Tax The Financial Sector To Pay For Protecting Undersea Cables, Says Former Cabinet Minister

In her first extended interview since losing her seat of Berwick-upon-Tweed at the 4 July General Election, Anne-Marie Trevelyan, the former Tory secretary of state for both trade and international development, said the industry wrongly assumes that the vital cables can be protected from sabotage.

“The corporations who use them, who make the vast proportion of our tax receipts – all our financial services, they assume, in the nicest possible way that actually if there was a problem we the government, every government would have a solution and would be able to fix and protect it,” she told the Bourke & Ryan podcast. 

“And that isn’t yet true.

“There is a whole series of challenges to our economic security which we have got to look in the eye.”

Undersea fibre optic cables transmit 99 per cent of the UK’s digital communications with the outside world. 

But because they lie on the ocean floor the critical infrastructure is vulnerable to attack from hostile actors like China, Iran and Russia who could sever the cables and severely disrupt the UK economy. 

Trevelyan said that it should not be up to her former constituents in Berwick to pay for strengthening the nation’s underwater defences.

“The global maritime threats are real and we need to ‘assess value’ them and then come at the problem the other end,” she said. 

“And say, not 'well we’ll get to our defence and security when we’ve got a bit of extra cash', but 'what is the threat to our economic security'.”

She said knowing the value was key to how knowing how to solve the issue of what security to provide and at what cost.

“Why don’t we just tax the financial services industry?

“They need protection, let’s do it specifically," the former Tory MP said.

She said as ministers she had tried to force Whitehall to examine the global maritime threat picture and urged the new Labour Government to continue the task. 

“We were living under a delusional view from about 2010 where there was a bit of piracy off the African coast … and not much else,” she said. 

“Frustratingly, because of the change of government I can’t be there to drive it through to the next stage but it sits there waiting to be pushed forwards.”

The UK’s financial services industry comprised 12 per cent of the economy in 2024, according to analysis published by the City of London and the Treasury. 

This amounted to £278 billion worth of economic output and £100 billion in tax revenue and generated 2.5 million directly related jobs and a further 1.3 million in related fields.

Trevelyan said taxing the sector to pay for its own safety was no different to taxing the oil and gas industry to pay for the costs of polluting the environment while the economy transitions to net zero carbon emissions.

“Why are we not taxing, for the purpose of not creating better defensive tools, those whose industries are most directly affected?

“There’s some alternative thinking we need to do, not just the UK but across the board to shift the dial. 

“But that has to come with the Government being honest enough to say the world is not a pretty place anymore, we don’t live in a benign world.

“We’re not at war but we are in a coercive environment.”

The City UK which represents the interests of London’s Square Mile was approached for comment but declined. 

Both Russia and China have already targeted undersea cables and investigations are ongoing into who sabotaged the underwater Nord Stream 2 gas pipeline connecting Germany with Russia in the months after Russian President Vladimir Putin invaded Ukraine.

In February last year, Chinese maritime vessels disabled internet access to Taiwan’s Matsu Island, depriving 13,000 residents of internet access.

According to a Policy Exchange report published earlier this year, there have been eight unattributed, suspicious incidents of cables being cut in the Euro-Atlantic in just the last three years alone. 

There have also been 70 publicised sightings of Russian vessels behaving abnormally near critical maritime infrastructure in the last three years.

Cutting a country or region from accessing global communications can be part of an “invisible blockade” and a dress rehearsal for war, the report said.

It called on ministers to create a Space to Seabed strategy that would set out how to defend and protect the cables as well as satellites. 

The same report said it was critical that the private and public sector work out who is responsible for protecting commercial cables.

“The MoD is currently legislated to protect defence infrastructure but not commercial, although it de facto covers both areas,” it said.

“Clearer delineation between public and private sector obligations is needed from both the legal and operational perspective. 

“This feeds into the general need to devise a clearer chain of command and ownership framework for the undersea domain.”

Last year the Royal Navy deployed RFA Proteus, a ship from which underwater surveillance will be carried out.

Ben Key, the First Sea Lord said a typical month of Proteus would involve her sailing in the waters around the UK and Europe with a range of existing and new surveillance capabilities that could map the critical infrastructure on the seabed floor.

“We will then use information that the Proteus is developing to then investigate those changes which we may or may not find suspicious,” Key told journalists. 

PoliticsHome has learned that the Treasury has not conducted any work on the value or magnitude of the economic shock that would be delivered to the economy in the event of an attack on undersea cables.

Retired Navy Commander and defence consultant Tom Sharpe said the issue exposed the complexity around who is responsible for the protection and defence of critical infrastructure.

“This issue highlights the complex interface between private and public sector responsibilities for the protection of critical infrastructure,” he said.

“The basic principle that it shouldn’t be wholly the responsibility of the state is right, as with other essential commodities such as shipping and oil.

“I’m not sure it greatly affects who ends up paying in the end – that will be us, whether it be through increased charges or increased taxes but there are undoubtedly smarter ways to finance protection of these assets in the meantime.”

Professor Malcolm Chalmers, deputy director-general of the The Royal United Services Institute said while there was an urgent need to bolster the nation’s defences, he was unsure a sector-specific tax was the answer.

“The UK economy, including its financial sector, derives benefits from national defence – and the deterrence of Russian aggression – that extend far beyond the protection of undersea cables,” he said. 

“There is a clear need to fund increased defence spending and better protection of our national infrastructure, but it is less clear that a financial transactions tax is the best way to achieve this aim.”

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