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Tax Avoidance and HSBC

Volume 759: debated on Monday 23 February 2015


My Lords, I will now repeat in the form of a Statement the Answer given by my right honourable friend the Chancellor of the Exchequer to an Urgent Question in another place. The Statement is as follows.

“The allegations about tax evasion at HSBC Swiss are extremely serious. They have been the subject of extensive investigation by HMRC. Money has been recovered for the Exchequer and HMRC continues to be in active discussion with our prosecuting authorities. Both the chief executive of HMRC and the Director of Public Prosecutions have confirmed that they have the necessary resources to carry out their work on this. If they need more resources, they will get them.

The House should know, however, that in each and every case the alleged tax evasion—both by individuals and the bank itself—happened before 2006, when the shadow Chancellor was then principal adviser on tax policy and economic affairs to the then Labour Government. The news that the French had got hold of files with the names of the bank accounts became publicly known in 2009, when the shadow Chancellor was sitting on these Benches, in government, and the files were requested and recovered by HMRC before May 2010, when he was a member of the Cabinet. He wrote to me last week asking me five questions about my responsibilities. I will repeat the answers that I have given to each one directly, and in return he can answer the questions about his responsibilities.

First, he asked me about what he called ‘the selective prosecution policy’ pursued by HMRC and a decision made by Ministers. The answer is: yes, it was. The Inland Revenue’s overall approach to prosecuting cases of suspected serious tax fraud was set out in col. 784W on 7 November 2002 by the then Chancellor of the Exchequer, the right honourable Member for Kirkcaldy. It was confirmed again when HMRC was created in 2005, again by the right honourable Member for Kirkcaldy. What I have done is increase resources for tackling tax evasion and, as a result, prosecutions are up fivefold. So I have answered for my responsibility. Perhaps he will answer for his and tell us: did he have a hand in drafting the selective prosecution policy under the last Government?

Secondly, he asked me in his letter when I was first made aware of the HSBC files, what action I took and whether I discussed it with the Prime Minister. I first became aware of the existence of these files in 2009 when a story appeared in the Financial Times. I was the shadow Chancellor at the time, so I could take no action, and I could not discuss it with the then Prime Minister at that time because we were not on speaking terms. So that is what I knew. What did he do, as a Cabinet Minister, when he heard about these revelations, and did he speak to the Prime Minister about them?

Thirdly, he asked why we appointed Stephen Green to the Government. We thought that he would do a good job as Trade Minister—and so did the Labour Party, which welcomed his appointment. But the trade job was not Stephen Green’s first public appointment: that was when he was appointed by the last Government to be not just a member of the then Prime Minister’s business council but its chair, a post he continued to hold after the existence of the HSBC files became public and after HMRC negotiated to receive them. So I have explained why we appointed Stephen Green to our Government: why did he appoint him to his Government?

Fourthly, he asked about discussions with Stephen Green about tax evasion. I can confirm that the Cabinet Secretary and the director-general for ethics at the Cabinet Office carried out the background checks for ministerial appointments that were put in place by the last Government and that Stephen Green’s personal tax affairs were examined by HMRC on behalf of the House of Lords Appointments Commission, again using exactly the last Government’s procedures. Those are the procedures we followed when we appointed Stephen Green. What procedures did he follow?

Finally, he asked me, ‘Why did you sign a deal with the Swiss authorities in 2012?’. He does not need my explanation—listen to the shadow Chief Secretary. This is what he said at the time:

‘We support the agreement signed by the UK and Swiss Governments to secure billions in unpaid tax’.

He is right—billions in unpaid tax never collected under a Labour Government.

Under this Government, tax evasion is at the top of the G8 agenda. We have collected more money, and prosecutions have increased five times over. Ahead of the Budget, I set the Treasury to work on further ways to pursue not just the tax evaders but those providing them with advice. I say to anyone involved in tax evasion, whatever their role: this Government are coming after you. Unlike the last Government, who simply turned a blind eye, this Government are taking action now and will do so again in the weeks ahead. So I am happy to answer any time for our record on tackling tax evasion: now let him account for his”.

My Lords, that concludes the Statement.

My Lords, a highly political Statement from the other place a month or so before the general election I suppose is to be anticipated. But the Chancellor did not answer the questions, and it is for this Minister to answer the questions before this House. Once the information was available of the 1,100 names involved in tax evasion or avoidance, the Chancellor confirmed that the “selective prosecution policy” was a decision of Ministers. There has been one prosecution—I repeat, one prosecution—since then, despite the fact that the Government also gave the assurance to the Public Accounts Committee that at least another dozen would follow. None has. The country will be staggered to discover that the Government are moving at this pace to deal with these issues, particularly when it is known that the French Government have prosecuted a multiple of cases with success. What is our problem?

Secondly, why was the noble Lord, Lord Green, appointed a Member of this House and a member of the Government when the Government already knew the position of these files? It is not, as the Government said, because no Chancellor seeks to get indications of the personal taxation of a Member of this House—we all understand how improper that would be. But it is the role of the noble Lord, Lord Green, as chairman of HSBC during this period that led to the bank being subject to £1.9 billion in fines; that is why we need an explanation of why the Government carried on with this appointment.

Finally, on the question of the deal with the Swiss authorities in 2012 which prevents the UK actively obtaining similar information in the future, why was this declaration signed by the Government? What advice was given about how it would impede the ability of HMRC and the Government to act in the future? The Minister thus far has given no adequate explanation of that.

