Modern Slavery Act 2015 (Transparency in Supply Chains) Regulations 2015

Lord Bates Excerpts

Monday 19th October 2015 Lords Chamber

Moved by

[Lord Bates]

That the draft regulations laid before the House on 7 September be approved.

Relevant document: 4th Report from the Joint Committee on Statutory Instruments

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

My Lords, I beg to move that the draft Modern Slavery Act 2015 (Transparency in Supply Chains) Regulations 2015, which were laid before this House on 7 September, be approved.

The Modern Slavery Act 2015 includes a ground-breaking transparency in supply chains provision. Once commenced, this provision will require all commercial organisations that carry out business in the UK and are above a certain turnover threshold to disclose what steps they have taken to ensure that their own business and supply chains are slavery-free.

Many businesses are already taking action to prevent modern slavery but the legislation will encourage business to do more and create a virtual race to the top. Requiring commercial organisations to be transparent about the activity they are undertaking will give the public, consumers and investors the information they need to make informed decisions about whom they do business with and where they shop.

Recognising the importance of the provision in the Modern Slavery Act, we decided to consult on whom the provision should apply to. The Government have always wanted to create a level playing field between businesses with the resources and purchasing power to take action, while at the same time avoiding placing any undue burdens on smaller businesses. The regulations before this House today set the threshold determining which businesses need to comply.

Between February and May 2015, the Government held a formal consultation on the threshold level and the content of statutory guidance for businesses. The consultation generated over 180 responses from a range of businesses, business groups, trade bodies and NGOs. It asked respondents for their views on the level of turnover threshold and they overwhelmingly supported setting the threshold at £36 million. Many respondents noted that setting the threshold at that figure would align with the definition of a large company in the Companies Act 2006, providing clarity and consistency for businesses.

Having listened to businesses and their representative groups carefully, the Government have determined that the transparency provision should apply to all commercial organisations with a total turnover of £36 million or more per year. The Government believe that setting the turnover threshold at this level is ambitious and creates the broadest level playing field for those businesses affected.

These regulations also specify how the total turnover of a commercial organisation should be defined for the purposes of this provision. It is calculated as the turnover of that organisation and the turnover of any of its subsidiary undertakings. This means that in calculating their total turnover, parent companies will have to include the turnover of all their subsidiaries when considering whether this provision applies.

The Government are determined to ensure that this important provision works effectively on the ground in the long term. That is why these regulations also require the Secretary of State to publish at least once every five years a report that sets out the objectives of these regulations, and assesses the extent to which these objectives are being achieved and whether they remain appropriate. This will ensure that the provision remains relevant and effective for businesses tackling modern slavery risks in the future.

The UK is the first country in the world to introduce such transparency in supply chains legislation in relation to modern slavery. This ambitious legislation will help to ensure that UK consumers do not unwittingly drive demand for modern slavery anywhere in the world and that the UK is recognised as a world leader in this area.

For this ground-breaking legislation to work effectively, it is vital that it applies to the right businesses—those with the resources and purchasing power to effect real change—and that it is kept under close review. These regulations will ensure that that is so, and I commend them to the House.

[Lord Alton of Liverpool (CB)]

My Lords, in welcoming the Minister’s speech to the House tonight, I will ask some questions and make a couple of observations about the regulations.

I will start by drawing the Minister’s attention to Regulation 4(2)(c), which suggests that the objectives in the provision,

“could be achieved with a system that imposes less regulation”.

I wonder whether the phrase “a system that requires more effective regulation” would have been better. Perhaps the Minister might spell out the difference between less regulation and effective regulation.

Secondly, can the Minister say why the regulations do not provide more specific guidance to the Secretary of State on the timescale for publishing the report? While the draft regulations stipulate,

“at intervals not exceeding five years”,

more frequent reporting could uncover issues that need to be addressed to enable the provision to have its intended effect.

Thirdly, I understand that the independent review of the overseas domestic worker visa, which was committed to in Committee during the passage of the Modern Slavery Act, is now being carried out by James Ewins and was due to report to the Home Secretary in mid-July. The report has been delayed, and I understand that it is now expected in mid-November. It is important to have that in time for our debate in your Lordships’ House on the Immigration Bill. Can the Minister give us some clarity on that?

