Economic Crime and Corporate Transparency Bill Consideration of
Lords message Mr Deputy Speaker (Mr Nigel Evans) I must draw the
House’s attention to the fact that financial privilege is engaged
by Lords amendment 161B. If that Lords amendment is agreed to, I
will cause the customary entry waiving Commons financial privilege
to be entered in the Journal. Dame Margaret Hodge has tabled two
manuscript amendments to Lords amendment 161B, which have been
selected by...Request free trial
Economic Crime and
Corporate Transparency Bill
Consideration of Lords message
Mr Deputy Speaker ( )
I must draw the House’s attention to the fact that financial
privilege is engaged by Lords amendment 161B. If that Lords
amendment is agreed to, I will cause the customary entry waiving
Commons financial privilege to be entered in the Journal. has tabled two manuscript
amendments to Lords amendment 161B, which have been selected by
Mr Speaker. Papers will be distributed as soon as possible.
The deferred Division has now resumed in the No Lobby and injury
time has been added, but Members do not have long.
After Clause 46
Register of members: information to be included and powers to
obtain it
2.07pm
The Parliamentary Under-Secretary of State for Business and Trade
()
I beg to move, That this House agrees with Lords amendments 23B
and 23C.
Mr Deputy Speaker
With this it will be convenient to discuss the following:
Lords amendments 151B and 151C, Government motion to disagree,
and Government motion to insist on amendment 151A.
Lords amendment 161B, Government motion to disagree, manuscript
amendments (a) and (b), and Government motion to insist on
amendment 161A.
It is always a pleasure to speak with right hon. and hon. Members
on the Economic Crime and Corporate Transparency Bill, which they
will know is close to my heart and contains many vital measures
for which I have long campaigned. The Bill will give us the
powers we need to crack down on those who abuse our open economy,
while ensuring that the vast majority of law-abiding businesses
can grow and flourish.
I am grateful that both Houses have reached agreement on several
issues, including those relating to the register of overseas
entities and on removing the extension of the failure to prevent
offence to money laundering. However, we are here today as
agreement is still outstanding on a handful of remaining issues.
I urge this House to accept the Government amendments, to settle
those remaining topics and ensure that we can proceed to Royal
Assent and implementation of these important reforms without
delay.
I will now speak to those remaining topics. In the other place,
the Government tabled two amendments on nominee
shareholders—amendments 23B and 23C, in lieu of Commons amendment
23A, and in response to Lord Vaux’s amendment 23 on this topic
from Report stage in the other place.
The Government’s amendments will allow the Secretary of State to
make regulations to make further provision for the purpose of
identifying persons with significant control in cases where
shares are held by a nominee. This will allow the Government to
work with relevant stakeholders to target the regulations in an
effective and focused way that does not impose disproportionate
burdens. Members of the other place agreed with the Government’s
proposal and I trust that Members of this House will therefore
agree with it today.
Lords amendments 151B and 151C would apply the exemption from the
failure to prevent fraud offence to micro-entities only, rather
than the Government’s position of excluding all small and
medium-sized enterprises. The Government appreciate that has moved closer to the
Government’s position in agreeing to the principle of applying a
threshold. However, our position remains that such an amendment
would still incur significant costs to businesses. Reducing the
exemption threshold to only micro-entities would increase one-off
costs for businesses from around £500 million to £1.5 billion.
The annual recurrent costs would increase from £60 million to
over £192 million.
Sir (South Swindon) (Con)
Where do those figures come from?
We used very similar analysis to that used for the failure to
prevent bribery and failure to prevent tax evasion offences. We
have used a common methodology. I have not seen any figures that
contradict our figures here, but in my view—having run a business
and dealt with some of the failure to prevent bribery
provisions—there is no doubt that there are significant costs.
There may be external consultants to bring in, for example. Even
if one is compliant, one might not know whether one is compliant,
so there are definite associated costs to ensuring that
reasonable efforts are made to prevent fraud, as it would be in
this case.
Those costs would still be disproportionately shared by small
business owners, when law enforcement can attribute and prosecute
fraud more easily in these smaller organisations; and, as I have
set out before, we must be mindful of the cumulative impact on
SMEs across multiple Government requirements and regulations. In
all the work I have done in the past from the Back Benches on
failure to prevent, it was invariably the case that all cases
involved larger businesses, not SMEs.
