Economic Crime and Corporate Transparency Bill

Baroness Blake of Leeds Excerpts

Report stage
Tuesday 20th June 2023 Lords Chamber

[Lord Fox (LD)]

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 (Lab)]

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 (Con)]

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.

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[Baroness Blake of Leeds (Lab)]

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 (Con)]

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.

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[Lord Fox (LD)]

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 (Lab)]

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 (Con)]

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.

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

Baroness Blake of Leeds Excerpts

Tuesday 13th June 2023 Grand Committee

In general, however, having asked those questions, naturally we welcome this SI as we welcomed both last year’s Act and this year’s Bill. We look forward to a stronger Companies House enforcing this regime and we hope that it will have a highly beneficial effect on the British housing market, on reducing the amount of illicit finance coming into the United Kingdom, and on what the Treasury receives from business rates and what local authorities receive from property rates in future.

[Baroness Blake of Leeds (Lab)]

I add my thanks to the Minister for his opening remarks and the detail that he went into in explaining the nature of the SI before us. I preface my comments by picking up on one remark that he made, that the whole purpose of this is not to deter investment. We are always looking at finding the bad actors in this situation, rather than bringing in penalties that will have a detrimental effect on businesses’ ability to attract investment.

We regard this as an important statutory instrument, and I am sure the Minister will agree with me that it is very overdue. We know that there were conversations around this and action was taken by David Cameron back in 2016. We have to acknowledge that it is a tragedy that it took the war in Ukraine to precipitate the action that we have seen thus far. I hope we do not get into a Groundhog Day situation, as I know that we will probably engage in further conversations around this when we head into Report on the Bill next week. However, that is the nature of the fast-moving situation that we are in. Many of the issues that have been touched on today have been discussed at length in Committee on the Economic Crime and Corporate Transparency Bill, so I do not want to repeat too much of that, knowing that we will come back to it.

As I say, we support provisions within this SI and believe that they are common sense, but we have to acknowledge that the delays have been at a cost.

I believe the fine is currently set at £2,500 per day. Is it the case that no one has yet been issued with a penalty? It would be good to clarify where we are in the process. We certainly want to see action stepped up against those failing to comply with the new legislation, and we know that there are those who are yet to face financial penalties. The spirit running through all the debates about the next stages of this is of wanting the system to be as robust as possible. In particular, as the Minister mentioned, this presents us with an opportunity to bring in further measures and strengthening, but the question that will run throughout this, which he probably cannot answer at the moment, is whether it will be fit for purpose and will cover all the issues that come up.

How soon after the passing of the SI will the registrar be able to issue financial penalties? I presume there will be a process of issuing warning notices. Has there been any provision for warning notices to be sent out in advance of the SI being passed? It would be helpful to know whether that is the case and therefore whether it will be possible for the registrar to move to those financial penalties as soon as the SI has been passed.

More generally, on timings, the dates of appeal on the warning notices suggest that a period of 28 days needs to be passed. Can we have some clarification? The draft regulations state that the period contained in any warning notices

“must be at least 28 days beginning on the day after the date of the warning notice”

being issued. If a company or entity disagreed with what was in the warning notice, would it have to make representation to the registrar within 28 days or after a minimum of 28 days? There is a need for some clarification. Also, if warning notices have been issued, have any written representations been received?

I also emphasise the issue that we have raised significantly. I am grateful to the noble Lord, Lord Johnson, for arranging for us to meet the registrar and some of her officers; it was a very instructive meeting. But, as has been outlined, I want to put on record our continuing concern about whether the level of resources will be fit for purpose, given the scale of change being brought in, the number of companies that we have heard about and the fact that there will be stubborn cases that are difficult to bring to a conclusion. We have had some reassurance that this will not be fixed in stone and that if the registrar feels that more resources are required, they will be able to come back to that. The issue is the sheer capacity and the fact that the status of those working in Companies House is being changed from recording information to taking action when there is suspicion of wrongdoing.

The other area that has generated a great deal of concern is the 25% threshold for beneficial ownership and the possibility of anonymity that it gives, enabling overseas entities access to UK properties and markets. I know there will be more discussion around this, but it is important to flag these matters whenever we have the opportunity. I hope the Minister will acknowledge that this area still presents a problem in getting underneath all the issues that need to be addressed. I thank him for his very clear explanation of the powers in the SI to consent to Northern Ireland dispositions.

I conclude by saying that, yes, we support the changes being introduced, but it is an area of huge concern. Economic crime is still increasing, as we know, and coming back to deal with unforeseen loopholes that might ensue will be an important part of the legislation before us. I very much look forward to the Minister’s response and to continuing the work on this important area.

[The Earl of Minto (Con)]

I thank both noble Lords for their valuable contributions to this debate—not just now but in the past.

The Government are absolutely committed to ensuring that the register is robust and effective at tackling the use of UK property to launder money. These regulations provide mechanisms that ensure the register operates effectively. A clear and effective procedure for the imposition and enforcement of penalties will serve as a deterrent against non-compliance and bad actors, as well as punishing guilty parties, including by potentially imposing charges over their land.

The provisions relating to the dispositions in Northern Ireland extend the same treatment to the entirety of the UK. They allow the registration of land, where it would otherwise be prohibited, for the benefit of those who act in good faith, and ensures that their interests are not affected by the actions of non-compliant overseas entities.

The points that noble Lords have discussed today highlight the necessity of the measures contained in these regulations. I will try to address some of these now. The noble Lord, Lord Wallace, raised a number of extremely important issues, and I will take them in the order I wrote them down.

On the question of proper funding for Companies House, there are two elements of funding, which total a maximum of about £83 million in any one period; that should certainly be enough. I think one can see from the work it has already achieved that it has made great strides. I am not saying the work is finished, but it has made great strides towards achieving the whole purpose of the register and, through that, giving the registrar the leeway to concentrate on the people who have not yet fully complied.

On the continuous rate of compliance, I think we last met here on about 2 May. Since then, Companies House has had 600 more applications for compliance. That rate of about 100 a week is continuing, so the process is working.

Employment Relations (Flexible Working) Bill

Baroness Blake of Leeds Excerpts

2nd reading
Friday 19th May 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, I start by offering sincere congratulations to my noble friend Lady Taylor of Bolton on sponsoring this very important Bill, introduced by Yasmin Qureshi in the other place. I also thank her for her very clear explanation of the provisions within the Bill, and Members across the House for their very thoughtful contributions.

The Bill has Labour’s full support, and we recognise also the cross-party support. However, we still expect much greater action from the Government to enhance workers’ rights. As we have heard, the Bill will help many across the country to balance work with caring for loved ones, and the circumstances and the needs are various, as we have also heard. We know there are many statistics around this subject. I have seen estimates that at least 2.2 million employees are unable even to make requests for flexible leave. Indeed, some statistics suggest that only 11% can do so. So Labour welcomes the provisions in the Bill, which will begin to create the environment for a fairer and more equitable discussion between employers and employees about flexible working, with a very strong belief that this should be universally available.

