House of Lords
Wednesday 17 January 2018
Prayers—read by the Lord Bishop of Durham.
Brexit: Aviation Safety Regime
To ask Her Majesty’s Government what is their assessment of the warning from the United States Federal Aviation Administration that British aviation manufacturers may have to pay the United States to be able to export their products to the United States if Her Majesty’s Government do not negotiate a continuing role in the European Aviation Safety Agency or set up a British aviation safety regime before leaving the European Union.
My Lords, we have a very close and constructive relationship with the Federal Aviation Administration and have been working with them since early last year on arrangements to replace the EU-US bilateral aviation safety agreement when the UK leaves the European Union. We are working to ensure that as far as possible, existing arrangements for the recognition of safety certification between the UK and US continue to apply.
I thank the Minister for that comforting reply but I wish to stress some points. We should not forget that the UK aerospace industry is a global leader, after the US, with a turnover of more than £32 billion. We have led the development of international safety regulations, under the European Aviation Safety Agency, EASA, and they are fully compliant with the American Federal Aviation Administration. If, on Brexit, we leave EASA, all bets will be off unless we negotiate continued membership of the agency. The alternative, which has been mentioned, of creating a whole new system is not supported by the Civil Aviation Authority, the aerospace industry, the maintenance facilities or the airlines. These are hugely important issues. The Government are on notice. Will they commit, therefore, to establishing a working group with the industry to maintain the regulatory alignment and ease the concerns of EASA?
My Lords, we work closely with the aerospace industry and are very aware of their views on both what is needed for the sector and the desire for a speedy agreement. We will be representing these views in our negotiations with the EU and will continue to keep the sector updated as negotiations progress. There is a precedent for non-EU states such as Switzerland and Norway to participate in the EASA system and we continue to examine the suitability of such an arrangement. We have been clear that we seek a close and collaborative relationship with the EU on a range of issues, including aviation safety.
My Lords, before we were taken into the present European arrangements, principally by the noble Lord, Lord Kinnock, a number of years ago when he was Transport Commissioner, were not the Civil Aviation Authority, supported by the Air Registration Board, the finest airworthiness organisations in the world? Can that situation not now be restored?
My Lords, the CAA is still one of the finest aerospace organisations in the world. It is highly regarded, not just in Europe but around the world for its expertise in safety regulation. As part of the EASA system, the CAA has been the specialist regulator for aviation safety and issues certificates and approvals. The competence to issue such safety certificates will stay as we leave the EU: none the less, the CAA is making prudent preparations for whatever scenario we are in.
My Lords, does the Minister recognise that if the UK does not remain a member of the European Aviation Safety Agency or establish an equivalent recognised regulatory UK agency by the end of March next year, UK aviation operators and manufacturers will not be able to fly in the airspace or sell in the markets of the United States of America? This was confirmed by Mr Michael Huerta, head of the Federal Aviation Administration. Does she accept the view of Mr Andrew Haines, chief executive, as she will know, of the UK Civil Aviation Authority, which is worthy of the praise she has just offered, that:
“I’m yet to meet anyone of substance that supports that approach”,
of withdrawal from the European Aviation Safety Agency? Does she agree that only continuing membership of EASA will prevent huge cost, disruption and damage to UK operators, manufacturers and passengers?
My Lords, of course we are aware of the important relationship we have with the USA regarding our aerospace industry. Last year we exported more than £2 billion-worth of aerospace products to the USA and imported £4.5 billion-worth. As I said, we are fully aware of the industry’s views on this and we will be presenting those as we go forward in our negotiations. I should also mention that Administrator Huerta made it clear that from his standpoint, we can make any scenario that might be negotiated work, and we are working very closely with the Americans.
My Lords, as my noble friend may be aware, there is a very significant aerospace industrial hub at Prestwick in Ayrshire, based around BAE Systems’ work on existing aircraft and Spirit AeroSystems’ work on the Airbus wings. Both these companies rely heavily on the American industrial supply chain. What are the Government going to do to support jobs and business at these two Scottish companies?
My noble friend is absolutely right. The UK has been very successful in securing a leading supply chain role globally, particularly with Airbus. The industry supports 128,000 direct jobs and 153,000 indirect jobs across the country. Of course, we must do all we can to ensure that we protect these jobs, and the industry. Globally integrated supply chains are mutually beneficial to us and our import and export partners, and it is in all our interests to ensure that trade continues.
Does the Minister accept that the creation of any additional regulatory barrier or dual regulations would undermine UK competitiveness, as well as the continuous improvement in safety? Does she agree that continued membership of EASA is by far the simplest way of achieving this?
My Lords, I agree that we need to keep regulation as low as possible. Continued membership of EASA is a possibility and we are actively considering it. The UK has a proud record in the aerospace sector and a number of distinct advantages, and will continue to do so after we leave the European Union.
My Lords, when Mr Michael Huerta, the outgoing boss of the Federal Aviation Administration, visited in December, he had a sense of urgency. He said:
“We need to know by next month because if we do not have a clear picture it leaves us little choice but to embrace a much more costly strategy of working on multiple potential scenarios”.
“Next month” is January, and he was implying that the FAA needs to know by the end of this month what we are going to do. What answer did he get at that meeting? If he did not get a straightforward answer, when will his successor get one?
My Lords, regardless of our future relationship with EASA, there will be an aviation safety agreement in place between the UK and the USA. The precise form and exact terms of that agreement will of course be influenced by our relationship with EASA. As I said, we are working with the FAA. We are updating our technical annexes to the 1995 UK-US aviation safety agreement, which predates and has a wider scope than the EU-level agreement, and will continue to do so. We look forward to welcoming the new boss of the FAA in the coming months and having constructive meetings with him.
Greece: Migrant and Refugee Support
To ask Her Majesty’s Government what, if any, support they are providing to the government of Greece, the UNHCR or Greek or international non-governmental organisations to help meet the challenges of winter for migrants and refugees in hotspots in the Greek islands.
My Lords, the UK is supporting the European Union, which, with the UN High Commissioner for Refugees and other organisations, is working tirelessly with the Greek Government to improve the conditions for refugees. The EU has allocated more than €1 billion in emergency funding to Greece.
My Lords, I thank the Minister for his response and I know that he is genuinely interested in this issue. Perhaps I may focus on unaccompanied children in these hotspots. How many unaccompanied minors are in hotspots and what are the UK Government doing to liaise with organisations which support and protect these children?
The Government are very concerned about the reports of conditions in the camps on the five hotspot islands which currently operate as receiving centres. The current numbers are 394, of whom 299 are unaccompanied children and 95 are separated children. The greatest number of unaccompanied children are on Lesbos island, where there are 168, along with 66 separated children.
My Lords, the Minister and I have been in correspondence about this precise situation and I thank him for his replies. Can he confirm, first, that the emergency aid which he mentioned will be concentrated on dealing with the worst camps on the islands? Secondly, does he agree that there should be no compulsory returns of refugees to Turkey but that, on the other hand, those who can voluntarily return to their countries of origin should be given all possible help?
Following the intervention of the European Commission—we are working through the commission and the UNHCR in this regard—a number of urgent steps have been taken. The first is to speed up the rate at which assessments are taken; the second, to address the point of the noble Baroness, Lady Massey, is to identify vulnerable children and make sure that they are moved out of the camps and on to the mainland as soon as possible; the third point is to ensure that new accommodation is built and opened up. Those steps will go some way towards addressing what is obviously a horrific situation for the people who are living there and experiencing it.
My Lords, one issue is the policy of containment on the islands. The conditions are deteriorating, particularly over the winter. Oxfam and many NGOs have been calling on the Greek Government to move people to the mainland, so that facilities can be improved. Have the Government had any discussions with the Greek Government about that, including giving financial support?
In all these things, we work through our European partners to address these situations and they have been very involved. We also have people from the Home Office in the UK seconded on to the islands. They are acting as camp security and liaison managers, and helping to identify and register young people. But exactly those types of efforts are part of the prioritisation that I referred to in reply to the noble Lord, Lord Hylton, by ensuring that winter accommodation and heating are there for them now. The number currently on the islands is 14,000 and there are 48,000 on the mainland; that is 62,000 people in this position and we need real urgency to improve the humanitarian response.
My Lords, does the Minister agree that the rumour that the Home Office has closed the Dubs scheme is given credence by the fact that the majority of Dubs places remain unfilled, yet just one lone and very traumatised child has been transferred to the UK from Greece, and that only after litigation? If he does not agree, can he say how many lone children we can expect to arrive within the next six months under the Dubs scheme?
The scheme to which the noble Baroness refers under Section 67 of the Immigration Act, after an amendment, ably proposed by the noble Lord, Lord Dubs, requires other member countries to make referrals to us. What has been established under it is a facility for 480 children to come to this country. Two hundred have already come, although I accept that they were categorised under the 900 as part of the agreement with France for the clearance of the site referred to as the Jungle. But that scheme remains open and is an important factor, along with four or five other schemes that are helping the most vulnerable people to get access to the help and security they need.
My Lords, what steps are being taken to pressure the EU to accelerate family reunification processes? Our colleagues in the Anglican communion in Europe have noted that applications made for family members in Greece to come to this country are currently taking well over a year and that the processes have, sadly, slowed in the past 18 months.
I am sorry to hear that. Our records show that some 24,000 people have come to this country through the Dublin regulations. That is an important part of the facility. However I say to the right reverend Prelate that we are talking about tens of thousands of refugees. Let us not forget that there are 13.1 million people in Syria who are in urgent need of humanitarian assistance, 5.4 million refugees from Syria still in the region and 6.1 million internally displaced people. That is why we are one of the largest donors, donating £2.46 billion, to those people in need. We need to keep both sets of people in our mind.
Is there any reason why the children in terrible conditions in Greece, particularly on the islands, cannot be brought over here under Section 67? The Government have said that the limit is 480 children. So far, we have had 204 children, I think. Why can we not do that now?
Under the mechanism of the rules to which the noble Lord referred, they need to be referred to us by the Greek Government once they have applied for asylum and their application has been proceeded with. That is part of the EU/Turkey agreement. Those are the rules. We have other schemes, such as the vulnerable persons resettlement scheme, which brought in 9,394 people last year, and the vulnerable children resettlement scheme, which brought in 412 children. These are all substantial steps to address that issue while at the same time remembering the great humanitarian issue in the region, which is children who are living in a war zone. We need to make sure that they get the help and support they need.
Brexit: Trade Agreements
To ask Her Majesty’s Government with how many countries with existing trade agreements registered with the European Union they intend to open trade talks from April 2019; and how long they expect the process of concluding those new trade agreements to take.
Through membership of the EU, the UK is currently party to around 40 trade agreements with more than 70 countries. Our priority is to secure the continuity of these existing trade arrangements as we leave the EU in order to provide certainty for businesses, consumers and investors. That is the basis of our current discussions. After leaving the EU, we will consider how we might best further develop our existing trading relationships, including with developing countries.
I think that Answer is both rash and brave, so I thank the Minister for it. Will she bear in mind that the total absurdity—I use those words deliberately—of the programme that is planned by the Government means that, really, the programme should start on 1 April 2019—in the morning, of course?
We have made it clear in the Trade Bill that, as I said, our focus is on continuity to make sure there is security and no cliff edge. We are actively working towards that. I have to respect confidentiality and do not want to pre-empt the outcome, but the process has been very positive. We have had discussions with more than 70 countries and have already moved to the technical stage with some countries. On future trade agreements, as the noble Lord will know, under the terms of the EU we are not allowed to negotiate new free trade agreements. We are, however, able to start discussions, so we have 14 working groups and high-level dialogues looking at a range of ways in which we can develop our trading relationships for when we are able to start negotiating and agreeing future agreements.
I am focused on the continuity of the ones that we have and on building working relationships with the countries that we can have trading relationships with in the future. The EU now has a number of trading relationships through both traditional free trade agreements and EPAs, where the focus is much more on development. We in the UK have long been supporters of a very strong and open pro-trade agenda.
My Lords, can the noble Baroness tell us how many of the 40 free trade agreements she mentioned, with 70 countries, include either most favoured nation clauses or national treatment clauses—that is, non-discrimination clauses? What assessment have the Government made of that for the process of our negotiations, and do they think there will be an impact on our ability to have a Canada triple-plus agreement?
The most favoured nation clauses are in a number of those agreements, although I could not give the noble Baroness the exact number. Clearly that is one of the issues that needs to be resolved as we move forward, because most favoured nation provisions clearly need to apply where they exist. If the noble Baroness would like the number to be assessed, I will ask my officials to write.
My Lords, are the Government aware of the Civitas research which shows that Brussels has managed to reach free trade agreements with countries whose combined GDP amounts only to some $7 trillion, whereas four small economies—Chile, Korea, Singapore and Switzerland, which have much smaller economies than ours—have averaged FTAs with countries whose combined GDP is $42 trillion, six times that of the EU? Does this not show that the EU’s famous clout in this area is yet another fraud and that we would be far better making free trade agreements on our own?
My Lords, the UK is a very strong believer in free trade, within rules. Trade means trade within rules. As I said, we will be pursuing our free trade policy and will try to take advantage of the opportunities that exist today. In my department, we are focused on building our export sales, which we can do in the current environment and through our free trade agreements.
My Lords, can my noble friend tell us whether it is intended to replace the current trade agreement between the EU and central America with separate trade agreements with each of the central American countries or to continue on the path of the EU agreement?
The initial plan is to make sure that we have as much continuity as possible. We are trying to replicate the effects of that as much as possible. As I said, we now have working groups looking at a variety of options and approaches to free trade agreements. We will progress those when we are able to do so, after we leave the EU.
Brexit: European Travel Information and Authorisation System
To ask Her Majesty’s Government what discussions they have had with the European Union about British citizens being subject to the European Travel Information and Authorisation System for travel to the European Union if the United Kingdom leaves the European Union, and about the costs arising from that System that British citizens might face.
My Lords, the EU is discussing a proposal for a European travel information and authorisation system that will apply to third-country nationals. The final details of that system have not yet been agreed. It is still too early to say what procedures will be in place for British citizens travelling to the EU after we leave. We will discuss these matters as part of our future relationship discussions.
I thank the Minister for that Answer. At present, all that a British citizen needs to do to go to Spain on holiday or to Germany on business is to present a passport at the border. If we Brexit, they will have to apply for an ETIAS, which is similar to a US ESTA. The fee could become significant and it could take four days for approval. It would require the supply of biometric data and details of health, criminal record and previous immigration history. When will the Government level with the British people about how this is another example of Brexit increasing costs and red tape? Is it not another reason why the British people should be able to exit from Brexit?
No, my Lords, it is not. The noble Baroness is making a whole series of assumptions in her question, none of which may turn out to be true. We are still to have the discussions with the EU on the future relationship in terms of how people will travel backwards and forwards. When we have had those discussions and reached a conclusion, we will be sure to let her know.
My Lords, yesterday we had a debate in this House about the question of deal or no deal—indeed, the Minister was here late last night to answer it—and the majority of speakers from the government Benches indicated that they were quite content with the no-deal option, which would mean abruptly crashing out from all EU arrangements and procedures at the end of March next year. Will the Minister confirm that Ministers really would jeopardise British citizens’ rights to travel on holiday visa free, and to work in the EU, as the price of their failure to agree terms with the EU?
I thank the noble Baroness for her question, but I am slightly surprised that she is coming back to this subject, as we spent about four hours debating it last night. Perhaps it would be helpful to read Hansard. No, we have been very clear that no deal is not an outcome that we want or expect. We are working to get a deal but, as a responsible Government, we have to be prepared for any eventuality. We discussed these issues in great detail last night.
I thank the noble Lord—my noble friend, I should say—for his very helpful question. We are trying to get a good deal and are not making any assumptions. We are negotiating in good faith with our EU friends and partners, and we are confident of obtaining that deal.
Sorry, that is a very wide-ranging question. We communicate, through this House and frequent media and TV interviews, with everyone about the consequences of government policy. We are always keen to do better in terms of explaining that, but on all the consequences of the agreements that we reach we will report back fully to Parliament and to the public as a whole.
My Lords, may I ask the Minister a more helpful question? Does he agree that the way forward here is for visa-free access between ourselves and the EU, and that we should join the 61 countries that already have such access to the EU? For our part, we should insist on visas only for those who wish to work, and those who wish to work should be invited to get a work permit on the same terms as non-EU. Is it not now time for the Government to look forward a bit, consider the slightly wider context and produce this sensible way forward?
Of course, all questions from your Lordships are helpful in this House. We have been very clear that we are going to have these discussions with the EU. We want to get an agreement and to make travel for EU citizens coming to the UK, and UK citizens going to the EU, as easy and painless as possible.
My Lords, at the moment citizens from the European Economic Area can use the electronic gates at UK airports. What contingency planning have the Government done should EEA nationals no longer be able to use the e-gates after Brexit? It is reported that, at one point on 29 December, at Heathrow terminal 4 non-EEA passport holders had to wait two and a half hours to cross the UK border.
I think that the Liberal Democrats are yet again making a whole series of assumptions about things that may not happen. If there are delays at the border, that is clearly unacceptable and I am sure that my Home Office colleagues are looking at that. We want people to visit the UK, we want the UK to be an open and welcoming place, the e-gates are one way that the Home Office is improving the procedures and we will want them to continue after Brexit.
My Lords, it is the turn of the Conservative Benches.
My Lords, can I ask an even more helpful question than has come forward so far? So far, we have been discussing the signed agreements to the main treaty. Is it not becoming increasingly apparent that the real loser from not signing most of these agreements will be the EU itself?
My Lords, is it not the case that, in this and many other areas in which we are negotiating with our present partners, we are nowhere near completion? Should we not be trying to talk to our partners about extending the time to allow proper negotiation and proper solutions to the many problems that we face with Brexit?
My Lords, perhaps I can help the Minister with his assumptions. Do the Government assume that, at the end of this process, we will have the status of a third country in our relations with the EU or an associated country? The noble Baroness who answered the first Question mentioned the parallels with Switzerland and Norway. Do we see ourselves as having a close association agreement, or are we content to be just one of the many third countries?
NHS: Nurse Retention
Private Notice Question
My Lords, nursing numbers have increased since 2010, including 11,700 more nurses on hospital wards. To retain more of these hard-working staff and to build a workforce fit for the future, the Government are increasing the number of nurse training places by 25%, supporting new flexible working arrangements in the NHS and delivering a new homes for nurses programme.
My Lords, even for the Minister, that is remarkably complacent. The overall number of nurses may be rising, but it has nowhere kept pace with the increasing number of patients. For years, the Government have failed to get new recruits coming through, while failed policy decisions such as the NHS pay cap and the ending of the NHS bursary have contributed to the growing crisis. Last year, 33,000 nurses left the NHS. More than half of those who walked away were under 40, and the number of leavers outnumbered joiners by 3,000. There are now more than 100,000 vacant posts in the NHS. Does the Minister accept the need to lift the pay cap, fund proper rises for nurses, restore bursaries and support this precious profession, which has been so unappreciated by this Government?
The noble Lord is quite wrong to say that it is an unappreciated profession; nurses are deeply appreciated by everybody in this country, and that includes members of the Government.
Of course we want to reduce the number of nurses leaving the profession. It is important to point out that the number is down on two years ago, which was the peak in both number and proportion, and that the number of nurses has risen over that period. The noble Lord mentioned the pay cap. He will know, I hope, that in the Budget the Chancellor announced that he would be funding pay increases above the pay cap for nurses and other professionals on the Agenda for Change contracts, which is extremely welcome. We know that pay matters.
