Employment Relations (Flexible Working) Bill (First sitting)

Kevin Hollinrake Excerpts

Committee stage
Wednesday 7th December 2022 Public Bill Committees

[Yasmin Qureshi (Bolton South East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I rise to speak in support of the amendment.

I was successful in the private Members’ Bill ballot and at my first meeting with departmental officials, many of whom are present in the Committee Room, I raised the issue that flexible working should be a day one right that should be enshrined on the face of the Bill. However, we have now been promised that that will be done in secondary legislation. Will the Minister confirm that?

We need to make it clear to everyone that flexible working will be a day one right. From conversations with pressure groups and campaigners, I know people are saying, “Well, the words ‘day one’ are not on the Bill itself.” I have explained to them why that is the case, but I seek clarification from the Minister about that.

I thank my hon. Friend the Member for Hampstead and Kilburn for tabling the amendment and for her ten-minute rule Bill, which came long before my private Member’s Bill. She has campaigned tirelessly for flexible working. I thank her for that and for the kind words she said about me.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a pleasure to serve with you in the Chair, Mr Davies.

I thank the hon. Member for Hampstead and Kilburn for drawing the Committee’s attention to an important point that I was going to address in my main speech, but I am happy to address it now. The good news is that we are in violent agreement about the day one right. As she will know, last year the Government consulted on a range of measures to support the uptake of flexible working arrangements, including whether to remove the existing 26-week qualifying period and make the right to request flexible working a day one right. We published that consultation on Monday. The response explains that the Government will give the right to request flexible working to all employees from the first day of employment. Indeed, we made that commitment in our 2019 manifesto, so we agree that it is the right thing to do.

The hon. Member for Hampstead and Kilburn raised a number of points that I will cover in my main speech, but I am happy to address them now. On timescales, the legislation should pass through both Houses during the course of next year, taking effect in 2024 in order to give businesses time to adapt. On the number of requests granted, according to our research 83% of requests are granted and fewer than one in 10 are refused—that is the information we have.

The hon. Lady asked about adverts. Employers may well use adverts to promote a position that is flexible, and we would encourage them to do that. We see this legislation as key to getting people back into work, particularly those who have left their workplace and are considering returning. To us, that should be an option for the particular employer. Certainly, it is our intention that the right to request flexible working should become well known and therefore become a discussion point between employers and employees for any role, not just for jobs that may be advertised as flexible.

[Tulip Siddiq]

The Minister is reassuring me with all his clarifications. However, could I ask what his source is for saying that only one in 10 requests is turned down? Every piece of evidence that I have looked at, including when I did my ten-minute rule Bill, said that one in three requests was turned down. If the statistics are better, I am very happy to hear it.

[Kevin Hollinrake]

The source was the post-implementation review of the 2014 right to request flexible working regulations, which was published in September 2021 and found that, in most workplaces, 83% of the time, where a request has been made, a request was granted.

[Tulip Siddiq]

I am very grateful for the information, but 2014 was a very long time ago.

[Kevin Hollinrake]

No, the review was of the 2014 regulations, but it was published in September last year, so the actual consultation was much more recent than that.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

I thank the Minister for the points he is making, and I think this is an excellent Bill. I welcome flexible working from day one, as does the SNP. Does the Minister agree that it will be an important step in addressing the disability employment gap? That gap is far too large and means that we are missing out on the potential of many people in the population who have a lot to give to the economy, and can really contribute in a positive way, but, so far, have not been afforded the opportunities that they should have been.

[Kevin Hollinrake]

I entirely agree. Whether they are related to a disability, childcare responsibilities or semi-retirement, such provisions mean that we can bring talented people back into the workplace, which is good for the talented people and for the workplace. I therefore entirely agree with the hon. Lady’s point.

To address the point that the hon. Member for Hampstead and Kilburn raised about whether an employee or potential employee can challenge the employer, it is about a dialogue. That is the key to this, and, as part of the legislation, there will be a dialogue between employer and employee around flexible working, so a discussion can happen at that point. The employer would have to set out a reason for refusal—there are eight reasons, such as customer service or productivity—so, at that point, there is not an appeal process. It is important to have a balance between the rights of employers and of employees, and I think that this strikes the right balance.

[Rachael Maskell (York Central) (Lab/Co-op)]

I welcome the Minister to his place and it is a pleasure to serve under you as Chair, Mr Davies. When Government pass legislation around employment law, they normally provide guidance to employers. Given that many people make decisions about the employment that they take up depending on the arrangements around flexibility, will the Minister ensure that there will be guidance about having that conversation at interview, and about making it the norm that discussions around work patterns are included in that conversation, to enable people to make informed choices about their future employment?

[Kevin Hollinrake]

The hon. Lady raises an important point. Of course, as she will be aware, we engage heavily with ACAS on such provisions, and it does some excellent work in providing guidance for employers. This measure will be no different, in terms of advice that might be available to employers and employees.

We consider the measure to be a key part of the policy package, bringing an estimated 2.2 million additional people into the scope of the legislation and encouraging early conversations about flexibility. The Government will introduce the day one entitlement through secondary legislation, alongside the measures included in this Bill, so we do not believe there is any need to amend the Bill to achieve that change.

The Government already have the power to make flexible working a day one right via secondary legislation and intend to lay the statutory instrument to remove the 26-week qualifying period when parliamentary time allows, so that it takes effect at the same time as the measures in this Bill. On that basis, I would invite the hon. Member to withdraw her amendment.

[Tulip Siddiq]

I am still a bit uncertain about the statistics cited by the Minister, because the research I looked at by the TUC found that three in 10 requests for flexible working are turned down. Maybe there are different figures, but I have never seen such positive numbers in the surveys I have looked at. However, the Minister has given me a lot of reassurance on all the questions I have asked, and it sounds like the Government are serious about making flexible working a right for employees. I am grateful that the Government have taken the issue so seriously, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

It just remains for me to say thank you and congratulations again to my hon. Friend the Member for Bolton South East. Congratulations also to everyone here, to all the officials and the Clerks on their work together to put this issue into legislation.

[Kevin Hollinrake]

I thank the hon. Member for Bolton South East for bringing this Bill before the House. I twice had the honour of bringing forward legislation through a private Member’s Bill in my many years as a Back Bencher. We are all in this place to try to make a difference. Sometimes we differ on how we should do that, but bringing forward legislation is a great honour. I pay tribute to the work of the hon. Member for Bolton South East—not just her work on this Bill, but her campaigning prior to it, which we heard about very clearly in earlier contributions.

I also pay tribute to the Committee members here today and to my predecessors, not least the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Sutton and Cheam (Paul Scully), who did much work on this issue prior to my taking over the role, and my hon. Friend the Member for Watford, who did such great work on it. I echo the comments made about the Comptroller of His Majesty’s Household, my hon. Friend the Member for Castle Point, who does such great work in the private Member’s Bill space and has done for many years.

The key thing about this Bill is that it has great benefits not just for businesses but for workers and not just for workers but for businesses—it is a win-win situation for all. I know that some will have concerns about it; certainly I have had feedback already from some businesses that are concerned, but I think that when they look at the detail, they will be reassured. The No. 1 thing that the Bill will do is make a more constructive workplace and, crucially, bring more people back into the workplace. That is good for everybody. We all know that businesses are suffering a shortage of workers.

On Second Reading, we heard from hon. Members from both sides of the House about their personal interest in flexible working; some of them are serving on this Committee. During that debate, I was struck by the breadth of issues that flexible working can help to address. Contributions were made on issues ranging from increasing economic opportunities for people living in rural communities, to supporting those with fluctuating illnesses such as ME, and enabling businesses to continue operating during disruptive events—not least global pandemics.

When flexible working arrangements are agreed between employees and employers, the benefits are not simply accrued by the employee; they often extend far beyond that. For the business, it could be a chance to retain the skills and expertise of an experienced worker or to encourage one to come back to work, or lead to a more diverse senior leadership team. In other circumstances, there could be wider, societal benefits, such as for the elderly relative able to spend more time with a family member during their non-working hours.

As you know, Mr Davies, before I entered Parliament, I ran my own business. I know at first hand the importance of looking after a team. With a good discussion and a bit of flexibility, working patterns can be adapted to get the most out of the employment relationship. At the same time, I recognise that there will be times when a requested pattern is unworkable. That is why, rather than prescribing or guaranteeing certain ways of working, the legislation needs to leave space for employees and employers to work out the right arrangements for their particular circumstances. Only in this way will we realise the potential productivity gains. I was struck by the comments from the hon. Member for York Central, who talked about the productivity improvements that can come from such ways of working. They can be realised through a more engaged and flexible workforce. I am pleased to reiterate today that the Government fully support this Bill.

I know that the Bill’s progress will be particularly welcomed by the Minister of State at the Department of Health and Social Care, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately), who has long campaigned for better access to flexible working. We came into Parliament at the same time, in 2015, and she was campaigning on this in my early days as an MP, many years ago. Although she is not on today’s Committee, I want to take this opportunity—I notified her that I was going to do so—to recognise her efforts in driving forward the flexible working agenda.

I am pleased to confirm that earlier this week, the Government published their response to the consultation on measures to encourage flexible working. The consultation considered several changes to the current legislative framework, and I am pleased to see those updates brought forward by this Bill. In response, as I said earlier, we have committed to introducing secondary legislation to make the right to request flexible working a day one right, thereby giving all employees this right from the first day of employment.

It has been great to see a positive reaction to the response from the business community this week. The British Chambers of Commerce commented:

“Having free and open discussions from the outset will help ensure workplace arrangements are the best they can be for everyone.”

The BCC was a member of the flexible working taskforce, which included the Federation of Small Businesses, employer groups and ACAS. ACAS does such great work, and I have met with it twice already, including with the ACAS council, and discussed these matters. The Chartered Institute of Personnel and Development added that the measures will

“enable organisations to attract and retain a more diverse workforce and help boost their productivity and agility.”

Copies of the full consultation response have been placed in the Libraries of the House.

The measures in this Bill adjust the existing right to request flexible working. This is already very good enabling legislation, but these are important changes that will facilitate better access to all forms of flexible working, whether that relates to when, where or how people work. The changes will particularly support those who need to balance their work and personal lives and may find it harder to participate in the labour market, from older workers to new parents and those with disabilities—the hon. Members for York Central and for East Kilbride, Strathaven and Lesmahagow raised that issue—or long-term health conditions. This Bill will be an important step in supporting them to remain and progress in work.

When more flexible working arrangements are agreed as a result of this Bill, employers will also benefit from a more committed workforce, higher levels of employee retention and lower recruitment and training costs. We know that as a result of this legislation, more people will return to work. According to our research, the No. 1 thing on the wish list of those who have left the labour market and are considering returning is flexible working. It was very interesting to hear from the shadow Minister about her own childcare responsibilities, and I am sure that all parents on the Committee will recognise instances such as those she described. More broadly, by making work accessible to a wider pool of talent, the measures will help to create a more diverse working environment and workforce, which studies have shown leads to improved financial returns.

As the hon. Member for Bolton South East has set out, the two clauses of this Bill are relatively straightforward. They make changes to the provisions in sections 80F and 80G of the Employment Rights Act 1996 to encourage a better dialogue between employers and employees about the benefits of flexible working, increase the possible frequency of requests, speed up the administrative processing of requests and promote equal access to flexible working arrangements. These changes are timely and important to help both individuals and businesses secure the benefits of flexible working, and they represent a sensible, proportionate update to the right to request flexible working, a framework that enables a discussion from both sides.

I was struck by some of the shadow Minister’s points. She talked about the invisible restrictions holding people back; that is key to this legislation, because only dialogue can expose those restrictions. She asked whether we can make the process quicker—let’s see. It is important to give businesses a little time, because it will cost them. It will not be a great deal of money—we reckon less than £2 million a year—but there is an administrative cost. The timeline is that the legislation will complete its passage through both Houses in 2023 and then take effect in 2024.

As for adverts, again we would rather not be prescriptive. We see this change as something employers can use to make a job sound more attractive, so we would prefer to leave it to employers to decide how to do that.

I turn to wider legislation. The shadow Minister mentioned the employment Bill, but we are bringing forward several pieces of legislation, of which this is only one. Things such as neonatal care leave, carer’s leave and more protections for workers during pregnancy or returning to work have all come through private Members’ Bills. Indeed, we are taking forward some legislation that my hon. Friend the Member for Watford first proposed to ensure that people, principally those who work in the hospitality sector, keep all the tips that they earn, which is absolutely right.

In conclusion, supporting this Bill is in line with the Government’s ongoing commitment to build a strong, flexible labour market that supports participation and economic growth. I thank all those on the Committee today and those who spoke on Second Reading for supporting the Bill’s progress so far. I look forward to continuing to work closely with the shadow Minister to support the Bill’s passage, and I extend particular thanks to you, Mr Davies, for your excellent chairing of today’s sitting.

[Yasmin Qureshi]

I thank the Minister for his response and reassurances. I think we all agree that the Bill will help millions of people in our country get back into work. It is good for businesses and good for employees. It is, as everybody says, a win-win.

I thank all the parliamentary staff, the Clerks, the Minister and his officials, and my colleagues, all of whom have supported me throughout the process—I could not have done this without them. I look forward to the Bill passing to the next stage.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Bill to be reported, without amendment.

Flexible Working Consultation: Government Response

Kevin Hollinrake Excerpts

Monday 5th December 2022 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

The Government have today published their response to the consultation on flexible working. This delivers on our manifesto commitment to encourage flexible working, and represents an important part of our drive to deliver growth by helping people to access and stay in work.

Flexible Working Consultation Response

In 2021, the Government consulted on changes to the right to request flexible working. This right currently supports all employees with 26 weeks’ continuous service to make applications to change their work location, working hours and/or working pattern. The legislation enables employees and employers to find arrangements that work for both sides. The consultation proposals were intended to help ensure it remains fit for purpose.

The response, published today, states that the Government will legislate to:

Make the right to request flexible working a day one right. This will bring an estimated additional 2.2 million people into scope of the legislation and encourage early conversations about flexibility in the job design, recruitment and appointment phases. Supporting employees and employers to agree flexible working arrangements from day one will be an important measure in the context of a tight labour market, as it will assist those who wish to return to work but can only do so on certain patterns.

Introduce a new requirement for employers to consult with the employee when they intend to reject their flexible working request. This will enable both parties to explore the types of flexibility that may be available within the specific role before reaching a conclusion.

Allow two statutory requests in any 12-month period, rather than the current one request. This will help to ensure that individuals do not feel “trapped” in certain work arrangements they know are not sustainable for them, particularly in the event that their circumstances change within 12 months.

Require a decision period of two months in respect of a statutory flexible working request, rather than the current three. This acknowledges that long delays in responding to requests can lead to negative outcomes for both employers and employees, for example where a response is needed quickly, and the alternative is the person dropping out of work.

Remove the existing requirement that the employee must explain what effect, if any, the change applied for would have on the employer and how that effect might be dealt with. This will create a level playing field among those making requests as it will mean the legislation no longer favours those with more experience or better writing skills.

The first of these measures will be delivered through secondary legislation. The other measures require primary legislation, and the Government are pleased to support the Employment Relations (Flexible Working) Bill introduced by the hon. Member for Bolton South East (Yasmin Qureshi).

The response also commits to non-legislative action: developing guidance to raise awareness and understanding of how to make and administer temporary requests for flexible working; and launching a call for evidence to better understand how informal flexible working operates in practice.

As a package, these steps will encourage better two-way conversations about flexible working and prompt both the employer and employee to focus on identifying an arrangement that works for them both.

The review of the Flexible Working Regulations 2014 showed that flexible working can reduce vacancy costs, increase skill retention, enhance business performance, and reduce staff absenteeism rates. In the current context of a tight labour market, flexible working can also play a key role in attracting people into work. Research conducted by the Behavioural Insights Team has shown that offering flexible working can attract up to 30% more applicants to job vacancies, and a recent Office for National Statistics publication revealed that older workers working flexibly would be more likely to say they were planning to retire later. Strengthening the legislative framework will therefore help to ensure that those who are under-represented in the workforce have access to more employment opportunities.

The Government recognise there is no one-size-fits-all approach to work arrangements since the needs of businesses and individuals will differ in each circumstance. It is therefore important that the legislation remains a right to request, not a right to have, and that employers continue to be able to refuse requests for specified business reasons.

The territorial extent of the proposals included in the Government’s consultation response extends to Great Britain—employment law is devolved to Northern Ireland.

I will place copies of the consultation response in the Libraries of the House.

[HCWS411]

Draft Internal Market Information System Regulation (Amendment etc.) Regulations 2021

Kevin Hollinrake Excerpts

Thursday 1st December 2022 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

I beg to move,

That the Committee has considered the draft Internal Market Information System Regulation (Amendment etc.) Regulations 2021.

It is a pleasure to serve with you in the Chair, Sir Robert. The draft regulations were laid before the House on 20 July 2021. Right hon. and hon. Members will understand the importance of the need to protect citizens and businesses through the effective operation of the Northern Ireland protocol. I hope that right hon. and hon. Members will agree that it is also important that our statute book provides a clear and up-to-date picture of UK law for the benefit of UK public authorities, businesses and citizens.

The statutory instrument tidies up the statute book by removing provisions relating to access to the EU’s internal market information system database that are redundant or inoperable as a result of the UK’s departure from the EU. It also forms part of the UK’s delivery of the Northern Ireland protocol. The IMI is a secure online tool used to facilitate the EU single market. The tool was created to resolve problems of ineffective, insecure and inefficient communication between the European Commission and EU member states. It is hosted and maintained by the European Commission. At the end of the implementation period, the UK’s access to the European Union’s networks, information systems and databases was blocked by the EU, save for specific exemptions.

Under the Northern Ireland protocol, the EU can grant the UK access to such systems as it considers necessary to enable the UK to comply with its obligations under the protocol. In a decision of 16 October, the European Commission granted the UK limited access to the IMI to enable the UK to fulfil certain obligations under EU legislation that continue to apply in respect of Northern Ireland under the protocol. I will set out those obligations in more detail shortly. The UK’s access to the IMI has otherwise been removed.

EU regulation 1024/2012 on administrative co-operation through the IMI sets out the framework for use of the IMI. That regulation is retained EU law under the European Union (Withdrawal) Act 2018, and applies in areas where access to the IMI is retained. The draft regulations do not make any policy changes, impose new obligations or create new powers. They remove redundant provisions that are inoperable because access has already been removed by the European Commission on the grounds that UK access is no longer required. In particular, they remove references concerning legislative areas in respect of which the UK does not have access to the IMI, which include patient rights relating to cross-border healthcare, posted workers, public documents, the services directive, the recognition of professional qualifications and non-road mobile machinery. They also clarify that regulation 1024/2012 applies in respect of Northern Ireland only to facilitate communications and the exchange of information for three general purposes, which I will set out.

The first relates to the return of cultural objects unlawfully removed. The relevant EU directive sets out the procedures for the return to an EU state of objects that are national treasures possessing artistic, historic or archaeological value that have been unlawfully removed from that EU state to another. An EU member state can enter a case on the IMI to send a notification of the EU member state to which it is believed that that object has been taken. On receipt of the case, all reasonable steps would be taken to locate the object and protect it until such time as it can be retrieved, unless it cannot be located or has been found to have been legally imported. All actions taken would be recorded on the IMI. The UK Department for Digital, Culture, Media and Sport is responsible for cases on the IMI module on the return of cultural objects.

