There have been 10 exchanges between John Glen and Alison Thewliss
|1||Tue 5th March 2019||
Oral Answers to Questions
|4 interactions (267 words)|
|2||Tue 26th February 2019||
Financial Services (Implementation of Legislation) Bill [ Lords ] (First sitting)
|22 interactions (4,708 words)|
|3||Mon 25th February 2019||
Exiting the EU (Financial Services)
|2 interactions (3,123 words)|
|4||Mon 11th February 2019||
Financial Services (Implementation of Legislation) Bill [Lords]
|3 interactions (1,200 words)|
|5||Tue 1st May 2018||
Sanctions and Anti-Money Laundering Bill [Lords]
|3 interactions (1,159 words)|
|6||Thu 26th April 2018||
|7 interactions (3,630 words)|
|7||Tue 6th March 2018||
Sanctions and Anti-Money Laundering Bill [ Lords ] (Fifth sitting)
|2 interactions (265 words)|
|8||Tue 6th March 2018||
Sanctions and Anti-Money Laundering Bill [ Lords ] (Sixth sitting)
|5 interactions (3,329 words)|
|9||Thu 1st March 2018||
Sanctions and Anti-Money Laundering Bill [Lords] (Fourth sitting)
|11 interactions (1,278 words)|
|10||Tue 27th February 2018||
Sanctions and Anti-Money Laundering Bill [ Lords ] (First sitting)
|7 interactions (2,257 words)|
2. What recent steps he has taken to tackle money laundering. 
The Economic Secretary to the Treasury knows better than most of us about the nefarious impact of Russia, and I send my best wishes to his constituency, to the Skripals and, most of all, to the family and friends of Dawn Sturgess, one year after the Salisbury attack.
Yesterday, Prince Charles ended up being drawn into the troika laundromat scandal, with money linked via a maze of shell companies back to the Magnitsky case. Criminal and legitimate money is sloshing around together in our banking system. What are the Government doing to close the loopholes and stop legitimising the proceeds of kleptocracy?
I beg to move amendment 2, in clause 1, page 1, line 2, leave out “may” and insert—
“, in respect of a piece of specified EU financial services legislation, within six months of that legislation being implemented in the European Union, or immediately if more than six months has passed before this section coming into force, must”.
This amendment would require regulations to be made to apply specified EU financial services legislation in domestic law within six months of that legislation being implemented in the European Union.
Break in Debate
It is a pleasure to see you in the Chair, Sir Edward. I shall keep this relatively brief. I am pretty sure that the Government know the concerns of the Scottish National party and other Opposition Members about the scope and powers of the Bill.
The amendment would require the UK Government to change regulations in line with European Union standards, as opposed to merely allowing them to make such changes. The UK is reliant on the EU for trade in services, and has become increasingly so since the referendum, according to Office for National Statistics figures for trade, which show that the EU makes up almost half of the UK’s service exports. Brexit risks displacing thousands of jobs in the vital financial services industry, despite institutions drawing up and triggering contingency plans to prepare for the UK’s exit from the EU.
The more that UK regulations differ from those of the EU single market for services, the harder it will be to continue to work alongside our friends in Europe. The UK Government are consistently trying to remove democratic control over the Brexit process—they had to be taken to court to give Parliament a role, they introduce statutory instruments at the last minute before adequate scrutiny can take place and they threaten us all with a no-deal Brexit in a dangerous game of Brexit Russian roulette. The amendment would therefore limit the powers given to the Treasury under the legislation to diverge from EU standards.
I would like to press the amendment to a vote.
Question put, That the amendment be made.
I beg to move amendment 4, in clause 1, page 1, line 9, leave out “the Treasury consider appropriate” and insert
“the Treasury and the House of Commons consider appropriate as defined in sub-paragraphs (i) and (ii)—
(i) any proposed adjustments must be approved by a motion of the House of Commons prior to regulations being laid in draft in accordance with subsection (8)(a), and
(ii) if the House of Commons agrees a motion that certain adjustments be made, the Treasury shall consider that to be an expression of agreement by the House that those adjustments are appropriate.”
This amendment would only permit adjustments to be made that have been pre-approved by the House of Commons.
This amendment also addresses the extra powers that the Bill gives to the Treasury. Clause 1(1)(b) talks about the Treasury considering things “appropriate”. We think that a wider definition of “appropriate” is needed, because the drafting gives the Treasury a good deal more power. The amendment asks for a bit more information on that and for more powers to be given to the House of Commons, with a motion being needed for any adjustments to be made.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Break in Debate
I would like to press my amendment to a vote.
Question put, That the amendment be made.
