Subsidy Control Bill

Lord Callanan Excerpts

Lords Hansard - Part 1 & Report stage
Tuesday 22nd March 2022 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, I declare an interest as a vice-president of the LGA. I also express—I like the term—a personal “modicum of delight” at having been released from the Covid nightmare and enforced isolation which has unfortunately hit too many of us in this group.

I sincerely recognise the movement from the Government in the amendments tabled. I thank the Minister for taking our comments on board. We have all expressed our reservations and commented from wide experience and knowledge from the front line of how significant these subsidies are—particularly, as has been said, in the context of driving investment, regeneration and putting some substance behind the rhetoric around levelling up. We have given examples of discrepancies in investment and funding, and the real disadvantage that that has caused too many communities across the United Kingdom.

I express my gratitude for the quality of the discussion on the amendments in this group, particularly for several conversations my noble friend Lord McNicol and I have had with the noble Lord, Lord Ravensdale, about what it is like being part of a body with the responsibility for delivering on the ground. The issue here is bridging that gap between the words in the Bill and the reality of how you make this happen on the ground.

My noble friend Lord Chandos has, as ever, expressed his views eloquently. I cannot add to what he has said, other than to thank him for his reasonable and measured approach, which highlights the significance of his comments around the investment in equity securities and how we must ensure that the discrepancies between the contents and the supporting documentation are resolved. We hope that the Minister can offer helpful clarifications on this subject.

Like other noble Lords, we on these Benches are very pleased that the Government have been persuaded of the case for strengthening the Bill’s focus on local and regional economic disadvantage. These points have been raised consistently both in another place and in your Lordships’ House. Without wishing to sound churlish, we feel it is a case of “better late than never”. It seems obvious to use whatever instruments are to hand to bring advantage to all parts of the country.

It may be that the Bill never prevented subsidies from being used to level up deprived areas, but the clarification in Amendment 2 will be helpful for public authorities at all levels. The exemption for relocation subsidies, introduced via Amendment 14, is also a hugely significant step. As we will all recall, we had a very interesting debate on relocation in Grand Committee and how, perversely, not addressing this matter could have caused real damage, inadvertently perhaps. I am glad that we have some movement and some common sense in this area.

I understand the intention behind Amendment 9, in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd. In an ideal world, the Bill would indeed contain further detail on how the equity rationale will work in practice. As has been said several times, the amendment is looking for that clarification—the standards and principles—for how we can ensure that there are no grounds for misinterpretation and confusion. I am fairly confident that the Minister will say that this is exactly the kind of information that will be contained in future guidance, but, again, we must bear in mind the recipients of that guidance and how it will be interpreted. The subsidies must be a force for good. They must clearly demonstrate purpose and benefit to the communities where they are applied. I emphasise the clarity that will be needed around this. Talking to various stakeholders in the field, it is about the level of advice and clarification, and about ensuring that everyone feels that there is a level playing field and that interpretation in different areas is not bringing disadvantage as a knock-on effect.

It is fair to say that the Welsh Government have consistently voiced concerns that the original Bill treated Mayfair and Merthyr in the same manner, and with these changes we are definitely making progress. However, as regards other elements of the Bill and the changes that have been made, we must emphasise the significance and importance of the review process, making sure that that is done in a transparent way at every stage of the game. We are talking about value for money, delivery, the spend of the public pound, making sure that all the concerns around the decisions that have led to investment decisions—which have been fairly, from our point of view, criticised—must be addressed. This is a powerful opportunity and I hope that through the changes that we are seeing, the opportunities are not missed.

As we speak, there is discussion about the spend of the shared prosperity fund, the delay in the skills element of that and the fact that ESIF will fall out next year, and there will be a gap if we do not pick up these issues. All those matters need to be brought together so that the spirit behind the gain-share agreements with all the devolved areas can be delivered with local determination, bringing benefit to all. This is a current and very important debate and I look forward with interest to the Minister’s response.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I start by welcoming the noble Baroness back to her rightful place on the Front Bench, fully recovered. In fact, I say that with more than a modicum of delight—to use my favourite phrase of the week so far. For the noble Lord, Lord Fox, that is the equivalent of being damned with faint praise. So as not to be sexist about this, it is good to see the noble Lord, Lord McNicol, back as well.

The interaction of the subsidy control regime with the Government’s levelling-up agenda has rightly occupied many noble Lords during their consideration of the Bill, both in Committee and on Report. I hope that so far I have been able to provide sufficient reassurance that public authorities are no less able to give subsidies to address regional disadvantage under the Bill than they were under the previous EU state aid regime. Indeed, moving away from the EU’s default prohibition on subsidies and the resulting exemption for certain categories of subsidy in specified areas will allow public authorities greater ability to design measures that address not only regional disadvantage but the stark differences in social and economic opportunity that exist at a much more granular local level.

It is important that public authorities understand the way that they are empowered by this regime to give levelling-up subsidies, so I recognise the value of noble Lords’ suggestions that this would benefit from being made clear in the subsidy control principles. Amendment 2 to Schedule 1 therefore makes it clear that addressing local or regional disadvantage is considered to be an equity rationale for the purpose of assessing compliance with principle A. That was urged on me by many noble Lords in Committee and I am delighted to be able to put that forward—with more than a modicum of delight —on behalf of the Government. This puts it beyond any doubt or confusion that a subsidy to address local or regional disadvantage can be given, provided, of course, that the other principles and requirements of the regime are met.

I am grateful to the noble Baroness, Lady Blake, and the noble Lord, Lord Ravensdale, for supporting this amendment—I am not sure that there are many occasions when people put their name to my amendments but I am more than delighted when they do so. I am also happy to reassure noble Lords, the noble Lord, Lord Ravensdale, in particular, that beyond this change to the Bill, the Government will be exploring the creation of streamlined routes to support levelling up. I reassure the noble Lord that these streamlined routes may have deprivation-related eligibility criteria, although it is important to note that levelling up is about improving opportunities in the whole of the UK.

A streamlined route could therefore facilitate interventions—high street regeneration is one example—that could be used by a range of public authorities, but particularly those who wish to address deprived areas. Although streamlined routes will be produced by the Secretary of State, none of this prevents local authorities or other public authorities making subsidy schemes that have deprivation-related eligibility criteria.

--- Later in debate ---

Moved by

[Lord Callanan]

2: Schedule 1, page 52, line 7, after “as” insert “local or regional disadvantage,”
Member’s explanatory statement
This amendment clarifies that Principle A of the subsidy control principles covers subsidies aimed at addressing local or regional disadvantage.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Boycott, for tabling her amendments and sorry that she cannot be here to move them today; I am grateful that my noble friend Lord Whitty stepped into the breach much more than adequately. I want also to recognise the contribution of the debate and the importance of getting on to the front foot with its urgency on such a range of different issues. Obviously we have the climate emergency, but we have to mention Russia’s illegal invasion of Ukraine and the West’s urgent discussions about how to lower its dependence on Russian oil and gas.

These discussions are happening at the highest possible level. For some, I fear that they will give a convenient excuse to promote activities that will cause significant environmental damage if unchecked, whether that is firing up coal-fired power stations, resuming fracking, or indeed Shell’s announcement just this morning that it will look again at the Cambo field. For many, the focus is on the acuteness of the energy security issues that we are facing, which have come to the forefront, and the ever greater need to develop energy self-sufficiency; that means focusing on the climate imperative together with security issues, regeneration and the new green jobs that will come along.

Following COP 26, the UK remains a key player in driving implementation of the various agreements reached. What hope do we have of ensuring that other countries follow through on their commitments if we do not play our leading role in this global fight? Another aspect is that we know the Government want a degree of flexibility for public authorities at every level, but we do not see anything in Amendment 3 that takes that flexibility away. The Minister has been keen to use the example of Welsh steel during our discussions on this matter. If, when conducting the so-called balance test, the Welsh Government decide that the short-term economic benefits outweigh the costs of emissions, they will be able to award the subsidy. However, as a general principle, public money should be used for public good, and what greater public good can there be than preserving our planet for future generations?

Now is the time for us to double down on our commitments to renewables and nuclear rather than being swayed by those who are seeking to turn back the clock. I finish by picking up on the comments of my noble friend Lord Whitty about pressing Amendment 3 to a vote. If he does indeed decide to do so, we will support him.

[Lord Callanan (Con)]

My Lords, first, I thank all noble Lords who have spoken on these amendments, which were introduced so ably, as always, by the noble Lord, Lord Whitty. I will respond to them all together since they all relate to climate change and energy matters.

Amendment 3, tabled by the noble Baroness, Lady Boycott, and the noble Lord, Lord Whitty, seeks to include specific mention of our “net zero emissions target” and “environmental targets”. It would require public authorities to consider the negative impacts, with respect to our Climate Change Act and Environment Act targets, when making a balancing test under principle G of Schedule 1. Amendment 61 would allow the Secretary of State to issue guidance to support public authorities with this assessment.

I understand noble Lords’ keen interest in ensuring that subsidies and schemes granted within the UK further our climate change and environmental targets, wherever practical, and that public authorities should be supported by the Government in making robust assessments of the impacts that their subsidies or schemes may have on these targets. The Government share this objective, and our record in office demonstrates that. I make it clear that this applies to some of the other amendments to which I will be coming later: the UK’s net zero target is, and remains, the law of the land. Nothing in this Bill changes or undermines that fact. The Government remain resolutely committed to net zero by 2050. At this point, I welcome the addition of the noble Lord, Lord Fox, to my speechwriting team. However, it is right and proper, particularly in the current crisis, that we keep in mind that our energy transition to net zero is an issue not only of decarbonisation but of national security and—especially at the moment—national importance.

In response to the noble Lord, Lord Whitty, I make it clear that the balancing test in principle G already requires public authorities to take into account all relevant “negative effects”, which would include negative effects in relation to climate change and the environment. Similarly, subsidies that support our net zero and environmental targets should also take those positive impacts into account in the balancing tests. Principle G emphasises particularly “competition”, “trade” and “investment” effects because minimising harmful distortions in these areas is the primary purpose of a system of subsidy control. However, it is not intended to suggest that these factors should override all other policy-making considerations. There is no implication that public authorities should set their climate and environmental obligations—or, indeed, any other duties or objectives—to one side.

I reassure the noble Baronesses, Lady Sheehan and Lady Hayman, and others, that the Secretary of State will issue guidance on the practical application of the subsidy control principles, and regarding the energy and environment principles. This guidance will include instructions on how to take into account, where relevant, any impacts the subsidy or scheme may have on targets under the Climate Change Act or the Environment Act—or, indeed, signpost the public authority to existing guidance to this effect.

It is also worth pointing out that environmental policy is a devolved matter. This regime is designed to empower public authorities with democratic mandates to use subsidies in pursuit of their own policy objectives—within certain bounds which merely protect UK competition and investment—and safeguard our international obligations. It is not seeking to direct the devolved Administrations, or any other public authority, to spend on one specific policy objective, however important and worthwhile that policy objective may be. For that reason, I am highly reluctant to impose any additional constraints on other public authorities which are fundamental neither to subsidy control policy nor to implementing our international obligations. There are later amendments in which noble Lords will seek to persuade me to do the opposite in respect of the devolved Administrations, so I hope that noble Lords will not be so hypocritical as to repeat those arguments back to me then. I believe that these amendments are therefore unnecessary, and I ask the noble Lord, Lord Whitty, to withdraw Amendment 3.

Electricity Supplier Payments (Amendment) Regulations 2022

Lord Callanan Excerpts

Monday 21st March 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Electricity Supplier Payments (Amendment) Regulations 2022.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, this statutory instrument amends regulations concerning the levies used to fund the operational costs budgets for the Low Carbon Contracts Company and Electricity Settlements Company. The LCCC administers the contracts for difference scheme on behalf of the Government under the Energy Act 2013. Under the same Act, it is anticipated that the LCCC will also administer the dispatchable power agreement and support the development of a new scheme for bioenergy with carbon capture and storage within the next three years. The ESC administers the capacity market scheme. Those schemes will incentivise the significant investment required in our electricity infrastructure, keep costs affordable for consumers and help to deliver our net-zero strategy, while keeping our energy supply secure.

The contracts for difference—CfDs—provide long-term price stabilisation to low-carbon generators, allowing investment to come forward at a lower cost of capital and therefore at a lower cost to consumers. The current CfD auction, which is the fourth to date, opened in December and we are seeking to secure more capacity than all the previous auctions combined. It will allow a broad range of renewable technologies to come forward, while delivering the best deal for bill payers. To date, only projects located in Great Britain have been awarded CfDs. However, BEIS and the Department for the Economy are considering whether to extend the current GB-only CfD scheme to Northern Ireland. Funds have therefore been included in the budgets to enable the LCCC to undertake some preparatory work in case a final decision is made to enable Northern Ireland to join the scheme.

I turn to the Electricity Settlements Company—ESC. The capacity market is tried and tested and is the most cost-effective way of ensuring that we have the electricity capacity that we need now and in the future. The capacity market provides incentives in the form of guaranteed payments to eligible capacity providers to be on the system and to deliver capacity when needed by increasing generation or by turning down their electricity demand in return for guaranteed payments.

The capacity auctions held to date have secured the capacity that we need to meet the forecast peak demand out to 2025-26. The next auctions, scheduled for early 2023, will secure most of the capacity we need out to 2026-27. In the CfD and capacity market schemes, participants bid for support via a competitive auction, which ensures the costs to consumers are minimised.

The LCCC and ESC’s effective administration of the CfD and capacity market schemes to date has demonstrated their ability to deliver such schemes at least cost to consumers. It is in part for this reason that the LCCC has been working with BEIS to develop new schemes for incentivising the deployment of more low-carbon technologies. For example, the LCCC has supported BEIS in the development of dispatchable power agreements, or DPAs, under the Energy Act 2013. These agreements, which are based on CfDs, have been designed to instil confidence among investors for power carbon capture and storage projects and incentivise the availability of low-carbon, non-weather dependent dispatchable generation capacity.

The DPA will drive the private sector investment required to bring forward at least one power carbon capture and storage project by the mid-2020s. The LCCC is expected to be the counterparty for DPAs, and funds have been included within the budgets to support this role. It is anticipated that the LCCC will also work with BEIS to develop incentives for bioenergy with carbon capture and storage. Although this has not yet been confirmed, contracts for such projects could potentially be entered into following a process established under the Energy Act 2013. Were BEIS to move forward with this option, the LCCC would need to undertake activity to prepare for acting as the counterparty during the next three years. Consequently, funds have been included within the budget for this purpose.

It is of course important that the LCCC and the ESC are sufficiently funded to perform their roles effectively, given their critical role in administering the schemes that I have just outlined. However, the Government are clear that both companies must deliver value for money and, with this in mind, we have closely scrutinised their operational cost budgets to ensure they reflect the operational requirements and objectives for the companies.

Both the LCCC and the ESC are themselves very mindful of the need to deliver value for money, as their guiding principle is to maintain investor confidence in the CfD and capacity market schemes while minimising costs to consumers. They have taken a number of actions to date to reduce costs, such as bringing expertise in-house rather than relying on more expensive outside consultants. It is because of actions such as this that CfD operational costs per contract are falling, despite the growing size of the CfD portfolio. There is a similar narrative for the ESC. The company currently manages 200.8 gigawatts of capacity agreements with 1,335 capacity providers under the capacity market. For the delivery year 2022-23, this equates to 52.9 gigawatts of capacity and 350 capacity providers, an increase of 78 capacity providers compared to the 2021-22 delivery year. Despite this increase, operational costs are expected to be lower in 2022-23 than in 2021-22.

The operational cost budgets for both companies were subject to consultation, which gave stakeholders the opportunity to scrutinise and test the key assumptions in the budgets and, more importantly, to ensure that they represent value for money. The response received to the consultation noted the significant increase of budget for the LCCC but was generally supportive of the Government’s rationale for the increase. BEIS is satisfied that the operational costs budgets for the LCCC and the ESC should remain as consulted upon. Subsequently, the budgets remain unchanged as a result of the consultation. The proposed operational costs budget for the LCCC in 2022-23 is £24,210,000, in 2023-24 it is £26,978,000 and in 2024-25 it is £29,051,000. For the ESC, the proposed operational cost budget is £6,954,000 in 2022-23, £7,382,000 in 2023-24 and £7,734,000 in 2024-25.

The amendments revise the levies currently in place to enable the companies to collect enough revenue to fund these budgets. Any levy collected that is not spent will be returned to suppliers at the end of the relevant financial year in accordance with the regulations.

Subject to the will of Parliament, the settlement cost levy for the ESC is due to come into force the day after the day on which these regulations are made and the operational costs levy for the LCCC by 1 April in each of the relevant financial years.