The Bill also represents an important step towards ensuring that legislation reflects where we are as a society. We have heard a great deal about the need to take the lessons learned from Covid very seriously indeed. Remote working is one area, but there is also hybrid working, the ability for people to go to the workplace and work from home at the hours they choose, where that is possible. Surely this presents the best of both worlds for so many people, acknowledging that workers still need greater protections, and that flexible working should be an employment right, not a “nice to have” or a job perk. We need this Bill to be a very welcome starting point, not the endpoint. I was very struck by my noble friend Lady Taylor’s reflections on the needs of those such as the MS Society, and her very poignant explanation of the challenges that are faced by so many people.

As I have mentioned, in responding to this Private Member’s Bill and considering how we move forward, I have to say that it is a great disappointment that the Government have not taken the chances to bring forward comprehensive legislation in the form of an employment Bill, as was promised in the 2019 manifesto and the subsequent Queen’s Speech. I ask the Minister to reassure us of his full support for the provisions within this Bill going forward and a commitment to continuing the steps that need to be taken.

We on these Benches are of course proud to commit to strengthening rights at work. Labour’s A New Deal for Working People will ensure the right to secure flexible working for all workers, as default, from day one, with employers required to accommodate that as far as is reasonable. From my own experience, talking to employers for many years around this issue, I know that matters have been heightened by Covid and the response—but this issue goes back many years. I was very struck by the employers’ comments that, when people are seeking employment, often one of their first questions now is whether the company, or the employer, will offer flexible working conditions. This is across many sectors. It is not limited to the high-end providers.

To their credit, many employers now understand that being responsive on flexible working leads to a happier workplace and a more stable workforce. It contributes to the building of loyalty to the employer and of course is a significant factor to consider when we are looking at the very vexed issue of staff retention. We have heard that we are in a climate where too many employers are struggling to recruit and retain staff, and this must be an important consideration.

Both men and women seek flexibility in their parental duties. I welcome this and I see it in members of my own family: both parents want to share the care of their children. We also have to acknowledge that many of these thoughts are driven by the prohibitive costs of childcare, which mean that too many parents are seriously struggling to balance and juggle the needs of caring for their children with returning to the workplace.

As we have heard, too many requests are still declined. We know from the evidence that too many people do not make requests for flexible working due to the fear of the consequences. Many people are sensitive about their personal circumstances and find it difficult to be open and transparent when they are afraid of the punitive consequences of disclosing their particular needs. If three in 10 requests are declined, we also know that too few jobs are advertised with flexible working as an option; I understand it is as low as one in four. If we are serious about closing the gender and disability pay gap, and recognising the challenges to the workforce whether due to personal health needs or caring responsibilities, surely this area is crying out for change.

I confirm our support for the Bill. I also note that the Government referenced flexible working in the Spring Budget, including that they

“will work with employers to demonstrate the benefits of offering flexible working, including through initiatives such as employer pledges and offering flexible working in job adverts”.

We welcome those statements. However, can the Minister confirm how the Government plan to evidence the impact of the commitments made in the Budget, in particular those on encouraging employers to include flexible working in job adverts, widening access to flexible working and improving the quality of flexible working?

It goes without saying that I am delighted that the Bill has made such good progress and I very much look forward to the Minister’s comments giving us the reassurance that we all need and deserve to make sure that this welcome first step is adopted, with a commitment to doing far more in future.

Carer’s Leave Bill

Baroness Blake of Leeds Excerpts

Friday 19th May 2023 Lords Chamber

[Lord Fox (LD)]

My Lords, this is a very worthy Bill and one that I am glad to see through to its final reading. We know that caring can take many guises, and providing unpaid care for a family member, friend, neighbour or dependant is a reality for many millions of people across the UK and is something that almost everyone will experience either directly or indirectly through their lives.

New findings from Carers UK and the University of Sheffield released earlier this month show that unpaid carers in England and Wales now contribute a staggering £445 million to the economy of England and Wales every day—that is £162 billion per year of voluntary work and the equivalent of a second NHS in England and Wales.

At an individual level, staying in work while providing care for a relative or friend can be incredibly challenging. Latest estimates show that over 7 million people in the UK are juggling work and unpaid care and, every year, more than 1.9 million people in paid employment become unpaid carers. The stresses and strains of having to juggle paid work alongside unpaid care without the support they need has left many exhausted and burnt out, and too often it is impossible for them to manage. As a result, on average, 600 people per day have had to leave work because they need to provide care. Many others have had to reduce their hours.

Research shows that having a supportive employer and the ability to take time off work to support dependants can mitigate those pressures. That is why this Bill would create a new entitlement for employees to take up to a week of unpaid leave a year in order to provide or arrange care for a dependant with a long-term care need, and it is why it is so important. I am delighted that my Liberal Democrat colleague in the Commons, Wendy Chamberlain MP, brought forward this Private Member’s Bill with government support, for which I express my thanks.

The Bill will provide, on day one, a right to one week of unpaid leave for carers in employment, with the flexible option to take as little as half a day at a time. This will be available to all employees providing care for a dependant with a long-term care need. Carers will have the time and flexibility for their caring responsibilities and to make the required preparations for the future, such as being able to take half-days off for medical appointments. The Bill will give carers the opportunity to be able to put work to one side and focus solely, for that time, on their caring responsibilities without the added pressures of having to juggle both duties. Although the Bill does not provide carers with a paid leave right, it will nevertheless go a long way towards helping to relieve the financial burden by providing carers with the confidence of job security. It is also an important step in recognising the role of carers in the workplace.

I am pleased that the Bill will support women in particular to stay in work, as they are more likely to juggle work and care and to be a part-time, rather than a full-time, worker. Indeed, the impact assessment produced for the Bill recognises this, stating:

“In the context of the gender pay gap, the fact that women are more likely to provide care means that they are more likely to face adverse employment effects associated with caring i.e., lower earnings and leaving the labour market”.


I hope that the Bill will bring some peace of mind to all employed carers so that they can live in the certainty that their jobs are secure while they are caring for their dependants. I beg to move.

[Baroness Blake of Leeds (Lab)]

My Lords, I welcome this stage of this important Bill. I acknowledge the very rich debate we had at Second Reading, including the incredible personal testimony from so many Members on behalf of their own families and people they had met in their communities or work. As the noble Lord, Lord Fox, laid out, this is an important first step, but we need to acknowledge that there is still much more to do. I emphasise, to avoid any confusion, that this refers to unpaid leave, although many arguments have been made to move to paid leave.

