Serious Fraud Office

Tuesday 7th February 2017 Westminster Hall

09:00

[Stephen Timms (East Ham) (Lab)]

I beg to move,

That this House has considered funding of the Serious Fraud Office.

It is a pleasure to serve under your chairmanship, Mr Owen. The Serious Fraud Office owes its origins to the work of the fraud trials committee, set up under the chairmanship of Lord Roskill in 1983 after a series of failures to secure convictions in relation to high-profile City of London scandals. The SFO began its work in 1988.

I know from previous discussions on the SFO in the House that the Minister values its work very highly. He said in one debate that the Roskill model on which the SFO operates is

“essential when it comes to this type of offending. It works and it must continue to be supported.”

He also said:

“It is important that we give our full-throated support to the work of the SFO”.—[Official Report, 2 July 2015; Vol. 606, c. 1610.]

I very much agree with the view that he expressed and I hope it will be shared by other hon. Members contributing to this important debate. It was in the spirit of wanting the SFO to do the best possible job that I applied for this debate on how it is funded. However, it is worth just revisiting at the outset the case for the SFO, because the model has had its detractors, including the current Prime Minister when she was Home Secretary, so the case needs to continue to be made and the arguments need to be spelt out.

The SFO is unique among UK law enforcement agencies. Under the model recommended by Lord Roskill at the conclusion of the fraud trials committee in 1985, it is both investigator and prosecutor of the cases that it handles. A string of failed City of London fraud cases undermined public trust and inspired the recommendation and decision to break with the usual division between those two roles that we see in most of the rest of the English and Welsh legal system. I want to return to the issue of public confidence that justice will be done in fraud cases when arguing that the Government need to look again at the mechanisms by which the SFO is funded.

Legal cases are often complex, but the cases that the SFO deals with are frequently an order of magnitude more complex than others. They involve thousands of documents and a huge amount of complex financial data. The SFO requires multidisciplinary teams working under its case controllers: they are made up of lawyers, investigators, forensic accountants and so on. Those multidisciplinary teams ensure that legal scrutiny is applied to investigations from their commencement.

The Roskill model also ensures that there is no hand-off point, when specialist knowledge and insight developed by investigators and accountants who have been studying a case may be lost as it is transferred to the barristers. That does not happen in the SFO model. Institutional memory and continuity are very important in the prosecution of complex fraud cases, and I am concerned that that important virtue of the Roskill model might be being undermined by the way the SFO is funded at the moment.

The Prime Minister, when she was Home Secretary, tried in 2011 and again in 2014 to bring the SFO into the new National Crime Agency. The Financial Times reported on 5 October 2014 that she was

“to revive plans to abolish the UK’s main anti-fraud and corruption agency and bring it into her new FBI-style national crime force, according to officials familiar with the situation.”

I am glad to say that that move was resisted. The director of the SFO from 2012 to the present, David Green, QC, was clear in his statement that it would

“distract and destabilise the SFO in a really bad way at a time when”

it was “grappling with what” was

“probably its heaviest-ever workload and making real headway.”

He was not alone in making the case against abolition of the office. Bond, the umbrella organisation representing 370 international development organisations, which sees the impact of corporate corruption at the sharp end, with millions lost to public services and community wellbeing in developing countries, co-ordinated a letter to the then Prime Minister in 2015 from seven charity chief executives, in which they suggested three key tests for the Government on bribery and corruption. First, they stated:

“Investigation and prosecution teams should be combined in the same agency.”

The Roskill model achieves that requirement, and a number of observers think that moving the work into the NCA would probably end that beneficial arrangement. Secondly, the letter stated:

“Corruption must be a top priority for that agency, and not simply one amongst many.”

Thirdly, it stated:

“There must be specialist corruption teams”

in the agency.

The current arrangements for the make-up of the SFO meet those requirements, and as a result the UK is one among only four countries that are officially recognised as “active enforcers” of the OECD’s anti-bribery convention. I hope that maintaining that status will be an important concern of the Government and the Minister. Moving the anti-corruption role of the SFO into another agency would undermine UK leadership in this area. I agree with Transparency International UK, which says that it

“strongly opposes the abolition of the SFO unless an alternative is proposed which is demonstrably better. We believe that is highly unlikely given the SFO’s recent success, the instability and damage to caseload that would be caused by abolition, the detailed analysis that went into the creation of the SFO, and the lack of expertise and track record in any other government agencies regarding prosecutions of corporate corruption.”

I therefore hope that the model will be maintained, but how well is the current SFO doing? It is quite difficult to assess its effectiveness. Its case load is deliberately small: under David Green, it has focused its attention, taking the most serious and complicated cases through to prosecution. However, we can say that over the four-year period, 2012-13 to 2015-16, it had a case conviction rate of 81%, although that goes up and down from year to year, and since then it has achieved some important successes, including the first individual prosecutions for LIBOR rigging, which are welcome, and the recent landmark deferred prosecution agreement with Rolls-Royce, which resulted in a fine of £671 million, which was equivalent to the company’s entire operating profits. The SFO is undoubtedly making an impact. The question is whether it is as effective as it could be and as we would all wish it to be.

[Alex Chalk (Cheltenham) (Con)]

I declare an interest as someone who has previously been appointed to the SFO’s “A” panel of counsel. Does the right hon. Gentleman agree that in looking at the SFO’s achievements, it is right to focus also on the sums recovered under the Proceeds of Crime Act 2002 through confiscation? Its track record on that is certainly better than that of equivalent agencies.

[Stephen Timms]

The hon. Gentleman is absolutely right. I certainly do not want to argue that the SFO has not been effective; there is good evidence that it has been. The question is whether it is as effective as it could and should be, and that is why I now want to come to the numbers and my concerns about the way it is funded. It receives its funding as a mix of core costs and what is termed “blockbuster” funding.

[Marie Rimmer (St Helens South and Whiston) (Lab)]

Blockbuster funding can make up a significant amount of the total funding for the SFO. Does my right hon. Friend share my concerns about the lack of transparency around the process for blockbuster funding, which will inevitably cover the most serious and complex cases?

[Stephen Timms]

Yes, I do share concerns about that, and I will come to it in a moment. I hope the Minister might tell us a bit more about how the process works and how decisions are made about whether blockbuster funding is provided. I noticed that in the exchange between my hon. Friend and the head of the Serious Fraud Office in the Select Committee on Justice, he made the point:

“I would like to move to less dependence on blockbuster funding and more core funding”.

I think he is on to something and I want to explain why, in my view, that shift would be worth making.

Blockbuster funding is additional funding allocated on a case-by-case basis where individual, high-profile cases are likely to cost more than 5% of the SFO’s core budget—those costing more than around £1.5 million. To access that funding, the SFO has to apply directly to the Treasury. As I understand it—I hope the Minister will tell us a bit more about this—applications bypass the Attorney General’s office. However, as my hon. Friend the Member for St Helens South and Whiston (Marie Rimmer) has pointed out, the basis on which they are approved or denied is not transparent. I certainly do not know—I would be grateful if the Minister could shed some light on this—what the criteria are for allocating the funding. I know the system was renegotiated by Mr Green in 2012.

[David Simpson (Upper Bann) (DUP)]

Does the right hon. Gentleman think that the way in which the Serious Fraud Office is funded has a detrimental impact on recruiting the proper staff required to do the job?