The Modern Slavery Act 2015 enjoyed all-party support and is, as I think we all agree, a very good start in combating modern-day slavery and trafficking. The Government have placed a great deal of emphasis on the role of the Independent Anti-slavery Commissioner; perhaps the Minister will confirm that some £350,000 has been set aside to support his office this year. When spelling out the sums of money involved, perhaps the Minister could also say what resources are being made available by his department to non-governmental organisations that support vulnerable people who are trafficked—sometimes over several years if they are to be helped to avoid the siren voices of their traffickers.

The House will not be surprised to learn that I want to return to an issue which I raised at Third Reading on 4 March of this year—at col. 230—when introducing Amendments 3 and 6 to Clauses 54 and 57 during the passage of the Modern Slavery Act. Those amendments, on which I divided the House and which I had raised on Second Reading, in Committee and on Report, would have required the Secretary of State to make regulations to appoint an organisation or an individual to collate slavery and human trafficking statements and to maintain a website—a repository—on which to publish those statements, in a form searchable by members of the public without charge.

The proposal was supported not only by many noble Lords from all parts of your Lordships’ House. It has been consistently asked for by civil society groups, which have so much experience of working with businesses on supply chains, including Amnesty International, Anti-Slavery International, CAFOD, the CORE coalition, the Dalit Freedom Network, the Evangelical Alliance, Focus on Labour Exploitation, the Law Society, Quakers in Britain, Traidcraft, Unseen,War on Want and the Equality and Human Rights Commission. I argued that without the incorporation of a central repository for slavery and human trafficking statements, it would be very difficult—if not nigh impossible—for civil society, investors, consumers and other agencies to hold big business to account.

Consider for a moment the substantial obstacles to accessing annual turnover information which indicates those companies that fall within the compliance threshold, let alone the vast number of different websites that would have to be trawled through, and it is patently obvious why a central repository must be established. One estimate was that if the threshold figure of more than £60 million had been used, more than 12,000 businesses would be obliged to produce a statement. The Minister has said to the House this evening that the threshold is now being set at £36 million. When he replies, I would be grateful if he said what he anticipates will be the number of businesses affected by that threshold; however, it will be a large number of businesses. The site would enable easy filing for business with secure verification of reports, so that spoof reports cannot be submitted. Businesses would not find themselves in the invidious position of not knowing whether they should be on that site. It must be a robust database with scalable secure storage, as over time there will be a growing number of reports to be stored, sorted and compared. This year-on-year comparison will enable clear evidence that the reports are iterative and that progress is being made year on year by businesses in combating modern slavery in their operations around the globe.

During the passage of the legislation, some noble Lords tried to cast doubt on whether the proposal for a central website enjoyed the full support of Kevin Hyland, the Independent Anti-Slavery Commissioner. He wrote to me, stating:

“I can confirm I fully support the suggestion of a website as the central repository for reports as suggested by yourself and other noble Lords”.

He said that without such a website and adequate resources,

“it will be unlikely to achieve the objective”,

but the creation of such a,

“repository with the right resource would, I believe, make a very positive difference”.

Experience from overseas supports his judgment. Groups involved in the implementation of the California Transparency in Supply Chains Act of 2010 urged the House to learn from their experience. The Californian organisation Not For Sale says that the American failure to create a central repository of information has made it,

“difficult to know which companies need to comply with the law, and which do not”.

A coalition of major UK companies, trade unions and non-governmental organisations—including many familiar high street names—that would be required to comply with this measure supports this proposal. They say that they strongly support a published list of,

“all companies that are required to publish their statements on modern slavery in an accessible central website so that effective monitoring and accountability can be assured. We believe this would go a long way to levelling the playing field for ethical and responsible businesses, ensuring that they are not undercut by unscrupulous companies that operate under the radar of public scrutiny”.

The Minister himself said on Report that he accepted the principle, stating that:

“we want to see these statements in one place so that people can monitor and evaluate them to ensure that the intended action takes place”.—[Official Report, 25/2/15; col. 1750.]