The noble Lord is right to focus on under-40s; that was an area that concerned me. The programme whereby we are promising to deliver 3,000 social homes for nurses is an important part of retaining staff, because we know how important housing costs are, particularly in the south of England.
Finally, we have been around the issue of bursaries a number of times, and there is no evidence that their introduction will make a long-term impact on our ability to recruit the nurses we need. Indeed, we are increasing the number of nurse training places from next year by a further 5,000.
My Lords, the Minister has yet again repeated that there are 11,700 extra nurses on the ward, and compounded that by saying that there are more trained nurses in Britain than there were in 2010. Yet a Written Answer to me of just 10 days ago shows that we currently have 317,980 nurses, which is fewer than there were in 2010. Can he square that circle—or is he talking not about nurses but about nursing assistants?
On the specific and most recent workforce data—if we are going to get into the specifics of nurses only—in May 2010 there were 273,071 nurses and in September 2017 there were 275,356, so that is an increase. I shall certainly look into the figures with which I wrote to the noble Lord. Of course, I intend always to be truthful. I am reading from the latest workforce stats.
As for nurses on wards, the noble Lord will know that the number has gone up. An important response to the scandal of Mid Staffordshire and the Francis report was to increase nurse numbers. We know that that has a consequence for other professions—I have talked about that quite openly—and in mental health and district nursing. That is why we want to increase the number of nurses in those areas.
Does the Minister agree that the real issue is the lack of long-term workforce planning of all health professions, including social care? That planning should address the changing demography of citizens and the changing pattern of disease—and involve flexible training. Does he agree that that is what is required, and that what we have now is too many individuals or organisations trying to address the workforce? While he is at it, could the Minister also put on record when the Government will respond to the Select Committee of this House’s report on NHS long-term sustainability, which was published 10 months ago?
The noble Lord speaks with great wisdom and experience. He is quite right about the need for long-term workforce planning. I hope that is why he will welcome the 10-year strategy that Health Education England is launching. It is looking at diversifying the working population—for example, through the growth in the number of nursing associate training places.
On the report, I can only apologise again for the delay. I hope that at least the noble Lord will welcome the fact that in the reshuffle the health department gained social care policy. That was one of the issues on which he wanted to promote greater integration.
My Lords, in the past 12 months, more than 6,000 nurses have gone on long-term sick leave, related to stress. How are nurses being helped to cope by the occupational health departments of their employers, and do the Government acknowledge that the problem is exacerbated by a 1% cap on their pay rise?
I acknowledge the importance of looking at pay, which is why it was so welcome that the issue was dealt with in the Budget, with the cap being lifted for nurses and other health professionals on Agenda for Change contracts. I agree that long-term sickness is a big concern and undoubtedly having an impact on some nurses leaving. That is why the return-to-practice programme that we have is so important. Several thousand nurses have been through it; it is about providing opportunities to come back into the profession in a supportive way for those who want to do so.
In the last few years there has been an increase in agency spend. Of course, per nursing hour that tends to be more expensive. We have managed to reduce agency spend by increasing the availability of nursing banks. Those are the people employed on flexible contracts, which is very welcome for many nurses who are looking for—as they say in staff surveys—greater flexible working arrangements.
We know that we have a growing ageing population—I do not doubt that. We have been increasing real-terms funding for the NHS, which is going on more staff. Nurse numbers have increased and I should point out that there are more doctors and ambulance staff. There have been about 40,000 more clinical staff in general in the NHS over the past few years and more to come in the future.
Does the Minister accept that roughly 10% of our nursing workforce has left the profession this year? Many of them are new recruits or not long into their careers. It takes about £80,000 to train a nurse. Any employer with any sense would want, first, to retain them and, secondly, when they leave, to know why they have left, where they have gone and how to get them back. What are we doing to track people who leave and what are we doing to attract them back?
The point about understanding the reasons that people leave is very important. Some hospitals use exit interviews for that; I do not know if it is a nationwide programme but I shall certainly write to the noble Lord about that as it is a good idea. As for attracting staff back, I mentioned the return-to-practice programme. I think my noble friend Lady Chisholm took advantage of a similar programme when she returned to work after having children. I come back to the issue of pay. We know that pay is important, which is why lifting the cap will make an important difference to showing how much we value these staff.
The noble Baroness is quite right. We know that housing costs are an issue, particularly in the south of England and cities, which is why we want to use the sale of surplus NHS land to deliver more homes specifically for nurses and other similar professionals. She is also right to talk about flexible working, which comes up time and again in staff surveys. The use of nursing banks can be very helpful in that regard, and we have seen a big switch away from agencies towards using such banks for those places that need to be filled temporarily.
My Lords, the Minister talked about the number of nurses on wards; can he say something about the numbers in accident and emergency departments? I had occasion recently to go with somebody to accident and emergency. The person in question was in dire straits and, when I spoke to the sister in charge, she said that there were waits of six, seven, eight hours every night in accident and emergency in that hospital in a major town in Wiltshire. Can the Minister tell us whether accident and emergency is being properly addressed and when he last had occasion to speak to a sister in charge about what is really happening?
The kind of waits that the noble Baroness has pointed to are clearly unacceptable. People should not have to wait that long in A&E and that is why we have the target. I accept that it happens but it is unacceptable. We know that the NHS is under huge pressure at this time of year. There have been, as I pointed out, more nurses in A&E and in wards in general—indeed, there are more emergency doctors as well. But we accept that there is a need for more, because of the growing needs of the population.
Data Protection Bill [HL]
My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Data Protection Bill, have consented to place their prerogatives and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
1: Clause 2, page 2, line 6, after “lawfully” insert “and fairly”
My Lords, when we debated the right to data protection on Report, the House decided to opt for a declaratory statement, as opposed to the creation of a new right enshrining Article 8 of the European Charter of Fundamental Rights into UK law. In that debate, my noble friend Lord Ashton committed to consider further a number of points made by noble Lords, in particular the suggestions of the noble Lord, Lord Pannick.
Government Amendments 1 and 2 are the result of our further consideration of this matter. Amendment 1 concerns fairness. Data must be processed fairly. We previously took the view that this is clear and does not need repeating. The requirement for processing to be fair can be found in article 5(1)(a) of the GDPR and Clause 35(1) of the Bill. None the less, Clause 2 is entirely declaratory and, if it helps understanding, there is little to object to in this repetition, and our amendment inserts a reference to fairness.
Amendment 2 concerns the right to rectification. The right to rectification is in article 16 of the GDPR, which will soon be part of our domestic law. It is also found in Clause 46 of the Bill. As with the previous amendment, if it helps, we have no objection to covering this matter, and the amendment inserts the reference.
The data subject rights and the controller-processor obligations set out in the Bill are subject to specific limitations, restrictions and exemptions and in this clause and these amendments to the clause we do not change that, but hope that these amendments add to the value the declaratory clause has, as we previously agreed.
It was suggested to us on Report that we should also add reference to “proportionality”. I am grateful to the noble Lord, Lord Pannick, for taking the time to discuss this with me, and to the noble Lord, Lord Stevenson, who has also had several conversations with my noble friend Lord Ashton as well as the Bill team. I am sure that the noble Lord, Lord Stevenson, will speak more fully on this point in the context of his Amendment 3 but it may help the House if I say a few words on this now.
The GDPR takes effect in May and will be part of domestic law when we leave the European Union. There are 26 references to proportionality in the GDPR. In resisting this amendment we are not saying that proportionality is irrelevant or a concept we are avoiding, but we cannot simply say that the restriction of personal data rights must be proportionate. That oversimplifies a complex issue with unintended consequences. I will sit down but I will return to this once the noble Lord has spoken to his amendment.
My Lords, I have signed up to Amendments 1 and 2 in the name of the noble Lord, Lord Ashton of Hyde, and do so in support of the position that we reached after considerable discussion and debate. The noble and learned Lord, Lord Keen, mentioned a few of the occasions on which we discussed these matters but did not refer to—perhaps it would be embarrassing to do so—the flurry of paper that accompanied those discussions, when drafts were traded back and forth as if they were some bitcoin or equivalent, and people snapped at them in excitement and feverishly opened emails when a new draft appeared. That is not overstating the case.
I jest slightly but stress that, as noble Lords will be aware, this issue was raised on day one of Committee. That signified a sense on our side of the House that this matter was so important that it needed to be addressed early on in the Bill. We have moved our position considerably during the discussions; we were wise to listen to the voices raised at that time. I look at no one in particular but the general voice to which we listened was that more time was needed to think through the implications of this amendment and try to come to an appropriate conclusion on it. That time has been well spent. We have looked at various ways of doing what we set out to do, we have thought hard about the Government’s response, and we have been happy to have meetings and discussions and, as I said, we traded possible options. The conclusion we reached—in keeping with the main thrust of the Bill, which has a large amount of detail in it that is of a signposting nature so that those who read it understand correctly where the source documentation and source principles can be found—was that it would be appropriate to have at the head of the Bill a statement around the basic rights which personal data processing involves and for which the protection and privacy issues are so important.
Therefore, in support of both the original amendment placed by the Government on Report, which was voted in after debate and discussion, and in full support of the amendments to that, which would include “fairly” and,
“and to require inaccurate personal data to be rectified”,
we are happy to sign up and support this amendment today. However, as the Minister said, a couple of other issues were raised in the context of those debates, one of which is this question of proportionality. He has given a sense of why the Government have resisted our approach, and I will spend a couple of minutes just to make sure that we have explored this properly in the context of this Third Reading.
The point about proportionality is that it can, as I think he has argued and will argue again, be brought into the very drafting of the Bill. It is suffused throughout the GDPR and exists alongside a number of other documents to which we will still be bound, both while we are in the EU and should we leave, in the light of current legislation that is going through the other place and is soon to come to this House. It is therefore possible to argue—I hope that the Minister will reflect a little on that when he speaks again—that proportionality is a matter of fact to be determined by the readings that one makes of the Bills that pass through this House. I am sure that there is a better way to express that in legal language but that is the sensibility I take from it.
However, the point made by the noble Lord, Lord Pannick, which is reflected in our amendment, is that at times in the future adjustments may be made as a result of changes in legislation itself or perhaps because of judgments made by courts that hear data protection cases, and that other strands of thinking, points and issues may come to bear on the relationship which an individual subject has to the data controller and on the relationship which the whole has to the law. In that sense, Amendment 3 in my name is an attempt to try to add to the present signposting amendment—that is all it is trying to do—that proportionality is not just fixed as of today’s date or the date the Bill receives Royal Assent but that it is to be brought forward on all fours with the Bill and the Act as that Act progresses. On Report the noble Lord, Lord Pannick, observed that Her Majesty’s Government’s amendment on Report made no mention of the principle of proportionality, despite it being an important element of the European Charter of Fundamental Rights, and noted that it featured in the wording we are putting forward. The response “We don’t need to do this because it is already well cooked into the Bill, the GDPR and the applied GDPR” may not take into account the issue I have been raising, which is about what will happen in the future. If the Minister can reassure us on that point, I would have little difficulty in not pressing the amendment, but at the moment I would like to hear his comments before I respond.
My Lords, I take this opportunity to further reassure noble Lords that proportionality is a concept that has a continuing role in the Bill. Not only will the obligations in the GDPR carry over to domestic law but they will continue to apply to the Government. If Ministers are minded to use the powers in Clauses 10 or 16, for example, that allow new processing conditions or exemptions to be created in the future, they will need to continue to be proportionate. Further, the courts will continue to apply a proportionality test where appropriate. The Human Rights Act ensures that any public body must act compatibly with the convention, and as data protection is within Article 8 —the right to privacy—the public authority must act proportionately.
Clause 6 of the EU withdrawal Bill has the effect that any question as to the validity, meaning or effect of any retained EU law, including the GDPR, is to be decided, where relevant, in accordance with any retained case law and any retained general principles of EU law. Proportionality is one of those retained principles, so it will live on for as long as this legislation is in force.
Indeed, leaving the EU will not shake proportionality out of our legal system—it has worked its way into public law. Any public body acting disproportionately must be at risk of being challenged. Whenever any public body acts, it must act compatibly with the convention rights. Where qualified rights are concerned, such as Article 8 of the convention, which has been held to encompass personal data protection, there exists a requirement for that action to be a proportionate means of achieving a legitimate aim. So to that extent it is implicit that the Executive as well as data controllers must act in a proportionate manner. With that explanation, I invite the noble Lord, Lord Stevenson, not to press his Amendment 3.
Amendment 1 agreed.
2: Clause 2, page 2, line 9, after “data” insert “and to require inaccurate personal data to be rectified”
Amendment 2 agreed.
Amendment 3 not moved.
Clause 124: Age-appropriate design code
4: Clause 124, page 69, line 7, at end insert—
““children” means people under the age of 18;”
My Lords, I am pleased to speak to my Amendment 4, which I regard as small but important for the purposes of clarification.
Last month, there was universal support from your Lordships when my noble friend Lady Kidron introduced her excellent amendment on the age-appropriate design code, which is now the subject of Clause 124. At the time, I raised a question about the intention regarding the scope of the amendment, as there is no definition of “children” either in the amendment or in the Bill. I said that, as the amendment refers to the United Nations Convention on the Rights of the Child,
“I assume that the intention is that the age-appropriate design code of practice will cover all children up to the age of 18”.—[Official Report, 11/12/17; col. 1430.]
During the debate, my noble friend Lady Kidron said:
“The code created by the amendment will apply to all services,
‘likely to be accessed by children’,
irrespective of age and of whether consent has been asked for. This particular aspect of the amendment could not have been achieved without the help of the Government. In my view it is to their great credit that they agreed to extend age-appropriate standards to all children”.—[Official Report, 11/12/17; col. 1427.]
I was reassured by this statement about the intent of the clause but I remain concerned that there is no explicit definition in the Bill to indicate that we are indeed talking about any person under the age of 18, especially as the reference to the requirement to engage with the UN Convention on the Rights of the Child in Clause 124(4) is an obligation only to “have regard to”.
The truth is that there is no clear or consistent reference to a child or children in the Data Protection Bill. Clause 9 defines the right of a child to consent to their data’s use and says that this right starts at 13. Clause 201 covers children in Scotland, suggesting that there the right commences at the age of 12. These different approaches open up the door for arguments about the age at which the rights conferred by Clause 124 are operational for children. I would hate us to find ourselves in a position where, once this Bill was passed, a debate began about the ages at which the benefits of Clause 124 applied to children. This could result in a narrowing of the definition of children benefiting from Clause 124 so that it related only to some people under 18, rather than to all those under 18, on account of the Bill not being clear.
Years of experience have taught me that it is best to be crystal clear about what we are talking about, and that is why I have tabled this amendment. If the Government do not think it necessary, I hope the Minister will clearly state in his reply that the Government intend that Clause 124 should indeed relate to all persons under the age of 18. I look forward to hearing what he has to say. I beg to move.
My Lords, I thank my noble friend for bringing this issue to the attention of the House. It is my understanding that, by invoking the UNCRC, we are talking about children being people under the age of 18. I would very much welcome the Minister’s saying that that extends beyond Clause 124, which we brought forward, to everywhere in the Bill that “children” is mentioned.
My Lords, Clause 124(4)(b) refers to the United Nations Convention on the Rights of the Child, which defines a child as a person under the age of 18, so we can assume that that is the working principle. Clause 124, introduced at a previous stage by an amendment from the noble Baroness, Lady Kidron, talks about age-appropriate design, and so presumably that means appropriate at different ages—for example, safeguards for those aged 12 will be different from those for people aged 16 and 18. Bearing in mind the United Nations convention definition, will the Minister confirm that that is the working principle for this Bill?
My Lords, I do not wish to detain the House. I thank the noble Baroness for raising the point; clarity is always important, as we have learned, and she is right to put her finger on it. However, the point made by the noble Lord, Lord Paddick, is correct.
We run the risk in this Bill of pouring fuel on an already raging fire: the more we try to focus on children as a group, the more we demonise and make difficult the Bill’s attempts—through an amendment we all supported on Report—to raise our sights and find a way of expressing how all people are dealt with in terms of internet access, with particular reference to those with developmental or other support needs to whom the word “child” could well be applied. But that does not mean that we want the more generic approach to fail because it did not mention vulnerable adults, the elderly who may be struggling with internet issues, those with special needs or others. These groups all need to be considered in the right way, and I am sure that, in time, “age appropriate” may not be the most appropriate way of dealing with it. It does get us to a particular point, however. It was a historic decision that we took on Report to do it this way, but we need to have an eye on the much wider case for a better understanding of under what conditions and with what impact those of us who wish to use the internet can do so safely and securely.
My Lords, I feel confident that I will be able to reassure the noble Baroness and other noble Lords who have spoken this afternoon.
Child online safety is an issue close to the heart of the noble Baroness, Lady Howe, and everyone in this House. It is right that children in the UK should be granted a robust data regime so that they can access online services in a way that meets their age and development needs. It was with this goal in mind that the Government, with a great deal of support from a number of Peers from all sides of the House, led by the noble Baroness, Lady Kidron, agreed and supported her amendment. It introduced a requirement on the Information Commissioner to prepare an age-appropriate design code. This amendment was the product of many hours of discussion and days of drafting and redrafting, and I am glad that it was accepted with no dissenting voices in this House. The code will contain guidance on standards of age-appropriate design for relevant online services which are likely to be accessed by children.
The aim of Amendment 4, as explained by the noble Baroness, is to add a definition to the age-appropriate design code to define “children” as those under the age of 18. We are determined to ensure that children of different ages are able to access online services in a way that is safe and takes into account their different needs. For that reason, we included in Clause 124(4) a requirement that the commissioner must have regard to the fact that children have different needs at different ages, and in Clause 124 (4)(b) that the commissioner must have regard to the United Kingdom’s obligations under the United Nations Convention on the Rights of the Child. So I maintain that it is explicitly included in the Bill.
Article 1 of the United Nations Convention on the Rights of the Child defines children as,
“every human being below the age of eighteen years unless under the law applicable to the child, majority is attained earlier”.
As such, the existing age-appropriate design code, which requires the commissioner to have regard to the convention, already addresses the point that the proposed amendment is making.
Article 2 of the convention obliges state parties to respect and ensure the rights in the convention to each child—all those under 18. By requiring the commissioner to have regard to the convention, Clause 124 ensures that in order to comply with the requirements for the code on age-appropriate design, children up to 18 would need to be considered. Therefore, the existing age-appropriate design code already ensures that the commissioner must have regard to the different needs and rights of children under the age of 18, and as a result this amendment is not necessary.
Not only is the amendment unnecessary, it is potentially unhelpful. One of the key features of the existing age-appropriate design code is that it recognises that children have different needs at different ages. The proposed amendment risks undermining this important point by presenting children as a homogenous group. The needs of a child aged 17 are very different from the needs of a child aged 10 and it is right that the requirements of the age-appropriate design code reflect that.
The noble Baroness asked—the noble Baroness, Lady Kidron, also alluded to this—whether the Bill is consistent in its approach to children. As I said, children are human beings under the age of 18. That is the consistent approach we are taking on this legislation. But the Bill works in tandem with the GDPR and we cannot amend the GDPR. Nor does the GDPR allow member states to come up with their own definitions, so we interpret the GDPR as adopting the definitions from the UN Convention on the Rights of the Child.
