Category: Economy

Bryn Davies – 2022 Speech on the Growth Plan (Baron Davies of Brixton)

The speech made by Bryn Davies, Baron Davies of Brixton, in the House of Lords on 10 October 2022.

My Lords, I start by reminding the noble Lord, Lord Bridges, that his Government were in power for the 10 years he referred to and some of the guilt must attach to him and his colleagues.

I want to ask about two of the specific proposals in the so-called plan for growth; first, on the change to the IR35 freelance rules. I find this proposal to give up on the effective enforcement of tax rules both extraordinary and wrong. The reopening of opportunities for employees to exploit tax rules does nothing for growth—the purported purpose of these proposals—let alone levelling up. It also severely undermines the wider integrity of the tax system. It should be understood that the Government are actively making mugs of the majority of independent contractors, who follow the rules and pay the tax that is due. I recognise that the whole treatment of freelance workers is a mess and needs to be sorted out, particularly the issue of employment rights. I note the conclusions of the Finance Bill Sub-Committee from two years ago but it should be understood that the Chancellor’s proposal here falls far short of the comprehensive approach that was proposed by the sub-committee.

It is particularly extraordinary that the Chancellor should make such a proposal now, when, inevitably, on the one hand we have no idea of the eventual cost, because it depends on individual actions, while on the other we know that the Treasury has set a figure of £6 billion for the cost of this change over the next four years. That is an extra £6 billion that will have to be borrowed to pay people who are seeking to avoid paying the tax that is due. Therefore, my first question to the Minister is: why do the Government think that this reversal of policy is justified on its own terms, let alone at the current time?

Secondly, I want to ask the Minister about the announcement of the change in the pensions regulatory charge cap. This is particularly relevant following the events of the last few days that arose directly from the investment policies of private sector pension funds. The Bank of England has stressed the significance of the problems that the whole system faced, so I ask the Minister: is this really the time to make these changes, which are intended to have the effect of reducing the liquidity of these private sector pension schemes? Does he understand that the crisis was a crisis of liquidity and not about solvency? This measure is aimed at further reducing the liquidity of these schemes. Therefore, before proceeding with these proposals, we need, at least, a far better understanding of what went wrong following the Budget and the impact that it had on the investments of pension schemes.

October 16, 2022
George Bridges – 2022 Speech on the Growth Plan (Baron Bridges of Headley)

The speech made by George Bridges, Baron Bridges of Headley, in the House of Lords on 10 October 2022.

My Lords, I start by congratulating my noble friend Lady Neville-Rolfe on her appointment. It is great to see her back on the Front Bench. I also congratulate the noble Baroness, Lady Gohir, on her excellent maiden speech. It is wonderful to see her here. I regret very much that we heard the valedictory speech of the right reverend Prelate the Bishop of Birmingham. We shall all miss him.

We are at last waking up from the make-believe world we have lived in for a decade or so. As my noble friend Lord Forsyth said, it is a world where we became deluded into thinking that cheap money would last for ever and that inflation was safely behind bars. Far from being transitory, as we were confidently told, inflation is now running amok, seeping into the pores of our economy.

As the noble Lord, Lord Burns, said, the Bank has questions to answer. For example, why did it take so long to kick the addiction to QE, raise rates and send an unequivocal, clear message that it will do whatever it takes, however painful, to keep prices down? It also needs to clarify how its current £65 billion bond-buying programme has nothing to do with monetary policy, as it claims, even though it seems to be using QE to do so.

That is the first delusion that has fallen. The second has been called out by the Prime Minister. She is entirely, 100% right to say that high taxes risk snuffing out growth and enterprise. The problem is that we—this and successive Governments—have been putting taxes up: in just two years, Boris Johnson raised taxes by more than Gordon Brown did in 10.

So this Prime Minister has my full support in calling time on higher taxes, not just corporation tax but also the dreaded IR35. But—and there is a “but”—taxes are high because spending is high, and it is getting higher still. Here we are only just beginning to wake up to reality. Before the energy package was announced, Mr Sunak said his last Budget increased total departmental spending over this Parliament by £150 billion. That is the largest increase this century.

That is the backdrop to this debate. As we look ahead, if we want to lower taxes, as I do; if you believe that you cannot borrow your way to growth, as I do; and if you want to bring inflation down, as I do, we must all be very honest about spending. If we are not, we risk taking a gamble we cannot afford. Thanks to our living in this make-believe world for so long, borrowing is already high and risks rising higher thanks to the soaring cost of servicing our debt.

Let me give one fact on why this is such a risk. We have the highest proportion of index-linked debt in the G7. It is 25%, which is five times what it is in Germany. Add to that the risk of rising rates and it is not surprising that the OBR forecasts that this year debt interest costs might hit a record high of £83 billion. That is getting on for double what we spend on defence—and it was forecast in March, before the impact of the last few weeks. An average RPI rate of 15% next year would boost borrowing costs to almost £130 billion, and that does not include the cost of rising rates.