Large companies have the resources and specialist expertise to
cope with additional burdens, whereas small businesses often have
to dedicate a significant amount of time and resource, often
paying for external professional advice to assess what new rules
would mean for them. That is the case even where they
subsequently assess that they already have adequate controls in
place. That is time and resource that could otherwise have been
used to grow and generate wealth for their businesses and jobs
for their staff. The Government are extremely mindful of the
pressures on companies of all sizes, including SMEs, and
therefore do not feel it is appropriate to place this new
unnecessary burden on over 450,000 businesses. I therefore urge
Members of this House to support the Government motion to
disagree with the Lords amendments, to ensure that we take a
proportionate approach and do not impose unnecessary measures
that would curb economic growth.
Turning to Lords amendment 161B, made by , on cost protection for law
enforcement in civil recovery cases, the Government remain of the
view that the amendment would be a significant departure from the
loser pays principle and therefore should not be rushed into
without careful consideration. There is no clear evidence that
such changes would help to achieve their intended aim of
increasing the capacity of law enforcement to take on more civil
recovery cases. There have been no adverse cost rulings against
an enforcement authority carrying out this type of civil recovery
in the past six years.
Costs are just one of many factors that determine whether law
enforcement will take on a case. For example, the evidence
available to pursue a case, particularly where evidence is
required from overseas, often proves more vital to an operational
decision. There are already a number of ways in which an
enforcement agency’s liability to legal costs can be protected
under the civil procedure rules in England and Wales. For
instance, rule 44.2 gives the court discretion as to the payment
of costs by either party, including whether they are payable to
another party, the amount, and when they are payable. In
addition, a cost-capping order can be applied for under rule 3.19
to limit any future costs that a party may recover under a later
costs order. If we are to introduce further legislation, we must
consider what gap this is trying to fill. We should also consider
civil liberties and property rights that underpin our economy. We
will potentially be handing huge powers to the state, which could
be held over an individual.
2.15pm
The Government recognise the potential merits of reform, which is
why we have added to the Bill a statutory commitment to review
the payment of costs in civil recovery cases in England and Wales
by enforcement authorities, and to publish a report on the
findings before Parliament within 12 months. I therefore hope
that Members of this House will agree with the Government’s
position today.
In conclusion, I encourage this House to agree with the
Government’s position on the outstanding Lords amendments. It is
vital that we achieve Royal Assent without delay, so that we can
proceed to implement the important reforms in the Bill as quickly
as possible.
(Bethnal Green and Bow)
(Lab)
It is a great honour to speak for the Opposition on behalf of
myself and my hon. Friend the Member for Aberavon (). I pay tribute to my
predecessor, my hon. Friend the Member for Feltham and Heston
(). I am also grateful to my
right hon. Friends the Members for Barking ( ) and for Birmingham, Hodge
Hill (), my hon. Friend the Member for
Rhondda (Sir ) and many others across the
House who have played such an important role in getting the Bill
to this point.
By the Government’s own definition:
“Economic crime refers to a broad category of activity involving
money, finance or assets, the purpose of which is to unlawfully
obtain a profit or advantage for the perpetrator or cause loss to
others.”
It poses a threat to our country’s national security, our
institutions and our economy, and causes serious harm to our
citizens and society. Failure to act allows criminals to benefit
from the proceeds of their crimes and to fund further
criminality. In the most extreme cases, we have seen the funding
of organised crime groups, terrorist activity, drug dealing and
people trafficking.
Economic crime has many victims. For too long, the Government
have turned a blind eye to corruption and dirty money, allowing
Russian illicit finance to flood into our country and let Putin’s
cronies stash ill-gotten gains and even recycle the proceeds of
crime into luxury properties across our cities. More than two
thirds of English and Welsh properties held by foreign shell
companies do not report their true owners. Research by the London
School of Economics and Warwick University shows that the
register of overseas entities is not fully effective. For 71% of
those properties, essential information about their beneficial
owners remains missing or publicly inaccessible, despite the
register of overseas entities. It is not enough, and we need more
action.