There are of course differences between young children and older children, and the provision needs to be age appropriate. A child who is 12 years old may consent to having their data processed in the offline world. Clause 201 ensures that is consistent in Scotland as well as England and Wales. A child who is 13 years old may consent to having their data processed online. That is provided by Clause 9. Any website or app maker providing services for children—meaning everyone under 18—will have the benefit of the code of practice on age-appropriate design provided by Clause 124. Of course, the law generally makes different provision for older children and for young children—for example, the age of sexual activity, marriage and serving in the Armed Forces.
There is a risk that the proposed amendment to the clause on age-appropriate design could also have serious unintended consequences. The Data Protection Bill contains numerous references to “children”. We cannot agree to an amendment that could have implications for issues elsewhere in the Bill.
Finally, it is worth emphasising that the existing wording of the age-appropriate design code is completely consistent with the wording of the general data protection regulation, which itself does not define children. I hope I have reassured the noble Baroness and as a result she feels able to withdraw her amendment at this late stage of the Bill.
My Lords, I thank all those who have spoken, particularly the Minister for his considerate reply, which he will appreciate I nevertheless find somewhat disappointing. I hope that when the Data Protection Bill reaches the other place the issue will be debated again—and even that the Minister might by then have changed his mind. Nevertheless, in the meantime clearly I must do as requested. Therefore, I beg leave to withdraw the amendment.
Amendment 4 withdrawn.
Clause 144: Information notices: restrictions
5: Clause 144, page 79, line 26, at end insert—
“( ) An information notice does not require a person to give the Commissioner information to the extent that requiring the person to do so would involve an infringement of the privileges of either House of Parliament.”
My Lords, I turn now to an issue that is pertinent to us all: parliamentary privilege. I am sure that noble Lords will agree that it is paramount that both this House and the other place continue to be safeguarded in their processing of personal data in connection with parliamentary proceedings.
This issue was raised in previous debates by the noble and learned Lord, Lord Brown of Eaton-under-Heywood, to whom I am very grateful. Those debates influenced our thinking on how the Bill currently provides for parliamentary activity, and I am pleased to announce that the amendments in this group have been tabled to ensure that privileges under the current law will not disappear when we enter the new data protection framework.
I will start with Amendments 5 to 8. Amendments 5 to 7 restrict information, assessment and enforcement notices served by the commissioner from requiring a person to comply with the notice if compliance would involve infringing the privileges of either House of Parliament. Put simply, the commissioner’s notices are “switched off” where there would be an infringement of parliamentary privilege. Amendment 8 prevents the commissioner giving the House a penalty notice with respect to the processing of personal data by or on behalf of the House. These amendments have been tabled to ensure that parliamentary proceedings will not be impeded by the commissioner and that Parliament will maintain the freedom to do its work that it currently enjoys.
Amendments 9 to 13 relate to criminal liability and seek to prevent corporate officers of either House of Parliament being liable to prosecution as a data controller. This is the current position in the Data Protection Act 1998, and our amendments seek to clarify the Government’s intention to maintain the effect of Section 63A of the 1998 Act. The amendments also make equivalent provision for government departments and data controllers for the Royal Household. It should be noted, however, that these provisions do not prevent corporate officers being liable for their own conduct when acting as data controllers on behalf of either House, for government departments or for the Royal Household. This maintains the current position, and we believe that it is an important safeguard that allows full parliamentary privilege while balancing the rights of data subjects.
Amendments 14 and 15 revert to the current position under the Data Protection Act 1998 in relation to the processing that is necessary for the functions of the Houses of Parliament or for the administration of justice by removing the additional “substantial public interest” test. On reflection, we could not see how such processing would not be in the substantial public interest, so the test appeared redundant. On that basis, the Houses of Parliament will have to consider simply whether processing is necessary for the purposes of their functions, as is the position now.
Amendments 20 and 21 make a corresponding amendment to Schedule 8, where processing is necessary for the administration of justice under the provisions in Part 3 for law-enforcement processing, to maintain a consistent approach across the Bill.
Amendment 18 is to Schedule 2 and extends the exemptions from the GDPR relating to parliamentary privilege to include an exemption from article 34(1) and article 34(4) of the GDPR. Article 34 requires controllers to communicate a personal data breach to the data subject where the breach is likely to result in a high risk to the rights and freedoms of the subject. The amendment excludes this requirement from applying to parliamentary proceedings and also restricts the ability of the commissioner to oblige either House to comply with it.
I hope that the House will agree that these amendments, taken as a package, will ensure that there will be no chilling effect on the functions of Parliament and will restore the regime that applies under the Data Protection Act 1998. It has the approval of the House authorities. I beg to move.
My Lords, I strongly support this group of amendments, perhaps unsurprisingly given that they have now been brought forward in place of a series of broadly similar amendments which, as the Minister has mentioned, I tabled on Report. They achieve the same basic objective, which is to safeguard parliamentary privilege and thereby ensure that this House, along with the other place, can continue to go about its business and fulfil its vital constitutional role without inappropriate inhibitions and concerns with regard to the protection of data and privacy, which of course the Bill as a whole is rightly designed to protect.
As I made plain on Report, I was prompted to table the original amendments by and on behalf of the officials of both Houses, that is to say, the clerks and counsel, because of their concern about how, unamended as it then was, the Bill risked infringing parliamentary privilege in the various ways that the Minister has recounted. These concerns were raised and over recent months they have been discussed extensively between officials and the Bill team. Again I express my gratitude and pay tribute to the Bill team for its hugely constructive help and co-operation throughout. As now formulated, these amendments substantially and realistically meet the concerns of officials, and accordingly I welcome them.
My Lords, we should all thank the noble and learned Lord, Lord Brown, together with officials of the House, for having prompted these amendments. In thanking the Minister I want also to mention in dispatches my noble friend Lady Hamwee. She highlighted this point early on in Committee, I think to the incredulity of the House at the time because it was thought that it was only Members of Parliament who should have the exemptions in the Bill. These elegant solutions demonstrate that parliamentary privilege covers both Houses.
I too thank the noble and learned Lord, Lord Brown of Eaton-under-Heywood, for his stalwart work in bringing forward these important amendments. What he did not say but we should also recognise is that on a couple of occasions he had to stay late in order to do that, I am sure far beyond his normal bedtime.
Unfortunately, squeezed out in the second group of amendments which I also supported but which did not find favour with the Government, was an effort to try to retain the current arrangements under which noble Lords of this House who wish to speak about individual cases would be able to do so on the basis that they would be treated as elected representatives. That did not win the support of the Government and therefore will be left to the other place, which I am sure will immediately seize on it and see the injustice reversed. In due course it will come back to us. With that, I support the amendment.
Amendment 5 agreed.
Clause 147: Assessment notices: restrictions
6: Clause 147, page 81, line 37, at end insert—
“( ) An assessment notice does not require a person to do something to the extent that requiring the person to do it would involve an infringement of the privileges of either House of Parliament.”
Amendment 6 agreed.
Clause 151: Enforcement notices: restrictions
7: Clause 151, page 85, line 27, at end insert—
“( ) An enforcement notice does not require a person to do something to the extent that requiring the person to do it would involve an infringement of the privileges of either House of Parliament.”
Amendment 7 agreed.
Clause 155: Penalty notices: restrictions
Amendments 8 and 9
8: Clause 155, page 87, line 28, at end insert—
“( ) The Commissioner may not give a controller or processor a penalty notice with respect to the processing of personal data where the purposes and manner of the processing are determined by or on behalf of either House of Parliament.”
9: Clause 155, page 87, line 31, leave out “under” and insert “by virtue of”
Amendments 8 and 9 agreed.
Clause 202: Application to the Crown
Amendments 10 and 11
10: Clause 202, page 119, line 33, leave out from beginning to end of line 34 and insert—
“(5A) As regards criminal liability—(a) a government department is not liable to prosecution under this Act;(b) nothing in subsection (4) makes a person who is a controller by virtue of that subsection liable to prosecution under this Act;(c) a person in the service of the Crown is liable to prosecution under the provisions of this Act listed in subsection (6).(6) Those provisions are—”
11: Clause 202, page 119, line 40, leave out subsection (7)
Amendments 10 and 11 agreed.
Clause 203: Application to Parliament
Amendments 12 and 13
12: Clause 203, page 120, line 15, leave out from beginning to end of line 16 and insert—
“(4A) As regards criminal liability—(a) nothing in subsection (2) or (3) makes the Corporate Officer of the House of Commons or the Corporate Officer of the House of Lords liable to prosecution under this Act;(b) a person acting on behalf of either House of Parliament is liable to prosecution under the provisions of this Act listed in subsection (5).“(5) Those provisions are—”
13: Clause 203, page 120, line 21, leave out subsection (6)
Amendments 12 and 13 agreed.
Schedule 1: Special categories of personal data and criminal convictions etc data
Amendments 14 and 15
14: Schedule 1, page 123, line 30, leave out paragraphs (a) and (b)
15: Schedule 1, page 123, line 35, at end insert—
“6A_ This condition is met if the processing is necessary—(a) for the administration of justice, or(b) for the exercise of a function of either House of Parliament.”
Amendments 14 and 15 agreed.
16: Schedule 1, page 126, line 34, leave out from beginning to end of line 34 on page 128 and insert—
“13A(1) This condition is met if the processing—(a) is necessary for an insurance purpose,(b) is of personal data revealing racial or ethnic origin, religious or philosophical beliefs or trade union membership, genetic data or data concerning health, and(c) is necessary for reasons of substantial public interest,subject to sub-paragraphs (2) and (3).(2) Sub-paragraph (3) applies where—(a) the processing is not carried out for the purposes of measures or decisions with respect to the data subject, and(b) the data subject does not have and is not expected to acquire—(i) rights against, or obligations in relation to, a person who is an insured person under an insurance contract to which the insurance purpose mentioned in sub-paragraph (1)(a) relates, or(ii) other rights or obligations in connection with such a contract.(3) Where this sub-paragraph applies, the processing does not meet the condition in sub-paragraph (1) unless, in addition to meeting the requirements in that sub-paragraph, it can reasonably be carried out without the consent of the data subject.(4) For the purposes of sub-paragraph (3), processing can reasonably be carried out without the consent of the data subject only where—(a) the controller cannot reasonably be expected to obtain the consent of the data subject, and(b) the controller is not aware of the data subject withholding consent.(5) In this paragraph—“insurance contract” means a contract of general insurance or long- term insurance;“insurance purpose” means—(a) advising on, arranging, underwriting or administering an insurance contract,(b) administering a claim under an insurance contract, or (c) exercising a right, or complying with an obligation, arising in connection with an insurance contract, including a right or obligation arising under an enactment or rule of law.(6) Terms used in the definition of “insurance contract” in sub-paragraph (5) and also in an order made under section 22 of the Financial Services and Markets Act 2000 (regulated activities) have the same meaning in that definition as they have in that order.”
My Lords, I am very pleased to be able to set out the Government’s reasoning in tabling this group of amendments in response to valid concerns from the insurance industry. There are three amendments in the group; one technical matter and two addressing processing for insurance purposes. Regarding Amendments 16 and 17, I am grateful to the noble Earl, Lord Kinnoull, and the noble Lord, Lord Clement-Jones, for raising the challenges facing the insurance industry in previous stages of the Bill’s progress through the House and in discussions with me and my officials.
The Government recognise the fundamental importance of insurance products. They are vital to the public at large, who rely on insurance daily to protect them from financial loss due to an unfortunate emergency, accident or other unforeseen event. The industry is an important sector in the economy. On Report, we made clear our intention to propose an amendment addressing the noble Lords’ concerns at Third Reading. These amendments make good on that promise. Amendment 16 therefore replaces the three narrow conditions currently included in Schedule 1 with a single, more holistic condition permitting the processing of certain types of special category data where it is necessary for an insurance purpose.
There is a need to balance such processing with appropriate safeguards, and Amendment 16 provides these. First, as I have just said, processing must be necessary for a defined insurance purpose. For example, this condition will not be met if the organisation could achieve the purpose by some other reasonable means that did not require the processing of special categories of data, or if the processing was necessary only because the organisation has decided to operate its business in a particular way.
Secondly, processing must be necessary for reasons of substantial public interest. We consider that ensuring the availability of insurance at a reasonable cost to members of the public through risk-based pricing, the ability to detect and investigate fraudulent claims and the efficient administration and payment of insurance claims are matters of substantial public interest. Nevertheless, as this processing condition for insurance purposes is drawn more widely than those previously included in the Bill, we consider it reasonable to ask data controllers to consider whether, in respect of a particular processing activity they propose to undertake, it is necessary for a purpose that is in the substantial public interest.
Thirdly, the processing condition has been designed so that it affords additional safeguards to those data subjects who do not have rights or obligations in respect of the insurance contract or insured person. For example, a witness to an event giving rise to an insurance claim or a parent of a person seeking health insurance might fall into this category. Processing of data relating to these data subjects is permitted only if the data controller cannot reasonably be expected to obtain the consent of the data subject and they are not aware of the data subject withholding their consent.
Fourthly, data controllers relying on this new insurance condition will be required to have an appropriate policy document in place, as set out in Part 4 of Schedule 1 to the Bill.
Amendment 17 extends paragraph 13A so that the processing of criminal conviction and offences data is also permitted for an insurance purpose, which is clearly essential. Taken as a whole, we think that the processing condition set out in the new paragraph 13A provides the necessary balance between the rights of data subjects and the benefits that members of the public derive from the efficient and effective provision of insurance products.
Finally, Amendment 19 is a minor and technical matter. It merely deletes a reference to a provision elsewhere in the Bill that no longer exists. I am grateful to the helpful staff of the Public Bill Office who spotted this error when preparing the current print of the Bill last week. I am pleased that we have achieved what we agreed to do at the earlier stages of the Bill and I acknowledge the help of the Association of British Insurers and the Lloyd’s Market Association in reaching this solution. On that note, I beg to move.
My Lords, I strongly support this excellent group of amendments. I declare my interests as set out in the register, particularly those in respect of the insurance industry. I am enormously grateful to the Minister for being so generous with his time in the process that has led to the birth of these amendments. His Bill team has been quite outstanding—I see some of them sitting over there—and I thank them as well. I also thank three other Members of your Lordships’ House: the noble Lord, Lord Clement-Jones —who yet again was emailing me at 11 o’clock last night —and the noble Lords, Lord Hunt of Wirral and Lord Stevenson of Balmacara, who have been great supporters in trying to make sure that the ordinary man in the street can continue to buy insurance at a good price.
I have one tiny point of clarification, which will be very easy for the Minister to answer. He talked about insurance and I have talked about insurance, but it is important that reinsurance is understood, as well as retrocession and all the other words. We are talking about the whole concept of insurance and if he could confirm that reinsurance, retrocession and other things are included, that would be very helpful.
Anyway, with this change the man in the street will be able to buy personal and business insurances that involve special category personal data and yet the GDPR will have arrived. Insurers will have to improve their game somewhat—never a problem for the good, and important for the back-markers in the industry.
My Lords, I congratulate the noble Earl on the assiduous way in which he has pursued these issues on behalf of the insurance industry, and thank the Minister for his close engagement on them. We very much welcome these amendments but I have a couple of clarificatory questions for the Minister, the answers to which would be helpful in making sure that we all understand the exact position of the insurance industry relative to these new provisions.
The proposed derogation to paragraph 13A of Part 2 of Schedule 1 does not specifically address the processing of data relating to criminal convictions or offences. First, can the Minister confirm that paragraph 28 of Part 3 of Schedule 1 may be read in conjunction with paragraph 13A of Part 2 to permit the processing of data relating to criminal convictions or offences where it is necessary for an insurer to process this data for policy underwriting and claims management or related money laundering and anti-fraud activities? The reference in paragraph 13A to,
“racial or ethnic origin, religious or philosophical beliefs or trade union membership, genetic data or data concerning health”,
would appear to preclude this, but we assume that this is not the intent.
Secondly, can the Minister confirm that the processing of special category data or data relating to criminal convictions or offences by insurance companies and related intermediaries, such as reinsurers and brokers, for the purposes of conducting insurance-related business and managing claims will be regarded by the Government as purposes that are in the “substantial public interest”?
My Lords, I welcome these amendments and it is nice to hear the story that has come through of a listening Bill team and a listening Minister, and the way in which the industry has organised itself to make sure that the perceived faults were remedied.
If it is of interest to the House, a lot of us have been doing events with professional bodies and others interested in this whole area since the Bill started. I was reflecting just before this Third Reading debate that there were really only three things that came up time and again at these sessions, after the presentations by the experts and others such as us who were trying to keep up with what they were saying. The first was Article 8 of the European Charter of Fundamental Rights—that came up time and again. People did not understand the basis on which their rights would be retained, but we have dealt with that.
The second was the—unpronounceable—re-identification of previously anonymised data. I suspect that was because there are one or two very active persons going around all these groups—I seemed to recognise their faces every time it came up—who were anxious to make sure that this point was drilled back to Ministers. We have found a way forward on that, which is good.
The third item was the insurance industry time and time again raising points similar to those raised by the noble Earl, Lord Kinnoull, by suggesting that there was a problem with efficient markets and the operation of customer good, and that the Government had to look again. We are very glad that the Government have done so. I have now ticked off all my list and it is done.
My Lords, I am grateful to the noble Earl, Lord Kinnoull, and to the noble Lords, Lord Stevenson and Lord Clement-Jones. The noble Earl is absolutely right that there are various names for different insurance contracts, including reinsurance and retrocession, but they are all contracts of indemnity. The schedule absolutely covers all types of insurance, including reinsurance and retrocession contracts.
As for the clarificatory questions asked by the noble Lord, Lord Clement-Jones, they are very reasonable because this is not an easy part of the Bill to understand—even for people who have been looking at it for many weeks, as we have. First, he asked whether the provision permits processing of data relating to criminal convictions or offences where it is necessary for an insurer to process this data for policy underwriting and claims management, and for insurance purposes. Technically speaking, paragraph 13A, introduced by Amendment 16, does not permit the processing of criminal convictions data because it exercises the derogation provided by article 9(2)(g) of the GDPR. Criminal convictions data is regulated by a separate article of the GDPR, article 10, but the noble Lord will be pleased to know that Amendment 17 extends paragraph 13A so that it also covers criminal convictions and offences data.
Secondly, as for the processing of special category data by insurance companies and related intermediaries such as reinsurers and brokers, which are important, as is managing claims, the noble Lord asked whether that will be regarded by the Government as purposes that are in the substantial public interest. The answer is that the Government have introduced paragraph 32A because they believe that the provision of core insurance products is in the substantial public interest. However, the world of insurance is an exciting and dynamic one—no, really it is—and controllers must be accountable for their own particular processing activities. I hope that answers his questions.
Amendment 16 agreed.
17: Schedule 1, page 134, line 21, at end insert—
“32A_ This condition is met if the processing—(a) would meet the condition in paragraph 13A in Part 2 of this Schedule (the “insurance condition”), or(b) would meet the condition in paragraph 32 by virtue of the insurance condition,but for the requirement for the processing to be processing of a category of personal data specified in paragraph 13A(1)(b).”
Amendment 17 agreed.
Schedule 2: Exemptions etc from the GDPR
18: Schedule 2, page 144, line 2, after “provisions” insert “and Article 34(1) and (4) of the GDPR (communication of personal data breach to the data subject)”
Amendment 18 agreed.
Schedule 6: The applied GDPR and the applied Chapter 2
19: Schedule 6, page 182, line 6, leave out “and (d)”
Amendment 19 agreed.