Therefore, my question to him is: why are we not moving towards that by regulation? Is the Home Office doing it without regulation? How much progress has been made since the House divided on this issue? At the time, the Minister said,

“we are more or less on the same page. The question is: do we at this stage want to have this written on the page, or do we want to leave it to something that we will come to a little later?”

Well, we are still here, at a later stage, and I would be grateful if the Minister told us how much longer we have to wait. At the time, in urging patience, he said that we should await the outcome of the consultation with the Ethical Trading Initiative. He said that the consultation was,

“a concession; it was something which we said we would do in response to concerns raised in your Lordships’ House. We launched the consultation and it is open until 7 May”.

He added:

“We are using this opportunity to talk directly to technology companies and to some of the businesses that will be producing these statements to determine the best options. I am pleased to say that discussions have already highlighted a number of interesting ideas which we want to pursue with the businesses as quickly as we can”.—[Official Report, 4/3/15; col. 237-38.]

I welcomed that at the time and I welcome the sentiment again this evening. But I told the House then, and I repeat, that although the Minister told us that we should wait for the consultation, I cannot think of an organisation—and I cited many—that we would consult about this proposal that has not already come out in favour of a central repository, which should be available to prevent people having to trawl across the internet to find individual companies.

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On these Benches we generally welcome these regulations, as we welcome the Act—we have been in the same place on many points—but this is such an important issue that it needs to be reviewed carefully to avoid unintended consequences. I hope the noble Lord will come back to us and tell us what the Government are going to do in the future.

[Lord Bates]

I thank all noble Lords who have spoken in this debate and welcome the noble Lord, Lord Kennedy, to his new role and responsibilities. He has shown a great interest in the area of modern slavery for some time and we look forward to continuing that discussion. He is right to say that this has been—certainly in my time in both Houses—model legislation in the way that it had pre-legislative scrutiny before the Bill was published. It is interesting that the original Bill was published without a clause on the supply chain. That came later between two stages. There have been a number of commitments to review and consultations which have led to that role. When we consulted on the range it varied from £100 million to £60 million, and the noble Lord is right to state what we have come forward with. During those debates there was a little suspicion in some quarters of the House as to whether it would be under £100 million but it has come down on the side of £36 million, which is the right level.

This is new legislation—a new initiative that we are undertaking—so all aspects of it have to be constantly under review to see how it is being introduced and how it is working. I will come to specific questions but I particularly wish to make reference to the question raised by the noble Lord, Lord Kennedy. The noble Baroness, Lady Hamwee, referred to the Independent Anti-slavery Commissioner and his priorities. He produced his strategic plan for 2015-17 last week and it sets out clearly what he aims to do. His first priority of course—it is important to put this on record in the context of a debate on the supply chain, although we all want to do more in every area—is the identification and care of victims. We all felt that that should be his priority. The supply chain is important. It comes in at number 4 in the section on what he intends to do to promote awareness of these new obligations on businesses. There is also an element which runs on from that about international co-operation. It is a crucial element. We are leading the way in the international community and we want this to help us build relationships with other organisations and to encourage them to have similar regulations in place.

I turn now to the specific points, but not in the order in which they were made. The noble Baroness, Lady Hamwee, asked about the transitional provisions and whether the company will need to report only up until the end of the full financial year. When we commence this transparency and supply chain provision, we will include a transition provision so that the first organisations required to comply will be those whose financial year ends on or after 31 March 2016. This will ensure that all organisations have sufficient time to consider the new provision and the statutory guidance before publishing their first statement. A follow-on from that was to say how long after that period they will have to file that report; the noble Baroness, Lady Hamwee, referred to this. We anticipate that a period of six months should be sufficient.

The noble Earl, Lord Sandwich, asked whether this provision applied to charities, universities and other organisations. The organisation will be caught if it engages in commercial activities irrespective of the purpose and whether profits are made. Ultimately it will be for the individual organisations to take legal advice, consider whether they meet the requirements of the Act and determine whether they need to comply. I have touched upon the transitional arrangements.

