Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023

Earl of Minto Excerpts

Tuesday 13th June 2023 Grand Committee

Moved by

[The Earl of Minto]

That the Grand Committee do consider the Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023.

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I beg to move that these regulations, which were laid before the House on 26 April 2023, be considered. They form part of a series of secondary legislation needed to effectively implement the register of overseas entities. The register of overseas entities, which I will refer to as the register, was created under Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022, which I will refer to as the Act.

The register will help crack down on dirty Russian money in the UK and corrupt foreign elites abusing the openness of our economy. Overseas entities owning or buying property or land in the UK must give information about their beneficial owners or managing officers to Companies House. Law enforcement agencies now have a wealth of new information to help them track down criminals using UK property or land as a vehicle for money laundering.

On 1 August 2022, the register went live, with the deadline for registering set at 31 January this year. There has been a high level of compliance, with more than 28,100 overseas entities already registered to date. Entities that disposed of land before the end of the transitional period were required to provide statements with information about their beneficial owners and details of the land disposals, such as the title numbers. More than 750 have provided details to Companies House, having disposed of all their interests before the end of the transition period. This means that just under 29,000 entities have complied with the requirements. While that leaves up to a few thousand entities still to register, some of these are believed to have been dissolved or struck off and others have not kept their addresses up to date with the land registries. This means that they may not have received letters from Companies House.

I know noble Lords will want reassurance that compliance and enforcement action is being taken. This takes time but is well under way. Companies House continues to work to increase compliance even further and is preparing cases for enforcement action. Any overseas entity that has failed to register is already restricted from selling, leasing or raising charges over land that they own. Overseas entities are also unable to register any new purchase of UK land without first registering. These are novel and severe sanctions.

It is worth reminding noble Lords that, when the draft Registration of Overseas Entities Bill was scrutinised by Parliament in 2019, the Joint Committee on Human Rights warned of the severity of these restrictions, in particular the “chilling effect” that this would have. The Government took these concerns seriously but felt that the sanction was proportionate given the register’s policy objectives. This shows the seriousness of the sanction and the need for the Government to balance our approach to enforcement so as not to deter legitimate investment into the UK.

Once the Economic Crime and Corporate Transparency Bill receives Royal Assent, a further enforcement tool will be added to our arsenal. A person who receives a financial penalty from the registrar or is convicted of an offence may be disqualified from acting as a UK director. Once that Bill receives Royal Assent, I will also bring forward further regulations under new and amended powers to further strengthen the register’s requirements.

I now turn to the details of this instrument. These regulations deal with two main areas: financial penalties arising from offences in relation to the register; and the treatment of land disposed of in Northern Ireland by overseas entities and the rights of those acting in good faith. The Bill sets out that the registrar may impose a financial penalty as an alternative to criminal prosecution. This instrument sets out the procedure for imposing and enforcing these financial penalties. A financial penalty could be imposed on a variety of persons depending on the offence in question. For example, it could be imposed on the entity and its officers where an overseas entity has failed to register, a verifier who has knowingly submitted a false filing or a person who has failed to respond to an information notice sent by an overseas entity.

If the registrar suspects that a person has committed an offence, she may issue them with a written warning, giving them 28 days to make representations about their conduct. If the registrar is satisfied beyond reasonable doubt that the person has committed an offence, she may issue a penalty notice in writing to that person, giving them 28 days to pay the penalty. If a person fails to pay, interest will accrue at the statutory interest rate of 8% per annum.

The instrument sets out that financial penalties imposed by the registrar may be fixed, set at a daily rate or a combination of both. Where the criminal fine set out in the Act is a fixed penalty, the registrar may impose multiple penalties in relation to the same conduct if the contravention continues. Subsequent penalties could be of increasingly higher amounts to encourage compliance. The instrument does not prescribe the specific financial penalties that may be imposed on each offence. Instead, it states that a financial penalty must not exceed the maximum fine that a court in the jurisdiction in which the offence was committed could impose under criminal proceedings. This flexibility allows non-compliant persons to be targeted proportionately and effectively and allows for penalties to be adjusted according to the seriousness and specifics of the case.

I will now briefly set out the approach that the registrar will take. Given that financial penalties are an alternative to criminal prosecution, the registrar will bear in mind the process that a court would follow. They will be proportionate, as the goal of the financial penalty regime is to encourage ongoing compliance with the requirements of the register. When deciding whether to prosecute and what sentence to give, courts follow sentencing guidelines to ensure that it is in the public interest to prosecute and that the sentence is proportionate to the seriousness of the offence. The registrar will also consider the public interest and be proportionate when imposing financial penalties.

The Act provides different maximum fine amounts and prison sentences commensurate with the nature of the offence. Contrary to recent reports, the Act does not set out that courts may impose daily fines for the failure to register offence. This means that the registrar cannot impose daily penalties either. Instead, the instrument allows the registrar to impose more than one penalty if non-compliance is ongoing.

For the failure to register offence, the Act sets out that, in England, Wales and Scotland, courts can impose an unlimited fine. In theory, this means that the registrar may impose an unlimited financial penalty if an overseas entity fails to register. As an indication of the seriousness of this offence, the registrar will review portfolios owned by overseas entities that fail to register.

The registrar will use a range of sources to estimate the value of the portfolio in question, including the UK house price index and data on business rates bands. The registrar will then apply different starting points for the financial penalties, depending on whether the estimated value of each property or piece of land falls into one of three bands. If its value is estimated to be in the lower band, the starting point for the penalty will be £10,000. If it is estimated to be in the middle band, that rises to £20,000. If it is estimated to be in the higher band, it rises again to £50,000.

If an overseas entity owns more than one property or piece of land, the penalty values will be added up to calculate its starting point. Given that interest will accrue at the statutory interest rate of 8% per annum, if an overseas entity fails to pay, the penalty will rise quickly. The registrar may also consider other aggravating factors, such as whether the person has committed the offence previously.

Where any financial penalty remains unpaid, it can be enforced as if it were a judgment debt, including by registering a charge against the property or land owned by an overseas entity. The registrar will keep the model under review before imposing financial penalties for failure to file the annual update on time. If the registrar finds that the level of penalties needs to be reviewed because they are not providing a sufficient deterrent, this instrument gives her the flexibility to do so.

The instrument gives the registrar the power to vary or revoke financial penalties on a case-by-case basis, for example if new information comes to light that aggravates or mitigates any offence. The instrument also sets out the grounds for appeal and the court’s powers in relation to that appeal.

This measure adds to the tools at the registrar’s disposal to promote compliance and maintain the register’s credibility as a vehicle for improving transparency and reducing the misuse of UK property by overseas entities. Companies House has been preparing to operationalise these regulations and will be ready to issue notices as soon as they come into force.

The second part of this instrument sets out the grounds for registering dispositions in Northern Ireland that would otherwise be prohibited. It amends Schedule 8A to the Land Registration Act (Northern Ireland) 1970 to provide a mechanism to allow the Secretary of State to consent to the registration of a land transaction that would otherwise be prohibited.

If a third party transacts with an overseas entity at a time when that entity is non-compliant with the register’s requirements, the third party will be prohibited from registering the transaction. For example, if they have purchased land from a non-compliant overseas entity, they will be unable to register themselves as the new proprietor. The intention of this sanction is to disincentivise anyone from transacting with non-compliant overseas entities. However, in certain circumstances, it is possible that a third party may transact in good faith without knowing that the overseas entity was non-compliant, resulting in their acquisition of a land title that cannot be registered with the Land Registry. The Act is not intended to penalise innocent third parties, so this mechanism is necessary for the effective functioning of land transactions. A similar mechanism is already available in England and Wales, and in Scotland.

The Bill’s expedited passage through Parliament last year left no time to include this mechanism in the draft Bill for Northern Ireland. Instead, a power was taken to make regulations, ensuring that consistency in the application of the requirements could be maintained across the UK. The instrument also inserts a regulation-making power into Schedule 8A to enable regulations to be made to specify how applications should be made, and makes other consequential amendments to Schedule 8A.

I close by emphasising once again that the measures in these regulations are crucial for the effective operation of a register that will crack down on dirty Russian money in the UK and corrupt foreign elites abusing the openness of our economy. I hope noble Lords will support these measures and their objectives. I commend these draft regulations to the Committee.

[Lord Wallace of Saltaire (LD)]

My Lords, I thank the Minister for that extremely clear and helpful explanation of the statutory instrument. As he will be well aware, we are now in the middle of considering the second economic crime Bill in two years. This deals with a number of issues that overlap with those two pieces of legislation, in particular the position of Companies House and how far it will have the additional staff needed to handle its new responsibilities and ensure that this SI and the other elements of those two pieces of legislation will be effectively enforced. I would welcome any reassurance he might give on that.

