Tackling Corruption

Tuesday 11th December 2012 Westminster Hall

16:30

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Leigh.

Sunday 9 December marked the United Nation’s international anti-corruption day. This year, the UN Secretary-General, Ban Ki-moon, called on us all to pledge to do our part by cracking down on corruption, shaming those who practise it and engendering a culture that values ethical behaviour. Those words are poignant when considering the general feeling in the public, who have been protesting about fairness and ethical behaviour, particularly among multinational corporations.

According to the Christian relief and development agency, Tearfund, corruption hits the poorest sectors of society the hardest. It reduces access to and quality of essential public services, such as education and health care, prevents resources from reaching their intended destinations, undermines trust and harms economic growth. In Africa alone, the cost of corruption has been estimated at nearly £100 billion a year, or £3,000 a second, representing 25% of the continent’s GDP.

Tackling corruption is particularly important to ensure that money, whether tax, investment or aid, is used for economic growth and to tackle poverty. For example, the 2009 extractive industries transparency initiative report showed that in Nigeria there was a discrepancy of $800 million—equivalent to the health budget—between what companies said they pay to the Government and what the Government said that they received. That Government are rightly working to recover that money.

As co-chair of the all-party parliamentary group on anti-corruption—my fellow co-chair, my hon. Friend the Member for Glasgow Central (Anas Sarwar), is also in the Chamber—I say that we need much greater focus on this issue. The Prime Minister made it clear recently that, together, transparency and fighting corruption are part of

“‘the golden thread’ of conditions enabling open economies and open societies to thrive”.

He announced, rightly, that he is putting transparency at the heart of the G8. In addition, the UK Government have set themselves the ambitious target of becoming the most open, transparent Government in the world. We will hold the Prime Minister to that statement.

The Bribery Act 2010 is a strong piece of legislation. The Department for International Development, created by the previous Labour Government, came top in the recent ranking for aid transparency. The UK Government came third in the 2010 open budget index for transparency in budgeting. The UK is also showing strong leadership in pushing for effective transparency legislation in the European Union, so that oil, gas and mining companies publish what they pay to Governments. However, 2013 is an opportunity to continue this progress, because as chair of the G8 and co-chair of the Open Government Partnership, the UK has a unique opportunity to harness the energy and commitment of Governments, the private sector and citizens to ensure that resources are used to tackle poverty.

The UK Bribery Act has, in many ways, set the standard globally. Now, effective implementation of the Act requires sufficient resources for enforcement. The Serious Fraud Office is responsible for enforcing the new legislation, but its budget has been cut from £52 million in 2008, to approximately £33 million in 2012 and it is expected to be further reduced in forthcoming years, which is a huge worry. Without sufficient funding, the SFO will not be able to do its job of enforcement, however good the legislation may be. Given the importance of the issue at stake, I hope that the Minister will give assurances that the SFO will have sufficient funding to implement the Bribery Act effectively. What steps are the Government taking to ensure that that happens?

With at least 11 Departments and public bodies having the remit of tackling corruption, there is clearly a need for cross-departmental co-ordination and an overarching anti-corruption strategy. The Prime Minister’s commitment in June 2010 to make the then Secretary of State for Justice, now the Minister without Portfolio, the right hon. and learned Member for Rushcliffe (Mr Clarke), the Government’s anti-corruption champion was welcome. However, the role lacks clarity and after the summer’s reshuffle we heard little more about it. The all-party group recently wrote to the Prime Minister about that and, although it was reconfirmed that the right hon. and learned Member for Rushcliffe will remain anti-corruption champion, we have yet to see further details about the remit of the role or any cross-Government strategy to tackle corruption at home and overseas. Will the Minister confirm when further details of the role of anti-corruption champion will become available and when we can expect the production of a cross-departmental anti-corruption strategy?

Some 3.5 billion people live in countries rich in oil, gas and minerals. Revenue from those sectors is often one of the greatest sources of wealth generated within developing countries. In 2010, for example, exports of oil and minerals from Africa were estimated at $333 billion, nearly seven times the value of international aid to the continent, which is currently valued at $48 billion. However, such wealth provides little benefit to the people living there, especially the poor, in part due to lack of transparency.

The UK has shown leadership in Europe in pushing for strong EU transparency legislation, for oil, gas and mining companies to publish what they pay, and has received cross-party support in the UK. We in the all-party group wrote to the then Department for Business, Innovation and Skills Minister, the hon. Member for North Norfolk (Norman Lamb), to show our support for strong Government leadership in Europe on the matter. Nevertheless, more can be done. The recently passed US Dodd-Frank Act, together with the EU transparency legislation, will cover all extractive industry companies listed on the US and EU stock exchanges, including many from G8 and G20 countries, such as Australia, Canada, China and Brazil.

