Criminal Finances Bill

Lord Hodgson of Astley Abbotts Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

[Lord Beith (LD)]

My Lords, my noble friend has explained with magnificent clarity the purpose and nature of her two amendments. However, in discussions that I have had with her, she has still not quite convinced me that the use of a statutory instrument to create further facilitation crimes is something that I ought to be enthusiastic about. I well understand the purpose that she is pursuing and the care with which Amendment 161 incorporates various safeguards both within its own text and by reference to other legislative provisions. My concerns are not raised by Amendment 163, which she offers as an option.

As your Lordships look further at this matter, I just hope that we can focus a little attention on the fact that, if anything is created as a crime by a statutory instrument, it is done by a process which, although affirmative in terms of the amendment, is not capable of amendment. Therefore, any defect in the way it is worded or presented can only result in either it going through in a faulty way or the Government accepting that they should withdraw the amendment and come back with a better one. I wish that they would do that more often and quite quickly, because it would resolve some of the problems that we have with statutory instrument procedure. However, I listened to that part of the debate with still unresolved anxiety about the use of a statutory instrument without further qualification.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I think it is worth making two points. I understand the point that the noble Baroness, Lady Bowles, was making and the importance of the topic that she has raised. It is quite a serious matter to introduce a change of this nature by a statutory instrument—an issue that has concerned your Lordships’ House in the past. I understand that the noble Baroness has drafted her amendment to try to avoid some of the worst excesses but it is something which—with Henry VIII powers and so on—we are very concerned about. Widening this provision through a statutory instrument could lead to some difficulties regarding the appropriate level of parliamentary scrutiny, given that statutory instruments are, by definition, not amendable.

My second point relates to Amendment 166 in the name of the noble Lord, Lord Rosser. I always support him when he wishes to do post-legislative scrutiny. I think that part of what he is getting at here is that we should look at whether all the holes have been blocked up. However, to do so within six months of the day on which the Act is passed will not give much time to see how the new legislative provisions are bedding down. Therefore, from my point of view, it would be more appropriate if a longer time was allowed during which the serious impact of the Act would, I hope, make itself felt.

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[Baroness Butler-Sloss]

My Lords, as vice-chairman of the All-Party Parliamentary Group on Gibraltar I am grateful to the noble Baroness, Lady Stern, for having noticed that I was here and expressly excluded Gibraltar from Amendment 167. It is possible, however, that the omission of Gibraltar might be misunderstood; consequently I want to put on record Gibraltar’s position on its financial affairs. It is compliant with all the financial requirements. The OECD, in its phase 2 review of Gibraltar, ranks it equal with the United Kingdom and the United States on transparency, effectiveness and exchange of information.

Gibraltar, as we know from earlier discussions in this House, is the only overseas territory within the European Union at the moment. It continues to be bound by EU law for at least the next two years and is transposing the fourth anti-money laundering directive by June of this year. That includes the creation of a central register of beneficial ownership, which points out that Gibraltar is doing well as a financial centre and is compliant.

[Lord Hodgson of Astley Abbotts]

My Lords, the theme of corruption and the damage it does to society has been the thread running through all our debates this afternoon and, indeed, on our first day in Committee last week. When you have powerful speeches from the noble Baronesses, Lady Stern and Lady Meacher, the right reverend Prelate the Bishop of Peterborough and my noble friend Lord Kirkhope, you have to be influenced by what they are telling you. When they link it to the idea of a gold standard of a publicly available register—although after the noble Lord, Lord Eatwell, had finished with Companies House, gold was no longer the metal that I would associate with that institution—you feel that there may be an exceptionally strong case. Equally, as you reflect on it, you begin to wonder whether the best may not become the enemy of the good.

In trying to clarify my thinking on this very difficult issue, I ask my noble friend on the Front Bench to focus in her reply on three points that are important to me. They relate to the big three of the overseas territories mentioned in the amendment: Bermuda, the British Virgin Islands and the Cayman Islands. The others are much smaller; they may be important in the future but the major difficulties will arise with the first three.

First, can my noble friend confirm what the noble Lord, Lord Beith, said—that those three territories are going to have an up-to-date register of company ownership—and the date by which it is going to be in place? If it is going to be in place, are the Government satisfied that each register operates effectively and accurately?

Secondly, I come to the verification point raised by the noble Lords, Lord Eatwell and Lord Naseby. Since information is put into these registers by third parties, which have titles such as corporate service providers—CSPs—trust or company service providers, and so forth, are the UK Government satisfied that the regulatory regime in each of these territories ensures that the CSPs operate to timely and accurate standards? Are there adequate checks on their performance? For example, are there, as we have in the City of London, fit and proper person tests to make sure that those who are providing the information have decent standards of behaviour imposed on them?

Thirdly and finally, as my noble friend Lord Kirkhope said, are UK law enforcement agencies satisfied with the level of co-operation and assistance provided by these regulatory authorities? Do they get prompt and helpful responses or are the responses dilatory and evasive? If my noble friend was to say that she could give the Committee assurances on those points, my concerns about the best being the enemy of the good would rise in significance. Of course we are seeking a gold standard but surely in the short term what is vital is not that I or other Members of your Lordships’ House should be able to interrogate the register but that the relevant law enforcement agencies should be able to do so, and should be able to do so promptly and to get information promptly. Then, I hope, as enforcement standards rise and, as my noble friend Lord Naseby said, the United States begins to bring all parts of its dominion into proper behaviour, the gold standard of full public disclosure may well be appropriate.

I quite understand why the noble Baroness wishes to do this but my concern is that if we go too far, too fast now, the malfeasant—and it will be those who go first—will drift away to still murkier regimes. We may have only half a loaf and the noble Baroness would like the full loaf, but at least we have half a loaf. If we go to murkier regimes, there will be no way of getting any sort of collaboration, co-operation or help at all to tackle what I think everybody in your Lordships’ House agrees is a really important problem and is imposing terrific damage and harm on our fellow citizens, particularly in the developing world.

I hope my noble friend can answer my questions. Are there going to be prompt and accurate registers in the major territories—and, if so, by when—or are they there now? Are those who upload information into the registers properly checked, verified and regulated? Do our law enforcement agencies really get wholehearted collaboration and assistance from their opposite numbers in those three territories?

[Baroness Kramer]

My Lords, I am a signatory to Amendment 167, which was moved so eloquently by the noble Baroness, Lady Stern. I have signed that amendment because I struggle to see any effective way forward other than a route that essentially follows the lines that she outlined.

In this House, I think that every Member is utterly dismayed by the level of corruption in many countries across the globe, particularly those with some of the poorest and weakest populations. But there are also kleptocracies with sophisticated developed populations which do huge damage to their countries and to international affairs. If we look at the strife that drives people to become refugees and migrate across borders, on a scale that we have hardly seen in the past, there are criminal groups which manage themselves so effectively. All of those groups are enabled—indeed, can survive—only because they can find a portal with which to interface with the legitimate financial services community.

The work we are trying to do with these amendments is to close down those portals because the impact of that would be phenomenal, and not just for developing countries. It would have a great impact on the developing world and potentially on us. There is almost nothing we could do that would have more impact in bringing peace, opportunity and prosperity across the globe. This takes great courage, but it is also a great prize.

On the argument being made today, first, I congratulate many of the countries which have moved forward, for example to establish central registers. Work is being done in the overseas territories—I know it is true in the Crown dependencies as well but I understand their different constitutional position, which is why they are not included in Amendment 167—to establish a powerful relationship with UK enforcement authorities. If that were sufficient to close down those portals to the people who we know should not be able to use them, I would be happy to stop at that point. But I have found no one who believes it is true that enforcement authorities would be able to act through those central registries in ways sufficient to close down the routes and effectively shut out so many of the people who we think should be shut out from the legitimate financial world.

The only route I can see to make this reasonably or wholly effective is transparency. I fully accept that transparency at the global level is the obvious ideal, but I am a realist. I do not think anybody in this House believes that a global standard of transparency, with public access to central registers, will be available in my lifetime—and probably not in my children’s lifetime. Achieving that global standard is near impossible, so how do we move forward and at least create the reality that more and more portals will be closed down to those who try to use them? I was proud of this country when it took a very strong and difficult position to lead not only on central registers, for example, but on transparency. It said that if nobody takes the lead and moves out in advance, the rest will never follow. There is no basis if one waits for everybody to move together. We still face that situation.

I have met with representatives of the BVI and Bermuda and I hear the case presented for the Cayman Islands, and others such as Jersey and Gibraltar. I fully understand that every country on our list, even those that think they are touched by the underlying principle of the amendment, are quite offended. They feel that they are reputable places which have done a great deal to make progress on the elimination of corrupt practices. I understand their sensitivity on that issue, but the problem with which we are dealing is so much bigger.

Criminal Finances Bill

Lord Hodgson of Astley Abbotts Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Tuesday 28th March 2017 Lords Chamber

The Government said at Second Reading that they would carefully monitor and review the use of unexplained wealth orders once they are introduced. Is it not the Government’s intention to do that in respect of all the new and enhanced offences and powers in the Bill, not least in relation to the resources available? Is it not the Government’s intention to do it in a way that ensures Parliament is directly involved? That is the purpose of this amendment, which requires a one-off report from the Secretary of State to Parliament on the implementation of the Act covering the issues of additional resources provided and required, based on experience of seeking to implement the provisions of the Act—rather than, as now, on conjecture—the training of staff and the extent to which the enforcement authorities have used the powers provided in the Bill. I beg to move the amendment and await the Government’s response.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, the noble Lord, Lord Rosser, is talking about post-legislative scrutiny arrangements. I quite favour post-legislative scrutiny but think that the amendment has some serious weaknesses. Essentially, it is a list of requests, in the sense that proposed new subsection (2)(a), (b) and (c) asks for additional resources and training. When you tie that in with the list of enforcement authorities overleaf in proposed new subsection (3)(a) to (e), there are some extremely serious and bulky authorities there that could come up with a pretty large list of what they might want. While I entirely support what is said in proposed new subsection (2)(d)—

“to what extent enforcement authorities have used the powers provided”,

which is an extremely good point to inquire about—nowhere does the report require any assessment of what has been achieved. It seems to me that the critical aspect of the Bill is what is achieved. I worry that what we have here is a shopping list for more resources but without any need to justify the money that has been spent or to what extent it has proved effective in various ways; for example, by inhibiting crime or by seizing drugs or other forms of assets.

Finally, 18 months would be a very short time in which to make this sort of assessment. By the time this begins to build as an organisation, it will be longer than that. We are in danger of taking a snapshot in which we get only half the picture—that is the asking half and not the delivery half—and of looking at it before it is fully fledged and developed. I hope that my noble friend will resist this amendment, in this form at least.

[Baroness Williams of Trafford]

My Lords, I thank the noble Lord, Lord Rosser, and my noble friend Lord Hodgson of Astley Abbotts for speaking to the amendment. As with all powers introduced in legislation, it is crucial that the necessary resources are available to law enforcement and prosecution agencies so that they are used effectively. As he mentioned, ARIS is essential to this work. Under this scheme, half of all assets recovered go back to the law enforcement and prosecution agencies involved. Put simply, the more they recover, the more they get back. I am pleased to say that £764 million has been raised since 2006, and over £257 million in the last three years has been invested in law enforcement agencies under this scheme. The new powers will ensure that there are even more efficient ways of recovering assets and that they will be cheaper. Indeed, senior law enforcement officers gave evidence to the Commons Public Bill Committee that the powers will help agencies achieve more with the resources that they have. We have not downplayed the estimates in the impact assessment. These are provided subject to all the standard guidance based on input from law enforcement, the banks and others.