So, when my noble friend stands up, I would like him to assure us unequivocally that if we are going to proceed with tax cuts, which I would love to see, a coherent plan will be published on 31 October that sets out how our finances will be put on a sustainable, stable footing. I would also like him to assure us that we will not try to borrow our way to growth, as that is part of the make-believe world I hope we have left behind.

October 16, 2022
Libby Lane – 2022 Speech on the Growth Plan (Lord Bishop of Derby)

The speech made by Libby Lane, the Lord Bishop of Derby, in the House of Lords on 10 October 2022.

My Lords, it is a pleasure to join other noble Lords in congratulating the noble Baroness, Lady Gohir, on her maiden speech, which was delivered with such authority and clarity on matters that are close to my heart as well. I look forward to working with her in the years ahead. It is also a real privilege to pay tribute to my right reverend friend who gave his final reflection from these Benches. I am indebted to him as he has been not only an excellent Convenor of the Lords Spiritual but someone whose example has greatly influenced my ministry over many years.

I declare an interest as vice-chair of the Children’s Society. This afternoon, I want to give voice to the unheard voices that it works with and advocates for, as we take note of the economy and the Government’s growth plan. Last month, the Children’s Society published the 2022 Good Childhood Report, which records that 85% of parents and carers, despite welcome packages of support, are worried about the increase in the cost of living as it affects their ability to care for their children.

I too am concerned about the direct impact of economic policy on children. To ask the lowest-income families to cope with even less seems unthinkable. At a time when so many families are already struggling to put food on the table, a real-terms cut to their income would be catastrophic. Some 4.3 million children in the UK are growing up in poverty and the Children’s Society calculates that not uprating benefits would add another 200,000 to that number.

According to a coalition of national children’s charities, one of the most direct ways of supporting the most vulnerable children would be by increasing child benefit. A £10 increase would help but, given the rate of inflation, an increase of £20 to £25 would be more realistic. On behalf of those charities, I ask the Minister whether His Majesty’s Government might reconsider their position on those benefits to directly support the welfare of children. Jesus, our scripture tells us, put a child at the heart of the kingdom of God and I urge us to do the same in our United Kingdom.

As Bishop of Derby, I am pleased to recognise that Derby is an international centre for skilled engineering and high-tech industry which has brought to the area many highly paid and secure jobs. Some in Derby and Derbyshire will likely benefit from much of the Government’s plan for growth. However, we also face some of the starkest indices of inequality in the country.

I finish with words from Psalm 41:

“Blessed are those who consider the poor and needy; the Lord will deliver them in time of trouble.”

I trust that as we take note of the economy and the Government’s growth plan we will prioritise those who are at the margins of our society to reduce further inequality, especially as it impacts our nation’s most vulnerable children.

October 16, 2022
Richard Denison – 2022 Speech on the Growth Plan (Lord Londesborough)

The speech made by Richard Denison, Lord Londesborough, in the House of Lords on 10 October 2022.

My Lords, first, I congratulate my noble friend Lady Gohir on her passionate and eloquent maiden speech. We look forward to hearing much more from her from the Cross Benches.

As we have heard, the Prime Minister’s economic strategy is, “Growth, growth, growth”. This has unfortunate echoes of her predecessor who, just five months ago, trumpeted the slogan, “Jobs, jobs, jobs”, at a time of record unfilled vacancies. Single repetitive word slogans often suggest oversimplified approaches, with wilful disregard for the consequences. Indeed, the Chancellor appears to have grabbed the helm of a vessel without consulting the crew on the weather or sea conditions and slammed down the throttle with the fuel tank on reserve and oil lights flashing. I will not prolong the nautical metaphor, but you get my drift.

Sustained economic growth requires a qualitative, not quantitative, approach, especially in a period of high inflation and supply side shortages—not least our shrinking workforce. We have economic inactivity levels not seen anywhere else in Europe, while our productivity remains in the doldrums. These are the issues that need to be addressed, and they will not be solved by tax cuts and escalating debt. If you think you can buy growth this way, the markets will find you out—indeed, they already have. Growth needs to be sustainable, balanced and, I suggest, broadly distributed. Achieving 2.5% is far from ideal if only 10% of the population benefit.

Let us reflect for a moment on the impacts of the proposed tax cuts, especially amid a cost of living crisis. Do we give a £20,000 tax break to one person—let us say a mid-ranking City lawyer earning £500,000 a year—or a £1,000 tax break to 20 people earning the median average salary of £26,000? The cost to the Treasury is the same but I argue, as an entrepreneur and business investor, that the impact on growth will be much more significant if you reward at the margins. I do not have time to preach the theory of marginal utility but I urge the Ministers to brief both No. 10 and No. 11 on its relevance in relation to taxation and growth.

So how do we engineer real economic growth? I have two suggestions. First, we now have a very competitive exchange rate, close to record lows against the US dollar. Remember what happened back in 1992 when we exited the ERM: sterling lost 20% of its value —a gift from the markets—and our economy grew by 3% per annum over the rest of the decade, fuelled by a boom in exports. I ask the Minister: what are the new Government’s plans to seize this opportunity?

