Modern Slavery (Transparency in Supply Chains) Bill [HL]

Lord Keen of Elie Excerpts

Friday 8th July 2016 Lords Chamber

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

My Lords, I am grateful to the noble Baroness, Lady Young, for introducing this Bill and this debate. This Government are determined to tackle modern slavery and ensure that UK supply chains are not driving demand for slavery around the world. That is why we included a world-leading transparency in supply chains provision in the Modern Slavery Act, and why we welcome suggestions for strengthening our approach.

The provision in the Act requires all commercial organisations carrying on business in the UK which supply goods or services and have a turnover of £36 million or more to set out the steps that they have taken to prevent modern slavery in their business and supply chains. This transparency will allow consumers, investors and civil society, and indeed commercial organisations, to hold businesses to account and drive a race to the top.

The first proposal in the Bill is to extend the transparency provision to include public sector organisations as defined by Regulation 2 of the Public Contracts Regulations 2015. The Government fully agree that the public sector must play a full part in increasing the transparency of supply chains. Work to achieve this is under way. Several major public sector procurers have already introduced anti-slavery measures in their standard procurement procedures. For example, the NHS standard terms and conditions for goods and services suppliers include conditions on labour standards, and the Department for Health and NHS Supply Chain have also developed a labour standards assurance system that encompasses issues of forced labour for auditing suppliers in high-risk categories.

We agree that such good practice should be used more widely. That is why we are taking action to ensure that information on slavery and trafficking statements informs future procurement decisions by the public sector. We are amending the cross-government procurement selection questionnaire so that large commercial organisations wanting to do business with government will be asked whether they are compliant with Section 54 of the Modern Slavery Act. This will enable contracting authorities in the public sector to decide whether to exclude the organisation from the procurement process. The new questionnaire will be in place later this year.

We are not, however, convinced of the merits of the proposal in the Bill which involves applying to the public sector a provision that was specifically designed with private sector organisations in mind. The public sector already has different kinds of transparency requirements and accountability to Parliament, which means that it is held to account in a different way from the private sector. Public authorities are also already legally required by Section 6 of the Human Rights Act to act compatibly with the European Convention on Human Rights, which incorporates Article 4 prohibiting slavery, servitude and compulsory labour. Public authorities can therefore be challenged under the 1998 Act for acting incompatibly with convention rights, which private sector organisations cannot, and there are other ways to make progress that do not require primary legislation.

The Bill would also require all organisations to include their statements in their annual report and accounts. This would be a departure from the current provision, under which the Government have made clear that businesses can include their transparency statement in another publication or report, as long as it is clearly marked as their slavery and human trafficking statement and there is a link directly to the statement in a prominent place on the organisation’s website. The existing approach was very much based on a consultation with businesses and NGOs and reflected their desire to avoid a one-size-fits-all rule that could be restrictive. We remain open to feedback about this, but we would prefer to assess the impact of the provision in its existing form before considering any changes to the guidance.

This Bill would also require the Secretary of State to publish a list of all applicable organisations covered by this legislation. This is an interesting proposition. The Government are committed to doing everything we can to amplify the value of information in the slavery and trafficking statements. We want consumers, businesses and civil society to make informed choices that reward companies that take action to eradicate slavery. In theory, publishing a list of the commercial organisations which are captured by the duty by dint of their operation in the UK and their annual turnover could help with this. In practice, producing such a list is likely to be difficult and resource-intensive and may, in any event, not require primary legislation. We are prepared to look at this, but at this time we believe that no legislative change is needed.

The Bill would make it mandatory for contracting authorities in the public sector to exclude an economic operator from a procurement process, if it was established that it should have complied with Section 54 but had not. It would also require the Secretary of State to publish guidance for those public contracting authorities on how to comply with this requirement and with Section 54. We agree with the objective of this provision but do not think that legislating for more guidance is necessary. First, contracting authorities can already exclude an economic operator which has failed to comply with Section 54 of the Act. This is provided for under Regulation 57(8)(a) of the Public Contracts Regulations 2015, which was referred to by the noble Baroness, Lady Hamwee. The regulation is not absolute, as she observed. Secondly, the Cabinet Office will later this month publish cross-government guidance on social, labour law and environmental aspects of the public procurement regulations. This will help public sector authorities decide when and how to exclude economic operators. This guidance will be issued via a Crown Commercial Service procurement policy note which is binding on central departments, their agencies and non-departmental public bodies and which is recommended for the wider public sector. Thirdly, as I mentioned earlier, we are already taking steps to encourage compliance with Section 54 by amending the cross-government procurement selection process. We are confident that these steps will achieve the desired outcome.

