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General Committees

Debated on Monday 22 November 2021

Delegated Legislation Committee

Draft Local Audit (Appointing Person) (Amendment) Regulations 2021

The Committee consisted of the following Members:

Chair: David Mundell

† Badenoch, Kemi (Minister for Levelling Up Communities)

† Bell, Aaron (Newcastle-under-Lyme) (Con)

Betts, Mr Clive (Sheffield South East) (Lab)

† Bowie, Andrew (West Aberdeenshire and Kincardine) (Con)

† Bristow, Paul (Peterborough) (Con)

Carden, Dan (Liverpool, Walton) (Lab)

† Drax, Richard (South Dorset) (Con)

† Heald, Sir Oliver (North East Hertfordshire) (Con)

† Higginbotham, Antony (Burnley) (Con)

McKinnell, Catherine (Newcastle upon Tyne North) (Lab)

† Mann, Scott (Lord Commissioner of Her Majesty's Treasury)

Mishra, Navendu (Stockport) (Lab)

† Owen, Sarah (Luton North) (Lab)

† Richardson, Angela (Guildford) (Con)

† Smith, Jeff (Manchester, Withington) (Lab)

† Smith, Royston (Southampton, Itchen) (Con)

Liam Laurence Smith, Committee Clerk

† attended the Committee

First Delegated Legislation Committee

Monday 22 November 2021

[David Mundell in the Chair]

Draft Local Audit (Appointing Person) (Amendment) Regulations 2021

Before we begin, I encourage Members to wear masks when they are not speaking, in line with current Government guidance and that of the House of Commons Commission. Please also give each other and members of staff space when seated, and when entering and leaving the room. Members should spend their speaking notes by email to hansardnotes@parliament.uk. Similarly, any officials in the Gallery should communicate electronically with the Minister.

I beg to move,

That the Committee has considered the draft Local Audit (Appointing Person) (Amendment) Regulations 2021.

It is a pleasure to serve under your chairmanship, Mr Mundell. The regulations we are considering today were laid in draft form before the House on 21 October 2021. If approved and made, they will provide for the appointing person to set fee scales for local audit later in the financial year; apply standardised fee variations in specific circumstances; and appoint auditors for shorter contract periods, where appropriate. These regulations are designed to provide the appointing person with greater flexibility to ensure the costs to audit firms of additional work are met, and to reduce the need for time-consuming case-by-case consideration of fee variation requests in order to support the timely completion of local audits.

The Local Audit and Accountability Act 2014 enables the Secretary of State to make regulations through secondary legislation. This statutory instrument was laid before Parliament under the affirmative resolution procedure. The 2014 Act placed responsibility on local bodies to appoint their own auditors. However, that Act also provided for an “appointing person”, specified by the Secretary of State, to appoint auditors on behalf of local bodies that choose to opt into such arrangements. Public Sector Audit Appointments Ltd is a subsidiary of the Local Government Association, and it is the body currently appointed to perform that role.

In September 2020, Sir Tony Redmond published his independent review into the effectiveness of external audit and the transparency of financial reporting in local authorities. The Redmond review found that there was an increasing disparity between the fee scales set by the PSAA and the amount of work being carried out by auditors. In turn, that had led to a large increase in the amount of fee variation requests, which are requests from auditors to charge additional fees beyond those provided for in the fee scales set by the PSAA for each audit year. The Local Audit (Appointing Person) Regulations 2015 provide for fee variations relating to the audit of a particular authority to be considered by the PSAA. In practice, this means that the PSAA can only consider and approve fee variations on a case-by-case basis.

In their response to the Redmond review, the Government committed to reviewing regulations to provide the PSAA with greater flexibility to ensure the costs to audit firms of additional work were met more easily. To provide that flexibility, earlier this year the Government consulted on potential amendments to the 2015 regulations. The overwhelming majority of respondents to the consultation agreed with the Government’s proposals, which we now propose as the following amendments to the 2015 regulations. First, this statutory instrument will amend the regulatory deadline for the PSAA to set fee scales, from before the start of the financial year to 30 November of the financial year to which the fee scales relate. This will enable the PSAA to take into account more up-to-date information when setting fee scales, including results from previous audits. More accurate fee scales should help to reduce the number of instances in which fee variations are required.

