Economic Crime and Corporate Transparency Bill

Nigel Mills Excerpts

Report stage
Tuesday 24th January 2023 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

We have wrestled with a similar issue on tax agents, where it has become clear that people are filing tax returns on behalf of their clients when they are neither competent nor perhaps have the right ethics to hold that power. However, it becomes hard to sort that out once they are existing in the system and filing returns. Does the right hon. Member agree that it would be much better to get only the right people authorised in the first place and that, by doing that up front, we would not have to come back afterwards to try to kick off people who have a heavy investment in carrying on?

[Dame Margaret Hodge]

The hon. Member makes a valid point, as he always does. That is a parallel argument for ensuring proper supervision and regulation and then checking and disciplining people in a professional capacity so that we get rid of the bad apples right across the piece. I was thinking about lawyers, because I think that only one case has been taken by the Solicitors Regulation Authority against one firm of solicitors on implementation of AML regulation. It is pathetic how little has been done in that context.

I turn briefly to the resourcing of the regulatory enforcement agencies and new clause 20. Our failure properly to resource these agencies is a disgrace. We should all share blame for where we are to date. In the USA, Biden sees economic crime as a security issue. As we now know from Russian activity in relation to the invasion of Ukraine, it is a security issue, and yet, if we look at our records, expenditure in the USA is going up by 31%, whereas here in the UK it has been cut by 4%. That is absolutely crazy. The Americans are much more aggressive and assertive in pursuing economic crime in both the civil and criminal courts. There is the Danske bank case, and there is the HSBC case that involved the Mexican drug cartel—the Minister will know about that. In America, in 2012, HSBC was fined $1.4 billion. In Britain, by 2021—nine years later—we managed a fine of only £64 million. Let us also look at the case of Standard Chartered—a UK bank. There again, the USA fined it $842 million. What we did in the UK? A fine of £102 million.

Let us look at the implementation of the Bribery Act 2010—legislation that we all think is working quite well—with a “failure to prevent” duty in it. In the UK, we have seen 99 criminal convictions since its introduction. In America, where there is a similar legislative framework, 236 criminal convictions—more than twice as many—have been completed.

Despite our timid approach to pursuing economic crime, and despite our pathetic response, it still pays to pursue it. In the five years between 2016 and 2021, the enforcement agencies brought in £3.9 billion to Treasury coffers. So it is not just a good thing for all those other arguments we have given; it also helps to support the public finances.

It is pointless passing laws and then failing to agree appropriate funding that would enable the Government to put those laws into practice. Our amendments aim to do just that, at—I stress this fact, which I think the hon. Member for West Worcestershire (Harriett Baldwin) mentioned—no cost to the taxpayer. We are doing it through raising the fees, which do not appear on the public sector borrowing requirement. We are not doing it by demanding any bit of public sector funding towards that cost.

It is absurdly low, whatever Members feel, to pay £12 to set up a company. To put that into context—this is a figure I used in Committee, but I will share it with the House—it costs £1,220 to get a visa for a skilled farm worker. We have just got the priorities completely, crazily wrong. If we look at the cost of incorporating a company across the world, even in those jurisdictions that are not the best, the British Virgin Islands charges £1,000 to set up a company and Jersey charges £425 to set up a company. In America, it varies from $570 to $1,400. Luxembourg—not my favourite jurisdiction—charges €1,100. It is only Greece and Slovenia who charge less than the UK.

We propose £100. That is a figure slightly imagined rather than grounded in fact, but it is the figure the Treasury Committee chose and the figure that the House of Lords’ Committee on fraud put forward, so we thought it was a better one. I do not accept that it is a barrier to any business, whether it is run by women or men. I just do not accept that argument at all. If you are setting up a business and you do not have £100, you have to question, whatever the nature of the business, the motivations for establishing it.

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[Dame Margaret Hodge]

Absolutely. The Minister always assures us that he will be on top of it, but he will not be there forever, much as he might like to be. We therefore have to embed these issues in legislation, otherwise we will never to the position where funding for the enforcement of economic crime will be a priority for a Government of any colour. That is why setting it here is really important. I have to say to the Minister that I just do not believe that the figures are not around. I think that by this stage in the cycle, he will have figures that demonstrate how much is required. If we have more duties, it may go up. That is not a bad thing, because if it goes up it means we will be more effective at policing the system, and therefore preventing and detecting.

[Nigel Mills]

rose—

[Kevin Hollinrake]

rose—

[Dame Margaret Hodge]

I will give way to the hon. Member for Amber Valley (Nigel Mills) and then I will give way to the Minister.

[Nigel Mills]

I am not sure I should pull rank on the Minister, but I am grateful to the right hon. Lady. Does she agree that it is not just the set-up fee we need to get at the right level, but the ongoing annual registration fee? Ensuring companies have the correct records on an ongoing basis is as important as having them on day one. There is probably a lot more money to be raised for Companies House with an annual fee, rather than a one-off at the start.

[Dame Margaret Hodge]

If that has been proposed, it has not been proposed in the Bill. I am not hostile to that; it is a perfectly good suggestion. At the moment, all we have is a fee which we are trying to tie to inflation so it does not get caught up in annual arguments over priorities in the Budget. However, if there is a proposal, it would have been nice to see it. If there is a proposal to fund it in a different way, that would be great.

