Lord Flight
Main Page: Lord Flight (Conservative - Life peer)Small Business, Enterprise and Employment Bill
Lord Flight Excerpts
Lord Phillips of Sudbury
I would not deny for a minute that they know better than the description the noble Lord gave of me. I just repeat that I do not think it will seriously inhibit the small or medium-sized company that operates in a straightforward fashion in this country. I am confident of that.
Lord Flight (Con)
My Lords, we touched on this previously. Four million small companies are going to be affected, and if any of them does not obey the law, it will be committing a criminal offence. How is a small entrepreneur with a plumbing business up in Norfolk going to even know that this law exists and that he needs to comply with it?
Lord Phillips of Sudbury
I have a huge amount of sympathy with the noble Lord pointing out the hypercomplexity of this. I can only say to him—I must also put it in the context of having worked in this field for more than 50 years and having been a non-executive director of more than 15 SME companies—that I do not think there is any real prospect of an innocent SME going about its business falling foul, let alone criminally foul, of this law. However, I accept that the whole Bill is of near barbaric complexity and I do not know how we get round that. I am afraid that the price for the scandalous intentional misbehaviour of large and some small entities is invariably paid by the innocent.
Perhaps I may try to return to my story. As I said, there is a real demoralisation particularly of the business world but also of our whole society which we need to take intense notice of. We are at a tipping point in terms of the common good. The publicity of some of these awful cases is universal now, so that more and more of the richest people and companies, in terms of the money they have, are seen to be getting away with murder—as the man in the street would call it—in terms of paying tax. That is totally antipathetic to the good and fair society that we seek to create and help in this House. It is a total denial of fairness and duty.
These provisions are very modest but will enable the authorities, in particular the tax and fraud authorities, to grapple with some of these very expensively advised entities and the chains that they establish around the tax havens of the world, without one arm being tied behind their back. We all know that the authorities are ludicrously understaffed in comparison with the private sector—I am talking about the irresponsible part of the private sector—although that is another issue which has to be dealt with another day. I hope that my noble friend will be able to reassure the House that this will not be yet another statute that lies gathering dust on the shelves of Whitehall, but that there will be a practical and rigorous enforcement of the provisions inserted here.
Finally, without the limited transparency that is afforded by Amendments 36, 37 and 38, the authorities will not be able to get at the malefactors any more than they have thus far. I think I am right in saying that not a single bank director has been prosecuted since the collapse of 2008, during which period tens of thousands of our fellow countrymen and women have been prosecuted before magistrates’ courts. We must stop that, as it is profoundly demoralising for this country. We must give the authorities the tools to do their hugely difficult job. The fact that we are the first country to introduce a PSC register is something that the Government should be congratulated on. I commend the Prime Minister, because it is not easy in his party to say some of the things that he has said. The noble Lord, Lord Watson of Invergowrie, mentioned one of those things, but I particularly like what he said to the G8 in 2013. The point he made and the language he made it in were absolutely right. The Prime Minister said that,
“companies should know who really owns them, and tax collectors and law enforcers should be able to obtain this information easily”—
for example, through central registries—
“so people can’t avoid taxes by using complicated and fake structures”.
Bang on. All this series of amendments does is lend a few practical teeth to that sentiment. I hope that this commends itself to the House and the Government.
Lord Flight
Lord Flight (Con)
My Lords, I suggest that measures like this and other anti money-laundering measures are much more effective to the extent that they are common preferably among the G20 countries, but at least among the G8 and other more advanced parts of the world. There is less scope to pick and choose jurisdictions if the same rules broadly apply across all the important areas. In that context, I have made the point previously that it is not achieving much to say, “The UK is in the lead here”. The question, in introducing measures like this, is whether they are going to be followed internationally and will be similar in order for them to be effective. Although I am no great lover of the EU, the forthcoming fourth anti-money laundering directive is extremely important. It is expected that it will require a central register of company-beneficial information, which data will need to be accessible to those with a legitimate interest; that is, law enforcement agencies and regulated entities. The word “legitimate” has not as yet been defined and I do not know whether it is going to be, but the supposition is that it would cover the proper investigative bodies for anti-money laundering, tax evasion and security matters.