Break in Debate
The amendment would increase the frequency with which the UK Government must report on the use of these powers, which would be a step forward for transparency about the new powers taken by the Treasury. The Lords raised various issues in Committee, and the Government took those on board on Report by accepting amendments that require more detailed and frequent reporting from the Treasury about its proposals and use of powers, and on extending those reports and requirements to financial regulators, the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority, where powers are sub-delegated to them. Our amendment seeks to build on work done by the Lords to try to hold this centralising Government to account for the Henry VIII powers that they are taking.
The timeline for when these pieces of EU legislation will be introduced and how they will be implemented is not clear. Regular reporting will enhance that transparency, allowing us to keep track of the measures as they come through, and an eye on the implications of the legislation for financial services in the UK.
On the basis of what the Minister has said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Break in Debate
I would still like to press amendment 10 to a vote, because we need to understand better the impact that divergence will have. It is one thing to say, “This is the impact of this bit of legislation,” but we need to know the wider impact of divergence for particular industries.
Question put, That the amendment be made.
Break in Debate
We support new clause 1, which helps us hugely to move forward to a point of clarity. It makes sure that when we take on new pieces of legislation for the different regulatory bodies, we try to get rid of any loopholes and inconsistencies, and that everybody knows exactly what the landscape looks like. It is important that the Government lay out where they intend to go with it. A draft consolidated financial services piece of legislation would be useful, to give everyone the clarity that they require.
I thank the Minister for all his work on these financial services SIs. I have debated some of them and the hon. Member for Oxford East (Anneliese Dodds) has debated some, but he has had to debate almost all of them. That is a terrible burden for one man to have to bear, and it illustrates that this process is hugely time consuming. It is eating up massive amounts of all our time. We might hope that we will not need to use these statutory instruments, but as we head towards Brexit, and with the Prime Minister’s announcements over the past 24 hours, it feels as though things are getting more and more perilous the closer we get.
In many cases it feels very much like we are rearranging the deckchairs on the Titanic, because we are less than five weeks from exit day and the Government are quite clearly running down the clock. We should be under no illusions that while a no deal is an absolute catastrophe, the deal being proposed is not good enough either. There are no merits to a no-deal Brexit plan for financial services, but whatever deal can be cobbled together, it will be nowhere near as good for financial services as what we have at the moment. Removing passporting, which is part of what this legislation is all about, will have a huge impact on financial services and how they operate.
It is no secret that I have very different opinions from many on the UK Government Benches, but this is no longer a question of differing opinions. The reality is that no competent Government would have let things get to this stage. We should not be coming here at the very last minute to discuss such legislation. The Minister was up front in saying that there were errors in the legislation, but that smacks of a process that is not good enough. Some things have been picked up as incorrect, but there may be other things, because this is a substantial SI. We have got it pretty late in the day, and it is incredibly detailed and complex.
I would like the Prime Minister to recognise the urgency of the situation and extend article 50, taking no deal off the table, to give us more time on all this. Ideally, I would like us to stay in the single market and the customs union, because that would make things hugely simpler, certainly for financial services and for everybody else in other sectors of the economy too.
The Scottish Government have been doing their best, preparing as best they can, but they cannot mitigate everything. We do not yet have the Treasury’s full analysis of the Prime Minister’s Brexit deal, despite this House having voted on it twice. Last week the Scottish Government invested in their own analysis, which was published last week in a report by our chief economist. The results were damning. It said that Scotland could see a fall in GDP by 7% in the first two years after Brexit. That would be an enormous blow to our industries and jobs and to the household incomes of the people of Scotland. To put things in context, the 2008 recession saw Scotland’s GDP fall by 5.7%. This shambolic UK Government, in hock to the most extreme elements on their Benches, are doing this on purpose.
The analysis looked at only the first two years after Brexit, but the long-term effects could be sustained and long lasting. The Fraser of Allander Institute in my constituency has conducted one of the most comprehensive studies to date of the effects of migration on the UK economy. Migration is a huge issue for the financial services sector, which has much talent from around the world that needs to be able to move backwards and forwards without any difficulties. The effect of reduced migration after Brexit will lower Scotland’s GDP by 9% over the next 20 years. Reduced migration is very much the intention of the Prime Minister’s deal—it proposes to slash immigration by 80%. That will have a massive impact. [Interruption.] Government Members may sigh, but this will have a huge impact on our financial services—on the skills and talents of people coming to live and work in Scotland. The London bubble may well be fine, but as we get further away from that bubble, the impact will be greater—on Edinburgh, on Aberdeen and on Glasgow. It will mean fewer of the working-age population contributing to the economy and enriching our lives. It is an unforgiveable, ideological obsession, which has no evidence to support it.
The impact of no deal is very serious indeed, and many businesses in my constituency are gravely concerned about their futures. This SI, as the Minister says, is intended to offer consistency for businesses in the event of a no-deal cliff edge. However, relying on transitional provisions such as the temporary permissions regimes offers very little in the way of reassurance for businesses. We are being encouraged to rush through significant pieces of legislation, right, left and centre, without proper scrutiny for those businesses to engage with, and the effects will be felt by nearly 60,000 businesses. It is just not possible for each of those businesses—small and large businesses and businesses of varying different types and of varying different sectors—to have their say on this to explain exactly how it will affect them. The effects will impact them, yet they will not have the opportunity to fully engage in the process.
