Digital Markets, Competition and Consumers Bill

Debate between John Penrose and Kevin Hollinrake

Consideration of Lords amendments
Tuesday 30th April 2024 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

May I start by saying that this was and still is a good Bill? It does an enormous number of very important things and I am glad to see that it has broad acceptance and agreement on both sides of the House, although with some minor points of disagreement. It contains many of the measures that I personally called for in my Government-commissioned review of competition policy called “Power to the people” a little while ago, and it definitely updates and makes some much-needed changes to our competition and consumer laws. However, I share some of the concerns raised today about the Government’s opposition to four of the amendments that have come back from the Lords.

I do not have worries about the Lords amendments themselves because, as we have just heard from the Opposition Front-Bench spokesperson the hon. Member for Rhondda (Sir Chris Bryant), they mainly seek to restore the effect of clauses that were in the Bill when it originally came to this House. What worries me is that the wrong people are clapping. The changes that the Government have made, in many cases by seeking to resist Lords amendments, seem to many people to be on the side of the big tech firms rather than on the side of consumers, of sharper competition, of more consumer choice and of standing up for the man and woman in the street. I therefore earnestly hope that the Minister will be able to channel his historical zeal for these things in his closing remarks and reassure me, and I am sure others as well, that that is not the Government’s intention and that they remain committed to those things—that the fire still burns brightly in his eyes to make them happen.

I start by saying that the Government have already done some of that work with amendment (a) in lieu of Lords amendment 38—they have replaced the Lansley amendment with a version of their own—dealing with the amount of time that the Secretary of State can take in dealing with guidance put forward by the CMA to make sure it is not unduly delayed. That is extremely welcome and a very good measure, and I enthusiastically support it. However, we have already heard about two other things in particular. One is the role of judicial review in dealing with penalties. I share the concern that in moving away from a judicial review standard for penalties to a full merits review we may get bleed-across—that clever lawyers working for big tech firms may effectively be able to broaden the scope through clever use of legal techniques to prolong their attempts to walk backwards slowly and prevent justice from being done. I therefore devoutly hope that my good friend the Minister will be able to clarify that he expects to be able to show to us—either from the Dispatch Box now, or in guidance or another kind of clarification in due course—that it will not be possible for bleed-across to happen and he will be able to take any steps that may be needed.

[Kevin Hollinrake]

I am very happy to make that commitment. We believe the Bill draws a clear distinction between infringement decisions and penalty decisions. After taking legal advice on this matter and looking at previous competition case law considering similar issues, the Government consider that neither the Competition Appeal Tribunal nor the higher courts will have any trouble making that distinction for digital markets appeals. We have clarified that in the explanatory notes, which I hope provides reassurance that there is little risk of bleed-back from the merits appeal standard for penalty appeals to appeals on other types of decisions.

[John Penrose]

I thank the Minister for that intervention and, emboldened by my success so far in getting him to front up, I move on to my second point, which has similar concerns around it: the issue of countervailing benefits. We have heard from the Opposition spokesman about that, so I will not go through it all again, but it would be enormously helpful if, either now in a further intervention or in his closing remarks, the Minister could be clear about the new wording, which we have already heard about in his speech. I hope he will make it clear—again, either through clarifications now or in guidance—that it is not intended to be in any way a lower standard than what we had before when this Bill first came to the House, and that it is either the same or tougher. I am pausing just briefly to see whether he wants to intervene.

[Kevin Hollinrake]

rose—

[John Penrose]

He does, which is marvellous.

[Kevin Hollinrake]

The revised wording did not change the effects of the clause. Strategic market status firms will still have to prove that there is no other reasonable and practicable way to achieve the same benefits for consumers with less competitive effect.

[John Penrose]

We are making marvellous progress and ending up with changes being confirmed on the Floor of the House in a way I do not think I have seen before, so let us keep going.

--- Later in debate ---

[John Penrose]

I am sure the Minister will grab that opportunity in his closing remarks, if he so wishes. At least he has taken the opportunity to stand up and give us public reassurances on the record about the standard that is intended. It is clear that it is no lower than it originally was, which is an important change.

[Kevin Hollinrake]

rose—

[John Penrose]

And again.

[Kevin Hollinrake]

The shadow Minister and I are having this debate vicariously, but I just note that the wording in the explanatory notes has not changed.

[John Penrose]

I am on a roll here.

The final of the four issues in question is proportionality. We have had the debate already, so I do not propose to repeat the concerns, but it would be helpful if the Minister, either now or in his closing remarks, clarified that the new and amended standard that is to be applied is no lower. I think he said something to that effect earlier to the former Attorney General, my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright), but it would be helpful just to nail that one down and drive the nail home, if the Minister can. It is important for everybody to understand whether that new standard is any lower at all; it should be the same or higher.

[Kevin Hollinrake]

indicated assent.

[John Penrose]

The Minister is nodding, but I do not know whether he intends to intervene again.

[Kevin Hollinrake]

indicated dissent.

[John Penrose]

We will have to preserve our souls in patience for the Minister’s closing remarks. I will declare victory very shortly. It has been a helpful set of interventions, and I thank him for that.