My Lords, the noble Lord asked about the selective prosecution policy and why further prosecutions have not been taken. In the case of the HSBC people, the French authorities placed restrictions on the way in which we could use the data so that we could pursue only tax evasion, which greatly circumscribed what we could do. That restriction is in the process of being lifted by the French authorities within the last few days, so there is the possibility of going after more people in future.

The noble Lord contrasted our prosecution position with that of France. I am afraid that he is misinformed. In France they are pursuing prosecutions, but, as yet, there have been none. HSBC Geneva has been indicted for money-laundering offences, but the case has yet to proceed to court.

The noble Lord asked about the noble Lord, Lord Green. I have nothing further to say about the procedures followed by him; they were perfectly straightforward and proper. I believe that the noble Lord, Lord Green, may be asked to appear before the Treasury Select Committee in another place—and, if he does, he can be asked questions which may be appropriate to his time as chairman of HSBC.

The noble Lord was very dismissive about the deal with the Swiss authorities that has yielded more than £1 billion. That is £1 billion more than the Labour Government even set about trying to get from people who had bank accounts in Switzerland. Frankly, to be dismissive of it bears no investigation whatever.

Finally, the Government’s pursuit through G8 of the automatic transfer of tax information, which has now been agreed by 90 countries, will mean that the kind of activities that were happening in Switzerland simply will not happen in future, because all transactions and money placed in Swiss bank accounts will automatically be disclosed to the British tax authority.

My Lords, does my noble friend agree that the issue before us is much greater than the particular case that has been raised? The City of London was for long regarded as having the greatest integrity and as one of the most honest financial centres in the world. To this day it plays a large part in the economy of this country. Does he agree that it is absolutely crucial that the integrity and honour of the City of London must be rebuilt? Sadly, it is not only about the case of HSBC and the allegations of money-laundering—incidentally, money-laundering in areas which are clearly criminal, such as the laundering of money from drugs and trafficking. Does he also agree that it is crucial that the Government should pursue their policy of mounting a vigorous attack on those who avoid or escape paying their taxes?

I should like to ask my noble friend two questions, because no doubt he shares with me the view that it is absolutely critical that the City of London should be seen as a centre of honour and not a centre of rather clever dodges to escape the law, both national and international. The first question is whether the suggestions made by my noble friend Lord Macdonald that what we are now seeing adds up to something of a conspiracy does indeed provide proper grounds for prosecution. The second question is whether, in the light of Mr Stuart Gulliver’s response and indeed admission that he himself was a client of the Swiss bank, and that in addition he is now considering the right to receive the great bonuses coming up from the considerable profits of HSBC, it would be sensible for the bank and its shareholders to consider very carefully whether those substantial bonuses should be paid in full. I say that given the record of HSBC not only in this matter but, equally disturbingly, in the heavy fines it has had to pay for being part of the so-called forex scandal earlier last year.

My Lords, before the Minister replies, can he inform the House of how many minutes are available for Back-Benchers?

My Lords, there are 10 minutes for everybody, so let me be brief. I agree with my noble friend in her core view. I have not read in any detail what my noble friend Lord Macdonald has said, but HMRC has made it clear that now that the restrictions on the use of the information from France have been lifted, it is looking closely at that new information and will refer cases to the CPS for prosecution as appropriate. I think that bonuses at HSBC are matters for its board and shareholders.

My Lords, that really was an astonishing and disgraceful Statement. I heard it in the House of Commons, and it was outrageous how the Chancellor tried to portray Labour as the friends of the tax evaders. If that is the case, why is it that £5 million has been given by HSBC to a political party—not the Labour Party but the Tory party? Why is it that there are three Peers who are either members of the board or advisors to HSBC—not Labour Peers but Tory Peers? Perhaps I can remind the Minister that in the July my noble friend Lady Royall and I raised a question about the appointment of the noble Lord, Lord Green of Hurstpierpoint. The noble Lord, Lord Strathclyde, and others pooh-poohed the question and said that there was no need to worry about it. Now we are being told that we did not raise it at the time. I raised it because the noble Lord never turned up at the House, and that is why I dubbed him the Scarlet Pimpernel. He really has to come and face the music about his role as the chair of HSBC.

My Lords, I am sure that the noble Lord, Lord Green, like many other noble Lords, will read the noble Lord’s comments with great interest.

My Lords, does the noble Lord recall that about two weeks ago I raised with him on the Floor of this House the question of the governance of banks and reminded him of the Bank of England’s criticism of the failure of that governance? There can hardly be a better example of the failure of governance than what has happened at HSBC. It is one thing to say that these organisations are so big that they need to be broken but, frankly, they are not so big that they cannot be better managed. The managements of these banks need to provide reports on the quality of their management. They need to give those reports to the Chancellor of the Exchequer so that they can be placed before both Houses and we can keep an eye on these organisations. They are now becoming a disgrace to the public where once they used to be regarded as one of the great strengths of the United Kingdom.

My Lords, the important thing to note is that the problems that we are now looking at—never mind who was in government—arose before the new regulatory regime was in place, before the banking industry itself set up its new standards body, and before there was the kind of scrutiny of what is happening in the banks that there is now. Everyone agrees that there needs to be a change of culture in the banks, including many who are in senior positions in those banks. I agree completely that Parliament has a role to play in calling the banks to account, and I hope that both Houses will continue in it.