The hon. Member for Oxford East (Anneliese Dodds) said that the temporary permissions regimes allows companies to provide services in the UK for up to three years after 29 March. I agree very much with what she and the right hon. Member for Loughborough (Nicky Morgan) said about the consistency of this process. We are seeing so many different pieces of legislation and so many different SIs, and that is causing inconsistency, which is a worry. Some firms may find that, for one part of their business there is one date, but for another part there is another date. That will cause additional confusion.
Furthermore, businesses may well infer from these stopgap measures that the Government are expecting chaos after Brexit, and that is a position I would find it difficult to disagree with. It is no wonder that, in this context, we are seeing investment in UK businesses grinding to a halt. Ernst & Young noted that £800 billion of assets have been moved from the UK to Europe since 2016, which is absolutely terrifying.
This SI also deals with mortgages. It talks about covering contracts after Brexit, but only if they are secured on residential property in the UK. There are different measures for properties outside the UK, which means yet more complication for people to deal with. The instrument also deals with investment firms and insurance. The impact assessment says that branches of EEA banks authorised in the UK will be treated in the same way as third country branches are treated now. That is yet more red tape and more paperwork. The SI deals with consumer credit, which is, of course, hugely important to all of our constituents in their daily lives. Those are just some of the highlights of this very complex SI, and they illustrate just how much more difficult things will be than they are at the moment.
The hon. Member for Oxford East mentioned scrutiny. Part 8 of the SI covers the setting of fees by the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority. In effect, we are saying to those organisations, “Right, you go ahead and set your fees.” We will lose any idea of scrutiny over this. I am sure that those organisations will set reasonable fees, but can we be certain about that? We are giving that power to them. We are taking that power away from ourselves. There are no Brexiteers here saying, “Oh, we talked about taking back control.” Actually, we are not taking back control; we are losing any sense of control over this because we are delegating it all to those organisations. They may well have to report back, but we are still losing direct control.
The issue of familiarisation costs has been mentioned. A total of £1,900 per firm does not sound huge, but, as was mentioned earlier, it is affecting 59,200 firms, which is hugely significant. We should consider the fact that this is costing industry £110 million. This is money that industry should not have to be thinking about. Should we get to this Brexit cliff edge that the Prime Minister appears to be leading us towards, they will be spending this huge amount of money when they could have been investing it in other things, such as staff and research and development. This money is just being sucked up by Brexit, and we will be left all the poorer.
Let me return now to this idea of transitional provisions. As the provisions are transitional, it means that, at some point, we will have to come back to them. All of these SIs and pieces of legislation that we have been working on and divvying up will have to be revisited. That does not fill me with any great joy; I am sure that it does not fill the Minister with any great joy. As other Members have said, we need to see the UK Government’s wider plans. Where is the White Paper on financial services that will cover all of these things comprehensively, that will set out our direction of travel, and that will set out the principles of our financial services? It is hugely important to have these principles in place. In 2008, at the time of the crash, financial services lost their way. As part of the EU, we put these principles in place to get us back on track. We cannot see any dilution of those principles as we go forward, because we will end up in exactly the same disastrous place. I question the process and the legislation, but I remind the House that it is in the Prime Minister’s gift to withdraw the option of a no-deal Brexit. If she did that, it would render everything that we are talking about today completely useless, but we would be in a better place.
On the substantive content of the Bill, I have a point to which I would like to draw the House’s attention. In a letter to the Treasury, the Financial Markets Law Committee highlighted an area of legal uncertainty arising from the textual content of the SI. Section 137R(4) of the Financial Services and Markets Act 2000 grants the FCA the power to make rules applying to authorised persons in relation to communications by or approved by them if it considers that such rules are required to ensure compliance with certain “listed requirements”. The legislation goes on to explain that “listed requirements” means requirements under the law of the UK that appear to the FCA to correspond to the requirements of various EU legislation.
This definition leaves considerable scope for interpretation. I have raised in this House and in Committee my concerns about the nature of the withdrawal Act and the erosion of parliamentary scrutiny that it brings. It does appear that we are handing an awful lot of latitude to a public body in this example cited by the FMLC. It recommends that a more specific list, such as that included in the original drafting, would be more useful, albeit altered to reflect UK legislation. If we are to be in this position facing a no-deal Brexit, despite all evidence showing the damage that that will cause, we need to have more robust and more detailed plans in place.