It is encouraging how much compliance there has been so far. It will be interesting and useful to know how stubborn the remaining non-compliant areas are. What is the scale of the unregistered land and properties that we still face in England, Scotland and Northern Ireland? We are all aware of stories of large houses in Hampstead that have been unoccupied for many years and whose ownership is unclear. Is this SI likely to end that situation so that business rates can be properly levied, and so that ownership will be clear and, if necessary, come under scrutiny and be changed?

I am interested in the remark about an alleged chilling effect from forcing everyone to comply. I have a certain interest in this, since my wife and I are thinking about downsizing and are looking at aspects of the London property market. On looking at a major new development on the South Bank some months ago, we were told that just over 40% of the apartments had already been sold to foreign buyers. I wonder whether the Government have looked at the impact of full compliance with the new overseas ownership regulations and whether they think that will have a marked effect on the London housing market—and possibly on London house prices, which the Wallace family would welcome.

The extent to which over the last 20 years a number of new housing developments in London have been built specifically to be sold to foreign owners rather than to serve the needs of people who need housing here has been one of the scandals of our housing market, and we very much welcome this position now changing.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

I add my thanks to the Minister for his opening remarks and the detail that he went into in explaining the nature of the SI before us. I preface my comments by picking up on one remark that he made, that the whole purpose of this is not to deter investment. We are always looking at finding the bad actors in this situation, rather than bringing in penalties that will have a detrimental effect on businesses’ ability to attract investment.

We regard this as an important statutory instrument, and I am sure the Minister will agree with me that it is very overdue. We know that there were conversations around this and action was taken by David Cameron back in 2016. We have to acknowledge that it is a tragedy that it took the war in Ukraine to precipitate the action that we have seen thus far. I hope we do not get into a Groundhog Day situation, as I know that we will probably engage in further conversations around this when we head into Report on the Bill next week. However, that is the nature of the fast-moving situation that we are in. Many of the issues that have been touched on today have been discussed at length in Committee on the Economic Crime and Corporate Transparency Bill, so I do not want to repeat too much of that, knowing that we will come back to it.

As I say, we support provisions within this SI and believe that they are common sense, but we have to acknowledge that the delays have been at a cost.

I believe the fine is currently set at £2,500 per day. Is it the case that no one has yet been issued with a penalty? It would be good to clarify where we are in the process. We certainly want to see action stepped up against those failing to comply with the new legislation, and we know that there are those who are yet to face financial penalties. The spirit running through all the debates about the next stages of this is of wanting the system to be as robust as possible. In particular, as the Minister mentioned, this presents us with an opportunity to bring in further measures and strengthening, but the question that will run throughout this, which he probably cannot answer at the moment, is whether it will be fit for purpose and will cover all the issues that come up.

How soon after the passing of the SI will the registrar be able to issue financial penalties? I presume there will be a process of issuing warning notices. Has there been any provision for warning notices to be sent out in advance of the SI being passed? It would be helpful to know whether that is the case and therefore whether it will be possible for the registrar to move to those financial penalties as soon as the SI has been passed.

More generally, on timings, the dates of appeal on the warning notices suggest that a period of 28 days needs to be passed. Can we have some clarification? The draft regulations state that the period contained in any warning notices

“must be at least 28 days beginning on the day after the date of the warning notice”

being issued. If a company or entity disagreed with what was in the warning notice, would it have to make representation to the registrar within 28 days or after a minimum of 28 days? There is a need for some clarification. Also, if warning notices have been issued, have any written representations been received?

I also emphasise the issue that we have raised significantly. I am grateful to the noble Lord, Lord Johnson, for arranging for us to meet the registrar and some of her officers; it was a very instructive meeting. But, as has been outlined, I want to put on record our continuing concern about whether the level of resources will be fit for purpose, given the scale of change being brought in, the number of companies that we have heard about and the fact that there will be stubborn cases that are difficult to bring to a conclusion. We have had some reassurance that this will not be fixed in stone and that if the registrar feels that more resources are required, they will be able to come back to that. The issue is the sheer capacity and the fact that the status of those working in Companies House is being changed from recording information to taking action when there is suspicion of wrongdoing.

The other area that has generated a great deal of concern is the 25% threshold for beneficial ownership and the possibility of anonymity that it gives, enabling overseas entities access to UK properties and markets. I know there will be more discussion around this, but it is important to flag these matters whenever we have the opportunity. I hope the Minister will acknowledge that this area still presents a problem in getting underneath all the issues that need to be addressed. I thank him for his very clear explanation of the powers in the SI to consent to Northern Ireland dispositions.

I conclude by saying that, yes, we support the changes being introduced, but it is an area of huge concern. Economic crime is still increasing, as we know, and coming back to deal with unforeseen loopholes that might ensue will be an important part of the legislation before us. I very much look forward to the Minister’s response and to continuing the work on this important area.

[The Earl of Minto (Con)]

I thank both noble Lords for their valuable contributions to this debate—not just now but in the past.

The Government are absolutely committed to ensuring that the register is robust and effective at tackling the use of UK property to launder money. These regulations provide mechanisms that ensure the register operates effectively. A clear and effective procedure for the imposition and enforcement of penalties will serve as a deterrent against non-compliance and bad actors, as well as punishing guilty parties, including by potentially imposing charges over their land.

The provisions relating to the dispositions in Northern Ireland extend the same treatment to the entirety of the UK. They allow the registration of land, where it would otherwise be prohibited, for the benefit of those who act in good faith, and ensures that their interests are not affected by the actions of non-compliant overseas entities.

The points that noble Lords have discussed today highlight the necessity of the measures contained in these regulations. I will try to address some of these now. The noble Lord, Lord Wallace, raised a number of extremely important issues, and I will take them in the order I wrote them down.

On the question of proper funding for Companies House, there are two elements of funding, which total a maximum of about £83 million in any one period; that should certainly be enough. I think one can see from the work it has already achieved that it has made great strides. I am not saying the work is finished, but it has made great strides towards achieving the whole purpose of the register and, through that, giving the registrar the leeway to concentrate on the people who have not yet fully complied.

On the continuous rate of compliance, I think we last met here on about 2 May. Since then, Companies House has had 600 more applications for compliance. That rate of about 100 a week is continuing, so the process is working.

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

My Lords, I apologise for interrupting the noble Earl, but there is a Division in the Chamber. The Committee will adjourn for 10 minutes.

--- Later in debate ---

[The Earl of Minto (Con)]

If I am right, I completed talking about the compliance rate, which I hope answers the noble Lord’s query.

On the question of the marked effect on the market, I suppose one will have to wait and see what the market response is. As the noble Baroness said, we must not affect the investment market because inward investment into this country is extremely important. We are trying to catch the people who are trying to launder dirty money but there are many more people who are trying to invest legitimately. Whether the market is actually affected by this instrument, I am not so sure. It is an enormous market and we are not talking about a vast number of properties. It is a very difficult question to answer. It is a balance between having severe penalties for those who are flouting the law and allowing proper, genuine inward investment.

On the question about how enforcement action will take place, the answer is that the fine can be enforced as any judgment debt. This would include a charge on the property, which could indeed lead to repossession and, ultimately, the sale of the property.

I think I have answered the question on Northern Ireland. It is not a significant number of properties in Northern Ireland, as I understand it. The purpose of the SI is just to ensure that there is commonality—it is a levelling-up issue—throughout the whole of the United Kingdom.

Some of the issues that the noble Baroness, Lady Blake, raised have been covered by some of those answers. Her initial point about deterring investment was very well made: that is certainly something we do not want to do. We have already discussed the detail of this, but she mentioned the fine being set at £2,500 a day. The actual amount can be limitless. The courts can issue and aggregate that fine, depending on the scale of the penalty. The instrument is as robust as possible, and I believe it is fit for purpose.

The statutory instrument sets out that the register must allow a minimum of 28 days for the person to make representation following receipt of the warning notice. That period of notice will be issued at the same time as the warning notice.

On the question of how much action has already been taken, the answer is that no one has had a penalty yet. This SI allows Companies House to impose financial penalties. It has written to property and service addresses, but warning notices cannot be issued until the SI is in force. However, Companies House stands ready to issue warning notices as soon as the SI is actionable.

The Government fully understand the 25% beneficial ownership point. It is one that really needs careful watching; the Government and Companies House are fully aware of the potential ongoing issue that is likely to provide. I hope that answers some of the specific questions raised by noble Lords.

The register sets a new global standard for transparency and levels the playing field with property owned by UK companies, which must already disclose their beneficial owners to Companies House. This register is a crucial part of the Government’s fight against illicit finance. The Economic Crime and Corporate Transparency Bill, which is currently before Parliament, will feature substantial changes to UK company and partnership law and will complement the Act. The Bill will introduce amendments to the Act which will further strengthen the requirements for overseas entities wishing to own land in the UK. For example, new measures in the Bill will require more information about overseas entities, including the title numbers of the properties held. It also introduces minimum age limits for managing officers to ensure that the details of a person aged over 16 are always provided—a point the noble Lord made when we last discussed this.

