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Many points have been made during the debate. I will try to cover all of them, but if I do not do so, I will ensure that I write to right hon. and hon. Members. A number of contributions, particularly that of the hon. Member for North-East Hertfordshire (Mr. Heald), referred to the slightly complicated benefits system. The Department has a simplification unit that is constantly looking at how we can simplify benefits. I am sure that it would acknowledge that complexity has been placed on complexity, but we try to refine the system as much as we can. It is important, as the hon. Gentleman said, to look at a system that allows for longer-term decisions, and an element of certainty. However, as constituency MPs, we can all own up to the fact that when we press for changes to the benefits system, such changes can sometimes inevitably lead to a greater degree of complexity.
Andrew Selous: On a point of genuine inquiry and interest, is the Minister aware of any country that has cracked this nut? Are the UK Government looking for inspiration from any other country that has gone down this path successfully? I would be interested to hear if she is aware of any.
Ms Winterton: Other countries often look to our welfare state for inspiration, because it has led the way in providing a crucial safety net for many vulnerable people. We look to other countries to see whether changes have been made that could help to simplify our system. On welfare-to-work benefits, for example, we have considered whether there are simpler systems in other countries.
I want to deal with a number of points raised, starting with the so-called 10 per cent. rule, which was raised by the hon. Member for Edinburgh, West (John Barrett). I want to emphasise that there is no 10 per cent. rule. The income tariff is a simple method of calculating the contribution that people are expected to make to help to meet their living costs. Some 80 per cent. of pension credit recipients are unaffected by what is called the income tariff. The rules have been in place since 1988, but the Government have tried to make the system more generous than it was. Under the previous system, anyone with savings above £12,000 was not eligible for any support at all. The less generous rules also assumed £1 a week for every £250 of savings. Not only is the rate of tariff income half of the previous rate, but we have abolished the upper capital limit, which gives more people access to more support.
The hon. Member for North-East Hertfordshire, among others, raised the issue of carers allowance. As I said, as we work towards reforming the benefits system we will consider how we can best support carers in line with the principles outlined in the carers strategy.
The hon. Member for Edinburgh, West talked about the fact that inflation was very low and asked what would happen next year. Decisions on uprating for 2020-11 will be made later in the year, but the Government have already made a commitment to increasing the basic state pension by at least 2.5 per cent. Should inflation fall to a negative figure next year, I can assure the House that we would not be looking to reduce current benefit levels.
A number of hon. Members touched on the question of trying to increase pensioner take-up. I said during my speech that there were a number of areas in which we wanted to see how we could improve take-up, and we will continue to do so.
On benefit fraud and error, I reassure the House that we have an error strategy and that we are constantly considering ways to ensure that errors are not made. As I said earlier, I have tabled a statement to apologise for the fact that two types of error have been made, but we certainly try to minimise them. The estimated level of overpayment due to fraud and error across all benefits is at 2 per cent., the lowest ever, and we are bringing it down. There has been a great deal of consensus that personal accounts and auto-enrolment are the right way forward, and we certainly want to ensure that they start in 2012.
I turn to the rate of pensioner inflation, as I believe it is called. It is true that a report by the Institute for Fiscal Studies on the inflation experiences of older households, published in October, suggested that in August 2008 pensioners were experiencing inflation of 7.4 per cent., or about 9 per cent. in the case of the oldest and poorest pensioners. However, it is important to point out that it also stressed that in the long term average inflation is almost identical for pensioners and non-pensioners. It showed also that pension credit is worth about £430 a year more than it would have been if it had been uprated since 2001 according to the inflation index used in the report. Similar figures show that the state pension is currently £340 a year more than if it had been uprated according to the inflation figures given in the report since 1987.
Andrew Selous: The Minister says that pensioner inflation is the same as for the rest of the population in the long term. Does she mean during the time when a person is a pensioner or over their whole life?
Ms Winterton: I believe that it is during the time when they are a pensioner, but I can return to the hon. Gentleman with further details on the report if that would help.
On the general point that hon. Members made about savings, I hope that they are aware that the Chancellor has said that he is considering policy options to help pensioners who are currently affected by the interest rate cuts, and that those options may be implemented in the Budget this spring.
I will write to the hon. Gentleman about the national insurance fund. I am sure that he realises that the combination of recent economic prosperity and demographics means that contributions currently exceed claims. Some of that money has been used to reduce Government borrowing, which ensures that everybody benefits, including pensioners. However, that does not necessarily mean that todays recipients have an unlimited claim on the fund. We need to consider the balance between what is currently happening and what will happen if things become difficult, perhaps because of the downturn or when the demographic balance shifts. We need to ensure that we get that balance right. As hon. Members said, there is a campaign by people who say, There is £30 billion, it is our money and we should
have it straight away. However, there are other important factors for us to take into account when considering the national insurance fund.
I reiterate a point that I believe I mentioned earlier: we have legislated to re-establish the link between the basic state pension and earnings. As I said, subject to affordability and the fiscal position, our objective is to do that in 2012, and in any event by the end of the Parliament.