Schedule 8: Conditions for sensitive processing under Part 3
Amendments 20 and 21
20: Schedule 8, page 184, line 24, leave out “a purpose listed in sub-paragraph (2)” and insert “the exercise of a function conferred on a person by an enactment or rule of law”
21: Schedule 8, page 184, line 26, leave out sub-paragraph (2) and insert—
“1A_ This condition is met if the processing is necessary for the administration of justice.”
Amendments 20 and 21 agreed.
A privilege amendment was made.
My Lords, in moving that the Bill do now pass, I shall say a few words about it. The Bill has been central to my life and the lives of a number of noble Lords for many weeks now. It was accepted right from the word go as a necessary Bill, and there was almost unanimity about the importance and necessity of getting it in place by next May, taking into account that it still has to go through the other place. I am very relieved to have got to this stage. Despite that unanimity, we have managed to deal with 692 amendments during the passage of the Bill, which is a very good indication of unanimity as far as I am concerned. I have to admit that of those 692, 255 were government amendments, but that is not necessarily a bad thing. The GDPR takes effect in May and many of the things that would have been put into secondary legislation have been dealt with in the Bill. I think most noble Lords would agree that that is a good precedent. Data protection is so pervasive that the previous Data Protection Act, passed 20 years ago in 1998, is referred to around 1,000 times in other legislation, so a lot of the amendments were to make sure that when we repeal that Act and this Bill becomes law it will be consistent with other legislation.
I am very appreciative of what we achieved and the way that we did it. One thing we managed to achieve was to accept a number of recommendations from your Lordships’ House, so we changed the way that universities, schools and colleges can process personal data in respect of alumni relations; we ensured that medical researchers can process necessary personal data they need without any chilling effect; we agreed that patient support groups can process health data; we ensured a fair balance between privacy and the right to freedom of expression when journalists process personal data; and we have talked about insurers today. The noble Baroness, Lady Kidron, one of the heroes of the Bill, helped us protect children online, which we all agreed with—in the end. We amended the way that some of the delegated powers in the Bill are effective and subject to the right parliamentary oversight.
I thank the Front Benches for their co-operation. This is meant to be the last Bill for the noble Lord, Lord Stevenson. I doubt that. Every time he says that, he comes back. He had a good team to help him: the noble Lords, Lord Kennedy and Lord Griffiths of Burry Port. It was the first Bill for the noble Lord, Lord Griffiths; if he can survive this, he can survive anything. I am sure we will see a lot of him in future. I thank the noble Lords, Lord Clement-Jones and Lord Paddick. I should have mentioned the noble Baroness, Lady Hamwee, and acknowledged her position on the privilege amendment. I must say that the way she withdrew her amendments one after the other on Report is a very good precedent for other legislation that might be coming before your Lordships’ House soon.
The Bill team has been mentioned several times, not only today but all through the passage of the Bill. The members of the team have been outstanding. They have worked incredibly hard. I should like to mention Andrew Elliot, the Bill manager, Harry Burt, who worked with him, Jagdeep Sidhu and, from the Home Office, Charles Goldie. They have all done a tremendous job and been great to work with.
Lastly, I have had a galaxy of talent to help me with large parts of the Bill. My noble friends Lady Williams, Lady Chisholm and Lord Young of Cookham and my noble and learned friend Lord Keen have made my life very easy and I am very grateful to them. I beg to move.
My Lords, I will just slip in for a couple of minutes in the light of the Minister’s very shrewd appraisal of the progress on the Bill. I had not quite realised that the Bill team were treating the Digital Economy Bill as a dress rehearsal for the Data Protection Bill, but that is really why this has gone so smoothly, with very much the same cast on the Front Benches.
We on these Benches welcomed many aspects of the Bill on its introduction last October and continue to do so. Indeed, it has improved on the way through, as the Minister pointed out. I thank my noble friends Lord Paddick, Lady Hamwee, Lord McNally, Lady Ludford and Lord Storey for helping to kick the tyres on this Bill so effectively over the last four months. I also thank the noble Lord, Lord Stevenson, and all his colleagues for a generally harmonious collaboration in so many areas of common interest.
I very much thank the Minister and all his colleagues on the Front Bench and the excellent Bill team for all their responses over time to our particular issues. The Minister mentioned a number of areas that have been significant additions to the Bill. I thank the Minister for his good humour throughout, even at late hours and on many complicated areas. We are hugely pleased with the outcome obtained by the campaign of the noble Baroness, Lady Kidron, for age-appropriate design, which many of us on these Benches think is a real game-changer.
There is just a slight sting in the tale. We are less happy with a number of aspects of the Bill, such as, first, the continuing presence of exemptions in paragraph 4 of Schedule 2 for immigration control. Solicitors need the facts to be able to represent their clients, and I am afraid these immigration exceptions will deny access to justice.
Secondly, the Minister made a pretty good fist of explaining the way the new framework for government use of personal data will operate, but I am afraid, in the light of examples given, for instance by the noble Earl, Lord Clancarty, in relation to the Department for Education’s approach to the national pupil database, and now concerns over Public Health England’s release of data on 180,000 patients to a tobacco firm, that there will be continuing concerns about that framework.
Finally, one of the triumphs of debate in this House was the passing of the amendment from the noble Baroness, Lady Hollins, calling for, in effect, Leveson 2. The response of the Secretary of State, whose appointment I very much welcomed at the time, was rather churlish:
“This vote will undermine high quality journalism, fail to resolve challenges the media face and is a hammer blow to local press”.
On Sunday he did even better, saying it could be the “death knell” of democracy, which is pretty strong and unnecessary language. I very much hope that a sensible agreement to proceed is reached before we start having to play ping-pong. I am sorry to have to end on that slightly sour note, but it is an important amendment and I very much hope that it stands.
My Lords, from this side of the House, I also thank the Bill team, as I think I can call them. What we faced when we first came across the Bill was a beast—a beast dressed up as legislation but a beast in many ways. As the Minister said, we got round most of it but then discovered there were another 250 amendments coming down the track from the Government. Although they were dressed up as being small, trivial things, you have to read them and understand them, and they add a little to one’s workload.
If we did not learn to love the Bill, we certainly at least respect it. It is a good Bill, now much better than it was before. I hope it will have the longevity of its predecessor, the 1998 Act. It has the same aspirations and aims but, because of the inclusivity of the age-appropriate design and other matters that the noble Lord, Lord Clement-Jones, mentioned, it also begins to shape the debate that we still need to have about how and under what conditions we as a mature democratic society wish to engage with those who provide information, data, statistics, facts, communications and other things in relation to the electronic world in a way that is, if not comparable to, at least as effective as what is applied in the current non-virtual world. That is not the subject of the Bill, I am afraid, but it is something that will trouble this House now and in the future. We should not shy away from it because at its heart lies the future of our society. Morality and ethics are dimensions that we have not yet touched on in the Bill; they are still to come. They may well be foreshadowed for us by the creation of a data ethics commissioner of some kind. I welcome that and hope it will come forward quickly. Without it, we really are not in a very good place, despite the strength of the Bill.
For my part I am grateful to my noble friend Lord Kennedy and to my apprentice—if I can call someone of such distinguished age and experience that—my noble friend Lord Griffiths of Burry Port, who is going to take over my responsibility here in the main, although, as the Minister said, I am not leaving the Front Bench; I am simply moving sideways to accommodate those with greater skills and abilities than I have myself.
I have enjoyed the Bill tremendously. It is the sixth Bill that I have done with DCMS, and five of those have been with the current team. With familiarity comes a certain ability both to see through the artifices as they come at you but also to recognise a true offer when it comes, and both sides have benefited from that. We understand some of the pressures a bit more, particularly the difficult time that any Bill team has when it is agreed to move forward but the processes and procedures in Whitehall are so slow that they cannot keep pace with our aspirations for doing it. That is very frustrating for all concerned.
On that point, but not related to the mechanics, there is a question that the House must address at some point in the near future. What happens when it is agreed around the House, through Second Reading and Committee and approaching Report, that a desired amendment would bring public good but it cannot be moved because it falls outwith the narrow scope of the Bill, is a frustration that we have all encountered on this Bill and the previous Bill that I was involved with. There is a solution to that which should be discussed by the Procedure Committee. I hope it will do so in the near future, and I will be writing to it to that effect.
The Bill team have been absolutely fantastic. I gave them a rousing welcome when they first arrived because they have a trick at DCMS, which I recommend to all departments, of bringing together in one place at the very beginning of the process all the documents that you need to work out what you are talking about. If only every Bill team did that, we would all have much easier lives. They did it again this time, and it was fantastic. I have enjoyed working with them; their professionalism and efficiency were wonderful and a great help to us. Our support is minuscule in comparison; effective and efficient though Nicola Jayawickreme and Dan Stevens are, there are only two of them to support all our work. I wish to ensure that our sincere appreciation is on the record.
This has been an enjoyable ride. I have had a great time, waxing lyrical on things I did not think I would ever want to talk about. I hope that the Bill passes, and that when it comes back we will be able to deal with it expeditiously and appropriately.
Bill passed and returned to the Commons with amendments.
Sanctions and Anti-Money Laundering Bill [HL]
Report (2nd Day)
Relevant documents: 7th and 10th Reports from the Delegated Powers Committee, 8th Report from the Constitution Committee
Clause 41: Money laundering and terrorist financing etc
71A: Clause 41, page 28, line 38, at end insert—
“( ) Regulations under subsection (1) may not make provisions that create new criminal offences.”
My Lords, the issue which arises on this amendment captures precisely the same constitutional point on which your Lordships expressed your views on Monday. It is therefore disappointing that the Minister has not been able to acknowledge the view that vesting wide-ranging powers in a Minister to create criminal offences by regulation is constitutionally troublesome. Troublesome is a modest word; very troublesome is not much stronger; but understatement perhaps has something to do with my disappointment, because there is a further disappointment. During the course of the debate on Monday, the Minister made clear before the vote that he knew and, to use his words, “totally accepted” the concern of the House about the creation of criminal offences using secondary legislation.
There is a further reason for my disappointment. At least on the sanctions part of the Bill, the Minister was able to advance an arguable point—not a strongly arguable point, but an arguable point—that it was necessary to have the legislation in the form proposed because, after our departure from the EU, there would be a gap and sanctions would be needed which could not be provided for. In other words, there had to be an element of continuity. As I said, it was a colourable argument, but it was an argument.
No such argument is present in relation to this amendment. This is not a provision for continuity; it is not a provision for saving anything; it is a distinct part of a long Bill which is entirely creative and in no sense preservational. We have this very long Bill, and the legislation on money laundering which we are concerned with today is a very short part of it. There is no primary legislation in it at all; it is all regulation-making powers. It is backed up with an endless further supporting group of regulation-making powers in Schedule 2: on and on they go. I shall come to look at one or two of them in a moment.
Where criminal offences exist, and they do here, and if ever you were to be deterred from committing offences, there is also ample protection. The regulations which will support the regulations include: the power to have a supervisory body; directions for investigation; enabling those with the powers to do so to come into your home to search; liability to civil penalties; the fact that you can be caught if you are doing this abroad; and so on and so forth. There are ample powers, therefore, to provide the evidence which would be necessary to prove one of the many offences in the Terrorism Act, the Counter-Terrorism Act, the Terrorist Asset-Freezing etc. Act, the Proceeds of Crime Act—the litany is endless, and I shall not weary your Lordships with it.
Perhaps we may consider for a moment some of the offences which you can commit which exist and will exist whether we stay in Europe or come out of Europe—whatever we do until Parliament repeals them. There is the offence of entering into money laundering: precisely what this is about. There is the offence of concealing the proceeds of crime: precisely what this part of the Bill is about. There are endless offences currently in existence of which you will be guilty if the regulations come into force but which we do not need the regulations to base the prosecution on. The statute book is full of offences.
In none of our debates so far has a single possible gap been identified in the criminal law as requiring closure. I would have a recommendation to make if one had been identified—come back to Parliament—but there is none. As with the previous part of the Bill, we are invited to hand over power to a Minister which, save in the most exceptional circumstances, should remain within the power of Parliament to give or refuse on proper scrutiny.
Would the noble and learned Lord also agree that, if these powers were to be given, they should be exercised only in an emergency situation and that, heretofore, the Minister has not been able to identify any likely emergency not covered by existing legislation?
I agree—and I do not propose to add anything to that, with no discourtesy to the noble Viscount. That is the reality. These powers are not to be given, save in the most exceptional circumstances—and I would not define them, but I would invite some suggestion of what is exceptional here.
So here we have it. There is no self-evident necessity for this. The criminal law covers what is proposed to be covered in the regulations that are proposed to be allowed to be created. Without this amendment, which I am advancing, we would once again be allowing an alarming accretion of power to the Executive. We should not do it; we did not do it on Monday; let us not do it today. I beg to move.
My Lords, I simply add to the very powerful statement made by the noble and learned Lord that it is the generality of the power that is so objectionable—its unrestricted nature. If the Minister can bring forward an amendment at Third Reading that confines and restricts this power to some specific purpose, of course the House would consider it. At the moment, the Bill confers a completely unrestricted and unregulated power on Ministers, which is what is so objectionable.
My Lords, my name is also attached to this amendment. The case has been so clearly and emphatically made by the noble and learned Lord, Lord Judge, that I cannot see that there is anything that I have to say that could strengthen that argument. There are other arguments in favour of Amendment 71A, but they are frankly of second order. It is the constitutional issue, right at the heart of our constitution, that is the fundamental one that we have to consider today. I hope that the Minister takes that on board and responds accordingly.
I want to use this opportunity, because this amendment is part of a much larger group, to pay tribute to the Minister and the Bill team. On quite a number of the other amendments in this group—and my noble friend Lady Bowles may speak for a moment or two to them—the Minister and the Bill team have recognised that the issues in contention are those that concern all of us and there was a great deal of common ground. The Minister and the Bill team have listened—in fact, the Bill team have come many times and listened—and they have responded. I expect that by the end of the Minister’s comments on this grouping, we will feel that, with one exception, it is going to be possible to withdraw the amendments, because the response has been satisfactory and respectful on both sides. I attribute a lot of that to the real skill in the Bill team in understanding the core issues and finding ways in which to respond to them that meet the Government’s requirements, as well as the requirements of those scrutinising the issues. I thank noble Lords for this opportunity and hope very much that this House recognises the importance of Amendment 71A.
My Lords, I rise briefly to say that I found the observations of the noble and learned Lord extraordinarily persuasive. I have had a look at the regulations set out in Schedule 2 and, in particular, paragraphs 15 and 18 of that schedule, which make the point that the regulations create criminal offences and deal, too, with the defences that can be advanced as well as the evidentiary requirements. Furthermore, paragraph 18 makes the point that the regulations can impose custodial sentences of not in excess of two years. If we accept what the Government are asking us to accept, we would create powers that are very intrusive in criminal processes and impose custodial sentences—and we are being asked to do so by regulations, which are not amendable. I regard that as the chief vice of this process, because the resolution procedure is simply not amendable.
If we were being asked to contemplate an emergency situation, I might find these exceptional powers acceptable, but I do not think—for the reasons advanced by the noble and learned Lord—that we are dealing with emergency situations, because no such situations, or the likelihood of the same, have been identified. There is a raft of existing legislation that covers the kind of issues that are likely to arise.
I am personally always against giving delegated powers to Ministers whenever I can avoid doing so. There is a fundamental rule in politics that I have observed over nearly 40 years in Parliament, which is that, if you give powers to Ministers or officials, on occasion they will be abused. That is a fundamental rule of politics. Consequently, you give powers to Ministers and officials only where you must and, when you do, you ensure that there are as many safeguards as possible. I find the observations of the noble and learned Lord wholly persuasive. If he seeks the view of this House, he will have my support.
My Lords, I do not have anything to add to give force to the argument that has been put so forcefully by my noble and learned friend and the noble Viscount. All I will do, if I may, is add an anecdotal note. In 1936, I believe, a former Attorney-General and former Lord Chief Justice, Lord Hewart, wrote a book called The New Despotism. He was worried about the very powers that we are talking about today being delegated in a dictatorial way to Ministers. If it was a new despotism then, what is it now?
My Lords, the scope for regulation under the provisions that are in issue is very wide. It is an area in which there is, as the noble and learned Lord, Lord Judge, said, a great deal of legislation already. I therefore hope that my noble friend the Minister will be able to indicate some form of restriction that might be acceptable in relation to this particular power. In the debate that we had on Monday, he pointed out that the power would be used only in restoring, in effect, what might be lost as a result of our leaving the European Union and that, in particular, there is power under the European Communities Act 1972 to do a good deal under statutory provision that is not by primary legislation. I thought that, if that were the case, it would be a justification for using this particular method. In this case, however, there does not appear to be justification for anything like that. I therefore invite my noble friend to indicate, as far as he can, what restriction he has in mind and whether that restriction could be embodied in the terms of the legislation.
My Lords, I had not intended to speak and—I apologise—I have not taken a close interest in this Bill, but I was moved and impressed by what the noble and learned Lord, Lord Judge, and my noble friend Lord Hailsham said. The mantra of taking back control means only one thing to me: it is Parliament taking back control. It is not Parliament conferring a blank cheque upon the Executive, from whichever party they are drawn. I am disturbed that this principle appears very much at risk.
In the previous Divisions on this Bill I voted for the Government. I did so because I have not taken a close and continuing interest in the Bill, as I indicated at the beginning, and because I have a real regard for my noble friend Lord Ahmad of Wimbledon, who I have come to know well. I respect him greatly and regard him as a Minister who has proper regard for Parliament and the constraints under which Ministers should operate. I feel for him on this issue but add my appeal to the brief but eloquent appeal of my noble and learned friend Lord Mackay of Clashfern.
Taking up the point made by the noble Lord, Lord Pannick, I very much hope that my noble friend the Minister will indicate that he truly appreciates the concerns of those who are apprehensive about an accretion of power to the Executive, and that he will, after discussing the matter further with the noble and learned Lord, Lord Judge, come back at Third Reading with something that is acceptable throughout your Lordships’ House.
We are in difficult waters. This is a precursor to a long and I am sure complicated, but I hope not acrimonious, debate on the withdrawal Bill, on which the other place is coming towards the end of its deliberations. However, it is no part of the functions of your Lordships’ House to connive at the accretion of power to the Executive. Certain things should depend upon primary legislation, not the fiat of a Minister. I hope that my greatly respected noble friend Lord Ahmad will give me a response that will not oblige me to refrain from supporting the Government.
My Lords, I recognise the great importance of Amendment 71A but wish to speak to some of the other amendments with which it is grouped. As has already been said by my noble friend Lady Kramer, we have had productive discussions and have identified common ground in relation to the concerns about paragraphs (a), (b) and (d) in Amendment 72. I understand that the Minister will make a statement about the House returning to these issues at Third Reading, with assurances and language that enable me to not press Amendment 72. I also understand that the Minister will clarify the effect of the term “without prejudice” at the beginning of Schedule 2, which relates to my Amendment 76A.
Amendment 74, standing in my name and those of my noble friend Lady Kramer and the noble Lord, Lord Collins of Highbury, would introduce a failure to prevent a money laundering facilitation offence. This was elaborated in Committee, so I need only remind noble Lords that the Law Commission has long recognised a need for a change in the law to enable large corporations to be brought to justice where the need to find a directing mind gets in the way of achieving justice. This type of offence has worked not only since it was introduced in the Bribery Act but has recently been legislated for with regard to tax evasion. Money laundering is in a similar category and this offence would enable offending British companies to be successfully prosecuted here instead of us witnessing the United States getting a better grip than us: that is not being a leader on anti-money laundering. It is also proper that such a new offence is brought in by primary legislation. I give notice that at the appropriate moment I will move Amendment 74 and, if need be, divide the House.