Finally, I assure the Committee that the Government are also mindful of the uncertainties involved in setting a budget for the next three years, such as any world events that we are witnessing now which could of course impact energy demand, and in policy decisions on new schemes that have not yet been taken. Consequently, BEIS will keep the companies’ budgets under careful review throughout the budget period to ensure, as always, that the costs to consumers are minimised.

I commend these draft regulations to the Committee.

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, I thank the Minister for his explanation of the regulations before the House. They are essentially non-controversial and, on this lonely side of the House, we do not take issue with them. As we have heard, the regulations update the rates for the operational costs levy and settlement costs levy, which fund the operational costs of the LCCC and the Electricity Settlements Company, respectively. As these two private companies share staff and facilities, these levies are set together.

After a single year of unpredictably and reduced electricity demand during the pandemic, first, it is welcome that this process has been able to return to a three-year system, allowing stakeholders greater visibility of the estimated operational costs, as well as reducing the administrative burdens on the two companies and on us here. Given the situation, it was sensible to reduce the periodicity, and I am glad that we have returned to normal.

Both the LCCC’s contracts for difference and the Electricity Settlements Company’s capacity market are measures that encourage low-carbon electricity generation and ensure security of supply, which is a noble intention. As my colleagues in both Houses have argued whenever these issues have arisen, since these arrangements came into place in 2013, a levy system, which will be passed on to customers by the electricity firms, is possibly the most regressive way of making these arrangements. The figures involved are certainly not large, as the noble Lord, Lord Oates, said, especially when looking only at the impact on the yearly changes, as is the case with the explanatory notice, but with energy bills increasing substantially amid a wider cost-of-living crisis, it is certainly the case that every little bit helps. Has the Minister therefore given any consideration to other methods that could facilitate the costs of these arrangements not falling on the customer?

I would also like to ask some questions about the consultation that took place ahead of the laying of this regulation, both on questions coming from it and the consultation itself. The consultation ran for four weeks and received only one response, from Scottish Power. While the perspective of this large stakeholder was welcome, I am sure the Minister would agree that having a single response to any consultation is not ideal. It is no fault of Scottish Power, but there were gaps in the responses leaving questions mostly unanswered, and inherent biases from a single respondent were unavoidable. Perhaps when this is revisited in three years’ time, the Minister could consider a longer consultation for a broader spectrum of responses to be generated.

One aspect of Scottish Power’s response that I would like to pick up upon surrounds budget lines related to providing policy support to BEIS, which Scottish Power recommended be kept under review. In their response, the Government committed to returning funds allocated here to suppliers. As this is the case with any unused funds, will unallocated funds from this aspect be ring-fenced for return, and, more importantly —as the noble Lord, Lord Oates, has said—will steps be taken to ensure that this is passed on to customers, given that any adjustment to their bills will have already been enacted?

It was also pointed out that the year-on-year budget rises are not insignificant, reaching approximately 40% over the four years from this financial year to the last of the three years this regulation covers. The Government rightly say that this is not unprecedented, given that at least in the case of the Electricity Settlement Company, the Explanatory Memorandum suggests that the body has only become more efficient, but I would be grateful if the Minister could elaborate a little on where the cost increases come from.

I look forward to the Minister’s responses to these questions.

[Lord Callanan (Con)]

I thank the noble Lords, Lord Lennie and Lord Oates, for their contributions to this brief debate. The noble Lord, Lord Oates, is of course quite right to raise the issue of the publication of the five-year review, especially since I told him last year that it was going to be ready shortly—I am sure there could be a big debate on what “shortly” means in the context of government. If I may fill in a little more detail for the noble Lord, I understand that updated advice on the matter is currently with my colleague Greg Hands, the Minister for Energy, Clean Growth and Climate Change. I think he intends to publish the review in due course—I hope, shortly.

The noble Lord also, rightly, asked for an explanation of why the review is so delayed. I can certainly say that it has of course been a government priority to deliver on our commitment to open the largest ever CfD allocation round—I am sure that is something he would agree on—and it has been announced that the rounds will be running annually from March 2023. A lot of work has gone into the preparation behind that. Schemes such as CfD are vital in developing domestic sources of renewable energy to reduce our exposure to volatile global fossil fuel markets, which are of course peaking at the moment, and to protect consumers in the longer term. Delivering on those priorities has had an unfortunate knock-on impact on the publication of the review, but we will endeavour to get it out as quickly as possible.

The noble Lord also asked for an update on the hydrogen business model. Of course, it is not part of this statutory instrument, but I would be very happy to write to him separately. I can certainly confirm that we are not intending to fund hydrogen under this particular mechanism or under the Energy Act 2013, so it falls outside the scope of today’s debate.

On the noble Lord’s questions on inflation, we have used a somewhat optimistic assessment of 5% inflation for each year of the proposed budgets. That was after careful consideration of the forecasts produced by the Office for Budget Responsibility. They probably looked very sensible when it put its advice together, but it suggested that, on balance, an assumption of 5% was appropriate.

Onshore Wind Bill [HL]

Lord Callanan Excerpts

3rd reading
Friday 18th March 2022 Lords Chamber

[Lord Lilley (Con)]

My Lords, I congratulate the noble Baroness on her Bill, which I fully support. I have long opposed subsidies for wind, but I am not opposed to wind. As far as onshore wind is concerned, beauty lies in the eye of the beholder and I find windmills quite attractive—although this was not a view universally shared by my constituents.

In the current circumstances we must support the cheapest, most reliable mix of energy we can produce. With high gas prices, clearly wind is more economical. We should support it and not have artificial barriers to its development. But however much wind power we develop, we will need gas to back it up when the wind is not blowing. As well as liberalising the rules on building wind farms on land, I hope we shall liberalise the rules on exploiting gas to go with it.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I join in the thanks to the noble Baroness, Lady Hayman, for this Bill to revise national planning guidance on onshore wind. While the Government were not convinced that the Bill is the right course of action, we agree with the importance of increasing onshore wind deployment in order to reach our net-zero targets. As my noble friend Lord Lilley implied, recent events have demonstrated how crucial it is that we build a strong, homegrown renewable energy sector to further reduce our reliance on fossil fuels.

However, that does not alter the Government’s position here. We welcome the Bill and the opportunity to debate this important subject, although we cannot support it. I congratulate the noble Baroness, Lady Hayman, on bringing the Bill to the House and enabling what has been an excellent debate. I thank all noble Lords for their contributions at Second Reading, which allowed for an insightful and important debate on the subject. I also thank my officials for their support during Second Reading, which enabled noble Lords to receive prompt and, I hope, comprehensive answers on matters of interest.

The Government are not convinced that this Bill is the right solution to bring forward more onshore wind deployment in England. We continue to keep English planning policy under careful review to ensure that decisions on onshore wind can be taken that are in keeping with our carbon budgets.

[Baroness Hayman (CB)]

My Lords, I am grateful; I shall read the Minister’s comments very carefully. I think he said the Government were not convinced that this was the right way to bring forward more onshore wind. Of course, the moratorium was effectively imposed by a ministerial Statement. If the Government can find other ways, I will gladly cede my Bill in the cause. Beyond that, I was delighted to have a moment of unanimity with the noble Lord, Lord Lilley, almost to the end of what he said—but we must take what we can.

Shale Gas Production

Lord Callanan Excerpts

Tuesday 15th March 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend Greg Hands MP to an Urgent Question in another place:

“In response to Putin’s barbaric acts in Ukraine and against the Ukrainian people, we need to keep all our energy options open. We have always been clear that the development of shale gas in the UK must be safe and cause minimal disruption and damage to those living and working in nearby sites. This is not a new position. Shale gas and new approaches could be part of our future energy mix, but we need to be led by the science and have the support of local communities. That was in our general manifesto, on which my honourable friend and I stood at the last election.

The pause on fracking implemented in November 2019 on the basis of the difficulty in predicting and managing seismic activity caused by fracking remains in place, and we will continue to be led by the science in our approach. We are clear that shale gas is not the solution to near-term issues. It would take years of exploration and development before commercial quantities of shale gas could be produced. Additionally, fracking relies on a continued series of new wells, each of which produces gas for a relatively short time. Even if the pause were lifted, there are unlikely to be sufficient quantities of gas available to address the high prices affecting all of western Europe and it would certainly have no effect on prices in the near term.

As the Business Secretary has said, we will continue to back our vital North Sea oil and gas sector to maximise domestic production while transitioning to cheaper, cleaner, homegrown power at the same time. We will shortly set out an energy supply strategy that will supercharge our renewable energy and nuclear capacity, as well as supporting our North Sea oil and gas industry.”

[Lord Lennie (Lab)]

My Lords, the Government’s consideration of fracking is a potentially dangerous and risky policy that neither addresses the real concerns about future affordable energy supplies nor contributes to achieving our net-zero targets. Surely, a better way to proceed would be to reintroduce government support for onshore wind as a cheap and generally reliable fuel source—it was abandoned by the then Conservative Government in 2015. Will the Government now reconsider this damaging decision by reinstating their support for major onshore wind farm developments?

[Lord Callanan (Con)]

As the noble Lord is aware, there was a further contracts for difference round held in December and onshore wind was able to bid into it. We will be announcing decisions on that shortly.

[Baroness Foster of Oxton (Con)]

My Lords, in 2014 Anders Fogh Rasmussen, the then NATO Secretary-General and former Prime Minister of Denmark, told a Chatham House meeting in London that Putin’s Government were behind attempts to discredit fracking across Europe. He said that Russia had

“engaged actively with so-called non-governmental organisations - environmental organisations working against shale gas - to maintain European dependence on imported Russian gas.”

In 2017, the US media and Congress picked this up too. The propaganda and scare tactics also became prevalent in the UK. If energy security was not a concern before, it certainly should be now. Does my noble friend agree with me that it is vital that we need to become energy self-sufficient sooner rather than later, and that we should no longer rule out shale gas extraction in the United Kingdom?

[Lord Callanan (Con)]

I thank my noble friend for her remarks. I suspect that she is probably right that there was an unholy alliance between Putin and some of the more extreme end of our environmental movement. Of course, both had the same objective in mind: to rule out shale gas production. Nevertheless, it is important to recognise that there were some serious problems caused by the attempted fracking in Lancashire. I take the point which my noble friend is making. We are not ruling it out. If the scientific objectives can be overcome, and the tremors which were caused can be solved, it is potentially an option for the future.

[Lord Oates (LD)]

Is the Minister aware of the remarks made this afternoon upstairs by the former Kenyan Prime Minister and current presidential candidate, Raila Odinga, about the impact of climate change on his country, including increased droughts and flooding and deteriorating food security? Does the Minister share my concern that those advocating fracking do not seem to recognise that it would provide no solution to the current energy crisis, would lock us into dependency on fossil fuels and takes no account of the climate emergency? In this situation, is it not the number one priority to reduce the amount of energy which we are wasting?

[Lord Callanan (Con)]

I have not seen the remarks to which the noble Lord is referring. Of course, we still have our commitments to net zero, which is now a legally binding commitment, but the reality of this situation, which we have debated many times before, is that there is a need for fossil fuels during the transition—unless we are proposing to disconnect everyone’s gas boiler and stop them driving their cars tomorrow, which I do not think is anyone’s sensible position. We need fossil fuels during the transition. It is unarguable that it makes much more sense to try to get those fossil fuels from our own production, rather than relying on Putin or other unstable parts of the world. Having said that, we also need to progress our nuclear generation capacity and invest in renewables, which we are doing. We are talking about quadrupling our renewables capacity from offshore wind alone, from something like 4 gigawatts up to 10 gigawatts. We need to be doing all those things; we need a diversity of supply.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I welcome elements of this Statement from the Government on fracking, particularly the reference to the support of local communities. This implicitly acknowledges the huge amount of work and passion that was put in by anti-fracking campaigners from Balcombe to Preston New Road, and many other places. However, the last two sentences of this Statement essentially repeat a desire to maximise North Sea oil and gas production. Last year, the Government, as the chair of the COP 26 climate talks, commissioned the International Energy Agency to produce a report which advised that no new fossil fuel exploration or development should take place from this year, if the world is to stay below 1.5 degrees centigrade. Does the Minister agree that this Statement does not line up with maximising North Sea oil and gas?

[Lord Callanan (Con)]

I am slightly nervous now if the noble Baroness is welcoming a Statement which we have made. We might have made a mistake in our energy policy—sorry, I am being facetious.

The difficulty with the Green Party’s position is that they say that everything should be done with renewables, but that does not give us solutions to the problems in the near term. This is a gradual transition. We already have some of the largest quantities of offshore wind and renewables in the world. I accept that the position of the noble Baroness is that we should go even further and faster, but we are progressing as fast as we possibly can. We have huge investments going into renewables. However, we need fossil fuels in the short term—unless the Greens are also proposing that we should stop driving our petrol and diesel fuel vehicles and disconnect our gas boilers. This is a gradual transition; there is a need for fossil fuels during the transition, and the independent Committee on Climate Change has accepted that. Even the noble Baroness might think that it was probably more sensible to gain those fuels during the transition from our own domestic production, rather than from Putin.

[Lord Teverson (LD)]

My Lords, I also welcome the Minister’s Statement. It is good to hear what the Minister said in general. Historically, I have not been that opposed to fracking done under absolutely the right conditions. However, he is absolutely right that the development period would now be far too long. History has moved on, and gas has to be cut down rather than supplied locally. For renewables developments such as offshore wind, which the Minister mentioned, the gestation period for those sort of investments is still something like 10 to 12 years from when the Crown Estates goes out and makes an offer. Does the Minister have any views about how that period can be cut down, without in any way compromising on the environmental investigation aspect? It seems to me that we should be able to do that sort of stuff quicker.

[Lord Callanan (Con)]

The noble Lord makes a good point; I think he has put his finger on the nub of the problem. Whenever there is a crisis in politics—and there is definitely a crisis at the moment—there is always a search for quick and easy solutions. Unfortunately, on energy infrastructure, there are no quick and easy solutions: these things take years, if not decades, to put into operation. We are progressing nuclear power, as indeed we should, but nothing is going to happen for a number of years—possibly not until the start of the next decade. We already have in motion the expansion that I mentioned earlier of offshore wind. We have the targets in place for 2030 and those developments are already proceeding.

The same problem occurs with the search for new licensing fields in the North Sea, if we push ahead with it: it will be a number of years before new fields can be developed. Even if we did progress shale, it would be a number of years—possibly a decade—before we would get meaningful quantities of gas out of the ground, even if we overcame all the environmental objections. I am afraid that there are no easy silver bullets to this problem. It is probably a silver buckshot: there are lots of different smaller-scale solutions that we will need to develop over a number of years.

[The Lord Bishop of Durham]

Will the Minister expand on the investment of microgeneration at local level? At Bishop Auckland, one of the local estates is having a massive transformation through solar being installed on all the rooms on that estate. Could not more money be put into that? Let us forget fracking, to be honest, because it is not going to deliver us anything at any time.

[Lord Callanan (Con)]

Yes, is the short answer to the right reverend Prelate’s question. We are supporting microgeneration with feed-in tariffs et cetera, but we need to be cognisant of the scale of the problem. Microgeneration—solar panels, small wind turbines, small-scale running-water power, et cetera—will make a contribution, but it is unlikely to solve the problem in the meantime. We are talking about a few megawatts as opposed to the gigawatts we need in total. It would, however, make a contribution, and it is already making a contribution. Government policy is to support small-scale microgeneration, but it is unlikely to be a long-term solution to our problem.

National Minimum Wage (Amendment) Regulations 2022

Lord Callanan Excerpts

Tuesday 15th March 2022 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 31 January be approved. Considered in Grand Committee on 10 March.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, on behalf of my noble friend Lord Callanan, I beg to move the Motion standing in his name on the Order Paper.

Economic Crime (Transparency and Enforcement) Bill

Lord Callanan Excerpts

Report stage
Monday 14th March 2022 Lords Chamber

Moved by

[Lord Callanan]

1: Clause 4, page 2, line 19, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an application for registration as an overseas entity to include the information and statement required by subsection (2A) (information about trusts).

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank everyone who contributed to a lively and interesting Committee. I will move these government amendments on trusts. The Government seek to make amendments that address concerns raised in this House and the other place about trusts. These amendments set out that, where a trustee of a trust or equivalent arrangement is a registrable beneficial owner, the overseas entity must give them formal notice to provide their personal information and information about the trust. This information will be disclosed to HMRC, law enforcement agencies and other specified persons with a public function for the purposes of taking action with any offences they commit. I beg to move.

[Lord Coaker (Lab)]

I am grateful to the Minister for bringing these amendments forward following the wide-ranging discussions we had earlier, when we had a full exploration of all the issues.

