at the list, it is strange that all the lawyers and solicitors involved are the blue-chip City gang who are purchasing these properties. I know that Global Witness and Transparency International and others have to be acutely careful when they say anything publicly because the next day they get a letter from one of these companies advising them that it has been noted. It is not in these people’s interests that we have a register, but I say to the Minister that we will be watching this. He has given a very firm commitment, which I certainly appreciate, but a lot of people with vested interests—our own citizens and companies here in the City and in the legal structures—will not be happy with this, because all these properties have been purchased. Someone has done the conveyancing of this crooked money that has come into London and we have to be aware of that.

[Lord Bates]

That is right. We are certainly not going to shrink from the commitment from the previous Prime Minister, with which the current Prime Minister is in agreement. We want to see that happen. We have also, of course, taken certain actions in relation to this area. For example, the annual tax on enveloped dwellings, known as ATED, was introduced in April 2013 to ensure that those who place UK residential property in a company pay a fair share of tax.

My noble friend Lord Hodgson asked whether the number of purchasers was increasing. The anecdotal evidence and the facts suggest that. The ATED receipts in 2015-16 were £178 million, a 53% increase on the previous year. It is at least an indicator of the scale of the undoubted challenge. We stand by the commitment made earlier this year. However, because we lead the world in seeking to be the first major economy to have such a register, there are legal consequences. The same lawyers who do the conveyancing will be reading through the fine print of any legislation that comes forward. We have to make sure that it is watertight to ensure that the right people are affected by it and, as the noble Lord, Lord Collins, said, that other people are dissuaded from making those investments here.

With those reassurances and the commitment to meet again, I hope that my noble friend will withdraw his amendment.

[Lord Hodgson of Astley Abbotts]

My Lords, I am very grateful to all noble Lords who have spoken in support of this amendment: the noble Baroness, Lady Bowles, the noble Lord, Lord Rooker—he has shown that his investigative nose is as sharp as ever—my noble friend Lord Freeman, the noble Baroness, Lady Kramer, and the noble Lord, Lord Collins of Highbury.

My noble friend Lord Bates defended his wicket a great deal better than the English test team has been doing in Australia. He quite fairly drew attention to the Government’s efforts in relation to additional tax for properties owned inside a company and so on. But we have been round the familiar arguments, and nine months after the consultation closed seems a very long time for careful consideration.

I think we will take the Minister up on the invitation offered by his friend for a meeting. I am concerned that there will be a response early in the new year, just as we wave goodbye to this piece of legislation. I am not clear whether this requires additional primary legislation. If so, how will it be fitted into our programme? It could be tacked on to this Bill but once it has gone I am not aware of much else coming down the track where this register and all the other stuff could be included

We have been round this a great many times. I am grateful for the Minister’s initial response. He understands the strength of feeling on all sides of the House that this situation should not be allowed to continue. We look forward to the meeting and, in the meantime, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Davidson of Glen Clova]

My Lords, I pay tribute to my noble friend Lord Hain for that remarkable and well-researched analysis of the real problems that money laundering can cause, and the need perhaps to look at money laundering enforcement in the UK rather more sharply than has been done in the past. He has set out the most remarkable tale of corruption in South Africa and the impact it has had on global banking, and not just within the UK.

On Amendment 69B, we are wholly supportive of the underlying principle of criminalising corporate failure to prevent money laundering. I assume that this amendment cannot be contentious. As the noble Baroness, Lady Bowles, pointed out, the Government and the Law Commission both concur in assessing the nigh impossibility of prosecuting large global commercial actors under current corporate liability legislation. It is clear that identifying the involvement of the directing mind in such entities is a major obstacle. Of course, as the noble Baroness pointed out, that skews prosecutions towards the SME sector and risks leaving major crimes unprosecuted. The Serious Fraud Office, which has the difficult and complex task of prosecuting such offenders, repeatedly has called for such an offence, as do Transparency International, Global Witness and Corruption Watch. It will be especially helpful to hear the Minister’s response given the terms of the EU’s current proposed money laundering directive, particularly Article 7, which covers a not dissimilar approach to questions of failures in the corporate sector.

Is it correct to assume the Government will adopt the proposed new EU directive? More generally, are the Government committed to maintaining regulatory alignment—to use a phrase—with the EU’s AML terrorist financing regime? Or do they envisage a different autonomous regime in due course? The autonomous regime approach has the potential to freeze the access of UK financial services to EU financial markets. I am not sure that I have detected thus far what the Minister’s response is to that particular concern.

The amendment standing in my name regarding consultation, to which the noble Baroness, Lady Bowles, kindly referred, resulted partly from the Government having opened a call for evidence in January this year on corporate liability for economic crime, which inevitably covers money laundering, but nothing appears to have emerged from the Ministry of Justice thus far.

True it is that the Government are reported to have proposed consultation for reform this year, but this year is running out. Amendment 69F seeks to create an obligation within a timeframe for consultation on corporate liability for money laundering, terrorist financing and other financially threatening offences. True it is that there has been a consultation process, a discussion of this area, for very many months, indeed years. As has been pointed out, perhaps we are getting to the point where action is required rather than further consultation. But consultation with a timeframe might at least assist the Government in moving forward even earlier. The fight against economic crime must have a real priority. Economic crime destabilises both fragile and developed economies, as my noble friend Lord Hain has pointed out so eloquently. Of course, one recognises that this Government sometimes seem to be having difficulty concentrating on any issue other than Brexit. This amendment will oblige the Secretary of State to give priority to corporate liability for economic crime.

[Lord Bates]

My Lords, I thank the noble Baroness, Lady Bowles, for introducing this amendment; she brings her own expertise in this area from her role in the European Parliament. That was evident in the way she went through a very complex issue, and I will come to the response on that.

These amendments propose creating a new corporate criminal offence for the failure to prevent money laundering, and launching a public consultation within six months of this Bill receiving Royal Assent regarding possible further reform of the law relating to corporate liability for money laundering, terrorist financing and offences which pose a threat to the integrity of the international financial system.

I understand and sympathise with the need to ensure that policies are in place which effectively prevent money laundering. However, I hope that the Committee will agree that it is of paramount importance to consider the evidence and current context before creating a new corporate offence, as the noble and learned Lord, Lord Davidson, invited us to do before introducing this element. He referred to the Ministry of Justice call for evidence earlier this year on potential reforms of the law relating to corporate liability for economic crime. Indeed, one of the options considered within that call for evidence was the potential for creating a corporate criminal offence of failure to prevent economic crime. I am sure the Committee can see the overlap with the new offence proposed by Amendment 69B and the provisions of Amendment 69C. The Ministry of Justice is considering the responses to its call for evidence, and will publish a response in the new year.

I should say that the responses to these consultations are like buses: you wait for a few months and then three of them come along together. The other one is of course on our anti-corruption strategy, which the noble Lord, Lord Collins, referred to. I mention it in this context to say that my noble friend Lord Ahmad and I have just been discussing it, and we will seek to provide a substantive update on progress towards the strategy by Report in the new year. Of course, because some of the consultations are outstanding, some of the elements of that strategy may need to wait until they are clarified.

[Baroness Kramer]

Just for clarification, is the Minister saying that before Report he will be publishing the MoJ’s response to its consultation? He said it would be in the new year.

[Lord Bates]

I did say the new year, but I was talking about two different things. That is my fault. The MoJ consultation response will be published in the new year—that is what we have said. Earlier the noble Lord, Lord Collins, asked what had happened to the anti-corruption strategy, which is an overarching approach by the Government. I was saying that after discussing that with my noble friend Lord Ahmad, who leads on these matters—

[Baroness Kramer]

Can I clarify that the MoJ response to the consultation will not be available before the Bill has completed its process through this House?