[Stephen Timms]

Yes, it inevitably does. We have seen a big shift over time away from core funding towards blockbuster funding. That inevitably means fewer permanent staff at the SFO and more temporary staff. That raises a serious concern about how the SFO is able to function. In 2008, core funding was £52 million. In 2015-16, the total budget was about the same, but core funding was only £34 million. For each of the last three complete financial years, the blockbuster funding element was large: £24 million in 2013-14, £24.5 million in the following year and £28 million in 2015-16. In 2015-16, the blockbuster funding was more than 80% on top of the core funding. The SFO’s total expenditure has been as much—perhaps rather more—in recent years as it was in 2008, before core funding started to be reduced as part of the Government’s efforts to cut public spending, but a big slice of the funding today is in the form of this one-off, exceptional Treasury grant. I am grateful to the hon. Gentleman for drawing attention to the fact that, as a result of that, a large proportion of those working at the SFO are temporary staff brought in for a particular case and then laid off when it is concluded.

I would be grateful for the Minister’s comments on whether that is an effective way to run an organisation as important as the SFO. Her Majesty’s Crown Prosecution Service inspectorate certainly thinks that it is not. In its view, the current model is not satisfactory, and I think it has an important point. In its 2016 report, it stated:

“The blockbuster funding model is not representing value for money and it prevents the SFO building future capability and capacity. Temporary and contract staff are often more expensive than permanent staff and managing surge capacity is a constant drain on Human Resources (HR) and other staff. Increasing core funding would provide the SFO with the ability to build capacity and capability in-house and lead to less reliance on blockbuster funding.”

That is the case that I want to press upon the Minister this morning. The evidence is on the inspectorate’s side. At the time of the inspection, 21% of SFO staff were temporary. As of March 2016, 106 of the 510 staff were there on an agency basis and another 35 were there on a fixed-term basis. That level of instability and impermanence would damage any major organisation.

[Alex Chalk]

The right hon. Gentleman is making a powerful and important speech; however, the real question is whether the surge that we have seen in demand, which has given rise to the need for blockbuster funding, is likely to be sustained. Can he shed any light on whether that is perceived to be a likely outcome?

[Stephen Timms]

It certainly has been sustained over a lengthy period, although I think I am right in saying that in the most recent year the funding sharply reduced. For me, that accentuates the problem, because once the funding is sharply reduced, a large number of people get sacked or their employment at the SFO ends and the expertise and experience they have built up is dissipated. It seems to me that we should aim to hang on to that expertise and build up the capacity and skills that the SFO can deploy for its future work.

I am not saying that the 106 people who were there on an agency basis in March 2016 were second-rate or anything like that. I am sure that they were talented people, doing good work. However, as temporary staff they are more expensive than permanent staff and the additional expense does not make sense when the blockbuster funding is consistently high over an extended period—not permanently, but consistently over a long period. Temporary staff will build up skills and expertise during their work with the SFO, which will then be lost as soon as their contracts expire and they leave. That raises concerns about an inability to ensure consistency across the entire duration of a case and build institutional knowledge in the longer term, which was precisely the aim of setting up the Roskill model in the first place 30 years or so ago. Surely we want the SFO to build up its expertise, and having so many people on temporary contracts makes that a great deal harder. At a time when the Government are, for very good reason, pushing for the public sector to spend less on expensive agency staff in areas such as education, Ministers can surely see that the same considerations apply—I suggest even more powerfully—to the SFO.

Managing the human resources implications of blockbuster funding makes it harder, as the inspectorate points out, for personnel staff to do the other things they ought to be doing. The SFO is the only one of the Law Officers’ departments with fewer than half of its staff positions held by women and it has less than half the proportion of disabled people working for it than the civil service does as a whole, at only 3.6% of employees. We know that delivering diversity requires focused human resources effort, but with such high levels of turnover and agency staff at the SFO, HR attention is perhaps inevitably turned elsewhere. That weakens the organisation.

I am sure that the Minister will argue in his response that the director of the SFO has spoken favourably about the blockbuster funding system in the past. To an extent, that is true. Last October, he told the Justice Committee in the evidence session that I referred to:

“There are pros and cons to it.”

The SFO’s submission to the Committee prior to the session stated:

“It is a workable mechanism which allows the SFO to respond flexibly to a demand-led workload.”

That may well be the case, but “workable” is not the same as “optimal”.

I am not arguing that we should not have any blockbuster funding. I entirely accept that such a mechanism can enable the department to cope with fluctuations and ensure that it does not have to turn down a case on the basis of cost, but we have funded getting on for half the SFO’s budget for the last three or four financial years in that way. As a result, it has not been possible to build the expert, permanent workforce that I think we all want to see, so the balance must surely be wrong. Judging from the director’s comments to the Justice Committee, that appears to be his view as well.

There is another important issue. In requiring the SFO to ask the Treasury for additional funding on a case-by-case basis through a pretty opaque process, it is impossible to demonstrate independence about decisions on which cases are prosecuted. I do not want to make too much of that point, but being seen to be independent is important. Making the SFO dependent, case by case, on a Treasury sign-off does not provide that all-important assurance. That problem could be greatly reduced by making core funding a bigger proportion of the overall SFO budget. Another risk presented by the level of blockbuster funding—other Members have raised this matter in the House—is that justice may be delayed if an unnecessary layer of bureaucratic delay is added to the office’s work by its having to apply for blockbuster funding.

The model under which the SFO operates has established the UK as a global leader in tackling corruption, fraud and bribery. That is an important achievement, which we all want to maintain, and I commend the director of the SFO for his progress in focusing the organisation on its core purpose. The recent inspectorate report, however, was right to point out that over-reliance on blockbuster funding makes the SFO less effective than it should be. Will the Minister therefore commit this morning to looking again at the proportion of the SFO’s funding that comes from the blockbuster mechanism? Will he also look again at whether the SFO could do a better job, building up and maintaining better expertise more effectively in the long term, with more permanent staff, if a larger proportion of its funding was in its core budget?

09:53

[Sir Edward Garnier (Harborough) (Con)]

I congratulate the right hon. Member for East Ham (Stephen Timms) on initiating the debate. I listened to him with great care and gratitude, because he spoke as a critical friend of the Serious Fraud Office. As he gently pointed out, when the current Prime Minister was Home Secretary, she was perhaps not a friend, even if she was critical, of the SFO. Possibly—who knows?—one reason I remained a Law Officer for two and a half years, but no longer, was because I fell out with the Home Secretary over the independence of the Serious Fraud Office.

There is a misunderstanding among politicians about the Roskill model and its value. However, before I go on further, I declare an interest—as must be obvious—in the SFO and all that it does. I also declare an interest in that, like my hon. Friend the Member for Cheltenham (Alex Chalk), the SFO instructs me from time to time as a member of the private Bar. One of the most recent cases that I have been instructed in was that of Rolls-Royce, which the right hon. Member for East Ham spoke about. Although I do not want to talk too much about my wonderful case load, I want to use the case of Rolls-Royce to illustrate the successful way in which the organisation deals with criminal activity at the corporate and most complex level.

It is a given, certainly among those who know anything about the Serious Fraud Office, that the Roskill model of having a joint investigating and prosecuting system in the organisation works. Although plenty of people criticise the SFO—as the right hon. Gentleman said fairly, it is not beyond criticism, and there are things to be said about the blockbuster system and so forth—it is remarkably successful, given the limited resources under which it has to operate.

