How they intend to work with other Governments to ensure that offshore financial centres respect the principles of openness and disclosure with a view to restoring financial stability in international markets.
The Financial Services Secretary to the Treasury (Lord Myners): My Lords, we are witnessing unprecedented turmoil in global financial markets that needs international solutions. Co-operation with international partners is crucial to an effective global response, and to this end we will continue to work with those partners, including the Financial Stability Forum and the G20. Given their role in hosting offshore financial centres, the Crown dependencies and Overseas Territories have an important role to play in this international response.
Lord Wallace of Saltaire: My Lords, I thank the Minister for that Answer. In his Statement yesterday, the Prime Minister promised that he would bring greater transparency to tax havens by including them in the scope of the financial system. Will the Minister confirm that tax haven and offshore financial centre are interchangeable concepts? I know that some Crown dependencies object very strongly to being called tax havens, but actually an offshore financial centre is a place where people put their money in order, among other things, to minimise their tax obligations, and therefore it is a tax haven.
Will he also confirm that half of the OECD-listed financial centres are under Crown sovereignty and that Britain therefore has a particular role to play not only with the Crown dependences but also the Overseas Territories in making sure that transparency and disclosure as promised by the FSB and the FATB are fulfilled?
Lord Myners: My Lords, 10 of the 35 low-tax jurisdictions identified by the OECD are either Crown dependencies or Overseas Territories. We fully support
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The Minister of State, Department of Energy and Climate Change & Department for Environment, Food and Rural Affairs (Lord Hunt of Kings Heath): My Lords, let us hear from my noble friend Lord Barnett first. I am sure that there will be time for both noble Lords to speak.
Lord Barnett: My Lords, will my noble friend give a definition of an offshore financial centre? Under certain definitions, could the United Kingdom be considered to be one of those centres? Some billionaires, and even modest millionaires, come here from time to time and are evading or avoiding tax. Apparently, we are counting how many days a lot of these people spend here. How many people are being counted, and if are they considered to be avoiding or evading tax, do we disclose that fact?
Lord Myners: My Lords, the UK is a world-leading financial centre, but it has not achieved that status for tax effectiveness reasons, and as such is clearly not included by the OECD in its list of territories. In recent years, we have taken steps to tighten up the process to reduce tax evasion, including through the tax and information exchange agreements to which I referred earlier. As a result of information exchanges with major banks, we recently secured more than £400 million of tax repayments, and we believe that there is considerable potential to extend the programme further. We also announced last year further changes to non-domicile status, in particular to ensure that those who stay here for longer than seven years make a fair contribution to British society and the British economy. I cannot quantify tax evasion because by its very nature it is not a figure that is easy to place. However, we are vigilant in our pursuit of tax evasion.
Lord Trimble: My Lords, I noticed that the Minister, in referring to international agencies, did not mention the European Union. May I suggest that he looks closely at the suggestions for added regulation coming from the EU that, if not checked, could have the result of driving all the banks offshore?
Lord Myners: My Lords, we are looking carefully at the recent proposals for tightening the savings directive. Inasmuch as they reduce the risk of money-laundering, reduce the risk of money flowing into counterterrorism and lead to greater tax transparency, we will encourage them, but only on the basis that they do not impose disproportionate, excessive or unnecessary cost on UK financial institutions.
Lord Davies of Coity: My Lords, I am not sure if I should declare this interest, but I will do so for the sake of protection: I am chairman of the All-Party Parliamentary Group for the Cayman Islands, a British Overseas Territory.
Lord Davies of Coity: My Lords, is the Minister aware that the Cayman Islands financial services industry is fully committed to meeting international standards and criteria, that it has put in place the most rigorous regulatory and monitoring regimes and that it has enacted the relevant local legislation and demonstrated its commitment, as well as observing the European directive on bank accounts?
Lord Newby: My Lords, does the Minister agree with President-elect Obama in wanting to crack down on tax havens, including Jersey, Guernsey and the Isle of Man? If so, and if the Government are committed to greater transparency in this area, why has the UK been blocking moves at the UN to upgrade its tax committee to intergovernmental status?