Fundamentally, everybody in this House knows the position of the Scottish National party. In Scotland, we voted to remain in the EU. We have worked very hard on building up our financial services sector in Scotland. It is an important, high-skill and high-pay sector, which drives many of our towns and cities. To face the prospect of crashing out without a deal is an absolutely appalling situation. Everybody working in this sector deserves better than the plans that the Prime Minister has put forward and they certainly deserve better than a no deal, and she should take that off the table.
(1 year, 7 months ago)Commons Chamber
The Minister talks in his letter about how things are deemed to be beneficial for the UK, but he and I will have very different opinions on what would be beneficial for the UK, or indeed on whether Scotland should be part of the UK, so how can he say that that is not a policy decision?
I have already made this point to the Minister. I agree that the Scottish Parliament does not have the power to impose sanctions, but why do the UK Government want to say that we cannot do so when it is already clear that we cannot? Why should the Government revoke something that we cannot actually do?
I am glad to be able to speak for the Scottish National party in this debate.
I am sure the Brexiteers will accuse me of not being optimistic enough, but having looked the issues for financial services in the UK post-Brexit, I cannot help but have some apprehension. I understand that a lot of people in the industry are apprehensive as well. The challenges are huge and significant.
We have the best possible set-up in financial services with the EU, whether with regard to co-operation, influence or regulation. We are part of the decision-making process and have been key players in the set-up of financial services across the EU. There is no doubt that we will not be able to replicate the influence we have, because that influence is born from being part of the EU and a member of the single market and the customs union. The UK Government must seriously consider that reckless approach. The financial services sector provides a good illustration of why remaining in the single market and the customs union is the least-damaging option for the UK’s and Scotland’s economy. Brexit is a key risk to that sector.
The financial services industry is huge—the figures were mentioned by the hon. Member for Chelmsford (Vicky Ford)—and, as she said, Scotland is a key part of it. Many financial services jobs are outside London. Edinburgh has 49,800 employees in the industry—a significant number—but Glasgow has 36,300 employees or thereabouts. Nearly 60% of employment in financial and related professional services in Scotland is concentrated in those cities. Edinburgh has an important international financial centre and a strong presence in banking, life insurance and investment management activities, and Glasgow has strengths in insurance, legal services and accountancy, but Aberdeen and Fife employ a large number of people in the industry.
As the Member for Glasgow Central, it would be remiss of me not to talk about Glasgow which, since 2001, has developed its international financial services district. That has rejuvenated an area in the city that had been left behind by old industries, with warehouses and neglected areas near the Broomielaw. It has been redeveloped into a hugely vibrant sector of the city. Many large companies based there employ people in high-value jobs. Those companies were able to get buildings, set up to work and employ people locally.
The IFSD has attracted £1 billion of investment to the area, so it is no small project. It has brought in more than 15,500 new jobs through investment and expansion by working in partnership with the city council, Scottish Development International, Scottish Enterprise and Skills Development Scotland, to name a few.
It worries me greatly that Glasgow, which is recognised in the global financial centres index as the 14th most competitive financial centre in Europe, would lose out as a result of the reckless move towards leaving the EU, the customs union and the single market. It concerns me because when jobs go in London, London may be able to absorb it, but the economies of Edinburgh and Glasgow are more peripheral in the UK set-up. The UK has a London-focused economy. Without any great control in the Scottish Parliament over such things, I am concerned that we will not be able to put the mechanisms in place to protect those industries as we would like to do. We are at the whim of what the UK Government decide to do.
I hope the Minister can tell us more about the White Paper that the Government were due to publish last summer on the approach to Brexit and financial services. As I understand, that has not yet been brought forward. I asked the Library for an update on its report from July on financial services and Brexit, and although it could give me an update, it could not give me much progress, because not much has been made—certainly not anything visible or tangible. That concerns me and the sector greatly because of the uncertainty. We should be in no doubt that the sector has to plan and make decisions. The more uncertainty there is, the greater the risk of losing jobs.
Predictably, the European Banking Authority has decided to move to Paris. There are moves afoot from France to build up its sector and to regain what it feels it has lost to the UK in terms of financial services expertise. There is a risk, and other countries are looking to step into the void that we are leaving. The transition agreement merely extends the deadline to reach a deal to the end of 2020. The financial services industry needs and deserves more certainty so it can plan for that.
Not only will we lose financial institutions and companies, but those companies will not have the automatic access to EU markets that they currently have. That loss of influence is significant for the companies that base themselves here, for the decisions and investments that they make and for the jobs they create.
We will also lose influence in Government and between Governments. We will not be in those decision-making rooms where the regulations are being drawn up. We will not have the early influence that we have through EU institutions. We have set a lot of the rules, but in future, at most, we will be able to take rules, which is a huge difference.
The Minister has acknowledged that in an article, where he wrote:
“We know how important it is to the financial services industry that they have continued market access”.
I am sure he will tell us more about what he intends to do about that. Market access is not the same as being part of a market or a component in that market. Market access is second best. The Tories are delusional if they think we will get a better deal than we have at the moment.