I shall now consider one or two particular questions raised by noble Lords. The noble Lord, Lord Whitty, acknowledged that the United Kingdom is at the forefront of this form of legislation. He suggested that it may not be enough for us to rely on consumers and consumer organisations. Over and above that, we rely more particularly on peer pressure. That was underlined in the consultation process that preceded the original Act. There is a desire, particularly on the part of larger businesses, to ensure that at an economic level they are not unfairly prejudiced by the unlawful and disgraceful conduct of potential competitors. Therefore peer pressure plays a part in this process.

The noble Lord referred to the strange omission of public authorities but, with respect, the legislation was designed to apply to the private sector. I pointed out the distinction that arises under the Human Rights Act. Under Section 6, all public authorities are bound by the terms of the convention. He also asked questions with regard to gangmasters and the Gangmasters Licensing Authority. As the noble Lord may recollect, the Government used the Immigration Act 2016 to extend the remit and powers of the GLA. It will be renamed the Gangmasters and Labour Abuse Authority, and its new mission will be to prevent, detect and investigate worker exploitation across the entire economy, which will result in more scrutiny of companies from a law enforcement agency which can examine their supply chains. I hope that meets his concerns about the position of the GLA in that context.

[Lord Whitty]

I recognised the extent of its remit and asked what resources were given to it and to the other bodies involved in that area. Will the Minister reply to me in writing if necessary?

--- Later in debate ---

[Lord Keen of Elie]

I will reply in writing as I do not have the figures available to me this morning. I am obliged to the noble Lord.

The noble Lord, Lord Cormack made a number of observations about the Bill and the future of this country. What I would concur in, at the very least, is that we should work to ensure the circle is completed as far as this legislation is concerned.

The noble and learned Baroness, Lady Butler-Sloss, referred to the Bill as timely and necessary. I concur that, in a sense, it is timely because we should review such important legislation, but for the reasons I have given, I would not go so far as to say it is necessary at present.

[Lord Cormack]

I am sure we would all rather be defended by the Minister than prosecuted by him, but he gave us a glimmer of hope when he talked about the need to complete the circle. Will the Minister be kind enough to agree on the Floor of the House to meet the noble Baroness and all her supporters, those of us who have spoken and others, together with the Independent Anti-Slavery Commissioner to see whether something could be produced that would complete the circle?

[Lord Keen of Elie]

I am obliged to my noble friend. I have already met the noble Baroness, and I am obliged to her for making time for that meeting. I am perfectly prepared to meet again to discuss how we can address some of the issues raised by the Bill because the Government’s position is that, while we welcome some of the proposals, we do not consider that primary legislation is required to achieve these ends. I would welcome an opportunity to discuss those points further in due course.

I turn to the observations by the noble and learned Baroness, Lady Butler-Sloss. She asked a number of questions about the burden of regulation and whether it was any longer an issue because, as she put it, in the consultation process the biggest companies said it was not a problem. We are not concerned with just the biggest companies, though; we acknowledge their role in this and the peer pressure that they can bring to bear, but this concerns every company with a turnover of £36 million or more and we have to take account of the burden upon all those companies, not just the biggest of them.

On the point about government procurement, I hope I have addressed that by pointing out that in a sense a parallel scheme is in place regarding procurement. I acknowledge the point made by the noble Baroness, Lady Hamwee, that the regulations do not carry an absolute. There are reasons for that. The code of practice will complement how and why those regulations should be taken into account.

[Baroness Hamwee]

Is the Minister aware, and he may not be, whether the Government have any plans to report publicly on the compliance with—“compliance” may be the wrong term for something that is discretionary, so perhaps I should say “observance” of—those regulations? In other words, will they report on how successful those regulations are? That is a matter of public concern, obviously.