Oral Answers to Questions

Nigel Mills Excerpts

Tuesday 17th January 2023 Commons Chamber

[Graham Stuart]

I thank the hon. Gentleman for this question and for the numerous parliamentary questions he has also tabled, highlighting the need to ensure that vulnerable customers, including those on prepayment meters, are treated properly by suppliers. Where customers are not treated properly, those suppliers are in breach of their licensing conditions from Ofgem, which, as he knows, has investigated that matter, has found the suppliers wanting and is taking compliance action now. I share his frustration, as does the Secretary of State, to ensure that the system not only does what it says on the tin, but delivers in practice for people, including his constituents and mine.

[Nigel Mills (Amber Valley) (Con)]

T9.   After the price of energy, the second most common complaint from local businesses in Amber Valley is that they cannot work out how the tariff that they are quoted bears any relation to the wholesale price and the cap. They then cannot work out why all the additional charges are now, for no obvious reason, a multiple of many times what they were a year ago. Can the Minister ask Ofgem to cut down on those practices so that businesses can see a fair and transparent price that cannot be altered halfway through the year?

[Graham Stuart]

It is important to differentiate between the domestic market, which is much more heavily regulated and for which, of course, we have the energy price cap, and the non-domestic market, which is much more complicated and for which we have not felt that a one-size-fits-all approach would work. But my hon. Friend is absolutely right to highlight issues where companies do not behave in the right way. That is why my right hon. Friend the Secretary of State and I are working with Ofgem to ensure that it fulfils its obligations. It may not be fully regulated in the same way, but it has licensed conditions and it needs to fulfil them.

Economic Crime: Planned Government Bill

Nigel Mills Excerpts

Wednesday 26th January 2022 Commons Chamber

[Paul Scully]

Very.

[Nigel Mills (Amber Valley) (Con)]

May I ask the Minister just how bad the level of economic crime has to be before the Government bring the Bill forward? Can he also set out to the House how well worked our legislation is? Many of the proposals have been promised for years and years. I think he will find that there is quite a lot of support across the House to bring those measures forward piecemeal. We still have three months of this Session, so why wait for the Queen? Let us bring some forward and get on with them.

Subsidy Control Bill

Nigel Mills Excerpts

3rd reading
Monday 13th December 2021 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

Does my hon. Friend agree that there is a general presumption that there should be more transparency about people receiving money effectively from the taxpayer? We could have a strange situation where if I am being paid £600 for grass cutting for my local council, the council would publish the invoice on its database, yet if I am receiving tens of thousands of pounds of taxpayers’ money, it would not be published. Surely, that cannot be the right balance.

[John Penrose]

That is absolutely right. Although I appreciate that there is a technical distinction between amounts of subsidy and amounts of general local authority spend, it is a very strong comparison. If it is worthwhile recording £500 spend on anything by a local council, why are subsidies so special and why should they be different? If anything, because of the scope for potential cronyism and other concerns, we should be tougher on subsidies than on other kinds of spending. Let us at least make the thresholds the same at £500, and then there can be no concern or worry about it.

The first collection of amendments is about the amount. The second collection of amendments, about which we have already heard a bit from the hon. Member for Aberdeen North, is about speed. As I have mentioned, in today’s digitising economy, publishing details of a subsidy potentially almost two years later, or even six months later, could be way too late. A company could have gone under if it had been faced by a successfully heavily subsidised competitor in its local area. Jobs will have been destroyed, wealth will have been destroyed, investment will have been forgone and, most importantly, the reputation of that local economy as a free, fair, sensible level-playing-field place to do business will have been damaged.

Clearly speed matters today, and it will matter more and more as our economy moves faster through digitisation. It makes no sense at all, therefore, to allow six months, and in some cases even longer, for those subsidies to be declared. When someone dishes out a subsidy, a letter has to be sent to the person receiving it, so in most cases they could put the subsidy on to the database at the same time—they could probably do it electronically if they had the right interface. I am suggesting that that could happen within a month; it could probably happen within days, but let us be generous and kind, and give people a bit of space.

I will expand on the point about tax-related subsidies. It is true, as we heard, that a tax-related subsidy can take almost two years to be recorded and to become transparently visible under the current proposals. I cannot see any reason why that should be the case, not just for tax-related subsidies but for anything else at all. In general, for most tax-related subsidies, we can do it immediately because we know the value with some certainty right up front. If I am giving someone a subsidy as a reduction on their business rates, I know how much the value of that subsidy is going to be on the day it comes out, so I can put that out on the subsidy database right there and right then. The same goes for most other kinds of tax-related subsidies, such as subsidies on VAT or whatever it may be.

Only for a very small number of tax-related subsidies would there be uncertainty for any length of time. As we have already heard, and I think this is absolutely right, it is perfectly possible to come up with a good estimate to begin with, and I do not think it works—it is not an adequate piece of logic—to turn around and say, “Well, because we don’t know precisely what this particular subsidy amount will be, we should not reveal it at all.” That is making the best the enemy of the good, and the trouble with that, and with saying that we are therefore not going to put anything out, is that we do not end up with the best or the good. We end up with something that is actually pretty dreadful, because we are keeping it secret for up to two years. How does that make sense when, as we have already heard, we can estimate it very accurately? In fact, in many cases these things are done in bands, and we can certainly say, at the very least, that it will be roughly in this or that band. Even if we get it wrong, we can still correct it later, and people know it is there, what it was and roughly how much it will have been. That will have allowed challenge, if necessary.