In addition, the Home Office share of ARIS is invested in front-line capabilities, including the regional organised crime units, which have received over £100 million in direct funding from the Home Office since 2013-14. Further to this, £5 million has been set aside from ARIS every year until the end of this Parliament to fund key national asset recovery capabilities, and we are fulfilling a manifesto commitment to return a greater percentage of recovered assets back to policing by investing all the Home Office share of the scheme’s money—above a certain baseline—in the multiagency regional asset recovery teams.

All the agencies listed in this amendment already report on their resources and results through departmental annual accounts and reports. As my noble friend said, this is about what they have achieved. They are subject to examination by the National Audit Office and Public Accounts Committee. The Criminal Finances Board, which is co-chaired by the Security Minister and the Economic Secretary to the Treasury, closely monitors resourcing, performance and support mechanisms such as training, to ensure that agencies are achieving results with the powers that Parliament imparts to them.

Finally, the Government have protected the NCA’s budget. In addition, new capital investment of over £200 million will be available over the period 2016 to 2020, to transform the NCA into a world-leading law enforcement agency, with new digital and investigative capabilities to tackle cybercrime, child exploitation and the distribution of criminal finances. The noble Lord, Lord Rosser, asked how many UWOs would be used and why so few were predicted. I said before—and the noble Lord said—that it was a conservative estimate, but we will encourage their use from day one. We are already actively engaging with law enforcement and prosecutors to encourage the use of all the new powers being introduced by the Bill. I hope with those words that the noble Lord is satisfied with my response. I know that we will keep an eye on this in the future but, for now, I hope that he will feel happy to withdraw his amendment.

Criminal Finances Bill

Lord Hodgson of Astley Abbotts Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 28th March 2017 Lords Chamber

Moved by

[Lord Hodgson of Astley Abbotts]

1: Clause 1, page 1, line 13, after “satisfied” insert “beyond reasonable doubt”

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, this is a modest amendment that is grouped with around 58 other amendments which deal with unexplained wealth orders, a new form of legislation in this country. Those 58 other amendments have been proposed by a bevy of talent, including several by my noble friend on the Front Bench, so after a few introductory remarks I propose to focus on the narrow issue which is the subject of my particular amendment. Before doing so, I should remind the Committee of my interests as declared in the register. I understand that it is now no longer approved procedure just to make a general reference and that we are supposed to be more specific. I should also remind the Committee that, while I am no longer an authorised person under financial services legislation, I remain the chairman of two companies that provide services to the financial industry.

At Second Reading I said that I strongly support the direction of travel of this Bill. I am well aware of the impact and the deleterious effect of the worm of corruption on society as a whole. However, I pointed out then and I point out now, as we begin Committee, that new regulation is by no means always the answer. Better use of existing regulation may well be equally effective, as encouraging and rewarding better behaviour to create the right climate may be. We need sticks but we also need carrots. The most important carrot is that people believe that what they are being asked to do is proportionate, fair and worth while, and that the information they are being asked to provide will be used and used effectively.

That should not be taken as my being in any way lukewarm about what we are discussing in the Bill and its purpose, but I shall want to be reassured now and as we go through Committee on three things: that the new powers being sought are required and required in the form it is proposed they should take; that those powers will be used, will be used effectively and will not sit on the shelf; and that they are likely to have a proper impact on the reduction of financial criminal activity.

With those introductory remarks, I turn to my amendment. As I said, this first part of the Bill is concerned with the introduction of an entirely new power for the authorities to obtain a court order to investigate what is called in the Bill “unexplained wealth”. I am no lawyer, but that seems a fairly broadly drafted phrase capable of quite a varying range of interpretations. I accept, however, that such broad phrasing may be necessary to cover the many forms that criminal financial activity may take, but equally, when I read that the provision will involve a reversal of the burden of proof—that is, under an unexplained wealth order I will have to explain why I should have this wealth, rather than the authorities explain why I should not—I wonder whether the right balance has been struck in the drafting.

In particular, in the group of amendments that we shall discuss, government Amendment 8 in the name of my noble friend on the Front Bench proposes to reduce the amount above which an unexplained wealth order may be sought from £100,000 to £50,000. If the Committee was minded to accept this amendment, quite small sums and probably quite legally unsophisticated individuals may be swept up in the new regime. It could be argued that such people need and deserve a higher level of judicial protection. With my amendment I seek to redress and improve the balance by imposing an additional duty on the court in the case of unexplained wealth orders. Clause 1 requires the court, under new Section 362A(1) merely to be,

“satisfied that each of the requirements for the making of the order is fulfilled”.

My amendment would raise the evidential bar a little by requiring the court not merely to be “satisfied”, but to be satisfied “beyond reasonable doubt” by inserting those three words in line 13 of page 1.

In summary, I argue that, if the authorities want the burden of proof reversed, the citizen is entitled to a high degree of protection from the court against possibly vexatious activities by regulators. My noble friend on the Front Bench may argue that government Amendment 6 would achieve the same purpose. Again, I am no lawyer, but the Government’s phrase,

“there is reasonable cause to believe”,

seems a good deal weaker than my phrase in Amendment 1, “beyond reasonable doubt”. I will await reaction from other Members of the Committee who have more legal experience than me as to whether my fears are justified or groundless. My noble friend may also argue that I should have tabled a similar amendment to deal with Scottish unexplained wealth orders under Clause 4. She would be absolutely right but my response is that, for today at least, this is a probing amendment to enable a broad discussion on the point to take place.

Other noble Lords will no doubt wish to discuss the practicalities of how the UWOs will work and whether the target category of politically exposed persons will be able to be dealt with effectively because of personal and functional immunity—we have had quite a lot of briefing on these matters. My amendment is about trying to achieve the right balance.

Before I sit down, I want to ask my noble friend one last question. It is about legal privilege and client confidentiality under the new unexplained wealth order legislation. As I understand it—again, I say that I am no lawyer—legal privilege does not exclude a legal adviser from the provisions of the suspicious activity, or SAR, regime. If a legal adviser becomes aware as a result of discussions or communications with his or her client that activities that would be capable of being caught by the SAR regime are occurring, they are obliged to report them and to do so without informing their client—indeed, informing their client would be an offence. Can my noble friend in due course make clear what the position is on a legal adviser whose client becomes the subject of a UWO? Is the construction of legal privilege changed in any way? I do not think that unexplained wealth orders or the suspicious activity regime will necessarily walk hand in hand. I beg to move.

[Lord Davies of Stamford (Lab)]

My Lords, the noble Lord has said that his amendment is merely probing. Clearly, the purpose of a probing amendment is above all directed at trying to influence the Government, but the other purpose is to see whether anyone else in the Committee rather agrees with the line of it, which may also be useful information for Ministers when they are taking final decisions on what the shape of the Bill should be.

The noble Lord made a very good case. We all know that legislation of this kind is essentially a matter of balance. On the one hand, we are imposing on people constraints and breaches of privacy and liberty. We are also imposing on them costs, because it is likely that to be able to respond to orders such as these they will have to pay accountants to do work. As the noble Lord said, we may be talking about amounts of wealth that are a substantial portion of the portfolio of the individual citizen being investigated. To respond to the investigation, the individual may need to spend significant amounts of money on accountancy or other professional advice. We should be very careful and aware of the costs of doing such things. We should also be aware that there is always a temptation for an authority, if it has a power, to use it and say, “There’s no downside. Let’s just put in a request to the High Court to have one of these investigations”. The noble Lord is therefore right to emphasise the need to protect the citizen to make it absolutely clear that an authority before making such a request, or a court before acceding to it, must be really convinced that there is a case for doing something quite exceptional—the state asking an individual to declare his or her private affairs. I therefore agree with the sense of the noble Lord’s amendment and I hope the Government take it seriously.

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[Baroness Williams of Trafford]

I did say “hearing”.

[Lord Hodgson of Astley Abbotts]

My Lords, we began with my modest amendment an hour and 40 minutes ago, and we have obviously ranged pretty widely. That is not surprising with nearly 60 amendments in this group. I asked in my opening remarks for reassurance that the government amendment,

“that there is reasonable cause to believe”,

provided adequate protection and we did not need “beyond reasonable doubt”. I asked for more experienced legal expertise than I have to provide me with that reassurance. I got not one but two noble and learned Lords to provide that in the shape of the noble and learned Lords, Lord Brown of Eaton-under-Heywood and Lord Phillips of Worth Matravers, for which I am very grateful.

I was slightly surprised that the noble Lord, Lord Blair, was dismissive of what I put in my amendment but will, I imagine, accept government Amendment 6, which provides a slightly lower level of inhibition to police activity, but that is as it may be. I was grateful to my noble friend on the Front Bench for her reassurance that there was no change to the issue of legal privilege. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

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[Lord Hodgson of Astley Abbotts]

My Lords, I support this amendment and the sentiments that have been expressed. Like other noble Lords, I am not sure whether it will do anything other than send a signal that this is something we are very serious about. An important aspect of not allowing it to become too London-centric—the darkened squares that my noble friend referred to in his opening remarks—is the ripple effect. What happens in central London ripples out through the country. I think the Lloyds Bank review says that Oxford is now the most unaffordable town in the country in terms of local wages to local house prices. If we can stop the ripple, or at least inhibit the ripple, that will have an effect much wider than merely the darkened squares to which my noble friend referred. As my noble friend Lord Deben said, if we take this further out, there are implications for social cohesion, as some of our less well-off and less well-resourced fellow citizens are finding themselves squeezed out by gentrification in an increasingly wide range of towns and cities across the country.

[Lord Kennedy of Southwark]

My Lords, Amendment 11 is tabled in the names of the noble Lord, Lord Faulks, and my noble friend Lord Anderson of Swansea. My noble friend was taken ill yesterday, and I am sure we all wish him a speedy recovery. This amendment would add a new paragraph to subsection (4) which clearly specifies that where,

“the respondent has a financial interest in land or property ... which is registered in the name of an overseas company”,

which could be being used as part of a complicated financial arrangement to hide from the authorities their unexplained wealth, the court can make an unexplained wealth order. I support the aims of this amendment. It highlights another way that a person can seek to avoid having to explain their wealth. This amendment seeks to address that in a very clear way. My noble friend Lord Rooker raised some important points, and I am sure the Minister will respond to them in her remarks.

Like the noble Lord, Lord Deben, I have had a bank account for 38 years. I have only ever had one—I opened it when I was 16. I went into the bank at Camberwell Green and have kept it in pretty reasonable order for those 38 years. All the things you have to do—saying who you are and having to give your mother’s maiden name—are very irritating, but there are clearly issues with funds travelling backwards and forwards that must have gone through a bank somewhere. If they are ever to be brought to account for things, that is something we must address in these debates.

A lot has been said about the London housing market. Any suggestion that it could be a safe haven for corrupt money should be of concern to us all. What a terrible thing that we even have to contemplate that. It contributes to the housing crisis in London. I referred to the Transparency International report in my contribution at Second Reading. It did some work in 14 developments and found that 1,616 companies and individuals bought properties and that only 450 were registered to people who were living in the UK. Forty per cent of purchases in London, totalling £1.6 billion, were bought by investors from countries with a high risk of corruption. We do not want any suggestion of our capital city being seen as a safe haven for corrupt money, as that must concern us all. The noble Lord, Lord Faulks, made the point that whole parts of central London are in darkness. Ten per cent of Westminster is owned by faceless companies. Properties with an abnormally low use of electricity suggests that they are not lived in on a regular basis. Transparency International also found that 140 properties with a value of £4.2 billion have been bought by investors who represent a high money-laundering risk. My friend the Mayor of London, Sadiq Khan, has launched an inquiry into the impact of foreign investment flooding into London’s housing market. The noble Lord, Lord Faulks, referred to this.