Secondly, we must address the UK’s anaemic productivity, which in terms of output per hour still lags both France and the US by some 15%. This is where our political system serves us very poorly. We need to stick to targeted, long-term measures to spur productivity, addressing education and skills, and the chronic underinvestment in both the public and private sectors. Would the Government consider setting up a productivity task force, or at least an advisory board, that includes those at the cutting edge of the private sector, who build businesses, create jobs, balance the books, count the beans and have first-hand experience of what drives productivity, and indeed growth?

October 16, 2022
Julie Smith – 2022 Speech on the Growth Plan (Baroness Smith of Newnham)

The speech made by Julie Smith, Baroness Smith of Newnham, in the House of Lords on 10 October 2022.

My Lords, I have not been watching British politics and economics for quite the 60 years that the noble Baroness, Lady Blackstone, referred to. My first memory of the British economy was during the three-day week in the early 1970s and its periodic blackouts. My father and I visited my great-uncle, who had a corner shop; I would have been about three or four, but even then I can remember him talking about the difficulties of getting in produce, as supermarkets found it so much easier to undercut. There were changes in the economy then that were not necessarily attractive; they were not necessarily times we would want to go back to. The 1970s were probably the worst time for the British economy that I and many others remember.

When we voted for Brexit, despite the Project Fear perhaps put out by some, I did not expect that we would indeed end up in a period where there would be threats of blackouts and growth would be slipping back as much as it is.

Lord Forsyth of Drumlean (Con)

It has nothing to do with Brexit.

Baroness Smith of Newnham (LD)

The noble Lord says from a sedentary position that it has nothing to do with Brexit—

Baroness Jones of Moulsecoomb (GP)

Of course it does.

Baroness Smith of Newnham (LD)

I thank the noble Baroness. There was a suggestion by those who were arguing against Brexit that it would have catastrophic economic consequences. We will never know fully what the implications of Brexit would have been had it not been for the Covid pandemic and a whole range of other issues, but it is absolutely clear that we are in an economic situation that was unforeseen five years ago and which very clearly started at the time of Covid and was exacerbated by the war in Ukraine.

Had I not been heckled from a sedentary position, I was going to say that today a miracle has happened—I agreed with the noble Lord, Lord Lilley. Before the Whips in my party get too worried, I say that it is over something with which I hope perhaps all Members in your Lordships’ House can agree: that we should not want a Government to fail. It must be of considerable interest to us all, as citizens of the United Kingdom and Members of your Lordships’ House, that our country should be respected globally and that our economy should be as strong as possible. I therefore do not seek to talk down the Government, however much I might like to see them defeated at the next election.

The noble Lord, Lord Eatwell, raised the question of whether the Prime Minister had too many Ps in her PPE. I was more concerned that she had missed Politics 101: as Prime Minister, there are certain people you want to have in your Cabinet, so do not kick to the Back Benches those people who do not agree with you. The Prime Minister might like to rethink that a little bit. But did she really learn the lessons in Oxford PPE that some of the rest of us did? There seem to have been so many decisions in the last four weeks that are not about strengthening the economy; some of them stand to weaken the economy.

The noble Lord, Lord Forsyth, is right that cheap money is no longer available, but those decisions that the Chancellor put forward two and a half weeks ago led to a set of consequences that is going to increase borrowing. Can the noble Lord, Lord Callanan, in his response tell the House what calculations the Government have made around the impact on the economy and our borrowing of the Government’s mini-Budget; the amount of borrowing the Government are having to do; the intervention of the Bank of England; and the long-term consequences this will have on young people and their mortgages, and on those who are repaying their student loans? The youngest are among those who are going to suffer most from many of these changes.

Cutting energy prices is right. Borrowing for tax cuts most certainly was not.

October 16, 2022
Tessa Blackstone – 2022 Speech on the Growth Plan (Baroness Blackstone)

The speech made by Tessa Blackstone, Baroness Blackstone, in the House of Lords on 10 October 2022.

My Lords, in the 60 years I have spent either participating in or observing British politics, I have never seen such a shocking failure in government policy-making as last month’s mini-Budget. What is particularly shameful is that it was a self-inflicted failure—what the former Governor of the Bank of England described, using a tennis analogy, as “unforced errors”. It showed an inability to make sensible economic judgments and an irresponsible lack of proper consideration to what the likely outcome would be for the markets of enormous unfunded tax cuts, with no indication of how they would be paid for in the medium and longer term. It is said that hedge fund managers have described the Chancellor as “a useful idiot”. Useful to them perhaps, but what about the rest of us?

There are a number of lessons that the Prime Minister and the Chancellor might learn from the mini-Budget fiasco. Above all, they must stop trashing the system which is set up to advise them. Doing so is arrogant as well as ill advised. They need to understand the likely consequences of their actions from good advice. They should not sack a competent Treasury Permanent Secretary with particular expertise in the way the market works on their first day in office. They should not sideline the Office for Budget Responsibility, citing the dubious excuse that there was no time for it to respond. They should consider the views of the Bank of England on maintaining financial stability, for which it is responsible, before taking actions which threaten that very stability.

