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16 Jun 2010 : Column 166WH—continued

It argues:

Although Sri Lanka is not a member state of the International Criminal Court and it is therefore unlikely that the UN Security Council would refer the matter to it in the short term, the ICG's conclusion is that:

If countries such as ours do not take that action, disreputable Governments around the world may look at the Sri Lankan option and ask, "What's to lose?" We must not let that happen.

11.17 am

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt): It is a great pleasure to serve under your chairmanship, Dr McCrea. I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing this debate and on the number of colleagues who have attended it. I appreciate that the issue raises a great deal of concern among Members and our constituents.

I appreciated the brevity of colleagues' interventions and would be grateful if those who are already on the record listened to the bulk of my remarks before intervening. I am not sure whether I can compete with the hon. Lady's speed and clarity, but I will do my best. This is the first occasion on which I have spoken on Sri Lanka as Minister, and I know how much interest the debate will generate in the community.

The United Kingdom has long-standing historical connections with Sri Lanka. Our two peoples are united by many ties of family and culture, as well as business, tourism and education. Our primary objective, therefore, is to support the development of a peaceful and prosperous Sri Lanka.

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Let me turn immediately to the first of the concerns raised by the hon. Lady: the war crimes. Sri Lanka is now emerging from a prolonged and painful period of bloody internal conflict. We have seen immense suffering across all the communities in Sri Lanka, and the country's development has been blighted by terrorism. Sri Lanka can now blossom and grow, and we want to work with the Sri Lankan Government and all their people to achieve that.

For any country emerging from conflict, there must be a balance between looking forward to new opportunities and development, and dealing with the past with honesty and compassion. The decades-long conflict in Sri Lanka has seen the country's Sinhalese, Tamil and Muslim communities riven by mistrust and suspicion. There are serious allegations of the most atrocious violence and abuses having been committed by all sides over the past 30 years. Most recently, serious allegations have been made of war crimes by both Government forces and the Liberation Tigers of Tamil Eelam in the final stages of the conflict in early 2009. Our view is that the allegations will haunt the country for many years to come and will hinder much-needed reconciliation between the communities unless there is an honest process of accountability for the past.

President Rajapaksa made a commitment to the UN Secretary-General last year that he would take measures to address possible violations of international humanitarian and human rights law. He has now announced the establishment of a lessons learned and reconciliation commission. My right hon. Friend the Prime Minister has written to the President to encourage him to ensure that the commission produces recommendations that address the past allegations and allow all communities in Sri Lanka to live and work together in peace and security. I have today spoken to Foreign Minister Peiris to emphasise the need for a credible and independent process of accountability.

Siobhain McDonagh: We wish the Minister well and want him to make progress with his speech but, for us, the position seems incredible. Do the British Government actually believe that the current Sri Lankan Government have the wherewithal to carry out such a reconciliation inquiry, given that Sri Lanka is the most dangerous country in the world for journalists?

Alistair Burt: We take the view that the Government of Sri Lanka are committed to a process, understanding the extraordinary degree of international concern and recognising the need for credibility in what happens. The responsibility of an inquiry and an investigation is primarily with the Sri Lanka Government-something that we understand, as did the previous Government, and we are proceeding accordingly.

Barry Gardiner: In taking the matter forward, I ask the Minister to pay heed to the establishment in the diaspora of the transnational Government elections that took place recently? Will he give a commitment that the British Government will work with those who were elected from the diaspora in the United Kingdom to ensure precisely that all the views of the wider Tamil community are taken into account in the Government's thinking?

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Alistair Burt: We shall continue to listen to everyone in such circumstances. It is not for us to dictate how an inquiry should work or what voices it should listen to, but this Government will continue the policy followed by the previous Government and be open to the views of all those in the community.

Keith Vaz: I congratulate the Minister on his appointment; I am sure that his work will be a very valued addition to the Foreign Office. When he next speaks to the Sri Lankan Foreign Minister, will he raise with him the newspaper reports that a Chinese firm has been contracted to go into Sri Lanka to remove the evidence of those who have been buried there? It is a very serious matter, and it will obviously affect any investigation that takes place. Will he ask the Foreign Minister whether such reports are true? Has a Chinese firm been instructed to remove the evidence?

Alistair Burt: I shall make sure that an inquiry looks into the issue the right hon. Gentleman has raised.

The establishment of a lessons learned and reconciliation commission is a step in the right direction, but to be credible it needs to show itself to be a strong, independent voice. We urge the Sri Lankan Government to draw on the experience of other countries that have set up successful post-conflict commissions. I said very clearly to the Foreign Minister today that, no matter how painful they are, experiences in South Africa, Rwanda and, indeed, in our country have shown that the only way to deal properly with reconciliation is to be honest and open and to get absolutely to the heart of the matter. There must be proper public consultation, sufficient time to examine evidence and a clear and realistic mandate.