[Anas Sarwar (Glasgow Central) (Lab)]

I congratulate my hon. Friend on securing this important debate. It is said that developing countries lose three times as much in tax revenues as they receive in aid. We need to rush this legislation through so that we can start developing such countries and they can start raising their own income to allow their economies to prosper.

[Catherine McKinnell]

That is the crux of the issue. The Government have rightly supported the previous Labour Government’s calls for committing 0.7% of our GDP in aid to developing countries, but until we get the international structures right—the transparency—to ensure that that money goes to the right people and is spent in the right places, and that countries are able to protect their own resources and tax revenues, we will not make the progress that we would like and aid will not have the greatest effect. To win the argument on many fronts, work must be done on the anti-corruption agenda and increased transparency to improve the efficacy of that aid, which we are rightly committed to as a country.

Much more can be done. The UK has been a leader in spearheading and supporting the extractive industries transparency initiative, a mechanism by which companies report the payments that they make to Governments, host Governments report their revenues, and any discrepancies can be resolved. That has led to large differences being identified between payments made and revenues reported and, as a result, money has been recovered, as shown in the Nigeria example that I mentioned. However, despite supporting the EITI, the UK is not yet one of its 36 current members; only one G20 country is. Although many warm noises are coming from the G8 and G20 Governments on the transparency agenda, it is questionable whether we can provide global leadership without putting our own houses in order. What plans do the UK Government have to use the G8 to encourage other rich countries to pass transparency laws and to reach global standards on transparency for oil, gas and mining companies? Is there an existing timetable that the Government are using to sign up to the EITI?

Open and transparent budget systems promote development by enabling citizens in developing countries to help their Governments to formulate budgets that reflect public priorities, to reduce money lost due to corruption, and to hold their Governments to account on spending. Such systems ensure the optimal use of resources gained from tax, aid and investment, which is even more vital now in times of austerity. For example, Mexico made details of agricultural subsidies to small farmers publicly available, showing a high concentration of recipients among the wealthiest 10% of farmers, who received nearly 20 times what the bottom 80% received. In 2007, under public pressure from the International Budget Partnership, the local non-governmental organisation Fundar, and Congress, maximum and minimum limits for farm subsidies were introduced and the recipient list was then cleaned up. In Uganda, public expenditure tracking surveys led to a reduction in leaked funds from 80% to 20% in five years, from 1995 to 2000, which was connected to Government grants for school fees. Many Governments, however, do not have transparent budgets, and nor do they allow citizen participation in the process. According to the 2010 open budget index, 74 out of the 94 countries surveyed failed to meet even the most basic standards of transparency and accountability. Only seven provided extensive information, of which the UK was one.

Clearly, much more needs to be done at an international level. The UK has an opportunity to make sure that that happens through its role as chair of the G8 and co-chair of the Open Government Partnership. The partnership, with 58 member countries, had its first steering group meeting under the UK chairmanship on 3 and 4 December, led by the Minister for the Cabinet Office. Countries have committed to publish data on Government spending in a way that the public can use, but the commitment is still limited and only includes the Executive’s budget proposal and audit report, while missing other key documents. Most importantly, the commitment does not require member Governments to develop practical ways of engaging their citizens and Parliaments in the process. As a result, the Open Government Partnership eligibility criteria need to be strengthened, so that countries show year-on-year progress and reach the highest standards of budget transparency, and to state clearly how citizens and parliamentarians can be involved in the budget process. For that to work, other key G8 and G20 countries need to commit to joining—fewer than half are currently members. Greater support is also needed to support civil society groups in using the information produced to hold their Governments to account. That could also be done, for example, through DFID programmes.

The process is comprehensive but crucial, and I will welcome further information regarding the Government’s plans to support its development in the years ahead as part of their wider anti-corruption strategy. A cross-governmental commitment to fighting corruption, throughout all Departments and across parties, is vital. I look forward to hearing the Minister’s response to the various questions and challenges that I have put to her today.

16:43

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

I thank the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) for this important debate and for rightly celebrating international anti-corruption day, which fell on Sunday. We might be somewhat belated, but we are ensuring that we mark it in Parliament today.

Some interesting points have been made, which I will endeavour to answer as best I can. I will provide an update on the Government’s efforts to tackle international corruption, which, as the hon. Lady rightly said, have to go across Departments. I am sure that such efforts come with the strong good wishes of all parties. I also welcome the presence in the Chamber of the hon. Member for Glasgow Central (Anas Sarwar). He has not made a full speech today, but he is well known to the House as the co-chair of the all-party group on anti-corruption. He and the hon. Lady ought to be congratulated on their work on that agenda.