My final point is not related to these Lords amendments, but to a commitment that the Minister made at the Dispatch Box on Report in response to an amendment on better regulation that I had tabled with the support of a great number of parliamentary colleagues. He made a commitment that a set of conclusions, matching a set of standards whose wording he and I had agreed in advance, would be in place before the Bill receives Royal Assent. Clearly we are getting close to that date—I hope very close—and I understand that a Government White Paper may be in the offing, but I am not sure whether that will arrive before Royal Assent. My point is intended not to delay Royal Assent, but to bring forward the White Paper or whatever document the Government may be thinking of.

Based on conversations I have had so far, I am also concerned that not all the commitments the Minister made from the Dispatch Box may be in that White Paper. I therefore urge him to make sure that between now and Royal Assent, he works assiduously with his fellow Ministers to make sure they have got the memo that should gone round after he made those commitments.

Oral Answers to Questions

Debate between John Penrose and Kevin Hollinrake

Thursday 7th March 2024 Commons Chamber

[Kevin Hollinrake]

The hon. Gentleman is right to raise this issue, on which we do much. For example, we make sure that people can anonymously report the underpayment of the national living wage through either His Majesty’s Revenue and Customs or ACAS. It is really important that we do that. We have labour market enforcement undertakings and orders, and we provide the tools for serious cases. As of April 2022, 40 employers were on labour market enforcement undertakings and 18 employers have been prosecuted. The message should be loud and clear to employers that if they do not comply with the law, we will take action.

[John Penrose (Weston-super-Mare) (Con)]

17. When she plans to publish the smart data road map.

[The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)]

My officials are co-ordinating and leading on the drafting of the road map, which will set out the Government’s ambition for future smart data scheme development across seven different sectors. We will publish that very shortly.

[John Penrose]

I am delighted to hear that the road map is coming very shortly. My hon. Friend will recall that I asked this question just before Christmas and he said it would be out in January. We were then hoping it might be coming out in yesterday’s otherwise excellent Budget, but it did not. Other countries are coming up on the rails and trying to overtake us. The noise of the approaching herd is growing in our ears, so can we please move as fast as possible on this?

[Kevin Hollinrake]

My hon. Friend is right to hold our feet to the fire on this. We are pressing forward and we are determined to get it right, not just out quickly. He rightly said that I set the ambition to get it out in January, and that has put officials’ feet to the fire as well in getting it out. I signed off the road map yesterday, so it should be out very shortly. I do not agree that other nations are hot on our heels on this issue, as we are way ahead. There are billions of calls in open banking every month, and millions are using this every day without even knowing it. We are going to extend those opportunities to energy, telecoms and, crucially, small and medium-sized enterprise finance, making the journey for SMEs to get business finance far easier.

Oral Answers to Questions

Debate between John Penrose and Kevin Hollinrake

Thursday 30th November 2023 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

8. If she will make a comparative assessment of the adequacy of the number of statutory duties of the Competition and Markets Authority and other regulators reporting to her Department.

[The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)]

The CMA has a primary statutory duty to promote competition both inside and outside the UK for the benefit of consumers, which provides the CMA with a clear, strong focus on delivering for consumers. In our recent steer to the CMA, we did point out how very important it is that it focuses also on economic growth.

[John Penrose]

Regulators such as the CMA have huge powers, so Parliament must give clear instructions about how those powers should and should not be used. Does the Minister agree that the CMA’s instruction is a model of the kind of clear and strong legal duty that leaves no doubt in regulators’ minds about the job that Parliament has asked them to do. Will he join me in pushing for equally clear and focused duties for other economic regulators where, sadly, the same cannot currently be said?

[Kevin Hollinrake]

I thank my hon. Friend for his question and for his very important work in this area. I know that reducing the regulatory burden is a cause that is very close to his heart, and to the hearts of those in the Chamber today who supported his amendment in the recent Digital Markets, Competition and Consumers Bill. That view is also shared by myself and by the Secretary of State. We are very keen to make sure that, as well as ensuring that sectors are well regulated, our economic regulators focus on competition and economic growth.

--- Later in debate ---

[John Penrose (Weston-super-Mare) (Con)]

T7. In yesterday’s data Bill debate, Ministers gave clear and positive replies about the importance of interoperable data standards, and the need for an investable timetable of which sectors will get smart data and when. However, they were much less clear—one might even call it bashful—about giving a date for when that timetable will be published. Is my hon. Friend the Minister willing to be a little less coy this morning?

[The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)]

I am not known for my coyness. My hon. Friend has done very important work in this space, and we share his ambition: I chair the Smart Data Council, and we are planning to open up databases right across our economy to allow for more competition in the worlds of energy, telecoms, and buying and selling houses. He has been a great champion of all those measures. I am very keen to bring forward the roadmap that my hon. Friend has referred to, hopefully as early as January next year.

