Serious Crime Bill [HL]

Lord Rosser Excerpts

Wednesday 2nd July 2014 Lords Chamber

Moved by

[Lord Rosser]

2: Clause 7, page 6, line 21, at end insert—
“(4A) In considering whether to make a compliance order the court must, in particular, consider whether any restriction or prohibition on the selling of property subject to the confiscation order and located overseas ought to be imposed for the purpose mentioned in subsection (2).
(4B) The court may attach penalties to a failure to comply with provisions made pursuant to subsection (4A).”

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[Lord Rosser (Lab)]

The three amendments in this group are concerned with recovering money from overseas or in response to such requests from overseas jurisdictions. Many investigations into stolen assets parked in this country do not get off the ground because the Home Office routinely fails to respond, or is unable to respond, to requests for help from other countries. The Home Office has shown in Parliamentary Answers that, despite UK courts freezing more than £200 million at the request of overseas jurisdictions, not a single penny of this has been repatriated to the country asking for the money. Since 2010, it seems that only two bilateral agreements have been signed with overseas jurisdictions to ensure co-operation on mutual legal assistance.

Last year, the former head of the UK financial intelligence unit—part of the National Crime Agency—indicated that when an investigation was initiated from the victim country, and moneys were suspected to be in the UK, the request went out through all the proper channels but there was no great keenness to comply, as there was a mindset that we could just be giving ourselves a headache. Assuming that is a fair analysis, such an approach does not help foster greater reciprocity at international level and cannot help us in securing co-operation when we want it from overseas jurisdictions. The Minister may well contest this analysis, since it suggests there are somewhat different reasons for the problem from those given in the Government’s impact assessment.

It would be helpful if the Minister could provide information on the number of asset recovery requests received from foreign authorities over the past three years, how many have been referred to investigative bodies and how many cases are pending. The World Bank estimates that, each year, developing nations lose between $20 billion and $40 billion through corruption. Between 1994 and 2009 only $5 billion of stolen assets were recovered globally—which is apparently less than 2% of the lowest estimate of the amount stolen, according to an analysis by the World Bank and the United Nations Office on Drugs and Crime.

Amendment 22 in this group requires the Secretary of State to set up,

“an independent review of the effectiveness”,

of our mutual legal assistance arrangements,

“with overseas jurisdictions in cases concerning the proceeds of crime”,

since the figures that are available, the comments made by people who have been on the inside and, indeed, the rather different causes of the problem that are set out in the Government’s impact assessment all strongly suggest that everything is not well. Criminals here also seek to hide their ill gotten gains overseas, and a significant proportion of unpaid Serious Fraud Office confiscation orders are thought to relate to funds located overseas. Criminals put their assets where the UK authorities find it hardest to recover them, which usually means a jurisdiction with which we have no standing mutual co-operation arrangements. Even where this is not the case, without mutual recognition of confiscation orders in the jurisdiction where the assets have been hidden, those charged with enforcing the orders effectively have to relitigate the issue abroad, which can be hard, slow and not very effective.

In Clause 7, proposed new Section 13A provides that in every confiscation case the court will be required to consider making an order to ensure that a confiscation order is paid. In particular, it will have to consider placing a “restriction or prohibition” on the defendant’s overseas travel to prevent that defendant travelling abroad to dispose of his or her assets. Perhaps we ought to consider going further. At the moment, there is nothing the courts can do about people who sell overseas property funded through proceeds of crime because it is in another jurisdiction. We consider that a court should be in a position to fine or jail someone, possibly by making it a contempt of court, if he disposes of property based overseas that is subject to a freezing or confiscation order. Amendment 2 provides for Clause 7, on compliance orders, to be amended to that effect.

We also consider that there should be a consultation on introducing a legal obligation to repatriate liquid assets that are subject to a restraining or confiscation order and which appear to have been moved overseas. Amendment 21 in this group provides for a consultation along these lines. I hope the Minister will be able to give a helpful response to the amendments in this group, since we are at one in seeking to make sure that crime does not pay.

