Small Business, Enterprise and Employment Bill

Debate between Vince Cable and Jonathan Djanogly

Wednesday 16th July 2014 Commons Chamber

[Vince Cable]

I recall the major role that the hon. Gentleman played in trying to obtain commitments in relation to the north-west and, in particular, his constituency. The same issue will arise in other cases. He is right. Although commitments were made, there is an issue of enforceability. That is what we now wish to address by strengthening the rules.

Let me move on to company transparency. The OECD has reported that

“almost every economic crime involves the misuse of corporate vehicles”.

There are staggering sums of money involved. Organised crime costs the UK alone about £24 billion a year. The European Commission estimates that global criminal proceeds are in the order of $2 trillion. Of course, not all crime flows through companies, but much does. More specifically, in 2011 the World Bank carried out an exercise that suggested that 70% of grand corruption cases involved at least one corporate vehicle to hide beneficial ownership and the true source of funds. Very often, criminals create complex corporate structures spanning multiple jurisdictions to hide the involvement of a company. That is why the UK pushed the agenda for greater corporate transparency during our G8 presidency last year. We obtained agreement from G8 members that all would take action to increase corporate transparency. That is what we are now doing, thus demonstrating our commitment.

We wish to help to deter, identify and sanction those who hide their interest in UK companies to facilitate illegal activities, as well as generally creating a more trusted business environment. That is why we are going to require companies to keep a register of the people who have significant control over that company—their beneficial owners—and provide this information to Companies House, where it will be publicly available. We will lead the way within the developed economies in having an open register. Alongside that, the Bill abolishes the use of bearer shares, which can change hands without any record and have been open to abuse for tax evasion and money laundering purposes.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

Will the Secretary of State acknowledge that the vast majority of beneficial owners are absolutely legitimate and are not involved in crime, and that his regulatory proposals will significantly attack privacy and reduce the amount of investment going into British companies?

[Vince Cable]

I do not accept any of those propositions. It will be possible to devise a register—we have devoted a great deal of thought to this—to ensure that individual privacy is respected. We do not want the kind of invasion of privacy that occurred, for example, with life sciences companies in respect of animal testing. That is exactly the kind of problem we wish to avoid. We have discussed this extensively with business groups. We do not believe that it will have a negative effect on investment; we think that the opposite is the case, because honest, transparent transactions will be acknowledged. Indeed, moving to an open register is a process that many organisations, including business organisations, welcome. The hon. Gentleman’s starting point is quite right: the vast majority of companies are completely honest and therefore have absolutely nothing to fear from an open register.

Oral Answers to Questions

Debate between Vince Cable and Jonathan Djanogly

Thursday 7th February 2013 Commons Chamber

[Vince Cable]

I would like to acknowledge the contribution the hon. Lady has made through debates in the House to this very important issue. The Minister of State, my right hon. Friend the Member for Sevenoaks (Michael Fallon), has launched a significant initiative with business in order to reduce that problem. We also have a trade financing scheme, working with Kingfisher to try to ensure that credit flows through the supply chain. The key point is that credit does not depend solely on banks; it also depends on the big primes, whether in the retail sector or in manufacturing, and we are providing substantial support to small companies caught up in that problem.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

Businesses in Huntingdonshire are reporting to me that access to credit has significantly improved over the last year, which is very good news indeed. The complaint I am increasingly getting is that banks are becoming detached from their customers—that, because of regionalisation and formulaic processes, they still cannot get to the right people. Are the Government addressing this issue?

[Vince Cable]

Yes, the decline of relationship banking has been a long-standing problem and it underlines the difficulties my hon. Friend describes. The factual position is that last year a third of all applications to the banks for loans were declined, according to SME Finance Monitor. When appeals were made to an independent arbitrator, some 40% were successful, which shows how bad the banks are in sifting good credit from bad.