The other problem is the trickle-down effect. It causes property prices to be abnormally raised and is putting whole sections of the capital out of the reach of ordinary law-abiding citizens. That must worry us all, and very regrettable it is. About a year ago, I was standing at this Dispatch Box discussing with the Minister the Housing and Planning Bill—the cost of rents, how we get people living in safe, warm, dry properties, how people can afford to buy property and whether starter homes are the right answer. The way money has come in has made it more difficult for families, which must be of regret to us all. That is something we need to address in this Bill. The noble Lord, Lord Faulks, made the point that there may well be very little legislative time in the next Session, so we should take the opportunity that this Bill gives us.

The noble Lord, Lord Deben, talked about housing. I am happy to accept that all parties have failed in the past. There is no question about that—we all need to do very much more about it. I live in Lewisham. The noble Lord was the Member of Parliament for Lewisham at one time; I am a councillor in his old constituency. It is a great area to live in, not the most expensive part of London, but I could not now afford to buy the house that I live in. I have lived there for 13 years and the rent the people in the house next to me pay is more than my mortgage. It is ridiculous. If corrupt money has led to that, it is a bad situation.

This amendment raises important issues, and the Minister should reflect on them very carefully. If we can find some way forward before the Bill becomes law, we should do that.

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[Lord Brown of Eaton-under-Heywood]

I want to address only Amendments 58 and 59, both of which I oppose, to new Section 336B on page 28 of the Bill. That section deals with an application under the previous section to extend the moratorium period, which has to be dealt with as soon as is practicable. New subsection (3) says that the court,

“may exclude from any part of the hearing … an interested person”,

or “anyone representing that person”. We see that formulation again in new subsections (4) and (6). They are the people whose presence or otherwise at the hearing is in question.

New subsection (4) allows for a particular application, that certain specified information may be withheld from the interested person or representative, but that order can be made only under new subsection (5), if the court is,

“satisfied that there are reasonable grounds to believe that if the specified information were disclosed”,

something bad would happen—that either,

“evidence of an offence would be interfered with or … the gathering of information …would be interfered with”,

or somebody would be injured, or,

“the recovery of property … would be hindered, or … national security would be put at risk”.

In that situation, new subsection (6) comes into play. Unlike new subsection (3), which we looked at earlier, where the court “may exclude”, in this instance—because it relates to an application under new subsection (4)—the court inevitably “must” direct that the interested person or his representative be excluded. With the best will in the world, I cannot see how we could sensibly leave out new subsection (6), which puts a requirement on the court which is not to be found in new subsection (3), which deals with the general position. Nor would it make any sense whatever to substitute “may” for “must”. You have already got “may” in new subsection (3), but for this situation, “must” is the appropriate direction to the court for the order to be made. I respectfully oppose those amendments.

[Lord Hodgson of Astley Abbotts]

My Lords, I support Amendment 72, in the name of the noble Lord, Lord Rosser. It has been common ground in our discussions this evening that the volume of SARs is rising all the time. There are now over 1,500 a working day and it slightly defies belief that those are all getting anything like the attention that they should. Those of us who have had experience of this find that the National Crime Agency is extremely reluctant to allow any inhibition on its ability to call for SARs at every level. It should be possible to have discussions about automatically asking for a time limit—not that the information could not be asked for subsequently—of 25 or 50 years. One of my most recent PEP inquiries involved events 53 years ago. I simply cannot believe that collecting that sort of information is a good use of my time or the bank’s. There would be a great deal of virtue in my noble friend trying to persuade the NCA that some focus was a good idea. Getting the focus that is badly needed, and things like time and a de minimis figure, would make the whole system much more effective. The amendment tabled by the noble Lord, Lord Rosser, is a first step towards that and is worthy of serious consideration.

[Baroness Williams of Trafford]

My Lords, these amendments cover measures in Chapter 2 of Part 1 of the Bill. I thank noble Lords who have taken part in the debate. As the Action Plan for Anti-money Laundering and Counter-terrorist Finance set out, the Government see public/private partnership as central to tackling money laundering and terrorist financing. A major part of this approach is to provide support for the effective exchange of information, both within the private sector, and between the public and private sectors, to increase our collective knowledge of threats and vulnerabilities; to help the regulated sector to protect itself, and to improve the quality of the UK’s financial intelligence. The provisions in Chapter 2 assist this approach, and our amendments will enhance their ability to do so.

I hope noble Lords will agree that the government amendments in this group are technical and uncontroversial. Clause 11 permits the UK Financial Intelligence Unit—or UKFIU—hosted in the National Crime Agency, to request further information in relation to a suspicious activity report, or following a request from a foreign authority, from any member of the regulated sector. Clause 35 allows the police to do the same in relation to terrorist finance. At present, the clause will allow the NCA and police to direct that further information is provided through issuing a further information notice. If the information is not provided in accordance with the direction, the NCA will be able to apply to a court for a further information order to require the person to provide the information requested. However, following further consultations with operational partners, we have concluded that a further information notice is not required, as the NCA can already request information to be provided voluntarily under existing powers. Government Amendments 64 to 69, 130 to 137 and 173 will therefore remove further information notices. If the regulated sector entity declines to provide information on a voluntary basis, the NCA or police can still apply to a magistrates’ court for a further information order.

--- Later in debate ---

[Lord Sharkey]

My Lords, Amendment 108 seeks to help the FCA to ensure meaningful compliance and right behaviour in the banking sector, which has not been entirely a stranger to money laundering. Work done by the New City Agenda think tank, of which I am a director, has shown some progress in changing the culture within banks—but has also shown that there is still a need for much more change.

Last week's report by the Banking Standards Board also had interesting things to say about banks acting in an honest and ethical way. For example, its very comprehensive survey found that 12% of employees had seen instances where unethical behaviour had been rewarded; 13% saw it as difficult to get ahead in their careers without flexing ethical standards; and 18% had seen people in their organisation turning a blind eye to inappropriate behaviour.

Since the FCA under its previous chief executive abandoned its promised inquiry into the culture within banks, it has relied heavily on financial penalties to punish misbehaviour and as a control mechanism. Since 2013, the FCA has levied an absolutely staggering £3 billion in penalties on firms. The latest, which the Minister mentioned, was a settlement in January with Deutsche Bank. The proposed penalty was £230 million, which was discounted to £163 million. This was a settlement. In fact, almost all the penalties imposed have been settlements. Typically, the FCA proposes a financial penalty and then agrees a discount if the firm settles—as almost all do. The discount is normally 30%. Since 2013, that amounts to a total of £1.2 billion awarded in discounts.

My amendment proposes to put this gigantic discount mechanism to better use. It would enable the FCA to have direct sight of the improvements in process and behaviour agreed in any settlement. It would enable it to see that appropriate disciplinary action had been taken against those responsible for the transgressions. It would give the settling firms a powerful incentive to fulfil any settlement conditions. It would do this by making part of any discount withholdable until the settling firm had satisfied the FCA that all appropriate disciplinary actions had been taken. Only then would the full discount be realised.

This is a simple proposal. It would give the FCA more power, more say and more insight into how transgressors had modified their behaviour and addressed individual and structural culpability. It would give the firms involved a powerful incentive to take proper remedial action—which, unfortunately, still seems to be needed.

[Lord Hodgson of Astley Abbotts]

My Lords, I have Amendments 126 and 127 in this group. They impose duties on the National Crime Agency regarding the performance of its duties and the way it supervises the bodies that report to it. I tabled the amendments to address my concern that the country’s anti-money laundering regulations, which were and remain a critical part of the fight against financial crime, are not as effective as they should or could be.

There are three related issues. The first is that the regulations lack focus. Far too much unnecessary information is collected, which serves to distract rather than to illuminate the task of the regulator. We have heard tonight from my noble friends Lord Deben and Lord Leigh, and every Member of your Lordships’ House could produce evidence of the collection of superfluous information. They also lack effectiveness and follow-through. I was astonished to read in the debate on Second Reading in the House of Commons that Sir Edward Garnier, experienced lawyer that he is, said that many certification orders, having been granted, are never enforced. I therefore put down a Parliamentary Question—which is due for answer the day after tomorrow, sadly, but I am sure that my noble friend can chase up her officials—in which I asked,

“in each of the last three years for which figures are available, how many confiscation orders were … authorised by the courts … put into effect; and how much money was recovered”.

I hope that my noble friend will be able to give us those figures when she winds up.

However, it is not just about confiscation orders. My noble friend Lord Faulks talked about the report in the Times last week, according to which between 2007—when we introduced the last set of money-laundering regulations—and 2012, there were no convictions at all:

“There have been four convictions since and five more proceedings, according to a freedom of information request by the London law firm Howard Kennedy”.


Of course, as I said at Second Reading, the asset recovery by the NCA can only be described as trivial: £26.9 million for an agency that costs some half a billion pounds to run, and which tells us that billions of pounds of illegal money passes through London every year.

Lastly, and most importantly, the regulations do not enjoy general public confidence. Too many members of the public regard them as a paper-pushing exercise. As a result, they do not feel committed to their success or to ensuring that they work well. In my experience, having from time to time chaired risk and compliance committees, attempts to get the regulators to explain how valuable their work is are not greeted with great approval; they tend to say, “This is our business—you mind yours”. That is very different from the approach of the security services, which have publicly praised the public for their help.

At that point, some people may be tempted to say, “He works in the City, so he is a tainted witness”. However, I was interested to read the briefing from Transparency International—an NGO about which I know very little. It said:

“At the heart of the problem is the fact that”,


there are,

“27 Supervisory Bodies in relevant sectors … This leads to a fragmented approach:

...Failure to identify where the risks are and mitigate against those risks…The approach to enforcement is inconsistent and not transparent or effective…Many of the supervisors have serious conflicts of interest”—

we have already discussed that this evening—

“which we believe prohibits the bodies from doing a good job”.

I could hardly have put it better myself.

Compliance remains the great growth industry. Noel Coward may have said to Mrs Worthington,

“Don’t put your daughter on the stage”,


but you could do a great deal worse than putting her into compliance. Regulators seek more powers, so more returns are needed, compliance officers see a chance to build their empires, professional firms seek commercial opportunities in checking and rechecking the records, and Ministers can attend conferences and refer to all the efforts being made and the money being spent.

While the money being spent is considerable, both directly in maintaining the supervisory bodies, and by the firms who have to comply with their requirements, there is another cost which is much less frequently referred to: reputational cost, which arises from a process known as “de-risking”. When you de-risk, you remove from a group of people or a set of companies their financial ability to transact. Noble Lords will be aware of my interest in the charity and voluntary sector. Charities which operate in “difficult”—sensitive—areas find it almost impossible to get the financial services of British banks; it is not worth their time or trouble. It is not about borrowing money but just checking facilities—day-to-day operations—and the smaller the charity, the more difficult they find it. It affects not just organisations but individuals as well. Thirty years ago I worked in the City with a Pakistani who has a British passport and who is as Anglophile as you would like him to be. He worked in Hong Kong, and now lives in Lahore. He has just been told that all his bank accounts have been closed. Is there anything wrong with the accounts? There is nothing wrong with them—it has just been done. It is clear that the pressure on the banks to close down these accounts is coming from the regulators.

--- Later in debate ---

[Baroness Williams of Trafford]

I take the noble Lord’s point that one is perhaps much simpler, but of course each case is different. One firm might be a lot more compliant and it might not take much effort; another might take a lot more effort. However, I take his point.

