Corruption in the United Kingdom

Lord Sikka Excerpts

Thursday 13th October 2022 Grand Committee

[Lord Sikka (Lab)]

My Lords, I thank the noble Baroness, Lady Jones of Moulsecoomb, for securing this debate, and I fully agree with everything she said.

The UK is drowning in political, financial, legal and other forms of corruption. Evidence is all around us. Open any newspaper any day and what do we find? We find mis-selling of financial products on an industrial scale, rigging of interest and foreign exchange rates, pension abuses, tax dodges, money laundering and cooking the books. I have been doing accounting since 1968—that is a long time—and I cannot make head or tail of the accounts of large companies any more. They are incredibility opaque, yet the Government do absolutely nothing, and that opacity provides the cover to shift profits, dodge taxes and launder money. Whenever you ask questions in the Chamber, you get a standard kind of answer read from a sheet. Nobody really deals with the issues. We have phone hacking, diesel emissions, raw sewage dumping, insider trading and auditors such as KPMG admitting that they falsified audit files. Companies are filing fictitious accounts. A large number of small companies are doing that, yet nothing seems to happen.

The UK does not even have a central enforcer of company law. There is cognitive capture—not just capture, but cognitive capture—and regulators are pretty much useless. I shall give the Committee some examples. Between 2017 and 2021 there have been just two successful convictions for insider trading in the UK. NatWest is the only bank ever convicted of money laundering, and only because it admitted it. Despite strong condemnations in the courts, no big accounting firm has been investigated, fined or prosecuted for selling unlawful tax avoidance schemes. I keep asking Ministers to please name one firm. They always dodge the issues. The Bribery Act 2010 introduced the offence of failure to prevent bribery. The Crown Prosecution Service has secured just one conviction. The SFO has secured two. That was after the companies themselves pleaded guilty because of what came out of the US. Separately, Standard Bank, Rolls-Royce and seven other companies were let off with a deferred prosecution agreement—in other words, carry on as usual.

In 2018, the Government launched the National Economic Crime Centre to tackle what they call high-level fraud and money laundering. There is yet to be even a single prosecution. It is no good the Minister in response referring me to a plethora of laws. What we need is action, and that action is missing. The key reason for corrupt practices is to secure profits and high executive pay. The Government have absolutely no mechanism for ensuring that executives do not benefit from ill-gotten pay packets.

The state continues to fail to tackle corruption because it has a close relationship with big business. I am reminded of a quote by Adam Smith in his 1776 book, in which he says that

“the English legislature has been peculiarly attentive to the interests of commerce and manufactures”.

Some 250 years later, little has changed. This Government actually shield organisations which in writing say that they have been engaged in criminal conduct.

For example, in the US in 2012, HSBC admitted in writing that it had been engaged in criminal conduct. It paid a $1.9 billion fine for money laundering. It is a UK-registered, supervised bank, but it faced absolutely no investigation of any kind. Without making any Statement to Parliament, it later emerged that the Chancellor, George Osborne, the Governor of the Bank of England and the head of the Financial Services Authority secretly wrote to the US authorities asking them to go easy on HSBC. It was too big to jail and too big to fail—so carry on. And HSBC has carried on.

In how many other countries do Ministers cover up criminal conduct? It is certainly happening here. If we do not investigate these malpractices, there is zero chance of developing any effective laws, regulations or other mechanisms.

The Financial Conduct Authority and the National Crime Agency know that banks have been forging customers’ signatures to repossess their homes and businesses. I have had a dialogue with the Minister before; more than 10,000 pages of evidence have been submitted. Three years later—nothing. No action whatever. Even worse, the City of London Police fraud investigation unit is now funded by Lloyds Bank, which is no stranger to banking fraud. You cannot make this up.

A former Thames Valley police and crime commissioner said:

“I am convinced the cover-up goes right up to Cabinet level. And to the top of the City.”


That is the indictment—but nothing happens.

Secrecy is a key ingredient in corrupt practices and the UK leads the way. The financial secrecy index published by the Tax Justice Network ranks the UK as the 13th most secretive nation out of 141 countries. As I said, I cannot make head nor tail of company accounts any more. The rules are made by the corporate elites, auditors do not care—they sign and disappear—and there is virtually no accounting accountability or transparency in company accounts.

The Government’s obsession with deregulation has resulted in many small companies filing false accounts at Companies House. I have tabled many Questions drawing attention to that. Too many of these small companies are now fronts for money laundering. I have looked at the Economic Crime and Corporate Transparency Bill and it does not curb any of these things.

As the noble Baroness, Lady Jones, said, our political system is not up to the job of curbing corruption. It is available for hire to the highest bidder. Knighthoods and peerages are for sale. As Mohamed Amersi, who funded Boris Johnson’s campaign, said:

“You get access, you get invitations, you get privileged relationships, if you are part of the set-up”—


and obviously lucrative contracts then follow.

