House of Lords

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Tuesday 20 June 2023
14:30
Prayers—read by the Lord Bishop of St Edmundsbury and Ipswich.

Industrial Strategy

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
14:37
Tabled by
Lord Allen of Kensington Portrait Lord Allen of Kensington
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To ask His Majesty’s Government what is their industrial strategy.

Lord Haskel Portrait Lord Haskel (Lab)
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In the name of my noble friend Lord Allen, and with his permission, I beg leave to ask the Question standing in his name on the Order Paper

Earl of Minto Portrait The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)
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The Government have set out an ambitious plan for growth and prosperity. Delivering economic growth in key sectors is a priority and the Chancellor has identified five growth sectors for the UK: digital technology; green industries; life sciences; advanced manufacturing; and creative industries. The Government have announced a £500 million per annum package of support for 20,000 research and development-intensive businesses and £650 million to support the UK’s life sciences sector.

Lord Haskel Portrait Lord Haskel (Lab)
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I thank the Minister, but we are still little the wiser about a strategy. The Prime Minister removed the words “industrial strategy” from the business department. As Chancellor, he scrapped the Government’s industrial strategy and the independent Industrial Strategy Council. Instead, we now get announcements, as now—soundbites instead of sound economics. Can the Minister say precisely when the Government will produce a much-needed comprehensive and co-ordinated industrial strategy? That will help business, industry and investors plan for the long term and, we hope, get some growth and progress back into the economy.

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I think noble Lords will agree that this is a time for specialisation rather than a single, overarching, broad strategy. By targeting specifics, such as the five key growth sectors, we can be more effective and, in this age, more agile to respond to change.

Lord Howell of Guildford Portrait Lord Howell of Guildford (Con)
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My Lords, does my noble friend agree that a key component of a successful industrial strategy and growth is massive investment, both from foreign sources, on the scale we used to attract and are not attracting now, and of course from pension funds, which are managing trillions and are ready to invest? Does he agree that in the energy sector the attraction is going to be more to quick-build small modular reactors than to any large, rather out-of-date, massive giants which take years to build and are full of risks? Will he advise his friends, as a priority, to put all their efforts behind developing small nuclear reactors as part of our sensible energy strategy and our move to a decarbonised electric sector?

Earl of Minto Portrait The Earl of Minto (Con)
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I thank my noble friend for his comments and his question: indeed, I will. On the specific question of investment, the Government, along with Rolls-Royce, have invested over £300 million in small modular reactors. On inward investment—again, I agree that a massive amount of inward investment is always required—we have arrangements with the UAE, bringing in £5.9 billion, and Qatar, for £10 billion. We know about the Nissan/Envision billion-pound investment up in the north and Ford has put in nearly £400 million recently as well.

Lord Fox Portrait Lord Fox (LD)
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My Lords, Make UK, the manufacturing organisation—it represents most of the countries’ manufacturers—issued an authoritative report on industrial strategy. Some 99% of respondents said that they believed that the UK should have an industrial strategy—which indicates that they do not think that the UK has one now. Will the Minister acknowledge that the very people who are going to deliver what he talks about have not heard what he thinks he has told them?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I understand exactly the point that is being made. Communication is critical to any successful enterprise, and there is no doubt that the change from a unified industrial strategy to one that is more targeted and focused is, at times, not the easiest message to get across. However, I believe that the five growth sectors for which the specific strategies have been written will be very effective.

Lord Aberdare Portrait Lord Aberdare (CB)
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My Lords, an essential part of any industrial strategy is a strategy for addressing the skills needs on which it depends. When the Minister reads the Make UK report that the noble Lord, Lord Fox, has just referred to, he will find that it sets out a long-term vision for UK manufacturing and highlights the failure of current apprenticeships policy to support manufacturers in developing the talent pipeline they need. When will the Government respond to the barrage of demand from employers for a more flexible apprenticeship levy, with greater incentives to offer apprenticeships addressing skills and labour shortages?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I think the whole House agrees with that point, and I can assure the House that the whole question of the apprenticeship levy and the flexibility thereof is being looked at closely right now.

Lord Woodley Portrait Lord Woodley (Lab)
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My Lords, I have raised my serious concerns about the lack of industrial strategy for the automotive sectors, important as they are for our country. But I also pay tribute to the Government for supporting the Jaguar Land Rover battery plant that could easily have gone to Spain—well done. But does the Minister agree that this is small compared with the billions and trillions being set aside by the EU and the USA to encourage investment, particularly in battery gigaplants? What is our industrial strategy for this important sector, which, clearly, as I said last time, is genuinely at a tipping point?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I quite agree with the noble Lord about the success of the announcement from JLR. It is extremely important that we continue to invest in all sorts of technologies and advances. We are continuing to see investment into that sector. As for where the tipping point comes, I am not quite clear. But I will go back and write to the noble Lord with specifics.

Lord Bellingham Portrait Lord Bellingham (Con)
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My Lords, is the Minister aware that only 15% of SMEs actually export? If that figure could be increased substantially, maybe to 20% or 25%, it would not only create a lot of jobs but help our balance of trade and be a crucial part of our industrial strategy.

Earl of Minto Portrait The Earl of Minto (Con)
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I entirely agree with my noble friend. I assure him and the whole House that the Department for Business and Trade is specifically making it easier for small and medium-sized enterprises to consider and go through the process that they fear is difficult—and in fact is not so difficult—to start exporting, to the benefit of all.

Lord Anderson of Swansea Portrait Lord Anderson of Swansea (Lab)
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Do the Government agree that a continuation of steel production in the UK is vital to our industrial future? Therefore, does an industrial strategy include the investment at Port Talbot steelworks which Tata Steel is now wishing to make, without which there will be an enormous hole in employment in south Wales?

Earl of Minto Portrait The Earl of Minto (Con)
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The Government fully recognise the role that steel plays within the UK economy, and they are working with the industry on its decarbonisation options. It is a foundation industry, it is high-wage, and it is extremely important to this country for all sorts of reasons. On the specific issues with Port Talbot and Tata, there are ongoing negotiations, which I am sure the House will realise I cannot divulge. But we are closely involved with Tata, British Steel and Liberty.

Baroness Hoey Portrait Baroness Hoey (Non-Afl)
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My Lords, an industrial strategy must be for the whole of the United Kingdom. How does the Minister think it will work in Northern Ireland, since so much in Northern Ireland is still under European Union rules and not British law?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, there is a conference later this year on investment into Northern Ireland, which I am sure will prove a successful enterprise. Investment into Northern Ireland is critical; the difficulty we have had with extricating that part of the United Kingdom is well known.

Baroness Chapman of Darlington Portrait Baroness Chapman of Darlington (Lab)
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My Lords, Make UK says that the UK is

“the only leading nation in the world without a comprehensive, long-term industrial plan”.

The Government might be on slightly firmer ground on the UK storming ahead of other economies but a range of initiatives, as the Minister has referred to, is not a strategy. The Government are sitting on their hands and we are losing out to the US and the EU too often when they should be acting. They will have to grip this at some point. When will they?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, the Atlantic declaration shows how closely we are working with our American colleagues. The value of trade with that nation is well known and there is no question that we will be able to grow that and continue working with it. The green deal industrial plan is being followed in the EU; I hope that we will get some breakthroughs in that area too.

Inheritance Tax: Cohabiting Siblings

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
14:47
Asked by
Lord Lexden Portrait Lord Lexden
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To ask His Majesty’s Government what plans they have, if any, to make transfers of property between long-term cohabiting siblings exempt from inheritance tax.

Baroness Penn Portrait The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
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My Lords, the long-standing inheritance tax assumption for wealth transfers between spouses and civil partners reflects the formal legal obligations that marriages and civil partnerships necessarily entail. While the Government understand the issue, there are no plans to exempt transfers of property between long-term cohabiting siblings.

Lord Lexden Portrait Lord Lexden (Con)
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My Lords, the Government say that two people who have shared a jointly owned home for years must be in a legal relationship if inheritance tax is to be deferred when they are parted by death. I remind the Government that they blocked my Private Member’s Bill to open up civil partnerships to siblings after its Second Reading, where it gained wide support across the House. This would have enabled siblings to establish legal relationships and solve the problem. Why on earth should the postponement of tax on the death of the first of two people united in a loving association for years require sexual activity between them? Why should the survivor of a chaste relationship have to face the agony of selling the family home on the death of a loved partner to pay an inheritance tax bill? Have this Government no compassion?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, it is important to set this Question in context. Each individual has a nil rate band of £325,000. Two cohabiting siblings who jointly own a house may have an inheritance tax liability only when the value of the house exceeds £650,000—well in excess of both the average UK house price and the average London house price. There are also circumstances in which inheritance tax can be paid over a period of time, giving the beneficiaries time to adjust to changed circumstances. That facility would enable people in those circumstances to remain in their home, which I believe is the concern at the heart of my noble friend’s Question.

Lord Pannick Portrait Lord Pannick (CB)
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My Lords, I declare an interest in that I acted for the two Misses Burden, who unsuccessfully challenged this policy in the European court in 2008. This is not a question of law but a question of fairness. How can it be fair for two elderly sisters who have lived together for the whole of their lives, jointly own their property and have each made wills leaving the property to each other on the death of the first to be denied a tax benefit enjoyed by married couples and civil partners who may have a far less committed, developed and permanent relationship, or does fairness not count in the implementation of the tax system?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the Government have attempted to draw up a system that is fair but recognises the unique status of marriage and civil partnerships. As I pointed out to your Lordships’ House, very few estates fall subject to inheritance tax, and we have put in place processes to ensure that those who live in the same house, for example, are able to meet their obligations over time, to lessen the impact of inheritance tax.

Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (LD)
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My Lords, one can leave all above £325,000 to your spouse, your civil partner, a charity or a community amateur sports club. Can the Minister explain how siblings are less important than a community amateur sports club?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I do not think that is the rationale behind the approach. The rationale in distinguishing between marriage and civil partnership and other relationships is the unique legal status and the unique legal and financial obligations that people enter into in that regard. As the noble Lord, Lord Pannick, referred to, this question was also referred to the courts, which found in the Government’s favour.

Baroness Browning Portrait Baroness Browning (Con)
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Does my noble friend accept that the Treasury seems to regard inheritance tax as locked into the Ovaltine family of the 1950s with 2.4 children? As my noble friend Lord Lexden’s Question indicates, it is about time that it took a long look at how inheritance tax works for families that do not have 2.4 children. Can I add to the sibling argument, and I declare a personal interest, the parents who take responsibility for disabled adult children for all of their lifetime, where the amount of money that can be passed on during an adult’s lifetime is severely limited on the assumption that lawyers—looking round the Chamber now, there are lots of grins around me—will be able to manage the trusts for that money after the parent has died? The parents want to do what is right for their children during their lifetime.

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I am happy to look at the specific circumstance that my noble friend raises. I do not think the Government have an old-fashioned view of how families are formed in modern times; that is why the benefits of being able to pass on inheritance, if you are married, is also extended to those who are civilly partnered.

Lord Livermore Portrait Lord Livermore (Lab)
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At the last Budget, the Government abolished the lifetime limit on tax-free pension savings. In the middle of a cost of living crisis, this giveaway for the very wealthiest cost £1.2 billion and increased the value of a £2 million pension pot by some £250,000. It also opened up an inheritance tax loophole whereby it is now possible to accumulate unlimited sums within a pension fund and pass them on entirely free of inheritance tax. What assessment has the Treasury made of the number of very wealthy individuals who will now use pension funds as a vehicle for inheritance tax planning, and at what additional cost?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I was disappointed that the party opposite did not support our changes to pensions, which were key for many public sector workers in respect of recruitment and retention for their posts. The primary purpose of a pension is to provide income or funds that individuals can draw on in retirement. If an individual dies before they get to use it for that purpose, we believe their beneficiaries should be able to have those funds, and that is why unspent pension pots do not normally form part of an individual’s estate. As the Chancellor said to the TSC after the Budget 2023, we will keep any changes to the lifetime and annual allowances under consideration and look at the impact.

Baroness Deech Portrait Baroness Deech (CB)
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My Lords, I think the Minister is avoiding the issue of principle. Ever since I took an interest some 15 years ago in the case of the Burden sisters, referred to by the noble Lord, Lord Pannick, I have wondered why the financial inheritance benefits of coupling up are confined to sexual relationships, whether it is husband and wife, civil partners or even a deceased person and the person they lived with. What is so special about the sexual relationship, when you might have two sisters who have been committed for much longer, are unable to marry and have undertaken freely to take care of each other? The Government would not even lose in the end, because the inheritance tax is rolled over. Will the Minister please address the issue of principle?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I do not think that I am not addressing the issue of principle; I am just disagreeing with some noble Lords on the conclusions of that question. The Government’s view is that marriage and civil partnership relationships necessarily entail particular legal and financial obligations to one another for the parties concerned. We think it is right that those obligations are reflected in our inheritance tax system. When it comes to the impact of inheritance tax, however, on people in the circumstances to which the noble Baroness referred, there are several measures in place to ensure that those impacts are minimised. Those include the existence of the nil-rate band, which means that the vast majority of people in this country—fewer than 6% of estates this year are due to fall subject to inheritance tax—do not pay inheritance tax. For those who are affected, there are measures in place to ensure the smoothing of those obligations when they find themselves in circumstances that we have heard about today.

Lord Forsyth of Drumlean Portrait Lord Forsyth of Drumlean (Con)
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My Lords, following up on that last point, is not the problem that the only people who pay inheritance tax are the middle classes, or people whose only asset is the roof above their heads, whereas very rich people are able to buy farmland and make all kinds of arrangements to avoid inheritance tax? If the Treasury is keen on raising extra revenue, why not abolish inheritance tax and introduce capital gains tax on death, which would provide far more revenue and be far fairer to all concerned?

Baroness Penn Portrait Baroness Penn (Con)
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I have to disagree with my noble friend that the wealthiest do not pay inheritance tax. Statistics from 2019-20 show that tax paid on estates valued at £1 million or more accounted for 82% of total inheritance tax liability for that year. When it comes to reforming inheritance tax and looking at areas such as agricultural property relief and business property relief, we would need to be really careful about considering the impacts of changing that approach on family farms and family businesses before taking forward such changes.

Lord Watts Portrait Lord Watts (Lab)
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My Lords, the Minister said that the Government introduced the pension changes to help GPs to be retained in the National Health Service. However, is it not the case that the majority of the savings will go to rich people rather than GPs?

Baroness Penn Portrait Baroness Penn (Con)
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I have to disagree with the noble Lord. The feedback we have had comes not just from the medical profession but from people in many other public service jobs who benefit from defined benefit contribution pension schemes and who have found their annual allowance and the lifetime allowance to be a real barrier to staying on in their work. It was in response to campaigns such as those from the BMA that the Government took action.

Defence: Support Ships and Type 32 Frigates

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
14:58
Asked by
Lord West of Spithead Portrait Lord West of Spithead
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To ask His Majesty’s Government when they expect to place orders for (1) multi-role support ships, and (2) Type 32 frigates.

Baroness Goldie Portrait The Minister of State, Ministry of Defence (Baroness Goldie) (Con)
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My Lords, the multi-role support ship—MRSS—and the Type 32 programmes remain in the concept phase and have not yet reached the level of maturity for me to confirm when orders are expected to be placed. The programme and procurement strategy for MRSS and Type 32 will be decided following the concept phase.

Lord West of Spithead Portrait Lord West of Spithead (Lab)
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My Lords, as I stand here today, our great maritime nation has 11 operational destroyers and frigates. Why are we in this parlous state? The reason is that, for many years, up until fairly recently, we have not been ordering ships on a rolling basis. This is absolutely necessary for a proper shipbuilding industry. Indeed, the Government recognise that now and, within the MoD, Ministers understand the need for a rolling programme. We have had some recent orders, but they have stopped. We must keep ordering, otherwise we will have the same problem again. The Treasury does not seem to understand that, if we do not do that, the SMEs and all our trained people will go to the wall, we will not have a proper shipbuilding industry and we will not have a proper fleet. Could the Minister please go to the Treasury, point out the error of its ways, and explain how important it is for us to go down this route?

Baroness Goldie Portrait Baroness Goldie (Con)
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I do not impugn the noble Lord’s right to hold the Government to account but I would not wish his persistent interrogation and commentary to imply that our Royal Navy is in some dysfunctional state. The Royal Navy was one of the few navies in the world to have ships in every ocean on the planet in 2022, from the High North to the Antarctic, and from the Baltic to the Pacific. It continues to deliver its commitments by undertaking the biggest recapitalisation of the fleet in a generation, from Type 23 to 26 and 31, and from Vanguard to Dreadnought. It is worthwhile reminding your Lordships that our Royal Navy is one of only three navies in the world to be able to operate to fifth-generation carriers and aircraft, along with the United States and China. The Royal Navy is our British pride and joy. I wish that sometimes the noble Lord, Lord West, would acknowledge that, instead of repeatedly and monotonously talking down his former service. It is time to champion it.

Baroness Smith of Newnham Portrait Baroness Smith of Newnham (LD)
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My Lords, I do not wish to talk down His Majesty’s Royal Navy. However, like the noble Lord, Lord West, I am keen to ensure not only that we have an effective rolling programme but that our ships should be buoyant and seaworthy, ideally as soon as the trials are over. With regard to moving from the concept phase for the Type 32s, can the Minister tell the House what lessons His Majesty’s Government have learned from procuring the Type 45s and the “Queen Elizabeth” class so that, when the next ships go into service, they will be seaworthy from day one?

Baroness Goldie Portrait Baroness Goldie (Con)
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Again, to disabuse anyone of any misconception of the noble Baroness’s question, we have a functional, operational Royal Navy which is discharging its obligations to the country. As regards the more recent types of shipbuilding commissioning by the Royal Navy, such as the Type 26 and Type 31, part of their attraction is their design concept, which means that they are more readily produced, and they have an exportable value, and that means that the sorts of problems to which the noble Baroness refers, which certainly characterise some previous ships, are now much less likely to materialise. What I described to the Chamber with regard to what the Royal Navy is currently undertaking demonstrates beyond a shred of a doubt that it is highly professional, very well-equipped and functional.

Lord Lexden Portrait Lord Lexden (Con)
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My Lords, is it not customary, in the year which sees the Coronation of a new monarch, for the Royal Navy to be reviewed by the new monarch? Will His Majesty review the fleet in the course of the current year?

Baroness Goldie Portrait Baroness Goldie (Con)
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That is a matter for the palace. However, I am sure that if His Majesty were to review the fleet, it would be very positively received.

Lord Mountevans Portrait Lord Mountevans (CB)
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My Lords, the Minister has made some excellent points in defence of our wonderful Royal Navy. However, the impressive response of Ukraine in the current conflict demonstrates the rapidly changing nature of warfare and the growing importance of agility and flexibility. The Royal Navy is working hard to maximise these latest technologies, including AI. Does the Minister agree that the Type 32 frigate addresses all those developing priorities?

Baroness Goldie Portrait Baroness Goldie (Con)
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The Type 32 is conceived as an agile, resilient and capable ship. However, I point out to the noble Lord that we have already, for example, upgraded Type 45s with the Sea Viper Evolution programme and upgraded Type 23s with the Naval Strike Missile in partnership with the Norwegians—the first ship will be ready by the end of the year. In addition, the initial Sonar Type 2150 ships have already been upgraded. We are constantly reviewing how we can keep our fleet swift, agile and effective.

Lord Bishop of St Edmundsbury and Ipswich Portrait The Lord Bishop of St Edmundsbury and Ipswich
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My Lords, given that one of the intentions and evident benefits of a national shipbuilding programme is local economic benefit, including the levelling-up aims of investing in young people and retraining older workers, and that shipyards are, by and large, in areas of deprivation where such benefit is vital, will His Majesty’s Government ensure that current capacity and design skills, apprenticeship training and other essential infrastructure is maintained pending the commitment to the Type 32 frigates and MRSS programmes so that it does not cost a great deal more to initiate these vital programmes?

Baroness Goldie Portrait Baroness Goldie (Con)
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I thank the right reverend Prelate for making a number of extremely important points. The whole essence of the national shipbuilding strategy was to ensure that we got shipbuilding in the United Kingdom on to a more stable and sustainable basis. The right reverend Prelate is absolutely right: the MoD’s direct spend supports 29,800 jobs in the shipbuilding industry—that includes submarines—with a further 21,300 jobs supported indirectly. There is an opportunity for shipbuilding in the UK to deliver exactly the sort of benefits to which the right reverend Prelate refers.

Lord Grocott Portrait Lord Grocott (Lab)
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Can the Minister explain how asking questions, however persistently, about providing the Royal Navy with the equipment that it needs is somehow talking it down?

Baroness Goldie Portrait Baroness Goldie (Con)
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If the noble Lord had listened to my preface in response to the noble Lord, Lord West, he would have heard me say that I do not impugn the right of the noble Lord, Lord West, to hold the Government to account. However, I think the Chamber would agree that there is a certain predictability to the character of the noble Lord’s questions; I know from first-hand experience the volume of questions with which I have to deal. I am not impugning his right to hold the Government to account but to do so repetitively, without ever counterbalancing the argument by acknowledging some of the Royal Navy’s enormous triumphs, gives a slightly disproportionate and not totally representative picture.