We have heard very clearly that the Bill will help to relieve the stress and isolation that carers often experience—the loneliness, the impact on mental health and, as we have heard, the disproportionate impact on women. But what we also know, which is not emphasised enough, is that the Bill will benefit employers by reducing the risk of the absenteeism, turnover and retention of staff.

All that remains is to thank Wendy Chamberlain MP, the Bill’s sponsor in the other place; the noble Lord, Lord Fox, for bringing it to the Lords; and the cross-party support we have seen. I also refer to the work by Carers UK from which we have all benefited. I thank carers and their families who have shared their stories and experiences. In particular, I make special mention of my noble friend Lady Pitkeathley; she is very sorry not to be able to be here today. I thank her again for her tireless work over many years and her absolute determination to make progress on this really significant issue.

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I thank the noble Lord, Lord Fox, for bringing the Bill through the House. The Government have been pleased to support it throughout all its stages. This is in line with our 2019 manifesto, which committed to introduce one week of leave for unpaid carers; I am pleased to continue that support today at Third Reading. I am also very grateful for the cross-party support that the Bill has received.

The Government appreciate the time dedicated by unpaid carers to help those who rely on them for their everyday needs. No one should underestimate the contribution that unpaid carers make. They play a vital role in society, supporting those who are unable to care independently for themselves. Many provide that care while holding down a job. We know that there are some brilliant, supportive and flexible employers out there already who are taking great steps to support those in their workforce with caring responsibilities, recognising the value to both their businesses and their employees of helping carers to stay in work. The Bill will extend aspects of what those employers do voluntarily to all employers, ensuring a baseline of support for all working unpaid carers. This will help to alleviate the pressure that carers—particularly women, who are more likely to provide care—can face as they seek to juggle their work and caring responsibilities.

The new right to carer’s leave will provide more flexibility to those unpaid carers. It will enable them to take more time out of work if they need to. Carer’s leave will allow employees to be absent from work on unpaid leave to provide or arrange care for a dependant with a long-term care need. Eligible employees will be able to take the leave, regardless of how long they have worked for their employer. It will be available from the first day of their employment. The leave will be available to take in increments of half-days, up to a week, to be taken over a 12-month period. Employees will not be required to provide evidence in relation to a request for carer’s leave. Employees taking carer’s leave will have the same employment protections as associated with other forms of family-related leave, including protection from dismissal or detriment as a result of having taken the leave.

I am personally very pleased to support the Bill; it is a huge step in the right direction for our carers, who give their time to help others who need it. I once again thank the noble Lord, Lord Fox, for his sponsorship of the Bill as it has moved through the House. I also thank Wendy Chamberlain and my honourable friend Kevin Hollinrake for their stewardship in the other place and their hard work in putting the Bill forward.

Car Industry

Baroness Blake of Leeds Excerpts

Wednesday 17th May 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, I watched this Urgent Question in the other place keenly today but was left disappointed by the number of questions actually answered, so I thank the Minister for coming here to answer ours.

This situation is extremely serious. As we know, all manufacturing is facing supply chain difficulties globally, and our car industry is suffering. Does the Minister agree that our trading relationship with the EU should reflect this? Will the Government follow the sector’s advice by reopening negotiations on the trade and co-operation agreement to protect it from further risk?

[The Earl of Minto (Con)]

My Lords, the Government are acutely aware of the global challenges that the UK car industry faces. We have been leveraging private investment, alongside government support, to bring EV manufacturing to UK shores. The UK remains highly attractive; our workforce is among the most productive in Europe, and we excel in R&D and innovation. The DBT Secretary of State is aware of this issue facing the automotive sector, and is raising this with her counterparts in the EU.

Whistleblowing Framework

Baroness Blake of Leeds Excerpts

Tuesday 16th May 2023 Lords Chamber

[The Earl of Minto (Con)]

My Lords, I quite agree that taking any form of case to an employment tribunal is risky and difficult for the individuals involved, and it is no less so in a whistleblowing case. When the review is done and we are able to take a look at what the recommendations are—I think I have said this twice already—it will be very surprising if the question of an office of the whistleblower did not come up.

[Baroness Blake of Leeds (Lab)]

My Lords, evidence suggests that the UK’s law on whistleblowing is falling behind international best practice and has not kept pace with the modern workplace or the scale of the problem. We welcome the Government’s announcement of the establishment of the review into the whistleblowing legislation, but perhaps the Minister could tell us when this will report. In the light of that, would he not agree that the Economic Crime and Corporate Transparency Bill, shortly going to Report, provides an ideal opportunity to act now to bring in immediate, obvious improvements? Further, does he agree that requiring all employers to introduce effective internal arrangements would be a beneficial step forward?

[The Earl of Minto (Con)]

I absolutely agree that the current whistleblowing framework is not current best practice. This was basically put in place in 1996 and 1998, and that is one of the main purposes for the review being carried out now. The review is due to complete its work in October this year and will report very soon after that. Hopefully, from that, we can get to a situation where we are able to move forward to something that really is world-class.

Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations 2023

Baroness Blake of Leeds Excerpts

Tuesday 2nd May 2023 Grand Committee

[Baroness Blake of Leeds (Lab)]

My Lords, I thank the Minister for his opening comments. I think he will be aware that several of us are spending quite a lot of our time on the Economic Crime and Corporate Transparency Bill, which is going through the House at the moment, and many of the issues in the statutory instrument we are discussing today are the subject of ongoing conversations.

We recognise that this is secondary legislation to amend the Act that went through last year. I welcome the Minister’s comment that this is work in progress and that further revisions will be required because there are still some gaps that we may need to consider in future.

I preface my remarks by highlighting the scale of the problem that we are dealing with. I do not think any of us should shy away from the real problem we have in this country now as a result of not taking action sooner. It is a tragedy in many ways that it was the onset of the conflict in Ukraine that necessitated swift action, and it is regrettable that this problem, which had been highlighted before, had not come into our focus and received the attention necessary.

I welcome in the main the provisions in the statutory instrument, but I shall make a couple of comments and ask a couple of questions. I make it clear, as we have done throughout the discussions in this area, that we recognise that the vast majority of companies investing in the UK do so with good intentions and bring great benefit to the country and that we are concentrating on the actions of the relatively small number of bad actors. Sadly, their contribution to this is profound and has done an enormous amount to damage the reputation of the UK on the world stage. I hope that we are united across the Committee in making sure that we take every opportunity to improve the chances of our reputation being recovered and are seeking out problems as they arise.

My main hope is that those at serious risk if information is given out are protected. It is very important that we recognise that there are genuine cases where protection needs to be secured. By the same token, we have to avoid disproportionate burdens and make sure that legitimate investors are welcome to operate in our country.