I move on to Amendments 126 and 127 in the name of my noble friend Lord Hodgson of Astley Abbotts. These relate to the role of the NCA. The NCA leads, co-ordinates and supports the national law enforcement response to money laundering. The prosperity command of the NCA houses the UK Financial Intelligence Unit, or UKFIU, and receives suspicious activity reports, or SARs, from the regulated sector. The intelligence gathered from these is used to support investigations into both money laundering and the predicate offences.

The amendments seek to require the NCA to act in a regulatory manner by ensuring that the provisions of the Money Laundering Regulations, such as customer due diligence and monitoring of transactions, are implemented effectively, and to ensure that the NCA acts with regard to the principles of regulatory best practice. The NCA can and will act where there is criminal activity relating to money laundering. However, it does not have a regulatory remit, and to require it to have one would deflect it from its purpose of tackling serious and organised crime.

My noble friend also asked me for some figures on the moneys recovered. I can tell him that in 2015-16 £255 million was recovered under the Proceeds of Crime Act, of which £208 million was in confiscation. However, I will write to him with further details on that.

Finally, I turn to Amendment 70, moved by the noble Baroness, Lady Hamwee, and Amendment 73, tabled by the noble Lord, Lord Rosser.

[Lord Hodgson of Astley Abbotts]

I thought I heard the Minister say that the NCA is not a regulator, but I do not understand why it cannot abide by regulatory principles in executing its duty as an enforcer on money laundering regulations. I do not understand why the two are mutually exclusive. If I heard my noble friend aright, she appeared to say that it could not abide by regulatory principles because it is an enforcer.

[Baroness Williams of Trafford]

That is correct.

I now turn to Amendment 70, moved by the noble Baroness, Lady Hamwee, and Amendment 73 in the name of the noble Lord, Lord Rosser. I can update the Committee on the significant action that the Government are taking to improve the effectiveness of anti-money laundering regulation by strengthening the obligations on all supervisors through the new Money Laundering Regulations 2017. The Treasury published a consultation on these regulations shortly after Second Reading and it is open until 12 April.

The Government set out in a Treasury publication earlier this month their proposals for the new office for professional body anti-money laundering supervision. However, it would not be right for the Government simply to legislate without proper public consultation on the detail of this proposal, and I hope the noble Lord will recognise that that is the appropriate way forward.

We have also recognised the need for more co-ordination between regulators and supervisors of the regulated sector in relation to tackling money laundering. The new office for professional body anti-money laundering supervision will therefore work with professional bodies to help, and ensure, compliance with the regulations. The office will be hosted by the FCA and will liaise with other bodies across the regime to discuss and share best practice to help ensure consistent high standards across supervisors—especially where statutory and professional body anti-money laundering supervisors monitor the same sectors—and to strengthen collaboration between professional body anti-money laundering supervisors, statutory supervisors and law enforcement agencies.

The Government will consult on the draft regulations that will underpin the office over the summer, and they will be finalised and laid before Parliament in the autumn. The Government expect the office to be fully operational by the start of 2018.

The new arrangements will also support the enforcement capability of the supervisors. The supervisors can take a range of actions in relation to failings identified in the areas they supervise. Professional bodies have sanctions specific to their supervisory population—for example, the ability to expel firms from membership. The removal of professional accreditation in this way can incentivise compliance.

HMRC and the FCA have powers under the regulations to require information, enter and inspect premises, and administer monetary civil penalties to their supervised population. The UK is leading the way in improving transparency and accountability in anti-money laundering supervision by publishing an annual report on money laundering supervision on GOV.UK.

The Treasury’s annual report, which is now in its fifth year, sets out how the UK’s supervisors are contributing to the fight against money laundering and terrorist financing. The most recent report shows that supervisors are increasingly focusing on educating businesses on how to meet their anti-money laundering obligations, and ensuring that systems and controls are effective and proportionate to the risks. The actions that supervisors are reporting help to ensure that the UK’s financial system is a hostile environment for illicit finance.

The report shows the positive collaboration between the Treasury and the supervisory authorities, which include the FCA, HMRC, the Gambling Commission and the professional bodies. As set out in the Government’s response to the review of the supervisory regime, the annual report will be strengthened with a new requirement for supervisors to provide relevant information to inform the annual report. This will be expanded to include two new questions on enforcement activity.

I hope that noble Lords will recognise and commend the considerable government activity in relation to the anti-money laundering regime. On that basis, I hope that the noble Baroness will withdraw her amendment.

Criminal Finances Bill

Lord Hodgson of Astley Abbotts Excerpts

2nd reading (Hansard): House of Lords
Thursday 9th March 2017 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I begin by drawing the House’s attention to my entry in the register of interests of your Lordships’ House.

It is always a pleasure to follow the noble Baroness, Lady Stern, who, as ever, has introduced an informed and incisive view. Like her, the right reverend Prelate the Bishop of Oxford, who is no longer in his place, had some very valuable things to say about the role of this Bill and its impact on the developing world. In an earlier part of my life, I had a chance to hear a spellbinding lecture by Professor Peter Bauer—later Lord Bauer, a Member of your Lordships’ House. He revolutionised the way the world thought about development economics.

In that lecture he pointed out that, in his view, the single thing that most held back undeveloped countries in achieving their potential was the prevalence of corruption, and that if you could root it out, many countries that suffered from underdevelopment would move forward quite swiftly. It seems to me that what applies to underdeveloped countries has an application in a developed nation such as ours. That is why I instinctively have sympathy with a Bill like the one before us today which has the strategic aim of reducing criminal activity and corruption.

However, I do not believe that that support and sympathy should be slavish. More regulation is not always the answer to every problem because any measure, including measures such as those in the Bill before us, come at a cost—a point raised by my noble friend Lord Flight. I refer not just to the cost of establishing the necessary enforcement powers but to the increased costs for those affected by the regulations.

More worrying for me, however, is that too widespread an approach can include a drag on, or an impeding of, innovation in the development of our financial services. Why is that so important to us in this country? The City of London has become a world financial centre—probably second only to New York in size. Surprisingly, it has achieved this despite being backed by only a medium-sized economy, and the country as a whole has benefited greatly from the City’s success.

That success has had to be based on innovation and acceptance of new ideas. Bigger economies such as that of the US and, increasingly, China can rely on weight of money and the volume of economic activity to carry them forward. The UK cannot. We have to be nimbler, quicker and more entrepreneurial, and being nimbler, quicker and more entrepreneurial is a concept that can worry regulators. Regulators are, appropriately and rightly, risk averse. They can be concerned that novelty automatically hides malfeasance, and thus they block or slow the development of new ideas and new approaches. However, if novelty becomes a dirty, suspicious word, the City and the country will be the long-term losers.

To summarise what I see as the dilemma, on the one hand, too low a standard of behaviour damages the City’s reputation and drives business away; on the other hand, an unreasonably high bar drives businesses away because of the costs, problems and time taken to complete transactions, and the unwillingness to adopt new ways of working. That seems to be the delicate balance we have to strike when we look at proposals such as those in this Bill.

Therefore, as we go to the Committee stage of a Bill whose strategic aims I entirely endorse, the test that I wish to apply is: will what we are proposing encourage good standards of behaviour, or merely mindless compliance whereby forms are filled and boxes ticked?

I turn to a couple of provisions of the Bill, both of which have already been mentioned, so I shall be very brief. First, I support the proposal of unexplained wealth orders and I thank the Minister for her further explanation in her opening remarks. My noble friend Lord Faulks raised a couple of points about them, and I was interested in receiving the White Collar Crime Centre report, which suggests that the enforcement of UWOs will present challenges. Where state officials and politically exposed persons are concerned—two categories that are particularly in the target zone for UWOs—it will be hard to prosecute because of what the White Collar Crime Centre calls “personal immunity” and “financial immunity”. I look forward to hearing in the wind-up or in Committee how those two immunities will work, and whether they will have implications for or impede the way this provision is used. As my noble friend Lord Faulks said, we shall need to look at the Australian and Irish experiences to date.

My second question about the Bill concerns the overseas territories. A number of noble Lords, including the noble Lord, Lord Rosser, raised this in his opening comments. We have a particular responsibility in this country. White collar crime is very flexible: it is like a balloon—you squeeze it in one place and the air pops out somewhere else. Therefore, we have to explore our links with our overseas territories and Crown dependencies. I look forward to hearing the views of other people, because I am not sure that we have the situation quite right yet, and the noble Lord, Lord Rosser, obviously has some important points to make about that.

For the rest of my speech I want to return to the idea that new regulation should be formed to encourage quality behaviour and not mindless compliance. I do so because I firmly believe that it is only by engaging the widest possible range of people in the fight against criminal financing that we can ultimately hope to have a high degree of success. It is interesting to note that when Security Service chiefs talk about their successes, they always emphasise how much they have benefited from the notifications that have come from members of the public.

I regret to say that I do not think that the authorities responsible for the detection of criminal financing have so far managed to engage the interest and support of the public—particularly those who work in the City—in the same way. Why is this? First, it is because many people believe that the existing regulations, both on money laundering and SARs, gather together a vast mass of data—much of which is irrelevant—which the public believe is then put in a file and never examined. They have no reason to believe the contrary. I hope the Government and the authorities will develop a regime which encourages the use of the precision of a rifle shot, not the blunderbuss approach of a shot-gun. Under that regime, the authorities should connect better with the general public about their objectives and how they are being achieved.

Secondly, there are concerns among the public about effectiveness and the value for money that the present regime provides. Regulators always seek more powers, usually with more money to enforce them. We need to be careful to ensure that, before more powers are granted, all existing powers are being used effectively. I was interested to note that at Second Reading, Sir Edward Garnier, the Member for Harborough and an experienced lawyer, said:

“I have noticed that in the past with confiscation orders. Very often, the courts make an order, and either the order is never put into action or very little of the amount required from the offender is ever recovered”.—[Official Report, Commons, 25/10/16; col. 208.]


Is this true and, if so, what are the statistics? Is the Minister confident that other existing powers are being fully used?

Finally, I turn to the point made by the noble Lord, Lord Brown of Eaton-under-Heywood. In 2015-16—the last full year for which figures are available—the National Crime Agency, which cost £478 million to run, seized £26.9 million of assets. Am I alone in feeling that, when billions of pounds are supposed to be passing through the City of London, that is not an adequate performance? There are some 27 different bodies engaged in this, so it would be helpful if, before Committee, the Minister could give noble Lords a little schedule of each body’s costs and asset recovery in the last year for which figures are available. I support the Bill, but we need to make sure we are creating an effective, lean crime-fighting machine and not just adding to the bureaucracy.

--- Later in debate ---

[Baroness Williams of Trafford]

The noble Lord is absolutely right that we will never get a global homogenous position with every country being equally compliant. We are aiming for those territories and Crown dependencies to work towards the standard to which we aspire. That is where we are at this point. I hope both noble Lords are satisfied with that.

I trust that this House, like the Commons, will recognise the constitutional settlement that we have with these territories and agree that we should look to work consensually with them rather than enforcing legislation.

The noble Lord, Lord Rosser, and my noble friend Lord Faulks made the point that there is no point in legislating if law enforcement agencies do not have the resources to deliver. I understand the concerns raised regarding law enforcement and the resources available fully to implement these new powers. I am pleased to say that £764 million has been invested in law enforcement agencies since 2006 and that more than £257 million has been invested over the past three years under the asset recovery incentivisation scheme—otherwise known as ARIS—which returns recovered assets back to the front line. These moneys are used by law enforcement for reinvestment in law enforcement capabilities or in community crime prevention schemes.