Lord Trefgarne Portrait Lord Trefgarne (Con)
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My Lords, how many qualified crews do we have to support our destroyers and frigates? Have any been deployed in recent days in search for the missing mini-submarine near the “Titanic”?

Baroness Goldie Portrait Baroness Goldie (Con)
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I have no information on my noble friend’s latter point. I can seek specific information about the crew numbers to which he refers and will write to him.

Lord Tunnicliffe Portrait Lord Tunnicliffe (Lab)
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My Lords, the Type 32 frigate was announced on 19 November 2020. I understand that, to make the national shipbuilding strategy work, the first ship needs to be laid down by mid-2027. After two years and seven months, the project is still in the pre-concept stage. I think that means, in plain English, that we do not even know what these ships are for. Can the Minister enlighten the House, or will the project slip, so plunging the British shipbuilding industry into chaos once again?

Baroness Goldie Portrait Baroness Goldie (Con)
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I have already indicated to the House that this ship is in the concept phase; there is no more that I can add to that. The programme and procurement strategy will be decided following the current concept phase, once that has concluded. However, I would observe that this is part of a shipbuilding programme for the Royal Navy that is substantial, significant and very important for the Navy’s future operational effectiveness.

Lord Houghton of Richmond Portrait Lord Houghton of Richmond (CB)
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My Lords, on this particular argument I find myself more in favour of the Minister’s point, inasmuch as the lineage of these questions, although entertaining, occasionally gives the impression that the sole purpose of the defence budget is the maritime renaissance. Increasingly, the issue of military advantage will be born not of hardware but of software. Can the Minister confirm that it is this strategic shift, and not necessarily by accounting for military competence and capability in the counting of input numbers, that is the qualitative output of a sophisticated and technologically equipped Armed Forces—the point of the Minister’s expression of frustration—and a more balanced approach to the investment necessary?

Baroness Goldie Portrait Baroness Goldie (Con)
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I thank the noble and gallant Lord. He makes the point more eloquently and with greater authority than I can. I do not seek to pre-empt the defence Command Paper refresh, which is imminently in the stages of becoming public, but the hybrid nature of our capability will be obvious from that paper. The noble and gallant Lord is quite correct: we cannot put things in silos. We have to work out what we are trying to deal with, what the threat is, what the hybrid character of the threat is and how we can have a capability—whether by land, air or sea—that will effectively combine to address that threat.

School Buildings: Safety

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
15:09
Asked by
Baroness Twycross Portrait Baroness Twycross
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To ask His Majesty’s Government what assessment they have made of the safety of school buildings, particularly in relation to the use of reinforced autoclaved aerated concrete, and what action they are taking to address (1) current safety issues, and (2) any disruption to pupils’ education caused by unsafe school buildings.

Baroness Barran Portrait The Parliamentary Under-Secretary of State, Department for Education (Baroness Barran) (Con)
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My Lords, safe and well-maintained school buildings are a priority. We are actively working with the sector to help identify reinforced autoclaved aerated concrete, or RAAC. If RAAC is suspected, we commission professionals to verify its presence and assess its condition. We support schools, including with capital funding, in measures to ensure that it does not pose any immediate risk and to minimise disruption based on professional advice.

Baroness Twycross Portrait Baroness Twycross (Lab)
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My Lords, I thank the Minister for her Answer, but the Government have already admitted that current funding will not be enough to make all schools safe. Will she tell us how long children, parents and school staff will have to wait for schools to be made safe once the data on their condition is finally released?

Baroness Barran Portrait Baroness Barran (Con)
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I want to be absolutely clear to the noble Baroness and the House that the department is not aware of any child or member of staff being in a school which poses an imminent safety risk. We are working as fast as is humanly possible to identify RAAC across the school estate. We sent out a questionnaire last year and nearly 90% of schools and responsible bodies have sent in their initial responses. We are working closely with the structural engineering sector to identify accurately whether RAAC is present and whether it poses a risk.

Baroness Evans of Bowes Park Portrait Baroness Evans of Bowes Park (Con)
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Following on from my noble friend’s answer, is she confident that there is enough capacity among surveyors to identify RAAC in schools before, as the noble Baroness said, issues become too serious? We have had similar problems in other parts of the public sector estate, hospitals for instance, where there have been safety issues because of RAAC. Perhaps she could provide us with reassurance on this issue.

Baroness Barran Portrait Baroness Barran (Con)
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I thank my noble friend for her question. I hope it reassures her to know that I have met twice already the leading structural engineering firms. We have looked at different ways that we can accelerate the pace of surveys and are very confident that we will have carried out at least 600 surveys by the autumn.

Lord Addington Portrait Lord Addington (LD)
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My Lords, will the Minister give us an assurance that any new school is constructed with a material that we expect to have to pull down and will not fall down before we get there?

Baroness Barran Portrait Baroness Barran (Con)
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I can give the House that reassurance. Not only that but any new school we construct will be net zero in operation.

Baroness Berridge Portrait Baroness Berridge (Con)
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My Lords, obviously, responsible bodies are legally responsible for the safety of the building. They come in all shapes and sizes. It could be a very strong, robust local authority or a large multi-academy trust with a lot of expertise; conversely, it could be a local authority that is in intervention with commissioners or a trust which has only one school. Of the 10% which have not returned their surveys, can my noble friend the Minister outline how we are going to approach those responsible bodies to make sure they respond and find out whether they are in that risky category because they are weak for other reasons?

Baroness Barran Portrait Baroness Barran (Con)
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I do not think we can say that the 10% which have not responded are weak. We are dealing with it by running a small call centre in the department. There are organisations that we have had to contact multiple times—including, sadly, some local authorities—and we are working with MPs and others to make sure we get all the returns. We are also supporting, in slightly slower time, all trusts to improve their competency in relation to the management of their estate, including rolling out a free specialist capital adviser programme to support them in estate management.

Lord Hendy Portrait Lord Hendy (Lab)
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My Lords, one aspect of safety in schools is fire safety. I declare an interest as a vice-chair of the All-Party Parliamentary Fire Safety and Rescue Group. In 2007, draft guidance was given that predicted that most schools would be fitted with sprinklers and very few would not. In 2021, further draft guidance was published which predicted the contrary: that very few schools would be fitted with sprinklers. I understand the consultation on that has not been published yet and therefore the guidance has not come into effect two years later. I understand, too, that the problem is that there is a division of opinion between the department on one side, which thinks the risk is low, and the insurance industry and fire chiefs on the other, which think the risk is high. Would the Minister be content to attend a meeting of the APPG with representatives of the insurance industry and fire chiefs to see whether there is some methodology to ascertain precisely what the risk is and therefore the need or lack of it for sprinklers?

Baroness Barran Portrait Baroness Barran (Con)
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I would be delighted to meet the APPG, but I remind the noble Lord that there are 67,000 buildings on the school estate and about 450 fires a year, 90% of which cause no significant damage.

Lord Dobbs Portrait Lord Dobbs (Con)
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Does my noble friend agree that a much greater danger to children in our schools comes from a judge’s ruling last week that parents are not allowed to know about the relationships and sex education that their children are given? This is a hugely controversial area. Parents may knock on the door of a school to ask what is being taught to their children, and can be denied. Does my noble friend accept that this is a nonsense that undermines the heart of family responsibilities and parental authority? Would the Government please do something quickly to make clear what parental rights are in knowing what their children are being taught?

Baroness Barran Portrait Baroness Barran (Con)
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I am delighted to be able to let my noble friend know that the Government have already acted on this. We wrote to every school to be clear about exactly that relationship between parent and school and that trust, particularly on these very sensitive topics, is essential. Schools should not enter into arrangements with third parties that prohibit them sharing curriculum materials with parents.

Baroness Hussein-Ece Portrait Baroness Hussein-Ece (LD)
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To get back to the Question about the safety of school buildings, can the Minister give an assurance that schools deemed to be at risk have been made safe or at least closed until urgent repairs can take place? Is she also aware that teachers leaving the profession cite the state of school buildings and the environment in which they work as one of their reasons for leaving?

Baroness Barran Portrait Baroness Barran (Con)
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I am very happy to give the noble Baroness reassurance on that point. To be clear, the returns that we have had from schools about whether they suspect RAAC on their estate indicate that a significant percentage believe they do, but then when we send the surveyors in, in fact they do not. When RAAC is identified, some poses a risk, but some does not. In every case where a risk is posed, whether in a single store cupboard or a whole block, we send our team in and work closely with the school, trust and local authority to provide both practical and financial support to address issues as quickly as possible.

Lord Laming Portrait Lord Laming (CB)
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My Lords, the noble Baroness knows that schools have made great progress on incorporating children who have special needs of all kinds. Sometimes, the buildings are an impediment to this. Has work been undertaken to ensure that schools are adapted to meet the needs of children with very special needs?

Baroness Barran Portrait Baroness Barran (Con)
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That is extremely important. Access to and the shape of a building should never be an impediment to a child’s learning. That is more straightforward in the new schools we are building, but we are making adjustments and supporting schools through our existing capital programmes to address exactly the needs that the noble Lord raises.

Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Motion to Approve
15:19
Moved by
Earl of Minto Portrait The Earl of Minto
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That the draft Regulations laid before the House on 26 April be approved. Considered in Grand Committee on 13 June.

Motion agreed.

Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) (No. 2) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Motion to Approve
15:19
Moved by
Baroness Penn Portrait Baroness Penn
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That the draft Regulations laid before the House on 27 April be approved. Considered in Grand Committee on 15 June.

Motion agreed.

Armed Forces Act (Continuation) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Motion to Approve
15:20
Moved by
Baroness Goldie Portrait Baroness Goldie
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That the draft Order laid before the House on 22 May be approved. Considered in Grand Committee on 15 June.

Motion agreed.

Judicial Appointments (Amendment) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Judicial Pensions (Remediable Service etc.) Regulations 2023
Motions to Approve
15:20
Tabled by
Lord Bellamy Portrait Lord Bellamy
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That the draft Order and Regulations laid before the House on 11 and 15 May be approved. Considered in Grand Committee on 15 June.

Lord Davies of Gower Portrait Lord Davies of Gower (Con)
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My Lords, with the leave of the House and on behalf of my noble and learned friend Lord Bellamy, I beg to move the Motions en bloc standing in his name on the Order Paper.

Motions agreed.
Commons Reasons
15:21
Motion A
Moved by
Lord Callanan Portrait Lord Callanan
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That this House do not insist on its Amendment 15B, to which the Commons have disagreed for their Reason 15C.

15C: Because the Commons do not consider the Lords Amendment necessary in order to maintain environmental protection.
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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My Lords, with the leave of the House, at the same time as moving Motion A I will speak to Motion B.

The retained EU law Bill has once again returned to this House from the other place. I am pleased to say that the other place has accepted the final drafting change to Amendment 16, so that matter is now closed. This amendment significantly adds to the scrutiny that Parliament can conduct on this Bill.

However, the House of Commons has now been very clear, for the second time, that it is firm in its position on the remaining two amendments. Noble Lords asked the Commons to think again, and it has reached exactly the same conclusion. Indeed, the Solicitor-General noted the many ways in which the Government have already moved on the Bill to reflect the thoughts and concerns of this House. Therefore, today I propose Motions to accept the Commons position on the Bill and accede to the wishes of the elected House.

With regard to the other Motions in front of us today, Amendment 42D looks to be loosely based on one of the scrutiny provisions of the Legislative and Regulatory Reform Act 2006. However, its use in that Act relates to the legislative reform order power, which is much broader. It can act on any piece of legislation, including Acts of Parliament, whereas the revoke and replace power in this Bill can operate only on secondary retained EU law—in other words, retained EU law that is not primary legislation. We have taken steps to make clear what this retained EU law is by publishing and updating the retained EU law dashboard, and we will be reporting regularly to Parliament on our intentions to reform it. This will allow Parliament a substantial amount of time to scrutinise and report on reforming legislation, if Parliament wishes to do so. As such, these powers are clearly not comparable in terms of scope.

Furthermore, the legislative reform order process is not time-limited. It is still ongoing and available after 17 years, whereas this power will expire three years and three days from today. This is crucial when you consider how long parliamentary processes can take. Amendment 42D envisages up to 60 sitting days for Parliament to consider and debate proposals for statutory instruments, and potentially time after that for further scrutiny before the SIs can be made. We have supported and encouraged the initiative, which started in this House, to maximise transparency around the Government’s plans for retained EU law reform via regular reports to Parliament. In our view, this additional 60-day pre-scrutiny period is simply not required.

Therefore, the Government cannot accept a requirement that would place such a significant time restraint on the usage of the power. Doing so would substantially reduce the time available for the power to be used, which is clearly not an appropriate balance between scrutiny and reform. The clause currently provides for this balance in a much more sustainable way; the third limb of the power already requires the affirmative procedure by default, and the second limb is automatically pushed to the affirmative procedure under specific circumstances. For all other circumstances, the sifting committee exists to recommend upgrading the scrutiny procedure, if Parliament judges it necessary. For all these reasons, the Government cannot accept the amendment.

On Motion A1, of the noble Lord, Lord Krebs, I am once again clear that Amendment 15D is unnecessary. I and many other Ministers have committed to uphold our environmental protections. Equally, the consultation part of the amendment is also irrelevant, as the Government remain committed to consulting on major policy changes, in line with usual practice. We take Dispatch Box commitments very seriously as a Government and will not shirk away from the commitments we have already made during the passage of this Bill.

This amendment is therefore unnecessary. The Government are clear that we have set a strong direction of travel on environmental regulation with our actions across this Parliament, and nothing in this Bill will change that. I therefore ask noble Lords to support Motions A and B on the Order Paper today. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by
Lord Krebs Portrait Lord Krebs
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At end insert “, and do propose Amendment 15D in lieu—

15D: After Clause 16, insert the following new Clause—
“Environmental protection
(1) Regulations may be made by a relevant national authority under section 12, 13, 15 or 16 only if the relevant national authority is satisfied that the regulations do not reduce the level of environmental protection arising from the EU retained law to which the provision relates.
(2) Prior to making any provision to which this section applies, the relevant national authority must seek advice from persons who are independent of the authority and have relevant expertise.””
Lord Krebs Portrait Lord Krebs (CB)
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My Lords, I will be brief, because we have debated this many times before. I will simply explain why I found it necessary to come back yet again with an amendment on environmental protection.

In the previous round of ping-pong, on 6 June, the Minister, in urging your Lordships to reject a previous version of my amendment, said:

“we have substantive concerns that this amendment, in the way that it is worded, would actually make it more difficult to uphold those environmental commitments”. [Official Report, 6/6/23; col. 1271.]

When I heard this, I was puzzled. It appeared that the Minister was saying that the problem was with the wording of the amendment, rather than the substance. I wondered which bit of the wording would make it more difficult for the Government to ensure that their policies do not lower standards of environmental protection.

Was it the non-regression element, requiring the Government to commit to not lowering standards if and when retained EU law is changed? Was it the requirement to consult relevant experts before making changes? We know from the past record that, when experts were not consulted, mistakes were made. Back in 2019, when Defra removed a protection under EU law relating to endocrine-disrupting pesticides, and it was pointed out that it had made a mistake, Defra quickly corrected its mistake and re-introduced the regulation. Was it the requirement for transparency—the need to publish the reasons for any change, and the advice received? Or was it, fourthly, the requirement to comply with international environmental treaties to which the UK is a signatory?

None of these four requirements seems to me to stand in the way of the policies designed to protect the environment, so I decided to try to find out. I requested a meeting with Ministers to help me understand how a change to the wording of the amendment would achieve my objective of ensuring that environmental standards are not lowered, without making it more difficult to achieve this end. However, I regret to say that Ministers were not prepared to discuss this with me or to come up with an alternative form of words. Therefore, I have redrafted the amendment to make it even simpler than before, in the hope that I have succeeded in overcoming the objection the Minister raised last time around.

15:30
The new version of the amendment has just two elements instead of the four that were in the previous version: non-regression on environmental protection and consultation with relevant experts. I have left out the other two elements of the previous version, which were compliance with international obligations and transparency in reporting on expert advice. I have conceded a great deal since my original amendment was passed on Report. In making these compromises, I am trying very hard to make this amendment acceptable to the Government. I am not making a partisan point; I am simply trying to ensure that our environmental protections are not weakened. I am not arguing against future changes to retained EU law. My amendment would simply put in the Bill what the Government say they wish to do in any case—the Minister said it just a few minutes ago—which is not to lower environmental standards. If that is what the Government want to do, why not put it in the Bill? It is not adding any burden or obstacles. As the Minister said, the Government already consult experts, so this is simply saying “Yes, that is what we will do”.
As I said in the previous round of ping-pong, when my amendment passed with a majority of 54, the Government’s watchdog, the Office for Environmental Protection, said that the additional insurance provided by this amendment is essential, especially bearing in mind the parlous state of our environment. I had unexpected support today. It is the first time in my life that I have been supported by the Daily Express—in an opinion piece by former England cricket captain David Gower, who expressed support for this amendment, so it is not just a narrow interest group that I represent. I hope that, in spite of what has been said by the Minister, this time around the Government will accept my stripped-down version, but if not, I will wish to test the opinion of the House. I beg to move.
Baroness Jones of Moulsecoomb Portrait Baroness Jones of Moulsecoomb (GP)
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My Lords, I am going to take the liberty of speaking on this amendment because the last time I spoke on an amendment tabled by the noble Lord, Lord Krebs, he said that he liked me speaking because I made him look more reasonable, so I will do my best now. The Minister said that the Commons is very clear on this. I would like to make a couple of points. First, I very much doubt whether any of them knew what they were voting on, because they do whatever the Whips tell them. Secondly, if it is so obvious that the Government are going to do this, why not just accept the amendment? Given that this has been brought back twice, it is clearly something this House cares very much about. Lastly, if the other end is stupid, it is our job to make it clear that it is being stupid and that we think this is a very important amendment to make to the Bill. Obviously, the Greens will be voting for it.

Baroness Parminter Portrait Baroness Parminter (LD)
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I rise briefly to add our Benches’ support, if the noble Lord, Lord Krebs, pushes this to a vote. His amendment is a canary in a coal mine—perhaps a Cumbrian coal mine. You put a canary down a coal mine when you want to test whether essential resources that you rely on are about to be lost, to be snuffed out. This is what this is. It is about not just the essential protections for our much-depleted nature, but the essential protections that we as humans rely on: water, air quality and all the ecosystem services that nature provides.

I use that analogy for another purpose, as well. You do not see the canary in the coal mine, but if you talk to the general public about puffins and other wildlife, and all the things they care for when they see them on TV programmes, they know that they want them protected, and they want the Government to act. But we are here at the coalface, mining through the amendments, and we can see the damage that this will do to the protections for people and the animals and wildlife they care for. We are here to bring that canary to the surface. We should do that and press the matter again.

Lord Hope of Craighead Portrait Lord Hope of Craighead (CB)
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My Lords, Motion B1, in my name, raises an issue that has been of great concern to many in this House from the outset in our examination of the Bill: parliamentary sovereignty. The clause that causes particular concern, and to which my Motion is addressed, is Clause 15, headed “Powers to revoke or replace”. All the powers that it contains are exercisable by statutory instrument alone, with no provision for active or meaningful scrutiny by either House. That amounts to what the noble Lord, Lord Anderson, described when the issue was before us two weeks ago—without any exaggeration, I think—as a delegated superpower.

It is worth taking a moment to think about the key words that are used to describe the extent of the powers conferred on a relevant authority by this clause. For our purposes, the relevant authority is a Minister of the Crown. Clause 15(2) states that the Minister

“may by regulations revoke any secondary retained EU law and replace it with such provision as the relevant national authority considers to be appropriate and to achieve the same or similar objectives”.

Clause 15(3) states that the Minister

“may by regulations revoke any secondary retained EU law and make such alternative provision as the relevant national authority considers appropriate”.

The subsection (2) power extends not just to achieving the same objectives but to achieving objectives that the Minister considers to be similar. The decision as to whether they are similar or appropriate, about which there may reasonably be more than one view, is left entirely to the Minister.

Subsection (3) goes even further: it extends to the making of such alternative provision as the Minister considers appropriate. There is no limit here to the objectives that are to be achieved. They do not need to be similar—there is no limit to that extent—so they could be different from those of the secondary retained EU law that is being revoked. Again, there could reasonably be more than one view as to whether the alternative provision, whatever it may happen to be, was appropriate.

It is worth reflecting for a moment on the subject matter of what is open to revocation and replacement in the exercise of these powers. This is not simple, routine stuff for which delegated legislation is unquestionably appropriate. It extends to, among other things, major instruments of policy. It extends to fundamental rules relating to public health, trade and the environment, which were handed down to us by the EU and with which we have lived for several decades. It includes, for example, agricultural support, blood safety, fisheries management, food composition standards, nutrition, resources and waste, and the control of ozone-depleting and radioactive substances. Those are just some examples.

Your Lordships might consider it rather strange, given the nature and extent of what is involved, that neither House of Parliament can play any kind of active role in the scrutiny of these regulations. It really is a take-it-or-leave-it system dictated to Parliament by the Executive. The objections to this, which I need not repeat, have been set out many times, and that is what my amendment seeks to address.