The second purpose relates to the acquisition and possession of weapons. The relevant EU directive sets out the minimum standards for civilian firearm acquisition and possession in European economic area states for the purpose of controlling the movement of weapons between EEA states. The IMI is used by EEA states to notify other EEA states where they have granted authorisation to a business or an individual to acquire a firearm from, or transfer a firearm to, another EEA state. The UK Department for International Trade is responsible for all such communications through the IMI module on the control of firearms.

The third and final purpose is to facilitate mutual recognition of goods. The relevant EU regulation sets out a framework for ensuring that goods lawfully marketed in one EEA state can be sold in any other EEA state as long as they are safe and respect the public interest. It provides that economic operators who consider that their rights under this regulation have been breached by a public authority of another EEA state can use the single market problem-solving network, SOLVIT, to try to find solutions without the need to resort to action in court.

The SOLVIT network is hosted on the IMI. If a decision was made by a UK public authority to deny entry to the Northern Ireland marketplace of goods sold in an EEA state, and the EEA economic operator considered that to be incompatible with this regulation, he could lodge a case through the SOLVIT network. The IMI SOLVIT co-ordinator for the UK would then review the case and engage with the responsible authority in the UK in order to agree a response to the case, to be submitted through the IMI.

[Andy McDonald (Middlesbrough) (Lab)]

I am very grateful to the Minister for giving a very detailed account on this important issue.

[Kevin Hollinrake]

I am nearly done!

[Andy McDonald]

On SOLVIT, the dispute about the tracing of goods has been one of the major issues around the Northern Ireland protocol. When we speak to people in Brussels, they tell us not only that they are sad to see us go but that they have a solution. That solution relates not only to GB-Northern Ireland and resolving perceived difficulties through co-operation, but to repairing the trade imbalance that now exists between the EU and the UK. That means that what we can solve in GB-NI, we can also solve in EU-UK. Do the draft regulations, albeit narrow and targeted, not suggest that we are going in the wrong direction in our attempts to work better with our European Union partners, for the benefit of our trade?

[Kevin Hollinrake]

Co-operation is always the best way. I agree with the hon. Gentleman that we need to be pragmatic in finding solutions. This statutory instrument is not about resolving things that have gone wrong in the past; it is about removing things that are no longer needed and that would potentially conflict with other pieces of legislation. However, I agree with him that, in terms of co-operation, it makes sense to come to agreements that suit both sides. Both parties are involved in the negotiation, of course, and we have to tread a pretty fine line in trying to get to the right place.

The IMI SOLVIT co-ordinator is based in the Department for Business, Energy and Industrial Strategy.

In conclusion, this statutory instrument simply makes technical amendments to reflect the current position regarding the UK’s access to the IMI. It removes provisions that are no longer operable following the end of the implementation period and it retains only those provisions that are necessary in respect of Northern Ireland, to ensure that the UK can comply with certain obligations under the Northern Ireland protocol. This statutory instrument ensures that UK public authorities can continue to access the IMI, to allow them to deliver these obligations securely, effectively and efficiently, where necessary. I commend the draft regulations to the Committee.

--- Later in debate ---

[Kevin Hollinrake]

I join the hon. Member for Newcastle upon Tyne Central in thanking the two Committees whose work preceded this debate, and I thank hon. Members for their consideration of this statutory instrument and for their contributions.

As I previously set out, the SI makes technical amendments so as to reflect the current position regarding the UK’s access to the IMI. In terms of wider debate on the Northern Ireland Protocol Bill and the Retained EU Law (Revocation and Reform) Bill, the hon. Member for Newcastle upon Tyne Central has every opportunity to raise concerns about that legislation at the appropriate time on the Floor of the House, as the Bills pass through both Houses. That is the right place to do that.

The hon. Member also said that sunsetting the legislation by the end of next year is irresponsible. Personally, I think it is irresponsible not to set a date, because timings will just drift if we do not do so. I urge her to engage with these issues within the relevant debates. She could set out her previous position on a second referendum, which I think she once called for, on leaving the European Union. Government Members are committed to making Brexit work. That is where we stand and where we will remain.

[Chi Onwurah]

The Minister has a desire to refight the Brexit debate at every opportunity. We are trying to make the SI work and are asking the questions to make it work. I ask him to please set out to us how it is going to work.

[Kevin Hollinrake]

We do not want to refight previous battles, and that is what a second referendum would open up for people. That is not where we want to be. We want to move forward, and that is what we are trying to do today.

In terms of further changes beyond those under discussion, if any are necessary they could be part of the ongoing negotiations between us and the European Commission. It is very important that we have those negotiations, but also that they take place in a framework where we have a strong position, not a weak one. That is the position we have taken.

In terms of the timing of the measures, the UK was given a right to access the IMI under the withdrawal agreement for a period of nine months in order to deal with outstanding applications for European professional cards from nurses, physiotherapists and pharmacists. The EU and the UK agreed to extend the UK’s right of access to the IMI beyond the nine-month period, to process the remaining outstanding applications. The need for that temporary access has now been resolved and we are now in a position to progress the SI. In terms of the specific timing, one of the powers used to make the instrument under section 8 of the European Union (Withdrawal Act) 2018 expires at the end of the year, so it is necessary to legislate as we are doing now right now.

With the statute book updated, the SI will provide clarity to businesses, citizens and public authorities about the sharing of data between the UK, EU member states and the European Commission

[Chi Onwurah]

The Minister talks about providing clarity. I hope he is going to address my point about the divergence of the data protection regimes in this country and the European Union, and the impact that that will have.

[Kevin Hollinrake]

That has absolutely nothing to do with this debate, so I will not get into that at all.

[Chi Onwurah]

The Minister just said that he is looking to provide clarity on data sharing. He also said very specifically that data sharing would be in accordance with the regulatory frameworks in the country, yet those regulatory frameworks are going to differ.

[Kevin Hollinrake]

This statutory instrument is about data sharing within the IMI, not within the wider context of the relationship between the UK and the European Union—that is what it deals with. The hon. Lady wants to extend the debate into areas that are not relevant to this SI, in my view, and I think it is inappropriate that we do so.

[Chi Onwurah]

Will the Minister give way?

[Kevin Hollinrake]

For a final time.

[Chi Onwurah]

Is the Minister clear, therefore, that the regulatory framework under which the data sharing will take place in this SI is the regulatory framework of the single market, and not the regulatory framework of the Department for International Trade?

[Kevin Hollinrake]

The position is that the Data Protection and Digital Information Bill, which was introduced to the House of Commons on Monday 18 July 2022, will amend the existing legislation and adapt the UK general data protection regulation to create a new, bespoke British data protection framework that is business and consumer friendly, and that keeps people’s personal data secure. We are working with businesses and other stakeholders to make sure that it is fit for purpose. But, as I say, that is not relevant to this SI.

This statutory instrument introduces no new costs, obligations or powers. As I have set out, it ensures that UK public authorities can continue to access the IMI, where necessary, in order to enable them to securely, effectively and efficiently deliver their obligations under the Northern Ireland protocol. The statutory instrument also ensures that the UK’s statute book accurately reflects the changes in access to IMI following the UK’s departure from the European Union. I commend the draft regulations to the Committee.

Question put and agreed to.

Draft Prescribed Persons (Reports on Disclosures of Information) (Amendment) Regulations 2022

Kevin Hollinrake Excerpts

Wednesday 30th November 2022 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

I beg to move,

That the Committee has considered the draft Prescribed Persons (Reports on Disclosures of Information) (Amendment) Regulations 2022.

It is, as always, a pleasure to serve with you in the Chair, Mr Gray. Before I speak to the regulations, I will briefly touch on how our whistleblowing framework works. As a former vice-chair of the all-party parliamentary group for whistleblowing, I am keen to ensure that we get this legislation in the right place.

The Employment Rights Act 1996, as amended by the Public Interest Disclosure Act 1998—PIDA—enables workers in all sectors to seek redress if they are dismissed or suffer detriment at the hands of their employer because they have blown the whistle. Workers who believe that they have been dismissed or otherwise detrimentally treated for making a protected disclosure can complain to an employment tribunal. To be covered by these rights, a worker who makes a disclosure must reasonably believe that they are acting in the public interest and that the disclosure tends to show past, present or likely future wrongdoing. A worker must also generally make their disclosure either to their employer, legal adviser or the relevant prescribed person.

There are over 80 prescribed persons across numerous sectors, including bodies such as the Equality and Human Rights Commission, the Health and Safety Executive, the Financial Conduct Authority and the General Medical Council. Prescribed persons have been given this legal status because of their ability to take action in respect of a disclosure made to them. Many have extensive knowledge and understanding of the subject matter and, in some cases, regulatory oversight of the sector. Over 50,000 whistleblowing disclosures were made to prescribed persons in the 2020-21 financial year, which underlines just how important prescribed persons are in our whistleblowing framework. They are an invaluable route for whistleblowers to provide vital information to appropriate bodies, enabling them to prevent and act on wrongdoing that harms both our economy and wider society.

The changes in these regulations are necessary as a result of changes made in another statutory instrument, the Public Interest Disclosure (Prescribed Persons) (Amendment) Order 2022. I am pleased to say that that instrument makes a number of significant additions to the list of prescribed persons: the Drinking Water Inspectorate, the Office for Environmental Protection, Environmental Standards Scotland, Social Work England, all 129 Members of the Scottish Parliament, the Scottish Public Services Ombudsman and Natural Resources Wales. The SI also removes the European Securities and Markets Authority as a prescribed person, reflecting the fact that, since we exited the EU, the relevant regulatory responsibilities have been assigned to the Financial Conduct Authority. Consequently, disclosures that could previously be made to the ESMA will now be made to the FCA.

The overall effect of the SI is that more workers will be able to blow the whistle to a relevant prescribed person. This not only ensures that the worker making the disclosure is more likely to qualify for employment protection, but means that those regulators and public bodies will benefit from receiving valuable intelligence.

The draft regulations deal with the annual reporting requirement that applies to most prescribed persons. The requirement was introduced in 2017. It requires most prescribed persons to publish an annual report on whistleblowing disclosures made to them by workers. It introduces greater transparency on the work of prescribed persons to increase confidence among whistleblowers that their disclosures are taken seriously and action is taken where appropriate. The requirement also supports greater consistency across different bodies in the way they respond to disclosures.

A small set of prescribed persons are exempt from the reporting requirement, including Members of the House of Commons and Welsh and Scottish Ministers. These prescribed persons are exempt as they do not have a regulatory function; instead, they are prescribed due to their distinctive and key role in aiding constituents on whistleblowing matters and supporting them to make a disclosure to a relevant regulatory body. As a constituency MP I always want to hear about the issues impacting my constituents, and know how important we can be in championing the causes of whistleblowers.

The draft regulations amend the list of prescribed persons who are exempt from the reporting duty in two ways. First, as Members of the Scottish Parliament are being added as prescribed persons, the regulations add them to the list of prescribed persons exempt from the reporting requirement. That will ensure that MSPs will be able to fulfil their role in a proportionate manner and will be prescribed on the same terms as Members of the House of Commons. Secondly, the regulations remove the ESMA as a prescribed person exempt from the reporting requirement. This is necessary because, as I explained, the ESMA is being removed as a prescribed person.

In conclusion, the Government greatly value the role of whistleblowers in bringing wrongdoing to light. The effect of the draft regulations will be to bring the list of prescribed persons exempt from the reporting requirement up to date, and I commend them to the House.

--- Later in debate ---

[Kevin Hollinrake]

I am grateful for the Committee’s support and I thank all hon. Members for their consideration. I really appreciate the shadow Minister’s support.

The point made by the hon. Member for Hackney South and Shoreditch about Members of Parliament’s responsibility is a very good one. I have had a number of whistleblower disclosures—protected disclosures—sent to me personally, and I was a little confused myself about what I should do with them. For the benefit of the Committee, Members of Parliament are expected to liaise with the relevant regulator. That is what they are expected to do, rather than deal with the issue ourselves. There are people with expertise in particular matters—for example, if a case involves financial matters, the Financial Conduct Authority is the relevant body.

We need to address a wider issue with whistleblower reform. As a former vice-chair of the all-party group I have some ideas about the change I would like to see, which might well encompass better advice for MPs and MSPs. I am keen to undertake that review as quickly as possible and am working with officials to do it. The hon. Lady makes a very good point.

The underlying key to the regulations is that we are looking to make the UK the best place in the world to start and grow a business. To do that, we need a partnership between business people and the labour market, and we need a strong and flexible labour market that supports participation, income and growth. In my view, whistleblowing is key to that and to ensuring that the framework for employment is fit and proper and fit for purpose. That benefits both workers and businesses.

We know the important work that whistleblowers do in rooting out wrongdoing. I believe that the draft regulations will give workers the confidence they need to raise concerns about wrongdoing and to ensure that the information goes to the relevant bodies. That is key to this. Those bodies have the powers to act on the wrongdoing that can harm both our economy and wider society. In line with that, we need Members of Parliament to properly understand the rules, as the hon. Lady set out, and to fulfil their role in a proportionate manner. I commend the regulations to the Committee.

Question put and agreed to.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 29th November 2022 Commons Chamber

[Catherine West (Hornsey and Wood Green) (Lab)]

8. What steps his Department is taking to support small business growth.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a delight to be part of a ministerial team of whom many members actually have a business background. We are for business because we are from business, and we know what it is like to lie awake at night worrying about how to pay the bills.

The reversal of the national insurance rise will save small businesses an average of approximately £4,200 a year, alongside the cut to fuel duty for 12 months and the energy bill relief scheme. The British Business Bank supports small and medium-sized enterprises to access growth finance.

[Catherine West]

From Muswell Hill to Myddleton Road, from Turnpike Lane to Hornsey High Street, we are celebrating Small Business Saturday in my constituency this weekend. There are two major concerns on the mind of small businesses. The first is the business rates expense. When will the Minister consider reforming it to help small business? The second is a wider question for business and trade unions about retained EU legislation, which is providing a lot of uncertainty in the business community and a drag on growth. When will the Government come out with a decision on that crucial issue?

[Kevin Hollinrake]

I am grateful for the hon. Lady’s question, especially the part about Small Business Saturday. As hon. Members can imagine, I will be spending much of the day visiting small businesses across my constituency. I will also shortly be attending a House of Lords reception to celebrate the 100 small businesses recognised in the programme.

As the hon. Lady knows, in the autumn statement my right hon. Friend the Chancellor announced £13.6 billion of support for businesses over the next five years, reducing the burden of business rates for SMEs. Of course we all want to see reform, but simply announcing the scrapping of business rates without announcing any replacement cannot be the right thing, because it does not give business the certainty that it needs. That is the sensible reform that I think the hon. Lady should be grateful for.

[Mr Gagan Mohindra (South West Hertfordshire) (Con)]

May I put it on the record that as well as being the week of Small Business Saturday, this is Family Business Week? I had the opportunity to visit Tony at Croxley Hardware a few weeks ago. Does the Minister agree that small businesses are the lifeblood not only of the economy, but of our communities?

[Kevin Hollinrake]

I thank my hon. Friend for his recognition of the small businesses in his constituency. He is absolutely right: there is no greater force behind the supply side of the economy than small businesses, which are essential to prosperity and productivity. He is absolutely right to champion their cause, and we should all join him in that endeavour.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

There has been some talk about business rates. I appreciate what the Minister says about needing a proper plan. Businesses in my constituency tell me that business rates are their big bête noire and that reforming and replacing them would make their lives a lot easier and their survival more certain. Will he give some indication of the Government’s thinking, and of the timescale in which they might be looking at the matter? Labour is proposing a radical reform.

[Kevin Hollinrake]

Well, Labour is proposing a radical reform, but we cannot quite work out whether it will scrap business rates or reform them. There have been mixed messages among Labour Front Benchers—indeed, among the shadow Chancellor and the Leader of the Opposition—so we are not quite sure what Labour’s policy will be. We are certainly not sure how it would replace the £25 billion to £30 billion of revenue. I would really like to understand that.

This is a thorny issue, because if we scrapped business rates the taxpayer would have to find that huge amount of money by some other means. The right thing to do right now is to see businesses through this very difficult time with the kind of concession that we have made, such as the £13.6 billion, rather than making irresponsible and in my view undeliverable promises to completely scrap business rates.

[Sir James Duddridge (Rochford and Southend East) (Con)]

Essex Linen Services, which provides laundry services to hospitals and hotels, is struggling to survive because of electricity prices. It believes that its sector has been left out of the energy support packages. Will the Minister agree to review the situation for providers of laundry services and see whether they can be supported in paying their electricity bills in future?

[Kevin Hollinrake]

All businesses have access to the energy bill relief scheme. There are concerns about which sectors will be covered by the revised scheme. We will have details on that by the end of the year; the Government have committed to that. Clearly we are trying to balance the interests of the taxpayer, who has to fund this, with those of business. It is right that we focus on businesses that cannot mitigate their energy use, by whatever means, or pass on the costs to consumers. My hon. Friend is absolutely right to raise the interests of the sector.

[Mr Speaker]

I call the shadow Minister, Seema Malhotra.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I grew up in a small family business. Labour is proud to be supporting Small Business Saturday and its 10th anniversary, and to have supported last week’s family business week.

Small and medium-sized enterprises are indeed the lifeblood of our economy, but they have been hit hard by 12 years of Tory failure and staggeringly low growth. Even after three Prime Ministers this year, the Government have no answers—and the House should not just take that from me; the Federation of Small Businesses judged the autumn statement as being

“low on wealth-creation, piling more pressure on the UK’s 5.5 million small businesses”.

If the Government are really serious about helping small businesses to grow, is it not time they adopted Labour’s plan to reform business rates, back our high streets, make Brexit work, and make Britain the best place in which to start and grow a business?

[Kevin Hollinrake]

As one who was in business in 2010, I remember very well what the economy was like in that year, when we took over from Labour: it was not having a good time. [Interruption.] Yes, it is a lot stronger now.

We should bear in mind that while we can choose our own opinions, we cannot choose our own facts, and the facts are that the UK has experienced the third fastest growth in the G7 since 2010—behind only the United States and Canada—and has grown faster than Germany since 2016. It is right that we seek to provide new solutions for businesses; we have to stimulate the supply side of the economy, not least because that is good not only for businesses but for consumers. However, as I said earlier, simply claiming that you are going to scrap business rates without saying how you are going to replace that £25 billion of revenue is highly irresponsible.

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

9. What steps he is taking with Cabinet colleagues to help support (a) small and medium-sized enterprises and (b) other businesses to recruit adequate numbers of staff.

[Mr Speaker]

Come on!

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

I am new to this, Mr Speaker.

My Department works closely with other Government Departments and with firms in all sectors of the economy on a range of issues relating to the labour market and skills. That includes increasing the number of apprentices and business investment in skills development, the adoption of T-levels and skills bootcamps, and ensuring that there is better information along with easier routes into careers in a range of sectors.

[Douglas Chapman]

Last month I held a business roundtable with the Association of Chartered Certified Accountants. It was clear that SMEs were struggling with recruitment, high energy costs, Brexit, and £20 billion worth of late payments.

When it comes to late payments, the prompt payment code does not cut it for SMEs. Will the Minister work with me to introduce legislation to outlaw late payments once and for all and give our SMEs a fighting chance?