I seek some clarification. There seems to be some concern that the Act still does not provide a complete definition of what a foreign limited partner is. The description in the Explanatory Memorandum seems rather abstract. I wonder whether this may lead to practical implications where the confusion continues to exist. Reassurance on this point would be gratefully received. Most of all, we want to make sure that the register is populated correctly and effectively. Throughout the discussions on this matters, transparency is paramount in the context of those who will need further protection, as the Minister outlined.

I thank the Minister for his comments about risk, but I want to understand if bringing this instrument forward has led to further thought on the definition of risk. Have we gone far enough? I would like to understand how this is demonstrated and whether there has been an assessment of how well this is working so far. As has been highlighted, the issue of the alternative address could still be problematic. I understand the need for flexibility, but is there a risk remaining? We would like to be confident of the success of this provision. Again, this links to the balance between protection and transparency.

The other area is—if you can describe it as this—cleaning up the register and recognising, as we have heard, that some of the information held is clearly not factually accurate or even worse, as we know there is certainly a measure of intent in some of the entries. Do we know the extent of this? On how many occasions is this going to be necessary? Do we have an estimate of how much of a problem this is and how regular it is? Most importantly—I think this runs through all the debates on the Bill itself—how will this work be resourced? Can we be reassured that there are adequate personnel and resources at our disposal to make sure that we get this done successfully?

What are the sanctions once a forgery or anything factually inaccurate has been identified? Are there punishments? Do we have any evidence of this? Can we have a general clarification around the deterrent factor to make sure that we do not have problems going forward? Obviously, with there being an equivalent provision in the Companies Act 2006, I would hope that we have learned from the experience of working on this. I wonder if there are examples of that that would help to inform the debate.

I understand the Minister’s comments about the deadline of 31 January, but I have heard an estimate that 7,000 companies failed to register. Is that about the ballpark he is suggesting? Since January—we are now in May—has there been an understanding of how successful the action taken against the remaining numbers has been?

There are still other issues and I look forward to other measures coming forward to fill the loopholes. In conclusion, of course we welcome the provisions being made, but are seeking reassurance and confidence that concerns will be addressed, and the necessary changes will be made as we go forward.

[The Earl of Minto (Con)]

I thank both noble Lords for their valuable contributions to the debate. The Government are committed to ensuring that the register of overseas entities is robust and effective at tackling the use of UK property to launder money. These regulations provide the mechanisms that ensure that the register of overseas entities operates effectively. A clear definition of “foreign limited partner” provides greater certainty concerning registrable beneficial owners of overseas entities; I have a full definition for the noble Baroness that I can share. Applicants will be able to identify registrable beneficial owners more easily with a definition that is recognisable across multiple jurisdictions.

The amendment to the protection regime will address the unintended consequences of the regulations as they stand, by removing the requirement to demonstrate the risk of violence or intimidation arising directly from the individual’s association with the overseas entity. The measure on rectification ensures that errors on the register, whether deliberate or accidental, are identified and removed. The points raised by noble Lords highlight the necessity of the measures in these regulations, and I will answer some of them now.

The noble Lord, Lord Wallace, raised the question of accuracy—that is definitely ongoing. I do not think Companies House fully knows the number of inaccurate entries, but it still stands by the estimate it has used before of there being 32,000 registrable entities in total. We are up above 28,000 now. Although there will be some inaccuracies, I hope that by continuing to approach these organisations, Companies House will iron them out. I have not been involved in this sort of thing before but, despite the fact that it has taken some time to get there—it took the atrocious situation in Ukraine to bring this to the fore—it has certainly made some significant progress in getting that many people to register in such a short period of time. However, the point is well made that the accuracy of the register is paramount, including in terms of lost revenue.

On the younger people mentioned, I understand there are issues of family trusts, particularly with UK beneficial owners. That point, too, was well made. I could go through what is meant by the “foreign limited partner”, but I would rather share that with the noble Baroness. I hope that answers some of the more direct questions, and I will write to noble Lords if there is anything that I have not answered.

[The Earl of Minto (Con)]

Behind the noble Lord’s question is the question of resource. Companies House has 120 full-time equivalent staff working on this and pursuing precisely what the noble Lord referred to. I hope that will continue to improve the situation as time moves on, but the point was very well made.

[Baroness Blake of Leeds (Lab)]

Can I link that to the question I asked about what punishment or sanction there is? I apologise if the Minister is coming to that.

Employment (Allocation of Tips) Bill

Baroness Blake of Leeds Excerpts

3rd reading
Friday 21st April 2023 Lords Chamber

[Lord Robathan (Con)]

My Lords, this is a very simple Bill and the issue is one of fairness. I am very keen that there should be no extra and unnecessary regulation; the chances of extra bureaucracy are negligible. Similarly, we do not need to worry in any way about the likelihood of great costs, as they are also negligible.

Most businesses already allocate tips fairly to their staff, but, regrettably, a minority have not done so. That gives the staff, who are often among the least well-paid in the hospitality sector—waiters, for instance, and others, stretching beyond the hospitality sector, but in particular waiters—the opportunity to insist that they are given the service charge that many of us in restaurants pay whenever we go to a restaurant, so they get the tips rather than the money going to the profits of perhaps a big company. This does not happen that much but does happen a bit, and we need to make sure it does not happen at all. I beg to move that this Bill do now pass.

[Baroness Blake of Leeds (Lab)]

My Lords, I start by congratulating the noble Lord, Lord Robathan, on sponsoring this important Bill, as he has outlined. I also thank Virginia Crosbie, the Member for Parliament, for stepping in to take up the discussions in the other place. As has been said, this is indeed an important issue; the Bill will support some of the lowest-paid workers across the country, and I am pleased to recognise the cross-party support it has received during its passage.

I will also reflect the comments my noble friend Lady Chapman made at Second Reading. This is a very welcome Bill; it may not deal with absolutely everything on the topic, but when the Government are supporting a sensible agreement, we should acknowledge that. We do recognise that there are probably some more details that need to be ironed out to ensure that the intent of the Bill is carried forward. I also add my thanks to everyone, including officials, who has supported its passage in both Houses.

Economic Crime and Corporate Transparency Bill

Baroness Blake of Leeds Excerpts

Committee stage
Thursday 20th April 2023 Grand Committee

[Lord Wallace of Saltaire (LD)]

My Lords, this amendment is to ask for much more information from the Government on the international implications of the Bill, which is a way of asking whether the Bill is serious in terms of enforcement. Most serious economic crime—indeed, all serious economic crime nowadays—is cross-border: the money is taken out of your bank account and rapidly moved to another jurisdiction. One of the huge problems we all face in a globalised economy is that policing is bounded by sovereign borders and criminals are not. Therefore, Governments are forced to co-operate across them.

