Economic Crime and Corporate Transparency Bill

Lord Coaker Excerpts

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Garnier (Con)]

To add further irrelevance—no, just irrelevance; I apologise to my noble friend—I am pleased that the noble Lord, Lord Ponsonby, and the Labour Party have moved this amendment. When we debated identity cards in the dim and distant days when Tony Blair was Prime Minister, one of the great things that was stressed by the then Labour Government was that there should be a photograph of the person in question, but they did not say that it should be of the person’s face. This enabled cheeky Members of the Opposition to tease—I cannot remember whether the noble Lord, Lord Coaker, was a Home Office Minister at the time—

[Lord Coaker (Lab)]

I am not admitting it.

[Lord Garnier (Con)]

We had a great deal of fun working out which part of the identified person’s anatomy should form the main part of the photograph. I am happy to say that the noble Lord, Lord Ponsonby, has obviously learned from that hideous experience. This seems an altogether better set of proposals.

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Moved by

[Lord Coaker]

64: After Clause 91, insert the following new Clause—
“Reporting requirements
(1) The Secretary of State must publish an annual report assessing whether the powers available to the Secretary of State and the registrar are sufficient to enable the registrar to achieve its objectives under section 1081A of the Companies Act 2006 (inserted by section 1 of this Act).(2) Each report must—(a) make a recommendation as to whether further legislation should be brought forward in response to the report, (b) provide a breakdown of the registrar’s annual expenditure,(c) provide a recommendation as to whether charges for fees for the incorporation of a company should be amended,(d) contain the details of the steps the registrar has taken to promote the registrar’s objectives under this Act,(e) provide annual data on the number of companies that have been struck off by the registrar, the number of companies that have been required to change names by the registrar, the number of fines and the average and total amount of fines the registrar has issued, the number of criminal convictions made, and of cases of suspected unlawful activity identified by the registrar as a result of the registrar’s powers as set out in this Act,(f) provide annual data on the number of cases referred by the registrar to law enforcement bodies and anti-money laundering supervisors,(g) provide annual data on the total number of company incorporations to the registrar, and the number of company incorporations by authorised corporate service providers to the registrar, and(h) detail all instances in which exemption powers have been used by the Secretary of State, as introduced by this Act.(3) The first report must be published within one year of this Act being passed.(4) A further report must be published at least once a year.(5) The Secretary of State must lay a copy of each report before each House of Parliament.”

[Lord Coaker (Lab)]

My Lords, it is a pleasure to address the Committee for the first time this afternoon. The theme of the discussions earlier was transparency. The noble Lord, Lord Vaux, made an outstanding speech about why transparency is important. Other noble Lords talked about this being a once-in-a-lifetime opportunity for this Parliament to progress in a way that perhaps we have been slow to do, which has led to many of the things that the noble Lord, Lord Agnew, pointed out in his remarks about the exploitation of the economic and business laxness in London and beyond that has led to things that all of us deplore. The Bill gives us a real opportunity to tackle that. The Minister’s response is crucial for us to determine what we may wish to push the Government on on Report.

We have now moved from transparency to reporting, how the Bill will be implemented and how effective it will be, hence Amendment 64 in my name and those of my noble friends Lord Ponsonby and Lady Blake. I also support Amendment 72 in the names of the noble Lords, Lord Agnew and Lord Cromwell, the noble and learned Lord, Lord Garnier, and the noble Baroness, Lady Bowles, which is virtually the same.

I know that the Minister’s notes will tell him that there is no need to worry about this because he can just get up and tell Coaker that it is irrelevant, that there is no need for this because the Government proved that they are a listening Government in the House of Commons and introduced Clause 187, which, as noble Lords will have seen, talks about reports on the implementation of the operation of Parts 1 to 3. Indeed, I had not realised that the noble Lord, Lord Johnson, is as radical as he is, but the clause includes some of the amendments that I and other noble Lords tabled. I refer to the Minister’s radicalness because subsection (3) of the proposed new clause inserted by Amendment 64, states:

“The first report must be published within one year of this Act being passed”.


However, if we read what the Minister has put before us, it states

“The first report must be laid within the period of 6 months beginning with the day on which this Act is passed”.


It is good to see the Government moving further than they were pushed to do. The Minister no doubt has that in his notes.