I recognise that the previous amendments, which were moved first by me and later by the noble Lord, Lord Anderson, proposed a system that the Minister was right to describe as novel and untested. What I am now proposing is based on a system, as the Minister has pointed out, known as the super-affirmative procedure, which was enacted by Section 18 of the Legislative and Regulatory Reform Act 2006. I shall explain briefly what this involves.

It applies only to regulations made under Clause 15. It proposes a Commons committee—not a Joint Committee, as previously suggested—to sift regulations made under the clause in the light of an explanation by the Minister as to why the regulation is considered appropriate. If, but only if, the committee reports that there are any regulations to which special attention should be drawn, the Minister must arrange for them to be debated on the Floor of each House. The Minister must then have regard to any resolution of either House and may, but is not required to, propose a revised proposal in the light of what has been resolved. The procedure for approval in both Houses thereafter is the affirmative procedure. Finally, the committee may recommend that the Minister’s proposal should not be proceeded with, but the House of Commons has the last word, as it can reject that recommendation. If it does that, the regulations may be laid.

This is a relatively light-touch procedure, which gives Parliament some measure of oversight of what has been proposed. I offer it as a compromise, in the hope that the Minister, despite the remarks he made at the outset of this debate, will feel able to give it serious consideration. At the heart of it all is an issue of principle, which is of basic concern to this House and the other on their entitlement to take an active part in the major exercise proposed. It is in that spirit that I propose to test the opinion of the House, if necessary, when the time comes.

Lord Hodgson of Astley Abbotts Portrait Lord Hodgson of Astley Abbotts (Con)
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My Lords, I would like to detain the House for no more than a minute on this issue. I have spoken about it many times in the past.

I support what the noble and learned Lord, Lord Hope, has said on the principle of what we are looking at. It is very important we remember that my noble friend the Minister said, as a defence of the government position, that the House would have a chance to look at these instruments by means of the affirmative procedure —unamendable, as we know—and that it would have the appropriate back-up information. One of the things that has moved on from the days of just framework Bills is the increasing reluctance of the Government to produce the back-up information—impact assessments and Explanatory Memoranda—in time for the House to do its job properly. The spat we had last week about the Public Order Act regulations was the result of this very question of overcasual behaviour.

My noble friend will say that of course we will have absolutely similar treatment—this is the Government’s argument—for affirmative resolutions as we do for primary legislation. I have the greatest respect for my noble friend on the Front Bench—for his patience, courtesy and diligence—but how he can say that with a straight face absolutely beats me. I am sure that the noble and learned Lord, Lord Hope, has done a very important service for Parliament—this House and the other House—in bringing back this issue for us to consider today.

But then we get to the politics—and politics does come into this. The reality is that the reforms that the noble and learned Lord, Lord Hope, many other Members of your Lordships’ House and I would like to see come about will take place only if they are led by the House of Commons. If that does not happen, the Government will immediately say that this is the unelected House trying to tell the elected House how to do its job. That, I am afraid, will be game over. That is why I voted against the fatal amendment in the name of the noble Baroness, Lady Jones of Moulsecoomb. The House would be unwise, within one day of the Commons having passed a resolution, to immediately pass a fatal amendment.

The brutal truth is that we have been unable to get Members of Parliament in the House of Commons in sufficient numbers to understand what we are driving at: that it is not to do with EU law but is about parliamentary sovereignty, as the noble and learned Lord has said. There are stirrings there but they are only stirrings.

The case before us is further complicated by the fact that this is all going into the Brexit meat-grinder. In the debate in the House of Commons on 12 June, Sir William Cash MP said:

“The way the House of Lords has dealt with these amendments demonstrates that the Lords are determined to try, by hook or by crook, to obstruct the House of Commons, which is the democratic Chamber in these matters as far as the electorate is concerned”.


Later in the same speech he said:

“We know from everything that we have heard over the last few weeks on the Bill that there is an intransigence—a stubbornness, if I may say so politely—from our noble Friends in the House of Lords in the face of any attempt to get rid of retained EU law in the way in which we are proposing”.—[Official Report, Commons, 12/6/23; col. 34.]

15:45
The House will realise from those quotes, which were not contradicted by the Solicitor-General when winding up the debate, that the issue of parliamentary sovereignty has now become irretrievably mixed up and commingled with Brexit, and indeed the last attempts to ask the House of Commons to think again were rejected by a majority of 65 in one case and 67 in another. I believe that the struggle between the Executive and the legislature, so elegantly and wittily explained by the noble and learned Lord, Lord Judge, in his lecture, “The King’s Prerogative”, will go on.
I hope, but I do not have much hope, that my noble friend will still have a chance to think again when he comes to wind up, and he will be able to accept, or go some way towards accepting, what is proposed by the amendment tabled by noble and learned Lord, Lord Hope. If not, I fear that this particular battle is lost, and as regards this vital principle of parliamentary sovereignty and involvement, I fear we may risk traducing it by continued referrals back, particularly when the issue concerned is the volatile and fiercely fought issue of Brexit. We need to encourage the uncommitted Members of the House of Commons to look beyond Brexit to the issue of parliamentary sovereignty and the relative power of Parliament and the Executive.
I hope my noble friend will still be able to make some concession, but in the meantime I am concerned about our continued actions in this regard, and although I entirely support the principle put forward by the noble and learned Lord, Lord Hope, it is with a heavy heart that, for this reason, I am not sure I will be able to support him in the Lobby if he chooses to divide the House.
Lord Pannick Portrait Lord Pannick (CB)
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My Lords, the noble Lord, Lord Hodgson, makes a very strong case that the House of Commons is dealing with this as a matter of politics rather than of principle. I draw precisely the opposite conclusion to that of the noble Lord: it is precisely for that reason that we should send the matter back. We should emphasise, as the noble and learned Lord, Lord Hope, did, that this is a matter of constitutional principle. It is not a matter of whether you support Brexit or you do not support it. It is not a matter of politics, and we should respectfully invite the other House to focus on what we see as the real constitutional issues that lie behind the Motion proposed by the noble and learned Lord, Lord Hope.

Baroness Meacher Portrait Baroness Meacher (CB)
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My Lords, I support the amendments tabled by the noble Lord, Lord Krebs, and the noble and learned Lord, Lord Hope, but in doing so I want to put on record, as a former member of the Delegated Powers Committee, my objection to the Government’s rejection of Amendments 42 and 42B, which proposed a very reasonable process, enabling both Houses of Parliament to debate, vote and make amendments to regulations, but only if those regulations involved a substantial change to the law. The Government’s reaction to Amendments 42 and 42B is yet another example of their determination to bypass Parliament as far as possible and enable substantial law changes to be made by Ministers through delegated powers without the ability of Parliament to make any amendments.

The new amendment tabled by the noble and learned Lord, Lord Hope, is very modest indeed: it applies only to draft Clause 15 regulations, the broadest delegated powers in the Bill. Also, although Parliament will be able to recommend amendments to the regulations, it does not enable Parliament to amend those regulations, only to accept or reject them. Justice takes the view that the amendment tabled by the noble and learned Lord, Lord Hope, is a proportionate and necessary compromise, and should be supported.

Baroness Altmann Portrait Baroness Altmann (Con)
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My Lords, I apologise to my noble friends on these Benches, particularly my noble friend Lord Hodgson. I have the opposite conclusion from the one at which he arrived. My noble friend suggests that it could be game over if we vote once again to ask the Commons to think again. As far as I can see, if we agree to this, it could be game over for us anyway. The Government’s arguments are that if we do not accept their position, these changes will delay the repeal of retained EU law and have also argued that sufficient scrutiny measures are already in place. We know that is not the case.

Giving almighty powers to Ministers to bypass Parliament upends the norms that have governed our country and given us the international reputation we have built. The possibility of allowing any Minister to revoke secondary legislation, just because it happens to emanate originally from the EU, confuses the issue of leaving the European Union with the issue of parliamentary democracy. A Minister could make, change or repeal laws or rules that they consider appropriate, according to this legislation, regardless of Parliament’s view and regardless of whether that Minister even has any expertise in the areas so well outlined by the noble and learned Lord, Lord Hope, such as public health, agriculture, fisheries and blood safety.

The noble and learned Lord’s amendment gives the House of Commons the last word. This is an existential issue beyond politics, and I urge noble Lords to think beyond this Parliament too. If we set this precedent now for this Government, presumably nothing can stop that precedent being used against these Benches, or in some other unacceptable manner, in the future. That could happen if we give up the idea that Parliament must make the rules, rather than Ministers.

Baroness Butler-Sloss Portrait Baroness Butler-Sloss (CB)
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My Lords, over the years I have sat in this House, I have become increasingly concerned about the powers which have been taken by successive Governments, particularly this Government, to the detriment of both Houses of Parliament. It seems extraordinary to me that the House of Commons has not yet appeared to realise the extent to which it, quite apart from us, is being marginalised. This is a very concerning matter. It goes, as my noble friend Lord Pannick said, far beyond the politics; this is a constitutional issue about the rights and powers of both Houses. This is just one example—the latest and one of the most disturbing—which this House has seen over a number of years.

I support both amendments, but particularly the amendment of my noble and learned friend Lord Hope. We really have to remind the House of Commons, the other place, what is happening to it as well as to us.

Lord Hamilton of Epsom Portrait Lord Hamilton of Epsom (Con)
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My Lords, I totally agree with the sentiments of the noble Baroness, Lady Meacher, my noble friend Lady Altmann, and the noble and learned Baroness, Lady Butler-Sloss. However, at the end of the day, the House of Commons is the elected House, and it has the right, as the elected House, to be wrong. I am afraid we have to accept that.

If we go on throwing this back, saying it should think again—and the House of Commons thinks again and comes up with yet another quite substantial majority in favour of the status quo—all we are doing is antagonising the other place unnecessarily. I cannot understand why the other place is giving away the powers that it is—in the way that it seems happy to let the Executive take over everything—but that is what it has decided to do. It is the elected House and we should live with it.

Lord Fox Portrait Lord Fox (LD)
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My Lords, it is an honour to follow so many wise speeches. I am not going to attempt to lengthen this debate or trump that wisdom. In the various iterations of this discussion, we have benefited from having either the noble and learned Lord, Lord Hope, or the noble Lord, Lord Anderson; today, we have both of them in their places. Although I associate myself with my noble friend Lady Parminter’s comments regarding the amendment in the name of the noble Lord, Lord Krebs, I will speak to the amendment in the name of the noble and learned Lord, Lord Hope.

I want to make just two points. First, the objection in the Commons largely and often dwelt on the unprecedented nature of the amendment that was being brought to them by your Lordships last time. In this case, the noble and learned Lord, Lord Hope, has dealt with that issue. This is not an unprecedented situation. It speaks a little to the point made by the noble Lord, Lord Hamilton: it is not that we are bringing back the same amendment, rewritten in different ways. Your Lordships are being asked to re-present a different proposition to the one that was presented last time. The Leader of the House can shake his head but, if he reads the amendments, he will see that they are fundamentally different; I am sure that he knows that in his heart. We are asking your Lordships not to be stubborn, in the words of William Cash, but to offer the Commons a different alternative. Stubbornness is doing the same thing over and over again. This is not the same thing; it is markedly different.

The other point that I want to address, which no one else has addressed, is the one made by the Minister about how much time this would take. I accept that it may take time, but we have to look at what we are doing. First, we are doing important things that Parliament should retain an ambit over. Secondly, the things that we are dealing with are things that we have lived with for many years—indeed, decades. This is not a burning platform; it is stuff that already exists. We are co-existing with it. It is not something that has a blue light on and must be rushed down the road as fast as possible. The argument about time does not count, in my view.

It is clear from what I and my colleagues have said that we support this amendment and will certainly vote for it when the noble and learned Lord, Lord Hope, presses it.

Baroness Chapman of Darlington Portrait Baroness Chapman of Darlington (Lab)
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My Lords, I will speak briefly because I agree with everything that the noble Lord, Lord Fox, just said. We are grateful to the Minister for what he said in his introduction to this debate and to all noble Lords who have contributed and engaged with this Bill since the beginning. However, we on these Benches think that the Government should join us in insisting on Lords Amendments 15B and 42D, as they now are. We agree with noble Lords that their amendments in lieu are sensible compromises and remain deeply concerned by the potential for the protection of our environment, in particular, to be watered down without such protection on the face of the Bill. It seems slightly odd that the Government have compromised on the fundamental purpose and shape of this Bill in removing the sunset, which was a huge thing for them to do. It is strange that they are now determined to hold out on these two relatively minor outstanding issues, which are about improved scrutiny and environmental protection.

The proposal from the noble and learned Lord, Lord Hope, is a proportionate and necessary compromise. The noble Lord, Lord Krebs, is correct to highlight the inadequacy of the verbal commitment offered by the Minister, which obviously may not stand the test of time. These are important principles. Should the noble and learned Lord and the noble Lord wish to test the opinion of the House, we on these Benches will support them.

Lord Callanan Portrait Lord Callanan (Con)
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My Lords, we have had this debate numerous times now, so the House will be delighted to know that I can keep my response fairly brief. I have responded to all the points made previously because noble Lords have repeated many of the points that they made in earlier debates.

Interestingly, the one person who did not repeat the points that he made in earlier debates was the noble Lord, Lord Fox; I was surprised to hear him say that he will support the Anderson/Hope amendment because, in the previous round, in response to a similar point about endless ping-pong made by my noble friend Lord Hamilton, the noble Lord, Lord Fox, said:

“I respectfully suggest that we are not proposing”


endless ping-pong but that

“we are proposing one more ping and one more pong”.—[Official Report, 6/6/23; col. 1262.]

Unlike some of the sceptics behind me, I have faith in what the Liberal Democrats say. I am absolutely certain that, because that is what the noble Lord, Lord Fox, said last time, he will join us in the Lobby this evening. We have hope yet; I am sure that the Liberal Democrats would not want to go back on their word.

16:00
On Amendment 42C, while I respect the noble and learned Lord, Lord Hope, on this point, I think he is pushing his luck slightly now, if I may say so, respectfully. I think he knows this is adding unacceptable time into the debate, and the Government cannot accept a procedure as unwieldy as what he has proposed. It would also cut the amount of time for the powers to be used by up to a third, which is an unacceptable limitation on the reform programme. I think the noble and learned Lord knows this is not about additional parliamentary scrutiny; this is actually about stopping Parliament acting in this area. The reform programme is a crucial part of the Government’s agenda, and it is not an appropriate balance between scrutiny and reform to restrict it in such a manner.
Turning to Amendment 15C, I will repeat the arguments that I have made previously and that the House of Commons has supported. The noble Lord’s Motion proposes to insert additional measures into the Bill on environmental protection. I do appreciate the sentiment, but the noble Lord also knows very well the Government’s position on this and the importance we attach to maintaining environmental standards. We do not believe that this amendment is necessary, and in light of the many commitments we have made in this House and the other place, I hope noble Lords will reject both.
Lord Krebs Portrait Lord Krebs (CB)
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My Lords, I thank the noble Lords who have contributed to the debate on my amendment, as well as on the amendment of my noble and learned friend Lord Hope of Craighead. A key word that was mentioned in the contribution by the noble Baroness, Lady Chapman of Darlington, was “compromise”. When my amendment passed at the last round of ping-pong, I asked Ministers whether we could talk about it and try to find a compromise wording that would satisfy the Government and the majority of Members of this House who supported the previous amendment; but no compromise was forthcoming. I thought that when you have a disagreement among reasonable adults, you talk it through and try to reach a compromise. That is not what the Government are trying to do, so I am left with little option but to test the opinion of the House.

I would also briefly like to thank the noble Baroness, Lady Jones of Moulsecoomb, for fulfilling her duty of making me look reasonable, so I thank her for that. I also thank the noble Baroness, Lady Parminter, for reminding us of the important fact that protecting our environment is of huge public concern. I am sure there will be noble Lords who will want to vote against my amendment, and I would like them to ask themselves whether they would be prepared to stand up in front of a television camera and explain to David Attenborough why they think it is not necessary for this Government to maintain our current standards of environmental protections. I wish to test the opinion of the House.

16:04

Division 1

Ayes: 232


Labour: 111
Liberal Democrat: 59
Crossbench: 47
Independent: 8
Bishops: 3
Green Party: 2
Conservative: 1
Plaid Cymru: 1

Noes: 187


Conservative: 169
Crossbench: 6
Democratic Unionist Party: 5
Independent: 5
Labour: 1
Ulster Unionist Party: 1

16:15
Motion B
Moved by
Lord Callanan Portrait Lord Callanan
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That this House do not insist on its Amendment 42B, to which the Commons have disagreed for their Reason 42C.

42C: Because the Commons consider the scrutiny procedure imposed by the Lords Amendment to be inappropriate.
Motion B1 (as an amendment to Motion B)
Moved by
Lord Hope of Craighead Portrait Lord Hope of Craighead
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At end insert “, and do propose Amendment 42D in lieu—

42D: After Clause 15, insert the following new Clause—
“Parliamentary scrutiny
(1) This section applies to all regulations proposed to be made under section 15 by a Minister of the Crown which revoke any secondary retained EU law and –
(a) replace it with such provision to achieve the same or similar objectives, or
(b) make such alternative provision,
as a Minister of the Crown considers to be appropriate.
(2) Regulations referred to in subsection (1) may not be made (under the applicable provisions of paragraphs 7 and 8 of Schedule 4) unless a document containing a proposal for those regulations has been referred to a Committee of the House of Commons, together with a statement by the Minister of the Crown which explains why the Minister considers the replacement or the alternative provision proposed, as the case may be, is appropriate, and the other requirements of this section have been met.
(3) If the Committee reports that special attention should be drawn to the proposed regulations in question, then subsections (4) to (8) apply.
(4) A Minister of the Crown must arrange for the proposal for the regulations to be debated on the floor of each House within the relevant period referred to in subsection (5).
(5) The relevant period is a period of 60 days beginning with the day on which the proposal and the corresponding statement were referred to the Committee, not including any period during which Parliament is dissolved or prorogued or either House is adjourned for more than four days.
(6) The Minister making the regulations must have regard to any resolution of either House and to any recommendations by the Committee made during the relevant period.
(7) If, after the expiry of the relevant period, the Minister making the regulations wishes to make an instrument in the terms of the proposal (under the applicable provisions of paragraphs 7 and 8 of Schedule 4), the Minister may do so only if the proposal for those regulations is approved by a resolution of each House of Parliament.
(8) If, after the expiry of the relevant period, the Minister making the regulations wishes to make an instrument in the terms of a revised version of the proposal (under the applicable provisions of paragraphs 7 and 8 of Schedule 4), the Minister must lay before Parliament a document containing the revised proposal for the regulations together with a statement of the changes proposed and may make an instrument in the terms of the revised proposal only if the revised proposal is approved by a resolution of each House of Parliament.
(9) The Committee may, at any time before the regulations are laid in draft or made (under the applicable provisions of paragraphs 7 and 8 of Schedule 4), recommend that they should not be proceeded with.
(10) Where a recommendation is made by the Committee under subsection (9), the regulations may not be laid in draft or made unless the recommendation is rejected by a resolution of the House of Commons.””
Lord Hope of Craighead Portrait Lord Hope of Craighead (CB)
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My Lords, I am grateful to all noble Lords who spoke to my Motion B1. I have only one comment to make, which is that the noble Lord attributed to me a state of knowledge that I simply do not recognise. It is not my intention to frustrate the intentions of the Government in any way; my amendment is all about the issue of principle to which the noble Lord, Lord Pannick, referred—it is a crucial instrument. That being the point, I beg to test the opinion of the House.

16:16

Division 2

Ayes: 241


Labour: 113
Liberal Democrat: 60
Crossbench: 50
Independent: 9
Conservative: 3
Bishops: 3
Green Party: 2
Plaid Cymru: 1

Noes: 181


Conservative: 166
Democratic Unionist Party: 5
Crossbench: 4
Independent: 4
Labour: 1
Ulster Unionist Party: 1

Report (1st Day)
16:29
Relevant documents: 27th and 36th Reports from the Delegated Powers Committee
Clause 1: The registrar’s objectives
Amendment 1
Moved by
1: Clause 1, page 2, line 8, leave out from “to” to “a” on line 9 and insert “ensure that records kept by the registrar do not create”
Member’s explanatory statement
This brings the wording of objective 3 into line with objectives 1 and 2.
Lord Johnson of Lainston Portrait The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
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My Lords, before we begin proceedings, I draw your Lordships’ attention to my interests as set out in the register of interests, including as a director and person with significant control of AMP Ventures Ltd, a person with significant control of Cigarkeep and as a shareholder of several other companies, including a previous shareholder and person of significant control of Somerset Capital Management. As I have set out before, I believe these interests serve only to increase my enthusiasm for this Bill to ensure that the UK remains the best place to start and grow a business while driving dirty money out of the UK. It is at the absolute core of this Government’s mission that we help legitimate business thrive.