My Lords, my name is attached to Amendment 74, and of course to Amendment 71A. I will not repeat what the noble Baroness, Lady Bowles, said on Amendment 74, but this demand has been made for some considerable time. It is important that we act to ensure that all players involved in such criminal activity are brought to justice. That was reinforced by the Serious Fraud Office, too. On Amendment 71A, I concur wholeheartedly with the noble and learned Lord, Lord Judge, but the noble Lord, Lord Pannick, hit the nail on the head. On Monday this House spoke very clearly on this principle. It is of concern that the Minister, who has been in effective listening mode on a lot of the amendments, particularly in this group, has not reflected properly on Monday’s decision. How do we constrain these powers, as the noble Lord, Lord Pannick, said? If the Minister is not prepared to say how he will do that, I have no doubt that this House will speak with the same voice as it did on Monday.
My Lords, the opening line here says “I wish to thank noble Lords for putting forward this amendment”. I am not sure whether that best reflects the sentiments of the House. However, as I have said before, I deeply appreciate that this is a matter of great interest and concern to many in your Lordships’ House. In proceeding, I hope that in part I can reassure noble Lords that the powers in the Bill are taken with the utmost regard to your Lordships’ concerns. In the wider context, I also thank noble Lords for the practical, helpful and constructive engagement we have had. As a government Minister, I always approach legislation with the view that there will be times when we will disagree, but equally, we disagree with great respect to the House and to the incredible experience and wisdom in it. Where we are unable to agree, that does not mean that we have not listened. The Government’s position is a listening one, as the noble Lord, Lord Collins, said, and as we have demonstrably shown on both parts of the Bill. I also thank the noble Baronesses, Lady Kramer and Lady Bowles, for the constructive engagement we have had on the anti-money laundering aspects, and I am grateful for the key co-ordination role—I hope she will not hold this against me—that the noble Baroness, Lady Northover, played on this. I also very much appreciated the expertise that the noble Baroness, Lady Bowles, in particular, brought to this group.
Amendment 71A seeks to prevent regulations from making provisions that create new criminal offences. It is not unusual for requirements to be set in delegated legislation which can be enforced using criminal penalties, both in financial services legislation and other regimes such as health and safety. As I am sure all noble Lords are aware, in accordance with standard practice when implementing EU directives, criminal offences in this area have already been created in delegated legislation, in the Money Laundering Regulations 2017, made under the powers given by the European Communities Act 1972. This was also the case in their precursor, the Money Laundering Regulations 2007, which were brought into force—notwithstanding the contribution made by the noble Lord, Lord Collins—by the then Labour Government. The Bill therefore makes no changes to the current position in this sense and reflects the Government’s firm intention to continue imposing criminal penalties for breaches of anti-money laundering requirements.
These detailed provisions, setting standards and procedures for regulated businesses, should also be seen in the context of a separate penalty regime for the key substantive money laundering offences. Such offences are established under Part 7 of the Proceeds of Crime Act 2002, which provides for more punitive prison sentences of up to 14 years—for example, for those guilty of directly laundering the proceeds of crime.
The Government’s view is that removing their power to create criminal offences under secondary legislation would seriously weaken the enforceability of new regulations and therefore lower the effectiveness of the UK’s anti-money laundering regime.
As I have indicated, this is not a departure from what already exists. I have already quoted previous Acts and talked about the ways in which Governments of different political colours have used secondary legislation in the past for this purpose.
More generally, noble Lords may recall that it is not unusual for requirements, which can be enforced using criminal penalties, to be set in delegated legislation. In response to my noble friend, in the area of financial services, for example, the Regulated Activities Order under the Financial Services and Markets Act 2000 specifies which activities are or are not regulated. Carrying on such activities without permission from the regulator is a criminal offence.
I assure noble Lords that I am sympathetic to the arguments on the constitutional position, and I say to the noble and learned Lord, Lord Judge, that I have listened very carefully to his contributions—we have had positive engagement on various parts of the Bill. However, as I have indicated, it remains the Government’s position that it is neither unusual nor improper for Parliament to confer powers of this type on Ministers, as we have done previously and has been accepted. I shall turn to the appropriate safeguards relating to these powers in a moment.
I would like to set out why the ability to create criminal offences specifically for the UK’s anti-money laundering regime is necessary. When the Government consulted on whether to remove the specific criminal offence provisions in previous money laundering regulations, the British Bankers’ Association stated that removing such provisions would be at odds with the objective of driving an effective anti-money laundering regime. Furthermore, the Crown Prosecution Service argued that provisions for creating criminal offences in the money laundering regulations different from those in the Proceeds of Crime Act 2002 serve a separate and useful function in tackling money laundering. In some instances, prosecuting according to the Proceeds of Crime Act 2002 could jeopardise ongoing investigations. It said:
“In such cases, the ability to prosecute for a regulatory offence relating to defective”,
anti-money laundering or counterterrorist financing,
“systems can be an important tool”.
Finally, in response to the same consultation, HMRC noted that abolishing criminal sanctions for breaches of regulations “carries significant risk” to its ability to tackle money laundering. In lieu of such sanctions, if the UK wishes to maintain a functioning anti-money laundering and counterterrorist financing regime post our departure from the European Union, it is vital that the Government continue to have the power to create criminal offences for those regimes.
As the noble Baroness, Lady Bowles, pointed out, there are other amendments in this group. Amendments 90 and 92 envisage the same effect as that of Amendment 71A. Amendment 90 aims to prevent future regulations containing provisions to create new criminal offences, while Amendment 92 deals with provisions relating to penalties for such offences. As I set out to noble Lords previously, removing the Government’s ability to create criminal offences would seriously weaken the enforceability of new regulations, thereby, we believe, lowering the effectiveness of the UK’s anti-money laundering regime.
Amendment 72 proposes to restrict the scope of anti-money laundering regulations in several ways. First, it aims to prevent the making of regulations that are detrimental to the UK’s anti-money laundering and counterterrorist financing regime. Secondly, it aims to ensure that future regulations prescribe measures which are duly proportionate. Thirdly, it seeks to ensure that regulations cannot create new criminal offences, and, fourthly, it makes provision restricting the ways in which powers in the Bill can be used to update the definition of “terrorist financing”.
I have stressed from the Dispatch Box many times that the Government are listening to concerns expressed by noble Lords about the aims of these regimes, the need for a proportionate approach and the best way to keep definitions up to date. I am pleased to be able to confirm to the House that, having engaged directly with noble Lords on this matter, we will be tabling new amendments for Third Reading which aim to address the concerns contained within limbs (a) and (b) of Amendment 72. I have set out my position on criminal offences in relation to limb (c), and so do not propose to repeat that. I can further confirm that the Government will seek in the other place to restrict the ability to add to the definition of “terrorist financing” in Clause 41. This was also something that we discussed very constructively. I assure noble Lords that it will be limited to cases where any relevant regulations under Clause 1 are for the purposes of compliance with UN or other international obligations or to further the prevention of terrorism, or both. I hope that this is sufficient reassurance to enable the noble and learned Lord not to press this amendment so that we can table amendments and engage constructively with those issues again at Third Reading.
Amendment 74 proposes to create a corporate criminal offence of failure to prevent money laundering. The effect of this amendment would be to provide that a company or partnership is guilty of a criminal offence in cases where the company’s employee, agent or other service provider commits one of the substantive money laundering offences contained in Part 7 of the Proceeds of Crime Act 2002. The relevant company would have a defence if it could prove that it had adequate procedures in place to prevent its employees and agents from committing such an offence.
I would like first to note that, as noble Lords may be aware, in 2017 the Ministry of Justice carried out a call for evidence on corporate criminal liability for economic crime, such as money laundering, fraud and false accounting, to establish whether further reform of the law was necessary. Noble Lords will accept that this is a complex and controversial area of the law, attracting views from across a broad spectrum. Responses were received from a wide variety of stakeholders and expressed diverse and often conflicting views, as well as raising several important issues that need careful consideration. As I have told the House when dealing previously with this Bill, the Government’s response is being finalised and will be published in due course. I hope we can agree that it would make no sense to muddy the waters by introducing a further failure to prevent offence before there has been a proper review of the evidence.
I emphasise and assure noble Lords that there is no gap in the regulatory regime for financial services that would be addressed by the introduction of a failure to prevent offence for money laundering, which was a concern expressed. The senior managers regime requires that relevant financial services firms, such as banks and building societies, allocate a senior management function for overseeing the firm’s efforts to counter financial crime, including money laundering, to a specific senior person.
The requirement to maintain this role is in addition to the requirement for a money laundering reporting officer, or MLRO, who is directly responsible for ensuring that measures to combat money laundering are effective. Noble Lords may wish to note that the MLRO has a personal responsibility for the oversight of the firm’s compliance with Financial Conduct Authority rules on anti-money laundering systems and controls.
The senior managers regime is robust in the additional requirements it places on senior managers responsible for overseeing firms’ defences against financial crime. Such senior managers are required to obtain pre-approval as fit and proper from the Financial Conduct Authority and the Prudential Regulation Authority. If there is a contravention of the money laundering reporting requirements by a firm, the Financial Conduct Authority can take action against the responsible senior manager, if they can prove that they did not take such steps as a person in their position could reasonably have been expected to take to avoid the contravention occurring. This enforcement action includes fines and disbarment from undertaking regulated activities.
The senior managers regime currently applies to banks, building societies, credit unions, Prudential Regulation Authority-designated investment firms and UK branches of foreign banks.
The Government have legislated for it to apply across all financial services firms, and this will be implemented in due course—the regulators have been consulting on the final design of this extension of the regime. The introduction of the senior managers regime has significantly enhanced the ability to hold individuals responsible for failures of the systems and controls of relevant firms. Its expansion across the financial services sector will do more in this regard.
These measures are in addition to the measures mandated by the money laundering regulations 2017, which already require regulated firms to have policies, controls and procedures to mitigate and manage risks of money laundering and terrorist financing. We have legislated to require that these policies, controls and procedures must be proportionate with regard to the size and nature of the firm’s business, and approved by the firm’s senior management. Failure to comply with these requirements can be sanctioned through either civil or criminal means. The Financial Conduct Authority and other supervisors are able to take action against firms if their measures to counter money laundering are deficient. Recent regulatory penalties related to firms’ anti-money laundering weaknesses include a £163 million fine for Deutsche Bank in January 2017 and a £72 million fine for Barclays Bank in November 2015. All those requirements are additional to the substantive money laundering offences in the Proceeds of Crime Act which apply to any individuals, and companies; such as entering into arrangements which facilitate the use of criminal property.
The Government have previously introduced two similar offences: failure to prevent bribery in 2010 and failure to prevent the facilitation of UK and foreign tax evasion in 2017. These are structured in a similar way to the proposed amendment. They were introduced, however, following clear evidence of gaps in the relevant legal frameworks which were limiting the bringing of effective and dissuasive enforcement proceedings. We have already established that these offences apply to legal entities regardless of whether they operate within the regulated sector.
The situation in relation to money laundering is very different. The international standards set by the Financial Action Task Force and the UK’s money laundering regulations apply to banks, financial institutions, certain professional services firms and other types of entity that act as gatekeepers to the financial system. As I said, such firms are already required to have policies and procedures in place to prevent their services being misused for money laundering. Subsection (6) of the amendment would, however, require all companies, regardless of where they were incorporated, to have procedures in place to prevent persons connected with them laundering money. That would not be proportionate. It would risk making non-regulated firms liable for the actions of their regulated professional advisers, when responsibility for anti-money laundering compliance should properly rest with the regulated sector. Given the robustness of the senior managers regime and the additional requirements placed on MLROs by existing legislation, I see no clear evidence showing that there are any regulatory gaps that a failure to prevent money laundering offence would address.
Amendment 76A has been tabled as there is some concern about the words,
“without prejudice to the generality of section 41”,
in paragraph 1 of Schedule 2. I hope that I can reassure noble Lords that the normal rules of statutory construction mean that these words do not enable any Minister using this power to circumvent the clear limitations expressed in paragraphs 1 to 17 of that schedule. Those limitations will continue to apply in respect of the matters set out in those paragraphs. The words simply make it clear that regulations under Clause 41 may, for the purposes mentioned there, make provision of a kind which is different from, but related to, the kinds of things mentioned in paragraphs 1 to 17.
For example, applying the general rules of statutory construction to Schedule 2, as amended by government Amendments 77 to 89, 91 and 93 to 97, those words could not be relied on by the Minister to make regulations under Clause 41 imposing requirements of the kind mentioned in paragraphs 3 and 4 on persons other than relevant persons—that is to say, persons carrying on business of a kind which entails risks relating to money laundering, terrorist financing or other threats to the integrity of the international financial system. Nor could such regulations be made authorising a supervisor other than the FCA or HMRC to impose civil monetary penalties. Those words do not, and are not intended to, allow provision to go beyond the limitations on the powers that I have explained.
I am also aware that concerns were raised by noble Lords about whether a gap in existing data protection law could arise from the anticipated replacement of the Data Protection Act 1998, which currently regulates the processing of personal data. The money laundering regulations 2017 contain an express provision that states:
“Any personal data obtained by relevant persons for the purposes of these Regulations may only be processed for the purposes of preventing money laundering or terrorist financing”.
These regulations cross-refer to the Data Protection Act 1998 in providing further detail on the circumstances in which personal data can be used, and the information that regulated firms must provide to customers before entering into a business relationship or occasional transaction with them.
The Data Protection Bill that is currently proceeding through Parliament will update the UK’s data protection regime, reflecting the requirements of the general data protection regulation, or GDPR, which will be directly applicable in the UK from May of this year. Any references to the current Data Protection Act in the money laundering regulations will be updated in line with the new Data Protection Act at the same time as the Act takes effect.
When the UK ceases to be a member of the EU, the GDPR will be further incorporated into the UK’s domestic legal regime by virtue of Clause 2 of the European Union (Withdrawal) Bill. The same provision will also preserve the money laundering regulations 2017 within the UK’s legal framework, ensuring that the Government’s objective of embedding data protection requirements within the UK’s anti-money laundering regime is met, and will continue to be met when the UK ceases to be a member of the European Union.
I reiterate that the Government have listened carefully to concerns raised by the Delegated Powers and Regulatory Reform Committee and by noble Lords in Committee. I hope that the House will be satisfied with the additional requirements to this end contained in Amendments 77 to 89, 91, and 93 to 97.
The DPRRC expressed concern at the scope of the powers taken through the Bill. As an example, the committee mentioned the power to require persons to put in place prescribed controls and procedures. I assure noble Lords that the Government intend to use this power in line with the duties on regulated firms and payment service providers in the MLRs. In practice this will limit the scope of this element of the power to businesses whose activities are particularly likely to be used for the purposes of money laundering, terrorist financing or other activities that threaten the integrity of the international financial system. This aligns with the FATF standards and long-standing policy in this area, so the Government have tabled an amendment confirming that businesses will be brought within the scope of anti-money laundering/counterterrorist financing regulation under paragraph 3 of Schedule 2 only where such risks exist. To address points made by the committee, further amendments have been tabled making it clear that only businesses of this type can be required to carry out customer due diligence measures under paragraph 4 of the schedule, supervised for the purposes of paragraph 7, or registered for the purposes of paragraph 9.
Concerns have been raised over provisions for the creation of offences. It is important that any requirements relating to anti-money laundering or counterterrorist financing are subject to appropriate penalties so as to provide a deterrent to persons who might otherwise breach such requirements. In light of concerns expressed by the DPRRC and noble Lords, the Government are therefore putting forward amendments providing that any future criminal offences established under Clause 41 can be established only if regulations provide that such offences have either a mental element necessary for their commission or a defence to it, or both. This will maintain the existing policy position under the money laundering regulations 2017 and preserve the deterrent effect established by criminalising breaches of anti-money laundering and counterterrorist financing regulations. Additional amendments are being put forward providing that only the Financial Conduct Authority and HMRC will be able to impose civil monetary penalties for future regulations made under Clause 41.
I am nearly there. In order to further ensure the proportionate application of such offences, the Government are also tabling an amendment providing that a person cannot be liable for a civil monetary penalty through regulations established under Clause 41 when they have already been convicted of a criminal offence in relation to the same act or omission established through such regulations.
Between the Committee and Report stages there have been extensive discussions and debates about various parts of this grouping.
I am extremely grateful to my noble friend. It is quite clear that the grouping of these amendments is not a convenient way of proceeding. I understand that my noble friend has given careful thought to the wide range of issues covered by the amendments, and I understand that he is saying that he will make further changes to the Bill at a later stage. What I am not clear about is whether any of these will cover the points made by the noble and learned Lord, Lord Judge, in his opening remarks. Perhaps my noble friend will clarify that.
My noble friend is right to raise the point and I admire all noble Lords who have followed the thread. The reason I have gone into detail, as my noble friend has articulated, is that the range of amendments in this group is quite extensive. Also, as I have said before, it reflects the importance of the discussions we have had.
On the specific issue of Amendment 71A, on this occasion I regret that we are unable to meet the views of the noble and learned Lord. However, I hope that I have indicated at least in part that this is not a departure from the existing system. Indeed, it is something which has been applied previously and continues to be so. I hope, therefore, that I have convinced noble Lords that the Government’s proposed changes—aside from the differences set out by the noble Baronesses, Lady Kramer and Lady Bowles, which we have talked about and I appreciate and acknowledge—will ensure that proper safeguards are put in place in the Bill regarding offences, rather than removing the ability to create them and leaving a vacuum that we believe would weaken the UK’s anti-money laundering regime.
I hope also that I have convinced at least some noble Lords—I am looking behind me as well as ahead; it does not say that in my speaking notes. I have gone into detail but I believe that it was necessary to do so since, as I have always said, this is an important Bill. With those reassurances, I hope that noble Lords who have tabled amendments in this group will be minded to withdraw them.
Just before my noble friend sits down, can he help me on one point? There is already authority to make regulations in respect of money laundering which have criminal sanctions. If so, why is another provision to the same effect necessary? Can he help us further by explaining why it is necessary to do this not only for money laundering but in other areas where authority in primary legislation already exists to lay statutory instruments?
Perhaps the Minister could confirm that at present, the primary legislation takes place in Europe through the various processes of the European Parliament and Council. It is from those that the current regulation flows. The issue here is that in the future, there will be no mechanism for primary legislation to sit behind the regulation; it will be the regulation disembodied.
The noble Baroness has correctly pointed out that all this is to do with what we do after we leave the European Union, which I have sought to make clear to my noble and learned friend. We will set up the mechanism and put in place the provisions to allow the Government to address the issue of criminal offences. The Government’s proposal would be to continue on the same basis as we do now—through the use of regulatory powers. As I indicated earlier, this is not different. I have also stressed that this would be subject to the affirmative procedure, which would allow for debates in both Houses. We covered that area extensively both at Second Reading and in Committee.
I thank all noble Lords who have taken part. I fear that the disappointment I expressed about the Minister’s reaction remains. Of course it is true that from time to time, following primary legislation, Parliament allows regulations to be created which would impose a criminal sanction. However, I underline that we are not dealing here with a regulation made on the basis of primary legislation which identifies a criminal offence: this is a regulation to create offences based on something that is only a regulation. In other words, the Minister will have complete power, subject to the affirmative resolution procedure, to decide what should fall within the ambit of the regulations, and then complete power—quite apart from all the millions of provisions in the schedule—to create criminal offences. That is simply wrong in principle.