As to whether guidance will be published before October to coincide with the duty coming into force, our intention is to publish guidance at the same time as we bring this provision into force, which we expect to be next week, subject to approval of these regulations.

The noble Baroness, Lady Hamwee, asked what buy-in has been detected in the Home Office from institutional investors. A wide range of businesses and investors called for this legislation to be introduced. This included a prominent campaign led by a range of major investment firms, which wrote letters on a number of occasions calling for transparency in supply chain legislation. These include Rathbones Investments, BNP Paribas Investors, Pardes and Aviva Investors. We are therefore confident that investors welcome this provision and will provide more information. In fact, during the debate the most effective voices to be heard by organisations will be from their own shareholders. It is for institutional investors—whether they be trade unions or other investors—to make sure their voice is heard at annual general meetings. We know from experience in some areas—for example, female representation among non-executive directors on boards—that that very powerful voice has been heard. We hope that institutional investors will ensure that the voice is heard and that companies will give an adequate response.

The noble Baroness, Lady Hamwee, asked whether the Home Secretary intends to report more frequently than the statutory minimum infills. The regulations set out,

“before the end of a period of five years”.

Of course, “before the end” can be open-ended but it is certainly worth putting in a limit. While the requirement is to report only once every five years, if the Home Office receives clear evidence that the regulations are not achieving their objectives at an earlier point, we will of course consider conducting a formal review at an earlier stage.

I think that the message needs to go out to business that we are commencing this in a way which, while I do not want to use the term “light touch”, tries to work with businesses to get their supply chains in order. But the clear message is that we expect action to be taken, and if it is not taken it is of course open to this or future Governments to come forward with further measures for consideration.

I was asked what HMG were doing about their own procurement. The transparency provision was specifically designed with the private sector in mind. The Government are of course subject to parliamentary scrutiny and freedom of information requests in terms of their duties, but this is a key element. We have a cross-government procurement policy so that modern slavery considerations become a key part of procurement processes. I believe that imminently, if not already, a question relating to the compliance of supply chains with the Act and the regulations is being inserted into that policy.

The noble Earl asked about the role of the Independent Anti-slavery Commissioner. His remit includes promoting good practice in the prevention, detection, investigation and prosecution of modern slavery offences, which includes encouraging good practice among businesses to prevent slavery from occurring in their supply chains. The whole point is that the anti-slavery commissioner is independent, which is another change that was made in the process of the legislation. We cannot instruct him on what to do, but the Home Secretary will ensure that she listens carefully to his recommendations and requests.

The noble Lord, Lord Alton, raised a number of points, one of which was echoed by the noble Lord, Lord Kennedy: why is there a reference in Regulation 4(2)(c) to “less regulation” rather than more effective regulation? The reference to “less regulation” reflects the standard-view terminology applicable to all business regulations. It reflects the fact that these regulations are from a Government who have as one of their aims a deregulatory culture. We have committees and processes that scrutinise what we do to ensure that what we put forward is consistent with the wider government approach. In any event, the review of these regulations will seek to ensure that they remain effective.

The noble Lord also asked when James Ewins’s report would be published. He has asked for more time to complete his work, but we expect Mr Ewins to publish his report on migrant domestic workers around mid-November, and we have made a commitment that we would seek to come forward with actions in that area by the end of the year. If that is not correct—

[Lord Alton of Liverpool]

I am grateful to the Minister for giving way. He will know that organisations like Kalayaan gave evidence to Members of your Lordships’ House when we were debating these issues, and he will recall that my noble friend Lord Hylton and I divided the House on this question. I hope that we will have the opportunity to have, first, briefing sessions with the Minister when the report is available so that proper discussion can continue to take place. Secondly, I hope that at some point there will be a chance either in the House or in Committee to have a debate before any final decisions are taken. I wonder if the noble Lord is able to give some assurances on the process of how the issue of domestic migrant labour will be taken forward.

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[Lord Bates]

I thank the noble Lord for his questions. We have not made a commitment on that, but I can certainly give a commitment that I will reflect on what he has said about how we should handle the report once it is received and I will come back to him.