However, the serious point is that it is good see Clause 187 in the Bill because it takes on board many of the points raised in the amendments about the effectiveness of the way in which the Bill will operate. The Bill says many things that we all agree with, but the concern is whether it will be enforced and will work in the way that the Government and, indeed, all of us wish it to. Hence Amendment 64 seeks to explore what the Government mean. Clause 187 states:

“The Secretary of State … must prepare reports”,


but through my proposed new clause, which would be placed after Clause 91, I am saying to the Government what such a report should include. I do not see why we would not report on the effective implementation of the Bill.

Let us look at why I am saying in Amendment 64, with the requirement to report on the way in which the four objectives laid out in Clause 1 are actually met. We had a debate earlier on in Committee about how effective those objectives are and whether the Bill would meet them. It is particularly important that these objectives are reported on—not just in some general report that the Government lay before us but in a specific report, given the fact that, in Committee, we have debated long and hard about why on earth the registrar of companies would have as an objective “to minimise the risk” rather than prevent it. We also debated why objective 4 says “minimise the extent” rather than “prevent it happening”. Given the concerns raised in this Committee about the loose language that the Government have employed in the very first clause of the Bill to determine the objectives of the registrar, it is especially important that we have laid before Parliament a full and frank report on how effective the registrar has been in achieving the four objectives in Clause 1.

Through the reporting requirements in my amendment, I have sought to say that these are the sorts of things that the Government should include. It starts with proposed new subsection (1). It would be interesting to hear what the Government think about it. Is this what is going to be included? That is the question around each of the various points that I have set down. Are they what the Government are going to report on or not? Are they what the Government are going to include in determining the Bill’s effectiveness? Is that what the Government are going to do? I would have thought that assessing whether the objectives have been achieved was an absolutely fundamental part of this. Is that what the Government will report on: whether the objectives have been achieved?

Is further legislation needed? All sorts of regulations are included in the Bill but, again in previous debates, noble Lords referred to this Bill as a once-in-a-lifetime opportunity. I think that the noble and learned Lord, Lord Garnier, mentioned that; if it was not him it may have been the noble Lord, Lord Leigh of Hurley, but a noble Lord certainly said it. He is quite right—indeed it is. However, perhaps the Bill will identify gaps that the regulatory powers in this legislation could seek to avoid.

On the breakdown of annual expenditure, we are going to have a discussion when we come on to the next clause and beyond about fees, where they should go and how they should be used. That will give us an opportunity to look at annual expenditure, where the charges for fees should be amended. The Government have a regulation-making power but perhaps the report could give the Government some information about that.

Again, I go back to the steps that the registrar takes to promote the objectives. Proposed new subsection (2)(e), to be inserted by my Amendment 64, refers to

“annual data on the number of companies”.

How will we know what is going to happen? We do not want bald statements; we want factual information so that we can base any decisions that we make on evidence.

Proposed new subsection (2)(f) is particularly important. It would require each report to

“provide annual data on the number of cases referred by the registrar to law enforcement bodies and anti-money laundering supervisors”.

It is crucial that the Bill has some teeth, is seen to be implemented and is seen to operate in a way that deters those who may wish to operate in a way that undermines the vast majority of good business. Is that the sort of thing that the Government are thinking of?

A whole range of points have been raised there. These are the sorts of things that should be reported on. These are the sorts of things that the Government need to reflect on and allow Parliament to reflect on to see how effective the Bill, when it becomes an Act, is in achieving the things that we all want it to achieve. As I said, in a later clause, the Government say that they will report. This amendment probes what the Government actually mean by that and what they seek to include. It would be helpful to the Committee for us to hear a bit more about what the Government think they are going to use as a way of determining whether the Bill is successful in the way that they want. I beg to move.

[Lord Agnew of Oulton (Con)]

My Lords, I do not want to speak for too long because the noble Lord, Lord Coaker, has covered it clearly and our amendments are very similar. Indeed, in a spirit of collaboration, I would be delighted to give ground and for my noble friend to accept amendment moved by the noble Lord, Lord Coaker, rather than my amendment.