Economic Crime and Corporate Transparency Bill

Debate between John Penrose and Kevin Hollinrake

Consideration of Lords amendments
Monday 4th September 2023 Commons Chamber

[Kevin Hollinrake]

We intend to launch the consultation by the end of the year, and we would like the regulations in place as soon as possible. It is quite clear that we want to do that. We all agree on the transparency—I agree with the right hon. Gentleman’s point that sunlight is the best disinfectant. I am absolutely keen to do it, but we must make sure we do it right. We do not want any unintended consequences. It is right that we consult widely with the different sectors to make sure that this legislation—and the regulations, when they come—are fit for purpose.

[John Penrose (Weston-super-Mare) (Con)]

When my hon. Friend does his consultation, will he reassure those of us who are anxious to maintain the distinction between significant control and general beneficiaries? If he is going to try—rightly—to protect minors for example, who he mentioned in his earlier remarks, will he focus on people who may be misusing trusts because they have control of them? That might be trustees—in some cases it could be beneficiaries if they have effective control of the trustees as well, but in many other cases it will not. Will he try to make sure that he makes that distinction? It is absolutely essential and reads directly across from the persons of significant control legislation that we have elsewhere in disclosing information about shareholdings as well.

[Kevin Hollinrake]

I thank my hon. Friend for all his work in this area. He makes the point very well. We need to ensure that when we bring forward these measures, they are properly considered and do not result in unintended consequences. He may want to raise those points as part of that consultation when we launch it.

The Government firmly believe that their own amendment and their commitment to consult better achieve the aim of improving trusts’ transparency, as intended by Lords amendment 117, while ensuring that we have time to analyse and stress test the risks in greater depth, including legal risks. We therefore do not support the amendment.

Lords amendment 151, in effect, removes the threshold, as right hon. and hon. Members have already raised, that the Government introduced as part of the failure to prevent offence, which exempts small and medium-sized entities. As I have set out, the Government are extremely mindful of the significant pressures that small companies are under, and do not want to place unnecessary and duplicative burdens on legitimate businesses.

Digital Markets, Competition and Consumers Bill

Debate between John Penrose and Kevin Hollinrake

2nd reading
Wednesday 17th May 2023 Commons Chamber

[Kevin Hollinrake]

My hon. Friend makes a good point. I wish him the best of luck in the election this afternoon. It is for a very important Committee that will scrutinise this legislation. The final offer mechanism is innovative and represents a positive way forward, in that it will bring parties to the table and they will both have to make sensible offers relating to how they see a fair resolution. This will avoid them putting unrealistic claims on the table, and it could well help the news industry and many other sectors.

[John Penrose (Weston-super-Mare) (Con)]

Like my hon. Friend the Member for Folkestone and Hythe (Damian Collins), I was concerned that the Minister might be moving on from part 1 a fraction early. This is a welcome Bill that will do an enormous amount of good, and it has allowed me to tick off a large number of the recommendations that I made in my report, which he referenced earlier. The concern about the Digital Markets Unit’s powers is not that they are not good enough; it is that they might over time add more and more of a regulatory burden as ex ante powers build up over the years. Does he have thoughts on how he can ensure that, after those ex ante powers have been in place for a couple of years as regulations, the CMA can analyse whether they could perhaps be replaced by pro-market reforms?

[Kevin Hollinrake]

I am grateful to my hon. Friend for his engagement on this. We have discussed this at length many times, both in my role as a Minister and in my previous role as a Back Bencher, when we looked at the best form of regulation. I think we both agree that ex post regulation is preferable to ex ante regulation, as is a pro-competitive environment, as I said earlier. We should step in only when there is market failure. Of course we should look at the powers and ensure that they are being used wisely, and I have confidence that the CMA will do that. There are a number of checks and balances on the CMA and the DMU, not least through the competition appeal tribunal and the courts, which ensure that decisions are valid and worthwhile, but we should also have a good debate on how we scrutinise the DMU and CMA generally. Obviously they report to Parliament every year, and the Select Committee work is also important. I think that my hon. Friend and I would agree that the best way to regulate markets is through competitive environments, and that is what we should always favour in this discussion.

--- Later in debate ---

[Kevin Hollinrake]

The annual cost to business is £178 million, which we must consider carefully when we bring forward new regulatory burdens, but most people will think that the measures are needed because there is a huge consumer benefit of roughly £1 billion a year over 10 years, so it is important that we strike that balance. I am not aware that the cost to the state has been calculated, but my right hon. Friend and I are probably most concerned about the cost to business.

[John Penrose]

I thank the Minister for his generosity in giving way again.

The Minister’s response to the question about regulatory burden mentioned the welcome, necessary and important review of economic regulators. However, he will understand that enormous regulatory burden is created by other regulators. There are only eight economic regulators, but there are dozens of other regulators, many of which create vastly more regulatory burden than the economic regulators, although the economic regulators are not exempt. What plans does he have to address those regulatory burdens, which are much broader and cover much more of the economy?

[Kevin Hollinrake]

My hon. Friend makes a very good point, and it is why only a few days ago we published a framework for better regulation to look at these things in the round and to make sure we have regulators that serve the public, rather than the interests of the regulator. We do not want to see regulatory creep for any purpose other than consumer benefit, and he and I will continue to have significant dialogue on those issues.

