[Relevant document: the Fourteenth Report from the Joint Committee on Human Rights, Session 2005-06, Legislative Scrutiny: Sixth Progress Report, HC 955.]
Order for Second Reading read.
I beg to move, That the Bill be now read a Second time.
The Bill will reform the criminal law on fraud and dishonestly obtaining services. It applies to England and Wales and to Northern Ireland; Scotland has different provisions.
We know that fraud has a massive impact on the United Kingdom economy. It is difficult to give precise figures, because fraud is by nature secretive, but in 2000 National Economic Research Associates estimated that it cost the UK economy £14 billion. In 2004, Norwich Union suggested that the cost had risen to more than £16 billion. Despite the public perception that most fraud is a victimless crime, the reality is that it hits most of us. We all pay higher prices for security systems, banking services, credit and goods, and of course we also pay higher premiums for insurance. If the Norwich Union estimate is right, fraud is costing each household more than £650 a year.
Tackling fraud and the provisions of the Bill are therefore important to everyone. The Government’s strategy for tackling fraud has three aims. The first is to get the law right, and is the reason for the Bill. The second is to improve the investigation of fraud by the police and other agencies. The third is to ensure that the courts deal expeditiously and effectively with fraudsters. The investigation of fraud is being considered by the fraud review that the Attorney-General is currently leading, and which is expected to report soon. I shall return to that later. We have also agreed to deal with the issue of trials, particularly the contentious question of non-jury trials, in another Bill.
This Bill was the subject of a great deal of discussion in another place. By the end there was broad all-party support for most of its provisions, although I am sure that Opposition Members will want to test the detail in Committee.
Strange as it may seem, no general offence of fraud exists today. When lawyers talk of fraud, we refer collectively to a wide and complex array of deception and theft offences. The Theft Acts and the common law, compiled somewhat haphazardly, have the task of encompassing the wide range of fraudulent conduct.
In 1998, the Government asked the Law Commission to review this area of law. The commission conducted a lengthy and painstaking review, for which we thank it, producing a report in July 2002. Unsurprisingly, it concluded that the existing law on fraud was deficient and proposed changes, most of which found their way into the Bill. It identified certain key problems. First, the deception offences in the Theft Acts tend to be specific and narrow, which makes them vulnerable to technical assaults. Defence lawyers are often able to argue that a particular behaviour fell just outside the definition of the offence with which the defendant was charged, or that the defendant was charged with the wrong kind of deception and so ought to be acquitted. Defendants may indeed face the wrong charge or too many charges, and indictments may be excessively complex because of charges relating to various alternative counts.
Secondly, deception is an essential ingredient of the offence. That requires a victim to be deceived. However, a shop assistant who accepts a card for payment may be indifferent about whether the cardholder has authority to use the card as long as the payment goes through. Machines and computers have generated new problems. For example, a ticket machine has no mind of its own: can it be deceived? What of problems such as internet phishing? The more we use machines to obtain goods and services, the greater such problems are likely to become. So far the old laws are coping with those developments, but the signs of stress are beginning to show.
The Law Commission rightly took the view that it was unrealistic merely to plug the loopholes in the deception laws, or to try to create a new collection of specific new deception offences, as such piecemeal reform would produce even more complexity. Instead, the commission recommended a new general offence of fraud that would make the law more comprehensible to juries, would be fairer to defendants by making the law more straightforward, and would encompass fraud in its many unpredictable forms. In proposing that change, the Law Commission made two specific recommendations in relation to the law. First, the focus should be on dishonesty rather than on deception. Secondly, proof of gain should no longer be essential to proving the crime: it should be enough that the offender intends to make a gain for himself, to cause a loss to another, or to expose another to a risk of loss.
The Bill creates the general offence of fraud in clause 1. It will replace provisions in our law that are in daily use in the courts. It is important that we get those changes right. That is why, in 2004, after the Law Commission's report, the Government decided to carry out a further consultation on the proposals. The consultations showed wide support for the proposal for a new general offence. Most stakeholders agreed that it would be right to focus the crime on the dishonest behaviour of the defendant, rather than the deception of the victim. Most also agreed that the Law Commission was right to reject the idea of a very broad offence of dishonesty, which risked being too uncertain.
The general offence in clause 1 requires not only dishonesty and the intention of making a gain or causing a loss, but one of three other elements, which must be met before the crime can be charged. The three elements are: fraud by false representation, fraud by failure to disclose information, or fraud by abuse of position. Let me briefly describe each of them.
Fraud by false representation is set out in clause 2. The extra element is that the offender makes a false representation knowing that it is, or might be, false or misleading. The types of representation covered may be of fact or law, including making a representation as to a person's state of mind. There is no restriction on whether it is written, spoken or in non-verbal communication. The representations can be implied or expressed in any form. For example, it can be done by entering a stolen chip or PIN into a machine or by internet phishing, where someone puts a letterhead on an email suggesting it has come from a bank in order to elicit a victim’s financial details.
Under the second limb of the offence, fraud by failing to disclose information, the extra element is that the offender fails to disclose information that he has a legal duty to disclose. There were some differences of view on that proposal between the Law Commission and others. The commission’s report proposed covering circumstances where there was no legal duty to disclose but where one person trusted the other to disclose—where there was some kind of moral responsibility, for want of a better phrase—but in the Government's consultation, although there was widespread welcome for that limb of the general offence, the issue of going beyond a legal duty was questioned.
Some—for example, the Association of Chief Police Officers fraud working group—said that it would create uncertainty in the law. I can see their point. For example, how many of the minor defects of a second-hand car would a seller be trusted to disclose? The Government listened with care to those concerns and responded by restricting the offence to legal duties only—a position supported by the Rose committee, comprising members of the senior judiciary set up to ensure that legislative proposals are as well formulated as possible and can work in practice.
The incidence of credit card fraud, not merely by customers against retailers but often the other way around, is a significant problem, of which I confess I was briefly the victim in South Africa last year. Will the hon. and learned Gentleman tell the House something about the penalties proposed in the clauses and specifically how they compare with existing penalties? Is he prepared, alongside custodial sentences, to consider stiff community penalties and possibly the use of restorative justice?
We certainly need to look at the full range of penalties. Crime involving fraud, particularly cheque card fraud and other credit card fraud, varies in terms of extent. It can be a massive fraud that merits a high penalty. Indeed, the maximum penalty under the Bill is 10 years’ imprisonment. A community penalty and restorative justice may be appropriate if the amount involved were limited, the defendant had a limited record, or none at all. In those circumstances, we could look at various forms of restorative justice, particularly if the defendant were younger. I think that it is about achieving proportionality and ensuring that the appropriate sentence is delivered for the offence that was committed.
The third limb of the offence—fraud by abuse of position—is set out in clause 4. Here, the additional element is abusing a position of responsibility to commit a fraud. It applies in situations where the defendant has been put in a privileged position and by virtue of that position is expected to safeguard another's financial interests, or at least not to act against those interests.
I understand the thrust of the clause, to which we will obviously have to return in Committee, but is there not a possible problem with the lack of definition involved in a person’s occupying a position in which he is “expected to safeguard” somebody else’s interests? That is a much wider term than “a duty to safeguard” such interests.
We need to ensure that we have a view about how a relationship is created. It can be created in various ways, such as by contract, through various relationships or by a legal obligation. It is clear that, as long as there is a basis for ensuring that a person has a fiduciary duty to another person, there is the potential for such a charge to be made. But in prosecuting any such case, it will of course be necessary for the prosecutor to ensure that he identifies the way in which the circumstances had developed, and whether a fiduciary duty had indeed existed. It will then be up to him to show that that is what happened.
The Solicitor-General has used the precise expression “a fiduciary duty”, which would already provide a definition that appears currently to be absent from clause 4. In saying that, I emphasise that he might be able to persuade me during our proceedings that the current wording is better; I simply wish to register that this issue causes me some concern.
I wish to make exactly the same point. I am unclear as to why the expression
“he is expected to safeguard”
should replace a clear reference to a fiduciary duty. The question that all Members wish to ask is: who is the “he” who is expected to provide the safeguard? Is it the man on the Clapham omnibus, or the judge; or will the terms of contract provide the safeguard? What does the expression “expected to safeguard” mean? We will clearly need to explore that issue in Committee, but if the Solicitor-General can help us to understand it now, that would be to the advantage of us all.
The Law Commission cogently set out its views on how this relationship should be formed. In each prosecution, it will be necessary to assess the particular circumstances and whether there is a duty, in that a person is expected to safeguard, or not to act against, the financial interests of another. It will be for the prosecutor to show that that relationship existed, and, in due course, for the court and the jury—if it is a jury trial—to determine whether such a relationship existed.
Might that include the position of a friend? For instance, if I am selling something to a friend of mine who happens to know that its value is far higher than the price that I am selling it to him for, will he be required in law to reveal to me the full value, and will he be guilty of fraud if he fails to do so?
I do not think that that would arise under this limb of the offence, but it would depend on the circumstances and the relationship between the friends. If they are dealing as equals, it would be a straightforward contractual relationship. Under this limb, for there to be an abuse of position, it is required that a particular duty is owed by the individual, over and above that which people have when they enter into a normal contract to purchase property, or anything else.
I note the characteristically cautious reply that the Solicitor-General gave to the hon. Member for Rhondda (Chris Bryant), but is it not the case that the far more likely reaction of his friend would simply be to think that he has undervalued one of his own possessions? That is such a spectacularly implausible scenario as to merit no further discussion.
The nature of the Bill probably means that the detail is the most important aspect, but it is true that clauses 3 and 4 overlap. It is possible for one single action to be an offence under clause 3, which is reasonably happily drafted, and under clause 4, about which I have much greater concerns.
There is some overlap and I say again that it would depend on the circumstances between the two friends undertaking the financial deal that my hon. Friend the Member for Rhondda (Chris Bryant) described.
Fraud by abuse of position improves upon the current law, because it may be problematic under the current law to show that a victim has been deceived in circumstances where the defendant occupies a position of trust. In proposing the new offence, the Law Commission recommended that it should be an offence of fraud only if the abuse of position is both dishonest and secret. However, again after considering the arguments put forward during the consultation in 2004, the Government decided not make secrecy an essential part of the offence. We took that view because secrecy is difficult to define and would represent an unnecessary complication, which could lead to technical arguments in court. Moreover, conduct that is not secret is not any the less reprehensible and thus should come within the ambit of clause 4.
The Fraud Bill also creates some offences designed to complement the new general offence.
My hon. Friend will know that on 1 June EU Ministers met and agreed a formula for sharing evidence between EU countries on matters such as fraud. Does he agree that that decision, along with the decision to implement the European arrest warrant, which came into effect in 2004, will help us on cross-border issues, so that no one who commits a fraud in another EU country should believe that that will necessarily prevent them from being brought to justice here?
It is certainly right that some of the developments in the global economy that have so benefited our economy have also benefited a lot of fraudsters, who operate in Europe and globally. We now see frauds committed by a group on one continent against victims on another, especially by use of the internet. We are now developing relationships between the various prosecutors and Governments to build up new mechanisms, such as the one that my hon. Friend described, that will enable law enforcement agencies to keep abreast of the changes that the global economy is bringing. I hope that those mechanisms will enable us to get ahead of the fraudsters. My hon. Friend is not only well informed but right about the importance of developments in the EU, especially the European arrest warrants.
Some of the other changes in the Bill were recommended by the Law Commission, but others were not. Clause 11 was recommended by the commission and creates a new offence of “obtaining services dishonestly”. It is probably the most important other provision in the Bill, and the offence will have a maximum penalty of five years on indictment. It will replace section 1 of the Theft Act 1978 and will fill a gap in the existing law. At present, it is questionable what crime is committed by a person who dishonestly obtains services from a machine. Under current law, the problem is not only that fraud must involve deception, but that services cannot be stolen.
The Solicitor-General mentioned that the maximum sentence for the offence would be five years, which is a restatement of the current law. Did the Government give any consideration to increasing the maximum sentence for the offence to make it comparable with the sentence for obtaining property by deception, or with the offences that replace that offence?
We are responding to the broader consultation that took place and the work done by the Law Commission. On the face of it, the penalties that we have set out in the Bill look to be appropriate in all the circumstances. Consideration is always given to whether penalties are adequate, and we took the view that in all the circumstances they were adequate in this case. It is always possible to increase sentences, but it is necessary to look at the circumstances that the offence would contain and to determine the appropriate maximum penalty, in the knowledge that the maximum penalty is rarely imposed. None the less, the provision gives the court an indication of the relative seriousness with which Parliament regards various offences. We have taken the view that five years on indictment is the appropriate maximum, but in due course we can consider in Committee whether a higher sentence is more appropriate, and I shall be happy to discuss that point with the hon. Gentleman then.
As I indicated, the problem under current law is that fraud must involve deception but that services cannot be stolen, so the new offence of obtaining services dishonestly is a “theft-like” offence and will, for example, deal with a person who gains access to a Sky machine, or television, with an illegal decoder. It would also cover longer-standing misbehaviour such as gaining access to football matches without paying, so it moves from the more substantial to the not necessarily more substantial.
I do not want the Solicitor-General to expand his examples too widely, but would the provision also apply to downloading music? Would it put a new weapon into the hands of large music corporations for protecting their intellectual property—as they would see it?
It may. Such corporations could use other provisions, but often the real problem in the area that the hon. Gentleman mentions is not so much with the law but with the practicalities. Some of those items are downloaded from countries a long way away, so whatever our law, it is sometimes difficult for people, artists or companies to protect their copyright. That has been a long-term issue, and is better dealt with not so much through the criminal law, which is obviously related to a particular jurisdiction, but through international agreements. When I had ministerial responsibility for dealing with issues relating to internet fraud, I helped to negotiate agreements with Japan and a number of other countries so that we could begin to make the international agreements that would provide a basis for trying to protect some of the copyrights and international artistic licences that need protection. The provision could be used, but the jurisdictional problem is greater than the legal one.
The provisions to which the hon. and learned Gentleman referred had some limitations, which we believe that the broader offence will be able to ensure are covered. There have been quite a lot of changes in technology and in the way in which people commit frauds. The previous legislation had constraints. The proposed provisions are designed to ensure that we can deal with some of the modern phenomena that are causing problems, various frauds and the dishonest obtaining of services. They will ensure that the legislation covers those issues in a broader and more effective way than the previous legislation did.