I express my gratitude for the vast amount of engagement that has taken place since we concluded Committee in May, and the constructive way in which your Lordships have worked with me, my noble friend Lord Sharpe, my noble and learned friend Lord Bellamy, and all our exceptionally hard-working officials to ensure this Bill reaches its full potential. I am pleased that the Opposition Front Benches remain supportive of the intentions of the Bill and that they desire to ensure it works effectively. I am particularly grateful for the focus they have brought to bear on the drafting of the new objectives for the Registrar of Companies and for the constructive dialogue they have had with the registrar and me in recent weeks. I also give particular thanks to my noble friends Lord Agnew of Oulton and Lord Leigh of Hurley and the noble Lord, Lord Vaux of Harrowden, for their scrutiny of the Bill and their amendments on shareholder transparency, authorised corporate service providers and the register of overseas entities, which we will debate shortly.

Before I turn to the government amendments in this group, I briefly remind the House of the key principles of this Bill. It builds on last year’s Economic Crime (Transparency and Enforcement) Act, which contained key measures to help crack down on dirty money, including from Russia and other foreign elites abusing our open economy. That Act introduced reforms to the UK’s sanctions framework and to unexplained wealth orders and it provided for the introduction of the register of overseas entities.

Forming a key part of the wider government approach to tackling economic crime and sitting alongside the recently published economic crime plan, this Bill will further tackle economic crime, including fraud and money laundering, by delivering greater protections for consumers and businesses, boosting the UK’s defences, and allowing legitimate businesses to thrive.

I direct noble Lords to read the economic crime plan, if they have not already done so, as it contains a significant set of actions. Soon after the plan came out, our Home Office colleagues supplemented it with the launch of the new fraud strategy and in the coming months the Treasury will consult on the future of the anti-money laundering supervisory framework. These are relevant points because they fit within the debate today. My own department will conclude its review of the whistleblowing framework. This is a lot of activity and rightly so, because economic crime is a growing issue and affects people of all backgrounds and businesses large and small.

This Bill will make an immediate difference to real people. For example, we have discussed the problems of fraudsters creating companies using an individual’s or business’s personal details or address without their consent, including to obscure ownership and control of a company. Innocent citizens have been left seriously distressed by huge volumes of post for fake companies arriving through their letterbox and finding to their horror that their credit reference scores have suffered because they have been appointed a director of a debt-ridden company without their knowledge. The Bill introduces safeguards to put an end to these issues.

Elsewhere, the Bill provides vital new powers to underpin our law enforcement agencies; for example, over crypto assets, and to address corporate criminal liability. The powers supplement the £400 million package the Government have allocated to tackle economic crime over the spending review period, including support for the National Economic Crime Centre, reform of suspicious activity reporting and upgrading the Action Fraud service.

The Bill also supports our national security by making it harder for kleptocrats, criminals and terrorists to engage in money laundering, corruption, terrorism financing, illegal arms movements and ransomware payments. We have continuously sought to improve the Bill as it has progressed through Parliament. As noble Lords will know, the Government have tabled a number of significant amendments to be considered at Lords Report stage, including on strategic lawsuits against public participation, corporate criminal liability, the role of authorised corporate service providers and the transparency of information on trusts on the register of overseas entities. We believe these present a significant, meaningful package of measures that demonstrates that we have listened carefully to the concerns of this House.

Yet, throughout the passage of this Bill, it has also been essential to hold uppermost in our minds the fact that the vast majority of businesses are entirely law-abiding, and that the 350 or so pages of the Bill as it now stands and the dozens of secondary regulations which will follow it represent a lot for the business community to grapple with. The reforms in this Bill will touch every company in the country—nearly 5 million of them. The Government have worked very hard to ensure that, despite the length of the Bill, the burdens it will place on businesses are slight. As the FSB has tweeted today:

“The Economic Crime Bill must work for small businesses”.


The estimated net direct cost to the business community of the package of reforms to Companies House is less than £20 million a year. Indeed, these reforms will underpin systems changes that will improve the user experience for company directors. Elsewhere, the Home Office measures in Part 5 will reduce the reporting burdens on businesses, enabling the private sector to work with law enforcement more efficiently and effectively.

I am therefore extremely pleased that we have been able to maintain the support of the business community as the Bill has progressed. Indeed, the Institute of Directors very recently said:

“The UK is rightly seen as a country which champions high standards of business conduct. The IoD welcomes this legislation as a measure that will help maintain the integrity of the UK business system”.


However, that support cannot be taken for granted. As we reach the concluding phases of the Bill’s passage, I hope that noble Lords will work with the Government to ensure that what emerges is an Act which works for the law-abiding majority at a time when so many businesses and businesspeople are under strain. We are doing a great deal, and we need to bed it in and monitor how this will affect businesses before going significantly further.

Turning to the reforms in Parts 1, 2 and 3, which we will debate today and which are the responsibility of my department, I say that noble Lords will know that these measures will fundamentally change the role of Companies House, transforming it from a passive recipient of the data it receives to a proactive gatekeeper that upholds the integrity of the companies register—the most significant reform to the UK’s framework for registering companies in some 170 years. This, of course, means significant changes for Companies House as an organisation—to its systems, processes and culture. Investment in new capabilities is already under way, with a £63 million allocation to Companies House across the spending review period and the creation of some 400 new roles to ensure delivery of the registrar’s new objectives. Furthermore, through additional investment of up to £20 million of allocated spending on economic crime, new anti-money laundering intelligence teams are being created at both Companies House and its close partner the Insolvency Service to tackle the misuse of UK companies, corporate entities and property.

Having met with the registrar, Louise Smyth, several times in recent weeks—I express my gratitude to her and her team for their time; I am sure noble Lord will join me in doing so—I am convinced that she is well aware of both the challenges and opportunities this brings. These are transformative changes that will require a step change in the capabilities and practices of Companies House staff and its systems and users.

I hope that noble Lords who joined our session with the registrar and her team a fortnight ago share my conviction that the registrar and her team will rise to these challenges. Those who attended heard how, even before the reforms reach the statute book, Companies House is breaking new ground with HMRC, the National Crime Agency and others to maximise the power of its data to tackle criminality. The amendments we are about to debate get to the core of these changes.

I turn first to the government amendments in this group, starting with Amendments 1 and 2. The Bill introduces a wholly new set of objectives for the registrar. These are: to ensure that any person who is required to deliver a document to the registrar does so and that the requirements for proper delivery are complied with; to ensure that documents delivered to the registrar are complete and contain accurate information; to ensure that records kept by the registrar do not create a false or misleading impression to members of the public; and to prevent companies and others carrying out unlawful activities or facilitating others carrying out unlawful activities. These objectives were warmly welcomed across the House, as were the amendments tabled in Committee to broaden and strengthen the scope of those objectives.

However, in the interesting and lively debate we had on the subject in Grand Committee, it was apparent that a number of noble Lords felt we could have been more ambitious in the tone the registrar’s objectives set. Mindful of the need to strike a balance between that which is sensibly aspirational and what is simply unachievable, we have looked closely at the drafting once more.

I recall that the language of “ensuring” found your Lordships’ favour in the context of the first two objectives, concerning compliance and accuracy respectively. I trust, therefore, that the House will similarly support our amendment to replicate that language in objective 3, which is concerned with the risk of register records creating a false or misleading impression to members of the public. Instead of tasking the registrar “to minimise that risk”, the intention is that she will now have the more stretching objective “to ensure” that it does not happen. Furthermore, we understand the strength of feeling on the wording of the fourth objective and recognise that noble Lords wanted an alternative to “minimising” the extent of companies’ and others’ unlawful activities.

We have been cautious here for good reason, not wishing to subject the registrar to either unrealistic expectations or the risk of unnecessary legal challenge. However, following dialogue with the registrar, we have resolved to replace the wording

“minimise the extent to which”

with “prevent” in objective 4. I know that the noble Lords, Lord Coaker and Lord Fox, in particular, felt strongly about that point. I hope these amendments will be welcomed as a further demonstration both that we have listened to the views of the House and of the commitment on the part of both the Government and the registrar to improve the quality of register information and work proactively in combating economic crime.

I turn to government Amendments 46 to 48, 51, 54 to 56, 64, and 80 to 82. Companies legislation contains various regulation-making powers allowing the Secretary of State to delegate duties and functions to the Registrar of Companies. For efficient administration, there are instances where it is appropriate for such powers to allow the Secretary of State to confer on the registrar discretion as to how she discharges her statutory duties.

We have identified various new delegated powers within the Bill where such discretion would be beneficial to efficient delivery. The common thread linking them is that they determine, at a high level, how various statutory mechanisms for applications, notifications and appeals to the registrar shall be established through secondary legislation. Although we strive to establish the parameters of such mechanisms as precisely as possible, operational experience shows that sometimes being overprescriptive can hinder efficient administrative delivery.

The primary legislation is not consistent. In some cases, it allows the registrar discretion on all aspects of processes, in other cases only some aspects, and in others, none. These amendments will give the Secretary of State the ability to delegate consistent discretions. These will cover matters such as who she gives notice to when she exercises her powers, periods allowed for certain objections and what material is required to substantiate applications and objections.

Briefly, on government Amendment 40, the Bill provides the registrar with new powers to examine and query applications for company incorporation and restoration and verify certain information. Although it is expected that this will significantly improve the integrity of the register, it is inevitable that criminals will try and, in some cases, succeed in finding ways to circumvent these checks and file under false, deceptive or misleading pretences.

Existing powers, further enhanced by the Bill, allow for the removal of false information from the register—for example, directors’ names and registered office addresses. However, the circumstances in which the registrar can, by her own action, remove a company itself from the register through the process of strike-off are limited. She must be satisfied that the company is no longer operating and is effectively defunct. Forming that judgment and seeing the process to a conclusion is a relatively lengthy process, involving various statutory notification obligations.

It will be immensely beneficial for the registrar to be able to act more quickly than current processes allow. This amendment will allow the registrar to act expeditiously where there is reasonable cause to believe that the incorporation or restoration of a previously struck-off company is based on a false premise. This will mean that she can act much more quickly to expunge potentially fraudulent companies from the register.

Finally, this group contains several minor and technical amendments to Parts 1 and 2 to correct drafting errors or ensure that the drafting works properly—namely, government Amendments 3, 4, 18 and 38. Amendments 3 and 18 correct cross-references in Clause 4 and Schedule 2. Amendment 4 changes the definition of “the registrar” in Clause 30 so that it does not refer to the Companies Act—which is itself not defined. Amendment 38 corrects a mistake in Section 1082(1) of the Companies Act 2006 by spelling out that the power conferred by that subsection is exercisable by regulations—that this was always the intention is clear from the subsequent subsections.

In combination, these amendments will further improve the registrar’s objectives and powers, enabling her to better fulfil her new role. I therefore hope that your Lordships will support these amendments and I beg to move.

16:45
Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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My Lords, there seems to be a gap, so I will happily fill it. I remind the House of my declaration of interests in the register, which discloses that I am a director of a number of private and public companies, and I am a person with significant control of rather a large number of private companies that should really be consolidated, but there you are. Now that Companies House has made it easier, perhaps I shall do that.

I thank the Minister for the discussions that he has held with me and others between Grand Committee and today. I congratulate him on most of these amendments. It really shows that he and his colleagues have listened, and it is really pleasing to know that our House has contributed to improving this Bill in such a dramatic way, with so many government amendments to the Bill at this stage. Nearly all of them—if not all of them—are going to be welcomed by this House.

There are a few points and comments that I would like to make. We do not have the consistency point that I wanted in the objectives, but the proposals that the Government are making on the objectives are tremendous and will make a big difference to the quality of the Bill. On Clause 40, perhaps the Minister could explain—now or later—that if we are going to have a power to strike off companies registered on a false basis, what about those companies that submit accounts on a false basis? The clause addresses when the companies are created; it does not deal with—I do not think it does, unless it is dealt with elsewhere—those regular company accounts. Perhaps I have misunderstood, and the Minister could clarify.

I turn to my noble friend Lord Agnew’s Amendment 49; he has not had a chance to speak to it, so it is perhaps not right for me to comment on it. There is obviously going to be extra work to do this risk assessment, and I would not want the registrar to be let off the hook by just doing a risk assessment, so perhaps he could clarify that that was not his intention by inserting that clause.

I welcome the discretion that the registrar is given throughout the clauses, especially Clauses 54 to 56. I think that giving the registrar much more discretion is a very good thing. As a result, I would suggest, in advance of my noble friend Lord Agnew’s words, that his idea of a review is a very good idea because, if the registrar is going to be given this discretion and so much is going to happen, it would be helpful for us to see what is happening. We all remember how disappointing the unexplained wealth order legislation is in practice in that nothing much has happened. It would be helpful for us to have an annual or regular update on the implementation of this Bill when it is enacted.

Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
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My Lords, I thank my noble friend the Minister for all the engagement and patience he has shown over the last few weeks and months, not just with me but with a wide congregation. We now have something that is much better than when it began its journey through the House, so I thank the Minister for that.

I am very pleased with two particular changes in this batch of amendments from the Government. First, that key, vital objective has been added for the registrar, so that it is absolutely crystal clear culturally for the organisation Companies House to know what it has to do. Added to that, giving her more discretion on how she delivers on that is very sound because, of course, it will be a mobile battlefield and she will have to be more fleet of foot.

Lastly—and I have said this before, but I think it is important that it goes on the record—we should not underestimate the extent of the cultural change needed in Companies House to move from being, as my noble friend said, a passive recipient of data to something far more dynamic and intelligent. That is why this reporting to Parliament—albeit with a sunset clause up to 2030—is really important to keep driving the momentum of that change. Every single employee of Companies House will need to be thoroughly retrained in this new mission.

Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (GP)
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My Lords, I apologise for my croakiness; the hay fever is definitely winning. I join others in welcoming, in these government amendments, that we have seen significant change since Committee. It is worth highlighting a couple of comments from the Minister’s introduction. He said that the aim of the Bill to drive dirty money out of the UK; I hope we can all agree that that is essential. He also said that we had seen so many people abusing our open system; I think we have to acknowledge that we invited those people in, and that that is the situation we created. We are now trying to fix it.

In that light, I very much welcome the fact that the Minister said that we need to see how these changes bed in before going significantly further. I want to make sure that we acknowledge, and see on the record, the fact that the Government have acknowledged that this is not enough, and that a lot more will need to be done, in what is, after all, as described by UK Finance,

“the fraud capital of the world”.

Lord Fox Portrait Lord Fox (LD)
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My Lords, there are political Bills, where the House divides on political issues and argues among itself, and there are Bills of practical importance, when the House can come together and pull in the same direction. We will not all agree about everything, but the motives behind what we are proposing have been similar. In this case, it is about helping to clear up and clean up a bad situation, and to do so in the best possible way. The Minister and his colleagues, the noble Lord, Lord Sharpe, and the noble and learned Lord, Lord Bellamy, must be congratulated on their openness and their listening ears. They have not just listened but acted on what they heard, and we should all be grateful that we have moved in this direction.

I am pleased that I can agree with the noble Lords, Lord Leigh of Hurley and Lord Agnew, in their characterisation of these changes, which are important. I think the change to the mission of Companies House is absolutely fundamental. It is vital that it is there, and it then plays to the point made by the noble Lord, Lord Agnew, about the culture change, as well as, I think, giving the flexibility and understanding that—again, as the noble Lord, Lord Agnew, said—this is going to be a mobile struggle that we have to move forward.

This group of amendments is followed by other groups which are other examples of where listening has turned into positive changes. From these Benches, we are really pleased that we are moving in this direction, and are grateful that we have done that. As we have heard, the Bill is improving as a result. So we are very supportive of these measures, and continue to be supportive of the other measures that we will hear about later.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, I add my thanks to the Ministers for their regular updates, and the access we have had to their officials. The ability to meet the team from Companies House was particularly helpful and instructive. I too believe that we have a better Bill before us.

Having said that, we must not forget the scale and severity of the consequences of actions of bad actors, particularly the exposure of the public to fraud, nor the victims, who have suffered so appallingly over many years. As we know, the Ukraine war has brought all these issues to a head, necessitating a swift response. I thank everyone involved for responding positively to some of the many proposals that we have put forward.

I will refer particularly to Amendment 2, with regard to the fourth objective. It would be wrong of me not to mention the fact that the noble Lord, Lord Coaker, as has been mentioned, was very forceful in his views that the objective surely must be to prevent unlawful activities rather than to minimise them, as was the earlier wording. I also welcome the change to the third objective, and the increase in the ability of the registrar to strike off companies and take swift action. Again, I think that running through this is the emphasis on the ability to act quickly with clarity.

I acknowledge the amendments in the name of the noble Lord, Lord Agnew, which would bring in a framework of intervention criteria to assist the registrar, and particularly Amendment 57, which recognises the sheer scale of the task ahead of Companies House and seeks full, regular scrutiny. I want to put on record our concern about the sheer scale of the task ahead of Companies House and make it plain that we must communicate to everyone involved that there is a fallback position and that it can come back if the resources are not adequate for the job it has in hand. The scale of change it has to go through, from being a receiver of information to a proactive partner, is quite significant.

I again thank the Ministers involved for their openness and for having moved on a number of our suggestions.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I am extremely grateful to all noble Lords who participated in this debate. I shall answer their questions in order.

The financial guru, my noble friend Lord Leigh of Hurley, pointed to Amendment 40. He is right that it does not specifically mention submitting misleading information—this is related specifically to the filing of accounts—but I believe that the Companies Act enables the Secretary of State to issue a winding-up order if there are materially inaccurate filings in the accounts. I am happy to write to him specifically on that issue.

I am grateful to my noble friend Lord Agnew for his comments. I am extremely pleased to come back to the noble Baroness, Lady Blake, about the objectives. We had long and specific discussions about the difference between the words “minimise” and “prevent”. I think the House understood clearly from my approach that I was being carefully guided by our legal advisers. It is right that we should be, and it is also right that we found a word that would be suitable in how the noble Baroness saw the Bill being presented. We want to make sure that we get the language right. It is important that we have remained in our current function to ensure that there is flexibility for the registrar to perform her duties while at the same time sending the appropriate signal.

The noble Baroness, Lady Bennett, rightly commented on the need to continue to review the situation as we see it. I hope that the noble Baroness has been reassured by my attitude to the Bill as it has progressed through the stages in this House. My point was to ensure that we do not deluge businesses with unnecessary obligations at this stage before we know how this process will transpire. I am also very aware of the dangers of being too prescriptive. Technology changes and the activities of criminals change, and it is important that we assess the situation as it stands and work out how to ensure that we can confront those challenges as and when they arise.

I turn specifically to the amendment tabled by my noble friend Lord Agnew, Amendment 57. Reporting by Companies House is an extremely important element of its activities, and I agree that it is important that Parliament is informed about the implementation and delivery of the reforms that we are undertaking. That is why the Government brought forward an amendment in the other place to that effect, which is now Clause 187. I am aware of the comments made about the cultural and operational changes linked to Companies House’s new responsibilities. I hope that through meeting the registrar we felt a sense of reassurance that the head of investigations is extremely dedicated to his task. We believe that the amount of money we are applying to Companies House and the fees, which we will discuss later, will amply cover expenditure, and could be increased if necessary. It is up to Companies House to ensure that it presents to the Government its funding requirements to ensure that it can do its job and perform its tasks.

It might be helpful for me from the Dispatch Box to go through some of the points formally so there is a record of what we expect Companies House to report when it has finished reporting on what it is intending to do—the inputs—and then turn our attention to the outputs, which is the difference between what it is obliged to report to Parliament for the first three years of operation, I think, and what we then expect to be business as usual.

From the discussions with Companies House to date, I can commit that, subject to the successful implementation of the necessary information systems, early reports will cover items such as: the number of documents rejected for not being properly delivered or for a discrepancy; rejected incorporations and name changes; the number of documents removed from the register for being inaccurate, incomplete or fraudulent; and the number of times the querying power is used and the resulting actions taken by Companies House. We are also looking into how we might report on the number of times Companies House has shared data with other organisations and vice versa. I would be happy to explore with Companies House officials how they might incorporate some of the new items in this amendment into its reporting without the need for this statutory requirement, and of course we listen to all sides of the House about other areas where noble Lords feel it would be beneficial for Companies House to report.

