Economic Crime and Corporate Transparency Bill

Lord Agnew of Oulton Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Agnew of Oulton (Con)]

I refer noble Lords to my entry in the register of interests, as an adviser to Manolete, a litigation funder. I warmly welcome our noble friend the Minister to his new role. I am delighted that he is arriving at the start of this Bill’s journey through the House; he will have time to reflect on all the comments made today, where there is an extraordinary amount of consensus.

In February of last year, the Government promised to bring a second economic crime Bill into legislation, and I am most grateful that this has happened. I would also like to thank my noble friends the Ministers for their courtesy and time in addressing some of my concerns. This is a complex Bill, and it certainly improves on our current very weak system. However, given the time and effort expended by several government departments, there are a number of areas for improvement which, if we could harness the will of the Government, could easily be incorporated.

I will focus briefly on seven of these areas, taking account of many comments already made. First, on making Companies House fit for purpose in the new environment, the Bill will dramatically change the role of Companies House from a passive receiver of information to, one hopes, a dynamic analyser of data and first line of defence against bad actors gaining access to our corporate system. But this is a huge cultural change. I offer this as a little levity for this stage of the evening. I was having a poke around on Companies House and a casual search of the system revealed a previous director called Jesus Christ—country of residence “Heaven”, and occupation “Creator”. It took a year for Jesus to be removed. This is the cultural problem that is going to be faced. Unless it is very carefully monitored, the changes that we want to see happen could take years to occur.

I was a Minister responsible for arm’s-length bodies, and I know how ill equipped government is for these kinds of changes. When I arrived in that position, they could not tell me even how many ALBs there were in government, let alone rate their operational performance. Our previous Minister assured me, when I met him, that he would be vigorously holding to account the management of Companies House. Of course, that commitment lasted less than seven days. I welcome our new Minister, but can I confirm that he will also try to hold Companies House to account? More broadly, this illustrates why we need to ensure that both Parliament and the National Audit Office receive regular updates on the refit and improvements arising from it. There is talk in the current wording of annual updates to Parliament, but it is too loose. In simple terms, what gets measured gets done.

Second is the need to ensure adequate resources for Companies House to execute its role. We have heard a lot about this, but the Government have fought very shy of revealing how much will be available. As someone who has run these kind of fast-moving, high-volume, low-margin businesses, my back-of-the-envelope assessment is that we are going to need to treble or quadruple the fees. That sounds a lot but, as we have heard, the fees are laughable they are so low at the moment. It costs about £10 if you register a company online; that probably needs to go to about £40. The annual filing fee of £13 probably needs to go to about £50. The Government will need to come clean on this because, if they do not, the whole thing will be a dead letter.

My third point is on creating a duty of failure to prevent. Again, I am not an expert in this. We are going to hear from my noble and learned friend Lord Garnier later, who was a Solicitor-General and is a practising KC. He feels strongly about this and I hope will support Ministers in coming up with drafting that works. Suffice it to say that the whole idea that enablers can operate on a “see no evil, hear no evil” basis is not tenable. I take one example: the role of unscrupulous insolvency practitioners in conniving with what are known as “buried liquidations”. These are situations where an unholy trinity of company director, local accountant and so-called “friendly” insolvency practitioner quietly liquidate a company on a voluntary basis with no questions asked as to how the director might have ripped value out of the company for his own benefit prior to liquidation. HMRC is losing millions to this loophole. A tiny amendment to require the same procedure as used in compulsory liquidations—where they basically use a cab rank so that there is a rotation that cannot be distorted—would resolve it or indeed broader failure to prevent, so that this insolvency practitioner could not do that without damaging his professional standing.

Fourthly, I turn to whistleblowers. Again, we have heard a lot about this but, as an ex-businessman, for me it is about the most cost-effective and streamlined way of dealing with economic crime. We have available in our society many brave, principled people who see wrongdoing but are too frightened to alert the authorities because we do not adequately protect them. The excuse for doing nothing is the normal refrain: “It’s all very complicated.” Indeed it is. At my meeting with my noble friend the Minister last week, I brought this up. There were at least 12 officials in the room or on Zoom. I asked them to explain to me how it all worked but none of them could, so I asked to be sent a link that summarised the system. I only got that just before I came here this afternoon and, I have to say, I was completely baffled by the information that was made available.

However, it certainly protects only one category of person: workers. It does not protect suppliers, customers or anyone else who is in the chain who may see wrong- doing. I will therefore push very hard for the Government to consider an opportunity to sort this out. It will save money—the whole refrain at the moment. It would create another quango, but it would also get rid of a lot of quangos or agencies; there would be one place where the concern could be raised and then all the other nooks and crannies could be removed.

We have heard a lot about SLAPPs. We have heard from the noble and learned Lord, Lord Brown of Eaton-under-Heywood, who, again, knows far about this than me, and we will hear from the noble Lord, Lord Faulks. We already have mechanisms for cost capping in libel cases. The noble Lord, Lord Faulks, is the chairman of IPSO, which has a very clear mechanism for dealing with this. The point is that some lawyers for claimants do not like to use these routes because they cannot charge an arm and a leg supporting their oligarch clients through this much more streamlined process.

However, this is not about creating a libeller’s charter. There must be mechanisms to ensure that baseless allegations cannot be made with impunity. The Government are doing the normal thing and trying to kick this into the long grass. We heard earlier about all the efforts that have been made with Private Members’ Bills, but this Bill is the perfect opportunity for the Government to show that they care. We are apparently the SLAPP capital of Europe—an undignified title that we should erase.

On cost capping, because of the dramatic imbalance of resources between the parties, enforcement agencies often do not prosecute. It is asymmetric warfare. A mechanism was put in place in the Economic Crime (Transparency and Enforcement) Act last year, in its Section 52, to restrict cost orders for unexplained wealth orders. There is no reason why this could not be extended to other areas of economic crime. Again, I will be pressing the Government to consider this.

Lastly, I turn to loopholes. This Bill immediately creates a new batch of loopholes. One example is that, for limited companies, limited liability partnerships and limited partnerships, it will be possible to claim that there are no persons of significant control and then list the shareholders, members or partners as shell companies in the British Virgin Islands, Belize and the Marshall Islands, respectively—so we are back to square one. There needs to be transparency all the way down the chain.

To sum up, the Government have at their disposal on the speakers’ list today—not including myself—a huge body of extraordinary expertise available to dramatically improve the Bill and really clamp down on economic crime. I do not want to force amendments on what are clearly common-sense improvements when the Government could so easily make them their own. I am not asking Ministers to respond to my seven points tonight, but I do ask for a commitment that we can have a dialogue before Committee with credible explanations as to why none of these can be brought forward by the Government. It is my strong conviction that there are clear, workable solutions to every one of them.