That is why the Law Commission came forward with the proposal. If the hon. and learned Gentleman reads the report—I am sure that he has done so—he will be aware that the Commission argues that the provisions set out in the current legislation need to be updated. The Government have endorsed that view. When we went out to consultation, the proposal was warmly welcomed by all who commented on that consultation in 2004.
Clause 6 did not form part of the Law Commission’s report, but was developed through consultation with law enforcers and other key stakeholders who were concerned about the restricted scope of the existing law as regards the possession of articles preparatory to committing acts of fraud. The clause therefore introduces a new offence of possessing articles for use in, or in connection with, the commission or the facilitation of a fraud. It draws on the current offence in section 25 of the Theft Act 1968. Under that section an offence is committed when a person has with him, when not in his place of abode, any article for use in the course of, or in connection with, any burglary, theft or cheat.
The requirement that a person be outside his place of abode when going equipped may have worked in 1968, but in the modern world, with computers, fraud may be perpetrated by a person sitting at his computer terminal in his home. The offence should not be limited to possession outside the home.
Some commentators have referred to the fact that there is an absence of any mens rea element in this part of the Bill. The Solicitor-General has already referred to the “going equipped” part of the provision. I am concerned that a person could be in possession of an article that was for use in the course or in connection with a fraud, without knowing that that article would be for use in connection with the fraud. That is dangerous. Although I understand the reasoning for updating the law, which is very important, I think that it would have been preferable to put in the Bill a clear mens rea element.
As it needs to be shown that there was an intention that an article would be used for any involvement where someone was going equipped in connection with any burglary, theft or cheat, there is a requirement for some degree of intention. There is a mens rea, and case law shows that.
I suggest that the problem may go further, particularly with regard to clause 7. If one were a member of the Magic Circle, with all the impedimenta for deceiving people, and one were going through the streets or even in one’s own home, one might frequently be making an article that could be used or adapted in a connection with fraud. I suspect that that is one of the reasons why the original cheating provisions were so tightly drawn. That is something else that we may be able to examine during the passage of the Bill. I am sure that it is not the Government’s intention to make it impossible for conjurors to perform their trade.
Let me reassure conjurors throughout the land that, provided that they are not intending to get involved in burglary, theft or cheats or anything else of a similar nature, they should be all right. Let them continue with their tricks.
The aim of the Bill is to ensure that we get particular individuals who are seeking to go equipped, and may be equipped in their home, and to ensure that—
If the hon. Gentleman will let me complete my thought, perhaps I will. It is the intention that we should be able to catch those who are involved in something that is, properly, prosecuted. It is also the intention that there should be a maximum custodial sentence of five years, and that no tricks should be able to get someone out of choky.
May I bring the Solicitor-General back to the point made by the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) about the possibility of someone being in possession of an item defined in clause 6(1), but not knowingly? Would the Solicitor-General be amenable to returning to that matter in Committee? The simple addition of the word “knowingly” in that subsection would deal with the point.
May I make it clear that clause 6 does not go too wide, in my view? It does not introduce a strict liability offence in any way. Its wording draws on the wording of section 25 of the 1968 Act in order to attract the case law that goes with that section—notably the case of Ellames, which is referred to in the explanatory notes and which established that the prosecution have to prove a general intention that the article will be used by the possessor, or by someone else, for a fraudulent purpose. We are not dealing with a strict liability offence for which members of the Magic Circle or ordinary honest citizens are going to be caught.
There is a distinction. Under the present law of going equipped, if a person were out at night with a jemmy and various other tools, as an initial starting point it would be fairly obvious from the nature of those tools that he was up to no good. The distinction is that an article that could be used in connection with fraud might look perfectly innocent to a person such as me, who is not high-tech, or whatever the word is. Without knowing it, I could have something on my computer that might be used in connection with fraud. If I walked down the street with a jemmy, clearly that would be a different thing altogether.
Again, the hon. Gentleman seems to suggest that this is a strict liability offence, but it is not. If he were in possession of something that he ought not to be, but did not know and did not have any intention, he would be able to put forward a defence. That is right and proper. Nobody intends to catch people who are not acting inappropriately or in a way that goes outside the provisions set out in the case of Ellames. No doubt this is the sort of issue that we can discuss at some length in Committee. Having given way fairly generously, and being aware of the time that has elapsed, I would now like to try to make some progress on the rest of the Bill.
Clause 7 introduces a higher-level offence of making and supplying articles for use in fraud. This aims to catch groups who create articles for use in what may be very substantial frauds. For example, there are organised criminals who do not engage in actual frauds themselves but who sell lists of personal financial and banking details for others to misuse. The maximum custodial sentence of 10 years serves as a strong deterrent to criminals who prosper from an industry based on fraud.
Clause 9 implements a recommendation made by the Law Commission in 2002 in a separate report on multiple offending. The commission recommended that, as the existing offence of fraudulent trading under companies legislation applies only to companies, it should be “extended to non-corporate traders”—for example partnerships, sole traders, trusts or companies incorporated abroad. Fraudulent trading is an activity offence, and carries procedural and evidential advantages because it is not limited to specific fraudulent transactions. The proposal was widely welcomed in the Government’s consultation of 2004. The new clause 9 offence, together with section 458 of the Companies Act 1985, will carry a maximum sentence of 10 years.
Let me now turn to the one area of the Law Commission’s proposals that elicited opposition when the Government consulted stakeholders. The Law Commission proposed the repeal of the common law offence of conspiracy to defraud. Opposition to that proposal has come not only from law enforcers and the judiciary, through the senior judges on the Rose committee, but from many others, including the Fraud Advisory Panel, the Confederation of British Industry and the Law Society. The Government took account of those considerable objections, so the Bill does not include that repeal, although we will review the position three years after its implementation. We accepted the arguments for the retention for the time being of the common law offence, based on the need to provide a seamless transition between the current situation, in which there is heavy reliance on the offence, to compensate for defects in the statutory law, and the stage when its abolition can be safely contemplated.
The common law offence of “conspiracy to defraud” is flexible. It is of use in frauds that involve a number of conspirators and hundreds of offences. If each item were charged, the indictment would be lengthy and extremely complex. Conspiracy to defraud allows a charge that covers the agreement to carry out the crime. There are limitations, too, on the application of statutory conspiracy, and the common law offence can be used in situations where statutory conspiracy cannot be used—for example, when the final offence is carried out by someone outside the conspiracy. Overall, the new offences go a long way towards filling many gaps in the law. However, we are concerned about a number of issues, and we should ensure that the common law offence of conspiracy to defraud remains in place, at least for the meantime.
The Law Commission will shortly publish a report on assisting and encouraging crime. Any reform of the law on conspiracy to defraud or of other laws that flows from that work should be taken into account. We intend to consider the report, all the circumstances and the way in which conspiracy to defraud has been used, then make a decision, which will be informed by our operational experience, not only from the Bill once it is in force, but from the multiple offending provisions in the Domestic Violence, Crime and Victims Act 2004. Those provisions enable multiple offenders to be brought to justice for the totality of their offending. They have not yet been implemented, but we hope to bring them in later this year, making it possible for the courts to deal appropriately with fraudsters who are responsible for scams involving hundreds of victims. The Home Office will review the operation of the Bill three years after its implementation, and it will focus on conspiracy to defraud. We have put in hand measures to collect the information for the review from all Crown prosecutors so that we have a clearer picture of the way in which the common law is used after the new law is implemented.
I met the staff of the Serious Fraud Office this morning, when I made the same point. I want them to look at the ways in which they use conspiracy to defraud to ensure that it is used appropriately, and to set out their reasons for using it in particular cases so that we can make a more effective assessment in three years’ time. That will provide information on which to base a decision about whether the common law offence can be repealed. In the meantime, the Attorney-General’s guidance to prosecutors on the use of the common law offence will prove instrumental. It will state what information must be collected from the outset to inform the review, as well as setting out the circumstances in which the use of the common law might, or might not, be justified.
The Bill intends to make fraud law easier to understand. In that spirit, can the Solicitor-General define exactly which areas the common law offence of conspiracy to defraud will cover that are not covered by the new offences in the Bill?
The conspiracy to defraud has proved useful to prosecutors in several ways. For example, it can be used to reduce the number of charges that would otherwise be brought. It can be used, too, if the substantive offences are steps to achieve a wider dishonest objective, such as swindling a large number of people. It should not be used where, for example, statutory conspiracy is more appropriate. There are circumstances in which the conspiracy has involved certain individuals who carried out the steps preparatory to the offence, but the substantive offence was committed by somebody outside the circle involved in the conspiracy. There are a number of examples where prosecutors have been able to prosecute people who clearly had a dishonest intent and who were clearly carrying out acts preparatory to a fraud, but who were not involved in the final substantive act. Such cases are extremely useful to the prosecutors.
We hope that the Bill will cover many areas of fraud. However, since even Ministers do not claim infallibility, we cannot be sure that we can create a set of legal provisions encompassing all the areas currently covered by conspiracy to defraud. We therefore need to await the outcome of events and see how the Bill operates in practice. If we do not need conspiracy to defraud to capture those who are committing serious frauds, our preference would be to repeal that provision in due course. But if we still find a series of examples in which we need to use conspiracy to defraud, we will have to consider whether we can repeal the provision, or whether we should consider alternative tightening provisions.
The Theft Act 1968 was relatively good. In 1968 it was regarded as innovative—in plain words we would be able to encompass all the circumstances of theft. In practice, it has had to be amended on at least two occasions, and has been the cause of much stress, as the world has changed. We will review the operation of the Bill and see whether a repeal is possible.
Does my hon. and learned Friend agree that when people are charged with criminal offences, it is important to make it as clear as possible in the charge what the offence is? One of the difficulties with the common law offence of conspiracy to defraud is that it is too general a provision. We should always try to ensure that offences are as particularised as possible. That is why the common law offence ought to be repealed as soon as possible.
If we can repeal the offence, our preference would be to do so, but we want to ensure that we deal with the issues of fraud, so that is not appropriate at present. The prosecuting authorities and the judges took the view that we need to approach the matter with caution. The Rose committee, whose opinion is highly valued, did not consider it appropriate to repeal the offence at this stage. In principle, though, I have sympathy with the point raised by my hon. Friend.
The Bill will not be a panacea for preventing fraud. We should not overrate the capacity of the criminal law alone to solve this or any other problem. The Bill is only one of a number of measures in hand to combat fraud. Among those measures, we have provided considerable resources for the Serious Fraud Office and the City of London police to tackle fraud, including £1.08 million this year, which has been matched by the City of London. That has gone to the City of London police. We have also set up the Serious Organised Crime Agency, which is a new force in tackling and defeating serious organised crime.
The Government plan to introduce a stand-alone Bill to address the issue of non-jury trials. We have also set up a wide-ranging review of fraud to examine the UK’s long-term response to fraud. The fraud review should report shortly, and we expect it to recommend a coherent strategy for preventing, detecting and penalising fraud, and to suggest ways to improve upon the use of the various tools and techniques at our disposal to reduce the incidence of fraud and the harm to which it can lead.
This Bill is largely based on the Law Commission’s original proposals, and it is only part of the Government’s strategy for combating fraud, but it is a measure that has been eagerly awaited by many of the agencies that prosecute, and by the police. It should improve the prosecution process by reducing the chance of offences being wrongly charged, and provide greater flexibility to keep pace with the increasing use of technology in crimes of fraud.
When hon. Members consider the Bill in Committee and on Report, I hope that they give it a fair wind, so that it can proceed into law and be enforced, which will reduce some of the fraud that is all too often committed against families in this country.
I congratulate the Solicitor-General on having secured that rarest of things for a Law Officer—an outing at the Dispatch Box on Second Reading. I note that the interest of the House has not been wholly seized by this matter, but the Bill is extremely important and I am grateful for the manner in which he introduced it. Furthermore, it is clear that the Bill was well thought through before its initial presentation and I make my remarks against that background.
The Bill is an opportunity to simplify and strengthen the law in an important area. If we get it right, we will undoubtedly improve our ability to fight fraud in all its forms, and we wholly support the principle behind what the Government are trying to achieve. As with all technical Bills, this Bill has quite a long history. There is no doubt that the Law Commission’s 2002 report was a document of great value. I would not want Second Reading to pass without expressing the Opposition’s gratitude for the Law Commission’s work, because the report was a model of its kind. I note that the Serious Fraud Office was extremely positive about the commission’s proposals, stating that the suggested improvements would not only clarify offences of fraud, but simplify the law to allow more effective prosecutions, and I am sure that all hon. Members want to see exactly that.
I agree with the Solicitor-General that, although fraud sometimes sounds like an esoteric issue that affects others, that is not the case. The scale of the problem is considerable—his estimate of £14 billion appears well researched—and everyone pays for it through extra credit card payments, if nothing else, so the burden falls upon the law-abiding, who provide the fruit of such dishonest activities.
Fraud is extensively used to fuel wider criminal activity. The evidence from the National Criminal Intelligence Service shows that, unless we succeed in tackling fraud properly, there will be knock-on consequences in terms of wider criminality and, indeed, terrorism. In my career as a barrister, one fraud case that I did involved allegations of widespread benefit fraud that was being used to fuel the activities of the IRA. The fraud was taking place on a massive scale in south-east London with stolen benefit books and the case brought home to me how the eventual destination of such funds can be inimical to the public good.
There are clearly problems with the current law, which originates from a variety of sources, and I accept the Solicitor-General’s comments on that matter. The Theft Act 1968 attempted to simplify matters on obtaining property by deception, but the patchwork of law is unsatisfactory and the multitude of overlapping but distinct statutory offences does not make it easy for the prosecutor to decide the counts on which to draft an indictment, whether there should be alternative counts and how best to present a case to a jury.
In my experience of being involved in fraud trials, an astonishing number have come unstuck in one form or another, long before they could be presented to a jury, simply because the prosecutor—I hasten to add that I was defending in these particular cases—had failed to understand the true nature of the fraud or, indeed, who the ultimate victims were. Although the evidence of dishonesty was manifest, it was impossible to show that the people who were alleged to have been deceived had been deceived. In some cases, the wrong target altogether had been selected. In a case where it looked as though a building society had been the true victim, it became clear as the case proceeded that the true victim was almost certainly the taxman. Those examples classically illustrate some of the problems that arise.
In those circumstances, there is a powerful argument for reform. The Bill sets out to achieve that in a form that seems to have considerable internal logic and coherence. The creation of a new single offence of fraud that can be committed in three ways appears to be eminently sensible. We will judge it and scrutinise it in Committee on the basis that it fulfils three requirements. First, it must overcome the complexity of the current law and make it more comprehensible to juries. One way of achieving that would be to make fraud indictments simpler and more self-explanatory. At first glance, the Bill seems to go a long way towards achieving that goal.