Subsidy Control Bill

Nigel Mills Excerpts

2nd reading
Wednesday 22nd September 2021 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate and to follow the hon. Member for Aberdeen South (Stephen Flynn). I echo my hon. Friend the Member for Weston-super-Mare (John Penrose) in broadly welcoming the Bill’s direction, and indeed its existence; I think that we need a robust subsidy control regime and I am glad that we are putting one in place.

I largely welcome the Government’s central decision to put parameters and rules in place and then trust public authorities to follow them, rather than having a very strict consent regime that would then become slow and cumbersome. I think that that is the right way to go, but it is intriguing to read the Bill and find a control regime that applies only if there is a

“subsidy…of interest or particular interest”,

neither of which terms is defined. At some point, a future Secretary of State could end up with quite a controlling regime by defining “particular interest” as any subsidy of more than half a million pounds, and then we would be back where we were.

It would be interesting to hear what the Minister thinks a “particular interest” might be and what the criteria might be for going into it, so that we know roughly where the line will be drawn, where the discretion for authorities is, and where we will start to expect mandatory or voluntary referral for advance clearance. I do not object to that process, because one of the key things for any subsidy regime is getting certainty so that when a business receives a subsidy, it knows that the rules have been followed, that it is entitled to it, and that there will not be a claim in six months’ or a year’s time that ends up with its having to repay the subsidy and being in worse distress than at the start. Having a regime with clearly drawn lines, so that everyone knows where they are and knows that once something is given it will stick, is hugely welcome. When we consider the Bill in more detail, it would be helpful to know where the line of discretion will be drawn.

The quid pro quo of a regime without intrusive up-front clearance is that we must have transparency on what is being paid, so that everyone knows that it is consistent with the rules and that some public authorities around the country are not misinterpreting them or, heaven forbid, deliberately doing things that they should not be doing. Clearly a risk in any subsidy regime is money being paid out in unlawful ways, so we want to be able to identify that situation pretty quickly.

[Angus Brendan MacNeil]

The hon. Gentleman is making some excellent points. I think that a Bill’s Second Reading is the time to test the arguments. He mentioned transparency, and a colleague of his debated a similar point with the SNP Front-Bench spokesperson, my hon. Friend the Member for Aberdeen South (Stephen Flynn). The crux of it comes back to the state aid point. In the European Union, there were 27 or 28 states and a very defined gamekeeper among all those poachers, namely the European Commission. The concern that I think SNP Members share is who the gamekeeper is and who the poachers are. Are the UK Government playing both gamekeeper and poacher in regards to subsidy? I am testing the arguments in this debate, but over time the Government will need to address the point and be very clear that they are not taking both sides, as poacher and gamekeeper.

[Nigel Mills]

I think that I understand the hon. Gentleman’s point. One attraction that I think the EU system had for the Treasury and occasionally for some politicians was that they could say, “We’d love to give you a grant to save your business, but tragically we’re not allowed to under EU rules,” when actually they did not want to because they knew it was not the right thing to do, so it was handy to have somebody else to blame. I think the Bill sets out that the CMA is the body that will or will not give clearance. It will not be Ministers doing that, so if the hon. Member wants a gamekeeper in this situation, I think it is the CMA.

[Angus Brendan MacNeil]

But is the CMA not a body of Westminster construction, as opposed to being a body of the Union?

[Angus Brendan MacNeil]

Well, there are many Parliaments in this United Kingdom at the moment, and we know that each and every one should have the same voice. If this is the poacher and gamekeeper Parliament, surely that is a problem for Northern Ireland, Scotland and Wales—that is the argument that I would postulate.

[Nigel Mills]

I think it is fair enough for a UK single market to have a single regulator that decides a subsidy regime to ensure that the application of the rules is consistent across the whole of that single market. The hon. Gentleman wants to go back into the EU single market, which has a single regulator which decides things across the whole of that its single market. He does not seem to accept that the EU single market should have the same arrangement.

[John Penrose]

May I strengthen my hon. Friend’s point by saying that whatever people’s views of the CMA may be, it is pretty well respected as being a robustly politically independent organisation, no matter who is in government?

[Nigel Mills]

I am grateful to my hon. Friend, but I think we should move on from this point before we lengthen the debate into something that we do not want.

As I was saying, a transparency regime enabling us to see promptly what is being paid to whom and for what reason, and what the expected outcomes are, is of key importance. I agree with what my hon. Friend was saying earlier: a regime in which we have to wait six months for a disclosure, and then only of amounts over half a million pounds, has the wrong balance. I think that is where we end up with concern over subsidies, and scandals brewing, and then a lurch back towards more of a clearance regime. I urge the Government to rethink those points.

