Economic Crime and Corporate Transparency Bill

Robert Buckland Excerpts

Consideration of Lords message
Wednesday 13th September 2023 Commons Chamber

[Kevin Hollinrake]

It is always a pleasure to speak with right hon. and hon. Members on the Economic Crime and Corporate Transparency Bill, which they will know is close to my heart and contains many vital measures for which I have long campaigned. The Bill will give us the powers we need to crack down on those who abuse our open economy, while ensuring that the vast majority of law-abiding businesses can grow and flourish.

I am grateful that both Houses have reached agreement on several issues, including those relating to the register of overseas entities and on removing the extension of the failure to prevent offence to money laundering. However, we are here today as agreement is still outstanding on a handful of remaining issues. I urge this House to accept the Government amendments, to settle those remaining topics and ensure that we can proceed to Royal Assent and implementation of these important reforms without delay.

I will now speak to those remaining topics. In the other place, the Government tabled two amendments on nominee shareholders—amendments 23B and 23C, in lieu of Commons amendment 23A, and in response to Lord Vaux’s amendment 23 on this topic from Report stage in the other place.

The Government’s amendments will allow the Secretary of State to make regulations to make further provision for the purpose of identifying persons with significant control in cases where shares are held by a nominee. This will allow the Government to work with relevant stakeholders to target the regulations in an effective and focused way that does not impose disproportionate burdens. Members of the other place agreed with the Government’s proposal and I trust that Members of this House will therefore agree with it today.

Lords amendments 151B and 151C would apply the exemption from the failure to prevent fraud offence to micro-entities only, rather than the Government’s position of excluding all small and medium-sized enterprises. The Government appreciate that Lord Garnier has moved closer to the Government’s position in agreeing to the principle of applying a threshold. However, our position remains that such an amendment would still incur significant costs to businesses. Reducing the exemption threshold to only micro-entities would increase one-off costs for businesses from around £500 million to £1.5 billion. The annual recurrent costs would increase from £60 million to over £192 million.

[Sir Robert Buckland (South Swindon) (Con)]

Where do those figures come from?

[Kevin Hollinrake]

We used very similar analysis to that used for the failure to prevent bribery and failure to prevent tax evasion offences. We have used a common methodology. I have not seen any figures that contradict our figures here, but in my view—having run a business and dealt with some of the failure to prevent bribery provisions—there is no doubt that there are significant costs. There may be external consultants to bring in, for example. Even if one is compliant, one might not know whether one is compliant, so there are definite associated costs to ensuring that reasonable efforts are made to prevent fraud, as it would be in this case.

Those costs would still be disproportionately shared by small business owners, when law enforcement can attribute and prosecute fraud more easily in these smaller organisations; and, as I have set out before, we must be mindful of the cumulative impact on SMEs across multiple Government requirements and regulations. In all the work I have done in the past from the Back Benches on failure to prevent, it was invariably the case that all cases involved larger businesses, not SMEs.

Large companies have the resources and specialist expertise to cope with additional burdens, whereas small businesses often have to dedicate a significant amount of time and resource, often paying for external professional advice to assess what new rules would mean for them. That is the case even where they subsequently assess that they already have adequate controls in place. That is time and resource that could otherwise have been used to grow and generate wealth for their businesses and jobs for their staff. The Government are extremely mindful of the pressures on companies of all sizes, including SMEs, and therefore do not feel it is appropriate to place this new unnecessary burden on over 450,000 businesses. I therefore urge Members of this House to support the Government motion to disagree with the Lords amendments, to ensure that we take a proportionate approach and do not impose unnecessary measures that would curb economic growth.

Turning to Lords amendment 161B, made by Lord Faulks, on cost protection for law enforcement in civil recovery cases, the Government remain of the view that the amendment would be a significant departure from the loser pays principle and therefore should not be rushed into without careful consideration. There is no clear evidence that such changes would help to achieve their intended aim of increasing the capacity of law enforcement to take on more civil recovery cases. There have been no adverse cost rulings against an enforcement authority carrying out this type of civil recovery in the past six years.

Costs are just one of many factors that determine whether law enforcement will take on a case. For example, the evidence available to pursue a case, particularly where evidence is required from overseas, often proves more vital to an operational decision. There are already a number of ways in which an enforcement agency’s liability to legal costs can be protected under the civil procedure rules in England and Wales. For instance, rule 44.2 gives the court discretion as to the payment of costs by either party, including whether they are payable to another party, the amount, and when they are payable. In addition, a cost-capping order can be applied for under rule 3.19 to limit any future costs that a party may recover under a later costs order. If we are to introduce further legislation, we must consider what gap this is trying to fill. We should also consider civil liberties and property rights that underpin our economy. We will potentially be handing huge powers to the state, which could be held over an individual.

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[Alison Thewliss (Glasgow Central) (SNP)]

I strongly very much with what the hon. Member for Bromley and Chislehurst (Sir Robert Neill) said. Let us just agree with the Lords. Let us get on with this. Let us do this legislation, and do it properly.

