Serious Fraud Office

Nick Thomas-Symonds Excerpts

Tuesday 7th February 2017 Westminster Hall

[Nick Thomas-Symonds (Torfaen) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Owen, for what I believe is the first time. I refer to my relevant entry in the register and the fact that I am a non-practising door tenant at Civitas Law in Cardiff. I pay great tribute to my right hon. Friend the Member for East Ham (Stephen Timms) for his measured, carefully phrased contribution. Whenever I listen to him, he always adds a great deal to the quality of the debate, and that has to be said about his contribution this morning. I thought he set out extremely well the emergence and creation of the Serious Fraud Office in the 1980s and the importance of the Roskill model, with investigatory and prosecuting functions under one roof together with all the other necessary skills, including forensic accountancy. He set out the SFO’s history extremely well: its emergence from the fraud trials committee and its creation under the Criminal Justice Act 1987.

The contribution from the right hon. and learned Member for Harborough (Sir Edward Garnier) was extraordinarily erudite, if I may say so. He set out extremely well the complexity of the cases, not simply in terms of their scope and scale but in terms of the law itself. We are not in a position where vicarious liability has been extended into the criminal corporate sphere in the UK. We are therefore left with the directing mind concept, which, as he pointed out, was originally devised in the mid-Victorian era, when companies were different from how they are today. Of course, there is the ongoing importance of the failure-to-prevent model under section 7 of the Bribery Act 2010.

The right hon. Member for Cities of London and Westminster (Mark Field) put his finger on one of the key issues in this debate: transparency of the funding model. It was put well by the right hon. and learned Member for Harborough when he talked about prospective and retrospective transparency. Although I am not for a moment suggesting there has been political interference from the Treasury, the truth is that the model lends itself to the appearance of a potential conflict of interest in the way it is set up. The hon. Member for East Renfrewshire (Kirsten Oswald) put it quite well when she talked about the public interest in these cases.

I give the Solicitor General great credit for recently providing a letter requesting additional funding. Transparent though that is, the content of the letter illustrates the complexity, because in fact the parliamentary timetable means that the SFO cannot expect to have access to any additional funding from the supplementary estimates until the third week in March, so there has to be a cash advance from the Contingencies Fund to keep cash flowing until then, which is not the clearest of situations to be able to explain to the public.

The hon. Member for Strangford (Jim Shannon) pointed out very well the importance of value for money, which is what I want to direct my remarks to. Clearly, everyone in this room is united by the desire to see good corporate conduct, and the Serious Fraud Office is an absolutely essential part of that. However, on the funding model, I would press the Solicitor General to look at the balance between core and blockbuster funding and whether we have that precisely right.

It is difficult at times to judge the performance of the Serious Fraud Office. I agree with the right hon. and learned Member for Harborough, in that we are always looking to improve. My right hon. Friend the Member for East Ham was described as a critical friend, and I would put myself in the same category. Looking at prosecution and conviction rates is not the easiest thing to do. In 2015-16, at one point it was down to about 31%. Objectively, that does not look like a good figure, but, looking at the director’s evidence to the Justice Committee, it came about because there were two defendants who ended up not being fit to stand trial, which severely affects the statistics, because we are dealing with such a small number of cases.

Similarly, although the confiscation rates are important, they do not show appreciation for the fact that not every case is as cash-rich as another might be, so even they are not necessarily an essential yardstick. I ask the Solicitor General to look more generally at that and at transparency, which is important, particularly in relation to the use of deferred prosecution agreements and when they are thought appropriate. Cases should be monitored because of the situation I have described of defendants being too ill to stand trial. That may not be within the control of the SFO, but where there can be careful monitoring of whether it is realistic that something will ever come to trial, that should be considered. Over time, we need to look not only at the number of acquittals, because that is not always the best indicator, but at whether, over a long period, there were cases falling at half-time in the criminal courts, which would be a cause for concern.

We could also look at international comparisons. America has a very different legal framework and different corporate culture, but we should still look around the world at how other agencies perform and at how economic crimes are tackled to see whether there can be improvements in that regard.

On the specific model, my right hon. Friend the Member for East Ham quoted the director of the Serious Fraud Office at the Justice Committee in October last year. He said:

“I would like to move to less dependence on blockbuster funding and more core funding.”

Indeed, the investigation by Her Majesty’s Crown Prosecution Service inspectorate concluded that it was not necessarily providing the best value for money. When the Solicitor General comes to address the matter, I am sure he will mention the issue of unused capacity if the budget was set too high for too long. At the same time, we have to acknowledge that we may be preventing the Serious Fraud Office from building future capability and capacity if, as my right hon. Friend the Member for East Ham pointed out, we have staff who build expertise in a certain area and are then, in essence, lost to the SFO. There is also the issue of large surges of temporary staff. Not only does that create a burden on human resources management, but temporary staff are often more expensive than permanent staff.

I appreciate the flexibility of the blockbuster funding model, but I am directing my remarks to the balance between core funding and the additional funding that is available. In some years, such as 2015-16, the blockbuster funding nearly matches the core funding at the start of the year—I think it is £33.8 million versus £28 million. That may be only one year, but it is illustrative of what can happen.