There is a serious point to this. My noble friend will know that in business what gets measured gets done. Unless we are specific in the requirements of this annual report to Parliament, it will be fudged if the story is not a good one. Earlier, I read to the Committee some extracts from the internal HMRC report. It absolutely hates putting bad news out there and will use every bit of the English language to obfuscate as much as possible. Having a simple list of requirements that we expect to hear every year will reduce that—it is really that simple.

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[Lord Coaker (Lab)]

My Lords, I thank the Minister for his response, which in some ways was helpful in trying to clarify some of the things the Government would expect to be included in any report. Amendments 64 and 72 are clearly very close; we will need to discuss with others whether we need to push the Government further on Report as to what they mean. There was, if I am honest about it, some ambivalence in the Minister’s response to the sunset clause and Clause 187(1)(a). We will have to reflect on that. There will obviously be further discussions with officials about what “and operation” means. We will have to see, on that basis, what we might or might not wish to do on Report.

However, in the interests of time, we have had a reasonable debate on this. Following discussions with others, we will see whether we need to return to it. I take the point that what gets measured gets done. I think that is what we all want to see: an effective Bill that works. We may need to see whether further clarification is needed in the Bill for it to achieve that. With those remarks, I beg leave to withdraw the amendment.

Amendment 64 withdrawn.

Moved by

[Lord Coaker]

65: After Clause 91, insert the following new Clause—
“Fees and penalties
(1) Section 1063 (fees payable to registrar) of the Companies Act 2006 is amended in accordance with subsections (2) to (4).(2) Before subsection (1) insert—“(A1) The registrar must charge a fee of at least £100 for the incorporation of a company.(B1) The Secretary of State must once a year amend the fee in subsection (A1) to reflect inflation.”(3) In subsection (1)—(a) after “fees” insert “other than the fee in subsection (A1)”;(b) in paragraph (a), after “functions” insert “other than the incorporation of a company”.(4) In subsection (5), in paragraphs (a) and (b) after “regulations” insert “or subsection (A1)”.(5) The Secretary of State must lay before each House of Parliament a report examining the case for fees paid under section 1063 of the Companies Act 2006 being paid into a fund established for the purposes of tackling economic crime.(6) The report must also examine the case for penalties received by the registrar under section 1132A of that Act (power to make provision for financial penalties) being paid into the same fund.(7) The report must be laid before each House of Parliament within six months of this Act being passed.”

[Lord Coaker (Lab)]

My Lords, I will be reasonably brief on Amendment 65, which is tabled in my name and those of my noble friends Lord Ponsonby and Lady Blake. Amendments 69 to 71 have some, if not many, similarities and, like Amendment 106E in the name of the noble Baroness, Lady Altmann, seek to do the same thing. I shall make a few introductory remarks.

I know the Government are resisting putting an amount in the Bill and are saying that they are going to do this by regulation, but I think it is important for Parliament to make a statement about what it thinks is a reasonable fee. As I understand it, the resolution is under the negative procedure. If it is not in the Bill and the Government propose £40 or £50, it may be that we do not think that is enough, but we will not have any way of changing that or dealing with that.

The research that I have had done shows that the current fee is £12, while the eurozone average is €300, and that £12 is the sixth-lowest incorporation fee in the world, so somewhere along the line, we have got this badly wrong. I do not think that £100, as my amendment suggests, is going to deter businesses or could be seen as anti-business. It is a reasonable fee in line with that charged in many other economies in the world. There would also be the opportunity to raise the fee in line with inflation and with various other changes made to the Companies Act.

Alongside this, Amendment 70, tabled by the noble Lord, Lord Agnew, Lord Cromwell and others, is about the establishment of an economic crime fund rather than reporting on the need for one and is something that we will need to reflect on from our position. However, I take the point that if there is a fee as laid out in Bill, it just goes into the Consolidated Fund to disappear without trace, whereas amendments in this group suggest not just reporting on it to see whether it is needed but establishing an economic crime fund which could then be used; in other words, it becomes a hypothecated fee. The Treasury will always say that it hates hypothecated taxes, that they go against the grain and are something that on principle it does not do. However, the Explanatory Memorandum shows examples of where the Treasury has agreed to the hypothecation of tax. A very effective argument is: as the principle of hypothecation has been accepted by the Treasury in the instances laid out in the Explanatory Memorandum, why should it not be accepted here?