In addition, the Home Office share of ARIS is invested in front-line capabilities, including the regional organised crime units, ROCUs, which have received more than £100 million in direct funding from the Home Office since 2013-14. We reformed ARIS to boost the resources available to tackle serious and organised crime. A top slice of £5 million has been set aside every year until the end of this Parliament to fund key national asset recovery capabilities.

The noble Lord, Lord Rosser, also asked which agencies can use the powers in the Bill. The powers in the Bill can be used by a variety of law enforcement agencies, not just the NCA. The police, the Serious Fraud Office, HMRC, the Crown Prosecution Service and immigration officers will be able to use the new powers in the Bill to investigate money laundering and seize criminal assets.

My noble friend Lord Faulks asked about the effect of partial compliance with a UWO. If there is compliance or purported compliance, the rebuttable presumption that the property is recoverable does not arise. However, law enforcement has valuable information and can pursue an investigation, if relevant. If the purported compliance is false or misleading, it will be an offence.

My noble friend also asked why so few UWOs are predicted—20 per year—and why the amount expected to be recovered as a result of UWOs is so small. A number of other noble Lords alluded to this. I reassure noble Lords that the figure given in the impact assessment is a conservative estimate based on the views of operational practitioners. It is not a definitive indication of how often this power will be used. The Government are keen that these powers are used in as broad a range of cases as possible, and we are already actively engaging with law enforcement and prosecutors to encourage the use of all the new powers being introduced by the Bill. Ultimately, it will be for the enforcement authorities, which are operationally independent, to decide when and how often to use these new powers. We will carefully monitor and review the use of UWOs once they are introduced. This will inform future changes that may be needed to ensure that they are being used to their maximum effect.

My noble friend also asked what we have learned from the use of UWOs in Australia. As part of the work developing our draft legislation, we have noted with interest the experience of other jurisdictions which have existing provisions for UWOs, Australia being one of them.

The noble Lord, Lord Rosser, and other noble Lords spoke about corporate failure to prevent other economic crime and asked why the Government have not created a corporate liability offence in respect of failure to prevent economic crime. The damage caused by economic crime perpetrated on behalf of, or in the name of, companies to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business is a very serious matter. However, the Government believe that it would be wrong to rush into legislation in this area and that there is a need to establish whether changes to the law are justified.

On corporate criminal liability for economic crime, the Government launched a public call for evidence on 13 January—which I think one noble Lord alluded to—which is open until 24 March. This is part of a potentially two-part consultation process. It has requested and will examine evidence for and against the case for reform and seeks views on a number of possible options, such as the Bribery Act failure to prevent model. Should the response the Ministry of Justice receives justify changes to the law, a consultation on a firm proposal would follow. We are therefore not in a position to comment on the timetable for reform, should that be the way forward.

The noble Lord, Lord Rosser, made a point about SARs reform, which was mentioned during the consultation on the Bill but is distinctly lacking in the Bill. He asked whether SARs will be prioritised as major and trivial. Reform of the SARs regime is a crucial part of the Government’s Action Plan for Anti-money Laundering and Counter-terrorist Finance. We have established a programme to reform the SARs regime, working collaboratively with partners in line with commitments published in that plan. The Government are seeking improvements in the short, medium and long term, and the legislative elements in the Bill are only one element of the wider reform that is required. During the review of the SARs regime that the Home Office ran in 2015, a number of regulated-sector companies suggested that suspicious activity reports should be prioritised. We will consider this as part of the SARs reform programme.

The noble Lord, Lord Rosser, suggested that the anti-money laundering regime is confused and ineffective and asked what HMG are doing to reform the 27 supervisory bodies. The Government consulted on reforms to the anti-money laundering supervisory regime in the autumn and have considered the responses. The Treasury intends to publish the outcome of that review in the coming weeks in order to ensure the most effective possible supervision of the regulated sector.

The noble Baroness, Lady Kramer, talked about whistleblower protection.

[Lord Hodgson of Astley Abbotts]

My Lords, does that mean that the results of the consultation will be available in time for Committee? What was discovered as a result of that consultation will inform our debate on money laundering in a very important way.

[Baroness Williams of Trafford]

I can find out and let my noble friend know. I did say a matter of weeks, so we may be in luck.

Protection for whistleblowers under the Employment Rights Act 1996 means that dismissal for whistleblowing is automatically unfair. BEIS is reviewing legislative provisions around protecting whistleblowers in the workplace and will make recommendations on how we might strengthen them.

My noble friend Lord Faulks and another noble Lord referred to the Observer article about individuals using the tax on enveloped properties and asked what was to become of that. We are providing new investigate powers, including UWOs, which will make it easier for our law enforcement agencies to investigate money laundering in the London property market and recover the proceeds of crime. However, the issue will not be solved by law enforcement action alone. We need to ensure that lawyers, estate agents and other professions, as many noble Lords have mentioned, are complying with their obligations under the Money Laundering Regulations. To that end, the Treasury has launched a review of the anti-money laundering supervisory regime and will publish the findings imminently.

In addition, the Government intend to publish a call for evidence, seeking views on a new register of overseas companies that own property in the UK. We hope to do so shortly and will then introduce the relevant legislation when parliamentary time allows.

Lord Rookie—sorry, I mean the noble Lord, Lord Rooker; I do not know why I called him “rookie”—talked about the Government ensuring that the Magnitsky power will be used. The expansion of the civil recovery regime is a significant step and adds to the suite of powers available to UK law enforcement agencies, including the NCA, to combat money laundering and other serious crime. Ultimately, it will be a matter for the agencies to decide which powers are justified on a case-by-case basis, but the use of this power will be subject to the relevant safeguards in Part 5 of POCA. In particular, law enforcement agencies will need to be satisfied and have the evidence required to satisfy a court on the balance of probabilities that property in the UK is the proceeds of gross human rights abuses or violations overseas.

The noble Lord, Lord Rooker, talked about fines on banks in the UK. He raised the issue of banks in the UK not being penalised for laundering funds from overseas. I have a huge list of fines, which I will not read out today, because it would take up valuable time in responding to the noble Lord’s point, but I will send it to him and other noble Lords and place a copy in the Library.

My noble friend Lord Faulks asked about deferred prosecution agreements in the Bribery Act, and I thank him for his words on DPAs. I agree that they are a very useful tool that encourages companies to engage with law enforcement and self-report wrongdoing. It is used effectively for bribery overseas, for example, in the case of Rolls-Royce, and it will be useful in bringing new offences under Part 3.

The noble Lord, Lord Flight, asked what the Home Office is doing to improve asset recovery and said that not enough is being recovered. More assets have been recovered under this Government than ever before. In 2015-16, we recovered more than £255 million-worth of criminal assets using the POCA powers. We have delivered our 2015 manifesto commitment to return a greater share of recovered assets to the police. When performance exceeds the baseline set in 2015-16, additional receipts will be invested in the regional asset recovery teams, which I think is the right way. The 50% share of recovered moneys that are already invested, including in local police forces, will be unaffected.

The right reverend Prelate the Bishop of Oxford talked about the large proportion of African wealth invested in tax havens. The UK is working precisely on that to bring corrupt leaders to justice and recover the assets that they have stolen, quite often from their own people, as the right reverend Prelate said.

In 2014-15, DfID’s gross losses to fraud and corruption were approximately £2.3 million, recoveries were £1.5 million and the net loss was therefore £750,000, which is a recovery rate of 67%.

The noble Lord, Lord Rooker, asked about procurement, particularly in the public sector. HMG are acutely aware of the risks that central and local government face, and that is why procurement is one of the priorities in the forthcoming anti-corruption strategy. He and other noble Lords have praised my right honourable friend in the other place, Sir Eric Pickles, and I join them in that praise.

The noble Lord, Lord Flight, and other noble Lords made a point about domestic PEPs. According to the Financial Action Task Force and EU law, politically exposed persons must be subject to some sort of enhanced due diligence in recognition of their influence, their authority and their prominence in public life. Our view is that banks should take a proportionate and sensible approach to know-your-customer measures for Members of Parliament, Peers and other UK PEPs. I fully accept, because I have heard various anecdotal evidence, that perhaps this is not being consistently applied across the piece.

I hope noble Lords will indulge me for one more minute, because I have quite a few things to get through. The noble Baroness, Lady Whitaker, asked when UWOs will take effect and when the code of practice will be available. At the earliest opportunity is the answer to that.

The noble Baroness, Lady Bowles, made a very good point about company director disqualification. Where a director is convicted, they can be disqualified as part of their sentence. Where a company is convicted of a Part 3 offence and the director is not party to that, fairness requires a separate hearing of application to disqualify. Where a director of a corporation is implicated in wrongdoing, they can be subject to prosecution. If their actions amount to criminality or facilitating tax evasion where their actions fall short of being criminal, investigators can already investigate whether they are fit and proper to continue to hold the position of a company director and report their findings to the Secretary of State.

I realise that I am well over my time and will have to write to noble Lords, as I still have a wad of answers here. I finish by again thanking noble Lords for what has been a very enjoyable debate.

Immigration: Students

Lord Hodgson of Astley Abbotts Excerpts

Thursday 25th February 2016 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

I thank the noble Baroness for giving us the chance once again to debate this rather vexed issue. I have listened carefully to what she said and I understand the force of her arguments, but I am afraid for me they are trumped by other and wider considerations. I therefore think that the Government should resist calls to change the categorisation at this time. I will explain why.

In the year ending in March 2015, 216,000 student visas were issued—roughly the same number as in the prior year. But also in that year, 73,000 applications to extend the student visa were made and granted. One-third of the total of students asked for an extension: some to continue to study, some to work and some for family reasons. There lies my concern. This could be the beginning of a process whereby individuals who have come here as students slowly morph into becoming members of the settled population of the country.

The extent of this leakage is hotly disputed, and indeed, the excellent briefing pack from the Library for the debate today contains some important figures. Perhaps my noble friend can update us in his reply on the Government’s latest estimates of what this leakage is. Whatever the figure, an integral part of this morphing and transition is that the person becomes an immigrant, not a student, and should therefore be classified as such.

Noble Lords will have heard me before express my concern at the very rapid rate of increase in the population of this country and the implications for the entire settled population. Our population is now growing by 1,153 people per day, and of that about half comes from immigration. This is a small and increasingly crowded island. England is now more densely populated than the Netherlands. That is also why, with respect to the noble Baroness, I must say that using the example of the United States, with its massive geographical extent, is not a fair one in a debate such as this.

That takes me to my final point and a question for my noble friend. What gives this debate its edge is that we still have inadequate control over our borders. We cannot ensure that everybody who is here is entitled to be here. Though launched in 2003, the e-Borders system appears some way from completion. I understand that in the past four years, between 2011 and 2015, my noble friend’s department spent nearly £90 million on improving systems that the e-Borders system would have replaced, and information about travellers is still being processed on two systems that do not share data or analysis effectively. An update from my noble friend on the e-Borders progress would be much appreciated.