They should also demonstrate greater political nous. To propose cutting the top rate of tax for high earners against a backdrop of a cost of living crisis which will damage the lives of medium and, especially, low-income families, beggars belief. Not surprisingly, it led to a rapid, embarrassing U-turn. It has also led electors to believe that this is a Government on the side of the rich and not the poor. Did they not also think through the possible risk of higher interest rates as a consequence of their Budget? Quite apart from the damage to investment, a hike in interest rates would have big implications for the mortgage market. I am sure many Members of your Lordships’ House will feel great sympathy, as I do, for young people who have worked hard to save, found a property they want to buy and, at a stroke, have been told the mortgage that they had been promised has been cancelled.

As an aside, it is particularly galling to hear the Prime Minister say in interviews that the increase in interest rates is a decision of the “independent Bank of England” when it is obvious that her policies forced the Bank of England to act quickly and raise rates to prevent further damage to our financial system.

The noble Lords, Lord Newby and Lord Macpherson of Earl’s Court, and my noble friends Lady Smith and Lord Eatwell have all challenged the Government’s flawed economic ideology about how growth can be achieved. They have pointed out the past failure of trickle-down policies, especially in the context of high inflation, and the need to restore economic credibility. I hope that the Minister will say in responding why greater priority has not been given to innovation, as mentioned by my noble friend Lord Eatwell, to improving skills, which no one has mentioned, and to creating better infrastructure, as referred to by my noble friend Lord Liddle. All these are likely to be far more valuable in achieving growth than unfunded tax cuts.

Growth is of course a highly desirable goal, but I ask the Government and the Prime Minister in particular to refrain from further slurs against the Labour Party for being anti-growth. That is nonsense. The issue between us is not whether we want growth but how to achieve it. Lastly, following what the noble Baroness, Lady Hayman, said, I ask the Government, in thinking about growth, to give further thought to the economic rewards and cost-saving potential of the green economy.

October 16, 2022
Peter Lilley – 2022 Speech on the Growth Plan (Baron Lilley)

The speech made by Peter Lilley, Baron Lilley, in the House of Lords on 10 October 2022.

My Lords, it is a pleasure to follow the right reverend Prelate the Bishop of Durham; I will take his biblical injunctions to heart. I hope that he will take to heart my observation that there is no free market economist who believes in anything called “trickle-down economics”; that is a fantasy of his imagination.

My noble friend Lord Lamont reminded me that I should perhaps begin with a declaration of interest: as a former Treasury Minister I am a registered bean counter and member of the Treasury orthodoxy, which may be why I voted for Rishi Sunak in the leadership election. However, I passionately want the Prime Minister and Chancellor to succeed, not just because I believe in their central objective; I also wanted Tony Blair and Gordon Brown to succeed, because I want our country to succeed. I am therefore rather upset by the relish that some have shown for the brief adverse market reaction to the Budget. After all, it was brief, which suggests that it was as much about misunderstanding as about the substance. Sterling is back to the level against the euro that it was before the announcement. The dollar has been equally strong against both the pound and the euro—and many other currencies—which has nothing to do with the Budget statement.

Surely we can all agree that the Government’s priority is right. Growth is crucial. Growth, not redistribution, is the only sustainable way to increase living standards and finance improved services. If I may, I will use my four minutes to make a few reflections based on the experience of the 1980s.

First, the impact of the deregulatory measures that we introduced then was in fact greater than we anticipated. Britain moved from being the slowest-growing major economy in Europe to the fastest. But this improvement was slower in emerging than we hoped, and reflected the cumulative effect of a whole range of often small changes. It is therefore very unlikely that the benefits of changes that this Government rightly propose will be felt before the next election. But that is no reason for giving up. The electorate is collectively far more intelligent than many cynics assume. They re-elected the Thatcher Government twice before much of the benefits of their reforms had materialised, because they gave the Government credit for tackling what were manifestly important issues.

Secondly, in the 1980s we tackled many, although not all, of the big regulatory problems, such as scrapping exchange controls, ending the vestiges of a prices and incomes policy which gave the Government control of every single price, wage and dividend in the country, and privatising large swathes of nationalised industries. But that does not mean there is nothing left to do. We could not then tackle the issues covered by the EU’s laws and regulations. Now, thanks to Brexit, we can, so this Government are right to turn their attention to these.

Thirdly, one area we did not tackle, which was at least partly within the scope of domestic law, was planning. There, in my experience, speeding up decision-making, so you know whether you can or cannot do something, is as important as liberalising it, and may be less contentious.

Fourthly, we tend to forget one significant feature that the UK had in the 1980s, which was the development of North Sea oil, which simultaneously strengthened the balance of payments and generated huge tax revenues. The Government are absolutely right to license more North Sea acreage, but the only energy sources which can come on stream speedily are onshore gas and onshore wind. We must face up to the anti-growth coalition, which agitated against shale gas with arguments which, frankly, make anti-vaxxers look positively scientific. More than a million wells have been fracked in the United States without a single building falling down as a result of the micro-seismic events which follow, and without anyone being poisoned by contaminated aquifers, and gas produced domestically emits far less CO2 than importing LNG. If anyone needs to apologise for our present shortage of secure, affordable energy, it is those who objected to nuclear because it would not come on stream until 2021, to quote Nick Clegg, and who supported frankly scaremongering arguments to stop us exploiting such shale reserves as we have.