[Lord Bates]

The new year is the new year. I do not want to prejudge when that response might be. I have said enough, basically; obviously we are trying to respond to noble Lords’ questions on these matters as fully as we can, but that is as far as I am able to go at this point. What I was saying about the anti-corruption strategy was that we will seek to provide a substantive update by Report.

I hope the Committee can agree that it would be precipitous to introduce a further “failure to prevent” offence before we properly review this evidence. Similarly, this call for evidence substantively overlaps with Amendment 69F, proposing a new consultation relating to corporate liability for offences of the type referred to in Clause 41. It is right that we wait for the Ministry of Justice to respond to this call for evidence before undertaking a further public consultation that covers the same ground.

Further, the Government introduced corporate criminal offences of failure to prevent bribery, which the noble Baroness, Lady Bowles, referred to, through the Bribery Act 2010, and failure to prevent the facilitation of UK and foreign tax evasion in September through the Criminal Finances Act 2017. Consideration of the introduction of future “failure to prevent” offences should be informed by how those policies operate in practice. While the Bribery Act 2010 has been in force for a number of years, the relevant provisions of the Criminal Finances Act 2017 were commenced only in September of this year, meaning that as yet there is little evidence on how the offences established through that legislation are operating in practice.

I further note that many instances of corporate failures related to anti-money laundering are already captured by existing anti-money laundering legislation. The 2017 money laundering regulations, for example, already impose requirements to prevent money laundering on companies in the regulated sector, such as banks, lawyers and accountancy firms. Breaches of any of those duties by the company are subject to civil or criminal penalties, including fines. For example, firms are required to put and keep in place specific policies, controls and procedures to manage and mitigate effectively the risks of money laundering to their business, including by their clients or customers.

Those regulations, the previous regulations and related rules are well enforced. For example, the Financial Conduct Authority fined Deutsche Bank £163 million in January this year for failing to maintain an adequate anti-money laundering framework, after its investigations revealed that a UK division of the bank had failed to take reasonable care to establish and maintain an effective anti-money laundering control framework. Further, in 2015 the Financial Conduct Authority fined Barclays Bank £72 million for similar failures in guarding against financial crime, noting that Barclays,

“did not exercise due skill, care and diligence”,

and,

“failed to assess, manage and monitor those risks appropriately”.

These financial penalties substantively demonstrate that effective and proportionate penalties are already applied to UK-regulated firms that fail to put in place proper systems and controls to prevent money laundering.

--- Later in debate ---

[Lord Hain]

Perhaps I may press the Minister to respond to my request on red flag warnings to the British domestic banks. I am happy for him to write to me about it, but some government response on this matter is important to try to deal with this infection of our own banking system by a disease that is spreading throughout the South African economy.

[Lord Bates]

The noble Lord, as an experienced Member, will know that when there is an ongoing investigation, to which he referred, it is often dangerous for Ministers, who are supposed to be detached from the process, to comment. However, I recognise the seriousness of the allegations—as does the Chancellor—and they have been passed to the appropriate authorities. I am pleased that they are being investigated.

[Lord Hain]

I apologise to the Committee for probing this point. I am grateful for the Minister’s response but I have named other banks as well as those to which I previously referred—namely, HSBC, Standard Chartered and the Bank of Baroda. I hope that he or the Chancellor will send me a letter in the manner in which the Chancellor responded to my earlier request—even if the Minister cannot respond this evening, for reasons that I totally understand.

[Lord Bates]

I am happy to undertake to write to the noble Lord in response.

[Baroness Bowles of Berkhamsted]

My Lords, I thank the Minister for his responses to the amendments in my name and that of my noble friend. I am conscious that there are issues of due process around consultation, but forgive me if I also think that there was a bit of fancy footwork going on with the alacrity with which a call for evidence went out during the progress of the Criminal Finances Bill, when some distinguished Members of the other place started to take a great deal of interest in including an offence of failure to prevent. It is the best part of nine months since then and probably three months since I was contacted and asked whether it was okay to publish my submission to the call for evidence. I said yes, but still nothing has been published. I do not know why we cannot see some of the responses separately from the response of the Ministry of Justice.

However, one thing that has been established is that we have a pretty rubbish criminal regime on corporate liability. Something has to be done. In that context, it would be good to know how long the Minister thinks it might take for the Government to analyse whether any good has been done by having a second failure-to-prevent offence on tax evasion. I gave an exposition of how good it is to have one, and it will not be shown to be any weaker vis-à-vis tax evasion than it is vis-à-vis bribery. Therefore, to require specific evidence within the economic crime sphere is probably overegging it.

The Minister referenced fines, and there will potentially be more fines under the money laundering regulations 2017. I accept that, as well as what he said about the senior managers regime—but ultimately you have to be able to bet to board level. It is, importantly, board members who ultimately control how much resource goes to internal audit. That is behind the director disqualification point. It is always somebody further down, not the people at the top—the people who are able to pass the buck to some junior person who may not necessarily have been given the resources. They are the ones who carry the can, mainly in the senior managers regime.

I therefore hope that the Minister will listen to and think about these points, and consider how much use the Secretary of State is making of the potential for director disqualification when it is discovered that procedures have not been in place in the regulatory environment. The Secretary of State could still say, “Right, I want investigations of whether the directors are fit and proper because they have allowed these things to go on within the companies for which they are ultimately responsible”.

--- Later in debate ---

[Baroness Kramer]

My Lords, the noble Lord, Lord Patten, may be very interested in the next group of amendments, given the theme that he has just raised. He may have raised it because he cannot remain for that group, but if he has the opportunity, he will get a thorough response to the questions that he has just raised—possibly not from the Government, but certainly from other Benches.

I rise to explain the origin of this particular amendment. This came as a consequence again from the meetings that the Minister very kindly was able to offer to discuss the content of the Bill. The Minister will be aware of how strongly I feel about the importance of keeping the democratic process embedded in creating anti-money laundering legislation by essentially taking those powers that are undertaken by the European Parliament and the Council and transferring them to this Parliament, rather than to government Ministers and executive control. That is the underlying issue that essentially faces this Bill, and we discussed some of that earlier.

When we were in that discussion and proposed something very simple—the text of Amendment 68A, which took the existing 2017 regulations, put them on to the face of the Bill and then said they could be amended only by primary legislation in order to make sure that that democratic process continued—two primary issues were raised with us. First, it was said that sometimes action would need to be fast-tracked. We took care of that, as your Lordships who were here will remember, under Amendment 69A, which provided a fast-track mechanism for those moments of emergency. However, I notice from the Delegated Powers and Regulatory Reform Committee report that, when it probed to try to find examples of those emergencies, the FCO could not come up with a single one, which the committee was not very impressed by. But let us accept that there are times when there are emergencies—and there certainly is a role that FATF plays—so we made a carve-out for that.

The second issue that was raised with us was that it would be impossible to change in the Bill the language of regulations tied to the European Union and convert it over to a UK equivalent—that was almost too impossible for anybody who was sitting there drafting the Bill even to contemplate. The noble Baroness, Lady Bowles, who is a fearsome drafter, very rapidly took pen to paper and drafted an amendment which pretty much does that. She accepts that the amendment may not be absolutely perfect, but she does not have the resources or legal staff that the department has available to do the checks and complete conversions. I believe that this particular transposition took about an hour, and I think that anybody on the government Benches would agree that, in terms of making that shift, the amendment probably does 98% to 99% of what is necessary and is in need of only a little refinement.