--- Later in debate ---

Moved by

[Lord Callanan]

2: Clause 4, page 3, line 20, at end insert—
“(2A) Where an application includes information that a registrable beneficial owner is a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the application must also include—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.”Member’s explanatory statement
This amendment provides that where an application for registration as an overseas entity discloses that a registrable beneficial owner is a trustee, it must include additional information about the trust.

--- Later in debate ---

Moved by

[Lord Callanan]

3: Schedule 1, page 41, line 6, leave out “the table in section 4” and insert “sections 4, 7 and 9”
Member’s explanatory statement
This amendment is consequential on changes to clauses 4, 7 and 9.

--- Later in debate ---

Moved by

[Lord Callanan]

6: Schedule 1, page 42, line 21, at end insert—
“(g) whether the entity is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner which is a government or public authority includes information about whether the entity is designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.

[Lord Callanan (Con)]

My Lords, the Government have put forward a number of amendments to the register of overseas entities provisions. These amendments will address a number of the concerns of Members of this House. The amendments expand the information requirements for registrable beneficial owners to include information about whether they are designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.

The amendments also provide a revised threshold for the offence of providing false statements. These no longer have to have been submitted knowingly or recklessly. Rather, it will be an offence when the statement is merely misleading, false or deceptive and the person has no reasonable excuse for supplying such a misleading statement, with an additional aggravated offence carrying a higher penalty where it can be proved that a false statement was made knowingly.

The Government seek to make amendments to require the Secretary of State to consult with Scottish and Northern Ireland Ministers before making regulations to amend parts of the Bill that legislate on devolved land law matters. I beg to move.

Amendment 6 agreed.

Moved by

[Lord Callanan]

7: Schedule 1, page 42, line 36, at end insert—
“(h) whether the entity meets that condition by virtue of being a trustee.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner who is a legal entity includes information about whether the entity is a trustee.

--- Later in debate ---

Moved by

[Lord Callanan]

11: Clause 7, page 4, line 13, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an overseas entity when complying with the updating duty to include the information and statement mentioned in subsection (2A) (information about trusts).

--- Later in debate ---

Moved by

[Lord Callanan]

16: Clause 9, page 6, line 14, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an overseas entity when applying for removal from the register to provide the information and statement mentioned in subsection (2A) (information about trusts).

--- Later in debate ---

Moved by

[Lord Callanan]

21: Clause 9, page 7, line 23, leave out sub-paragraph (i) and insert—
“(i) is entered, on or after 8 December 2014, as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland,”Member’s explanatory statement
This amendment expands the scope of circumstances where an overseas entity is registered as the proprietor of a relevant interest in land for the purpose of clause 9 (to include, for example, Keeper-induced registration) by removing the requirement for there to have been an application for registration.

[Lord Callanan (Con)]

My Lords, the Government are putting forward a group of technical amendments on land registration and transactions in Scotland, in addition to some further substantive amendments. These amendments include obligations on overseas entities that disposed of land between 28 February 2022 and the end of the transitional period to outline the details of the beneficial ownership of the entity at the time of the transfer. I beg to move.

[Lord Coaker (Lab)]

My Lords, I want to say a few things about this group of amendments, and in particular to speak to my Amendment 62. As the Minister knows, we are generally supportive of the amendments in this group. The Government, to be fair, have moved in several areas, and that is to their credit. Once again, I thank the Minister and his ministerial colleagues for their engagement over the course of these last few days with respect to this Bill. It has been most helpful.

Earlier today, the Minister outlined several reasons for opposing a reduction in the transition period from six months to 28 days. In the spirit of compromise, we therefore tabled an alternative provision of 90 days for the transition period, and that is the subject of my Amendment 62. He will also know that this amendment is supported by the body representing accountants, which has said that it believes three months is a reasonable figure for the transition period. I shall not go over all the arguments on the length of the transition period that we have had today and at Second Reading, as the Minister will be very well aware of them. Noble Lords are worried that this will allow people to avoid the new rules and regulations and be able to circumvent them.

Furthermore, given the potential lengthy process that needs to be followedbefore Part 1 of the Bill can be formally commenced, we believe that there is also a case for accelerating the registration period. As I again said to the Minister, the commencement period is subject to the Secretary of State’s decision for Part 1, so there is no clarity as to when that will actually start. If there is a six-month transition period and six months until it is commenced, that will be a year. Therefore, we seek clarity from the Minister, even at this late stage, about the implementation of the measures in the Bill, not only with respect to the commencement date, but to some of the other issues. Can the Minister say anything further?

We would, of course, be delighted if the Minister were able to accept the amendment, but if he is to hold firm, would he be able to make certain commitments so that we would be clear on the steps that the Government are taking to ensure Parliament is appraised of the progress between this Bill receiving Royal Assent and the next, more substantial piece of legislation to be introduced—namely the Bill that has become known as economic crime Bill 2? We want to know something about the effectiveness of the measures within this Bill and the way forward to the next Bill.

Can the Minister confirm the scope of the next Bill? Will that be broad, and will there be an opportunity to amend some of the measures in this Bill as we move forward to the next Bill? As we know, many noble Lords have raised the issues within this Bill of the fact that there has not been proper scrutiny. It may well be that many of the points that noble Lords have raised will actually come to fruition, but we need some assessment of that from the Government so that we can then inform our deliberations with respect to the economic crime Bill 2.

Also, as I say, there is a general belief that, although we are allowing the Bill to pass because of the emergency we face, there are still significant weaknesses and omissions within it. There is, therefore, a need for the next Bill to be brought as soon as possible—that is absolutely crucial—rather than at some time in the future. Can the Minister give any assurances to the House as to when he expects the next economic crime Bill to come before your Lordships in order to discuss that? There are a number of questions for the Minister, and I look forward to hearing the answers to them to determine whether we wish to test the opinion of the House or not.

[Lord Fox (LD)]

Very briefly, my Lords, we thank the noble Lord and congratulate him on tabling this amendment. We on these Benches still remain concerned about the cumulative delay of transition and commencement—or the potential cumulative delay—so we are pleased that the Minister has another chance to respond to that particular concern. We also share the concerns of the noble Lord, Lord Coaker, about the speed with which ECB 2 arrives in your Lordships’ House.

[Lord Callanan (Con)]

I thank both the noble Lords, Lord Coaker and Lord Fox, for their extremely constructive engagement over the course of the weekend and over the course of a number of meetings and chats today. I really am very grateful for their constructive attitude and for their willingness to be open to the arguments that we have deployed in why we genuinely do not think that reducing the transition period further is a runner, for a whole variety of reasons we have discussed—I will not go into detail now. But I am grateful—I want to put that on record—for the support of the Opposition parties in accepting this as emergency legislation that we want to get through as swiftly as possible and passed down to the other place.

I also note their interest in seeing a rapid introduction of the measures of this Bill and their focus on ensuring its effective implementation—and also their interest in a wider range of issues that can be covered in the Bill. The forthcoming legislation on economic crime will, as I have said previously, provide for significant reform of the powers of the Companies House registrar. These will directly interact with the provisions of this Bill, enhancing further its effectiveness—for instance, by providing greater powers to query and act on the information on the register. I would be happy, therefore, to commit the Government that this House will have the opportunity to review the effectiveness of the current legislation in that wider context of our discussion on the new powers. I am also committed to the rapid implementation of the measures in this Bill, and I would also be happy to commit to updating the House on the Government’s progress on this within six weeks of this measure achieving Royal Assent.

I can reassure noble Lords that the further economic crime Bill that the Government intend to introduce in the next Session will be a broad one. We will, of course, consider and carefully examine any amendments put forward in either House which serve to strengthen our frameworks for tackling economic crime. As my honourable friend the Minister for Small Business, Consumers and Labour Markets—who I am pleased to see at the Bar of the House—said in the other place last week, we are committed to bringing forward the next economic crime Bill early in the next Session.

I hope that has provided sufficient reassurance for the noble Lord and that, therefore, he will feel able to withdraw his amendment.

[Lord Coaker (Lab)]

I thank the Minister very much for that reply. It does show that the parliamentary process works, because the Government have moved in a significant way to meet the concerns not only of myself and other noble Lords on this side but, indeed, noble Lords across the Chamber. These concerns are not resolved, but the Minister has given us a way forward, in particular by reviewing the effectiveness of the current legislation. That is an important concession from the Government, which will allow us to see whether the concerns raised about the Bill come to fruition or whether the Government are right to say that we are worrying about things that will not come to pass.

An update on progress within six weeks of Royal Assent is a significant step forward and another important concession from the Government. As my noble friend Lady Smith has raised on a number of occasions, we are particularly pleased about the Government’s commitment to an economic crime Bill No. 2 early in the next Session. I think the word “early” is significant for all of us because we believe that there are things that will need to be changed, and this means we will have the opportunity to do so. I thank the Minister once again for that.

Given the concessions that the Government have made and the demonstration of the way that the parliamentary process has worked within this context, I will not press Amendment 62.

--- Later in debate ---

Moved by

[Lord Callanan]

22: Clause 9, page 7, line 33, leave out sub-paragraph (iii) and insert—
“(iii) is the tenant under a lease that was registered in the Land Register of Scotland on or after that date, or”Member’s explanatory statement
This amendment rephrases clause 9(8)(b)(iii) to ensure consistency with the language used at paragraphs 10(1) and 11(1) of Schedule 4.

--- Later in debate ---

Moved by

[Lord Callanan]

25: Clause 12, page 8, line 28, leave out from “obtain” to end of line 29 and insert “, for the purposes of the application under section 4 or 9 or for the purposes of complying with the updating duty under section 7—
(i) the required information about each registrable beneficial owner, and(ii) in respect of any registrable beneficial owner who is a trustee, the required information about the trust.”Member’s explanatory statement
This amendment requires an overseas entity to take reasonable steps to obtain information about trusts, where relevant.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, the arguments have all been made in the previous stage, when the Minister stood up and said that the Government were prepared to accept what was then Amendment 43; I was delighted. It is now Amendment 27, which I beg to move.

[Lord Callanan (Con)]

My Lords, I am happy to confirm and accept the amendment from the noble Lord, Lord Fox, also signed by the noble Lord, Lord Coaker, which was originally Amendment 43. It removes an exemption from reporting where this is in the interests of the economic well-being for the UK. As I said in Committee, I have listened carefully and we have engaged on this. In reflection of this and, as has been said, in the interests of working together to progress this vital legislation collaboratively and swiftly, the Government are happy to support this amendment.

Amendment 27 agreed.

--- Later in debate ---

Moved by

[Lord Callanan]

28: Clause 22, page 13, line 14, at end insert—
“(ba) any required information about a trust delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B) (required information about trusts),”Member’s explanatory statement
This amendment means that the required information about trusts will be unavailable for inspection on the public register.

--- Later in debate ---

Moved by

[Lord Callanan]

31: After Clause 22, insert the following new Clause—
“Disclosure of information about trusts
(1) This section applies to information delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B) (required information about trusts).(2) The registrar may not disclose the information unless—(a) the same information is made available by the registrar for public inspection otherwise than by virtue of being delivered to the registrar by virtue of a provision mentioned in subsection (1), or(b) the disclosure is permitted by subsection (3).(3) The registrar may disclose the information to—(a) the Commissioners for Her Majesty’s Revenue and Customs, or(b) any other person who—(i) has functions of a public nature, and(ii) is specified for the purposes of this section by regulations made by the Secretary of State.(4) Regulations under this section are subject to the negative resolution procedure.”Member’s explanatory statement
This new clause generally prevents the registrar from disclosing the required information about trusts. But it also includes a new power to disclose information to HMRC or other specified persons with public functions.

--- Later in debate ---

Moved by

[Lord Callanan]

32: Clause 25, page 15, line 26, after “21” insert “, (Disclosure of information about trusts)”
Member’s explanatory statement
This amendment is consequential on the new clause about disclosure of information about trusts.

--- Later in debate ---

Moved by

[Lord Callanan]

33: Clause 31, page 18, line 13, leave out “knowingly or recklessly” and insert “, without reasonable excuse,”
Member’s explanatory statement
This amendment removes the mental element for the offence under clause 31 and introduces a reasonable excuse defence instead (for example to cater for cases where an overseas entity reasonably relies on information provided by others which turns out to be untrue).

--- Later in debate ---

Moved by

[Lord Callanan]

37: Clause 32, page 19, line 13, at end insert—
“(5A) The Secretary of State must consult the Department of Finance in Northern Ireland before making regulations under subsection (4).”Member’s explanatory statement
This amendment requires the Secretary of State to consult a Northern Ireland department before making regulations under clause 32(4).

--- Later in debate ---

Moved by

[Lord Callanan]

38: Schedule 3, page 55, line 20, leave out “period of 6 months beginning with the commencement date” and insert “transitional period”
Member’s explanatory statement
This amendment and related amendments align the transitional periods under Schedule 3 with the period in new clause (Applications in the transitional period: information about land transactions).

--- Later in debate ---

Moved by

[Lord Callanan]

43: Schedule 4, page 57, line 29, leave out “granted” and insert “delivered”
Member’s explanatory statement
This amendment ensures consistency with paragraph 7 of Schedule 4, which prohibits the delivery of a qualifying registrable deed in specified circumstances.

--- Later in debate ---

Moved by

[Lord Callanan]

60: After Clause 38, insert the following new Clause—
“Sharing of information by HMRC Sharing of information by HMRC
(1) The Commissioners for Her Majesty’s Revenue and Customs may disclose information to the Secretary of State or the registrar for the purpose of the taking of action in connection with an offence under this Part.(2) For the purposes of this section, the taking of action in connection with an offence under this Part includes any of the following—(a) investigating whether an offence has been committed;(b) prosecuting an offence;(c) imposing financial penalties for conduct amounting to an offence.(3) A person who receives information as a result of this section—(a) may not use the information other than for the purpose of the taking of action in connection with an offence under this Part;(b) may not further disclose the information unless the disclosure is necessary for the taking of action in connection with an offence under this Part.(4) It is an offence for a person to disclose, in contravention of subsection (3)(b), any revenue and customs information relating to a person whose identity—(a) is specified in the disclosure, or(b) can be deduced from it.(5) It is a defence for a person charged with an offence under subsection (4) to prove that the person reasonably believed—(a) that the disclosure was lawful, or(b) that the information had already lawfully been made available to the public.(6) Subsections (4) to (7) of section 19 of the Commissioners for Revenue and Customs Act 2005 apply to an offence under subsection (4) as they apply to an offence under that section.(7) In this section “revenue and customs information relating to a person” has the same meaning as in section 19 of the Commissioners for Revenue and Customs Act 2005 (see section 19(2) of that Act).”Member’s explanatory statement
This amendment permits HMRC to disclose information to allow the registrar and the Secretary of State to take action in connection with offences.

--- Later in debate ---

Moved by

[Lord Callanan]

61: After Clause 38, insert the following new Clause—
“Applications in the transitional period: information about land transactions
(1) This section applies where an overseas entity makes an application under section 4 for registration before the end of the transitional period.(2) If the entity has not made any relevant dispositions of land during the period—(a) beginning with 28 February 2022, and(b) ending with the making of the application,the application must include a statement to that effect.(3) If the entity has made any relevant dispositions of land during the period mentioned in subsection (2), the application must include—(a) the required information about each relevant disposition of land made during that period (see subsection (5)),(b) in relation to each such disposition, the statements and information mentioned in paragraphs (a), (b) and (c) of section 4(1) expressed by reference to the state of affairs immediately before the making of the disposition, and(c) a statement that all of the information required by paragraphs (a) and (b) of this subsection has been included in the application.(4) In this section “relevant disposition of land”, in relation to an overseas entity, means—(a) a registrable disposition of a qualifying estate within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 other than—(i) a disposition made in pursuance of a statutory obligation or court order, or occurring by operation of law, or(ii) a disposition made by a specified insolvency practitioner in specified circumstances (within the meaning of paragraph 3(3) of Schedule 4A to the Land Registration Act 2002, as inserted by Schedule 3 to this Act);(b) the delivery by the entity of a qualifying registrable deed granted by it where the entity’s interest in respect of which the deed was granted was registered in the Land Register of Scotland on or after 8 December 2014, unless the deed was granted—(i) in pursuance of a statutory obligation or court order, or(ii) by a specified insolvency practitioner in specified circumstances (within the meaning of paragraph 2(5) of schedule 1A of the Land Registration etc. (Scotland) Act 2012, as inserted by Schedule 4 to this Act).(5) The required information about a relevant disposition of land is—(a) where the relevant disposition of land is within subsection (4)(a)—(i) the date of disposition, and(ii) the registered title number of the qualifying estate;(b) where the relevant disposition of land is within subsection (4)(b)—(i) the date of delivery of the deed, and(ii) the title number of the title sheet in which the entity’s interest is entered.(6) In subsection (4)(a) “qualifying estate” means—(a) a freehold estate in land, or(b) a leasehold estate in land granted for a term of more than seven years from the date of grant,of which the overseas entity became a registered proprietor in pursuance of an application made on or after 1 January 1999.(7) In subsection (6) “registered proprietor”, in relation to an estate, means the person entered as proprietor of the estate in the register of title kept by the Chief Land Registrar.(8) In subsection (4)(b) “qualifying registrable deed” means a registrable deed (within the meaning of the Land Registration etc.(Scotland) Act 2012) which is—(a) a disposition,(b) a standard security,(c) a lease (including a sub-lease), or(d) an assignation of a lease (including a sub-lease).(9) For the purposes of subsection (4)(b), a qualifying registrable deed is to be treated, as at the date of delivery, as having been granted even if at that time it has been executed by the overseas entity only.(10) In this section “the transitional period” means the period of 6 months beginning with the day on which section 3(1) comes fully into force.”Member’s explanatory statement
This new clause requires an overseas entity, when making an application within the first 6 months of the commencement of clause 3(1), to provide additional information about relevant dispositions of land on or after 28 February 2022.