[Lord Keen of Elie]

I can understand the observation but, as the regulations are to be complemented by a code of practice that I believe is going to be brought into force in October this year, I do not think I am able to anticipate how compliance may occur. I will address in writing to the noble Baroness the question of whether there will be some form of requirement for compliance auditing in respect of that matter.

The right reverend Prelate the Bishop of Derby raised the question of central repositories, and mentioned an instance of an organisation in Bristol. I am not in a position to go into individual cases at this time. As noble Lords are well aware, the Government have not launched an online repository, although we are aware of a number of proposals from third parties who suggest that they could develop a website to host these statements and to help people to search for them. I would like to complete a quotation that the noble Lord, Lord Alton, made regarding an answer I gave in April this year when I said:

“There never was an intention to establish any central monitoring system with respect to these provisions”.

That was in the context that there was never any government intention, which was perfectly clear. I went on to say:

“The Government have always been clear that it is for others to establish such a mechanism. We are aware of a number of organisations that propose to set up a central repository”.—[Official Report, 13/4/16; cols. 256-58.]

The right reverend Prelate went into some detail regarding a particular development in this regard, and I undertake to write to him on that matter because he raised a point that I am not in a position to address this stage.

The noble Baroness made the point, which was also made by other noble Lords, that these are early days. I remind your Lordships that this legislation came into force in October 2015, requiring companies to respond and to obtemper their Section 54 statement in their financial year from March 2016 onwards. We are at the very beginnings of this process.

That brings me on to a point made by my noble friend Lord Smith, who asked me a number of questions about the number of companies that have complied and the number that have relied upon Section 54(4)(b) of the Act and said they could not make a statement. It is simply too early to say what the position is regarding those matters. Those figures have not been collated and cannot be, because it is only from March this year that companies have had to address the question of compliance. I regret that I cannot provide figures at this stage.

The noble Baroness, Lady Goudie, raised the issue of local authorities and government departments. I hope that to some extent I have addressed the point that she was making by seeking to explain that the original legislation was designed particularly for the private sector, and that there are parallel provisions. They may not be regarded as quite as absolute as those that apply to the private sector, but there are parallel provisions that we have under the procurement regulations and which are being developed by reference to the code of practice.

I turn to the observations from the noble Lord, Lord Alton. Again, he referred to early indications of how the Act is being complied with. I underline that point: these are only early indications. We have to look further and consider how the Act is going to bed in. In my submission, it is too early to suggest that we should be tinkering with the legislation before we know how it is actually going to work in practice. He also alluded to the alleged lack of any monetary penalty for those who simply ignore the provisions of the Act. I remind noble Lords that the provisions are civil. The Secretary of State has the right to bring injunctive proceedings against a company that persistently fails to obtemper its Section 54 obligations, and if it still fails thereafter to obtemper those obligations it will be in contempt of court and liable to an unlimited fine.

[Lord Alton of Liverpool]

Before the Minister leaves that point, he will recall that in fact the quotation was not mine; it was from the US State Department’s observation about the working of our Act. I believe it is important to get the question of penalties on the record so I am grateful to him for doing that, but will he return to the question of post-legislative scrutiny? He will recall that, when I moved amendments in 2015 on that subject, the Government opposed them. Is there not a strong case for at least saying that there will come a point where, just as there was pre-legislative scrutiny of this legislation, which was incredibly effective, there will be post-legislative scrutiny so that we can decide what is working and what is not? Then it will not be a question of “tinkering”, as he put it.

[Lord Keen of Elie]

I am grateful to the noble Lord. I understood that he had quoted the US source because he agreed with it, not because he simply wanted to put it into play. Be that as it may, I also observe that there is provision for review under the terms of the Act, albeit a five-year period. I am not suggesting that we wait that long because, as I indicated, I am perfectly content to sit down with the noble Baroness, Lady Young, and discuss these proposals further. We are sympathetic to some of the suggestions, or at least to the aims, but we do not believe they require primary legislation. I am quite happy to discuss some of these aspects with her.