After the Grenfell Tower fire disaster, which claimed 72 lives,
we have learned more about freeholders hiding behind offshore
trusts and labyrinthine company structures to make it impossible
for leaseholders to uncover who is responsible for replacing
dangerous flammable cladding. Hundreds of thousands of people
across the country are living in fear of Grenfell-style fires in
unsafe blocks, while some owners hide abroad under company
structures that help them to dodge paying for replacement
cladding by setting up companies and trusts in overseas
territories, lacking transparency. Our Government and our
citizens must be able to access information about who owns what,
and where responsibility lies.
This legislation is long overdue. As far back as 2018, the then
Security Minister, the right hon. Member for Wyre and Preston
North (Mr Wallace), was reported to have said that the BBC hit
series “McMafia” was
“very close to the truth”
and condemned the
“impunity with which some of these people operate and the
brutality of it”.
He promised new powers to crack down on gangsters, criminals and
corrupt members of the global elite, with the full force of
Government to be used against them. While some steps have been
taken, it took Russia’s invasion of Ukraine for the Government to
step up and introduce further legislation. The Government have
delayed legislation for too long, and in that time money has been
lost, economic crime has persisted, and the UK economy has once
again lost out. Shamefully, our city—our capital—has taken on the
reputation of cleaning up much of the world’s dirty money.
The illegal Russian invasion of Ukraine has merely highlighted a
shameful situation that campaigners have long decried. For years
the UK has been awash with cash from kleptocrats and oppressive
regimes. Transparency International UK has highlighted that £6.7
billion worth of property has been bought with the use of
suspicious wealth. I recently visited Ukraine, where I witnessed
the terrible impact of the Russian aggression on the civilian
population, who are constantly living in fear of airstrikes. It
is sickening to think that the people who are responsible for
these atrocities today could be enjoying luxury apartments and
houses in Belgravia and Mayfair, just a stone’s throw from this
House. However, it is not just the Kremlin; as The Times has
reported, more than £200 million-worth of UK property is owned by
the children of notorious rulers and their henchmen from failed
states and autocracies around the world. The cost of economic
crime is as much as £350 billion.
There is much to do. Law enforcement must be backed up; we must
have the transparency that justice demands, and send a clear
signal that there cannot be dark corners where kleptocrats can
stash their money. The Bill is a starting point, not an end
point. We will be holding the Government’s feet to the fire to
ensure that this legislation makes an actual difference.
Crucially, tackling economic crime requires support for key
institutions such as the National Crime Agency, His Majesty’s
Revenue and the Customs Crown Prosecution Service. It is not
enough just to introduce legislation; we need enforcement, and we
need these institutions to be properly resourced and
supported.
We have had the FinCEN files, the Panama papers and the Paradise
papers, as well as numerous inquiries by Select
Committees—including the Treasury Committee, on which I served
for a number of years—but we have seen only incremental change,
which is very frustrating for many Members on both sides of the
House. Further action is needed to ensure transparency in respect
of the ownership of UK property by overseas companies, and on
compensation for victims of economic crime. There remain huge
gaps. However, we welcome the changes that the Government have
made in relation to strategic lawsuits against public
participation, which have been worked on by a number of
Members.
We support Lords amendments 151B and 151C, and welcome Lord
Garnier’s focus on the failure to prevent fraud in non-micro
entities. We also support Lords amendment 161B, tabled by . As he has explained,
subsection (2) should state that the court should not normally
make an order
“that any costs of proceedings relating to a case to which this
section applies”,
and so on. My right hon. Friend the Member for Barking has tabled
an amendment to that Lords amendment, which has been accepted,
and we accept the Lords amendment on that basis.
This Bill is almost over the line. It has been improved since
Ministers first embarked on it. However, there is much more to be
done. We hope we can ensure that enforcement takes place once it
is on the statute book, so that dirty money can be exposed,
illegal assets can be seized, and action is taken against those
who are guilty of economic crime. We must not have further delay
in pushing for transparency and action in tackling economic
crime.
(Bromley and Chislehurst)
(Con)
This is an important Bill and there is much good in it, but I am
afraid that a number of areas require further attention. Now is
not the time for discursive speeches, but I regret to say that
notwithstanding the good in the Bill, the Government have fallen
into error in relation to the two Lords amendments that they seek
to reverse.