Secondly, the new offence must provide a genuinely useful tool for prosecutors. My Front-Bench colleagues in the other place have said that the current range of specific offences can lead to complicated decisions, so we will need assurances as the Bill goes through that a single offence will really help to focus investigations at an early stage and help prosecutors to get the charge right.
Thirdly, we will need to be satisfied—we believe at first sight that we shall be—that the new offence will be adaptable to the changing face of criminality in the 21st century. The Solicitor-General pointed out areas where new offences have been created to deal with new technology. We entirely welcome that. We will seek in Committee to ensure that it delivers what he believes that it will.
Let me, at the risk of repetition, raise one or two slight areas of concern. The Solicitor-General mentioned the continuation of the common law offence of conspiracy to defraud. He provided some reassurance in the form of a promise that the Government will not just let that issue drift off into sleep. I would be happier if we had greater reassurance, perhaps by means of a sunset clause to ensure that, unless the Government revisited the matter within three or five years, the power to bring a prosecution under common law for conspiracy to defraud would lapse. The arguments against keeping the common law offence of conspiracy to defraud are enormous. Throughout my career at the Bar, there have been numerous occasions on which that offence has come into disrepute when used. It is possible for a person to be convicted of such an offence if he conspired with another person, yet if he carried out the act on his own, it would not amount to an offence. That immediately introduces an element of concern for anybody who believes in civil liberties. Although I am mindful of the Solicitor-General’s comments on the subject and appreciate that Governments have a tendency to caution, I am sorry that they have not been bolder, especially since the Law Commission stated emphatically that it perceived no good ground for the continuation of the common law offence of conspiracy to defraud. Indeed, the Government’s report of November 2004 acknowledged that when it stated:
“It is normally fundamental to a codification exercise such as this, that the common law should be repealed in favour of the new statute”.
It is strange that the Government have clung so obstinately to not doing that.
I am mindful of the Solicitor-General’s comments on the views of Lord Justice Rose and his Committee, but against that, the hon. and learned Gentleman need only read the speeches of Lord Lloyd and Lord Ackner—his contributions on many aspects of the law and, indeed, to legislating in Parliament, will be sadly missed—who argue that there is no good ground for retaining the common law offence. I hope that the Government will listen during our proceedings on the Bill. I shall not press the Solicitor-General to get rid of the offence immediately, but we need cast-iron reassurances that, unless the Government can make a good case for retaining it, we can have a finite date by which it will go.
The hon. Gentleman referred to the Rose Committee. Let me refer him to the letter from Sir Christopher Rose, representing the views of senior judges. It stated:
“We said that it would be risky to repeal common law conspiracy to defraud, as it can be the most effective charge in a case where multiple defendants are engaged in a fraudulent course of conduct. There are limitations on the law of statutory conspiracy, which has had something of a chequered history. All the judges present at the meeting agreed the Bill should not repeal common law conspiracy to defraud.”
That is not an example of the Government deciding not to do something but of the Government listening. We have listened to the consultation.
I, too, have listened to the consultation. If I had not been listening, I—and, I daresay, my noble Friends—would be pressing for the removal of the common law power. I want to make it clear that I do not seek to do that because I have read what has been said. Distinguished as the group may be that has called for the retention of the powers, I remain mildly unconvinced.
I hope that the Bill is sufficiently effective that it becomes crystal clear in two to three years that the common law offence of conspiracy to defraud is no longer necessary. The other option that one might consider if the offence remains necessary is whether that hole could be filled by something else, which does not have some of the problems that are associated with common law conspiracy to defraud that the Solicitor-General heard me discussing. He would, I am sure, be the first to acknowledge them. There may be a halfway house that we need to consider and that we have not yet explored.
Conservative Members will not try to amend the Bill to get rid of common law conspiracy to defraud. However, knowing as we do the constraints on Government of timetabling and so on, we do not want the opportunity to slip through our fingers so that we end up with the offence in 10, 15 or 20 years. I believe that there might be some way of at least ensuring that the matter is properly revisited so that either the offence’s retention is justified or it disappears.
It concerns me that arguments for the retention of the common law offence in prosecuting multiple offences are affected by the fact that provisions in the Domestic Violence, Crime and Victims Act 2004, which the hon. Gentleman and I spent time debating, have not been implemented two years on. That might have coloured the judicial voices in favour of retention in a way that would have been unjustified had implementation occurred.
The hon. Gentleman makes a good point. Indeed, one problem, given the plethora of legislation that the Government introduce, is the astonishing length of time that it takes to bring into operation much of the legislation that we pass. I do not wish to get diverted down a side road, but I would say to the Solicitor-General that we will try at least to probe the Government in Committee as to how we might best proceed in this regard. I would feel uncomfortable if we were really saying that it was inevitable that such a blunt instrument as common law conspiracy to defraud should continue to be an offence for the foreseeable future. If that turned out to be necessary, we would have failed to legislate properly here. Minds need to be concentrated on that issue.
I would like to express my gratitude to the Government, because I had feared that there might be a major difference between us over the role of juries in fraud trials, but that issue has been parked to await other legislation. May I say to the Solicitor-General that the sensible thing to do would be to wait and see how well this legislation works? If it turns out greatly to have simplified the law on fraud, no more powerful an argument could be devised for persuading the Government to drop their idea of getting rid of juries in certain fraud trials in its entirety.
I have always taken the view that juries are perfectly capable of understanding fraud trials. Indeed, as I have pointed out to the Solicitor-General, in my experience, the cases that collapsed did so long before the jury had the opportunity to consider the issues. I remain concerned about the proposals on juries in fraud trials that the Government had floated, and that will doubtless be a subject for debate at another time. The Government appear to wish to move speedily towards implementing their proposals to restrict the use of juries in certain fraud trials, but it would be odd if they did so immediately after implementing new legislation that could go far towards reassuring them that fraud trials can be considerably simplified.
In interventions on the Solicitor-General, I raised some matters of detail that gave rise for concern. We shall doubtless return to them in Committee, but I want to put them on the record today. Fraud by abuse of position is a concept that most right-thinking people have no difficulty in considering improper. However, the definition in the Bill of the position in which such fraud is committed is woolly. I am worried that we have developed a consistent pattern in recent years of passing legislation whose scope is uncertain in criminal justice terms. People behave reprehensibly at times in ways that other people would consider to be of poor moral standing. The hon. Member for Rhondda (Chris Bryant) gave the good example of a friend not revealing to another the true worth of some chattel that he was selling off to a third party—or to the friend himself—when he knew that it was in fact very valuable. However, we should be careful about moving from a position of deeming such activity morally reprehensible to saying that it is in breach of the criminal law.
Clause 4 deals with fraud by abuse of position. However, unless we define exactly who is intended to be caught by the provision, quite a wide range of people—including relatives, for example—could fall into that category. I want effective legislation on the statute book and I believe that it is possible to sharpen this measure to make it clear who is intended to be caught by it. If we do not improve clause 4, the danger is that we will end up bringing prosecutions in circumstances in which people are surprised to learn that some special duty lies on them to protect another person from making a loss.
I also highlighted the issues surrounding the making or supplying of articles for use in frauds and was delighted to hear the Solicitor-General comment that the provisions were not intended to catch conjurors or members of the magic circle, but I have to say that, looking at the plain text of the statute, such people might well be caught. The use of gadgetry that can potentially be used to defraud in order to entertain is a well-established practice, so I wonder what other safeguards could be provided to ensure sufficient mens rea in clauses 6 and 7 to avoid idiotic prosecutions of individuals who never had any intention of defrauding anyone. We shall look further into the detail of those clauses in Committee, as we will examine further the general issue in clause 2 of what constitutes gain or loss.
I do not want to take up more of the House’s time on Second Reading. As I have already told the Solicitor-General, we welcome the Bill.
The Solicitor-General makes a perfectly reasonable point that it all comes down to money and there is no doubt that resources for the investigation of fraud are limited. My hon. Friend may have seen the Norwich Union briefing, which showed that it uncovers thousands of fraud cases in any 12-month period, but that only a very small percentage of the total are even passed on to the police because of the company’s awareness of the lack of police resources.
Certainly in my experience—and it is one of the reasons why the Serious Fraud Office was set up—many a prosecution in the late 1980s and early 1990s was investigated by officers of county constabularies who, although well meaning, were often out of their depth when it came to dealing with the elements of fraud. That often coloured the way in which the prosecution was conducted. By the time the prosecutor, and certainly barristers, got involved, it was evident that the whole case was completely on the wrong track. There were real problems.
We may have an opportunity to debate in Committee the extent to which the Serious Fraud Office has been able to take a grip on the matter, but it is worth remembering that many frauds that concern individuals do not fall within the Serious Fraud Office’s remit. They are simple straightforward frauds, but they nevertheless have sufficient complexity to merit having officers—certainly police officers and, in my view, members of the Crown Prosecution Service—working on them who have an understanding of the concepts and pitfalls. My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) made a fair point, but there are resource implications, so to that extent, I am sympathetic to the Solicitor-General and the problems that he faces.
Certainly, the fraud review led by the Attorney-General will examine some of those issues, particularly how the police have dealt with fraud—mainly lower-level frauds that do not fall within the ambit of the Serious Fraud Office. I hope that, as a result of that review, we will see some improvements in the policing of fraud. Without wishing to widen our debate too much, I believe that the larger police forces will allow greater specialisation so that chief constables can identify the experts to focus on fraud cases. That should help to ensure that police forces have the level of expertise that the hon. Gentleman wants. Having larger forces will help.
I am not wholly convinced by the Solicitor-General’s arguments on the last point, especially, of course, as one of the most effective police forces in dealing with fraud is the City of London police, which is rather a small force. My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) may agree from personal experience not only that it deals with fraud rather effectively, but that its general policing is pretty effective at every conceivable level. I am afraid that that is where the Solicitor-General and I part company.
The City of London police are expert at dealing with fraud, but we have given them more than £1 million extra to ensure that they are, and the City gives them even more. That costs extra resources. If he wants to replicate the specialism of the City of London police across the country, I would be interested to see his commitment to doing so.
Is the hon. Gentleman unimpressed, as I am, by the Solicitor-General’s specific contribution in saying that we have given £1 million to the City to improve the capacity to investigate fraud? Should not those costs fall entirely on the City of London? Why should the general taxpayer be required to provide money in that way?
At the risk of straying mildly but not too far away from this issue, if the City of London was allowed to raise and keep its own rate precept of both business and domestic rates entirely to itself, so that none of it was sent to any other part of the country, including the hon. Gentleman’s constituency, I am sure that it would not ask the Government for a ha’penny. In those circumstances, he might go away and usefully review the statistics on what happens to the City’s money, which it raises both from the business community and from its domestic residents.
I look forward to engaging with the Solicitor-General in the debates in Committee for sensible scrutiny of the Bill. In its framework, it appears well judged. We will try to ensure that, when it leaves the House, it is improved in any area where that is required.
I speak in support of the Bill today. It looks to be a good Bill—one that has had a very long gestation period, which reflects its complexity, rather than its size. It is one of the better Bills for me, as it is rather slim. It is a credit to all concerned in the consultation on and the production of the Bill that it has been drafted so concisely. The accompanying explanatory notes are well laid out and a great help to people like myself, a non-lawyer, in understanding the logic behind the Bill.
Fraud is not a victimless crime; it is an insidious, indiscriminate crime that wreaks long-term damage on UK business, not only in cash terms but in undermining confidence in the institutions that are needed to trade and create wealth. It hits the pockets of individuals and creates misery for many families. It costs the people of our country dear, and I should like to extend the figure that my hon. and learned Friend the Solicitor-General put on that: it is now approaching £20 billion a year. It is a large business, and its proceeds keep organised crime funded. It also funds terrorist organisations—the very groups that are pledged to bring down our way of life. So I welcome this approach to tackling those problems, but I remind my hon. and learned Friend that the Bill is only part of the solution: we cannot will the end without providing the means.
Let me talk about the enforcement of the Bill and, if I have time, about the responsibility of financial institutions in their struggle against fraud. Who do we envisage investigating alleged fraud? Will we ensure that all investigating police officers tasked with applying the law will be trained to understand it, able to contend with modern technology or have access to specialist support? Will they be properly supported by Crown Prosecution Service lawyers?
Will judges be trained and maintained as specialists in fraud cases, to retain and reinforce expert knowledge and skill within the law? One cannot imagine going into hospital for a knee operation, or for neurosurgery, and being told that a heart surgeon will do the operation. It is ridiculous that a judge who has presided competently over a fraud trial might never oversee another fraud trial in his career. Society cannot afford such a waste of resources.
With regard to the financial institutions, it is no longer acceptable, if it ever were, for companies to pay out on claims without making thorough checks on their legitimacy, and merely to recoup their losses by passing on the costs to all policyholders through increased premiums. The scale of the problem was highlighted by Norwich Union, which, in 2004, identified and prevented 15,000 insurance frauds. It estimated that 4,000 would have met the criminal level of burden of proof. Because it did not want to over-burden the police, it submitted just 41 of the most serious cases, in which there were possible links to organised crime and the evidence was overwhelmingly persuasive. Of those, 27 were taken up by the police, and 18 came to court and resulted in conviction. I applaud Norwich Union’s attempt to tackle fraud, but until every organisation, bank and insurance company takes the same stand against organised crime and fraud, the costs of which are met through extra bank charges and premiums, it will not be tackled seriously.
Do the police have the resources to process all such cases? Do we seriously intend to use—I look to the Solicitor-General to give an answer—the Proceeds of Crime Act 2002, and to channel funds to the police for this activity, so that it becomes self-funded? Does he have any other ideas about finding resources?
Speaking not as a lawyer, but as the man on the Clapham omnibus, let me examine the plain English guide in the explanatory notes. The Law Commission recommended that the conspiracy to defraud charge should be abolished, but then had concerns that limitations on scope meant that certain types of secondary participation and fraud might still only be caught by the common law charge. Will my hon. and learned Friend give some examples? I listened closely to what he said, but he knows that there is still concern. Alternatively, will he say that the Government do not know exactly what the situation might be but that it would be prudent to leave the provision in place, as a belt and braces approach, while they reassess the legislation as they intend to do?