One of the questions I hope we will pursue on these amendments and the ones that follow on the overseas territories is how Whitehall ensures that the various parts of it that deal with the various parts of our international efforts to combat different forms of crime—terrorist financing, drug smuggling, people smuggling, et cetera—co-ordinate, and which are the lead departments for what. Reference has already been made to HMRC and the Treasury. I note that, in Washington, the US State Department has now established a State Department-led but cross-department anti-corruption board to deal with these necessarily cross-border problems. I hope the Minister will be able to tell us—if not now then perhaps, as I asked at Second Reading, in a briefing in the context of the Bill—how Whitehall will make the necessary changes to ensure that different departments work together coherently in coping with these very complex problems.

It might help if I remark briefly on how I became involved in some of these problems of international crime. In 1989 I was director of research at Chatham House, the international affairs think tank. I was approached by a chief inspector who was then head of the strategy unit at the Metropolitan Police to ask if we could run a seminar on the international dimensions of policing, now that it seemed likely that the Berlin Wall might come down. As it happened, I was then attached briefly to an institute in Germany, in Bavaria, and when I asked it whether I could get any briefing on the subject, which I knew nothing about, I found myself very rapidly being taken to the Bundesnachrichtendienst headquarters and given a very thorough intelligence briefing on how the German Government were approaching the likely explosion of cross-border crime that would accompany the end of that very hard border that had kept a lot of crime away from western Europe.

Since then, we have had 30 years of globalisation, the communications revolution, digitisation and international banking deregulation, which have made cross-border economic crime far easier, far faster and far harder to keep up with. It is no accident that the Financial Action Task Force, one of the main mechanisms for international intergovernmental co-operation in combating money laundering, was also founded in 1989 by the G7; it saw what was coming. Perhaps the Minister can consider whether we could have a briefing on this to be told more about how effective the Financial Action Task Force is.

When I looked rapidly for an update on the FATF, I was a little worried to find that there is rather more up-to-date information on Wikipedia than there is in statements from GOV.UK, which tend to be from 2015, 2018 or 2019. The Wikipedia comments say that the FATF is now pretty good at setting standards and maintaining a blacklist and a grey list of countries that do not observe basic international standards. Some of your Lordships will have seen the article in the Financial Times yesterday about the Government of Panama hoping that it may finally be about to be taken off the grey list, which has clearly damaged its position as an international financial centre. But apart from reporting and setting standards, the FATF does very little in terms of enforcement. The question of enforcement, verification and the exchange of information is extremely relevant to whether the Bill is really going to make a difference to our pursuit of economic crime.

I followed the development of international police co-operation in the 1990s, partly because, when I came here, I became chair of the sub-committee of the European Union Committee that dealt with justice and home affairs, and thus followed quite closely the development of Europol, the Schengen Information System and those other forms of European police co-operation. I was struck by the extent to which progress was driven not by any commitment to some fantasy of a European superstate but by the demands of police forces and intelligence agencies in different countries. They needed to share information—in good, constant time if possible—and share activities and operations, as they now do. Of course, we have now left Europol and the Schengen Information System, which has denied the British authorities access to one of the closest ways in which we used to share information on transborder economic crime. I am not very well informed about the other mechanisms, apart from the OECD’s various activities on beneficial ownership and the FATF, which we find useful.

As the noble Baroness, Lady Blake, may remind us, David Lammy, the shadow Secretary of State for Foreign Affairs, proposed some weeks ago that there should be a transatlantic anti-corruption council to bring together more closely the various agencies, authorities and law enforcement bodies concerned with these areas. I am not aware that the British Government are actively engaged in all this, so my amendment asks the Government to tell us what the current situation is, what their strategy is and how this intrinsic element of any serious approach to economic crime will be treated. If they are unable to do that, they cannot be very serious about the enforcement of action against economic crime, which is not, after all, primarily a domestic matter. I beg to move.

[Baroness Blake of Leeds (Lab)]

I will respond to the comments made by the noble Lord, Lord Wallace, in moving his Amendment 68. I was very struck, looking back at the comments from Second Reading. He very forcibly talked about the international dimension and how important it is, and the fact that the international dimension in the Bill generally is thin; I think those were the words he used. I think we all knew that we would require amendments to look at this area. I am keen to understand from the Minister what actually is being proposed.

We talk a great deal about collecting data, but one of the rules of thumb I have always worked with is that data is of use only if it is open and transparent, there is a responsibility for the data to be analysed and, where things are held up as being untoward, appropriate action is taken.

I do not want to draw out the debate, but this could be an opportunity for the Minister to give us an update about the progress made since the Government launched the register of overseas entities on 1 August. What is the Government’s assessment of the success of the register and of the beneficial ownership registration being set at 25%? Do we know whether many companies are avoiding this by spreading out shares throughout a family? We know that there were significant concerns about nominee arrangements being used to disguise true beneficial owners. What is the Government’s assessment of this, now that the register has been introduced, and will they use the regulation-making powers in the existing economic crime Act to address this?

I anticipate a full response to the issues raised by the noble Lord, Lord Wallace. I would like to understand and am seeking reassurance that the Government are putting arrangements in place. As we have heard, the scale of the co-operation is quite significant. It needs constant review, and it needs to relate to finance, trade and crime. I look forward to the Minister’s response.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

I thank noble Lords very much. It is a great pleasure to be here again to continue this valuable and important inquiry into how to make our company structures more transparent, fairer and more effective for our long-term business needs.

I thank the noble Lord, Lord Wallace of Saltaire, for this amendment. Over the next few hours, I hope to cover many of the points raised and clarify further points from our discussions earlier this week. Specifically on this amendment, I hope it will be of some reassurance to noble Lords that Companies House already has excellent relationships with overseas counterparts—it is important to emphasise that. It works closely with authorities in the Crown dependencies and overseas territories on the implementation of the register of overseas entities.

The noble Baroness, Lady Blake, asked about the progress of the register of overseas entities in relation to UK companies and, specifically, property ownership. We have come a long way: I think we are now 75% to 80% registered. Some overseas entities have not fulfilled our requirements, and I am happy to send a note to Peers about that. This changes regularly but it is a minority, which is important. I am pleased about that, and we are grateful for the collaboration of the Crown dependencies and overseas territories.

As a government Minister it is important that I say that, if you listened only to this debate and did not have any experience of the outside world, you may be forgiven for thinking that every single authorised corporate service provider, Crown dependency and overseas entity was somehow engaged in and designed for criminal undertakings, which we all know is not the case. It is important that I state that many of these measures and the discussions we are having are about a very small minority of bad actors and that the overall industry is worth while and valuable. The principles around high-quality corporate service provision, Crown dependencies managing their own affairs and how companies are structured are very much to be celebrated and embedded. What we are doing here is making sure that there is transparency and legitimacy. I want to make sure that is on the record.