[Lord Taylor of Holbeach]

My Lords, Amendment 2 relates to compliance orders. Under the provisions in Clause 7, the court will be required to consider making, in every confiscation case, any order it considers appropriate to ensure that a confiscation order is paid. Under the new order, the court will be able to impose any restrictions, prohibitions or requirements it believes appropriate to ensure that a defendant pays a confiscation order and that the order is effective. A compliance order will normally be made at the time that a confiscation order is granted. If the court determines that a compliance order is not necessary at that confiscation hearing, the prosecutor will be able to apply for an order any time afterwards as long as the confiscation order remains unpaid. This type of order is not new to the Proceeds of Crime Act 2002, as the Act already confers on the Crown Court the power to make any,

“such order as it believes is appropriate for the purpose of ensuring that the restraint order is effective”.

Amendment 2 would require the court to consider attaching to a compliance order a restriction on selling overseas property that is the subject of a confiscation order. It is, however, already possible to impose such a restriction as part of a restraint order, as the noble Lord will understand from what I have just said. A restraint order can be obtained at a significantly earlier stage in an investigation—for example, before the defendant has been charged. Such a restriction may also be added to a compliance order where there is no restraint order in place. As such, it is not necessary to make express provision for the court to consider such restrictions or prohibitions. The court already has that discretion. It is worth adding that, once a confiscation order has been made, it may be necessary to sell property to enable the order to be paid off. In high-value cases, this may fall to a court-appointed receiver. In addition, not all defendants will have assets overseas so it would not be necessary to require the court to consider imposing such a restriction in every case.

Amendment 21 seeks to confer on the court, when making a restraint or confiscation order, a power to require the defendant to repatriate liquid assets held abroad back to the UK. The Proceeds of Crime Act already allows the court to make any order that,

“it believes is appropriate for the purpose of ensuring that the restraint order is effective”,

as I have already said. That could include, for example, a requirement for liquid assets to be returned to the UK. Breach of the terms of a restraint order, including selling property that is frozen under the terms of the order, will be a contempt of court and, as such, punishable by a term of imprisonment of up to two years.

Finally, Amendment 22 calls for a review of mutual legal assistance. The movement of money and assets quickly across borders means that it is essential that the UK seeks the assistance of its international counterparts so that it can quickly freeze and recover the proceeds of crime, and it can likewise assist jurisdictions that ask the UK for assistance. Historically, international co-operation on asset recovery has been poor, as the noble Lord, Lord Rosser, said. We depend on other countries to enforce our orders on our behalf, but these orders may not be given priority. Some countries are witting or unwitting safe havens for criminal assets.

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I hope that I have shown that I have some sympathy with the intention behind these amendments, having afforded the Committee a valuable opportunity to debate these issues, which I consider to be important. They have given us the opportunity of discussing something which is not frequently discussed in this House. I invite the noble Lord to withdraw this amendment.

[Lord Rosser]

I thank the Minister for his reply on this group of amendments. As I understand it, the Minister was saying that, as far as Amendments 2 and 21 are concerned, the current legislation already gives the power to do what is set out in those amendments—at least, I think that was the thrust of the Minister’s reply. Obviously, at least if I have understood the essence of his reply, I just wish to leave the matter in the context that clearly I will wish to read in Hansard the details of the Minister’s response.

On his response to the last issue, on mutual legal assistance, I am sure that the Minister will understand if I say that I will want to read it, since he gave some statistics and information on the current situation. I shall read that with interest when Hansard appears.

[Lord Taylor of Holbeach]

The noble Lord asked me some questions about numbers, which I did not have to hand in my papers. I am willing to see whether I can find further information which I can give him, because I agree that it is an area where a modest improvement in performance could lead to considerable improvement in the amount of money that we recover.

[Lord Rosser]

I am grateful to the Minister for those comments. I suppose that part of the reason for my saying that I would want to see the detail of the figures that he gave was to see whether he had in fact responded to the questions that I asked, but if he, too, is going to look at that, and if there are parts to which he did not respond on which he will write to me, I will be grateful. In view of that, I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

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Moved by

[Lord Rosser]

6: Clause 10, page 9, line 39, leave out “£10 million” and insert “£1 million”

[Lord Rosser]

Under the Proceeds of Crime Act 2002, a default sentence of imprisonment can be imposed against a defendant if a confiscation order remains unpaid past its due date. Of course, as we know, this Bill increases the maximum default sentences where the confiscation order is for more than £500,000. Those increases are from five years to seven years for orders of more than £500,000 but no more than £1 million, and from 10 years to 14 years for orders of more than £1 million. The Bill also ends the automatic release at the halfway point of a default sentence for confiscation orders of more than £10 million.