Secondly, this statutory instrument will enable the PSAA to set standardised fee variations to be applied to all local bodies or groups of local bodies. This change is designed to streamline the fee variation process where a particular issue has had a similar impact on the audit of large numbers of local bodies. Circumstances in which this may apply could include a regulatory or policy change, such as a change to accounting or auditing codes, or even one-off events that have a national or far-reaching impact, as we have experienced recently with the coronavirus pandemic. In those circumstances, the PSAA will be able to apply a standardised fee to all affected bodies, preventing the auditor from having to submit a fee variation request for each individual body. The PSAA will be required to consult both opted-in local bodies and local auditors before setting standardised fee variations.

Thirdly, this statutory instrument will give the PSAA the flexibility to appoint auditors for one or more financial years at time, up to a maximum of five consecutive years. That could include years that precede the date to which the authority opts in, if those years still have an audit outstanding. Under existing regulations, the PSAA is required to appoint an auditor to that authority for the remainder of the compulsory appointing period, which could be up to five years, depending at what point in the appointing period the authority elects to opt in.

In conclusion, these amendments will help to support the stability of the local audit market by making it easier for firms to claim for the costs of work completed. Alongside this, we continue to implement all the recommendations we committed to in our response to the Redmond review, including the regulations we are discussing today. I hope that colleagues will join me in supporting the draft regulations, and I commend them to the Committee.

It is a pleasure to see you in the Chair, Mr Mundell, and you will be pleased to know that I intend to be brief in my remarks.

I thank the Minister for her introduction, and I thank the officials who talked me through the regulations last week. The Opposition recognise that the 2020 review by Sir Tony Redmond found concerns about the state of the local audit market and made a number of recommendations to address that, and that this statutory instrument is a result of those recommendations. We also recognise the importance of effective audit procedures so that stakeholders, and ultimately residents and voters, can hold local authorities to account for their performance, so we will not be opposing the statutory instrument.

We note that a large majority of respondents to the Government’s consultation, including stakeholders and local authorities, were supportive of the proposals, and so is the Local Government Association. The LGA agrees with the idea of a framework of set-scale fees rather than a large number of variations within a year, and there is general support for the flexibilities in relation to audit timescales and the period of appointments, so we will be agreeing with those proposals.

I have two questions for the Minister. First, I am aware that the Government have earmarked £15 million in extra resources for local authorities to deal with the potential extra costs of audit this year. That funding needs to be ongoing. Can the Minister give any indication about whether the Government plan to roll it over into future years?

Secondly, this is only one part of the response to Sir Tony Redmond’s review. There were a number of other recommendations, not all of which have been as well supported or as unanimously accepted as the proposals that we are debating. Some are quite significant issues, such as a new regulatory body for audit. I know that the Government were supposed to respond to the big parts of the review earlier this year. I may have missed it, but I have not seen that response. Can the Minister give us an indication of the full details of the Government’s response to those major issues, or of the timescale to achieve the vision set out in the review?

Finally, these regulations may well result in cases of fee increases for audit. It is essential that local authorities are able to carry out their functions, such as audit, properly. I acknowledge the £15 million for this year, but we really need our councils to be properly funded for the long term. We have now had 10 years of underfunding of local authorities, and it is the area of government that has been hit hardest—first by austerity and now, under huge challenge, by the pandemic. It is not just local services for residents that have been hit, but the ability of local councils to carry out their essential functions properly. We really need the Government to recognise that, and at long last to start funding our councils properly.

I thank the shadow Minister for his comments. Members on both sides of the Committee clearly agree that timely completion of audits is vital in maintaining the transparency and assurance of local authority accounts. Late delivery of local assurance can have a significant impact on not just local authority financial planning, but the timely completion of whole of Government accounts. That is why we continue to implement all the recommendations that we committed to in our response to the Redmond review, including the draft regulations.

