Economic Crime and Corporate Transparency Bill
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 18th October 2023
(1 year, 1 month ago)
Lords ChamberEconomic Crime and Corporate Transparency Act 2023 View all Economic Crime and Corporate Transparency Act 2023 Debates Read Hansard Text Watch Debate Amendment Paper: HL Bill 172-I Marshalled list for Consideration of Commons Reasons - (17 Oct 2023)
16:31 - Division on Motion A1 - Ayes: 245 / Noes: 204 - Motion A1 agreed.
16:43 - Division on Motion B1 - Ayes: 245 / Noes: 209 - Motion B1 agreed.
Lord Sharpe of Epsom
That this House do agree with the Commons in their Amendment 151A and do not insist on its Amendments 151B and 151C in lieu to which the Commons have disagreed for their Reason 151D.
The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)
My Lords, in moving Motion A I will also speak to Motions B and B1.
It is a great pleasure to bring this Bill before your Lordships’ House once more. I hope it is for the last time, as I know that Companies House and law enforcement agencies are keen to use the important changes made by it. Without it, we will not be able to fund the recruitment of hundreds of new staff at Companies House to deliver the transformation that we all agree is needed. We will not be able to tackle SLAPPs, fraudsters will continue to be able to take advantage of vulnerable victims via fake companies, and we will not be able to go after the assets of criminals as effectively as we might. I could go on.
The Government have listened carefully to noble Lords during the Bill’s passage and have already moved significantly. This is an extensive and comprehensive Bill, standing now at nearly 400 pages of drafting, and it is imperative that we see it become statute. Noble Lords will of course be aware that the end of the Session is fast approaching.
I start by discussing Motion A, which seeks to reinsert the SME exemption for the failure to prevent fraud offence. I am grateful that my noble and learned friend Lord Garnier has moved closer yet again to the Government’s position by exempting microentities and smaller organisations from the offence. However, I am afraid that the burdens that this would place on medium-sized enterprises are simply too great, and so the Government cannot and will not support any lowering of the SME threshold that we have introduced. The threshold proposed by my noble and learned friend Lord Garnier would cost medium-sized enterprises £300 million more in one-off costs and nearly £40 million more in annual recurring costs.
However, it is not just about these costs—although they fully justify the Government’s position in their own right. Undoubtedly, a chilling effect also occurs with the imposition of a criminal offence. I have spoken before about my experience of working in the City. I know from that experience that, when this type of new regulation shows up, a whole industry of lawyers, consultants and accountants cranks into action, telling businesses what they can and cannot do. All this distracts businesses from what they should be doing, which is creating jobs and growing their businesses, which benefits the whole economy. As Kit Malthouse, the Member for North West Hampshire, put it in the House of Commons, the SME threshold is
“a level at which companies can absorb the step up in responsibility, and without a disproportionate amount of cost”.—[Official Report, Commons, 13/9/23; col. 947.]
I therefore urge noble Lords to support the government Motion to reinsert the SME threshold, to ensure that we take a proportionate approach and do not impose unnecessary measures that will curb our economic growth.
I now move on to discuss government Motion B, focusing on the amendment tabled by the noble Lord, Lord Faulks, on cost protection in civil recovery cases. The Government remain of the view that this type of amendment will be a significant departure from the loser pays principle, and therefore not something that should be rushed into without careful consideration. However, that is not to say that this type of amendment is necessarily a bad idea, and I am grateful to the noble Lord for bringing it to our attention. With that being said, it would not be responsible for us to rush into making such a significant change at the tail-end of a Bill without full consideration by the Government and commensurate scrutiny by Parliament. That is why we previously added a statutory commitment in the Bill to review the payment of costs in civil recovery cases in England and Wales by enforcement authorities, and to publish a report on the findings and to lay it before Parliament within 12 months. I hope noble Lords will agree that this is the responsible approach to take and therefore support government Motion B.
In conclusion, I encourage noble Lords to agree with the Government’s position in these two areas. It is vital that we achieve Royal Assent without delay so that we can proceed to implement the important reforms in this Bill as quickly as possible. I beg to move.
Motion A1 (as an amendment to Motion A)
Lord Coaker (Lab)
My Lords, I start by echoing something that the noble Lord, Lord Wallace, said: overall, we all believe that this is a good Bill. It is a step forward, and we welcome the changes that the Government have made over a number of months to improve it, and that they have listened to the various points that have been made. It would be churlish not to say that to the Minister at the outset, but that does not alter the fact that the amendments tabled by the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Faulks, seek to address two omissions where, even at this late stage, the Government could act to further improve the Bill. I say to both that should they choose to test the opinion of the House, we certainly will support them in the Lobbies to do that.
I will not repeat the arguments. It was interesting; sometimes, when you are constrained by time, the argument distils down to its essence. I think that what the noble and learned Lord, Lord Garnier, said, supported by the noble Lords, Lord Agnew, Lord Eatwell and Lord Wallace, really summed it up with respect to his amendment. As he said, the failure to prevent bribery offence applies to everyone; there is no opt-out or exemption. The Government do not think that that is too burdensome for anyone. As he also said, no company is too small to be exempted from the failure to prevent tax evasion offence. But on this particular emphasis, the failure to prevent fraud, the Government come forward and say: “We need to protect a certain number of businesses”.
The noble and learned Lord, Lord Garnier, has moved amendment after amendment to try to come closer to the Government’s position. As the noble Lords, Lord Agnew and Lord Eatwell, have just said, if you took that to its extreme, you would impose no costs on business at all, and they used the seatbelt argument. So we are very happy to support the amendment of the noble and learned Lord, Lord Garnier, should he choose to test the opinion of the House.
