DRAFT ALTERNATIVE FINANCE (INCOME TAX, CAPITAL GAINS TAX AND CORPORATION TAX) ORDER 2022

Tulip Siddiq Excerpts

Tuesday 17th May 2022 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under you in the Chair, Sir Edward. The Labour party is completely committed to ensuring that every religious community in the UK is able to benefit from the opportunities that access to finance can offer—whether that is taking out a student loan to attend one of our world-leading universities, setting up a new business or getting a mortgage to buy a house and start a family. For a significant number of British Muslims, having to take an interest-bearing loan would exclude them and their families from higher education or home ownership. Interest is prohibited in Islam, as it was in Christianity until the middle ages. Thousands of Muslims living in the UK today adhere to the core concepts of Islamic economics, of which the description of riba, the Arabic word for interest, is perhaps the most significant. That is why the role of the UK’s Islamic finance sector is so important; it currently supports more than 100,000 retail customers across the UK by offering alternatives to interest-based products.

The City of London is one of the leading centres for Islamic finance in the western world, and the Opposition want to see this vibrant sector continue to thrive and grow. The Minister will be pleased to know that we therefore wholeheartedly welcome the Government’s draft regulations today, which will help provide a more level playing field for the providers of conventional and Islamic financial products.

By providing for the equal treatment for tax purposes of Sharia-compliant home purchase plan providers and regulated peer-to-peer platforms with traditional mortgage and loan providers, the regulations are also an important step forward for financial inclusion. I am sure the Minister will agree that my hon. Friend the Member for Bradford West (Naz Shah) and Lord Sheikh of Cornhill have done some fantastic work in highlighting the role that Islamic finance plays in tackling financial exclusion in the Muslim community. They are co-chairs of the all-party parliamentary group on Islamic finance and have long campaigned for the changes introduced today, which will provide many Muslims with a greater choice of financial products.

The Minister will not be surprised to learn that I have a series of questions for him. Although the Government have taken a welcome step today, will he explain why no such progress has been made on perhaps the other greatest barrier to financial inclusion in the Muslim community—the introduction of Sharia-compliant student loans? For nine years, successive Prime Ministers have pledged to address the shameful situation in which many young British Muslims, faced only with the option of an interest-bearing student loan, have not been able to attend university.

An October 2021 survey by Muslim Census, an organisation that gathers data on Muslims living in the UK—

[The Chair]

Order. Student loans are not part of the proceedings. You can refer to them briefly, but please do not give a long speech on student loans. They are not part of what we are talking about.

[Tulip Siddiq]

With all due respect, I think they are connected, but I will listen to the Chair’s comments. I would like the Minister to tell us why, despite the Government identifying the solution to this problem six years ago, they continue to stand by as thousands of Muslim students are giving up on university education. I hope the Minister can answer that point.

I want to raise the concerns of the APPG on Islamic finance regarding stamp duty land tax. The APPG has warned that the draft regulations fail to address the fact that Islamic fintech companies, which are regulated by the Financial Conduct Authority, are unable to benefit from the alternative finance rules that relate to stamp duty land tax, because of how a financial institution has been defined in the regulations, which do not recognise Islamic fintech companies as equivalent to banks or building societies. Although the UK may be the leading hub of Islamic finance outside of the Muslim world today, growth in the sector is increasingly driven by fintech. In the absence of a comprehensive strategy for Islamic fintech, the UK is at risk of falling behind its global competitors in Islamic finance. Has the Treasury considered the impact on the UK’s Islamic finance sector of the omission of Islamic fintech companies from the extension of the financial institution definitions for the purposes of SDLT?

We welcome and fully support the draft regulations, but why was there no progress over nine years on the introduction of Islamic student finance, and what reassurance can the Minister provide that his Government will support and champion the interests of the Islamic fintech sector?