If the Solicitor-General has no specific time scale in mind, does he have in mind a number of cases on which case law can be built up? Until such time, will he not throw out the legislation but reinforce it with a belt and braces approach? This is the man on the Clapham omnibus speaking, not the lawyer, as the general public will not take it kindly if we throw out old legislation and replace it with new legislation that contains a loophole.
As I look through the explanatory notes, I see in relation to fraud by false representation that there is no legal definition of dishonesty. That is a surprise to me and will come as a surprise to people outside. What we have is a tortuous two-stage test as established in the case of R v. Ghosh in 1982. The first question is whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people. If that is answered in the affirmative, the second question must be whether the defendant was aware that his conduct was dishonest and would be regarded as dishonest by reasonable and honest people. That is a tough test, and it is becoming tougher by the week. It is certainly becoming tougher for those who do not come from the same culture and background as others in this country. What constitutes “honest” and “dishonest”, and what is reasonable and honest behaviour, without a definition of dishonesty?
Paragraph 16 of our “Everyman’s Guide”, the explanatory notes, refers to “phishing” for internet details. My hon. and learned Friend spoke of ties with Japan and other countries, but are we going to extend the provision to America? An internet bank could be established in America and the proceeds could go to Belize, and when the bank folded it could be found that no crime had been committed because no section of jurisprudence covered the total area. Will my hon. and learned Friend work closely with his colleagues to try to close the loophole generated by internet sites based overseas?
Clause 3 is headed
“Fraud by failing to disclose information”.
When I read that, I thought “Here we go”. I must say that it is a very brave idea. It may have escaped others’ attention that we now live in a capitalist society. Capitalists make profit, if not through sheer exploitation of individuals through labour, then through exploitation of knowledge, skills and money. That is a legal activity; it only becomes illegal when dishonesty makes it a criminal fraud. But as I have said, dishonesty is a rather nebulous concept in law because there is no firm definition, only cases in relation to which definitions can be established. Until we can establish firmly what constitutes dishonesty, the pursuit of wealth and gain through exploitation of knowledge and skills in a capitalist society must remain legal. That is one of the problems with which we shall have to struggle on for a bit longer.
Clause 4, entitled
“Fraud by abuse of position”,
causes me a few more worries. I am not talking about family membership; I am talking about a much more difficult problem. I am not talking about insurance salesmen, who must declare to their clients what commission they are being paid, what the risks are and so forth. I am not even talking about building societies that try to sell endowment mortgages: people must be well aware of those risks as well. Insurance salesmen and those selling endowment mortgages are paid for their services and can be regulated, but I am not sure whether my hon. and learned Friend has thought about this: what happens when a company’s directors are in a position of power, influence and authority, and decide that although they are already well paid, they will shovel bucketloads—shedloads—of money into their own pension fund, while the pension fund of the workers for whom they are responsible becomes a black hole? They may say, “We will put X per cent. into our pension fund and X per cent. into our employees’ pension fund”, but when they shovel money into their own pension fund, will they be guilty of fraud by abuse of position at any time in the future? If so, I—the man on the Clapham omnibus—would very much like to sit on the jury, especially if it affects my pension fund.
I think that the Standing Committee should start hammering out—unless my hon. and learned Friend can give us an answer today—whether that would be covered by the Bill, and if not, why not.
The explanatory notes tell us:
“The term ‘abuse’ is not limited by a definition”,
because it covers
“a wide range of conduct.”
Clause 4, they say,
“makes clear that the offence can be committed by an omission as well as by positive action.”
I have some difficulty with that as well.
“For example, an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead at the expense of the employer”
will commit an offence. If the employee is conspiring with the rival, fair enough. If it is a malicious act against the employer, fair enough. However, the employee may be plain stupid. Are we going to start charging people for fraud because of their stupidity? Proof must be provided that not only the company but the person involved made a gain.
My friendly notes say that the definition of property includes intellectual property, “although in practice intellectual property is rarely ‘gained’ or ‘lost’.”
It must be understood that, although the information and knowledge may not be gained or lost, the holder’s equity in that intellectual property can be seriously weakened once that has been leaked into the market. I therefore wish that we would move away from the view that intellectual property cannot be gained or lost.
We have talked about making or supplying articles for use in fraud. I understand that one or two Members are a bit concerned about the software that is loaded on their computers, and rightly so. Software may come with a package and all that stuff. The notes refer to programmes that “can be used” for fraud. Someone will be capable of being charged with having in their possession something that can be used for fraud. For an offence to be committed under the Bill, it should be made clear that the article has been used for fraud or is intended to be used for fraud—one must see that something has been downloaded or used in that manner, rather than someone just being in possession of something that can be used for fraud.
Clause 11 deals with obtaining services dishonestly. Again, this is a cracker. We have to understand the wording in law with regard to people in general. The notes say that it is an offence dishonestly
“to obtain services for which payment is required, within intent to avoid payment.”
I can see someone going to the court and saying, “M’lud, the trouble is that it says here ‘with intent to avoid payment’. I had no intent to avoid payment. I just had no cash. I intend to pay it when I have money. I will put my name down and put a paper or slip in.” When we look at these Bills, can we make sure that it is clear that, if people do not have the money to pay, they may still intend to pay?
Later we have another classic one: the decoder example. I am sure that the Minister is fully aware of all the packages that are available on the internet now for terrestrial and other channels. If he is fully aware of all the channels that are paid for and the ones that are not paid for, can he give me an indication, because I am not?
The package in my house comes through cable. We get channels that we should normally pay for but that we do not pay for because it is all-in: television, telephone and everything else. We pay once a month, so they are paid-for channels. If I get a freeview box and put it on top of the television, I cannot get the paid-for channels through the freeview box. However, if they attach the channels as part of a package, they come with the freeview box.
Imagine the nephew of some person on a council estate walking in and saying, “Auntie, you have not got a freeview box. I can supply one to you. I have a mate who has a freeview box.” Very good. He puts it in and it is £50 for the box. She does not know that she can get a box for £30. In it goes, and the card goes in. She is sitting happily watching the television. She has her freeview box on top of the television. There is a knock at the door and someone says, “You are viewing channels you are not supposed to view.” She will say, “I did not know that. If I go to the market, I can see freeview boxes every week. What makes this one different?”
The BBC is chasing up people using televisions without a licence. So why should we chase up people who watch Sky movies or any other such product? Why is Sky not chasing them up? I can understand why it is a criminal offence to make such a decoder box, and why, if such information comes to us and we find these people out, we should chase them up. But I am not sure why we should do so simply to help Mr. Murdoch make a few more million pounds.
I turn finally to the Visiting Forces Act 1952. Under the Bill, any member of the visiting forces cannot be charged because all such offences will be regarded as offences against property. Why? I recognise that visiting forces from certain parts of the world might want to have some independence of local legislation, but no serviceman of a force coming to Britain should be able to stand aside from the 1952 Act. Visiting servicemen will be able to supply such articles in this country without being tried, unless their commanding officer decides to try them.
With those few caveats, I welcome the Bill. I hope that we will fund and resource it properly, and that we will show the people of this country that we are serious about such crime, which is not a victimless crime. It causes great distress to many families, especially when people have their identities or passports pinched, or their bank cards are fraudulently made and the bank continues to issue cards in their name, even after they have told it to stop doing so. In the meantime, it bears no risk because it can pass the charges on. If someone introduced a Bill seeking compensation from financial institutions that pass on, by increasing premiums, such costs to the people on whom they impose their incompetence, I would back that as well. That said, I wish this Bill well.
I join in the general welcome for the Bill and for the way in which the Solicitor-General and the hon. Member for Beaconsfield (Mr. Grieve) opened the debate. There is a general view that the Law Commission has done an extremely good job in addressing issues relating to the prosecution of fraud, and a general realisation that we should take fraud a great deal more seriously than we have perhaps sometimes done. Indeed, there is much frustration at the fact not only that high-profile serious fraud cases have often appeared to founder, but that low-level fraud is frequently not prosecuted at all—at the fact that it is somehow regarded as a lesser offence than others that are, perhaps, committed by people not wearing white collars and ties at the time. I do not accept that view; fraud is a serious crime that should be prosecuted with as much assiduity as any other offence.
Three factors are involved in the general approach to achieving successful prosecutions. The first is the law, which we are addressing today by simplifying the law relating to the relevant offences; the second is the prosecuting and investigating authorities; and the third is the management of court cases.
I have long had a serious concern about the disjunction between the various prosecuting authorities. I know that it is fashionable to criticise the Serious Fraud Office and, to a certain extent, the prosecuting department of Her Majesty’s Revenue and Customs, but the real problem lies in the lack of resources available across the field, and in the fact that, too often, we have different compartments. Some deal with fraud against Government, and others deal with serious fraud. There is the Serious Organised Crime Agency, which is in its infancy and deals with organised crime; and the City of London police, which does a wonderful job—within the City of London. Beyond that, there is very inadequate provision across the territorial forces of this country. I know from my own experience in policing that there simply is not the expertise in most provincial forces effectively to investigate and to provide the wherewithal for successful prosecution of fraud.
The City of London police are responsible not only for fraud in the City, but more widely for London and the south-east, hence the extra resources that they receive. They have built up enormous expertise and I endorse the hon. Gentleman’s comments about the way in which they carry out their duties. We are all very grateful to them.
I concur, and, as one of the rare breed of council tax payers in the City of London, I am glad that it is not solely my contribution that enables them to do their job on behalf of the wider community. I have thought for a long time that we need a single, all-embracing anti-fraud organisation, with much better internal connections, to provide better investigations in parts of the country that are not currently well served. I hope that that will form part of the conclusions of the review that the Solicitor-General mentioned.
Even when we have successful investigations, we still have problems with the management of fraud cases. The over-simplistic view sometimes expressed on behalf of the Government that that is somehow the result of juries who cannot cope with the amount of information and the time scale of cases is unsupported by evidence. We must be clear about that. If we want an instructive case study, we need look only at the Enron trial in Houston. It was the fraud case of the century—a huge case, with huge ramifications. It did not lack for evidence, because it took evidence from 56 witnesses, but those responsible managed to conclude the trial in 15 weeks. The jury had nearly six days of deliberation and found the defendants guilty as charged. If that is possible before a Texas jury and a Texas judge, it is not beyond the wit of UK juries and UK judges to effect similar management. In contrast, the BCCI litigation—although it was a misfeasance trial, not a fraud trial—took more than two years, and cost more than £100 million in legal bills. The two opening speeches alone took 200 days of court time, only for the action to be abandoned, with all that work proving abortive. That is an effective comparison of the effectiveness of trial procedures and the Lord Chancellor—as he is at the moment—the Attorney-General and the Solicitor-General need to consider the issue carefully to see how we can make improvements.
Like the hon. Member for Beaconsfield, I hope that we will hear no more of the implementation of section 43 of the Criminal Justice Act 2003. I think that we have had an assurance from the Attorney-General that if the Government take the view that they need to restrict jury trial further—which I would oppose with every fibre of my being—he will do so by means of new primary legislation. If that is the case, he will no doubt support the amendment that I intend to table in the course of proceedings on the Bill to repeal that section as entirely otiose. We shall then have proof of the Government’s intentions.
I shall mention several issues that I hope to address further in Committee. We had a short debate on clause 4, which states:
“A person is in breach of this section if he…occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person”.
I was not entirely persuaded by what the Solicitor-General said about that provision. He seemed to be saying that he actually means “the person occupies a position in which he has a duty”—wording that seems entirely appropriate. However, the wording “he is expected to” opens the provision to all sorts of challenge, which is entirely unnecessary because there is no suggestion that there is an additional general duty on an individual citizen. I think that is what the hon. and learned Gentleman said, so it is something that we could usefully consider in Committee.
I have looked through my notes for the exact quote from the Law Commission about clause 4, which I shall read out as the hon. Gentleman has expressed concern about the issue. It states that the “necessary relationship” of a position of trust
“will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice”.
But—and this is important—it states:
“We see no reason, however, why the existence of such duties should be essential.”
In other words, the Law Commission has set out the type of relationships in which a position of trust might arise.
I hear what the Solicitor-General says, but I still do not entirely understand the point. I do not want to detain Second Reading by trying to reach that comprehension, so perhaps we can explore it in Committee. All those cases suggested a duty that could be expressed in those terms, so the idea that there may be some other context in which a court could be persuaded that a person had a reasonable expectation of that duty without it comprising a duty seems a very nice point, of which I would need some persuasion before embracing it.
Clause 5 gives definitions of gain and loss and, again, we can usefully explore those points in Committee. Subsection (3) notes:
“‘Gain’ includes a gain by keeping what one has”.
So how would the law apply, for instance, in the case of overpayment of a sum of money that one has received in good faith, such as a child tax credit? Again, that is something that we can explore at a later stage.
On clause 6, the point has already been raised about mens rea in the case of possession of an article and we heard warm words in support of conjurors, who will be able to go about their legal business, using their paraphernalia without fear of arrest. I am not absolutely sure that that is what the Bill says, although I accept the assurances of the Solicitor-General. At what point does a conjuring trick become a dishonest act? The three-card trick seems to be the turning point at which a conjuring trick starts to become a confidence trick. I shall be interested to know how the definition will work in such cases. The Solicitor-General was at pains to say that it would not be an absolute offence, but there is at least an intimation that it is, because the Bill does not specify a statutory defence.
I am less worried about conjurors, however, and more worried about unwitting agents of fraudsters. There are many examples of a person carrying forged credentials—forged documents or letterheads—believing that they are acting lawfully and appropriately for an enterprise when in fact they are not. It worries me that they might unwittingly find themselves in possession of an article that was being used and had been produced for the purpose of fraud, but which they were not aware was being used or had been produced for the purpose of fraud. We need to be clear about the defence that could be used in those circumstances.
We do not want to create a defence that is too easily used by someone who is probably guilty of an offence but who wishes to use their ignorance as a means of avoiding prosecution. We must also be careful to ensure that innocent people are not found guilty of an offence when they are genuinely ignorant of the purpose to which the article in their possession could be used.
As I indicated earlier, it is not a strict liability offence. It is the responsibility of the prosecution to show that the individual had an article in his possession with an intention that it should be used in some fraud. That is not on the face of the Bill, but the provisions import the case law of Elan from the previous legislation. That is clear. I say it with all the authority that a Minister has on presenting a Bill. It is intended that the provision should import previous case law.
That is extremely helpful. It is clearly not on the face of the Bill. I do not think that we can assume, but the Minister has gone a long way to helping us to assume in a way that the courts will recognise. I am grateful to him for that.