Earlier today I met a former regulator from one of our Crown dependencies, who was surprised at the tone that some noble Lords are taking in the debate, given what he had done with his own regulator in his Crown dependency. He felt that it had set the standard—a higher standard, maybe, than some other Crown dependencies. He felt that they had lessons to teach us in the United Kingdom. We ought to be aware of this. I do not want to belabour the point, but it is important to get the tone right and make sure that the messages are clear.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

To follow on from those comments, my comment will be very much in the same vein. We need to bring this part of the conversation into the general understanding that if we are to be successful, there has to be a root and branch reform of Companies House and the way in which it works. We need a massive cultural shift. Moving away from being a passive receiver of information to a dynamic analyser of data will be quite a step. It speaks to the need for resource to make sure that everything we are doing can be delivered. I emphasise the comments that have been made: of course we want this to succeed, but I am sure that everyone will understand our calling for more information and calling out opportunities to improve what is before us. Significant improvements can be made as we move forward.

Following on from what the noble Lord, Lord Agnew, said, we need to make sure that we do not follow the law of unintended consequences by introducing new measures and then creating new loopholes which will let bad actors fall through the net. We need to triple-check everything proposed through these measures to ensure that that cannot happen. As we have all said throughout this debate, the best way is to make sure that the data is transparent and can be viewed and seen. There have to be ways to introduce safeguards so that sensitive matters can be protected as and when they occur. It cannot be outside the bounds of possibility to make these improvements and move forward in a way that gives greater protection to all those involved.

[Lord Johnson of Lainston (Con)]

I thank the noble Baroness, Lady Blake, for those well-expressed sentiments. I hope the Committee knows my passion for these important reforms. I apologise for not declaring my interests at the beginning of this debate, as I should have. We have had so many different meetings it is easy to forget. It is important that I declare them because I do own companies, I have set companies up and I have been a participant in LLP structures and so on—although I do not believe I am now; please refer to my entry in the register. There is no conflict in my mind; if anything, I hope that gives me quite a good perspective on how these structures can be used for good but also by bad actors.

On the importance of eradicating corruption in our economy, there is, potentially, no greater value that a person can engage in than allocating capital to the highest point of return. That may sound a bit cynical and clear-cut but the point is that the effective functioning of our economy is what gives us the goods, services and quality of life that allow us to exist in harmony and happiness. Corruption, which we are trying to eradicate, is extremely invidious in allowing us to have successful economic growth and, in many cases, it is invisible. It is also assumed to be victimless, which is not the case: it is highly corrosive to our economy and every crime has a victim, even if they are not immediate or apparent.

Our determination to eradicate corruption and economic crime is at the core of our agenda to make our economy work better to provide better lives for our citizens. The noble Lord, Lord Coaker, raised a good point when he said that the public demand this. That is absolutely right. If one believes, as I do, in business and capitalism, and the power of capitalism to do good, if it is being distorted, that destroys our foundation and means that we do not have the true legitimacy to carry on effectively legitimate affairs, because they are conflated with illegitimate affairs.

I am completely dedicated to this mission and am grateful to all noble Peers. I am very glad that we have put on record our group support, if I can call it that, for an industry that, as we have discussed, is incredibly valuable and performs enormously important functions for companies that work in it. It is important; I am happy to state that.

Given this opportunity, I will go back over some of the statistics. The noble Lord, Lord Faulks, raised the issue of compliance. This has been well flagged; there was an assumption, perhaps, that the compliance rate is low. It has taken time for these overseas entities to register themselves. The population of entities in scope is around 32,000 but it is assumed that some of them—perhaps as much as 10%; let us say around 2,500—are dormant, defunct, in the process of being wound up or just part of the general churn of overseas entities. We now have 28,000 entities that have complied with our requirements; that is a high level if one assumes that, as I said, 2,500 or so are probably part of natural churn. So we are already looking at a non-compliance rate of maybe 1,500 to 2,000 companies out of 30,000—I know that I am making estimates; I would be happy to write to the Committee with specific numbers.

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[Lord Johnson of Lainston (Con)]

I appreciate the noble Lord making that comment, which I will come on to but, if the Committee does not mind, I would like to correct some of my statistics. Slightly fewer than 28,000 of our overseas entities have registered, although it is very nearly that. My officials want me to be accurate, so that I never mislead this august Committee. I should also be specific about the PSC regime relating to registered overseas entities. As noble Lords know, but were kind enough not to pick me up on, they have a separate regulatory regime, which is similar to it but not actually called that. I apologise and hope that has been corrected.

[Baroness Blake of Leeds (Lab)]

It would be helpful if we were regularly updated on the number of overseas entities that have registered, with a running total. Otherwise, we keep having to come back and it is not clear where we are in the process.

[Lord Vaux of Harrowden (CB)]

I would also be grateful if the Minister could answer the question about whether there is a process for privacy.

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Moved by

[Baroness Blake of Leeds]

73A: After Clause 106, insert the following new Clause—
“Beneficial owners in overseas territories
In section 51 of the Sanctions and Anti-Money Laundering Act 2018 (public registers of beneficial ownership of companies registered in British Overseas Territories), after subsection (5) insert—“(5A) The Secretary of State must take all reasonable steps to ensure that an Order in Council of a kind mentioned in subsection (2) comes into force on a date no later than 30 June 2023.””Member’s explanatory statement
This new Clause would amend the Sanctions and Anti-Money Laundering Act 2018 to ensure that an Order in Council requiring open registers of beneficial ownership in the British Overseas Territories, for the purposes of the detection, investigation or prevention of money laundering, comes into force no later than 30 June 2023.

[Baroness Blake of Leeds (Lab)]

My Lords, included in this group is Amendment 108, which I am sure the noble Lord, Lord Wallace, will refer to. Amendment 73A is straightforward. It seeks to amend provisions in the Sanctions and Anti-Money Laundering Act 2018 to require the introduction of open registers of beneficial ownership in each of the British Overseas Territories for the purposes of detection, investigation or prevention of money laundering, and for those to come into force no later than 30 June 2023.

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[Lord Garnier (Con)]

The noble Lord is right, and it has not been an easy history, but these small jurisdictions have a choice. I am well aware of the criminal cases currently going on in the Turks and Caicos, and the need for direct rule there. But I have seen too many occasions—not a vast number, but too many none the less—when these small jurisdictions are prepared to be seduced by China rather than maintain their relationship with the United Kingdom. We need to be careful that we do not force these smaller jurisdictions into the arms of the Chinese, when it would be much better for their well-being and ours if we were to maintain them within our own family. I will leave it there.

[Baroness Blake of Leeds (Lab)]

With apologies, as I am not sure whether this is an appropriate time to raise this, but given that our amendment refers to the Sanctions and Anti-Money Laundering Act, perhaps the Minister can explain what sensitive negotiations and discussions, as the noble and learned Lord, Lord Garnier, mentioned, have taken place and the reasons for the disappointing progress. It would be helpful to have a better understanding of why we have not been able to progress.