These changes are being put forward by the Government because of the significant number of higher-value confiscation orders that go unpaid. Some would say that that is putting it far too mildly, because the amount collected by the police and the volume of the confiscation orders have fallen, yet there are still some £1.5 billion of outstanding orders because assets have been hidden. They have been moved away overseas, or they have been reduced by third-party claims. Only 18% of confiscation orders worth more than £1 million are recovered. A National Audit Office report has indicated that just 26p of every £100 of profit a criminal makes is confiscated. On top of this, the costs of recovering proceeds of crime are high, since investigation, prosecution and enforcement costs come to 76p out of every £1 collected.

In light of this, it is not clear why the Government are proposing only that automatic release at the halfway point of a default sentence should cease in respect of confiscation orders of more than £10 million. The Government’s own fact sheet on the Bill says that it is the higher-value orders that go unpaid. It is the Government who are proposing that orders in excess of £1 million should potentially attract the new maximum default sentence of 14 years. Having said that, since 1987 confiscation orders of £1 million or more have constituted well under 1% of such orders imposed by the courts.

The Government clearly believe that more time in prison for non-payment of a confiscation order is justified and will have some impact, since it is proposing, as I said, that the default sentences should be increased from five years to seven years for orders of more than £500,000 and up to £1 million and from 10 years to 14 years for orders of more than £1 million.

The current maximum default sentence is 10 years, which in practice means release on a tag at three years and without a tag at five years. Increasing the maximum for orders of more than £1 million from 10 years to 14 years will probably have some impact. It seems unlikely, however, that less than another 18 months at maximum in prison before being released on a tag will produce a significant shift in the attitude toward payment of a confiscation order of criminals with just under £10 million hidden away.

The National Audit Office found that in 2012 only 2% of offenders paid in full once the default sentence was imposed. The NAO also found that there are currently 11 criminals who still have not paid their confiscation orders, which remain due to the Serious Fraud Office after they have served their default sentence. Criminals should not be able to gain by not paying back money obtained through their criminal activities by choosing to go to prison in the knowledge that the time they spend in prison will be cut short.

The National Audit Office report pointed out that the current system does not work when it said:

“The main sanctions for not paying orders, default prison sentences of up to 10 years and additional 8% interest on the amount owed, do not work”.

The Bill itself suggests a degree of uncertainty over the £10 million threshold for the ending of automatic release at the halfway point of a default sentence, since there is provision for a power to lower this £10 million threshold through secondary legislation. A further order-making power also allows for minimum default sentences to be introduced in the future—a point on which I will comment later.

So what is the Government’s argument for saying that £10 million is the right figure rather than either of the figures of £1 million or £500,000 in our two amendments—or, indeed, any other figure? The £1 million is in effect the figure at which the Government are proposing that a maximum default sentence of 14 years rather than 10 years should apply.

The Government’s impact assessment indicates that no longer having release at the halfway point of a default sentence for confiscation orders of more than £10 million would result in an increase in the prison population that would be minimal. I think the figure is 20, but it is minimal. What the impact assessment does not tell us is the projected increase in the size of the prison population if the figure were £1 million or £500,000 rather than the £10 million provided for in these two amendments. Indeed, it does not give us the figures for any other amount or what the impact would be on the prison population if early release in this situation were ended altogether.

No doubt the Minister will provide this figure in his reply or subsequently, particularly if a reason for the Government not wanting to see the figure lowered to £1 million or less is the impact this might have on the size of the prison population. I make two points on that issue. First, the Government have told us that their reforms of probation and the probation service will result in a reduction in reoffending, particularly among those serving sentences of 12 months or less, and thus a reduction in the prison population. Will the Minister say if this Government’s anticipated reduction would offset any increase arising from ending automatic release at the halfway point of a default sentence for confiscation orders of £500,000 or more, or £1 million or more?