When I was shadow Attorney General in the lead-up to the 2010 election, I made quite a study of the way in which the Serious Fraud Office operated, not least because it was one of the most important aspects of our prosecuting system that came under the supervision of the Attorney General and the Solicitor General. When I got into office in 2010, it was clear that the comprehensive spending review that the new Government introduced would have a pretty direct and possibly damaging effect on the SFO’s ability to carry out its important work. That persuaded me that we needed to find other pragmatic ways of allowing the SFO to get on and catch villains, both human and corporate. I was particularly concerned that we were underperforming on—that we were inhibiting—the prosecution and conviction of corporate crime.

Of course we were, and still are, beset by the Victorian identification principle: in order for a company to be convicted of a crime, a directing mind of sufficient seniority has to be able to be identified in order to fix criminal liability on the company. That was fine in the 1860s, 1870s or the 1880s, when companies had a board of two or three and operated within a town or a county—or possibly even within the country as a whole—but the vast international conglomerates that there are now, with offices in several jurisdictions and boards, sub-boards, national and international boards, make it extremely difficult for the Serious Fraud Office to attach criminal liability for a crime to the company. Individual financial directors, country directors, or country managing directors can be prosecuted, as the SFO has—we have seen that happen in a number of the cases that the right hon. Gentleman referred to—but that has proved difficult when dealing with international companies that misconduct themselves.

That is why—this is a slight diversion, but an important one—this House and the Government should develop the “failure to prevent” model. Under section 7 of the Bribery Act 2010, it is a criminal offence for a company to fail to prevent bribery by one of its associated people or bodies. The first deferred prosecution agreement—in which I appeared, as it happened—dealt with the failure of a bank to prevent bribery by one, or a number, of its staff in Dar es Salaam in Tanzania. Under the terms of the deferred prosecution agreement, that brought in from the errant bank about US$25 million in costs and penalties.

As the right hon. Gentleman correctly identified, the Rolls-Royce case brought in something in excess of half a billion pounds sterling, which will be paid by that company over the next five years. Beyond the penalty, it will have to pay interest on the delayed payment. More importantly, as far as funding the Serious Fraud Office is concerned, part of the deferred prosecution agreement is that the respondent company pays the SFO’s costs, which, at the time of the announcement of the agreement before the President of the Queen’s Bench division, Sir Brian Leveson, 10 or so days ago, amounted to about £13 million. Sadly, that £13 million did not go into the Edward Garnier special holiday fund; it went into reimbursing the Serious Fraud Office for what was essentially the biggest investigation that it had ever done since its inception. That investigation required huge international co-operation with the United States Department of Justice and with investigators and prosecutors in a number of other jurisdictions—the criminal allegations against Rolls-Royce covered the company’s activities within seven jurisdictions.

While the Rolls-Royce matter was being brought to an end a fortnight or so ago in this country, it was also being brought to an end in the United States and in Brazil, where the company had to pay the authorities about $176 million and $25 million respectively. That illustrates how the Serious Fraud Office can be pragmatic, efficient and effective now that it has the deferred prosecution agreement model and can use its money wisely to bring international companies to book for international criminal conduct.

[Alex Chalk]

Now that the SFO has more tools at its disposal, including the DPA model, does my right hon. and learned Friend believe that its workload will increase? Does that make the case for a larger underlying capacity, as the right hon. Member for East Ham indicated?

[Sir Edward Garnier]

Yes. The DPA system is a new tool—there have been three DPA cases—but if the Serious Fraud Office is to carry out its international investigative work at the highest and most complex level, it will need a bigger budget. That was clear to me when I became Solicitor General in 2010 and it remains clear to me now. In 2010, as I understood it, the revenue budget was about £40 million and was set to go down over the course of the Parliament, under the comprehensive spending review, to something like £29 million.

When I went to the United States to discuss international corporate crime and learn from American prosecutors about the system for prosecuting corporate crime there, one of the federal prosecutors in Manhattan asked me how much our budget was. I said, “It’s about £40 million, going down to just under £30 million.” He laughed and said, “Is that just for one office?” I said, “No, it’s for the entire jurisdiction: England and Wales, and Northern Ireland”—unusually for a prosecuting agency in this country, the Serious Fraud Office covers England, Wales and Northern Ireland, but not Scotland. The American prosecutor found it unbelievable that one of the centres of the financial world had a serious fraud office that ran on that amount of money. He went on to joke that he spent more than that on flowers at home; I do not think that that was quite true, but I would not be at all surprised if he lived pretty well. Good luck to him.

What I want the House to understand is that there is no perfect way to sort this out. The right hon. Member for East Ham is entirely right to say that there are uncertainties and, to some extent, an absence of transparency—or at least prospective transparency—in how the blockbuster system works. There is retrospective transparency, because the Justice Committee, Parliament, the National Audit Office and non-governmental organisations such as Transparency International—to pick one organisation at random—can delve into the SFO’s financial workings. I accept that although the blockbuster system works up to a point, it is not ideal, but the best is often the enemy of the good; I would rather the SFO could apply to the Treasury for blockbuster funding than its being constantly in danger of having its budget slashed and slashed again. The SFO is unusual and not very well known and therefore not terribly politically popular. Obviously its work is often private, because if its investigations are not conducted in privacy, the villains get away—I take the right hon. Gentleman’s point about that.

To assist the SFO in its complicated and difficult work, we need to think hard about how to nail corporate misconduct. Will we be brave enough to move to the American system of vicarious corporate liability, so that when an employee commits in the course of their work a crime that has a benefit for their company, the company should be liable in criminal law—just as it would be in civil law for the negligence of one of its drivers, for instance? If not, we will have to extend the failure-to-prevent model. The Criminal Finances Bill that is going through the House at the moment will enact a failure-to-prevent tax offence; I have tabled some amendments that would extend the list of failure-to-prevent offences to a far wider collection of financial crimes. My amendments will not be agreed to, but Parliament needs to debate the issue. I look forward to co-operating with the right hon. Gentleman, who not only has experience as a Treasury Minister but can no doubt see the City of London across the road from his constituency office. I hope that the question of developing the criminal law to meet the increased sophistication with which business is done internationally will be cross-party and non-partisan.

On the right hon. Gentleman’s point about staff, I agree that any form of threat to any organisation from the promise or threat of change is distracting and destabilising. Now that the SFO is doing good work and building on its record of success with LIBOR, with the three deferred prosecution agreements and with the cases against Barclays bank, GSK and others, the one thing that it does not need is to be subjected to further interference. That would be destabilising and cause the employment equivalent of planning blight. Imagine a bright young lawyer in a City firm who thinks that it might be good to go and work for the Serious Fraud Office for a while. It would be, and it is, but if they know that the Government want to pull up the pot plant every 20 minutes and have a look at the roots, the SFO is not going to seem like a very stable place to go and work.

I want to see people from the private sector—the big City firms that have expertise in dealing with corporate crime, mergers and acquisitions and the highly complicated banking law that is sometimes involved—coming to work for the SFO for two or three years. I also want permanent members of the SFO staff to go into the City firms and other banking organisations, so that there is proper cross-fertilisation. What I do not want is for the current Whitehall fascination with sticking things with nice initials into great pots of alphabet soup to destroy David Green’s valuable work or distract him from it. I am proud to say that he is a personal friend of mine; he and his organisation have a proud record of demonstrating to the Government that it is worth every penny it gets and that it ought to get yet more money, so that it can catch more and more villains.

