Tax Havens

Lord Howarth of Newport Excerpts

Thursday 6th April 2017 Lords Chamber

[Lord Young of Cookham]

My Lords, I do not have the estimate of the amount lost but the noble Lord will know that we are taking steps to avoid the diversion of profits through country-by-country reporting. This means that we tend to tax the activity in the country where it takes place—so, if the activity takes place in the UK, companies will be taxed in the UK. We have also introduced a diverted profit tax, so if people seek to divert their profits to another country, a higher rate of tax can then be paid. Therefore, we are taking measures to plug the loopholes that the noble Lord has identified.

[Lord Howarth of Newport (Lab)]

My Lords, why have the Government not used the leverage they undoubtedly have to require the British Overseas Territories and Crown dependencies to maintain publicly available registers of beneficial ownership? Will the noble Lord accept that the Government’s failure to do so has not only had bad reputational consequences for our country but impeded law enforcement here and in other countries, and it has allowed the huge inflation of house prices in London, which has had very damaging effects on the lives of Londoners who are not rich?

[Lord Young of Cookham]

My Lords, we had an extensive debate on this subject on Monday on the Criminal Finances Bill, and I suspect that we will be returning to exactly the same subject on Report on, I believe, 25 April. In that debate, the Minister at the Home Office explained why we had encouraged the Commonwealth dependencies and overseas territories to produce central registers, and they will be doing that by June this year. We are not prepared to use the powers that the noble Lord has referred to, which we believe should be used in exceptional circumstances such as the abolition of capital punishment and rules relating to homosexuality. We do not believe it is appropriate to use those powers in this case.

Class 4 National Insurance Contributions

Lord Howarth of Newport Excerpts

Wednesday 15th March 2017 Lords Chamber

[Lord Young of Cookham]

I am grateful to the noble Lord. He said “improvisation”, but I think he does an injustice to the minds of the civil servants, politicians and spads who had to put together the Statement that the Chancellor made a few moments ago.

[Lord Howarth of Newport (Lab)]

My Lords, further to the excellent exchange between the noble Lord, Lord Higgins, and the Minister, is not the moral of this episode—indeed, one that should be taken by all parties—that manifestos that read like mail order catalogues are a bad idea and that manifestos would be better confined to one side of A4?

[Lord Young of Cookham]

I have some sympathy with that as a person who has had to defend manifestos over 10 general elections. It is important that the public have some idea of the direction in which a political party will take the country if it is successful in a general election, and that manifestos give some idea about the big issues such as public ownership, tax, defence, the police and law and order. However, 600 commitments, which I think is what we made, may be on the high side. By the time we hit 2020, I am sure everybody will learn that there is something to be said for brevity.

House of Lords Act 1999 (Amendment) Bill [HL]

Lord Howarth of Newport Excerpts

Friday 9th September 2016 Lords Chamber

[Lord Howarth of Newport (Lab)]

My Lords, we should all be grateful to my noble friend Lord Grocott. He has a deep understanding of Parliament and cares deeply that Parliament should be fit to perform its role in today’s political circumstances. A proudly party-political parliamentarian, he also has a rare ability to speak for this House as a whole, to understand what noble Lords are concerned about and to articulate their views and feelings. Therefore, when my noble friend says that we should end the system of hereditary by-elections for membership of your Lordships’ House and that the time has come to do that, he must be right.

My noble friend draws the House’s attention to the requirement to complete some unfinished business. What he proposes—the end of the system of hereditary by-elections—is but one part of a series of reforms that have been identified and articulated under the leadership of the noble Lord, Lord Cormack, over some 10 years or more by the effective second Chamber group, a group of some 300 parliamentarians of both Houses and all parties. The measure my noble friend proposes has been part of the programme of the effective second Chamber group and as such commands broad consent and support across the House. As the agenda of the effective second Chamber group moves forward—it has already moved some way—it can well be argued that it would amount to a fully comprehensive reform of your Lordships’ House. Members of that group of 300 parliamentarians are all profoundly convinced that it would not be for the good of Parliament and our democracy for there to be an elected second Chamber, and by the same token they therefore attach particular importance to ensuring that the reforms needed to bring this institution up to date, making it fit for purpose in today’s world, matter very much and must be pressed forward.