In particular, we hope that the commission can investigate fully the recent allegations of war crimes. We also encourage the Government to address urgently the issue of witness protection in Sri Lanka, mentioned by the hon. Lady. That will be essential if the commission is to get to the truth in its investigations. We recognise that it is for the Government of Sri Lanka to take the lead in addressing allegations of war crimes, but we also support the UN Secretary-General's proposal for a panel of experts to advise on accountability issues. We trust that the Government of Sri Lanka will co-operate fully with the Secretary-General's panel to help their own domestic process.

We believe that lasting peace will come about only when Sri Lanka addresses the underlying causes of the conflict and ensures that all communities are treated with fairness and respect. Following elections earlier this year, the President and Government of Sri Lanka have a renewed political mandate. We urge them to use the mandate to take meaningful steps towards long-term, inclusive political action. We welcome the commitment of the President in his joint declaration with the Indian Prime Minister on 9 June to develop a political settlement that is acceptable to all communities, in which the people of Sri Lanka can

The United Kingdom stands ready to support Sri Lanka to make good on those commitments, and to take decisive steps to establish a long-term political solution to the island's divisions.

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I hope that the Sri Lankan diaspora in the UK can also play a role. The diaspora's support following the humanitarian crisis undoubtedly helped to alleviate the hardship of many individuals and their families, and we thank them for their contribution. I hope the diaspora will find meaningful ways to engage with communities across Sri Lanka in pursuit of a lasting and agreed political solution.

Mr Love: I thank the Minister for his contribution, which is coming across very well. However, all the evidence emerging from Sri Lanka is that those wise words are unlikely to persuade the Government. That therefore leads me to GSP plus. Can he give us an assurance today that the British Government will continue to look critically at GSP plus in the light of what is happening in Sri Lanka?

Alistair Burt: The hon. Gentleman anticipates my next but one paragraph. Let me deal first with the humanitarian situation touched on by my hon. Friends the Members for Ilford North (Mr Scott) and for Harlow (Robert Halfon). A focus of much international attention in the past year has rightly been the humanitarian needs of nearly one third of a million Sri Lankan citizens who are displaced due to the conflict. We continue to support the humanitarian response in Sri Lanka as people strive to re-establish their lives. We have been concerned at the long delay in returning internally displaced persons from the camps to their homes, and the restrictions placed on their freedom of movement. We note the progress the Government of Sri Lanka have made in releasing IDPs from their camps to the home areas, but urge that this progress continue.

United Nations figures from 3 June show that some 60,000 displaced persons remain in the camps, compared with an immediate post-conflict figure of 280,000. However, many humanitarian agencies do not enjoy full humanitarian access to them once they return to their home areas. This limits the effectiveness of the assistance we and other donors are able to provide. Concerns remain about the situation of some 8,000 ex-combatants of the LTTE held in detention. Despite repeated calls by the international community, the International Committee of the Red Cross has not been allowed access to this population. We therefore urge the Government of Sri Lanka to establish clearly the legal status of these people and to allow the ICRC access in line with international norms.

As for the GSP scheme, in a meeting with the Sri Lankan Foreign Minister recently, my right hon. Friend the Secretary of State for Defence called upon the Government of Sri Lanka to make progress on human rights and reconciliation. We remain concerned about
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the human rights situation in Sri Lanka. There have been widespread and persistent allegations of human rights abuses by both state and non-state actors. There have been attacks on the media, including the murder and disappearance of prominent journalists. We support the EU statement made at the UN Human Rights Council last week, expressing concern about the situation of journalists and human rights defenders and the lack of adequate investigations of alleged violations of human rights. We urge the Government of Sri Lanka to ensure that human rights for all communities receive full protection.

Strengthening the mechanisms for the protection of human rights in Sri Lanka will be an essential part of building strong and durable peace and stability. We hope to see these translate into evidence on the ground that the Government are following through with those commitments, and building confidence in the rule of law and good governance. The UK supports the EU's decision of 15 February to remove GSP plus trade preferences from Sri Lanka from August 2010. The European Commission report of 19 October 2009 on Sri Lanka's failure to implement core human rights conventions, which are a requirement of the scheme, made this a clear decision.

We also support the moving of the Commonwealth conference, which the hon. Lady mentioned. We know that the Government of Sri Lanka are taking steps to address the Commission's concerns. We encourage constructive engagement between the Government of Sri Lanka and the Commission, so that the concerns in the Commission report can be properly addressed. The GSP scheme brings significant benefits to all in Sri Lanka; we recognise that it plays a role in the ongoing development of Sri Lanka's economy and that economic development has a role in the reconstruction process. We sincerely hope that Sri Lanka will therefore take all the necessary steps to ensure GSP plus is retained.

On the point made by the hon. Member for Edmonton (Mr Love), Des Browne did a very good job for us. We have not come to any decision on special envoys yet, but I know him very well and will certainly talk to him. It was disappointing that he was not well received by the Government of Sri Lanka, which might limit his effectiveness. We believe that this is an historic moment for Sri Lanka, but it will only get somewhere if it moves forward. Listening to the concerns expressed by Members and by the international community will be a welcome sign for the reconstruction and reconciliation that we all wish to see among all communities led by the Government in Sri Lanka.

11.30 am

Sitting suspended.