[Kevin Hollinrake]

I am grateful for the hon. Gentleman’s correspondence on this matter, and I look forward to meeting him on 7 December.

The prompt payment code, which we introduced and which we reviewed recently, will be out for consultation very shortly, and I am keen to learn from best practice how we can make it more effective. The hon. Gentleman is right to say that there are many issues facing businesses today, and we are keen to help them get through the difficulties that will no doubt continue over the next few months, but in my experience of business our best years come after our worst years, and I think we can be confident when looking ahead while also recognising that there will be difficult times in the short term.

[Mark Pawsey (Rugby) (Con)]

There are many SMEs in the retail and hospital sector. It is a sector that does well in the run-up to Christmas, which gives those businesses the opportunity to make some money. What impact does the Minister think the rail strikes that are planned for next week will have on their ability to recruit more staff?

[Kevin Hollinrake]

It is, of course, right that we look after the interests of business and consumers. There is no doubt that the strikes will have an impact on both parts of that sector, and it is also right for us to prioritise the needs of all consumers, not just those who are seeking to take industrial action. We urge all parties to get round the negotiating table as quickly as possible and try to reach a sensible agreement.

[James Grundy (Leigh) (Con)]

11. What steps he is taking to support (a) households and (b) businesses with energy bills in winter 2022-23.

--- Later in debate ---

[Sir Stephen Timms (East Ham) (Lab)]

The Groceries Code Adjudicator has done a good job over the past 10 years, leading to a big fall in the number of breaches of the fair purchasing code, but bad practice is still rife in the fashion industry, with UK fashion retailers among the worst offenders. The Environmental Audit Committee called for a garment trade adjudicator. Will Ministers bring that proposal forward?

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

I thank the right hon. Member for all his work in this area; I know that he has done an awful lot. We have no plans to bring forward a garment code adjudicator, but we do take reports of illegal and unsafe employment practices very seriously. Since October 2020, a wide group of stakeholders, comprising retailers, manufacturers and non-profit organisations have been working with the Gangmasters and Labour Abuse Authority to address poor practice and working conditions.

[Virginia Crosbie (Ynys Môn) (Con)]

T7. May I say pob lwc, good luck, to the Wales football team tonight? Can the Secretary of State confirm that, beyond Sizewell C, Great British Nuclear will be empowered to commission and build at not only gigawatt-scale, but small modular reactor-scale, so that my constituents on Ynys Môn can benefit from those new jobs from new nuclear?

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

Yesterday, I hosted a roundtable meeting for businesses in my constituency. They were worried about late payments and a Government who are not helping them. Fifty thousand businesses close every year due to late payments, and small businesses account for two thirds of UK private sector employment. Will this Government act before the worst of the Tory-led recession bites to save millions of jobs?

[Kevin Hollinrake]

I thank the hon. Member for his question. He is absolutely right to bring up this matter. It is one of the concerns that has been raised most frequently with me since taking on this role. We are tackling the culture of late payments with measures including the Payment Practices Reporting, the Small Business Commissioner and the Prompt Payment Code, but I am determined to see how much further we can go to be effective in this area.

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

T8. I recently met my constituent, Puneet Bhalla, who is the founder and chief executive of Maxim World, a very successful small exporter of hotel goods across the world. He told me of some of the challenges that small and medium-sized exporters are facing with post-Brexit trade arrangements. Can my hon. Friend tell me what plans there are to involve SMEs in the review of EU retained law?

[Kevin Hollinrake]

It is great to hear that my hon. Friend’s constituent is looking to export right across the world, and we are determined to make it easier to do so through trade deals outside the European Union. Ministers and officials from across BEIS regularly engage with SMEs on a wide range of issues and will continue to do so as the retained EU law programme proceeds.

[John Cryer (Leyton and Wanstead) (Lab)]

Further to the question from my hon. Friend the Member for Sefton Central (Bill Esterson), when will Ministers start to use procurement in order to generate and defend British jobs? I have been listening for years to Ministers coming to that Dispatch Box saying that they will use procurement, so when will we actually see it?

[Kevin Hollinrake]

That is a very important point. The Government are determined to tackle not just their own procurement practices, but those further afield. Clearly, we want to keep our markets open to international competition, because we want to compete internationally as well, but there also needs to be fair competition. Where we can prioritise the needs of British companies and British workers, we should do so.

[Gary Sambrook (Birmingham, Northfield) (Con)]

T9. Northfield Business Improvement District and I are eagerly awaiting the announcement of the levelling-up bid, especially the one for Northfield High Street. In the meantime, many local shops, especially independents, are in need of help to stay open. Can the Minister help Marcia and Andy from the Northfield BID and set out how the Government can help those businesses?

[Kevin Hollinrake]

I am grateful to my hon. Friend for standing up for his constituency businesses; I hope he is supporting Small Business Saturday this weekend, as I am sure hon. Members across the House will be. It is absolutely right that we are supporting businesses through these difficult times with the energy bill relief scheme and the £13.6 billion of rates support that they will see over the next five years, but we will continue to look at the needs of business to ensure that we have the right measures in place.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Rosebank oilfield would produce more than 200 million tonnes of CO₂ when burned, which is equivalent to running 58 coal-fired power stations for a year and more than the combined annual emissions of 28 low-income countries. How does that make any sense in a world where heating needs to be constrained to below 1.5°?

--- Later in debate ---

[Feryal Clark (Enfield North) (Lab)]

Recently, a Premier Inn hotel in my constituency threw out one of their visually impaired guests, Ms Angharad Paget-Jones, and her guide dog Tudor in the middle of the night because they refused to believe, despite being shown identification, that Tudor was a guide dog. Can the Minister tell me what action his Department is taking not only to ensure that businesses are complying with the Equality Act 2010, but to go after those who show frank disregard for it in practice?

[Kevin Hollinrake]

That is a very disturbing case, and I am happy to help the hon. Lady with it. I know that the guide dog campaigning organisations have this issue in their sights as something we need to address. I would be grateful if she wrote to me with the specific instance and I will be happy to deal with it for her.

[David Duguid (Banff and Buchan) (Con)]

I welcome the Government’s recent doubling of the alternative fuel payment and yesterday’s written communication from the Minister confirming that the majority of households eligible for those payments will receive their £200 automatically as a credit on their electricity bill. Can he reassure constituents in Banff and Buchan who are dependent on heating oil in particular that those payments will indeed be made as soon as practically possible?

--- Later in debate ---

[Matt Warman (Boston and Skegness) (Con)]

The proposed takeover of Activision by Microsoft has the potential to have a profound impact on many of Britain’s brilliant video games industry manufacturers and makers. Although I know that the Secretary of State will not want to comment on the specifics of that case, can he reassure me that the Competition and Markets Authority has all the resources it needs to come to the right conclusion and to do so as thoroughly and rapidly as possible on this important matter?

[Kevin Hollinrake]

My hon. Friend is right to raise that question. I know that the CMA has received a large number of submissions, and some very large submissions as well. I think it has until 1 March next year to complete its phase 2 inquiry. We absolutely believe that it has the right resources to do that, and we will make sure that it has over the coming months.

Economic Crime and Corporate Transparency Bill (Nineteenth sitting)

Kevin Hollinrake Excerpts

Committee stage
Tuesday 29th November 2022 Public Bill Committees

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Robertson, and to follow the hon. Member for Paisley and Renfrewshire North, who made a very important speech. New clause 69 would introduce new provisions to prevent the continued trading of companies repeatedly declared insolvent and the practice of phoenixing, which the hon. Member outlined. It states:

“A company may not be registered under the Companies Act 2006 if, in the opinion of the registrar of companies, it is substantially similar to a company which has been subject to winding up procedures under the Insolvency Act 1986 on more than three occasions in the preceding ten years.”

A company may be “substantially similar” to previous companies in terms of its name, registered office, proposed officers and so on. This would mean that there is more scrutiny, and questions are raised about whether a company should be able to continue trading.

It is very important, for the reasons we have outlined in Committee, to seek to protect the public and other businesses from unscrupulous operators effectively carrying on their business activity and going through the same cycle of building up debts, which leads to consumer issues, and simply disappearing and starting again. We must deal with that behaviour, which is a route through which economic crime takes place, and that is why we support the new clause. We will listen closely to the Minister’s response on how the Government propose to tackle the issue of phoenixing.

I note the similarity between the intentions of this new clause and new clauses 28 and 46, tabled by my hon. Friend the Member for Aberavon and I, which we have discussed. In different ways, all those new clauses would tighten up glaring loopholes around strike-off, insolvency and phoenixing that enable those who are participating in economic crime to avoid scrutiny. We welcome the new clause, and we look forward to the Minister’s response.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a pleasure to serve with you in the Chair, Mr Robertson. I appreciate the spirit of the amendment, and I also appreciate the hon. Member for Paisley and Renfrewshire North describing this as an excellent Bill—a very constructive point—but one that needs tightening up; I understand his points and applaud the efforts made by him and other Opposition Members to do so.

I am fully aware of the devastating consequences that such issues have on businesses, suppliers, supply chains and our constituents. I have a case of a gentleman called Scott Robinson who repeatedly closed his investment business down. It was called TBO Investments at one point and then became Mount Sterling Wealth. He effectively took his clients with him, and people lost huge amounts of money. They had provided money for him to invest based on supposedly low-risk investments, but he was actually gambling that money in very high-risk investments, and he did that time and again. I really sympathise with the spirit of the amendment, and I am keen to look at not just phoenixing but other types of situation where people deliberately take risks like that that have devastating consequences for consumers and businesses in our constituencies.

[Gavin Newlands]

The Minister says he will look at this and is sympathetic to the issue. For clarity, does that mean a later stage beyond the Bill or at a later stage of the Bill?

[Kevin Hollinrake]

In my view, it needs further work rather than just plonking the new clause in the Bill. There is a wider issue here and I am pleased to see that he seems to acknowledge that. Certainly, a piece of work is needed to look at this in detail. There are some measures in place already—just the pre-pack arrangements subject to Committee scrutiny. I will come on to that in a second.

There are existing provisions in the Bill that provide safeguards against the fraudulent phoenixing behaviour that the new clause targets. Section 216 of the Insolvency Act 1986 makes provision for restriction and prohibition on the re-use of a company name when new companies are formed, which is an intrinsic feature of phoenixing and one that the hon. Gentleman addresses in his new clause. That provision will be complemented by the new powers contained in the Bill. For instance, the registrar may choose to exercise the power to compel the production of information to help her determine whether an application to incorporate a company complies with the proper delivery requirements. They will include that those named as prospective directors can lawfully act as such, which would not be the case if they were barred under the 1986 Act from acting as a director of a company using a prohibited name, and the registrar would be empowered to reject the incorporation application. Furthermore, the registrar will have greater power to direct companies to change their names if they deliberately mislead in their purpose. Such powers provide the registrar with a powerful tool when considering new company registrations.

The registrar will be able to examine and interrogate information already held and share data with law enforcement partners and other authorities. That will allow other key characteristics such as verified identities, the registered office, proposed officers and business activities to be critically assessed with intelligence received to spot patterns of phoenixing.

If adopted, the new clause would be largely duplicative of provisions already in place or those introduced by the Bill. It would also erode the registrar’s discretion in the application of their powers as envisaged. There will be some instances when companies are captured by the new clause and are not culpable, but are merely victims of a legitimate business failure trying to start their enterprise. For instance, the new clause mentions companies that have

“been subject to winding up procedures”.

In that situation, they may be companies that have not necessarily gone into liquidation. There might be other legitimate reasons that those procedures have taken place, which may not be reflective of something that might be considered phoenixing. So, the registrar must be allowed to apply their powers according to the facts and information available. As I have said, I am keen to look at that, including the pre-pack rules, to see where we can tighten up on the matter to make sure those instances are minimised. For all those reasons, I hope the hon. Member will withdraw his new clause.

[Gavin Newlands]

I thank the Minister for his response. The new clause was very much a probing amendment and the Minister points out one weakness. It is a small new clause for dealing with quite a big problem and I may look to table a much more rounded amendment on Report. With that, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 70

Bar on directors in breach of duties receiving public funds

“(1) A company with a director or directors which are in breach of the general duties outlined in Chapter 2 of the Companies Act 2006, or who have been found to have committed statutory breaches of employment law, may not receive Government provided funds or financial support, unless subsection (2) applies.

(2) A company whose director or directors meet the criteria outlined in subsection (1) may receive Government provided funds or financial support if such funds or support are provided solely and specifically for the direct benefit of the company’s employees.”—(Gavin Newlands.)

This new clause seeks to prevent directors who fail to comply with their duties as a company director or with employment law provisions from being able to access funds in instances where these funds are for the benefit of the company and not the company’s employees.

Brought up, and read the First time.

[Seema Malhotra]

This is a useful new clause, in the spirit of some of the new clauses that we have tabled on what should and should not be available to directors who are in breach of their duties, disqualified and so on. The new clause, tabled by our colleagues from the SNP, would introduce new provisions that bar directors who are in breach of their duties from receiving public funds. Under the new clause, a company with a director or directors who are in breach of the general duties outlined in the Companies Act 2006, or who have been found to have committed statutory breaches of employment law, should not receive Government-provided funds or financial support unless it is solely and specifically for the purpose of directly benefiting the company’s employees.

This is an important debate, and I would be interested in the Minister’s response. When taxpayers find out that their money goes towards effectively supporting or enriching directors who are in breach of the Companies Act, there will be a real question about what the Government can do to further disincentivise and not reward those who are in breach of employment law or other areas of legislation. We support the sentiments behind the new clause and the arguments being made, and I look forward to the Minister’s response.

[Kevin Hollinrake]

I thank the hon. Member for Paisley and Renfrewshire North for his new clause; again, I support the motivation behind it. Clearly, there are restrictions already. Where a director has failed to observe a specific duty under the Companies Act 2006, they will potentially find themselves liable to criminal sanction and disqualification. I accept the fact that we have not focused too much on that area in the past, but that is exactly why we are legislating in the Bill to make the registrar far more proactive in her work. Where an employer has committed a breach of employment law, the relevant statute will generally provide appropriate remedies either by way of a right of action for the worker—normally in an employment tribunal or the courts—or by way of state enforcement, or sometimes both.

The new clause seeks to isolate only two triggers for denying access to financial support. Although they may have merit as triggers, who is to say that there are no other matters of conduct on the part of either a company or its directors that might lead one to question the wisdom of awarding it taxpayers’ money? Obviously, that should be determined within the scheme rules. The hon. Gentleman pointed to a case in which a director was interlinked with four other companies. There are already restrictions on Government loans—covid loans, for example—which must be taken into account where there are interlinked schemes, and he is probably aware of that.

--- Later in debate ---

[Dame Margaret Hodge]

I will speak for a little longer on new clause 73, but hopefully we will get through the others more quickly. It is probably one of the most important new clauses that we have tabled. It sits with new clause 79, which we will come to a little later. If we can make progress on this issue, we will be putting some better meat on the bones of what is still quite timid legislation.

We all want to do all we can to prevent economic crime from occurring in the first place. Prevention and early intervention is obviously the best, cheapest and most effective way of tackling the problem of dirty money. We want to stop it happening in the first place. We also all know that much economic crime takes place because lawyers, company service providers, accountants, bankers or estate agents either enable or collude with bad actors, helping them or turning a blind eye to the things that they do, thus enabling money to be laundered, crime to be committed, and our systems to be used to commit financial crimes.

There is currently too little in our laws and regulations that will stop the enablers—accountants and all the others—supporting and enabling economic crime. Companies and individuals are not held to account for what they do. The new clause aims to put a halt to that. We need to reform our outdated corporate liability laws so that not only companies but senior managers can be prosecuted if they fail to prevent fraud, false accounting and money laundering. It is not because we want to have endless prosecutions, or to fill prisons with these enablers, but because the threat of criminal prosecution will act as the best and most vital deterrent in preventing professionals from helping criminals to launder and manage their dirty money.

As we have said time and again in Committee, most professionals act with integrity. Those professionals with integrity have absolutely nothing to fear from the new clause. Indeed, the majority, who act responsibly, should welcome the change, because it will help us to clean up their profession, get rid of the bad apples and restore our reputation as a trusted jurisdiction. The Minister knows very well—I am trying to find the right Minister—

[Kevin Hollinrake]

I know as well.

[Dame Margaret Hodge]

Both Ministers know that reform has been promised, and delayed, for a long time. The 2015 Conservative manifesto committed to making it illegal for companies to fail to put in place measures to prevent economic crime. The 2017 Ministry of Justice consultation on corporate liability reform sat for three and a half years. Inexplicably, it found that there was not enough evidence to pursue reform. I can only imagine that the Ministry was strongly lobbied. It said there was not enough evidence despite the fact that 76%, or three out of four respondents, said that the identification doctrine, which we will come to, inhibits the holding of companies to account for economic crime, and that two out of three respondents thought that corporate liability reform would result in improved corporate conduct. Despite all that, the Ministry chose not to pursue reform.

We then got the Law Commission’s review in 2022. It found that the current situation was “highly unsatisfactory” and that, on the status quo on corporate liability, “the identification doctrine”—for fraud and money laundering, the way in which we determine whether the people involved represent the “directing mind and will” of the company and can therefore be held responsible—

“is an obstacle to holding large companies criminally responsible for offences committed in their interests by their employees.”

The commission said that the status quo is “unfair” and that if the law remains unchanged it

“will continue to enable large companies to be acquitted for conduct which would see small businesses convicted.”

It also stated that that

“could diminish confidence in the criminal law”

and, finally, that the status quo incentivises poor corporate governance and

“rewards companies whose boards do not pay close attention.”

Given all that, I cannot think of a stronger indictment of the status quo.

There are endless examples of where our failure to modernise our criminal liability law has led to failure in the courts. The Barclays bank action is probably the most infamous, or famous, of them all. In 2008, during the financial crisis, Barclays wanted to avoid nationalisation and entered into a deal with Qatar, from which it received more than £11 billion and a loan of £3 billion. The bank, however, also set up what was called an advisory service agreement—in a sense, as I can say under parliamentary privilege, it was a bribe—and, under it, £322 million was given to those who facilitated the deal between Qatar and Barclays bank.

The Serious Fraud Office tried to prosecute the bank and its chief operating officer with charges of conspiracy to commit fraud and charges involving “disguised commissions”—in my interpretation, bribes. The court threw out all the charges, saying that the alleged criminal dishonesty of senior officers “could not be attributed” to Barclays. So the chief executive could not be held responsible for what the bank did, because the chief executive was not the bank, but reported to the bank. It was a crazy judgment. The court also dismissed cases against other individuals, as they could not be defined as the “directing mind and will” of Barclays.

There was, then, a Barclays fiasco, but there were other examples, such as the LIBOR rate-rigging scandal. No criminal prosecutions were brought, although the individuals prosecuted gave evidence that their managers knew what they were doing, so the company itself was liable. If the Minister for Security will allow this comparison, the US brought criminal enforcement action against 12 of the banks in the LIBOR scandal—British banks—and extracted $3.4 billion in criminal fines. Other examples include HBOS—to which the Under-Secretary often refers—Serco and the tagging contract, London Capital & Finance, and so on and so forth.