I will mirror many of the concerns that have been expressed this afternoon, and I lay out the reassurance that the Government are committed to tackling corruption at home and abroad. Corruption is a scourge that hurts individuals, businesses and social and economic development. Such injustice invariably hits the most vulnerable citizens the hardest, throughout the world, and it has a corrosive impact. Corruption can have a badly corroding effect not only on society, the rule of law and democracy but on the reputation of and trust in the state in general terms. In particular, if we look at people’s views of the ease and cost of doing business, the effect can be seen clearly in many places around the world.

The British Government’s view is that strong action to address corruption will help to move the vast resources involved to more productive ends. Instead of people’s resources being squandered to enable organised crime or to undermine the rule of law and those bonds of trust to which I referred, we seek for them to be used to support trade, commerce and growth.

The UK has played a leading role in the international fight against corruption, and I wish to make a few points about that today. I also take the opportunity to welcome the correspondence that hon. Members have had with the Prime Minister on the role of the anti-corruption champion. Indeed, I have a copy of that correspondence with me.

I am delighted to have the full support of the Minister without Portfolio, my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), as I address the issue today. I shall ensure that he hears the results of the debate, and I shall convey to him the points made by hon. Members in their desire for clarity on the breadth of his role and on his next steps.

I turn to what the UK is doing on the international stage. Over the past 20 years or so, there has clearly been progressive globalisation—not only of business but, crucially, of corruption. We must therefore internationalise the fight against corruption. The UK has taken part in the need for broader and more sophisticated legislation and co-ordination. The Bribery Act 2010 represents what many consider to be the most comprehensive anti-corruption legislation in the world, as I think the hon. Member for Newcastle upon Tyne North recognised. The Act clamps down on foreign as well as domestic bribery and addresses passive as well as active corruption. It acknowledges the international and multifaceted nature of the challenge, and I hope and believe that it will provide a template to many other legislatures around the world.

Some UK businesses might have been concerned when the 2010 Act came in so, as an aside, I reassure them that a legal system that provides a good reason not to pay bribes saves businesses money and protects their reputations. They could also point out any corruption with hope of redress if their competitors were not acting as honestly. Far from driving firms away, the Act ought to attract and to deliver something of an ethical premium in respect of doing business.

The UK has played a prominent role in co-ordinating international efforts. The hon. Lady mentioned the G20 anti-corruption working group, which the UK has co-chaired with Mexico and which has made progress on asset disclosure, mutual legal assistance and the denial of entry to corrupt public officials. The success of the group has been such that we have seen the bringing together of global expertise from civil society and, crucially, businesses.

[Anas Sarwar]

I agree with all the Minister’s comments so far, but can we tease out the details on what specific action the UK Government have taken, internationally or domestically, to clamp down on corruption?

[Miss Smith]

Without a doubt. I will carry right on and do exactly that, and I am happy to ensure that the hon. Gentleman has further information if I do not manage to cover everything in the time available.

The UK is the lead chair of the Open Government Partnership, an international initiative that has attracted 57 other countries since its launch, which is an accolade to the UK’s lead chairmanship. It allows us to help countries to build transparent governance structures which, because the battle is international, help the UK as well, demonstrating that transparency is a central plank of any effort.

The UK fully recognises the importance of the longer-term agenda, and Ban Ki-moon spoke about the millennium development goals on Sunday. That is another important point to note in the record. There is

“a golden thread of development”

and we intend that to be a central tenet of our G8 presidency in 2013. The UK intends to champion an agenda of transparency and accountability by changing the nature of the debate on development and aid. The power of open economies, open Governments and open societies can deliver that growth and prosperity that we seek and, crucially, the bonds of trust.

The hon. Lady asked about the extractive industries. The UK is leading efforts in the UK to require oil, gas and mining companies to publish key financial information for each country and project that they work on. In many ways, the UK’s work on transparency paves the way for the G8, and this is my point in answer to the hon. Gentleman.

The Department for International Development has made great strides over the last couple of years, as hon. Members recognise. We are publishing data according to the international aid transparency initiative. Through those efforts we have been able to move in one year from fifth to first place in the Publish What You Fund aid transparency index. I am sure that the hon. Gentleman will welcome that, and I know that both hon. Members will welcome the fact that the traceability of aid benefits those for whom the aid is intended. We all agree on that, and our constituents throughout the country want transparency of Governments and a reduction in waste, fraud, and corruption in the country’s aid budget.

[Anas Sarwar]

We want transparency in how aid is delivered, but one frustration for our constituents is that although they may believe in aid, they see corruption by Government officials coming the other way. We must reform our institutions here to ensure that we do not aid and abet corruption in other countries.

[Miss Smith]

The hon. Gentleman raises a wise point. If he will forgive me, I will allow a Minister from the Department for International Development to respond in more detail than I can today.