17:00
However, I hope that I have convinced my noble friend Lord Agnew that his amendment is not the best way to achieve his intended effect. The Government’s report will be comprehensive, and a statutory list of specifics is likely to become out of date quickly. I therefore urge him not to move his amendment.
Amendment 49 would insert new requirements to the manner in which the registrar should carry out her analysis function and how she should share evidence with the relevant law enforcement agencies. The Bill already provides that the registrar must carry out analysis where she considers it appropriate, and she has the relevant powers to query information and exchange information with law enforcement agencies for the purposes of crime prevention and detection. I understand that my noble friend would like to see the mandatory prescription of the use of those powers and a risk-based approach in legislation. However, the Government are firmly of the view that to do so would unnecessarily restrict the registrar in making judgments about how to make best use of her resources.
Although the Bill does not explicitly require the registrar to take a risk-based approach, it provides that she must carry out analysis where she considers it appropriate and gives her relevant powers to query information and exchange information with law enforcement agencies for the purposes of crime prevention and detection. The Bill provides the registrar with functions and objectives which have been carefully drafted to allow her to do everything she can within the resources at her disposal without imposing upon her duties which there can be no guarantee she will be capable of attaining. It is imperative that we afford the registrar sufficient discretion to focus her efforts on the areas of highest risk. In doing so, she will be implicitly operating in a risk-based fashion. It is the intention that the risk-based approach will be informed and driven by an intelligence hub in Companies House. Utilising ever-more sophisticated data science methodologies, the hub will only expand over time in its ability to identify strategic and tactical economic crime threats.
I was pleased that there was an opportunity for noble Lords to hear from the registrar in person earlier this month, and what she said, in my personal view, was very encouraging. The commitment is there, and the plans are well advanced. It is a significant task we are giving her, and I do not wish to unnecessarily tie her hands as she goes about it. I therefore ask my noble friend not to move his amendment.
Amendment 1 agreed.
Amendment 2
Moved by
2: Clause 1, page 2, leave out lines 11 to 13 and insert—
“Objective 4 is to prevent companies and others from—(a) carrying out unlawful activities, or(b) facilitating the carrying out by others of unlawful activities.”Member’s explanatory statement
At the moment the registrar’s fourth objective is to minimise the extent to which companies and others carry out unlawful activities etc. This amendment makes it an objective to prevent companies and others from carrying out unlawful activities etc.
Amendment 2 agreed.
Clause 4: Proposed officers: identity verification
Amendment 3
Moved by
3: Clause 4, page 4, line 7, leave out “206(7)” and insert “207(1)”
Member’s explanatory statement
This amendment corrects a cross-reference in Clause 4 of the Bill.
Amendment 3 agreed.
Clause 30: Registered email addresses: transitional provision
Amendment 4
Moved by
4: Clause 30, page 22, line 8, leave out from second “the” to end of line 9 and insert “meaning given by section 1060(3) of the Companies Act 2006.”
Member’s explanatory statement
This amendment changes the definition of “the registrar” so it does not refer to the Companies Acts (which is itself not defined).
Amendment 4 agreed.
Clause 36: Disqualification of persons designated under sanctions legislation: GB
Amendment 5
Moved by
5: Clause 36, page 26, leave out line 26 and insert “and Article 15A of the Company Directors Disqualification (Northern Ireland) Order 2002 (see section 3A of the Sanctions and Anti-Money Laundering Act 2018)”
Member’s explanatory statement
This amendment makes it clear that a person who is subject to director disqualification sanctions will be so subject both for the purposes of section 11A of the Company Directors Disqualification Act 1986 and for the purposes of Article 15A of the Company Directors Disqualification (Northern Ireland) Order 2002.
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, the amendments in this group relate to the new director disqualification sanctions measure introduced in Committee. This measure created a completely new type of sanction in the Sanctions and Anti-Money Laundering Act 2018 called director disqualification sanctions. It will be unlawful for a designated person subject to this new measure to act as a director of a company. I welcome the support this measure received from this House in Committee.

Government Amendments 5 to 11 address some technical drafting concerns raised by Northern Ireland officials. The amendments clarify that the definition of a

“person who is subject to director disqualification sanctions”

encompasses disqualification for the purposes of the Company Directors Disqualification Act 1986, which applies in England, Wales and Scotland, and the Company Directors Disqualification (Northern Ireland) Order 2002, which applies in Northern Ireland. This does not alter the legal consequences of the measure but simply clarifies that the definition relates to both Great Britain and Northern Ireland legislation.

The amendments also make clear that the Department for the Economy in Northern Ireland will now be required to maintain information about individuals subject to the new director disqualification sanction in the department’s register of disqualified directors. This mirrors the requirement for the Secretary of State to update the UK-wide director disqualification register, ensuring consistency between GB and NI legislation.

Lastly, these amendments clarify when a designated person, or a person acting on the instructions of a designated person, is responsible for the debts of a company. The current drafting does not address the liability of a third party who acts on the instructions of a designated person. These amendments therefore specify the circumstances in which a third party acting under instructions from a designated person may be liable and clarifies the defences that may relieve the designated person or the third party from personal liability.

The amendments mean that a person will not be responsible for debts incurred when they could not reasonably have known they were subject to director disqualification sanctions. And a third party who acts on instructions that were given by a person who they did not know was subject to director disqualification sanctions, or who they reasonably believed was acting under the authority of a licence, will similarly not be responsible. As a package, these amendments improve the coherence of the new director disqualification sanctions measure.

Government Amendments 52 and 53 amend Clause 101 of the Bill, which inserts new Section 1132A into the Companies Act 2006. Government Amendment 83 inserts into the Bill after Clause 169 a new clause which amends Section 39 of the Economic Crime (Transparency and Enforcement) Act 2022. Both new sections allow the Secretary of State to make regulations which confer power on the registrar to impose a financial penalty on a person if satisfied, beyond reasonable doubt, that the person has engaged in conduct amounting to an offence. These amendments align the drafting with the drafting of Clause 202 of this Bill, which inserts new Section 17A into the Sanctions and Anti-Money Laundering Act 2018. These amendments mean that regulations must provide that no financial penalty may be imposed on a person in respect of whom criminal proceedings are ongoing, or if a person has been convicted of an offence. At the moment, it is the other way around, so criminal proceedings cannot be continued once a penalty is imposed. This is clearly unhelpful, as without amendment, prosecutors’ discretion to prosecute could be infringed upon.

Government Amendment 50 relates to the setting of Companies House fees. It will allow the Secretary of State to take into account additional costs incurred, or likely to be incurred, in relation to the new disqualified directors sanction which the Bill is introducing. Specifically, this amendment will ensure the costs of delivering the licensing function for this sanction can be covered by Companies House fees. Without this amendment, the costs of this licensing regime would fall on the taxpayer. We have made great strides through this legislation to require those that benefit from incorporated status to contribute towards maintaining the integrity of the register and a healthy business environment. It therefore seems reasonable for this to extend to the funding of the licensing regime that enables sanctioned directors to remain compliant and continue lawfully to carry out certain activities within the limitations set out in the licence.

I hope noble Lords will support these amendments. I beg to move.

Lord Fox Portrait Lord Fox (LD)
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My Lords, again this is a group of amendments with which we can thoroughly agree, which is a nice position to be in. Government Amendments 5 to 11 speak for themselves in the sense of tidying up the situation in Northern Ireland. The one amendment that is worth dwelling on a little bit is government Amendment 50, which gets to the point around resources and having sufficient resources for Companies House to be able to do what it needs to do.

There is a certain irony that, if the Companies House team is successful, there will be fewer companies on the register. So one of the things they will need to consider about fees is that they will be reducing the number of companies or the amount of income that will come per company. One of the issues in setting them is that, if estimates of 5% of companies being fraudulent are right, there will be 5% fewer companies paying the annual renewal. Some people, and some organisations, put that number much higher, so I suggest that the Government think about the success that Companies House will hopefully have in order to set a fee that does not become self-defeating if it removes companies.

The more companies the team removes from the register, the less money Companies House receives in annual renewal. That is the point I am making. I am assuming that this number will come quite soon after this Bill becomes an Act, and it would be useful for the Minister to update us on when we think the secondary legislation will come, because, clearly, Companies House and others will rely on this money for planning ahead. I am assuming the money goes to Companies House and not the Treasury, but perhaps the Minister could confirm that.

If the Minister could say a little around the operation of Amendment 50, that would be helpful—so that I understand it even if everybody else already does. He could say a little about how much money and how changeable it will be in the event that more money is needed to support the drive to remove criminality from our companies. I think that everything else is broadly very welcome.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, we agree with all the amendments in this group. This group is all government amendments which make minor changes to ensure that penalties align with previous legislation, that they are taken into account when setting fees and that penalties do not stop criminal proceedings, as the noble Lord explained introducing the amendments.

I take the point the noble Lord, Lord Fox, made about Amendment 50. I presume fees can be updated as the situation evolves regarding the number of companies on the register. Nevertheless, we support this group of amendments and look forward to the Minister’s response to the questions asked by the noble Lord, Lord Fox.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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As always, I am extremely grateful to noble Lords for their interventions and the points raised in debate.

I turn to government Amendment 50. It is not a technical point, but it would not, in my view, be a point of significant consequence. It is just to ensure that when the Secretary of State has a licensing regime for directors who have been disqualified but whom she may require to perform a director’s duties, such as winding up a business—it is practical to allow disqualified directors in some instances to perform certain functions—the cost for administering that process is met by the fees. I do not imagine that would be a significant component of the Companies House fees. This is a tidying-up point more than anything else. It just means that the taxpayer does not have to pay the bill. If I am wrong in my expectations, I will certainly correct that for the House, but I do not think that is the case. It is a technical point.

We have discussed at great length what we feel the Companies House fees should be. I do not think there is a single similar opinion; every noble Lord in this House has a different view on the exact amount to the nearest 50p it should cost to register a company and to reregister it or confirm the registration each year. The fact is that Companies House now has a licence to propose its budget, which must be agreed. That budget will be met through the fees charged to companies using its services.

The noble Lord, Lord Fox, raised a good point. It is anticipated that some companies will leave the register. I hope that there will not be a significant number of companies forced to leave the register because they are not legitimate companies, but it is right that this investigative power will encourage those companies that should not be on the register to leave. The quantum of the number of companies—I think there are nearly 5 million companies—at any reasonable fee rate, which the discussions established is between £50 and £100, would allow there to be ample funding for Companies House.

To answer the question the noble Lord, Lord Fox, asked about what happens to any excess money raised by fees, there is only one place excess money raised by anything in this great nation of ours goes: His Majesty’s Treasury. We would clearly wish to avoid that. We would rather make sure that the fees were set at the right level.

To end on a serious note, we are not looking to have a fee rate. This is why the Government have been careful not to hypothecate fees for Companies House activity with other activities. It is not right, in our view, to charge legitimate businesses excess amounts of money to cover other things unrelated to their Companies House registration. We have tried to set this in the right fashion. I think this will result in the right outcome. I hope very much that the House will support what are seen as largely technical amendments.

Amendment 5 agreed.
Amendments 6 and 7
Moved by
6: Clause 36, page 27, leave out lines 4 to 15 and insert “where—
(i) the instructions are given by a person whom they know at that time to be subject to director disqualification sanctions (within the meaning of section 11A),(ii) the giving of the instructions does not fall within any exception from section 11A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and(iii) the instructions are not authorised,(but see subsection (3A)).”Member’s explanatory statement
This amendment ensures that a person who acts on instructions that were given by a person that they did not know was subject to director disqualification sanctions would not be responsible for all of the relevant debts, and is otherwise consequential on my amendment to page 27, line 16.
7: Clause 36, page 27, line 16, at end insert—
“(f) after subsection (3) insert—“(3A) But—(a) a person who is subject to director disqualification sanctions (within the meaning of section 11A) is not personally responsible under subsection (1)(a) for any relevant debts of the company incurred at a time when the person did not know and could not reasonably have been expected to know that they were subject to director disqualification sanctions;(b) a person is not personally responsible under subsection (1)(c) for any relevant debts of the company incurred at a time when the person reasonably believed that the instructions were authorised.”;(g) after subsection (5) insert—“(6) Subsection (7) applies where a person (“P”) at any time—(a) was involved in the management of a company, and(b) acted on instructions where—(i) the instructions were given by a person (“D”) whom P knew at that time to be subject to director disqualification sanctions (within the meaning of section 11A),(ii) the giving of the instructions did not fall within any exception from section 11A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and(iii) the instructions were not authorised,unless P reasonably believed at that time that the instructions were authorised.(7) For the purposes of this section P is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by D.(8) For the purposes of this section instructions are “authorised” if they are given under the authority of a licence issued by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018.”” Member’s explanatory statement
This amendment means that a person is not responsible for debts incurred when they didn’t know they were sanctioned, or they reasonably believed they were acting on instructions under a licence. A person who acts on instructions given by a sanctioned person is presumed to be willing to do so thereafter.
Amendments 6 and 7 agreed.
Clause 38: Disqualification of persons designated under sanctions legislation: NI
Amendments 8 to 11
Moved by
8: Clause 38, page 28, line 24, leave out “(see section 3A of that Act)” and insert “and section 11A of the Company Directors Disqualification Act 1986 (see section 3A of the Sanctions and Anti-Money Laundering Act 2018)”
Member’s explanatory statement
This amendment makes it clear that a person who is subject to director disqualification sanctions will be so subject both for the purposes of section 11A of the Company Directors Disqualification Act 1986 and for the purposes of Article 15A of the Company Directors Disqualification (Northern Ireland) Order 2002.
9: Clause 38, page 28, leave out lines 36 to 46 and insert “where—
(i) the instructions are given by a person whom they know at that time to be subject to director disqualification sanctions (within the meaning of Article 15A),(ii) the giving of the instructions does not fall within any exception from Article 15A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and(iii) the instructions are not authorised,(but see paragraph (3A)).”Member’s explanatory statement
This amendment ensures that a person who acts on instructions that were given by a person that they did not know was subject to director disqualification sanctions would not be responsible for all of the relevant debts, and is otherwise consequential on my amendment to page 28, line 47.
10: Clause 38, page 28, line 47, at end insert—
“(f) after paragraph (3) insert—“(3A) But—(a) a person who is subject to director disqualification sanctions (within the meaning of Article 15A) is not personally responsible under paragraph (1)(a) for any relevant debts of the company incurred at a time when the person did not know and could not reasonably have been expected to know that they were subject to director disqualification sanctions;(b) a person is not personally responsible under paragraph (1)(c) for any relevant debts of the company incurred at a time when the person reasonably believed that the instructions were authorised.”;(g) in paragraph (5), in the closing words, after “given” insert “by”;(h) after paragraph (5) insert—“(6) Paragraph (7) applies where a person (“P”) at any time—(a) was involved in the management of a company, and(b) acted on instructions where—(i) the instructions were given by a person (“D”) whom P knew at that time to be subject to director disqualification sanctions (within the meaning of Article 15A), (ii) the giving of the instructions did not fall within any exception from Article 15A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and (iii) the instructions were not authorised,unless P reasonably believed at that time that the instructions were authorised. (7) For the purposes of this Article P is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by D.(8) For the purposes of this Article instructions are “authorised” if they are given under the authority of a licence issued by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018.””Member’s explanatory statement
This amendment means that a person is not responsible for debts incurred when they didn’t know they were sanctioned, or they reasonably believed they were acting on instructions under a licence. A person who acts on instructions given by a sanctioned person is presumed to be willing to do so thereafter.
11: Clause 38, page 28, line 47, at end insert—
“(5) In Article 22 (register of disqualification orders and undertakings), in paragraph (3), after sub-paragraph (c) insert—“(d) persons who are subject to director disqualification sanctions within the meaning of Article 15A;(e) any licences issued by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018 that authorise such a person to do anything that would otherwise be prohibited by Article 15A(1).””Member’s explanatory statement
This amendment ensures that the register of disqualification orders kept by the Department for the Economy in Northern Ireland includes details of persons who are subject to director disqualification sanctions and any licences that allow those persons to act in Northern Ireland.
Amendments 8 to 11 agreed.
17:15
Clause 46: Register of members: information to be included and powers to obtain it
Amendment 12
Moved by
12: Clause 46, page 35, line 29, after “changes” insert “and, at the time of the change, it is a non-traded company”
Member’s explanatory statement
This amendment means that only non-traded companies are required to keep old information about their members (eg old addresses).
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, before we turn to the amendments tabled by my noble friend Lord Agnew of Oulton and the noble Lord, Lord Vaux of Harrowden, I shall briefly outline government Amendments 12, 13, 14 and 15 in this group. Clause 46(4) amends Section 113 of the Companies Act 2006, including by inserting new subsection (6A). This will require all companies to retain information about a member in their register of members where it changes, and to note the date on which the information changed and was entered into the register by the company. The requirements apply only prospectively, not retrospectively. The government amendments target the scope of this requirement, so it applies only to non-traded companies, to ensure that excessive burdens on traded companies with large numbers of shareholders are avoided.

However, these amendments do include a power for the Secretary of State to make regulations which allow for a full or partial reversal of this scope restriction, allowing this requirement to retain old information and note the dates of changes to also be applied in future to traded companies, should it be judged to be useful and proportionate. In considering all the amendments in this group, I remind noble Lords that the UK already has one of the most open and accessible shareholder registers in the world. Disclosure of shareholder information is far from a global norm. In fact, the UK is one of relatively few international countries to have any publicly available shareholder information for companies not listed on its stock exchange. Noble Lords will know that many countries do not even disclose major shareholders or beneficial owners publicly.

The UK led by example with its public register of PSCs. We were the first G20 nation to institute such a register, back in 2016, and we have been a strong voice ever since in promoting the importance of collecting and sharing beneficial ownership information. Numerous jurisdictions, including the EU, the US and Australia, have been influenced by our approach. But a responsible Government must weigh carefully the benefits of further transparency regulations, and the inevitable rules, forms and penalties that would follow, against the costs and impact. The Government support the publication of accurate and useful shareholder information and we are one of the most open countries in the world in this respect—but do we need to go further, and if so how far? What really are we seeking to achieve?

There are over 10 million shareholders of UK companies. At a time when this Government are looking to reduce regulatory constraints on business, even small cost changes to shareholder obligations could very quickly add up to a large drag on our economy. I ask noble Lords to reflect carefully on the value of the amendments we are about to discuss. I beg to move.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I shall speak to the amendments in this group in my name, Amendments 16 and 17. I should remind the House of my interest in the register as a non-practising member of the Institute of Chartered Accountants in England and Wales. I also take the opportunity, since it is the first time I have spoken so far, to thank the various Ministers and their officials, and indeed the registrar and her staff, for their constructive engagement and the generosity they have shown with their time. The engagement process on the Bill has been exemplary. We are helped by the fact that this is generally agreed to be a fundamentally good Bill: we are all on the same side here, just trying to ensure that it is as good as it can be.

These two amendments are designed to improve the transparency of ownership of our companies, to ensure we know who really owns or controls them. I remind the House of the words of the Minister at Second Reading:

“The use of anonymous or fraudulent shell companies and partnerships provides criminals with a veneer of legitimacy and undermines the UK’s reputation as a sound place to do business”.—[Official Report, 8/2/23; col. 1250.]


I think we all agree with that.

One of the classic ways to hide the real ownership of a company is through the use of undisclosed nominee arrangements, where a shareholder is named on the register but is in fact holding the shares on behalf of another person. At present, while the company must try to identify any persons with significant control, or PSCs, according to the guidance, all it really needs to do is look at its shareholder register: if there is no shareholder with 25% or over, it can reasonably conclude that there is no person of significant control. For example, if a company has five shareholders, each with 20%, the company can reasonably conclude that there is no person with significant control that needs to be named or verified.

However, what if those five shareholders were in fact holding the shares on behalf of a single third party? That third party would then control 100%. There is an obligation under the PSC rules for that third party to tell the company, but a dishonest actor probably would not do so. The problem is that there is no obligation for the person who is acting as the nominee to disclose that fact, which makes it far too easy for a dishonest actor to hide their identity. The company has the right to ask the nominees, but, remember, the company in my example is controlled by the dishonest actor—so it will not do that. If it is asked, it can point to the fact that it has followed the guidance, having checked its register and not found anyone with a share of 25% of more. In fact, all the dishonest actor has to do to hide their ownership is find five willing people who are prepared to have their name on the shareholder register and hold the shares on behalf of the dishonest actor. There is no comeback for these nominees. They have no obligation to disclose.

Where does one find five such willing people? I suggest that noble Lords would find it interesting to google “nominee shareholders”. They will find pages and pages of businesses that will do this, with few questions asked, for around £200 to £300 a year. They advertise specifically that the nominee service is for the purpose of hiding the true identity of the shareholder. In passing, it is worth saying that many of the people offering such services are the same people who will be the authorised corporate service providers and will carry out the ID verification under this Bill. That introduces an interesting conflict, but I stress: under the current proposals, these people will be doing nothing wrong.

Amendment 16 aims to close this loophole by making it a requirement for shareholders to state, as well as their name and address, whether they are—or, importantly, are not—acting as a nominee. If they are acting as a nominee, they would have to provide the name and address of the person on whose behalf they are holding the shares. I said that it was important that they should state that they are not holding the shares on behalf of someone else; that is because they would then have to lie actively if they are a nominee but do not disclose it. I believe that there is a real difference between lying actively and just keeping quiet passively—that is, turning a blind eye, as has happened all too often in the past.

This simple step of making people declare whether they are a nominee should make it much more difficult for dishonest actors to find people willing to act as nominees. They will need to find someone who is willing actually to lie on the record rather than just to keep quiet. Having this information will make it much easier for companies to identify hidden PSCs. Knowing which shares are held by nominees will also assist Companies House and organisations such as Transparency International to focus their attention where the risk is greatest.

We have heard the Minister telling us that we have to be careful not to create too great a burden on legitimate businesses. I agree with him, but I do not think that this would do that. Shareholders already have to provide their name and address. I struggle to understand why it would add any material extra burden to have to make a simple declaration—perhaps even as simple as ticking a box—and to provide the details of the actual beneficial owner. I really do not see that as adding any significant additional effort. In any event, there are significant benefits that arise from a company structure; it really cannot be too much to ask that the beneficial owner of the shares is disclosed in return for having those benefits.