The amendment makes it clear to the Government, since such a challenge was thrown down, that there is a very simple way—it is a relatively short new clause—to cover what, apparently, was one of the primary obstacles or difficulties for moving through the primary legislation route. This would leave the policy framework and principles in place as part of a democratic process, rather than requiring that all of those be abandoned and we just go to a regulation process on these very fundamental issues.

As my noble friend has said, these provisions can place great burdens on business and—we will come on to this later—can lead to the creation of criminal offences, with imprisonment for up to two years; can define the defences available against prosecution; can put in place new supervisors and change the powers of those supervisors; and can redefine every other piece of legislation that uses the phrase “terrorist financing”, using sweeping wide powers.

I understand the Government would have loved to have been able to do that in primary legislation but could not see a way through and was therefore forced to try and do this through a regulatory mechanism. This amendment is just one of those examples that makes it clear that it can be done, and I hope the Government will take it seriously.

[Lord Bates]

My Lords, I thank the noble Baroness, Lady Bowles, for doing this. I have to say that I am growing in awe of the noble Baroness and her drafting skills. Should there be any vacancy among the clerks in the Public Bill Office, they will be quite impressed by the notion that the noble Baroness can draw up this technical amendment in one hour—it is very impressive indeed.

My noble friend Lord Patten perhaps did the noble Baroness a disservice by saying that it was a “probing probing amendment”; I think it was a “very probing probing amendment”, which the record should capture. Having read through her handiwork in the drafting, I think she did not do herself justice. The amendment certainly provides a welcome opportunity—which is, I know, its purpose—for us to put on the record some further remarks about how we see this particular issue being addressed.

--- Later in debate ---

[Lord Naseby (Con)]

My noble friend Lord Patten said that there was a black list and a grey list, but the Minister is now saying that there is no such thing as a grey list. That is quite an important clarification, because either the overseas territories are on the black list or they are fully co-operating and on the non-existent grey list. So there is a degree of clarity required about an important matter such as this one.

[Lord Bates]

My noble friend is right, and I am sorry if I have not been very clear on this. The key point was that the stylistic terms “grey list” and “blacklist”, which may be for general convenience, were not reflected in what we were saying—rather, it is a demonstration of commitments by the 30 jurisdictions named to address the concerns of the EU Code of Conduct Group. So we are more discussing the semantics of the terms that might be used to describe a jurisdiction which is complying or not complying, or progressing or not progressing, towards addressing concerns of the Code of Conduct Group.

[Lord Patten]

It is extremely important that we have the terminology right. If I have got it wrong, I apologise to the territories involved. I think—I ask my noble friend to reflect on this—that it is perfectly daft to put a British Overseas Territory such as Bermuda on a list of whatever shade of grey, because I believe that it is a very upright outfit and a suitable, well-run territory for financial services, and I do not believe that it is involved in money laundering. But it has been fingered in reports, and Commissioner Moscovici said yesterday that it was on some sort of grey list. We need a certain amount of clarity, because it is damaging to those people who do business with Bermuda. So I agree with my noble friend.

[Lord Bates]

That is a good point.

[Baroness Kramer]

Can I just be helpful? I am sure that there will be a better note from the Box, but is the correct phrase “on notice” for the group that falls within the terminology of the grey list? Is that the correct terminology?

[Lord Bates]

That may indeed be a very helpful intervention from the noble Baroness, Lady Kramer. However, for the record, because this is a serious point, the note that I read out may not fully reflect the announcement to which my noble friend has referred. To make sure, I shall seek some additional clarification. The next group is very germane to the issue that he raises in relation to overseas territories. Therefore, perhaps without presuming on my noble friend too much, we may have some further information that will better answer that particular point.

In fact, a note has arrived, and I can say that the list published yesterday relates to tax. The EU maintains a separate list of countries which represent a high risk of money laundering and terrorist financing, to which UK firms must have regard. That may be part of the answer; more will come in the next group, if my noble friend can bear with us.

On the EU withdrawal Bill, which the noble Baronesses, Lady Bowles and Lady Kramer, asked about, Clause 7 is very clear—it is a power to remedy deficiencies in law that arise as a result of the UK leaving the EU, no more and no less. That is a level of certainty which I hope will offer some reassurance to the noble Baroness. We do not intend to make changes to the 2017 regulations other than to make those fixes. The 2017 regulations refer to guidelines issued by the European supervisory authorities. Amendment 69D enables those references to be removed only if they are replaced by references to those issued by the UK supervisory authorities. Those would cause additional work and a risk of duplication with other guidance. So, in response to that, and after what I am sure has been a very helpful debate, if not fully illuminating at this stage, I invite the noble Baroness to withdraw her amendment.

[Baroness Bowles of Berkhamsted]

I thank the Minister for his response. As he perhaps imagines, we will return to the issue again. I take his assurance about the withdrawal Bill not being to make changes of policy, but we still have the problem of what this Bill will be doing. It opens the door to very substantial changes of policy and principle, and that is the problem—nowhere does it have such reassurance that that is not going to happen. I think that the Minister has understood that there are things, especially in financial services regulation, where there is a policy framework, as we have tended to refer to it. Without duplication, you make sure that it is within scope of what the UK supervisory authorities would do—or there are provisions that there should be reviews, which have been put into European legislation for good and proper reason. I probably put a lot of them there myself, and I was probably cheered on by people in the Treasury for doing so. It would be quite appropriate to have something that says that we will continue in the same vein.

I thank the Minister for his comments about my drafting skills. As he probably knows, this involves about 100 directives and I remain available to assist if somebody does not know why they are there, because I probably do. At this point, I beg leave to withdraw the amendment.

Budget Statement

Lord Bates Excerpts

Monday 4th December 2017 Lords Chamber

Moved by

[Lord Bates]

That this House takes note of the economy in the light of the Budget Statement.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, just under two weeks ago in the other place, the Chancellor set out a Budget to define the UK’s future. It was a Budget which acknowledged the fundamental strengths of the UK economy, responded to immediate challenges and laid the foundations for an economy that is fit for the future. It is a privilege to present this Budget to your Lordships’ House today.

The Budget demonstrated the underlying strength and resilience of the British economy, which has grown over the past year by 1.5% and has now expanded for 19 consecutive quarters. Employment has risen by 3 million since 2010 and is close to a record high, with a near record number of women in work as well. The unemployment rate has fallen as well, to its lowest level since 1975.

This is all very welcome; however, there remain challenges that need to be addressed. In particular, productivity growth remains stubbornly low. Accordingly, the independent Office for Budget Responsibility has revised downwards the outlook for productivity growth across the forecast period. This has a direct impact on its forecast for GDP growth, which the OBR now predicts to be lower in every year of the forecast period compared to that forecast in March this year. As a consequence, business investment is expected to remain subdued, while inflation is set to peak at 3% this quarter before falling back towards the target over the next year. The Budget therefore takes action to support households and businesses in the near term while investing further to improve productivity and drive future growth in the medium to long term.

The Government have made significant progress since 2010 in restoring the public finances to health, but borrowing and debt remain too high. The Government’s fiscal rules take a balanced approach, getting debt falling while continuing to invest in our key public services and keeping taxes low. The OBR reports that, having taken into account the new forecast and the measures presented in this Budget, the Government are on track to meet both their interim fiscal targets during the forecast period. It is in this context that this Budget seeks to address the future challenges and opportunities for the UK, embracing change while providing immediate support for people, businesses and our public services where it is needed most.