The Bill will also make further provisions for registrable beneficial owners in cases involving trusts. It includes an anti-avoidance mechanism to ensure that those in scope of the register when the Act was first published as a Bill in Parliament cannot circumvent its requirements. The laying of these regulations will complement the measures in the Act to ensure the register is as effective as possible. I commend these draft regulations to the Committee.

Motion agreed.

Baby-changing Facilities

Earl of Minto Excerpts

Tuesday 6th June 2023 Lords Chamber

[Lord Kirkhope of Harrogate]

To ask His Majesty’s Government whether they plan to oblige cafés, restaurants and other businesses serving food and drink to provide adequate baby-changing facilities.

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

Although building regulations already require consideration to be given to baby-changing facilities at the design stage of non-dwellings, we need to also consider the impact that further obligations would have. Most hospitality businesses are SMEs, which may not have the resources, or indeed the space, to install suitable facilities.

[Lord Kirkhope of Harrogate (Con)]

I much appreciate those remarks from my noble friend. However, as many parents and guardians of infants find it inconvenient, if not embarrassing, when in restaurants and other outlets serving food and drink where adequate baby-changing facilities are not available, will the Government now consider amending Section 20 of the Local Government (Miscellaneous Provisions) Act 1976 to add a requirement for such facilities, wherever practicable, to those already covering the provision and maintenance of toilet facilities?

[The Earl of Minto (Con)]

My Lords, I think we can all agree that the principle of free access to baby-changing facilities in as many different hospitality situations as we can reach is desirable. Under the existing building regulations there is already a requirement for new non- residential properties to consider this, as well as for buildings which are undergoing substantial reconstruction.

[Lord Leong (Lab)]

My Lords, as most mothers and fathers will tell you, taking an infant out, especially to eating places, is a real chore—you have to pack nappies, a changing mat and wipes, among other things. Having to find a place to change nappies is another chore. They should not be forced to do this in unsuitable places. Most child-friendly restaurants and cafés already have baby-changing facilities. This makes good business sense, contributing to a healthy “bottom” line, as parents will look at these eateries positively. There have been suggestions from many people that cafés, pubs and restaurants should be required to provide baby-changing facilities by law so that parents can have peace of mind. Will the Government look at this again?

[The Earl of Minto (Con)]

I thank the noble Lord for his comments—in all respects. My noble friend made a very good point about how this needs to be practicable. There are a lot of existing hospitality venues where it is not practical to provide additional services, either from a financial point of view or, more importantly, from a space point of view. However, the principle holds good that, whenever the opportunity arises with anything new or anything that is being rebuilt, consideration should be, and indeed is, required under the building regulations improvements.

[Baroness O'Loan (CB)]

My Lords, in considering the situation of parents who wish to change babies in hospitality venues, will the Minister also consider parents who need to change children with disabilities, and older people with disabilities, who need more extensive facilities?

[The Earl of Minto (Con)]

My Lords, that is again a very good point. There is a requirement at the moment to separate disabled toilet facilities from baby-changing facilities, and I think that is probably the right thing to do. This morning, I met the chief executive of the British Beer and Pub Association, and she said that her members take every opportunity to put in baby-changing facilities for precisely the reasons that the noble Lord mentioned earlier: from a marketing point of view, it is absolutely the right thing to do, because you win more customers and more money.

[Lord Shinkwin (Con)]

My Lords, my noble friend the Minister helpfully makes a point about the separation between baby-changing facilities and accessible toilets. Does he accept that that depends on whether the building itself is accessible to someone like myself, a wheelchair user? Could he write to me to tell me how long he thinks I should have to wait, as a wheelchair user, before I can by law access licensed premises, given that the Government are refusing to use the Licensing Act, as recommended by a committee of this House, to enforce access on licensed premises?

[The Earl of Minto (Con)]

My Lords, my noble friend makes a very good point. One of the challenges is that a lot of pubs are in historic buildings and are listed. Therefore, it is extremely difficult to get through the planning laws so that doorways and steps can be taken out to give free access. I say again that every opportunity is taken to provide disabled access.

[Baroness Burt of Solihull (LD)]

My Lords, fathers change babies too, and yet baby-changing facilities are often situated in ladies toilets. Does the Minister think that we should have an inclusive place where fathers and mothers can change children—and in a nice environment, rather than some of those that some mothers have to bear up with?

[The Earl of Minto (Con)]

My Lords, again, that is a very good point. The issue is predominantly driven by space and, to some extent, finance and running costs. The Welsh Government did a very interesting study a few years back, in 2019-20, where they estimated that it costs between £2,500 and £5,000 to put in baby-changing facilities. We all know that the majority of small hospitality businesses are SMEs, and that sort of cost, let alone the ongoing cost of maintenance, cleaning, refuse collection and that sort of thing, at times makes it restrictive.

[Lord West of Spithead (Lab)]

My Lords, one of the joys is that these babies are being born into a free and wonderful country. Some 79 years ago today, 7,500 ships —the bulk of them British—landed the American, Canadian and British armies in Europe, at Normandy. Does the Minister agree that that helped lead to the destruction of the vile Nazi state? It is well worth commemorating that. Would it not be a good idea to have some more ships?

[The Earl of Minto (Con)]

Although that is not entirely within my brief, I entirely agree.

[Lord Hannan of Kingsclere (Con)]

My Lords, I wonder whether the Normandy landings would have been so successful had they all been obliged to have baby-changing facilities on every vessel. This idea of state regulation for baby changing takes the nanny state to a literal level. Can my noble friend the Minister confirm that, in the other place, the Government were elected on a manifesto promising minimal regulation, and that providers of services have every incentive to offer their customers the best deal they can afford without needing to be told what to do with the full coercive power of state law?

[The Earl of Minto (Con)]

My Lords, I entirely agree. In fact, my role is about regulation and reducing the amount of it. We should all agree that, by reducing regulation, business becomes easier and more productive, everybody’s salaries improve and there are increased job opportunities.

[Lord Sahota (Lab)]

My Lords, I declare an interest: my wife runs a leased café in Telford. When I am not in your Lordships’ House, I help her out. I totally agree with baby-changing facilities but there should also be a public convenience because, since the severe cuts to public authority budgets in 2010, we have been short of public conveniences up and down the country. I know this for a fact because people come running into my wife’s café looking for a public convenience. There should be one funded by the local authority. I hope that the Minister agrees with me.

[The Earl of Minto (Con)]

My Lords, I do. Most shopping centres now provide not only a full range of toilet facilities but baby-changing facilities too; that is absolutely right and proper. The planning law is operating correctly. On levelling up, £30 million has been set aside for precisely what the noble Lord wants. I am sure that we will continue to move towards a more available service.

Employment Relations (Flexible Working) Bill

Earl of Minto Excerpts

2nd reading
Friday 19th May 2023 Lords Chamber

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I thank the noble Baroness, Lady Taylor, for bringing this important Bill forward for debate today. It is an honour to be here to confirm the Government’s ongoing support for the Bill, and I thank all noble Lords who have spoken on this important matter.

The ability to vary the time, hours and place of work is an important element of the flexible labour market in Great Britain. Having access to flexible working arrangements enables individuals to participate in the labour market in a way that suits their circumstances. I see this in how flexible working plays a part in a host of cross-government strategies; whether it relates to disability, childcare, health or retirement, we know how important flexible working can be in helping people to stay in work doing jobs that they enjoy. Many of these strategies seek to encourage workplace conversations. We know that, with a good discussion and a bit of flexibility, working patterns can be adapted to benefit not only individuals but employers.

For employers, supporting flexible working could ensure the retention of an experienced worker, and all the skills and experience that they contribute, or create a more diverse senior leadership team, which studies have shown leads to improved financial returns. Furthermore, one of the key challenges for businesses today is finding good people to hire.

In this context, promoting and implementing flexible working can also make the workplace more attractive to potential applicants. This is supported by research conducted by the Behavioural Insights Team, showing that offering flexible working can, as has already been said, attract up to 30% more applicants to job vacancies.

There are also more fundamental structural issues to consider. More than 8 million people in the UK work part-time, representing a quarter of the working population. We need to make sure that the labour market continues to accommodate a diverse range of working patterns to ensure that everyone can participate and that businesses have the people they need. That is why the Government are pleased to support this Private Member’s Bill, which will help to facilitate better access to all forms of flexible working, whether that relates to when, where or how people work.

As set out by the noble Baroness, Lady Taylor, the successful passage of this Bill will introduce changes to the existing right to flexible working. This right was introduced in 2003 for employed parents and carers of children under the age of six and disabled children under the age of 18. The legislation has since been amended several times, most recently in 2014 as part of the Children and Families Act. Currently, all employees with 26 weeks’ continuous service can formally apply, once in any 12-month period, for a contractual change to the hours, timing or location of work.