We are not expecting public authorities to be handing out huge numbers of subsidies after half an hour’s consideration. The rules that we are introducing are fairly strict. There will have to be some careful consideration of any proposed subsidies to ensure that those rules have been met, and there are processes for checking that the person who is being paid has not already exceeded a certain threshold. It is not a half-hour, quick and dirty process; there is plenty of time to gather the information that is needed to declare the subsidy, which can then, pretty promptly, be put on to what I suspect will be a simple database form that the CMA, or whoever, will put in place. I do not think it is an intrusive burden to have to say, “Here is what we gave to whom and why.”

I should add that I would like it to be possible to see the identity of the beneficial owner of the entity that has received the subsidy on the database, so that we can see who is really benefiting, rather than seeing some obscure, lower-down subsidiary name, which would make it not very easy to trace by going through the whole system who has been getting what from different public authorities.

Let me suggest as a comparison the furlough scheme, which is essentially a subsidy being given to businesses to pay their employees’ wages. We have published the names, in a range of bands starting with £1 to £10,000, of employers who have received that subsidy during the pandemic. I think that if we can publicise the details of employers who have received up to £10,000, we can justify publishing the name of anyone who has received a subsidy that has gone through a due process, down to a much lower level than £500,000, without its being unduly damaging to their commercial confidential interests. I think that someone involved in the process of asking for money from the taxpayer should accept and welcome that transparency. There should be nothing to be ashamed of, nothing to hide: if that money is needed for a good purpose, there is no reason why we should not know about it. I urge the Government to make some changes in that regard.

I was intrigued by the remarks about the way in which taxation policy can elide with the subsidy regime. There are quite a few cut-outs for taxation situations which I guess make sense, but I think there could be a role here. If we are giving individual taxpayers very generous tax deals, letting them off liabilities that they may owe for reasons that may not necessarily be entirely technically robust—as people have feared before—I see no reason why those should not count as subsidies and therefore be published through this regime, in order to get around that horrible situation in which we know that deals are being done but we do not know who the beneficiaries are. I think that it would be an interesting legal challenge to establish whether they are caught by these rules.

My final remark—I think—concerns the exclusion of subsidies for purposes of national security. I have absolutely no objection in principle to our being unable to publish everything that is spent in relation to national security, but those words—

“for the purpose of safeguarding national security”—

constitute a very broad definition. We have hit a problem with the freedom of information rules in this regard. Some authorities have an incredibly broad interpretation of what that means. I think it was the West Yorkshire fire and rescue service that would not publish a response to an FOI request about the vehicles it had bought in case someone could somehow clone them and thus get into its premises. I hope that the Government are not expecting to have such a ridiculously broad definition of national security that we cannot in any circumstances see the subsidy given to any defence company, or police authority, or fire and rescue authority. Given that energy security is probably a national security issue, presumably no energy subsidy could be published. I suspect that some creative people around the country could find all manner of ways of making the broad definition “for the purposes of national security” exempt almost anything from these rules. I hope that we can be clear in Committee about the sort of things we think we should not publish, and about where the line should be drawn as to what we can see. If we have too many exemptions from these rules, we will end up weakening confidence in the system. We could end up with scandals that could lurch us away from the fast-moving, flexible system that the Government want in order to get aid where it is needed fast. We could end up back in a cumbersome, slow and bureaucratic system to try to avoid the scandals that we could see from a lack of transparency.

Oral Answers to Questions

Nigel Mills Excerpts

Tuesday 15th December 2020 Commons Chamber

[Alok Sharma]

I will refrain from coming back on that jibe. As a Government, we have been working incredibly hard to support businesses. I know that it is very difficult. The right hon. Gentleman talks about the end of the transition period. Of course, there are a lot of changes that businesses can already put in place and, as he knows, we are communicating with businesses to ensure that that happens. I think that businesses do want us to continue talking to the European Union, and that is precisely what we are doing.

[Nigel Mills (Amber Valley) (Con) [V]]

Last week Swanwick Hayes conference centre in my constituency was forced to make redundancies, having had practically no turnover since March. Is there more that we can do to support the events industry, which may face many more months before it can start earning anything like its normal levels?

[Alok Sharma]

As my hon. Friend knows, we are providing support. It is difficult for a lot of businesses right now. The furlough scheme has been extended until the end of March, and I know that my right hon. Friend the Secretary of State for Digital, Culture, Media and Sport is working closely with the sector, as is the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully).

Oral Answers to Questions

Nigel Mills Excerpts

Monday 4th May 2020 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

What steps his Department is taking with UK manufacturers to increase the supply of personal protective equipment.

[The Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office (Michael Gove)]

Every NHS and careworker must get the personal protective equipment they need. That is why we have appointed Lord Deighton to lead a national effort to boost PPE production and to support the scaling up of engineering efforts for small companies capable of contributing supplies.

--- Later in debate ---

[Michael Gove]

Again, I am grateful to my hon. Friend for the efforts that he and his constituents are making. It is the case that specifications of the type of personal protective equipment required in a health and social care setting have been shared by the NHS and by Public Health England, but it is also the case that companies are in a conversation with the Department of Health and Social Care about what more they might be able to do to augment those who are not necessarily operating in those settings.

[Nigel Mills]

I thank the businesses, and also John Flamsteed Community School in Amber Valley, who have been making PPE for healthcare providers. Does the Minister agree that we are going to need UK manufacturers to keep making this equipment for the long term, and will he therefore be able to relax procurement rules to allow these people to have some longer-term contracts so that they can get maximum efficiency in producing this equipment?