I have a series of questions to pose to the Solicitor General. Could a greater core element of funding increase the in-house capacity and be of benefit to the Serious Fraud Office? Can it enhance the depth and quality of expertise available in-house? Could it increase value for money? In addition, could it increase diversity? The Solicitor General may have more up-to-date figures, but as of 31 December 2015 the Serious Fraud Office was the only one of the Law Officers’ departments with far more men than women. All the others had more women than men, but not the Serious Fraud Office.

There is also the issue of what I have described as the Treasury veto. Is that system necessarily the best sustainable long way forward? Can the Solicitor General look at ways in which that might not be necessary? For example, could there be a contingency fund, with Law Officers having far more authority over additional funds? Is the Treasury necessarily needed to give that specific assurance or permission?

In conclusion, the Serious Fraud Office plays a vital part in good corporate governance across the United Kingdom. Everyone who has made a contribution to this debate today wants to see that, but of course we want to see the Serious Fraud Office, even with its achievements, improve. I look forward to hearing what the Solicitor General has to say about that.

[The Solicitor General (Robert Buckland)]

It is a pleasure to serve once again under your chairmanship, Mr Owen. I thank and pay tribute to the right hon. Member for East Ham (Stephen Timms) for securing this debate, which has been wide-ranging and well informed. Perhaps we should expect that when we have a former Chief Secretary to the Treasury in the room and one of my predecessors as Solicitor General, my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier). Indeed, my right hon. Friend the Member for Cities of London and Westminster (Mark Field) also has long expertise in and knowledge of combating financial crime.

The hon. Member for East Renfrewshire (Kirsten Oswald) raised a specific case. I am grateful to her for raising such a serious matter. She is right to say that from the layperson’s point of view, it can be—to borrow a phrase from my right hon. and learned Friend the Member for Harborough—a bit of an alphabet soup when it comes to the investigation of serious crime. I have not had notice of that particular issue. I make no criticism of the hon. Lady for that, but my advice would be to write directly, if she has not already, to the director of the SFO, copying in the Law Officers, so that we can have full and up-to-date knowledge of the serious case she raises.

I will do my best in the 10 minutes or so that I have to answer the questions posed by the right hon. Member for East Ham. I come straight to blockbuster funding. I have to confess that I am too young for glam rock, and perhaps that is a good thing. In my mind, the word “blockbuster” conjures up the golden age of Hollywood. I do not know whether that is an appropriate metaphor, because we are dealing with an independent prosecutorial authority that, for the best part of 30 years, has worked in a particularly specialised way, bringing together investigators and prosecutors from the outset. That is the Roskill model to which right hon. and hon. Members have referred. To be scrupulously fair to the right hon. Gentleman, he conceded—I think properly—the point that some element of blockbuster funding is desirable and, indeed, appropriate. When he was in the Treasury, I am sure the same rules were applied to the SFO. The question is not one of principle therefore, but of degree.

I come back to the age old question of balance and how to maintain that from year to year. The particular criterion that is now used by the Treasury was set out back in October 2012, when the then Chief Secretary to the Treasury came to an agreement with the director in relation to the funding of very large cases. Blockbuster funding is applied for when it is expected that costs to investigate and potentially prosecute a case will exceed 5% of the SFO’s core budget, which, at present, are cases likely to exceed £1.7 million. The ability to have recourse to funding for very large cases is a model that the Law Officers fully support. The SFO has to present a business case to the Treasury, but I reassure right hon. and hon. Members that it is not the Treasury’s function to perform the role of gatekeeper and assess the legal merits of a particular case. That is not its function at all. As the right hon. Member for East Ham will well know, its function is to make sure that the case is sound and that there is evidence on which to base that application; that the SFO has demonstrated that there is a real need for the money based on specific investigations or day-to-day needs. It is on that basis that we would see an advance being made.

The hon. Member for Torfaen (Nick Thomas-Symonds) rightly refers to a written ministerial statement that I am laying today to outline the position. I agree with him that it might seem rather inelegant, but, when it comes to the need to be flexible and to recognise the ever-changing demands on the SFO, I am afraid a degree of inelegance is a price worth paying for the practical effect of making sure that the SFO has fleetness of foot for dealing with a case load that varies dramatically year on year.

[Nick Thomas-Symonds]

I do not think there is any dispute on the principle and the flexibility. The dispute is about the balance. Does the Solicitor General feel that the balance has been right in recent years? Should it be adjusted in favour of core funding?

[The Solicitor General]

The hon. Gentleman is right to bring me back to balance. From year to year, it is very difficult to predict. There will be times—he cited a year—when the amount of blockbuster funding exceeds the core funding, but there are other years when that is not the case. That underlines more eloquently than I can the essential fluidity of the system.

In replying to the right hon. Member for East Ham, I would deal with the question in this way. It would be troubling if either the Law Officers’ Department—there was once a suggestion that our Department should be the gatekeeper—or the Treasury acted in some way as a second opinion, second-guessing the professional judgments of members of the SFO. That would be wrong and is not what happens when it comes to blockbuster funding. No application for blockbuster funding has ever met with a refusal. That is a very important point to hold on to when it comes to the Government’s understanding of the reputational importance that the fight against economic crime has not just for the Government, but for the United Kingdom generally.