Immigration Bill

Lord Hodgson of Astley Abbotts Excerpts

Monday 18th January 2016 Lords Chamber

[The Earl of Sandwich]

My Lords, we may be in danger of making a meal of this group of amendments. I quite understand that the noble Lord, Lord Horam, has pointed out a connection between the two, but it is a very serious issue to describe the difference between them. I go back to the Modern Slavery Act, which was an excellent example of pioneering government and listening Ministers. A welcome number of government amendments on both that and this Bill shows that the law is constantly in need of review. As many NGOs are actively demonstrating, there is much more to be done on illegal working, as we work through this Bill and beyond. Part 1 does not adequately reflect human rights concerns. The noble Lord, Lord Rosser, pointed out the big confusion here that comes up under several amendments between labour regulation and immigration law enforcement, and the improper use—or potentially improper use—of employers and landlords as immigration officers, making migrant workers especially vulnerable. Some with more legal training than me are concerned about the likelihood that this encroachment is inconsistent with the ILO Convention No. 81, the Labour inspection convention of 1947. I hope someone will confirm that that is a difficulty. Do the Government agree that to ensure protection these two areas must be kept separate?

[Lord Hodgson of Astley Abbotts (Con)]

I have to say that I have some sympathy with my noble friend Lord Horam about the importance of not narrowing the gateway too much in terms of the work of the Director of Labour Market Enforcement. The wording in Clause 2(2)(a)(i) allows for a very wide remit: it seems to me to be important to preserve this. It is very easy of course to see this only through the prism of the victims—and indeed there are terrible victims who need protection—but the director should surely be able to identify practices, behaviours and trends not only relating to the protection of workers.

I am a keen supporter of employee share ownership. Every year the Employee Ownership Association has a dinner in your Lordships’ House, which I am proud to sponsor. Last year I was sitting next to one of the biggest companies in the field of imports, which brings a lot of stuff across the Channel in containers. He said to me, “Do you know that up to about a year ago, once a year a container would have people inside it; two or three times a week now, you open the container in Cowley and six or seven people jump out and disappear into the dark. They have a baseball bat and you can’t stop them—and talking to my colleagues in other firms this is an increasingly prevalent practice”.

It seems to me that this is the sort of issue that ought to be publicised and the director ought to be able to raise. It is not about protection of workers, though that is a very important part of his job. It is about what is happening in the labour market generally. It would be a grave mistake if we allowed ourselves not to think about these activities as well, and make sure that the director could comment on them and make suggestions for improvement. It is in the interests of everybody, but particularly those who are victimised, that this should be publicised—and the other side of the coin should be publicised as well. I hope that my noble friend will bear that in mind when he comes to consider his reply to this set of amendments.

[Lord Bates]

I first thank the noble Lord, Lord Rosser for moving this amendment. I am glad we are on the same page in terms of tracking the amendments. As I do that, let me remove another lever-arch file, with a message from the Box, which I thought was a very timely one: if noble Lords would kindly tell us when they plan to degroup an amendment, then we will try to do better at telling people when we intend to lay an amendment. But I suppose it is the first day in Committee and we are all finding our way through that postbag.

This has been a useful exchange. Under this particular group, as I see it, the Committee is seeking to understand better the nature of the role of the new Director of Labour Market Enforcement and to flesh it out, to understand something more of the resources and to understand where the immigration enforcement boundary and the role of standards in the labour market actually connect. While I appreciate the desire to include upfront a strong statement of the remit of the Director of Labour Market Enforcement, a role that has been welcomed on all sides of the House and in the other place, I believe that amendments on the subject are unnecessary. The role and remit of the director are clearly set out already in Clauses 1 to 7. We want the director to bring co-ordination across the whole spectrum of breaches in employment law, from employers who do not know the rules right through to the organised criminal exploitation of workers.

I should say here—this is relevant to the contributions from a number of noble Lords, particularly the noble Lord, Lord Alton, and the noble Earl, Lord Sandwich—that we often find that the rogue employers, underpaying employees with regard to the national minimum wage, and the unscrupulous employment agencies that deduct far more than they should from employees’ salaries are often the same people, who will be guilty of abuse across a whole range of different headings. That is the essential value that the information gives us, and the essential value of the overall role.

I will send around to noble Lords a very useful schematic. I know that schematics are not favoured by your Lordships’ House because of the difficulties that they convey to the Official Report in communicating them, but this one is a good way of illustrating that at the moment a number of disparate functions are prosecuted in different silos. We are seeking to be much more effective by bringing those silos together, not just in terms of their strategy but by placing the Director of Labour Market Enforcement above them to ensure that scarce resources are allocated most efficiently, and that we learn the maximum that we are able to about exploitation.

Where we set the director’s primary purpose in legislation as enforcement, as the noble Lord, Lord Rosser, seeks in Amendment 4, we are prejudging the best way to secure compliance. The noble Baroness, Lady Hamwee, seeks in Amendment 5 to give the director the purpose of protecting workers from exploitation. Exploitation is not universally defined and means different things to different people. Concerns have been expressed that the director will get involved in enforcing our immigration laws. I reassure noble Lords that that is not part of the role of the Director of Labour Market Enforcement. I know that there was some discussion about the exchanges in Committee in another place on this, but I am happy to place on record again my remarks in my letter of 8 January:

“I want to reassure colleagues”,

following Second Reading, that immigration control,

“is not part of the role of the Director of Labour Enforcement. Nowhere in this Bill is the Director given the power or purpose to do that … they would be acting outside of their statutory powers”.

It is useful to get that very clear statement on the record in Committee. Concerns have been expressed that the director will get involved in enforcing our immigration laws, and I want to ensure that that is not the case.

I turn to the annual labour market enforcement strategy. The Government’s position is that it will be successful only if it includes an assessment of threats and obstacles by “turning over stones”, telling Ministers where the gaps are and making proposals for how they can be addressed. Similarly, a successful strategy will be based on the evidence of what enforcement has happened in previous years, including what remedies were secured for victims. These are both already covered by the Bill so Amendment 7, in our opinion, is unnecessary.

Amendments 8 and 10 cover the director’s role in the funding arrangements for the enforcement bodies. It is the Government’s intention that Ministers in the Home Office and the Department for Business, Innovation and Skills should continue to set the overall envelope of spending available for labour market enforcement and should recommend how best to allocate this between the three bodies and the different activities they undertake, based on their assessment of the likely nature of non-compliance in the following year. I cannot support these amendments. While the Government intend that the relevant Secretaries of State will take the director’s proposals on resources into account in their discussions with the Treasury about funding, it is right that the Government set the overall level of resources devoted to labour market enforcement in the context of the totality of pressures on public spending.

Amendments 18, 25, 28 and 32 relate to the power to change the scope of the labour market enforcement strategy by regulations. While at present we believe that the director’s remit is sensibly defined, it may make sense in the future to extend this if it becomes clear that the risk of abuse and exploitation is changing. It is appropriate for such extension to be made by secondary legislation to ensure flexibility and to enable us to act quickly, subject of course to the appropriate degree of parliamentary oversight.

Amendments 33 to 35 relate to the director’s strategy-making role in respect of offences committed against workers under the Modern Slavery Act 2015. The clause or the proposed amendments would not redefine “worker”—as mentioned by the noble Baroness, Lady Ludford—for the purposes of the Employment Agencies Act 1973, the National Minimum Wage Act 1998 or the Gangmasters (Licensing) Act 2004. The existing coverage of the respective Acts continues to apply. This means that the Employment Agency Standards Inspectorate and the GLA will still tackle non-compliance by employment agencies, businesses and gangmasters regardless of whether the affected workers have the right to be—or work—in the UK. We see the director’s focus as improving the way we enforce labour market and employment law rules—making sure workers who are properly here are protected better. However, we are committed to tackling serious crimes committed against individuals, whatever their status, as the noble Baroness will know from the work she and others did on the Modern Slavery Act last year—a landmark piece of legislation.

I turn to the contents of the director’s annual report. The Bill already requires the annual report to include an assessment of the extent to which the strategy had an effect on non-compliance in the labour market. There is no need to specify the other details. If the strategy identifies threats and obstacles to effective enforcement and makes proposals to address them, the effectiveness of these throughout the year must be covered in the annual report. Similarly, as the strategy will set out how the enforcement bodies are to exercise their functions, including seeking remedies for victims, the success of this must be covered by the annual report. Therefore, I believe the majority of Amendment 36 is unnecessary.

The point was made that we need to focus our attention on victims. Victims have been protected, for example, by the recovery of unpaid earnings, by making sure that employment agents who persistently abuse contracts or unfairly treat their employees are no longer allowed to register as agents, and by the Gangmasters Licensing Authority not renewing certain licences.

The final amendment in this group concerns the publication of the annual strategy and annual report. The legislation as drafted states that any strategy or annual or other report prepared by the director and laid before Parliament must not contain material that has been removed for very specific reasons. These reasons are where the publication of such material,

“would be against the interests of national security, … might jeopardise the safety of any person in the United Kingdom, or … might prejudice the investigation or prosecution of an offence under the law of England and Wales, Scotland or Northern Ireland”.

These are pretty standard exclusions that we have come across in previous legislation. The Bill as drafted requires the Secretary of State to remove information from a publication if he or she considers it to fall into those categories. The Government believe that this is essential and strikes the right balance between transparency and safety. Indeed, it replicates provisions in Section 42 of the Modern Slavery Act regarding the strategic plan and annual report prepared by the Independent Anti-slavery Commissioner. I hope that my answer will reassure noble Lords on that point.

Finally, we have put on the face of the Bill, in Clause 1(4):

“The Secretary of State must provide the Director with such staff, goods, services, accommodation and other resources as the Secretary of State considers the Director needs for the exercise of his or her functions”.

That is a statutory statement. My noble friend Lady Neville-Rolfe announced in the previous debate that the amount of money that has gone into national minimum wage enforcement has increased by £4 million. While it is right to press us to spell out in more detail exactly what is intended for the role, I think that there is a logic there, which my noble friends Lord Horam and Lord Hodgson have reinforced. I hope that, with that reassurance, the noble Lord will feel able to withdraw the amendment.

Foreign and Commonwealth Office: Funding

Lord Hodgson of Astley Abbotts Excerpts

Thursday 19th November 2015 Lords Chamber

[Lord Green of Deddington (CB)]

My Lords—

[Lord Hodgson of Astley Abbotts (Con)]

My Lords—

[Lord Hughes of Woodside (Lab)]

My Lords—

UK Opt-in to the Proposed Council Decision on the Relocation of Migrants within the EU (EUC Report)

Lord Hodgson of Astley Abbotts Excerpts

Wednesday 22nd July 2015 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Hannay. I have had the honour of serving under him on several EU sub-committees and it has always been an instructive experience. Our views do not always coincide. The noble Lord has an Olympian view, honed by years of distinguished service to this country in the Foreign Office, while my more utilitarian views have been honed by years of experience in the rather more vulgar world of industry and commerce, so I am afraid that our views today do not coincide.

I was not a member of this sub-committee, but I have served on it before and was a member when, in the 2007-08 Session, it produced its report on FRONTEX, the EU’s external borders agency, under the chairmanship of my noble friend Lord Jopling. Then, as now, one could not fail to be appalled by the evidence of human misery: wretched men, women and children being plucked from the sea or staggering on to some Mediterranean beach. Then, as now, one could not fail to be appalled by the cynical behaviour of the people smugglers. I remember a particularly heartrending evidence session given by a senior officer from the immigration service of Malta. He described overloaded, unseaworthy boats being towed by an inflatable until the GPS showed that the boat was in the territorial waters of Malta. A cheap satellite phone would then be handed to one person on the unseaworthy boat with instructions to call a number, and when it was answered to say, “We are in Maltese territorial waters. Please rescue us”. The number, of course, was for the Maltese coastguard. By the time the coastguard turned up, the inflatable was, if not back in Africa, well its way there. So I would not want any Member of your Lordships’ House to doubt my sympathy for these unfortunate people.