In 2022, four parliamentary Committees called for the reform of corporate criminal liability legislation. In February 2022, the Treasury Committee urged the Government to

“act quickly in bringing forward any legislation flowing from the Law Commission’s review. In the meantime, corporate criminals will continue to be able to escape prosecution for economic crimes.”

I probably do not have to quote this one, as the Minister might remember it, but the Foreign Affairs Committee called for

“reform of outdated and ineffective corporate criminal liability laws which mean that it is difficult to hold large companies to account for economic crimes.”

--- Later in debate ---

I could go on; does he want to hear all of his speech?

[Kevin Hollinrake]

No, I remember it very well.

[Dame Margaret Hodge]

Anyway, I thought it was a speech in favour of the intent of this new clause.

Failure to prevent offences have proved effective elsewhere, as the Minister himself has said. We use them to tackle bribery and tax evasion, and the Minister always raises the best example when he refers to what used to go on in the construction industry. In my youth, people would regularly have terrible accidents on construction sites, some of which were fatal. It was only when a duty was introduced for those who ran construction companies to ensure the health and safety of their workers in the workplace, meaning it would be a criminal offence if they failed to do so, that miraculously, overnight, deaths on building sites came almost to a 100% halt. We have lots of examples of where a failure to prevent does not end up with people being locked up but does change behaviour. That is what we are trying to do.

I have lots of examples of areas where the Bribery Act 2010 has been successful and this is not one. This is the last legislative opportunity we will have in this Parliament to put into effect something that Members across the House think is important. There is so much evidence from so many bodies emphasising the importance of this bit of legislation. I cannot see any argument for delay. Before they reached their great, really important roles on the Front Bench, both Ministers argued passionately, frequently and loudly for this reform. I hope they will accept the new clauses, together with new clause 79, on the identification principle. With the inclusion of those three new clauses, we can hold our heads up high and say that we have done good work in Parliament.

--- Later in debate ---

[Alison Thewliss]

I, too, rise to support the new clauses, which are incredibly important.

“Of all the measures we have talked about today, this would have the biggest effect in terms of cutting down on economic crime, because lots of our financial organisations are complicit when it suits their interests to be so.”—[Official Report, 13 October 2022; Vol. 720, c. 309.]

If the Under-Secretary recognises those words, it is because they are his own from just a few weeks ago, on 13 October 2022. What a long time it has been; here we are today at the end of November.

It is important that we use the new clauses as an opportunity. As the right hon. Member for Barking said, this is an opportunity to make this change now and get it right. It cannot be said that the Ministers present do not agree with the measures. The Under-Secretary argued for a failure to prevent economic crime offence not just on 13 October 2022 but on 7 July 2022 and 1, 22 and 28 February 2022, on 2 December 2021, on 9 November 2021, on 22 September 2021, on 18 May 2021, on 9 November 2020, on 25 February 2020, on 19 July 2019, on 23 April 2019, on 18 December 2018 and on 9 October 2018. Why have we got to the point today where he is arguing against something that he has argued for so consistently and repeatedly in this House?

[Kevin Hollinrake]

Will the hon. Lady give way?

[Alison Thewliss]

I will if the Minister can give me an explanation as to why he is not going to back the new clause.

[Kevin Hollinrake]

When have I argued against it?

[Alison Thewliss]

I suspect that if it goes to a vote, he will vote against the new clause, so he does not even need to argue against it. If it goes to a vote, he and his colleagues will vote against something that he has consistently and repeatedly supported in this House. He knows in his heart of hearts that this is the right thing to do. I am very interested to know whether, if the Government will not support the new clause—whether it goes to a vote or not—they will introduce something similar on Report. Both Ministers know that this is the right thing to do. The opportunity is here in the Bill. If the opportunity is there and the will is not, that leaves huge questions for the credibility of the entire Bill.

--- Later in debate ---

[Kevin Hollinrake]

The right hon. Lady makes a very important point about vested interests. We have previously discussed the influence of people who may not be keen on these kinds of clauses. I would say to anybody in the financial services sector who is making these claims that there are potentially huge benefits from preventing fraud across the board, because 70% of online fraud, which costs banks a lot of money, comes from platforms, and this kind of legislation could make the platforms responsible for removing content. So the sector could see benefits as well as potential new obligations.

[Dame Margaret Hodge]

I am grateful to the Minister for reinforcing my argument. I would add simply that the same is true of the online harms Bill. If we had director liability there, I think we would see a lot of the online harms disappearing, but that is for next week.

On how the new clause would work, we can mirror processes that take place in other bits of legislation. To say that it is already covered is a nonsense, because we would not have had the failure of the Barclays case and all the other cases that I cited to the Minister had we already put in place legislation that was appropriate for ensuring that companies and their directors are held to account. I will not put the matter to a vote, but this is a hugely important issue. I look forward to our debating it further at other stages during the course of the Bill. I wish Ministers well in their attempts to get it past the Government, but if they do not, Parliament will do so. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 75

The Economic Crime Committee of Parliament

“(1) The Secretary of State must by regulations establish a body to be known as the Economic Crime Committee of Parliament (in this section referred to as “the ECC”).

(2) The ECC will consist of nine members who are to be drawn both from the members of the House of Commons and from the members of the House of Lords.

(3) Each member of the ECC is to be appointed by the House of Parliament from which the member is to be drawn.

(4) The ECC will have the power to meet confidentially.

(5) The ECC may examine or otherwise oversee any regulatory, enforcement or supervision agencies involved in work related, but not limited to—

(a) tax avoidance and evasion by corporations;

(b) illicit finance;

(c) anti-money laundering supervision;

(d) tackling fraud;

(e) kleptocracy and corruption; and

(f) whistleblower protection.”—(Dame Margaret Hodge.)

Brought up, and read the First time.

--- Later in debate ---

[Dame Margaret Hodge]

I beg to move, That the clause be read a Second time.

This new clause relates to another issue on which there is cross-party support: reform of whistleblowing. It has been put together for me, although it is in my name, by the hon. Member for Cheadle (Mary Robinson), who leads the all-party parliamentary group for whistleblowing. I must put it on the record that she has been a fantastic campaigner in this area and an outspoken champion for the countless courageous individuals who have dared to speak out. As she rightly says, for most of those individuals whistleblowing has shattered their lives, with many losing their health and livelihood. What we are talking about here is really important.

Our new clause would introduce an office for whistleblowers, which would protect the whistleblowers and ensure that their disclosures are investigated and information provided is passed to the relevant authorities. In clause 4, we set out ways in which whistleblowers would provide that service. I think that the hon. Member for Thirsk and Malton is the Minister replying to this debate; I know that he is passionate about this topic, because he has said so on lots of occasions—most recently on Second Reading on 13 October, when he said:

“We do not protect or compensate whistleblowers, and that is wrong. Those people do the right thing and come forward but—not to put too fine a point on it —we hang them out to dry.”—[Official Report, 13 October 2022; Vol. 720, c. 309.]

He went on to say:

“It is pointless having lots of law enforcement people charging around not knowing where to look. Whistleblowers tell us where to look. Some 43% of all financial crimes are identified through whistleblowers, yet it is something we do not talk about. We do not just need more regulators; we need somebody to point us in the right direction. Regulators will always be watchdogs, never bloodhounds. We need the bloodhounds in the organisations who are willing to speak up if things are going wrong.”—[Official Report, 7 March 2022; Vol. 710, c. 121.]

Hear, hear to that, but let us have some action arising out of those passionate words.

Whistleblowing plays an absolutely key role in addressing economic crime, whether it is for money laundering or other crimes. Think of the Panama papers 2016—we would never have had them—or the Paradise papers, the Russian and Troika laundromats, the Azerbaijan laundromat, the FinCEN files and the Pandora papers. Let us look at just one of those—the Panama papers—which were 11.5 million legal documents held by the Panamanian law firm Mossack Fonseca. It basically made its money by creating offshore companies and bank accounts to launder and hide the money. The story was given to a German paper, then 370 journalists got involved in investigating the data, working in 80 countries.

Just think what came out of that. Twelve current and former world leaders were named in those papers. There was a $2 billion trail to Putin through his close friend Sergei Roldugin, known as Putin’s wallet. The money went all over the world, including into an upmarket ski resort in Leningrad owned by a company funded by this dirty money and where Putin gave his daughter a sumptuous wedding. The Icelandic Prime Minister resigned off the back of the papers. The Pakistani Prime Minister was removed from office due to allegations of corruption and fraud.

Through the leak, some £1.2 billion of tax revenue was restored to 23 national Governments. In the UK, there was an extraordinary list of the rich and powerful, from Kevin Keegan to Nick Faldo, Lewis Hamilton, Tiger Woods, Gary Lineker, Madonna, Keira Knightley, Simon Cowell, Nicole Kidman, the Barclay brothers, Stuart Gulliver of HBSC, and political figures like Arron Banks, Michael Ashcroft and the right hon. Member for North East Somerset (Mr Rees-Mogg). They were all named and exposed.

Going back to my Public Accounts Committee days, the work we did all came from whistleblowers in the area of economic crime. I referred earlier to the Goldman Sachs sweetheart deal. That emerged from a whistleblower—a lawyer working in His Majesty’s Revenue and Customs. We had a very frustrating session. We knew something was going on, and we interviewed the head of tax at HMRC, but he would tell us absolutely nothing. I then got a bundle of papers from a lawyer who was working there, and in that bundle was a sheet of paper that had on it two things. It said that a meeting was held by the head of law, and he had said that the head of tax had shaken hands on the deal, which the head of tax had denied at the Treasury Committee. He also said that the deal was unconscionable.

We called back the head of tax and head of law and interrogated them. They still said nothing. Then my hon. Friend the Member for Norwich South (Clive Lewis) said to me, “Put the guy on oath. He might tell you something.” That had never happened in a Select Committee. I turned to the clerk, who told me that I could put him on oath, and said, “Go and find a Bible.” It took them 20 minutes to find a Bible. But the point is that all that from a whistleblower led to the trail that I think has certainly ended up with me being on this Committee considering the Bill today.

What is so terrible about that story is that the then head of tax left public service, and I asked the person who became the permanent secretary in HMRC every time she appeared before the Committee, “Are you looking after that whistleblower? Is he okay?” She always gave me assurances that he was, but actually they raided his computer and telephone. His marriage broke up, and in the end life became so intolerable that he had to leave public office. It is one of the things I feel great shame about really—that I was not able even in that position to protect him, even though it was his revelations that enabled us to start discovering what was going on.

Whistleblowing helps everywhere. It is a vital way of revealing wrongdoing in all sorts of sectors. It was a child sex abuse whistleblower who helped reveal the child sexual exploitation in Rotherham. The NHS is full of workers who blew the whistle on things such as the lack of personal protective equipment. The Public Accounts Committee saw another example, relating to Serco, where a GP contract was done in Cornwall but they were lying about their performance. A whistleblower came to us, but Serco’s response was simply to rifle through everybody’s lockers to try to find out who the whistleblowers were. Serco was not interested at all in the fact that the information it provided was inaccurate, or in trying to improve the quality of the service.

Interestingly, whistleblowers in America are treated very differently, particularly on the issue of compensation. To give one example, in the JPMorgan case, there was a $45 million settlement after two whistleblower employees at a Georgia mortgage broker alleged that the bank had scammed a programme that was intended to make it easier for veterans to qualify for loans, and had submitted fraudulent claims to the Government. The whistleblowers were awarded $11 million. Facing the same charges, Wells Fargo later settled for $108 million. A whistleblower revealed massive robo-signing at the four banks that were the country’s largest mortgage providers. The companies had allegedly relied on a company called Docx to forge signatures on thousands of mortgage documents. The suit was settled for $95 million, and the whistleblowers received $18 million for helping to expose the fraud.

The Minister well knows the facts that I will give him now. In 2018, 40% of whistleblowers reported going on sick leave—that is the pressure in the workplace. Only 4% of whistleblowers who bring claims under the current legal structure succeed. Of the 1,041 whistleblower reports submitted to the FCA in 2021-22, only three have resulted in any significant action. The Minister must agree that enough is enough. We in this country cannot go on failing to treat whistleblowers with the respect, support and advice that they deserve. Our new clause starts the process of reform. It does not do everything—for example, it does not do financial compensation—but it is a start.

Finally, please do not just say, “We are looking at this.” Do not tell us you will come back. This is a once-in-a-lifetime opportunity.

[Kevin Hollinrake]

The right hon. Lady makes an interesting point about how compensation works in the USA. She will be aware that Protect, the most high-profile whistleblower organisation in the UK, is against a compensation scheme similar to that in the USA. There is good reason for that: very few whistleblowers in the USA actually get compensation, which is one of the flaws in the scheme. Does she agree that we must think carefully about how we introduce whistleblower reform? It needs to be well thought through, rather than simply rushed.

[Dame Margaret Hodge]

I agree that we have to think carefully, but setting up an office for whistleblowing, which is what our new clause would do, could be the start. We might get some proper expertise in there, so as to think through some of the more complex issues.

Minister, grasp the opportunity and agree with our proposal. It would set up a new office—a central place for any would-be whistleblower to come for advice. It would support regulation in organisations. It would be a central place for setting standards, monitoring, evaluating and reporting. It would ensure that those who inflict or suffer detriment will be properly held to account or properly compensated. An office for whistleblowers would drive up standards across both the private and public sectors, increase transparency and restore public confidence. Whistleblower discrimination is a global problem, and the new office would set a global standard here in the UK.

--- Later in debate ---

[Alison Thewliss]

We also support this important new clause. In a recent speech, the Minister said that 43% of all economic crime was identified by whistleblowers, which illustrates why the new clause belongs in the Bill. We all know from whistleblowers’ stories that doing the right thing comes often at a significant cost personally, professionally and financially. It is important that we do anything we can to support those whistleblowers and to make sure they feel comfortable to go ahead and do what they do to ensure that we are all protected. I look forward to hearing the Minister supporting the new clause, because he has supported it umpteen times in the past.

[Kevin Hollinrake]

I think this is the last occasion I have to address the Committee, so I thank all Members for their contributions. We have had very constructive debates throughout the days that we have looked at the Bill. I thank the officials for all their work in these areas.

Not for the first time, I am very sympathetic to the new clause and to the previous one on failure to prevent. Nothing I have seen or heard since I started as a Minister only a few weeks ago has changed my mind on the things I have said in the House and other places about the need for whistleblower reform and failure to prevent reform. There is no conspiracy behind the scenes here. There is a difference between arguing against the principle of something and arguing against the provisions of something. That is where we probably differ a little.

As the hon. Member for Glasgow Central said, I have said before that 43% is the stat for the discovery of financial crime. In my experience, it is much higher than that—about 100%. Everything I have dealt with has been brought to the attention of authorities through whistleblowers, not least Ian Foxley, my constituent who was very important to the case on GPT Special Project Management Ltd that the right hon. Member for Barking referenced. He was the bloodhound in that case. We need those bloodhounds.

Since taking over as Minister with whistleblowing in my portfolio, I have asked officials to prioritise this review and to get it moving properly, and that is what we have committed to do. There are differences in where we go with it: do we do something to address the cases like Ian Foxley’s and the others the right hon. Lady references? Sally Masterton addressed those cases. Do we do something longer term and more complex? It is either low-hanging fruit or something more radical.

My hon. Friend the Member for Cheadle has done fantastic work in this area. I am keen to engage with her and my hon. Friend the Member for Weston-super-Mare (John Penrose) to make as much progress as we can as quickly as we can. Ian Foxley’s case is interesting because he was prevented from getting compensation. He was very successful in getting that case highlighted and the authorities successfully prosecuted it, but he was denied compensation because the PIDA rules on what it describes as an employee did not cover his particular category. That is a relatively easy issue to fix and something I want to look at.

The other part of the current legislation is around prescribed persons. There are 80 prescribed persons at the moment: people to whom others can make a protected disclosure. We are extending that this week when I introduce a statutory instrument on extending the number of prescribed persons to whom whistleblowers can go to seek assistance. Indeed, some of those prescribed persons are in this room. Members of Parliament are prescribed persons, as are some Ministers, but so too are our agencies. That is probably my biggest concern.

I took the case of Sally Masterton, who was key to highlighting the HBOS Reading scandal, which I have referred to many times in Parliament, to the Financial Conduct Authority. When I asked Andrew Bailey, who was then the chief executive of the FCA, whether he had followed his own whistleblowing procedures in relation to Sally Masterton, who was terribly mistreated by Lloyds Banking Group, he refused to answer the question because I was not a relevant person, under the relevant legislation. That is quite astounding, when it was Parliament that legislated to introduce the whistleblowing protections in the first place.

There are things that we need to do quickly that would address many of the problems, but we have done much. We have improved the guidance on what a prescribed person needs to do. We have a requirement on people to make public annual reports on what they have done in terms of whistleblowers, but I am keen to hold regulators’ feet to the fire in this area. I ask the right hon. Member for Barking not to pre-empt the review that I am urgently undertaking, because she knows how serious I am. I would like to bring forward effective reform very quickly, and to effect change more quickly. I fear that the new clause would delay the reform, when we can make progress by other means.

[Dame Margaret Hodge]

I hear what the Minister says. I simply say to him that finding legislative time will be a battle, so I hope that he has some mechanism to get the reform through.

[Kevin Hollinrake]

There are things that we can do without primary legislation that could move much more quickly.

[Dame Margaret Hodge]

I hear that. This matter will be debated by others on Report. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 79

Identification doctrine

“(1) A body corporate commits an offence listed in Schedule 8 where the offence is committed with the consent, connivance or neglect of a senior manager or senior managers.

(2) An individual is a ‘senior manager’ of an entity if the individual—

(a) plays a significant role in—

(i) the making of decisions about how the entity’s relevant activities are to be managed or organised, or

(ii) the managing or organising of the entity’s relevant activities, or

(b) is the Chief Executive or Chief Financial Officer of the body corporate.

(3) A body corporate also commits an offence if, acting within the scope of their authority—

(a) one or more senior managers engage in conduct, whether by act or omission, such that, if it had been the conduct of only one representative, that representative would have been a party to the offence; and

(b) the senior manager who is responsible for the aspect of the organization’s activities that is relevant to the offence — or the senior managers collectively — fail to take all reasonable steps to prevent that offence being committed.”—(Dame Margaret Hodge.)

Brought up, and read the First time.

Postmaster Suspension Pay

Kevin Hollinrake Excerpts

Thursday 24th November 2022 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

The Bates et al v. Post Office Ltd common issues judgment in March 2019 found that clauses in postmaster contracts allowing Post Office to withhold remuneration during any period of suspension were unreasonable under the Unfair Contract Terms Act. Post Office was not entitled to rely on them.

Before March 2019, postmasters were not remunerated during the period of any contract suspension. Post Office has subsequently changed this policy, resulting in postmasters continuing to receive remuneration during a period of suspension.

As part of its efforts to address historical operational issues and implement improvements to its company culture, Post Office is setting up a compensation scheme to provide compensation to postmasters who did not receive remuneration during a suspension period. Post Office will write out to current and previous postmasters to offer them compensation based on the remuneration they were not paid and any associated consequential losses they may have suffered.

The Government will provide funding to Post Office to cover compensation to postmasters for unpaid suspension remuneration and any associated consequential loss. The Department for Business, Energy and Industrial Strategy will provide oversight to ensure that this compensation is delivered quickly and effectively to affected postmasters.