Mr. Heald: Savings credit is help for pensioners who have a bit of income on top of their basic state pension. Why is the Minister cutting back on that? The Pensions Policy Institute described the policy as
a tighter squeeze on Savings Credit.
Why is that being done so far ahead of the change to basic state pension earnings?
Ms Winterton: We have tried to get the balance right between a fair pension system for all and ensuring that the most vulnerable people get the help that they need. As I said earlier, the extra assistance that we have made available to people on pension creditand the savings element of itis far more generous than that under previous Administrations.
We are considering a comprehensive package of help for pensioners. We have a robust foundation on which to redouble our efforts to do more. We can do even more by looking to the longer term, planning for the future and making the right choices to answer the questions posed by demographic change and turning challenge into opportunity.
The Pensions Act 2007 and the Pensions Act 2008 have laid the foundations for pension reform, backed by positive consensus. The Welfare Reform Bill will ensure that support is matched by responsibility. That is especially important in an economic downturn. The cost of uprating benefits for next year is nearly £6.2 billion and almost two thirds of that will go to pensioners. That is significant investment which recognises that it is right to protect the most vulnerable in society, especially in times of economic hardship.
On top of our active efforts to increase benefit take-up, the money represents genuine help and action now, when it matters most. That is the right approach, and I am therefore pleased to commend the orders to the House.
That the draft Social Security benefits Up-rating Order 2009, which was laid before this House on 28 January, be approved.
That the draft Guaranteed Minimum Pensions Increase Order 2009, which was laid before this House on 28 January, be approved. (Ms Rosie Winterton.)
Motion made, and Question proposed, That this House do now adjourn.( Helen Jones.)
Andrew Mackinlay (Thurrock) (Lab): On 13 January, I stumbled across a copy of The Wall Street Journal. An articled headed Tehrans strip club reported something that is widely known across the Atlantic in the United States but has not had much oxygen, or light shed on it, in the United Kingdom either in the media or in Parliament. Nevertheless, it relates to our security policy, and our attempts to combat terrorism and have high standards of banking.
I discovered that Lloyds TSB had pleaded guilty to the Attorney Generals Department in the United States to doing things in London to circumvent US sanctions against Iran. Not only The Wall Street Journal, but many other journals report that Lloyds TSB has entered into what is described as a deferred prosecution agreement with the US federal authorities, whereby it has already paid $300 million to those authorities by way of a fine. That was done not with a view to settling the matter, but to entering into an agreement with the federal authorities to make full disclosure of what is known in the industry as stripping in relation to money that came from Iran via London and got into the United States by the falsifying of documents in London. This is a very serious matter. The US Department of Justice and the district attorney concerned have done a favour not only to the United States but to the wider international financial community and us in the United Kingdom by detecting that operation.
As I have said, there is no disagreement or debate about the matter. Lloyds TSB has acknowledged fully and unreservedly that it was involved in the practice. However, it made that declaration after being discovered. Lloyds TSB was certainly using the practice, which is illegal in the US, between 2001 and 2004, but never acknowledged that until being challenged after 2007. Indeed, in the period up to 2007, Lloyds TSB used similar practices in relation to moneys that came from Sudan, which were stripped here in London and then got into the US financial and banking system.
What was the purpose of such a complicated process? I inquired about that. It would seem that Lloydsand, regrettably, some other financial institutions here in Londonhelped Irans rogue banks to infiltrate the US. The Iranians needed American dollars, sometimes to purchase things within the US borders, but also to channel other moneys through US banks to third countries or other parties demanding payment in dollars. All the evidence suggests that at least some of the money was destined to be used to purchase dual-use materials or technology, as part of the Iranians desire to increase their weaponry and develop weapons, to the disadvantage of the international community.
The system worked like this. The UK branches or subsidiaries of the Iranian banks would send electronic messages via what is described as the SWIFT banking payment system, which would go to Lloyds. Employees at Lloyds in London would then re-key the data into a new SWIFT message, carefully removing any reference to Iran or its banks. Employees at the British bank called the process stripping, as I have already said.
The US sophisticated screening operations and software would normally have flagged up concerns, but as the transfers came from a respected British financial institution, the alert system did not operate. As I have said, that is agreed ground, and Lloyds TSB has acknowledged it. The Iranians also benefited sometimes from overnight deposits in the US, taking advantage of favourable interest rates.
The US authorities are now in a race to track down the ultimate destinations of those moneys and their precise origins. The district attorneys office has made it clear that he fears some of the funds
may have been used to purchase raw materials for long-range missiles.
I also regret to tell the House that it is not just Lloyds TSB that is involved. Since starting to delve into the issue, I have discovered that Barclays is having to co-operate with both the US Department of Justice and the district attorney, apparently in relation to similar transactions. Regrettably, the Royal Bank of Scotland has indicated that ABN Amro, which it bought earlier this year with our money, is also being investigated by the US Department of Justice about a similar issue.