Remaining in the European Economic Area could enable financial passporting to continue. That is crucial, because equivalence is nowhere near as uniform and comprehensive as passporting. It does not cover the full range of services currently sold by UK-based firms into the EU, or the full range of clients. As I understand it, banking services could not be offered under an equivalence regime.
Many are deeply concerned about what would happen if there was policy divergence between us and the EU in future, because that could result in the Commission revoking access to those markets with only 30 days’ notice. If a regulatory change that we disagreed with was agreed by the EU, such as a cap on bankers’ bonuses, that could be enough to trigger that denial of services. Switzerland’s referendum to limit immigration from the EU triggered such a response from the EU.
That is worrying given the Government’s attitude to immigration and how they want to treat immigration from all parts of the world—not just the Windrush generation, but EU nationals. Many constituents who come to my surgeries are in highly skilled jobs and have come here as highly skilled migrants. They have found that, because they made a minor change to their tax returns many years ago, the Government deem them a threat to national security under paragraph 322.5 of the immigration rules. If that is how they treat the highly skilled migrants who come to this country to contribute, work and generate wealth, I have little confidence that they will do anything to improve the situation. That is how people are being treated now. How will they treat EU nationals who have come to work in the finance sector?
Some 9,000 EU nationals work in the financial and business services sector in Scotland. Each of those people brings wealth to this country, pays their taxes, has a family, works here and has settled here. They have no great certainty about their future status, how their employers will employ them and whether they will have the right to work as they do now, which is a huge worry.
Those individuals are making decisions as to whether they want to stay here on the basis of what they hear and see. The mood music around immigration has not been very welcoming. Those narratives are almost certainly causing many of them to give up and leave. The Minister is sighing somewhat at that, but that is the reality—that is what I get at my surgeries.
People are not sure what will happen, and they need to have more certainty before they make their decisions. Just as people in the financial sector are making decisions about where their businesses will go, individual employees are deciding as well.
My husband works as an IT professional in Glasgow and knows many people in the sector. They are highly sought-after, highly skilled and well-paid jobs, but they are tied to financial institutions in the city such as J.P. Morgan and Barclays. If those financial institutions contract, those IT jobs, which are highly skilled, will contract too. We need to think carefully about the full pipeline of people. It is not just about bankers in suits sitting in offices; it is the full ecosystem. Those bankers buy lunch, commute into towns and take public transport.
Glasgow has a long and distinguished history in banking. The Bank of Scotland opened its doors in 1695. The Royal Bank of Scotland has its global headquarters in Edinburgh, the Clydesdale Bank has its European headquarters in Glasgow and there are lots of other banking operations in Scotland. I have mentioned Barclays, but HSBC and others also have a presence within Scotland.
Scotland’s general insurance, life insurance and pensions sectors also have a strong reputation and an enviable history of success, with their origins dating back to the early 1700s, when the increase in international trade led to a requirement for marine insurance, and Scotland continues to be a major centre for that sector.
The hon. Member for Chelmsford mentioned the insurance industry. The Association of British Insurers is deeply concerned about the current uncertainty. It has contracts that run for 10 years and pension contracts that run for more than 30 years, and has pointed out that
“these contracts cannot be transferred safely and quickly to a new EU location. Special arrangements would be needed to transfer the contracts, covering both legal form and regulatory responsibility…If nothing is fixed, insurers will be left in an impossible position and face an unacceptable choice: break their promise to customers or risk breaking the law.”
That is deeply serious and I hope the Government are looking at it. It is a huge concern for the sector, which relies on confidence and its reputation.
Fund management in Scotland encompasses a broad mix of large institutional companies and smaller boutique firms that provide investment services to institutional and personal clients around the world. The quality of investment management expertise in Scotland has led to a robust growth in boutique firms and new business start-ups. We have also become a major European centre for asset servicing.
Looking forward, Scottish Government analysis shows that a hard Brexit threatens to cost our economy £12.7 billion—£2,300 per person—a year by 2030, compared with what would happen if we remained in the EU. The UK Government’s analysis is that reverting to World Trade Organisation rules could reduce growth by 8%; that a free trade agreement with the EU would reduce growth by 5%; and that membership of the European Economic Area would reduce growth by 2%.
The EU is the largest single market for Scotland’s international exports—in 2016, Scottish exports to the EU were worth £12.7 billion. The Fraser of Allander Institute estimates that 134,000 Scottish jobs are supported by EU trade. Last week, a report for Citibase, a service provider to small and medium-sized enterprises, found that 63% of Scotland’s SMEs would like to reverse the Brexit process and remain in the single market. That report also found that just 14% of Scotland’s SMEs trusted the UK Government to get a good deal on Brexit. Steve Jude, the chief executive officer of Citibase, has said:
“The message is clear. Scottish confidence in the Westminster Government to secure a good deal for them is at an all-time low, with most SMEs wanting to press the reset button on the entire process.”