Secondly, I ask the Minister if he believes that the prospect, with no automatic release at the halfway point, of having to serve up to 14 years in prison for not paying more than £500,000 or more than £1 million ordered by a court under a confiscation order of ill gotten criminal gains secured at someone else’s expense or at the expense of large numbers of people would in fact greatly enhance the likelihood of co-operation being forthcoming to secure the necessary assets. If he believes that, would that not only reduce the number of criminals preferring to serve their prison sentence rather than hand over their ill gotten gains but provide some additional income from which the cost of any resultant increase in the size of the prison population could be paid if that should prove to be the outcome?

Our view is that criminals who do not meet the requirements of a default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. In these two probing amendments, however, we suggest only the lowering of the threshold to £1 million or £500,000, because we want to find out at this stage why the Government believe that a threshold of £10 million is appropriate for the ending of automatic release at the halfway point of a default sentence.

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[Lord Taylor of Holbeach]

My Lords, as we have already said today, under this Government around £746 million of criminal assets have been seized under POCA, which is more than ever before. Around 60% of confiscation orders for sums up to £500,000 are discharged within six months, but it is clear that we need to do more to ensure that confiscation orders, particularly the higher-value orders, are robustly enforced. That is what lies behind the measure that the amendments seek to address.

A key mechanism in POCA for incentivising prompt payment of confiscation orders is the availability of default prison sentences where somebody fails to pay. It is clear that for lower-value orders default sentences have the desired effect, with nearly 90% of orders under £1,000 being discharged. But at the other end of the spectrum, just over 18% of orders over £1 million are settled in full. There is anecdotal evidence that serious and organised criminals would rather spend a few extra years in prison in the knowledge that they can enjoy the fruits of their crimes when they come out. It is clear that we need to provide further incentives to persuade these hardened offenders to pay up. It is with that in mind that we are legislating. Clause 10 accordingly increases the length of default sentences for higher-value orders. For orders between £500,000 and £1 million, the maximum sentence is increased from five to seven years, while for orders over £1 million the maximum sentence will increase from 10 to 14 years.

In addition to increasing the maximum default sentences for higher-value orders, we have looked again at the early release arrangements. Current provisions allow for automatic release at the halfway point of a default sentence. Early release reinforces the view of certain offenders that a default sentence is worth serving in order to retain criminally acquired assets—I think that the noble Lord, Lord Rosser, made the same assessment when introducing his amendments. Unconditionally releasing offenders at the halfway point of their default sentence seriously impairs the intended deterrent effect of the default sentence, particularly for the highest-value orders. So this clause will also end automatic early release for those serving a default sentence for failing to pay an order valued at over £10 million. The combined effect of these changes will mean that, in such a case, an offender will serve up to 14 years in prison rather than five years, as now. This is a significant increase which will make offenders think long and hard about serving the time rather than paying their confiscation order.

The noble Lord quite rightly asked why we set the threshold for ending early release at £10 million and not, let us say, at £1 million or £500,000, as Amendments 6 and 7 propose, or indeed at any other level. What is the rationale behind the Government’s decision? As I have said, evidence suggests—I have given figures earlier—that the existing default sentences do not have sufficient deterrent effect for the highest-value orders. We have therefore focused the changes made by Clause 10 on the upper end of the scale.

As a responsible Government, and as the noble Lord will know, we are committed to eradicating the deficit which we inherited from the previous Administration. We naturally took into account the potential cost of changes to the default sentencing arrangements. As we have set out in the financial effects section of the Explanatory Notes, the combined cost of the changes made by Clause 10, all other things being equal, is £1.78 million, or 60 prison places, by 2033. Ten of those extra prison places are attributable to the ending of early release for default sentences for confiscation orders of more than £10 million. The cost of these provisions should not be viewed in isolation. Elsewhere in the Bill, the new participation offence will cost some £6.6 million, including some 45 additional prison places.

I was intrigued by the arguments put forward by the noble Lord, Lord Rosser. He seems to have reined in the Opposition’s ambitions, because the proposals put forward by the shadow Home Secretary and shadow Attorney-General as recently as May stated:

“Labour would end early release for criminals serving default sentences who refuse to pay”.

I wonder whether the noble Lord can tell us what the cost of such a proposal would be. If not, I can tell him. Again, if there was no change in offender behaviour, such a policy would require an additional 900 prison places, at a cost of some £25 million per annum by 2033, although the great majority of those costs would kick in by 2020. This of course assumes that the capacity will be available within current prison facilities. However, given the impact of this proposal, it is likely that further facilities will need to be provided, which will result in a considerably higher total cost. It is therefore reasonable to ask the noble Lord where the money would be found to fund the proposals as set down in his amendments.