Lord Myners: My Lords, we are committed to ensuring that people meet their tax obligations. Many offshore financial centres play a vital role in international economics that is not solely dependent on the tax status, but we are working with our colleagues in the United Nations, the Financial Action Task Force, the OECD and the EU to increase scrutiny and supervision of offshore financial centres.
Baroness Noakes: My Lords, the original Question was about restoring financial stability in the international markets, but most of the supplementary questions have been about tax havens. Will the Minister explain what tax havens have to do with international financial stability?
The Parliamentary Under-Secretary of State, Home Office (Lord West of Spithead): My Lords, the United Kingdom Border Agency undertook a comprehensive review of the United Kingdoms visa regimes in 2007. The results of this review regarding Macedonia were such that the Government have no plans at present to lift the visa requirements for Macedonian citizens.
Lord Foulkes of Cumnock: My Lords, my noble friend will be aware that, when they were citizens of Yugoslavia, Macedonians could come here without visas and, once they join the European Union, they will be able to come here without visas. In the interim, however, there is an anomaly, causing an adverse effect on both trade and tourism. I plead with the Minister to ignore the bureaucrats brief in front of him, exercise the leadership for which he has become famous and go back to the Home Office and sort this matter out.
Lord West of Spithead: My Lords, I thank my noble friend for the accolade, which, given that we are talking about Macedonia, makes me feel somewhat like Alexander. I would never follow a bureaucrats brief word for word. I have looked at this issue. Whereas when Yugoslavia was a complete nation the rules were different, we have now undertaken this comprehensive review and I am afraid that we do not feel that most of the western Balkan countries meet the requirements for us to allow their citizens to enter this country without visas.
Lord Avebury: My Lords, when the comprehensive review of the visa regime that the Minister mentioned was undertaken by UKBA, we were looking at imposing visas on citizens of three countriesBrazil, Malaysia and Venezuelawho are currently not subject to our visa regime or, I believe, to visa regimes in the European Union. What was the result of that review? Are we taking part in the European Union review of visa regimes in relation to not only Macedonia but also Ukraine? What steps are being taken to harmonise our visa regime with those of the European Union as a whole?
Lord West of Spithead: My Lords, the visa waiver test identified 11 countries on which we propose to introduce new visa regimes, but these were subject to a six-month review, which is ongoing; we will not know the result until 2 January. We have talked to these countries and outlined the issues that we are concerned about: how passports are issued, co-operation on documentation and a whole series of things. We are negotiating with these countries and, if we come to an agreement, we could possibly waive the visa requirement. Of course, we require visas for 110 other countries because we do not believe that they have gone anywhere near meeting those steps and we demand the visa regime to ensure the safety and security of our country.
Lord Pearson of Rannoch: My Lords, how do Her Majestys Government justify the present position whereby not only Macedonians but also citizens of the United States, Australia, Canada and New Zealand need a visa to come to this country, whereas Bulgarian and Romanian gangsters are free to come and go as they wish?
Lord West of Spithead: My Lords, I like to think that SOCA and various other organisations would bowl out various gangsters. As the noble Lord well knows, Bulgaria and Romania are part of the European Union and we have agreements there. People from
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Lord Anderson of Swansea: My Lords, there is evidence from the last elections in Serbia that the younger elements, who cannot travel on Yugoslav passports as their parents did, are the most nationalistic parts of the population. Does my noble friend agree that, if we are serious about integrating the western Balkans as a whole into the European Union, we must ensure that younger people and people generally are able to travel to prepare themselves for entry, which is in our interests and theirs?
Lord West of Spithead: My Lords, the fact that there are visa requirements does not stop youngsters travelling. I agree completely with my noble friend that movement, travel and the ability to visit by youngsters is a very good thing, particularly for those visiting our rather splendid country. It is wonderful for them to be able to see how this nation operates and what happens here. If they take those things back to their country, it is good for us all.
Baroness Hanham: My Lords, does the Minister understand that the difficulty with people coming to this country is that, by and large, they need to be sponsored? Can he say whether the number of employers who are happy to sponsor people to come to work or visit here is sufficient to enable them to do so?
Lord West of Spithead: My Lords, I have spotted that the noble Baroness specialises in asking questions to which I do not know the exact answer. As far as I am aware there are, but I hope that I may get back to her in writing. I was told in the briefing that this would not have an impact on visits and things, but I would like to clarify that to be absolutely certain.
