Economic Crime and Corporate Transparency Bill

Debate between Richard Fuller and Alison Thewliss

Consideration of Lords amendments
Monday 4th September 2023 Commons Chamber

[Alison Thewliss]

I thank the Minister for that point, but the number of incorporations is massive and the resource to Companies House is not keeping pace to check on each and every company that is going. I direct him to the tweet from Graham Barrow highlighting some of these issues, because there are so many companies and we need as many eyes as possible on this data. Companies House does not have the resource to do this and neither does law enforcement. Allowing those researchers who have the time, expertise and patience to tease out this data to do this and do it well is important. They must be allowed to do this.

Let me turn to the amendment on failure to prevent fraud, from Lord Garnier. I recall the Minister being keen on such an amendment beforehand and there is an awful lot more the Government could be doing on this. As other Members have said, if this can be done for bribery and tax evasion, there is no reason why doing it for fraud should present an additional burden. As the Minister himself pointed out, 99% of businesses are not in scope under what is being proposed here—again, that is ludicrous.

There is also an effect on small and medium-sized businesses to consider, because they also stand to lose money through fraud. They stand to be targeted by those who want to commit this fraud. So those businesses that are perhaps more exposed—those local businesses that do not have the power to stand up to those who would bully them to engage in such activity—are put at risk and should be better protected by this legislation, were they to be kept in line with it.

[Richard Fuller]

The hon. Lady has made a point, which the shadow spokesperson also made, about harms being done to small businesses by businesses that are committing fraud against them. But there is already a law against committing fraud, so why does the additional law about not taking any actions to prevent fraud help in those circumstances?

[Alison Thewliss]

Because such a law has helped in the case of the Health and Safety Executive. The Minister used to talk about how when the health and safety legislation came in, the number of deaths at work dropped dramatically, because the measure was a preventive one, whereby one had to prevent people from being injured and killed at work. This works the same way for bribery and tax evasion, so why would it not also work for fraud?

[Richard Fuller]

rose—

[Alison Thewliss]

I will not give way, as I am conscious of the amount of time for this debate. As I was saying, it is important that we recognise the significance of this to small businesses—this is there to help them, not hinder them.

I move on to the cost protection for civil recovery cases. Again, this is incredibly important, because the balance we have is not right. Those who can pay—the enablers, the lawyers, the sharp accountants—have a huge advantage over law enforcement agencies, which do not have significant resource and expertise to do this. As Bill Browder said when he gave evidence to the Bill Committee in October 2022:

“What has to happen here—this is plain as day—is that you have to get rid of this adverse costs issue in a civil case brought by the Government… If you make that point, it will change the whole dynamic—the whole risk-reward—for these people.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 66, Q140.]

On adverse costs, the Government are saying that they are sympathetic to this, and they are going to consult and do some other things later on, but by not putting this measure in this Bill, they are allowing this uneven playing field to continue and be perpetuated. Because the law enforcement agencies know that it is going to cost them an absolute fortune, which they do not have, these cases go unpunished and those who perpetrate all of this money laundering, with all this money washing through the UK financial system, will see this continue, because people can afford to get away with it. The Government should be deeply concerned about that.

Let me recommend to the Minister Bill Browder’s latest book—if he has not already read it. It exposes the capture of all of these enablers, from lawyers to everybody else; we need to be looking to close the door on that in this Bill. The Government have an important opportunity here. This important situation does not come along very often and we do not know when we will pass this way again. We have a Bill in front of us. The Government could go for accuracy and for transparency in the register. They could close the door, fix the loopholes and do all of these things that they must do. They could accept these Lords amendments tonight. They could fix this Bill and do it right, and we would not have to come back here to legislate again.

[Sir Robert Buckland]

It is a pleasure to follow the hon. Member for Glasgow Central (Alison Thewliss). She said that we might not pass this way again. Indeed, this has been a very long way for me and for many others in this House who have been making the case for a failure to prevent offence for many years, both in office and as Back Benchers. I am delighted that the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) is in his place, because he is a true believer as well.

I hoped that tonight could have been a Simeon moment—I could have sung my Nunc Dimittis and departed in peace—but no, I am afraid that, as a result of the welcome but somewhat limited amendments made by the Government in the Lords, I am reduced to the role of Moses; I can see the promised land but I am not, it seems, according to the Government, destined to get there. Therefore my exhortation to my good friend the Minister is, “You can be Joshua. You can knock the walls of Jericho down. You can go the extra mile and finish the job.”

We have heard a lot about this failure to prevent offence, and the word “fraud” has been bandied about as if we were dealing with fraud in general. May I, perhaps uncharacteristically for some hon. Members, draw the attention of the House to the Lords amendments themselves, because they are what we are considering?