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Tax Avoidance

[Dr William McCrea in the Chair]

2.30 pm

Dr John Pugh (Southport) (LD): It is a pleasure to serve under your chairmanship, Dr McCrea, and I welcome the Front-Bench speakers to the debate. I have a high degree of respect for them both and I hope that between us, in this relatively informal environment, we can start the ball rolling on what is a serious topic for this Parliament: tax avoidance.

Let me put the Minister at ease by saying that I am not going to discuss the capital gains tax proposal or any of the media coverage of it. It is a key aspect of the coalition agreement. All I will say is that the thrust for change comes from the desire to close a loophole that allows for tax avoidance, where people receive economic rewards as capital rather than income so as to avoid higher rates of taxation. Obviously, that is a move for the privileged few that potentially costs the Exchequer millions. Recently, there have been both decent and some dodgy arguments in the media about the mooted capital gains tax proposals. I am prepared to acknowledge that a number of sensible points have been made apropos the need to encourage long-term investment rather than short-term gain, and the need to privilege savers above speculators. There has been much learned discussion about tapers, capital relief and so on. I remain fairly sanguine about the matter and will leave the Minister to his pre-Budget deliberations-provided that, within the coalition, we do not lose the essential goal of successfully attacking tax-avoiding abuse.

Tackling tax avoidance is important to the coalition, particularly in the present circumstances. If the central problem of this Parliament is reducing the structural deficit, there are essentially not two but three ways to help to do that: we can cut spending, which none of us wants to do unless necessary; we can increase taxation, which none of us wants to do unless necessary; or we can ensure that tax revenues are more often and more efficiently collected and not avoided, which all of us would be perfectly happy to do were it the panacea for all our ills. Unfortunately, in the present circumstances, it is not.

If the coalition is not ruthless in its pursuit of avoidance and evasion, now more than ever, we will stand accused of harming or at least being indifferent to the industrious and needy, to the advantage of the devious and the privileged few. That is scarcely fair or in line with the themes announced by the coalition of fair taxation and fair reward. So far in the history of this Parliament, little has been said by the Government about tax avoidance. I understand that the Minister has answered a few questions, both oral and written, but by and large he has given answers that I would describe as holding answers that refresh the position that we understand to be in place-that Her Majesty's Revenue and Customs does not take lightly the matter of tax avoidance and there is a big gap to be plugged. There is a big gap, because potentially large sums are to be obtained by a clampdown. The Treasury estimates the tax gap of tax avoided or evaded to be about £40 billion. The Tax Justice Network-not uninformed people-gives a figure
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of £120 billion. The truth is probably that we do not know the precise figure, and perhaps we should split the difference.

The reality is that we have made some progress in getting large sums back to the Exchequer as a result of a serious attack on tax avoidance. That is to the credit of Ministers in the previous Government, who recognised that a serious attack was necessary. The figures for 2008-09 provided by the Treasury suggest that about £12 billion of extra revenue was collected because of the forthright approach taken to tax avoidance. The figure expected for 2010-11-the Minister will be able to tell us whether we get anywhere near it-is a whopping £16 billion. Those are significant sums.

A distinction is often drawn between avoidance and evasion. I do not want to trespass into the area of evasion, as that is a different issue, although at times it is quite difficult to define the difference. Somebody said that the only real difference or line between evasion and avoidance is the thickness of a prison wall.

Mr Gregory Campbell (East Londonderry) (DUP): Or an accountant.

Dr Pugh: It is a different sort of accounting, let us put it like that. Evasion characteristically involves not only non-compliance, but a breach of tax law and often an element of downright and explicit dishonesty. However, in truth, some forms of avoidance are almost equally morally reprehensible if looked at from an ethical point of view rather than a technical or legal one. We think of past abuses of charity law, which people have explicitly used to make a fast buck with no real benefit to charity, thereby bringing the whole business of charity law into disrepute. We think of a genuine unwillingness on the part of some members of society to pay towards the maintenance of the society that enables them to thrive-the free-rider mentality that is found in certain sections of society and business.

On the other side, we must recognise that we are talking about an industry that does not hang its head in shame. It is staffed by clever and well rewarded people who are dedicated to not what they would call tax avoidance-although it is that in a sense-but, to give it another name, tax planning. As tax law becomes more sophisticated, the economic instruments with which tax planning is arranged become ever more complex and, because of the global reach of the economy these days, ever more global.

The demands for such services are huge and appreciable. There are some well rewarded people in the City whose life is almost entirely dedicated to some form of tax avoidance or tax planning-whatever they want to call it-which they regard as an entirely legitimate enterprise. One should not be too pompous about this. Few people volunteer to pay more tax than is due, or avoid opportunities that come their way to defray their own tax burden. Some people are capable of availing themselves of clever, post hoc rationalisations that run along the lines of: if they spend the money rather than paying it in tax, it will be spent to greater social benefit. That is not a plausible argument, but it is a comforting moral argument if one's conscience bends in that direction. Such people argue that they can spend their money better than the state can for the social benefit of people in their community. That is a bit of sophistry with which we need not detain ourselves.

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