I turn now to my second amendment in this group, Amendment 17. The Bill introduces a welcome identity verification requirement for persons with significant control, but that applies only to shareholders who own 25% or more. I should say that I know the Minister will correct me on that point, because it also applies to those who might have below 25% of the shares but otherwise exert control. He would be right, but in practice the 25% level is the driver. As my previous example shows, it is quite easy to structure a company so that there is no apparent 25% shareholder. There is certainly a legitimate debate to be had over where the correct level to trigger identity verification should lie, but I do not hear many people arguing that it should be as high as 25%.

Amendment 17 would reduce the level to require identity verification from 25% to 5%. Why 5%? There are a number of precedents. For UK listed companies, 3% shareholdings must be disclosed, with an exemption for fund managers, who must disclose at 5%, so 5% is deemed of sufficient importance for all listed companies to disclose. The rules around entrepreneur relief, which gives a reduction in capital gains tax payable on a disposal, state:

“A company is your personal company if you hold at least 5% of the ordinary share capital and that holding gives you at least 5% of the voting rights in the company”.


So tax rules consider that 5% gives sufficient influence for the company to be treated as your personal company, and there is a high degree of consistency supporting a 5% level. As I say, though, there is potentially a debate to be had about that level.

Again, I am sure we will hear that we should not create an undue burden on innocent parties, so let us consider the impact of that. I understand that the average number of shareholders for UK companies is two, so for the average company the amendment would create no additional burden; they already have to verify the identity of their shareholders. It would apply only where a more complex shareholder structure has been created with a greater number of shareholders. Yes, it would create a little more work for them, but in fact it would only increase the maximum number of ID verifications required by a company from a maximum of four to a maximum of 20, which should be easily manageable. We are not talking about companies having to verify hundreds of IDs.

Both these amendments would make a significant difference to the transparency of the register, helping to ensure—to get back to the Minister’s words that I referred to earlier—that we make it more difficult for criminals to use anonymous or fraudulent shell companies. I will listen carefully to what he has to say in response, but I give notice that I intend to divide the House on at least Amendment 16 unless he is able to provide very strong assurances.

Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
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My Lords, I support Amendments 16 and 17 from the noble Lord, Lord Vaux. I shall also speak to my Amendment 19.

I do not want to repeat everything that the noble Lord has said, but I received a letter from my noble friend the Minister yesterday on this subject that included the subheading, “Transparency over shareholders and nominees”, and one of the arguments that the Government are making is that this could cause a significant cost to the economy. We have just heard from the noble Lord, Lord Vaux, that that is, frankly, a fantasy; if the average number of shareholders per company is two—perhaps the Minister could confirm that, but it is certainly my instinctive understanding—then what is the cost?

In any case, that should be put against the cost to the economy of the fraud and economic crime that is happening at the moment at an increasing rate. We have endlessly reminded ourselves that 40% of all crime in this country is now economic crime. I know from my time in government that the loss to fraud in government alone each year—this is the bottom-end estimate by the NAO—is £30 billion, and a lot of that is facilitated through the holes in the Companies House structure. I urge the Minister to think hard about this because it is a great opportunity, at minimal cost to the economy or to business, to make a substantial change.

Lord Fox Portrait Lord Fox (LD)
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I shall speak to Amendment 16, to which I have added my name, and I support the noble Lord, Lord Vaux, in his clear outline as to why this is an elegant solution. It is so because it would push the onus on to the supplier of the service and make them decide whether to lie or tell the truth. A lie detector, in a sense, for dishonest actors is a very good way of exposing this practice. It is not unreasonable to know who is behind a company; in fact, it is perfectly reasonable that we should.

Amendment 17 from the noble Lord, Lord Vaux, also contains an important point: at what point does the cut-off come? It will be interesting to hear what the Minister has to say about the continuum between 25% and 5%. The Government have chosen 25%, which is a very large number when you think about it. The numbers breakdown given by the noble Lord, Lord Vaux, is clear that it would not mean that a huge number of people had to be identified, even if his suggestion of 5% was adopted by the Government.

If the noble Lord chooses to move Amendment 16 then it is safe to say that we on these Benches will support it, and we will wait to hear what the Minister has to say on other matters.

17:30
Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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I thank the Minister for his comments on the government amendments. We support Amendments 16, 17 and 19. They would significantly help improve the integrity of the register. This issue has been raised in amendments throughout the passage of the Bill. While we welcome many of the other changes that the Government have made and the manner in which they have collaborated with colleagues to make the Bill stronger, the issue of nominees represents a weak point in the Bill. We must know which bad companies and actors are acting fraudulently in order to fight fraud, corruption and economic crime.

A point that has repeatedly been made is that, as things stand, shareholder information is incomplete. It is difficult to identify the real owners of certain companies, which reduces the reliability of shareholder information published by Companies House, which we are all determined to improve. That undermines the corporate register as a whole.

As I said, we support Amendments 16, 17 and 19. I was struck by the comments of the noble Lord, Lord Agnew, about the cost of fraud to the economy, which we need to keep front of mind when we are told to be concerned about the cost of putting these measures in place. I confirm that, if the noble Lord, Lord Vaux, is minded to test the opinion of the House on Amendment 16, these Benches will support him.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I thank the noble Lord, Lord Vaux of Harrowden, and my noble friend Lord Agnew of Oulton for their amendments. If noble Lords allow me to, I will just set the scene.

We have made some significant advances in understanding who is behind a company and who is running these organisations, which is at the core of these measures. By understanding who the people with significant control are, we will be able to crack down on crime and the dirty money going through the system. That is at the core of it, as far as we are concerned; any other changes around that are fundamentally peripheral.

On a comment made by the noble Lord, Lord Vaux, a nominee is obliged to declare if they acting on behalf of a person with significant control, as is the company collecting the data. If they are acting as a nominee in a collective way to achieve a threshold of 25% or above, or acting as a person of significant control, that nominee has to declare themselves a person of significant control. There is no additional benefit from changing the rules to see how people who stand as nominees are listed as such. It is important for me, for Companies House, for this Government, for the House and, frankly, to reduce crime with this Bill to understand who is behind the companies, and these measures do that.

My concern, if we try to track every move, is that we will bring into the criminal and penalties regime a large number of people who do not necessarily know that they have to register—for example, if they are a registered nominee on behalf of a very small shareholder. We are concerned that we may go too far at this stage. We need to see how the work that Companies House does develops before expanding the regime.

I stress that the work that we have done on PSCs is at the core of the Bill. Most of the government amendments reframe the existing PSC information gathering and disclosure rules to make them clearer and to work more effectively with a centrally held PSC register. This may be covered a little later, but it is worth noting that it is not necessarily for the company to hold the register of PSCs any more; the registrar will now hold this information centrally.

The amendments we are proposing make provision to require more information to be provided by UK companies concerning the transparency of their ownership, including full explanations to be given by companies which claim they are exempt from the PSC requirements, and for notifications to be made to the registrar where a company believes it has no PSC. That is a relatively unique point but it is certainly possible, and so the company has to then explain why it has none. Every company will have a person of significant control listed and registered de facto; if it does not, it will have to explain why that is the case.

My noble friend Lord Agnew rightly pointed out that the average number of shareholders is two—I think it is actually 2.2. If you look at the 4.8 million or so companies that are registered and add up the numbers of companies with one, two or three shareholders, from memory—no doubt my officials will correct me—you would account for 80% of all companies, at around 4.1 million or 4.2 million. Some 3.7 million companies are held by one shareholder, who will automatically be a person of significant control. If you have two shareholders, the assumption is that you will probably have two shareholders with significant control, and so on. You are looking at a relatively small number of shareholders in the 10 million or so shareholders of the 4.8 million or so companies who would not necessarily fall, specifically and immediately, without debate, into the PSC legislation.

I turn to Amendments 19 and 16, put forward by my noble friend Lord Agnew and the noble Lord, Lord Vaux. I have some specific text about the improvements we are going to make to the Bill, and I will read it out to make sure I get the wording right on what we believe we can take to Third Reading. I stress that we welcome greatly the work we have done in this area, and I hope the noble Lord, Lord Vaux, sees the spirit with which I have entered into the debate, particularly around the issue of classifying who is a nominee and who is not. The Government have great sympathy with the intention around that, and I will come on to talk about it in a moment.

As I say, these amendments are not ones that we would be keen to accept. I do not believe they achieve their intent, and they risk disproportionate burdens on legitimate actors and Companies House. The Government considers that further amendment is not warranted because the provisions in the person with significant control framework already require the whole process of disclosure of a PSC behind a nominee. To reaffirm, if a nominee does not declare that they are acting on behalf of a PSC, or becomes a PSC on account of their nominee holdings, then they are committing an offence. I believe the company is also required to collect the information, so there are a number of tiers around this structure.

I emphasise to noble Lords one more time how the existing requirements achieve what we in this House want to achieve. Where a company sees that it has a shareholder with over 25% of the shares or voting rights, or otherwise knows or has reasonable cause to believe the shareholder may fall under the definition of a PSC, the company is obliged to check with the shareholder whether they are in fact a PSC, and the shareholder is obliged, on pain of criminal sanction, to respond.

It is worth mentioning to the House that we talk at length about the 25% threshold but, as the House well knows, a person with significant control can own one share in a shareholding of a billion shares and would still be registered as the PSC if they controlled the business. This legislation is quite well crafted, if I may say so, to ensure that we catch the people who are exercising control over these businesses.

I repeat that the shareholder is obliged, on pain of criminal sanction, to respond. If the person responds to deny that they are a PSC, despite meeting the share-ownership voting rights threshold for qualification, the implication is that they are holding the shares as a nominee for a PSC. Under the Bill, shares held by a person as nominee for another are treated as held by that other and not by the nominee for the purposes of assessing who a company’s PSCs are. That is an important point, and I hope it gives noble Lords some reassurance.

The Bill gives companies the power to require third parties to provide information about the PSC they are holding the shares for. The nominee commits an offence if they fail to respond or give a false statement in response. Amendments I will bring forward at Third Reading will make it easier to prosecute these offences—I will come on to this momentarily. The Government’s position is that it would not be proportionate to require all shareholders to state whether they are nominees or to provide information about who they are holding the shares for. If a company had cause to believe a minority shareholder knew who its PSCs were, the company already has the power to require the shareholder to provide that information.

If noble Lords’ proposals became law, they would be difficult to enforce effectively, and it is unlikely that bad actors would comply with the new requirements. This measure would create a large and expensive haystack with few, if any, needles to find inside. It would therefore serve only to impose new undue burdens on the law-abiding majority, which the Government are actively seeking to avoid. As several noble Lords heard directly from Companies House executives earlier this month, gathering more and more information on shareholders would risk diverting its resources away from material intelligence work and more harmful cases and into more administrative work. An important point to emphasise is that we want Companies House to focus on running an effective companies register and on catching the criminals who are abusing our system.

I am sure that noble Lords who have greater experience than me in this House—looking around, I cannot see one with less experience sitting on the Benches—will know that, if we make too prescriptive legislative statements for these operational entities, they can easily become distracted by the minutiae to try to get to the nth degree and, because of the implementation of the legislative processes placed upon them, not necessarily focus on the core tasks. I repeat again my sympathy and empathy with noble Lords putting these amendments forward. However, I am extremely concerned that they would place undue burdens on individuals, and in particular on Companies House, which would then be distracted from its duties. At the same time, we believe that we have brought in a strong framework which will ensure that we deter crime while allowing legitimate businesses to function.

I appreciate noble Lords’ concerns that the current framework may not always lead to the disclosure of all PSCs, and that having further information about minority shareholders acting as nominees could in theory be useful to help flush out undeclared PSCs. However, the Government’s position is that there is no evidence that any additional benefit would outweigh the costs to all companies and that the totality of measures in the Bill, such as the registrar’s new objectives and powers, will serve better to deter non-compliance and flush out such persons.

I now come to the undertaking to bring forward amendments at Third Reading. The amendment in the name of the noble Lord, Lord Vaux, has stressed the importance of the transparency of ownership and control of companies. The Bill already makes great strides forward in this area, as I am sure the noble Lord knows. However, after further review of the PSC framework and the changes made to it by the Bill, the Government have identified a number of necessary improvements, and I undertake to bring forward amendments to address this at Third Reading.

The current legislation allows companies to maintain their own PSC registers and to then notify the registrar of changes to those locally held registers. The Bill changes that framework so that after it is brought into force the registrar will maintain a central PSC register for all companies. Most of the amendments will reframe the existing PSC information-gathering and disclosure rules to make them clearer and work more effectively with a centrally held PSC register.

The amendments will include provisions which will enable those persons thought to be PSCs to confirm that they are, and to confirm their details before those are published. The amendments will also make provision to require more information to be provided by UK companies concerning the transparency of their ownership, including for explanations to be given by companies which claim they are exempt from the PSC requirements, and for notifications to be made to the registrar where a company believes it has no PSC. The amendments will align the drafting of false statement offences relating to the PSCs of UK companies with other similar offences in the Bill.

I regret that these amendments could not be finalised for Report, but, given the strength of feeling that noble Lords have demonstrated today on ensuring that this legislation is as robust as possible, I trust they will welcome them. We of course stand ready to engage with noble Lords on these amendments ahead of Third Reading.

Finally, on Amendment 17, put forward by the noble Lord, Lord Vaux, my officials have analysed what the cost to businesses would be should identity verification requirements extend beyond directors, PSCs and filers. As I mentioned to noble Lords, the individuals—as in the numbers of companies covered—will be broadly covered, in my estimation, to the tune of about 80% of the number of people who are single shareholders or shareholders of companies containing one, two or three, and then of course all the other companies, in theory except in rare circumstances, would have PSCs associated with them. The verification process will be deep and significant, and will cover many millions of people who will be required to formalise their identity through these processes.

This analysis estimates that introducing identity verification for all shareholders in non-traded companies could have a net annual direct cost to business of up to around £150 million. I will say that again, so that noble Lords may hear it: we believe that these measures, if introduced, could have a net annual direct cost to business of up to around £150 million. The costs and methodology have been published on GOV.UK, and I am happy to share them directly with noble Lords, if that would be of use.

17:45
This analysis also indicates that setting a threshold for identity verification—for instance, 5%, 10% or 20% of shareholdings in a company—will not mean significantly lower burdens than if all shareholders needed to verify. Moving the level, thinking 15% or 20% or whatever is a reasonable level, does not change the burden significantly, given the number of shareholders who additionally, it is believed, will apply. I have not had a chance to see the analysis on GOV.UK, but I will be happy to talk to noble Lords in further detail about that. This is due to the fact that any change in requirements would attract familiarisation costs, which affect all companies, most of which have very few shareholders, and all companies would likely need to follow a new Companies House submission process independent of the PSC identity verification process.
I am concerned that this amendment could therefore lead to a sizable cost to business, in particular small businesses—and the vast majority of the register is made up of small companies. Further, there are on average 2.2 shareholders per company, meaning that many shareholders will already be captured by identity verification requirements for PSCs. This Government are committed to supporting small business and boosting growth. Adding more requirements for these companies could place undue burdens on small businesses, and that is not something that I or this Government can support. Identity verification requirements already capture the key players in a company. Any improved transparency achieved by extending these requirements to individuals who do not exercise any significant control is unlikely to exceed the cost to business.
In order for the noble Lord’s amendment to work, these individuals would need to face criminal penalties for failure to verify their identity. These sanctions can be justified for directors and PSCs who are the key players in a company, but to subject minority shareholders to criminal sanctions would be disproportionate and would likely disincentivise investors—aside from the point mentioned earlier about the complexity and additional burdens placed on Companies House, which might act as a terrible distraction when it comes to it performing the crucial task we have laid before it. Finally, imposing any additional identity verification requirements would have significant resourcing burdens for Companies House. I am concerned that accepting these amendments could likely delay the implementation of other necessary reforms for minimal value. I am afraid therefore that I will ask the noble Lord, Lord Vaux of Harrowden, to not press his amendment.
Amendment 12 agreed.
Amendments 13 to 15
Moved by
13: Clause 46, page 35, line 30, leave out “that” and insert “the fact that the information has changed”
Member’s explanatory statement
This is consequential on my amendment to Clause 46, page 35, line 29.
14: Clause 46, page 35, line 38, at end insert—
“(6B) Where any of the information required to be entered in a company’s register of members changes and, at the time of the change, it is a traded company, the company is not required to include or retain the old information in the register.(6C) The Secretary of State may by regulations—(a) amend subsection (6A) so as to provide for it to apply in relation to traded companies, and(b) repeal subsection (6B) in consequence.(6D) Regulations under subsection (6C) are subject to affirmative resolution procedure.”Member’s explanatory statement
This amendment means that traded companies are not required to keep old information about their members (eg old addresses). It also confers a regulation-making power to require them to keep old information in future.
15: Clause 46, page 35, line 39, at end insert—
“(g) after subsection (8) insert—“(9) In this section—“non-traded company” means a company that is not a traded company;“relevant market” has the meaning given by section 853E(6);“traded company” means a company any of whose shares are admitted to trading on a relevant market or on any other market which is outside the United Kingdom.””Member’s explanatory statement
This is consequential on my other amendments to Clause 46.
Amendments 13 to 15 agreed.
Amendment 16
Moved by
16: Clause 46, page 36, line 14, at end insert—
“113BA Required information about members: nomineesThe required information about a member includes a statement by the individual, or where the member is a body corporate, or a firm that is a legal person under the law by which it is governed, by an officer of that body corporate or firm, as to whether or not they are holding the shares on behalf of, or subject to the direction of, another person or persons, and if they are—(a) where any such person is an individual, the information required by section 113A in relation to that individual;(b) where any such person is a body corporate or firm that is a legal person under the law by which it is governed, the information required by section 113B in relation to that body corporate or firm.”Member’s explanatory statement
This amendment would require a person or firm holding shares as a nominee to declare whether or not that is the case, and to provide the details of the person or persons on whose behalf, or under whose control the shares are held. This would assist the company in identifying Persons of Significant Control, and would introduce an offence for a nominee who did not declare themselves as such.
Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I thank the Minister for his response and for his undertakings to bring further amendments at Third Reading. I will make just a few comments. First, in terms of Amendment 17, which I do not intend to move, I find the concept that it is going to cost £150 million a year frankly unbelievable. A small number of companies—as the Minister pointed out—verifying up to a maximum of an additional 16 shareholders, and in most cases fewer, cannot possibly come to £150 million a year. I am afraid I find that unrealistic.

To move to Amendment 16, I want to correct something that the noble Lord was saying about nominees having to declare that they are nominees. That is not actually correct. What has to happen is that the company has to look at its shareholder base and see whether it has anybody who is a PSC—a person with significant control. If it has no shareholders over 25%, it can conclude that it does not have any. If there is a PSC behind that, the PSC has to declare it, but if that is a bad actor, they are hiding and will not declare it. The nominees need to declare they are nominees only if the company seeks out and asks them. We are talking about a situation where a bad actor controls the company—so guess what? It will not. There is nothing there at the moment that makes nominees have to disclose the fact that they are nominees. I think the idea that disclosing nominees would create too much noise for Companies House is ridiculous. It does the opposite. It identifies where the risk lies.

We have heard from the noble Lord, Lord Agnew, about requiring risk assessments and a risk-based approach. This allows us to see which companies are most at risk of having bad actors who are hiding behind nominees, by ensuring that they are disclosed. The point here is to make it more difficult for bad actors. You make it much more difficult for bad actors if people are unwilling to be nominees. At the moment, there is no downside, so there is a huge industry of people who are prepared to do it for almost nothing—there is no risk to them. If we put a risk on those people and make them have to lie actively and on the record to say that they are not a nominee when they are, you will get many fewer people who are prepared to do it. That will make life a lot more difficult for the bad actors, and the nominee industry will have to clean up its act. So I am afraid that I have not heard anything that changes my mind, so I wish to test the opinion of the House.