To answer the shadow Minister’s first question, this was before my time, but my understanding is that we have provided a response to the Redmond review. The shadow Minister raised the question of ongoing funding, for which I have not seen any specific request directly. That is, obviously, not something that I can commit to in Committee. We look at all decisions requiring financing in the round, and authorities would need to make representations for that. Given the pandemic and what various authorities and auditing groups have had to deal with, I think that funding is appropriate, certainly at this point in time.

A new regulatory body was a really interesting recommendation. In our spring report, we set out our intention to establish the audit, reporting and governance authority—a new regulator to replace the Financial Reporting Council as a system leader for local audit within a simplified global audit framework. That is where we feel we can meet that recommendation, not exactly to the letter with the office of local audit and regulation that I believe was the initial recommendation.

I am happy to follow up in writing if the shadow Minister has any further questions, but I do not have any more comments. I hope that the Committee will join me in supporting the draft regulations.

Question put and agreed to.

Committee rose.

Draft Eggs (England) Regulations 2021

The Committee consisted of the following Members:

Chair: Mrs Sheryll Murray

† Abrahams, Debbie (Oldham East and Saddleworth) (Lab)

† Afriyie, Adam (Windsor) (Con)

† Cairns, Alun (Vale of Glamorgan) (Con)

† Clarke, Theo (Stafford) (Con)

Duffield, Rosie (Canterbury) (Lab)

Gardiner, Barry (Brent North) (Lab)

† Jones, Fay (Brecon and Radnorshire) (Con)

† Kearns, Alicia (Rutland and Melton) (Con)

† Moore, Robbie (Keighley) (Con)

† Prentis, Victoria (Minister of State, Department for Environment, Food and Rural Affairs)

Spellar, John (Warley) (Lab)

† Tami, Mark (Alyn and Deeside) (Lab)

† Timms, Stephen (East Ham) (Lab)

† Webb, Suzanne (Stourbridge) (Con)

† Wheeler, Mrs Heather (South Derbyshire) (Con)

† Williams, Craig (Montgomeryshire) (Con)

† Zeichner, Daniel (Cambridge) (Lab)

Huw Yardley, Stella-Maria Gabriel, Committee Clerks

† attended the Committee

Second Delegated Legislation Committee

Monday 22 November 2021

[Mrs Sheryll Murray in the Chair]

Draft Eggs (England) Regulations 2021

Before we begin, I remind Members that they are expected to wear a face covering and to maintain social distancing as far as possible. That is in line with Government guidance and that of the House of Commons Commission. Please give each other and members of staff space when seated and when entering and leaving the room. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. That can be done either at the testing centre on the estate or at home. Members should send their speaking notes by email to hansardnotes@parliament.uk. Similarly, officials in the Public Gallery should communicate electronically with Ministers.

I beg to move,

That the Committee has considered the draft Eggs (England) Regulations 2021.

The draft regulations were laid—that is the end of my jokes—before this House on 19 October.

This draft statutory instrument has been laid to allow marketing standards checks on class A eggs imported from third countries to continue to be conducted at the locations where they already take place. That is in accordance with current practice and, indeed, practice over the past 30 years or so. The instrument is needed because, without amendment, the retained regulation on egg marketing standards will require those checks to be relocated, causing disruption to the inspection process and requiring considerable additional resources, with no material benefit to anyone, frankly. The instrument will have effect only in England. Both the Scottish and Welsh Governments will make the same amendment to their own domestic legislation.

Marketing standards are intended to ensure that the market is supplied with products of satisfactory quality to meet consumer expectations. They are in addition to, and completely separate from, safety—or sanitary—standards. Sanitary standards will continue to be checked at the border, as they are at the moment. The amendment to be made by this draft instrument is not a change of policy and simply continues the existing arrangements for the marketing standards checks.