--- Later in debate ---

Moved by

[Lord Callanan]

63: After Clause 38, insert the following new Clause—
“Requirement for certain unregistered overseas entities to provide information
(1) An overseas entity, and every officer of the entity who is in default, commits an offence if—(a) at any time during the period beginning with 28 February 2022 and ending with the end of the transitional period, the entity has made a relevant disposition of land,(b) at the end of the transitional period the entity—(i) is not registered as an overseas entity,(ii) has not made an application for registration as an overseas entity that is pending, and(iii) is not an exempt overseas entity, and(c) the entity has not, after making the relevant disposition of land and before the end of the transitional period, delivered to the registrar—(i) statements and information of the kind mentioned in paragraphs (a), (b), (c) and (d) of section 4(1), expressed by reference to the state of affairs immediately before the making of the relevant disposition of land, and(ii) the required information about the relevant disposition of land (within the meaning of section (Applications in the transitional period: information about land transactions) (5)).(2) A person guilty of an offence under subsection (1) is liable on summary conviction—(a) in England and Wales to a fine and, for continued contravention, a daily default fine not exceeding the greater of £2,500 and one half of level 4 on the standard scale;(b) in Scotland or Northern Ireland, to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one half of level 5 on the standard scale.(3) The contravention continues until such time as the overseas entity has delivered the statements and information mentioned in subsection (1)(c).(4) In the case of continued contravention, an offence is also committed by every officer of the overseas entity who did not commit an offence under subsection (1) in relation to the initial contravention but who is in default in relation to the continued contravention.(5) A person guilty of an offence under subsection (4) is liable on summary conviction—(a) in England and Wales, to a fine not exceeding the greater of £2,500 and one half of level 4 on the standard scale for each day on which the contravention continues and the person is in default;(b) in Scotland or Northern Ireland, to a fine not exceeding one half of level 5 on the standard scale for each day on which the contravention continues and the person is in default.(6) In this section—“exempt overseas entity” means an entity of a description specified in regulations under section 33(6);“relevant disposition of land” has the meaning given by section (Applications in the transitional period: information about land transactions) (4);“transitional period” has the meaning given by section (Applications in the transitional period: information about land transactions) (10).”Member’s explanatory statement
This new clause makes it an offence for certain unregistered overseas entities to fail to provide information about relevant dispositions of land made on or after 28 February.

--- Later in debate ---

Moved by

[Lord Callanan]

65: Clause 39, page 22, line 22, at end insert—
“(2) A reference in section 12 or 13 to a person who is a registrable beneficial owner of an overseas entity includes, in connection with the obtaining of information required by section 7(1)(b), 9(1)(c), (Applications in the transitional period: information about land transactions)(3)(b) or (Requirement for certain unregistered overseas entities to provide information)(1)(c)(i), a reference to a person who has ceased to be a registrable beneficial owner.(3) A reference in this Part to a trust includes arrangements, under the law of a country or territory outside the United Kingdom, that are of a similar character to a trust, and any related expressions are to be read accordingly.(4) The Secretary of State may by regulations make provision specifying descriptions of arrangements that are, or are not, to be treated as being of a similar character to a trust for the purposes of subsection (3).(5) Regulations under subsection (4) are subject to the negative resolution procedure.”Member’s explanatory statement
This amendment makes further interpretive provision, including provision extending the provisions of Part 1 of the Bill in relation to trusts so that they apply to arrangements of a similar character outside the UK.

Economic Crime (Transparency and Enforcement) Bill

Lord Callanan Excerpts

Committee stage
Monday 14th March 2022 Lords Chamber

Moved by

[Lord Callanan]

1: Clause 4, page 2, line 19, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an application for registration as an overseas entity to include the information and statement required by subsection (2A) (information about trusts).

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, we start with a group of government amendments to collect more information about trusts and overseas trust-like arrangements. These amendments address both the concerns raised in the other place by noble Lords on Second Reading in this House. I pay particular tribute to my noble and learned friend Lord Garnier, the noble Lords, Lord Vaux of Harrowden, Lord Faulks and Lord Fox, and the noble Baroness, Lady Jones of Moulsecoomb, all of whom drew attention to this important issue in their speeches.

As highlighted by those noble Lords, there is a particular difficulty with the availability of information about some trusts, including so-called discretionary trusts. This is where the assets are held in trusts to be used at the discretion of the trustees, because the beneficiaries can change. So we need to have some further information captured on trusts in this register, over and above what Her Majesty’s Revenue & Customs already captures on the TRS—trust registration service.

Both Houses can rest assured that this issue was not overlooked by the Government. Officials had already been working on amendments to the Bill, but it was important to table amendments only when we were sure that proposals were workable in practice and that the drafting fully achieved the policy intent. I have had a number of discussions with noble Lords, so I think everybody appreciates this is a complicated technical area.

These amendments set out that where a trustee of a trust—or of an equivalent arrangement that under the law of a country or territory outside the United Kingdom is of a similar character to a trust—is a registrable beneficial owner, the overseas entity must give them an information notice. That notice requires the recipient to provide information about the settlor, beneficiaries and other persons who have rights to appoint or remove trustees or rights over the exercise of the trustees’ functions—sometimes referred to as protectors.

--- Later in debate ---

[Lord Cormack (Con)]

I just make a very brief point to my noble friend. Because of migraine, I was unable to take part in Second Reading; I had to go home. I was going to make the point then that, if ever a Bill needed continuous post-legislative scrutiny, it is this one. Can my noble friend give an assurance that he will try to set up a special sort of post-legislative scrutiny to look continuously at how the Bill comes into force, what effect it has and where it fails?

[Lord Callanan (Con)]

First, I thank noble Lords for their comments. I do not disagree with the sentiments of a lot of what has been said. I say to the noble Lord, Lord Coaker, that I absolutely appreciate the points that he has made. This is a very complicated and technical area of law, and I assure noble Lords that we have gone into it in great detail. This morning, I met my noble friend Lord Wolfson, who is a trusts expert, to go through the provisions, and I have examined them closely with Treasury and BEIS officials.

We are doing this to close potential loopholes in trusts; the Government have no other agenda here. This is a difficult area. HMRC has recently established a trusts register for UK trusts, and we want to try to make sure that the same visibility exists for overseas trusts. If an overseas trust buys UK property, its interest is clearly covered and will need to be declared, but there is a potential problem with an overseas entity holding a property, and then that being owned by a trust. It is an attempt to control and close those particular loopholes in this complicated area of law, and what I totally accept are complicated amendments have been worked on at great pace to try to do that. So there is no difficulty and no difference between any of us in what we are trying to achieve with this legislation.

I also happily concede that we may not have got every last dot and comma absolutely accurate and right. One point that my noble friend made to me this morning was that we are if not the first then possibly the second in the world to attempt to do something like this, and it will be an iterative process—it is fair to accept that. A lot of international lawyers and others will be carefully studying this legislation and trying to find ways around it. I can certainly say that, if there are loopholes and if something is presented that we think needs closing, we will absolutely do that, if necessary, in the next Bill—although the full extent of the legislation may not be visible at that stage. But we are committed to doing this, providing that information and giving law enforcement the opportunity carefully to scrutinise many of these arrangements.

In particular, I give the assurance that the noble Lord, Lord Vaux, and possibly my noble friend Lord Cormack, were looking for: the further economic crime Bill, which the Government intend to introduce in the next Session, will be broad. We will, of course, carefully examine and consider any amendments proposed in either House that serve to strengthen our framework for tackling economic crime. I know from my long experience in this House that noble Lords will not be shy in coming forward where they can see improvements that could be made to legislation and where they identify any potential loopholes. There are some fine minds in this House and I am sure that they, along with some of our excellent officials, will turn their attention to doing just that.

I agree with the sentiments; there is no difference between us and what we want to try to achieve, and I am grateful in particular to the opposition parties’ Front Benches, with whom I have had extensive discussions, for their forbearance. I will happily concede that this is not necessarily emergency legislation; we have been trying to introduce this register for a while but until now it has not managed to get the prominence in the public sphere and sufficient priority in the legislative programme to allow it to be brought before this House. As the Minister responsible for it in the House and in my department, I am grateful that we have now managed finally to bring it forward. It will be a useful tool of transparency and of benefit to, first of all, the public, and then to the law enforcement community in attempting to target the small minority of overseas entities that hold property in the UK. Something like 59,000 overseas entities hold property, and the vast majority do so for perfectly legitimate, lawful and legal reasons—but within that there is, of course, a tiny minority we all want to target, and this is our transparency contribution to an attempt to do just that.

I move on to look at the amendments in detail. I thank the noble Lords, Lord Clement-Jones and Lord Fox, and my noble friend Lord Agnew, for their Amendment 17. I am grateful for the meeting that I was able to have with my noble friend Lord Agnew earlier to talk about this issue. As I said, I can see the good intent behind this amendment, but it would be ineffective as tabled—and I shall explain why.

It does not fit within the legislative scheme of the Bill. For example, the Bill provides five conditions for “beneficial owner” in Part 2 of Schedule 2. These five conditions, in general terms, relate to shareholdings, rights or control over legal entities, or other arrangements. Amendment 17 seeks to apply the term “beneficial owner” in the context of a qualifying estate—that is, the land itself—which would not work. Further, the amendment fails to empower overseas entities to obtain the information required which, for the most part, remains undefined.

To be clear, this Bill was designed specifically to capture the beneficial owners of overseas entities. This is because, if the land is held in the name of an overseas entity registered in a jurisdiction with poor levels of corporate transparency, law enforcement agencies here may struggle when investigating the affairs of someone of interest. If they cannot obtain information about the entity itself, they will almost certainly never be able to identify any ultimate economic beneficiary of the land. This register aims to ensure that investigators can find out about the overseas entity to further their investigations. There may be a wider policy debate to be had about capturing ultimate economic beneficiaries of land, but this register, focused as it is on overseas entities and not on land held by individuals or UK companies, would not be the appropriate vehicle.

The government amendments provide robust provisions to ensure that overseas entities provide information about beneficiaries, settlors and other persons who can appoint or remove trustees or have rights over the exercise of trustees’ functions, which some may refer to as protectors, where there is a trustee who is a registrable beneficial owner. These amendments go one step further and also apply where there are overseas arrangements with similar characteristics to a trust and those arrangements’ trustee equivalents are registrable beneficial owners.

The noble Lord, Lord Clement-Jones, suggested that nominees will be used to hide true beneficial owners of property. I point out to the noble Lord that there are regulation-making powers within the Bill allowing for amendments to prevent such abuse, if that is needed. I therefore hope that, with the information that I have provided, the noble Lord and his supporters will feel able not to press Amendment 17.

I turn to Amendments 1A, 22A and 29A, which seek to require a director who is acting as a nominee to provide a statement that they are satisfied by the legitimacy of the financial affairs of the beneficial owner and that the nominee will cease to act if information validating legitimacy is not forthcoming on a timely basis. I appreciate the intent of my noble friend Lord Agnew in tabling these amendments, and I understand that his intention is to further verify the legitimacy of the beneficial owner, to create an obligation for a nominee director to have regard to the financial affairs of those they are acting for, and to validate this legitimacy on a timely basis.

--- Later in debate ---

[Lord Clement-Jones (LD)]

My Lords, perhaps I could just add to what the noble Lord has just said. The Minister mentioned the regulations which are possible post the passing of the Bill. Will he undertake to review some of the points made during the passage of this Bill and consider whether or not regulations might be needed to fill certain gaps?

[Lord Callanan (Con)]

Indeed, I am happy to provide the reassurances that both noble Lords have asked for—in the case of the noble Lord, Lord Clement-Jones, in terms of the regulations, and in the case of the noble Lord, Lord Empey, that we see this as an iterative process. As I mentioned, this is fairly unique legislation in the world; we are aware of only one other country, possibly, that has attempted to do something similar. When we introduced the provisions on PSCs—persons with significant control—in relation to UK companies, we had to make some iterative changes to that, as it became evident over time that aspects were not working as effectively as we had hoped. I hope that we have thought of everything on this one, and I hope that we have all of the details correct, but a lot of it—some of it anyway—has been drafted in haste and it is possible that we will have missed one or two complicated international devices. But, the noble Lord can be assured that we will keep it regularly under review, and if there are—I hesitate to use the word “loopholes”, although it is probably appropriate—devices that clever lawyers, of which there are several in this House, find to get around the provisions, we will not hesitate to close them if we need to.

Amendment 1 withdrawn.

--- Later in debate ---

[Lord Coaker (Lab)]

My Lords, this is yet another group of amendments with contributions from across the Chamber that signifies some of the problems we have in fast-tracking this part of the Bill. Many noble Lords, including my noble friend Lord Sikka, have put forward sensible amendments that would improve the Bill, but we cannot accept them because we are in a rush to get it through. They are common-sense amendments. I take very much the point that the noble Lord, Lord Empey, made: if we are not careful we will have a situation where we pass the Bill and, in a week or a couple of months’ time, there will be an oligarch, a kleptocrat or whatever you want to call them—somebody living off dirty money—on the front pages of the papers parading themselves as having got round what the Government have only just passed.

Of course, that is the whole purpose of the amendments that so many noble Lords have put forward: to say to the Government that they have to address some of this. If they cannot address it in this Bill, which clearly they will not be able to do because it is emergency legislation—we all accept the crisis in front of us—let us have a cast-iron guarantee that the second economic crime Bill will come quickly to address these various issues and that we will be able to come back to them. Those are the reassurances that so many of us are looking for from the Government. I do not think that is too much to ask.

As my noble friend Lord Rooker pointed out, with his normal passionate use of the English language, we do not want a situation where people—I cannot remember who he referred to—parade around saying, “Look, we’re cleverer than the regulator.” That undermines democracy and Parliament. It undermines all of us. That is how serious it is when people flaunt their ability to circumvent the law. That is not in our interest, whatever the crisis we face. I know that the Minister would accept that.

I am grateful to all noble Lords who have tabled amendments in this group, which cover a variety of non-trust provisions relating to the register of overseas entities. I should give my noble friend Lady Chapman’s apologies. She cannot participate in proceedings for personal reasons, but she tabled Amendment 23, which, like Amendment 24 in the name of the noble Lord, Lord Vaux, seeks to accelerate the reporting of changes in beneficial ownership, for reasons ably supported by my noble friend Lord Eatwell. Again, this seems absolutely common sense; it does not seem to be a point of argument.

The Government are keen to stress that the vast majority of entities that apply to join the register will be entirely above board. We accept much of that. However, under the current provisions, a shell company could be registered under certain ownership on day 1, with new appointments to the board made on days 2 and 3, but it would be required to report that only 12 months later. That is clearly not acceptable or sensible. As my noble friends Lord Sikka and Lord Eatwell, the noble Lord, Lord Vaux, and others said, something should be done about that. The Government should see what changes they can make.

There are legitimate questions about enforcement, but do the Government agree that there should be a general principle that entities need to be proactive in reporting changes? The Minister should accept Amendment 23, or indeed Amendment 24, but if not, he should commit to giving this further thought as the Government begin to draft the next piece of legislation.

We are also sympathetic to other amendments in the group, including Amendment 3 from the noble Lord, Lord Agnew, and Amendment 53 from the noble Lord, Lord Clement-Jones, supported by my noble friend Lady Chapman and the noble Lord, Lord Fox, which tries to start to deal with enablers. On so-called enablers, it would be helpful to understand what steps, if any, the Government have taken since Russia invaded Ukraine. As this is an emergency piece of legislation, what emergency action have the Government taken with respect to enablers? There have long been stories of lawyers and estate agents who purposely avoid asking their clients probing questions because they know that the answers would preclude them from doing business with them. It is time to say, “Enough is enough and we will seek you out and do something about it.”