Let me say first that while a measure to deal with “failure to
prevent” offences is a good idea, this measure is too widely
drawn. The Minister made a point about the burden of costs on
small businesses, but the definition of a medium-sized business
is significant: the risk is less to do with the size of a
business than with where it does its business, and also its
corporate structures. One of the important things we have learned
from the United States is that “failure to prevent” offences are
not simply about prosecuting, important though that is, but also
about changing corporate behaviour. I did not hear a word about
that in the Minister’s speech, and I think it might be better to
reflect on it again.
tabled an amendment to
compromise on micro-entities; perhaps we should think again about
a third tier, consisting of medium-sized as opposed to small
entities. That would not be unreasonable, given that many
medium-sized entities do significant work abroad where there is
some risk, and given that the costs are tax-deductible from
profit. I urge the Government to think again, because having done
so much good in the Bill, it will be a shame if we weaken its
enforcement by widening the net too much.
As for the cost caps, when the Minister said that no prosecutions
had been brought yet, he did not add that that was because of
their chilling effect. People will not risk bringing prosecutions
if their budgets are going to be eroded after the event by costs
being awarded against them. Only yesterday, in the House of
Commons, I had the pleasure of meeting Bill Browder, who has set
out very clearly why that has been the case for a number of
years. The Serious Fraud Office tried to bring a prosecution a
few years ago and got its fingers burned, and there have been few
prosecutions since then. This is about behaviours rather than
outcomes.
I have to say—with apologies to the Minister, whom I like and
respect—that the Government have taken an unduly restrictive and
literalist approach to these matters. It would be far better to
find compromises—to think again, go back to the Lords, and see
whether there is somewhere between Lord Garnier’s position and
that of the Government. Perhaps that third tier of the
medium-sized entity is a way around this. The Government are
committed to a review of cost caps in 12 months’ time, but, as my
right hon. and learned Friend the Member for South Swindon (Sir
) said the last time this
came up, what is there to review? The evidence is there: cost
caps are chilling. As the Minister will see if he reads the
evidence given to the Cambridge economic crime summit—at which I
had the pleasure of speaking last week—it is overwhelmingly clear
that not a single one of the experts could understand the
Government’s position on this, so I ask them please to think
again about it as well.
(Glasgow Central)
(SNP)
I strongly very much with what the hon. Member for Bromley and
Chislehurst ( ) said. Let us just agree with
the Lords. Let us get on with this. Let us do this legislation,
and do it properly.
Let me say first that it is important for us to have as much
information as possible about those who own companies. It is
clear from all the evidence that has come before us that the lack
of such information causes people to find ways of hiding their
money, and the UK has become a magnet for that. The Minister has
suggested that there will be a significant cost to businesses,
but businesses are already doing work on failure to prevent
bribery. As said on Monday, there is a
clear read-across: it would be easy to add fraud to the current
provisions. It would not be difficult, and it would bring about
an economic benefit. The Minister also suggested that economic
growth would be hampered in some way, but he himself has said
that
“ a corporate offence of failure to prevent economic crime and
money laundering would reduce the amount of money that is
illegally shifted out of the UK into foreign jurisdictions and
increase the amount of tax that is paid.”[—[Official Report, 22
February 2020; Vol. 672, c.
220.]](/search/column?VolumeNumber=672&ColumnNumber=220&House=1)
Why does the Minister now disagree with himself? Why does he
disagree with statements that he has made in the past? He knows
that this is an important measure, and that this is an issue that
we can deal with here today and it will be done. We will not have
to come back to it, we will not have to keep debating it, and the
Minister will be able to see that he has finished it off and done
a good job.
On the issue of adverse costs, I agree with what Bill Browder
said in his evidence to the Bill Committee. By not introducing
such a measure, we are inhibiting law enforcement when it comes
to economic crime. We know that those on the other side of the
equation who want to hide their money have plenty of it to throw
at the best lawyers and at the best accountants to make things
look a particular way. If we are to be in this fight, we need to
give the law enforcement agencies the resources that they
require, and cost capping is a key element of that.
As I said the previous time we debated these matters, there is no
need for a review. We need to get on with things. An election is
coming, and we do not know when we will pass this way again. The
Minister should accept the Lords amendments, and get on with the
work.