October 16, 2022
Paul Butler – 2022 Speech on the Growth Plan (Lord Bishop of Durham)

The speech made by Paul Butler, the Lord Bishop of Durham, in the House of Lords on 10 October 2022.

My Lords, I congratulate my friend of more than 40 years, the right reverend Prelate the Bishop of Birmingham, on his valedictory speech. I thank him for his contributions to this House, particularly as our convenor, and pray God’s blessing for his future endeavours. I also congratulate the noble Baroness, Lady Gohir, on her excellent maiden speech.

In Luke, chapter 16, Jesus tells of a rich man who

“lived in luxury every day”,

while a beggar named Lazarus lay longing to eat what fell from his table. Sat at the rich man’s gate, Lazarus was in plain sight, yet he was invisible to the rich man—a man blind to suffering and the needs of Lazarus.

The Trussell Trust has revealed devastating statistics regarding those in poverty. In recent months, its food banks have provided 50% more parcels. Of those on universal credit, 2 million have skipped meals to meet other essential costs. These statistics continue to rise; poverty is in plain sight. Yet a policy of trickle-down economics renders those in poverty invisible. Like Lazarus waiting to eat what fell from the rich man’s table, this policy does not address urgent needs. These people cannot wait for the benefits of this economic policy to trickle down; this is especially the case for children and young people. We all get only one childhood, which shapes the rest of our lives. Children do not have time to wait for the “pie” to grow; they need meaningful investment now. God does not “trickle down” his love for us; he pours it out extravagantly. Jesus’s priority was to lift up the poor, not wait for some small advance to trickle down.

I agree, therefore, that the rule book needs rewriting to recognise in plain sight the value of parents giving their full time to raise children and to honour carers for selfless service to the disabled and elderly—an economics that says the well-being of people and of creation matter most. It is urgent that economic policy prioritises the poor and vulnerable. Growth certainly matters, but growth must have the most vulnerable in sight. It must not be a growth of greed but of supply, sufficiency and contentment. Social security should be increased in line with inflation. A failure to do so will have devastating consequences for families across the UK—families already struggling due to policies such as the two-child limit and the benefit cap. In the north-east, two in five children live below the poverty line, making the gap between the north-east and the UK average child poverty rate greater than ever. The Government’s lack of commitment to increasing social security will further plunge children into poverty, while making levelling up an increasingly distant fantasy. What does this say about the value that this country places on caring for children?

I acknowledge the reversal of the 45p tax cut, but for those on the lowest incomes it is, frankly, irrelevant. As Jesus proclaimed:

“You cannot serve both God and money.”

We must ask ourselves who we serve when developing economic policy. Is it for the benefit of a select few, or is it those who are poor and most vulnerable, those whom God expects us to protect and care for first and foremost?

October 16, 2022
Seema Malhotra – 2022 Speech on Economic Crime and Corporate Transparency Bill

The speech made by Seema Malhotra, the Labour MP for Feltham and Heston, in the House of Commons on 13 October 2022.

It is indeed a pleasure to speak on Second Reading of this important Bill. But before I begin my remarks, let me just mention that, in the Public Gallery today, there are two young dancers from Ukraine, Yeva and Zakhar, who, yesterday, came second in the International Ballroom Dancing Championships. I am sure that we all want to pass on our congratulations to them.

I welcome the Minister to his new role. I very much look forward to working with him in the same spirit as I did with his predecessors. Today, he will have heard Members across the House express their concerns about the time that it has taken to introduce this legislation. Urgency is required not just to bring forward a Bill, but to bring forward the Bill that we need to close the gap between what we are doing now and what needs to happen to tackle the scale of economic crime that exists.

As we heard today, action on economic crime was first promised in 2016 and then again in 2018 and 2019. Even in March, the Government blocked Labour’s amendments, which would have introduced reforms to Companies House and left Russian oligarchs with nowhere to hide. It matters that we have had these delays, because, in six years, we have seen a significant increase in economic crime, much of which could have been prevented had the Government acted earlier.

I thank all the Members who have contributed today from all parts of the House, many of whom have been ahead of the Government in calling for action. I also thank the Minister and his team for our meeting earlier this week. It is also good to have heard about the work going on with the devolved Administrations, because we do indeed need to hear voices from across the nations.

Let me pay tribute to some of the contributions that we have heard today. The right hon. Member for East Hampshire (Damian Hinds) made the important connection between fraud and cyber-crime. He also mentioned the local nature of crime and its links with economic crime nationally. This is not just a debate about a grand scale matter. There is a very deep connection with the lives that we lead in our everyday economies. There is also a need for global action, and it is up to the UK to take the opportunity to lead that action.