I, like you, Madam Deputy Speaker, am a stickler for ensuring that we stick to the point, so I turn to page 46 of the bundle and, in particular, amendment 151, which is the proposed new clause “Failure to prevent fraud”. It ain’t any old fraud; it is fraud intending to benefit “the relevant body”. That is not a fraud in general, about loss to the taxpayer or the company—in fact, there is a specific defence on that basis that says if the fraud causes loss to the company, it is not a criminal offence—but a very targeted type of fraud that is about benefit to the company.

As a lawyer, Madam Deputy Speaker, you know that we have something called the criminal standard of proof. This is not any old regulatory device; this is a criminal offence. The threshold and standards that have to be applied by the police, the investigating authorities and the prosecutors are high. As my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright) said, the defence set out in clause 4, about reasonable prevention proceedings, is crucial. When I hear people talk about regulatory burden, I have to say, in all candour, that that is a misplaced understanding of what this rather limited offence will achieve.

Cost of Living: Support for Young People

Debate between Richard Fuller and Alison Thewliss

Tuesday 18th October 2022 Westminster Hall

[Richard Fuller]

I must finish up, if I may. They will continue to do so from now until April next year. The Government have also announced £37 billion of targeted support for the cost of living this financial year.

Many young people will have benefited as their wages got a boost from the national minimum wage increase. As a result of our changes to the national minimum wage, from April 2022 people aged 21 or 22 saw a 9.8% uplift, to £9.18 an hour, while 18 to 20 year-olds received a 4.1% rise, to £6.83 an hour, and 16 to 17 year-olds had an equivalent 4.1% increase, to £4.81 an hour.

[Alison Thewliss]

rose—

[Richard Fuller]

I just have one more minute—I think that is correct.

[Richard Fuller]

In that case I would love to.

[Alison Thewliss]

Can the Minister explain why people of a younger age are not worth the same as someone older?

[Richard Fuller]

Yes I can. The fundamental point is that we are investing in young people. Many businesses wish to invest and add additional costs for training and support to tap into those skills, so that people can earn higher wages later on. It is because companies have the incentive to invest in young people that young people can then earn more. The hon. Lady shakes her head, but she should recognise that the national minimum wage is not a cap on what people can be paid but a floor. If companies invest in young people to get those skills, they can earn more.

Our youth offer provides guaranteed foundation support to young people searching for work on universal credit. That includes 13 weeks of intensive support to help new claimants into suitable opportunities and provision. Youth hubs are co-delivered by the Department for Work and Pensions and local partners, and youth employability coaches are available for those with complex needs.

We will always encourage labour market participation and make it pay to work. Through universal credit, the Government have designed a modern benefits system that ensures that it always pays to work and that withdraws support gradually as claimants move into work, replacing the old legacy system, which applied effective tax rates of more than 90% to low earners.

Questions were raised by the hon. Member for Bath about free school meals and breakfast clubs. The Government spent more than £1 billion on delivering free school meals to pupils in schools. Around 1.9 million disadvantaged pupils are eligible for free school meals, as well as an additional 1.25 million infants who receive a free meal under the universal infant school meal policy. The Government are also providing an additional £500 million toward the cost of extension, which has come via a six-month extension to the household support fund.

The hon. Member for Leeds North East talked about breakfast clubs. The Government are providing over £2 million a year to continue the holiday activities and food programme, which provides free holiday club places to children from low-income families. The Government are providing £24 million over two years for the national breakfast club programme, benefitting up to 2,500 schools.

The hon. Member for Sheffield Central and others asked questions about support for university students. He may know that the Government have increased maintenance loans every year, meaning that disadvantaged students now have access to the highest ever amounts in cash terms. He may know that the Government have made £260 million available through the Office for Students, which universities can use to boost their own hardship funds. He may know that many students also benefit from the wider package of cost of living support, and he will know that maximum tuition fees will be frozen until 2025. He mentioned one particular idea on thresholds, which I would be grateful if he could write to me about.

Financial Services and Markets Bill

Debate between Richard Fuller and Alison Thewliss

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Richard Fuller]

My hon. Friend opens up what was an area of particular personal interest to me when I was a Back Bencher, and I therefore feel tempted to stray, during what might be my rather temporary position on the Front Bench—[Hon. Members: “No!”] That was a cheap attempt for a laugh, but if I may just say this without straying too far, I think it is recognised across the House that the role of Parliament in holding regulators to account needs further investigation. The Bill is quite remarkable because we are building on a structure from the year 2000 that put tremendous power in the hands of the regulators. We think that is right. We do not think that we should have the same prescriptive statute-based approach as the European Union, because we feel that is too rigid, does not promote competition and does not help growth. But we must recognise, as we take the Bill through the House, that we have a responsibility carefully to ensure that those structures of parliamentary oversight are appropriate.