The Government continue to support Post Office in its efforts to review company practices and ensure that historical operational errors are not repeated.

[HCWS384]

Economic Crime and Corporate Transparency Bill (Seventeenth sitting)

Kevin Hollinrake Excerpts

Committee stage
Thursday 24th November 2022 Public Bill Committees

[Stephen Kinnock (Aberavon) (Lab)]

It is a pleasure to serve under your chairship, Sir Christopher. New clause 24, tabled by SNP Members, would add to the transparency of the companies register and enhance the ability of law enforcement to identify suspect registrations. It would do so by requiring the subscribers or initial shareholders of a company to provide information on the location of any bank account held either by the individual shareholders or in the name of the company itself.

The new clause reflects an acknowledgement of the realities that have been exposed by many of the recent leaks and investigative reporting by the media of the widespread criminal use of bank accounts registered in jurisdictions known for exercising minimal oversight over financial activity and for lax controls on money laundering offences. Given that the entire point of the Bill is to clamp down on the ability of criminals to exploit gaps in laws and regulatory approaches to economic crime across different countries, the Opposition sincerely hope that the Government welcome proposals that are intended to provide law enforcement with as much information as possible to facilitate the detection of economic crime. Requiring Companies House to record information on the location of relevant individuals’ bank accounts seems like an eminently reasonable measure that could make a valuable contribution to the fight against economic crime.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a pleasure to serve with you in the Chair, Sir Christopher. I thank the hon. Member for Glasgow Central for the new clause, which raises an interesting point. I have concerns about the privacy issues involved in putting this information in the public domain, and I wonder whether she has considered that. We are potentially talking about personal bank accounts rather than company bank accounts.

A similar proposal to require the disclosure of bank account information relating to companies was included in the 2019 corporate transparency and register reform consultation, as the hon. Member mentioned. Respondents did not on balance support the proposal and the Government subsequently agreed that the proposal did not offer sufficient benefits to justify the additional burden being imposed on companies. There is also concern that there would be practical difficulties with implementation, such as the inability to confirm information provided, or to identify where it is missing, which would reduce the effectiveness of the proposal.

There are some other measures we can use. The European Union’s fifth anti-money laundering directive required the UK to build a centralised automated mechanism, a bank account portal, designed to help law enforcement and AML supervisors to access information on the identity of holders and beneficial owners of bank accounts and safe deposit boxes. Following the UK’s exit from the EU and the agreement of the trade and co-operation agreement in January 2021, the Government reviewed the case for building the portal. At that point, law enforcement did not believe there was a strong rationale for an alternative, centralised mechanism in order to support its work and the Government concluded that we should not build a bank account portal. UK money laundering regulations have been amended to remove redundant obligations.

I would be grateful if the hon. Member withdrew her amendment, but I would like to explore the issue further, certainly as it relates to company bank accounts, so we will perhaps return to it at a later stage.

[Alison Thewliss]

I thank the Minister for his consideration of this proposal. I would be interested to know what has changed since the previous consideration was arrived at that such provisions were not necessary. He suggests he will weigh that up and perhaps bring forward some amendments on Report, I beg to ask leave to withdraw the amendment.

Clause, by leave, withdrawn.

New Clause 26

Reporting requirement (objectives)

“(1) The Secretary of State must publish an annual report assessing whether the powers available to the Secretary of State and the registrar are sufficient to enable the registrar to achieve its objectives under section 1081A of the Companies Act 2006 (inserted by section 1 of this Act).

(2) Each report must make a recommendation as to whether further legislation should be brought forward in response to the report.

(3) Each report must provide a breakdown of the registrar’s annual expenditure.

(4) Each report must provide annual data on the number of companies that have been struck-off by the registrar, the number and amount of fines the registrar has issued, and the number of criminal convictions made as a result of the registrar’s powers as set out in this bill.

(5) Each report must provide annual data on the number of cases referred by the registrar to law enforcement bodies and anti-money laundering supervisors.

(6) Each report must provide annual data on the total number of company incorporations to the registrar, and the number of company incorporations by Authorised Company Service Providers to the registrar.

(7) The first report must be published within one year of this Act being passed.

(8) A further report must be published at least once a year.

(9) The Secretary of State must lay a copy of each report before Parliament.”—(Seema Malhotra.)

This new clause would add a requirement on the Secretary of State to report on the powers available to the Secretary of State, the Department for Business, Energy and Industrial Strategy, and Companies House in relation to the registrar’s powers to achieve their objectives set out in clause 1.

Brought up, and read the First time.

--- Later in debate ---

[Dame Margaret Hodge (Barking) (Lab)]

It is a pleasure to serve under your chairship, Sir Christopher. I rise to make the simple point that the new clause is not a technical amendment; it is about an issue of principle. It is about transparency and accountability. It is not a provision that improves things at the margin; it is about making the legislation fit for purpose. Without it, the legislation will not be fit for purpose.

Throughout my history of learning about dirty money and money laundering, it has been absolutely clear to me that we have a range of tools already in legislation. As we do not have any accountability to Parliament as to how and whether those tools are employed, we do not know how effective we are in the battle against dirty money. Let me give three examples. There is now a new bit of legislation on unexplained wealth orders; it is the first time that I have known Ministers to agree to an annual report to Parliament. They agreed to it when we did the emergency legislation. I have been arguing for that for years, so I was pleased to see it, but until that moment we did not know, and we have not seen the report yet.

A better example is golden visas. We are still waiting for the report on golden visas, how they were abused, misused and used during that period, and who was let into the country on one. Another example is the amount of money that has been frozen from people who have been sanctioned by this Government. We do not have a clue how much that is. The Government put out a figure the other day for how much Russian state money had been frozen—£18 billion—but we do not have a clue how much money we have managed to get off some of the characters we know are sitting on billions.

If there is going to be effective legislation, we need clear transparency and proper accountability. That is something that the Opposition feel incredibly strongly about. We will be pressing the new clause to a Division, because it is a sensible, pragmatic and practical provision that should be in the Bill.

[Kevin Hollinrake]

I thank the hon. Members for Feltham and Heston and for Aberavon for tabling their new clause. I also thank the right hon. Member for Barking and the hon. Member for Glasgow Central for their contributions. I agree with much of what they said. As they know, I fully agree that Parliament should be regularly updated on the implementation and impact of this legislation. What gets measured gets done, and it is vital that we know what is being done with this legislation.

I will speak to new clauses 26 and 28 first, because I think there may be a duplication of things that exist already. Much of the information suggested by new clause 26, such as Companies House expenditure and the numbers of companies incorporated and struck off, is already published in the Companies House annual report. Companies House already reports publicly on its activities and its regular statistical releases on gov.uk. On new clause 28, through dissolution a company is brought to a point at which it ceases to exist and ceases to appear on the register. A company can seek its own voluntary strike-off, or it can be struck of compulsorily by the registrar. In principle, that process takes place when there is reason to believe that the company is no longer in operation or carrying on business. In both cases, statutory processes ensue whereby the public generally are informed that the dissolution is in train by publications in the Gazette. There are opportunities for third parties to intervene and object to a company being dissolved.

Concerns have been expressed that unscrupulous companies choose to give the impression that they are defunct in order to precipitate their dissolution and evade creditors. That concern is ultimately misplaced, as any assets left in a company following its dissolution will not be held by the company any more, and will be passed to the Crown, bona vacantia—as ownerless property. It is also important to note the effects of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, which amended the Company Directors Disqualification Act 1986 by introducing a mechanism for disqualifying directors of dissolved companies.

It is also worth noting that the 1986 Act includes provision not only for disqualifying directors but for ordering disqualified directors to pay compensation. That provision is in section 15A of the Act and, as amended by the 2021 Act, covers directors of both insolvent companies and dissolved companies. If a director is disqualified and the conduct for which they were disqualified caused loss to the creditors of an insolvent or dissolved company, the director can be ordered to pay compensation either for the benefit of specified creditors or by way of a contribution to the assets of the company.

The Bill introduces a new circumstance under which the registrar might seek to strike off a company that persistently fails to provide an appropriate registered office address. I assure Members that the registrar will initiate dissolution in those particular circumstances only after having assessed the risks of doing so. The normal notification procedures, by way of the Gazette and Companies House webpages, will apply.

As noted, Companies House already makes data on company dissolutions regularly available. I question what benefit the reporting proposed by the new clause would add, as it is not clear to me that the information it covers would necessarily be available to the Secretary of State. However, I acknowledge the concern about the manner in which compulsory strike-off operates. I have asked my officials to advise me on the extent to which the Bill’s new information-sharing provisions might improve safeguards and transparency in this area. I am of course happy to engage further with Members on this topic in due course.

Most of the comments related to new clause 63. I absolutely agree that there needs to be a mechanism by which progress made on the implementation of the provisions in the Bill is reported to Parliament. There should be regular reporting on the registrar’s use of the new powers. I also accept that it is important to give Parliament an early opportunity to scrutinise how quickly Companies House implements the reforms.

I believe, however, that the new clause requires further consideration. As drafted, it has the potential to place unintended obligations on the registrar. For example, it will require the registrar to report on the imposition of financial penalties before the commencement date of the regulations. It also requires the registrar to indefinitely report on the implementation of the legislation, even if it is completed in the near future.

With the agreement of the Committee, I would like to ask my officials to consider the new clause further. I hope Members are reassured that we will give it consideration. If the new clause is withdrawn, we will have further discussions about what we might put in its place.

[Seema Malhotra]

I thank the Minister for his comments about the new clauses. I appreciate his response on new clause 63 and very much look forward to hearing from his officials about the proposed reports, but will he tell us when we will hear from them? None of us wants the measure to be lost in the course of proceedings, and we do not want it to be left to the Lords, so I would be grateful if he can tell us when he expects us to hear a response. Assuming that it will be positive, I am happy not to press new clause 63 to a vote.

On new clause 26, the Minister did not respond with the detail that I was expecting. I understand that some data is already published. We can have an argument about whether it is there, but it is easy for there to be a summary. If Parliament is looking at one document, it will want that data. It will want to review the later data in the context of the more procedural data that Companies House already publishes. I cannot see that it is onerous to publish a summary of data that already exists.

--- Later in debate ---

[Seema Malhotra]

My right hon. Friend is absolutely right; indeed, that is precisely where my concerns lay. The Minister simply talked about the relatively small part of the reporting requirement. If there were an argument as to whether to include it or not, my argument would continue to be that that is relevant to have in the context of the full reporting requirement that we are arguing for. There is not anywhere else in the legislation—unless the Minister can direct me to it—that will provide Parliament with such a report.

[Kevin Hollinrake]

Just to abbreviate the debate, much of the information in new clause 26 is already reported by Companies House in its annual report. I think it is being said that the key measures are the additional ones in new clause 63, which relate to what the Bill’s provisions will give effect to. I am happy to return to the Committee before Report to say where we feel the new clause needs to be addressed. If we do not do it at that point, the hon. Lady is welcome to table an amendment on Report.

[Seema Malhotra]

I thank the Minister. To clarify, he referred to coming back on new clause 63; my question is in relation to new clause 26 and whether and how the later subsections are all going to be covered by the Companies House annual report. It would be helpful if he responded to that, because currently I am not clear that they are all covered.

In new clause 26, we are asking for an assessment of whether

“the powers available to the Secretary of State and the registrar are sufficient to enable the registrar to achieve its objectives”

and about

“making recommendations as to whether further legislation should be brought forward in response to the report.”

Yes, there may be details elsewhere, but they could be summarised for the ease of use of the report. The new clause requires

“a breakdown of the registrar’s annual expenditure”

and

“data on the number of companies struck off”.

That information may well also be elsewhere. Will the Minister confirm whether

“the number of cases referred by the registrar to law enforcement bodies and anti-money laundering supervisors”

and so on is all going to published elsewhere?

[Seema Malhotra]

I thank my right hon. Friend for explicitly emphasising the importance of subsection (6). She is absolutely right. The Minister will be mindful of the importance of transparency in respect of the issues relating to incorporations by authorised company service providers. Will he confirm that all the subsections in new clause 26 will be explicitly covered elsewhere? If not, we will want to pursue the matter of how that information is going to be published by Companies House and the Secretary of State.

[Kevin Hollinrake]

Nobody is ignoring the comments that have been made. Nobody is keener than I am to make sure that there is proper scrutiny of what Companies House does with the powers. We should absolutely ensure that.

On the requirement for the Secretary of State to report on the use of the powers, any Secretary of State appointed by any Government, be they Labour or Conservative, will of course always review the powers needed and whether there is a need to legislate further. It is not right to dictate in legislation that the Secretary of State should do this, that or the other and I would not expect any Opposition to require that.

Companies House already reports on the number of companies incorporated and struck off—that is already in the annual report. It is an interesting point about corporate service providers; the right hon. Member for Barking has concerns in that regard, and I do too. I suggest that I should look at the matter further with officials and come back to the hon. Member for Feltham and Heston well in advance of Report—outside the tabling time—and if we are not going to do anything, she can table a similar new clause. If we are going to do something, that might address her concerns or she might need to go further. Those options are open to her and I hope she will give us time to try to address these matters to the House’s satisfaction.

[Seema Malhotra]

I thank the Minister for his comments. He has said he will review the issues addressed in new clauses 26 and 63 with his officials. There may well be areas in which, on further reflection, he agrees with us that more could be done.

On the Minister’s comment about the Secretary of State being able to introduce legislation at any time, the point that was missed was that we know the speed with which we have to respond to economic crime. If we think back to 2016, we can see that we did not act fast enough—we have not acted fast enough in the past six years—so there is strong merit in having a mechanism that speeds up any requirements for future legislation through a report that can be reviewed and followed up on.

If the Minister is committing to review the matter and come back to us, we accept that. We would like to be involved in the discussions, perhaps after he has had an initial discussion with his officials. If there is a way to move forward with consensus, perhaps prior to Report, that could be a positive way forward. I therefore beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 29

Report into the merits of a fund for tackling economic crime

“(1) The Secretary of State must produce a report into the merits of a fund for tackling economic crime.

(2) The report must consider the case for penalties paid to the registrar to be ringfenced and used solely for the purposes of tackling economic crime.

(3) The report must be laid before Parliament within six months of this Act being passed.”—(Dame Margaret Hodge.)

This new clause requires a report into the merits of a fund for tackling economic crime to be laid before Parliament.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

HMRC supervises trusts and company service providers about which we have had a long debate. They include estate agents, letting agencies, high-value dealers, on-market dealers, accountancy professionals who do not belong to any professional body, and finally the Gambling Commission. The Financial Conduct Authority supervises the rest. HMRC in particular does not do a proper job. It does not see it as part of its function to do the supervision.

[Kevin Hollinrake]

Can I just say something from my own business experience? We had two very thorough inquiries from HMRC, which spent days in our office looking at our money laundering procedures. I am pleased to say that we passed the test, but HMRC really does take its job seriously.

[Dame Margaret Hodge]

I do not know whether I have the quote here from the previous HMRC permanent secretary—I will dig it up and send it to the Minister—but he actually said, in evidence to the Treasury Committee I think, that he did not quite understand why it was part of his job to do the supervision. I am not quoting him accurately, but the purport of what he said was that they see it as marginal and a sort of add-on—I think he used the word “add-on”—to their main function, which is to get the money in.

The position and reputation that professionals enjoy through membership of professional bodies is really important. Therefore, the professional bodies themselves should be taking steps to minimise and attack suspicious activity where it takes place, and they should be calling it out. It is in everybody’s interest to get the bad apples.

Let me give some evidence of the current failings as we see them. The 2021 review of OPBAS—the body responsible for all the professional bodies—found that 81%, or eight out of 10, were not supervising their members effectively. This review was done only on the legal and accountancy professions. Half the supervisors did not ensure that their members were taking timely action to improve their money laundering procedures where they were found wanting. A third of the supervisors did not have effective separation between the advocacy role and the supervision role, which I think is an important aspect. For a proper review, one would separate bodies undertaking supervision and bodies undertaking advocacy to ensure there is no conflict of interest.

Some 60% of the firms visited by the Solicitors Regulation Authority in 2021 were failing to comply fully with their duties to have adequate AML controls in place. OPBAS found that nine supervisory bodies of MLR are engaging in what it calls “low levels of enforcement”. The way in which those bodies respond when they find something going on is to have a quiet chat rather than issue fines and publicly censure lawyers for breaching the MLR rules. The highest ever AML fine for a law firm by the SRA was £232,500, and it was for Mishcon. If that fine had been levied by the FCA under similar powers, it would have been £5.4 million.

The Council for Licensed Conveyancers, another group of professionals who are active in this area, imposed zero fines, despite finding that two out of three of the firms it is responsible for supervising were non-compliant with AML regulations in 2019-20. To use another example, the Law Society of Northern Ireland imposed just one fine—of £1,750—in the year 2019-2020, despite it finding 228 cases of non-compliance. That is a considerable body of evidence, if I may say so, that shows that the current system is broken and not fit for purpose.

The Chartered Institute of Taxation, a group I work with a lot, found that a third of the firms visited were non-compliant, but only four firms were disciplined for failure to provide renewal forms by the required deadline and fined for failure to submit appropriate criminality check certificates or to deal with the action points that had been raised with them in the review by CIOT of their AML procedures. In three of the four disciplinary cases by CIOT, a financial penalty was imposed, and only in the fourth was the member suspended.

I know that the Government are looking at the supervisory framework but, as is the way with Governments, that could take forever. We want to implement these reforms swiftly, so we must have some assurance and confidence, particularly because of the outsourcing of the checks on individual companies, that the professionals will seek out the miscreants in their profession. We cannot wait for the review, to put it bluntly. With these measures, we have taken the least of all the options the Government have put forward and proposed it for legislation. If the Government, on reflection, want to come back with a tougher regime, that is fine, but at least we would have the minimum in place as we enact the legislation and the reform of Companies House. Our new clause says, “Action now. Toughen up the powers and duties of OPBAS—introduce greater transparency into the system, and comeback if that is needed.” We are suggesting new powers and duties for OPBAS. The power is

“to impose…financial penalties on Professional Body Supervisors that fail to…adopt an effective risk-based approach to anti-money laundering supervision…impose proportionate and dissuasive sanctions for non-compliance…and…separate their advocacy and regulatory functions.”

This is minimal, sensible and desperately needed now if we are to go ahead, with the speed that we all want, with the implementation of the legislation.

--- Later in debate ---

[Dame Margaret Hodge]

I wish I had brought some of my previous notes with me. What evidence does the Minister have of that, apart from HMRC telling us that?

[Kevin Hollinrake]

It visited my business!

[Dame Margaret Hodge]

I am amazed that it did. Is there evidence of the number of visits or assessments carried out? I can remember a quote from the previous permanent secretary, who said, “It is not our core business.”

--- Later in debate ---

Important as those developments in the law undoubtedly were, it is not hard to see the difficulties involved in enforcing those laws against individuals who spend little if any time in the UK. Successful prosecutions may depend on the co-operation of other Governments, whose laws on corporate criminal liability may not be as robust as our own. They may also be subject to lengthy and expensive extradition proceedings. New clause 50 would provide a simple safeguard in those cases. Ensuring that at least one company director ordinarily resides in the UK and is therefore subject to UK law could make it much easier for offences involving corporate criminal liability to be enforced. At the very least, it should serve as an effective deterrent, for instance by making third parties who act as company directors for a fee think very carefully about what kind of clients they are prepared to act on behalf of.

