Economic Crime and Corporate Transparency Bill

Lord Wallace of Saltaire Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Wallace of Saltaire (LD)]

My Lords, it is a pleasure to follow that fascinating speech. I think I need to read it again before I fully understand it. I had not heard it on the five previous occasions on which the noble and learned Lord, Lord Garnier, made it. Halfway through this debate, the noble Lord, Lord Agnew, commented that there seemed to be an extraordinary amount of consensus. That carried on through the rest of the debate. The question behind all the speeches is how serious are the Government about making sure that this Bill becomes an Act which successfully tackles economic crime, rather than one making another tiny step—a shuffle perhaps—in the direction of saying that it will, but not actually managing to implement it?

We have heard a range of arguments that the Government should accept amendments on several issues to strengthen the Bill, in so far as they can be fitted within its remit: SLAPPs, whistleblowers, greater transparency, asset seizures for reparations, tighter enforcement of the register of overseas entities and penalties for failure to prevent fraud or for assisting fraud actors and activities.

On the question of fees, we do not need that in the Bill, as the noble Lord, Lord Leigh, remarked. I disagree with him on whether Companies House needs more powers. It needs more powers, and for that it needs more resources. What we want is an assurance from the Government that they will substantially raise the fees. I sat thinking with amazement that the fees for Companies House are the way they are. With my wife, I am working through the process of downsizing our house after 45 years in one place. I gather that this is in line with the Government’s preferences and policy. They would like people our age to move out of their large houses into smaller flats so that housing problems are moderated. Yesterday, I sorted out how much it will cost me in stamp duty, conveyancing fees et cetera. In comparison with the fee for registering a company, there is rather a large gap.

We all know—I say this to our Conservative friends—that over the past 12 years a number of regulatory bodies have had their budgets slashed. The Environment Agency’s budget has been slashed by 80% and—surprise, surprise—it does not seem to have kept up with discharges of sewage by water companies. The Charity Commission, as the noble Baroness, Lady Stowell, will know, had its budget severely cut, and that badly affected some of the things it had previously done to regulate and advise charities.

[Baroness Stowell of Beeston (Con)]

Forgive me for interrupting. I am grateful to the noble Lord for giving way. I ought to make the point that the Charity Commission’s budget was very severely cut, but it has been increased. Its operating budget is now pretty healthy. It might not be healthy compared with a lot of other regulators, such as Ofcom, when you look at what is required of the Charity Commission, but it had a quite dramatic reversal of its fortunes in terms of its operating costs.

[Lord Wallace of Saltaire (LD)]

I take that correction happily. I was the Lords Minister responsible for charities from 2012 to 2015 and remember these arguments very painfully.

I hope that the Conservatives will say to those in their party, like our last Prime Minister, who say that the answer to every question is tax cuts and for that you have to cut spending wherever you can that there are some areas in which sufficient resources from whatever means—whether fees or taxes—provide very substantial public benefits and sometimes economic advantages as well. This is clearly one of them.

The noble Lord, Lord Clarke, added that greater accountability for Companies House is an important factor that we need to get into this Bill if we can. My career was in dealing with international issues. When I look at a Bill, I always start by asking where the international dimension is dealt with. The international dimension in this Bill is remarkably thin. I said to the noble Lord, Lord Clarke, that I could challenge him on Clause 190 when we get to it. The extent clause is always the one you have to start by looking at.

As the noble Lord, Lord Gold, said, a lot of economic crime is extraterritorial. When I briefly dealt with some police matters at the beginning of the coalition, I recall being taken around Yorkshire to discuss organised crime. The first statement that the chief constable made was, “There is no domestic organised crime”. All organised crime is cross-border—it is international—and, for that, one clearly needs international co-operation. The Conservative Peer who said in a debate here two years ago that we did not need Europol because we had Interpol and that that provided everything we needed did not understand the complexity of the co-operation one needs among national authorities. I, and I think many of us, would appreciate a briefing from the team on how the pursuit of economic crime will be managed in co-operation with other countries if the Government are going to be more serious about this. There is a brief reference to the Financial Action Task Force in the Explanatory Memorandum, but the whole ethos of coping with a massive transnational problem is almost absent from the Bill.

This leads me on to the question of the Crown dependencies and the overseas territories, which the noble Lord, Lord Faulks, raised. I have been interested in this for many years. The frustration is that they fall between the domestic and the international. One is usually assured that one does not have to legislate for them—indeed, that it is improper to do so—but we ask them to follow British domestic legislation. Three years later, we are told that most of them have not got round to doing so yet, but they will, soon. I recall going to one Crown dependency many years ago and gathering from the chief Minister’s enthusiastic briefing that their chief message to me was, “We are so much better than the other two”. That is not a good area. I strongly suggest that this House needs to consider a sessional committee to look at the relationship between the Crown dependencies, the overseas territories and the United Kingdom. It is always being pushed to one side. It is dealt with by a junior Minister in the Ministry of Justice or the FCDO, but some very knotty issues come with it.