Yet, while this Motion is entirely worthy and has been incredibly persuasively argued by the noble Baroness, Lady Prashar, I think it is misconceived. As the noble Lord, Lord Jay of Ewelme, said, this is a very complex problem and I believe that the Government are right not to opt into this measure or any part of it on any basis. I do so on two grounds. First, while I agree that the measure is entirely well intentioned, it addresses the symptoms, not the problem. As such, it risks exacerbating the problem rather than solving it. Secondly, while many noble Lords have referred to this country’s historical welcome to displaced persons and refugees, the situation now is that this country is experiencing, and will continue to experience for the next 20 years, a population explosion—unlike our continental European neighbours—with consequent strains on social cohesion. In that context, the relative population densities of different EU countries are a critical feature.

Let me deal with each of those in turn. I am afraid that I do not accept the assertion of the noble Lord, Lord Hannay, that there is no pull factor from allowing immigrants, refugees and displaced persons to enter the EU. I support what the Government say in paragraph 24 of the report. The challenge is that even at first quite small, limited numbers can begin the creation of what is known as an immigration superhighway. Immigration superhighways can now be created faster than ever by the prevalence of social media, which allow instantaneous communication about possibilities and opportunities. The more desperate the people, the quicker the highway emerges.

That takes me to my concern about the statement in paragraph 29 that this event is “exceptional and temporary”. I am afraid I have difficulty in accepting that argument. I would very much like to see evidence to support the argument in paragraph 31 that somehow “international protection” will not encourage a steady drift west or north in search of a better life or merely to avoid persecution, poverty and threat to life or limb. However neat this may appear to the Commission in Brussels, displaced persons are not so easily segmented or clearly put into one box or another.

There is another political, rather more stark reason why this proposal is misguided. The presence of these unfortunate people puts pressure on the Governments of the countries involved to police their borders effectively. If there is a hope—a possibility—that arrivals can be passed on to the rest of the EU, I fear that the political and operational focus will inevitably diminish. The numbers, as other noble Lords have said, are staggering. The noble Lord, Lord Jay, referred to 10 million displaced persons in Syria, 3 million in Iraq and many more in Sudan, Eritrea, Somalia and other north African and Saharan countries. Any action, however trivial, that suggests that the EU might open its door even a fraction could create population movement on a scale hitherto undreamed of.

So, do I think that we have to leave those unfortunate people to their fate? Of course not. The Government have made a courageous and principled commitment to spending 0.7% of our GDP on overseas aid and have ring-fenced it. The economic power with our international partners—I entirely support the noble Baroness, Lady Ludford, when she said that we ought to make sure that everybody does their bit—needs to be deployed to improve the living and economic conditions of these displaced people at source, as does our military power to offer protection to displaced people as well as to destroy the boats and generally inhibit the operations of people smugglers wherever they may operate.

I turn to the second reason why I believe that the Government need to keep control of our borders and should not take part in any relocation scheme. Noble Lords have made moving statements. The right reverend Prelate the Bishop of Peterborough, and others, talked about the contribution that refugees have made to our country in the past. This is a very small and very crowded country. Furthermore, it is a crowded country undergoing a population explosion. Last year our population rose by 500,000 people—1,400 people a day. A small town or large village is being put on the map of Britain every week. If we wish to house these people to the same standard that we enjoy ourselves—I assume we wish to do that, with 2.3 people per dwelling—we need to build 600 dwellings a day. That is one every two and a half minutes, 24 hours a day, seven days a week. That is without building the hospitals, the schools, the roads and other infrastructure that are required. That is not all. The mid projection from the Office for National Statistics suggests that this will continue for the next 20 years. By 2035 it is estimated that we will have a further 8 million people in this country, equivalent to three cities the size of Greater Manchester. To house them, we will have to build 3.4 million dwellings—building a house every three minutes for the next 20 years.

The right reverend Prelate the Bishop of Peterborough referred to social strains. This will put huge social strains on our country. Some of those strains, I fear, are beginning to make themselves felt already. We should not add to those strains as this proposal suggests, not only because it would be unfair to our settled population, of whatever race, colour or creed, but no less significantly because, when social cohesion breaks down, it is the poor, the disadvantaged and the recently arrived who suffer the most. If the European Union wishes to proceed with these plans, it is surely essential that existing countries’ population densities need to be taken into account. This is not mentioned in paragraph 11 of the report.

I described England as a crowded country. We have just overtaken the Netherlands as the most densely populated country in Europe, with more than 400 people per square kilometre. The Netherlands has 393 people per square kilometre. However, Germany has 233—about 60% of our density—and France 111, about 25% of our density. If the EU wishes to proceed with this measure, these countries must surely be the destination for the 40,000 people.

To conclude, I recognise that these are stark realities and I, for one, do not always feel comfortable spelling them out, but the 40,000 are only the symptom of the problem. We need to tackle its roots.

[Lord Hannay of Chiswick]

I apologise for interrupting but I would have thought the noble Lord might recognise that at the Council meeting on Monday of this week, the French and Germans accepted numbers in the region of 10,000 each under this scheme, and these are countries where there are very active political forces urging them—like us—to accept no one at all.

[Lord Hodgson of Astley Abbotts]

My Lords, I did not expect to get through this speech without the noble Lord, Lord Hannay, wishing to draw attention to the advantages of the European Union. The fact is that those countries are immeasurably less densely populated than the United Kingdom. France, at 111 people per square kilometre, has 25% of our population density, and we have to bear that in mind. Our settled population—and when I say “settled population”, I mean people of whatever race, colour or creed—has its own position and we are in danger of—

[Baroness Prashar]

I draw the noble Lord’s attention to Malta, which, as he knows, is under enormous pressure from migrants arriving by sea. Malta has agreed to take 360.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts]

I understand. I am speaking for the people of this country and what we should be doing to make sure that our settled population’s rights are looked after. I am trying to draw attention to the fact that, with a population growth rate of 1,400 people per day, this country’s population is growing very fast indeed, and that will bring strains with it. Those are strains to which we should not be adding, but we risk doing so if we go down the line being pursued this afternoon by the proposers of this Motion, well-meaning, beautifully argued and well-modulated though it may be. It is a question of the preferences that we need to speak up for in this debate. I believe that, as the sub-committee itself reported, this situation is “exceptional and temporary”. In my view, the Government would make a grave mistake if they opt into this proposal in any way.

UK: Population

Lord Hodgson of Astley Abbotts Excerpts

Thursday 16th July 2015 Grand Committee

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, the noble Lord, Lord Green, has done the House, and, indeed, the country, a service in continuing to raise this issue. In my view, the current and projected increase in the UK population represents if not the greatest, certainly one of the greatest, threats to our country, environment and society and to the cohesion of our entire settled population.

Historically, there has been an emphasis on growing the population because people have felt that an increasing population means economic strength and power. At a more atavistic level, it means larger military power because you have a greater number of people to enforce your will. Psychologically, it is a sign of national confidence if your birth rate is rising and people wish to come to your country. It shows that you are, as a nation, on the rise. Vestiges of those beliefs still affect our thinking on this issue today. But now, as the noble Lord, Lord Green, pointed out, we are faced with new challenges. He talked about population density. England has just overtaken the Netherlands as the most densely populated country in Europe. We always think of the Netherlands as quite a small country that is pretty densely populated but England is now more densely populated. As the noble Lord has just told us, the population of this country is increasing by 1,200 people a day, adding a large village or small town to the map of Britain every single week, 52 weeks a year.

As my noble friend Lord Bates has heard me say before, if we are to house those people to the same standard as we currently house ourselves—that must be right—which is 2.3 people per dwelling, we have to build 500 new dwellings a day. Noble Lords can do the mathematics—that is a new dwelling every three minutes, night and day. That is without improving the housing stock, which we all agree needs to happen, and before you consider the additional infrastructure demands of health, education, roads, fire services, police support and so forth. However, as the noble Lord pointed out, that is not the end of the story but just the beginning. As he said, the ONS projection for our population 20 years from now is an increase of at least 8 million. That is not the high or low projection but the mid projection. As he pointed out very graphically, 8 million people represent three times the entire population of Greater Manchester, which is 2.5 million people. That will mean 3.4 million new dwellings. We are going to have to build a dwelling every three minutes for 20 years. I hope that my noble friend will tell us when he comes to wind up where these three Greater Manchesters, or 3.4 million homes, are going to be built. This is not theory according to Malthus or expectation: these projections affect us and our country today.

This is not just about the physical impact of housing and other infrastructure. Equally important, perhaps more important, are the consequent challenges to our social cohesion and the impact of what sociologists are increasingly calling “crowding out”. Crowding out will affect all parts of our society. Above all, it will affect those who have most recently arrived, so the less well integrated sections of our community will suffer most.

My noble friend has heard me talk about our Premier League footballers, of whom 21% are born in this country. Does that matter? It is an exceptionally successful economic export which earns much for this country, but that statistic means that several hundred young British males do not realise their dreams. Among those several hundred young British males will be an unusually high proportion of young black members of the minority community—people we wish to see integrate, have role models and succeed.

At a lower level, in my home counties of Herefordshire and Shropshire, local people find it hard to get jobs as fruit pickers because the fruit farmers prefer to hire 200 at a time from eastern Europe than engage people in this part of the world on an individual basis. It is not just at that level. I invite my noble friend to go and look at the number of secondary degree MA students enrolled over the last 10 years, and he will find that in our settled population, of whatever colour, creed or racial origin, the numbers have gone up by about 10% to 20%. But the numbers from overseas have doubled. That means that, to some extent, we are educating people from abroad at the expense of our own people, and we are doing so in part because it is beneficial for our universities to do that, because they pay more. Then you go to the property prices. The influx into London and the ripple effect of property prices has meant that large numbers of our own settled population are unable to buy a house or flat in their own capital city. More and more of them are being asked to live at home.

Those who continue to argue that, in the face of all these facts, we need to continue with high levels of immigration use two arguments. The first is the economic prosperity argument. The Select Committee in your Lordships’ House, which is referred to in the back of the briefing pack, has done some excellent work on this, but its report summarises that it has,

“found no evidence for the argument, made by the Government, business and many others, that net immigration—immigration minus emigration—generates significant economic benefits for the existing UK population … Overall GDP, which the Government has persistently emphasised, is an irrelevant and misleading criterion for assessing the economic impacts of immigration on the UK. The total size of an economy is not an index of prosperity. The focus of analysis should rather be on the effects of immigration on income per head of the resident population. Both theory and the available empirical evidence indicate that these effects are small”.

We need much better data on population flows and the consequent impact on the country as a whole. We certainly need some restriction on the free movement of labour within the EU to form part of the Prime Minister’s renegotiation package.

The second argument that is much used, and the noble Lord, Lord Green, referred to it, is what is known as the dependency ratio, expressed as the number of people in work for every person in retirement. It shows the extent to which a country is exposed as an ageing population. As the ratio falls, those in work will have to pay more, either directly by paying tax, or by taking responsibility for their relatives. So some of our huge increase in population is essential to offset those impacts, but that ignores the fact, pointed out by the noble Lord, Lord Green, that today’s young people are tomorrow’s old people. While you may have deferred the problem, you have compounded it, because they will in turn require a still larger number of people to support them in their old age. Indeed, people have pointed out that if we wish to maintain the present dependency ratio in the UK’s population, we will have to approach 100 million towards the end of this century, 50% more than we are today. The answer must lie elsewhere. Noble Lords have pointed out that if people are going to live for longer they will have to work for longer, and that will adjust the dependency ratio—and technology wars have to help. Modern monitoring devices will enable people to stay in their own homes without direct supervision for longer—and many of them wish to do that.