Too many legislators, in both Houses, are on the payroll of corporations, including those that are engaged in illicit financial flows. The inevitable outcome is inadequate scrutiny, laws and legislation. People can see that the system is corrupt and really needs reform, but I cannot see this Government reforming it—so hopefully they will make way for a Labour Government to do so.

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[The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)]

My Lords, I thank the noble Baroness, Lady Jones of Moulsecoomb, for securing this important debate, and I am grateful to all noble Lords for their contributions. I will do my very best to answer the points that have been raised. Noble Lords will appreciate that some of them are broadly philosophical, and perhaps I will come back to those in due course, and some I cannot answer. On the points made by the noble Lord, Lord Sikka, I am not qualified to opine on the accountancy rules; that does not fall under the Home Office, as he will be well aware. It is a Treasury matter, and I will be certain that it sees the contents of his speech and will try to get him a response.

The Government are fully committed to protecting our institutions and systems from those who wish to undermine or abuse them. Like the noble Lord, Lord Evans, I do not believe that this country is systemically corrupt, but corruption poses a significant threat to all democracies, and to our economy and security. The Government are steadfast in their determination to ensure that the UK has the strongest possible defences and upholds the highest possible standards.

Before I talk about some of the things that the Government will do, it is worth defining corruption in response to the point made by the right reverend Prelate. The debate has raised a number of topics which demonstrates how broad a topic corruption can be, so it is important that we understand what we mean by corruption and define its scope. Corruption is the abuse of entrusted power for private benefit that usually breaches laws, regulations, standards of integrity and/or standards of professional behaviour. Corruption need not be economic in nature and can still exist even if everyone has acted within the law. Therefore, it is imperative that we also consider actions that go beyond economic crime legislation and capture the broader elements of corruption.

Corruption is harmful in many ways. It threatens national security, global stability and development; it can amount to a hidden tax stifling the growth we need to get our economy moving; and it can undermine trust in our democratic institutions—a point that I think all noble Lords made. As the former president of the World Bank, Robert Zoellick, said so eloquently,

“corruption is a cancer that steals from the poor, eats away at governance and moral fibre and destroys trust”.

Corruption is far from a victimless crime. While the impact of corruption is often hidden, we must never forget that it undermines the efficiency of public services, weakens the security of ordinary citizens and hurts the bottom line of businesses. More broadly, as the noble Lord, Lord Coaker, just noted, it undermines trust.

All noble Lords have asked what the Government plan to do. I will go into some detail, but I have only a limited amount of time, so I commit to write to noble Lords if I cannot cover all their specific points.

Economic crime is undoubtedly a multidimensional and multifaceted issue. There is a strong correlation between corruption and economic crime, and we are taking strong action in that regard. The Economic Crime (Transparency and Enforcement) Act 2022 was introduced in March, containing key measures to help crack down on dirty money, including from Russia and other foreign elites abusing our open economy, and provide greater powers to identify and investigate the illicit wealth of criminals. These powers have been put to immediate use.

The Combating Kleptocracy Cell in the NCA was set up after the invasion of Ukraine and recognises a significant increase in the NCA’s operational capability. I have seen those people in action and am in awe of their efforts. About £400 million has been allocated to tackle economic crime over the next three years.

The Government are following up on this expedited legislation with the Economic Crime and Corporate Transparency Bill, currently going through its Second Reading in the other place. I hope that will deal with the point made by the noble Baroness, Lady Kramer, about Companies House enforcement; among a suite of measures, the Bill includes reforms to Companies House that will bear down on the use of thousands of UK companies and other corporate structures as vehicles for economic crime, including fraud, international money laundering, illicit Russian finance, corruption, terrorist financing and illegal arms movement.

On strategy, the UK has long been seen as a world leader in dealing with corruption, from the UK-led anti-corruption summit in 2016, to the current anti-corruption strategy, which has served as a model for many other countries. Noble Lords may have seen our annual updates to Parliament on the progress we have made against this strategy. As they show, we have taken a number of important steps during the strategy period.

However, we know that the threat does not stand still, and we cannot be complacent. That is why the Government are developing a new anti-corruption strategy to succeed the existing strategy, which expires at the end of this year. The Security Minister will lead on that work as we look to build on the progress to date and make the UK even more resilient against the threat posed by corruption.

That resilience includes the overseas territories and Crown dependencies. They are separate, self-governing jurisdictions, but I am pleased that they have committed to upholding international standards and to having publicly accessible registers of who ultimately owns companies in place by the end of 2023. Gibraltar has already introduced such a register. I should note that this exceeds the standards required by the Financial Action Task Force.

The subject of standards in public life came up in a couple of contributions. The recent DHSC court case against the Government on Covid contracts ruled in our favour on all grounds. It showed the exceptional circumstances that Ministers and civil servants worked under during the pandemic to deliver impartial decisions to reach the best outcomes for the nation.

The Government are also working on their response to the recommendations made by the Committee on Standards in Public Life and in the Boardman reports. The Government have already issued new guidance on the declaration and management of outside interests in the Civil Service, and in July updated the House on progress made in responding to those reports, including outlining which recommendations have already been adopted. I will happily update the House on progress once more has been made.