The key element in a number of contributions was about the central repository for these forms. The Government are not launching an online repository. However, we are aware of a number of proposals from third parties who have suggested that they could develop a website to host these statements and help people search for businesses and compare them. In California the non-governmental organisation Know The Chain has set up a website that allows the public to see which companies have complied with the legislation. The UK could adopt a similar approach to support a transparency provision. In essence, we believe that this is something that it would be valuable to have, but it is for civil society, not for government, to actually maintain the repository.

We were asked how many businesses it was likely that this would apply to. Of course, applying the threshold at the lower level captures more businesses, and according to the Mint Global database as set out in the impact assessment, 17,257 businesses will be involved.

[The Earl of Sandwich]

Can the noble Lord clarify whether the commissioner has any role in this? It is quite an undertaking to leave it entirely to the voluntary sector.

[Lord Bates]

In the strategy which he published, the commissioner did not say that he felt that it was for him to do this. He did not express that as a view and he set out other priorities. Of course, whatever the sums are that he has to work with, we know that many demands will be made on those resources, and he wishes to target them in a particular way. I am aware that discussions are going on with third-party organisations which might be willing to step forward in this area, but we feel that it is not something for the Government themselves.

[Lord Alton of Liverpool]

Again, I am grateful to the noble Lord. Could he clarify what he means by civil society and third-party organisations? In my earlier remarks I was careful to distinguish between commercial organisations and, say, universities, charities and NGOs. I would be perfectly happy about any of those, but I would have some reservations about commercial organisations, which could have some direct vested interest and might not inspire the same confidence as what we might loosely call third sector groups would. Can the noble Lord explain what he means by the civil society groups which are in discussion with the Home Office at the present time?

[Lord Bates]

They might be better described as non-governmental groups. It could be that private sector groups or even charitable organisations are interested in putting this together. All I am saying is that there is possibly an interest out there, but the key element for the purpose of these regulations is twofold. First, we recognise that it would be of interest, but we should remember that the whole purpose of insisting that this was not in a published, hard-copy annual report and accounts but was a statement on a website is that such a statement is searchable. A number of people, organisations and NGOs took part in the consultation and have shown a real, forensic interest in how people are doing, and they will be able to search those. That sort of social media activism, which we see so much of in many areas, could be brought to bear in order to shine a light in this particular area. That might be more effective than simply, as it were, designating one particular organisation to take responsibility for it.

[Lord Kennedy of Southwark]

The noble Lord is absolutely right. We will have the company statements on the company website, but the only issue with the central repository, of course, is that if you have 7,000 to 10,000 companies, it will be difficult if they are not all in one place. I think that there has been some movement from the Minister tonight, but can he explain why he thinks that this should not be done by government? Why should it be left to civil society or a third-party organisation? It is an important point and it seems to be the missing part in all this.

[Lord Berkeley of Knighton (CB)]

In order to save the Minister from popping up and down like a jack-in-the-box, perhaps I may add one point which may help my noble friend Lord Alton. If by civil society one were able to define that by ruling out commercial interests, that would go a long way towards meeting the point being made.

[Lord Bates]

I am grateful for all those points. Let us remember that as this Act went through we debated whether it should be a statutory responsibility to do this or whether it should be something on which the Government should take the lead. The Act has come through in its present form. I hear the voices saying that all these points are needed. If an organisation does not file its statement on its website for the financial year, on or after 31 March, there are remedies set out in the Act as to what can happen as a result of that. Therefore, this is a very serious statement, but it is an added tool for people to use.

For example, many times we have seen stories in the press about practices in the supply chains of organisations. Now, to go along with those investigations in the press, there would be an ability for them to say, “Well, of course, this is what the said company said on its own website about its supply chain”. People can then draw an additional conclusion from that statement.

We are moving further down this route. These are early days and we will need to see how it comes about. Guidance will be published, on which we have consulted extensively. It will provide further information about what should be done and how it should be presented. However, we are where we said we would be when we passed the Act and we should allow these regulations to come into force so that it can be seen to work and can be evaluated after a period of examination. I beg to move.

Motion agreed.