This Government have already set in train a series of long-term reforms to deliver real improvements in growth. We have seen more than a quarter of a trillion pounds of public and private investment in our infrastructure since 2010. We are overseeing the biggest rail programme since Victorian times, and we are transforming skills through apprenticeships and the launch of T-levels at the previous Budget.

In this Budget, the Government have taken further steps to increase our long-term prosperity through investing in the skills and infrastructure needed to compete in future. The national productivity investment fund introduced last year will be extended to 2022-23 and funding will be increased to £31 billion. The fund will support an additional £2.3 billion investment in R&D, taking total R&D spend in 2021-22 to £12.5 billion. That is the largest public-sector R&D investment programme over the past 40 years. This will be alongside an increase in the R&D expenditure tax credit from 11% to 12%, an ambition to create the most advanced regulatory environment in the world and further funding to roll out fibre-optic broadband and 5G networks across the UK.

The Government are also committed to using funding from the national productivity investment fund, along with other transport spending, to boost regional infrastructure. Plans include an ambitious strategy to maximise the growth in the Oxford to Cambridge corridor through projects such as the completion of the east-west rail that will connect Oxford to Cambridge by train. The Budget also announced an action plan to unlock £20 billion of new investment in high-growth, innovative businesses in response to the patient capital review.

On skills, the Budget invests £406 million in maths and digital skills to help everybody get the skills they need to succeed in a modern economy. These efforts are complemented by the industrial strategy, which set out a clear plan for how we can boost the productivity and earning power of people throughout the UK and ensure that our country can embrace and be empowered by the excitement of technological change.

We speak about the infrastructure our businesses need to thrive, but we also need to talk about the infrastructure people need to survive. Increasing the supply of housing in the right places supports productivity improvements. It encourages a flexible labour market and enables people to work where they can be most productive, but, more importantly, providing homes is key to building communities and giving families the stability and security they deserve. Yet home ownership has become increasingly unaffordable, with the average house price in England and Wales now almost eight times the average person’s salary, compared to 3.6 times two decades ago. The number of 25 to 34 year-olds owning their own home has dropped from 59% to just 38% over the past 13 years.

So the Budget sets out an ambition to deliver 300,000 homes a year, supported by a comprehensive package of planning reforms and targeted investment. It commits over £15 billion of financial support to boost housing supply over the next five years, bringing the total amount of support to £44 billion over this period. It makes proportionate planning reforms, focused on urban areas where people want to work and live, helping towns grow in the right way while protecting the green belt.

But we also want to take action right now to help young people who are saving for a home, so the Budget permanently reduces the up-front cost of stamp duty for over 95% of first-time buyers who pay it. This is a comprehensive plan that will deliver on the pledge that we have made of ensuring that the dream of home ownership becomes a reality for the next generation once again.

The Budget is committed to ensuring that we have the foundations in place to support growth in the long term, but it also recognises that there are immediate challenges caused by rising prices. So the Budget will boost wages, reduce the cost of living and support businesses by freezing fuel duty, reducing the burden of business rates by a further £2.3 billion, increasing minimum wages and increasing the personal allowance to £11,850, lifting some 1.2 million out of tax altogether.

Finally, I turn to our public services and the taxes we need to pay for them. I take the opportunity to point out that this is the second Budget this year. The investment this Budget provides to core parts of our public services builds on the previous funding that the Government set out, such as the additional £2 billion we invested in social care in the spring Budget. The Budget takes further steps to put the NHS on a strong, sustainable footing, with £6.3 billion of additional funding, of which £3.5 billion will be invested in upgrading NHS buildings and improving care, while £2.8 billion goes towards improving A&E performance, reducing waiting times for patients and treating more people this winter. This is a significant first step towards meeting the Government’s commitment to increase NHS spending by a minimum of £8 billion in real terms by the end of this Parliament.

The Budget also commits an extra £3 billion to prepare for Brexit over the next two years, to make sure the Government are ready on day one of exit.

On welfare, the Government are committed to building a modern welfare state that is sustainable, in which work always pays and claimants are supported to increase their earnings. That is why the Government are continuing to roll out universal credit, which delivers long-overdue reforms to the welfare system. However, the Government recognise the genuine concerns raised in many places, including in your Lordships’ House, about the operational delivery of universal credit. In response, they are introducing a £1.5 billion package of measures to address those concerns.

The Government are clear that everyone must pay their fair share of tax in order to support our vital public services. The actions taken by this Government since 2010 have secured a £160 billion in additional tax revenue that would have otherwise gone unpaid, and brought the UK’s tax gap down to 6%—its lowest level ever and one of the lowest in the world. The Budget will continue to collect tax due, with a package of measures that is forecast to raise £4.8 billion by 2022-23.

A sustainable tax system also needs to keep up with developments in the wider economy. The Government recognise that the development of the digital economy creates imbalances between those firms with and those without a physical presence. This is not sustainable. Therefore, the Budget sets out how the UK will ensure that all businesses—both digital and bricks and mortar—operate on a level playing field within the corporate tax system.

In summary, the Budget takes sensible actions in the light of revised forecasts to address the some of the key challenges and opportunities that lie ahead, and in doing so, lays the foundations for a prosperous future. It invests sustainably in our public services, while supporting people and businesses and continuing to invest to secure a bright future for Britain. I commend it to your Lordships’ House.

Budget Statement

Lord Bates Excerpts

Monday 4th December 2017 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I thank all noble Lords for their contributions to this extraordinarily good debate. It has focused on all the issues, which tended to coalesce around five themes which I will direct my remarks to: housing; social care and the NHS; living standards and social mobility; business and industrial strategy; and Brexit. It has been good for me and my noble friend Lord Young to have the benefit of all the contributions, but I will single out those from my noble friends Lord Balfe and Lord Dobbs and the noble Lords, Lord Goddard and Lord O’Neill of Gatley. I do so because they began with an optimistic outlook. I confess that I am an optimist: my blood group is B-positive. I am afraid I am drawn to that concept. If the House will indulge me I will take a few minutes to point to the many good things that are happening.

I begin with the noble Lord, Lord O’Neill of Gatley, who has a distinguished record and made observations on the global economy. His forecast—which I trust very much—was that the economy might grow by as much as 4%. If it does, and you take the global economy as somewhere between $70 trillion and $80 trillion, I make that growth of the size of the United Kingdom economy being added to the world economy this year. There is therefore a huge opportunity out there for us to tap into. The noble Lord, Lord Horam, talked about export potential and there is an example of it. The world is growing, markets are growing and most of the fastest-growing markets are outside the European Union. That global strategy therefore strikes a chord.

We should also remember that employment is up by over 3 million, with over 32 million people in work. The noble Lord, Lord Balfe, referred to the hard-working people of this country. The challenge that we face is to add to their hard work increased productivity—which I will come on to later. Unemployment is down by over 1 million since 2010. The unemployment rate has not been this low since 1975. We had lots of nostalgia in this debate, not least for Led Zeppelin and Dusty Springfield. Even Lord George-Brown had a look in among the distinguished figures from the past, including Lord Whitelaw and Lord Healey, the latter’s Budget debate being the first to which my noble friend Lord Wakeham contributed. I believe it was also the first Budget for my noble friend Lord Young.

The noble Lord, Lord O’Neill, mentioned the northern powerhouse and the growth taking place in the regions. It is worth mentioning—the noble Lord, Lord Goddard, echoed this—that employment numbers are growing faster in the north-west than anywhere else in the country. That is something to welcome. It is not happening by accident; it is happening because of a designed policy—a long-term economic plan to rebalance the economy.