In September 2021 the Government published a review of the legislation, which found that in the vast majority of cases—83%—where a statutory request is made, it is accepted. The review found the framework to be functioning adequately but highlighted some relatively minor areas for improvement. In the same month, the Government launched a consultation that considered proposals in each of these areas. We published our response to that consultation at the end of last year. I am pleased to say that the measures in the Bill reflect what we set out in our response.

The new consultation requirement will mean that employees and employers are encouraged to have a broader conversation about what flexible working arrangements may be appropriate before a decision is reached, avoiding the scenario in which an employer rejects a specific request out of hand. Allowing employees to make two statutory requests every 12 months updates the legislation, so that the right-to-request entitlement operates more flexibly and can be used more frequently if people’s circumstances change. Reducing the timeframe within which employers must respond to requests, from three to two months, will simply speed up the whole process. Removing the requirement for the employee to set out the impact of the requested change removes red tape from the process and levels the playing field between employees who have been with the organisation for a shorter or longer period, as well as between those who are more or less capable of presenting a case for their application.

I will take a moment to highlight the other measure that was set out in the consultation response and will be implemented alongside the Bill to complete the package. We will remove the 26-week qualifying period and make the right to request flexible working available to all employees from the first day of their employment. This will not only encourage early conversations about the availability of flexible working but bring an estimated additional 2.2 million people into the scope of the legislation.

These changes represent a timely, sensible and proportionate update to the right to request flexible working, and reflect what many employers already do. The changes will particularly support those who need to balance their work and personal lives, and who may find it harder to participate in the labour market. From older workers to new parents to those with disabilities—the point about MS is extremely well made—or long-term health conditions, the Bill will be an important step in supporting their ability to remain and progress in work.

It is important to acknowledge that there is no one-size-fits-all approach to work arrangements and there will be times when a requested pattern is unworkable. That is why the legislation leaves space for employees and employers to work out the right arrangements for their particular circumstances, and for employers to continue to decline requests for one of the specified business reasons.

I am pleased to reassure the House that the Bill contains only a single provision concerning delegated powers: a standard power for the Secretary of State to bring the provisions of the Bill into force by commencement regulations. That approach seems to have been accepted by the Delegated Powers and Regulatory Reform Committee, which in its report published on 2 March 2023 stated simply:

“There is nothing in this private member’s Bill which we would wish to draw to the attention of the House”.


I hope that is ample reassurance for noble Lords.

Before going into specific points, I say that I hope that my speech has addressed most of the points raised. On the wider question raised by the noble Lords, Lord Davies of Brixton and Lord Browne of Ladyton, it is true that the 2019 Queen’s Speech said that there would be an employment Bill. We then went into Covid, and the Government are taking forward many of their manifesto commitments on employment law by supporting this and other Private Members’ Bills.

The noble Lord, Lord Davies of Brixton, also raised the question of what determines consultation—a very difficult thing to put your finger on, I imagine. The issue of consultation will be dealt with in guidance; we want to encourage positive conversation about what flexible working may be possible which meets the needs of both parties. But we do not want that to be a burdensome bureaucratic process on whether the consultation requirement will be enforceable.

The question of advertising is an interesting one. There is a downside to advertising, because it gives employers the opportunity to say no from the outset. We consulted on advertising in 2019. Clearly there is a strong business case for employers to do this; to some extent, why would they not? The trials with Zurich have proved that 30% more applications are received. But the view is that rather than pursuing this through legislation, we will take a voluntary approach, as set out in the business case.

I agree with almost everything that my noble friend Lord Holmes said. On the question of unpaid internships, I never did not pay an intern. It is incredibly important to make people realise early on in their working lives that if they give the time, they get properly rewarded. His point about the challenges that AI is going to present us was extremely well made. I will turn briefly to the comments of the noble Lord, Lord Browne, and I think he is absolutely right; what we are doing is turning a cultural shift into law. I think that is very good. The point about higher versus lower earners is another well-made point, and I hope that the consultation process will address that. To the noble Lord, Lord Palmer of Childs Hill, I say that I also remember the water cooler. It is very important to have a little cultural place, where people can meet and chat freely, to drive the culture of a business and the ethics in any organisation.

Supporting the Bill is in line with the Government’s ongoing commitment to build a strong and flexible labour market that supports participation and economic growth. I observed a welcome degree of cross-party co-operation and support in the other place, and I think it is a testament to the strength of our system that we can work across parties, putting aside our rivalries to deliver change which will make a real and positive impact on people’s lives. With this in mind, I look forward to continuing to work with the noble Baroness, Lady Taylor, as this Bill progresses through the House.

Carer’s Leave Bill

Earl of Minto Excerpts

Friday 19th May 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, I welcome this stage of this important Bill. I acknowledge the very rich debate we had at Second Reading, including the incredible personal testimony from so many Members on behalf of their own families and people they had met in their communities or work. As the noble Lord, Lord Fox, laid out, this is an important first step, but we need to acknowledge that there is still much more to do. I emphasise, to avoid any confusion, that this refers to unpaid leave, although many arguments have been made to move to paid leave.

We have heard very clearly that the Bill will help to relieve the stress and isolation that carers often experience—the loneliness, the impact on mental health and, as we have heard, the disproportionate impact on women. But what we also know, which is not emphasised enough, is that the Bill will benefit employers by reducing the risk of the absenteeism, turnover and retention of staff.

All that remains is to thank Wendy Chamberlain MP, the Bill’s sponsor in the other place; the noble Lord, Lord Fox, for bringing it to the Lords; and the cross-party support we have seen. I also refer to the work by Carers UK from which we have all benefited. I thank carers and their families who have shared their stories and experiences. In particular, I make special mention of my noble friend Lady Pitkeathley; she is very sorry not to be able to be here today. I thank her again for her tireless work over many years and her absolute determination to make progress on this really significant issue.

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I thank the noble Lord, Lord Fox, for bringing the Bill through the House. The Government have been pleased to support it throughout all its stages. This is in line with our 2019 manifesto, which committed to introduce one week of leave for unpaid carers; I am pleased to continue that support today at Third Reading. I am also very grateful for the cross-party support that the Bill has received.

The Government appreciate the time dedicated by unpaid carers to help those who rely on them for their everyday needs. No one should underestimate the contribution that unpaid carers make. They play a vital role in society, supporting those who are unable to care independently for themselves. Many provide that care while holding down a job. We know that there are some brilliant, supportive and flexible employers out there already who are taking great steps to support those in their workforce with caring responsibilities, recognising the value to both their businesses and their employees of helping carers to stay in work. The Bill will extend aspects of what those employers do voluntarily to all employers, ensuring a baseline of support for all working unpaid carers. This will help to alleviate the pressure that carers—particularly women, who are more likely to provide care—can face as they seek to juggle their work and caring responsibilities.

The new right to carer’s leave will provide more flexibility to those unpaid carers. It will enable them to take more time out of work if they need to. Carer’s leave will allow employees to be absent from work on unpaid leave to provide or arrange care for a dependant with a long-term care need. Eligible employees will be able to take the leave, regardless of how long they have worked for their employer. It will be available from the first day of their employment. The leave will be available to take in increments of half-days, up to a week, to be taken over a 12-month period. Employees will not be required to provide evidence in relation to a request for carer’s leave. Employees taking carer’s leave will have the same employment protections as associated with other forms of family-related leave, including protection from dismissal or detriment as a result of having taken the leave.

I am personally very pleased to support the Bill; it is a huge step in the right direction for our carers, who give their time to help others who need it. I once again thank the noble Lord, Lord Fox, for his sponsorship of the Bill as it has moved through the House. I also thank Wendy Chamberlain and my honourable friend Kevin Hollinrake for their stewardship in the other place and their hard work in putting the Bill forward.

[Lord Fox (LD)]

My Lords, I thank the Minister for his words, and, more than that, I thank him for the Government’s support for the Bill. I also thank the noble Baroness, Lady Blake, who pointed to the personal nature of the Bill and the improvements it will give to individuals across the country.

It has been an unusual experience for me to propose, rather than oppose, something, and to have the support of the House, so I thank all noble Lords for that. However, I am standing on the shoulders of giants. From my own Benches, my noble friend Lady Tyler has been a very important supporter of the needs of carers in the Bill. As the noble Baroness, Lady Blake, pointed out, the noble Baroness, Lady Pitkeathley, has been a tireless campaigner for carers, both in the House and through Carers UK. It is a great shame that neither she nor my noble friend were able to be here today, because, frankly, this is the culmination of their work rather than anything I have done.

Wendy Chamberlain did a great job in the Commons in proposing the Bill and stewarding it through. I thank Kathryn Sturgeon, her adviser, who worked very hard with us. I also thank my own adviser, Mohamed-Ali Soudi, in our Lords Whips’ Office, who has been an excellent support in getting this through. Externally, I thank Carers UK and particularly John Perryman and Emily Holzhausen, who have been great in providing briefing support. The Bill team has made sure that I have not fallen over—at least, not yet—so I thank them very much for their support. Finally, once again, I thank the Minister and his colleague, the noble Lord, Lord Johnson, who both supported the Bill going through.