We know that some individuals have sought to urgently offload their UK-based interests and, if they are seeking to rush sales through, we would hope that estate agents and others were already querying the reasons for that. In addition to any steps that might have already been taken, what steps do the Government plan to take over the coming days and weeks to deal with that problem? This series of amendments asks various questions, but ultimately seeks to tighten up a Bill that is in all our interests.

[Lord Callanan (Con)]

First, I thank all noble Lords who have contributed to this debate. Before I address the amendments tabled, I reiterate the point I made earlier. This will be almost the first register of its kind in the world. We should accept that we are leading on this. I completely accept that we may not have everything perfect, but we will learn as we go—just as we did, in the example I cited, when we implemented the people with significant control requirements for domestic companies. We had to learn and iterate that, and now many other countries have followed our lead. That is a good thing. I re-emphasise that we will be perfectly willing to revisit these measures if it transpires that we have not got everything quite right.

[Lord Eatwell (Lab)]

Just thinking off the top of my head, I can think of four registers of this ilk which exist already.

[Lord Callanan (Con)]

I would be happy to debate with the noble Lord. When I queried this, my information was that Germany potentially has something similar, but nobody else. I am happy to exchange letters with him about numbers, but that is not the information I have.

Before I move on, perhaps I may correct something I said on the first grouping—which will teach me to pluck numbers from memory rather than consulting my notes. The correct figure is that there are 30,000 overseas entities registered in the UK owning approximately 95,000 properties. I think I may have said that the other way round. I slightly disagree with the noble Lord, Lord Sikka. The vast majority of those are perfectly legitimate entities. We are an open trading environment and welcome investment from all over the world. International companies owning headquarters in the UK do so perfectly legitimately. The vast majority of these entities are legitimate. A small minority are not, and they are the ones we seek to catch in this register, but we must be fair to the vast majority which are perfectly legal, above board and just seeking to use the UK to do business, which we encourage.

Let me also pick up the points made by the noble Baroness, Lady Jones. Although I am grateful that she is supporting the government amendments—I will write that down for posterity, because I am not sure it will happen again—we did not just pluck the dates of 1999 for England and Wales and 2014 for Scotland out of thin air. We did not just sit there and think what date we would make it retrospective to. Those were the dates of incorporation when that was required by the Land Registry, so it is appropriate to go back to them. Northern Ireland has never required this, so it is impossible to retrospectively apply the provisions there. I hope she will accept that we did not just make these dates up; they are put in place for a reason.

--- Later in debate ---

[Lord Sikka (Lab)]

I refer the Minister to an entity called Business Bank Italy Ltd. It was owned by a convicted Mafia person from Italy, who registered this bank here and it had a website inviting wealth management. At Companies House, there was absolutely no declaration of any criminal convictions. Previously, the same person registered as secretary and director of another company, where the same person provided information in Italian. When it was translated into English, it read, “My name is the Chicken Thief, my occupation is a fraudster”, and the address was “Street of 40 Thieves, town of Ali Baba in Italy.” There is no information on whether there was any criminal conviction or anything else. The Minister just said that there are robust checks at Companies House. Where are these robust checks? I could pick out that example. Companies House did not carry any out; neither did any government department. As he knows, I have been filing a lot of Written Questions of late drawing Ministers’ attention to all kinds of strange goings-on in companies. It seems to me that, by rejecting the idea that somebody has to provide their former names and a record of criminal convictions and sanctions, the Government are opening the door for these people to misbehave.

[Lord Callanan (Con)]

We are not opening the door. I assume that the companies the noble Lord is referring to are existing UK-registered companies; I know he has asked me a number of Written Questions about companies registered on the UK database, and I totally accept his point. He is pointing out an issue we are well aware of: that the existing UK companies register is a dumb register. The registrar is obliged under existing law to accept the information tabled to her. The noble Lord has raised a number of examples and tabled Written Questions to me about some patently ridiculous information that has been supplied. I get regular correspondence from noble Lords and from constituency Members of Parliament where false information is given and false companies registered at people’s addresses, unknown to them, and they then receive correspondence.

The difficulty at the moment is that the registrar does not have the legal power to query the information registered to her. If the noble Lord will be patient and wait for economic crime Bill part 2, which is coming, he will find that it will deal with this precise point. It will give the registrar the ability to query that information and provide that people must give identity details, passport information, et cetera, when they register. This is a massive change to the operation of Companies House—the biggest change for something like 170 years to the register database. It will give the registrar the power to query that information and people will have to provide evidence of their identity, addresses, et cetera. The noble Lord is right—there are a number of ridiculous examples—but we will deal with that. I am aware of it, and it will be in the next Bill.

In addition, information regarding designated persons who are listed on the UK sanctions list is already published for free via GOV.UK by colleagues in the Office of Financial Sanctions Implementation.

Finally, the verification mechanisms of the register, which will be provided for under Clause 16, will ensure as far as possible that the information provided is highly accurate. This register will provide vital information and in turn give enforcement agencies even greater information to take actions and carry out their own investigations. Therefore, on balance and taking into account the reasoning we have set out, we are unable to accept these amendments.

However, I am in agreement with the noble Lord on the particular importance of ensuring that there is clear information for users of the register about whether individuals identified as beneficial owners of the overseas entities are subject to UK sanctions. It is in the public interest for users of the register of overseas entities to be able easily to see whether a registrable beneficial owner is a designated person listed on the UK sanctions list.

The Government have therefore tabled their own Amendments 7, 9 and 11, which would mean that the required information about a registrable beneficial owner will include information about whether they are designated by virtue of the Sanctions and Anti-Money Laundering Act 2018. These three amendments would require overseas entities to confirm whether any of their registrable beneficial owners are designated persons listed on the UK sanctions list. It would be an offence not to do so. This information would be displayed publicly on the register. This will ensure that this information is then more easily accessible to the average user of the register. That fulfils a requirement raised by a number of noble Lords, and by Members of the other place when they debated this legislation. I hope that the noble Lord, Lord Sikka, will appreciate that these three amendments will deliver a good deal, if perhaps not all, of the intention of his amendments and those proposed in the other place.

I move on to Amendments 18, 19 and 20, also tabled by the noble Lord, Lord Sikka, which relate to the level of shareholding that would define a “beneficial owner”. His amendments seek to remove the 25% level altogether, to capture any person who holds any shares in the overseas entity in scope.

The 25% threshold contained in the Bill is in line with global norms with regards to beneficial ownership. The Financial Action Task Force, which sets global anti-money laundering and counterterrorist financing standards, has found that this threshold is acceptable as an example of how to determine beneficial ownership. As a result, 25%—or more than 25%—is used in many jurisdictions, such as in the US and in the European Union’s recent anti-money laundering directives. The 25% threshold also follows the UK’s PSC—person with significant control—regime, which similarly requires beneficial ownership information of UK-registered companies. When the PSC regime was in development—

[Lord Burnett (LD)]

Does the 25% limit cater for class rights in the definition of control? In other words, you can have 10% and 90% but the 10% have all the voting rights.

[Lord Callanan (Con)]

I think it refers to rights of control—the actual percentage shareholding of the company—but if I am incorrect on that, I will certainly write to the noble Lord.

When the PSC regime was in development, significant analysis, including consultation, considered the question of thresholds. The threshold of more than 25% reflects the level of control a person needs in voting rights, under UK company law, to be able to block special resolutions of a company. It was considered that 25% represented the optimum opportunity to understand who is in a position to exert significant influence and control over a company. Collecting information on legal ownership below that threshold would be much less likely to do this. Removing the threshold altogether would have the effect of essentially creating a register of shareholders rather than a register of beneficial ownership, which—I hope noble Lords will agree—is not appropriate for the purposes of the Bill and the transparency involved in this register. Maybe the noble Lord, Lord Sikka, likes going through thousands of register entries, but I am not sure it would be helpful to most people.

For entirely legitimate entities, there could be hundreds or thousands of shareholders. For instance, think of a large foreign company that owns property in the UK. I am really not sure whether it would be tremendously helpful to have literally thousands of individual shareholders on the list of a property’s beneficial owners. For example, in the case of public limited companies with highly dispersed ownership, where shares can be bought and sold frequently and instantly, removing the 25% threshold would make the requirements of the register disproportionately difficult to comply with, as entities must first send a notice to those that they believe are their beneficial owners, and then allow time for potential beneficial owners to respond.

We are mindful of the risk that an individual wishing to disguise their beneficial ownership might, for example, deliberately reduce their shareholding. We have considered this, and so have made provision that means that anyone, regardless of their shareholding or voting rights, who exerts or has the right to exert significant influence or control over an entity is captured within the meaning of “beneficial owner”. This includes anyone who holds the right to appoint or remove a majority of the board’s directors. Perhaps that takes account of the point the noble Lord made earlier.

I am sorry that the noble Baroness, Lady Chapman, cannot be with us today. I thank her and other noble Lords for Amendments 23 and 24. In particular, I thank the noble Lord, Lord Vaux, for his engagement and for the points he has made. I am very happy to meet the noble Lord to discuss these matters further.

These amendments would require overseas entities to update the register not just annually but when there has been a change in beneficial ownership. I know this matter has been exercising a number of noble Lords. It was also raised in 2018, during pre-legislative scrutiny of the then draft registration of overseas entities Bill. At the time, the scrutiny committee accepted fully in its report that this requirement would be difficult to enforce without active investigation. This would also create great uncertainty for third parties transacting with the overseas entities. This is the key reason why we have adopted the 12-month threshold.

A change in beneficial ownership is not necessarily foreseeable and would not be knowable to any third parties, including Companies House, without detailed investigation. As I said, there are about 30,000 of these overseas entities. As such, a requirement for an overseas entity to update its information when there is such a change means that, at any point in time, it could be compliant one moment and then not compliant the next. Our problem is that we think this creates significant legal uncertainty for any third parties engaging with the entity and seeking to purchase the property from it.

[Lord Cromwell (CB)]

Can the Minister help me and explain why they would be non-compliant if they had two weeks within which to register it? As long as they did it within two weeks, they would be fine.

[Lord Callanan (Con)]

Yes, but they would have to be tabling notices to any potential beneficial owners in order to update the register. We think that if we have a yearly update, any third party transacting with that entity would then have sufficient legal certainty to be able to proceed. The point is not that the entity might not register the change of ownership but that the third party, and indeed Companies House, have no way of knowing whether it has. Therefore, a third party could engage in a transaction thinking that the original entity is compliant and then discover afterwards that it has not updated its register and is non-compliant, and therefore potentially lose its money and be unable to proceed with the transaction because it cannot register the property. On balance, we think the better option is to have a yearly update cycle, but I realise that this is a point of debate and I am happy to discuss it further. I know that the noble Lord, Lord Vaux, is engaged in this.

[Lord Vaux of Harrowden (CB)]

The Minister has not addressed the point that this can easily be dealt with by bringing forward the annual update, which a company has the ability to do under—I think, from memory—Clause 7. If that were done as part of the property transaction, that solves the problem completely. Does the Minister disagree with that?

[Lord Callanan (Con)]

No, I do not disagree with that. It is, of course, perfectly possible—

[Lord Eatwell (Lab)]

My Lords, on the same point, would it not be helpful for a third party to know who it is actually dealing with? Under the Minister’s proposal for 12 months, it could rely on the register and find out that it is dealing with someone it had not expected at all.

[Lord Callanan (Con)]

Indeed it would be helpful, and that is why we have the transparency of the register in the first place. Returning to the point made by the noble Lord, Lord Vaux, it would indeed be possible for them to update it, and it is of course perfectly possible that the advisers of the third party buying that property would wish to say to the entity that they wanted it to update the register in terms of formal ownership before they could advise their clients to proceed with the transaction, which is a point that the noble Lord made to me. That is different in terms of due diligence of the third party’s financial legal advisers, but in terms of the legal requirements, we think that it is best to leave it at 12 months. However, maybe we could have further discussions on this before we get to the second Bill.

To summarise, a change in beneficial ownership is not necessarily foreseeable and would not be knowable to any third parties, including Companies House, without detailed investigation. As such, a requirement for an overseas entity to update its information when there is such a change means that it could be compliant one moment and non-compliant the next, at any point in time. Our point is that this would create significant legal uncertainty for any third parties engaged with the entity.

I remind noble Lords that the key sanction for non-compliance with the new register—apart from the criminal penalties for non-compliance—which interferes with existing property rights is effectively to make it impossible for the buyer to then register title, if purchasing from a non-compliant entity. Of course, if they have transacted with an overseas company in a different jurisdiction, it might be very difficult for them to then take appropriate legal action to recover any sums that they have paid. This is not about providing a free “get out of jail” card for the overseas entity; it is genuinely about protecting the rights of third parties that wish to transact with them.

As the noble Lord, Lord Vaux, pointed out, the onus is on the buyer and their agents to ensure that they do not transact with a non-compliant entity. In order to protect the buyer, who is likely to be an innocent third party, it follows that there must be absolute legal certainty in every case as to whether the overseas entity doing the selling is compliant. An annual update with a transparent end date for the update period will give third parties transacting with the overseas entity the certainty that they need. The annual update already requires an overseas entity—

[Lord Cromwell (CB)]

I do not wish to be argumentative with the Minister—well, perhaps I do—but can he confirm in respect of the third party buying the company that that company will be compliant even if, say, 11.5 months ago, they changed their ownership because they will not have had to register?

[Lord Callanan (Con)]

Yes, that provides the required legal certainty to the third party that is buying it, at the expense of, perhaps, a certain amount of transparency for that 11.5-month period. So, yes, I accept that.

The annual update already requires an overseas entity to provide information about its current beneficial owners, as well as any changes since its last update. This latter information was added as a result of the pre-legislative scrutiny of the Bill, providing a complete picture of an overseas entity’s beneficial owners. For these reasons we do not believe a change in the updating period is necessary or desirable, and I therefore encourage noble Lords not to press their amendments.

Turning to government Amendments 49, 50, 51 and 52, the Government have listened to the concerns raised about the need to deal effectively with anyone seeking to file false or misleading information or those who know or suspect that they may be filing false information, and we have taken on board those concerns. I thank all noble Lords who raised these concerns with me. They made the point that the evidential threshold to prove intent or recklessness is too high in the clauses as drafted. I have therefore tabled these government amendments to ensure that those who provide false or misleading information “without reasonable excuse”—in other words, a lower legal barrier—can be prosecuted and are subject on conviction to an unlimited fine. This will catch those who seek to facilitate and enable money launderers and the corrupt.

Furthermore, we have amended the threshold for what, under our amendments, constitutes an aggravated offence. This removes the reference to the word “recklessly”, which caused a lot of concern in the other place and to the noble Lord, Lord Fox, and others in this place. It also retains the potential for imprisonment and an unlimited fine if convicted of the aggravated offence of knowingly filing false, misleading or deceptive information. I hope this addresses the concerns.

I thank the noble Lord, Lord Clement-Jones, for Amendment 53, which would create a criminal offence of failing to disclose to the registrar certain information when a professional knows or suspects, or has reasonable grounds for knowing or suspecting, that misleading, false, or otherwise deceptive information was provided to them in their professional capacity. Again, I understand the noble Lord’s motive for proposing this new clause, but I hope that he will agree that his aims can be met by the existing provisions in the legislation regarding offences for the provision of false information, as developed in the way I have just set out by the Government’s amendments to lower the threshold needed for prosecution. We are confident that this will ensure that enforcement agencies have sufficient capacity to tackle those who seek to subvert the integrity of the register through the provision of misleading information.

I also take this opportunity to reassure the noble Lord—

[Lord Clement-Jones (LD)]

My Lords, I am afraid I do not agree with the Minister; I am amazed that he thought that I would. The Government need a strategy to catch these enablers in the way that they currently operate. What strategy do the Government have? The Minister was just about to pass on to other things. He has prayed in aid the professional regulators, such as the SRA and the ICAEW, and he has more or less said that the legislation is absolutely fine: it will catch the enablers properly. But does the Government not need a proper strategy for dealing with enablers? They cannot gloss this over. Is the Minister prepared to look at this carefully before the next Bill?

[Lord Callanan (Con)]

Of course, we are constantly looking at these matters. The Treasury is implicitly engaged in pursuing crackdowns on the so-called enablers that the noble Lord has mentioned, and the anti-money laundering regulations exist. This register, which is a transparency measure, is designed to provide information to the public, HMRC and other law enforcement agencies that can then take the appropriate action under the other provisions. However—before the noble Lord, Lord Fox, gets up—I totally agree with the noble Lord that we need to look again at whether the anti-money laundering statutes are appropriate. It is not for this legislation, but I am sure it is something we will want to look at in detail before we get to the next Bill, because it is a complicated area of law. If we do not, I am sure the noble Lord will wish to table his amendments again then.