We have cut income tax for over 30 million people, taking 4 million people out of income tax altogether. We have frozen fuel duty for eight years in a row, saving the average car driver £850 since 2010. Last month we doubled free childcare, which is worth £5,000 a year to families—an issue referred to by my noble friend Lord Farmer. We have also invested in 3.4 million apprenticeships. The noble Baroness, Lady Kramer, and the noble Lord, Lord Rooker, speculated as to whether the investment plans would be manifested. So far since 2010, we have invested £500 billion in infra- structure projects and have delivered 1,000 such projects.

At the same time, we have seen corporation tax for small businesses—a concern of my noble friend Lord Wakeham—go down from 28% to 19%, making it one of the lowest tax rates in the G20. An interesting point in looking at the yield from corporation tax is that, as the noble Lord, Lord Darling, will recognise, it is not just the tax rate that counts but the tax take. When we had a corporation tax of 28%, the revenue was about £43 billion a year. With a current tax rate of 19%, the amount of money being brought in is close to £50 billion. Therefore, although the rate has come down, the take has gone up. Should any opposition party be foolish enough to postulate that reversing that beneficial and benign occurrence of falling taxes and rising revenues would somehow be a way to reduce the deficit, I suggest that it might not be the way forward.

Perhaps I may address some of the points that were raised concerning international attitudes towards this country. The noble Lord, Lord Lea of Crondall, talked about foreign direct investment here. The UK remains the leading foreign direct investment recipient in Europe, attracting a record total of 1,144 financial foreign direct investment projects since 2016—an increase of 7% over 2015. So people here may be losing confidence in themselves but it is noticeable that the world is not losing confidence in Britain. With our world-class universities, our incredible market and our technical abilities, the UK attracted $254 billion in 2016, second only to the United States.

At the launch of the industrial strategy, referred to by the noble Baroness, Lady Randerson, we also celebrated two major new investments in cutting-edge pharmaceutical companies—MSD, which will develop a research facility in London by 2020 aimed at finding new drugs, and Qiagen, a leading diagnostics company, which, partnered by Health Innovation Manchester, will develop genomics and diagnostics at its campus in the city. Facebook announced just today that it will create another 800 new jobs in the UK in 2018, and not quite the low-skilled jobs that some noble Lords referred to. Toyota announced a £240 million investment to upgrade its car plant in Derbyshire, Rolls-Royce announced a £150 million investment in UK aerospace, and BMW will build a fully electric version of the Mini in the UK. All these are investments in the UK. They express a belief in the United Kingdom and what we, the people of the United Kingdom, have to offer. That point was touched on by the noble Lord, Lord Skidelsky, who then rightly asked us to focus on the importance of investment. I will come to that point first.

In the Budget, we proposed that an increased amount will go into the productivity investment fund. This will bring investment in R&D to its highest level in over 40 years—again, another welcome forecast.

The OBR forecast that the UK contribution to the EU, net of public sector receipts, will be £7.7 billion over 2017-18. This figure does not include receipts received by the private sector.

On the points raised by my noble friend Lord Maude, obviously he did a tremendous amount of work in raising activity across the public sector during his time as Cabinet Minister in the Cabinet Office. The figure he quoted of £50 billion saved in the delivery of front-line services has made a tremendous difference to the working of government and to the impact on our financial position. My noble friend Lady Neville-Rolfe said that we ought to maintain pressure on this and not let up, because the battle was not won, and she is right that we should focus on that.

Perhaps one of the most inspiring contributions was from my noble friend the Duke of Wellington, who talked about the King’s College maths pilot school. Of course, we recognise that if we are to compete in the world and attract more foreign direct investment of the type we are talking about, building more tech companies in this country, we need to attract high- quality maths teaching. That is why we announced in the Budget that we will invest £42 million in a pilot teacher development premium. We will also triple the number of fully qualified computer science teachers from 4,000 to 12,000, raising maths attainment packages through a support plan. I am happy to convey my noble friend’s recommendation of the noble Baroness, Lady Wolf, who was behind that particular school, and I commend them for their work.

A number of noble Lords referred to social mobility issues: the noble Lord, Lord Tunnicliffe, the noble Baroness, Lady Donaghy, my noble friend Lord Farmer and the noble Lord, Lord Skidelsky. It is worth recognising at this point that some other things are of note. The number of young people from the most disadvantaged areas who attend universities has increased to its highest level on record—19.5% for England—and, as my noble friend Lord Balfe mentioned, income inequality is down to its lowest level. The noble Baroness, Lady Donaghy, referred to the impact of the Budget on women; in April 2016 the gender pay gap for full-time employees decreased to 9.4%, and there are record numbers of women in the workplace.

On comments by the noble Lords, Lord Lennie, Lord Beecham, Lord Goddard and Lord Shipley, particularly on the north-east of England, people who work in that area will benefit from an ambitious devolution deal in the north of Tyne area, covering Newcastle, North Tyneside and Northumberland, which will give them greater freedom—which my noble friend Lady Eaton called for—to get on and do the work they are supposed to be doing on investment and looking after their local communities. That will be worth a significant amount—£600 million over the next 30 years or, more precisely, £20 million per year. There is also the mayor of Tees Valley’s initiative on the SSI site, to which the noble Lord, Lord Lennie, referred as well as the investment in rolling stock on the Tyne and Wear Metro, which again is something that should be welcomed and shows that investment and prosperity are heading out across the UK.

I turn now to universal credit. The right reverend Prelate the Bishop of Portsmouth referred to that and the measures that were being taken. We are ensuring that households that need it and have an underlying entitlement to UC will have access to a month’s worth of support within five days via interest-rate-free advances. Universal credit is paid monthly and in arrears to mirror the world of work. We have listened to representations from your Lordships’ House, among others, and have made changes that will continue with the principle but ease the impact as the programme is rolled out.

Housing was raised by my noble friends Lord Ryder and Lord Horam, the noble Lords, Lord Darling and Lord O’Neill of Clackmannan, and the noble Baroness, Lady Blackstone. The issue that we have at the moment is one of unaffordability. The noble Baroness, Lady Kramer, referred to the issue of supply. Of course it is about supply, which is one reason why we have announced the housing White Paper, Fixing Our Broken Housing Market, and announced a whole series of initiatives within that package of £15.3 billion about how we release more sites for development. That is entirely a supply measure. The housing infrastructure fund at £5 billion is a supply measure. Oliver Letwin has been asked to undertake a review about the situation referred to by the noble Lord, Lord Shipley, and my noble friend Lord Ryder where developers are granted planning permission but do not go on and build the houses that are necessary. That is looking at blockages in the supply area. It has to be seen that the focus is not just on demand, such as the measure on stamp duty; there are supply measures as well.

The noble Lord, Lord Beecham, and my noble friend Lord Horam referred to the Homelessness Reduction Task Force. That has been established to develop a cross-government strategy with the initial focus on delivering a commitment to halve rough sleeping by 2022 and eliminate it by 2027. There will be three housing pilots—the first in Greater Manchester, the next in the West Midlands Combined Authority and then another in the Liverpool City Region.

The noble Lord, Lord Campbell-Savours, asked about online VAT fraud and how HMRC will implement and monitor it. HMRC has discretionary powers that it will use on a case-by-case basis where there is clear evidence that a UK business trading via an online marketplace is not complying with VAT rules. Compliant UK sellers who are legitimately trading below the VAT registration threshold or are VAT registered correctly accounting for all VAT due will need to be addressed in this particular context. The requirement to display a valid VAT number applies to those companies that are provided with one.

My noble friend Lord Balfe asked whether we could introduce a surcharge on foreign-owned empty residential properties. The Government are keen to encourage owners of empty properties to bring the properties back into use, which is why the Budget announced we will give the power to local authorities to increase the council tax premium on empty homes from 50% to 100%.

