Sobering potential of Islamic finance for Members of Parliament

30th Sep 2016

Ala Abbas

Five Whitehall buildings are being used to underpin special Islamic bonds the Government has issued to investors in the UK, Middle East and Asia. The policy to use Islamic bonds, known as sukuk, was introduced by the then Chancellor George Osborne two years ago, when the UK became the first Western country to use Islamic finance products in its Government.

Since then, at least £200m of the sukuk bonds have been sold to investors in the UK and the major Islamic finance centres in the Middle East and Asia. The sukuk bonds proved hugely popular – the £200m scheme was over-subscribed 10-fold. Osborne expressed the hope that it would boost London’s standing as a global financial centre.

Because charging interest or ribaa is forbidden in Islam, sukuk bonds give a return to their investors through rental income, and this is where the Whitehall buildings come in. In the terms of the sukuk contract are certain Islamic ethical and jurisprudential conditions. This has resulted in the premises being used to underpin the Government’s bonds not being allowed to sell alcohol. However, a Government source said that serving pork does not break the terms of agreement of the bonds.

As part of a multi-billion pound renovation and restoration programme for the Palace of Westminster, MPs and Peers are to move out of the premises from 2020. The Times reported that a plan to relocate MPs to Richmond House, one of the five buildings underpinning the sukuk bonds, was meeting resistance because of the alcohol ban. The plan is yet to be finalised.

This sparked a media outcry as references were made to Sharia law and its maligned connotations. A Treasury spokesperson said: “This is not news. As the Government set out clearly in 2014, three Government buildings are being used to underpin the Government’s sukuk bond – Richmond House, 22-26 Whitehall and Wellington House…The sukuk is issued under, and governed by, English law which applies at all times.”

Some MPs proposed taking the Red Lion pub, located between Parliament and Richmond House, into public ownership and banning entry to the general public, but the move was opposed by Fuller’s Inns, the Red Lion’s owners, and a parliamentary subcommittee eventually ruled out the proposal.

It is thought that alternative drinking arrangements will need to be made for MPs and Peers, who currently enjoy 10 licensed bars and restaurants, if they are moved out to Richmond House during the renovation. The building is currently home to the Department of Health.

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