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House of Commons

Thursday 7 December 2006

The House met at half-past Ten o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Money Laundering

1. Michael Gove (Surrey Heath) (Con): What estimate he has made of the total amount of money laundered through British businesses and by individuals in each year since 1997-98; and if he will make a statement. [104881]

The Economic Secretary to the Treasury (Ed Balls): It is estimated that the total quantified organised crime market in the UK is worth about £15 billion a year. As a result of actions taken to counter money laundering, we have seized more than £230 million of assets from criminals over the past three years. Last year we recovered a record £97 million.

Michael Gove: The Minister will be aware that when the Permanent Secretary to the Treasury was giving evidence to the Treasury Committee he confirmed that only £500,000 of suspect terrorist funding had been frozen, but the United States has interdicted 400 times that amount. Why has the Treasury’s performance been so poor in that vital regard?

Ed Balls: I am aware of the hon. Gentleman’s interest in those matters and I read his very interesting speech in the debate on the Queen’s Speech a few weeks ago. It is true that we have frozen 192 accounts with some £500,000 of suspected terrorist funds since 2001. That is less than the US, but more than other G7 members, including Canada, France, Germany and Japan. In addition to that £500,000, a further £460,000 cash has been seized under the Terrorism Act 2000, a further £126,000 of assets has been forfeited by those suspected of being involved in terrorism, and the latest figures show that £1.385 million—which is solely terrorist-related money—has been seized under the Proceeds of Crime Act 2002. Across the piece we have been freezing and seizing assets. We have also been acting to ensure that we crack down on terrorist networks. I know that the hon. Gentleman has a great interest in those matters and I believe, as he does, that we should try to achieve a consensus across both sides of the House on the many actions that we are taking to deal with that important issue.

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Jim Cousins (Newcastle upon Tyne, Central) (Lab): Are there not matters that are not only abused by terrorists but by others, which lead to considerable tax losses? Those matters include the abuse of remittances; the abuse of taxed resident status; the shunting of private equity capital between tax jurisdictions; the abuse of trust services; and the failure to register trust service providers. Those issues have been on the agenda for some time and more tightening up is required.

Ed Balls: My hon. Friend is right to say that we need to tighten up even further and we are doing so. We have just completed a consultation into how we may strengthen the regulation of bureaux de change and the money services businesses so that we can deal with precisely the issues that he raises. In the past three years there has been a 46 per cent. rise in prosecutions for money laundering through those money services businesses and he is right to say that we need to act. We need to strengthen regulation and, following our consultation, we will have a consensus with the industry on tougher action to deal with those issues.

Sir Peter Tapsell (Louth and Horncastle) (Con): Will the Treasury bear in mind the fact that, without expert supervision at all times, casinos can be used by criminals to launder money. Criminals are believed to do so in many parts of the world, so why are we bringing super-casinos to Britain?

Ed Balls: The hon. Gentleman is quite right: we need to ensure that we get the regulation of that area right, as in all other areas. We have been consulting on how to implement the third money laundering directive to provide a better and more risk-based approach to the regulation of the casino industry. It is an important industry that creates jobs, but we must ensure that it is properly regulated and that is what we will do.

Hugh Bayley (City of York) (Lab): The UK joint money laundering steering group’s guidance notes acknowledge that misuse of corporate entities is the most likely vehicle for money laundering. When in July the Treasury published its consultation paper on the measures that are necessary to comply with the EU’s third money laundering directive, the proposals were seriously criticised by non-governmental organisations such as Transparency International because they would not monitor trust and company service providers tightly enough to avoid such misuse. Can my hon. Friend reassure the House that he will introduce proposals for legislation shortly that will include tough monitoring of company service providers?

Ed Balls: I can assure my hon. Friend that we have indeed been toughening up the guidance. We have also been consulting on how we implement the directive. I believe that we will have a consensus on the way forward on money laundering and I will take seriously the points that he makes. We have not only strengthened our rules and regulations on the important issue of money laundering over the past year, but have taken action that has involved 13,000 different financial investigations by the police in the past two years alone. We are acting and ensuring that we have the best approach to regulation of that area, and I take seriously the points that my hon. Friend makes.

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Mr. George Osborne (Tatton) (Con): In last year’s pre-Budget report, the Chancellor promised a comprehensive progress report on countering money laundering and terrorist finance in the spring. It is now winter: where is the report, and why is it more than six months late?

Ed Balls: As the hon. Gentleman knows, we have produced report after report on these matters all year. We produced new guidance on countering money laundering in February, and will produce Sir Stephen Lander’s Serious Organised Crime Agency report in the spring. In addition, we produced a consultation document on money laundering in July, and we made an economic statement to the House in October in which we outlined all the measures that we are taking. Those measures include two new orders and new powers to deal with benefits paid to the households involved. We have taken action month by month, and we are working very closely with the security services and the police to make sure that we have the best regime. As I said a month ago, we will produce a report around the end of the year that will bring together everything that we are doing.