The noble Lord, Lord Ryder, asked about stamp duty and observed its impacts on the housing market. Stewart Baseley, executive chairman of the Home Builders Federation, has said that first-time buyer’s relief will provide the certainty of demand to allow builders to invest with confidence, directing and increasing supply.

The noble Baroness, Lady Young of Old Scone, asked about housebuilding measures and whether they will have a negative impact on standards. The Budget confirms the Government’s commitment to maintain existing green belt protections. We are consulting to make sure that minimum densities are set at the right level for all concerned, including local people who will live in the homes. I will take her suggestion of green villages back to the Treasury, if I may.

My noble friend Lady Neville-Rolfe and the noble Baroness, Lady Randerson, asked about railway investment, Heathrow, local roads and the national planning infrastructure fund. That £1.7 billion fund will be used for transport in cities. It is spread across the regions, with £250 million for the West Midlands, £243 million for Greater Manchester and £377 million for the north-west for intra-city transport.

The right reverend Prelate the Bishop of Portsmouth asked about UK defence. The UK will meet the NATO target to spend 2% of GDP on defence. In the 2015 spending review, the defence budget was protected and increased by 3.1% in real terms until 2019-20.

The noble Lord, Lord McKenzie of Luton, referred to debt falling only due to the housing association reclassification. My answer is no: we would have met the fiscal targets in 2021, regardless of the change to the classification of housing associations.

The noble Lord, Lord Tunnicliffe, asked whether deficit reduction has failed, to which the answer is no, it has not. Of course, we inherited a deficit of 9.9% of GDP in 2009-10; that has been reduced to 2.3% in 2016-17.

The noble Lord, Lord Livermore, questioned whether we will reach the Government’s targets. In November 2017, the OBR forecast that the Government will meet both their fiscal targets for this Parliament. The deficit is forecast to be 1.1% of GDP in 2022-23—the lowest level since 2001-02—and debt is forecast to peak in 2017-18 at 86.5% of GDP, then fall every year of the forecast period to 79.7% in 2022-23.

My noble friend Lord Balfe asked about tax avoidance and evasion. Since 2010, we have introduced 100 measures, including in this Budget, to tackle tax avoidance and evasion. As a result, the tax gap is now at its lowest level and is one of the lowest in the world—some 6% of the total forecast.

I come to social care. The noble Baroness, Lady Bakewell, asked me to ensure I mention social care in my winding-up speech. I am happy to do that, as I mentioned it in my opening speech. There is a critical element that we need to bear in mind. One of the most staggering statistics we have come across is that there are some 15,000 centenarians living in the UK. From the population in this country living now, that figure will rise to some 10 million. Therefore, the issue to address in social care is intergenerational fairness, which was referred to, and the impact on areas such as those mentioned by my noble friend Lord Freeman, including pension funds. Those are vast concerns that will have to be addressed over the long term and reflected on. There will have to be Green Papers and discussion papers. Some £2 billion was announced in the Spring Budget. That will have to be kept closely under review in the light of any Green Paper.

I think I have addressed a number of the questions, though I am sure not all the points raised. In conclusion, I simply say that this is a Budget that invests in the infrastructure, skills and technology we need to succeed while providing immediate support where it is needed the most.

[Lord Bilimoria]

I am so sorry to interrupt the Minister as he is winding up after 23 minutes. He has addressed so many issues. Right up front he said, “And I will address Brexit”. Many Members have mentioned Brexit. It is the elephant in the room that overshadows the whole of the Budget and the Minister has not given it one minute.

--- Later in debate ---

[Lord Bates]

I am grateful to the noble Lord for giving me this opportunity. Many in this House have stood where I have when there have been, let us say, fast-moving events happening in other parts of Europe. I thought I would get a very helpful steer as to the line I was to take on the Brexit negotiations so that I could give an authoritative update. However, it basically distilled down to that there will be a Statement in the other place tomorrow, given by the Prime Minister, which will probably be repeated here, which will give noble Lords a full update on these matters. It is of course a matter of critical importance. The Prime Minister and the Secretary of State are in Brussels, trying to secure the right deal for British business and the British people so that we continue to have access to that very important market.

I can certainly say to my noble friend Lord Dobbs, having been invited to comment on Brexit, that nothing is agreed until everything is agreed. The talks have over the last couple of days made some good progress, but there are some final issues to resolve. As President Juncker and the Prime Minister said, both sides are confident that we will conclude this positively ahead of the December Council.

That particular aspect is to be continued, but this Budget strikes the right balance between addressing short-term priorities and seizing long-term opportunities. It capitalises on the changes ahead and will build an economy fit for the future. I once again thank all those who have participated and I beg to move.

Motion agreed.

HIV: Global Response and Young People

Lord Bates Excerpts

Thursday 30th November 2017 Lords Chamber

[Lord Collins of Highbury]

To ask Her Majesty’s Government how they will support young people as partners, leaders, and advocates within the global response to HIV.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, ending AIDS as a public health threat by 2030 is a UK priority. We are the second-largest international funder of HIV prevention, treatment and care. Much progress has been made, but AIDS remains a leading killer of adolescents globally. To change this, we must work together with young people to help them take informed choices to protect themselves from infection.

[Lord Collins of Highbury (Lab)]

My Lords, I welcome the Government’s commitment, but one thing that concerns me is that no mention is made of HIV in DfID’s youth agenda, which was published in 2015 and promotes youth as being the agents for change in the heart of development. HIV affects young people disproportionately. Does the Minister accept that, by including it in the agenda and recognising HIV as a youth issue, young people could be supported to lead HIV programming and to be effective advocates in stopping the spread of HIV? One thing that DfID could do would be to include a young delegate in the delegation to the international AIDS conference in Amsterdam next July, but certainly prioritising it among young people is key.

[Lord Bates]

That seems a very good suggestion. I am happy to take it away and look at the possibility of sending a young delegate to the AIDS conference next year. I think that we could do more in this area. Above the youth strategy, we have the HIV/AIDS strategy, which cuts across all these issues. The noble Lord is absolutely right to remind us about the effects of AIDS. It is the biggest killer of young girls in sub-Saharan Africa and 80% of all new infections among adolescents occur in young girls. Education, the involvement of peer groups, overcoming stigma and making sure that people have access to the right sexual and reproductive health advice are all very important, and I am very happy to take away the noble Lord’s suggestion and look at it again.

[Baroness Sheehan (LD)]

My Lords, the latest figures from the WHO show an increase in new infections in Europe. In Africa, the number of new infections is declining far too slowly. Does the Minister agree that prevention is better than cure and that investment in vaccines and other prevention tools must continue?

--- Later in debate ---

[Lord Bates]

As the noble Baroness will know, we are the second-largest contributor to the Global Fund, with a commitment of £1.1 billion. She is also absolutely right to say that the fastest growth areas in terms of new infections are eastern Europe and central Asia. Following a significant decline in infection rates in the early part of this century, we have found that those rates have plateaued out, with around 2 million new infections last year. That is way too high and is way short of the objectives that we all signed up to in SDG 3, which includes achieving the eradication of AIDS as a public health threat by 2030.

[The Earl of Sandwich (CB)]

My Lords, I know the Minister has been in Africa quite recently. Can he say which countries are most successful in reducing the infection rate? Is Uganda still in that position?

[Lord Bates]

Of the 15 countries which are at the highest risk, it is correct that 10 are in sub-Saharan Africa. Regarding those which have been most effective, there has been a combination of two things. First, there is a need to remove the stigma: in far too many countries, same-sex relationships are criminalised; there is a stigma attached to talking openly about sexual relations; and therefore, particularly among young people, that is not conducive to reducing infection levels. Secondly, there is the question of healthcare systems. We are working with many countries in sub-Saharan Africa to address those issues.

