Economic Crime and Corporate Transparency Bill

Lord Naseby Excerpts

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Leigh of Hurley (Con)]

My Lords, I confess that these amendments essentially offer me another bite of the cherry because they are almost exactly the same as amendments that appeared last time in respect of non-micro accounts, but for completeness I had to put them in here again to cover micro-companies. That was fortuitous because, given that the Minister so eloquently batted away my amendments last time, this gives me another opportunity to make pretty much the same case.

Completeness is defined in Sections 444 onwards of the Companies Act—for example, the balance sheet that was signed by the directors—but the Act and this Bill say nothing about tagging that information. It says that the registrar can require an electronic format, but the legislation does not really tell us what completeness means; in particular, electronic completeness and the area I highlighted, which is inconsistencies within the accounts. For example, an oligarch is a director of a company and his name quite correctly appears on the accounts, but that name has not been tagged or it has been tagged as something other than the director’s name so when one searches for that name, it will not be found; so not tagged means it is not complete or tagged wrongly means that it is not self-consistent. It is no good accountants arguing that the accounts are complete because the director has been named because if the name has not been tagged, it will not be found. I hope that before Report there will be some focus on this issue for micro- and other accounts to ensure that full advantage is taken of electronic filing so that searches can be made easier and the registrar has the responsibility to make sure that the accounts are correct.

I am minded to speak on my noble friend Lord Sarfraz’s intention to oppose the Question that Clause 54 stand part, which is in this group. I am aware that he is not in his place, but, first, having thought about this for some time and prepared some notes on it and, secondly, to avoid it becoming an issue down the line, I want to make the point that I do not think micro-companies should be excluded. They were not excluded, I think, until about 2013. Micro-company accounts can cover revenues in millions of pounds. There could be a temptation to form a number of micro-companies which in aggregate are quite substantial, so I urge the Minister to allow Clause 54 to stand part. I beg to move.

[Lord Naseby (Con)]

My Lords, I apologise for not taking part at Second Reading due to other parliamentary commitments. I have a couple of small questions, but one of them is quite important.

First, if we are dealing with micro-companies, they are not likely to have substantial staff. There must be some safeguard so that the authorities do not change the requirements for reporting and leave these poor micro-entities with perhaps two or three months to totally amend their software. That has happened in certain other areas, so there must be some requirement that, while it is quite right that the registrar’s requests should be met, there must be some safeguards and those having to do the returns must be given adequate time to do them.

Secondly, I have one small point in relation to new Section 443A(2) inserted by Clause 54. At the end, it says, “(and any directors’ report”). I assume the directors’ report refers to the accounts, but that is not totally clear.

[Lord Vaux of Harrowden (CB)]

My Lords, in the light of what we have just heard, I want to touch on the micro-company side of things. Micro-companies may be small but they are not unimportant. They are probably the single biggest sort of company used for VAT fraud, for example. There has been a lot of publicity recently about some poor chap in Cardiff. Several hundred companies were registered at his address, then he started receiving large bills from HMRC. It is precisely this sort of company that is used for that; we should not be too generous to these companies in relation to reporting requirements.

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[Lord Faulks (Non-Afl)]

The noble Lord has anticipated the point that I wanted to make, but I will make it very briefly. I am puzzled why we are so keen to protect anonymity. What is the respectable argument in favour of anonymity? Can the Minister help us with that? A solicitor, for example, will append their name to a document, identifying litigation or other contexts, and many other professionals have similar obligations. Why are we affording these particular people some special allowance? It simply does not make sense.

As the noble and learned Lord, Lord Garnier, said, for some time, those of us involved in the register of overseas entities were anxious that there should be improved verification. I gather that there has been some movement in that direction. I ask the Minister to consider having regard to the weight of opinion that there should be a similar movement in this area.

[Lord Naseby (Con)]

My Lords, I will be very brief. First, having chaired three public companies, I totally agree with my noble friend Lord Agnew’s Amendments 49 and 51, with the exception of subsection (1) of the proposed new clause in Amendment 51. I wonder about it being every three years; that basically means once a Parliament, and I wonder whether every two years would be more appropriate.

Secondly, I ask my noble friend: is there a difference between “foreign” and “worldwide”? Are they coterminous, or not? That is important.

Finally, proposed new paragraph (d) in Amendment 50A says that any authorised corporate service provider registering companies must

“disclose promptly on request from the registrar, or other relevant authorities including local authorities”.

Anyone who has been in local government or the chair of a major committee would like that to be a little more specific; otherwise, it opens the door to arbitration and legal matters as to whether the person making the representations is “relevant”.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I have added my name to Amendment 54 and those of the noble Lord, Lord Vaux, and the noble Baroness, Lady Bowles. I will be fairly brief, as this is an extremely unusual situation in that I agree with everything that has been said from all sides of the Committee. I will simply set out a couple of extra points.

I pick up particularly the points from the noble Lord, Lord Vaux, that journalists, campaigners and groups such as Transparency International have frequently and very bravely—at considerable financial and other risk to themselves—helped to uncover the situation that we have with the London laundromat, the centre of global corruption or whatever you call it. Many labels have been applied. These amendments, particularly Amendment 54, open this up so that people such as those can see and examine what is happening. We can see that the regulators have failed utterly to provide the sorts of checks that they should, and transparency at least enables NGOs, campaigners and others to do what should be the regulators’ work for them.

I would like to see Companies House not relying on any independent certification practices but doing its own checks. However, I acknowledge that the practical reality of that would require an enormous institutional set-up. You might ask who would pay for that. I say that, if you are going to benefit from being a limited liability company, the costs should cover it fully—but I can see that that is not going to happen. As it is not, the best possible thing is at least to make sure that these authorised corporate service providers are open to scrutiny from others.

We must not forget that we are asking those that have been the enablers of corruption, fraud and sheer robbery to become the enforcers. That is what we are doing now—asking the poachers to become gamekeepers, in more traditional terms. That carries a high level of risk. Your Lordships’ Committee has a huge responsibility to do everything we can to make sure that we have full oversight of that.

I will comment briefly on Amendment 51A in the names of the noble Lord, Lord Coaker, and others. It takes a risk-based approach in looking at the many industries we have that have huge problems. Some are identified here; the situation with car washes is a clear one. A recent study by Nottingham Trent University showed that only 11% of workers in hand car washes were getting payslips, which is the most basic arrangement to enable you to see what is going on. Not even that is happening there.

We have a huge problem in many sectors of our society. Just a couple of weeks ago, Farmers Weekly exposed huge levels of fraud and, as a result, significant public health risks in our food sector. We know what has happened in the building sector, where local councils, without the resources, have stepped away as we move to self-certification. We have huge problems with standards in that sector. These problems are there and many of them go back to the financial sector. These amendments are crucial to deal with problems right across our economy.

Finally, it sometimes seems like this is all financial, that it is not really related to people’s lives and that it is somehow a victimless crime. The reality is that we are robbing poor people around the world by enabling London to be a centre in which corrupt money is placed. In our own society, we are enabling whole sectors of our economy to be consumed by businesses built on fraud, corruption and the exploitation of workers. I have forgotten which, but a noble Lord opposite said that that makes it difficult or impossible for honest businesspeople to set up, run and thrive.