I welcome the new provisions for fraudulent business carried on by sole traders. An area that I would like to explore in Committee and perhaps at later stages is where actions are taken in anticipation of receivership or bankruptcy. I perceive that there are many instances where people carry out actions that have the long-term effect of defrauding creditors or employees of a company in the expectation of a company ceasing to trade or in anticipation of that happening. My belief is that that is fraudulent. My belief also is that there can be a deliberate intention to remove assets from a company prior to it ceasing to trade, in a way that is intended to prevent genuine creditors, including the employees of the company, from getting their proper recompense. That is not adequately covered, and is certainly not adequately prosecuted at present. I would wish to explore that.
We have already dealt with clause 11, which is the replacement of part of the Theft Act 1968. I made an intervention about downloading. I do not defend those who illegally download music. Equally, there have been occasions when large corporations have been extremely heavy-handed in either threatening to or carrying out legal action, particularly against minors who have perhaps unwittingly committed an offence. If the clause can be used to launch a private prosecution of a 12-year-old with a computer who is downloading songs off the internet, with mum and dad having no idea that that is happening, that worries me. Perhaps we shall receive some reassurance about that at a later stage.
We need a slightly more specific definition of the related offences on non-incrimination. Under clause 13 there is a requirement that a person is not to be excused from answering questions on matters relating to an offence under the Bill or a related offence. We need to know what the related offences are, rather than have an open-ended commitment at that point.
Lastly, in terms of what is in the Bill, there is the extent. I know that there has been an issue about whether we should assume extraterritorial jurisdiction in the Bill. The Government have broadly decided that they should not do so. However, the extent to which extraterritorial jurisdiction is appropriate in relation to some of the offences is still an open question. Certainly, internet crime is a real issue, as the Solicitor-General well knows. There is also an issue with unsolicited mail—something that bedevils an awful lot of our constituents. Often it originates from abroad and constitutes what I would consider a fraud on the recipient. When someone receives what purports to be a demand for money, which may have a fraudulent intent, we shall need to be careful about the point at which that becomes prosecutable and in what jurisdiction.
May I conclude with what is not in the Bill? The major issue, of course, is the fact that the Bill does not repeal the common law offence of conspiracy to defraud. The hon. Member for Beaconsfield said that the Law Commission was fairly explicit. It could not have been more explicit. Its report refers to
“the indefensible anomaly represented by the continuing survival of conspiracy to defraud”.
It is an indefensible anomaly that the Solicitor-General now finds himself in a position to defend. I am not convinced by the arguments. They are based on the existing law of fraud, rather than the law as it will be following the Bill’s enactment, and the existing law on multiple offences, rather than the position that will be the case after the rather belated implementation of provisions on multiple offences in the Domestic Violence, Crime and Victims Act 2004
The offence is a catch-all offence, which, if there are adequate alternatives, I find repellent in itself. The offence provides an easy route for dual criminality, which is becoming more and more of an issue in extradition proceedings, given that almost anything that is a lawful activity on behalf of one or more people might be interpreted as a conspiracy to defraud and might therefore provide that dual criminality to enable extradition. We need to look at this matter again, both in Committee and probably on Report. In the interim, I ask the Solicitor-General seriously to consider why it would not be appropriate to have a repeal provision in the Bill with a later commencement date or a commitment involving, in effect, a sunset clause for that particular provision, which could be reversed by Order in Council. There are ways of providing the primary legislative framework for the repeal of the existing offence, which we can do by virtue of the Bill and still have the precautionary approach that the Solicitor-General advises. The advice to prosecuting authorities needs to be extremely robust when it comes to why they should not use the conspiracy to defraud. I would like a commitment from the Solicitor-General, if he can give it, that he would be prepared to use noli prosequi powers to prevent a prosecution on that basis if he believes that there are other more appropriate offences as a result of the Bill that should be used as an alternative.
There are other matters that could have been placed to advantage in the Bill. We do not have that many Bills working in this broad area. I would have liked the Bill to be not just the Fraud Bill, but the fraud and corruption Bill. It is a perfect Bill for the incorporation of the provisions of the Corruption Bill that is before the House in the name of the hon. Member for City of York (Hugh Bayley). Many people feel that that is an essential part of our armoury against corruption on a wider scale and fulfils the expectations on this country by treaty to provide better anti-corruption legislation. It is consistent to join fraud and corruption, as there is a considerable overlap between the two, and the Bill is an appropriate vehicle to do so.
Some things that could be construed as fraud or corruption are not investigated or prosecuted. It is perhaps over-fashionable to talk about association football, but it is inappropriate for bung allegations to be investigated by the Football Association and other sporting bodies. They should, at least on a prima facie basis, be investigated by the police and other investigating authorities, and I am surprised that no such investigation has taken place on the basis of the evidence that has been made public.
Finally, does the Solicitor-General think that anything could be included in the Bill so we can deal more effectively with carousel fraud, which has become an extraordinarily serious issue? A report on figures recently released by the Office for National Statistics in the past few days says:
“Criminal gangs are cheating the taxman out of VAT on £1 in every £7 of Britain’s trade with Europe.”
That is a staggering figure—14 per cent. of all Britain’s imports and exports are subject to carousel fraud, yet we have been unsuccessful in achieving effective prosecutions and indictments. If we can do anything to make such fraud easier to investigate, to bring charges and to secure convictions, we should use the Bill to do so, as it is an appropriate legislative vehicle. I invite the Solicitor-General to consider whether that is possible.
On the whole, this is a good Bill. We wish to explore some issues in Committee and on Report, but we certainly support its passage and hope to improve it along the way.
May I begin by declaring an interest as a non-practising barrister? Like every speaker in our debate, I welcome the Bill, which is a good measure that deals effectively with an unnecessarily complex area of the criminal law.
As has been said, there can be no doubt that fraud is a serious business. The criminal law is required to deal with it effectively, and we do not want to construct laws that allow criminals to find loopholes. The Solicitor-General has made it clear that that is the purpose of the Bill, which I welcome wholeheartedly. I particularly welcome the fact that it deals with the fraudster’s intentions, rather than the consequences of fraud. Instead of dealing with deception and the question of who is deceived, which causes the problems that we have discussed, it addresses the fraudster’s intentions and whether or not they are dishonest. That is an extremely effective riposte to the fact that, as fraud is increasingly perpetrated electronically, there is no one to be deceived.
I wish to make three points about the Bill against the background of my broad welcome. First, I echo the remarks of my hon. Friend the Member for Beaconsfield (Mr. Grieve) about jury trials. This is a good Bill, because it makes the law of fraud simpler, thus weakening considerably what, in my view, is an already weak argument for a reduction of the right to jury trial for individuals accused of fraud. In my experience juries are well able to deal with the matters put before them in a fraud trial, so long as the lawyers putting those matters before them do so in a straightforward way. The Bill will help them do that, which means that juries will be more, not less, able to deal with fraud trials. I recognise that, as the Solicitor-General said, these arguments are for the time when we deal with another piece of legislation, but I hope that he will not do something counter-intuitive, by passing one piece of legislation that helps juries, and then not taking that into account when he considers whether juries are able to deal with fraud trials.
The second issue that I want to raise also follows on from comments by the Solicitor-General with which I wholeheartedly agree. It should not be up to the criminal law alone to deal with fraud. It is up to the Government to consider the other ways in which they can reduce the likely incidence of fraud. Fraud prospers in complex systems. It is much easier to perpetrate a fraud in a system that is difficult to follow, because that makes it difficult for those who enforce the rules to work out how the rules have been flouted, and difficult for a court and a jury to work out how the system has been abused.
I urge the Government to examine the systems for which they have responsibility and ensure that they are as simple as they can be. We have seen recently that in the tax credit system, the internet portal has become subject to precisely the type of fraud that the Bill is designed to address. The Government need to review not only the criminal law but the systems in place in the benefits system and the tax credits system, and ensure that where simplicity is possible, it is introduced, so as to play its part in defeating the potential fraudster.
Thirdly, I return to my earlier intervention and press the point about the maximum sentence in clause 11. The clause deals with obtaining services dishonestly. I welcome the fact that it redrafts the law so that dishonesty, rather than the deception of an individual, is the key question, but it is a restatement of the law with regard to maximum sentences. The Bill offers an opportunity, which is well taken by the Government, to simplify the whole area and make it straightforward, consistent and easy for the general public to understand so that everyone knows what they are obliged to do and what they are not permitted to do, but there is a potential anomaly in the law as it stands with regard to maximum sentences.
Under the Bill, if someone were to perpetrate a dishonest act by representation or by omission or in other ways, leading to a gain or loss of money or property, they would face a potential sentence of 10 years. If, however, they obtained services by dishonesty, they would face a maximum sentence of only five years. There must be circumstances, as we can all envisage, in which the value of services is at least as high as the value of property, which is encompassed by the earlier clauses.
If, for example, one defrauds a merchant bank of property or money to a high value, one faces a potential sentence of 10 years. If, on the other hand, one defrauds a merchant bank in such a way that one receives the services of a very highly paid, professional and experienced merchant banker, which might be worth as much as or perhaps more than the property of which the bank could have been defrauded, one faces half the potential maximum sentence.
I accept that, as the Solicitor-General says, not every case results in the maximum sentence, but we could take the opportunity in the Bill to send a message that dishonest acts leading to the defrauding of an individual or a company are all potentially very serious. Whether people are defrauding them of services or of property, the maximum penalty available should be consistent across the board. The Government could take the opportunity to establish that in the Bill, and would be well advised to do so. I hope that we will be able to return to the matter in Committee, and I invite the Government to think carefully about it.
Broadly speaking, I welcome the Bill. It is a good Bill, and it is generally well targeted. However, it could be better, and I hope that at the conclusion of its passage through the House, it will be.
I apologise for having missed the speech by the hon. Member for Somerton and Frome (Mr. Heath), although when I asked him whether he had said anything that I would not have expected him to say, he said no, so I did not miss very much.
In recent years, it seems to have become a law of Parliament that the significance of a piece of legislation to ordinary people’s lives is inversely proportional to the number of hon. Members in the Chamber. This Bill is very important for our constituents, not least because the law on fraud has been a hotch-potch until now, with different bits and pieces of legislation being knitted together to cover what many would consider to be an important offence.
Since the introduction of the Theft Act 1968 and its subsequent amendments, the nature of fraud has changed dramatically. The hon. Member for Rugby and Kenilworth (Jeremy Wright) has referred to the fact that much fraud is now conducted electronically, which is a specific issue for those trying to secure successful prosecutions. The law must keep up with technology, which it has failed to do in that area in recent years.
I know from my constituency surgeries and from letters from my constituents that a significant number of people are affected by identity fraud, the theft of credit card details and other scams. Such scams often involve relatively small sums of money, so people do not necessarily go to the police, who may find such matters too complicated to proceed with. I suspect that a large amount of fraud is barely considered by the criminal justice system, because people shrug their shoulders and say, “Ah well”.
In welcoming the Bill, I want to press the Solicitor-General on implementation and enforcement. He has referred to the Crown Prosecution Service, the Serious Fraud Office and additional funds for the police, particularly in central London. Around the country, however, police forces sometimes feel incapable of dealing with the complexity of the IT, of the fraud itself or of the law, and I hope that training will take place in all the police forces in the United Kingdom to make sure that everybody has equal access to justice.
Fraud is more than a national matter. Frauds that have been brought to my attention through my constituency casework include the Spanish lottery fraud, which is well known and has been well attested on television. In order to pursue justice in such cases, one needs a degree of Europe-wide intervention. Similarly, I am sure that all hon. Members have received e-mails from people across the continent of Africa offering them large amounts of money to set up some kind of business. Again, none of us ever refers those e-mails on to any part of the legal system—yet perhaps we should, because others who are perhaps less cynical and sceptical than us fall into those traps.
All hon. Members who have spoken have discussed whether we should abolish the common-law offence of conspiracy to defraud. I agree with the Government that fraud cases can be amazingly complex and that statutory conspiracy law may not suffice. In most major credit card fraud cases, one person does the phishing by sending out e-mails—again, I am sure that all hon. Members have received such e-mails—that make it look as if one’s bank has managed to lose one’s details and is asking for them to be restated.
Another person may use a “Trojan horse”—the practice of sending random e-mails that attach themselves to the recipient’s internet explorer and manage to inveigle them into visiting a website that they would not otherwise have visited, so that in the process, or in trying to extricate themselves from the website, they end up inadvertently giving further details about themselves. Such a fraudster may be separate from the first type.
Then, if money is to be taken out of the United Kingdom, a money mule will be required. The entire process of complex credit card fraud can involve a series of different people, each of whom is committing a fraud, but one does not get the full sense of the criminality that has been engaged in without seeing the whole package of the fraud. Indeed, individual members of the gang may not know that the others are engaged in it. In those circumstances, I understand that there may be reasons why we should want to keep the common law offence of conspiracy to defraud.
Moreover, the fact that, as the British Retail Consortium points out, many new forms of fraud are coming online as a result of new internet IT may mean that we would want to keep a stop-gap clause of some kind. However, as other hon. Members have said, some more hotly than others, it is pretty difficult to advance the argument that we should keep stop-gap legislation just in case we need it. Despite the comments of the Solicitor-General, the law says that an act committed by an individual is not an offence against the criminal law, whereas it may be an offence when it is committed by two people. That puts us in danger of bringing the law into disrepute. I realise that the Solicitor-General has moved considerably further on this issue than the Attorney-General did in the House of Lords, but I would welcome a clear indication that if we do not feel that the common law provision is still necessary, we will see a specific end date.
I question whether 10 years is a sufficient sentence. Some of this fraud is very significant. It does not always involve one person being defrauded out of a small amount of money; sometimes millions of pounds is defrauded from lots of people.
I also question, as did the hon. Member for Somerton and Frome, whether aspects of corruption should be included in the Bill. I note in particular that we have not revised for many years the legislation on the suborning of a police officer. There is some debate about precisely what that offence now is. However, many newspapers acknowledge that they pay police officers for information that would otherwise be secret and private, and should probably remain so, so that the police can perform their legitimate duties as regards a secure prosecution. Perhaps by now the Government should be advancing legislation to reform the law on suborning a police officer.
I think that what the shadow Solicitor-General said about magicians and the Magic Circle was wholly erroneous. It is clear that under clause 6, which deals with carrying articles for use in connection with a fraud, the fraud would have to involve the person making a gain for himself or another, causing loss to another, or exposing another to a risk of loss. I cannot see why magicians would be caught by that in any sense. The clause that they are most likely to be caught by is clause 2, which covers fraud by false representation, but they would probably not be dishonestly making a false representation, but honestly making a false representation.