[Lord Fox (LD)]

Each time the Minister speaks on this, I do not hear him acknowledge that there is a problem. In order for there to be a solution, there has to be an acknowledgement that there is a problem. So, does the Minister agree with me that there is a problem with unscrupulous enablers currently operating in the City and the United Kingdom? Unless the Minister agrees, I do not think that we can have much hope of a solution.

[Lord Callanan (Con)]

I am happy to agree with the noble Lord. If there is one firm of accountants or one legal practice that is turning a blind eye to these provisions, there is a problem with which we need to deal. Nobody wants to see that; we want to give the UK a reputation as the best place in the world to do business and to crack down on the small minority of the legal profession that are abusing their position and facilities—of course we would want to do that.

[Lord Clement-Jones (LD)]

My Lords, I am sorry to interrupt the Minister and slow the proceedings but, on that point, the Minister began to move, gradually, towards thinking about the enablers, and mentioned anti-money laundering legislation. But it is wider than that: it is about sanctions, economic crime in general and the provisions of this Bill. Is the Minister prepared to undertake to look more broadly across the piece?

[Lord Callanan (Con)]

Yes. Obviously, a number of different government departments would be involved in doing this, but a number have been involved in putting the provisions into this Bill, and a number will be involved in the provisions of the next economic crime Bill. Of course, we want to take action against lawyers and accountants who abuse their positions to benefit some of these oligarchs and others. We have all seen the press reports and we all know the people that we are concerned about. I would not seek to defend them in the slightest, and I hope that we will be able to put the appropriate sanctions in place to deal with them.

[Lord Cormack (Con)]

Does my noble friend think it would be a good idea to set up a Committee of your Lordships’ House immediately after the Bill has gone on to the statute book, like these special Select Committees that are set up for specific purposes, so that you have a number of knowledgeable Members of your Lordships’ House, among whom I do not include myself, who will be able to provide expert examination of this Bill on a continuous basis?

[Lord Callanan (Con)]

The noble Lord often suggests setting up special Committees of this House. He will know that it is way above my pay grade to dictate to the House authorities what committees they wish to set up for examining particular Bills. I know from appearances that there are some extremely good and effective committees already in this House examining all parts of the Government’s legislative agenda and all departments—but, if the noble Lord can forgive me, I will not get into instructing the House authorities on what committees to set up to future scrutinise our work.

Relevant firms, including financial institutions, law firms, accountancy firms and estate agents, under the anti-money laundering framework, must inform Her Majesty’s Treasury as soon as practicable if they know, or have reasonable cause to suspect while carrying out their business, that they have encountered a person subject to financial sanctions, or a person who has committed a financial sanctions offence. They must state the information on which the knowledge or suspicion is based, and any information they hold about the person by which they can be identified. It is already an offence to fail to comply with this reporting obligation. I understand that the noble Lord does not think that the legislation is applied properly—perhaps we can look at that—but there is already an offence on the statute book.

Activity which seeks to evade these new beneficial ownership reporting obligations should be taken into account in the course of these firms taking a risk-based approach to anti-money laundering, and any suspicions of sanctions evasion should be reported in accordance with their legal obligations. I am pleased to say that Treasury Ministers will be writing to the anti-money-laundering supervisors of the relevant professional enablers on this matter, highlighting that the Government will be expecting everyone in these sectors to be particularly vigilant.

I hope that, with the reassurances that I have provided on this important issue, the noble Lord will feel able to withdraw his amendment.

[Lord Vaux of Harrowden (CB)]

The Minister was kind enough to offer to meet with me about my Amendment 24. I actually asked about meeting regarding the verification regulations in Clause 16. Is he prepared to do that, probably with others, as it is very important that these regulations get the input of all these highly intelligent people around the Committee before they are issues, rather than afterwards?

[Lord Callanan (Con)]

Yes, I am happy to meet with the noble Lord and his colleagues to discuss that matter.

[Lord Agnew of Oulton (Con)]

I beg leave to withdraw the amendment.

--- Later in debate ---

Moved by

[Lord Callanan]

33: Clause 9, page 7, line 23, leave out sub-paragraph (i) and insert—
“(i) is entered, on or after 8 December 2014, as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland,”Member’s explanatory statement
This amendment expands the scope of circumstances where an overseas entity is registered as the proprietor of a relevant interest in land for the purpose of Clause 9 (to include, for example, Keeper-induced registration) by removing the requirement for there to have been an application for registration.

[Lord Callanan (Con)]

My Lords, I start this grouping by speaking to the government amendments, which I have tabled. They are Amendments 33, 75 and 76; 35, 36 and 37; 63 and 77; 65, 66, 69, 70 and 72; 68 and 71; and 73 and 81. I hope that everybody is taking careful note, because there will be a check later.

These are technical amendments relating to land registration in Scotland, tidying up some of the drafting in the Bill. If it would be of assistance to noble Lords, I am happy to speak in more detail on any of these, but meanwhile, in the interests of time, I will move on to the more substantive government amendments in this group.

Amendments 73 and 74 make small but important technical changes to the Bill to ensure that Schedule 4 operates effectively in line with the land registration law of Scotland. These amendments add to existing provisions when an application must be rejected by Registers of Scotland because of the implications for who will be shown in the Land Register of Scotland as the owner of a plot of land. These amendments ensure consistency and clarity in setting out the circumstances in which a prescriptive claim application might result in a prescriptive claimant being provisionally entered as the owner of a plot in Scotland.

I am mindful that several noble Lords and Baronesses, including the noble Baroness, Lady Chapman of Darlington, and the noble Lords, Lord Fox and Lord Sikka, have tabled amendments to shorten the transition period proposed. To inform that debate, I thought it might be helpful to set out several government amendments that we hope will help to ease concerns about the length of the transition period for registering retrospective property ownership and the perceived risk of people moving illicit assets in the meantime—a concern that has been raised with me by several noble Lords.

Amendment 86 requires overseas entities when registering, who have disposed of certain land between 28 February 2022—the date that the Bill was published—and the date of their application to register, to submit a statement with their application setting out details of what has been sold and the beneficial ownership of the entity immediately before that transfer of title. The land in scope is that which otherwise would be caught by the transition period: that is, land that was registered after 1 January 1999 in England and Wales and after 8 December 2014 in Scotland. The noble Baroness, Lady Jones, now knows why we have selected those dates.

This is an anti-avoidance measure. It would mean that any overseas entity disposing of any of their property in the period from 28 February and the date of their application to register on the register of overseas entities must provide information about the entity’s beneficial ownership immediately before the disposal. They must provide that information by the end of the transition period. This will mean that law enforcement will therefore have access to a record of the beneficial ownership to aid the enforcement of historic cases, and the seller would no longer be able to avoid being under a legal duty to provide beneficial ownership information by disposing of a property in advance of registering—something that I know was a significant concern for many noble Lords. This new disclosure requirement should significantly strengthen law enforcement’s abilities to investigate and prosecute both buyer and seller, and all involved in the transaction, should the criminal law have been broken.

Crucially, it addresses the concerns that have been raised with me in both Houses that corrupt people must not be allowed to sell up and escape the transparency that the register will bring. It is my submission that this measure will be more effective than any further reduction in the transition period, which risks opening up the provisions of the register to legal challenge, something that would no doubt be exploited by those wishing to avoid it.

Amendments 55, 60, 64, 79 and 82 align the transitional periods under Schedules 3 and 4 with the period in the new clause inserted by Amendment 86.

Amendment 87 supplements Amendment 86 by making it an offence for certain overseas entities who do not apply for registration during the transitional period, and every officer in default, to fail to provide information equivalent to that required by Amendment 86. That means information about relevant dispositions in land made on or after 28 February 2022 and the end of the transitional period. In the case of continued contravention, an offence is also committed by every officer of the overseas entity who did not commit an offence in relation to the initial contravention. A person guilty of an offence is liable on summary conviction to a fine and a daily default fine of up to £2,500 a day in England and Wales.

Amendment 88 makes further supplementary provisions, including a power to make regulations in connection with the new clause inserted by Amendment 86.

Amendment 59 reflects the revised transitional period of six months. It requires the Chief Land Registrar to act as soon as reasonably practicable, and in any event before the end of the transitional period, to enter a restriction in relation to an estate in land owned by an overseas entity that became the registered proprietor of that estate following an application made before commencement of the Bill.

Amendments 66, 69, 70 and 72 are technical amendments relating to land registration in Scotland. In the interests of time, I propose to move on to other substantive amendments, but am more than happy to speak on these amendments in more detail if required. I beg to move.

[Lord Sikka (Lab)]

My Lords, I apologise; I am not sure if it is my turn or someone else’s. I have four amendments in this group. I have listened carefully to what the Minister has said about Amendment 86. The real problem is that you can have an overseas entity that can be used to buy a property in the UK. When that property is sold, money is laundered, but before the six-month period is over the overseas entity is liquidated so there is no information of any kind to file. By giving anyone more than 14 days—this is a theme referred to earlier by the noble Lords, Lord Cromwell and Lord Vaux—the Government are inviting these kinds of cat-and-mouse games.

I recommend that no one should have more than 14 days. After all, that is what we give at the moment to UK companies to file information about persons with significant interest as per Part 21A of the Companies Act 2006, which says that the PSC’s details must first be recorded in the company’s internal register within 14 days of the change and Companies House must be notified within a further 14 days, which is the maximum permitted. So why are overseas entities to be given a longer period? We seem to be creating an opportunity here, a window, for these entities to misbehave, and at the end no declaration of any kind can be made. Fourteen days is not too demanding in the era of electronic filing. We must close all opportunities for anyone to circumvent the filing requirements and thereby get away with basically laundering their proceeds.

My second two amendments are Amendments 58 and 67, which, as has been referred to, are about the amnesty that is built into the Bill. The Bill grants amnesty from disclosures to those who acquired property in Scotland before 8 December 2014 and before 1 January 1999 in England and Wales. That is completely contrary to the Bill’s claim of adding transparency and providing no hiding place for dirty money. The amnesty will mean that large swathes of UK property are owned by overseas companies without any public knowledge of their true owners; people will simply not know who owns them.

I shall give some examples of Scottish property that is owned by anonymous offshore companies purchased before 8 December 2014 where people do not know who the true owners are: Strathfillan Forest, owned by Thar Enterprises in Jersey, registered at the Land Register in June 1999; Ardfin Estate, on the Isle of Jura, owned by Ardfin Lodge Ltd, again in Jersey, registered in November 2010; Glenogle Estate, owned by Glenogle Estate Ltd in the Isle of Man, registered in May 1999; most of Charlotte Square in Edinburgh, owned by Fordell Estates Ltd in the British Virgin Islands, registered in the Land Registry in 2010; Glenborrodale deer forest, owned by Luna Ltd in the Bahamas, registered at the Land Register in July 2000; and the Pitmain Estate, owned by Ranita Management SA in Panama. Even if these properties are acquired with clean money, people have a right to know who their neighbours are and who owns a large part of their locality. Are these people actually socially responsible? The Government are legally creating an amnesty, and that is really unacceptable.

This opacity is not just an issue in Scotland: it is an issue for the whole of the UK. Close to 250,000 residential properties in the UK are registered to individuals based overseas. UK property worth more than £170 billion is estimated to be held overseas, much of it anonymously. Last October, the Pandora papers leak revealed that Heads of Government, oligarchs, business tycoons, ruling families and Middle-Eastern monarchs were among the anonymous owners of at least £4 billion of property, held through offshore shell companies. When did they acquire that? We do not quite know: it might well have been before the dates specified in the Bill.

--- Later in debate ---

[Lord Fox (LD)]

It did indeed, and I am glad that the noble Lord has had the opportunity to speak.

Once again, we have a huge number of varied amendments lumped into the same group, which I think is a side-effect of the process we are travelling through. I am going to focus on two themes. I am not going to interpose myself between lawyers on the subject of Amendment 92, but I look forward to the Minister’s response to the comments of the noble Lord, Lord Coaker, and my noble friend Lady Kramer.

I will turn to Amendments 56, 61, 80 and 83 in the name of the noble Baroness, Lady Chapman, and signed by myself. I will be brief because I do not think we have to speak for very long on this. The noble Lord, Lord Coaker, has been eloquent in this vein already in the unfortunate absence of the noble Baroness, Lady Chapman.

During Second Reading we heard a chorus of disapproval on the six-month transition period, and there is a good reason for that. The noble Lord, Lord Coaker, was clear on those reasons, as were other speakers, including the noble Baroness, Lady Jones, and the noble Lord, Lord Sikka. We have to focus on what the Government are seeking to achieve and how they are going to achieve it. While that number is very important, the second number, introduced by the noble Lord, Lord Coaker, may be even more important, and it is the one covered by Amendment 97 in my name. It seeks to bring commencement forward to the First Reading of this Bill in the Commons. When I tabled that amendment, I was thinking of the National Security and Investment Act, which did just that.

In one of the meetings that the Minister kindly invited me to, he set out a number of reasons why that commencement date is, in Government’s view, not popular. The longer the Minister’s explanations were, the more alarmed I became, because it is clear now that the commencement date is subject to the pace of the slowest moving IT project. That is a matter of great concern, and certainly should be to your Lordships’ House.

In looking at the six-month transition period, we cannot isolate it from the commencement period, as the noble Lord, Lord Coaker, wisely stated. What the Minister has to think about and convince your Lordships of is how these two times work together. Can they be concurrent? Indeed, can commencement start without the whole system being in place? In other words, can there be some flexibility in how parts of the Bill come in? That would be controlled through statutory instruments, which the Government have control over.

Commencement is one thing, statutory instruments are another and the transition period is a third. They all add up to either a long time or a medium amount of time. The Minister needs to explain the formula the Government have in mind, because at the moment it seems to be a blank number. We do not really know when the terms of this Bill will be in place.

[Lord Callanan (Con)]

I am mindful that several noble Lords, including the noble Baroness, Lady Chapman of Darlington, and the noble Lords, Lord Fox and Lord Sikka, have tabled a number of amendments in this group. I will start with Amendment 34 in the name of the noble Lord, Lord Foulkes, who I see is not in his place. I will speak to it alongside Amendments 58 and 67 tabled by the noble Lord, Lord Sikka, as they cover the same subject of retrospectivity and the subject the noble Baroness, Lady Jones, raised earlier.

These amendments seek to extend the scope of the definition of overseas entities registered as the proprietor of a relevant interest in land by removing the registration dates currently stated in the Bill. This has obviously been an area of interest in both Houses. The Government, of course, agree that the register should be as comprehensive as possible. However, there is no benefit to be gained from removing the dates as suggested, as I explained to the noble Baroness, Lady Jones, earlier. Doing so would instead create legal uncertainty. Due to the way information was collected prior to those dates, the land registries would have no way of reliably and consistently identifying properties owned by overseas entities and those that are not. It was not compulsory in England and Wales, for example, to register the jurisdiction of ownership before 1 January 1999. As such, the Land Registry would have this information only where the overseas entity had voluntarily supplied the information itself.

The amendment would result in inconsistent application, as the information needed to enter restrictions on disposition on to relevant titles is not readily available before these dates. They were not just dreamt up arbitrarily; these dates are put in for good reason. The result of removing the reference to the registration dates would be that only those entities that could be identified as being overseas entities could be brought properly into scope. Others that could not be so identified would not be.

This situation would also introduce significant uncertainty for buyers. There would be no way of providing absolute legal certainty as to whether an entity should or should not be in scope for those properties registered before 1999 in England and Wales, and before 2014 in Scotland. Third parties who were in the process of or considering purchasing a piece of land in the UK registered before those dates could not be sure whether they were engaging with an overseas entity that was in scope of the Bill, and which could become non-compliant at any time. The existing clauses are therefore essential for the register to be effective and operable, and to provide certainty as to which overseas entities are actually in scope of the requirement to register once the register goes live.

Finally, I remind the House that the agents who support property transactions are, as we have said earlier, all covered by the provisions of the anti-money laundering regulations. If there are properties with titles held by overseas entities going back further in time, when those entities next come to sell or lease those properties, the agents involved will be obliged to conduct appropriate checks for money laundering.

I turn now to Amendments 56, 57, 61, 62, 80 and 83 on the transition period. I thank the noble Baroness, Lady Chapman, and the noble Lords, Lord Fox and Lord Sikka, for their amendments to shorten the transition period as proposed. Of course, as the noble Lord, Lord Fox, has just said, I am aware that speed of implementation of the register and of the transition period has been the focus of much debate in both Houses so far. The Government have already reduced the transition period from the initially proposed 18 months to six months.