The noble Lord, Lord Boateng, referred to the fact that we must not forget the past or past wrongs. I entirely concur with that, but perhaps he can appreciate that I can give no commitment with regard to Memorial 2007. He asked a number of questions about the tasking of high commissioners and ambassadors with regard to these matters. If I ventured into the realms of the Foreign and Commonwealth Office, I would fear for my future. I might fear for it anyway, but I hope the noble Lord will appreciate that I am not in a position to address questions that fall within the ambit of that particular department.

However, I have just been given this information: “18 minutes”.

[Lord Boateng]

I am grateful to the Minister but, having consulted his ministerial colleagues, will he undertake to write to me?

[Lord Keen of Elie]

I will request that appropriate provision is made in order that the noble Lord can be written to.

[Lord Boateng]

I could not ask for more from a lawyer.

[Lord Keen of Elie]

I am obliged to the noble Lord.

The noble Baroness, Lady Hamwee, raised a number of issues. One of them was how we identify those corporate entities or partnerships that have an obligation under Section 54. The obligation was designed to coincide with the definition of large companies under the Companies Act in the context of registration. I am not saying that that takes us very much further forward, but there is at least a litmus test that one can have regard to in that context. I do not seek to ignore the other points that she raised, but I hope I have covered them in the course of this reply.

The noble Lord, Lord Kennedy, asked about public bodies. Again, if I may, I repeat that they are subject to a parallel provision—albeit not identical, for obvious reasons—and that is being developed under reference to the code that I mentioned before.

In conclusion, I thank the noble Baroness, Lady Young, for raising this important topic. The Government have listened and reflected carefully on the topics raised by her Bill. We are determined to lead by example on this issue and do everything that we can to prevent modern slavery in both the public and private sector supply chains in this country, and indeed overseas. While the Government are not persuaded that further legislation is the right approach at this stage, we welcome the ideas in the Bill. We will want to examine some of them in more detail and, as I have said before, I will be happy to meet with the noble Baroness again to do so.

[Baroness Butler-Sloss]

Before the Minister sits down, may I ask two questions? First, as I understand it, it is being suggested that in the public sector the human rights requirement meets what is needed for modern slavery. If that is correct, why on earth was it necessary to have a modern slavery requirement for the private sector? Secondly, it is all very well for the Secretary of State to have the power to go to the County Court, but what he needs to know is, first, who the companies are and, secondly, whether they have in fact not complied. From what the Minister has said, I do not understand at the moment how the Government are going to find either of those points.

[Lord Keen of Elie]

On the first point, the private sector is not subject to Section 6 of the Human Rights Act 1998, which is what I sought to explain earlier. On the second point—

[Baroness Butler-Sloss]

The independent private companies are also caught by the Human Rights Act under the current legislation because they have to do a human rights report every year. I do not quite understand why the Government think that that is good enough for the Government but not for private companies.

[Lord Keen of Elie]

As I say, the public sector is subject to Section 6 of the Human Rights Act; that was merely one aspect of my explanation as to why it was not considered appropriate to extend this legislation to the public sector. The other issues concern the Public Contracts Regulations 2015 and the codes and guidance that apply in that context.

As regards the Secretary of State having resort to the courts to bring a penalty, we will see consumers, NGOs and peer pressure bringing out the question of who is complying and who is not. I will give one simple example. If a retailer on the high street discovers that their competitor is retailing T-shirts at 50p each when they know perfectly well that they cannot be produced for anything like that sum, and they persist in doing so, they will detect that something is amiss. As the large corporate retailers observed in the consultation period, they want a level playing field and their one way of doing that is to ensure that their competitors comply with Section 54 and, if they do not, to bring that to the attention of the Secretary of State.

[Lord Alton of Liverpool]

Before the noble and learned Lord sits down, I raised with him the position of minors and those who have been referred through the national referral mechanism when it has not led to any kind of criminal action being taken on their behalf. Will he agree to write to me on that subject?

[Lord Keen of Elie]

The noble Lord also reminds me that he raised the question of children coming from Europe under the immigration scheme. He may appreciate that I do not have figures on these matters for the purposes of this debate, but I will be content to write to him on the point he has just raised.