On 10 November, the Prime Minister said that the UK is
“not remotely a corrupt country”.
One can believe or disbelieve things that the Prime Minister says, but it is clear from the Bill that the UK is certainly not a transparent country when it comes to taxes. Efforts in the Bill to tackle economic crime are of course welcome, but, as ever, this Government are not going far enough to do so. The Minister mentioned the economic crime plan. On Monday, we had the Minister for Security and Borders at the Treasury Committee, where he set out that 34 of the 52 actions have been completed, while the rest are in progress and a few of them appear to be some way from being completed. It worries me that priority is not being given to these actions.
Clauses 53 to 66 provide for the Economic Crime (Anti-Money Laundering) Levy, which the Government estimate will raise approximately £100 million per year
to help to fund anti-money laundering and economic crime reforms. SNP Members are concerned that this part of the Bill is not well targeted and could potentially act as an additional tax on businesses that are not breaking the rules. For example, the Association of British Insurers is concerned that insurers will be disproportionately hit, because they present very little risk to the Treasury of tax avoidance and money laundering. The Chartered Institute of Taxation has expressed concern that smaller tax adviser firms may be driven from the market because of the increasing costs and reducing choices for consumers. It has also said that the measure could increase the tax gap by incentivising de-professionalisation. If it becomes too costly for firms to meet compliance, they may just choose to de-register from professional bodies altogether. De-professionalisation can result in less ethical behaviour and increased costs of supervision by HMRC, neither of which is particularly in keeping with the aims of this legislation. I understand that more than 32,000 firms are already supervised directly by HMRC, and the staffing to cover that does not nearly match the size of the job.
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On top of that, we have not received any guarantee that the funds raised by the levy will go into future schemes to tackle economic crime. That is why the SNP has tabled new clause 12, which would require an assessment of the impact of the economic crime levy on the tax gap and on opportunities for tax avoidance, evasion and other economic crimes, similar to Labour’s new clause 5 and new clause 15 from the right hon. Member for Barking (Dame Margaret Hodge).
New clause 12 would force the UK Government into being transparent about how effective the policy is, and effectiveness is important, because the disparity between the scale of the task at hand and the money being put to it was set out clearly in evidence at the Treasury Committee on Monday. I fear that the economic crime levy will not make the difference that the Chancellor and others are claiming it will, so I say to them that this is their opportunity to prove us wrong. The difficulty with a lot of this is enforcement. The Government regularly introduce rules and legislation that do not have the enforcement powers. The reason that the tax gap is so big in the first place is that our tax system has, with all this legislation, become so complex and unwieldy that it provides loopholes and places for crime to flourish.
Economic crime has a devastating impact on our economy, with the National Crime Agency estimating that money laundering costs the UK over £100 billion every year. The amount that the Government seek to put to it seems small by comparison. It is a big business, and it requires a more concerted approach. Reports from the Intelligence and Security Committee and the Foreign Affairs Committee have shown that the consequences of this problem are not solely financial. The flow of dirty money into the UK impacts our national security and the integrity of our democracy. Trust in public institutions is incredibly low, and the UK Government are helping to facilitate that by providing places for criminal elements to hide without any real sanction.
A good place to start would be reform of Companies House. I sat on the Joint Committee on the Draft Registration of Overseas Entities Bill, where we looked at the legislation that the Government were proposing.
One of the recommendations in that cross-party, cross-House report was better veracity of the information that Companies House collects. All it is is a register. It is not required to check what information comes in, or to ensure that the information is correct or accurate. It is not an anti-money laundering supervisor either, so that information does not have any consequence.
I have raised this matter time and time again. Companies House does not have the resources it requires to monitor the integrity of the data submitted to it. That allows criminals to incorporate companies using false or fraudulent information without any meaningful enforcement of the rules. Thousands of companies are either not complying with the rules or are filing entries that look highly suspicious, even to a layperson like me. For example, I understand that 4,000 beneficial owners in the persons with significant control register are listed as being under the age of two. That is fairly unlikely, I should think. Only five beneficial owners control more than 6,000 companies. Again, that is very suspicious. If Companies House was an anti-money laundering supervisor, and was required to verify that information, that number would almost certainly reduce.
If the Treasury was serious about economic crime, it would be taking action, rather than batting the issue back between itself and the Department for Business, Energy and Industrial Strategy. While at some point the Minister may point out that the number of SLPs that have not registered a person with significant control has fallen since the Government changed the rules, that does not mean the problem is fixed. There are a number of zombie SLPs on the Companies House register and there is a wider international aspect to this, too. Colm Keena of The Irish Times has written recently about the surprising and sudden increase in registrations of Irish limited partnerships, which are similar to those in Scotland. Some of whom are then listed as having SLPs as their owners. It becomes very difficult to find out who actually controls the company. Tightening up in one area without recognising that the problem will shift to the next place does not tackle the problem and, worse, the UK Government are giving those who would use such vehicles plenty of time to move their funds somewhere else. In the Registration of Overseas Entities Committee, we had information that the next place to look was trusts. If we close down something here, it will move somewhere else, but the Government are not looking ahead enough to tackle and anticipate that.