At the time, in 1998 and 1999, I was of the view that the manner in which the hereditary Peers were to be removed from Parliament was, shall we say, somewhat brusque, and I had no objection at all to the arrangement that was made that 92 of them should continue to serve as Members of your Lordships’ House. Of course, that was partly in recognition of the excellent work that so many of them do. A number of hereditary Peers are to speak in your Lordships’ debate today. I listened, as always, with respect and interest to the noble Lord, Lord Trefgarne, and we look forward to the speeches of the noble Lords, Lord Elton and Lord Mancroft. All are fine servants of your Lordships’ House and of Parliament. However, when I listened to the speech by the noble Lord, Lord Trefgarne, I found that he did not address the question that my noble friend had posed: what conceivable justification can there be in 2016 for the continuation of the hereditary principle in the legislature? He referred to a deal that had been made 17 years ago but, as my noble friend said, Parliament cannot be held hostage to a deal made by our ancestors, so to speak. If we are to have an appointed House, it had better be a fully appointed House, and those who serve in it should be appointed for their experience, their expertise and the skills they can bring to the work of the legislature.

My noble friend is not Jacobinical; he is no Robespierre; he does not propose that aristocrats should be despatched to the guillotine. If the measure he has put before your Lordships’ House is to be passed by Parliament, no hereditary Peers will be found suspended from the lampposts in Parliament Square. The process he proposes is entirely painless. It shows respect to the existing hereditary Peers who serve in Parliament and it would enable them to continue to serve until such time as they cease to wish to do so. That is a reasonable way to approach things.

I cannot conceive that any justification can be made for the continuation of the presence of hereditary Peers beyond the period of their service and their lives. When, sadly, each of them ceases to be a Member of your Lordships’ House, they should not be followed by another hereditary Peer elected in a parliamentary by-election. Lest hereditary Peers think I am prejudiced in this matter, I can also see no justification for the continuation of life peerages—people being appointed for life to serve in the legislature. None of us ought to carry on into our dotage. That is a story for another day, however, and for the next Bill that my noble friend introduces.

Lobbying (Transparency) Bill [HL]

Lord Howarth of Newport Excerpts

Friday 9th September 2016 Lords Chamber

[Lord Howarth of Newport (Lab)]

My Lords, I thank my noble friend Lord Brooke of Alverthorpe and congratulate him on bringing in this necessary legislation, which the Government, in the person of the noble Lord, Lord Lansley, should have introduced at that time but did not. The Bill is well drafted but like the noble Lord, Lord Lansley, I look forward to the shrewd scrutiny of its details by noble Lords in Committee.

Why is this measure needed? There is extensive anxiety among citizens of this country about the way lobbyists work and the way access and influence are gained in Whitehall. There is an apprehension that secret and privileged access to power leads to distortions in policy development in favour of particular interests rather than the national interest. My noble friend’s timing is apt, because that concern has reached quite a pitch. The Times, on 1 September, ran a feature headlined “Brexit to spawn US-style lobbying boom”.

There has been considerable adverse media publicity about the employment of a former Conservative Foreign Secretary and a former Labour Trade Minister by the US lobbying business, Teneo, and of course a significant number of ex-Ministers, including noble Lords, are employed or otherwise remunerated by lobbying organisations. There was also considerable adverse publicity about the outgoing Prime Minister’s resignation honours list, when he once again appointed more party donors to the legislature. It was welcome when the new Prime Minister, Mrs May, said,

“we will make Britain a country that works not for a privileged few, but for every one of us”.

But then we learned that the corporate brochure for the Conservative Party conference explains how business executives and lobbyists will be able to buy access to the Prime Minister, the Chancellor and other Ministers for the sum of £3,150 per head. However, it is not just the Conservative Party that sells access to its policymakers.

The operations of lobbyists and public relations firms, which are intimately involved with each other, and the activities of party fundraising, have given the impression to a great many of our fellow citizens that, in this country, money buys political influence. That is deeply damaging to our democracy: cynicism continues to plunge new depths. Whereas it was once taken for granted that politics and government in this country were clean, there is now seen to be an aura of corruption about them. Whether or not the vote on Brexit was a rational assessment of the country’s interests, there is no doubt that it was a roar of anger against Westminster and Whitehall.