Although I have listened very carefully, there has been no suggestion from the Minister that, in reality, there are any serious available offences that are not adequately covered, for deterrent and punishment purposes, by the endless stream of legislation to which I referred when I began my submission. What is more, none of the letters to which the Minister referred, from the CPS and so on, pointed out that here is a gaping hole which must be filled. This House took a decision on Monday; it would be astonishing if I did not give it a chance to consider again what the position should be. Therefore, I seek to divide the House.
Amendment 72 not moved.
73: After Clause 41, insert the following new Clause—
“Public registers of beneficial ownership of companies in the British overseas territories
(1) For the purpose of preventing money-laundering, the appropriate Minister must provide all reasonable assistance to the governments of—(a) Anguilla;(b) Bermuda;(c) the British Virgin Islands;(d) the Cayman Islands;(e) Montserrat; and(f) the Turks and Caicos Islands,to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government’s jurisdiction.(2) No later than 1 January 2020 the appropriate Minister must prepare an Order in Council, and take all reasonable steps to ensure its implementation, in respect of any British overseas territories listed in subsection (1) that have not by that date introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction, requiring them to adopt such a register.(3) In this section a “publicly accessible register of beneficial ownership of companies” means a register which, in the opinion of the appropriate Minister, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”
My Lords, Amendment 73 is tabled in my name and those of the noble Lords, Lord Kirkhope and Lord Collins, and the noble Baroness, Lady Kramer. I welcome the cross-party support this amendment has attracted. I am grateful to Mrs Kimberly Durrant, the representative of Bermuda in the UK, and Mr Benito Wheatley, director of the British Virgin Islands London office, for the useful briefing they have provided.
The amendment aims to bring transparency to the financial operations in the six British Overseas Territories that have financial centres by creating public registers of beneficial ownership of the companies based in them. One of the six—Montserrat—has already agreed to do this. Noble Lords will be aware that, since 2013, the Government have been working with these territories to develop registers of beneficial ownership that are rapidly accessible to law enforcement agencies. Amendment 73 would require the Government to go further and to give all reasonable help and support to those territories so as to make their registers publicly accessible. If this is not done, the Government should ensure it is done by making Orders in Council.
There is one change in the amendment since Committee, in that it requires the registers to be made public not by January 2019 but by January 2020. In a very useful meeting with the Minister last week—I add my voice to those who have expressed their admiration for him—he made clear that January 2019 was quite impractical for implementation. He is of course right: 2020 is much more realistic and would give a reasonable length of time for the change the amendment proposes to be brought in. When this amendment was discussed in Committee, the Minister very helpfully indicated the progress that had been made. He reported that Bermuda, the British Virgin Islands and the Cayman Islands have central registers of beneficial ownership information, or similarly effective systems, now in place. This is much to be welcomed.
This is the fourth time we have discussed in your Lordships’ House the need for the overseas territories to produce public registers. Each time, the case for ending secrecy becomes stronger as more information emerges about how illicitly obtained money is protected from discovery by anonymity. It is clear that not all those who set up shell companies in offshore locations are doing so because they have something to hide, but for those who do have something to hide—drug barons, arms traders, tax evaders, government Ministers in resource-rich countries stealing money that should go to the good of the people—anonymous shell companies meet their needs very well. They assume they will not be discovered, exposed to the public gaze or prosecuted. They can pursue their criminal activities with impunity.
In the absence of the transparency this amendment calls for, we have had to depend on whistleblowers and hackers to take great personal risks in order to expose this criminality. Thanks to the work of these whistleblowers and hackers, a flow of information has emerged, from the offshore secrets database in 2013, through the Panama papers of 2016 to the Paradise papers last year. It should be noted that more than 100,000 of the accounts revealed in the Panama papers were registered in the British Virgin Islands.
This information has given law enforcement and tax collection agencies a chance to pursue a considerable amount of criminality. For instance, Europol reported at the end of 2016 that it had found in the Panama papers database nearly 3,500 probable matches to organised crime, tax fraud and other criminal activities. The report on the recent work of the Government’s Panama papers task force revealed that in October last year 66 investigations were under way into tax evasion, organised crime and money laundering—and all that is the tip of the iceberg.
In Committee, the Minister explained very helpfully to your Lordships’ House why the Government were resisting the transparency required by this amendment. He argued that, as the overseas territories have their own democratically elected Governments, it is rare for this Government to legislate for them without their consent. Where this has occurred it has related to our international human rights obligations—that is, on the abolition of the death penalty and the decriminalisation of homosexuality. He told the House:
“Financial services are the domestic responsibility of territory Governments”.
He said that to legislate without their consent to require publicly accessible registers of beneficial ownership,
“would create considerable ill-feeling”,—[Official Report, 6/12/17; col. 1117.]
and jeopardise current co-operation. He did not argue, and this is most welcome, that requiring the registers in the British Overseas Territories to be publicly accessible would put the territories at a competitive disadvantage compared with other jurisdictions that provide similar secret financial services.
The Minister quite properly sees that what this amendment asks would be difficult and would require much patient negotiation. He is right. I too see the difficulties, but I also see hospitals and schools unbuilt because the money for them has been siphoned off; women trafficked and drawn into prostitution because there is no other way to feed their family or get healthcare for sick parents; mothers dying in childbirth because there is no money for maternity services; and much more.
The British Overseas Territories are British, and Britain is a global leader in fighting corruption. At the G20 summit in 2013, David Cameron promised that the UK would create a central register of companies’ beneficial ownership information. The UK is now the only country in the G20 to have established such a register. He was a strong advocate of such registers in the British Overseas Territories and elsewhere. The 2016 summit hosted by the UK was a significant event that moved anti-corruption work higher up the global agenda. Furthermore, the UK is at the forefront of providing development aid and promoting human rights internationally.
The Minister has an undoubted commitment to human rights and the rule of law. It has become very clear during the proceedings of the Bill that the levels of fraud, tax evasion and corruption that are causing so much misery in the poorest parts of the world are an abuse of human rights and the rule of law. I therefore urge the Minister to reconsider his view that we can wait until public registers become the global standard and only then require the British Overseas Territories to move to greater transparency. I beg to move.
My Lords, as a co-signatory to the amendment I support the noble Baroness, Lady Stern. I shall speak for only a few moments because we have already heard from her a very good explanation of the amendment.
I speak from the point of view of my support for the initiative that was originally taken by this country at the G20 summit in 2013 by my then right honourable friend David Cameron, and pursued by him very vigorously in the further widely supported summit in 2016, to provide this country with a position as a leader in the area of financial propriety. In my view, that is something that needs to be continued, particularly because this country is entering into a very uncertain future.
Whatever one’s views are about our present negotiations with the EU, and indeed the other negotiations that it will be necessary for us to have with the rest of the world, one of the areas in which this country has an enviable reputation—the noble Baroness referred to this a few moments ago—is the way in which we deal with financial matters. We are not perfect; everyone knows that, and other amendments that we are considering tonight will perhaps suggest that. Nevertheless, we are a country that has shown an example of being open and transparent and having standards. We have extended those things to public life, quality of products, the environment, health and, particularly, our financial conduct. Because of the uncertain future, we need constantly to look at this on the basis of David Cameron’s gold standard, rather than simply following behind global standards.
The Government have made progress, and I pay tribute to my noble friend, who has listened carefully to the concerns of those of us who wish to move in this direction. I also acknowledge that great progress has been made by both the Crown dependencies and the overseas territories in moving towards openness and transparency. However, what I believe to be a reasonable compromise on an ultimate date for the conclusion of public registers open to access will in my view tie in extremely well with this country’s future negotiations and arrangements, and the need for this country to attract more support all over the world from a great number of new investors and others who wish to be part of what we control.
This is a modest measure in many ways, but I am convinced that it gives a clear, positive and attractive measure that the world can see, so that it can continue to have total faith in this country’s integrity.
My Lords, I declare my interests as set out in the register of the House, particularly those in respect of financial services.
I greatly respect the noble Baroness, Lady Stern, and the other noble Lords who have signed the amendment, but I wholly disagree with it. If we in this Chamber sought to legislate for Scotland in a matter of devolved competence without consulting or without the consent of the Scottish Parliament, all of us know what a hullabaloo would be raised immediately. We would be reading about it in every newspaper; the media would be full of it. Indeed, the media are fairly full of warnings from the Scottish Government. I know the same to be the case in Wales. I was with the EU Select Committee recently. We visited the Welsh Parliament and, in the course of the day, the same point was made to me by, I think, every political party.
As a Parliament, we developed the Sewel convention to cope with this very situation. That has been put in the memorandum of understanding, and the October 2013 version of it states that,
“the UK Government will proceed in accordance with the convention that the UK Parliament would not normally legislate with regard to devolved matters except with the agreement of the devolved legislature”.
Indeed, we put it into statute in, for instance, the Scotland Act 2016, which has of course now been litigated. I have here the Miller judgment. In his outstanding judgment, the noble and learned Lord, Lord Neuberger, rather elegantly reminds us in paragraph 144 that the Sewel convention was not invented recently but that its substance was in effect between, for instance, the UK and Southern Rhodesia in the 1960s. The Sewel convention represents something that this Parliament has had for a long time, and it stretches out to our overseas territories as well as to our devolved Administrations here.
In the final paragraph of five pages considering the convention, the noble and learned Lord says:
“In reaching this conclusion we do not underestimate the importance of constitutional conventions, some of which play a fundamental role in the operation of our constitution. The Sewel Convention has an important role in facilitating harmonious relationships between the UK parliament and the devolved legislatures”.
I repeat all that and make a meal of it because I have to say that the six countries named in the amendment are proud and sophisticated places. Money laundering is rightly a devolved matter for them. Bermuda, for instance, is especially highly developed. Its GDP per head is much bigger than that of the UK, and it was not mentioned once in the Panama papers. Therefore, were we to legislate without even consulting these parliaments, let alone asking their consent, it would be deeply wrong. Just as with Scotland and Wales, our overseas territories would feel angry, which is why the Sewel convention is and has been a good thing. Westminster has the power to intervene and should exercise it were things badly awry. However, I have to say that evidence of “awryness” is in fact the other way. I looked yet again at the Wikipedia article on the Panama papers; about halfway down a long and extensive article, there is rather a good league table of banks that have been involved in the affair. Four of the top 10 banks listed in the league table were based in Luxembourg; none of the top 10 banks was based in any of the countries listed in this amendment. Therefore, there appears to be a bit of work to do at home, in the EU.
A second and much larger piece of evidence comes very recently from the EU itself. On 5 December last year, the EU adopted Council conclusions concerning non-co-operative tax jurisdictions. On page five of the adopted 38 pages I have in my hand, the EU Council affirms that,
“these actions collectively taken by EU Member States are in line with the agenda promoted by the G20, the OECD and other international fora”.
None of the six countries named in this amendment is on the black list.
Annexe 2 of the adopted conclusions lists countries in various categories that have agreed to make changes by the end of this year. It is a large list of countries. In other words, provided that changes are made by those countries, in the EU Council’s view they will be fully compliant with the EU, G20 and OECD thinking in this area. Only two of the six countries in this amendment are even part of that list of co-operative countries. Anguilla, the British Virgin Islands, Montserrat and the Turks and Caicos are not. In that respect, they are doing rather better than Switzerland or Hong Kong, which are. Indeed, 23 countries are making changes to improve transparency. None of the six countries of this amendment is listed. Twenty-two countries are making changes to anti-BEPS measures. Those are sophisticated corporate tax dodges. None of the six countries in this amendment is listed. Twenty-six countries, including Switzerland and Hong Kong, are making changes to amend or abolish “harmful tax regimes”. None of the six countries of this amendment is listed. Six countries, including Bermuda and the Cayman Islands, have agreed to,
“address concerns relating to economic substance”.
Among those six are also Guernsey, Jersey and the Isle of Man, the only time the Crown dependencies appear in the annexe. But, of course, they do not appear in the amendment.
Thus, after all the work of Pierre Moscovici and his officials—and he is no great friend of our overseas territories—and work aligned with that of the G20 and OECD, we are presented with this amendment. Six of the 14 British Overseas Territories have been singled out. Four do not appear on the definitive list at all; two do, and have agreed to take a very small amount of corrective action—the same corrective action that the Crown dependencies are taking, yet their names do not appear. I cannot fathom how this list of names was arrived at. To me, it looks unjust. I leave it to others to comment on mechanical aspects of the amendment, which also look problematic to me—but time is pressing.
The Government and the overseas territories, and indeed the Crown dependencies, have discussed these issues around the table regularly and, over the years, there has been continual incremental progress on this very important issue. The success of this approach can be seen in the work of Mr Moscovici and his very thorough 38 pages, with not one on the blacklist, and only a very small amount of agreed work to be done by a small number. We should continue to take this road, and the amendment is constitutionally wrong and unjust in casting unwarranted aspersions on a number of our loyal overseas territories.
My Lords, I will not reiterate the many arguments made in Committee on the ineffectiveness of foisting public registers on the overseas territories for tax or law enforcement, but rather pay tribute to the noble Earl, Lord Kinnoull, and my noble friend Lord Naseby for making similar points to those that I would have made. Instead, I rise to make a different point.
I spoke in response to an identical amendment tabled by the noble Baroness, Lady Stern, to the Criminal Finances Bill on 3 April, memorably, as she said, one year after the Panama papers. That amendment was ultimately not moved but it has appeared by and large in the same form today. A similar amendment to the same Bill was moved in the other place regarding the Crown dependencies, which the Opposition Front Bench stated it was keener to legislate for than the overseas territories. The amendment was defeated by the substantial majority of 301 to 180. The interest of the UK, and the interest of fairness, is to achieve a level playing field between the members of the British family of territories. Clearly, it is also the intention of the Opposition Front Bench to legislate for the Crown dependencies, so that clear steer from the other place should be noted and the impact on the Crown dependencies considered. Still, much has changed even in those few months to make the call for public registers possibly less compelling.
Since then, both Crown dependencies that have been assessed by the OECD’s Global Forum—the world’s standard-setter for beneficial ownership, retention and international exchange—have been rated as among the few jurisdictions fully compliant with international standards. Indeed, they have a better rating than the UK. Moreover, since then, the overseas territories’ 2016 exchange of notes with the United Kingdom, under which they agreed to introduce government central registers of beneficial ownership, have come into effect. Those registers are accessible by UK tax and law enforcement on a same-day basis, giving the UK access to information that is unparalleled by any other jurisdiction in the world.
Even more so, partly in response to the debate in this House last year, the Criminal Finances Bill was amended to introduce mechanisms to review the effectiveness of the overseas territories’ and Crown dependencies’ registers and their exchange agreements with the United Kingdom. That amendment, now Section 9 of the Criminal Finances Act, requires the Government to prepare and lay before Parliament a report by July 2019 on the effectiveness of these new systems. This will allow your Lordships’ House to have the full evidence in front of it before taking any further steps. That was most wise. It buttresses the systems that have been adopted in the overseas territories, rather than undermining them; it meets international standards, rather than conflicting with them; and it gives the UK oversight of the overseas territories, rather than pushing them around. David Cameron was quite right and prescient in setting out tax evasion and counter-fraud legislation as a priority, and I pay tribute to him for that prescience—long before “McMafia” was aired.
To legislate now would be to pre-empt that report, which has already been legislated for and which would greatly inform your Lordships’ House on the strengths and weaknesses that might require improvement. Moreover, by legislating now—before evaluating the overseas territories’ systems, as the Government are now required to do—the United Kingdom may jeopardise the good will and unparalleled relationship that it has with those overseas territories and Crown dependencies. I therefore urge your Lordships to show caution in the approach adopted to avoid undermining the progress that has been made. Even in difficult times, with some of the overseas territories named in this amendment having been devastated by recent hurricanes, they have made progress to remain at the fore of international standards. Let us not pre-empt the evaluation that Parliament has already compelled the Government to conduct by approving this amendment.
My Lords, I very much agreed with the constitutional points made, particularly by the noble Earl, Lord Kinnoull. More widely, I suggest that this amendment would be counterproductive in its effect. It is interesting to note that law enforcement agencies do not support public registers, particularly in such territories, as they do not improve law enforcement capabilities.
As David Lewis, head of the world’s anti-money laundering standard-setter, the Financial Action Task Force, and formerly of the UK National Crime Agency, said:
“Incomplete, unverified, out of date information in a public register is not as useful as law enforcement agencies being able to access the right information at the point they need it”.
Moreover, the UK’s overseas dependencies have already shown themselves extremely efficient in responding to the requests of policing and other agencies. Interestingly, tax authorities do not support public registers either, as people report less candidly than when information is available only to public authorities. The OECD’s Keeping It Safe states that to,
“comply with their obligations under the law, taxpayers need to have confidence that the often sensitive financial information is not disclosed inappropriately”.
Australia’s chief tax collector opposes public registers. Interestingly, UK intelligence and law enforcement, a key foreign policy asset, is likely to be undermined. UK law enforcement has access to information in the overseas territories’ central platforms. This can be exchanged with other countries to secure reciprocity or other benefits to the UK. Public registers remove this leverage and facilitate identity theft. The Financial Times has reported that directors are twice as likely to be victims of identity theft due to the Companies House public register of directors.
It is pretty clear that international standards do not require public registers but do require verification. That is the key point: you can have effective verification when registers are not public. However, as the, I am afraid, rather disappointing results of what has happened in the UK show, you cannot have verification with an open system. For once, even the EU was correct: it withdrew its proposal for public registers in December 2016 on the grounds that they disproportionately infringe human rights. The EU’s Legal Service stated that introducing public registers was a disproportionate infringement of the right to privacy and the European Data Protection Supervisor stated that it would breach data protection principles.
I think everyone is in favour of the objective; the question is how you achieve it most effectively. I have been a commissioner on the Guernsey Financial Services Commission for a number of years and have had some involvement in what Guernsey has done. Interestingly, Guernsey scores higher than the UK for general regulatory effectiveness and compliance. However, the crucial thing is that the registers are accurate, have been verified and can be used swiftly by the proper authorities that need that information. I am afraid that making them public undoes a lot of the point of them.
My Lords, I had the privilege of speaking in Committee, when I declared my interests as a vice-chairman of the All-Party Parliamentary Group for the Cayman Islands, and the fact that I have family working in the Cayman Islands.
I reflected on what the noble Baroness, Lady Stern, said in Committee, particularly the examples she gave of developing countries being fleeced by the operations of the overseas territories—my words, not hers. I did a bit of research and asked the Cayman Islands for information on the type of operations conducted there. I give a case history that I think your Lordships will find interesting. Money does not stay in the Cayman Islands but flows through them to support growth in onshore jurisdictions, including in developing countries. An example of this is the World Bank’s International Finance Corporation, which invested more than $400 million through Cayman-based investment vehicles in 2015 alone. The money supported critical development projects in more than 24 developing countries. That is not just a one-off example; there are many others in what I call the leading overseas territories. I will not repeat what the noble Earl, Lord Kinnoull, said; I am grateful to him for the research that he has done.
I point out that the Cayman Islands had a new constitution in 2009, which was approved at Lancaster House and contained measures on the rule of law and human rights that meet the most stringent international and European standards. Included in their Bill of Rights is the right to privacy and strong laws on data protection.