Let me say first that it is important for us to have as much information as possible about those who own companies. It is clear from all the evidence that has come before us that the lack of such information causes people to find ways of hiding their money, and the UK has become a magnet for that. The Minister has suggested that there will be a significant cost to businesses, but businesses are already doing work on failure to prevent bribery. As Lord Garnier said on Monday, there is a clear read-across: it would be easy to add fraud to the current provisions. It would not be difficult, and it would bring about an economic benefit. The Minister also suggested that economic growth would be hampered in some way, but he himself has said that

“ a corporate offence of failure to prevent economic crime and money laundering would reduce the amount of money that is illegally shifted out of the UK into foreign jurisdictions and increase the amount of tax that is paid.”—[Official Report, 22 February 2020; Vol. 672, c. 220.]

Why does the Minister now disagree with himself? Why does he disagree with statements that he has made in the past? He knows that this is an important measure, and that this is an issue that we can deal with here today and it will be done. We will not have to come back to it, we will not have to keep debating it, and the Minister will be able to see that he has finished it off and done a good job.

On the issue of adverse costs, I agree with what Bill Browder said in his evidence to the Bill Committee. By not introducing such a measure, we are inhibiting law enforcement when it comes to economic crime. We know that those on the other side of the equation who want to hide their money have plenty of it to throw at the best lawyers and at the best accountants to make things look a particular way. If we are to be in this fight, we need to give the law enforcement agencies the resources that they require, and cost capping is a key element of that.

As I said the previous time we debated these matters, there is no need for a review. We need to get on with things. An election is coming, and we do not know when we will pass this way again. The Minister should accept the Lords amendments, and get on with the work.

[Sir Robert Buckland (South Swindon) (Con)]

I shall be brief. The hon. Member for Glasgow Central (Alison Thewliss) repeated her phrase of last week—and, indeed, we have passed this way again. I will resist the temptation to be too biblical today; I will simply reiterate to the my hon. Friend the Minister the points that I made last week. Lord Garnier has moved on the position in the Lords and offered an olive branch to the Government, in the sense that this is a different amendment. It rightly now affords what, in the opinion of many of us, will be greater protections for businesses. What is being ignored in this debate is the fact that businesses that take reasonable measures will not be the subject of a prosecution or investigation. Businesses that are not within this regime will not have that protection, so there is a cogent argument that failing to extend the “failure to prevent” offence to more businesses would leave them less well protected.

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[Kevin Hollinrake]

I have listened carefully to my right hon. and learned Friend’s points. He said a few seconds ago that this would relate only to fraud that benefits the body concerned. Paragraph 1(b) of Lords amendment 151 also covers the body or an associate within that body providing services, so this is not just about the benefit to the organisation itself.

[Sir Robert Buckland]

I will take that qualification. I was seeking a short cut because time is brief. My hon. Friend is right to mention the agency point, but it is still a much narrower ambit of the offence than fraud in general. That is the point I would ask him to take away, because I am not persuaded. I think the amendments should remain within the body of the Bill as amended, and I will be voting accordingly.

[Dame Margaret Hodge (Barking) (Lab)]

Mr Deputy Speaker, I am conscious that we must vote in five minutes to remain in order, so I will simply say that economic crime is a national security issue and should not be a partisan issue in this House. I urge the Minister to set aside the party political views that he is expressing and to go with the consensus that has been built, not just in the House of Commons but in the House of Lords and in the non-governmental organisation sector outside.

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[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the right hon. Gentleman for his point of order. As he knows, we are now going to move on to the motion on amendment 161B, and if that is annulled there will be other opportunities, I am sure.

After Clause 187

Civil recovery: costs of proceedings

Resolved,

That this House disagrees with the Lords in their amendment 161B in lieu of Commons amendment 161A and insists on amendment 161A in lieu.—(Kevin Hollinrake.)

Motion made, and Question put forthwith (Standing Order No. 83H(2)), That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing with their amendments 151B, 151C and 161B.

That Kevin Hollinrake, Scott Mann, James Sunderland, Jane Stevenson, Rushanara Ali, Taiwo Owatemi and Alison Thewliss be members of the Committee;

That Kevin Hollinrake be the Chair of the Committee;

That three be the quorum of the Committee.

That the Committee do withdraw immediately.—(Kevin Hollinrake.)

Question agreed to.

Committee to withdraw immediately; reasons to be reported and communicated to the Lords.

[Sir Robert Buckland (South Swindon) (Con)]

On a point of order, Mr Deputy Speaker. May I seek your guidance about how I properly place on the record a reference to my entry in the Register of Members’ Financial Interests in the context of my speech in the debate about the Lords message on the Economic Crime and Corporate Transparency Bill?

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the right hon. and learned Member for his point of order. He has recognised that he made an omission and he has corrected it at the earliest opportunity. I thank him for doing so.