Some Members will argue that we should legislate more like the EU’s Digital Markets Act, by using this Bill to create sweeping, one-size-fits-all measures. However, our Brexit freedoms mean we can draft legislation that drives innovation without placing blanket obligations on firms or creating unnecessary regulatory burdens. Some will respond to the Bill by saying that we should go harder against big tech, but I remind them that the Bill’s primary purpose is to reduce economic harms, to boost competition, to create a fair and level playing field, and to give consumers greater choice and better prices.

We need to act, but we must act proportionally because tech firms make a valuable contribution to the economy and our lives. Big does not equal bad. A war on tech will not create growth. It has already been argued in this debate that the CMA has enough power, and my response is that technology is changing rapidly and our watchdogs need to be equipped to fully support businesses and consumers in this competitive world.

I look forward to engaging with colleagues as the Bill makes its way through the House, and I hope Members will give it their backing so that the Government can continue our work of protecting consumers, increasing competition in all markets and growing the UK economy.

Economic Crime and Corporate Transparency Bill

Debate between John Penrose and Kevin Hollinrake

2nd reading
Thursday 13th October 2022 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

I guess the simplest way to greet this Bill is with a massive cheer of hooray. Many of us in this place today have been waiting and waiting for a very long time, and it is really good to see it arriving on the Floor of the House at last, and to see it being welcomed from both sides. There is cross-party agreement on the fact that it is due and, frankly, past due to plug some of those gaps, and it is great news that it is here.

Many of us have been pushing for a very long time to get such things as beneficial ownership transparency, so that if we want to find out who owns a particular company, we do not have to go through multiple layers of shells and other bits and pieces, and finally end up in a secrecy jurisdiction. We are, at least in theory, able to find somebody in charge or exercising effective control over that company who has a pulse, and that is the ultimate guarantee that we are getting somewhere.

We have already heard that many further steps will be required to make that actually bite properly, but in principle is it not great that we are here and is it not great that this stuff is happening? I am delighted to be able to welcome it along with everybody else here today. However, you can probably tell, Madam Deputy Speaker, that I am working up to a but at the end of that sentence. In fact, I am working up to two buts, if I may.

The first but is the point raised by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) about the failure to prevent mechanism or indeed any other effective mechanism ensuring that for a corporate—I am using “corporate” in the broadest sense to mean not just companies, but all corporate vehicles, including things such as trusts—there is some sort of proper personal liability for the people running it if they allow things such as money laundering to happen. Failure to prevent is probably the most obvious way to do it, and it was blessed and agreed to for fraud, as an extension of where we are now, by the Law Commission in its recently published report. However, there is a whole range of other crime and economic crime that it does not cover, and the Law Commission said that there may be other mechanisms than failure to prevent.

It does not really matter what that the mechanism is, except that it has to be better than what we have at the moment, and we absolutely have to push forward on what is one of the biggest remaining holes in the coverage of our protections. My hon. Friend is quite right that until we do this—until we plug this particular gap—we will still end up with a huge opportunity for thieves, kleptocrats and organised criminals of all kinds to do what they do. I am afraid that they are incredibly entrepreneurial people, and they are very creative and stay ahead of whatever mechanisms we come up with. It is only by doing something like that that that we will close the gap properly and get an all-encompassing roadblock to what they do.

It is therefore absolutely essential that, whether it is with failure to prevent or some other mechanism, we do not accept that the status quo is adequate in this area, and we must, all of us from all parts of the House, send a resounding message to Ministers and to law enforcement that this must not be allowed to persist. I may be being a little bit over-optimistic, but I think we heard from the Home Secretary earlier that the Government plan to come back to, look at and take forward—I think that was the phrase she used—the report from the Law Commission. I hope she will hear from all of us here that that is good news, but that we would like to take it forward briskly, promptly and with maximum energy, if we can.

The second but is the point about enforcement. It is all very well to have brilliant legal structures, brilliant laws passed and regulations in place saying, “Thou shalt do this” and “Thou shalt not do that”, but it is no flipping use at all if there is no one there to actually police it and enforce it. While there are an awful lot of people working extremely hard in all sorts of organisations —the National Crime Agency and others—to try to do this enforcement, we all know that there is an enforcement gap in this country compared with, for example, America, which is an awful lot better at it than we are, in this particular area at least.

Therefore, we are going to have to raise our game here. I wish there was a Home Office Minister sitting on the Bench alongside the excellent BEIS Minister at this moment, because the Home Office is the Department that will be under funding pressure to raise its game in order to make sure there are enough resources for these enforcement organisations to do their job, and to do it better, more effectively and more efficiently than they are at the moment. Until they do that, we are always going to be a weak link internationally. I do not think we should kid ourselves about where we are at the moment, because we are a bit of a weak link at the moment.