The amendments in my name in this group hang together as a package and reflect the fourth EU anti-money laundering directive. Amendments 41, 43, 55 and 56 seek to mirror the expected terms of the directive: to limit access to proper and legitimate purposes as they are generally understood. The second important point, which is picked up in Amendments 39 and 40, is that the EU directive also requires the implementation of central registers of beneficial ownership. The amendments seek effectively to remove the option of individual companies keeping their own PSC registers at their registered offices and would permit the Government to require either that Companies House should keep a register, or if the Department for Business, Innovation and Skills wants to do it, it could do so. But it would clearly be messy to leave the option for companies to keep their registers and for there to be a central register as well. Surely it is better to have one or the other, but not either/or, which would further add to costs and complexity.
I thank the Minister for her helpful reply to my letter of 6 March. From her letter I detect some movement towards implementation, at least in practice, of what would be a more common EU approach to PSCs. The noble Baroness made the point in her letter that, although government Amendment 42 serves to remove the requirement for a person requesting access to a company’s PSC to state whether the information will be disclosed to any other person, a person seeking such access must provide their name, address and the purpose for which the information is to be used. The company will retain the right to apply to the court to refuse access if it suspects that the person is not requesting the information for a proper purpose. It will also be a criminal offence for a person to disclose information to another person if they know or suspect that such other person will use the information for an improper purpose. This is the language I have been arguing for—proper and improper purposes. My main objection to these measures has been that they would allow improper use to be made of the information about private companies, in particular writing about people’s private wealth in a potentially salacious way or stirring up hostilities. It seems that the UK is creeping towards mirroring the language of my amendments about proper purpose and refusing access to PSCs for what are not proper purposes. It would seem that the legislation, or its implementation in the UK, is shifting somewhat in the sensible direction, as I have argued throughout.
What matters is that the appropriate authorities—the tax and security authorities—can have access to information for proper purposes. Indeed, that is what the Prime Minister was saying at the G8 meeting, not that any old media individual can look up people’s personal affairs. I would ask this of the Minister. In the references she has made more recently to proper and improper purposes, it would seem that the legislation now provides much more protection against improper use than was the case before. If that is correct, it may be that my amendments are not necessary. Surely the right drift of things is that the measures across the EU should be pretty similar, led by this country but not with this country out of line and overgold-plated. I beg to move.
Lord Borwick (Con)
My Lords, there is a very significant difference between privacy and secrecy. There could be lots of reasons for privacy, but not only involving an entrepreneur. Take Tony Blair’s tax return, for instance. That is his private matter, but this Bill will open up private matters to anyone for any proper purpose. Blair and others can support their own cases, but who will speak up for the entrepreneurs? It is indeed a great power of the state to inquire about something, but that power should not be given to all its citizens. The state has its own secrets too, which is as it should be. Transparency is not always a merit. These proposals presume that anything which is not transparent is bad, and that anyone who is involved in anything secret is guilty of something. That is clearly not the case. There are nearly 3.5 million businesses in the UK. The vast majority of them are law-abiding and simply trying to make products that people want to buy or provide services that they need. In any case, there is unlikely to be reliable ownership information on criminals, who can be expected to conceal their interests. If this is intended to root out a few bad cases, then it really is using a sledgehammer to crack a nut.
Tony Blair mentioned in his memoirs that he regrets the freedom of information legislation. I can see why, as life has got more complex since then, with real threats affecting Britain. It is not impossible that extremist threats could be made against alcohol producers or other producers of goods not approved by IS sympathisers, or scientists and research facilities by violent animal welfare groups. Debbie Vincent was sentenced to six years in prison after attempting to blackmail an animal testing company. The campaign she was involved in used the threat of improvised explosive devices and the desecration of graves. Cases like that must be taken into consideration when we decide what information to make available. But it is not just extremist threats. Freedom of information has unquestionably changed people’s behaviour. This is mainly to avoid things being written down, which can make simple tasks all the more difficult to carry out. Not writing things down has the perverse effect of encouraging more secretive behaviour.