The reputation of our country is to a large extent built upon our financial services industry. Our corporations that sustain that industry—be they banks, be they insurance companies, be they whatever—and the people who work in it need to know that if they step beyond the line of honesty and acceptable behaviour, there is an investigating prosecuting authority that will not only come and get them but will make sure that they are convicted. That is what our constituents want. They want a vibrant financial services industry, but they also want an honest one, which attracts business, taxation and employment to our constituencies, whether they are in East Ham or Harborough.

Mr Owen, thank you for your patience. I hope that my hon. and learned Friend the Solicitor General can give me the reassurance that the SFO is safe from interference and distraction, and that we can look forward to another period of success, and well-funded success, for this most impressive organisation.

10:10

[Mark Field (Cities of London and Westminster) (Con)]

In congratulating the right hon. Member for East Ham (Stephen Timms) on securing this overdue debate on the workings of the Serious Fraud Office, I register my concern that the regular reliance of the SFO on special funding facilities from the Treasury lays it open to the charge that it lacks full and proper independence.

As we know, we live in financially straitened times for those agencies that depend on the public purse. Nevertheless, the sight of the SFO repeatedly having to go cap in hand to the Treasury for supplemental income opens up the Government to the potential accusation that they at least have the ability to close down what might be politically sensitive inquiries by the simple expedient of refusing the SFO funding.

I am not suggesting for one moment that the Government are behaving improperly. However, they must see that there is an inherent conflict of interest, which will persist unless and until the SFO’s funding is placed on a more sustainable and arm’s length basis.

[Alex Chalk]

Is it not important in this debate to keep a measure of context as well? The sums of money that we are talking about, while not insignificant, need to be set against a wider context. They are less in total, even including blockbuster funding, than the cost of one joint strike fighter and, given the ability of the SFO to protect British interests at home and abroad, that context is worth considering.

[Mark Field]

My hon. Friend makes a fair point, although in the comparison he draws he also possibly makes a point about the expense of defence procurement.

Those of us of a certain age cannot help but be transported back in time when we learn of the SFO’s requests for so-called blockbuster funding to pay for major investigations. Some Members will know that I am a keen pop music fan, and it is exactly 44 years ago today that the glam rock anthem “Blockbuster” by The Sweet was at No. 1 in the UK charts. Now, I am not sure that the 17-year-old future right hon. Member for East Ham was a great glam rock fan, but I am sure that his hair was fashionably longer back in 1973.

The cost of funding the SFO’s blockbuster investigations now invariably takes the SFO well beyond the Treasury’s year-on-year allocation of funding, as we have heard from other Members. Last year, the SFO’s spending reached some £65 million, which was a 12% uplift on the 2015 figure. Blockbuster funding has been applied for, not on an exceptional basis but for four of the last five years, so presumably that form of funding is here to stay permanently, at least in the eyes of the Solicitor General. I would be interested to hear what he has to say about that.

As my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) has pointed out, at the end of last year the SFO successfully secured funding to pursue criminal investigations against the Monaco-based Unaoil, which stands accused of securing complex corrupt contracts for a range of multinationals, including Rolls-Royce. I understand that the ongoing investigations over Barclays in Qatar and a range of potential fraud cases involving foreign exchange may yet have to be subject to special blockbuster funding appeals. Although I accept the Government line that that sort of mechanism allows the SFO great flexibility in the allocation of work, I trust that, as large and complex investigations become the norm, a serious re-evaluation of the pros and cons of the funding system for the SFO will be carried out.

I have to say something else, which I know will lead to my parting company with my right hon. and learned Friend in his paean to how wonderful the SFO is: I deeply regret that the reform of the entire workings of the SFO is overdue, and I believe that was yet another missed opportunity for the coalition Administration who were in office between 2010 and 2015.

For my part, as long ago as the autumn of 2009 I wrote two essays for the ConservativeHome website in the immediate aftermath of the financial crisis, setting out what I regarded as a proposed blueprint for the SFO. Then as now, I contend that an effective financial enforcement system requires the promotion of deterrence and competition, in order to boost consumer protection. Even at that time, a year after the financial crisis began, it seemed clear that, despite grandstanding galore from politicians, there was—indeed, there remains—a growing unease at the paucity of substantial change in the aftermath of that crisis.

Nowhere did that feeling resonate more than in the field of enforcement, where the prospect of adopting US-style powers to prosecute alleged wrongdoers in financial services has of course been dashed. Although over the past year or so the SFO has finally secured LIBOR convictions, it is in all honesty a body that I am afraid has long lacked clout and the respect of those who are most engaged in the financial industry.

As the right hon. Member for East Ham has said, the SFO has been operational since 1988 and the Roskill reforms. It is responsible for the detection, investigation and prosecution of serious fraud cases in England, Wales and Northern Ireland. Although it is operationally independent—as it should be—the SFO comes within the remit of the Attorney General and is given the power to bring criminal prosecutions directly. In contrast, the FCA is able to impose civil sanctions and launch criminal cases on matters such as market abuse, working in tandem with the City of London police and the Crown Prosecution Service.

There are some lawyers—perhaps those who are less close to the SFO’s workings—who continue to lament the difficulties associated with securing convictions for fraud, especially given the collapse of a number of highly complex jury trials. For that reason, many people feel that the introduction of a system of plea bargaining similar to that in the USA would not work. No one will risk blowing the whistle or turning themselves in when the likelihood of a successful prosecution being brought is—at least in recent years, as we have seen—so slim.

The SFO’s problems are not necessarily personnel problems; I agree with what was said earlier. However, having spoken to experts in this field, I have come to believe that one of the organisation’s main problems is in finding cases to investigate. Only when the police or the Attorney General have firm cause to believe that a criminal act has occurred is the SFO permitted to get involved. Moreover, when a case does get under way, its prosecutors routinely face months of battling defence lawyers before they can even get to trial. Of course, the defence has a strong incentive to engage in a war of attrition, in order to derail a prosecution on legal technicalities.

As a result, I think we have faced this task of reforming the financial services system and inculcating in the minds of its participants that sense of right and wrong, with an “umpire”—the SFO, in this case—that too often has lacked the tools or the respect from the market to do its job properly. I am not making any personal criticism of David Green, who, while at the helm, has developed a number of improvements to the SFO in the last three or four years.

Instinctively, I support a more robust economic crime policy, which would place the promotion of commercial competition at the heart of a new code of enforcement designed to deter fraudulent, anti-competitive or criminal activity. Such a policy should centre upon a new agency in place of the SFO, which would combine the SFO and the FCA’s enforcement division.

It is perhaps incongruous that the SFO stands under the jurisdiction of the Attorney General, although I very much appreciate that the right hon. Member for East Ham put that arrangement into some sort of historical perspective. Nevertheless, we should now look to place the SFO’s responsibilities within the remit of the Department for Business, Energy and Industrial Strategy, so that the SFO would work alongside the Competition and Markets Authority. By associating consumer protection with fraud and trust-busting, we would give competition its correct place as a central priority in the future commercial landscape.