[Michael Gove]

My hon. Friend makes a very important point. We do need to show flexibility in the way in which procurement operates, particularly in order to ensure that we have domestic production in the future upon which we can rely. My right hon. Friend Lord Deighton is leading the work in this area.

Draft Recognition of Professional Qualifications (Amendment Etc.) (EU Exit) Regulations 2018

Nigel Mills Excerpts

Monday 4th February 2019 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

I beg to move,

That the Committee has considered the draft Recognition of Professional Qualifications (Amendment etc.) (EU Exit) Regulations 2018.

Before your elevation, Sir Gary, I used to say that it was an honour to serve under your chairmanship; now, I can say that it is an extreme honour.

The purpose of the regulations is to ensure that, in the event of the UK exiting the European Union without a withdrawal agreement, the system for the recognition of European economic area and Swiss professional qualifications in the UK, for the purpose of access to regulated professions, continues to function effectively, and that existing recognition decisions for EEA and Swiss professionals remain valid.

The effect is to create a system that retains the best aspects of the current system while providing regulators with more freedom to rigorously check the standard of qualifications prior to granting access to a profession. The regulations will provide certainty to individuals with recognised EU professional qualifications already working in the UK, and the businesses and public sector organisations employing them. For example, that includes approximately 32,000 secondary school teachers who have had their qualification recognised in the UK in the 10 years from 2008 to the end of 2017. Furthermore, this statutory instrument will ensure that the future supply of professionals into the UK in certain key sectors can be maintained. It makes changes to existing regulations using the powers conferred by section 8 of the European Union (Withdrawal) Act 2018.

Before I turn to the detail, I shall provide hon. Members with some relevant background on the 2005 EU directive, which sets out a reciprocal framework of rules for the recognition of professional qualifications across borders. It applies to EU member states, EEA and European Free Trade Association states, and Switzerland by virtue of being annexed to the EEA agreement and Swiss free movement of persons agreement.

The directive provides several routes for recognition of qualifications, including automatic and general systems for the purposes of establishment, and a mechanism for those who want to work on a temporary or occasional basis. The directive covers a large number and wide range of regulated professions, including teachers, lawyers, engineers, underwriters, analytical chemists and a plethora of others. It does not include, I believe, Members of Parliament, as that is not a recognised professional status—perfectly understandably, I might add.

The directive is implemented into UK law by a number of pieces of legislation including the European Union (Recognition of Professional Qualifications) Regulations 2015, the earlier European Communities (Recognition of Professional Qualifications) Regulations 2007 in respect of Switzerland, and a number of pieces of sector-specific legislation for certain professions.

Following our withdrawal from the EU, the directive will no longer apply to the UK and the domestic legislation implementing it would not operate effectively because it would place obligations on UK regulators that they would be unable to fulfil outside the EU, for example, the obligation on regulators under the directive to use the internal market information system—IMI—to process applications and exchange information. As the IMI is a European Commission service, the UK will no longer have access to it after leaving the EU and will not be able to process applications, even unilaterally, using the service. The regulations are therefore necessary to ensure that the domestic legislation underpinning the recognition system operates properly.

Let me set out the effect of the draft regulations in more detail. First, they will protect recognition decisions made before EU exit and will allow applications for recognition made before exit to be concluded after exit under the pre-exit rules, as far as possible. Secondly, they will enable professionals who have started offering services on a temporary or occasional basis before EU exit to complete this service provision. Thirdly, they will enable qualifications to be recognised in the future. The changes that we are making will allow us to retain a version of the general system for recognition, under which UK regulators will be required to recognise EEA and Swiss qualifications of an equivalent standard to UK qualifications in scope, content and level. They will provide certainty to professionals who are already working and living here and will ensure continuity and stability for UK businesses and public services.

Some things will change under the draft regulations, however. First, we are amending the scope of the existing regulations so that the basis of recognition will be determined not by the nationality of the applicant but by where the qualification was obtained, since it will no longer be appropriate to give preferential treatment to EEA and Swiss nationals once the UK is no longer part of the European Union. Secondly, our regulators will not be obliged to offer compensation measures and partial access to professions in circumstances in which EEA and Swiss qualifications are not deemed equivalent to UK qualifications. Thirdly, we are removing the obligation for UK regulators to offer EEA and Swiss professionals a mechanism for providing services on a temporary or occasional basis.

Finally, farriers and certain healthcare professionals, such as physiotherapists, will no longer be in the scope of the amended 2015 regulations; they will be covered instead by related sector-specific legislation. The draft regulations and the amended 2015 regulations do not apply to nurses, midwives, doctors, dentists, pharmacists, architects and veterinary surgeons, who are entitled to automatic recognition on the basis that their qualification meets the EU’s minimum training conditions. The system for the recognition of qualifications in those professions is currently governed by legislation for which other Departments are responsible, and the relevant Ministers are laying their own no-deal statutory instruments to amend legislation accordingly. The European Qualifications (Health and Social Care Professions) (Amendment etc.) (EU Exit) Regulations 2018 were considered in a Delegated Legislation Committee last week, for example.