[Lord Johnson of Lainston (Con)]

I greatly appreciate the noble Baroness’s comment. I would be delighted to go through this in as much detail as I can. I am very aware, as a Minister in the department and someone guiding this legislation through, as a Peer in this House and as a member of the public, of the issues the Crown dependencies and overseas territories have when it comes to reputational issues surrounding financial probity. It has been well reported and widely discussed. I am very happy to comment on that and to come back to the Committee with more information on the specific work we are doing.

If noble Lords allow me to go through my notes, I should be able to answer some of the questions. I am very grateful to the Committee for the complimentary clerking advice we received from my noble and learned friend Lord Garnier and the noble Lord, Lord Faulks, although, since they both seem to have been educated in exactly the same way, I am not quite sure why they did not both have the same answer. That might be something to revisit.

I thank the noble Lords, Lord Coaker and Lord Wallace, who I have named in my brief, for their amendments; of course, the noble Baroness, Lady Blake, spoke to her part. Before I respond to the amendments, it will be useful for me to set out the long-standing constitutional relationship that exists between the UK Government and the Crown dependencies and overseas territories, although I do not want to repeat the very helpful comments made by noble Lords, particularly my noble and learned friend Lord Garnier.

The Crown dependencies and overseas territories are not part of the UK. It may seem obvious to state that, but it is very important. They are separate jurisdictions with their own democratically elected Governments responsible for their domestic affairs, including in these areas. The noble Lord, Lord Wallace, raised the National Security Bill, which I am advised would be more relevant since we are responsible for the national security of the Crown dependencies and overseas territories, or at least many of them—I am receiving reassuring nods. It would have been appropriate, in that instance, for there to have been some mention of them in the legislation. I will explain why there is no mention of the Crown dependencies and overseas territories in this Bill.

I make very clear my sympathy with the principles expressed in this debate. I cannot remember the exact phrase that the noble Baroness, Lady Bennett, used because the metaphor was very mixed, but it was something about there being no point shutting the stable door if we leave the barn door open. I very much agree with that principle; it would seem peculiar to go to all these lengths to make our system right if there were a backdoor through a Crown dependency or overseas territory, but I do not believe that will be the case. I assure the Committee that anything that happens in the UK has to have the additional level in terms of the equivalent regulatory framework to the PSC register, whatever the framework is so called, and so on.

We have a great deal of protection around us, but we should be aware of the fact that the Crown dependencies and dependent territories make their own laws in these areas. There is a well-established constitutional convention that the UK does not legislate for the Crown dependencies on domestic matters or otherwise intervene without their consent, except in very limited circumstances. I am sure that the noble Lord, Lord Faulks, would be comfortable talking to this, but it really is in very limited circumstances. We should be aware of that and very respectful of it, since we do far better collaborating in a more powerful way to ensure that our frameworks are meshed together so that we learn from and support each other rather than being heavy-handed, even in this specific and practical sense. Furthermore, the UK Government also recognise the long-established practice that the UK does not legislate on domestic responsibilities for the overseas territories without first consulting them, other than in exceptional circumstances.

I am grateful for the thrust of these amendments. On Amendment 73A, tabled by the noble Lord, Lord Coaker, I am aware that beneficial ownership registers in British Overseas Territories and Crown dependencies have long attracted significant interest from across the House, as I said earlier, and in general from the public. But it is worth mentioning that, when these types of amendment were tabled to Bills several years ago, we were in a very different place. The point is that all inhabited overseas territories and the Crown dependencies have now committed to introduce publicly accessible registers of company beneficial ownership.

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[Lord Wallace of Saltaire (LD)]

I will simply comment on the capacity question, which the Minister raised. There is a clear distinction between our Crown dependencies and some of our smaller overseas territories. The Crown dependencies have a lot of qualified people, and I am well aware that, in recent years, they have increased their staff capacity to cope with the rising amount of international financial business they have been dealing with. One regrets that, in some of the smaller and, I have to say, weaker overseas territories, there is not enough capacity and trained staff. They are further away from the United Kingdom. There are reputational questions and costs if and when a major scandal breaks out, as in the Turks and Caicos Islands, to the UK’s standing in the world because they are under our protection, they follow UK law and they have the reputation of having UK law.

I am conscious that this is part of a wider problem in the global financial system. The argument has been made to me in the past by people from these territories: “After all, if people do not come here as their offshore financial centre, they’ll go to somewhere dodgier and smaller, perhaps in the Pacific rather than the Caribbean.” We are all conscious of there always being that set of issues, but the UK and its associated territories need to ensure that, in managing a complicated global financial system, our overall contribution is one of which we continue to be proud and that all those territories for which we are responsible maintain higher standards. That is what this is really about.

We recognise how much has been done and how well Crown dependencies have improved the quality of their oversight in recent years, but some territories will simply not have enough people who are prepared to live there for 12 months a year to deal with the quantity and complexity of the financial movements through them. That has to be a matter for our long-term concern. I would love to hear more about the Open Ownership charity that is involved in helping them with this, because we clearly have to assist them to develop their capacity to cope with an increasingly complicated, and often dodgy, set of offerings from countries with which we have to deal but which do not have the same standards as us.

[Baroness Blake of Leeds (Lab)]

I thank all noble Lords who have contributed to this group of amendments. We have uncovered some important areas, but the overarching consideration, as we know and as has been mentioned, is the damage to our reputation if this matter is not addressed.

I take some comfort from the Minister’s offer to meet us to talk this through in more detail, but I remain concerned about the very real question of progress. If the necessary progress has not been made across the piece by the end of the year, I would like to know exactly what the Government are intending.

Given the sensitivity about relationships and the different stages that places are at, which has been highlighted so well, it would be useful to know whether there is an established framework around support and approach to make sure there is consistency in achieving this. This is not a terribly ambitious request; it should be straightforward. I look forward to our further discussions and, with those comments, beg leave to withdraw my amendment.

Amendment 73A withdrawn.

Economic Crime and Corporate Transparency Bill

Baroness Blake of Leeds Excerpts

Committee stage
Monday 27th March 2023 Grand Committee

Moved by

[Baroness Blake of Leeds]

13: Clause 14, page 8, line 8, after “days” insert “and no more than 90 days”
Member’s explanatory statement
This amendment, along with other amendments, would require that, when a when a company is ordered to change its name under the provisions of this Bill (including in cases where the name is considered misleading or it may facilitate criminal activity), the company must comply with the order with between 28 and 90 days.

[Baroness Blake of Leeds (Lab)]

My Lords, Amendment 13 is tabled in my name and those of my noble friends Lord Coaker and Lord Ponsonby. I thank the Minister and his team for all the briefings we have had and for their openness and support in getting us this far, and all noble Lords in the Room for all the information we are gleaning on almost every group that comes before us.