Shortly before he became Prime Minister, Mr Cameron described in lurid terms Britain’s broken politics. He said that lobbying was the next big scandal waiting to happen. I quote from his speech:

“We all know how it works. The lunches, the hospitality, the quiet word in your ear, the ex-ministers and ex-advisers for hire, helping big business find the right way to get its way.

We don’t know who is meeting whom. We don’t know whether any favours are being exchanged. We don’t know which outside interests are wielding unhealthy influence. This isn’t a minor issue with minor consequences.

I believe that secret corporate lobbying … goes to the heart of why people are so fed up with politics. It arouses people’s worst fears and suspicions about how our political system works, with money buying power, power fishing for money and a cosy club at the top making decisions in their own interest.

It is increasingly clear that lobbying in this country is getting out of control. We can’t go on like this”.

He went on to promise that a new Conservative Government would shine the “light of transparency” on lobbying to bring about a politics that

“comes clean about who is buying power and influence”.

I recommend that noble Lords study that speech, although it is not easy to do so because, interestingly, it has been deleted from the Conservative Party website.

We all agree that lobbying is legitimate. In an accountable democracy politicians listen to representations on policy, and officials and Ministers are accessible. However, money should not buy privileged access and influence. The system should provide a fair hearing for all. Policy decisions should be made and be seen to be made based on an honest assessment of what is in the national interest and not in favour of sectional interests.

The scale of corporate lobbying has become huge in the era of free-market ideology, privatisation and outsourcing. It was Mr Cameron himself who estimated that the lobbying industry is worth £2 billion a year. In their indispensable book on this subject, A Quiet Word: Lobbying, Crony Capitalism and Broken Politics in Britain, Tamasin Cave and Andy Rowell describe in some detail how industries—tobacco, alcohol, sugar, pharmaceutical, energy, defence, financial services, accountancy, IT and media—maintain their massive lobbying operations. The authors also describe a range of their techniques: manipulation of the media and think tanks, including Policy Exchange, which is interestingly discussed in that section; suborning scientists; colonising expert EU and Whitehall groups; rigging public consultations; faking grass-roots campaigns, known in the trade as “astroturfing”; espionage; and bullying.

The Leveson inquiry shone its light on how Murdoch’s lobbyists worked to bend Ministers to their will, particularly through developing relationships with their special advisers.

The deleterious effects of lobbying on the public interest are plain to see. We have no registers of beneficial ownership in tax havens. We have seen the indulgence of policy towards bankers’ bonuses. We have seen energy from gas designated as low-carbon. We have seen the degutting of the anti-obesity strategy. We still have no minimum alcohol pricing in England. We have a diesel emissions testing regime that endangers public health.

After his fine words in 2010, it took the Prime Minister three years to introduce legislation, and the vacuity of the legislation that was eventually brought in is, I suggest, testimony to the power of lobbying during that interval. The Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 is useless—the noble Lord, Lord Lansley, described it as minimalist, but I would say useless—as a measure to regulate lobbying. It casts no light of transparency and it does not pretend to regulate most lobbying, such as lobbying by in-house employees or trade bodies. Loopholes in the legislation allow lobbying companies to keep the identity of their clients secret. CTF Partners, run by Lynton Crosby, names no clients on the register of consultant lobbyists. That is also the case for RLM Finsbury, run by Roland Rudd, the brother of the Home Secretary.

Lobbyists need only declare their own direct meetings between themselves and Ministers and Permanent Secretaries and, as the noble Lord said, the provision that allows that requirement to be extended to special advisers has not been brought in. If a meeting is set up for clients to meet those very senior people, it does not have to be declared, and they do not have to declare if they meet more junior officials—the crucial people who may be formulating policy options to present to Ministers or who may be refining the details of policy that Ministers have agreed to in broad terms. If they meet MPs or Peers, no declaration is required.

My noble friend’s Bill fills some of the gaping holes in the existing legislation. But will her Majesty’s Government agree that this improvement of the legislation on lobbying should be supported? It would be greatly in the interests of our economy and our political culture if they did so.

On 24 February 2015, the Telegraph ran a depressing feature, headlined:

“Westminster’s history of cash for access and influence”.