The noble Lord, Lord Stevens, remarked that half the registered overseas entities come from the BVI. The largest numbers among the others, adding up to more than three-quarters, came from Jersey, the Isle of Man and Guernsey, and then, I think, Luxembourg. This leads me on to the other point made by the noble Lord, Lord Faulks: Luxembourg is of course also a tax haven and it has its own interests. I must look at that ECJ judgment. I am certainly for transparency against privacy when one draws the balance, and it sounds as though the ECJ has been persuaded on this occasion to support privacy against transparency. It seems to me that corporate privacy should be valued a great deal less than personal privacy, but I will look at the case. International co-operation is clearly an essential part of where we need to have this. The British Government’s deep reluctance to assert sovereignty over the overseas territories and Crown dependencies is very odd for a Government who have spent a lot of time saying that they want to take back control.

A number of noble Lords have talked about the role of enablers within our system, and I am a bit partisan on that issue. Liz Truss talked about the liberal establishment that blocked her radical reforms, but if one is to talk about the enablers who have assisted oligarchs and others—the Intelligence and Security Committee’s Russia report had some extremely strong language on that—one must acknowledge that they were at the heart of our financial, accountancy and legal establishment in the City and that they successfully penetrated the Conservative Party. That is a real problem for us, and we must do something much more strongly about it. When I criticised sleaze within the Government the other week, the noble Lord, Lord Clarke, said to me, “This is a different Government.” I say to him: to demonstrate that we now have a different Government, we need now to take some stronger action, with the Bill, on that problem.

The noble Lords, Lord Leigh and Lord Browne of Ladyton, my noble friend Lord Fox and others all praised the quality of debate on the Bill in the Commons, adding that the Ministers there were clearly listening to concerns and criticisms. I hope that the Ministers here will take very much the same attitude and accept that the Bill can be improved and strengthened, as everyone here has asked. I found it dispiriting, as others have, that on several Bills over the last two Sessions, Ministers here have been told to resist amendments as vigorously as they can. On one recent occasion, a Lords Minister told me that they had to go back on a concession made in the Lords because there was resistance to it from her party in the Commons.

This is a debate in which we have had remarkable consensus on all Benches. We are concerned with the quality and reputation of this country, and we think that the Bill can make a significant difference on that in a number of areas. Let us all pursue the further progress of the Bill with that in mind. I look forward to the conversations which I hope that the Ministers will offer us before we reach Committee, and then again between Committee and Report. Let us see what we can do to put on the statute book a strengthened and improved Act on economic crime and transparency.

--- Later in debate ---

[Lord Wallace of Saltaire (LD)]

Just on the register of overseas entities, the noble Lord, Lord Agnew, talked about following all the way down the chain to discover whether there is another company based in another offshore financial centre which says it is the beneficial owner and then chasing them back to, I think he said, the Marshall Islands, if necessary. That is not at all easy. Have the Government engaged with that? Can he perhaps brief us before Committee as to how difficult that is and how hard the Government are going to try?

[Lord Sharpe of Epsom (Con)]

My Lords, I just referred to the extensive investment that the Government are making in investigative capacity within this space, so I think the answer is yes, we will obviously be pursuing that and I will be more than happy to engage going forward—but I cannot give him specific answers at this moment.

I thank the noble Lord, Lord Ponsonby of Shulbrede, for raising the importance of the effective implementation of Companies House reform. I cannot commit to a precise timetable today, but I can confirm that investment in new capabilities—I have already alluded to some—systems and people is already under way. That is funded by an additional £63 million allocated across the spending review period.

The noble Lord, Lord Fox, and my noble friend Lord Gold asked about reporting to Parliament on the implementation of the reforms. On Report in the other place, the Government brought forward an amendment that will require the Government to produce an annual report for Parliament until 2030 on the implementation and operation of Parts 1 to 3 of the Bill. This will ensure that Parliament is provided with reassurance on the further work that will be required after Royal Assent, such as the laying of secondary legislation or the developing of IT during the implementation period. Companies House is an executive agency of my noble friend the Minister’s department, and there are various governance mechanisms to hold the agency to account on these important reforms.

The noble Lord, Lord Fox, asked about Companies House identity verification. The Bill will introduce robust identity verification checks for people who manage, own and control companies and other registered entities. Again, I am going to refer to some remarks from the noble Lord, Lord Sikka.