Car Industry

Earl of Minto Excerpts

Wednesday 17th May 2023 Lords Chamber

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I shall now repeat in the form of a Statement an Answer to an Urgent Question given in another place:

“The automotive industry is a vital part of the UK economy, and it is integral to delivering on levelling up, net zero and advancing global Britain. After a challenging period, where Covid and global supply chain shortages have impacted the international automotive industry, the UK sector is bouncing back. Production is increasing and in 2022 the UK’s best-selling car was the Nissan Qashqai—built in Sunderland.

The automotive industry has a long and proud history in the UK. We are determined to build on our heritage and secure international investment in the technologies of the future—to position the UK as one of the best locations in the world to manufacture electric vehicles.

We are leveraging investment from industry by providing government support for new plants and upgrades to ensure that the UK automotive industry thrives into the future.

Companies continue to show confidence in the UK, announcing major investments across the country including: £1 billion from Nissan and Envision to create an EV manufacturing hub in Sunderland; £100 million from Stellantis for its site in Ellesmere Port; and £380 million from Ford to make Halewood its first EV components site in Europe. We will continue to work through our automotive transformation fund to build a globally competitive electric vehicle supply chain in the UK, boosting homegrown EV battery production, levelling up and advancing towards a greener future.”

[Baroness Blake of Leeds (Lab)]

My Lords, I watched this Urgent Question in the other place keenly today but was left disappointed by the number of questions actually answered, so I thank the Minister for coming here to answer ours.

This situation is extremely serious. As we know, all manufacturing is facing supply chain difficulties globally, and our car industry is suffering. Does the Minister agree that our trading relationship with the EU should reflect this? Will the Government follow the sector’s advice by reopening negotiations on the trade and co-operation agreement to protect it from further risk?

[The Earl of Minto (Con)]

My Lords, the Government are acutely aware of the global challenges that the UK car industry faces. We have been leveraging private investment, alongside government support, to bring EV manufacturing to UK shores. The UK remains highly attractive; our workforce is among the most productive in Europe, and we excel in R&D and innovation. The DBT Secretary of State is aware of this issue facing the automotive sector, and is raising this with her counterparts in the EU.

[Lord Fox (LD)]

My Lords, on 2 March this year I asked a Question of the noble Lord, Lord Johnson, the Minister of State for the Department for Business and Trade. It was exactly on this issue. Unless the renegotiation is successful, the manufacturers of electric cars will not be able to export their vehicles to the European Union without a 22% tariff. The noble Lord mentioned Stellantis, which is one of the companies that yesterday made the point that this is very urgent. I did not get a sense of urgency from the Minister.

McKinsey estimates that between £5 billion and £18 billion will be required to deliver the domestic battery capacity we need in this country. Even if that money was available now, which it is not, and even if the plans were approved now, which they are not, there would not be a battery plant at the end of this year. Can the Minister reassure your Lordships that the Government are actually on this case, and that the urgency of this is understood, because the industry does not get that impression?

[The Earl of Minto (Con)]

The noble Lord makes some very good points. I assure him that the Government are absolutely on the case. We are not alone; the EU has challenges of its own.

[Lord Fox (LD)]

It is a quid pro quo.

[The Earl of Minto (Con)]

It is a quid pro quo. This whole question of battery manufacture has caught a number of countries, including us, where they do not particularly want to be. The Government have invested in this country; the joint investment with the OEMs is about £1.5 billion and we have put a further £2.8 billion in. That will probably not do it, but I assure the noble Lord that we are absolutely on it.

[Lord Popat (Con)]

My Lords, I declare my interest as the Prime Minister’s trade envoy for Uganda, Rwanda and the DRC. My noble friend the Minister must have seen the article in the Times last week about the exodus of car manufacturers from the UK because of the shortage of batteries. I have just returned from Rwanda, where I met Ministers and President Kagame, who expressed interest in a joint venture manufacturing plant for batteries, because they have the necessary raw materials. Will my noble friend support such an initiative to source these important electric car batteries for the UK’s car industry?

[The Earl of Minto (Con)]

I thank my noble friend for the points he made and appreciate his relationship with those key African states. In the challenges we face with EV manufacturing, any form of help can be only welcomed and supported. I would very much like to meet him and see what can be done.

[Lord Beith (LD)]

My Lords, is the Minister confident that batteries for electric cars will be produced at the site north of Blyth which was earlier identified for that purpose? If so, when?

[The Earl of Minto (Con)]

My Lords, I cannot give a direct answer. I will write to the noble Lord later, but I assure him that the Government are absolutely on it. I completely understand that the whole question of batteries and trying to resolve this country of origin issue is fundamental to the future of automotive manufacturing in this country.

[Baroness Randerson (LD)]

My Lords, the USA is now pouring trillions of dollars into green investment and the EU is rapidly following suit. Germany alone is investing far more than we are. What changes will there be to UK government policy to ensure that, now we stand alone as a manufacturing nation, we can compete on this advancing front where it is so important that we make our mark early?

[The Earl of Minto (Con)]

The money that has already been allocated is fundamental to the future. Through the APC, we have invested in 188 collaborative zero-emission, low-carbon R&D projects to the tune of about £1.4 billion. That is a clear indication of our level of commitment. I see no reason why that should not continue.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the noble Lord opposite referred to the raw materials necessary for electric car batteries. Will the Minister acknowledge the concerns about the environmental and labour conditions under which such materials are sourced? Will the Government pay very close attention to this?

--- Later in debate ---

[The Earl of Minto (Con)]

Not just the Government but the manufacturing companies take this very seriously. Everybody appreciates that these rare materials are finite; it is right at the front of our thinking.

[Lord Stoneham of Droxford (LD)]

My Lords, the news from Vauxhall should not have surprised anybody. These Benches have been warning about these problems for the last five years, ever since we launched this Brexit shambles. How can we have any confidence that the Government are now addressing this issue when they have ignored it for the last five years? Why would anybody in the international motor industry invest in this country while there is complete uncertainty over what the Government will do?

[The Earl of Minto (Con)]

A number of automotive businesses are investing in this country and will continue to do so. They realise the opportunity: we have a very good workforce and we are extremely good at R&D. I can see no reason why we should not continue to play an important role.

[Lord Whitty (Lab)]

My Lords, during the passage of the Bill we have just dealt with, there was a move at an earlier stage to make sure that the European standards for vehicles—on emissions, parts and safety—were not revoked, just like that, by the Bill. The Government refused to do that, and yet none of the investors we are trying to attract are British-owned and most of them have big investments in Europe. For us to depart from our vehicle standards by anything significant would be destroying any ability of the industry in this country to compete. Will the Minister indicate that we will keep in line, broadly speaking at least, with European vehicle standards?

[The Earl of Minto (Con)]

Virtually all vehicle manufacture is integrated throughout a number of different countries, and I can see no reason why we would not continue to follow the route that we have done in the past, and that of course involves our relationship with the EU. I know that the Secretary of State has been in close contact on this very matter.

[Lord Fox (LD)]

The Minister raised the international supply chain. I apologise if I tell him something he already knows, but the electrification of motor vehicles is a completely new industry. It is not changing a factory that currently exists; it is building a new factory. It is creating an entirely new supply chain. The reason you got urgent cries from these Benches is that unless that happens now, it will never happen. Now is the moment that it has to happen. My noble friend mentioned huge public subsidy. That is what this country has to compete against. Does the Minister understand why this is urgent?

[The Earl of Minto (Con)]

I certainly do, and the Government do as well. The automotive industry in this country employs well over half a million people and is fundamental to the success of the country. There is no doubt that some of the brands we have operating in this country are global, future brands, and the Government are fully behind them.

Whistleblowing Framework

Earl of Minto Excerpts

Tuesday 16th May 2023 Lords Chamber

[Baroness Kramer]

To ask His Majesty’s Government whether the whistleblowing framework will include an assessment of the desirability of setting up an independent Office of the Whistleblower to deliver its objectives.

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, the Government recognise how valuable it is that whistleblowers are prepared to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. The Government launched a review of the whistleblowing framework on 27 March this year. This will examine the effectiveness of the existing framework in meeting its intended objectives, which are to enable workers to come forward and speak up about wrongdoing and to protect those who do so against detriment and dismissal. The review will provide an up-to-date evidence base on whistleblowing.

[Baroness Kramer (LD)]

My Lords, the APPG for Whistleblowing, many Members of both Houses, scores of whistleblowers, significant legal counsel involved with whistleblowing, and even regulators in their evidence to the APPG have called for an office of the whistleblower. Will this review give full consideration to such an office —yes or no? If not, why not?

--- Later in debate ---

[The Earl of Minto (Con)]

My Lords, the review will gather and examine evidence on the effectiveness of the GB whistleblowing framework in meeting its objectives. The framework was introduced way back in 1996, updated in 1998 and appended to since. I do not believe that an office of the whistleblower is part of this review. Having said that, once the review has been completed and has reported, that is clearly something that should be considered.