It has already been made clear that most countries are not adopting public registers. Certainly, for the overseas territories in the Caribbean, the rival centres are the United States, Hong Kong and Singapore. They have all looked at public registers but not one has agreed to it. So if we force the overseas territories to have public registers, the effect will be that business will move away—there will be none of the sort of business that I have just cited, which is increasingly the nature of the business done in the overseas territories. Furthermore, the information Her Majesty’s Government get on money laundering or anything else they require would certainly be weakened greatly because the activities that people are interested in would not be available. My noble friend Lord Flight mentioned the situation in the EU, which takes the view that it would disproportionately infringe on human rights. I do not need to expand on that.
I will finish on a key constitutional point—perhaps, as someone who took the Maastricht treaty through, I had to learn something about constitutional law. I re-emphasise that the overseas territories are self-governing territories, and legislating for them is constitutionally questionable. It is true that Orders in Council have been used to impose legislation on the overseas territories, but only for constitutional or human rights issues. The need to consider the overseas territories’ interests was confirmed by the House of Lords in 2008. To use an Order in Council for financial regulation when the overseas territories have already adopted international standards while the UK has not would expose the UK to legal challenge as potentially irrational and therefore could be overturned on judicial review. It would also be provocative, as my noble friend has indicated, to Scotland and the other devolved Administrations in the United Kingdom. I for one will certainly, with a clear conscience, vote totally against this amendment.
My Lords, I see the beguiling simplicity of the noble Baroness’s amendment, and after the powerful speech she made in moving it and the graphic examples she gave, I find myself carried along on an emotional tide. But the House needs to be aware of some of the unintended consequences that may flow from this if we are inclined to accept it.
The amendment refers to the Companies House regulatory scheme as being the standard to which we should aspire. Companies House is a recipient of information; its interrogation is pretty limited. Noble Lords may be inclined to look in detail at the amendment and say, “Yes, but this is a higher standard because we are dealing with the section on persons with significant control”. As is shown in the register of your Lordships’ House, I am a person with significant control of a company, and I have never been asked anything at all about my entry. I hope—I intend—that it is accurate, but nobody at Companies House has ever approached me to say, “Is this correct?”; it is just accepted. There is therefore a danger that the seductive idea of a public register means that it is somehow better verified than the situation we now have. That is my first concern about the amendment.
The second relates to a point made by other noble Lords. If you raise the standards or increase exposure and transparency in one area, you merely drive business to another corner of the world. My noble friend Lord Naseby referred to Singapore and Hong Kong but there are other places a great deal less attractive to which business might be driven. As I understand it, each of the overseas territories has already established a proper register of beneficial owners of companies which can be interrogated at all times by our law enforcement agencies. My noble friend Lord Leigh of Hurley referred to the fact that the efficacy of that regime is to be tested in a review which will be put before Parliament in the next couple of years. Really, the question at issue is whether there should be public access to that register. Those are the words that make the difference, but in my view in the present situation that will have little practical effect. At present, our law enforcers can interrogate the register. If the public are also able to access it, the result might be that it will drive people to areas of the world where we cannot have even a vestigial chance of enforcing the proper levels of law.
Like my noble friend Lord Flight, I absolutely understand the purpose behind the noble Baroness’s amendment, but in my view the best should not be the enemy of the good.
My Lords, I am not wholly persuaded by the amendment of the noble Baroness, Lady Stern, although I am entirely persuaded by her argument that we have to address the grotesque abuses which, for example, came to light in the Panama papers and which involve, among other things, use of the secrecy of jurisdictions and the weakness of law enforcement.
We have to remind ourselves that the primary purpose of the work begun under the UK coalition Government in this area was that law enforcement and tax authorities should be able to gain access to reliable registers in real time. That objective is increasingly being satisfied in relation to the Crown dependencies, which are not the subject of this amendment, and in a number of the overseas territories. That is the primary objective. A strong case can be made for having public, open registers but it has to be recognised that that policy is not accepted in a great many substantial jurisdictions and that business will flow to some of those jurisdictions, including perfectly legitimate business that has nothing to do with the nefarious objectives described by the noble Baroness.
The only way to make a reality of open registers is through some form of international agreement, which would of course also change the constitutional position in relation to the overseas territories because the UK has responsibility for their external relations. However, from a practical point of view, the campaign for greater transparency seems to need to concentrate on securing some kind of international agreement which will drag all but the few most disreputable jurisdictions into agreement.
As it stands, the amendment risks undermining a process which seeks rather more to respect the constitutional development of our overseas territories. Unlike France and indeed even the Netherlands, the United Kingdom does not treat overseas territories as part of the home country—it does not treat them like local authorities in our country. Occasionally, overseas territories have asked to be treated in that way and have been vigorously denied that alternative. We seek to carry out constitutional and democratic development in overseas territories and to encourage a high degree of legislative autonomy that retains certain responsibilities, particularly for compliance with international agreements. I think that I prefer that model. If we can better achieve the objectives which the noble Baroness, Lady Stern, has rightly set out without reverting to a more colonial model of dealing with overseas territories, that will be a preferable route.
My Lords, my name is added to the amendment and I am delighted that it is. However, I did not think that when I got up to speak I would need to make a vigorous defence of public registers, yet I find that I must because the objections that we have heard from so many around this House have been to public registers per se.
I think many in this House would join me in saying that it is the disinfectant of transparency and light that is the best protection against the corruption that sits underneath and benefits from secrecy. This is a view held across many of these Benches, and it is one fed by experience. We have relied so much on whistleblowers—for the Paradise papers, the Panama papers and on other occasions—to expose significant criminality, but I am not going to repeat the examples that the noble Baroness, Lady Stern, presented.
Of course it is exceedingly helpful if countries have a central register and make it accessible to law enforcement, but I live in the real world. Law enforcement is relatively small and weak, and for it to be able to identify who to pursue and how to do so is exceedingly difficult. The benefit of a public register is that thousands of eyes are cast upon the information. I say this to the noble Lord, Lord Hodgson: if, by mischance, he has put incorrect information into Companies House, where the register is public, there will be many organisations and individuals in this country out to catch that error and make people aware of it, particularly if there is around it some significance of size or identity. Many eyes can be applied to public registers, and that is the point. It is a recognition that an environment in which information is withheld from the public, and where it is accessible to enforcement authorities only once they are on the trail and alerted, will be very weak.
We all understand how attractive the secret world is to those who make their money through nefarious purposes. I will not repeat the list given by the noble Baroness, Lady Stern, and the noble Lord, Lord Kirkhope, but these organisations can thrive only because there are portals through which they can take their money earned in the black and convert it to the white. If we are ever to clamp down on these activities which so disturb us, it is absolutely critical that we make sure that the money cannot be transferred into the white economy. That is why we have gone for a public register in the UK. However, having heard so many voices, I am now really concerned that that public register is under threat. If we add verification to the process, it is additional strengthening, and I am perfectly content with that—it is probably a good direction in which to go. However, we should be strengthening constantly the ability to identify where wrongdoing is being carried out in our financial services.
Both the noble Earl, Lord Kinnoull, and the noble Lord, Lord Leigh, talked about the importance of unfairness and injustice. Frankly, there is no greater injustice than the damages done by those who make their money in the black economy. Their victims—whether of sex trafficking, the arms trade, terrorism or kleptocratic politicians—are real victims in an incredible sense, and we know that there are more victims and more exploitation year on year.
Today, we are being asked to take a principle that we have established in the UK—the one that we have to abide by to minimise the opportunities for the exploitation of financial services in the UK—and extend it to our overseas territories, which are part of our British financial family whether we like it or not. I do not believe that this is ultra vires, because it touches on issues that are, frankly, utterly fundamental to the human rights of millions of people across the globe.
I hope very much that this House will today support this measure, which gives the Government the opportunity to work closely with the overseas territories. I accept part of what the noble Lord, Lord Naseby, said: that those who have something to hide will flee the various territories if they know that there is going to be a public register. That may well be damaging to their economies and we should step in to consider the issues that surround that. But long-term sustainability of our overseas territories and their economies requires that they work fully within the white economy, not the white, grey and black economies. That is crucial to their long-term prosperity and opportunities. I hope very much that this House will take the opportunity today to support this crucial measure.
My Lords, I do not want to take up too much time. The noble Baroness, Lady Stern, made an incredibly powerful speech in support of her amendment, to which I added my name. I want to say something in relation to setting international standards and trying to reach international agreement. Ultimately, that is the correct way. It is the solution. But there are many ways of achieving that. David Cameron realised that, actually, setting the standards and taking the lead is the way to reach international agreement—not sitting on our hands and saying, “Let’s see what others do first”. We need to take the lead and set the standards. When we talk about reputation, it is our family of nations that will suffer reputationally if we do not adopt this amendment tonight.
My Lords, I am grateful to all noble Lords who have taken the time to contribute to this important debate. The amendment would require the Secretary of State to provide all reasonable assistance to the Governments of certain of the British Overseas Territories with significant financial centres to enable each of those named overseas territories to establish a public register of company beneficial ownership. It further provides that, if by 1 January 2020 such overseas territories have not established such a register, the UK Secretary of State should take all reasonable steps to ensure that the Privy Council legislates to require the overseas territory to do so.
I am again grateful to the noble Baroness, Lady Stern. We have had a constructive discussion where we laid out the differences over our approach. I do not object to the fact that we are all seeking—that is clear from all contributions today—to ensure fairness and transparency but also to do the right thing to ensure progress in this regard. I appreciate that the deadline set in this revised amendment for preparation of an Order in Council has been put back by one year compared with the amendment tabled by the noble Baroness and others in Committee. I previously addressed many of these points in Committee. But I hope that the House will bear with me if I reiterate certain key points.
I first want to inform noble Lords of the commitments that the territories have made to advance transparency in the company and tax fields. We heard the noble Baroness, Lady Kramer, talk about taking leadership, having that relationship and allowing the British Government to work with the overseas territories and that this amendment is the way to achieve that. But we are already doing it. The overseas territories are part of my responsibilities as a Minister. They are totally engaged on this agenda. With respect, the noble Baroness laid out a series of assertions on how money laundering and certain activities occur. Is it right that these six territories alone are singled out? Where is the evidence base? That is important, but so is the action that is being taken. We need to focus on that.
For example, the overseas territories with financial centres are leading the world. They are among the early adopters of the OECD common reporting standard. I say to the noble Lord, Lord Collins, that the overseas territories, working with the British Government, are taking the lead. There is an agreement under which they automatically exchange offshore financial account information with taxpayers’ jurisdictions of residence. They started exchanging information with third jurisdictions in September last year. I join many noble Lords in the Chamber in commending our previous Prime Minister, David Cameron, and the steps that he took. But the process that we are now following is exactly the same process that was agreed during the coalition years with the Liberal Democrats. Since September 2016—in other words, a year before the common reporting standard came into effect, so I say to the noble Lord, Lord Collins, that this is another example of taking the lead—HMRC has been receiving data on accounts held in the overseas territories by UK taxpayers and has used this to further its compliance work.
The issue of public registers is relevant here. None of this means that we do not want to see the overseas territories take further action to move forward on the transparency agenda. We should, however, acknowledge the significant steps that they have already taken in this area and build incrementally on that progress, in partnership and with support.
As noble Lords will acknowledge, the UK is at the forefront of promoting corporate transparency. The UK is the only G20 country to have fully established a public register of company beneficial ownership and we continue to push for this to become—in the words of the noble Lord—a global standard. As I noted in Committee, however, the international standards set by the Financial Action Task Force do not require this, reflecting a lack of international consensus in this area. I am grateful to noble Lords who contributed on this. These standards state:
“Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities”—
for example, tax authorities and law enforcement authorities. The OTs are moving ahead on this agenda. Nevertheless, should public registers become the global standard, we would of course expect the overseas territories and Crown dependencies to meet this standard. The territories themselves have indicated their willingness to adopt a public register in that event.
I will highlight something important to this debate: namely, the progress that the overseas territories have already made on the beneficial ownership agenda in a relatively short time. Since we concluded our arrangements with them in the run-up to the Anti-Corruption Summit of 2016, the territories, which have their own legislative bodies and elected representatives, have passed new primary legislation and delivered technological improvements to comply with the terms of the arrangements known as the exchange of notes. I am grateful to my noble friends Lord Leigh and Lord Flight for highlighting the positive progress that the OTs have made in this respect. My noble friend Lord Naseby also pointed to the positive steps taken by Cayman.
Under these arrangements, each of the overseas territories with a significant financial centre committed to hold beneficial ownership information in a central register or a similarly effective system and to provide UK law enforcement authorities with automatic access to such information within 24 hours of a request being made—or within one hour in urgent cases. These arrangements, which have been put in place since 2016, are already bringing benefits to UK law enforcement. They mark a significant increase in the ability of UK law enforcement authorities to investigate bribery and corruption, money laundering and tax evasion. I am sorry that I do not share the opinion of the noble Baroness, Lady Kramer, that somehow these law authorities are very limited in scope. They make an incredible contribution.
Perhaps I might ask the Minister a question. Does he not agree that one reason we have public registers in the UK is that law enforcement authorities here said that they could not successfully track down those crimes if they were not backed by public register arrangements? If we in the UK cannot be effective as law enforcers without public registers, how will we be effective as enforcers across the sea without public registers?
I have already said—and I repeat to the noble Baroness—that the OTs are already moving in this direction. I will put it very simply and in context. We have agreed legislation in both Chambers. We have passed it. We have had anti-corruption summits. We have asked OTs to step up to the mark. They are stepping up to the mark. They are taking the action required. Half way through the process, before we have even tested the very objectives that the noble Baroness has just outlined, we say to them, “Sorry, we’re changing the rules”. That to me is unacceptable.
In Committee I reported that Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar all have in place central registers of beneficial ownership information or similarly effective systems, and we are taking forward the population of those systems with beneficial ownership data. Further progress has been made on data population in the interim. For example, the BVI—a territory that, as noble Lords know, was recently devastated by hurricanes Irma and Maria—recently reported that because of the co-operation of the UK Government with the OTs, they expected to have 90% of their data uploaded by the end of last week. Progress has also been made in the other two territories which are working on establishing beneficial ownership systems, but I am sure that even the noble Baroness and other noble Lords who are pressing for this amendment will agree that they have legitimate reasons for being delayed as a result of those devastating hurricanes.
I mentioned in Committee that we are providing support, referred to by the noble Lord, Lord Collins, to the Government of Anguilla to establish its beneficial ownership system. I am pleased to report that work on drafting underpinning legislation is now under way. We also shortly expect to conclude a memorandum of understanding with Anguilla on terms for the provision of our support for the establishment of its electronic search platform. This will enable Anguilla to take forward procurement of that platform.
Another overseas territory, the Turks and Caicos Islands, recently reported that their central register is now in its testing phase. I confirmed in Committee that we have not sought a bilateral arrangement with Montserrat because it had already committed to including beneficial ownership information in its existing public companies register. I am therefore pleased to report that a Bill requiring the inclusion of beneficial ownership information in the existing register was introduced in Montserrat’s legislative Assembly in December. The target date for the addition of beneficial ownership information to Montserrat’s existing register is 1 April 2018.
I have gone into detail and I hope that when noble Lords reflect on this contribution, they will agree that the overseas territories have made significant efforts recently—in some cases in the most challenging of circumstances—to move forward and, yes, to be at the leading edge, working in partnership with the British Government. As I have said previously, the arrangements on beneficial ownership will put them ahead of many G20 countries as well as many individual states of the United States of America. This demonstrates real progress and shows what can be achieved by working co-operatively. I fear that if we pass this amendment, we will risk that relationship and progress with the overseas territories, and indeed they have already indicated their deep concern in this respect. I therefore say to noble Lords that rather than imposing new requirements on the territories without their consent, a point well made by several noble Lords, it is right that we should focus our efforts on what we are doing now: on collaboration for the consolidation of the arrangements and acknowledging the progress they are making.
We are committed to ensuring that these arrangements deliver in practice, are implemented effectively and meet our law enforcement objectives. The Prime Minister made it absolutely clear when she met and spoke directly with the leaders at Downing Street in November last year that the exchanges of notes must be fully implemented. The exchanges of notes provided for the operation of the arrangements to be reviewed six months after they came into force—that is to say, at the end of last year—and subsequently on an annual basis. We are finalising the terms of reference for the initial six-month review with the overseas territories and, indeed, the Crown dependencies, and we plan to conclude it by March. In addition to these formal review processes, there is ongoing monitoring of the practical application of exchanges of notes by the United Kingdom and each relevant overseas territory. Noble Lords will also recall that the Criminal Finances Act 2017 provides for a statutory review of the effectiveness of these bilateral arrangements. This report will cover the operation of the arrangements up to 31 December 2018. They must be prepared before 1 July 2019, upon which they will be published and laid before Parliament. These reviews will provide the public and Parliament with a clear understanding of how the relevant overseas territories are meeting their commitments. At that point we will be in the right position, as well as in a firm position, to consider what needs to be done.
We want to create a level playing field, but in this regard it is important to touch once again on the UK’s constitutional relationship with the OTs. As noble Lords know, the territories are separate jurisdictions with their own democratically elected Governments and representatives; they are not represented in this Parliament. We would therefore be legislating for them, if we were to move forward on this, without their consent. We have done that, as has been mentioned, only in exceptional circumstances, and rightly so. As I mentioned in Committee, an example of this was to decriminalise homosexuality in certain OTs. We were acting then to ensure that the relevant territories were compliant with their international human rights obligations, but they are already, with the actions they are taking and the progress that has been made, meeting international obligations. While tackling complex criminality and its consequences is, of course, an extremely serious matter, there is a clear constitutional difference in the fact that domestic financial services are an area devolved to the territories’ Governments.
As I said in Committee, legislating for these territories without their consent effectively disenfranchises their elected representatives and legislative bodies, and such a course of action risks harming our overall relationship with overseas territories. The progress we have made will be put back and their electorates and residents will be looking at this, particularly given the damaging precedent that it would set. It also risks leading to a flight of business from the OTs to other, less regulated jurisdictions, where our law enforcement authorities would not have the same level of access to beneficial ownership information as they do under existing arrangements between the UK and the OTs. This could have a serious impact on the economies of territories—some of which are seeking to rebuild once again after the hurricanes—that derive a substantial part of their income from financial services, and it could have adverse consequences for the UK taxpayer. I am sure that that is not the intention of the noble Baroness and other noble Lords in terms of desirable outcomes.
Imposing public registers of company beneficial ownership on the OTs against their wishes and not including their legislative bodies and elected representatives is something that the territories will not take lightly. It will set back progress we have already made and have a negative impact on the ability of UK law enforcement and tax authorities to access beneficial ownership information held across the territories. Parallels with the devolved Administrations and the Sewel convention were also raised in Committee. This was eloquently set out by the noble Earl, Lord Kinnoull, again today. I ask the noble Lord, Lord Collins, and the noble Baroness, Lady Kramer, whether, if instead of talking about Anguilla, Bermuda and Monserrat we were talking about Wales and Scotland, they would be so keen to disenfranchise their elected representatives. That is a question that they must answer.
In conclusion, a key feature of the Government’s approach has been to maintain a level playing field between all OTs with financial centres and Crown dependencies. As I have described, we have robust review processes in place regarding the implementation of these arrangements, both on an ongoing basis with the Crown dependencies and the OTs and through the Criminal Finances Act 2017. If these reviews demonstrate that full implementation of the exchange of notes is not taking place in any individual jurisdiction, then I agree that it would be right for us to consider this issue further, but let us recognise and acknowledge that the OTs are making progress.