Through the functioning of the Northern Ireland protocol, regulation 589/2008 on egg marketing standards —which Great Britain has retained—will continue to apply to Northern Ireland, as it has effect in the EU. Therefore, the current checking arrangements for the movement of third-country class A eggs into Northern Ireland will not change.

For class A eggs to be imported into GB from a third country, the Secretary of State must determine whether the third country has equivalent egg marketing standards. Only European Union member states are currently recognised as producing eggs to that equivalent standard. I should add that we do not export or import a vast number of eggs—that accounts for about 10% of the egg market in England.

In the future, however, should things change and should we wish to import eggs from any third countries other than those in the EU, the Secretary of State must first make a similar determination of equivalence. Until then, class A eggs may not be imported into GB from non-EU countries. I reassure the Committee that that is really not an issue at the moment, because we do not import eggs from non-EU countries. We will continue to uphold the high standards expected by UK consumers.

The change contained in this draft SI been discussed with British egg industry stakeholders, and we held a joint consultation with the Scottish and Welsh Governments. I ask the Committee to approve the regulations.

It is a pleasure to serve with you in the Chair, Mrs Murray. I thank the Minister for her full and clear introduction, as ever.

As we belatedly start to introduce checks on goods coming from the EU, the issue of where and when checks will be made will, I imagine, be an issue that will crop up for many goods. Today, however, we are talking about eggs. We are advised that class A eggs are not currently imported from outside the European Union, so in practice this applies only to eggs from the EU. However, as the Minister said, the provision could potentially be extended in future. There is, of course, the ongoing issue of Northern Ireland to consider.

I was struck by the questions raised by the Secondary Legislation Scrutiny Committee’s report, following which there are a number of issues that I hope the Minister can clear up. Returning to the well-worn subject of arrangements on the Northern Ireland border, the Department for Environment, Food and Rural Affairs has said in response to a question from the Secondary Legislation Scrutiny Committee that eggs from Northern Ireland will continue to have unfettered access to Great Britain, which is as one would expect. It is not clear to me entirely how many eggs are going backwards and forward anyway. I am told by experts that most countries like to produce their own eggs. I therefore imagine that most in the island of Ireland are produced and consumed there.

I commend the quarterly egg statistics—which make for fascinating reading—maintained and published by DEFRA. Looking at those, it seems as if the numbers in Northern Ireland egg packing stations—about one sixth of the UK total—tell a slightly different story. Will the Minister tell us how many eggs that are produced in Great Britain are shipped to NI and could she confirm that they will be checked at the border, as stated in DEFRA’s response to the Secondary Legislation Scrutiny Committee? How much time is needed for those checks, and what is the estimated cost?

I would also be grateful if the Minister could provide some insight into how the current negotiations on the NI protocol between Lord Frost and the EU might impact on the future importation of eggs from Great Britain into Northern Ireland. I suspect she may not wish to comment on that.

Appendix 4 of the SLSC’s report shows that the Committee raised with DEFRA its concerns that the majority of respondents to DEFRA’s initial consultation were actually against the proposals in this instrument. Indeed, paragraphs 10.4 and 10.5 of the explanatory memorandum helpfully explain that over 80% of those consulted opposed the proposal and that the answer to this clear expression of interest was that

“a round table will be scheduled”.

Presumably a roundtable was scheduled to explain to them why they were wrong.

Looking at the response to the SLSC report, the roundtable seems to have been held on 24 September, where it was argued that this instrument will allow the Animal and Plant Health Agency to carry on randomly checking for both domestic and imported eggs at warehouses, distribution centres and packing centres and that if egg inspections were conducted at the border, inspectors would be unable to maintain their normal rate of inspection. That sounds basically like a cost argument to me. DEFRA helpfully says:

“It is likely that inspectors would be unable to maintain their normal rate of inspections on… imported eggs.”

In other words: “We won’t check at the border, because that requires extra resource.” However, checking at the border may help to stop potential future fraud, and that would be worth doing.