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[Lord Johnson of Lainston (Con)]

I greatly thank the noble Baroness, Lady Blake, for speaking in this debate and for tabling Amendment 13, to which I will now respond. All these amendments are concerned with directions issued to a company by the Secretary of State requiring it to change its name under provisions already in the Companies Act 2006 and added to that Act by virtue of the Bill.

I am very sympathetic to some of the background comments relating to this amendment, but we feel that it is better to allow an element of flexibility around the time it takes a company to change its name. There is already a 28-day target point, and it is right that the Secretary of State has the opportunity to extend that.

Noble Lords in the Committee who have been involved in company management will know that sometimes, in order to have a formal resolution, there are certain requirements of notice periods for boards, which can be 30 days. For the businesses I have been involved in, that tended to be common practice; you can have a special resolution, but it is more important that the change happens and that we do not necessarily set arbitrary timelines, which could cause other issues at a later date.

I am very comfortable with having a further discussion with the noble Baroness and her colleagues about this in case something has been missed in the debate. Ultimately, I believe that we have set the right level of activity requirements and that allowing the Secretary of State to have the flexibility would be more appropriate given the ambitions we are trying to achieve.

The second element of the amendments—I am not sure whether they were spoken to, but they were certainly proposed so it is worth covering them briefly because they are part of the debate—is the requirement for the Secretary of State to publish details of any directions. Directions are issued to companies by the Secretary of State rather than the registrar so they do not form part of the company register, which is a record of information provided to the registrar by companies and material issued to companies by the registrar. We do not believe it would be appropriate to depart from that principle. However, to repeat commitments made at earlier stages of the Bill, we would be happy to examine on a case-by-case basis the appropriateness of annotating the register where name change directions have been issued. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Blake of Leeds (Lab)]

I thank the Minister. I was indeed referring to all the amendments in the group. I note his offer of further conversations to make sure that we have absolutely nailed down the clarification that we are seeking and beg leave to withdraw the amendment.

Amendment 13 withdrawn.

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Moved by

[Baroness Blake of Leeds]

23: Clause 29, page 17, line 32, at end insert—
“(2A) An address is not an “appropriate address” if—(a) it is not a place where the business of the company is regularly carried out,(b) the registrar, following appropriate investigation, has reasonable grounds to suspect that the company does not have permission to use the address, or(c) it is a PO Box address.(2B) The Secretary of State may by regulations make provision—(a) for exceptions to subsection (2A), and(b) for the registrar to exercise discretion to disapply subsection (2A) in exceptional cases.”Member’s explanatory statement
This amendment seeks to clarify the Bill’s definition of an “appropriate address” for a company’s registration.

[Baroness Blake of Leeds (Lab)]

My Lords, Amendment 23 is tabled in the name of my noble friend Lord Coaker, which my noble friend Lord Ponsonby and I have signed in support. The amendment does not form part of a group. It seeks to clarify the Bill’s definition of an appropriate address for company registration. It is aimed in particular at trying to stop the terrible practice—which is widespread, as we heard at Second Reading—of companies using false addresses. Although Clause 28 defines an appropriate address, our amendment goes further in defining what is not an appropriate address, including a Post Office box.

In terms of public awareness of the debate that we are having as the Bill goes through, the use of false addresses is one of the most publicly well-known issues with Companies House, and we really should be putting all our efforts in to try to prevent it. People trying to prove that companies are registering falsely at their address often have to go to far greater lengths to prove that they are the proper residents of the said address than the person setting up the company. I hope that this amendment provides an opportunity to talk about the use of false addresses and, therefore, the impact that it has on the public. It is one of the most visible parts of the current failure of Companies House. As things stand, Companies House does not do any detailed check on an address where a company is registered, particularly if it uses the basic criteria laid down by Companies House.

I am sure that I am not alone in having listened to many of the different programmes in the media, particularly on the radio but on other outlets as well, which have had this vexed issue as their subject. You hear about the absolute distress caused to people, who are completely innocent in the process, who come home and find letters sent to their address and many other factors which lead them to understand that someone has falsely set up a company using their name or address—and on this occasion we are talking about their address. The most important issue to recognise here is that this can take years to disentangle, and it can cause distress and untold misery, and we have a collective responsibility, with the passage of this Bill, to make sure that Companies House does all the work that it can to help.

The important issue to bear in mind is that the onus should be on the businesses to prove that they are legitimate rather than it being on individuals to prove it is a scam and their innocence. I hope that other noble Lords will comment on this amendment, and I hope that collectively we can work together to make sure that innocent members of the public are given the full protection possible by the new legislation. I beg to move.

[Lord Leigh of Hurley (Con)]

I take up the noble Baroness’s invitation to comment on this amendment, although I have just received a text from my mother who says that, having been called a business guru by the Minister, I should keep quiet and not say any more. However, this is a very important issue on which I spoke at some length at Second Reading, and quoted an article in the Times highlighting the problem. The noble Baroness is quite right that it blights people’s houses when they find it to be a registered office, which they had not intended it to be and, of course, the information does not go to the right person.

Nevertheless, I am very concerned by this amendment as worded, because it says:

“An address is not an “appropriate address” if … it is not a place where the business of the company is regularly carried out”.


I assume that paragraphs (a), (b) and (c) in the amendment would be separated by an “or”, because many companies choose as their registered office their solicitor or accountant, with good reason, particularly in these days of working from home, start-ups and virtual companies, where they do not have a single office space but move around the place. The main place of business may be an apartment where they happen to live, so it is convenient and sensible to choose a solicitor’s or accountant’s office as their base. Indeed, when I worked as a chartered account in a large accountancy firm some 35 years ago, that was very common.

Sadly, I do not think the amendment as worded achieves what the noble Baroness seeks, but neither does the Bill: with the greatest respect to the Minister,

“would be expected to come to the attention of a person acting on behalf of the company”

is a bit convoluted for what we know we want to achieve. Although I cannot support this amendment at this time, I very much hope that before the next stage, we might come up with some wording that achieves where we all want to go.

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[Lord Johnson of Lainston (Con)]

I appreciate that comment. I will come back to the noble Lord with more detail, if that is possible.

[Baroness Blake of Leeds (Lab)]

I thank noble Lords for their comments, and I thank the Minister for his explanation. We will of course take those comments away and consider them, but at the moment I feel that there is still room to explore this issue and perhaps come up with another form of wording to take forward at a future stage. As I said earlier, the emphasis on reflecting the fact that the onus is on a business to prove that it is legitimate will need to run through all this. With those comments, and in anticipation of future discussions, I beg leave to withdraw the amendment.

Amendment 23 withdrawn.