[Sir Edward Garnier]

Is it not a problem to place the supervision of a prosecutor with a spending Ministry—a political Ministry? Obviously, the advantage of leaving the SFO and the CPS where they are—that is, under the supervision of the Attorney General—is that, in that respect, the Attorney General and the Solicitor General are not politicians, but protectors of the public interest. As soon as a Cabinet applies pressure upon a political Secretary of State, and we have seen this recently with the—

[Albert Owen (in the Chair)]

Order. Mark Field.

[Sir Edward Garnier]

I quite agree.

[Mark Field]

I very much take on board what my right hon. and learned Friend says, and I understand his concerns. He made a powerful point towards the end of his speech about the importance of there being public trust in the financial services sphere if it is to be the success we all hope it will be in the post-Brexit world.

To effect the necessary sea change in attitude and create a body with the powers of its US equivalent, we would need to be able to impose substantial fines on wrongdoers. Such fines could play a role in covering the costs of any new organisation. Clearly, there would be a need for some legislative changes, but measures would also need to be put in place to protect whistleblowers and offer genuine immunity to those who were aware of anti-competitive practice when they came forward.

[The Solicitor General (Robert Buckland)]

I am very interested in the point that my right hon. Friend outlines. What standard of proof would be applied in the proposed new regime?

[Mark Field]

I understand the point about moving away from a criminal more to a civil standard of proof. This is a back-of-the-envelope-type suggestion. I am just putting a few broader proposals forward because, as has been referred to elsewhere, the power of deferred prosecution is very much a positive step in the right direction. As Members know, deferred prosecutions will enable proceedings in a criminal case to be delayed for a given period, subject to certain conditions being met by the company in question. At the end of the set period, if all agreed conditions have been met—often, that includes paying a substantial fine along the lines of the one that Rolls-Royce had to pay—charges can be dismissed and the judgment of conviction can be entered. It is a more pragmatic prosecution-related process.

I could go on and on, but I know that at least one other Member wishes to speak and that we all want to hear from the Front-Bench spokespersons. Let me just say this, if I may: the incentives provided by healthy competition and the deterrent of stiff punishments should have formed the backbone to the new era of banking and business in the aftermath of 2008. The past two Administrations have missed the boat in restoring both the confidence of market professionals and the trust of the British public in our financial institutions. I very much hope that in addition to addressing the important issues raised in the thoughtful contributions made by the right hon. Member for East Ham and my right hon. and learned Friend the Member for Harborough, the Government will use this opportunity to take a fresh, broader look when it comes to the overall workings of the SFO, as well as its funding, and ensure that it has its rightful place within the enforcement sphere in the years to come.

[Albert Owen (in the Chair)]

I am grateful to the right hon. Gentleman. I remind Members that I will call the Front-Bench spokespersons at half-past 10. In calling you, Mr Shannon, I point out that it did not escape my notice that you were six minutes late joining us. That is discourteous to the Member leading the debate and to all other Members present. A less generous Chair would have gone straight to the Front-Bench speeches and ignored you. You are running out of excuses, but I ask you to be brief and finish at half-past.

09:00

[Jim Shannon (Strangford) (DUP)]

Thank you for calling me, Mr Owen. I apologise for not being here on time. I had a meeting with the—

[Albert Owen (in the Chair)]

No excuses.

[Jim Shannon]

I am just explaining the reason—

[Albert Owen (in the Chair)]

You are running out of excuses, Mr Shannon. Just carry on.

[Jim Shannon]

I congratulate the right hon. Member for East Ham (Stephen Timms) on making a very good case with lots of knowledge. His immense knowledge has been tremendous to have.

The role the Serious Fraud Office plays is essential and the House should ensure that it continues. The SFO initially had a financial threshold for its cases of £1 million, which was increased to £5 million. However, such thresholds soon became outdated, and the current director has published a statement of principle to make clear the main factors he takes into account when considering a case. We all know what those are: whether the apparent criminality undermines UK plc commercial or financial interests in general and those of the City of London in particular; whether the actual or potential financial loss involved is high; whether the actual or potential economic harm is significant; whether there is a significant public interest element; and whether there is any new species of fraud.

Current cases include, as other Members have said, investigations into the manipulation of the LIBOR rate; the recapitalisation deal by Barclays bank with Qatar at the height of the financial crisis; alleged bribes paid for the award of contracts relating to Rolls-Royce; alleged false accounting relating to Tesco; alleged bribery of public officials relating to Alstom; and alleged bribes paid to induce customer orders relating to GlaxoSmithKline. The list goes on and on.

Members have mentioned whistleblowing, and I myself have referred a whistleblowing incident to the SFO. Although it did not reach the aforementioned level, it was passed on to the financial regulatory authority. There must be a way to deal with the big firms; the individuals—the whistleblowers of this world—cannot take on such cases themselves. The SFO is essential in helping to take on the big firms. We have all watched or heard of the film “Erin Brockovich”, in which the David is able to take on the Goliath, but that is not the norm. The norm is that litigation costs are out of this world and, as a consequence, wrong is allowed to take place.

I fully support the SFO and hope I have made that clear. Indeed, its ability to look into cases should be much wider, and should include the case that I referred to it, which was of major importance at the time. However, there must be value for money and accountability for public spending, and the public must rest assured that there is no way to deal with those issues other than with the funding that is required.

Right hon. and hon. Members have spoken about how the core budget can be supplemented by blockbuster funding, and the right hon. Member for Cities of London and Westminster (Mark Field) mentioned that song from many years ago. He referred to hairstyles; I can refer to the days when I had hair. Indeed, I suspect that you remember those days as well, Mr Owen.

[Albert Owen (in the Chair)]

Absolutely.

[Jim Shannon]

It is always good to look back and remember what we had in the past.

The core budget can be supplemented by the blockbuster funding—that is clear—but if we are still recovering those large amounts of money, can that money go to the centre and can those recoveries be publicised, Minister, to show value for money? It is all about how the system works and how it works best.

I agree with the report from Her Majesty’s Crown Prosecution Service, which found that the blockbuster funding model does not represent value for money and prevents the SFO from building future capability and capacity. I understand the reasons and the thinking within that. Temporary and contract staff are often more expensive than permanent staff, and managing surge capacity is a constant drain on human resources and other staff. Increased core funding would provide the SFO with the ability to build capacity and capability in-house and lead to less reliance on blockbuster funding. I agree with that reasoning, and I think that other Members have expressed that also. Minister, I look forward to your addressing those issues to our satisfaction.

In a previous life, I worked as a local councillor—for some 26 years—and often queried the use of long-term temporary contracts for staff supplied through agencies because of the cost increase, often going through the pros and cons of the issue. Although I understand the rationale of needing to grow or shrink depending on the size of the case, a larger base to begin with could—would, I believe—save money and provide job security for those with the specialised know-how. There must always be the ability to access blockbuster funding for cases such as LIBOR, which was an extremely transparent case, but there should not be a standard top-up that excuses the need to do what every Department from Health to Work and Pensions has done—cost-cut, look at efficiency measures and see whether staffing arrangements are adequate.

In conclusion, and ever mindful of the timescale that you set me, Mr Owen, I do not believe that what I have just set out is happening in the SFO. I put on record my wholehearted support for the body, but I believe that it must learn to cut costs like the rest of us. I agree that that can be done through a larger core budget—that is where we start, and the Minister might refer to it—and through the ability then to apply for blockbuster funding in exceptional cases, not just as a matter of note or opportunity. Thank you, Mr Owen.