That brings me on to the other half of my point about enforcement, which is that the points made about whistleblowing by the APPG chair, my hon. Friend the Member for Cheadle (Mary Robinson), really matter. As I said to the shadow Home Secretary earlier, we can turbocharge and maximise the effectiveness of our existing enforcement organisations if we get our whistleblowing regime upgraded and improved very dramatically from where it is now, because whistleblowers are force multipliers for the police. They make the police’s life easier, bring them good, warm leads, blow open cases and provide the evidence that is needed to create effective prosecutions. Without them, the job is a great deal more expensive and less effective; with them, the police can do their job much faster and better. The kleptocrats, the oligarchs and the various different crime lords are a great deal more scared of the UK with a decent whistleblowing regime than they are without one.

That causes a problem because Ministers will say, “Ah yes, but there isn’t enough space in this Bill to provide upgrades to the whistleblowing regime.” Many of us asked that question before we got here today and we all had the same answer, which is, “Yes, it is very important, but not here, not now, and not just yet.” Frankly, that is not good enough or adequate.

I appreciate that the constraint on space is real and I am not trying to pretend it is not, but there are other things that Ministers could do that do not require this Bill and that could be done through, for example, little bits of secondary legislation. If Ministers can commit to make those changes—ideally in the Minister’s summing up this afternoon or certainly in Committee—the pressure for primary legislation and, dare I say it, for endless rounds of proposed amendments, which people may be minded to table later in the Bill’s progress, either here or in the other place, will be greatly reduced. So it is in everybody’s interest for Ministers to say, “Yup, we are going to do that.” If the Minister is able to stand up later this afternoon and say, “Yes, we will do these four things during this parliamentary Session”, that will relieve an awful lot of pressure in this area, because we will all know that proper progress will be made.

The things that would reduce the pressure and the need for primary legislation in the Bill are very simple. First, we could extend the Public Interest Disclosure (Prescribed Persons) Order 2014 to include all the professional regulators. At the moment, that order includes some of them, but if all the professional regulators were included that would massively improve the protection available. It would mean that when somebody says, “I have seen something that is wrong that needs to be dealt with, and I am going to blow the whistle and provide the information,” they would not be the ones who end up as victims, unemployable or completely monstered, either by their former employer or the profession in which they work. Extending the prescribed persons order would mean that those professional regulators have a duty to look after them. At the moment there are big gaps in the list, but it would be relatively straightforward and would not require primary legislation to plug those gaps. Why on earth are we not doing that? Why can we not do that now? It would only take secondary legislation, so let us get on and do it.

Secondly, we could expand the definition of “a worker” under the existing regulations. At the moment, employees who blow the whistle are better protected than trainees, non-executive directors or suppliers. Those sorts of people are very well placed to see wrongdoing, may know what is going on and may have good audit trail evidence to provide, but woe betide them if they blow the whistle, because they ain’t protected as they should be and as they would be if they were an ordinary employee. That seems to me and an awful lot of people to be jolly silly and a massive gap, and it would be easy to fix.

[Kevin Hollinrake]

My hon. Friend is making a fantastic speech. On that point, I talked about my constituent, Ian Foxley, who was a contractor working overseas. Those sorts of people are not covered by the existing legislation. Had they been, he would have been able to seek redress through the company he worked for. As it is, he cannot.

[John Penrose]

That is absolutely right and a very good example. Again, it is relatively simple to fix. It would not require primary legislation, it would reduce the pressure on the Bill and the pressure from all of us here trying to shoehorn extra things into the Bill. In the interest of giving the Minister an easy time, which we all want to do, if he could make these commitments for some time in this parliamentary Session, that all goes away. We would end up with something an awful lot better and quicker.

Thirdly, there are a series of money laundering regulations that can be upgraded and improved. Again, that will not need primary legislation and, again, that will help dramatically.

Finally, we must improve the process for raising concerns. Lots of other countries have online systems, with websites that work easily and are centralised. People know that if they raise concerns through the centralised system, they are automatically engaged with the necessary protections and have the right degree of protection, so they are much more comfortable that they will not end up on the receiving end of victimisation from the people they are trying to blow the whistle about.

Those are the four items. They are easy for the Minister to say—nice and simple. Not only that, I am sure he will have the support of his Home Office counterparts, because they will be the ones whose budgets will be under pressure to improve and upgrade the resources available to the investigative organisations, such as the NCA. Such organisations will otherwise have to be paid more money in order to carry out investigations; they will still need a bit, but they will be able to use it much more effectively if we can make those four changes. I hope that is helpful. I look forward to the Minister’s comments. I will have my pen poised to tick these points off. I am hopeful that he will be able to be helpful.

Economic Crime: Law Enforcement

Debate between John Penrose and Kevin Hollinrake

Thursday 7th July 2022 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I beg to move,

That this House notes that economic crime costs the UK economy at least £290 billion per year; recognises that law enforcement agencies are significantly under-resourced to deal with the scale of the problem and can be unwilling to properly enforce existing laws; is concerned at the fragmented nature of the enforcement landscape; and calls on the Government to bring forward an economic crime enforcement strategy that allows for a significant increase in resource to expand and restructure the fight against economic crime, including money laundering and fraud.