[Nigel Mills (Amber Valley) (Con)]

I should declare that I am a qualified chartered accountant and my wife is a pharmacist, so we may both be within the regulated professions.

How reciprocal a process does the Minister envisage? He mentioned that in some professions the UK regulator will have to accept that an overseas qualification is equivalent to a UK qualification. Is it possible that a perverse situation could arise in which we think a Cypriot qualification is okay for practising in the UK, but Cyprus does not agree that a UK qualification is sufficient for practising in Cyprus? Will he therefore encourage regulators to look at whether it works both ways? If we do not get reciprocal access to other markets, perhaps we should not be quite so generous in recognising their qualifications.

[The Chair]

If the Minister would prefer to reserve his answers to hon. Members’ questions until after the Opposition spokesperson’s speech, he is free to do so, but it is entirely up to him.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

I have a few questions for the Minister on some of the practicalities. I welcome the statutory instrument and think it eminently sensible, but even those of us who have more concerns about free movement than the hon. Member for Central Ayrshire accept that we need skilled people to come here, and if they can meet whatever immigration rules we put in place we should enable that and not try to make it harder. We want it to be reciprocal, so that people who have trained here and have good qualifications have the chance to work abroad if that is their desire.

My first question is: if we end up with a clean Brexit at the end of March—I know the Minister is not totally keen on that as an idea—what happens to some of those qualifications and their recognition at that point? Do we expect regulators to have gone through their assessment and published which EEA qualifications meet the requirements in the UK by 29 March, or will there be a period during which we can assume that whatever has been happening until that point will continue, so that if someone wants to come here on 30 March but has not already made an application their qualification will still be recognised, at least for a run-on period? In previous Delegated Legislation Committees we have been told that we will effectively honour the two-year transition period. Is that the case here as well?

My second questions is: what happens when we have different bodies doing the regulatory function in different parts of the UK? I mentioned that I am a chartered accountant. The Institute of Chartered Accountants in England and Wales does England and Wales and there is a Scottish institute that does Scotland. Might we get a perverse position in which we would recognise a Maltese accounting qualification in Scotland and not in England and Wales? Could someone go and work in Edinburgh but not come to work in London? That does not seem to be a sensible situation. Will there be a requirement for the regulators to work together and have a joint approach?

My third question is, are there separate provisions for Irish qualifications? Irish nationals will still have much more generous rights to come and work in the UK, without a visa or permission, so will we have a more blanket recognition of Irish qualifications, which are generally quite similar to ours, or will they be treated in the same way as any other EEA qualification?

Finally, are we still allowed to impose language requirements for certain sensitive professions? I know we are not dealing with medical ones here. Regulation 41 seems to suggest that, so can the Minister confirm that if someone is adequately qualified but does not have adequate English we perhaps do not have to let them come here and start working straightaway?

Draft Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) regulations 2018

Nigel Mills Excerpts

Thursday 10th January 2019 General Committees

[Nigel Mills (Amber Valley) (Con)]

I have just a few comments and questions about what we are doing here. To start with a slightly trivial one, the exemptions from having a statutory audit are set by EU regulation, and are based on thresholds for turnover and balance sheet size that are set in euros and then, every so often, are converted into sterling. I think the current ones we use set a turnover size of £10.2 million and a balance sheet size of £5.1 million. As we implement these regulations, would it not make sense to pick a nice round turnover and balance sheet number that can stay the same until we choose to change it, rather than having a slightly odd un-round number because of a conversion from euros?

I have two more substantive questions. First, while we obviously have some important ongoing discussions about how we reform our audit regulations and industry to make sure they are meeting the needs of the various stakeholders, our audit industry and professional services are well regarded around the world for the high quality of their work, their training, their standards and their regulation. They form quite an important export market. Can the Minister assure us that with all the stuff that we are carrying out on mutual recognition, we are aware that this is quite an important export for us? Ensuring that our UK businesses and our UK trading staff will continue to work in Europe and around the world is equally as important as ensuring that EU or EEA firms and others can work in the UK.

My second point is on what happens in the unlikely event of a no-deal exit at the end of March. There are many companies listed on our stock exchanges that are not based here and are therefore audited by non-UK audit firms. It is okay to have the powers to authorise non-UK firms to carry out these audits, but are we sure that in the event that an audit needs signing off and documents need filing in April, or pretty quickly after we leave, audit firms that are not UK-based will have been authorised so that those audited accounts are valid for listing purposes? Will we effectively just grandfather those approvals until the end of 2020, regardless of there being a deal or not, or will the FRC have to authorise a whole load of audit firms very quickly to ensure that we can continue to have firms meeting their listing requirements?

There have been various concerns about the ability of the FRC and its resourcing to meet all the very demanding roles that it already has. Is the Minister sure that it can at some speed meet these new demanding requirements that we have? Just for safety, I should declare that I am still a member of the Institute of Chartered Accountants in England and Wales. I used to work for audit firms, and I think I have a very small pension from one somewhere.

[Kelly Tolhurst]

I will try to answer as many of the questions that have been put by hon. Members as I can. The hon. Member for Sefton Central referred to the people behind me as thinking that I was not speaking the truth. I want to clarify my point: as a member of this Government, I am committed to getting to a position where the UK has a deal with the European Union. However, any responsible Government, as we are, would be preparing for a no-deal scenario. The regulations before us will put us in a position where UK business confidence remains. We have confidence in the UK markets and are acting responsibly to ensure that in the event of no deal, we are in a situation where the law works correctly.