--- Later in debate ---

[Lord Faulks (Non-Afl)]

I am very grateful to the noble Lord for giving way. He talks, understandably, about a transition period and the need for everybody to adjust to the new provisions. However, while Ukraine may have come as a surprise, the existence, or likely existence, of this register cannot fall into that category. I am sure the noble Lord would agree with me that anybody who had owned property would have had years to prepare themselves since it was first mentioned in 2016. It was mentioned in the Criminal Finances Act and again in the Sanctions and Anti-Money Laundering Act. Why is there so much need for further transition, when anybody would have been aware of these provisions?

[Lord Callanan (Con)]

The noble Lord will know from his time in Government that the law officers provide confidential legal advice to Ministers. I can only say to him that I am personally satisfied that this six-month period is appropriate. We are taking a severe step with this legislation; we are retrospectively interfering with property rights. Whether the legislation has been flagged in advance—I think David Cameron first promised it in 2015—does not, as I understand it, alter the legal case that somebody who wished to purchase expensive legal help to challenge the legislation would be able to do so under the Human Rights Act. I can do no more than assure the noble Lord that the officials and I are acting under the legal advice that we have received about the appropriate period. I can assure him that I wish to bring this in as quickly as I can. He will be aware that the Government originally proposed a period of 18 months. Following fairly significant political pressure, we have taken further advice and have managed to reduce it to six months. I am seriously concerned that, if we reduced it further, we could be subject to legal challenge. I am happy to speak to him outside the House.

[Lord Fox (LD)]

My Lords, I assume that the noble Lord, Lord Faulks, has had the answer he required. To come back to implementation and commencement, it is not clear what the trigger for commencement would be. Can the Minister be clear on what the trigger for commencement will be and, having stated that, can he perhaps undertake to maintain a dialogue with your Lordships’ House on how reaching that trigger is getting along and when we might expect the commencement of this Bill?

[Lord Callanan (Con)]

I totally understand the point the noble Lord is making. I cannot give him a precise date; all I can say is that I am keen to commence this legislation as quickly as possible, but there are number of steps that we need to take. We need to publish and implement a number of statutory instruments on the back of this. Companies House needs to put the systems in place; it has already been given the funding for that. The computer systems need to be set up and the register needs to be activated. I am very happy to maintain a dialogue and keep the House informed, but the ultimate answer to the question of when the legislation will be commenced is: as soon as we possibly can.

[Lord Fox (LD)]

Given that your Lordships’ House has demonstrated that it can process statutory instruments at an insatiable rate, my point that the rate-determining step is an IT system in Companies House is entirely correct. Would the Minister confirm that?

[Lord Callanan (Con)]

It is a number of different things. There are administrative procedures to be put in place; the IT system is of course important—I am hesitant to give assurances on when a government IT system might operate. It is not a hugely complicated system, but it needs to be done and to be put in place. Of course, we also need to go on to the next step, namely the economic crime Bill which will follow this one and will give Companies House the right to query the information that has been provided, as I outlined to noble Lords earlier. However, I am very happy to keep the House informed as to commencement dates. I am sure a lot of people will be writing to me about it and will be using the devices of the House to table Questions to ensure that my feet are held to the fire on this one.

[Lord Faulks (Non-Afl)]

I am sorry, but I had not quite got an answer. I absolutely appreciate the Minister’s sincerity in wanting to get this register ready. My point was that the transition would come as no surprise. His answer—as I understood it—was that the Government are concerned about possible legal action, which is not quite the same thing, because I think he is talking about a possible challenge under Article 1 of Protocol 1 to the European convention. I respectfully suggest to him that lawyers are being extremely cautious about this because, in the circumstances, it would be quite a brave court that would decide that the time allowed for transition was so short that they would be allowed to retain possessions.

[Lord Callanan (Con)]

I thank the noble Lord for his legal advice; I should not let my prejudices against lawyers get in the way here, but no doubt there are others who one might want to employ who might give a different opinion. All I can say is that we are acting under the advice that we have received. I am told that while people may have had an idea in advance that we would be introduce such legislation, the fact of Parliament actually passing it will, I suspect, be the legal test for when the register starts and when the requirements come into force—whether or not it had been flagged up in advance. However, that would be my opinion as a mere engineer, not a lawyer; I am sure that other opinions are no doubt available.

I turn now to Amendment 92—

[Lord Sentamu (CB)]

My Lords, I apologise that I was not here for Second Reading. I went down with a very bad cold and I wrote to the Convener’s office to say that I could not be here, so I apologise.

Can the Minister explain why the Government had gone for 18 months instead of six? Was the legal advice for 18 months that someone could challenge, so a longer transitional period was needed? Yes, there could be cases that come up, but if the intention is quite obvious and very clear why the decision is being taken, could he tell us why—no matter the number of days that you give for the transition—a very rich oligarch could not still bring a case regardless? I cannot understand why we have gone from 18 to six months, and now the Government are saying to stick at six because there will be a legal case. As a legislator, I just do not understand that.

[Lord Callanan (Con)]

I am happy to explain it to the noble and right reverend Lord. This is a severe piece of legislation retrospectively interfering with someone’s property rights going back—in the case of England and Wales—to 1999. Somebody could not have known when they entered into that transaction that we would wish to retrospectively legislate for that. There is a section in the Human Rights Act—I think it is the section quoted by my noble friend—about enjoyment of property and we are interfering with that. Bearing in mind that these are overseas entities for which contact details are sometimes not available, my advice is that we need a reasonable period for the entity concerned to become aware of their legal obligations. The rich oligarch mentioned by the noble and right reverend Lord may wish to bring a challenge against us on the basis that we had not allowed a reasonable period. What a “reasonable period” is then becomes a matter of legal definition and argument, for which there are obviously a variety of views. That is probably the best summation I can give of the case. I hope that satisfies the noble and right reverend Lord.

Moving on to the famous Amendment 92, I thank the noble Lord, Lord Coaker, for his innovative suggestion for a wide-ranging power for the Secretary of State aimed at preventing asset flight before the formal imposition of sanctions. I hope the measures we have added in the other House go a significant way towards dealing with the kinds of situations the noble Lord may have in mind. The sanctions measures in the Bill are designed to ensure that we are able to respond even more effectively to world events using those sanctions. While, of course, we are living in unprecedented times, I am concerned that his proposals would give huge amounts of power not just to the Secretary of State in relation to Putin’s regime but to future Secretaries of State with regard to people who are not yet the subject of sanctions regimes. Much as I hate to admit it, I think I agree with the noble Lord, Lord Pannick—for a change—on this one. We need to tread carefully on such matters. Indeed, this amendment would provide an open-ended power to freeze assets for an unspecified period prior to sanctions being imposed and includes custodial penalties for those who breach it.

I think we have led the world in sanctioning Putin and his cronies. In some areas we have gone further than the EU; for example, we have banned all 3 million-plus Russian companies from getting loans in the UK or from listing. The Government strongly support measures to ensure that sanctions are effective and will continue to keep under consideration all steps necessary to achieve that. In light of what I have said, I hope the noble Lord will not press the amendment, but this is on the understanding and with the commitment that the Government will continue to keep under review how we ensure that we have all the tools at our disposal to ensure that sanctions are as effective as possible.

In conclusion, I am aware of the strength of feeling in the House on this issue of the transition period. It has been made clear to me in meetings, in particular with the noble Lord, Lord Coaker, and the Opposition Front Bench, and the noble Lord, Lord Fox, and the Liberal Democrat Front Bench. I have listened carefully to the points made in this debate, particularly the powerful remarks made by the noble Lord, Lord Coaker, and I am grateful for the constructive approach that the Opposition in particular have adopted on this matter. I will, of course, continue discussions with the noble Lord, and I am sure we will continue to talk these matters through before we commence Report on the Bill. I beg leave to withdraw the amendment.

Amendment 33 withdrawn.

--- Later in debate ---

[Lord Coaker (Lab)]

My Lords, I am grateful to my noble friend Lord Eatwell for moving Amendment 42. As we all know, he has a huge amount of experience in this field, having overseen many of these matters in another jurisdiction. He has long pressed the Government to introduce a register of this kind, but Amendment 42 calls for proper data verification. As we have heard from a number of noble Lords—the noble Lords, Lord Vaux and Lord Cromwell, the noble Baroness, Lady Kramer, and others—it is essential to the credibility of this Bill to ensure that any data is verified and accurate, as my noble friend Lord Eatwell put it.

The Government moved a little on this topic when the Bill was in the House of Commons, passing what was then Amendment 49, as we heard from other noble Lords, requiring the Secretary of State to lay regulations outlining the verification process before the register goes live. We welcome that move as it provides greater certainty, but as we have already heard, it prompts a number of supplementary questions and, in our view, does not go far enough. That is what Amendment 42, which we support, seeks to address.

When will we see the regulations? Will the process be based on previous consultations or require a separate engagement exercise? What if they are brought forward and the envisaged process is deemed inadequate? What if we end up getting the Bill before the SI has been laid? As with the earlier group on the transition period, we need greater clarity on process and timescales. Surely, accurate, verified data as required by my noble friend Lord Eatwell’s Amendment 42 is essential; without it, the Bill simply will not succeed.

[Lord Callanan (Con)]

I first thank the noble Lord, Lord Eatwell, for tabling Amendment 42 and for his thoughtful contribution at Second Reading on the same subject. He is, of course, absolutely right: I agree wholeheartedly that ensuring the public can be confident that the data on the register is reliable is of the utmost importance. That is why, as has been referred to, the Bill already provides for the making of regulations to create a robust and effective verification mechanism.

Clause 16 sets out that:

“The Secretary of State must by regulations make provision requiring the verification of information”,


which must be in place before an overseas entity can undertake certain actions. These actions include applying for registration to, or removal from, the register. Clause 16 sets out that these regulations can include provisions about

“the information that must be verified … the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes”

of registration, updating of information and removal from the register.

This amendment seeks to add a statutory responsibility on the registrar to ensure the verification of any information provided to the registrar in accordance with the regulations made under Clause 16. The amendment would place responsibility for ensuring that information is verified on to the registrar, which means that the registrar would have to be satisfied that the information provided at the application stage is verified. We believe that such an addition would be nugatory to the already robust verification process that will be set out in regulations attached to this Bill once it has passed through Parliament.

The regulations that will be made under Clause 16 include the ability to specify the types of statements and evidence that the registrar can require in order to be satisfied that the information submitted to the register is appropriately verified. We expect that UK professionals regulated under the money laundering regulations will have a role to play in the verification process. We are, of course, aware of concerns raised in this House about enablers who might seek to undermine our systems. The verification process that will be set out in regulations will ensure that, whatever process is used, it cannot be undermined by enablers of unlawful activity. To support this, as was referred to by the noble Lord, Lord Coaker, we have also put forward an amendment that would ensure that, where anyone submits information that is false or misleading without reasonable excuse, they can be held to account for that.

I would also direct noble Lords’ attention to the amendment tabled by the Government in the other place, which committed to bringing regulations made under Clause 16 into force before any applications for registration may be made under Section 4(1). Therefore, creating a specific statutory requirement for the registrar to secure verification, as the amendment proposes, is in my opinion not necessary. The verification mechanism already contained in the Bill will ensure that those engaging with the regime have confidence in the information held on the register. I therefore hope that the noble Lord will feel able to withdraw his amendment.

[Lord Eatwell (Lab)]

My Lords, I always think that the government defence of “not necessary” is the weakest we ever hear in this House. My amendment calls for a clear statutory requirement for verification. Just think of the contrary, which the noble Lord is supporting: that there will not be final statutory verification, and that information will be provided by professionals, enablers. He says that we can ensure that this will not “undermine the process”. If he believes that, he will believe anything. How can he ensure that it will not undermine the process, unless there is a means of checking that it is not undermining the process?

We are dealing with very sophisticated crooks with the best legal advice that money can buy and the Minister is leaving the Bill naked, with the key protection lacking that is necessary to sustain confidence in financial markets in this country. This is a sad day for the probity of those markets. Having said that, regrettably, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, Amendment 43 is also signed by the noble Lord, Lord Coaker. During Second Reading, I spoke at length on this issue, so noble Lords will be pleased to know that that allows me to be brief in Committee. The amendment is clear, but I shall briefly explain its purpose. Frankly, it is one of the simpler amendments we have before us.

Clause 18 deals with exemptions. Subsection (1) gives the Secretary of State the power to write to a person to exempt them from this part of the Bill if said Secretary of State is satisfied that one of three conditions is fulfilled:

“(a) in the interests of national security … (c) for the purposes of preventing or detecting serious crime”—


I do not think any of your Lordships would find that an unacceptable condition—but

“(b) in the interests of the economic wellbeing of the United Kingdom”.


First, what does that mean, and secondly, why is it there?

The Minister heard not just my words but the compelling words of the right reverend Prelate the Bishop of Leeds, my noble friend Lady Kramer and others who explained—and I hope the Minister understood—why Clause 18(1)(b) is the wrong message to be sending, particularly at this time. I explained this issue to some members of the general public—people who do not actively engage in the sport of politics—and asked them what they thought. Their reply was, “Isn’t that the approach that got us into this trouble in the first place?” Quite. That is the message that the clause is sending.

This part of the Bill is designed to deliver transparent information that can be used by authorities, potential business partners and others to avoid trading with kleptocrats, thieves and money launderers. Hiding that information unnecessarily cannot be good for the economy. Why would a Secretary of State want to do that in these conditions? Amendment 43 removes that power from the Bill, and I beg to move.

[Lord Callanan (Con)]

My Lords, it might be helpful for the Committee, before it debates this amendment, if I set out that of course I am aware of the strength of feeling on this issue and am very grateful for the engagement with the noble Lords, Lord Coaker and Lord Fox, and others on it over the weekend and the past few days.

As I indicated earlier, we are keen to progress this vital legislation collaboratively and swiftly, and I again pay tribute to the Opposition for helping us to do that. Therefore, if I tell the House that the Government are prepared to accept Amendment 43 tabled by the noble Lords, Lord Fox and Lord Coaker, should they wish to re-table it on Report, perhaps that would enable a more speedy consideration of this group.

[Lord Agnew of Oulton (Con)]

My Lords, in view of that, I will not press my Amendment 44.

--- Later in debate ---

Moved by

[Lord Callanan]

54: Clause 32, page 19, line 13, at end insert—
“(5A) The Secretary of State must consult the Department of Finance in Northern Ireland before making regulations under subsection (4).”Member’s explanatory statement
This amendment requires the Secretary of State to consult a Northern Ireland department before making regulations under Clause 32(4).

[Lord Callanan (Con)]

My Lords, Amendments 54 and 84 require the Secretary of State to consult the devolved Administrations before making regulations on devolved land matters. It is appropriate when the Secretary of State is legislating on devolved matters in this space to consult the responsible devolved Ministers. This approach is supported by Ministers in the Northern Ireland Executive and in the Scottish Government.

The Bill seeks to make amendments to the Land Registration Act (Northern Ireland) 1970 to capture properties in Northern Ireland within the register of overseas entities by adding a new Schedule 8A. Clause 32 of the Bill allows the Secretary of State to amend by regulation the new Schedule 8A measures on Northern Ireland land provisions and the register of overseas entities.

It is, of course, convention that Westminster shall legislate only with the consent and support of devolved Ministers on devolved matters. The support of Northern Ireland Ministers has been secured for the provisions of the Bill but, should the measures be amended in the future, it is justified that the Secretary of State ought to consult with the Department of Finance before laying regulations. It is for this reason that Amendment 54 is being made. It will ensure that devolved Ministers continue to contribute on devolved matters.

The Bill also makes amendments to the Conveyancing (Scotland) Act 1924 and the Land Registration etc. (Scotland) Act 2012, including adding new Schedule 1A to the 2012 Act to include Scottish properties bought on or after 8 December 2014 within the scope of the register of overseas entities. Paragraph 13 of Schedule 4 to the Bill allows the Secretary of State to make further provisions for the purpose of requiring or encouraging an overseas entity owning land in Scotland to submit to the register of overseas entities.

As with Northern Ireland, Scotland has devolved competence for land provisions. I am pleased to say that the Bill has secured a legislative consent Motion from the Scottish Parliament, but this amendment would ensure that Scottish Ministers are consulted before regulations are laid, which will further impact those devolved matters. I beg to move.

[Lord Hope of Craighead (CB)]

My Lords, as someone who takes a close interest in devolution matters, I am delighted with these amendments. I have quite often moved amendments in similar terms and not been successful. It is a pleasure to see the Minister produce amendments in the very terms that I would have liked to have seen in the Bill. I very much welcome them both.