17:50

Division 3

Ayes: 218


Labour: 109
Liberal Democrat: 63
Crossbench: 32
Independent: 7
Conservative: 4
Green Party: 2
Plaid Cymru: 1

Noes: 175


Conservative: 170
Crossbench: 3
Independent: 1
Labour: 1

18:01
Amendment 17 not moved.
Schedule 2: Abolition of certain local registers
Amendment 18
Moved by
18: Schedule 2, page 200, line 15, leave out “206(7)” and insert “207(1)”
Member’s explanatory statement
This amendment corrects a cross-reference in Schedule 2 to the Bill.
Amendment 18 agreed.
Amendment 19 not moved.
Amendment 20
Moved by
20: After Clause 55, insert the following new Clause—
“Use or disclosure of profit and loss accounts for certain companies
(1) The Companies Act 2006 is amended as follows.(2) After section 468 insert—“468A Use or disclosure of profit and loss accounts for certain companies(1) The Secretary of State may by regulations make provision requiring the registrar, on application or otherwise—(a) not to make available for public inspection profit and loss accounts, or parts of them, delivered to the registrar under—section 443A (micro-entities), orsection 444 (other small companies);(b) to refrain from disclosing such accounts, or parts of them, except in specified circumstances.(2) Regulations under subsection (1) which provide for the making of an application may make provision as to—(a) who may make an application;(b) the grounds on which an application may be made;(c) the information to be included in and documents to accompany an application;(d) the notice to be given of an application and of its outcome;(e) how an application is to be determined;(f) the duration of, and procedures for revoking, any restrictions on the making of information available for public inspection or its disclosure.(3) Provision under subsection (2)(e) or (f) may in particular provide for a question to be referred to a person other than the registrar for the purposes of determining the application or revoking the restrictions.(4) The circumstances that may be specified under subsection (1)(b) by way of an exception to a restriction on disclosure include circumstances where the court has made an order, in accordance with the regulations, authorising disclosure.(5) Regulations under subsection (1)(b) may not require the registrar to refrain from disclosing information under section 1110F (general powers of disclosure by the registrar).(6) Regulations under this section may in particular confer a discretion on the registrar.(7) Regulations under this section are subject to affirmative resolution procedure.”(3) In section 1087 (material not available for public inspection), in subsection (1), after paragraph (bb) insert—“(bba) the following— (i) any application or other document delivered to the registrar under regulations under section 468A (regulations protecting profit and loss accounts for certain companies);(ii) any information which regulations under section 468A require not to be made available for public inspection;”.”Member’s explanatory statement
This allows the Secretary of State to make regulations requiring the registrar not to disclose profit and loss accounts for micro entities and other small entities. The regulations might cover all such accounts or only accounts relating to certain descriptions of company (see section 1292 of the Companies Act 2006).
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, government Amendment 20 will give the Secretary of State the ability to make regulations to specify what aspects of the profit and loss account delivered by companies that qualify as micro-entities or small companies might be withheld from public inspection. Such regulations would also set out the parameters and circumstances in which the information may be withheld.

Currently, Section 468 of the Companies Act gives us the power to specify the form and content of the profit and loss account that is to be delivered to Companies House. However, it does not provide us with the power to collect information and then withhold it from public inspection. Making the profit and loss accounts of micro-entities and other small companies available to the public benefits users of the register, such as credit agencies. It is a highly valuable data source and would aid the detection of economic crime.

We are of the firm belief that the Bill’s provisions requiring such accounts to be delivered to Companies House are important additions to transparency requirements. We know that the minimal requirements that currently exist make incorporating as a micro-entity, or as another small company, open to abuse by those who wish to present a false picture of a company’s financial position. However, I am mindful of the concerns raised by some noble Lords and stakeholders about the potentially negative impacts on privacy and competition for small business owners; they point to the risk that increased transparency might lay SMEs open to unwelcome commercial pressures.

We have also received some correspondence from small business owners who are concerned that publishing accounts will, in effect, reveal their personal salary. For example, the director of a small accountancy company from London wrote to us to complain that publishing their profit and loss account would let their neighbours and competitors know what they earn. The owners of a small company from Shoreham-by-Sea have written to us to express their discomfort with their earnings being viewed by clients and subcontractors, who might seek to gain commercial advantage with the information. The Federation of Small Businesses today tweeted:

“Requirements to declare profits and losses would leave small firms open to a high level of risk. … Commercially sensitive information could be used against them by competitors and suppliers”.


To recap, we are not looking not to collect this information; we are looking to ensure that there is a full review in terms of what level of information we publish.

Following Royal Assent to the Bill, and prior to exercising this power, the Government will consult further with business groups, credit lenders, the accountancy sector, enforcement agencies and others to understand what, if any, information should be withheld from the public register. The amendment therefore gives the right level of flexibility to enable the Government to formulate a balanced approach between the information required to be included on the public register and the privacy of small businesses. I beg to move.

Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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My Lords, we have discussed this concept of disclosure at earlier stages. Of course, if a person does not want anything disclosed, they could become a sole trader or a limited liability partnership or a partnership, in which case very little, if anything, needs to be disclosed. My question and concern is just to understand the approach that government will take to this. Is it the intention just to give a blanket exemption for, perhaps, companies in defence or companies with complicated IP or companies in sensitive sectors? Is it to respond to those who make the request generally in the affirmative or to ask further questions to determine why a company should be exempted from disclosure? If a company simply asks to be exempted because it does not want its competitors to know, will that open the floodgate to everybody to do the same? I am not sure that “because we don’t want our competitors to know” is a particularly good reason, to be honest. I am therefore a little nervous about this clause, particularly because it is a bit vague. It just talks about regulations, and Section 1292 of the Companies Act 2006 is just an empowering section on regulations. We are opening the door very wide, and I hope that the Minister, in due course, will be able to give us some very clear guidance on what the Government have in mind.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, may I very briefly support what the noble Lord, Lord Leigh, has just said? This amendment troubles me a little bit. The Companies House information is important for people who are dealing with those companies, be they suppliers or customers. When we were doing the inquiry into digital fraud for the committee on digital fraud, we met a range of fraud victims. For those where it was relevant, what was interesting was that every single one of the people whom we met, before they parted with their money, had gone to Companies House and had a look at the company. They took comfort from that and lost their money. The information there is important, and reducing the amount of information on it should be done only with real thought and consideration.

I get it that in certain circumstances it makes sense for companies to be able to apply that certain information should not be made available—there are plenty of situations where one could think that makes sense. However, this amendment goes a lot further than that. It gives the Government the power to make regulations to allow micro and small companies to make all or parts of their accounts public on application or otherwise. In theory, therefore, those regulations could simply say that no micro or small entity needs to publish anything. That would be going far too far, so it would be good to understand from the Minister what is actually intended here.

Lord Fox Portrait Lord Fox (LD)
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I have nothing to add.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I thank my noble friend Lord Leigh and the noble Lord, Lord Vaux, for their comments. It is absolutely right that we have this brief discussion about this point. Just to reaffirm, the intention of the amendment is not to suppress information or increase opacity. It is to give the opportunity to be discretionary in terms of what is published and what is not published. Section 468 of the Companies Act provides us with the power only to prescribe the format that small and micro entity accounts are received in but not to differentiate between what is received and what is included on the public register. The first point, therefore, is that it just gives flexibility, which, I think, noble Lords will agree is sensible.

The second point is that we have received a number of representations from small and micro-entities that are naturally concerned about the publishing of information that relates specifically to their own wealth. There is concern that they may be open to a higher degree of fraud and that they will receive undue commercial pressures as a result of, say, a landlord being able to see what their turnover is and so adjusting their rent upwards accordingly, and so on. The point is that I am speculating.

If noble Lords will allow me to say so, the intention of this amendment is to allow us the flexibility to consult broadly with all stakeholders—I listed clearly that these include credit lenders, enforcement agencies, small businesses, micro-entities and others—in order to work out what the right level of information is. It may be all of it, but this amendment certainly gives the Secretary of State, in some situations and for some specific cases, an opportunity not to publish this information, although it will still be retained by Companies House. That flexibility is absolutely right; it is right that this House allows the Secretary of State that level of flexibility. It is also right that this House will no doubt engage in a meaningful and useful debate on levels of transparency, but at least we now have flexibility.

Amendment 20 agreed.
Clause 63: Procedure etc for verifying identity
Amendment 21
Moved by
21: Clause 63, page 54, line 20, leave out “under section 1110A(1)(b) or”
Member’s explanatory statement
This has the effect that the registrar is required to make verification statements available for public inspection. A “verification statement” is the statement that an authorised corporate service provider is required to make to confirm that it has verified an individual’s identity.
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, as we discussed in Committee, identity verification is at the heart of the reforms in this Bill. It is essential that the framework for this is robust and reliable, including the role of authorised corporate service providers. I am therefore grateful for noble Lords’ continued input to ensure that the Bill is as effective as possible in this area, making sure that we really know who is interacting with Companies House.

This group of amendments contains several measures to strengthen arrangements, including in response to sensible suggestions put forward by the noble Lord, Lord Vaux of Harrowden, and my noble friend Lord Agnew of Oulton. This is a significant package of measures from the Government to improve the Bill and address the concerns of the House. I very much hope that the House will therefore support these amendments.

I turn first to government Amendments 21 and 22. This group of amendments relates to the verification statements that authorised corporate service providers, known as ACSPs, must deliver to the registrar when they verify an individual’s identity. Amendment 21 will require that all verification statements are made publicly available on the register. This responds directly to concerns raised by Members of both this House and the other place—including the noble Lords, Lord Vaux and Lord Fox—by increasing the transparency of the verification checks carried out by ACSPs. The statements will be made public.

Amendment 22 requires ACSPs to specify their anti-money laundering supervisor—or supervisors if they have more than one—on the statement. It also enables the Secretary of State to make further provisions regarding the contents of the statements via regulations so that this can be adapted if there is ever a need for different information to be available in the public domain. These regulations will be subject to the affirmative procedure to ensure appropriate scrutiny. Our intention is to align ACSP verification statements with those required for overseas entities under Section 16(2) of the Economic Crime (Transparency and Enforcement) Act 2022. Given that this area was previously discussed in Committee, I very much hope that noble Lords will support these amendments.

I turn now to government Amendments 34, 35 and 37. Reflecting on contributions made by noble Lords in Committee, for which I express my gratitude, my officials have been scrutinising the ACSP framework and looking for ways to strengthen it. Amendment 34 therefore clarifies that regulations can be made that impose duties on ACSPs to provide information to the registrar where this relates to monitoring compliance with any requirements under any part of the Companies Act 2006. This includes the requirement to carry out identity checks to the correct standard. It removes any ambiguity in the original drafting, ensuring that the information that can be requested is not limited to information relating specifically to Clause 64 only.

This is important as it means that there is no uncertainty regarding the use of the power to make ACSPs provide information on the identity checks that they carry out, the detail of these checks being in Clause 63. Tightening up the wording in this manner therefore ensures that the registrar will have the right tools to monitor ACSP compliance—something that the Government take very seriously. We want only legitimate actors to perform these identity checks and make filings on behalf of others.

18:15
I now turn to government Amendments 27 to 29, 31, 32 and 36 which make changes to the registration, suspension and deauthorisation elements of the ACSP framework overseen by the registrar. These amendments respond to the general concern of noble Lords that the framework should be as clear and effective as possible. They also respond to feedback in the Delegated Powers and Regulatory Reform Committee’s report on the Bill.
Amendment 29 inserts new criteria into Section 1098B(4) meaning that the register must not accept an ACSP application if it appears that the applicant is not a fit and proper person to carry out the functions of an ACSP, these functions being to file on behalf of others and undertake identity verification checks. This ensures that Companies House can reject applications from persons who have previously been deauthorised as an ACSP and who have taken no redeeming actions to make themselves fit and proper, even if they are supervised for anti-money laundering purposes. It ensures that the registrar has full agency in rejecting applications to be an ACSP, even where these are delivered by supervised persons.
On suspension, Section 1098G has been removed in its entirety and incorporated into Section 1098F, on ceasing to be an ACSP or deauthorisation, by Amendment 27. The circumstances for suspension are then specified as occurring when the registrar is deciding whether an ACSP should be deauthorised. For example, this could be if the registrar has received intelligence that suggests that an ACSP is not fit and proper and she wants to prevent the ACSP acting while determining whether deauthorisation is appropriate. It enables immediate action to be taken. I therefore hope that, by taking this opportunity further to tighten the ACSP framework, as well as responding to the Delegated Powers and Regulatory Reform Committee’s report, the government amendments will be supported.
I now turn to government Amendments 39, 41 to 45, 62, 65 to 68 and 75. Provisions in existing Clause 69 restrict who can file with Companies House to individuals who have had their identity verified, are an ACSP, are an employee of an ACSP or fall within an exception. We have identified a loophole in this provision that could be exploited by third-party agents who do not want to register as an ACSP. Such individuals could technically file documents on behalf of their client simply by verifying their identity and not also registering as an ACSP. This was clearly not the Government’s intention. These amendments close this loophole and restrict who is permitted to file directly with Companies House on behalf of a firm. It means that only ACSPs and officers or employees of the firm can deliver filing on behalf of a firm. This forces third-party agents to register as ACSPs, meaning that the registrar will check they are supervised and has the power to suspend or deauthorise them, if needed. The amendments also make related changes to provisions about limited partnerships, including by ensuring that the list of documents that LPs have no choice but to deliver by ACSPs may be delivered by officers of ACSPs as well as their employees.
New Section 1067A(4) in Amendment 42 also improves the exception-making power. It means that the Secretary of State can make an exception to allow a person who has not verified their identity to file with Companies House as well as making exceptions to the categories of filers specified in new Section 1067A(2). These powers are necessary as there are cases where requiring identity verification will not be needed or will be disproportionate —for instance, documents being delivered as part of the process to become identity verified or applications by individuals to remove personal information whose registration was procured by fraud.
As I mentioned at the start of my speech, the Government have taken major steps through these amendments to make the ACSP regime work robustly and to address the concerns of the House. I therefore hope that noble Lords will support all the amendments I have outlined, and I beg to move.
Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
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My Lords, I thank the Minister for a very comprehensive set of government amendments. He has completely revolutionised the impact of the Bill in relation to ACSPs. I congratulate him and his staff on that. It is important to remind noble Lords about why this is so important. Around half of all company formations occur through the offices of an ACSP. Frankly, it has been a cowboy environment. At the moment, they are not even required to be approved under the fourth anti-money laundering directive. So at one stroke with this Bill we will see a much cleaner field and a proper alignment of interests in that it will be in their interest to behave with integrity if they are to remain in business. I will not go through the comprehensive package, but my noble friend should be congratulated. This is probably the single biggest improvement to the Bill in the Companies House section.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I also thank the Minister for having listened to the points that were made in our previous debates about the importance of ACSPs’ verification statements being made publicly available and for making this comprehensive suite of amendments. Indeed, I think he has gone further than my original amendments on the subject and the Bill is considerably strengthened as a result. I am extremely grateful.

Perhaps I may add one quick word in support of Amendment 93 from the noble Lord, Lord Agnew. A very high number of the ACSPs are going to be authorised and regulated by HMRC, and it is an unfortunate truth that such regulation is not the principal function of HMRC. Accordingly, that regulation has been somewhat light-touch. I ask the Minister to reassure us that considering how HMRC carries out this role will be an important part of the forthcoming consultation on AML regulation? The only requirement to become an ACSP is to be regulated for AML, so we need to make sure that regulation is robust and that only genuine, suitable persons are therefore authorised.

Baroness Altmann Portrait Baroness Altmann (Con)
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My Lords, I thank the Minister and congratulate him on this suite of amendments. I know that my noble friend is keen that this should be a really landmark Bill and that he has worked really hard to listen carefully and ensure that it is as robust as it can be. I know his dedication to this matter, and I thank him for it.

Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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Although my noble friend the Minister has described me in very flattering terms today, for which I am grateful, I will not add to the flattery, as his noble kinsman is no longer sitting next to me. I just want to add a note of caution, because it is on the record in Amendment 93 from my noble friend Lord Agnew, on the possibility of HMRC taking AML to be of equal priority to tax collecting, essentially. I declare an interest as chairman of the Finance Bill Sub-Committee of the Economic Affairs Committee that investigated R&D tax credits, which led to HMRC’s accounts being qualified given the level of uncertainty. I just want to put it on the record that we all want HMRC to focus on tax collection, with fraud focused on in other areas.

Lord Fox Portrait Lord Fox (LD)
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The Minister will be blushing with the fulsome praise that he has received. I think he described it as a significant package of improvements and as major steps. The noble Lord, Lord Agnew, went further and described them as revolutionary changes. The Minister can be sure that he has hit an important nail very firmly on the head with this set of amendments. I think we all believe that this makes the Bill a much better Bill, and for that, we are very pleased.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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I rise just to add our support for the amendments. I emphasise the concern that has been raised in Amendment 93 from the noble Lord, Lord Agnew, in terms of recognising the significant function that HMRC has. I listened to the noble Lord, Lord Leigh, with interest. I think there is some issue with looking at the two functions equally and making sure there is no conflict between them.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I thank all noble Lords who have spoken during this debate, and I am grateful, personally, for the kindness they have shown to me as a new Minister on this Bill over the last few months. I am grateful for the high degree of collaboration and the sense of common purpose that all Members of this House have shown in trying to create a truly effective Bill to change—after 170 years—Companies House and what it can do for companies and to eradicate crime at the same time. I thank all noble Lords, my officials and the Government for the work we have done together.

However, we have not finished; we are only half way through. I thank my noble friend Lord Agnew for his Amendment 33. I appreciate the strength of feeling, but we would not wish to impose a duty on Companies House to carry out, as he has described, risk assessments. All ACSPs must be supervised for anti-money laundering purposes, and supervisors will already carry out risk assessments on them. I am aware of the concerns surrounding the supervisory regime, and I can confirm that the Treasury will publish a consultation on its structural reform. I believe this is to take place within the next month, which is very important and will be welcomed by this House and help inform further debate.

As I have just set out, the Government have tabled amendments to strengthen the ACSP regime, enabling Companies House to act if it has knowledge that a person is not fit and proper to carry out the functions of an ACSP, and to strengthen the registrar’s powers to request information. We are enabling the registrar to focus her attention on high-risk ACSPs rather than making it a duty to do so. A duty would reduce her operational flexibility—for example, inadvertently preventing her spot-checking the identity verification done by lower-risk ACSPs. We engaged with the registrar fruitfully on this subject only a few weeks ago. It is for these reasons that I urge my noble friend not to move his amendment.

I turn to Amendment 93. While the Government agree wholeheartedly on the crucial role that supervision must play in tackling economic crime, we are not keen to support this amendment. Under money laundering regulations, HMRC already has anti-money laundering supervisory functions and it takes them very seriously. HMRC is one of 25 supervisors of the money laundering regulations, alongside the Financial Conduct Authority, the Gambling Commission, and 22 accountancy and legal professional bodies. HMRC supervises around 30,000 businesses across nine sectors.

HMRC’s anti-money laundering supervisory function is resourced through the fees that it collects from the businesses it supervises, and these fees are solely for use by HMRC’s anti-money laundering supervisory function. HMRC attaches great importance to its anti-money laundering work, including its supervisory function. For example, in 2022-23, HMRC carried out over 3,200 anti-money laundering compliance interventions, including desk-based reviews and face-to-face visits. It also refused 439 applications to register from businesses considered inappropriate or unsuitable. The number of staff working on supervisory activity has more than doubled from 197 in 2018 to 397 in 2023; in 2022-23, they issued a total of 770 penalties, totalling £5.5 million. Specifically, £1.2 million of this amount came from trust or company service providers.

HMRC also works to help businesses understand the risk of money laundering. In 2022-23, its relevant web pages saw nearly 475,000 hits and it issued 850,000 alerts to businesses telling them about changes to law, inviting them to webinars or raising awareness of emerging risks.

The proposed amendment would duplicate the work that HMRC already does. It could make HMRC responsible for all anti-money laundering supervision, when Regulation 7 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 states that certain persons are subject to supervision by certain supervisors. For example, it states that

“the FCA is the supervisory authority for … credit and financial institutions”.

So it would not make sense to mandate that HMRC supervises them. HMRC would not necessarily have the expertise that it would need to supervise all sectors—for example, lawyers or large-scale financial institutions—and it would cut across existing regulatory relationships such as those between the banks and the FCA.

In conclusion, I urge noble Lords once more to support the government amendments that I outlined earlier, which address specific concerns raised during our debates. I believe they will deliver our shared ambition for a robust ACSP framework.