I am trying to follow the last point, which was interesting, to say the least—a rabbit out of a hat.
The debate is important and the Bill is interesting. As hon. Members of all parties have said, it is welcome, but, as with every measure, aspects need addressing in Committee. I agree with hon. Members who spoke in favour of preserving the right to jury trial. I speak as a practising barrister and not, I hasten to add, out of self-interest. Jury trial is and always has been the bulwark of justice and it should be retained at all costs.
The Solicitor-General, who was generous in allowing interventions and has taken the debate forward through his responses, made the point that the Bill will simplify to some extent the offences involving fraud and lead to shorter indictments. That, in turn, will lead to a simpler process, which will negate the need for denuding people of jury trial. [Interruption.] I note that the Solicitor-General was with me on the first three points but unfortunately shook his head at the last one.
All of us who are involved in the criminal justice system—as legislators, practitioners and so on—are bound to try to keep matters simple. That is not to be offensive to juries. When I prosecute, if I do not keep a case simple and it is lost, it is my fault because I have not made the case properly and it therefore should be lost. It does not happen because the jury did not understand it but because the case was not made simply and understandably. It behoves us all to make law that is readily understood by all concerned, including juries.
The Solicitor-General knows that the Lord Chief Justice recently referred to some protocols, including case management, the involvement of prosecutors at an earlier stage in larger fraud cases, more effective pre-trial hearings, encouraging judges to use their powers to persuade prosecution that charges should not be pursued, severing indictments and so on. If those are proactively pursued, together with the simplification for which the Bill provides to a large extent, a good job of work will be done.
I do not intend to say much about conspiracy to defraud because others have discussed it at length. Ultimately, there will be no case for retaining that offence, but I have some sympathy with the Solicitor-General, who is effectively saying, “Let’s see how the offences bed down and, in three years’ time, we might be able to knock it on the head.” That is a pragmatic and sensible approach. The hon. Member for Beaconsfield (Mr. Grieve) said that he would like the measure to include a sunset clause. That could amount to the same thing as the Solicitor-General’s approach, if we are considering discontinuing the offence in three years. I appreciate that it is not exactly the same, but it could have the same effect. I understand his caution, especially given that several highly regarded senior members of the judiciary on the Rose Committee have said that we should be careful about ditching it now. My opinion therefore varies slightly from that of the hon. Member for Beaconsfield.
Does the hon. Gentleman agree that the fundamental difference between the course of action that the Solicitor-General proposes and a sunset clause is that the latter does not require further action on the part of the Government for the common law offence to fall whereas the former does?
That is self-evident. Surely this place can find time for the presentation of a short Bill, if the political will is there. I do not understand why I am suddenly defending the Government—it is an unusual if not unique position for me to occupy––but the hon. Gentleman is right.
Although I should like to agree that it would be appropriate to incorporate a sunset clause, what guarantee could the hon. Gentleman give that sufficient cases had come to trial within the time to be sure that we no longer needed the offence? That is the difficulty. Who can guarantee the number of cases that will come before us in a set time? Surely it would be better to build up a bank of knowledge and ensure that the measure is working before we make the decision.
I think that I agree with the hon. Gentleman. A period of three years has been mentioned and that is ample time in which to ascertain whether to get rid of the offence. I stress that I do not violently disagree with the hon. Member for Beaconsfield, who supports a sunset clause. We all want the same thing—it is a question of how we get there.
I shall be relatively succinct because others wish to speak and we are holding a Second Reading debate, which does not call for going into the minutiae. The hon. Member for Beaconsfield referred to the definition of “gain” and “loss”. Some people believe that it is too broad. We shall have to revert to the matter in Committee and I am sure that we will hold an interesting discourse on it.
I am worried about clause 6. I intervened on the Solicitor-General to point out that it requires no mens rea element and that it should do so. A few moments ago, he responded to the hon. Member for Somerton and Frome (Mr. Heath), who made the same point, by saying that intention will be necessary for a successful prosecution. That poses the question of why “knowing” or “intending” is not included in the provision. If it were, I would not have raised the matter and I am sure that many other learned commentators would not have raised it. Is the Solicitor-General open to an amendment along those lines in Committee? He was adamant that intention was required. In opening the debate, he said that there was some sort of tie-up between the old offence of “going equipped” and the clause. I tried to make the point that they are different because, if a person, late at night, is carrying bolt cutters, jemmies and all the typical gear of a housebreaker, that is one thing, but there is also the high-tech stuff—PINs, cards and so on—that is not perceived as being there specificallyeb;normal;j for a dishonest or nefarious purpose. There is therefore a distinction, which bolsters the case for including some sort of mens rea element—either “knowing” or “intending”—in the provision. It is necessary to have a serious debate about that.
Perhaps a better analogy than the offence of “going equipped” is instruments that can be used for an innocent purpose and adapted for a nefarious one, for example an iron bar or knife. It is the old distinction between “made” and “capable of being adapted” for a criminal purpose.
The hon. and learned Gentleman gives a better example, albeit along the same lines as mine. I shall come back to this point in due course, and I do not want to labour it this evening. It was important to mention it in passing.
There is a mental element in clause 7(1)(a), which states that a person is guilty of an offence if he makes, adapts, supplies or offers to supply any article—
“knowing that it is designed or adapted for use in the course of or in connection with fraud”.
I believe that that approach is preferable. I am not sure why there is a distinction between clauses 6 and 7, in that there is a mental element in the latter but not the former.
The provision in clause 4 on fraud by abuse of position is overdue. A typical example that we have all come across is the situation in which a carer is less than honest and takes money or goods from the person in his or her charge. Unfortunately, we have all seen cases of that. The old Theft Acts would have covered such circumstances, but this provision creates a specific offence that may well be simpler to prosecute.
I have some difficulty with the wording of clause 4, particularly with the words
“position in which he is expected to”.
Those words are vague, and I hope that we can debate them in Committee. The present definition also raises the question of who is expecting the defendant to safeguard another person’s financial interests or to avoid acting against them. Is it the person whose interests are concerned? Is it a third party? Or is it a “reasonable person”? If a person unreasonably expects another to safeguard their financial interests, that should not give rise to liability under the clause. Further, if there was no legal duty to do so, and the defendant was not aware that he was expected to do so, he or she should not be liable for this offence. We need clarification and it is the whole point of our proceedings in Committee to discuss such matters in detail.
The organisation Justice is of the opinion that
“the offence should only give rise to liability for the intention to cause loss or risk of loss where the person suffering the loss is the same person to whom the duty is owed. It is, in our view, illogical that the mere existence of a duty towards party A may result in liability for an intention to cause loss to party B, who may be completely unrelated to A.”
I do not expect the Minister to respond to these points today, but no doubt we shall be able to engage in a debate on them in due course.
The Bill is vague about gain or loss, and that also needs to be looked at. I would like to give the Solicitor-General an example. Let us say that A’s mother, M, is a kind-hearted old lady, and that A fears that people occasionally take advantage of her kindness. A’s friend, B, asks A whether M has any money, as he needs a loan of £5,000. A knows that M has more than that amount in a savings account, but he lies to B, saying that his mother does not have any money at the moment. The morality of A’s actions might be open to question, but would there be any criminality involved? [Hon. Members: “ Discuss.”] Yes, it does sound like a university question, but it is none the less fascinating.
No, I have not, or, if I have, so has Justice.
Clause 6 deals with the possession of articles. The Solicitor-General has gone considerably further today than was the case in the other place, in saying that there would have to be an intention. He very fairly intervened on the hon. Member for Somerton and Frome on the point. I hope that it will be possible to advance this part of the Bill, to make it clearer and safer.
Clause 11 deals with obtaining services dishonestly. That new offence is necessary because of the way in which things have moved on since the Theft Acts 1968 and 1978. We are now living in an electronic age and it is important to look with clarity at such offences. We need to consider the words “dishonest act” in clause 11(1)(a). Should there be a specific mens rea requirement in regard to a defendant dishonestly obtaining services in breach of subsection 2? That is undoubtedly what the clause intends, but it could be argued that, under the present wording, such an act would be intrinsically dishonest, so there would be no need for a finding that the person was dishonest. A better interpretation would be to insert a mens rea element to avoid any difficulty.
The Bill is overdue, and it is welcome. I believe that the House will agree to the Government’s proposals in large part. However, caveats have been added by several hon. Members, and I join them in expressing my discomfort about some of the offences that lie between involving strict liability and being an ordinary form of offence. Obviously, we need to ensure that it is absolutely clear that we are setting up legislation that is designed to catch dishonest people. However, it is not utterly clear in some parts of the Bill that that will be the way that it will work. Despite those few misgivings and caveats, I welcome this important Bill. In relation to a remark made earlier by the hon. Member for Rhondda, (Chris Bryant) it has not been standing room only here today, but the Bill is important to all our clients—[Hon. Members: “Clients?”] I meant to say “constituents”. The Bill is important for all our constituents, especially those who might be affected by fraud, but also those who might be tempted to perpetrate an act of fraud.
We in this House think that we always legislate sensibly and that we always get things right. I remind hon. Members that there was a mistake in the Theft Act 1968 as a result of some draftsman forgetting to repeal the provision that a person caught stealing a sheep could be hanged. Let me tell you that, in some parts of Wales, that has caused a great deal of difficulty.
Thank you for calling me to speak last, Mr. Deputy Speaker. I am the tail-end Charlie in this important debate. Given the closeness of the debate, I feel that I am among old friends. At its best attended point, there were 15 Members in the Chamber, and that included Madam Deputy Speaker. However, it has been a good debate, and it is getting better. Or it was until I stood up. Certain parts of it were fairly sterile, but the hon. Member for Rhondda (Chris Bryant) started to inject the subject of people into it and talked about how fraud impacts on the ordinary people—real people—who come through our surgeries every week.
To use a well-worn cliché that I have heard on a few occasions this afternoon, fraud is not victimless. It is not some sterile concept. Fraud is theft. It is clear and simple theft, committed by very undesirable people. If I may use unparliamentary language, Mr. Deputy Speaker, fraud is, in the main, committed by absolute toe-rags—nasty, unpleasant, self-interested, self-motivated people.
It is easy to talk about fraud as something that is large scale—something to do, perhaps, with Asil Nadir and Polly Peck, The Mirror pension fund or the BCCI scandal of many years ago. By and large, though, fraud is often small scale. As the hon. Member for Rhondda said, it is committed against ordinary people, who might suddenly find £3,000 taken out of their bank account, not only their £1,000 worth of savings but another £2,000 overdraft on top. It is frightening and, once one gets caught up in the fraud web, it is extremely difficult to unravel it. It can take months or years to get one’s life back on track.
Fraudsters tend to be indiscriminate and opportunistic. In my constituency, there is a group of fraudsters who use fake ID to gain entrance to old people’s homes. Some come in the guise of police officers, others as council officers or workers for local utility—gas or electricity—companies. That is an obnoxious and obscene form of fraud, an absolute abuse of trust and a misrepresentation of the worst kind. I hope that, when the Bill becomes an Act, it will ensure that people who use fake ID or credentials to gain access to people’s homes feel the full force of the law. Ten years may not be long enough.
I met a local vicar earlier today, a minister of Rosedale church, whose mother had someone on her doorstep claiming to be a police officer and gaining access to her home in that way. She is an extremely clued-up woman. She quickly realised that something was wrong, she led him into a room that happened to be her garage and she locked him in it. It was 8.30 at night, so she thought that the police would not be interested in coming to arrest him and left making the phone call until the following morning. She thought that she would let this young man contemplate the error of his ways in her garage. Unfortunately, when the police turned up the next morning, he had found a way out of the garage. That may sound like an amusing anecdote, but it was only her presence of mind that allowed her to navigate her way out of that unfortunate situation. Many elderly people find their trust being abused and pay a huge cost for it, not only financially, but in their mental well-being.
As well as people who gain access fraudulently, there are the so-called rogue traders who use fake qualifications to gain people’s trust––“I am from the federation of master builders; I know what I am talking about.” All of a sudden, the vulnerable find themselves paying out vast sums of money for work that did not need doing to complete crooks who have used fake qualifications to con their way into a position of trust in order to abuse it. Once again, I hope that the Bill will cover those sort of fraudulent acts.
We must also understand that we have a responsibility and we need to be vigilant against fraud as well. That is the real meaning of responsibility. The hon. Member for Rhondda spoke about phishing schemes in which e-mails are sent claiming to be from the Halifax, advising people that they need to update their bank accounts. People are still falling for that con. I believe that it has been running for three or four years, yet I still find that some of my constituents are falling for it, giving out their financial details and losing vast sums of money in consequence. We, collectively as politicians, the Government, the financial services industry and local authorities need to educate people to be on their guard.
Why are we still throwing out our bank and credit card statements in the general rubbish, providing a rich source of opportunity? Some of us have bought shredding machines, but then we hear about armies of people sitting in darkened backrooms, putting together what we have shredded so that they can still read our bank account numbers. That is happening—[Interruption.] The hon. Member for Rhondda looks bemused, but I can assure him that this is absolutely the case. In fact, Frank Abagnale, one of the world’s top authorities on fraud, visited the country only a couple of weeks ago and said, “For crying out loud, people, don’t just get something that shreds vertically. Get a proper criss-cross shredder, so there is absolutely no chance of the information being reconstituted and used to defraud people.”
Does my hon. Friend believe that magistrates take a suitably robust approach to the obnoxious practice, prevalent in my constituency and across the country, of distraction burglaries, which are particularly aimed at older people, the most vulnerable in our community?
My hon. Friend is absolutely right. Nothing upsets the police more than the fact that, when they actually catch an individual who has been preying on the elderly and vulnerable and he is brought before the magistrates courts or even the Crown court, he is given a one or two-year suspended sentence or a bit of community service. That individual then goes back to doing what he was doing very well before—ripping people off. People like that should be locked up and if the Solicitor-General can lock them up not for three or four years but for 10, good on him.
The hon. Gentleman is making a case to show how the world of fraud has changed in recent years, but is not the truth of the matter or the real nub the very ancient problem that, as Shakespeare put it:
“There is no art to find the mind’s construction in the face.”?
I must confess that the hon. Gentleman has foxed me with that intervention. Being a man of limited intellect, I was never a great student of Shakespeare, but perhaps we can meet afterwards to talk it through. I am sure that he is talking perfect sense and thank him for that intervention.