The Government should take on board those concerns, because we do not have to leave the EU. Yes, the EU referendum produced a UK-wide result, but there was no mandate for leaving the customs union and the single market, and we must think very carefully about the potential damage that leaving the EU would do to our economy, which would hurt all of us and all of our constituents.
The hon. Members for Chelmsford and for North East Derbyshire (Lee Rowley) mentioned bank closures, which are of huge concern to our constituents right across the country. That is particularly true for RBS, in which the Government have the leading share. We own RBS and we should be telling it that it is unacceptable to renege on the trust we have put in it—we helped it to get back on its feet—by whipping away services to our communities. We have heard Members from across this House—not just Scottish National party Members but Conservative Members—criticising RBS for saying that it would provide banking services and send its vans around before pulling back on that as well. RBS has reneged not once but twice. RBS has provided a limited service, which are the bank vans it sends around. Those vans do not have disabled access, which has led to people being served in car parks in the wind, rain and all weathers. That is a ridiculous situation and the Government should do more to put pressure on RBS.
The hon. Member for North East Derbyshire mentioned the idea, which has a lot of merit, of a shared service point for bank branches. Banks should come together to see what they can do collaboratively so that their customers are not left with nothing. I know people from other parties have mentioned that idea. It definitely has merit.
Hon. Members have mentioned on the record dirty money, the importance of clamping down on money laundering and the SNP position on the scandal of Scottish limited partnerships being used for money laundering. I hope there will be progress on tackling SLPs and addressing their lack of accountability. We have tabled amendments to the Sanctions and Anti-Money Laundering Bill to that end, but if the Government are not going to take them on board, as I had hoped they would, I hope they will bring something else forward soon so that we can deal with that.
The major issue that prevents a clampdown on money laundering is the Companies House loophole. I have mentioned that to the Economic Secretary to the Treasury before—he has heard my views on it. Just recently, we had the strange case of the businessman Kevin Brewer, who fully admitted what he was trying to do in testing the Companies House loophole. However, he was fined and found guilty of crimes related to money laundering when all he was trying to do was to prove that the system was absolutely defunct and open to all kinds of corruption.
The Government have hailed the prosecution of Kevin Brewer, but all they have done in this case is to shoot the messenger. This man was deliberately trying to do something—he told the people he involved in this activity exactly what he was going to do. There has been a clampdown on this person but there is no clampdown on the many hundreds of people—at least—who abuse the Companies House loophole by paying their £12 to register a company with no checks whatsoever by Companies House as to the veracity of that person.
If someone applies for any other Government service such as a passport or a form to do their tax returns, they have to go through the Government’s Verify system. This situation is allowing people to set up companies with no checks on them whatsoever. It is wide open to money laundering and corruption. The Government need to take heed of that and take action.
The hon. Member for North East Derbyshire said the EU was “playing politics”. I found that comment slightly bizarre, because it is playing politics that has got us into this situation in the first place. A weak Tory Government, pandering to its Back Benchers, led us into the EU referendum and to the calamitous situation we are in. If anyone is playing politics, it is the Conservative party, and we need to get a lot more serious than playing politics because there is so much at stake.
The hon. Gentleman also mentioned innovation within financial services. That is an area where the UK has taken a great lead. I was on holiday in the US recently, over the Easter period. I found it astonishing that US companies do not even have chip and pin, never mind contactless payment, for their financial transactions. In this building and in other buildings in the UK, we are used to being able just to tap our cards to make a payment, so I found it bizarre to be given a slip of paper to sign. US companies find our position unusual, whereby we can just tap something and pay with our phone or a card. There is an interesting contrast between where we are and where they are in terms of technology—there are huge advances coming along in financial technology and other areas.
Hopefully, if we get any kind of Brexit deal right, FinTech will continue to blossom. Staying within the single market and the customs union gives us the best possible chance of using and developing our expertise and making it sellable to the rest of the world through the EU, which of course has a huge customer base.
I will close my remarks by saying that the problems within the financial sector are clear with regard to the EU and Brexit. The sector has made clear the difficulties that are arising, and the impact that those difficulties will have on jobs and on our economy, but we are coming up very close to the date when we will leave the EU, and the solutions are not there. The transition period will give only a little extra time for that process and does not give the reassurance required.
We need solutions from this Government and we need them soon. We need a White Paper and solutions that will make a difference to companies and give them reassurance before they decide that they will just take flight, and take with them so many jobs and so much else that they give to the UK economy.
Break in Debate
On business customers, does the Minister agree that the closure of bank branches in rural areas means that staff have to cover longer distances, in some cases carrying large sums of cash backwards and forwards? Has he raised with banks the concern that carrying money around in that way can put people at risk?
It is a pleasure to see you in the Chair, Mr McCabe.