I would like to go back to the point made by my right hon. Friend the Member for Welwyn Hatfield. Should a deal be agreed, we might not see many changes. We are in this particular agreement, which is retained EU law, so EU laws are being introduced in the UK. It sets out how we will deal with certain audit provisions. Whether there is a deal or not, further changes will come through, because we will take decisions on how to work things and lay out further guidance on how we will assess qualifications and how we will assess the competency of authorities in the future. Fundamentally, this applies whether there is a deal or not, but obviously it focuses on a no-deal scenario.

As the hon. Member for Sefton Central will know, the transitional agreement is under this SI. For example, up to 2020, under the SI, there is confidence that we will be accepting the relevant professional qualifications and competent authorities within EEA states for the transitional period, so as not to be at a cliff edge.

The hon. Gentleman asked whether the FRC is confident that it will be able to establish mutual agreements, and whether it is in a position to do so. Currently it carries out—fundamentally speaking—oversight with respect to the regulation as it stands. I am therefore confident that it will be in a position to deal with further work that is necessary in the event of no deal—and in a situation where there is a deal, although we are talking about a no-deal scenario at the moment.

I want to touch on a question from my hon. Friend the Member for Amber Valley about recognition of qualifications, and authorisations. Under the SI—and the FRC is agreed—in the case of businesses whose financial years fall after 29 March there will be a requirement for auditors to register prior to the audit being signed. Effectively, there could be up to an extra year for auditors to do that, after 29 March. That is exactly so that it can be managed. There may be benefits for some auditors, because there is potential for them to say, as a selling point, they have done it ahead of time. Obviously that will not be before 29 March, and they will have until the time when they need to sign the audit to register. I hope that that gives my hon. Friend some confidence.

[Nigel Mills]

I think I understand what the Minister is trying to say, but just to confirm it, let us say a firm had the year end of 28 February 2019 and had to submit audited financial statements to a listing authority by some such time as the end of April or early May, and we had a no-deal Brexit. The auditors could not register for that before 29 March; but would they have to register before they could submit those accounts—so that they would have to do it very quickly in early April—or would they be grandfathered, in the event of no deal?

[Kelly Tolhurst]

My hon. Friend has outlined a situation where the company’s end of year would fall before the withdrawal date. As things stand the new registry would be only for instances where the financial year started after 29 March. It depends on where the years fall. In the case he gave, effectively, the auditors would not have to do it.

As to the number of companies affected, there are currently 291 EEA companies registered on the UK markets, and approximately 240 UK companies that have registered securities on EEA markets. The regulations affect a small number of organisations and in some cases a few other European countries. We are talking about a small number of companies. To give the Committee an idea of the scale, there are 1,000 listed companies in the UK. We have 3.8 million companies registered in the UK, 98.5% of which are small businesses, 20,000 large businesses and 35,000 medium-sized businesses, so the direct impact will affect a small number of companies and audit firms that are registered within the EEA.

On the point about the Secretary of State taking those powers regarding approval of adequacy and competence that have lain with the European Commission under the EU regulation, there would be full parliamentary scrutiny, as there is, with the Secretary of State having that power. As the hon. Member for Sefton Central knows, all Secretaries of State face full parliamentary scrutiny, and I would argue that our Secretary of State having those powers represents far more scrutiny than the European Commission under the current position. It is a positive move for the Secretary of State to have those powers, and it is right that they are held at parliamentary level rather than being delegated, at this particular time, to an arm’s-length body such as the FRC.

Regarding what the hon. Gentleman says about my confidence in the FRC and its ability, this particular regulation deals with a no-deal scenario, but as he and the Committee know, Sir John Kingman’s report into the FRC was published at the end of last year. We also have the work that has been done in the audit market regarding competitions. Whether we have a no-deal or a deal scenario, those pieces of work on what we do in this area to ensure that our markets are working effectively and that our public bodies are acting effectively will be ongoing. If there were to be any changes in the future, this SI would be taken into account. That is what Governments do. In a no-deal situation we would be in a position to change whatever we might want to in this area. I do have confidence in the FRC and in how we would manage that, and that the FRC would be in a position to deliver what is required in both a no-deal and a deal situation.

Regarding bilateral agreements, the hon. Gentleman mentioned the position with Ireland and asked whether we had had those discussions with other European states. Currently, 200 of the around 240 companies affected operate in the Irish market, so Ireland is the main EU member state that we will need to work more closely with in the future. Our officials are in discussions with our European neighbours all the time across a number of topics in this area, and more of that will go on as we head toward European Union exit date and after 29 March, whether or not we are in a deal situation and working toward a future relationship. We are committed to ensuring that we are able to deliver those agreements with our neighbours in the future.