[Kevin Hollinrake]

I thank the hon. Member for his amendment. As he set out, new clause 50 would require all companies to have at least one person who ordinarily resides in the UK among their directors. The proposal has been considered and rejected before. I am aware that some other jurisdictions have similar provisions, but the UK has chosen not to enact that type of measure for two reasons. First, it goes against the long-standing principle that any legitimate global citizen can do business freely in the UK. If we mandate a UK resident director, we are effectively asking an overseas investor looking to set up a business here to have a UK business partner. That sounds to me very much like something that the Chinese state might do. We do not consider that it is right for our open economy.

Secondly, we are not persuaded that there are enforcement or accountability benefits that will lower levels of corporate abuse or economic crime. The reforms in the Bill, such as identity verification, intelligence sharing and greater information querying, will help to deliver much-increased transparency and accountability. That will help us to discover rogues faster, share their details more quickly, hold them to account and, where necessary, close down their businesses, or indeed ask questions of them before we even allow them to incorporate here.

It is my expectation, as the hon. Member for Aberavon has set out, that Companies House will work with the NCA and others to put in place the systems to raise red flags so that when we see applications to incorporate companies from individuals from certain jurisdictions, more questions will be asked. If the registrar is not persuaded by the responses, she may simply say no. The addition of a UK resident director will not provide additional value and I very much hope that the hon. Gentleman will withdraw his new clause.

[Stephen Kinnock]

I thank the Minister for his remarks. We are talking about how to make it as easy as possible for those red flags to be clear. If we were to do exception reporting, there may, of course, be a clear explanation in certain circumstances for why there is not a single UK-based company director and perfectly legitimate reasons for that. We think that it would be better to do the exception reporting on that basis, so that we are casting the net and identifying red flag areas because of the nature of the company directors and where the risk would appear to be.

I take it from the Minister’s remarks that there is not a great deal of room for negotiation on that point. However, we are trying to put forward a sensible and pragmatic solution. Can the Minister say any more about how to look through the telescope in terms of exception reporting? We argue that exception reporting could be conducted on the basis of explaining why there is not a single UK-based company director while maintaining the blanket provision that there should always be such an individual in order to minimise risk.

[Kevin Hollinrake]

That is exactly how we expect the process to operate. If there are red flags of concern—an exception report, as the hon. Gentleman calls it—the registrar can ask further questions and may deny that company the right to establish itself in the UK. I think those checks and balances are in place, and of course, as hon. Members have said, it is very important that those opportunities are used by the registrar. I am very keen to ensure that we have the opportunity to scrutinise the use of those powers.

[Stephen Kinnock]

I thank the Minister for those points. I see that we will agree to disagree on this. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 51

Registration requirements: UK-based assets held by overseas entity

‘(1) The Economic Crime (Transparency and Enforcement) Act 2022 is amended as follows.

(2) In Schedule 2—

(a) in sub-paragraph (a) of paragraph 2, for “and” substitute “or”;

(b) after sub-paragraph (a) of paragraph 2 insert—

(aa) is a beneficial owner of any UK-based assets held by overseas entity, and”.’—(Stephen Kinnock.)

The intention of this new clause is to broaden the scope of registration requirements for overseas entities, as set out in the Economic Crime (Transparency and Enforcement) Act 2022, to include the beneficial owners of any UK-based assets owned by an overseas company, as well as the beneficial owners of the company itself.

Brought up, and read the First time.

[Stephen Kinnock]

I beg to move, That the clause be read a Second time.

The purpose of the new clause is to close what appears to be a loophole in the current requirements on the registration of overseas entities that own property in the UK. The case for the new clause is simple. Under the current rules, as set out primarily in the Economic Crime (Transparency and Enforcement) Act 2022, a foreign company that owns property or land in the UK is required to declare the beneficial ownership of the company itself. It is, however, unclear whether it would also be required to disclose the ultimate beneficial owner of any property owned by that company.

In recent years, we have seen ample evidence of how easy it can be—

[Kevin Hollinrake]

I am trying to understand the new clause. How could someone be the beneficial owner of a company and someone else own the assets? If the beneficial owners own the company, how can a different beneficial owner own the assets?

[Stephen Kinnock]

According to our interpretation, schedule 2 of the 2022 Act is unclear about whether a company would be required to disclose the ultimate beneficial owner of any property owned by that company. Our worry is that there is a loophole in the law that talks about the beneficial owner but does not give us the tools to obtain disclosure of who is the ultimate beneficial owner of the property.

In recent years, we have seen ample evidence of how easy it can be for money launderers and the enablers of economic crime to exploit any grey area, perceived or actual, in the laws that apply to them. Therefore it is essential that the law is absolutely crystal clear on that point. It is about tightening up the law as it stands.

We already know that the beneficial ownership of property and other assets is often shrouded in layer on layer of corporate secrecy. In its official guidance and examples of best practice on beneficial ownership, the Financial Action Task Force draws a distinction between the ownership of a company on the one hand and the ultimate beneficial ownership of any assets held by that company on the other. The guidance makes it clear that they are not necessarily the same thing. One of the most salient differences is that although a company can be the legal owner of a property, the ultimate beneficial owner of that property will always be a natural person, or, in layman’s terms, a human being. It is not clear whether the current legal framework for the register of overseas entities is sufficiently clear on that point.

To make a significant difference in terms of transparency, the register must require all companies to disclose the ultimate beneficial owner of any UK property under their control. It must publish that information. I would be grateful to hear the Minister’s thoughts on whether the legislation currently provides an adequate degree of clarity. If he agrees that the requirements could be made clearer, I hope that we can trust that the necessary changes will be incorporated in the Bill, or set out in regulation.

[Kevin Hollinrake]

Again, I thank the hon. Gentleman for tabling the new clause. I understand what he is seeking to do, and I support him in that endeavour. I believe that the intent behind the new clause is the concern that assets other than land can be used for illicit purposes, but I am not sure that the new clause, as drafted, serves to address that.

As the hon. Gentleman knows, overseas entities are required to register beneficial owners with Companies House. Those registered as the beneficial owners of the overseas entity are the same persons as the beneficial owners that the new clause seeks to make registerable. Any assets held by the overseas entity are ultimately owned by those already required to register with Companies House.

Say an overseas entity owns a case of whisky, so we know who is the beneficial owner of that case. Who then owns the bottles of whisky in the case? It is the same owner as the one who owns the case. There is no separate owner—they either own the case of whisky, or they do not. I honestly do not think that the new clause would achieve what the hon. Gentleman wants it to achieve. If we think about yachts and other property, if we know the beneficial owner of the company, we also know the owner of the assets inside it. I hope that the hon. Gentleman will withdraw the motion.

[Stephen Kinnock]

I thank the Minister for that clarification. What rang alarm bells with us were the comments of the Financial Action Task Force, which drew the distinction between the ownership of a company and the ultimate beneficial ownership of any assets held by that company. The Minister has made his position clear, and, again, we just agree to disagree. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Scott Mann.)

Economic Crime and Corporate Transparency Bill (Sixteenth sitting)

Kevin Hollinrake Excerpts

Committee stage
Tuesday 22nd November 2022 Public Bill Committees

[Tom Tugendhat]

Different devolved Administrations have been contacted in different ways. Some of them have been written to, and I have sought conversations with some, although that has not always been achieved because of other people’s diaries as well as my own. The conversation is ongoing and, although I hope the Bill will be passed soon, it will have to continue because many things are going to change over the coming years.

Question put and agreed to.

Clause 160 accordingly ordered to stand part of the Bill.

Clauses 161 and 162 ordered to stand part of the Bill.

New Clause 1

Change of addresses of officers of overseas companies by registrar

“In section 1046 of the Companies Act 2006 (overseas companies: registration of particulars), after subsection (6) insert—

‘(6A) Where regulations under this section require an overseas company to deliver to the registrar for registration—

(a) a service address for an officer of the company, or

(b) the address of the principal office of an officer of the company,

the regulations may make provision corresponding or similar to any provision made by section 1097B or 1097C (rectification of register relating to service addresses or principal office addresses) or to provision that may be made by regulations made under that section.’”.—(Kevin Hollinrake.)

Where an overseas company is required to provide a service address or principal office address for a director or secretary, this new clause enables regulations to be made conferring power on the registrar to change the address if it does not meet the statutory requirements or is inaccurate.

Brought up, and read the First time.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 2—Overseas companies: availability of material for public inspection etc.

Government new clause 3—Registered addresses of an overseas company.

Government new clause 4—Overseas companies: identity verification of directors.

--- Later in debate ---

[Kevin Hollinrake]

It is always a pleasure to serve with you in the Chair, Ms Elliott. Government new clauses 1 to 4 will introduce delegated powers allowing for the application of the Companies House reform measures elsewhere in the Bill to overseas companies registered in the UK. In this context, an overseas company is one that is incorporated overseas but that has a physical establishment or branch in the UK. Under long-standing provisions in the Companies Act 2006, that presence brings with it certain obligations to register information with Companies House.

New clauses 1 to 3 allow for the making of regulations requiring overseas companies that have established a physical presence in the UK to provide an appropriate address for the overseas company, their directors or other officers, to the same standard required of domestic companies incorporated here in the UK. The aim is the same—to ensure that addresses and email addresses on the companies register are accurate and that documents sent to them will reach the companies concerned or their officers.

New clause 4 allows the application, through regulations, of identity verification requirements to directors of overseas companies operating in the UK. Through that, the Government seek to ensure that companies governed by the laws of other jurisdictions that operate in the UK are subject to identity verification requirements that are introduced by the Bill and will apply to UK companies. Regulations under the power will include requiring the delivery of statements or other information to the registrar. They will also include exemptions from identity verification on national security grounds.

The application of identity verification obligations through secondary legislation will allow the Government to adapt ID verification requirements at speed. Overseas companies who operate within the UK are only within limited control of UK law. UK legislation affecting them therefore needs to adapt more quickly to their changing circumstances than primary legislation would allow for.

[Seema Malhotra]

It is a pleasure to speak to the new clauses. The Minister has outlined the rationale for them, which is to bring some of the rules around overseas companies more in line with some other changes being made in the Bill. We welcome that, but I have a few questions.

New clause 1 outlines that where an overseas company is required to provide a service address or principal office address for a director or secretary, regulations can be made conferring power on the registrar to change the address if it does not meet the statutory requirements or is inaccurate. Who might determine whether the address is inaccurate? Is the expectation that the registrar finds that out or is that just about if something happens to be found out by chance? Is there any more information on how the power might be used to determine that an address is inaccurate?

New clause 2 confers a regulation-making power to require overseas companies to register information. The new clause makes it clear that the regulations can provide for the information to be withheld from public inspection and can confer a discretion on the registrar. We have had similar debates in Committee already. We will keep coming back to the question of the use of powers and the reporting on the use of those powers, particularly where information may be withheld. Would this be an example of a new power on the withholding of information from public inspection where the number of times it is used ought to be reported on? That would not need to give away details about whom the power had applied to, but it would help give an overall view of how the powers in the Bill were being used.

Under new clause 3, new regulations would require overseas companies to provide and maintain an appropriate address and email address. Would those new regulations be subject to the affirmative procedure, assuming that they would be in secondary legislation rather than in the Bill? It was not fully clear to me whether some of these matters were included in the Bill or whether they were regulations to enable the measures to come in later. Will the Minister clarify that?

[Kevin Hollinrake]

I am happy to, and I thank the hon. Lady for her points. As we have said during similar discussions, the registrar will have access to information; most of the queries that she will follow up will have come through information received during the course of her duties. It does not make sense for Companies House to physically validate all addresses, but nevertheless information may well come to light through the registrar’s work or the requirement for other bodies to share information with her if they feel that inaccurate information is on the register. That is how we anticipate that information will come forward.

I will not revisit the issue of national security other than to say that the power will be used sparingly and that we do not know what we do not know, so it is important that we have a provision that might be necessary in future.

Regulations under new clause 4 will correspond to regulations applying to UK companies made and debated by Parliament under the affirmative procedure. The extension to overseas companies would therefore not require additional scrutiny by Parliament and the regulations will be subject to the negative procedure.

Question put and agreed to.

New clause 1 accordingly read a Second time, and added to the Bill.

New Clause 2

Overseas companies: availability of material for public inspection etc

“In section 1046 of the Companies Act 2006 (overseas companies: registration of particulars), after subsection (6A) (inserted by section (Change of addresses of officers of overseas companies by registrar) of this Act) insert—

‘(6B) Regulations under this section may include provision for information delivered to the registrar under the regulations to be withheld from public inspection.

(6C) The provision that may be made by regulations under this section includes provision conferring a discretion on the registrar.’”—(Kevin Hollinrake.)

Section 1046 of the Companies Act 2006 confers a regulation-making power to require overseas companies to register information. The new clause makes it clear that the regulations can provide for the information to be withheld from public inspection and that they can confer a discretion on the registrar.

Brought up, read the First and Second time, and added to the Bill.

New Clause 3

Registered addresses of an overseas company

“(1) The Companies Act 2006 is amended as follows.

(2) After section 1048 insert—

‘1048A Registered addresses of an overseas company

(1) The Secretary of State may by regulations make provision requiring an overseas company that is required to register particulars under section 1046 to deliver to the registrar for registration—

(a) a statement specifying an address in the United Kingdom that is an appropriate address for the company;

(b) a statement specifying an appropriate email address for the company.

(2) The regulations may include provision—

(a) allowing an overseas company to change the address or email address for the time being registered for it under the regulations;

(b) requiring an overseas company to ensure that the address or email address for the time being registered for it under the regulations is an appropriate address or appropriate email address.

(3) The regulations may include—

(a) provision for information contained in a statement specifying an appropriate email address to be withheld from public inspection;

(b) provision corresponding or similar to any provision made by section 1097A (rectification of register relating to a company’s registered office) or to provision that may be made by regulations made under that section.

(4) In this section—

“appropriate address” has the meaning given by section 86(2);

“appropriate email address” has the meaning given by section 88A(2).

(5) Regulations under this section are subject to negative resolution procedure.’

(3) In section 1139 (service of documents on company), for subsections (2) and (3) substitute—

‘(2) A document may be served on an overseas company whose particulars are registered under section 1046—

(a) by leaving it at, or sending it by post to, the company’s registered address, or

(b) by leaving it at, or sending it by post to, the registered address of any person resident in the United Kingdom who is authorised to accept service of documents on the company’s behalf.

(3) In subsection (2) “registered address”—

(a) in relation to the overseas company, means the address for the time being registered for the company under regulations under section 1048A(1)(a);

(b) in relation to a person other than the overseas company, means any address for the time being shown as a current address in relation to that person in the part of the register available for public inspection.’”—(Kevin Hollinrake.)

Regulations under this new clause can require an overseas company to provide and maintain an appropriate address and appropriate email address. Broadly speaking, an address is appropriate if documents sent there will reach the company.

Brought up, read the First and Second time, and added to the Bill.

New Clause 4

Overseas companies: identity verification of directors

“After section 1048A of the Companies Act 2006 (inserted by section (Registered addresses of overseas companies) of this Act) insert—

‘1048B Identity verification of directors

(1) This section applies in relation to an overseas company that is required to register particulars under section 1046.

(2) The Secretary of State may by regulations make provision for the purpose of ensuring that each individual who is a director of such a company—

(a) is an individual whose identity is verified (see section 1110A), or

(b) falls within any exemption from identity verification that may be provided for by the regulations.

(3) The regulations may include provision—

(a) requiring the delivery of statements or other information to the registrar;

(b) for statements or other information delivered to the registrar under the regulations to be withheld from public inspection;

(c) applying section 167M (prohibition on director acting unless ID verified), with or without modifications;

(d) applying section 1110D (exemption from identity verification: national security grounds), with or without modifications.

(4) Regulations under this section are subject to negative resolution procedure.’”—(Kevin Hollinrake.)

Regulations under this new clause can impose identity verification requirements on the directors of overseas companies, corresponding to the requirements introduced by the Bill for directors of UK companies.

Brought up, read the First and Second time, and added to the Bill.

New Clause 5

Rectification of register: service addresses

“(1) The Companies Act 2006 is amended as follows.

(2) After section 1097A insert—

‘1097B Rectification of register: service addresses

(1) The Secretary of State may by regulations make provision authorising or requiring the registrar to change a registered service address of a relevant person if satisfied that the address does not meet the requirements of section 1141(1) and (2).

(2) In this section—

“registered service address”, in relation to a relevant person, means the address for the time being shown in the register as the person’s current service address;

“relevant person” means—

(a) a director of a company that is not an overseas company,

(b) a secretary or one of the joint secretaries of a company that is not an overseas company, or

(c) a registrable person or registrable relevant legal entity in relation to a company (within the meanings given by section 790C).

(3) The regulations may authorise or require the address to be changed on the registrar’s own motion or on an application by another person.

(4) The regulations must provide for the change in the address to be effected by the registrar proceeding as if the company had given notice under section 167H, 279H or 790LC of the change.

(5) The regulations may make provision as to—

(a) who may make an application,

(b) the information to be included in and documents to accompany an application,

(c) the registrar requiring the company or an applicant to provide information for the purposes of determining anything under the regulations,

(d) the notice to be given of an application or that the registrar is considering the exercise of powers under the regulations,

(e) the notice to be given of any decision under the regulations,

(f) the period in which objections to an application may be made,

(g) how the registrar is to determine whether a registered service address meets the requirements of section 1141(1) and (2), including in particular the evidence, or descriptions of evidence, which the registrar may without further enquiry rely on to be satisfied that the address meets those requirements,

(h) the referral by the registrar of any question for determination by the court,

(i) the registrar requiring the company to provide an address to be registered as the relevant person’s service address,

(j) the nomination by the registrar of an address (a “default address”) to be registered as the relevant person’s service address (which need not meet the requirements of section 1141(1) and (2)),

(k) the period for which the default address is permitted to be the relevant person’s registered service address, and

(l) when the change of address takes effect and the consequences of registration of the change (including provision similar or corresponding to section 1140(5)).

(6) The provision made by virtue of subsection (5)(k) may in particular include provision creating summary offences punishable with a fine not exceeding level 3 on the standard scale or, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

(7) The regulations must confer a right on the company to appeal to the court against any decision to change the relevant person’s registered service address under the regulations.

(8) If the regulations enable a person to apply for a registered service address to be changed, they must also confer a right on the applicant to appeal to the court against a refusal of the application.

(9) On an appeal, the court must direct the registrar to register such address as the relevant person’s registered service address as the court considers appropriate in all the circumstances of the case.

(10) The regulations may make further provision about an appeal and in particular—

(a) provision about the time within which an appeal must be brought and the grounds on which an appeal may be brought;

(b) further provision about directions by virtue of subsection (9).

(11) The regulations may include such provision applying (including applying with modifications), amending or repealing an enactment contained in this Act as the Secretary of State considers necessary or expedient in consequence of any provision made by the regulations.

(12) Regulations under this section are subject to affirmative resolution procedure.’

(3) In section 1087 (material not available for public inspection), in subsection (1)(ga)—

‘(a) after “1097A” insert “, 1097B”;

(b) for “company registered office” substitute “registered office, service address”.’”—(Kevin Hollinrake.)