It seems to me that when the Government promise no imports of goods imported at lower standards, that is a promise based on trust, not checking. Somehow we will trust that others would not be so unsporting as to send us lower-standard goods, because we trust them not to. That sounds pretty weak, which may be why some in the industry are not entirely convinced.

The Opposition will not oppose today’s regulations, but it seems that we are opening ourselves up to a situation where other countries check our goods going into their country, but we just wave stuff through. It is an open invitation to fraud, and it is very tough on our producers, who face much tougher checks than their competitors.

Finally, we have had correspondence with a representative from the egg industry, who raised the issue of costs. Will the Minister please confirm that the costs associated with checking eggs at packing centres will not be borne by the egg industry?

Today’s debate should guarantee our high animal welfare, food safety and marketing standards, and I share the concerns of industry stakeholders that DEFRA has failed to provide sufficient reassurance that these proposals will uphold those standards.

I am very happy to respond to the hon. Gentleman’s points. However, I do not currently know the exact number of eggs that are shipped to Northern Ireland, so I am happy to write to him on that specific point. The key issue, for the purposes of the draft SI, is that the current checking arrangements for Northern Ireland will continue to apply; there will be no change, at all, to the way that that works.

As I said earlier, compared with the entire industry, the number of eggs we import is relatively small, at about 10%; we also export a certain number. The numbers fluctuate a bit but, as the hon. Gentleman said, British consumers prefer to eat locally produced eggs—I suspect that consumers across the rest of the world do, too.

In the consultation, the reason why the stakeholders initially objected to the change was that, of course, the British egg industry is very ambitious and wants to produce more eggs, so that we do not import any at all. That was very much the tenor of the conversation that the Department had with industry. I am glad to say that the roundtable, which was held to talk through concerns raised, went very well, and my officials were able to allay industry’s concerns. In summary, the read-out from the roundtable was that, while domestic producers felt that eggs should be checked at the border, egg marketing inspectors from APHA were able to explain that additional resources would be needed to do this, which might necessarily divert resources from other functions.

I hear what the Minister says and I am reassured. However, from conversations with people in the egg industry my sense is that they are deeply concerned about the threat of lower-cost producers being able to undercut them. I am told that there is something like a 16% cost advantage from other egg producers in Europe. Should we not be concerned about that?

No, we certainly should not. If we pass this SI, APHA will continue to undertake risk assessment checks, both on domestic and imported goods. Other checks happen already, such as the sanitary checks—the safety checks—that happen at the border, as I mentioned earlier. The Food Standards Agency is also able to make checks on safety at the retail or processing end—that is normally where those checks take place. British consumers, and the British egg industry, should be under no illusion at all that imported and domestic eggs will not continue to be properly checked to ensure that they come up to our rightly high standards.

During the course of the roundtable, we also explained that imported eggs will be subject to exactly the same checks as domestic eggs, and that we will not import eggs from third countries until a full assessment has been made. Truthfully, we do not feel that is likely to be necessary or, indeed, to happen.

I hope that hon. Members fully understand the need for this statutory instrument, which ensures that marketing standard checks on class A eggs continue to happen in the locations where they take place today. This SI should avoid any disruption to the level of checks that currently take place and will allow egg marketing inspectors to continue to uphold our high standards. I therefore commend these regulations to the House.

Question put and agreed to.

Committee rose.