I thank the Backbench Business Committee for granting this important debate and the right hon. Member for Barking (Dame Margaret Hodge), who has worked closely with me on this issue. Too often in this place, we talk about legislation and not implementation. As the motion says,

“economic crime costs the UK economy at least £290 billion per year”—

probably a lot more than that—and our agencies are “significantly under-resourced” and “fragmented”.

I would like to say that things will get better, but actually they will get much worse. That is not a criticism of the Government or any of our agencies, although there are criticisms to be levelled; the reality is that things are moving so quickly in this space and in the ability of organised criminals—people who deal drugs, traffic people across continents, fund terrorism, and steal assets from foreign jurisdictions and foreign nations —to move money around.

Let me set out an example of how easy this is becoming—these are all instances running through one platform. There is a hackers group called Lazarus, which is in effect a state-funded agency for North Korea that funds the North Korean weapons programme. There is also Hydra, a dark net drug dealing network, as well as Grandefex, which is run by organised criminals, and Russian Government agencies. The thing they all have in common is that they use a crypto-exchange platform called Binance, set up by a guy called Changpeng Zhao.

Reuters has investigated how those organisations used Binance to move money around totally anonymously between 2017 and 2021. Until 2021, this was regulated by the Financial Conduct Authority, but still for this crypto -exchange, which moved bitcoins and lots of other currencies totally anonymously for those enterprises —for those funding terrorism and other nefarious enterprises —all people needed to do in order to register an account was to enter an email address. That was all people needed to do. There were no “know your customer” checks, no “know your client” checks and no ID requirements. People just had to enter an email address, which could easily be a fake one, and the money was moved around totally anonymously.

The owner of the organisation, Mr Zhao, said as recently as 2020, when speaking to his own staff, that he was driven by one thing and one thing only: growing his enterprise. This platform has now been banned in the UK as a regulated activity, but that does not stop UK people actually using it, because that is obviously how the internet works. He told his staff to “do everything” to increase market share, and spoke about “know your client” checks as being “unfortunately a requirement”.

The investigation by Reuters found that £2.35 billion was moved around in this way for nefarious ends, but a couple of billion pounds is just scratching the surface when we know that the amount of money washing through the UK is in the hundreds of billions of pounds. The UK plays a key role in this, and it is a role that we must acknowledge, and we must take responsibility for clamping down on this. We are getting nowhere near doing so at the moment.

We know that roughly 40% of our crime is economic crime, yet only 0.8% of our resources in man hours are dedicated to tackling economic crime, so there is a huge disparity. I think it is fair to say that the figure of £290 billion a year is a conservative estimate. It represents about 14.5% of our GDP as a cost to the UK economy, yet the application of resources to it adds up to 0.04% of GDP. There is a massive gulf in the cost to society and to this nation, as well as in many other ways. It is not just a financial cost, of course. As I say, there is drug dealing, people trafficking and all the things we are trying to tackle, yet money goes out through the backdoor to all these illegal enterprises.

Action Fraud reports on the impact on individuals, and I think that all of us, as constituency MPs, deal with individuals who have had money stolen from their accounts through things such as authorised push payment fraud. Action Fraud is not the most fit for purpose organisation on the planet. Anybody who has used it knows that the information just goes into a black hole, which is what Action Fraud is. It is going to be reformed, but just changing something’s name does not make it work. However, according to Action Fraud’s figures, £2.35 billion a year goes in that kind of small-scale fraud, which damages our constituents and small businesses directly.

[John Penrose (Weston-super-Mare) (Con)]

I congratulate my hon. Friend and the right hon. Member for Barking (Dame Margaret Hodge) on bringing this important debate to the House. Does he agree that to some extent our public debate about this is stuck in a 1980s time warp? We are all still talking about bobbies on the beat, when increasingly we need to have bobbies behind screens, patrolling digital highways rather than pavements. Without that, public trust in maintaining law and order and maintaining the credibility of the system will continue to be serious eroded.

[Kevin Hollinrake]

That is absolutely right. My hon. Friend has much experience and expertise in this area as the former Government anti-corruption champion. He is absolutely right that we are tackling this in an analogue way in a digital era, and that we need to look at it completely differently. This is about enforcement and resources, and understanding the scale of the problem and meeting that with the right scale of response. However, we also need to look at legislative areas, because there are things we could do to make sure we get a better bang for our buck from our enforcement agencies, rather than just have more and more people, and I will talk about some other measures shortly.

On my hon. Friend’s point, at the moment 0.8% of our police and enforcement agencies’ time is spent tackling economic crime. Of the 20,000 new police officers who are going to be recruited, 725 are going to be dedicated to economic crime. That is better, but it is still only 3.6% of that cohort, so he is absolutely right. Her Majesty’s inspectorate of constabulary says that 90% of cases of economic crime are not even looked at, which is shocking.

The FCA is responsible for controlling money laundering in our financial organisations. Most of this runs through financial organisations—not just through the likes of Binance, which are shadowy enterprises—and I will talk about our main institutions in a moment. For money laundering purposes, the FCA regulates 22,000 organisations, which is a huge number, of which 5,000 are defined as high-risk organisations for money laundering. Last year it did 200 checks—only 200 out of those 5,000—and some of those were desktop checks, for money laundering. I would argue that we are never going to be able to tackle this just by having more and more people, although we do need more people.