Sir (South Swindon) (Con)
I shall be brief. The hon. Member for Glasgow Central () repeated her phrase of
last week—and, indeed, we have passed this way again. I will
resist the temptation to be too biblical today; I will simply
reiterate to the my hon. Friend the Minister the points that I
made last week. has moved on the position in
the Lords and offered an olive branch to the Government, in the
sense that this is a different amendment. It rightly now affords
what, in the opinion of many of us, will be greater protections
for businesses. What is being ignored in this debate is the fact
that businesses that take reasonable measures will not be the
subject of a prosecution or investigation. Businesses that are
not within this regime will not have that protection, so there is
a cogent argument that failing to extend the “failure to prevent”
offence to more businesses would leave them less well
protected.
2.30pm
I pray in aid the excellent speech by , and in particular his
reference to the guidance that was issued to the Bribery Act
2010, which states:
“To a certain extent the level of risk will be linked to the size
of the organisation and the nature and complexity of its
business, but size will not be the only determining factor. Some
small organisations can face quite significant risks and will
need more extensive procedures than their counterparts facing
limited risks. However, small organisations are unlikely to need
procedures that are as extensive as those of a large
multi-national organisation.”
Herein lies the point. The Government at that point were taking
the view that it was the extent of external risk that mattered,
not the size of the enterprise, which begs the question: what on
earth are we doing here? Why this change? Why this change from
the policy of a Conservative Government, which was echoed in the
tax evasion “failure to prevent” offence of 2017?
With the greatest of respect to my hon. Friend the Minister, whom
I respect utterly—he knows that I share his passion for reform in
this area—it is no good citing at the last minute figures that I
simply do not accept have the veracity that he claims they do. A
lot of the measures have already been taken by businesses dealing
with tax evasion and bribery, and I say again that this is not
fraud in general; this is fraud with an intent to benefit the
entity—the company—which is a different beast altogether from
fraud in general.
Secondly, on the cost cap, was absolute right to ask: if
not now, when? The reason that there have not been many cases is
that there has definitely been a dampening effect on authorities
bringing these civil proceedings. The intention in the Proceeds
of Crime Act 2002 was for a lot more use of part 5 in civil
proceedings, but we have seen that vanishingly irregularly. We
need more of those in order to burnish Britain’s reputation as a
centre of clean money.
I have listened carefully to my right hon. and learned Friend’s
points. He said a few seconds ago that this would relate only to
fraud that benefits the body concerned. Paragraph 1(b) of Lords
amendment 151 also covers the body or an associate within that
body providing services, so this is not just about the benefit to
the organisation itself.
Sir
I will take that qualification. I was seeking a short cut because
time is brief. My hon. Friend is right to mention the agency
point, but it is still a much narrower ambit of the offence than
fraud in general. That is the point I would ask him to take away,
because I am not persuaded. I think the amendments should remain
within the body of the Bill as amended, and I will be voting
accordingly.
(Barking) (Lab)
Mr Deputy Speaker, I am conscious that we must vote in five
minutes to remain in order, so I will simply say that economic
crime is a national security issue and should not be a partisan
issue in this House. I urge the Minister to set aside the party
political views that he is expressing and to go with the
consensus that has been built, not just in the House of Commons
but in the House of Lords and in the non-governmental
organisation sector outside.
(Haltemprice and Howden)
(Con)
The right hon. Lady is right. It is not just the parties but the
different sides of the natural arguments over authority,
libertarianism and civil rights that are not divided. I am a
strong defender of the right to be presumed innocent, but there
needs to be a rebalancing in this area, where the criminals we
are up against are very sophisticated and will use smaller
companies to get around this if they need to.
In the interest of trying to get to the vote on time I will close
my speech, but I urge all Members to please support the
amendments proposed by Conservatives in the House of Lords, which
are eminently sensible, rational and pragmatic.
(North West Hampshire) (Con)
I am afraid that I am going to disappoint the right hon. Member
for Barking ( ) and speak very strongly
against Lords amendments 151B and 151C, and I refer the House to
my entry in the Register of Members' Financial Interests. I am
surprised at Lord Garnier’s lack of any conception of what it is
like to run a small business and the cumulative impact of
Government regulation thereupon. The limits that are drawn here
will draw in all manner of businesses, not least some eminent
barristers who will fall foul of some of the numbers. Indeed, the
average town-centre or city-centre pub will be covered by these
regulations, such is their level of turnover and employees. It is
worrying that I am perhaps the only small-business voice here and
that there are not enough small-business people in the House to
point out the problems with this issue.