Let me turn to what we are doing on enforcement and what we are doing in the UK, because both are vital. We are playing a key role in the tracing, seizing, recovering and return of illicit assets. That is important, and in September the Prime Minister launched a taskforce to work with the Egyptian Government to gather evidence on stolen money, for example. That builds on the work of two police units that DFID has funded in that arena.

Effective enforcement is central and essential in the trustworthiness of the whole process. Laws mean very little if they are not enforced by every official who might come into contact with the process. The UK targets foreign and corrupt officials who launder the proceeds of corruption and bribery through our country, and I will give an example. James Ibori, the former Governor of Delta state in Nigeria, became one of its richest men by embezzlement. Following a British police investigation, he was sentenced to 13 years in jail, which sends a clear message to those who might seek to use the UK as a refuge for criminal acts.

In addition, the UK operates a comprehensive anti-money laundering framework which, in accordance with the revised international standards of the Financial Action Task Force, helps us to combat money laundering and terrorist financing.

[Catherine McKinnell]

Will the Minister clarify that the action that she is outlining and has given examples of is pursued under the Bribery Act 2010 and through the Serious Fraud Office? If so, will she clarify the SFO’s funding situation, and whether it has sufficient resources properly to tackle corruption on an international scale, an example of which she has given?

[Miss Smith]

I am conscious that the hon. Lady asked that question earlier, and perhaps I can return to it. I have just mentioned one case, and I can furnish plenty more than what I have been able to give on my feet this afternoon. She will appreciate from her role on the Front Bench that it will be hard for me to pre-empt future spending decisions, but we are putting a serious focus on the new UK National Crime Agency, which I am about to come on to. I hope that she will find reassurance in that.

As well as telling other countries to put their houses in order, the UK must put its house in order. We should not be complacent. According to Transparency International’s work, we are perceived to be less vulnerable to corruption than some of our friends, such as the US, France and Ireland, but we remain behind other counterparts with whom we might seek to compete. We have subjected and continue to subject our domestic systems to peer review by the OECD, the UN convention against corruption and the Council of Europe’s anti-corruption experts.

We are already working across Departments and law enforcement and prosecution agencies to see how we can make it easier for UK residents and businesses to identify, prevent and report bribery and corruption. We need to improve the intelligence picture through a more joined-up and co-ordinated approach that gives us a clearer picture of the true nature and scale of domestic bribery and corruption. We can then use that to support a stronger law enforcement response.

From next year, the new UK National Crime Agency will have a part to play, and while the details are being developed, it will seek to reduce the threat from corruption and bribery within the UK and internationally.

[Anas Sarwar]

The Minister is being generous in giving way, and I thank her for that. What role will institutions play as part of that framework? Clearly, our banks, whether consciously or subconsciously, are being used to funnel corrupt money through our institutions. Will they play a role in that framework?

[Miss Smith]

I see the force of the hon. Gentleman’s argument. If he will allow me, I will ensure that in due course he receives a fuller answer than I can give him in the three minutes remaining.

I want to add to some points about what has just been announced in the autumn statement. The Government have reinvested more than £900 million in HMRC to tackle evasion, unpaid tax debts and avoidance. That allocation of extra resources to HMRC during this spending review period will add a real element to what we have discussed today. Our serious compliance activity shows that the Government are committed to clamping down on tax avoidance wherever it is identified, and that is an important plank in what we are talking about in the most general terms and in preventing corruption.

The autumn statement announced the closure with immediate effect of some newly identified loopholes that were being exploited, and that will protect hundreds of millions of pounds for the UK. It also announced the introduction of the UK’s first general anti-abuse rule, which provides a significant new deterrent to abusive avoidance schemes and strengthens HMRC’s means of tackling them wherever they persist. Finally, we are cracking down on the marketing of tax avoidance schemes through proposals to introduce new information disclosure measures.

[Catherine McKinnell]

The Minister is aware that very little time is left for this debate. Apart from the measures that she has just outlined on activities at HMRC, she has not told us whether there is a cross-departmental anti-corruption strategy, or whether one is likely to be published. That would be useful information to have before we run out of time in this debate.

[Miss Smith]

I endeavoured to address that in my opening words. As the hon. Lady and the hon. Gentleman know, my right hon. and learned Friend the Minister without Portfolio is delighted to continue to be the anti-corruption champion; there has been no change in that respect following the ministerial reshuffle in September. It is with his full support that I am here today answering the hon. Lady’s questions.

It has been difficult to give a full overview of everything the Government are doing, but that is what I have endeavoured to do in this debate. I will convey to my right hon. and learned Friend her desire for a fuller response. I am sure that the all-party group’s work, which is supported across parties, will be well recognised, and I am sure that its desire for that strategy can be discussed in greater detail at a later date.

Question put and agreed to.

17:00

Sitting adjourned.