Amendment 21 agreed.
Amendments 22 to 26
Moved by
22: Clause 63, page 54, line 34, at end insert—
“(2A) A verification statement must also specify the authorised corporate service provider’s supervisory authority or authorities for the purposes of the Money Laundering Regulations.(2B) The Secretary of State may by regulations make further provision about the contents of verification statements (including provision amending this section).”Member’s explanatory statement
This amendment requires a verification statement to specify the authorised corporate service provider’s supervisory authority or authorities. It also confers a regulation-making power to make further provision about the contents of verification statements.
23: Clause 63, page 54, line 40, after “may” insert “by regulations”
Member’s explanatory statement
This amendment spells out that the power conferred by new section 1110A(4) is exercisable by regulations.
24: Clause 63, page 55, line 6, after “statement” insert “: (A)”
Member’s explanatory statement
This is consequential on my amendment to Clause 63, page 55, line 8
25: Clause 63, page 55, line 8, at end insert “(B) specifying the authorised corporate service provider’s supervisory authority or authorities for the purposes of the Money Laundering Regulations, and (C) containing anything else required by the regulations.”
Member’s explanatory statement
This amendment requires a reverification statement to specify the authorised corporate service provider’s supervisory authority or authorities and to contain anything else required by regulations.
26: Clause 63, page 55, line 10, at end insert—
“(7) In this section—“Money Laundering Regulations” means the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692);“supervisory authority” means an authority that is a supervisory authority under the Money Laundering Regulations (see regulation 7 of those Regulations).”Member’s explanatory statement
This is consequential on my amendments to Clause 63, page 54, line 34 and page 55, line 8.
Amendments 22 to 26 agreed.
Clause 64: Authorisation of corporate service providers
Amendments 27 to 32
Moved by
27: Clause 64, page 56, line 24, leave out “section 1098G” and insert “section 1098F.”
Member’s explanatory statement
This amendment is consequential on my amendment to page 59, line 36.
28: Clause 64, page 57, line 7, leave out “may grant the application only” and insert “must grant the application”
Member’s explanatory statement
This amendment is consequential on my amendment to page 57, line 16.
29: Clause 64, page 57, line 16, at end insert “, and
(d) the registrar is not required by subsection (4A) to refuse the application.(4A) The registrar must refuse the application if it appears to the registrar that the applicant is not a fit and proper person to carry out the functions of an authorised corporate service provider.”Member’s explanatory statement
This amendment requires the registrar to refuse an application for authorisation as a corporate service provider if it appears that the applicant is not a fit and proper person to become an authorised corporate service provider.
30: Clause 64, page 58, line 22, leave out “(a) and (d)”
Member’s explanatory statement
This is consequential on my amendment to Clause 69, page 64, line 10.
31: Clause 64, page 59, line 36, at end insert “, whether automatically or as a result of a decision taken by the registrar;
(b) provide for circumstances in which the registrar may suspend a person’s status as an authorised corporate service provider pending a decision by the registrar under regulations made by virtue of paragraph (a).(2A) The provision that can be made under subsection (2) includes provision as to—(a) procedure;(b) the period of a suspension;(c) the revocation of a suspension.”Member’s explanatory statement
This amendment and my amendment to leave out lines 1 to 13 on page 60 are intended to narrow the power to make regulations for suspension of an authorised corporate service provider’s status so that it is available only pending a decision as to termination of an authorised corporate service providers’ status.
32: Clause 64, page 60, leave out lines 1 to 13
Member’s explanatory statement
This would remove the power to make regulations for suspension of an authorised corporate service provider’s status. My amendment to page 59, line 36 introduces a narrower power to suspend.
Amendments 27 to 32 agreed.
Amendment 33 not moved.
Amendments 34 to 37
Moved by
34: Clause 64, page 60, leave out lines 16 to 23 and insert “require a person who is or has been an authorised corporate service provider to provide information to the registrar in accordance with the regulations (including information for the purpose of monitoring compliance with the requirements of this Act).”
Member’s explanatory statement
This ensures that the registrar can obtain information about compliance with provisions such as new section 1110B of the Companies Act 2006 (see Clause 63), including from former authorised corporate service providers (including suspended providers).
35: Clause 64, page 60, line 24, leave out “(a)”
Member’s explanatory statement
This is consequential on my amendment to page 60, lines 16 to 23.
36: Clause 64, page 60, line 27, leave out from “1098F(2)” to “include” on line 29
Member’s explanatory statement
This is consequential on my amendment to page 60, lines 1 to 13.
37: Clause 64, page 60, line 30, leave out “(a)”
Member’s explanatory statement
This is consequential on my amendment to page 60, lines 16 to 23.
Amendments 34 to 37 agreed.
Clause 66: Allocation of unique identifiers
Amendment 38
Moved by
38: Clause 66, page 62, line 28, at end insert—
“(zi) after “may” insert “by regulations”;”Member’s explanatory statement
This amendment corrects a mistake in section 1082(1) of the Companies Act 2006 by spelling out that the power conferred by that subsection is exercisable by regulations (that this was always the intention is clear from the subsequent subsections).
Amendment 38 agreed.
Clause 67: Identity verification: material unavailable for public inspection
Amendment 39
Moved by
39: Clause 67, page 63, line 16, leave out “(3) or (4)” and insert “(1) or (2)”
Member’s explanatory statement
This is consequential on my amendment to Clause 69, page 64, line 10.
Amendment 39 agreed.
Amendment 40
Moved by
40: Before Clause 68, insert the following new Clause—
“Registrar’s power to strike off company registered on false basis
(1) The Companies Act 2006 is amended as follows.(2) After section 1002 insert—“Registrar’s power to strike off company registered on false basis1002A Power to strike off company registered on false basis(1) The registrar may strike a company’s name off the register if the registrar has reasonable cause to believe that—(a) any information contained in the application for the registration of the company, or in any application for restoration of the company to the register, is misleading, false or deceptive in a material particular, or(b) any statement made to the registrar in connection with such an application is misleading, false or deceptive in a material particular. (2) In subsection (1) the reference to an application includes any documents delivered to the registrar in connection with the application.(3) The registrar may not exercise the power in subsection (1) unless—(a) the registrar has published a notice in the Gazette that, at the end of the period of 28 days beginning with the date of the notice, the name of the company mentioned in the notice will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved, and(b) the period mentioned in paragraph (a) has expired.(4) If the registrar exercises the power in subsection (1), the registrar must publish a notice in the Gazette of the company’s name having been struck off the register.(5) On the publication of the notice in the Gazette the company is dissolved.(6) However—(a) the liability (if any) of every director, managing officer or member of the company continues and may be enforced as if the company had not been dissolved, and(b) nothing in this section affects the power of the court to wind up a company the name of which has been struck off the register.”(3) In section 1024 (application for administrative restoration to the register), in subsection (1), for the words from “section” to the end substitute “—(a) section 1000 or 1001 (power of registrar to strike off defunct company), or(b) section 1002A (power of registrar to strike off company registered on false basis).”(4) In section 1025 (requirements for administrative restoration), for subsection (2) substitute—“(2) The first condition is that—(a) in the case of a company struck off the register under section 1000 or 1001, the company was carrying on business or in operation at the time of its striking off;(b) in the case of a company struck off the register under section 1002A, at the time of its striking off, the registrar did not have reasonable cause to believe the matter set out in section 1002A(1)(a) or (b).”(5) In section 1028A (administrative restoration of company with share warrants), in subsection (1), for “or 1001” substitute “, 1001 or 1002A”.(6) In section 1029 (application to court for restoration to the register), in subsection (1)(c)—(a) omit the “or” at the end of sub-paragraph (i);(b) after that sub-paragraph insert—“(ia) under section 1002A (power of registrar to strike off company registered on false basis), or”.(7) In section 1030 (timing for application to court for restoration to the register), in subsection (5)(a), after “company)” insert “or section 1002A (power of registrar to strike off company registered on false basis)”.(8) In section 1031 (decision on application for restoration by the court), in subsection (1)—(a) after paragraph (a) insert—“(aa) if the company was struck off the register under section 1002A (power of registrar to strike off company registered on false basis) and the court considers that, at the time of the striking off, the registrar did not have reasonable cause to believe the matter set out in section 1002A(1)(a) or (b);”; (b) in paragraph (c), for “other case” substitute “case (including a case falling within paragraph (a), (aa) or (b))”.”Member’s explanatory statement
This Clause amends the Companies Act 2006 to confer on the registrar a power to strike off a company where the company was registered on a false basis, and makes provision for restoration of such a company to the register.
Amendment 40 agreed.
Clause 69: Delivery of documents: identity verification etc
Amendments 41 and 42
Moved by
41: Clause 69, page 64, line 7, at end insert—
“(1A) In section 9 (registration documents), omit subsection (3).”Member’s explanatory statement
This is consequential on the other amendments made by Clause 69.
42: Clause 69, page 64, line 10, leave out subsection (3) and insert—
“(3) After section 1067 insert—“Who may deliver documents to the registrar1067A Delivery of documents: identity verification requirements etc(1) An individual may not deliver a document to the registrar on their own behalf unless—(a) their identity is verified (see section 1110A), and(b) the document is accompanied by a statement to that effect.(2) An individual (A) may not deliver a document to the registrar on behalf of another person (B) who is of a description specified in column 1 of the following table unless—(a) the individual is of a description specified in the corresponding entry in column 2, and(b) the document is accompanied by the statement specified in the corresponding entry in column 3.

1

2

3

Description of person on whose behalf document delivered (B)

Description of individual who may deliver document on B’s behalf (A)

Accompanying statement

1

Firm

Individual who is an officer or employee of the firm and whose identity is verified (see section 1110A).

Statement by A—

(a) that A is an officer or employee of the firm,

(b) that A is delivering the document on the firm’s behalf, and

(c) that A’s identity is verified.

2

Firm

Individual who is an officer or employee of a corporate officer of the firm and whose identity is verified.

Statement by A—

(a) that A is an officer or employee of a corporate officer of the firm,

(b) that A is delivering the document on the firm’s behalf, and

(c) that A’s identity is

verified.

3

Firm

Individual who is an authorised corporate service provider (see section 1098A).

Statement by A—

(a) that A is an authorised corporate service provider, and

(b) that A is delivering the document on the firm’s behalf.

4

Firm

Individual who is an officer or employee of an authorised corporate service provider.

Statement by A

(a) that A is an officer or employee of an authorised corporate service provider, and

b) that A is delivering the document on the firm’s behalf.

5

Individual

Individual whose identity is verified.

Statement by A—

(a) that A is delivering the document on B’s behalf, and

(b) that A’s identity is verified.

6

Individual

Individual who is an authorised corporate service provider.

Statement by A—

(a) that A is an authorised corporate service provider, and

(b) that A is delivering the document on B’s behalf.

7

Individual

Individual who is an officer or employee of an authorised corporate service provider.

Statement by A—

(a) that A is an officer or employee of an authorised corporate service provider, and

(b) that A is delivering the document on B’s behalf.

(3) In relation to a corporate officer that has only corporate officers, the reference in row 2 of the table to an individual who is one of its officers is to—(a) an individual who is an officer of one of those corporate officers, or(b) if the officers of those corporate officers are all corporate officers, an individual who is an officer of any of the corporate officer’s corporate officers,and so on until there is at least one individual who is an officer. (4) The Secretary of State may by regulations—(a) create exceptions to subsections (1) or (2) (which may be framed by reference to the person by whom or on whose behalf a document is delivered or by reference to descriptions of document or in any other way);(b) amend this section for the purpose of changing the effect of the table in subsection (2).(5) Regulations under subsection (4)(a)—(a) may require any document delivered to the registrar in reliance on an exception to be accompanied by a statement;(b) may amend this section.(6) The Secretary of State may by regulations make provision requiring a statement delivered to the registrar under subsection (2) to be accompanied by additional statements or additional information in connection with the subject-matter of the statement.(7) Regulations under this section are subject to affirmative resolution procedure.(8) In this section “corporate officer” means an officer that is not an individual.””Member’s explanatory statement
This changes the categories of people who may deliver documents on another’s behalf. Among other things, it means an individual whose identity is verified can only deliver documents on behalf of a firm if they are an officer or employee of the firm or one of its corporate officers.
Amendments 41 and 42 agreed.
Clause 70: Disqualification from delivering documents
Amendments 43 to 45
Moved by
43: Clause 70, page 65, line 22, after first “an” insert “officer or”
Member’s explanatory statement
This allows officers as well as employees or authorised corporate service providers to deliver documents on behalf of a disqualified person.
44: Clause 70, page 65, line 23, leave out “and acting in the course of their employment”
Member’s explanatory statement
This is consequential on my amendment to Clause 69, page 64, line 10. An employee delivering a document under new section 1067B(2)(b) must be acting in the course of their employment without the need for express provision to that effect.
45: Clause 70, page 65, line 33, leave out from “person” to end of line 37
Member’s explanatory statement
This amendment removes the requirement for a statement to include certain information that will be covered by the statement that a person must make under new section 1067A of the Companies Act 2006 (inserted by Clause 69) when delivering documents.
Amendments 43 to 45 agreed.
Clause 82: Administrative removal of material from the register
Amendment 46
Moved by
46: Clause 82, page 71, line 46, at end insert—
“(4A) Regulations under this section may in particular confer a discretion on the registrar.” Member’s explanatory statement
This amendment enables any provision made by regulations under new section 1094A of the Companies Act 2006 to confer a discretion on the registrar.
Amendment 46 agreed.
Clause 88: Protecting information on the register
Amendments 47 and 48
Moved by
47: Clause 88, page 75, leave out line 35
Member’s explanatory statement
This amendment is consequential on my amendment to Clause 88, page 76, line 11.
48: Clause 88, page 76, line 11, at end insert—
“(8A) Regulations under this section may in particular confer a discretion on the registrar.”Member’s explanatory statement
This amendment enables any provision made by regulations under new section 1088 of the Companies Act 2006 to confer a discretion on the registrar.
Amendments 47 and 48 agreed.
Clause 89: Analysis of information for the purposes of crime prevention or detection
Amendment 49 not moved.
Clause 90: Fees: costs that may be taken into account
Amendment 50
Moved by
50: Clause 90, page 76, line 41, at end insert—
“(ba) any function of the Secretary of State under or in connection with regulations under section 1 of the Sanctions and Anti-Money Laundering Act 2018 that make provision in connection with licences of the kind mentioned in section 15(3A) of that Act;”Member’s explanatory statement
This enables fees set under the Companies Act 2006 to be set at a level to cover the Secretary of State’s costs in connection with licences for people who are subject to director disqualification sanctions under the Sanctions and Anti-Money Laundering Act 2018.
Amendment 50 agreed.
Clause 91: Disclosure of information
Amendment 51
Moved by
51: Clause 91, page 77, line 34, at end insert—
“(1A) In section 243 (permitted disclosure by registrar), for subsection (6) substitute—“(6) Regulations under subsection (4) may in particular confer a discretion on the registrar.(6A) Provision under subsection (5)(d) may in particular provide for a question to be referred to a person other than the registrar for the purposes of determining the application.””Member’s explanatory statement
This amendment enables any provision made by regulations under section 243 of the Companies Act 2006 to confer a discretion on the registrar.
Amendment 51 agreed.
Clause 101: Financial penalties
Amendments 52 and 53
Moved by
52: Clause 101, page 85, line 40, after “if” insert “—
(i) proceedings have been brought against the person for that offence in respect of that conduct and the proceedings are ongoing, or(ii) ”Member’s explanatory statement
This amendment and my other amendment to Clause 101 would mean that regulations must provide that no financial penalty may be imposed on a person in respect of whom criminal proceedings are ongoing; at the moment it is the other way around so that criminal proceedings cannot be continued once a penalty is imposed.
53: Clause 101, page 85, line 43, leave out “or continued”
Member’s explanatory statement
See the explanatory statement to my other amendment to Clause 101.
Amendments 52 and 53 agreed.
Clause 102: Registered office: rectification of register
Amendment 54
Moved by
54: Clause 102, page 87, line 23, at end insert—
“(4C) Regulations under this section may in particular confer a discretion on the registrar.”Member’s explanatory statement
This amendment enables any provision made by regulations under section 1097A of the Companies Act 2006 to confer a discretion on the registrar.
Amendment 54 agreed.
Clause 103: Rectification of register: service addresses
Amendment 55
Moved by
55: Clause 103, page 89, line 15, at end insert—
“(11A) Regulations under this section may in particular confer a discretion on the registrar.”Member’s explanatory statement
This amendment enables any provision made by regulations under section 1097B of the Companies Act 2006 to confer a discretion on the registrar.
Amendment 55 agreed.
Clause 104: Rectification of register: principal office addresses
Amendment 56
Moved by
56: Clause 104, page 91, line 9, at end insert—
“(11A) Regulations under this section may in particular confer a discretion on the registrar.” Member’s explanatory statement
This amendment enables any provision made by regulations under section 1097C of the Companies Act 2006 to confer a discretion on the registrar.
Amendment 56 agreed.
Amendment 57 not moved.
18:30
Clause 107: Required information about partners
Amendment 58
Moved by
58: Clause 107, page 92, line 32, at end insert—
“(3) In this section “the Companies Acts” has the meaning given by section 2(1) of the Companies Act 2006.”Member’s explanatory statement
This amendment inserts a definition of “the Companies Acts” into the Limited Partnerships Act 1907.
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, the amendments in this group relate to Part 2, which includes a number of reforms to prevent the abuse of limited partnerships. These measures are incredibly significant and will enable fundamental change in the transparency of limited partnerships while maintaining their crucial position as legitimate vehicles for doing business. They are the biggest changes to the legal framework for limited partnerships since the Limited Partnerships Act 1907.

We must keep in mind that limited partnerships, including Scottish limited partnerships, facilitate legitimate and important commercial activity. They are used across the UK in a variety of sectors, particularly in the private equity and venture capital industry, as well for a variety of other purposes, such as oil and gas exploration and production and real estate.

The measures in the Bill were formulated after several rounds of consultation to deliver the right balance of more transparency without undermining the use of these structures by legitimate business. The British Private Equity and Venture Capital Association reports that, in 2021, £17.3 billion was invested into UK companies from private equity and venture capital, with nine in 10 investments directed at small to medium-sized enterprises. We do not want to disrupt this activity, nor the 2 million or so people who are employed by companies backed by private equity and venture capital who use these vehicles.

Before I turn to the government amendments, it may be helpful to clarify a few points about the structure and principles of limited partnerships. These are business associations made up of one or more general partners who are responsible for the management of the partnership, and one or more limited partners who cannot partake in management and whose liability is limited to the amount they invest. In the Bill, to achieve more clarity over limited partnerships and those who have influence and control over the partnership, the Government have rightly focused on creating more transparency over the partners, and specifically the general partners. The Bill already ensures that, in future, we will know the names, addresses and dates of birth of all partners in a limited partnership, and all of this information will need to be confirmed at least annually. It is important to have these points in mind before we turn to the amendments tabled by my noble friend Lord Agnew.

In the meantime, I have a handful of minor government amendments to Part 2, which concerns limited partnerships—Amendments 58, 59, 60 and 61. These are required, in the most part, to correct drafting errors, by adding missing definitions and removing ones which are not essential. Amendment 60 is a minor change to the information that has to be delivered by general partners of a limited partnership when they give their annual confirmation statement. It means that a notice changing a general partner’s registered officer must be delivered at the same time as a confirmation statement, if the registered officer is not ID verified. I beg to move.

Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
- View Speech - Hansard - - - Excerpts

My Lords, I shall speak to my Amendments 63, 69 and 70. Again, I am grateful to my noble friend the Minister for his engagement and for his detailed letter to me recently to allay many of my concerns.

The Bill goes a long way to deal with the opacity of LLPs and LPs. It is very important that we regard them as similar in the level of transparency needed as we would consider for a company. We know there have been plenty of examples in the past where they have been used as a front for a lot of very bad activity.

I am not going to press my amendments today, and I thank my noble friend the Minister for his amendments. He has said to me that the Government plan to bring forward some work very soon after the Bill. I would be quite interested if he could just give us some sense of the timescale for this work. His brief said:

“Following Royal Assent, the Government intend to bring into force provisions to require a company director to be a natural person, with limited exemptions for corporate directors”.


If my noble friend could give us a timeline for that, I would be most grateful.

Amendment 58 agreed.
Clause 119: Notification of information about partners
Amendment 59
Moved by
59: Clause 119, page 109, leave out lines 24 to 26
Member’s explanatory statement
This amendment removes the definition of a term that is no longer used in the section.
Amendment 59 agreed.
Clause 123: Confirmation statements
Amendment 60
Moved by
60: Clause 123, page 116, line 30, leave out “and (b)” and insert “to (c)”
Member’s explanatory statement
This amendment means that notice changing a general partner’s registered officer must be delivered at the same time as a confirmation statement, if the registered officer is not ID verified.
Amendment 60 agreed.
Clause 134: Material not available for public inspection
Amendments 61 and 62
Moved by
61: Clause 134, page 127, line 14, leave out “(4) or”
Member’s explanatory statement
This amendment corrects a mistake. A statement under 8R(4) is not required to confirm that an individual is an individual whose identity is verified.
62: Clause 134, page 127, line 19, leave out “(3) or (4)” and insert “(1) or (2)”
Member’s explanatory statement
This is consequential on my amendment to Clause 69, page 64, line 10.
Amendments 61 and 62 agreed.
Amendment 63 not moved.
Clause 136: Disclosure of information about partners
Amendment 64
Moved by
64: Clause 136, page 129, line 31, leave out “and (6)” and insert “to (6A)”
Member’s explanatory statement
This is consequential on my amendment to Clause 91, page 77, line 34.
Amendment 64 agreed.
Clause 142: Delivery of documents relating to limited partnerships
Amendments 65 to 68
Moved by
65: Clause 142, page 138, line 12, leave out “and (3)”
Member’s explanatory statement
This is consequential on my amendment to Clause 142, page 138, lines 18 to 25.
66: Clause 142, page 138, line 16, after first “an” insert “officer or”
Member’s explanatory statement
Certain documents under the Limited Partnerships Act 1907 can only be delivered to the registrar by authorised corporate service providers or their employees. This amendment adds officers of authorised corporate service providers to those who are allowed to deliver those documents.
67: Clause 142, page 138, line 17, leave out “and is acting in the course of their employment”
Member’s explanatory statement
This is consequential on my amendment to Clause 69, page 64, line 10. An employee delivering a document under new section 1067B(2)(b) must be acting in the course of their employment without the need for express provision to that effect.
68: Clause 142, page 138, leave out lines 18 to 25
Member’s explanatory statement
This amendment removes the requirement for a statement to include certain information that will be covered by the statement that a person must make under new section 1067A of the Companies Act 2006 (inserted by Clause 69) when delivering documents.
Amendments 65 to 68 agreed.
Amendments 69 and 70 not moved.
Amendment 71
Moved by