As the Minister has said, hundreds of thousands of businesses
will be drawn into the net. This is not necessarily about the
compliance cost. The kind of regulation that comes with the
prospect of a criminal offence has a chilling effect on small
businesses. I speak as somebody who has owned one for nearly 30
years. When the Revenue, health and safety or trading standards
show up with some new regulation, a whole industry cranks into
place to terrify the owners of small businesses into some kind of
compliance. Then along come the consultants, the accountants, the
webinars and the newsletters telling us what we do and do not
have to do. All of this distracts us from what we should be
doing, which is trying to create employment and wealth and paying
tax to the rest of the country.
The other issue is that this misunderstands the dynamic of
businesses of this size. If a business of this size is going to
engage in fraud, it is very possible—more than likely,
actually—that the principal will be the instigator of that fraud.
The idea that, alongside all the other offences, they should take
steps to prevent themselves from perpetrating fraud seems
ridiculous. Added to those general difficulties are the specific
ones presented by the Heath Robinson-type calculation that every
business will have to undertake every month: adding together how
many employees there are and how many are employed in each month
in year P, then taking away the number you first thought of and
dividing it by the number of months. We are all going to have to
do this every single month to work out whether we are above the
threshold or not. Should we have the steps? Should we not have
the steps? It all seems particularly nonsensical.
We know that a vast amount of this fraud takes place in larger
companies, and they have the capacity and the wherewithal to deal
with it. If my hon. Friends really think that senior barristers,
whose turnover and assets will be more than the threshold, should
be taking and showing procedural steps to avoid conducting
fraud—do not forget that they are sole practitioners—then I am
afraid we have gone through the looking glass of what
Conservative Members think is appropriate.
Mr Deputy Speaker ( )
I call .
(Brent North) (Lab)
In the interest of moving to the vote, I will not speak.
Mr Deputy Speaker
In which case we come to the Minister, with the leave of the
House.
I welcome the hon. Member for Bethnal Green and Bow () to her place. We worked
closely together on the Treasury Committee and it is a pleasure
to work across the House with her today. I also pay tribute to
her predecessor, the hon. Member for Feltham and Heston () for her similar approach to
the work we have done on this legislation. I thank all hon. and
right hon. Members for their contributions to this debate and
their support for the Government’s amendments made in the other
place. I want to refer to a number of points that have been
raised today.
The shadow Minister, the hon. Member for Bethnal Green and Bow,
referred to the Government turning a blind eye to the issue of
economic crime, but nothing could be further from the truth. Many
of us have worked on this cross-party across the House from the
Back Benches and now on the Front Benches, and this is the second
piece of legislation we have brought forward on economic crime in
the past 18 months. These are groundbreaking new measures. This
Bill contains further reforms to the Register of Overseas
Entities introduced in the previous legislation. Our legislation
on strategic lawsuits against public participation—SLAPPs—is
world leading, and we now have the “failure to prevent” offence,
which I will speak to in a moment.
The hon. Lady also referred to the resources made available to
our law enforcement agencies. We are continuing to invest in
measures to tackle economic crime, and we have increased the
budget of the National Crime Agency year on year since 2019. Its
budget has now increased 40% from the figure in 2019 and stands
at just over £700 million.
Together, the recent spending review settlement and private
sector contributions through the new economic crime levy will
provide £400 million of funding over the spending review period,
and the levy is estimated to bring in £100 million per annum
starting from this financial year, 2023-24. There will be a
wide-ranging review by the end of 2027, providing transparency on
how the levy is performing against its original purpose,
including on how the money is spent. Existing efforts will move
at pace to enhance and further drive forward the unit in what are
inevitably complex and lengthy operations. In considering this
legislation, we have often debated the extra resources that we
are determined to deliver for Companies House and will pay for at
least 400 more people. That is an incredibly important part of
the Bill.
My hon. Friend the Member for Bromley and Chislehurst ( ) stated very clearly that he
feels the failure to prevent threshold is too widely drawn, and I
understand his point. As I said in my opening speech, all the
cases I have dealt with in this place—whether it be Lloyds HBOS
Reading, HSBC, NatWest or others—have involved large
organisations that turned a blind eye to fraud or let it happen
on their watch. We believe it is right to strike a balance
between the offence’s crime prevention benefits and the burden
placed on business. There is a balance between risk and
regulation, and we want to make sure that the regulations do not
put excessive costs on business.