I shall now deal with particular provisions, starting with clause 2, which the hon. Member for Rhondda also spoke about. We have seen the promotion of fraud conducted over computers through e-mail and the internet. The hon. Member for Rhondda and others mentioned phishing, but there are also the K-scams, largely from Nigeria, where people are told that they will receive a large sum of money from a relative of the former deposed king or local warlord who has $55 million to launder. People are asked to send £20,000 so that they can have the whole lot. Unbelievably, people are still falling for it. We have to go with the adage: if it sounds too good to be true, it is too good to be true. In plain and simple, non-Shakespearean English, if it looks too good to be true, ignore it and walk to the other side of the street. How will the Bill deal with international scams, as phishing and K-scams are run from Africa, by and large, or from parts of the former Soviet Union that are not yet in the European Union?
Clause 3 deals with failure to disclose information. A classic example would be the estate agent who visits an elderly or young person’s home and says, “I have looked at your very nice home and you should put it on the market for £165,000.” Lo and behold, a buyer turns up the next day and offers to buy it for that sum. The seller is extremely happy and the deal goes through, but he then discovers that the home was really worth £220,000 and that the estate agent undervalued it so that one of his mates could buy it, only to put it straight back on the market with the two splitting the profit. That is a classic example of fraud, which I hope the Bill addresses.
Clause 4 deals with fraud by abuse of position. Before I entered Parliament, I worked in recruitment businesses and what went on in some of our offices was phenomenal. Nice young men or women would be hired and given a computer at their desk. They would work away, but a year later, we might find out that they were running a completely parallel business from that desk. They might have downloaded all the company’s information on its candidates and clients, crossed it over to their computers and run two businesses. If they were caught, they would be fired, but they would often leave with all the data and set up business down the road—another classic example. I congratulate the Government on introducing legislation to deal with that sort of fraud. I am in a very congratulatory mood today.
One part of the Bill causes me some concern and I am sure that someone will say that I am making a fatuous point about clause 11, which deals with obtaining services dishonestly. It strikes me that the rights to cover test matches at the Oval are owned jointly by Sky and the England and Wales Cricket Board. Fair enough. Will the clause be used against the hundreds of people who like to dangle out of windows or sit on the roofs of the houses around the Oval, watching the cricket? The point is not necessarily fatuous and it is worth raising. People could get a knock on the door from Sky or the England and Wales Cricket Board, who then ask them what they are doing accessing the match. They might say, “You haven’t paid to access the match, so please remove yourselves from the windows or roofs.”
The hon. Gentleman makes a good point. I hope that my point is not as poor as he thinks and that the Minister will respond to it here or in Committee.
My final concern relates to the decision to retain the offence of conspiracy to defraud. I understand some of the Government’s reasons for doing so, but clause 7, on the making or supplying of articles for use in frauds, would cover that, by and large. We have talked about people walking around with crowbars. Of course, it is debateable whether someone is taking a crowbar to lever open a door or to lever off a manhole cover and go about his business if he is a plumber. However, if someone is caught walking around with a cash machine keypad recording device, it is very difficult to argue that that person did not know what it was for; they are specific machinery manufactured only to defraud. I hope that clause 7 will cover a large amount of what is still viewed as conspiracy to defraud, but the Government have a slightly different view.
My hon. Friend referred to Frank Abagnale, one of the world’s leading experts on fraud. On counterfeit measures, does my hon. Friend agree that Frank Abagnale has stated that most modern identification cards can be counterfeited at least within 18 months and, possibly, two years?
My hon. Friend makes a valid point, and to the Solicitor-General’s credit, he did not talk about ID cards in his opening remarks. Some people say that ID cards will help to reduce fraud, but many people think that they will worsen the problem. Fraudsters will get hold of ID cards and manufacture them, and they will find them an effective way to win people’s trust and take their money. We already see that with passports and there is no reason why it should not apply to ID cards.
The Solicitor-General said that he was very much in favour of police forces merging, so that they could pool their resources in tackling fraud. May I say for the record that I am totally opposed to the merger of police forces? I believe that most Conservative Members and some Labour Members share that view. Most of my constituents would not buy the argument that one needs to merge police forces to tackle fraud better. Most of them believe that the police are doing a pretty good job and that, when caught, fraudsters need to spend more time in prison and less time on the streets.
In conclusion, I broadly welcome this Government Bill. I have greatly enjoyed speaking in the debate and the interventions from the hon. Member for Rhondda and my hon. Friend the Member for Peterborough (Mr. Jackson). Thank you very much, Mr. Deputy Speaker.
I am delighted that someone such as my hon. Friend the Member for Broxbourne (Mr. Walker) has found this afternoon’s debate such an enjoyable occasion, because, as he knows, the Government are here to provide us with pleasure, and they have, in fact, done it 53 times since 1997. This is, I think, the 53rd Bill that they have introduced to do with the criminal justice aspect of criminal policy. Probably, on this 53rd occasion, this is the one Bill that I can more or less wholeheartedly welcome, so long as they implement it.
I have tabled a number of parliamentary questions to the Home Secretary—this one, the last one and the one before that—to ask which Bills have been brought into force, which of their provisions have been repealed before they came into force, which have been repealed since coming into force and which are yet to come into force, and it is quite amazing how one gets back a telephone bill of an answer, too big to be e-mailed by the relevant Home Office department, to show how active the Government have been in producing legislation, but how dilatory and, indeed, how repetitive they are in the work that they do in bringing it into force. So they are a Government who chase headlines, but thanks to the Law Commission—on behalf of the official Opposition, I send my thanks to the Law Commission—here at least we have a Bill that looks pretty good.
I also thank the Joint Committee on Human Rights for producing its 14th report, which deals in part with the Bill, and there is some good reading to be had in there, not least because it points out some of the concerns that the Government ought to have—I am sure that the Solicitor-General has them—about aspects of the European convention on human rights and the way in which it bites on the Bill, particularly in relation to articles 5 and 7.
A number of hon. Members have expressed our interest and support for the continuance of jury trial. My hon. Friend the Member for Beaconsfield (Mr. Grieve) and the hon. Members for Somerton and Frome (Mr. Heath) and for Meirionnydd Nant Conwy (Mr. Llwyd) and others have all expressed views in support of jury trial and quite sensibly stated that the problem with some of the more difficult fraud trials is not the jury’s participation but the case management and the way in which the prosecution case has been presented to the jury.
As my hon. Friend the Member for Beaconsfield pointed out, very often those cases have fallen apart well before they get to a jury. Certainly, if there was much space in the Government’s armoury for arguments against the use of juries in fraud trials, that space has been utterly emptied by the production of the Bill, which is, no doubt, intended to simplify and clarify the criminal law in relation to dishonesty. I trust that the Government will be extremely slow to introduce not only another criminal justice Bill, but a Bill to implement section 43 of the Criminal Justice Act 2003, to abolish juries.
As my hon. Friend and I have said, we broadly welcome the Bill and are prepared to allow the Government the three-year period to consider the aspects of it that have been discussed in the other place and in the House in relation to the common law offence of conspiracy to defraud. However, I remind the Government of what my noble Friend Lord Kingsland reminded the Attorney-General of on 29 March, when the Bill was read for the Third time in the other place. I quote his remarks as recorded in the Lords Hansard:
“The Attorney-General has helpfully summarised in paragraph 8 of his draft advice the judgment of the noble and learned Lord, Lord Bingham, the then Lord Chief Justice, in the joined cases R v Rimmington and R v Goldstein. The latter part of the portion of the judgment which appears in paragraph 8 reads,
‘good practice and respect for the primacy of statute do in my judgment require that conduct falling within the terms of a specific statutory provision should be prosecuted under that provision unless there is a good reason for doing otherwise’.”—[Official Report, House of Lords, 29 March 2006; Vol. 680, c. 779.]
In essence, what other hon. Members and I are asking for is that there should be clarity and certainty in the criminal law. The Solicitor-General and I are familiar with the expression “the certainty of indictment”, and that rubric should flow across into statute law, just as much as it does in the drafting of a criminal indictment. Although we are happy to give the Government that three-year extension while they consider the common law conspiracy offence, it is something that ought not just be let to run. Whether there is sunset clause or some other device, it is not something that the Government should allow just to roll off into the long grass.
What we are essentially talking about is dishonesty—a concept that is often easy to recognise and sometimes a lot more difficult to define. Definitions are important in all statutes, but particularly in criminal law statutes and certainly in the Bill. By and large, the definitions in the Bill are sufficiently clear and the sort of thing that a judge—I declare an interest as a Crown court recorder and as someone who practices as a barrister not at the criminal Bar but at the civil Bar—can easily explain to a jury at the end of a trial.
We must bear in mind the fact that some areas of definition will need to be teased out. My hon. Friend the Member for Beaconsfield ran through those relating to the expressions “loss” or “gain” in clauses 3 and 5. More importantly, that relating to the word “expected” in clause 4(1)(a) has far-reaching implications that require careful thought. Issues relating to duty flow from that. My hon. Friend and the Solicitor-General had a private debate earlier about fiduciary duty. Speaking as a defamation specialist, when one talks about qualified privilege, one often talks about the duty to pass on a defamatory allegation even though one might know that it is defamatory and might be damaging. That duty can be described as either legal, moral or social. Therefore the fiduciary duty about which my hon. Friend and the Solicitor-General were talking might not be the only sort of duty caught by an expression such as “expected”.
I therefore urge the Government to think carefully in Committee about what they mean, what they want the courts to mean, and what they think the police and prosecuting authorities ought to be doing when faced with a case that might fall under clause 4, entitled “Fraud by abuse of position”. As I said, there is a clear need for certainty in the criminal law, and as long as that is provided by the time the Bill leaves this House, either to go back to the other place or to get Royal Assent, none of us should complain.
I want to say one or two more things about clause 4, as that, in conjunction with the problems described in relation to clauses 6 and 7 on criminal intent, is where most of the difficulty with the Bill will lie. The hon. Member for Meirionnydd Nant Conwy had great fun with his Liberty briefing on A, M and—
Well, that is J rather than L. They are different letters of the alphabet, and we are making progress. In short, there is a foreseeable potential problem with relationships that can be the subject of abuse, which could then lead to fraud. We must bear in mind the distinction between straightforward dishonest criminal behaviour, which this Bill is designed to catch, and sharp practice, immorality or bad manners, which might be utterly reprehensible as matters of social conduct but which might not fall within the definition of fraud intended by the Government in introducing the Bill. I urge Members who serve on the Committee to invite the Government to think carefully about that.
There have been seven contributors to the debate, the last of whom, my hon. Friend the Member for Broxbourne, not only clearly enjoyed speaking in the debate but was good enough to tell us that he enjoyed speaking in it, which is a matter of some congratulation. He said that fraud affects not just Members of Parliament or lawyers but our constituents. It is a real issue. As he correctly said, it is not just dealt with on the Enron scale but can affect people with very little by way of assets or money, for whom the consequences can be disproportionately hard. Those with small savings and little wealth can be hard hit by some very nasty people. Now is not the appropriate time to debate the philosophy of sentencing policy. I have some interesting views, at least to me, about the appropriate sentence for all sorts of crimes, but the Bill makes it clear, depending on the clause that one is looking at, that sentences will be 10 or five years. I am sure that Members who serve on the Committee will have ample opportunity to exercise their minds on that.
My hon. Friend makes the perfectly good point that there is a great deal of self-help that can prevent fraud. Those who throw their bank account details, cheque books or other sensitive information into a bin without shredding them have, to some extent, only themselves to blame, even though those who misuse the confidential information contained in those documents in a criminal way can have no excuse simply because they found it in the bin.
The hon. Member for Tamworth (Mr. Jenkins) kindly undertook a gentle canter through the explanatory notes to the Bill, which many of us had perhaps not had the chance to read before he read them out to us. That was a valiant service, and I am sure that those on the Treasury Bench have noted that he was able to provide it, for which I thank him very much. He made some other, independent points in relation to the international nature of fraud. Those need to be grasped, especially, as he correctly pointed out, as so much fraud is conducted over the internet. The internet knows no national boundaries, even though the jurisdiction of our criminal courts is to a large extent confined within the boundaries of England and Wales, which I am sure is a point that the Under-Secretary, the hon. Member for Gedling (Mr. Coaker), will want to take back to the Home Office with him, along with the explanatory notes.
The hon. Member for Somerton and Frome gave a cautious but none the less thoughtful welcome to the Bill. He made some points about the need for a coherent prosecuting and investigatory policy. He invited us to try to manufacture a system with one coherent prosecuting and investigative authority, but he did not go so far as saying that he wanted one amalgamated national police force—
The hon. Gentleman says, “Certainly not”, from a sedentary position, in case anyone did not hear him. He also made sensible points about case management, and gave his support for the jury system. From my experience of summing up to juries, and of addressing juries as an advocate, they have a collective common sense, by and large, and are exceptionally good at discerning honesty and dishonesty. When considering cases of criminal fraud, one is essentially talking about dishonest behaviour. There is no better way of unravelling all the complicated inter-weavings of a scam and asking whether what was going on was a deliberate piece of dishonesty than to ask a group of 2 people to apply their collective common sense.
I will not detain the House now with a dissertation on fraudulent preference, on which the hon. Member for Somerton and Frome touched briefly, but there is a story to be told in that regard, as there is with regard to carousel fraud, which has lately hit the headlines. I am sure that the Government have both those matters fully in mind, and I am sure that he can raise them again in Committee.
One point on which the hon. Member for Somerton and Frome lighted, which others did not, and which is worth highlighting now, is that of evidence on self-incrimination in relation to clause 13. I will have to read clause 13 a few more times before I get my head around it completely, but as I understand it, the self-incrimination concerned relates to questions asked in civil proceedings, which might prevent a prosecutor from using the answers to those questions to mount a criminal prosecution. The Solicitor-General, or my hon. Friend the shadow Attorney-General, will no doubt take me into a cooler room and explain things to me gently.
I would be interested to hear from the Government, now or subsequently, either orally or in writing, how that clause impacts on what is loosely called the right to silence, or the denial of the right to silence. As the Solicitor-General will know, prosecutors are entitled in certain circumstances, under the Police and Criminal Evidence Act 1984, to comment on a refusal to answer questions or to explain a particular course of conduct, at the roadside, on arrest or later while being interviewed by the police—or, indeed, on a refusal to give evidence in a trial. I should like to know for my own purposes what impact clause 13 will have on that aspect of criminal procedure. As I have said, the Minister need not trouble himself to give me an answer this evening, but I should be grateful if a simple written answer could be prepared.