I advise the hon. Member for Tatton (Mr. Osborne) and his colleagues that they would do much better if they took this matter seriously and tried to build a consensus about the ways forward and the measures that we are taking. I should be very happy to meet him and the hon. Member for Chipping Barnet (Mrs. Villiers)—if she can fit it into her diary—so that we can discuss these matters.

Mr. Osborne: I very much look forward to that meeting, when we can discuss Oxford days. When the Economic Secretary publishes the review to which he referred, will he learn lessons from the Treasury’s past mistakes? The Treasury’s permanent secretary has confirmed that when steps were taken to freeze terrorist funds in 2001 a loophole was left open that allowed terrorist assets to go on being transferred. The Treasury closed the loophole only two months ago, when news broke that Abu Hamza was playing the property market from his prison cell. Why did the Treasury not spot that glaring error for five years, when it is clear that Abu Hamza was able to spot it? Why do the Chancellor’s claims on security fall apart on closer examination, just like his claims on the economy?

Ed Balls: I shall be very happy to have a serious meeting to discuss these serious matters. We discussed them at last month’s Treasury questions, and I wrote to the shadow Chief Secretary to the Treasury to offer her a meeting, but unfortunately she had to cancel. The meeting is being rearranged, and when we get together we can discuss the details.

In the meantime, I advise the shadow Chancellor to stop repeating statements that are factually incorrect. The police and security services advise us on these matters, which they looked at in 2005. They submitted a report, and I can tell the hon. Gentleman that there was no illegal transaction at all that involved Abu Hamza. As I said, I shall be happy to discuss these matters with the hon. Member for Chipping Barnet when she can fit a meeting in. In my letter to her I said that there was no evidence that Abu Hamza bought
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any properties while he was subject to an asset freeze or in prison. Moreover, there is no evidence that the financial sanctions against him were breached, or that funds from the sale or use of properties had been diverted to him or to terrorism.

I advise the shadow Chief Secretary and the shadow Chancellor to look at the details of the matter and listen to the advice of the police and security services, as the Government do. When we have the meeting that we are arranging, I will be able to discuss these matters in detail and seriously—if that is possible with the hon. Gentleman. Then we may be able to put an end to false and erroneous statements that undermine the national interest.

PFI Projects

2. David Taylor (North-West Leicestershire) (Lab/Co-op): What recent representations he has received on the National Audit Office’s access to the accounts of companies involved in private finance initiative projects. [104883]

The Chief Secretary to the Treasury (Mr. Stephen Timms): The most recent representation was in the Hansard Society report in July. Last December, we introduced an addition to the standard PFI contract that gives the NAO access, within reason, to all such documentation and requires contractors to agree up front that they will disclose publicly all but the most commercially sensitive information.

David Taylor: As both a Labour MP and a public sector accountant, I am politically delighted with the huge health infrastructural investment, but professionally disappointed that much of it has been rooted in PFI, whose spiralling costs and deepening inflexibility are aggravating NHS budgetary difficulties. Therefore much greater NAO access to PFI company accounts is urgently needed to expose their worrying lack of probity, efficiency and accountability. However, does the Chief Secretary believe that the incoming Prime Minister next summer will get a grip of the Treasury policy shapers, whose ardent love affair with private sector finance has stored up such serious problems for his future Administration?

Mr. Timms: The PFI has made an important, albeit minority, contribution to the big boost in public sector investment of the past few years. I agree that better transparency and accountability improve management and performance, and we have made much headway in that direction. However, it is very important to maintain the programme so that the progress that has been made with new hospital building, new schools and other public sector investment can continue to go from strength to strength.

Peter Bottomley (Worthing, West) (Con): Is it now Treasury policy, agreed with the Office for National Statistics, that PFI investment in hospitals is public sector investment, not private sector investment? Will the Minister say whether the National Audit Office is told each time that a hospital PFI contract is doubled in length from 30 years to 60 years because the original terms are too generous? Is that information normally given to the NAO and is it usually approved by the Treasury?

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Mr. Timms: I welcome the hon. Gentleman’s contribution. Thanks to freedom of information, the Department of Health places on its website detailed information on the profitability of each PFI contract. On the specific point, I did not quite grasp the question that he asked about the NAO information. I will gladly come back to him on that.

Angela Eagle (Wallasey) (Lab): Will my right hon. Friend accept congratulations from many of the people in my constituency, whose children are now being taught in the seven new PFI-built schools? Those schools had been on the books to be built for years and years, but never appeared until this Government took office.