My right hon. and learned Friend the Member for South Swindon
(Sir ) made similar points. He
cast doubt on the figures I have in front of me on the costs of
the burden on business, which we believe will be £1.5 billion of
implementation costs and around £192 million of recurrent annual
costs. I am happy to look at other costs and analyses, but those
are the figures before me.
My right hon. and learned Friend makes an interesting point that
the threshold will facilitate economic crime in certain
companies, but the Lords amendment allows some companies to be
outside the rules. I am not sure how he can draw a line to say
that there will be economic crime in some companies and not in
others. It is very difficult to draw a line, and we believe that
drawing a line at larger companies is right.
Lines matter. At a point in a business’s evolution, as my hon.
Friend will know from building his own business, it crosses a
line. It is perfectly possible, under the definitions in Lords
amendment 151C, that a company that satisfies the financial
criterion will decide to go from nine employees to 10 or 11, and
suddenly it crosses into this world of pain—the compliance people
show up, and the company needs a whole new process and procedure
that comes with employing that single extra person, on top of all
the other employment and safety regulation it is having to deal
with. Setting these thresholds at a level at which companies can
absorb the step up in responsibility, and without a
disproportionate amount of cost, seems critical. Does he
agree?
I do agree. I listened closely to my right hon. Friend’s remarks.
He said he might be the only small business owner currently in
the Chamber, but he is talking to one. I have owned a business
for 30 years, growing it from a small business to a larger one,
and I absolutely agree that it is not just the legislation itself
but its implementation and the requirement to implement
prevention procedures. As he puts it, that would almost create a
new industry of advisers to advise on what needs to be done, be
they accountants or third parties. He is right to raise those
concerns on behalf of small and medium-sized enterprises.
My hon. Friend the Member for Bromley and Chislehurst asked about
setting the threshold at a different level, the small company
threshold rather than the current micro company threshold. The
small company threshold is 50 employers, £10.2 million of
turnover and a £5.1 million balance sheet, according to Companies
House, whereas we think a 250-employee threshold would be more
appropriate. That is where we differ, but I am happy to continue
that conversation.
(North East Bedfordshire)
(Con)
I want to ask a question that I do not think was addressed last
time we debated Lords amendments, and that I do not think the
Government have addressed today. What are the implications if
there is an explicit threshold? What further thought have the
Government given to the implications of putting in a threshold?
Are they satisfied that some of the concerns raised by Opposition
Members and Conservative Back Benchers have been taken into
account?
2.45pm
We are very clear that we believe we have the right threshold.
Larger companies clearly have the capacity and the human
resources and risk compliance departments to mitigate these kinds
of risks, whereas small and medium-sized enterprises are rightly
much more focused on driving their business forward, which is
very important to the economic health of our country. I think we
have it right. My hon. Friend made a similar point in our
previous debate on this issue, and he makes it very strongly. The
fact that both he and my right hon. Friend the Member for North
West Hampshire () have made that point today counterbalances some of
the arguments on the other side for extending the threshold
further.
The hon. Member for Glasgow Central () spoke about my previous
comments. I think I have been pretty consistent in everything I
have said in the House, unless she can point to anything
different I have said from the Back Benches—[Interruption.] The
shadow Minister, the hon. Member for Stalybridge and Hyde (), laughs, but I have
always been a champion of the “failure to prevent” offence. If
Members look back to the original Bill, which I think was 260
pages long—it is now nearly 400 pages long—they will see that I
have been very keen to make sure that we listen to hon. Members
on things like the “failure to prevent” offence and the
identification doctrine, which both now feature in the Bill. All
the cases I dealt with on the Back Benches, and indeed the
information I have seen as a Minister, show that the kind of
fraud the law enforcement agencies have not been able to
prosecute is happening in larger companies, not smaller
companies.