[Albert Owen (in the Chair)]

I now call the Front-Bench spokespersons, starting with Kirsten Oswald.

09:00

[Kirsten Oswald (East Renfrewshire) (SNP)]

I thank the right hon. Member for East Ham (Stephen Timms) for securing the debate and for the very considered way in which he approached the topic. In fact, all the speeches we have heard have been considered and thoughtful on the question of how we should move things forward.

The right hon. Gentleman highlighted the complexity and depth of the work of the Serious Fraud Office, and I was pleased that he highlighted the prosecutions for LIBOR rigging. I was also interested in his comments and those of other Members on whether the funding mechanisms allow for the best recruitment of appropriate staff. The right hon. and learned Member for Harborough (Sir Edward Garnier) made a number of useful points relating to that, as did the hon. Member for Strangford (Jim Shannon) and the right hon. Member for Cities of London and Westminster (Mark Field), who made me smile by admitting to a love of glam rock. I entirely agree with him on that. I hope he will agree with me that the SFO has a vital role in prosecuting complex fraud and tackling corruption. I hope he will also join me and the Scottish National party in calling on the Government to increase funding to the SFO to show their commitment to fighting fraud and corruption—adding clout, as he would have it.

The UK Government have indicated that they seek to move towards more of a tax haven economic model, which rings serious alarm bells for combating fraud. The right hon. and learned Member for Harborough spoke about reputation, which is key here. The SNP calls on the UK Government to respond to the findings in the report by the Crown Prosecution Service inspectorate and ensure that future funding arrangements ensure that the SFO provides the very best value for money. As the right hon. and learned Gentleman pointed out, the Crown Office and Procurator Fiscal Service is Scotland’s sole prosecution service, so the SFO does not have jurisdiction to prosecute in Scotland, although its powers may be used to investigate serious or complex fraud that is prosecutable in England, Wales or Northern Ireland. The SFO works with Scottish authorities on UK-wide fraud. I am interested in this issue because it has relevance for some cases that I am dealing with.

As Members may be aware, I have recently taken on chairmanship of the all-party parliamentary group on the Connaught Income Fund. As happens with many cases of its kind, the Connaught case has disappeared into an extended limbo as investigations take place. To the astonishment of many, those investigations are being conducted by the Financial Conduct Authority and not by the SFO or even by the City of London police. When I read the subject of this debate, it set me wondering about what we should expect from the SFO as part of its core funding. Why was the Connaught case not quickly elevated to the SFO for investigation? Why has it been dealt with as a matter of regulation, rather than of potential criminality from the start?

The Connaught fund was set up in 2008 and collapsed in 2012. A related case, Connaught v. Hewetts, was heard in the High Court in July last year. Evidence in that case indicated that Connaught had all the hallmarks of being a dishonest enterprise from the start. Instead of gathering funds from a range of investors and lending them on to a wide range of borrowers, the fund made all its loans to a single group of companies, the Tiuta Group. Tiuta immediately started to use the Connaught loans to pay off existing loans and to bankroll dubious projects already sitting on its books. Early in 2011, a very clear allegation of fraudulent behaviour was made to the Financial Services Authority by George Patellis, the newly arrived chief executive of the Tiuta Group. Despite that, Connaught and Tiuta were allowed to continue their activities for many more months, before finally going into liquidation in 2012. It is not even clear if the case was raised with the SFO, which raises the question of just what we are funding the SFO for.

Since I arrived in the House, the Connaught case has been raised on a number of occasions, both in debate and in questions. Ministers and the Financial Conduct Authority have given assurances that the police have been informed of the activities around the fund, but to date there have been no prosecutions. I have written to the City of London police’s economic crime unit, seeking assurances that a police investigation is under way. I will let Members know the outcome of that correspondence when I receive a response.

The reason for raising the matter today is that when I looked at the briefing, I decided to return to the question of why the Serious Fraud Office was not at the heart of the Connaught inquiry. The director of the SFO has helpfully provided a statement of principles he uses when considering a case, and I have compared the Connaught case with the factors contained within that statement. If Connaught meets the criteria for cases that the SFO should look into, that suggests that the organisation’s core funding should cover at least exploratory investigations in this situation.

The first criterion the SFO uses is whether the actual or potential financial loss involved is high. With more than £100 million lost by investors, the Connaught case clearly meets that threshold. Is it any surprise that investors are surprised that the Connaught case has languished for so long, instead of quickly being elevated to the SFO?

The second criterion used by the SFO is whether the actual or potential economic harm is significant. In this case, it is. Many Connaught investors were looking for an unexciting but steady rate of return on their capital, with no expectation of risk. Indeed, when the fund was launched, it was called the “Guaranteed Low Risk Income Fund”. Not surprisingly, many of the people attracted were looking for a low-risk income fund. Immense damage was caused to the life plans of many. If the core funding of the SFO is not intended to protect such investors, perhaps the Solicitor General can explain why.

The third criterion for SFO involvement is whether there is significant public interest in a case. Again, with Connaught, for many reasons there has been huge public interest and significant public sympathy for those who have lost money. There is also a great deal of interest in the failure of the regulatory system to prevent harm in response to the whistleblowing by Mr Patellis. The information he provided appears to have been simply ignored by the FSA for many months. In a recent report on a complaint by Mr Patellis, the Complaints Commissioner referred to an internal memo within the FSA, acknowledging that there was an opportunity here to prevent harm, rather than simply clear up afterwards. There is a great deal of public interest in why the FSA failed and whether its replacement, the FCA, is any more likely to succeed and if not, why not. Surely the SFO would not be so ineffective in its handling of this kind of complaint.

The last component of public interest is the role of Capita, which is one of the major players in the UK’s financial services sector and a supplier of services to many levels of Government. As the initial operators of the fund, Capita gave Connaught an aura of credibility that it clearly never deserved. People want to know who in Capita knew what and when about the Connaught fund. Is such post-financial disaster investigation not the role of the SFO?

As a prosecuting authority, the SFO clearly has the power to demand papers, but so do the FSA and the FCA. In at least one instance, Connaught’s auditors were asked for papers and responded that it was beyond their remit to produce them. Astonishingly, the regulator simply dropped the request. Would the SFO or the City of London police have reacted in the same way? If there are multiple agencies in the field, yet not one of them seems able to impose on those suspected of economic crimes the level of disclosure that is routine in other kinds of investigation, what are we funding all these agencies for?

The fourth criterion for SFO involvement is whether it is a new species of fraud. Well, I am no expert, but I gather that the rules regarding the promotion of unregulated collective investment schemes, such as Connaught, have been changed. That suggests that some new form of fraud was seen to emerge in this case, and steps were taken to cut it off.

The final criterion used in assessing SFO involvement is whether the apparent criminality undermines UK plc commercial or financial interests in general or the City of London in particular. Now, that is tricky. Many of those involved in the Connaught case are suspicious that the lack of action six years after Mr Patellis blew the whistle is because of the damage that full and early revelation of information in the course of a fraud trial might have done to the reputation of Capita and the wider financial services sector. My point in this debate is that after reviewing the rationale for the SFO’s work, I see Connaught as something that should have been accommodated in the agency’s core funding. I am told that an agreement is in place between the FCA and the police to prevent overlapping investigations. Having looked at the protocol between the Attorney General and the directors of the prosecuting departments, including the SFO, I was surprised to see no reference to that agreement, at least not explicitly, within the protocol.

