The Chancellor writes in today’s Financial Times that he wants Britain to be “the unrivalled western centre for Islamic finance” and “the first sovereign to issue an Islamic bond outside the Islamic world”.
As he explains, “Sukuk bonds do not pay interest but instead entitle investors to a share in the returns generated by an underlying asset, such as property, making them Islamic-compliant”.
I am not an expert in Islamic finance; nor will many of our readers be. Those who are interested, however, may wish to turn to Hansard’s account of the proceedings of the 2008 Finance Bill, which gave government power to issue such bonds.
Readers will see that members of the then Opposition asked a series of questions about the Government’s intentions, from which I take my own below. (I draw readers attention in particular to the expert speech made by Greg Hands.)
The then Minister, Kitty Ussher, explained to the Committee that the Labour Government had “two main motivations for proceeding in this way”. The first was to boost jobs and prosperity in the City.
The second was indirectly ” to help the development of Islamic retail products if the outlet on the high street were able easily to invest in sharia-compliant Treasury bills, therefore ensuring that the entire investment chain is sharia compliant”.
Hands made the point that “Sukuk bonds are fine in principle and we want to encourage Islamic finance”, and I agree that there is no intrinsic problem in having financial arrangements or instruments that bar the payment of interest.
Readers will also see that the Conservative committee members voted against the Government clause in question, because the questions they raised had not been satisfactorily dealt with. Are the answers clearer now that roles have been reversed?