I took a look at the impact assessment of the policy, which was mentioned by my noble friend. I found it staggering. The cost is estimated to be £1.08 billion and the value zero—no benefits apart from a woolly promise to “lead the way” on transparency. Can our coalition partners or the Labour Party really not think of anything better to do with a billion pounds than make companies waste it on lawyers? There may well be Members of this House who believe that there could be nothing wrong with spending a billion pounds on professional fees, but they are in the minority and I believe they are proven lawyers. With these new rules, a private company raising money to employ more people and expand will have to go through extra hurdles to get a new shareholder. It is hard enough to get a new shareholder when a company really needs it, so any extra burdens will make that important task much more difficult.
Lord Watson of Invergowrie
My Lords, I oppose the amendments in the name of the noble Lord, Lord Flight. Frankly, they are quite in contradiction to the whole thrust of the Bill, which is to increase transparency. They would have the opposite effect and I very much regret that. I am not going to rehearse the arguments that we traded in Committee a couple of months ago but I would just like to point out that he has brought up a new point about proper purpose. I dare say we could be here till this time next week before getting any sort of consensus on what a proper purpose was—in fact, we might not have succeeded even by then. I really think that that would be a backward step.
Surely the basic premise of the legislation is that public scrutiny will root out corruption more effectively, and indeed quickly, than the legal authorities themselves could do. I cannot understand noble Lords being opposed to that. To a certain extent, as far as companies are concerned, there is a case of, “If you have nothing to hide, you have nothing to fear”—but, equally, what do companies have to fear from transparency? The analogy with the former Prime Minister Tony Blair was not particularly apt in this situation. Personal privacy is one thing but companies have to be prepared to be open about the way in which they operate. Commercial confidentiality is one thing, but it has its limits.
My final point is about removing the requirement for a business to make its register publicly available. That is an essential element of this part of the Bill. I find it strange that the noble Lord, Lord Borwick—
Lord Flight
My suggestion was that we fell in with the new arrangements, which are not complete but which use the language of a public register while stating very correctly that it should not be available to any old Tom, Dick and Harry but should be available for legitimate purposes. That seems to me to be the essence of what we are here to do.
Lord Watson of Invergowrie
Yes, but defining what is a proper purpose is simply not achievable. People will ask for information. If they use that information in a way that is against the law, they leave themselves open to action. That is a protection.
The noble Lord, Lord Borwick, said that he did not understand why the Liberal Democrats or the Labour Party were supporting this legislation. I have to remind him that it is a government Bill, and it is a government Bill with different aspects to it. It did not emanate from his coalition partners or from the Opposition. However, this is one aspect of the Bill which all parts of the House should get behind, because it seeks to achieve transparency. In terms of the way in which British business operates, surely that has to be a positive development.
Baroness Neville-Rolfe
My Lords, we hope that the directive will be agreed in Brussels in the next few months. It is a directive, so there will be a two-year commencement, as normal. In the mean time we will bring in—and, I hope, road test and make a great success of—the register that we plan. If the detail of the directive requires some change either to the Bill—or, more likely, I suspect, from my experience of European directives, to regulations made under Section 122—that will be laid before the House in the usual way. I take comfort from the fact that that important bit of transparency legislation is going through in Brussels, and one would hope to see it on the statute book as soon as possible. That is the situation.
Lord Flight
My Lords, I suggest that what will happen is that the EU directive will come forth and we will be heavily gold-plated on its requirement. It is pretty clear that its requirement is for a register, but one available only for legitimate purposes.
I know that I have no chance of persuading the Government at this stage to fall in line with the EU and honour the privacy of private companies. What right is there for a snooping journalist to go around finding out what wealth someone has through the introduction of the register and looking up information about their private affairs? I find it quite unacceptable that that should be done, just like that, when it adds absolutely nothing to the task of unearthing fiscal and terrorist crime.
I have tried throughout to persuade the Government that it would be more sensible to limit access essentially to those tasked with finding crime, so there is little point in pushing the amendment further. I beg leave to withdraw the amendment.