Why is it so hard to get the Government to focus on this issue? First, population increase is made up of two parts—the natural increase, in excess of births and deaths, and net immigration. Both are highly sensitive issues. Well-meaning people avoid discussing immigration for fear of being called racist, so let me make it clear that I am not talking about racial or religious make-up; I am talking on behalf of every member of the settled population in the United Kingdom, irrespective of age, sex, creed or racial origin. Secondly, family size is seen as a highly personal matter—and quite right, too. It is one that the Government steer clear of. When Sir Keith Joseph 35 years ago made a speech about it, it was more or less the end of his political career.

That is one reason why there is an anxiety about raising this issue. The second is that all demographic policies have very long lead times—15, 20, 25 years. It is the Government after the Government after this Government that may benefit from changes that we make today. There is an ineluctable temptation to keep kicking the can down the road and do nothing now, but continuing to kick the can down the road could lead to the one sure way of stopping our population growth. If, as a result of population growth, this country becomes too overcrowded or too expensive or if our traditional values of tolerance, sense of humour and, above all, a high regard for a sense of fairness—those shared values that were the subject of an earlier debate today—are threatened, then people will vote with their feet, either by leaving the country or by not coming here in the first place. This seems to me to be a high price to pay for continued inattention to this vital issue.

--- Later in debate ---

[The Minister of State, Home Office (Lord Bates) (Con)]

My Lords, I thank the noble Lord, Lord Green, for tabling the debate on this important subject. I declare an interest: immigration is a subject which is dear to my heart, on account of a certain young lady who came to this country 25 years ago from China. Therefore, I will also commence my remarks by recognising the incredible contribution that the immigrant population has made to the UK, both to our culture and our economy.

However, the Government recognise that uncontrolled immigration makes it difficult to maintain social cohesion —a point to which my noble friend Lord Hodgson referred—puts pressure on the UK population and public services, and can drive down wages for people on low incomes. I will therefore take this opportunity to update the Committee on the actions the Government are taking across the system to bring net migration down to sustainable levels while ensuring that we continue to attract the brightest and the best migrants to the UK.

As all noble Lords referred to, the UK population increased by almost half a million—the noble Lord, Lord Hodgson, put it in more precise terms of 1,200 per day—or 491,100 between mid-2013 and mid-2014, with 53% of the growth in the UK population accounted for by net migration. Net migration currently stands at 318,000. These figures show how far the Government have to go to reach our goal of reducing net migration to the tens of thousands—but also why it is important that we continue to do so.

As we have said for some time, we have been blown off course by net migration from within the EU, which has more than doubled since 2010. The figures show that by focusing on key areas we can make a big difference to net migration. In 2014, 86,000 EU migrants came to the UK looking for work as opposed to having employment to come to. There was a gap of 91,000 between non-EU students who came to the UK and those who left. Some will have stayed legally; many will have not. These two factors alone added nearly 200,000 to net migration. This is why the Government are determined to deliver the manifesto commitments on reform in Europe and tackling abuse and overstaying by students.

The immigration system today is very different from the one we inherited in 2010. Over the past 5 years, we have taken steps to control immigration and have fundamentally changed the approach taken by the previous Labour Government. Our reforms are geared towards an immigration system which works in the national interest, attracting skilled migrants for occupations where we need them instead of unskilled workers who drive down wages, and genuine students for our world-class universities instead of bogus colleges, almost 900 of whose licences we have revoked.

The Immigration Act 2014 is making it much tougher for illegal migrants to remain in the UK by restricting access to work. In this regard I note the comments on housing, benefits, healthcare, bank accounts and driving licences. Since July 2014, under the Act we have revoked the driving licences of more than 10,000 illegal migrants and deported almost 1,100 foreign criminals who would have had a right of appeal. The immigration health surcharge has stopped people from outside the EU using the NHS for free healthcare and has generated more than £20 million in net income. We have also clamped down on fake brides and grooms entering into sham marriages to stay in the UK. The Government will go further. The new immigration Bill will create a new offence of illegal working and extend our “deport first, appeal later” approach to ensure even more illegal migrants are removed from the UK.

The noble Lord, Lord Rosser, asked what the thinking was within government and what research was being done on the issue. We have commissioned the independent Migration Advisory Committee to reduce economic migration from outside the EU. We will form our labour market rules to crack down on the exploitation of low-skilled workers. As the Prime Minister has set out, we will address the incentives for migration from the EU—which has led to mass immigration from Europe—in informed negotiations. We will deliver these proposals and our commitments in the manifesto with a new immigration task force, chaired by the Prime Minister, which will ensure that every part of the Government plays its part in helping to control immigration. That is not ducking the issue, nor is it not taking the issue seriously. The Prime Minister is committed to addressing this important matter.

While the Government are committed to controlling immigration, that desire is in no way at odds with how proud we are of our diversity and we will continue to welcome the brightest and best migrants to the UK. All those talented workers who have come to work hard and the brilliant students who have come to study at our world-class universities will help Britain to succeed and add enormously to our economy. The Government have been clear that there is no cap on the number of overseas students who come to study at our world-class universities and since 2010 there has been a 16% increase in the number of visa applications for UK universities and a 30% increase in the number of visa applications for our world-class Russell Group universities, underscoring that the policy is working.

I noticed today that Portland Communications had published its soft power index. It measures soft power—cultural power, diplomatic power, media, digital, education, which is a key part of it, architecture, buildings, attitude and the respect in which the country is held in the world—and I was delighted to see that the United Kingdom is number one in the world. We beat Germany into second place and the United States is now in third place. That shows that it is possible to make the tough decisions necessary to bring immigration to the UK down to sustainable levels.

[Lord Hodgson of Astley Abbotts]

My Lords, could my noble friend write and give the Committee an estimate of how many students have overstayed their visas? There is clearly a major concern that while a great deal has been done—he has told us about that—nevertheless there is still a great deal of overstaying going on and morphing into the workforce.

[Lord Bates]

I mentioned early in my speech that the figure was 91,000 for the coming year for non-EU students. Overstaying is a significant problem that we face. The accuracy of that figure will increase significantly now that we have introduced exit checks at our borders. People who come here to study should study. If they want to come here to work, they should go back and then apply to come back to work here. In fact, from a technical point of view, tier 4 applicants, people who are studying here at bone fide universities, are able to transfer to a tier 2 status, which is graduate-level employment, so that they can continue to contribute to the economy. They can do that directly and there is no limit on the number who can progress on that route. We want to get that message out.

Queen’s Speech

Lord Hodgson of Astley Abbotts Excerpts

Tuesday 2nd June 2015 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, it is conventional in your Lordships’ House on occasions such as this to open one’s remarks with a few comments on the immediately preceding speeches. However, I am conscious that, as the 45th speaker, the House’s attention span is beginning to flag so, if I may, I will cut to the chase.

In the few minutes available to me, I want to lend my support to those measures in the gracious Speech which the press has loosely grouped under the heading of blue-collar aspiration. I had the pleasure of listening to the noble Lord, Lord Prescott, speak on Radio 4 about the Labour Party’s leadership contest. I am sorry that he is not in his place. The noble Lord was rather dismissive of the concept of aspiration—a word bandied about by the candidates—to which he referred, in rather fruitier words than I think would be appropriate to use in your Lordships’ House, as being without substance. With due respect to the noble Lord, I disagree with him. Aspiration is a wide-ranging concept. Of course, it has an economic aspect and covers access to the basic support services of our society—health, education, the police and justice—but it also encompasses much less tangible features such as a sense of belonging, a sense of involvement and a sense of community cohesion. These less tangible, less measurable objectives should in my view nevertheless form an important part of the Government’s aspiration agenda.

One part of our society that can play a particularly effective role in this regard is the charitable and voluntary sector. Some Members of your Lordships’ House will know of my interest in the sector and the reports that I have written for the Government. Therefore, it will not surprise my noble friends on the Front Bench that I am very pleased that the Government are proceeding with the Charities (Protection and Social Investment) Bill. It has the twin objectives of improving the efficacy of the regulatory powers of the Charity Commission, which is very important as a means of encouraging public trust and confidence, and at the same time facilitating the development of what is now called social investment—a new sector in which the UK is the world leader and in which we have a chance to remain so in the future. I look forward very much to the Bill’s Second Reading next week.

For the rest of my remarks I return to the issue of social and community cohesion and to what I think will be an immense challenge to it over the next 20 years. As we have heard from the noble Lord, Lord Green, that challenge is the expected increase in the absolute level of the UK population between now and 2035—20 years from now. I make it clear that this is not a speech about immigration. I am fond of remarking that we are all immigrants; the only question is when we got here. I also make it clear that my speech is nothing to do with people’s colour, creed or racial origin. I have no interest in that either. However, it is about absolute numbers. I give a couple of statistics. Every day the population of this country goes up by 1,100 people. Every week we are putting a small town or large village on to the map of Britain—every week, 52 weeks a year. This is in a country—England—which has recently overtaken the Netherlands as the most densely populated in Europe. The daily increase consists of 590 excess births over deaths—what is called the natural increase—and 510 from immigration.

I give one simple, specific example concerned with the controversial question of housing, which has featured in many noble Lords’ speeches this afternoon, including those made from the Front Benches. In passing, I add my congratulations to the noble Baroness, Lady Smith of Basildon, on her maiden voyage as leader of her party. In the UK we currently have 2.3 people per dwelling. If we are to house our new population to the same standard, we will need to build 478 dwellings every day. That is one every three minutes, night and day, and without any improvement or increase in our existing housing stock, which I think everybody in your Lordships’ House agrees needs some improvement.

I fear that this is not the whole story because between now and 2035, if you take the mid projection of the Office for National Statistics, we will have an additional 8.4 million people. If you apply the same metric to that, we will need to build 183,000 dwellings every year—that is, 3,500 a week, 500 per day or one every three minutes. So for the next 20 years we will have to build a house, dwelling, flat or some form of habitation every three minutes. I find it hard to believe that we will be able to integrate 8.4 million people and build 3.6 million homes without there being significant risks for our social and community cohesion. My concern is that part of our settled population—no matter its colour, creed or background—may well find itself pushed to the margins of our society; “crowded out” is what the sociologists call it.

I will give a very simple example. Football is in the news so I have chosen football as my example. The Premier League is a fantastically successful commercial enterprise. It earns millions around the world for this country. But just 21% of the players in the Premier League are British. Does this matter? Probably not, but it does mean that several hundred young men do not fulfil their dreams and aspirations, and that group of young men will contain a particularly high proportion from the black minority community—a group which I think most people agree needs role models and stories of encouragement, success and participation in our society. That is one simple, small example. I could replicate it if time permitted—it does not—across our society.

In conclusion, I see no easy answers to this issue but I am convinced that it is an issue that needs to be raised, debated and considered in a calm, rational and dispassionate way. If we do not do that, wilder spirits may take over, with results that I am sure no one in this House would wish to see. If I am uncertain about that, I am certain about one thing tonight: when my noble friend comes to wind up, he will take care to ensure that he makes no reference to this part of my speech or indeed the speech of the noble Lord, Lord Green. His officials will tell him, “Don’t go there, Minister, there be dragons. You will almost certainly be misreported and quoted out of context. There is no political advantage”. In that sense, his officials are quite right. Demographic policies have very, very long lead times—15, 20, 25 years. So a five-year parliamentary cycle gives every incentive to avoid the whole topic. But in 2035, when we have built those 3.6 million dwellings and I, aged 93, am dribbling into my cornflakes, our succeeding generations may well regret that we did not do more to consider the challenge now.