[Alison Thewliss (Glasgow Central) (SNP)]

I very much enjoy serving on the Treasury Committee, but it has an incredibly busy agenda. What the Government are doing here is taking a huge amount of scrutiny of incredibly important structural issues relating to financial services from 650 Members of Parliament and giving it to a Committee of 11 and a perhaps yet smaller Sub-Committee. Does the Minister really think that is adequate?

[Richard Fuller]

The hon. Lady tempts me to talk beyond what is really the responsibility of the Government. She is raising questions that are correctly and appropriately for the parliamentary authorities to respond to. On her more general point about whether the system is correct to rely on the regulatory framework that was established in 2000, I think the answer is absolutely yes. As I have just mentioned, it provides the ability for an agile, pro-growth, competitive set of financial services regulations, and I believe that Parliament itself is capable of providing that democratic oversight over the regulators. If she is concerned about that, I encourage her to take it up with the parliamentary authorities in the usual way.

So I welcome the Treasury Sub-Committee. I have said that ultimately it is for Parliament to determine the best structure for the ongoing scrutiny of financial services regulators. The Bill also includes a new power for the Treasury to require the regulators to review their rules when that is in the public interest. Following any such review, the final decision on potential action would be for the regulators to make.

Following the repeal of retained EU law, the Government will have no formal mechanism to bring public policy considerations directly into rule-making. It is right for the democratically elected Government of the day to be able to intervene in a matter of financial services regulation where there are matters of significant public interest. The Government’s intention is therefore to bring forward an intervention power that will enable Her Majesty’s Treasury to direct a regulator to make, amend or revoke rules where there are matters of significant public interest. The Chancellor will take a final decision on the precise mechanics of the power and the Government will table an amendment in Committee.

Let me now turn to the Bill’s second objective: bolstering the competitiveness of UK markets and promoting the effective use of capital. I have already spoken about the improvements to the UK’s regulation of secondary markets in this Bill through reforms to the MIFID framework in the wholesale markets review. These changes will lower costs for firms and align our approach with that of other international financial centres such as the United States. To improve the smooth functioning of markets, we will introduce a senior managers and certification regime for key financial market infrastructure firms. We will expand the resolution regime for central counterparties to align with international standards, and enhance the powers to manage insurers in financial distress.

The next objective of the Bill is to strengthen the UK’s position as an open and global financial hub. Outside the EU, the UK is able to negotiate our own international trade agreements, including mutual recognition agreements—MRAs—in the area of financial services. The Government are currently negotiating an ambitious financial services MRA with Switzerland. Clause 23 enables the introduction of any necessary changes through secondary legislation to give effective to this and to any future financial services MRAs. Schedule 2 contains measures that enable the United Kingdom to recognise overseas jurisdictions that have equivalent regulatory systems for securitisations classed as simple, transparent and standardised, allowing UK investors to diversify their portfolio while maintaining the level of protections they currently enjoy.

The Bill takes the UK further forward as a centre for financial markets technology. Clause 21 and schedule 6 extend existing payments legislation to include payments systems and service providers who use digital settlement assets that include forms of crypto-assets used for payments, such as stablecoin, backed by fiat currency. This brings such payments systems within the regulatory remit of the Bank of England and the payments system regulator, allowing for their supervision in relation to financial stability, promoting competition and encouraging innovation.

To foster innovation, clauses 13 to 17 and schedule 4 enable the delivery of a financial markets infrastructure sandbox by next year, allowing firms to test the use of new and potentially transformative technologies and practices that underpin financial markets, such as distributed ledger technology. In parallel, the Bill promotes the finance sector’s resilience by allowing the financial service regulators to oversee the services that critical third parties provide to the sector.

Let me turn to the Bill’s final objective, which I know will have the commendable focus of colleagues throughout the House: the promotion of financial inclusion and consumer protection. The Government will continue to foster an industry that supports everyone so that individuals do not feel left behind by the rapid advancement in financial technology. There is an extensive programme of ongoing work related to consumer protection, especially in the areas that were legislated for in the Financial Services Act 2021, such as buy now, pay later agreements and the FCA’s rules on the consumer duty.

Tackling Fraud and Preventing Government Waste

Debate between Richard Fuller and Alison Thewliss

Tuesday 1st February 2022 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

“Lamentable”, “woeful”, “arrogance, indolence and ignorance”—the words of Lord Agnew’s resignation should still be ringing in the Minister’s ears, as should the fact that the disconnect and disinterest in a range of Departments were part of the problem that he outlined. His words should prompt the Government to take action to fix the scandal of taxpayers’ money walking out the door.