This new clause confers a regulation-making power to enable the registrar to change a person’s registered service address. It is based on section 1097A of the Companies Act 2006, which makes similar provision in relation to a company’s registered office.

Brought up, read the First and Second time, and added to the Bill.

--- Later in debate ---

Brought up, and read the First time.

[Kevin Hollinrake]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss Government new clause 11—Power to amend disqualification in relation to relevant entities: NI.

[Kevin Hollinrake]

Through other provisions in this Bill, a disqualified individual is prevented from acting as a general partner of a limited partnership. However, that would only cover individuals who have been disqualified for their actions as directors in a company. We also need to be able to disqualify general partners for their actions within a limited partnership. Currently, that cannot be done because the Company Directors Disqualification Act 1986 applies only to directors of companies and other limited corporate entities such as building societies and NHS foundation trusts. We would like to ensure that general partners are subject to the same requirements as directors. New clauses 10 and 11 therefore provide powers to update the 1986 Act and the Company Directors Disqualification (Northern Ireland) Order 2002 to apply to limited partnerships, limited liability partnerships and Scottish partnerships.

[Seema Malhotra]

It is a pleasure to say a few words in support of new clauses 10 and 11. New clause 10 introduces new provisions allowing the Secretary of State to make regulations applying the Company Directors Disqualification Act to relevant entities. The new clause outlines that these relevant entities include limited partnerships and Scottish limited partnerships. New clause 11 has the same effect and applies the same principles to the context of Northern Ireland. We welcome the new clauses, especially given our calls in Committee to extend directors disqualification criteria to limited partnerships.

[Kevin Hollinrake]

I have nothing further to add.

Question put and agreed to.

New clause 10 accordingly read a Second time, and added to the Bill.

New Clause 11

Power to amend disqualification legislation in relation to relevant entities: NI

“(1) The Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)) is amended as follows.

(2) In Article 2(2) (interpretation), for the definition of ‘regulations’ substitute—

‘“regulations”, except in Articles 13D and 25D, means regulations made by the Department subject (except in Article 23(3)) to negative resolution;’.

(3) After Article 25C insert—

‘25D Power to amend application of Order in relation to relevant entities

(1) The Secretary of State may by regulations amend this Order for the purpose of applying, or modifying the application of, any of its provisions in relation to relevant entities.

(2) For that purpose, the regulations may in particular—

(a) extend the company disqualification conditions to include corresponding conditions relating to a relevant entity;

(b) limit the company disqualification conditions to remove conditions relating to a relevant entity;

(c) modify which company disqualification conditions can, in combination with each other, result in a person being disqualified under this Order;

(d) provide for any of the company disqualification conditions to result in or contribute to a person being disqualified from acting in a role or doing something in relation to a relevant entity.

(3) In this Article “the company disqualification conditions” means the conditions that can result in or contribute to a person being disqualified under this Order from acting in a role or doing something in relation to any entity.

(4) In this Article a “relevant entity” means—

(a) a limited partnership registered under the Limited Partnerships Act 1907;

(b) a limited liability partnership registered under the Limited Liability Partnerships Act 2000;

(c) a partnership, other than a limited partnership, that is—

(i) constituted under the law of Scotland, and

(ii) a qualifying partnership within the meaning given by regulation 3 of the Partnerships (Accounts) Regulations 2008.

(5) Regulations under this Article may make consequential, supplementary, incidental, transitional or saving provision.

(6) The provision which may be made by virtue of paragraph (5) includes provision amending provision made by or under either of the following, whenever passed or made—

(a) an Act;

(b) Northern Ireland legislation.

(7) Regulations under this Article are to be made by statutory instrument.

(8) A statutory instrument containing regulations under this Article may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’”—(Kevin Hollinrake.)

This new clause allows the Secretary of State to make regulations applying the CDD(NI)O 2002 in relation to relevant entities, meaning that a person’s conduct in relation to relevant entities would lead to disqualification, and disqualifications in other circumstances would prohibit a person from acting in relation to relevant entities.

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

Required information about overseas entities: address information

“In the following provisions of Schedule 1 to the Economic Crime (Transparency and Enforcement) Act 2022 (which refer to an entity’s registered or principal office) omit ‘registered or’—

paragraph 2(1)(c);

paragraph 5(1)(b);

paragraph 6(1)(d);

paragraph 7(1)(b).”—(Kevin Hollinrake.)

This new clause would mean that the required information that must be provided about an overseas entity, a corporate registrable beneficial owner or managing officer includes its principal office in all cases, rather than there being an option to provide its registered or principal office.

Brought up, and read the First time.

[Kevin Hollinrake]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 13—Registration of information about land.

Government new clause 14—Registration of information about managing officers: age limits.

Government new clause 15—Registrable beneficial owners: cases involving trusts.

Government new clause 21—Enforcement of requirement to register: updated language about penalties etc.

[Kevin Hollinrake]

All the new clauses relate to the register of overseas entities. New clause 12 will mean that the required information that must be provided about an overseas entity, a corporate registrable beneficial owner or a managing officer will always include its principal office, rather than there merely being an option to provide its registered or principal office. The new clause will improve the quality of the information provided and align with the information required about other types of legal entities.

New clause 14 will ensure that overseas entities that provide the details of a managing officer who is under the age of 16, or who is a legal entity, must also provide details of a person who is more than 16 years old. This is to ensure that there is a person who can be contacted about the overseas entity, in addition to the relevant person who verified the information. It is possible that in jurisdictions outside the UK, individuals younger than 16 may be allowed to act as company directors, secretaries or equivalents. Directors of UK companies are required to be at least 16 years of age, so the new clause provides consistency by requiring the contact details of someone who is at least 16 years of age.

New clause 21 will update the language about penalties for non-compliance in section 34 of the Economic Crime (Transparency and Enforcement) Act 2022 to reflect changes made by the Judicial Review and Courts Act 2022. It will ensure consistency with the wording used in other clauses in the Bill.

New clause 13 will require overseas entities to include the title number for relevant interests in land that they hold in their application for registration, both when providing an update and when applying to be removed from the register. Overseas entities that are already registered will be required to provide this information when they next provide an update or, if sooner, when they apply to be removed from the register. The collection of this information will improve the effectiveness of the register and will help law enforcement agencies with their investigations. The information will not be made publicly available because the Government do not consider that to be appropriate, given privacy concerns.

Let me turn new clause 15. In advance of the launch of the register, the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022 were made. Regulation 14 specified the circumstances in which a legal entity trustee is deemed to be

“subject to its own disclosure requirements”.

By virtue of a legal entity trustee being a registrable beneficial owner, the overseas entity must provide the required information about the trust and persons connected to it, such as beneficiaries, settlors and interested persons.

[Dame Margaret Hodge (Barking) (Lab)]

This is an issue for clarification, because it impacts on whether we move our new clause 59. Will the information that we are now going to get about trustees and beneficiaries be made public? Will it be open to the public in the same way as other information about beneficial owners is open to the public? I ask because that is what our new clause would achieve.

[Kevin Hollinrake]

I will deal with that, if I can, as I go through. Essentially, trusts are often there to protect the identity of vulnerable persons, so I am not sure that the provision will do what the right hon. Member wants to do in her new clause, but we can probably discuss that when we discuss her new clause.

[Dame Margaret Hodge]

So it does not do it.

[Kevin Hollinrake]

Without regulation 14, if the corporate trustee were not subject to its own disclosure requirements, the overseas entity would have to “look through” the legal entity trustee to find a registrable beneficial owner higher up the chain of ownership. But in the situations we are talking about it is information about the trust that is wanted, rather than information about the ownership or control of the legal entity trustee. Currently, regulation 14 therefore ensures that Companies House, His Majesty’s Revenue and Customs and law enforcement agencies receive the information about the trust and persons connected to it, which I think may be the point that the right hon. Member raises and which is much more useful to meet the aims of the register.

New clause 15 goes further by ensuring that a legal entity acting as a trustee is always a registrable beneficial owner whether or not it is “subject to its own disclosure requirements” and even if there is another registrable beneficial owner further down a chain of ownership. This maximises the transparency in respect of the involvement of a legal entity trust in a chain of ownership.

The provisions also provide a power to expand the description of persons who are registrable beneficial owners where the overseas entity is part of a chain of entities that includes a trustee. It is appropriate to have a power to expand the description, given that there may be complex arrangements that attempt to circumvent the requirements. The provisions revoke regulation 14 because it is no longer needed.

[Seema Malhotra]

It is a pleasure to make a few remarks on the new clauses which, certainly from the way the Minister has outlined them, are welcome, in that they require more information and transparency around overseas entities. We welcome all the new clauses in that regard. I do not propose to go through them—the Minister went through them in considerable detail—but I have a few comments.

On new clause 13—in fact, in relation to all the new clauses—we welcome the additional transparency. I make the point again that a particular reason for that is the large-scale abuse that we know has occurred and occurs through these rather opaque offshore corporate structures.

On new clause 14, it is welcome to have the threshold at 16 years old, but I want to clarify what that means. Can there technically be a managing officer who is under 16 but an individual who is over 16 and is a contact on their behalf? It would be helpful to know whether there could still technically be an officer who was 12, 13 or 14. It would be useful to have clarity on that.

On closing the potential loophole of beneficial owners avoiding scrutiny by acting as a trustee, it is important to have the information. I want to clarify whether it should be the same amount of information about those who have been avoiding scrutiny as trustees. Will that information be published so that third parties can search it and investigate for themselves?

[Kevin Hollinrake]

As I understand it, somebody under the age of 16 could be the managing officer, but we still require somebody over the age of 16 to be contactable. That is how we square that particular circle. It is not in our gift to legislate for how other jurisdictions describe directors of companies.

Forgive me, but I missed the hon. Lady’s second point. If she could restate it, I will try to address it.

[Seema Malhotra]

My second comment was about trustee information. New clause 15 expands the definition of “registrable beneficial owners” in part 1 of the Economic Crime (Transparency and Enforcement) Act 2022 in relation to an entity one of whose beneficial owners is a trustee, such that the beneficial owner may be included. There is also a power to expand that definition further. It looks like it is closing a potential loophole that enables beneficial owners to avoid scrutiny through acting as a trustee. The question was about whether the new information about trustees will also be published, whether there will be full transparency and whether it will be searchable by any interested parties.

[Kevin Hollinrake]

Okay. That was a similar point to the one made by the right hon. Member for Barking. No, we do not feel that is right. We do not believe that trust information should be made publicly available, given that trusts are often used to protect vulnerable people. I reassure the hon. Lady that that information will be shareable with HMRC, law enforcement and other persons with functions of a public nature once the relevant regulations have been made.

Question put and agreed to.

New clause 12 accordingly read a Second time, and added to the Bill.

New Clause 13

Registration of information about land

“In Schedule 1 to the Economic Crime (Transparency and Enforcement) Act 2022 (required information), in paragraph 2—

(a) in sub-paragraph (1), after paragraph (g) insert—

‘(h) if the entity is the registered proprietor of one or more qualifying estates in land in England and Wales, the title number of each of them;

(b) if the entity is the registered owner of one or more qualifying estates in Northern Ireland, the folio number in respect of each of them;

(c) if the entity is—

(i) entered as proprietor in the proprietorship section of the title sheet for one or more plots of land that are registered in the Land Register of Scotland, or

(ii) the tenant under one or more leases registered in the Land Register of Scotland,

the title number of the title sheet, in respect of each of them, in which the entity’s interest is registered.’;

(b) after sub-paragraph (2) insert—

‘(3) In sub-paragraph (1)(h)—

“registered proprietor”, in relation to a qualifying estate, means the person entered as proprietor of the estate in the register of title kept by the Chief Land Registrar;

“qualifying estate” has the meaning given by paragraph 1 of Schedule 4A to the Land Registration Act 2002.

(4) In sub-paragraph (1)(i)—

“registered owner”, in relation to a qualifying estate, means the person registered in the register kept under the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)) as the owner of the estate;

“qualifying estate” has the meaning given by paragraph 1 of Schedule 8A to the Land Registration Act (Northern Ireland) 1970.

(5) In sub-paragraph (1)(j)—

(a) “lease”, “plot of land” and “proprietor” have the meanings given by section 113(1) of the Land Registration etc. (Scotland) Act 2012;

(b) the reference to an entity’s being entered as proprietor in the proprietorship section of a title sheet is a reference to the name of the entity being so entered.’”—(Kevin Hollinrake.)

This new clause requires an overseas entity, when applying for registration in the register of overseas entities or providing an update, to include the title number etc for relevant interests in land held by it. For entities already registered, it will operate when they next provide an update.

Brought up, read the First and Second time, and added to the Bill.

New Clause 14

Registration of information about managing officers: age limits

“(1) Schedule 1 to the Economic Crime (Transparency and Enforcement) Act 2022 (applications: required information) is amended as follows.

(2) In paragraph 6(1), after paragraph (f) insert—

‘(g) if the officer is under the age of 16 years old, the name and contact details of an individual who is at least 16 years old and is willing to be contacted about the officer.’

(3) In paragraph 7(1), for paragraph (g) substitute—

‘(g) the name and contact details of an individual who is at least 16 years old and is willing to be contacted about the officer.’”—(Kevin Hollinrake.)

This new clause means that, where an application for registration as an overseas entity is required to provide details of a managing officer, there will be a requirement to include the name of an individual who is at least 16 years old and is willing to be contacted about the officer (unless the officer is an individual of at least that age).

Brought up, read the First and Second time, and added to the Bill.

New Clause 15

Registrable beneficial owners: cases involving trusts

“(1) Schedule 2 to the Economic Crime (Transparency and Enforcement) Act 2022 (registrable beneficial owners) is amended in accordance with subsections (2) to (5).

(2) In paragraph 3 (legal entities), in paragraph (b), after ‘(see Part 3)’ insert ‘or is a beneficial owner of the overseas entity by virtue of being a trustee’.

(3) In paragraph 8 (beneficial owners exempt from registration), after paragraph (b) insert—

‘(ba) the person is not a beneficial owner of the overseas entity by virtue of being a trustee,’.

(4) For the heading of Part 6 substitute ‘Powers to amend this Schedule’.

(5) Before paragraph 25 insert—

‘Expansion of meaning of “registrable beneficial owner” where trusts in view

24A (1) The Secretary of State may by regulations amend this Schedule so as to expand the description of persons who are registrable beneficial owners of an overseas entity in circumstances where the overseas entity is part of a chain of entities that includes a trustee.

(2) For these purposes an overseas entity is part of a chain of entities that includes a trustee if there is a legal entity which is a beneficial owner of it by virtue of being a trustee.

(3) Regulations under this paragraph are subject to the affirmative resolution procedure.

Power to amend thresholds etc’.

(6) Regulation 14 of the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022 (S.I. 2022/870) (description of legal entity subject to its own disclosure requirements) is revoked.”—(Kevin Hollinrake.)

This new clause expands the definition of “registrable beneficial owner” in Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022 in relation to an entity one of whose beneficial owners is a trustee. There is also a power to further expand the definition.

Brought up, read the First and Second time, and added to the Bill.

New Clause 16

Material unavailable for public inspection: verification information

“In section 16 of the Economic Crime (Transparency and Enforcement) Act 2022 (verification of registrable beneficial owners and managing officers), in subsection (2), after paragraph (c) insert—

‘(d) requiring the registrar not to make available for public inspection certain information delivered to the registrar by virtue of the regulations.’”—(Kevin Hollinrake.)

Section 16 of the Economic Crime (Transparency and Enforcement) Act 2022 confers power to make regulations about identity verification. This new clause allows the regulations to provide that information provided under the regulations is protected from public inspection.

Brought up, read the First and Second time, and added to the Bill.

New Clause 17

Material unavailable for public inspection

“For sections 22 to 24 of the Economic Crime (Transparency and Enforcement) Act 2022 substitute—

‘22 Material unavailable for inspection

(1) The following material must not, so far as it forms part of the register, be made available by the registrar for public inspection—

(a) so much of any application or other document delivered to the registrar under section 4, 7 or 9 as is required to contain—

(i) protected date of birth information;

(ii) protected residential address information;

(iii) protected trusts information;

(iv) the name or contact details of an individual provided for the purposes of section 4(1)(d), 7(1)(e) or 9(1)(f) or paragraph 6(1)(g) or 7(1)(g) of Schedule 1;

(v) an overseas entity’s email address (see paragraph 2(1)(e) of Schedule 1);

(vi) any title numbers or folio numbers in respect of land (see paragraph 2(1)(h), (i) and (j) of Schedule 1);

(b) any information that regulations under section 16 provide is not to be made available for public inspection;

(c) the following—

(i) any application or other document delivered to the registrar under regulations under section 25 (regulations protecting material), other than information provided by virtue of section 25(4);

(ii) any information which regulations under section 25 require not to be made available for public inspection;

(d) any application or other document delivered to the registrar under section 28 (administrative removal of material from the register);

(e) any court order under section 30 (rectification of the register under court order) that the court has directed under section 31 is not to be made available for public inspection;

(f) any statement delivered to the registrar by virtue of section 1067A(3) or (4) of the Companies Act 2006 (delivery of documents: identity verification requirements etc);

(g) any statement made in accordance with regulations made by virtue of section 1082(2)(c) of the Companies Act 2006 (statement of unique identifier);

(h) any document provided to the registrar under section 1092A of the Companies Act 2006 (power to require further information);

(i) any email address, identification code or password deriving from a document delivered for the purpose of authorising or facilitating electronic filing procedures or providing information by telephone;

(j) any record of the information contained in a document (or part of a document) mentioned in any of the previous paragraphs of this subsection;

(k) any other material excluded from public inspection by or under any other enactment.

(2) In this section—

“protected date of birth information” means information as to the day of the month (but not the month or year) on which an individual who is a registrable beneficial owner or managing officer of an overseas entity was born;

“protected residential address information” means information as to the usual residential address of an individual who is a registrable beneficial owner or managing officer of an overseas entity;

“protected trusts information” means the required information about a trust (see sections 4(3), 7(3) and (4) and 9(3) and (4).

(3) Information about a registrable beneficial owner or managing officer does not cease to be protected date of birth information or protected residential address information when they cease to be a registrable beneficial owner or managing officer.

(4) Where subsection (1), or a provision referred to in subsection (1), imposes a restriction by reference to material deriving from a particular description of document (or part of a document), that does not affect the availability for public inspection of the same information contained in material derived from another description of document (or part of a document) in relation to which no such restriction applies.

(5) The registrar need not retain material to which subsection (1) applies for longer than appears to the registrar reasonably necessary for the purposes for which the material was delivered to the registrar.

23 Disclosure of protected information

(1) The registrar must not disclose protected date of birth information, protected residential address information or protected trusts information unless—

(a) the disclosure is permitted by section 1110F of the Companies Act 2006 (general powers of disclosure by the registrar), or

(b) the information is required to be made available for public inspection (as a result of being contained in a document, part of a document, or record to which section 22(1) does not apply).

(2) In this section the following have the meaning given by section 22(2)—

“protected date of birth information”;

“protected residential address information”;

“protected trusts information”.’”—(Kevin Hollinrake.)

This new clause replicates for the register of overseas entities a number of changes made by the Bill in relation to companies. It also extends the list of information unavailable for public inspection.

Brought up, read the First and Second time, and added to the Bill.