The Financial Services Secretary to the Treasury (Lord Myners): My Lords, in 2003the latest year for which figures are availableit was estimated that the richest 10 per cent of the population owned 53 per cent of the wealth in the United Kingdom.
Lord Sheldon: My Lords, I thank my noble friend for that reply. For a number of years now, many of those with the highest level of income derived from their wealth have, by various means, avoided paying the rates of tax paid by those with much lower incomes. This should not continue indefinitely. But more immediately, why have the Government not made a fairer relationship between normal taxpayers and those with large incomes by introducing tax on a new level of income greater than 40 per cent?
Lord Myners: My Lords, if the noble Baroness, Lady Noakes, will allow me to answer a question relating to tax, the Gini coefficient of wealth distribution shows that a significant widening of inequalities of wealth during the 1980s and early 1990s has reversed somewhat in the current decade. In part, that is a consequence of tax policies, the national minimum wage and benefits. The proportion of tax paid by the wealthy continues to increase. The top 10 per cent of income tax payers pay more than 50 per cent of all income tax proceeds.
Lord Newby: My Lords, does the Minister accept that if you are talking about wealth as opposed to income, the relevant taxes are those on capital? Does he see the merit in having a capital gains tax rate that applied at the same level as income so that the wealthy did not have an incentive to go down a capital gains tax route, which means that they are paying tax at a lower rate than ordinary rate taxpayers?
Lord Myners: My Lords, earlier this year steps were taken to increase the rate of capital gains tax to match it with income tax in respect of the general partners in private equity firms. The Chancellor of the Exchequer gives very careful consideration to tax rates. If he wished to change those rates, he would no doubt do so as part of his Budget Statement.
Lord Inglewood: My Lords, what effect does the Minister consider the recent turmoil in the financial markets will have had on the figures he gave in his initial response to the noble Lord, Lord Sheldon?
Lord Myners: My Lords, that is a difficult question to answer with any precision, but it is likely that the decline in the value of marketable securities, land and property will have had a disproportionate effect on wealthier people.
Lord Pearson of Rannoch: My Lords, would the Minister care to cast any light on the proportion of national wealth enjoyed by the richest 10 per cent in socialist countries? For instance, in the former Soviet Union, was it not rather nearer 90 than 53 per cent?
Lord Myners: My Lords, I am not in a position to give the noble Lord a precise answer to that question. However, according to the OECD, we have seen the most significant move towards wealth and income equality recorded this decade within the OECD countries.
Baroness Gardner of Parkes: My Lords, perhaps the Minister could make clearer for simple people like myself what he meant by disproportionate. Did he mean that the wealthy had suffered more or less than other people under the present financial circumstances?
Lord Desai: My Lords, does not the fact that a severe stock market crash has reduced wealth inequality show that we have a somewhat false way of calculating true wealth? Perhaps we ought to revise our consideration and include houses not at current prices but at the long-run supply price: that would give us a more realistic account of what wealth is. We cannot have wealth being high one day and low the next: that cannot be true economics.
Lord Myners: My Lords, there are limitations to the methods used by the ONS and HMRC for calculating wealth and wealth distribution. They use the Gini coefficient, which is derived from the Lorenz curve. They use probate material that they supplement by modelling adjustments. At the heart of the question of the noble Lord, Lord Desai, is a very acute and correct observation. More importantly, a new wealth and assets survey has been introduced, covering a cohort base of more than 32,000 people, which will measure the progress of their wealth, including assets such as pensions claims. As times goes by, we will get much more reliable data from this new series, on which we will make our first report next year.
The Lord Bishop of Exeter: My Lords, around 13 million people in this country are estimated to be living in poverty. If the Government are going to use any proportion of tax revenue, however raised, to spend their way out of recession, what financial help will be given to those who support those at the poverty end of the wealth-inequality spectrum, such as credit unions and workers co-operatives? What will be done to provide more help for hard-pressed agencies such as the CAB and debt centres, which are so vital at the poverty end of the spectrum, particularly in this economic downturn?
Lord Myners: My Lords, the right reverend Prelate may be seeking to draw me on what might be contained in the Pre-Budget Statement next week. In that, he will fail, because I am not aware of what will be said on issues to do with taxation.
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