We believe that these circumstances are different from
unexplained wealth orders, for which we obviously put
cost-capping measures in place. Of course, unexplained wealth
orders are not a process for taking somebody’s assets from them;
they are a process for freezing assets. Lords amendment 161B is
entirely different. In my view, there is definitely a civil
liberties issue in terms of the power of the state versus the
power of the individual. This measure potentially delivers an
imbalance of power between the state and the individual. I would
be keen to have a conversation with the very learned Members in
the Chamber, but they must understand that the state is powerful
and well resourced compared with the individual. Obviously there
are some individuals who are very well resourced, but we still
operate on the presumption of innocence in this country, and we
have to be very careful. That is why we want a review to look
into this and report back to Parliament within 12 months.
We have communicated with the National Crime Agency to ask for
evidence on where it feels these measures are needed. All law
enforcement agencies want more power and more provision, of
course, but I have seen no clear, significant evidence from the
enforcement agencies that cost-capping orders would be needed in
this situation.
I, too, have spoken to Bill Browder, and I have spoken to
officials about whether this measure is needed in the UK regime.
Members will be aware that Mr Browder principally looks at the
parallels with the US situation, where adverse costs do not apply
across the system. Members have talked about the chilling effect
of such provisions, but there is potentially a chilling effect on
the other side of the equation.
Yesterday I met a barrister who defends people against such
actions, and he was very concerned about the imbalance of power
that would result. I have not seen any significant evidence, and
I am very interested in the evidence that my hon. Friend the
Member for Bromley and Chislehurst gave to the Cambridge crime
symposium, at which I have spoken in the past, on whether this is
needed. However, I am not aware of anything the Justice Committee
or the Law Commission has done in this area. It is important that
we look at that kind of evidence before we implement these kinds
of measures.
The right hon. Member for Barking ( ) accuses me of being party
political. I am surprised she takes that view. I have worked on a
cross-party basis from the Back Benches and, as she knows, I do
the same from the Front Bench, and I will continue to do so to
make sure that we get this legislation right.
In conclusion, throughout the passage of the Bill, the Government
have worked hard to get the balance right between tackling
economic crime and ensuring that the UK remains a place where
law-abiding businesses can flourish without unnecessary burdens.
The motions tabled by the Government today achieve that balanced
and proportionate approach, and I therefore urge Members on both
sides of the House to support them.
Lords amendments 23B and 23C agreed to.
After Clause 180
Failure to prevent fraud
Motion made, and Question put,
That this House disagrees with the Lords in their Amendments 151B
and 151C and insists on its Amendment 151A.—(.)
The House proceeded to a Division.
Mr Deputy Speaker ( )
Will the Serjeant at Arms investigate the delay in the Aye
Lobby?
[Division 327
The House having divided:
Ayes
276
Noes
210
Question accordingly agreed to.
Held on 13 September 2023 at
2.51pm](/Commons/2023-09-13/division/AF430F60-F61D-4646-901E-651BDC60CCE4/CommonsChamber?outputType=Names)
3.8 pm
More than one hour having elapsed since the commencement of
proceedings on the Lords message, the proceedings were
interrupted (Programme Order, 4 September.)
The Deputy Speaker put forthwith the Questions necessary for the
disposal of the business to be concluded at that time (Standing
Order No. 83G).
(Birmingham, Hodge Hill)
(Lab)
On a point of order, Mr Deputy Speaker. The inexplicable delay in
counting votes has now risked denying the House a vote on
ensuring that this Bill to tackle economic crime is as strong as
it could be. Will you therefore advise the House on what action
we can now take to ensure that in the debates that lie ahead we
can come back to this question and make sure we have the right
provisions in place in statute and that this country is no longer
a soft touch for economic crime?
Mr Deputy Speaker ( )
I thank the right hon. Gentleman for his point of order. As he
knows, we are now going to move on to the motion on amendment
161B, and if that is annulled there will be other opportunities,
I am sure.
After Clause 187
Civil recovery: costs of proceedings
Resolved,
That this House disagrees with the Lords in their amendment 161B
in lieu of Commons amendment 161A and insists on amendment 161A
in lieu.—(.)
Motion made, and Question put forthwith (Standing Order No.
83H(2)), That a Committee be appointed to draw up Reasons to be
assigned to the Lords for disagreeing with their amendments 151B,
151C and 161B.
That , , , , , and be members of the
Committee;
That be the Chair of the
Committee;
That three be the quorum of the Committee.
That the Committee do withdraw immediately.—(.)
Question agreed to.
Committee to withdraw immediately; reasons to be reported and
communicated to the Lords.
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