Many are concerned that the delay in concluding the Connaught investigation will lead to any criminal charges that emerge being challenged on the grounds of delay. I am not sure whose interests are served by having such a wide number of agencies with apparently overlapping and sometimes clashing interests. It would certainly be in the interests of justice to ensure a great deal more clarity and security of funding for whichever agency is on the frontline of trying to protect the public from deceptions, frauds and scams—the kind of thing perpetrated on Connaught investors. I look forward to hearing from the Solicitor General about the issues of the SFO and, in particular, the Connaught fund.

10:38

[Nick Thomas-Symonds (Torfaen) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Owen, for what I believe is the first time. I refer to my relevant entry in the register and the fact that I am a non-practising door tenant at Civitas Law in Cardiff. I pay great tribute to my right hon. Friend the Member for East Ham (Stephen Timms) for his measured, carefully phrased contribution. Whenever I listen to him, he always adds a great deal to the quality of the debate, and that has to be said about his contribution this morning. I thought he set out extremely well the emergence and creation of the Serious Fraud Office in the 1980s and the importance of the Roskill model, with investigatory and prosecuting functions under one roof together with all the other necessary skills, including forensic accountancy. He set out the SFO’s history extremely well: its emergence from the fraud trials committee and its creation under the Criminal Justice Act 1987.

The contribution from the right hon. and learned Member for Harborough (Sir Edward Garnier) was extraordinarily erudite, if I may say so. He set out extremely well the complexity of the cases, not simply in terms of their scope and scale but in terms of the law itself. We are not in a position where vicarious liability has been extended into the criminal corporate sphere in the UK. We are therefore left with the directing mind concept, which, as he pointed out, was originally devised in the mid-Victorian era, when companies were different from how they are today. Of course, there is the ongoing importance of the failure-to-prevent model under section 7 of the Bribery Act 2010.

The right hon. Member for Cities of London and Westminster (Mark Field) put his finger on one of the key issues in this debate: transparency of the funding model. It was put well by the right hon. and learned Member for Harborough when he talked about prospective and retrospective transparency. Although I am not for a moment suggesting there has been political interference from the Treasury, the truth is that the model lends itself to the appearance of a potential conflict of interest in the way it is set up. The hon. Member for East Renfrewshire (Kirsten Oswald) put it quite well when she talked about the public interest in these cases.

I give the Solicitor General great credit for recently providing a letter requesting additional funding. Transparent though that is, the content of the letter illustrates the complexity, because in fact the parliamentary timetable means that the SFO cannot expect to have access to any additional funding from the supplementary estimates until the third week in March, so there has to be a cash advance from the Contingencies Fund to keep cash flowing until then, which is not the clearest of situations to be able to explain to the public.

The hon. Member for Strangford (Jim Shannon) pointed out very well the importance of value for money, which is what I want to direct my remarks to. Clearly, everyone in this room is united by the desire to see good corporate conduct, and the Serious Fraud Office is an absolutely essential part of that. However, on the funding model, I would press the Solicitor General to look at the balance between core and blockbuster funding and whether we have that precisely right.

It is difficult at times to judge the performance of the Serious Fraud Office. I agree with the right hon. and learned Member for Harborough, in that we are always looking to improve. My right hon. Friend the Member for East Ham was described as a critical friend, and I would put myself in the same category. Looking at prosecution and conviction rates is not the easiest thing to do. In 2015-16, at one point it was down to about 31%. Objectively, that does not look like a good figure, but, looking at the director’s evidence to the Justice Committee, it came about because there were two defendants who ended up not being fit to stand trial, which severely affects the statistics, because we are dealing with such a small number of cases.

Similarly, although the confiscation rates are important, they do not show appreciation for the fact that not every case is as cash-rich as another might be, so even they are not necessarily an essential yardstick. I ask the Solicitor General to look more generally at that and at transparency, which is important, particularly in relation to the use of deferred prosecution agreements and when they are thought appropriate. Cases should be monitored because of the situation I have described of defendants being too ill to stand trial. That may not be within the control of the SFO, but where there can be careful monitoring of whether it is realistic that something will ever come to trial, that should be considered. Over time, we need to look not only at the number of acquittals, because that is not always the best indicator, but at whether, over a long period, there were cases falling at half-time in the criminal courts, which would be a cause for concern.

We could also look at international comparisons. America has a very different legal framework and different corporate culture, but we should still look around the world at how other agencies perform and at how economic crimes are tackled to see whether there can be improvements in that regard.

On the specific model, my right hon. Friend the Member for East Ham quoted the director of the Serious Fraud Office at the Justice Committee in October last year. He said:

“I would like to move to less dependence on blockbuster funding and more core funding.”

Indeed, the investigation by Her Majesty’s Crown Prosecution Service inspectorate concluded that it was not necessarily providing the best value for money. When the Solicitor General comes to address the matter, I am sure he will mention the issue of unused capacity if the budget was set too high for too long. At the same time, we have to acknowledge that we may be preventing the Serious Fraud Office from building future capability and capacity if, as my right hon. Friend the Member for East Ham pointed out, we have staff who build expertise in a certain area and are then, in essence, lost to the SFO. There is also the issue of large surges of temporary staff. Not only does that create a burden on human resources management, but temporary staff are often more expensive than permanent staff.

I appreciate the flexibility of the blockbuster funding model, but I am directing my remarks to the balance between core funding and the additional funding that is available. In some years, such as 2015-16, the blockbuster funding nearly matches the core funding at the start of the year—I think it is £33.8 million versus £28 million. That may be only one year, but it is illustrative of what can happen.

I have a series of questions to pose to the Solicitor General. Could a greater core element of funding increase the in-house capacity and be of benefit to the Serious Fraud Office? Can it enhance the depth and quality of expertise available in-house? Could it increase value for money? In addition, could it increase diversity? The Solicitor General may have more up-to-date figures, but as of 31 December 2015 the Serious Fraud Office was the only one of the Law Officers’ departments with far more men than women. All the others had more women than men, but not the Serious Fraud Office.

There is also the issue of what I have described as the Treasury veto. Is that system necessarily the best sustainable long way forward? Can the Solicitor General look at ways in which that might not be necessary? For example, could there be a contingency fund, with Law Officers having far more authority over additional funds? Is the Treasury necessarily needed to give that specific assurance or permission?

In conclusion, the Serious Fraud Office plays a vital part in good corporate governance across the United Kingdom. Everyone who has made a contribution to this debate today wants to see that, but of course we want to see the Serious Fraud Office, even with its achievements, improve. I look forward to hearing what the Solicitor General has to say about that.

10:48

[The Solicitor General (Robert Buckland)]

It is a pleasure to serve once again under your chairmanship, Mr Owen. I thank and pay tribute to the right hon. Member for East Ham (Stephen Timms) for securing this debate, which has been wide-ranging and well informed. Perhaps we should expect that when we have a former Chief Secretary to the Treasury in the room and one of my predecessors as Solicitor General, my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier). Indeed, my right hon. Friend the Member for Cities of London and Westminster (Mark Field) also has long expertise in and knowledge of combating financial crime.