Mr. Timms: I gladly accept that point and I thank my hon. Friend for it. She will have heard the announcement that my right hon. Friend the Chancellor made yesterday about £36 billion of investment in education over the next four years, to ensure that many more children and communities around the country benefit in the way that her constituents already have.

Mr. Brooks Newmark (Braintree) (Con): Several years ago the Chancellor called PFI

Does the Minister agree with him?

Mr. Timms: Of course, under the Conservative Government there were serious problems with PFI. [ Interruption. ] Absolutely. Not least of those problems was the fact that they could not make it work. For years under the Conservative Government we were waiting for the programme even to start. Under this Government, however, we have seen the problem solved and impressive and important progress.

Mrs. Theresa Villiers (Chipping Barnet) (Con): Sir John Bourn, the head of the National Audit Office, told the Public Accounts Committee in February this year that too many PFI schemes were off balance sheet, even where the majority of risk was borne by the public sector, not the private sector. Given that the Chancellor told us yesterday that he plans to borrow about £167 billion, if Labour stays in power over the next five years, is it not time that we had an honest appraisal of the true state of the nation’s balance sheet, including the £48.4 billion cost of PFI?

Mr. Timms: The hon. Lady should tell the House whether she is in favour or against the big programme of public investment that the PFI initiative has provided the country with. We have provided full information about the scale of the liabilities and the extent of the programme, and we will continue to do so.

Lyons Review

3. Joan Walley (Stoke-on-Trent, North) (Lab): What discussions he has had with the Office of Government Commerce on the measurement of the wider social and economic benefits of departmental relocations under the Lyons review. [104884]

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The Chancellor of the Exchequer (Mr. Gordon Brown): I can announce that, since the Lyons report recommended 20,000 civil service relocations by 2010, 10,179 posts have already been announced for relocation. Some 1,200 of those posts are in the east and west midlands. The Lyons review presented evidence that movement of posts would offer positive economic and social benefits for the receiving destination. That is now the subject of a review that will be published in the new year.

Joan Walley: I thank my right hon. Friend for that reply. May I remind him of our objective in north Staffordshire and Stoke-on-Trent of getting jobs relocated there from the Government estate? Given the information in yesterday’s pre-Budget report that more than half of the jobs to be relocated have now been relocated, will he look closely at the guidance from the Office of Government Commerce and, in particular, the e-PIMS mapping system, which tends to highlight areas that already have parts of the Government estate? In Stoke-on-Trent, we do not have that Government estate and we desperately need the Chancellor to recognise the social and economic case for relocation of jobs to our area.

Mr. Brown: I will look at that. When my hon. Friend asked me a question yesterday about the textiles and other industries—the pottery industry—in her area, I said that we would hold a meeting with her and other local MPs. The fact is that some of the 1,200 jobs relocated to the midlands have been relocated to her constituency—from the Department for Environment, Food and Rural Affairs and from Her Majesty’s Revenue and Customs. However, I appreciate that, although unemployment has fallen substantially in her constituency since 1997, from 1,880 to 1,326, jobs need to be created for the future. That is why we will also look carefully at how local enterprise grants can go to her constituency in future.

Mr. Philip Dunne (Ludlow) (Con): Yesterday, the Chancellor recycled announcements and fiddled his fiscal rules. Has he given Sir Michael Lyons the same misleading information as he gave the public last month about increases in central Government grant for next year’s local finance settlement? In south Shropshire in my constituency, the public were told that the Chancellor was increasing that grant by 5.9 per cent., but it ended up being 3.4 per cent.

Mr. Brown: I see that the hon. Gentleman has asked not about relocation of jobs to his constituency, but about Government grants. I think he will agree that Government grants to local authorities have gone up every year, continue to go up this year and will go up next year, which is a very different situation from what happened under the Conservative Government.

Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): My right hon. Friend should be congratulated on the progress of relocation of jobs and administrative centres since the Lyons review, but does he agree that many other bodies that receive Government money could also be relocated in other more deserving areas?

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Mr. Brown: That is exactly what we are looking at. My hon. Friend may be interested to know that the Training and Development Agency is moving to Manchester, the Qualifications and Curriculum Authority to Coventry and the Standards Board to the north-west; and that there are other relocations right across the whole of the UK. We will continue to look further into relocations—first because we believe that they are about best value for money and, secondly, because we believe that they can be of great benefit to constituencies and regions like my hon. Friend’s, where there is a continuing need to create more jobs for the future.

Mr. Mark Francois (Rayleigh) (Con): The relocation of civil servants raises issues about lack of geographical coverage: for instance, HMRC will now apparently be fighting fraud in London with a team based in Portsmouth. What does the Chancellor say to Mr. Clive Murray, who has 16 years experience as an HMRC compliance officer and who wrote to me last month about the centralisation of anti-fraud teams to ask how

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