Panama Papers — House of Lords, 2016-04-11
Topic: Macroeconomics
Angela Smith (Labour, Centre-left): My Lords, I thank the Leader of the House for repeating the Prime Minister’s Statement. It has been a difficult week for the Government. For most people, the reports that they have heard over the past week or so about offshore investments, tax havens and corporate tax avoidance are way outside of their personal experience. Most people are still going to open bank accounts in their local high street, if they can find a branch open. So the press reports will not be fully understood by everyone, but three things emerge. Overwhelmingly, most people have said that they were very familiar with reports on the Panama papers, with just over 4% of those aged 65 and over saying that they were not—so most people have read the information and heard what is going on. There is a general attitude from most people that, even without understanding the full details, something here is not quite right. But only 8% of people said that they were surprised at the reports. For me, that indicates a cynicism about the finances of those in the public eye and highlights a necessity for public confidence in financial regulatory regimes George Osborne said in his Budget Statement last month that people, "talked about social justice, but left enormous loopholes in our tax system for the very richest to exploit".—[Official Report, Commons, 16/3/16; col. 956.] When he said that, I do not think that he was anticipating the Panama papers. What has become clear, as news from across the world shows, is that not everyone who holds such offshore accounts or funds welcomes the transparency that this leak has brought—not because they have done anything illegal or necessarily wrong but because they never intended it to be public. Clearly, some have found it very difficult and for others it has had serious consequences I have a few questions for the Leader of the House on the Statement. It reports that Crown dependencies and overseas territories have agreed automatically to exchange taxpayer financial information from September. That is welcome, but it has taken some time, as my understanding is that these negotiations were initiated and made progress under the Labour Government. I ask specifically about bearer shares, when the identity of the investor or beneficiary is secret. Holding such shares is illegal for UK companies, but can she confirm that it is legal for a UK citizen to hold funds in bearer shares in other countries? If it is not, what is the penalty The Statement also says that there will be new legislation this year, "to apply to corporations who fail to prevent their representatives from criminally facilitating tax evasion" Your Lordships’ House will appreciate that that is not a new announcement. In fact, the Government have already consulted on this, and published the consultation responses last December. The report on responses to the consultation last year, under the fourth item, "Next steps", said that there would be further consultation early in 2016, including seeking views on, "the merit and content of industry drafted guidance" Why is further consultation needed after there has already been a consultation? Is that approach of industry-drafted guidance really appropriate, and has that consultation, which was promised for early 2016, yet been published? Given that we have an extra consultation, is this an opportunity for the Government to take account of the recommendations from the Parliamentary Commission on Banking Standards in its report, Changing Banking for Good? That commission included Peers from across your Lordships’ House, including the most reverend Primate the Archbishop of Canterbury and the noble Lords, Lord Lawson and Lord McFall. Following their work, and having taken evidence, they were clear that it is not just corporate responsibility that is needed—they recommended individual responsibility. The commission received considerable evidence, including from bankers themselves, that led it to the recommendation that, without such individual responsibility, it would be impossible to crack down on banking failures and problems. Does the Leader of the House really believe that, without individual responsibility, the legislation proposed would be an adequate deterrent The fines and compensation paid by UK banks in the past 15 years come to more than £53 billion, which is six times the cost of the 2020 Olympics. It is an almost inconceivable amount of money. Yet no one has ever gone to prison and only one person has ever been held personally culpable and personally fined, to the tune of half a million pounds. I think that the Chancellor raised the point that it is the customers and shareholders who bear the cost of that failure, not the senior managers, who are supposed to be rewarded for being responsible. Yet there are numerous accounts of those who have wrongly claimed benefits and been sent to jail. A quick internet search finds dozens of cases where false claims of £30,000 or less have led to custodial sentences. So will the recommendations from the Parliamentary Commission on Banking Standards be considered as part of this new consultation on corporate responsibility so that the Government can consider individual responsibility as well Will the noble Baroness explain why the Government lobbied the EU against plans to tackle tax avoidance? Conservative MEPs have regularly voted against measures to deal with aggressive tax avoidance and press reports suggest that the Prime Minister personally intervened to block EU plans to take action on tax havens. It would be helpful for your Lordships’ House if the noble Baroness could clarify those points Finally, on enforcement, the commitment of a £10 million cross-agency task force is welcome. Additional funding is clearly essential, especially given the cuts that have been made to HMRC. In the last Budget, the Chancellor made a strong case for bearing down on tax avoidance and evasion, especially in relation to the impact on public finances, and I think we would agree on that. In terms of ensuring that taxes are paid, the OBR reported just last month: "HMRC is also now less optimistic about how much of the lost yield can be recouped through additional compliance activity, on the basis that they are unlikely to be able to work the higher number of additional cases on top of existing workloads" To date, the Chancellor has refused requests better to resource HMRC. How will the £10 million referred to today be allocated? Will it go directly to HMRC or is it something to be found from within existing Treasury budgets? I am grateful to the noble Baroness for repeating the Statement and I look forward to her response in answer to those questions.