The hon. Member for Glasgow Central (Alison Thewliss), with whom it is always an honour to debate from the Front Bench, made some very powerful comments including around false registration, the methods of verification and the need for resources. I commend her work on tackling the issue of Scottish limited partnerships. I also commend the hon. Member for Cheadle (Mary Robinson) on her work on the APPG for whistleblowing; I hope that as we go through Committee we will see more action taken in this Bill to tackle the challenges faced by whistleblowers, who do us a service.

My right hon. Friend the Member for Barking (Dame Margaret Hodge) spoke eloquently, as always, but what stood out for me was her articulation of the scale of the challenge and the fact that there is still just not enough determination or ambition. She was absolutely right to say that warm words need to give way to action—I will come back to some of her other comments.

I will also come back to the speech by the hon. Member for Thirsk and Malton (Kevin Hollinrake), but his comments about legislation with implementation stuck with me. He is right, because we cannot afford to sit on our laurels after passing this Bill, saying we are proud of it, if it does not achieve the change that is necessary and vital. I will also come back to his campaigning on the failure to prevent; his arguments have been heard across the House.

My right hon. Friend the Member for Walsall South (Valerie Vaz) articulated the problem of homes being used fraudulently for the registration of companies when people are not living there, and the lack of redress—an issue also raised by other hon. Members across the House. I want to highlight what that means for the vulnerability of elderly people: we know they are more likely to be victims of scams, but the ability to identify them, often on the electoral register, as people who might be living alone is another source of vulnerability for them and may lead to their being targeted and becoming victims of economic crime.

The hon. Member for Weston-super-Mare (John Penrose), who I also come across in many debates on this and other related topics, is right that the Bill was due, and past due—I think those were his words. I am sure that we will come back in Committee to the arguments he has made about the urgency of proper beneficial ownership transparency and many other points he has raised. I look forward to working with him on those matters.

The hon. Member for Oxford West and Abingdon (Layla Moran), who is not in her place, was right to say that we should get this done in economic crime Bill 2, because we do not want to be back for economic crime Bill 3. This is our chance. She made the point that it is worth taking a little longer to get this Bill through both Houses of Parliament to make sure that it is fit for purpose, and I support that.

My hon. Friend the Member for Hammersmith (Andy Slaughter), speaking from his own deep experience on issues of policing and enforcement, made the point extremely well about the need to ensure that we have the resources, motivation and morale for both policing and enforcement. We cannot have a revolving door. We must have the resources within our public sector to tackle these issues effectively. The hon. Members for Glenrothes (Peter Grant) and for Rutherglen and Hamilton West (Margaret Ferrier) and my hon. Friend the Member for Stretford and Urmston (Kate Green) also made similar and very effective comments in the debate.

I would like to give one final set of thanks, because it is right to pay particular tribute to my right hon. Friend the Member for Barking and the hon. Member for Thirsk and Malton for their leadership in the work of the APPGs on anti-corruption and responsible tax and on fair business banking. Their work serves this House and our nation extremely well on these difficult and complex issues.

I also recognise and thank for their steadfast advocacy the civil society groups that work tirelessly for action on economic crime, including Transparency International, Spotlight on Corruption, the Royal United Services Institute, Open Ownership and the Fair Tax Foundation. That is not an exhaustive list, and many others are worthy of our thanks for bringing insight and clarity to a complex area, which demands that we act in the interests of our national and international security and prosperity.

This Bill is an historic opportunity to put a stop to the UK’s shameful role as a hub of illicit finance and a facilitator of economic crime. This debate is testament to the support of the House for the Government’s going further in tackling money laundering and the illicit use of cryptocurrencies to enable crime.

I am sure the Minister has heard the arguments put forward today, and the motivations for doing so are so clear. Dirty money is a national security threat. It is the lifeblood of corruption, crime and war. Organised crime gangs profiteer from drug smuggling, people trafficking, arms dealing, fraud and environmental destruction. Parliament’s Intelligence and Security Committee has criticised Russian influence in the UK and frankly, as long as Putin and his friends have a safe haven in London, we do a disservice to the brave people of Ukraine, who are fighting with their lives to defend their country and our shared values of democracy and freedom.

Dirty money also causes massive financial damage. In 2020, the National Crime Agency found that money laundering causes at least £100 billion of economic damage to the UK. We have heard other estimates today. Spotlight on Corruption estimates that fraud, now the most commonly experienced crime in the UK, costs us £190 billion annually, hitting businesses and tax receipts and damaging public services. As my right hon. Friend the Member for Barking said, we will never secure sustained growth on the back of dirty money. Every one of us is a victim of economic crime.

Dirty money is damaging the UK’s reputation. The prevalence of economic crime jeopardises our status as a business destination of choice. The United States has designated us as “high risk” for money laundering, alongside Cyprus. That is embarrassing, frankly. Britain must not lose its status as a trusted jurisdiction. The warning signs are there and we need to act urgently.

Finally, dirty money undermines the rule of law and democratic institutions. It corrupts political and legal systems. Oligarchs are clogging up Britain’s already overburdened legal system with vexatious lawsuits to muzzle legitimate critics and whistleblowers. My hon. Friend the Member for Hornsey and Wood Green (Catherine West) made that point extremely well. Democracy, free speech and the rule of law are under threat.