Money Laundering and Terrorist Financing (Amendment) (No. 3) (High-Risk Countries) Regulations 2021

The Committee consisted of the following Members:

Chair: Julie Elliott

† Afolami, Bim (Hitchin and Harpenden) (Con)

† Browne, Anthony (South Cambridgeshire) (Con)

Bryant, Chris (Rhondda) (Lab)

† Butler, Rob (Aylesbury) (Con)

† Costa, Alberto (South Leicestershire) (Con)

† Davies, Gareth (Grantham and Stamford) (Con)

† Efford, Clive (Eltham) (Lab)

† Hammond, Stephen (Wimbledon) (Con)

† Hunt, Jane (Loughborough) (Con)

† Jenkinson, Mark (Workington) (Con)

† McFadden, Mr Pat (Wolverhampton South East) (Lab)

McDonagh, Siobhain (Mitcham and Morden) (Lab)

† Mak, Alan (Lord Commissioner of Her Majesty's Treasury)

† Newlands, Gavin (Paisley and Renfrewshire North) (SNP)

† Twist, Liz (Blaydon) (Lab)

† Whately, Helen (Exchequer Secretary to the Treasury)

† Whittome, Nadia (Nottingham East) (Lab)

Chloe Freeman, Committee Clerk

† attended the Committee

Third Delegated Legislation Committee

Monday 22 November 2021

[Julie Elliott in the Chair]

Money Laundering and Terrorist Financing (Amendment) (No. 3) (High-Risk Countries) Regulations 2021

I remind Members that they are expected to wear face masks, in line with Government guidance and that of the House of Commons Commission, and to give colleagues space for social distancing when leaving the room.

I beg to move,

That the Committee has considered the Money Laundering and Terrorist Financing (Amendment) (No. 3) (High-Risk Countries) Regulations 2021 (S.I. 2021, No. 1218).

It is a pleasure to serve under your chairmanship, Ms Elliott.

This Government recognise the threat that economic crime poses to the UK, and we are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic costs through its links to serious and organised crime. It is a threat to our national security and risks damaging our international reputation as a fair, open and rules-based economy. It also undermines the integrity and stability of our financial sector, and can reduce opportunities for legitimate business in the UK. That is why we are taking significant action to combat economic crime, from introducing the economic crime levy to progressing the Government’s landmark economic crime plan. We are also working closely with the private sector and our international partners to improve the investigation of economic crime, strengthen international standards on corporate transparency, and crack down on illicit financial flows.

The money laundering regulations support our overall efforts. As the UK’s core legislation framework for tackling money laundering and terrorist financing, they set out various measures that businesses must take to protect the UK from hostile actors. Under the regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. Those countries have strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes and could pose a significant threat to the UK’s financial system.

The statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries to mirror lists published by the Financial Action Task Force, the global standard setter for anti-money laundering and counter-terrorist financing. As the Financial Action Task Force carries out its periodic reviews and regularly updates its public lists of jurisdictions with strategic deficiencies, we also need to update our own. Updating our lists shows that we are responsive to the latest economic crime threats and ensures that the UK remains at the forefront of global standards on anti-money laundering and counter-terrorist financing.

The amendment will enable the money laundering regulations to continue to work as effectively as possible to protect the UK financial system. It is crucial to the protection of our national security and the UK’s international reputation, and will secure businesses and the financial system from money launderers and terrorist financers. I hope that colleagues will join me in supporting this legislation.

It is a pleasure to have your chairing our proceedings, Ms Elliott. I thank the Minister for her explanation.

We debate these money laundering regulations quite regularly—as FATF changes its list, countries are added and removed. This particular statutory instrument removes Botswana and Mauritius from the list of high-risk countries, but adds Turkey, Jordan and Mali, which are now classed as high-risk countries that require extra due diligence.

As the Minister said, those changes are based on periodic FATF reports. I refer to the Treasury’s own response to the FATF report, which states in paragraph 1.6:

“Whilst the UK achieved a high rating, the FATF assessed the UK’s supervision regime to be only moderately effective. Specifically, it found that there were significant weaknesses in the risk-based approach to supervision among all the UK AML/CTF supervisors, with the exception of the Gambling Commission.”

My first question to the Minister is, what has been done since the Treasury accepted that there were significant weaknesses in our approach? The same document states:

“For the accountancy and legal sectors, weaknesses in supervision and sanctions are a significant issue which the UK has put steps in place to address.”