It is paramount that, as the UK exits the EU, we maintain the integrity of the UK system for audit regulatory oversight. These regulations will help to facilitate that by ensuring that oversight of the audit profession continues to work effectively following our withdrawal from the EU. The regulations do not introduce a change in policy. As I explained, the fundamental elements of the current statutory audit legislation will remain the same after exit. The regulations before the Committee make only the amendments that are necessary to ensure that audit legislation remains operable in the UK following our withdrawal from the EU. The measures in these regulations will ensure that, and mean that the UK system for regulatory oversight will remain coherent and understandable for the businesses that rely on it. I therefore commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018.

Draft Takeovers (Amendment) (EU Exit) Regulations 2019

Nigel Mills Excerpts

Tuesday 11th December 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft Takeovers (Amendment) (EU Exit) Regulations 2019.

It is a pleasure to serve under your chairmanship, Mr Austin. The regulations will be made under powers in the European Union (Withdrawal) Act 2018. They amend part 28 of the Companies Act 2006, so that the United Kingdom’s corporate takeovers regime can operate independently in the event that the UK exits from the EU without a withdrawal agreement.

If the UK leaves the EU without an agreement in place, the instrument will provide legal clarity and certainty. The takeovers regime seeks to ensure that shareholders receive fair and equal treatment when the company in which they have invested is subject to a takeover bid. The effective operation of the takeovers regime is vital to business confidence.

Part 28 of the 2006 Act transposes the takeover directive 2004/25/EC into UK law. The directive was intended to harmonise certain aspects of takeover supervision across the European economic area. It created expectations of reasonable behaviour to which company shareholders could hold bidders. It also created a system of co-operation, in which member states’ regulators shared jurisdiction over a small number of cross-border takeover cases.

The 2006 Act requires the Takeover Panel to make rules to give effect to the directive in the UK. The panel has done so in the City code on takeovers and mergers. The regulations preserve the statutory underpinning of the code, and make only minimal changes to the way in which the UK regime functions. In developing the regulations, we worked closely with the UK’s supervisory authority, the Takeover Panel. The panel has published a consultation document on the changes that it will need to make the takeover code reflect the regulations.

The regulations make only three substantive changes to the way in which the UK takeovers regime functions. The rest of the regulations import and correct provisions from the directive that are necessary for the independent operation of the UK regime, but do not change how the domestic regime operates.

First, the EEA takeovers regime includes a system of shared jurisdiction for company headquarters that are listed in different countries. The supervision of a company captured by the shared jurisdiction system is usually done by two regulatory authorities: one in the country where the company has its registered office, and the other in the country where the company is listed. The shared jurisdiction regime ensures that there is clarity about which national takeover rules apply in such cases.

The shared jurisdiction regime works on a reciprocal basis. Since the UK will be outside that framework, the reciprocal arrangements will no longer apply after EU exit. The regulation will remove shared jurisdiction from the UK takeovers regime. The Act requires the panel to supervise UK companies with securities admitted to trading on a UK-regulated market. The panel may also choose to supervise companies that do not fall within that definition. The panel is currently consulting on the application of the takeover code in the light of the loss of the shared jurisdiction regime.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister clarify what would happen if a takeover started before exit day, but had not been completed, and there was a co-operation arrangement, with two jurisdictions reviewing the proposed takeover? Presumably, after exit day, only one would be allowed to review it. Would a whole new process have to be started, or would one authority effectively just give up its scrutiny of the takeover?

[Kelly Tolhurst]

I thank my hon. Friend for his intervention; he raises a very good point. Although the statutory instrument will remove the shared jurisdiction, part 28 of the 2006 Act still places a duty on the UK to co-operate with any country or territory on mergers. While the SI will remove the reference to the EEA, we will not remove the continued co-operation of the UK regime with other countries and territories.

The panel is currently consulting on the application of the takeover code in the light of the loss of the shared jurisdiction regime. It proposes to supervise takeovers concerning only companies that meet the residency criteria set out in the takeover code.

The second feature of the draft regulations relates to the duty to co-operate. Section 950 of the Companies Act places a general duty on the Takeover Panel to co-operate with its counterparts and certain other regulatory agencies in any country or territory outside the UK. It also imposes a specific duty to co-operate with supervisory authorities in the EEA, which is derived from the takeovers directive 2004. After our exit, EEA member states will no longer be bound to co-operate with the UK under the directive. The draft regulations will therefore remove the specific obligation to co-operate with EEA supervisory authorities, as it will no longer be reciprocal. However, the Takeover Panel will still be required to co-operate with the authorities of EEA member states under the broader duty to co-operate with any international supervisory authority with an equivalent role. This change will not, in practice, constrain the panel’s ability to co-operate.

The final feature of the draft regulation relates to restrictions on the disclosure of confidential information. Section 948 of the Companies Act restricts the disclosure of confidential information obtained by the Takeover Panel during its duties and sets the conditions under which information can be shared. It applies to both the panel and the organisations with which information is shared. Breaching the section 948 restriction is a criminal offence.

The Companies Act provides an exemption from the section 948 restriction for EEA public bodies using confidential information disclosed by the panel for the purpose of pursuing an EU obligation. These EEA public bodies are bound by their own national laws and by EU law to prevent the inappropriate disclosure of information passed to them by UK authorities. After our EU exit, these reciprocal protections will no longer apply to the UK. The draft regulation will remove the specific exemption from the section 948 offence for EEA public bodies and ensure that there is a sanction to deter inappropriate onward disclosure of sensitive information.