In Lord Agnew’s resignation letter, he said:

“As the Minister for Counter Fraud, I have been asked today to publicly defend in Parliament our track record in countering fraud across Government. Unfortunately I am simply not able to do that given the lamentable track record that we have demonstrated since I took up this post nearly two years ago.

It has certainly not been through want of trying, but the Government machine has been almost impregnable to my endless exhortations.”

That is certainly a condemnation of the Government. The Paymaster General has become the Minister for defending the indefensible in the House, as he does yet again today. Perhaps if other Front-Bench Ministers and Conservative Back Benchers took the example of Lord Agnew and his attitude to them, many of them would learn something and resign too.

We are in a cost of living crisis, yet the sums of money that could go to help people now lie in the offshore bank accounts of crooks and fraudsters. Let us not forget that HMRC has stated that the levels of fraud in the covid support schemes are in line with its original planning assumptions. Planning for £4.3 billion-worth of fraud is absolutely breathtaking. The money that was committed in the Budget came far too late because these problems have been known about for years. The bounce back loan scheme, about which Lord Agnew was denied information as a Minister—that should really worry us all—is of course a UK Government-backed scheme, with an estimated £4.9 billion lost to fraud. Just look at the loans paid out to companies that were not trading. Lord Agnew indicated that 26% of losses are estimated to be attributed to fraud rather than to credit failure. This cannot be fobbed off to the banks, because the Treasury asked them to do this and they did it because the loans were Government-backed.

Let us put these figures into some context, because they are massive amounts of money. Scotland’s entire devolved social security system is forecast to cost £4.1 billion in the next financial year. The Institute for Fiscal Studies has calculated that a one-off £500 stimulus cheque for those on universal credit could cost £3 billion. A 5% pay increase for all the NHS staff in England would be £1.7 billion. This is money that could have been much better spent had it not walked out the door and into the hands of fraudsters.

We cannot deny that the money needed to go out the door quickly in the pandemic. I remember, during those early days, hearing on the Treasury Committee from banks and Treasury officials about how concerned they were about the fraud risk. Some of the checks that could have prevented this fraud are simple—a national insurance number or an HMRC reference—but others speak to a long-term systemic failure that the UK Government have been warned about repeatedly—the system of registration at Companies House. That is not an issue of reform, as some have tried to point out; it is an issue of legislation and an opportunity that this Government have missed time and again.

[Richard Fuller]

I am looking forward to hearing the hon. Lady’s recommendations on reforming this important area. She mentioned her role on the Treasury Committee. Did she, at the time, have concerns about the use of the British Business Bank for the delivery of loans to businesses?

[Alison Thewliss]

The British Business Bank being a relatively new mechanism, of course there were concerns about that. We took a lot of evidence on the concerns that existed around loans and other things that were going out the door, but that does not mean that things could not have been put in place to prevent this, and we did hear evidence to that end.

[Richard Fuller]

rose—

[Alison Thewliss]

I have a lot to get through. If the hon. Gentleman wants to make a speech later on, I am sure we will all be incredibly interested to hear what he has to say.

I have spoken at every opportunity, and Ministers have heard me at every opportunity, on the need for reform of Companies House, and it still baffles me why the Government are so lackadaisical about this clear open door to fraud. Companies House remains a repository of information, not a checking service. It is not an anti-money laundering supervisor. In answer to me at Treasury questions earlier, the Economic Secretary to the Treasury referred to the 2018 Financial Action Task Force report, but that still means four years of inactivity in this House. In 2018, as he will remember, we also had the Sanctions and Anti-Money Laundering Act 2018, a further missed opportunity to have closed this door and locked the fraudsters out.

Companies House has no connection with the UK Government’s Verify scheme, which is required for a passport, a driving licence or a tax return. For a minimal fee of only £12, someone can set up a company in the UK with no checks on who they are and what they intend to do with that company. Compare this with, for example, the £1,012 for a child to take up their right to citizenship. The money involved is absolutely baffling. Last year, in This is Money, Martin Swain, director of strategy, policy and external communications at Companies House, admitted:

“Even though, sometimes, we know that the information is incorrect or potentially fraudulent, the registrar is legally required to register it.”

The Companies House website even has a disclaimer at the top that says:

“Companies House does not verify the accuracy of the information filed”.

Why is this being allowed to continue? Even a simple drop-down menu in the registration process would stop people putting in things like “Anytown, Anywhere” rather than a place that really exists.