The hon. Member for East Renfrewshire (Kirsten Oswald) raised a specific case. I am grateful to her for raising such a serious matter. She is right to say that from the layperson’s point of view, it can be—to borrow a phrase from my right hon. and learned Friend the Member for Harborough—a bit of an alphabet soup when it comes to the investigation of serious crime. I have not had notice of that particular issue. I make no criticism of the hon. Lady for that, but my advice would be to write directly, if she has not already, to the director of the SFO, copying in the Law Officers, so that we can have full and up-to-date knowledge of the serious case she raises.

I will do my best in the 10 minutes or so that I have to answer the questions posed by the right hon. Member for East Ham. I come straight to blockbuster funding. I have to confess that I am too young for glam rock, and perhaps that is a good thing. In my mind, the word “blockbuster” conjures up the golden age of Hollywood. I do not know whether that is an appropriate metaphor, because we are dealing with an independent prosecutorial authority that, for the best part of 30 years, has worked in a particularly specialised way, bringing together investigators and prosecutors from the outset. That is the Roskill model to which right hon. and hon. Members have referred. To be scrupulously fair to the right hon. Gentleman, he conceded—I think properly—the point that some element of blockbuster funding is desirable and, indeed, appropriate. When he was in the Treasury, I am sure the same rules were applied to the SFO. The question is not one of principle therefore, but of degree.

I come back to the age old question of balance and how to maintain that from year to year. The particular criterion that is now used by the Treasury was set out back in October 2012, when the then Chief Secretary to the Treasury came to an agreement with the director in relation to the funding of very large cases. Blockbuster funding is applied for when it is expected that costs to investigate and potentially prosecute a case will exceed 5% of the SFO’s core budget, which, at present, are cases likely to exceed £1.7 million. The ability to have recourse to funding for very large cases is a model that the Law Officers fully support. The SFO has to present a business case to the Treasury, but I reassure right hon. and hon. Members that it is not the Treasury’s function to perform the role of gatekeeper and assess the legal merits of a particular case. That is not its function at all. As the right hon. Member for East Ham will well know, its function is to make sure that the case is sound and that there is evidence on which to base that application; that the SFO has demonstrated that there is a real need for the money based on specific investigations or day-to-day needs. It is on that basis that we would see an advance being made.

The hon. Member for Torfaen (Nick Thomas-Symonds) rightly refers to a written ministerial statement that I am laying today to outline the position. I agree with him that it might seem rather inelegant, but, when it comes to the need to be flexible and to recognise the ever-changing demands on the SFO, I am afraid a degree of inelegance is a price worth paying for the practical effect of making sure that the SFO has fleetness of foot for dealing with a case load that varies dramatically year on year.

[Nick Thomas-Symonds]

I do not think there is any dispute on the principle and the flexibility. The dispute is about the balance. Does the Solicitor General feel that the balance has been right in recent years? Should it be adjusted in favour of core funding?

[The Solicitor General]

The hon. Gentleman is right to bring me back to balance. From year to year, it is very difficult to predict. There will be times—he cited a year—when the amount of blockbuster funding exceeds the core funding, but there are other years when that is not the case. That underlines more eloquently than I can the essential fluidity of the system.

In replying to the right hon. Member for East Ham, I would deal with the question in this way. It would be troubling if either the Law Officers’ Department—there was once a suggestion that our Department should be the gatekeeper—or the Treasury acted in some way as a second opinion, second-guessing the professional judgments of members of the SFO. That would be wrong and is not what happens when it comes to blockbuster funding. No application for blockbuster funding has ever met with a refusal. That is a very important point to hold on to when it comes to the Government’s understanding of the reputational importance that the fight against economic crime has not just for the Government, but for the United Kingdom generally.

[Mark Field]

rose—

[The Solicitor General]

I give way to my right hon. Friend, who made that point.

[Mark Field]

The Solicitor General made a statement on the instances of refusal by the Treasury. I was going to come on to that. Has there been a refusal on the degree of blockbuster funding? It might not have been about the overall amount, but has there been a sense of haggling between the SFO and the Treasury over the amounts that should be given for particular cases?

[The Solicitor General]

My right hon. Friend invites me down a course that I am perhaps not fully qualified to talk about. There will of course have been discussions about the amounts, but at no time—this is again very important—has funding been a bar to the proper investigation of cases that are brought before the SFO and meet the criterion that the hon. Member for East Renfrewshire and the hon. Member for Strangford (Jim Shannon) set out. Previous Law Officers, including my right hon. and learned Friend the Member for Harborough, and current Law Officers have made it clear that funding issues will never be a bar to the prosecution of serious fraud in this country. That is why the reputation of the United Kingdom, to which organisations such as Transparency International have attested, is as one of the leaders in the field for the prosecution of economic crime.

In response to my earlier invention, my right hon. Friend the Member for Cities of London and Westminster conceded that his interesting ideas, which I very much hope will be fed into the Cabinet Office review of economic crime, must acknowledge the fact that we are dealing with not a regulatory but a prosecutorial authority. The tests, with which most hon. Members are familiar, of reasonable prospect of success and the public interest, as well as remembering the high standard of proof that needs to be reached, are vital when it comes to the criteria for an independent prosecutorial authority.

Right hon. and hon. Members will know that the Ministry of Justice is conducting a call for evidence on corporate responsibility. The Government have an excellent track record in that area, having supported and brought into force the Bribery Act 2010, particularly section 7, which created a failure to prevent bribery offence. A similar offence in the field of tax evasion is in the Criminal Finances Bill and the Government will seriously consider the outcome of the forthcoming consultation when it comes to failing to prevent economic crime.

I think the question of the attitude of the director to blockbuster funding has been adequately covered. I have described the system as inelegant, or imperfect. Although the director works within the system, at no point has he felt under any improper pressure from the Government, or the Treasury, on applications for funding. That is very important, bearing in mind the current director’s record in improving and enhancing the role of the SFO in our public life. In paying warm tribute to David Green, I also commend him for the creation of a chief operating officer post, which I think will go a long way to dealing with some of the human resources points raised by hon. Members.

On diversity, I am glad to say that when it comes to new starters at the SFO, 51% are female. I accept the diversity figures. However, before I sit down to allow the right hon. Member for East Ham to conclude the debate, I would say that it is tempting to seek to create a permanent cadre of staff at the SFO who might be able to build up expertise, but each large case stands very much on its own facts. The context of each case can vary widely. Therefore, the continuing need for flexibility in employing specialist agency staff who might be familiar with a particular scenario will not go away. I make no apology for the fact that flexibility of funding is important in terms of year-to-year demand, and employing and engaging agency staff can be of real benefit when it comes to the prosecution of specialist crime.

10:59

[Stephen Timms]

I am grateful to everyone who has contributed to the debate. Sadly, I do not think I have time to discuss glam rock. I want to ask the Solicitor General if he will reflect on the fact that everybody who spoke in the debate before him—I think I am right in saying that—agreed that the current heavy reliance on temporary blockbuster funding for the SFO is not the optimal arrangement. He accepted that it was not elegant, but it is not really the elegance that is the concern—it is the fact that it is an expensive way to pay for the SFO’s work and undermines its ability to build up a cadre of long-term, committed expertise.

Motion lapsed (Standing Order No. 10(6)).

11:00

Sitting suspended.