I would like to reiterate the concerns that I raised on Second Reading about the overruling of any Acts made by the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. I have a solution to this, to some degree, in amendment 37. That is coming up, so I will speak about it more then. However, I am deeply concerned that UK Ministers are being empowered in this Bill to make changes to devolved legislation without the involvement or the permission of the Scottish Government or the Scottish Parliament. That is deeply concerning. If not this Government, it makes future Governments capable of amending Acts of another Parliament and I remain deeply concerned about that.
I do not want to add a huge amount, but I very much welcome the new clause. As the hon. Member for Oxford East said, there is a big issue of incentive and authority for organisations, particularly for those that facilitate the formation and operation of Scottish limited partnerships in the private fund sector.
There has to be an effort to ensure that compliance with the rules is extended as far as possible. For example, a legal firm may be asked to register an SLP to get it up and going, and operating, but if no buck stops with it, there is no punishment for not ensuring that the SLPs are operating as we would want them to. For example, if a firm asks its client to register a person of significant control, and the client does not do so, where is the incentive for that firm to remove that client altogether? The firm has to decide for itself whether the cost of reputational damage from being named in the press is enough. That is the balance that it has at the moment. It is not obliged not to have that SLP within its client base. There is no comeback and no consequence.
There needs to be some means by which the firm is forced to do something to put that right. If the SLPs under its umbrella do not register a person of significant control, and continue not to register them, there is no fine to that legal firm, as I understand it. The SLP may face a fine—I am trying to get to the bottom of how many fines have been issued to those who have not registered a person of significant control—but there is no comeback to the legal firm, other than potential reputational damage.
The Government need to think about where the buck really stops in these arrangements , and this type of new clause would put some emphasis on the firm to do something about failing to prevent money laundering, rather than allowing things to continue as they are. As I understand it, there is no comeback at the moment to the legal firm that is protecting the SLPs underneath its umbrella.
Break in Debate
I support the new clauses proposed by the hon. Member for Oxford East. They flag up a huge loophole in the anti-money laundering regime, which is the inability of Companies House to do anything about what comes through its door. By not acting on information, and expecting company formation agents to behave in a different way from the way the Government’s own agency behaves, the Government become complicit in the money laundering that is clearly going on through companies that are registered for only £12.
The situation is curious. Last week I sat on a delegated legislation Committee that discussed passport fees and the need for full cost recovery of those fees by the Government because the Passport Agency wants to ensure that it is not making a loss. There is an argument about whether passports are too expensive, which I think they are, but it costs £12 for the registration of a company. If Companies House is not getting full-cost recovery for that, and that is the reason for not carrying out the due diligence that ought to be done on anti-money laundering, that is an argument to find a reasonable cost of registration that would allow Companies House to operate, make money and have sufficient funds to carry out the due diligence it ought to. If there is an incentive not to play by the rules, and the Government are incentivising that through the operation of their own agency, that is nonsense. That is highlighted in Global Witness’s “The Idiot’s Guide to Money Laundering”:
“Step 4: open your company direct with the corporate registry—they don’t do any checks on you!”
It seems ludicrous that the Government are going to encourage agents who want to set up companies for people to do that and go through the anti-money laundering things that they have to do, but the Government are not enforcing that. That seems absolutely ludicrous. I cannot for the life of me think how the Government will defend that unjustifiable loophole.
Transparency International reported that in the UK last year, 251,628 companies were created with no checks being made on the person setting up the company or their source of wealth. It is a scandal that these companies can be set up, facilitated by the Government, because Companies House has to accept their documents in good faith without doing due diligence checks that we would expect of other agents. If they are not going to support the new clauses, I urge the Government to propose a measure themselves, because this simply cannot continue.
I am concerned about the use of the word “may” in the clause, which states that the guidance “may include guidance” about certain things. I am concerned that that is not sufficiently well developed. I very much support the hon. Member for Bishop Auckland’s amendments, which would add a wee bit more clarity, detail and guidance. The clause is worth while, but the Government would do well to listen to the detail that she laid out.
We seem to be at cross purposes. The amendment is about the line further to that; subsection (2) states, further to “regulations must issue guidance”, that
“guidance may include guidance about”.
It is about the expansion of what that guidance may be.
Break in Debate
Does the Minister not agree that it is in the public interest for the Government to support payment channels being created? If, for example, there is a Disasters Emergency Committee emergency appeal and the NGOs gather lots of funds, but those funds cannot reach the beneficiaries because there is no appropriate payment channel that gives everybody reassurance, surely it is in the Government’s interest to make that happen.
Break in Debate
The hon. Lady has already said much of what I was going to say, so I am sure that, if that I am a bit briefer, that will be okay with everyone. We have serious concern about SLPs, and the Bill provides an opportunity to do something about it. When we know there is a problem and an opportunity to put it right, it would be negligent of us as parliamentarians to look the other way.