We have made a judgment. Our view is that the changes made by Clause 10 represent a well judged package. It is our expectation that the increases in default sentences and the ending of early release will lead to a change in offender behaviour. Faced with 14 years in prison, rather than five as now, we believe that an offender with a confiscation order of more than £10 million will not be so ready to serve the time rather than pay up. Fourteen years is a long time in prison.

However, it would be prudent to test that proposition before we go further. That is why the clause contains two order-making powers. The first will enable us to change the structure of default sentences, including by further increasing maximum sentences and introducing minimum sentences. The second delegated power will enable us to lower the £10 million threshold for ending early release. We will keep the changes made by Clause 10 under close review, and if they are having the desired effect then we will not hesitate to exercise these order-making powers.

The noble Lord, Lord Rosser, asked whether the Government had considered alternatives to the £10 million threshold. The answer to that is yes. I do not propose to get into a debate about whether we considered this threshold or that. Suffice it to say that Ministers considered a range of options and came down in favour of the proposition in Clause 10. I can tell the noble Lord that we estimate that the cost of ending early release for orders of £500,000 and over would be approximately 180 prison places, costing an estimated £5 million per annum by 2033. Ending early release for orders worth £1 million and over would lead to an increase in the prison population of approximately 70 places by 2033, costing an estimated £2 million.

The Government have considered this carefully and concluded that it would not be appropriate to lower the threshold for ending automatic early release until it was proven that it resulted in improved payment and was an effective deterrent, and that it was affordable to do so. We therefore believe that the provisions in Clause 10 are the appropriate way forward, while building in flexibility for the future.

The noble Lord, Lord Rosser, asked about the Government’s attitude to the conclusion of the Delegated Powers Committee that it would be inappropriate to introduce minimum default sentences through secondary legislation. We are considering carefully the points made by the committee about this order-making power, and in doing so we will want to take into account the points that the noble Lord made in today’s debate. Accordingly, I cannot take up the noble Lord’s suggestion that I respond to the report today, but I can undertake to reply to the Delegated Powers Committee report in advance of the Bill’s Report stage in the autumn.

In view of that commitment and the fact that I have valued the opportunity to explain the way in which the Government arrived at our judgment to introduce the measures in Clause 10, I hope that the noble Lord will withdraw his amendment.

[Lord Rosser]

I thank the Minister for his reply and for giving the information about the projected increase in the size of the prison population if the figure were £1 million or £500,000, and indeed what the increase would be if there were no threshold figure at all.

If the Minister thinks there has been a change in our policy, I shall put his mind at rest. I shall requote to him what I said in my contribution: our view is that criminals who do not meet the requirements of the default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. That is our approach. I said it in my contribution. I also made it clear that our two amendments are probing amendments to find out why the Government believe that the threshold of £10 million is appropriate.

We shall consider what the Minister has said, but I think that with regard to the £1 million threshold he said that the figure was 70 additional places at a cost of £2 million; I think he said that for the £500,000 threshold the figure was 180 additional places at a cost of £5 million; and for no threshold the figure was 900 prison places at, I think he said, the cost of £25 million. I just want to ensure that I have understood correctly what he said.

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[Lord Taylor of Holbeach]

I would like to reassure the noble Lord. I emphasise that I said that 10 of these extra places would be attributable to the ending of early release from default sentences for confiscation orders over £10 million. I actually said that as part of my presentation to the noble Lord.

[Lord Rosser]

But I think I am right in saying that the impact assessment assumes no change in the behaviour of the criminals concerned. I think, and perhaps the Minister will confirm this, that the figures he has given of an increase of, respectively, 70, 180 or 900 places and increased costs as a result also assume no change in criminal behaviour, and therefore no more money coming back in as a result of the ending of automatic release at the halfway point of a default sentence. A lot of people would find that an extremely unlikely assumption on which to base the impact assessment and the Minister’s figures.

However, I will leave it at that. I thank the Minister for the information and for his comment that we will have the Government’s response to the Delegated Powers Committee before Report. I beg leave to withdraw the amendment.

Amendment 6 withdrawn.