The concerns highlighted by the noble Baroness, Lady Stern, whom I respect greatly, and the noble Baroness, Lady Kramer, are of course concerns that we all share, but let us recognise that progress is being made and that the OTs have taken progressive action, and let us give them a chance to report back accordingly. Therefore, while I respect the intent behind the noble Baroness’s amendment, it is not something that I or the Government can accept. On the arguments we have heard today, and perhaps from the exposition and the detailed review I have given of the genuine progress that I know she acknowledges the territories are making, I hope that she is minded to withdraw her amendment.
My Lords, I am grateful to all those who have spoken—my co-signatories and those who supported the amendment, and those who did not. I say to them that I have never thought it was acceptable to say that one has to carry on doing dodgy business because, if we do not do it, someone else will. If one followed that line, nothing would ever get better. Since the amount of corrupt criminal money being hidden in various parts of the world grows every month, and the number of those who suffer from that is growing all the time, I would like to test the opinion of the House.
Amendment 74 not moved.
75: After Clause 41, insert the following new Clause—
“Public register of beneficial ownership of UK property by companies and other legal entities registered outside the UK
(1) In addition to the provisions made under paragraph 6 of Schedule 2, for the purpose of preventing money laundering in the UK property market and public procurement, the Secretary of State must create a public register of beneficial ownership information for companies and other legal entities registered outside of the UK that own or buy UK property, or bid for UK government contracts.(2) The register must be implemented within 12 months of the day on which this Act is passed.”
My Lords, in May 2016 at the international anti-corruption summit, the Government committed to create a new register showing the beneficial owners of overseas companies that own, or want to buy, property in the United Kingdom. This was to encourage transparency and was intended to play a significant role in combating corruption and money laundering. Many noble Lords feel a sense of dismay, as I do, that large parts of central London and other parts of the country are dark at night, with property wholly unoccupied or occupied for brief periods only. Who owns these properties? We simply do not know, there being no obligation to identify beneficial ownership of foreign companies which own property yet no restriction on foreign ownership.
We may not know, but we have strong suspicions. Transparency International says that £4 billion-worth of property in London is bought with suspicious wealth. Edward Lucas, a Times journalist with considerable knowledge of this subject, has written that,
“colossal sums of money, stolen from the Russian people”,
into the City of London and into the luxury end of the property market”.
All this at a time when young people struggle to get on to the property ladder and to live anywhere remotely near their place of work.
During the passage of the Criminal Finances Bill, I put down an amendment in similar terms to the one now before your Lordships’ House. That was in April 2017, and I could not follow through because of the wash-up. I was, however, given reassurance by my noble friend Lady Williams that the matter was in hand and would be taken forward,
“as soon as parliamentary time allows”.—[Official Report, 25/4/17; col. 1334.]
In July 2017, I asked an Oral Question about progress with the register. I was reassured this time by my noble friend Lord Young of Cookham—few are more reassuring than he is—that:
“Good progress is being made”,
and that the Government were,
“determined to honour the commitment to introduce such a register”.—[Official Report, 10/7/17; col. 1081.]
Then I put down an amendment to this Bill, as it was plainly in scope. When my noble friend Lord Hodgson of Astley Abbotts moved the amendment in my absence, he also was reassured, this time by my noble friend Lord Bates, who did not commit the Government to any timetable but did say that the Government would publish the response to calls for evidence,
“early in the New Year”. —[Official Report, 6/12/17; col. 1085.]
The responses have been in since March 2017.
I thank my noble friend Lord Hodgson for his support in this matter and the noble Baroness, Lady Bowles, and the noble Lord, Lord Collins, who have also put their names to this amendment. I also thank my noble friend Lord Freeman for his support and the noble Lord, Lord Rooker, who is sadly not in his place, but who left the House spellbound with his description of a kleptocracy tour around central London. I also pay tribute to the Minister, the noble Lord, Lord Ahmad, who has shown characteristic willingness to meet us, and to the Bill team and others across government who have endeavoured to explain how complex this all is.
However, the time has come not for reassuring words but for action. Something more substantial is needed. It is a supreme irony that this country’s adherence to the rule of law encourages criminals and fraudsters to invest here, when in their own countries there may be little or no respect for the rule of law. Are we to stand idly by and to act in effect like a handler of stolen goods? My amendment would allow the Government 12 months from the passing of the Act to set up the register. Given that the Bill has not yet even started in the Commons, there is some time to go before the clock starts ticking. I believe this House is very concerned about this issue. I beg to move.
My Lords, my name is on this amendment, and I rise with a sense of what I can only describe as weary resignation to speak in support of it once again. My feelings can probably best be summarised by that oft-quoted remark from a famous football manager—I forget which one—that, “I have a sense of déjà vu all over again”. We have been round this topic many times, both on this Bill and, as my noble friend said, during the proceedings of the Criminal Finances Bill in the spring of last year. My noble friend Lord Faulks has laid out the case with his well-known surgical precision, so I am forced to remember that other famous saying, this time about your Lordships’ House: “Everything that can be said on this topic has been said, but not everybody has yet said it”. Brevity is the order of the day, so I will just set out five quick facts.
First, given this country’s long-standing respect for property rights, stretching back now over 300 years, the UK is a particularly attractive place in which to invest in property assets. Secondly, this country has an extensive and well-resourced financial services sector, in which large transactions can be, if not hidden, at least made to not appear unduly large. Thirdly, a substantial number of investors from all corners of the globe have invested in property in both London and our other leading cities. Fourthly, a number of overseas investors have chosen to make their investments in UK property through a company, so enabling them to conceal their identity. Fifthly, recognising the potentially malign confluence of the above in 2016—two years ago, as my noble friend has mentioned—the Government committed to the creation of a register enabling the identification of the beneficial owners of those overseas companies that had investments in UK property. Those are five facts on which I believe there is general agreement, but still nothing has happened. In another phrase, there has been lots of jaw-jaw but so far no war-war. There have been extensive consultations and discussions of technical difficulties but no clearly timetabled way forward.
Of course we all want the new legislation to be fit for purpose. Legislation that proved to be full of loopholes would be hugely damaging. On this, the Minister has my sympathy and support, but I seek his assurance tonight on two points. First, the 12-month grace period allowed for in the amendment would give the Government three years to fulfil the commitment that they gave in 2016. If not three years, how long do the Government need and why is this time necessary? No ifs, no buts, no maybes. Secondly, how can the House be reassured that there will be space in the parliamentary timetable, after these apparently interminable deliberations come to an end, to bring the necessary legislation into effect?
I conclude with a final sporting metaphor. We have put the governmental horse at this fence a good many times. Each time the horse has galloped gamely towards the fence but at the last moment has swerved away from it. If tonight the Minister once again swerves away and cannot give the reassurances that I seek, and if my noble friend Lord Faulks chooses to divide the House, I shall be happy to support him.
My Lords, I put my name to this amendment but I acknowledge that it is the noble Lords who have already spoken who have made the running on this recently, so I do not wish to be seen just to piggyback. I shall simply tell the House that the noble Lords have my support and that of these Benches.
My Lords, I agree with all the sentiments that have been expressed. This is about a very strong commitment given by David Cameron, and what we want to hear from the Minister is a clear timetable. The noble Lords, Lord Faulks and Lord Hodgson, are absolutely right. In the previous debate we talked about transparency and those who pay. On this issue, it is not just those in the poorest countries who are paying because of this hidden money; it is our own communities. I have said before in this Chamber that to look down the river and see a skyscraper that is 60% foreign-owned, with 40% of that ownership hidden through companies, is clearly scandalous. We do not have to look far. So we need action and a very clear timetable. I hope the Minister will give us that timetable tonight.
My Lords, this amendment seeks to set down in legislation the commitment made at the 2016 anti-corruption summit to establish a public register of company beneficial ownership information for foreign companies that already own or buy property in the UK or that bid on UK central government contracts.
As we have readily acknowledged in various debates during the passage of this Bill and others, the UK is a world leader in promoting corporate transparency. As I said in the previous debate, we are the only country in the G20 to have established a fully publicly accessible company beneficial ownership register. I assure noble Lords that the Government are committed to leading the world in improving this transparency.
First—and here, I refer to my noble friends Lord Faulks and Lord Hodgson but also to noble Lords across the House—I know this issue has been debated and discussed through various vehicles. I congratulate them on ensuring that the Government remain accountable and the issue remains in the public eye. Let me assure my noble friends and all noble Lords that the Government appreciate the work that all have done in this respect, particularly my noble friend. I assure him that we share his desire, the desire expressed by all noble Lords, to reduce the opportunity for money laundering through UK property as swiftly and effectively as possible. We all acknowledge that it is a serious issue, so let me address that question head-on.
First, what has happened? Following last year’s call for evidence, the Department for Business, Energy and Industrial Strategy sent more than 100 pages of drafting instructions to the Office of the Parliamentary Counsel, and work preparing the clauses for the Bill is under way. The drafting instructions prepared so far cover just the application of the land registration elements of the policy in England and Wales. Once the clauses for England and Wales are complete, an exercise will be undertaken to make specific provision for how they will apply in Scotland and Northern Ireland, both of which have different land registration systems and their own Land Registries. The approaches taken to land registration and overseas entities by the Land Registries have differed until now, so all three approaches will need to be brought together to deliver a streamlined policy, consistent across the UK. I anticipate that exercise taking some months and it will involve expertise from many different teams across the UK Government and the devolved Administrations.
The department has also commissioned a piece of research on potential impacts of the policy, including on investment decisions. That research is ongoing and will feed directly into an impact assessment, work on which is also under way. I am sure my noble friend will agree that this is a crucial moment for the UK’s future trading relationship with the rest of the world, and we must proceed with as good an understanding as possible of the potential impacts on legitimate inward investment.
Having brought noble Lords up to date with the Government’s work so far, let me turn to our next steps. Since our last debate on the matter in Committee, the Government have considered carefully the proposals in front of us and had detailed discussion with my noble friend in this regard. Noble Lords were quite right to point out that the anti-corruption strategy published last month stated that we would publish a draft Bill during the current Session of Parliament. Doing so will help to ensure that any potential weaknesses in the policy are spotted and addressed in what will be new and complex legislation.
Let me now provide some of the certainty requested by my noble friends Lord Faulks and Lord Hodgson. I can confirm that we will publish the draft Bill by the Summer Recess this year. I can also confirm that formal introduction of the Bill will be a priority for the second Session of this Parliament. We anticipate that being in summer 2019, and doing so will put us on track to implement the register itself, which will be operational by early 2021. I further recognise noble Lords’ concern for greater certainty of the Government’s intention. We will shortly formally confirm our intention to meet these deadlines—a point mentioned by the noble Lord, Lord Collins—through a Written Ministerial Statement. We will continue to look at both legislative and delivery timetables for opportunities to implement sooner if at all possible.
Let me say why publishing a Bill in draft is the right approach. As I have said before, the register will be first of its kind in the world and will affect people’s property rights. A robust enforcement mechanism will be essential. As set out in last year’s call for evidence, the Government believe that criminal sanctions may not be sufficient in isolation, but that additional enforcement through land registration law will also be needed if the register is to have teeth. A key proposal is that those who own property who do not comply with the register’s requirements will lose the ability to sell the property or create a long lease or legal charge over it. This will be reflected in a restriction on the register of title.
I am sure that my noble friend will recognise that these are significant steps and will constitute a robust enforcement mechanism. As such, the regime must be able to withstand legal challenge from those who have the means and motive to make such a challenge. That is a key reason why delivering the register through dedicated primary legislation, in accordance with the will of Parliament, is preferable to doing so through secondary regulations to the Bill we are debating today. It is also the key reason why this House should welcome the fullest possible scrutiny of the draft clauses and the mechanisms behind a regime which will be a world first.
But that is not the only reason. New functions must be delegated to Companies House and the land registries, and we must ensure they have the tools and time needed to deliver this successfully. A protection regime must be established, balancing legitimate concerns for personal safety with the need for transparency. All those issues were considered in last year’s call for evidence, but only once we can scrutinise the draft clauses can we really stress-test whether they are going to be effective. We anticipate there being in excess of 50 clauses in the Bill.
Let me say why early 2021 is the appropriate timescale. First, it is because a dedicated primary Bill is the right way of delivering such a policy, and that will take time, given other pressures on Parliament at present. The Government will therefore introduce legislation as soon as possible, but it is impossible for me to make commitments to do so in the very near term—and I have already indicated the specific timetable, which will also be qualified in the Written Ministerial Statement.
Secondly, it is appropriate because that must be followed by secondary regulations, in which we will set out the more technical details underpinning the regime, such as the essential changes needed to the land registration rules. New systems must also be built between Companies House and the three land registries. Their design will depend on the precise content of those regulations. While much preparatory work will be done while the legislation and secondary regulations are passed, there are some inevitable lead times, because the systems and processes can be finalised only after Parliament has approved the legislation.
Finally, an appropriate transition period will be needed to ensure that lenders and other stakeholders can adjust to the new requirements. We believe that the policy must be robust, but fair. Overseas entities that have bought property in the UK, in some cases many years ago, will not have had this in their contemplation at the time. In most cases, the property will have been bought for legitimate and innocent purposes and by those who expected the degree of privacy offered by ownership through a legal entity. We should give those entities, and their beneficial owners, time to understand the requirements and consider their options.
There is a parallel with the development of the register of people with significant control. That policy was announced in 2013, following several rounds of consultation and primary and secondary legislation, and a fully populated register was delivered by June 2017. It may have taken four years, but it still put the UK’s framework in a world-leading position. The new register will take a similar path, but there are numerous additional considerations.
I hope that the detail that I have outlined and the timetable that I have given provide the House and my noble friend in particular with the reassurance of the Government’s continued commitment to enact this policy. But to go slightly further, my intention is also to bring forward an amendment on Third Reading to require the Government to provide regular updates to Parliament on progress on the timetable that I have outlined.
I hope that my noble friend feels that we have had a productive engagement and that what I have offered today from the Dispatch Box are not just warm words but specifics. For those reasons, I hope that he is minded to withdraw his amendment.
My Lords, I am grateful to all those who have spoken—and, indeed, to many others who might have spoken but who exercised restraint on this matter. I am also very grateful to my noble friend the Minister for giving, for the first time, an actual timetable for this legislation. A number of queries have provoked soothing words and not much else. We now have a timetable, although it is not happening as fast as many of us would like—but he has explained in some detail the difficulties involved in setting up this register.
I would have been a little more impressed had this been the first time that this issue was raised. We are talking about an undertaking by the Government in 2016, so with respect I should have thought that much of this could have been done a great deal earlier. For example, why do we need to commission an inquiry into the danger of inward investment being put off from coming to this country when the whole idea is to stop inward investment of corrupt proceeds from Russia and the like? I found that one of the less impressive parts of the reassurance given by my noble friend.
My noble friend cites the difficulty of setting up the register and uses the fact that the previous register of persons of significant control took four years to set up. My response to that is that, presumably, a great deal of the work that was done in setting up that register would enable a great deal of piggy-backing to go on in setting up this register—something of a dry run, I should have thought. However, despite that minor carping on my part, I want this legislation to succeed and I want the obscenity of having our property market corrupted to be stopped—and I want it done effectively, as I am sure other noble Lords do.
In those circumstances, and given the pressures on the legislative timetable, I appreciate that this will take time. I appreciate also the Bill team’s assurances, both to me directly and through the Minister, of the things that must be done to ensure that it is as successful as possible. Of course, we all know that no system of enforcing what are, in effect, criminal offences is 100% successful, and part of me says that the best should not be the enemy of the good. However, we are, I am told, a world leader—and rightly so—in this field and I look forward to this register setting an example for the rest of the world, as was indeed envisaged by former Prime Minister David Cameron as long ago as 2016. I am grateful for the commitment by my noble friend regularly to update the House on the progress of this legislation. I will keep the Government up to the mark on this, I assure him. I am also grateful for his indication that he will embody this with a further amendment at Third Reading.
Although I am disappointed by the lack of progress so far, I accept the Government’s commitment to take this matter further. I understand the complexities involved and it is in those circumstances that I am content to withdraw this amendment.
Amendment 75 withdrawn.
76: After Clause 41, insert the following new Clause—
“Registration of companies: anti-money laundering checks
(1) The Registrar of Companies must not register a company unless he or she is satisfied that appropriate anti-money laundering checks have taken place. (2) The Companies Act 2006 is amended as follows— (a) in section 9, after subsection (5), insert— “(5ZA) The application must provide satisfactory evidence that anti-money laundering checks have taken place.” (b) after section 13 insert— “13A” Satisfactory evidence of anti-money laundering checks (1) The Registrar is entitled to accept the anti-money laundering registration number of the United Kingdom body that has submitted the application as satisfactory evidence under section 9(5ZA), provided he or she believes that number to be valid. (2) The Secretary of State may by regulations made by statutory instrument specify any other evidence that the Registrar may accept under section 9(5ZA). (3) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.””
My Lords, this amendment is about closing a major money laundering loophole. Noble Lords will be aware that, last year, 606,000 companies were formed in the UK. Of these, 250,000 were set up through Companies House, but the majority were set up by company formation agents. In the middle of last year, the fourth EU anti-money laundering directive came into force, requiring company formation agents to complete due diligence checks on anyone setting up a company.
However, for reasons that are not clear to me, the Government decided to exclude Companies House from doing such due diligence. For years, Companies House has set up companies and has had to accept documents sent to it in good faith. It is not required to and does not have any statutory powers to verify or validate the information contained in them. It can act only within the parameters of the Companies Act. It certainly has no investigatory powers under that legislation and, therefore, there are no significant checks being done on companies registered through Companies House. In reality, this means that, for just £12, someone can set up a company using entirely false details without having to go through any verification checks on beneficial ownership, and with only limited checks on registered directors. Therefore, individuals who have been involved in money laundering, have convictions or have been debarred as owners in other jurisdictions can gain access to UK companies though Companies House.
Why does this matter? It is because, unfortunately, there are some companies being set up whose principal purpose is one of committing crime or which subsequently lend themselves to being used for that purpose. In extreme cases, incorporation is used entirely as a front to enable fraud to flourish. This leaves British businesses, consumers and taxpayers open to abuse. The evidence is there from an organisation called Transparency International. A couple of months ago, in November, it found that there were hundreds of British shell companies implicated in nearly £80 billion-worth of money laundering. That in itself should set off alarm bells in my judgment. Additionally, this lack of checks harms Britain’s reputation as a leading place to do business and must be addressed in the run-up to Brexit. It is essential to close this loophole to combat fraud, prevent money laundering and boost our country’s reputation.
The solutions seems pretty simple. In Committee, the Government said that they were not prepared to impose a financial burden on Companies House. However, we have to have some detailed checks and by adding a simple automated check of due diligence during the filing process, the Government can close their own loophole at a fractional cost while ensuring that the UK remains a competitive, low-cost place in which to do business. I understand that Her Majesty’s Government have recognised this is a problem and have given due thought to it. I look forward to hearing from my noble friend exactly how they may seek to close this large loophole. I beg to move.
My Lords, I have added my name to the amendment of the noble Lord, Lord Naseby. We had a good mini-debate on this issue in Committee. His amendment is a neat solution to the problem that those of us involved in that mini-debate identified—that some sort of check has to be done at the Companies House stage. If money is not put behind that to enable personnel to do that, this proposal seems a neat solution. I would be interested to know whether the Government will take it up or provide something similar.