On 21 January, I raised this matter at Prime Ministers questions, and the Prime Minister undertook to look into the matter and to write to me. I asked him how on earth this action could have been taken in London by Lloyds TSB, a British financial institution, to get around US sanctions, and how Lloyds TSB staff could have falsified documentsnot my words; that is the admissionto get round those sanctions. Bearing in mind the fact that the United Kingdom has boasted about the need for a strict regime of banking transparency across the membership of the United Nations in order to combat terrorism, how could this have happened in the United Kingdom without there being a breach of UK law? I asked what regulatory bodies such as the Financial Services Authority, the Serious Organised Crime Agency, the Bank of England and the Treasury, and our security and intelligence services, had been doing about it.
On 29 January, the Prime Minister wrote to me in reply to my questions. He said:
The position with regard to the penalty levied against Lloyds TSB is set out in the statement by the US Department of Justice of 9 January 2009. There is nothing further I can add in relation to the agreement reached between the US authorities and Lloyds TSB which is a matter between those two parties. You asked why the Bank has not been prosecuted in the UK regarding this matter. The US action against Lloyds TSB concerns past breaches of US sanctions. We can only prosecute in the UK in relation to breaches of UK law.
In my view, the Prime Minister has missed the point. After 9/11, the United Kingdom led the call for transparency across the United Nations, and many of us are proud of the diligent work of Sir Jeremy Greenstock, the then United Kingdom ambassador to the UN, who led the sanctions committee. I had assumed, as had other hon. Members, that we had the most rigorous regime of scrutiny and oversight of our banking and financial sector, in order to frustrate illegal transfers across countries in breach of United Nations sanctions. I think that the Prime Minister still thinks that that is the case.
I had assumed, because of all the posturing from the Dispatch Box by successive Ministers about Iran exporting terrorism, and Defence Secretaries acknowledging that
many British soldiers had been killed by ordnance emanating from Iran, that significant sanctions were in place. For a long time, all of usparticularly Her Majestys Governmenthave been concerned about Irans desire to develop missiles and nuclear weapons to a point that we believe will threaten our interests. I find it fantastic that it is not in breach of United Kingdom law for officials at Lloyds TSB in London to falsify documents. Even if I am wrong about the sanctions and that none existed at the time, there must surely be an offence relating to the falsifying of documents.
I am concerned that there is no indication of any attempt by the regulatory bodies to which I have referred to investigate this matter, or of any serious attempt to find the law in this matter. I felt, from the tone of his letter, that the Prime Minister went on to slap my wrists. He said:
Contrary to the assertion that you made in the House, the US case against Lloyds TSB has not involved accusations of money laundering. Therefore there is no suggestion that Lloyds TSB has contravened UK anti-money laundering legislation.
I was slightly irritated by that, so I thought I would look up the definition of money laundering. I had assumed that it was quite an old term, but I found that it was apparently invented by The Guardian newspaper at the time of Watergate, so it is a relatively recent one. Money laundering is, I discovered,
the practice of engaging in finance/financial transactions in order to conceal the identity, source and/or destination of illegally gained money.
The Prime Ministers thesis is that at the time of this action, the UK did not have sanctions against Iran in place; apparently we have had them only since early 2007, which will no doubt feature in the Ministers brief. The Prime Minister thus seems to think that this is not a matter for the UK authorities, but I believe that money laundering is.
Money laundering is something that has had to be combatedboth in principle and, I think, in lawfor a number of years. We are parties to an organisation known as the Financial Action Task Force on Money Laundering; it is based in Paris and is primarily known by its French nameGroupe daction financière sur le blanchiment de capitaux. We signed in 1996it was revised in 2003and agreed to criminalise money laundering and to enable the authorities to confiscate the proceeds of money laundering. Countries are required to ensure that their banks
report certain suspicious financial activities to the appropriate financial regulators and law enforcement authorities.
There is also something known as the suspicious activities report, to which even Members of Parliament are subject. Lloyds, of course, was hardly going to declare its own wrongdoing, but the UK has an obligation under FATF membership to bear down on such activities. That, however, we have singularly failed to do. Will the Minister kindly address that point in his reply?
The biggest potential payoff is that Lloyds must now disclose fully to the US authorities all the details of these wire transfers originating in Iran and help the CIA and the FBI to track them to their final destinations. I would like to be assured, however, that, at least from now on, the UK authorities will say they also want full disclosure.
Before I move on from the Financial Action Task Force, I want to emphasise the fact that it places a duty on banks to know their clients. Lloyds TSB has not used that as a defence in any case, but there is no doubt that the particular FATF agreement to which the UK is party requires us to ensure the highest standards of banking. The UK has clearly failed in that regard and we should be ashamed of that. It is acutely embarrassing to the UK, particularly to the Foreign Office, which, metaphorically speaking, beat around the head those states that were somewhat reluctant after 9/11 to adopt the required transparency.
I probed and probed to the best of my ability on this matter, Madam Deputy Speaker, and I indicated to you that I felt that things had not been properly reported. I discovered through use of a computer that there had been one or two references to this issue in the UK press and in Parliament, which I shall allude to. In particular, I discovered that a man named Conal Walsh had written in The Observer on 8 October 2006:
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