On fraud and procurement, some issues overlap with standards in public life; I will go into more detail on those. Fraud is undoubtedly a significant and growing threat. Victims of fraud can suffer both serious financial and emotional harm, and we know that the money fraudsters make can fund other serious and organised crimes.

Public procurement is an important area of focus. Through the Procurement Bill currently going through Parliament, we aim to deliver a step change in transparency, with notices mandated for direct awards and publication requirements extended from planning to termination, including contract performance. This will embed transparency throughout the commercial life cycle so that the spending of taxpayers’ money can be properly scrutinised. Not only will this allow better detection of fraud and corruption; it will also enable better value for money and efficiency.

I will digress briefly on PPE, raised by the noble Baroness, Lady Jones. Contrary to allegations of potential conflict of interest in the awarding of contracts, the National Audit Office made clear that it

“found that the ministers had properly declared their interests, and we found no evidence of their involvement in procurement decisions or contract management”.

Our priority throughout the pandemic was saving lives. More than 19 billion items of PPE were delivered to front-line staff to keep them safe. The normal tendering process takes a minimum of 30 days; this was obviously not practical under those circumstances. It was essential that we were able to act quickly in an emergency. Under rules that existed years before Covid, contracting authorities are allowed to award contracts directly when there is a situation of

“extreme urgency brought about by an unforeseeable event”.

Obviously, Covid was that.

The higher-priority lane was one way of helping us to identify credible opportunities for PPE procurement so that front-line workers received the protection they needed. Ministers were not involved in the decision to establish the high-priority lane, nor were they offered a decision on whether this should be created. This was an internal process within the PPE cell, led entirely by officials. I could go on but I think that covers the principal questions asked.

I hope noble Lords will forgive me for leaning forward. Unfortunately, my brief is slightly between my glasses and non-glasses range so I have no choice but to do so.

Tackling fraud more broadly requires a unified and co-ordinated response from government, law enforcement and the private sector to better protect the public and businesses, reduce the impact of fraud on victims and increase the disruption and prosecution of fraudsters. That is why we will publish a new strategy to address the threat of fraud against citizens. Whatever form it takes, fraud is a despicable crime that we must confront with all the energy and expertise we can summon.

Corruption not only undermines trust in our democratic institutions, as all noble Lords have noted; it also creates vulnerabilities that our adversaries can exploit. We must remain alive to those risks, which can undermine development, stifle economic growth and threaten global stability. We must also ensure that we keep the protection of our national security at the forefront of our efforts while maintaining the highest possible standards in public life.

The National Security Bill, currently before Parliament, completely overhauls our espionage laws and creates new measures to enable our law enforcement and intelligence agencies to deter, detect and disrupt the full range of modern-day state threats. The new foreign influence registration scheme, which has been added to the Bill, aims to strengthen the resilience of the UK political system against covert foreign influence and provide greater assurance around the activities of specified foreign powers or entities.

Many noble Lords referred to the role of businesses. Business has a huge role to play, of course, particularly as we seek to strike new trading relationships across the world. We are asking businesses to compete in new markets and be innovative in their approach. This is especially vital in times of global economic hardship but corruption can be a hidden tax on companies, denying them a level playing field. This must be countered.

[Lord Sikka (Lab)]

Forgive me for this intervention; I will be quick. How does the Minister reconcile what he has said with the statement made by Chris Philp, who is, I believe, the Treasury Minister? He said that the Government will ensure that

“no business under 500 employees is subject to business regulation”

and that this will be extended to businesses with up to 1,000 employees in due course. How can that be reconciled with any of these anti-fraud and anti-corruption strategies?

[Lord Sharpe of Epsom (Con)]

I apologise to the noble Lord; I will have to ask the relevant Minister what he meant by that. I have not read that particular statement, so I cannot help him.

As I was saying, this must be countered. We are seeking strong relationships with our new trading partners to reduce these risks, and our businesses operating abroad know that they must comply with the high standards set in the Bribery Act 2010—a piece of legislation noble Lords have previously found to be a “global gold standard” in their post-legislative scrutiny. We are actively enforcing the Bribery Act. Operational successes in recent foreign bribery cases over 2021 included the Serious Fraud Office’s conviction of Petrofac Ltd—resulting in over £77 million in fines, confiscation orders and costs—and a deferred prosecution agreement with Amec Foster Wheeler Energy Ltd, resulting in £103 million in penalties and costs that also included compensation to Nigeria. On the subject of DPAs—deferred prosecution agreements—and in answer to the noble Lord, Lord Evans, they have raised over £1.6 billion.

I am being told that I am out of time. I apologise to those I have not managed to answer, particularly the noble Lord, Lord Sikka, with his very specific query; I will get back to him on that. I am grateful to all those who have participated in this debate, and I agree: these issues strike at the heart of our democracy, security and economy. As I have made clear, the Government are absolutely determined to root out and tackle corruption however and whenever it appears.