[Lord Cormack (Con)]

My Lords, while I appreciate my noble friend’s sentiments and objectives, do we really have to prostitute the English language in order to achieve them?

[The Earl of Minto (Con)]

No, I do not think so.

[Lord Browne of Ladyton (Lab)]

My Lords, I thank the Minister for his letter yesterday to those of us who spoke in the debate on the amendment from the noble Baroness, Lady Kramer, on this very issue on day 6 of the Economic Crime and Corporate Transparency Bill Grand Committee. It deals particularly with data reporting. That is very helpful, although it shows that the regulators implement this patchily, inconsistently and, arguably, uselessly. So is it too late for the terms of reference of the review to be revised specifically to include an office of the whistleblower but, more particularly, to look at whether we could financially reward whistleblowers for information? That has generated a dramatically better climate for whistleblowing in the United States of America. Could we also look at our experience from the pandemic? Given the poor recovery rate for the public funds misspent on PPE, surely this is worth trying.

[The Earl of Minto (Con)]

The noble Lord has asked a lot of questions. The regulators and the level of consistency in reporting are absolutely part of the brief. The review is not currently structured to look at the question of a department of the whistleblower but, as I said in my Answer, I believe that that may well be a recommendation that comes out of it. I am afraid I cannot remember what the other question was.

[Viscount Waverley (CB)]

My Lords, maybe I can help the Minister out on this point by following on from the question from the noble Lord, Lord Browne, and asking what consideration has been given to replicating what is done in the United States in offering financial incentives? Different levels of compensation are paid out commensurate with the quality of information on economic crimes and for the strengthening of sanctioning regimes overall.

[The Earl of Minto (Con)]

My Lords, at the moment the Government do not think that financial incentives to whistleblow are an appropriate way to take this review or any future interest forward.

[Lord Flight (Con)]

[Inaudible.]

--- Later in debate ---

[Baroness Altmann (Con)]

I congratulate the Government on having a review of whistleblowing, which clearly is long overdue. I thank my noble friend for his letter and engagement with us on the whistleblowing issue in the Economic Crime and Corporate Transparency Bill, but does he consider that there is adequate protection in the current framework against career detriment and dismissal for whistleblowers? Does he not think that those who are working inside firms are best placed to blow the whistle and uncover crimes before any regulator tries to sweep up the mess afterwards? Therefore, looking at examples overseas, such as in America, that seem to work much better than here might be worth considering.

[The Earl of Minto (Con)]

My Lords, I think I have answered the question about the American system. Having said that, we will of course look at what is current practice and best practice overseas to see how we can take this whole process forward. Surely what we are trying to do is to come up with a world-class whistleblowing framework and structure that protects workers who come forward and risk their employment and, to some extent, their financial future in calling out this potential fraud.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, my direct experience of whistleblowers is that doing that actually devastates their life, their income and their circle of friends. They have a very tough time, particularly if they come from the police or the military. I am slightly concerned that the Minister almost seemed to rule out an office of the whistleblower, because it would be wrong to have a consultation and not look at all the options. It seems to me that we need something very drastic, because the current legislation is no protection at all.

[The Earl of Minto (Con)]

My Lords, I quite agree that taking any form of case to an employment tribunal is risky and difficult for the individuals involved, and it is no less so in a whistleblowing case. When the review is done and we are able to take a look at what the recommendations are—I think I have said this twice already—it will be very surprising if the question of an office of the whistleblower did not come up.

[Baroness Blake of Leeds (Lab)]

My Lords, evidence suggests that the UK’s law on whistleblowing is falling behind international best practice and has not kept pace with the modern workplace or the scale of the problem. We welcome the Government’s announcement of the establishment of the review into the whistleblowing legislation, but perhaps the Minister could tell us when this will report. In the light of that, would he not agree that the Economic Crime and Corporate Transparency Bill, shortly going to Report, provides an ideal opportunity to act now to bring in immediate, obvious improvements? Further, does he agree that requiring all employers to introduce effective internal arrangements would be a beneficial step forward?

[The Earl of Minto (Con)]

I absolutely agree that the current whistleblowing framework is not current best practice. This was basically put in place in 1996 and 1998, and that is one of the main purposes for the review being carried out now. The review is due to complete its work in October this year and will report very soon after that. Hopefully, from that, we can get to a situation where we are able to move forward to something that really is world-class.

[Lord McColl of Dulwich (Con)]

My Lords, does the Minister have any information on the percentage of whistleblowing claims that are false?

[The Earl of Minto (Con)]

My Lords, I do not, but I will find out and write to my noble friend.

Post Office Executives: Bonuses

Earl of Minto Excerpts

Thursday 11th May 2023 Lords Chamber

[Lord Leong (Lab)]

My Lords, I welcome the Minister to his new role and look forward to working constructively in the months ahead. I thank him for coming to this House to address these concerns.

The Post Office Horizon IT scandal is the most widespread miscarriage of justice in UK history. For more than a decade, this Government have allowed the scandal to drag on. Thousands of lives have been ruined and, tragically, more than 30 families have lost loved ones. Despite all this, continued delays mean that thousands of victims have yet to receive financial compensation.

It is appalling that, instead of these victims seeing anyone held to account for their lives and livelihoods being ruined, they are instead suffering the indignity of watching those who contributed to their suffering rewarded. CEOs who allow such behaviour disgrace the business community. Does the Minister agree with me that this is pure corporate greed? Does he really believe that paying nearly half a million pounds in bonuses to those involved in the scandal is justifiable in this case? Does he agree that the payment of these bonuses undermines the fight for justice and insults the hundreds of victims for whom Members on both sides of this House have campaigned so hard and for so long?

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, no doubt this is a serious error in corporate judgment, coming on top of the Horizon scandal and the misery and false accusation that it caused. In this regrettable situation, the Post Office was right to apologise. This is an extremely serious issue, at a time when it is essential that the public have confidence that the culture and processes at the Post Office have been improved. Government has acted swiftly, calling for an immediate explanation from the Post Office of how this mistake occurred and what steps its board is taking in response.

[Lord Fox (LD)]

My Lords, I also welcome the noble Earl, Lord Minto, to his seat. Your Lordships did not need reminding, but this demonstrates again that the executive and board of the Post Office regard themselves as, somehow, a law apart from the rest of us and do not understand the situation that they have created for so many innocent victims. Yesterday, the Parliamentary Under-Secretary of State for Business and Trade, Kevin Hollinrake MP, said in the Commons that

“more needs to be done”.—[Official Report, Commons, 10/5/23; col. 341.]

So what is “more”, and when will it be done?

[The Earl of Minto (Con)]

Initially, Amanda Burton, the new chair of the Post Office remuneration committee and a non-executive director, will have two weeks to find out the precise facts about what has gone on here. At the same time, there is another review on the whole question of remuneration within the Post Office, because, clearly, something has gone very wrong. Within a couple of weeks, I hope that we will have a reasonable report with which we can come back to the House.

[Lord Cormack (Con)]

My Lords, will my noble friend reflect on how often predecessors of his—we welcome him warmly today—have stood at the Dispatch Box, talked about the great scandal that has been highlighted so brilliantly by my noble friend Lord Arbuthnot, and said that we are within sight of a solution? We are still not, and that is an utter disgrace, made even more disgraceful by the subject we are discussing today.

[The Earl of Minto (Con)]

My Lords, I cannot disagree with the motive behind my noble friend’s question. The Government set aside £1 billion to deal with the compensation for the scandal. Of that, over £100 million has been paid out. But due process has to follow its route, and it continues to do so.

[Lord Berkeley (Lab)]

My Lords, the Post Office’s previous management seems to have got away scot free on this. It has been going on for a good 10 years, and some of them even get promoted to other jobs. Should they not be implicated and called to account, along with the IT provider that caused all this?

[The Earl of Minto (Con)]

My Lords, management clearly has a very serious responsibility, as the Post Office provides all of us, throughout the entire land, with some extremely valuable services. The specific management team in place has apologised and, while this is not the appropriate time to go into great detail about what might happen to it, it must be fully aware of the errors that it authorised.

[Baroness Wheatcroft (CB)]

My Lords, every member of that board should have been aware of the bonuses paid and the reasons why they were. If they were not aware, they were failing to do their duty, but, if they were, they showed appalling judgment. Is the Minister content that they should stay in office for even two more weeks?

[The Earl of Minto (Con)]

I entirely agree with the noble Baroness’s sentiment. Certainly, in my experience, every member of the board is fully aware of exactly what the remuneration package is for each individual director and everyone within the organisation, whether it is fixed or bonus-related. Having said that, at this moment it is important that the two reviews under way take place. A decision can then be made at the appropriate time.