[Lord Roberts of Llandudno (LD)]

My Lords, what action is taken with immigrants to the UK, including refugees and asylum seekers, to make them aware of the facilities available and that they are able to access them just like anyone else?

[Lord Bates]

My Lords, I am sure that is happening as a matter of course through our health service, which has been pioneering responses to and treatments of this epidemic throughout the world. I am sure that will continue and impact other people as well. At the same time, we are also working with organisations such as the Robert Carr civil society Networks Fund to get non-government organisations better joined up and advocating to reduce the threat and tackle the epidemic.

[Lord Foulkes of Cumnock (Lab)]

My Lords, will the Minister pay a visit to Scotland and discuss with the Scottish Executive—the Scottish Government—the Scottish Parliament, voluntary organisations in Scotland and his own staff at East Kilbride, where about 40% of DfID’s staff are based, what they can do to help fight AIDS, both at home and abroad? That would be particularly appropriate because, as well as World AIDS day, this is also St Andrew’s Day.

[Lord Bates]

The noble Lord provides me with an opportunity to pay tribute to our staff in East Kilbride on St Andrew’s Day for the incredible work they do in tackling poverty around the world from there. I am happy to visit East Kilbride, as I do often, and have discussions to explore opportunities to reduce this epidemic.

[Lord Skelmersdale (Con)]

My Lords, my noble friend will not be aware but a couple of years ago I went to Lusaka and visited a male prison where AIDS was in an incremental state. Does he accept that overcrowding in prisons is one of the causes, and one of the solutions, to reducing AIDS among men?

[Lord Bates]

By making sure that people are educated and aware, there are many ways in which infection can be prevented—and prevention is far better than cure in virtually every circumstance. We are looking for opportunities to provide better education and sexual and reproductive advice to inmates as well as the wider population.

[Lord Bruce of Bennachie (LD)]

My Lords, DfID should be congratulated on the work it has done with marginal groups. Does the Minister acknowledge that in too many countries, because drug abuse, sex between men and sex trafficking are criminal, many Governments refuse to engage with those sectors, and yet they are the drivers of AIDS? Will DfID keep up its good work in that sector?

[Lord Bates]

There are 72 countries around the world which criminalise same-sex relationships, eight of which have the death penalty. Therefore, having an open conversation about how to address these issues is very difficult in those circumstances. Sadly, 36 of those countries are also members of the Commonwealth. The Prime Minister has said that we will be taking the opportunity at the Commonwealth Heads of Government Meeting to raise those issues in that summit to ensure that there is change.

Brexit: Costs

Lord Bates Excerpts

Wednesday 29th November 2017 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, with the leave of the House, I will repeat a Statement made in answer to an Urgent Question by the Chief Secretary to the Treasury in another place earlier today.

“Mr Speaker, our negotiating team are currently in Brussels discussing our exit from the European Union. In fact, our officials have been working on it for months. It would be completely wrong of me to cut across those discussions by commenting on speculation on the financial settlement. It would not be in our national interest either.

The Prime Minister made it clear in her Florence speech that the EU member states would not need to pay more or receive less money over the remainder of the current budget as a result of our decision to leave. She also made it clear that the UK will honour its commitments made during the period of membership in the spirit of our future partnership.

As we have said before, nothing is agreed until everything is agreed. Any settlement that we make is contingent on our securing a suitable outcome, as outlined by the Prime Minister in her Florence speech. We will meet our commitments and get a good deal for UK taxpayers. We want to see progress towards a preferred option, which is an implementation period followed by an ambitious future economic partnership. In the Budget we set aside £3 billion in addition to £700 million we have already allocated to make sure that our country is fully prepared for all eventualities.

What we have seen today in the media is simply speculation. We will update the House when there is more detail to give”.

[Lord Davies of Oldham (Lab)]

My Lords, I was going to welcome the Statement, but I had hoped it would be a bit more definitive than the Minister has managed. We think that developments have gone a considerable way to securing the financial settlement, which of course is of great importance. I hope the Minister will accept that we expect the settlement to be a good deal for the nation, a fair settlement for the taxpayer and one that will meet our international obligations. The settlement will need to reduce the uncertainty that has obtained in the British economy over the period in which the Government have been negotiating so far. The Government must recognise that there is a real economic cost to those levels of uncertainty. Will the Minister accept that to get a good trade agreement in the next phase of the negotiations—the important phase—they should be based on trust and the Government should ensure that they earn that trust? Moreover, in circumstances where we may be negotiating positively in the wider world as well, such a reputation for trust will stand us in good stead for the future. The Government have so far pursued a negotiating strategy that has lacked transparency, which has caused considerable anxiety. I hope they will do better in the future.

[Lord Bates]

I welcome the support that the noble Lord offered to parts of the Statement, but the Government have a specific responsibility, which Parliament has endorsed, not to release information that would undermine our negotiating position. We are in the midst of one of the most complex and important negotiations that this country has ever undertaken in peacetime. It cannot be right that we should have to give a running commentary that will be observed and undermine our negotiating position. We do not want that to happen. At the same time, we are very mindful that we have a duty to keep Parliament informed as far as possible. The position is that we are negotiating the best possible outcome that we can achieve. We have a particular target in relation to the Council meeting taking place in mid-December. We are making every effort and working in a good spirit towards a successful completion of that negotiation.

[Baroness Kramer (LD)]

My Lords, the £50 billion to £55 billion being discussed is the net sum of our unpaid bills and commitments, so will the Minister answer the Question and tell us the costs of Brexit: the cost of a complex new customs system and of replacing 39 regulators; the cost to business of losing “just in time” in trade; the cost to the public of the collapse in sterling; the cost of Christmas dinner, which is up by 20% this year; and the cost of financial services not being able to sell across Europe? Then perhaps we could understand the shape of the Government’s negotiation.

[Lord Bates]

I accept that there are costs, but there are also benefits that will come from Brexit. As for the costs, there is our net contribution of £10 billion a year. We have set aside £3 billion, which the Chancellor announced in the Budget, to prepare government departments and the devolved Administrations for all eventualities and outcomes. This is the right and proper way to implement a decision of the British people.

[Lord Lamont of Lerwick (Con)]

Does my noble friend accept that what he has said will seem reasonable to many people: the member states will, over the budget period, receive what they would have expected to receive? But will any payments be made beyond that, apart from pension liabilities?

[Lord Bates]

My noble friend tempts me a little further than we are aware at present. The negotiations are happening in a complex situation—it is fast-moving and changing—but our team is out there trying to secure the best deal for the British taxpayer, which I am sure it will.

[Lord Anderson of Swansea (Lab)]

On careful reflection, does the Minister agree that the point made by the Foreign Secretary that the EU will have to “whistle for it” was just bluster and wholly unhelpful?

[Lord Bates]

This negotiation is going on across a whole range of headings and there have been remarks on both sides. The key ambition is that set out by the Prime Minister in her Florence speech, where she set out a rational, well-argued and clear vision for our exiting in a way that honours our obligations but also prepares a new relationship of economic partnership with our European friends.

[Lord Garel-Jones (Con)]

Does my noble friend agree that, regardless of any disagreements between Brexiteers and remainers, nothing could be more damaging to Her Majesty’s Government than that we should default on obligations properly entered into by previous Governments?