I will not repeat all that has been said but the fundamental point is to create a framework within which economic crime can be investigated effectively and the law enforced effectively. That is essentially what this is all about. The Government will agree with that and say that that is their intention. The purpose of my amendment and the other amendments in this group is to give the Government the tools with which that can be achieved and the resources by which that can be done. In later amendments there is real concern about the effectiveness of the various bodies we already have to tackle economic crime; that concern will no doubt come up again on Report. This Bill will quite rightly say that more needs to be done. How is that going to be achieved? The fee suggested in my amendment and the establishment of an economic crime fund as suggested in Amendment 70 can be used to ensure that we have the resources to tackle the level of crime that we know is out there. It is something this Bill needs to address. It is a real priority. I beg to move.

[Lord Agnew of Oulton (Con)]

My Lords, to build on the comments made by the noble Lord, Lord Coaker, again, this is a wonderful opportunity to do something that will put our enforcement agencies on to a much sounder footing in future. They are very underresourced. For example, we know that 40% of crime in this country is economic crime yet we deploy only about 1% of our crime-fighting resources to combat it. By ring-fencing this, it gives us a chance to solve that problem.

There is currently a scheme called the asset recovery incentivisation scheme—ARIS—where the money goes to the Treasury and the Treasury hands some of it back. However, the amounts that come back have decreased by 34% in the past five years, at a time when we are seeing escalating volumes of economic crime.

I put in my explanatory statement examples of the hypothecation that the Treasury has agreed over the past few years. As noble Lords can see, there are several of them; some of them are very recent. I want to head off the excuse from the Treasury that “We never do it”, because it does do it, and does it regularly. I suggest that this is as good an opportunity as any to do it. I very much hope that my noble friend the Minister will consider this issue carefully over the next few weeks because, if we do not have the resources in our crime-fighting agencies, we will not be able to stamp out a lot of this. Back in 1984, the US introduced a scheme in which all forfeiture proceeds go back into an assets forfeiture fund. I very much hope that we can do something similar.

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[Lord Johnson of Lainston (Con)]

I greatly appreciate my noble friend’s intervention. I hope that I have made clear to the Committee the importance that this Government place on fighting economic crime.

If I may—I am not sure of the protocol—I wish to question my noble friend’s intervention. He said that the asset recovery incentivisation scheme has seen a considerable drop in the monies deployed to law enforcement over the recent period. However, I have a figure here: since 2006-07, just under £1.3 billion—that is based on nominal values and not adjusted for inflation—has been returned to Proceeds of Crime Act agencies to fund further asset recovery capability and work that protects the public from harm. In 2021-22, £354 million was recovered under the Proceeds of Crime Act, of which £298 million was paid into the ARIS pot. So I certainly will research the figures given to me by my noble friend.

The point is that we are looking to provide funding of £400 million over the spending review in order to focus on fighting economic crime. I am happy to have further debates around this issue but I hope that I have made my point in relation to these amendments, minimum fee levels and creating a fund out of the fees, which would be completely contrary to the ambitions that we have set in our legislation around Companies House.

[Lord Coaker (Lab)]

My Lords, I have to say that there is a bit of work to be done on this group of amendments before Report. The Minister certainly failed to convince me and I am sure he failed to convince many, if not everyone, on the Committee. There is a real problem here. There is a problem with raising the fee and what it should be. The Government say that it is a matter for us and then came up with the figure of £50, which I think is inadequate. There we go; there clearly needs to be discussion about that on Report. I take the point that a number of noble Lords have made that the fee is not just to fight economic crime but for the additional responsibilities that Companies House will have. That is very clear.

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[Lord Agnew of Oulton (Con)]

I will just wrap up my amendments. I am afraid that I agree with both the noble Lords, Lord Coaker and Lord Fox, that there does not seem to be a strategy for fighting economic crime. I ask the Minister to think about this and come back to us. It could be something as simple as increasing the filing fee beyond whatever we think is the right figure by another £10. At 2 million filing fees a year, we would then have the start of a fund to fight economic crime. It could be something as simple as that, but I urge the Minister to give us something to get our teeth into. On that basis, I will not move my amendment.

[Lord Coaker (Lab)]

I beg leave to withdraw my amendment.

Amendment 65 withdrawn.