I shall pick out one aspect of the amendment of the noble Lord, Lord Faulks. It was a feature of all our debates and discussions that we wanted law enforcement to take tougher action against those who committed fraud. We believed that the state could and should take more action, that the amount of money lost with respect to fraud was enormous and that we need to do something about it. What I picked out from what the noble Lord said was about reducing the possibility of action not being taken by law enforcement agencies because they were frightened of the possibility of costs —not on the merits of the case that they might seek to pursue but simply because they were frightened that they may incur costs. As such, both amendments are simple but important ones that would do what this House, and I believe the public, expect Parliament to do, which is to give as much power as possible within the Bill to tackle the problem of fraud, which is what we all want.
Lord Sharpe of Epsom (Con)
My Lords, I thank all noble Lords who have contributed to this relatively short debate. Like my noble and learned friend Lord Garnier, I am in danger of sounding like a cracked record on this subject, so I will keep my remarks brief. I reassure my noble and learned friend that I still find his joke funny and I am glad he keeps making it. I thank him for being incredibly gracious although we continue to disagree on these matters. I have to say I do not believe the Bill is a dog’s dinner or that these arguments are dog’s-dinnery. We are not in a sticky hole on this; it is a difference of opinion, and I will make a couple of the arguments that I have rehearsed before in support of that.
I shall deal with my noble and learned friend’s amendment by first reminding him and the House that this may be a relatively small number of companies but, as I have said many times before from this Dispatch Box, they account for 50% of economic output in this country. The heart of the argument comes down to why there is a threshold for this offence but not for the offences of failing to prevent bribery or the criminal facilitation of tax evasion. As I have reminded the House on numerous occasions, the Law Commission has identified the disparity here: it is easier to prosecute smaller organisations under the current law, which this failure to prevent offence will address. The new offence is less necessary for smaller firms, where it is easier to prosecute individuals and businesses for the substantive fraud offence. The Government therefore believe it would be disproportionate to impose the same burden on them. The fact is that this is not an exemption from the law; the law applies in a different way to these smaller companies, as we have tried to explain on a number of occasions. I think I will leave that there.
On Motion B1 in the name of the noble Lord, Lord Faulks, I do not think that this represents a tender approach to fraudsters. As we have said and made the case on a number of occasions, fundamental changes are being proposed here, and the review that we have proposed seems like a fair way of assessing precisely the implications of making those changes.
I thank my noble friend Lord Wolfson for highlighting some of the complexities in this area in his particularly acute legal way, which I am not equipped to follow. However, I can perhaps answer the question about the difference in introducing the cost protection amendment for civil recovery compared with unexplained wealth orders. This issue has come up in previous debates as well. The fact is that the difference between the changes made to the unexplained wealth order regime by the first Economic Crime Act last year and what is proposed in this amendment is that unexplained wealth orders are an investigatory tool that do not directly result in the permanent deprivation of assets, whereas the civil recovery cases covered by the amendment could do so. There could therefore be a host of serious unintended consequences of such a change to the wider civil recovery regime, so the Government cannot support the amendment. A review is the appropriate way to look at this issue. As I tried to make clear in my opening remarks, that may well be a very good idea, but we would like to be convinced of that and to do the work before we actually accept it.
I thank the noble Lord, Lord Coaker, for generously accepting that we have made significant improvements to the Bill through its passage. I say to the noble Lord, Lord Wallace of Saltaire, that we have engaged extensively with all noble Lords in this House on the Bill. I thank him for his explanation of how he believes a revising Chamber should operate. The fact is that we are not sufficiently persuaded of the arguments against this, so there is a genuine difference of opinion. I do not think the noble Lord would mean to imply that this House should necessarily have a veto where there is such a difference of opinion. I think that is a fairly straightforward argument and a perfectly respectable one.
Throughout the passage of this Bill, the Government have worked hard to ensure the right balance between tackling economic crime and ensuring that the UK remains a place where law-abiding businesses can flourish without unnecessary burdens. The Motions tabled by the Government today achieve that balanced and proportionate approach. I therefore urge all noble Lords to support them.
Lord Garnier (Con)
My Lords, I will make one point in total agreement with my noble friend the Minister—we are not having a row, we are having an argument. He and I have a different view about the merits of our respective arguments. If the House listens to no other speeches, and if it wishes to forget mine, I urge noble Lords to remember what the noble Lord, Lord Eatwell, and my noble friend Lord Agnew said. From both sides of this House, they perfectly summed up the lacuna in the Government’s case.
I thank all noble Lords who have taken part in this short debate. Despite the fact that this is not an argument about party politics—it has nothing whatever to do with the Salisbury convention—I regret that I am insufficiently persuaded by my noble friend the Minister that he has quite got the point. I must therefore ask the House if it will join me in agreeing with my Motion by testing the opinion of the House.
Lord Sharpe of Epsom
That this House do agree with the Commons in their Amendment 161A in lieu and do not insist on its Amendment 161B in lieu to which the Commons have disagreed for their Reason 161C.
“Report on costs orders for proceedings for civil recovery
Report on costs orders for proceedings for civil recovery
(1) The Secretary of State must assess whether it would be appropriate to restrict the court’s power to order that the costs of proceedings under Chapter 2 of Part 5 of the Proceeds of Crime Act 2002 are payable by an enforcement authority and, if so, how.
(2) In carrying out the assessment, the Secretary of State must consult such persons as the Secretary of State considers appropriate.
(3) The Secretary of State must publish and lay before Parliament a report on the outcome of the assessment by the end of the period of 12 months beginning with the day on which this Act is passed.
(4) In this section “the court” means the High Court in England and Wales.”