[Lord Bates]

We have honoured those obligations and they are part of negotiating a settlement. The Prime Minister set out in her Florence speech that we will continue to honour that, that no country will have to pay in more and no country will get out less. I think that has been well received by our European partners and we look forward now to moving on to negotiating the more important area for us of continued trade with the frictionless access that we want to a very large and important single market.

[Lord Wigley (PC)]

My Lords, further to the point made by the noble Lord, Lord Lamont, will the Minister confirm that, if there is indeed a transition period beyond 2020, we may well need to make further payments for that period?

[Lord Bates]

We will find that out when we find out the outcome of the negotiations.

[Lord Pearson of Rannoch (UKIP)]

My Lords, is it not somewhat grotesque of the eurocrats to try to extract more money from us in pursuit of continuing free trade than we owe under our present commitments, when that free trade is so much more in the interests of EU exporters than it is in ours? Is not the underlying problem that the eurocrats’ absolute priority is to keep their failing project of European integration alive because it pays them so well, no matter how much damage it does to the real people of Europe?

[Lord Bates]

I am not going to respond in the terms that the noble Lord has set out because it is important that we are in a serious negotiation not with enemies but with people with whom we want to be friends. We want a constructive relationship with them in the future and it behoves us to recognise that in our language and the way we go about the negotiations. The Prime Minister’s speech in Florence was a textbook example of that.

[Lord Tebbit (Con)]

My Lords, have there been any discussions yet in this divorce, as it is called, about not only the alimony but the fate of the matrimonial home—all those buildings in Brussels to which we have contributed? Are we going to get our money back?

[Lord Bates]

There are assets on the balance sheet of the European Commission and, be they buildings, satellites or anything else, they will be part of the assets factored in to a fair and reasonable settlement for the United Kingdom.

[Baroness Quin (Lab)]

My Lords, in honouring our commitments—I very much welcome the fact that we will honour our commitments—will the Government explain to Parliament and the wider public the many positive programmes that this money will go towards and on which we hope we will be able to co-operate with the European Union in future? To pick up on the point made by my noble friend Lord Anderson, can we be assured that no more statements such as that about the EU whistling for its money will be uttered from Government Benches?

[Lord Bates]

Certainly, in relation to the ongoing programmes and relationships we are having, once the negotiations have been completed, it is important that we ensure that the British taxpayer understands the importance and value of those ongoing relationships as part of the wider settlement.

[Viscount Hailsham (Con)]

My Lords—

--- Later in debate ---

[Lord Bates]

Much as I understand the point my noble friend makes, in all this we should not be involved in fighting the battles of the past. We ought to be coming together and uniting with the single purpose of ensuring that we get the best possible deal, the best possible access to the European Union and the closest possible relationship without being a member.

Budget: Reduction of Waste

Lord Bates Excerpts

Tuesday 28th November 2017 Lords Chamber

[The Lord Bishop of St Albans]

To ask Her Majesty’s Government how they plan to implement action announced in the Budget Statement to reduce levels of waste.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government’s call for evidence to explore whether the tax system or charges could help reduce single-use plastic waste will be launched early in the new year. The implementation of policy thereafter will depend on the outcome of this call for evidence.

[The Lord Bishop of St Albans]

I thank the Minister for his Answer. While I welcome all plans for reducing the amount of waste that is being created, will the Minister also commit to implementing the strategy announced in April by the last Government, which promised a world-class anti-littering campaign and a litter innovation fund?

[Lord Bates]

We launched the litter strategy for England earlier in the year. That has an ambition to ensure consistency in anti-littering across government, tough enforcement on those responsible for littering and an ambitious clean-up of our streets, highways and byways. The litter innovation fund was launched in August and it will be open to people to come forward with innovative ideas as to how we can implement that strategy. I think we are in a strong place as regards that.

[Lord Campbell-Savours (Lab)]

My Lords, in the Budget report there is reference to £30 million being allocated to the Environment Agency to deal with illegal waste management arrangements. Why is that money being allocated only to the Environment Agency and not to local authorities, when they are dealing with a huge problem nationally of illegal tipping, which is stripping out from local authorities funds that are preciously needed in other areas of environmental health?

[Lord Bates]

The noble Lord is absolutely right in saying that the Environment Agency takes the lead on that. The £30 million was committed to it and in 2015 we announced another £20 million to tackle waste crime, which costs local authorities, the taxpayer and business around £605 million a year. It is a very important part of this, the Environment Agency in England takes the lead on it and it is right that it should have the resources to tackle waste crime.

[Lord Geddes (Con)]

Will my noble friend use his best endeavours to persuade the publishers of magazines to encase their products in paper rather than plastic, perhaps beginning with the House magazine?

[Lord Bates]

These are great and innovative ideas and things that ought to be looked at. We have some very strict targets for increasing the recycling of paper products and we are on our way to meeting them by 2020. It means that everyone has to play their part, including the House magazine.

[Lord Alton of Liverpool (CB)]

My Lords, has the Minister had a chance to study reports from the Institute of Engineering and the London School of Hygiene and Tropical Medicine which state that between 6% and 10% of greenhouse gases are produced by food waste, that around 100 million tonnes of food was dumped in Europe in the course of the last year alone and that, worldwide, if the food that is being wasted were available to eat, it would feed 1 billion people who are estimated to be without food or hungry today?

[Lord Bates]

The noble Lord is absolutely right. Of course, as part of our clean growth strategy, we have an ambition to reduce the level of food waste by half by 2030. The Courtauld initiative is also aiming to reduce food waste between 2015 and 2025. It is also part of the ambition of sustainable development goal 12. So all the strategy, all the rules and all the ambition are there—we just need to see the action.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, given the nearly 40% cut in local authority funding this year, can the Minister say what incentives he intends to implement to encourage householders to increase recycling to assist councils to meet their recycling targets and reduce expensive landfill and fly-tipping?

[Lord Bates]

In terms of landfill, of course it was the landfill tax introduced by the Conservative Government in 1996 that has reduced the amount going into landfill by some 70%. On local authorities, it is not just about money; it is actually about ambition and determination. We have neighbouring local authorities with varying recycling rates. Lewisham has a recycling rate of 18% but Southwark has a recycling rate of 35%, while Trafford has a recycling rate of 60%. We think that it is not just about money; it is about learning and the political leadership that will ensure that we deliver this.

[Lord Davies of Oldham (Lab)]

My Lords, does the Minister accept that normally this House would take some encouragement from the fact that the Treasury is taking the lead on an environmental issue? But what is it proposing to do? It is proposing to carry out an inquiry into how taxation impacts on plastics. Surely it can be a bit more proactive than that.

[Lord Bates]

One of the most recent ideas we had on that was about plastic carrier bags; we put 5p on them two years ago. As a result, we have seen usage reduce by 83% in two years, saving 9 billion plastic bags and leading to a 40% reduction in the number of plastic bags washed up on British beaches. That is exactly the type of innovative initiative that the Treasury should be working on, in partnership with other government departments.

[Lord Hayward (Con)]

My Lords, following on from that comment, does my noble friend recognise that in fact large numbers of people in this country would welcome a complete ban on plastic bags throughout England? There is also a general sense that there is excess packaging on fruit and vegetables. Just as my noble friend suggested that we could start at home, large amounts of fruit and veg that are delivered to this House go from grower to wholesaler, are wrapped in plastic and then delivered for immediate consumption in the restaurants in this building. It is unnecessary.

[Lord Bates]

My noble friend is absolutely right. This matter is urgent because if you put one plastic bottle in the ground today in a landfill site, it will not be fully degraded until 2457. The legacy we are leaving to our children is extraordinary. That is part of the reason we are taking the tough action that we are—not just for this generation and this time but for future generations.