New Clause 18

Protection of information

“For section 25 of the Economic Crime (Transparency and Enforcement) Act 2022 substitute—

‘25 Power to make regulations protecting material

(1) The Secretary of State may by regulations make provision requiring the registrar, on application—

(a) not to make available for public inspection any information on the register relating to an individual;

(b) to refrain from disclosing information on the register relating to an individual except in specified circumstances;

(c) not to make available for public inspection any address on the register that is not information to which paragraph (a) applies;

(d) to refrain from disclosing any such address except in specified circumstances.

(2) The regulations may make provision as to—

(a) who may make an application;

(b) the grounds on which an application may be made;

(c) the information to be included in and documents to accompany an application;

(d) the notice to be given of an application and of its outcome;

(e) how an application is to be determined;

(f) the duration of, and procedures for revoking, any restrictions on the making of information available for public inspection or its disclosure.

(3) Provision under subsection (2)(e) or (2)(f) may in particular—

(a) confer a discretion on the registrar;

(b) provide for a question to be referred to a person other than the registrar for the purposes of determining the application or revoking the restrictions.

(4) Regulations under subsection (1)(a) or (1)(c) may provide that information is not to be made unavailable for public inspection unless the person to whom it relates provides such alternative information as may be specified.

(5) The circumstances that may be specified under subsection (1)(b) or (d) by way of an exception to a restriction on disclosure include circumstances where the court has made an order, in accordance with the regulations, authorising disclosure.

(6) Regulations under subsection (1)(b) or (d) may not require the registrar to refrain from disclosing information under section 1110F of the Companies Act 2006 (general powers of disclosure by the registrar).

(7) Regulations under this section may impose a duty on the registrar to publish, in relation to such periods as may be specified—

(a) details of how many applications have been made under the regulations and how many of them have been allowed, and

(b) such other details in connection with applications under the regulations as may be specified in the regulations.

(8) Regulations under this section are subject to affirmative resolution procedure.’”—(Kevin Hollinrake.)

This new clause replicates for the register of overseas entities the provision made by clause 87 of the Bill in relation to companies.

Brought up, read the First and Second time, and added to the Bill.

New Clause 19

Resolving inconsistencies in the register

“(1) Section 27 of the Economic Crime (Transparency and Enforcement) Act 2022 (resolving inconsistencies in the register) is amended as follows.

(2) For subsections (1) and (2) substitute—

‘(1) Where it appears to the registrar that the information contained in a document delivered to the registrar by an overseas entity in connection with the register is inconsistent with other information contained in records kept by the registrar under section 1080 of the Companies Act 2006, the registrar may give notice to the overseas entity to which the document relates—

(a) stating in what respects the information contained in it appears to be inconsistent with other information in records kept by the registrar under section 1080 of the Companies Act 2006, and

(b) requiring the overseas entity, within the period of 14 days beginning with the date on which the notice is issued, to take all such steps as are reasonably open to it to resolve the inconsistency by delivering replacement or additional documents or in any other way.

(2) The notice must state the date on which it is issued.’

(3) In the heading, omit ‘in the register’.”—(Kevin Hollinrake.)

This new clause makes changes for the purpose of resolving inconsistencies in information relating to overseas entities that corresponds to the changes made by clause 81 of the Bill in relation to companies.

Brought up, read the First and Second time, and added to the Bill.

New Clause 20

Administrative removal of material from register

“(1) In the Economic Crime (Transparency and Enforcement) Act 2022—

(a) for section 28 substitute—

‘28 Administrative removal of material from the register

(1) The registrar may remove from the register anything that appears to the registrar to be—

(a) a document, or material derived from a document, accepted under section 1073 of the Companies Act 2006 (power to accept documents not meeting requirements for proper delivery), or

(b) unnecessary material as defined by section 1074 of the Companies Act 2006.

(2) The power to remove material from the register under this section may be exercised—

(a) on the registrar’s own motion, or

(b) on an application made in accordance with regulations under section 28A(2).

(3) The Secretary of State may by regulations provide that the registrar’s power to remove material from the register under this section following an application is limited to material of a description specified in the regulations.

(4) Regulations under this section are subject to the negative resolution procedure.

28A Further provision about removal of material from the register

(1) The Secretary of State must by regulations make provision for notice to be given in accordance with the regulations where material is removed from the register under section 28 otherwise than on an application.

(2) The Secretary of State must by regulations make provision in connection with the making and determination of applications for the removal of material from the register under section 28.

(3) The provision that may be made under subsection (2) includes provision as to—

(a) who may make an application,

(b) the information to be included in and documents to accompany an application,

(c) the notice to be given of an application and of its outcome,

(d) a period in which objections to an application may be made, and

(e) how an application is to be determined, including provision as to evidence that may be relied upon by the registrar for the purposes of satisfying the test in section 28(1).

(4) The provision that may be made by virtue of subsection (3)(e) includes provision as to circumstances in which—

(a) evidence is to be treated by the registrar as conclusive proof that the test in section 28(1) is met, and

(b) the power of removal must be exercised.

(5) Regulations under this section are subject to the negative resolution procedure.’;

(b) omit sections 29 and 29A (application to rectify register and resolution of discrepancies).

(2) In section 1073 of the Companies Act 2006 (power to accept documents not meeting requirements for proper delivery), in subsection (6)(a), after ‘section 1094A(1)’ (inserted by section 82 of this Act) insert—

‘or any corresponding provision of any other enactment’.”—(Kevin Hollinrake.)

This new clause replicates for the register of overseas entities the changes that clause 82 of the Bill makes in relation to the register of companies.

Brought up, read the First and Second time, and added to the Bill.

New Clause 21

Enforcement of requirement to register: updated language about penalties etc

“(1) The Economic Crime (Transparency and Enforcement) Act 2022 is amended as follows.

(2) In section 34 (power to require overseas entity to register if it owns certain land)—

(a) in subsection (4)(a), for ‘the maximum summary term for either-way offences’ substitute ‘a term not exceeding the general limit in a magistrates’ court’;

(b) omit subsection (5).

(3) In section 36 (meaning of ‘daily default fine’) after ‘applies for’ insert ‘the’.”—(Kevin Hollinrake.)

This new clause updates the penalty provision for the offence in section 34 of the Economic Crime (Transparency and Enforcement) Act 2022 to reflect changes made by the Judicial Review and Courts Act 2022. This ensures consistency with the language that clauses 136 and 137 introduce into the 2022 Act.

Brought up, read the First and Second time, and added to the Bill.

Ordered, That further consideration be now adjourned. —(Scott Mann.)

Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments 2022

Kevin Hollinrake Excerpts

Monday 21st November 2022 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

I beg to move,

That the Committee has considered the (Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1101).

[The Chair]

With this it will be convenient to discuss the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1102), the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1103), the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 (SI, 2022, No. 1124) and the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022 (SI, 2022, No, 1125).

[Kevin Hollinrake]

It is a pleasure to serve with you in the Chair, Mrs Murray. The regulations in the first three of the five statutory instruments we are discussing were laid before the House on 31 October, and the remaining two measures on 4 November.

Last Monday, my colleague the Minister for Industry and Investment Security, my hon. Friend the Member for Wealden (Ms Ghani), set out the details of the Government’s energy support schemes: the energy price guarantee or EPG, the energy bill relief scheme or EBRS, and the energy bills support scheme or EBSS. In Committee today, I will explain the pass-through requirements in respect of the schemes.

The Government have responded rapidly to the unprecedented rise in energy prices by introducing emergency legislation on energy support. That support will protect homes and non-domestic customers across the UK against inflated energy prices so that families and consumers will be supported in their cost of living this winter.

The various regulations have been created under the Energy Prices Act 2022, which gained Royal Assent on 25 October 2022. They are essential secondary legislation to implement the energy schemes. The pass-through regulations ensure that the Government’s energy support reaches families and consumers. Rather than expecting intermediaries to act of their own accord, we are requiring that they must pass on the financial benefit to the end users.

The requirements take into account the diverse range of contracting structures relating to the supply, resale, provision and charging of energy. As such, an intermediary is any individual or organisation that is party to an electricity or gas contract and receives energy price support in relation to that contract, or receives a pass-through of reductions attributable to that energy price support. The intermediary must pass on the costs of energy supplied and any reductions attributable to the energy price support to an end user—for example, landlords or property managers of a residential building.

The various regulations also cover intermediaries supplying a product or service where, contractually, a component of the price relates directly to the use of energy for the supply of heating or hot water—for example, park home managers, heat networks and electric vehicle charging operators. Taken together, the regulations apply to all three energy schemes, the EPG, the EBSS and the EBRS, including customers who are part of heat networks.

Turning to how the pass-through amount should be calculated, intermediaries can adjust the amount they pass on based on charges to end users. They must demonstrate to end users that that amount is just and reasonable. Intermediaries can take into account the extent to which they have increased their charges to end users as a result of the energy crisis. If they have shielded their end users from the impact of increased energy prices, it may be just and reasonable for them to retain some or all of the scheme benefit. For example, if a landlord charges their tenant an all-inclusive rent, incorporating a fixed charge for energy use, heating or hot water, they must pass on the discount in a just and reasonable way.

If the intermediary does not pass on the benefit, the end users can pursue recovery of the benefit as a debt through civil proceedings. Should a court rule in the end user’s favour, they will be entitled to the payment plus interest. The interest is set at 2% above the Bank of England’s base rate. This will begin to accrue from 60 days after the intermediary first receives the relevant scheme benefits. The enforcement approach is the same across the schemes, with a slight nuance for heat networks under the EBRS. If heat network customers do not receive the pass-through or information from their heat supplier, they will be able to raise a complaint with the energy ombudsman.

We have published guidance on the pass-through regulations to help those affected understand how to comply with these regulations. This Government guidance includes advice for landlords on how to meet their pass-through obligations. There are also template letters for tenants, should they wish to raise concerns with their landlords about their energy bills. Another SI will be laid later this month to correct some mistakes in the original heat supplier regulations.

In conclusion, these regulations protect those most exposed to high energy costs. The pass-through requirements allow cost savings to reach the people the Government intend to support, such as tenants and other individuals. Importantly, the regulations also provide routes for energy users to benefit from the discount they are entitled to in scenarios where intermediaries are not meeting their legal obligations. I commend the regulations to the House.

--- Later in debate ---

[Kevin Hollinrake]

I thank right hon. and hon. Members from across the House for their comments. I will address the points made by the shadow Minister first. He is right to point out some of the deficiencies in the scheme, in that there is great diversity in the number and type of intermediaries. Ideally, we would have liked one ombudsman that covered every sector; instead, we have park home site owners, landlords, electric-vehicle-charger operators and heat-network operators all having different ombudsmen, or sometimes an absence of any ombudsman. That is the challenge behind the measures we are putting in place.

The other challenge is having to design a scheme of such complexity at pace, with a diversity of suppliers and intermediaries. I gently challenge the shadow Minister on the point about park home residents, or people from a different cohort, not having got a penny yet. That should not be the case. Most landlords and park home site operators are decent people who will be doing the right thing and trying to help their residents through a very difficult time. This instrument just legalises and formalises the process. Often in this place we try to legislate to ensure that everyone is responsible for doing the right thing.

The shadow Minister asked about vulnerable customers, as did some other Members—not least my right hon. and learned Friend the Member for North East Hertfordshire. We have engaged extensively with consumer groups, representative organisations, Citizens Advice, local authorities, food bank operators, faith groups and some of the operators behind the park home associations to try to ensure that people are aware of the requirements on them to pass on the support provided.

Heat networks are a separate cohort and an exception in this whole discussion because they are already covered by the energy ombudsman; it is therefore easy to make them accountable to the energy ombudsman. Landlords do not have that kind of relationship with the energy ombudsman, or with any ombudsman. The Government have put forward a consultation and they intend to ask all landlords to be members of a redress scheme. I would have welcomed that move because it would have made the scheme far easier to implement. But at the moment that has not happened, so we have to make these measures subject to the courts. That is the only available method.

[Dr Whitehead]

I am a little puzzled by this. The ombudsman to whom we are referring is the energy ombudsman, and the energy ombudsman has standing as far as all matters pertaining to energy are concerned. Although I agree that the particular circumstances of intermediaries are different, they are all bound by the fact that the issue is about energy, so the energy ombudsman should have traction as far as those different cases are concerned. My concern that the energy ombudsman appears to act where heat is concerned, but not where electricity is concerned, has not been assuaged. Can the Minister expatiate any further on why that difference is there?

[Kevin Hollinrake]

I share the hon. Member’s concerns, but I can only reiterate that the energy ombudsman does not cover landlords. Landlords are not regulated by the energy ombudsman, so there is no recourse to the energy ombudsman. There has to be a relationship between the two. As I have said, moves are afoot to deal with the issue, but if the Opposition have ideas on how we do this more effectively they should write to us, and we can write back to them to say why not.

The shadow Minister asked for sanctions for people who do not comply, but we do not see any way to impose sanctions without regulations having been in place before the scheme was brought to bear. For all those reasons, I think it is not possible to do what he wishes, but as I say, if he has some ideas on how we might, he should write to us.

My right hon. Friend the Member for North West Hampshire made some very good points about care homes, and how their residents will benefit from the scheme. If service charges include energy provision, it would be just and reasonable to pass on the benefits of the EPG or EBRS to those residents. Although we do not want to see residents having to take landlords or the people who provide their accommodation to the courts, I think the courts would take a very dim view if the support had not been passed on to those residents.

My right hon. Friend the Member for North West Hampshire made another good point. What about if someone had been parsimonious and reduced their energy use? Would they still see the benefit? The Government support, as he knows, is provided on a per kilowatt-hour basis, so we would expect support to be passed over on that basis. If someone has done the right thing and reduced their energy use, they should see the full benefit of that, both in terms of the reduction— the energy they have not used—and the cost covered by the various schemes that apply.

On the point about “as soon as reasonably practicable”, I would expect the courts to take a dim view of somebody who had pocketed the money for 60 days and let the interest pile up.

[Kit Malthouse]

Could the Minister explain why there is not an absolute liability to pay? Why is there interpretation that makes it arguable in court? It could be a case of saying, “I have had £400 on your behalf from the Government for your energy, but I am not giving you £400 directly.” Why is there not a straight pass-through?

The Minister has a long and distinguished history in the property industry. He will know that service charges are subject to reams and reams of detailed litigation in the courts and that the crafting of a service charge bill is an art as much as a science. It can be a question of what people can get away with. I do not understand why we would inject the same kind of negotiability and arguability into what should be a straight pass-through.

[Kevin Hollinrake]

My right hon. Friend raises a good point. The difficulty is the different ways energy can be levied to a resident. The landlord might already have passed on the benefit to that individual. They might have already said, “I am not going to put your rent up, because I see a Government scheme coming down the line that means I can shield you from the costs of energy.” At that point in time, it is not easy to determine whether a tenant has or has not already had the benefit from the scheme. It can be expected that people will get the absolute benefit of the schemes, but how the landlord chooses to pass it on is complicated. It is not possible to have a one-size-fits-all solution.

[Kit Malthouse]

Just to understand, the Minister is saying that a landlord may charitably say, “I will reduce your rent because I see the energy bill rises coming. I feel sorry for you, and I want to protect you as my tenant. Therefore, I will not pass through the full subsidy I have from the energy scheme, because I have already given you that subsidy, effectively, through a rent reduction”?

[Kevin Hollinrake]

Exactly.

[Kit Malthouse]

Even though the tenant may say, “Actually, rents in our area are plunging anyway, so you have taken advantage of a market dynamic”—in, say, Hartlepool or Andover or wherever—“that means you were going to have to take less rent anyway.”

I do not want to labour the point. This is an important measure that needs to go through quickly, so I will not cause too much fuss, but injecting arguability and negotiability into what, for everybody else who is directly contracted to their energy bills—it just comes straight to us—is not negotiable, seems to me to be making these people’s lives more difficult than they need to be.

[Kevin Hollinrake]

My right hon. Friend makes the exact point. It may not just be the fact that the rent now charged reflects the increased cost of energy and the Government subsidy. It may also reflect that rents have changed in the area. They may have gone up or down. All these things are subject to market forces. The only way we can practicably deal with this is to require landlords, park home owners, or people who look after care homes to be just and reasonable in passing on the support to the individuals concerned.

[Mark Pawsey (Rugby) (Con)]

There is one thing that the Minister may not have considered so far. The park home owner has 60 days to pass the money on to the park home residents. What would happen in a circumstance where the park home owner’s business went into liquidation and they had already received the funding support for Government but not yet passed it on to the tenant? Is there some comfort that the tenant might have in those circumstances?

[Kevin Hollinrake]

My hon. Friend raises an interesting additional complexity, which I am not sure is dealt with in the regulations. However, again, there will still be a requirement for the administrator to pass on the benefit in that circumstance, I guess. That might be something I can discuss with officials and write to my hon. Friend about, if he is sufficiently concerned.

My right hon. and learned Friend the Member for North East Hertfordshire made a point about engagement with landlords. As I have said, we have done that, and we are certainly very concerned about the passing-through in all these schemes, particularly to the vulnerable. That is why we are working with organisations such as Step Up, Citizens Advice, charitable groups and food banks to make sure those people are sufficiently supported and that benefit is passed on to individual residents.

[Dr Whitehead]

I suspect the Minister has moved on from addressing my particular concerns, but one question I did raise was the extent to which the Department is monitoring the success or otherwise of these changes. What actions might the Department take to indicate whether they consider the scheme to be a success or not, and if not, whether they want to do anything about it? Is the Minister able to say tonight that after, say, a two or three-month period, he will make a statement to the House—not necessarily an oral statement; it could be a written statement—about what the Department thinks is happening with these schemes and, if it finds adversely as far as their success is concerned, what it might do about it?

[Kevin Hollinrake]

The hon. Gentleman makes a very fair point. We will always keep this matter under review, and there are many different ways he can choose of holding the Government’s feet to the fire for doing that through their Departments. There are many different mechanisms for that, which I do not need to outline to him. However, I can absolutely make a commitment to the hon. Gentleman that myself and my colleagues in the Department will make sure that these measures are effective and do what we want them to do. Of course, we always have the opportunity to refine our approach through legislation if we do not feel it is working as it should.

In conclusion, the regulations protect those who are most exposed to high energy costs. The pass-through requirements allow cost savings to reach the people that the Government intend to support, such as tenants and other individuals. Importantly, the regulations also provide routes for end users to benefit from the discount they are entitled to in scenarios where intermediaries are not meeting their legal obligations. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1101).

ENERGY BILLS SUPPORT SCHEME AND ENERGY PRICE GUARANTEE PASS-THROUGH REQUIREMENT (ENGLAND AND WALES AND SCOTLAND) REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1102).—(Kevin Hollinrake.)

ENERGY BILL RELIEF SCHEME PASS-THROUGH REQUIREMENT (ENGLAND AND WALES AND SCOTLAND) REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1103).—(Kevin Hollinrake.)

ENERGY BILL RELIEF SCHEME PASS-THROUGH REQUIREMENT (HEAT SUPPLIERS) (NORTHERN IRELAND) REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 (SI, 2022, No. 1124).—(Kevin Hollinrake.)

ENERGY BILL RELIEF SCHEME AND ENERGY PRICE GUARANTEE PASS-THROUGH REQUIREMENT AND MISCELLANEOUS AMENDMENTS REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022 (SI, 2022, No, 1125).—(Kevin Hollinrake.)