[Lord Browne of Ladyton (Lab)]

My Lords, this is the worst miscarriage of justice in the history of this country: 555 convictions have been declared unsafe. These people have been campaigning for 20 years, and some of them have died. The best that I can work out is that fewer than 100 of those convictions have been overturned. The scandal will be worsened by the fact that so many people are likely to die before their convictions are overturned. Can we not do something to speed this process up? One Bill with two clauses in this House could pardon them all.

[The Earl of Minto (Con)]

There can be absolutely no doubt about the seriousness of the Horizon disaster. I am sure that the noble Lord is absolutely right that things should be done quicker. I am not clear about what we can actually do about it, but I will certainly find out and get back to him.

[Lord Dobbs (Con)]

My Lords, justice must be done and be seen to be done, of course, but it must be done in a timely fashion if it is to be justice. This has not happened in this terrible case at the Post Office or with Windrush. One of the reasons for the Illegal Migration Bill is that we need to make sure that justice is done at our ports and for those coming in. Is not the one common thread in all this that we have corporate lawyers, pressure group lawyers and special interest lawyers who are there not to deliver justice but to delay it, and therefore to deny it to those who deserve it?

[The Earl of Minto (Con)]

My noble friend makes a very interesting point. Lawyers act for their clients. Their clients instruct them in so doing. The speed through the legal system in every country in the world is not as fast as one would like.

[Baroness McIntosh of Pickering (Con)]

What due diligence are the Government doing with regard to Fujitsu being a preferred bidder for government contracts on an ongoing basis, given its history with the Horizon project?

[The Earl of Minto (Con)]

My noble friend makes a very good point. I am not aware of the exact situation. I will find out and write to her.

[Earl Cathcart (Con)]

My Lords, I live three miles from the market town of Fakenham. The post office has been virtually closed for nearly four years. Surely the executives should provide a service that Fakenham and other communities need. Any bonus should be linked to providing that service.

[The Earl of Minto (Con)]

My noble friend is right. Bonuses should be awarded based on performance against specific measurable and recorded targets. As the noble Baroness, Lady Wheatcroft, said, everybody within the organisation should know this. Part of my noble friend’s question was about the commitment of the Post Office to the network. At the moment, there are about 11,500 post offices. During the last 10 years, the Government have poured about £2.5 billion of funding into the network. It is obviously very important that towns such as Fakenham have a proper post office. I shall take this up.

Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations 2023

Earl of Minto Excerpts

Wednesday 3rd May 2023 Lords Chamber

Moved by

[The Earl of Minto]

That the draft Regulations laid before the House on 15 March be approved. Considered in Grand Committee on 2 May

Motion agreed.

Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations 2023

Earl of Minto Excerpts

Tuesday 2nd May 2023 Grand Committee

Moved by

[The Earl of Minto]

That the Grand Committee do consider the Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations 2023.

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I beg to move that these regulations, which were laid before the House on 15 March 2023, be considered. These regulations form part of a series of secondary legislation needed to effectively implement the register of overseas entities, which I will refer to as the register.

The register was created under Part 1 of the Economic Crime (Transparency and Enforcement) Act, which gained Royal Assent last year. The register will help to crack down on dirty Russian money in the UK and corrupt foreign elites abusing the openness of our economy. It requires overseas entities owning or buying property in the UK to give information about their beneficial owners or managing officers to Companies House, and provides greater information for law enforcement officers to help them track down those using UK property as a vehicle for money laundering.

The register went live on 1 August 2022 and the deadline for registration was set at 31 January this year. There has been a high rate of compliance, with over 27,500 overseas entities registering to date. A further 700 have provided details to Companies House, having disposed of all their interests in land before the end of the transitional period. This means that over 28,000 entities have complied with the requirements. While that likely leaves a few thousand entities still to register, some of these are believed to have been dissolved or struck off while others have not kept their address details up to date with the Land Registry. Companies House continues to work to increase compliance even further; it is now also assessing cases for compliance action.

Noble Lords will recall my noble friend Lord Callanan introducing the first tranche of regulations last year. These included the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations, the Register of Overseas Entities (Verification and Provision of Information) Regulations, and the Land Registration (Amendment) Rules. The subject of today’s debate is the first regulations in the latest tranche that is subject to the affirmative resolution procedure. Other instruments are being prepared to ensure that the register can function even more effectively.

I turn to the details of this instrument. These regulations are laid under the powers of the Economic Crime (Transparency and Enforcement) Act 2022, which I will refer to as the Act. They deal with three main elements: first, prescribing the characteristics of a foreign limited partner for the purposes of the Act; secondly, allowing for information held within the register to be removed on application under circumstances; and, thirdly, amending the protection elements of the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022.

The first part of this instrument sets out the characteristics of a foreign limited partner for the purposes of the register. These regulations provide that such individuals participate in a foreign limited partnership as a limited liability participant or hold shares or a right, either directly or indirectly, in a legal entity that participates in a foreign limited partnership as a limited liability participant. The regulations also define exactly what is meant by a foreign limited partnership and how a person would qualify as a limited liability participant in such a partnership. These provisions will assist overseas entities in identifying registerable beneficial owners under the legislation for the register.

As regards the measure on rectification, Regulation 4 sets out the grounds for rectifying the register. There may be occasions when information submitted to and visible on the register is factually inaccurate, forged, or has been submitted without the consent of the overseas entity. This regulation therefore allows for the register to be rectified by removing such information.

Regulation 5 of the instrument establishes the criteria for those entitled to receive notice of an application for rectification. It also specifies the information that must be included in the notice.

Accordingly, Regulation 6 lays down the grounds for interested parties objecting to such an application while confirming how objections should be made and the time limit for making them. Regulation 6 also sets out how the register is to determine whether to accept an application for rectification where an objection has been received.

Without these regulations, it would not be possible for a person to apply for the removal of inaccurate or forged information from the register. These measures therefore strengthen the accuracy and utility of the register.

On the third measure, on protection, Regulation 7 sets out details of an amendment to the existing protection regime. The regime deals with the protection of personal information from public inspection; “protection” means that information is not displayed by Companies House on the public register, although protected information must be provided to Companies House and is available to law enforcement. As it stands, protection can be granted only on an application subject to strict criteria. Applicants must provide evidence that they are, or a person living with them is, at risk of serious violence or intimidation if their details are publicly disclosed. Such a disclosure must result directly from their link with the overseas entity.

The amending provision will remove the requirement to demonstrate the risk of violence or intimidation arising directly from the individual’s association with the overseas entity. The measure will subsequently allow applications for protection that are needed because an individual is at serious risk. They would still need to demonstrate that risk before protection is granted but the risk would no longer need to be linked to the overseas entity.

The amendment will also allow for relevant individuals’ usual residential addresses to be protected if, for example, an individual provides a usual residential address as a service address without realising that it will be displayed on the public register. The person will then have to provide an alternative address to protect their usual residential address. These changes are necessary because it has become apparent that the current criteria lack flexibility. Without these changes, there is a real risk that, by publicly disclosing their details, some people will be in danger of serious violence or intimidation due to the ease with which a link could be made to their residential address.

To sum up, the measures in these regulations are crucial for the effective operation of the register of overseas entities. I hope that noble Lords will support these measures and their objectives. I commend these draft regulations to the Committee.

[Lord Wallace of Saltaire (LD)]

My Lords, we welcome this small adjustment to last year’s Act. I think we all approach it from the angle of the Committee on this year’s economic crime Bill, and the Minister is well aware that the largest concern coming out of its successive sittings is about how serious the Government are on enforcement. That question will continue all the way through our consideration of that Bill and it relates to this SI a little.

We are aware of the problem we have with properties in London owned by foreign companies, particularly where it is not clear who owns them, and, to a more limited extent, with land across the UK. We are conscious that this leads to a loss of tax revenue because, if you cannot identify the owner, you cannot get the rates paid or whatever. I have not yet seen an assessment of how much revenue is being lost to local councils and others from this hole, but it must be considerable.

I was told that 40% of properties in the Nine Elms development around Battersea Power Station have been sold to people from outside the UK. That is a large amount, and we know that there are a considerable number of areas, including Belgravia, where the lights are off.

Over the weekend, I was quite surprised to get some interesting statistics from an organisation with which I was not previously familiar called Open Ownership. I note that Transparency International is one of the entities that funds and supports this new body. It gave me some very interesting figures including that, of the beneficial owners personally registered, some 70 appear to be under the age of 12, one appears to have been born in 1897, which makes him 126 now, and another was born in 1907, which makes him 116. There are possibly one or two inaccuracies in what is being reported. Perhaps the Minister will say a little about how checks will be made on what comes in, so that rectification can take place.

I was even more interested to discover that the overwhelming majority of individuals identified as beneficial owners so far were British, by both nationality and residence. I had expected more to be from Asia—Hong Kong, mainland China and Singapore—and areas of eastern Europe, Cyprus and elsewhere. The large majority of companies mentioned as beneficial owners were registered in either the UK or the three Crown dependencies. If what I have received is accurate, it suggests a considerable amount of a different sort of economic crime under way here, which is called tax evasion. There may be a substantial loss of revenue to the United Kingdom that, as we proceed further down this line, we might at last begin to tackle.