Clauses 84 to 92 give HMRC powers on publishing information on individuals who promote tax avoidance schemes, such as the freezing of assets, the closing down of companies and information sharing, and a new penalty on UK entities that support offshore promotors of tax avoidance. On Second Reading, I was clear that the SNP supports that in principle and has no problem with it, but I urge a note of caution. Industry experts have been in touch with concerns that the measures would go further than stated by the Government, and that the criteria for an individual to be named and shamed are perhaps too weak. An officer needs only to suspect that a scheme falls within the provisions to potentially ruin a company’s reputation in the long term. The measure needs to have checks and balances.
I also asked for some assurances on how the scheme would be resourced. TaxWatch has expressed its concern that HMRC simply does not have the capacity to take
on the job of more enforcement. As I understand from reports in the press, it already faces a considerable backlog of cases built up during the last 18 months, together with an eye-watering caseload of potential furlough fraud to investigate. To adequately enforce the rules on tax crime, it will need significant extra resources. I am sure that many hon. Members would want me to mention that the closing down of local tax offices across the UK means that some of that local knowledge, where somebody could detect tax fraud because they knew the area and who they were dealing with, has gone, which makes it more difficult for enforcement to be carried out locally. CIOT has said that the general feeling among tax professionals is that,
“HMRC frequently ask for new powers while not making full use of those they already have.”
The Bill threatens to increase the burden without any real guarantee of how the tax gap will be narrowed in return.
It would be an understatement to say that I am not convinced of the merits of this part of the policy. We need more detail from the Minister on how it will operate. The SNP has tabled another clause that places a reporting obligation on the UK Government. For those who do not understand how finance Bills work, we are very limited in the scope of amendments that we can table to such Bills so they often ask for a report or further information and detail. Those are the limitations of the Bill, but we do what we can within those limitations and we always hope that the Government will at least take that on board.
On the loan charge, which my hon. Friend the Member for Glenrothes (Peter Grant) raised on Second Reading, we want to see more about the promoters of the loan charge being brought to book. Sometimes, the victims did not have the full information that they should have had; sometimes, they were forced to be involved by the person who wished to hire them. We need to make sure that those promoters are brought to book.
New clause 13 would require an assessment of the impact of the provisions in clauses 84 to 92 on the tax gap. Again, we are making a reasonable request for the Government to assess the impact of their policies. It is not a radical or outrageous proposition and I would be disappointed if Labour Members did not support it.
Tackling economic crime is an area where the Labour party and the SNP can find a lot of common ground. I pay tribute to the right hon. Member for Barking, her all-party parliamentary group and all her work on the issue. The hon. Member for Ealing North (James Murray) made a useful point on Second Reading that the Government’s priority must be
“putting in place a public register of the beneficial owners of overseas entities that own UK property.”—[Official Report, 16 November 2021; Vol. 703, c. 501.]
It is nothing short of a disgrace that the Tories still refuse to create a publicly accessible register of overseas entities that own UK property. As he set out, that proposal has been ongoing for more than five years. There is no excuse for the Government not to have done more.
Research from Transparency International recently identified over £5 billion-worth of UK property bought with suspicious wealth. The UK property market is rife with corrupt and criminal transactions. It is the destination of choice for global money launderers, and the Government
have turned a blind eye again and again. We made suggestions in good faith on the registration of overseas entities Bill in pre-legislative scrutiny. The Economic Secretary to the Treasury said at the Treasury Committee on Monday that this was an “urgent” issue. It does not feel very urgent to us—not in the slightest—when this issue is left to drift for so long.
That is why our new clause 14 would require the Government to consider the impact of publishing a register of overseas property ownership. Such a register could prevent corrupt actors from being able to purchase UK property in secrecy under the cover of a company. That could be an SLP, a trust or some other vehicle for that purpose. The Government committed to that in the economic crime plan and said, as recently as 2 November, that they still intend to go ahead with this, but we have not seen it. The Bill is there. It is ready to go. They say that they will bring it forward whenever parliamentary time allows, but we all know what that means. We know that that is a way of kicking the can down the road and that there is no urgency to that. We will believe this Bill when we see it.
If the Government are serious about this, they will bring the Bill forward now. They control the time; they are the Government; they alone can do this. The delay can only lead one to wonder who benefits from it: could it be the same oligarchs who fill the coffers of the Conservative party?