My hon. Friend the Member for Rugby and Kenilworth (Jeremy Wright) described himself, rather diffidently, as a non-practising barrister, as though he had very little experience of the intricacies of criminal law. On the contrary, he is a highly experienced senior junior at the criminal bar. It is a pity that he has had to give that up for his parliamentary duties from the point of view of the courts in England and Wales, but it is a great benefit to the House. He too expressed support for the jury system. He too sensibly advised us that the Government should not just consider legislation on fraud, but consider ways of making things less complicated. He rightly said that the more complicated the system—he cited the tax credits system—the easier it would be for bad people to cheat. He too raised the issue of the maximum sentence in clause 11, which I think it is sensible to deal with in Committee.
The hon. Member for Rhondda (Chris Bryant) took a zoological canter through the Bill—if it is possible to take a zoological canter; perhaps not. He talked of phishing, Trojan horses and money mules. Essentially, his point was that fraud is an international crime which can be perpetrated by three separate people from three separate jurisdictions, and which can have an impact on a victim in this jurisdiction. It may well be that international co-operation of one kind or another outside the confines of the Bill is necessary to help reduce fraud. The hon. Gentleman was sceptical about the need to retain the common law conspiracy offence, although I think he properly recognised that it might be necessary to retain it in order to establish the most appropriate way of dealing with phishing, Trojan horses and money mules. No doubt the Government will consider that over the next three years.
The hon. Member for Meirionnydd Nant Conwy applied his legal experience to the Bill. He seemed less sure than Conservative Members about the need to abolish the common law conspiracy offence—not necessarily for the same reasons as the hon. Member for Rhondda—but I am happy to say that he was wholly with us on jury trial, on the need for tighter definitions, on the need for clarity in relation to mens rea or criminal intent in clauses 6 and 7, and on the wider and more general plea for clarity and certainty in the criminal law.
Let me say something about clauses 6 and 7. I understand the concern expressed by my hon. Friend the Member for Beaconsfield, and understand and support the simple solution that he proposed in relation to clause 7. I may be able to assist the Government in that regard, although no doubt my hon. Friend will explain his ideas better in Committee. Simply removing the word “or” from clause 7(1)(a) and substituting the word “and” would do away with all the problems that we may face.
The Government may ask what constitutes fraud within the confines of the Bill. Fraud is described in clauses 1, 2, 3 and 4. It requires criminal intent. The fraud referred to in clause 7(1)(a) is the fraud described in those earlier clauses. When we combine that with the word “knowing” in the same paragraph, we end up with criminal intent. My hon. Friend’s solution is so much neater, simpler and clearer. A stroke of a pen could remove one little word and insert another: end of problem.
There is a disjunction between the drafting of clause 7 and the drafting of clause 6, but as my hon. Friend said, what works in clause 7 ought to work in clause 6. If the Committee is to do itself any good—which I am sure it will, given a relatively benign and much welcomed Bill—it should concentrate on those two clauses, while obviously dealing with the difficulties presented by the word “expected” and the relationships issue raised in clause 4.
That is quite enough from me. I told the Government Whip that I would speak until about 9.30 pm, because I knew that the House was keen to hear from me. I also wanted to ensure that my hon. Friend the Member for Tewkesbury (Mr. Robertson) was given the shortest possible time in which to explain the issues that affected his constituents. Joking apart, however, it is time for me to sit down and shut up—or possibly shut up and sit down.
This is the first occasion on which I have spoken as a Minister in a Second Reading debate. As I am not a lawyer, I rise with a slight degree of apprehension, which is why I was grateful to the hon. and learned Member for Harborough (Mr. Garnier) for saying that I could write to him about clause 13.
I welcome the broad support that has been expressed for the Bill. I thank the hon. Member for Beaconsfield (Mr. Grieve), the hon. and learned Member for Harborough, the hon. Members for Somerton and Frome (Mr. Heath) and for Meirionnydd Nant Conwy (Mr. Llwyd), and others on both sides of the House for responding constructively, while committing themselves to scrutiny in Committee to produce the better Bill that is our common goal.
The hon. Member for Beaconsfield outlined three tests that he considered important. It was crucial, he said, to overcome complexity, to help prosecutors to prosecute those who committed the crime of fraud, and to adapt to the changing face of criminality—for example, in the context of new technology. I assure him that the Government agree with him about all those tests and aims. As for repeal of the common law offence of conspiracy to defraud, I repeat that, having listened to Lord Justice Rose and following various consultations, we decided not to repeal it but to review it after three years.
Let me point out to the hon. Member for Beaconsfield that the views expressed in the other place changed during debates on the Bill. The hon. Gentleman said that Lord Lloyd saw no case for retention of the common law conspiracy offence. That may have been his initial view, but on 14 March he said that after speaking to Lord Justice Rose he was “wobbling down in favour” of retaining the offence. Even Lord Lloyd, having listened to some of the arguments, decided to change his view. He wobbled, which is enough for me.
As has been said, non-jury trials will feature in another Bill and do not form part of this debate, but the points made today have been taken into account. As for clauses 6 and 7 and the mens rea issue, we believe that the requirement for an intention to use the articles in people’s possession will provide a safeguard against idiotic prosecutions. As my right hon. and learned Friend the Solicitor-General made clear, those are not strict-liability offences. Case law has established that the phrase
“for use in the course of…any fraud”
means that the prosecution must prove at least a general intention of committing a fraud. Anyone who has no such intention has nothing to fear from these provisions. Whether they are conjurors or innocent members of the public, safeguards are provided by case law.
I thank my hon. Friend the Member for Tamworth (Mr. Jenkins) for what I thought was an important and worthwhile contribution to the debate. He made the point that the Bill is only part of the solution. That is absolutely right. He suggested the need, for example, for specialist fraud judges and perhaps for specialist fraud courts. Those are useful proposals and I assure him that we will put them into the fraud review, which will report shortly.
My hon. Friend raised a number of issues to do with receiving digital television and no doubt he can argue his points in Committee; I am sure that he looks forward to serving on that. He made the important point, which the hon. Member for Broxbourne (Mr. Walker) also made, that fraud is not a victimless crime.
My hon. Friend said that there is no definition of dishonesty. Although there is no definition of dishonesty, the established test results from the case of Ghosh. Although that is case law, it is approved by the House of Lords and it has been in use for almost 25 years.
The hon. Member for Somerton and Frome raised many of the issues that we will need to look at in more detail in Committee. With that assurance, I will not mention all the points that he made. For example, we can discuss in Committee the issue of nationality jurisdiction. We do not think that the same justification for extra-territorial jurisdiction exists as it does for corruption. The corruption of officials overseas is dealt with in several international conventions. That stems from concern about corruption in developing countries and its effect on their stability. In contrast, fraud is a huge issue across the world—domestically as much as internationally. Corruption is also far less common than fraud. The resource implications for “policing” UK nationals worldwide for fraud are therefore much larger. The cost would need to be carefully examined before any party committed itself to it. If a UK national commits a fraud in Hong Kong that has no effect in the UK and no part of the fraud was committed in the UK, do we want the SFO to pay to send a team to Hong Kong? A degree of caution is needed with respect to that matter, but, as I say, it is an issue that we can debate in Committee.
The hon. Member for Rugby and Kenilworth (Jeremy Wright) was right to draw attention to the need for an appropriate penalty for obtaining services dishonestly. In response to his question about the maximum sentence, I draw his attention to the fact that the existing offence of obtaining services by deception carries a maximum sentence of five years’ imprisonment. The Law Commission examined that issue and saw no reason why the maximum for the new offence should not be the same. The Government’s consultation likewise did not elicit any demand for the creation of a higher maximum sentence. Therefore, the Government concluded on the basis of the Law Commission and the consultations that we undertook that the maximum sentence of five years was appropriate.
My hon. Friend the Member for Rhondda (Chris Bryant) reminded us, as always, of the importance of people. As others have made clear, it is important continually to make that point. Although some people find the issue of fraud dry and not very interesting, it impacts on thousands of people across the country. Therefore, today’s debate is particularly important.
My hon. Friend made an important point when he talked about the issue of training for the police. I assure him that the police, particularly the ACPO national fraud working group, are playing a full role in developing the policy in the Bill. They have publicly welcomed the Bill and look forward to its early enactment. The City of London police are using their experience to look at how they can train police forces throughout the country in ensuring that it is as effective as possible. Indeed—this will be of interest to the barristers here—the Crown Prosecution Service is also looking forward to issuing advice to prosecutors to ensure that it is as effective as possible.
As the Minister happens to be mentioning advice that will be given, I wonder whether the Solicitor-General could provide me and perhaps other members of the Committee with the guidance on the use of the conspiracy to defraud offence. It was mentioned in the debate in another place but so far we have not had sight of the draft guidelines.
I referred to the issue of the suborning of a police officer. Everyone in the Chamber seemed to be nodding their heads. I recognise that the Minister may not be able to respond directly to that today but it is an issue that has been lying around for quite a while and I wonder whether he would like to make some reference to it.
That is an interesting and important point but it is not one for the law on fraud.
The hon. Member for Meirionnydd Nant Conwy emphasised the need to ensure that the law is as simple as possible. The Bill will do that—it will help to simplify a range of deception offences. It will help juries and magistrates to deal with what, as he and I know, can be extremely complex matters.
On the issue of why “knowing or intending” is not included in clause 6, we should bear it in mind that we are building on existing offences and that the “going equipped” offence in the Theft Act 1968 applies not only to burglars but to those who have equipment to commit a fraud, which it describes as a cheat. The only problem with that Act is that it does not apply to fraudsters who operate from home. We already have nearly 40 years’ experience of the operation of that provision and we are not aware of any problems of innocent persons being troubled by it.
The hon. Member for Broxbourne pointed out, in his wide-ranging but interesting speech, that fraud is not a victimless crime. The Bill will help to tackle many of the examples that he gave of victims of fraud.
We have faced a growing threat from fraud. Tackling it requires effort by all concerned on several fronts and on prevention as well as enforcement. However, modernisation of existing criminal law is one essential building block. The existing statutory offences are specific and overlapping, yet they are not related to each other to convey the variety of fraudulent behaviour in an organised way. That untidiness in the law means that it is not always clear which offence should be charged and defendants have successfully argued that their particular deceptive behaviour did not fit the definition of the offence with which they had been charged.
Our reform efforts date back to 1998, when the then Home Secretary asked the Law Commission to consider whether a general offence of fraud would improve the criminal law. This is a tricky area of the law and the commission consulted stakeholders and gave the issue the most careful consideration. The 2002 report was the result. It decided that it was not a realistic solution to plug loopholes in fraud law by adding more specific offences, as has been done in the past. Such piecemeal law reform leads not only to further complexities and the potential for charging defendants wrongly, but means that the law will always be lagging behind any development in technology or new methods of committing fraud—a point that the hon. Member for Beaconsfield made.
I congratulate the Minister on his promotion. Clearly criminals are increasingly using more sophisticated IT methods, on which the police will need to be constantly trained and retrained. Can he give the House some assurance that the police have systems in place to be able to do that and that they are not going to find that they are continually outsmarted by ever-smarter criminals?
I thank the hon. Gentleman for his good wishes. There is always a race between the police and the criminal. The police are always racing to keep up with the criminal, but in the brief time I have been in post I have been to the Serious Organised Crime Agency and other agencies that are at the cutting edge of technology and are trying to ensure that they keep up with the criminal. They are soliciting support from all over to try to do that, including from the private sector. I have seen examples of those agencies working with various internet and computer companies, using their expertise and experience to try to ensure that, as far as possible, they keep up with developments in IT and the internet to tackle crime in the way that we would all want.
Our reform dates back to 1998, when the Home Secretary asked the Law Commission to look at this issue. The 2002 report was the result, and it was decided that the proposal to which I referred earlier was not a realistic solution that would plug the loopholes. Piecemeal law reform leads to further complexities and to the potential for charging defendants wrongly. As I said, the law will always lag behind new developments in technology.
The Bill introduces a general fraud offence, as recommended by the Law Commission, which does not focus on specific acts, as previous fraud statutes have done. Instead, it defines three broad ways in which fraud can be committed. The aim is to cover a variety of fraudulent behaviour, and that the offences should continue to be relevant as methods of committing crime and technology change and develop. The offence of obtaining services dishonestly is also important, as it plugs a legal loophole whereby fraudsters obtain services over the internet but are not subject to the current fraud law, as they have not deceived a person.
The shift in emphasis that the Bill brings—toward dishonesty and away from deception—is a critical and powerful element of this legislation. While it has always been the case that attempts to commit deception offences can be charged, the Bill simplifies the law and avoids the difficulties that arise from the narrowness of the existing offences. In simplifying the law, the Bill will make it more easily comprehensible to juries and the general public, and make the prosecution process more effective by providing a clear definition of fraud. The aim is to encompass most forms of fraudulent conduct within a law that is flexible enough to deal with developing technology. That could prove particularly beneficial in complex and serious fraud cases, and could shorten the time taken by each trial and lead to more efficient prosecutions.
In the end, the Bill will help us to prosecute the criminal and to defend victims—a goal common to us all. I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
FRAUD BILL [LORDS] (PROGRAMME)
Motion made, and Question put forthwith, pursuant to Standing Order No. 83A(6) (Programme motions),
That the following provisions shall apply to the Fraud Bill [Lords]:
1. The Bill shall be committed to a Standing Committee.
Proceedings in Standing Committee
2. Proceedings in the Standing Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 22nd June 2006.
3. The Standing Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
4. Proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.
7. Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed—[Mr. Michael Foster.]
Question agreed to.
Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
That the draft Immigration (Provision of Physical Data) Regulations 2006, which were laid before this House on 2nd May, be approved.—[Mr. Michael Foster.]
Question agreed to.
That the Railways and Other Guided Transport Systems (Safety) Regulations 2006 (S.I., 2006, No. 599), dated 9th March 2006, be referred to a Standing Committee on Delegated Legislation.—[Mr. Michael Foster.]
Mr. Deputy Speaker (Sir Michael Lord): With the leave of the House, I shall put motions 5 and 6 together.
That Colin Burgon and Steve McCabe be discharged from the Home Affairs Committee and Margaret Moran and Martin Salter be added.
That David Maclean be added to the Joint Committee on Statutory Instruments.––[Mr. Alan Campbell, on behalf of the Committee of Selection.]