I understand that, even in the new regime where people with significant control should be registered, up to December 127 or so SLPs had registered via law firms, but 489 had registered via anonymous mailbox addresses, which means that the people with significant control are not there, are barely identifiable and are very hard to trace. We know from recurring stories in The Herald worked on hard by David Leask and the researcher and expert in this field, Richard Smith, that such companies keep the issues, scandals and money laundering behind the scenes, and that it keeps going on. We therefore need to do everything we can in every area to tackle these problems.
There is the broader issue of SLP non-compliance and the inadequacies of Companies House, which we may speak about later in our proceedings. Not having a postcode when registering a company should be a pretty simple compliance issue—the process could be stopped at that point, never mind going into the more technical detail. We therefore need to look at this issue carefully. Never mind all the overseas territories; we are allowing it to happen here, in this country, behind mailboxes in Scotland. Frankly, that is unacceptable. We need to do something about it. If we continue to let it go, the problem will not go away.
We can talk about how we might go ahead with this issue in terms of enforcement, because other countries have tackled it. My colleague Roger Mullin and others have worked on it for many years, and we should take the opportunity to look at it here and now. If the Government are not willing to accept any of the amendments, I urge them to table their own and not to let the opportunity pass.
I agree very much with the amendments and support the hon. Lady in what she has said. I share the concerns that she has conveyed from both the NGO sector and the banking sector, where we seem to be caught between admirable public policy objectives—providing humanitarian aid—and the practicalities of sanctions compliance, which seems to be hindering the delivery of that aid in many different ways.
The amendments sensibly seek to expand a particularly narrow EU definition of humanitarian aid. That would give a wee bit more certainty and clarity to agencies working on the ground. It also gives us an opportunity to figure out how we ensure that money reaches those who need it and reaches them quickly. I understand that, at the moment, organisations can often wait up to six to nine months to get licences and agreements in place. Frankly, people on the ground in many of the countries involved do not have six to nine months to wait. They need money and aid almost immediately, so we need to find a way of fast-tracking the money in; we need to figure out what a viable financial route to get money from us here in the UK through to the frontlines in Yemen and Syria to ensure that people can survive looks like.
In Yemen particularly, there is a shortage of physical cash in the country. Hospitals in which people are working are often supported by the likes of Médecins Sans Frontières. MSF is paying those staff, but it needs to get the money into Yemen to pay them, so that they can turn up to work and feed their families, and provide vital assistance to people facing bombardment from the air. We need to find a way of getting the money in and doing that quickly.
There are practicalities involved in asking humanitarian agencies to go and carry out this work. Let us say that people are providing humanitarian aid on the ground; to move things around the country they need fuel. If they are in a country in which they have to choose between buying their fuel from Islamic State fighters or Assad, that is not actually a choice they can make, because both options would place them in breach of sanctions, so there needs to be a way of getting money to people and doing that quickly, so that organisations can do their work. If financial assistance has been granted to humanitarian organisations specifically for the purpose of buying fuel and then they cannot practically do that, that is a real problem and makes the delivery of much-needed aid extremely difficult.
There is an argument for granting up-front licences for infrastructure. If we know what is to be built—put in place—and it is a bridge that will allow people to cross it and move humanitarian aid around the country, or if it is a hospital or other facility that will provide aid, why cannot the licences be granted fast and up front, so that there is no delay in procuring the purchase of things to make that happen?
I agree very much with the points made by the hon. Member for Bishop Auckland about mutual recognition of licences. If we see fit to issue licences, that should be good enough for other countries as well. If we have gone through a due diligence regime, that should be good enough for other people to accept and would help speed up the process, and would prevent organisations from falling foul of someone else’s regulations. There should be agreement on that, whether in a treaty or some other form. It would be a hugely sensible way of speeding up the process.
I very much agree with the points that have been made on new clause 5. I understand that the United States has a huge amount of transparency around the exemptions and licensing regime. It is possible to see not only what has been licensed and how but the backlog to the licences, which is critically important because we can see delays in the process.
We need to understand why those delays are there and what we can do to overcome them. Frankly, people in different parts of the world cannot wait for us to go through a laborious process to issue licences. We cannot have those organisations spend huge amounts of money on lawyers. We just need to get the aid to where it needs to be with the best practicable due diligence.
Could the Economic Secretary give more clarity on the timescale? We have the Bill just now; how soon will the guidance appear? The current guidance is not really useful in terms of how the sanctions landscape works.
Break in Debate
I echo that. We are also very worried by this amendment, and by the return of something that was clearly and definitively rejected. As far as we are concerned, it is dangerous and an affront to democracy. The Government should accept that they were wrong, and withdraw the amendment. I point out that the Lords Constitution Committee said:
“We consider that such regulation-making powers are constitutionally unacceptable and should not remain part of the Bill.”
The Government should take heed.