This is not just about Binance. I am sure that, sooner or later, we will catch up with Binance. At some point in time, it will be banned, fined or something. In particular, the German regulators and the US enforcement agencies are on to it. Binance is based in the Cayman Islands, as Members might imagine. This is about our UK institutions as well.

If we look at our banks, we see that they have a horrendous record. HSBC was fined £1.4 billion for facilitating money laundering for Mexican drug cartels—the Escobars of this world—in 2012. That was a £1.4 billion fine, and it was fined another £64 million in 2021 for facilitating money laundering offences. In 2019, Standard Chartered was fined £840 million in the US and £102 million in the UK. In 2021, MT Global was fined £23 million by Her Majesty’s Revenue and Customs for money laundering offences. NatWest was fined about £260 million this year, which was the first ever corporate criminal prosecution by the FCA. I welcome the fact that this year is the first time this has ever happened for historical money laundering offences. UBS has had the biggest ever fine—£3.2 billion by the French authority in 2019.

Danske Bank has facilitated £200 billion of money laundering offences, but it has not been fined yet. This has been identified, and it will be fined for the £200 billion of Russian money coming out of Russia and being spread around the world, with it all going through small banks in Estonia via Danske Bank—horrendous. We talk about how Putin funds his invasion of Ukraine. He does so by keeping a coterie of people around him who are stealing Russian assets and making him—there is no doubt about this—the wealthiest person in the world. However, we are facilitating this, because UK companies are involved in the shell companies moving that money around.

I could cite other examples of economic crime from my involvement with the all-party parliamentary group on fair business banking. Criminal fraud at Lloyds HBOS was proven in 2017, and the cover-up associated with that is an utter disgrace. We are yet to see the Dobbs review, which later this year should identify the scale of the cover-up by Lloyds of what went on at HBOS. We have also seen the problems with Royal Bank of Scotland’s Global Restructuring Group, which devastated tens of thousands of businesses, in effect by defrauding businesses of their assets. On all those occasions, all those businesses ever got was a fine. Not a single senior executive in any of those cases has gone to jail. What we need is personal liability or this stuff will just be seen as a cost of doing business. That is the reality.

Economic Crime (Transparency and Enforcement) Bill

Debate between John Penrose and Kevin Hollinrake

2nd reading
Monday 7th March 2022 Commons Chamber

[Kevin Hollinrake]

New clauses 14 and 27 both deal with the establishment of a commission for the protection of whistleblowers to do exactly what my hon. Friend is setting out.

[John Penrose]

I acknowledge that point. I am not sure whether the Government will be able to accept those proposals, but if they do not, I hope they will be able to make some commitments about what they intend to do very soon to plug the undoubted gaps.

My final point is about trusts. My hon. Friend the Member for South Thanet (Craig Mackinlay) intervened on the Home Secretary to make a point about trusts, and it is essential that we do not forget that one of the issues we are dealing with here is to do with companies, because they have been proven to be an excellent vehicle for covering up the ownership of assets. We have also heard from the hon. Member for Glasgow Central (Alison Thewliss) about the problems that have accrued for Scottish limited partnerships. It is equally true that trusts could be, and potentially are being, misused in exactly the same way. This legislation does something on the use of trusts when it comes to unexplained wealth orders, but it does not do the same thing for the disclosing of the settlers, the trustees and the potential beneficiaries of trusts for everything else. Those vehicles could easily be misused, and we do not want to come back in a couple of years saying, “If only we had thought to plug that loophole at the same time.” I hope that my hon. Friend the Minister will be able to deal with that omission and promise us some progress on that very soon.

Subsidy Control Bill

Debate between John Penrose and Kevin Hollinrake

3rd reading
Monday 13th December 2021 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

I rise to speak to the amendments in my name and that of my hon. Friends. I start by saying that there is a great deal to support about this Bill, and I think I mentioned that on Second Reading. This Bill is vitally important, not just because it is required under the terms of our leaving the EU, but because it does some very important things to how the future subsidy control regime will be applied. We have already heard that the central set of principles is crucial. The notion of pre-approval and allowing things to be done at pace to create a much less bureaucratic, much more nimble, much more predictable regime is overall hugely to be welcomed. I hope everyone will be able to sign up to that.

The Bill also means that I hope we will be able to move to a principle where we have as few exemptions and exceptions to our subsidy control regime as possible. It is essential that we have a subsidy control regime that does not allow loopholes through which—I am sure the Minister would never dream of doing such a thing—some less principled future Government might try to drive any sort of measures through that might involve either cronyism or economic distortions of any kind. It is essential that there are minimal loopholes and that the Bill covers as evenly and as predictably as possible the entire economy.