The current edition of Private Eye has an extended feature detailing how:

“A well-trodden path from the public to private sector ensures ministers and mandarins looking to profit from their time in government are all but guaranteed a job in business, usually in an area over which they have exerted great influence”.

On 1 August, the front page headline of the Times was:

“Prime Minister’s top aide broke rules on lobbying”.

Fiona Hill, who was special adviser to Theresa May as Home Secretary, took a job with a lobbying organisation called Lexington without declaring it, as the rules required. She was now returning to government at No. 10. The Times went on to say that Ministers had watered-down their own rules, months before the general election, making it easier for aides to profit from their government contacts and experience.

Revolving-door stories have become a staple of political journalism. They feed public cynicism, contempt and alienation from politics. It makes no difference to public perception that the noble Baroness, Lady Browning, who chairs the Advisory Committee on Business Appointments, seeks to toughen the rules and vet applications rigorously. The public simply will not accept that people should profit or be highly remunerated as a consequence of their contacts, access or inside knowledge gained in public service.

What should the Government do? What should the policy be in regard to the revolving door? Ideally we would have a culture in which senior public servants, particularly former Cabinet members, do not seek to profit from their privileged status and trust but simply understand that it is the wrong thing to do. Whatever it may do for their bank balances, it is very bad for their personal reputations and for the reputation of public life. However, we cannot legislate for a better culture so we must hope that the Prime Minister will provide leadership in this matter and make clear the standards she expects, and that she will support strengthening the remit and powers of the advisory committee.

As to lobbying, we need maximum transparency and we should pass my noble friend’s Bill to provide a comprehensive register. We should go further. In 2013, I tabled amendments to the Intellectual Property Bill. My amendments would have provided that the contents of all lobbying representations made to the Intellectual Property Office, whether by correspondence or at meetings, and the minutes of those meetings should be made publicly available online. The noble Viscount, Lord Younger of Leckie, who is in his place today, was the Minister at that time and he rejected my amendments as being too bureaucratic. However, with digital technology, it would be feasible to meet this requirement. The minutes exist. The Home Office has refused to release the minutes of meetings between Theresa May, when she was Home Secretary, and representatives of the drinks industry, following which it is suggested that she backtracked on the Government’s previous intentions in relation to policy on alcohol-related crime. We do not know—but we should know—what the truth of that matter is.

The requirement I propose would not of course capture quiet words whispered at Wimbledon or the Royal Opera House, but it would go some way to letting more daylight into the secretive processes of lobbying and to mitigating any undue influence by lobbyists with deep pockets.

It is not anti-business to say that we should go further. We need to design democratic processes that better hold the political power of business to account. Corporate power now shapes our economy, culture and society profoundly, in ways that perhaps once it did not. Corporate power and businesses have become part of government. Political parties, of course, to varying degrees, rely on business to fund them. Government relies on business to help formulate policy. It is not excessive to say that Her Majesty’s Revenue and Customs, stripped down in its internal resources by the coalition Government, is now dominated by business, which designs tax law, determines how tax law should be enforced and contributes to the failure of HMRC to collect the revenue it ought to collect.

Businesses deliver public services, and Parliament should no longer agree to be fobbed off by the rubric of “commercial in confidence”. Again and again, when parliamentarians of both Houses ask questions in the public interest about how public services are being provided and what the contractual terms are between departments and businesses that are delivering public services, they are told that these matters are commercial and should be kept in confidence.

Corporate demands on government have become overbearing. Governments have been keen to nurture business and the market, and they have had little will to limit the power of business. They have failed to avert the economic instability, the human exploitation, the inequality, and the environmental degradation consequent upon the favouring of corporate interests. Global corporations in negotiations about trade agreements—TTIP, CETA, the trade and services agreement—are flagrantly circumventing national Parliaments and democracy. Multinationals elude government, as we have seen in the case of Amazon, and dictate sweetheart deals on tax, as we have seen in the cases of Google and Vodafone.

Citizens in this country have reached a point where they believe that business is over privileged and over mighty. They want to be able to believe that a Government accountable to them determine what businesses may do and not the other way round, and that their elected Government serve them above all. This is a challenge to government of the first order of importance.