I would be grateful if the Minister could update us on that. It matters for a number of reasons. The UK has a particular responsibility with regard to money laundering and terrorist financing because of the size of our financial services sector. It is a big advantage for the country to have a financial services sector with such global reach, but that means that it can be attractive to those who make their money through illicit means as well as legitimate ones.

Since we debated the last such statutory instrument some months ago, we have had the publication of the Pandora papers. They set out a familiar story of the UK and its overseas territories—one or two of which are mentioned in the list we are debating—being used as a vehicle for hiding finance and concealing ownership. I would like the Minister to tell us where we are on some of the promised measures on that. For example, where is the registration of overseas entities Bill, which has been promised for years? In fact, 10 December marks the fourth birthday of the promise of that legislation. Where is it? Where is the reform to empower Companies House to do more checks on who the owners and directors of companies actually are? Where is the implementation of the recommendations in the Intelligence and Security Committee’s Russia report? What do the Government propose to do to ensure that donations to political parties are not the proceeds of kleptocracy?

Talking of individual countries, why is Russia not on the list we are discussing? Is it really the Government’s position that Turkey and Jordan, to take two random examples, are places that require extra due diligence for financial investments, but Russia is not? Similarly, in recent months there has been major change in Afghanistan, but it is not on the list. Why not? What assessment have the Government made of the risk of terrorist financing as a result of the Taliban takeover of Afghanistan? I would be grateful for a response to those questions.

Obviously, we will not oppose this statutory instrument, but it would be absurd to think that all we need to do is mirror the FATF list to have adequate defences on anti-money laundering. It is crucial for our financial system that we act to expose the nature of hidden asset ownership and empower Companies House and others to crack down on illicit finance. Right now, those promises are not being put into practice.

It is a pleasure to serve under your chairmanship, Ms Elliot. I look forward to the answers to the questions from the right hon. Member for Wolverhampton South East. He always makes my presence entirely superfluous with his range of questions, two of which I was going to ask the Minister. I look forward to her response.

We will also not oppose the changes proposed, but we expect the Government to continue to monitor the situation in those countries to ensure banks do not unduly take Government-sanctioned high risks. In fact, it is beyond farcical that they list one of their own territories alongside Iran, Syria and the three countries added to the list today.

Terrorist finance—I will not stray too far into this—is not the only risk in financial services. The Companies House reform consultation is not due to end until February. We have been saying for many years that the UK Government must introduce a robust and transparent system of company registration in order to combat money launderers’ attempts to register entities for illicit purposes. The UK Government must act to tackle the ongoing improper use of Scottish limited partnerships—SLPs—via the proper reform of Companies House. The only question that remains for me to ask is when the Government expect to bring forward proposals to ensure that the register is accurate and covers these beneficial ownerships?

I will briefly pick up on some of the points made by hon. Members and address their questions as much as I can. I appreciate the overall support for the regulations.

The top-line point is that the Government are committed to making the UK a hostile place for illicit finance and economic crime. The Financial Action Task Force found that the UK has one of the strongest systems in the world for combating money laundering. To that end, in our ongoing action against economic crime, we have committed new investments of £18 million in 2022-23 and £12 million per year in 2023-24 and 2024-25 for economic crime reforms, in addition to £63 million across the spending review period for Companies House reform and the introduction of the economic crime anti-money laundering levy, which will raise approximately £100 million a year from 2023-24 to tackle money laundering and fund economic crime initiatives. We are in the process of legislating for that in the Finance Bill.

The shadow Minister asked about overseas territories. The Government have worked closely with the Crown dependencies and overseas territories to combat the risk of money laundering. They share confidential information on company beneficial ownership and tax information with UK law enforcement bodies under the exchange of notes arrangements and have agreed to introduce publicly accessible registers of company beneficial ownership.

We have already set out plans to reform Companies House and strengthen the UK’s ability to combat economic crime. Those reforms are significant and will deliver, alongside broader reforms clamping down on the misuse of corporate entities, more reliable information on the companies register via verification of the identity of people who manage, control or set up companies; greater powers for Companies House to query and challenge the information submitted to it; and the removal of technological and legal barriers to allow enhanced cross-checks on corporate data with other public and private sector bodies. As I said, we have already committed an additional £63 million for Companies House reforms.