It is no accident that this country has had one of the lowest levels of public subsidies granted in recent years under the guise of the EU’s regime. For the free marketeers among us and those who care about economic efficiency and productivity, that should be a source of pride, and we should not be trying to overturn or change that in future. In fact, I made that point in the Government-commissioned competition policy review that I was recently asked to do, which has a chapter specifically on subsidy control that says that less is definitely more. It is far better to do less in the area and therefore ensure more space for companies and business leaders to compete on their organisations’ abilities and the quality of their products and services rather than on whom they know in Government and, as a result, how much rent and subsidy they can wring out of their political connections. It is essential that we remember that, adhere to it and persist with it as much as we can.

That is crucial, because the Bill done right ought to be a major piece of post-Brexit dividend that we should seek to achieve as a result of leaving the EU. If we get it right, we can have a faster, more nimble and more economically rational way of dealing with subsidies. We can keep the best of the objectivity that everyone said we had under the EU but do it in a faster, more digitally enabled and generally more modern, less bureaucratic and less covered-in-red-tape fashion. Such a post-Brexit dividend is here for the taking. It is waiting for us to pick it up off the table, provided that we can do it correctly.

My concern—this is why I tabled amendments 1 to 8 —is that while the Bill does an awful lot of that right, we may be about to make one critical error. We have already heard the points about transparency made by the SNP spokeswoman, the hon. Member for Aberdeen North (Kirsty Blackman). It is all very well to pre-approve and to have a more flexible, faster and more nimble approach, but that will work only if we have an army of armchair auditors who can spot when something is going wrong and say, “Hang on a second. This is a marvellous principle, but it isn’t being adhered to in this case.” Without transparency, hon. Members, people in our constituencies and the journalists who pore over such things will not be able to do so until it is too late. In a digitising economy, speed matters, too. If it cannot be done before it is too late—or at all—companies will be driven out of business. Once all that is left is rubble, the jobs are lost and the investment is forgone, it is too late to come back two years later—or even eight months later in fast-moving sectors—and say, “We’re terribly sorry; we got this wrong.” We need to be able to move rapidly and pick up things up as soon as possible. That is why I tabled the amendments.

[Kevin Hollinrake]

My hon. Friend makes a strong point about armchair auditors in particular. As soon as the US published all loans of $150,000 under the paycheck protection program—its version of the coronavirus business interruption loan scheme—$30 billion was paid straight back to the US Treasury on the basis that companies did not want that visibility. It was not that money was taken fraudulently—perhaps it was taken inappropriately.

Subsidy Control Bill

Debate between John Penrose and Kevin Hollinrake

2nd reading
Wednesday 22nd September 2021 Commons Chamber

[John Penrose]

The right hon. Gentleman is right, particularly because in the modern digitising economy, everything is moving faster and faster every year. Even if that issue was not a problem before—and I think it probably would have been—it certainly would become one in future. There is scope for tightening that part of the Bill technically, so as to deliver on the principles that the Secretary of State has rightly enunciated regarding timing, the degree of transparency and the level of disclosure. As we will have nothing to hide, we should not hide it; we should get it all out there and ensure that it is available.

[Kevin Hollinrake]

My hon. Friend makes some strong points, and I absolutely agree with those about transparency. One objection to lowering the threshold to a few hundred pounds rather than £0.5 million might be the burden of red tape attached, but, as I understand it, the costs for having a database that includes pretty much every subsidy—about £20,000 per annum—are minimal.

[John Penrose]

My hon. Friend makes an important point. Indeed, he has led me to the final point in my speech. He is right to say—I know Ministers in the Department have this instinctively in the marrow of their bones—that we must not turn this into some bureaucratic red tape burden. Indeed, one chapter in the report that I was asked to write about competition policy refers to reducing red tape burdens. We all understand that too much of that will slow down even the best company and reduce its competitiveness compared with companies in other countries, so he is right to be concerned.

In this case, however, doing what I suggest should reduce the red tape burden rather than add to it. That is because one of the other exemptions, which I think is £325,000, is for a cumulative set of subsidies. If I have three or four subsidies granted by three or four different local councils, or perhaps by a devolved Government and some local councils, and they cumulatively add up to £325,000 over a three-year period, that has to be declared and everyone has to keep track of that. Under the existing Bill, individual councils making those grants will not be keeping that record. They will not be able to, because they will not know what the other councils have done. The companies that are getting those grants will have to keep their own records for three years. That is a business burden that we will create if we do not change the Bill right now.

If we just said instead, “There’s one central public database and everything gets put on it; no company has to keep any records whatsoever because it’s all out there and it’s visible, searchable, clear and transparent,” there would be no extra business burden at all and, as my hon. Friend the Member for Thirsk and Malton just pointed out, there would be minimal extra public burden, because the local councils, devolved Administrations and Government Departments keep these records anyway. All they would have to do is extend the print range on their spreadsheets slightly further down the page, or organise their automatic file uploads a little more simply, so the burden would be minimal. If we did it that way round rather than what is currently in the Bill, we would avoid creating a new red tape burden.

With that, I will do something unusual for a politician and shut up. This is a good Bill, it is an essential Bill, and it does some really important things. I am really pleased to see it come forward. My right hon. Friend the Secretary of State is doing precisely the right thing, in the right way. We have one concern about detail; with any luck, I am sure that can be ironed out.