We welcome the Bill. Our argument is not about what is in it, but what is not in it. There are aspects of the Bill that we will want to strengthen and to work with the Government on doing so. Let me lay out some of the areas on which we want to see further action, some of which have also been touched on today. Money launderers use complex financial structures such as shell companies and offshore tax havens to provide the secrecy that allows them to move, hide and spend their money. We must lift the cloak of anonymity that protects criminals and the corrupt.

We are pleased that the Bill begins to tackle the abuse of limited partnerships, including Scottish limited partnerships, by strengthening transparency requirements and enabling them to be deregistered. New research by Transparency International has revealed that more than one in ten limited liability partnerships ever incorporated—over 21,000—have characteristics identical to those used in serious financial crimes, such as bribery, embezzlement of public funds and sanctions evasion. We will review the detail of changes in Committee. Given the mass use of LLPs and other UK legal structures in large-scale money laundering, those networks are ideal platforms for a variety of clients looking to move dirty money.

On Companies House, the Bill is a huge step forward in improving the integrity of our register. That is important as we move from Companies House being a register to being more of a regulator. For far too long, fraudsters have obscured their identities behind shell companies, relying on a lack of verification of the information they submit. It is right that the Bill will make failure to comply with new ID regulations a criminal offence. The identity verification introduced by the Bill can finally begin to close that door, but it needs to be strong and we need further details about how the new powers will be used to close down those fraudulent companies already registered with Companies House.

Experts such as Graham Barrow suggest that there have been a huge number of bogus incorporations over the past decade alone, which will take significant effort and time to retrospectively verify. The Government have yet to clarify the period in which registered companies will be required to meet their new commitments, which, similarly to the Economic Crime (Transparency and Enforcement) Act 2022, will create a window in which those who have engaged in fraudulent activities can dissolve their entities or transfer interests. We do not want to see that happen. Has the Minister considered whether such verification should also be required to strike off and dissolve a company? That would help to prevent entities from dissolving and restructuring to avoid scrutiny under the new regime.

I urge the Minister to consider a mechanism by which parties affected by fraudulent entries—we have heard examples today—can apply to Companies House to have an entity or director struck off. They should not have to wait for Companies House to use its querying power, given the time that it takes. Public accountability is vital, so what plans does the Minister have for reports to Parliament on Companies House activity, which will bring public confidence?

Trust and company service providers are defined as being “of the highest risk” for money laundering by the National Crime Agency. A recent Treasury review found that HMRC, which is responsible for supervising TCSPs, continues to suffer from

“a lack of appropriate AML policies, control and procedures”.

The AML supervisory regime, including of TCSPs, is under review, but the further consultation promised by the Treasury in June is yet to be published. Until this broken supervision is fixed, how can we rely on such third-party agents to effectively act as the gatekeepers of our financial system? Under the Bill as introduced, they can be authorised to carry out ID verification as an alternative to Companies House. Crooks and kleptocrats already rely on these enabling professionals to build and maintain whole systems of shell companies. New measures in the Bill requiring third-party agents who form companies on behalf of someone else to register with Companies House and be registered in the UK with an anti-money laundering supervisor are long overdue. However, unscrupulous TCSPs will simply add ID verification and, potentially, falsification to their menu of law-busting schemes. That must not become a loophole in the legislation.

Could the Minister outline how the legislation will have sufficient teeth to prevent rogue actors from setting up shell companies for money laundering? The detail of verification checks is yet to be defined, but as drafted, third-party agents will simply be able to state that they have verified information on behalf of clients. Will the registrar have sufficient powers to review the documentation of “know your customer” checks if there are concerns?

There are concerns from stakeholders, such as Transparency International, that the Bill does not commit to verifying shareholder data, which could reduce the level of trust in the accuracy of that data. Concerns have also been raised about information sharing. While the measures in the Bill are a step forward, information-sharing measures appear to be reactive, rather than to proactively spot problem areas. This is a complex issue, and I am sure that there will be detailed discussion of it in Committee.

Extending current asset recovery provisions into the realm of cryptoassets is a welcome step forward, with cryptoassets increasingly used to launder the profits of crime and to support terrorism. On seizing and recovering cryptoassets, we will want to work with the Government to ensure that powers in the Bill extend to introducing sanctions on crypto-marketplaces that enable criminal activity. However, we are concerned, as the UK Anti-Corruption Coalition is, that to be effective, any new provisions regarding crypto money laundering and asset seizure need to be executed by a fully trained workforce. What is the Government’s economic crime people and skills strategy, and how is it changing in the light of the new threats we face?

Finally, I want to come back to a point raised by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) and others. We very much believe that there is a missed opportunity in this Bill, which is extending corporate criminal liability for economic crimes. The powers that exist under the Bribery Act 2010 and in relation to tax evasion could and should be extended to other economic crimes. The Secretary of State for Wales said this week that he considers a new failure to prevent offence for fraud “likely”. The Home Secretary said that the Government are looking at this, so why do they not just get on with it, and bring forward proposals or work with us on amendments to the legislation? I certainly believe, on the basis of the debate today, that there is support for such a move across the House, and we will continue to push for it.