I emphasise that the register of overseas entities will be one of the first of its kind in the world, which is good news for the UK; it will enhance our already strong reputation as an honest and trusted place to do business. These measures have full Treasury support but are not Treasury-led. I encourage the right hon. Member for Wolverhampton South East to take up the specific timetable for the introduction of that legislation with the Department for Business, Energy and Industrial Strategy.

The high-risk third countries list will now include Jordan, Turkey and Mali, which were listed by the FATF in October 2021. Botswana and Mauritius will no longer be listed because both have completed their FATF action plans and addressed the deficiencies in their anti-money laundering and anti-terrorist financing regimes that had previously been highlighted. Afghanistan is not identified on any of the FATF’s public lists. However, the FATF published a statement expressing concern about the current and evolving money laundering and terrorist financing risk environment in the country. The FATF is closely monitoring the situation and has called on countries to facilitate information sharing with their private sectors on assessing and mitigating any emerging money laundering risks that are identified.

In the absence of any explicit country listing, the money laundering regulations require enhanced checks in all instances where there is a high risk of money laundering or terrorist financing. In implementing this requirement, the regulated sector must consider geographical risks, such as those that exist in Afghanistan, and take into account information from reliable sources, such as the FATF or domestic supervisory and regulatory bodies. UK supervisory bodies, including the Financial Conduct Authority and Her Majesty’s Revenue and Customs, recently issued alerts to highlight the increased risk in Afghanistan. Those alerts inform firms that they must appropriately monitor and assess transactions with Afghanistan to mitigate the risks of being exploited for money laundering or terrorist financing purposes. There are also various targeted financial sanction requirements in place in relation to Afghanistan.

It is the Government’s view that this measure will ensure that UK legislation remains up to date and continues to protect the financial system from the threat posed by jurisdictions with inadequate AML and CTF systems. The measure also keeps the UK in line with international standards on AML and CTF, allowing it to continue playing its full part in the fight against economic crime. I thank hon. Members for joining us for this afternoon’s Committee, and I commend the regulations to the Committee.

The Minister’s closing statement, in a sense, sums up the problem. Yes, this list does keep us in line with the FATF list; nobody is disputing that. My point is that that is not enough. We should be capable of exercising our own judgments.

The Minister says, on Afghanistan, that FATF is looking at it, so we will wait until it looks at it. Surely this country, with a financial sector of such a size and a Treasury as powerful as the one she is a Minister in, is capable of exercising its own judgment about the financial risks in other countries? We took a major decision a few years ago that was all about sovereignty, and here we are franchising out our judgment on high-risk countries to another body and saying that until they come up with a verdict, we will not add any country to this list.

The same goes for Russia. Is the Minister really telling us that the Treasury and the Government do not judge Russia to be as big a risk as the countries on this list? That seems to me to be a judgment that is franchising out our capacity to act on these important issues to another body, in a way that the Government have spent five years telling us they do not want to do any more. My plea to the Minister is to have the confidence to exercise some of her own judgments on such things, because the very size of our financial sector means that we must be far less passive than that.

I am afraid it is not enough to say, on the registration of overseas entities Bill, that I will just have to ask another Department. The lack of urgency is not good enough given the risks posed in these repeated releases of papers. Similarly, the Minister is right that plans have been announced—over and over again—to reform Companies House, but they have not been implemented in a way that would empower that body to be a guardian of propriety, rather than simply a library of data.

The statutory instrument will go through, there is no question about that, but I would say to the Minister that we need a lot more urgency if we are to not just keep up with the FATF list but set an example around the world on how to tackle money laundering and terrorist financing. We should be taking enough pride in our country to want to set an example, rather than simply coming back here every few months to say that we have kept up with the FATF list.

Question put and agreed to.

Committee rose.