While I welcome this small step forward, we have a long way to go. There are a lot of questions about what we do with this information as we gather it and if this information is correct. One of the questions raised in the Committee on the Bill was how much capacity Companies House will have to go through this and trigger action on it, and with which agencies the Government will then pursue that action.

I apologise to the Minister for not having given notice of the questions I have just thrown at him, but I received this SI only two or three days ago. I welcome the regulations, but we still have a lot of other things to do in this large and complicated area in which the United Kingdom Government and, as we know from other areas of economic crime, British citizens lose a lot of money.

[Baroness Blake of Leeds (Lab)]

My Lords, I thank the Minister for his opening comments. I think he will be aware that several of us are spending quite a lot of our time on the Economic Crime and Corporate Transparency Bill, which is going through the House at the moment, and many of the issues in the statutory instrument we are discussing today are the subject of ongoing conversations.

We recognise that this is secondary legislation to amend the Act that went through last year. I welcome the Minister’s comment that this is work in progress and that further revisions will be required because there are still some gaps that we may need to consider in future.

I preface my remarks by highlighting the scale of the problem that we are dealing with. I do not think any of us should shy away from the real problem we have in this country now as a result of not taking action sooner. It is a tragedy in many ways that it was the onset of the conflict in Ukraine that necessitated swift action, and it is regrettable that this problem, which had been highlighted before, had not come into our focus and received the attention necessary.

I welcome in the main the provisions in the statutory instrument, but I shall make a couple of comments and ask a couple of questions. I make it clear, as we have done throughout the discussions in this area, that we recognise that the vast majority of companies investing in the UK do so with good intentions and bring great benefit to the country and that we are concentrating on the actions of the relatively small number of bad actors. Sadly, their contribution to this is profound and has done an enormous amount to damage the reputation of the UK on the world stage. I hope that we are united across the Committee in making sure that we take every opportunity to improve the chances of our reputation being recovered and are seeking out problems as they arise.

My main hope is that those at serious risk if information is given out are protected. It is very important that we recognise that there are genuine cases where protection needs to be secured. By the same token, we have to avoid disproportionate burdens and make sure that legitimate investors are welcome to operate in our country.

I seek some clarification. There seems to be some concern that the Act still does not provide a complete definition of what a foreign limited partner is. The description in the Explanatory Memorandum seems rather abstract. I wonder whether this may lead to practical implications where the confusion continues to exist. Reassurance on this point would be gratefully received. Most of all, we want to make sure that the register is populated correctly and effectively. Throughout the discussions on this matters, transparency is paramount in the context of those who will need further protection, as the Minister outlined.

I thank the Minister for his comments about risk, but I want to understand if bringing this instrument forward has led to further thought on the definition of risk. Have we gone far enough? I would like to understand how this is demonstrated and whether there has been an assessment of how well this is working so far. As has been highlighted, the issue of the alternative address could still be problematic. I understand the need for flexibility, but is there a risk remaining? We would like to be confident of the success of this provision. Again, this links to the balance between protection and transparency.

The other area is—if you can describe it as this—cleaning up the register and recognising, as we have heard, that some of the information held is clearly not factually accurate or even worse, as we know there is certainly a measure of intent in some of the entries. Do we know the extent of this? On how many occasions is this going to be necessary? Do we have an estimate of how much of a problem this is and how regular it is? Most importantly—I think this runs through all the debates on the Bill itself—how will this work be resourced? Can we be reassured that there are adequate personnel and resources at our disposal to make sure that we get this done successfully?

What are the sanctions once a forgery or anything factually inaccurate has been identified? Are there punishments? Do we have any evidence of this? Can we have a general clarification around the deterrent factor to make sure that we do not have problems going forward? Obviously, with there being an equivalent provision in the Companies Act 2006, I would hope that we have learned from the experience of working on this. I wonder if there are examples of that that would help to inform the debate.

I understand the Minister’s comments about the deadline of 31 January, but I have heard an estimate that 7,000 companies failed to register. Is that about the ballpark he is suggesting? Since January—we are now in May—has there been an understanding of how successful the action taken against the remaining numbers has been?

There are still other issues and I look forward to other measures coming forward to fill the loopholes. In conclusion, of course we welcome the provisions being made, but are seeking reassurance and confidence that concerns will be addressed, and the necessary changes will be made as we go forward.

[The Earl of Minto (Con)]

I thank both noble Lords for their valuable contributions to the debate. The Government are committed to ensuring that the register of overseas entities is robust and effective at tackling the use of UK property to launder money. These regulations provide the mechanisms that ensure that the register of overseas entities operates effectively. A clear definition of “foreign limited partner” provides greater certainty concerning registrable beneficial owners of overseas entities; I have a full definition for the noble Baroness that I can share. Applicants will be able to identify registrable beneficial owners more easily with a definition that is recognisable across multiple jurisdictions.

The amendment to the protection regime will address the unintended consequences of the regulations as they stand, by removing the requirement to demonstrate the risk of violence or intimidation arising directly from the individual’s association with the overseas entity. The measure on rectification ensures that errors on the register, whether deliberate or accidental, are identified and removed. The points raised by noble Lords highlight the necessity of the measures in these regulations, and I will answer some of them now.

The noble Lord, Lord Wallace, raised the question of accuracy—that is definitely ongoing. I do not think Companies House fully knows the number of inaccurate entries, but it still stands by the estimate it has used before of there being 32,000 registrable entities in total. We are up above 28,000 now. Although there will be some inaccuracies, I hope that by continuing to approach these organisations, Companies House will iron them out. I have not been involved in this sort of thing before but, despite the fact that it has taken some time to get there—it took the atrocious situation in Ukraine to bring this to the fore—it has certainly made some significant progress in getting that many people to register in such a short period of time. However, the point is well made that the accuracy of the register is paramount, including in terms of lost revenue.

On the younger people mentioned, I understand there are issues of family trusts, particularly with UK beneficial owners. That point, too, was well made. I could go through what is meant by the “foreign limited partner”, but I would rather share that with the noble Baroness. I hope that answers some of the more direct questions, and I will write to noble Lords if there is anything that I have not answered.

[Lord Wallace of Saltaire (LD)]

May I ask two questions, not to be answered now but perhaps in a letter? First, checking the accuracy of everybody’s name on the register will not be easy. Particularly for those that are not registered in Britain—those relying on co-operation from foreign authorities—it raises a large number of questions about how we get other authorities to co-operate with us and what multilateral network there is to ensure that they provide accurate information. I would appreciate knowing more about that.

Secondly, we are all familiar with the cascade of companies that one often finds—you go to the first company, which is owned by two different companies in two different jurisdictions and so on. If we are serious about this, how are we going to work through that, given that we are dealing not simply with overseas territories officially under British sovereignty but with other offshore financial centres which do not have a good record of co-operating to provide accurate information?

[The Earl of Minto (Con)]

Behind the noble Lord’s question is the question of resource. Companies House has 120 full-time equivalent staff working on this and pursuing precisely what the noble Lord referred to. I hope that will continue to improve the situation as time moves on, but the point was very well made.

[Baroness Blake of Leeds (Lab)]

Can I link that to the question I asked about what punishment or sanction there is? I apologise if the Minister is coming to that.

[The Earl of Minto (Con)]

At the moment, the main emphasis is trying to get the accuracy of the data. No punishment has been meted out yet, but there is power—both financial and legal—to punish as and when. Companies House is working hard to get those cases under way, but its main emphasis has been on trying to get the information as accurate as possible so that a lot of the anomalies that sit within it can be effectively eliminated. As the noble Lord said, some of these corporate structures are quite complicated, so it takes a while to get to the bottom of them. I promise that I will write.

The register of overseas entities provides sets of new global standards for transparency and levels the playing field with property owned by UK companies, which must already disclose their beneficial owners to Companies House. The register is a crucial part of the Government’s fight against illicit finance. The Economic Crime and Corporate Transparency Bill, currently before Parliament, will feature substantial changes to UK economic and partnership law and complement the Economic Crime (Transparency and Enforcement) Act. The Bill will introduce amendments to the Act that provide further operational detail on the register of overseas entities. For example, new measures in the Bill will require more information about overseas entities, including the title numbers of the properties held by overseas entities. It also introduces minimum age limits for managing officers to ensure that details of a person over 16 years of age are always be provided.

The Bill will also make further provisions for registrable beneficial owners in cases involving trusts and includes an anti-avoidance mechanism to ensure that those in scope of the register at the time that the Act was first published as a Bill to Parliament cannot circumvent its requirements. The laying of these regulations will complement the measures in the Bill to ensure that the register is as effective as possible, and I commend them to the Committee.

Motion agreed.