There is much to welcome in this Bill, with long overdue powers for Companies House and law enforcement agencies, but those powers will make a real difference only if the Government provide the resources to use them—legislation with implementation, as the hon. Member for Thirsk and Malton said. We know that the Government committed £63 million in the 2021 spending review to Companies House, which was allocated for the transformation effort that, rightly, must take place. That is £63 million as against the billions that I have described economic crime as costing the UK each year.

The Government have included a new power to set Companies House incorporation fees. We know that the £12 cost of registration is the sixth lowest in the world, so what are the plans to resource those efforts? Does the Minister plan to increase the costs of incorporation to help pay for the effective operation of the new regime as part of the sustainable resourcing model, or to seek an increase in the economic crime levy, and what is the alternative? It would be helpful to understand that as the Bill goes on its passage through the House.

With the Bill’s complexity, it would not be possible to touch on all the issues involved, but I am grateful to have had the opportunity to wind up for the Opposition. We have the power in this country to lead change, and for the sake of our citizens, our children and the international community we must do so now.

October 15, 2022
Margaret Ferrier – 2022 Speech on Economic Crime and Corporate Transparency Bill

The speech made by Margaret Ferrier, the Independent MP for Rutherglen and Hamilton West, in the House of Commons on 13 October 2022.

I shall be brief. I welcome the Minister to his place and I welcome the Bill. I am glad to see Ministers deliver on the commitment to use the building blocks laid by fast-tracked legislation earlier this year. While the war in Ukraine continues, we have to utilise what we can to hit the Russian state where it hurts financially.

Although Russian aggression may have been the catalyst for economic crime prevention measures, the benefits of a better-regulated system are far more wide-reaching. According to the Cabinet Office, fraud accounts for 40% of all crime committed in the UK. Tackling that is crucial, and a monumental task. However, as we have heard, the legislation is not the powerhouse it needs to be. There are some very big limitations and gaps to be plugged. For the Bill to be effective there cannot be any gaps or loopholes. We must close them before the Bill finishes its passage, and get it right the first time.

I have concern about the resourcing and funding that will be available to public bodies such as Companies House to undertake their new responsibilities. The Government have been clear that they are keen to cut back departmental spending and reduce civil service numbers. How do those priorities align with pouring what will be very necessary resource into the organisations responsible for operationalising the Bill’s measures?

Companies House will have to make a significant pivot to its new regulatory role, and that will require investment if it is to be effective in the long term. Some of the funding could, and should, be raised through increasing the registration costs for new companies. The Government have taken the power to do so through secondary legislation but have not yet committed to using that power. As we have heard, increases would not need to be astronomically high: industry has suggested an increase from £12 to £50 and the Treasury Committee has suggested £100. Those costs would still mean that the UK is one of the cheapest places in the world to set up a company.

What steps will the Government take to ensure the registrar’s proactive querying power is effective in targeting a significant number of the companies that have submitted fraudulent information to the register? Are Ministers also looking at further reform to the strike-off process? That will inevitably require further resourcing but is a crucial gap in the Bill that needs some more attention. If companies continue to be struck from the register automatically, there are no checks to assess whether any fraud has occurred. That means that the directors of automatically struck-off companies can go on to commit further frauds—indeed, many do just that. Will the Minister commit to putting such companies through an insolvency process to ensure that returns to creditors can be made?

The Bill will deliver significant changes for limited partnerships, which are at high risk of being “shell companies” that are used for fraudulent activity and crime. In its current form, the Bill does not adequately prevent limited partnerships, limited liability partnerships or Scottish limited partnerships from having corporate partners and members in secretive offshore jurisdictions. While such companies are controlled by offshore entities, we will continue to struggle to identify their real owners and verify that the information held by Companies House is accurate. Because limited partnerships operate differently and do not require directors, they could allow sanctioned individuals to continue to launder money through the UK. The Government must introduce measures to tackle that issue.

The last issue I wish to look at is communication and information sharing. I will give Ministers some leniency here—it is not easy to create an effective information-sharing gateway while protecting sensitive data—but information sharing will be key to the success of a new regime.

Regulated sector entities should be able to share information more easily—the new measures will be used reactively and miss the potential for proactivity in spotting fraudulent activity earlier. Regulated organisations need more clarity about the intent of the legislation and how it can be operationalised to its fullest potential.

The finance sector, for example, sees benefits in sharing information between firms on the same basis that they currently share information with the National Crime Agency. Although the legislative framework may exist for that, civil liability is a very real risk, particularly where firms are dealing with sophisticated, experienced and monied criminal individuals. We have already seen the risks of aggressive litigation in this area through the legal challenges mounted against the National Crime Agency when pursuing unexplained wealth orders.

I hope that Ministers will be looking closely at where the gaps are here. This is a piece of legislation that must be done right and must be watertight if it is to be effective. Rather than bringing forward multiple Bills over the next few years as issues are identified and further gaps need filling, I hope the Government will use the Bill as a legislative vehicle to reform the system and prevent these instances of money laundering and economic crime as soon as possible.

October 15, 2022