--- Later in debate ---

[Baroness Smith of Basildon (Lab)]

I can add to the Minister’s embarrassment. We are pleased to see these amendments brought forward. I have two questions. I think I understand why it is different, but it might be helpful if the Minister could put on record why one amendment refers to the Department of Finance in relation to Northern Ireland yet in the other, for Scotland, it is Scottish Ministers. It seems slightly odd. Secondly, has formal engagement begun already and, if not, when will that start? Overwhelmingly, we thank the Minister and hope that this is a sign of things to come.

[Lord Callanan (Con)]

I should quit while I am ahead on this one. I am not sure this will continue with other Bills, but let us welcome it when it happens.

I thank noble Lords for their brief comments. I am happy to confirm to the noble Baroness, Lady Smith, that engagement has already started. I have spoken to Scottish Ministers. I think I spoke to Welsh Ministers, but if not some of my colleagues have. I definitely also spoke to Ministers from Northern Ireland. I will get back to her with the precise reasons why it is the Department of Finance. I suspect the problem is that we have not been able to get a formal consent Motion from the Northern Ireland Assembly because it is not sitting, but we do have written confirmation from the Ministers that if the Assembly had been sitting they would have recommended that a legislative consent Motion be granted. I suspect that is why the Department of Finance is mentioned, rather than the Northern Ireland Assembly.

After moving the amendment, I now ask that it be withdrawn so that I can retable it and the other amendments on Report.

Amendment 54 withdrawn.

Economic Crime (Transparency and Enforcement) Bill

Lord Callanan Excerpts

Monday 14th March 2022 Lords Chamber

Moved by

[Lord Sharpe of Epsom]

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 4, Schedules 1 and 2, Clauses 5 to 32, Schedules 3 to 5, Clauses 33 to 65, Title.

Motion agreed.

Economic Crime (Transparency and Enforcement) Bill

Lord Callanan Excerpts

3rd reading
Monday 14th March 2022 Lords Chamber

Moved by

[Lord Callanan]

That the Bill do now pass.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, it is my great pleasure to thank all those who have supported the progress of the Bill. First, I thank the House of Lords Public Bill Office, the House clerks and the Office of the Parliamentary Counsel for their support and extremely hard work in ensuring that the Bill could be expedited through the House. In particular, I thank our new star of social media, my noble friend Lady Bloomfield—we shall all have to be very careful and make sure that we are paying attention when she is in the House in future—and my noble friends Lady Williams and Lord Ahmad, who have ably assisted me in getting this cross-cutting legislation through the House.

I also give particular thanks to my private office and the whole of the Bill team in both BEIS and the Home Office. All the civil servants working there are a credit to their profession. I can tell the House that they were working evenings and weekends. People were texting me at 10 pm last night, on a Sunday evening, on the details—so they have really assisted us by working hard. That is in addition to all the officials across government, in BEIS, the Home Office, the Treasury and the Foreign, Commonwealth and Development Office, who have all contributed by working tirelessly to get the Bill to this point. I also want to remember the late Nick Skates, a dedicated civil servant who spent many years working on these issues, tackling economic crime, who is very sadly not with us today to see the fruits of his labour.

I also give particular tribute to the Opposition spokesmen, the noble Lords, Lord Coaker and Lord Fox, and all their colleagues—the noble Baroness, Lady Chapman, and others—for their constructive challenge and continued support for the Bill. I am grateful to Members across the House for their valuable engagement and contributions to our debates on the Bill; it has been immeasurably improved by the work that they have put in in such speedy and short order. I also thank them for the support that they have already expressed for the upcoming second economic crime Bill, which the Government will introduce in the coming months, in the next parliamentary Session. I also pay tribute to the Joint Committee on the Draft Registration of Overseas Entities Bill, which, a few years ago, helped ensure that this legislation was in a good place prior to its introduction.

I express my gratitude and thanks to the devolved Administrations in Wales and Scotland for their support for the Bill. We are delighted that a legislative consent Motion has been agreed with Scotland.

I also thank the Northern Ireland Executive’s Department of Justice, the Department for the Economy and the Department of Finance for their support. In the absence of the Northern Ireland Executive, a legislative consent Motion cannot be secured from the Northern Ireland Assembly. However, given the active support of Northern Ireland Ministers, the Government have agreed to proceed with legislating on behalf of Northern Ireland. Ministers in Northern Ireland have, of course, been made aware of this. Both my department and the Home Office will continue to engage with Northern Ireland executive officials on devolved matters as the Bill is implemented.

The Bill will target sources of illicit wealth and their permeation through our economy. We will cut off these funds. We will send a message that the United Kingdom will not stand idly by when this exploitation is taking place. We will show the Kremlin that the United Kingdom will not facilitate or accept any aspect of aggression against any democratic nation. We will do so united, cross party and working together to bring these matters to fruition. I commend the Bill to the House.

[Lord Coaker (Lab)]

I start by thanking various people—including my family, who put up with me being on the telephone most of the weekend, often to the Minister. It was worth it in the end, as they say.

On a serious note, I thank everyone. This is a fast-tracked Bill, and that puts pressure on everybody. It is important to thank people at this time; it is a courtesy of the House but an important one to thank the staff, the clerks, the officers of the House and everybody who has enabled us to function in the way that we have and to put this extremely important legislation through the House. We are passing legislation which impacts on millions of people’s lives in this country, across Europe and beyond, and in thanking each other for doing that, we all ought to reflect perhaps a little more than we sometimes do on the enormity of the work that we do and the responsibility that we have. The people we are thanking should realise that they have made things possible in the Parliament of the United Kingdom, and that is something to remind ourselves of.

I also thank my colleagues: my noble friend Lady Chapman—who as we know has had to give her apologies for personal reasons today, and we wish her well—my noble friends Lord Kennedy and Lady Smith, and Dan Stevens in our office, who has worked tirelessly to keep us informed about the importance of different parts of the legislation.

I also thank the noble Lord, Lord Fox, and his colleague the noble Baroness, Lady Kramer, and others, for the work that they have done with us; and the many noble Lords across the Cross Benches who have taken the trouble to send me information, talk to me and give me the benefit of their expertise and knowledge. I have been very grateful for that; I hope that it has improved the contributions that we have all made to the House and in the end will improve the legislation that we take forward.

I thank the Minister again, as I did earlier, and his colleagues on the Front Bench for the co-operation that they have given us. Obviously there have been debates and discussions, but we have all had at the forefront of our minds the need to get the legislation through, and this has been a template for how to do that. I ask him to pass that on to all his colleagues. This is something important for our country.

This economic crime Bill 1—as we are calling it—needs to be improved, but we should remind ourselves that the bit that needs improving is not the emergency part. We should remind ourselves that we have passed an emergency Bill that allows us to do what we all want: to take effective action against dirty money within London—perhaps it should have been done before, but at least we are doing it now—and send a message to President Putin that he cannot act with impunity on the invasion of Ukraine. We stand united to try to deal with that. On the sanctions part—the real emergency part of the Bill—we all remain united. The message should go out clearly from this House of Lords back to the House of Commons and from us to the people of Ukraine, and to Russia itself.

As the Minister said, we will be moving from this economic crime Bill to an economic crime Bill 2. I am very grateful for the concessions he made. He will know the disquiet in the House about certain measures in the existing Bill, but he said that he would take that on board and reflect on the opinions expressed. It will allow us to take forward economic crime Bill 2 early in the next Session and build on the work we have done by putting improvements into it. Looking at various Cross-Benchers and around the House, I know that we will end up with a big economic crime Bill 2, which in the end will deliver the sort of legislation we all want to tackle the dirty money in our country.

I thank everyone again. It has been a pleasure and a privilege to be involved with this and I thank the Minister again for that.

National Minimum Wage (Amendment) Regulations 2022

Lord Callanan Excerpts

Thursday 10th March 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the National Minimum Wage (Amendment) Regulations 2022.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the purpose of these regulations, which were laid before the House on 31 January 2022, is to raise the national living wage and the national minimum wage rates on 1 April 2022.

We are committed to making the UK the best place in the world to work and build a business. The pandemic has presented extraordinary circumstances. The labour market shows strong signs of recovery but both workers and businesses will be concerned about the rising cost of living. Our approach must always balance the needs of both.

The UK labour market’s recovery from the pandemic is one to be proud of. The current number of payroll employees is over 400,000 more than pre-pandemic levels, and unemployment has fallen to 4.1%. This success is in no small part due to government intervention, most notably the Coronavirus Job Retention Scheme, which supported more than 11 million jobs over the course of the pandemic. The UK’s economic recovery has been no less impressive. GDP at the end of 2021 recovered to the pre-pandemic level and increased by an estimated 7.5% over the year.

However, we are aware that a key issue on people’s minds is the rising cost of living. We have already acted to support households with rising energy bills. We recently announced a package of measures worth £9.1 billion for 2022-23, including a £200 reduction in energy bills and a £150 rebate on council tax bills for all households in bands A to D in England. These are in addition to measures that we have already announced, such as cutting the universal credit taper rate and freezing fuel duty for the 12th year running.

Central to managing the cost of living in the long term is the creation of a high-skill, high-wage economy. We are committed to doing just that. Through policies such as the plan for jobs, we are helping people get into work and gain the skills they need to prosper, progress and succeed. We are also committed to supporting the lowest paid on this issue. Since 2015, we have increased the national living wage significantly faster than average wages and more than twice as fast as inflation, meaning more money for the lowest-paid workers. The increase in the rates this year will continue to protect the lowest paid against the increase in the cost of living.

These regulations will increase the rates of the national minimum wage and the national living wage from 1 April. We estimate that these will provide a pay rise to around 2.5 million workers. I am pleased to say that the Government accepted all the rate recommendations made by the Low Pay Commission in October 2021. The commission is an independent body that brings together the views of business and workers and is informed by expert research and economic analysis. Once again, I express my gratitude for its excellent work and well-informed recommendations.

The Government have a target for the national living wage to equal two-thirds of median earnings by 2024. Commissioners made their recommendations last October, taking into consideration the target and the strong economic and labour market recovery to that point alongside the remaining uncertainty and feedback from a wide range of stakeholders. We are delighted that this increase keeps us on track to reach our target for 2024; we remain committed to it. The Low Pay Commission made its recommendations on the basis of significant stakeholder evidence from business, workers and academic representatives. Businesses spoke of the variety of concerns they faced at that stage of recovery, as well as how they continue to plan for the future based on our target for the national living wage.

These regulations will increase the national living wage for those aged 23 and over by 59p to £9.50—an increase of 6.6%. A full-time worker on the rate will be more than £1,000 better off over the course of the year. The regulations will also increase the rates for younger workers and apprentices. Workers aged 21 and 22 will receive an increase of 82p an hour—a 9.8% increase—to see a minimum hourly rate of £9.18. Workers aged between 18 and 20 will be entitled to an extra 27p an hour, taking their rate to £6.83. Under-18s will have a 4.1% increase of 19p, to an hourly rate of £4.81. Apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 11.9% to an hourly rate of £4.81—51p more. This rate will remain equal to, but separate from, the under-18 rate. The regulations will also increase the amount that employers can charge workers for accommodation without it affecting their pay for national minimum wage purposes. From 1 April, it will be £8.70 per day.

Looking ahead, the Government have pledged to continue raising minimum wage rates. As set out in our manifesto, we have set a target for the national living wage to reach two-thirds of median earnings by 2024. To improve fairness for younger workers, we also have a target to further reduce the age threshold for the national living wage, making it apply to those aged 21 and over by 2024. These targets remain dependent on economic circumstances, and we will monitor the labour market carefully.

In conclusion, these regulations ensure that the lowest paid are fairly rewarded for their contribution to the economy. The Government will continue to monitor the impacts of increasing the minimum wage and will remain abreast of concerns about the cost of living. We will shortly publish the remit to the Low Pay Commission for 2022, asking it to provide recommendations for new minimum wage rates to apply from April 2023. I commend these regulations to the House.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the Minister for his introduction and welcome the fact that the figures are being increased. The support of the Government for having a minimum wage is to be welcomed. The Bible tells us that reformed sinners are to be welcomed. It does not say that we should not remind them of their previous sins. To be honest, I wasted a bit of time re-reading the Second Reading of the National Minimum Wage Bill in your Lordships’ House in 1998. I have several good quotes. The Conservative Front-Bench spokesperson said:

“If the Government go ahead with this legislation they will have to accept that business closures will lead to extensive unemployment in country areas.”—[Official Report, 23/3/98; col. 1078.]


There are several other statements on a similar theme. So I extend a welcome to a reformed sinner.

The second, brief point I will make is that of course this is not the real national living wage, as I am sure the Minister is aware. There was a national living wage before the Government co-opted the title, and it is somewhat greater than the figure being presented to us today. So I ask the Minister: have the Government considered the continued gap between their version of the national living wage and what I regard as the real living wage?

Finally, my main point, and why I am here today, is on the issue of pensions. I argue, and ask the Minister to accept, that a national living wage has to have built into it sufficient resources so that people can retire on a decent pension. A national living wage should encompass not just the day to day but a reasonable pension when the recipient of the national living wage comes to retirement. The Low Pay Commission reported on a submission from the TUC setting out that point in some detail—it reported on it but did not respond to it. If you dig down through what the Government are doing on pensions, you see that they are simply adding a margin that reflects what a typical employer does. It begs the question: is that sufficient to provide a decent pension when people get to retirement? The answer is that it is not.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the Minister for his introduction to these proposals, and the Low Pay Commission for the thorough and very persuasive way it has drawn up its recommendations. The labour market during the Covid era was undoubtedly worrying, but it is good to see the evidence that, since the economy has started to pick up, pay growth has been the strongest for low-paid workers. As a result, the proportion of the workforce reliant on the national living wage has fallen from 6.5% to 5.4%.

We therefore welcome the decision of the Low Pay Commission to get back on course to meet the national living wage target of reaching two-thirds of median earnings by 2024. We therefore support the increase of 6.6% in the rate, lifting it to £9.50 an hour for those aged over 23, and the subsequent rates that follow on from that.

These recommendations were finalised in December 2021, but since then we have had rising inflation, a rising cost of living and now the reality of huge increases in energy bills. The Minister referred to that. Has any provision been made for the Low Pay Commission to monitor those significant surges in the cost of living, and potentially to make emergency adjustments to the pay rate to ensure that the lowest-paid workers can survive the coming financial crisis without falling into debt? In the first instance, I suggest that the Government could go further and scrap the national insurance increases, and indeed adopt Labour’s policy of a minimum wage of at least £10 an hour, which would go some way to alleviate the pain.

I also support my noble friend Lord Davies’s point about pensions. He made an important point about pension payments needing to be factored into the living costs of the lowest paid. They therefore should be included as part of the statutory scheme.

Moving on from that, I ask the Minister: what happened to the other recommendations in the Low Pay Commission report? Will they come before us separately? I read the report, and it is clear that the commission has, for example, done a great deal of work on the domestic workers exemption, where staff such as au pairs and domestic servants live with a family. As it says in its report, it heard a great deal of distressing evidence from individuals whose hidden voices are rarely heard. As a result, it made a definite recommendation to remove the domestic worker exemption in Regulation 57(3) of the 2015 regulations. What happened to that recommendation?

Secondly, the commission addressed the issue of the pay for individuals involved in sleep-in shifts in social care. This was subject to a Supreme Court ruling this year, leading to calls for more clarity and consistency. The Low Pay Commission identified that there was a variety of practices across the sector, with payments “unregulated” and

“determined by negotiation between commissioning bodies, providers and the workforce.”

It concluded that any further clarification should be “linked to wider plans” for social care funding currently being considered by the Government. Can the Minister confirm that this issue is being considered in the context of the social care reforms, and that adequate money is being set aside to encourage new people into the sector, including those required to sleep over with those for whom they are caring? If we are not careful, this issue, which the Low Pay Commission has flagged up, will fall between all of these stools: it will not be delivered as part of the minimum wage recommendations and it will not be part of the social care reforms either. Once again, those care workers will fall through the crack.

Finally, we welcome the fact that the commission will carry out further work on the impact of low pay on those with protected characteristics, including younger, older, disabled and women workers, and workers from ethnic minorities. We recognise the complexities of untangling the cause and effect of these trends, but given the undoubted pay gaps that we know exist, we believe further measures may be required to rebalance the pay and employment opportunities of these disadvantaged groups.

I hope that the Government’s remit to the Low Pay Commission for next year will ask it to do further work on this issue so that we can be completely satisfied that the pay rates are being sufficiently addressed. I look forward to the Minister’s response.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Davies, and the noble Baroness, Lady Jones, for their valuable contributions to the debate. The points raised demonstrate the importance of providing a pay rise to workers, and both noble Lords welcomed the increases.

The national minimum wage and national living wage make a real difference to millions of workers in this country, and I am obviously glad that there is cross-party agreement in the House that these increases, which will help to protect workers in all parts of the UK from increased inflation and protect their standards of living, should proceed. It is just a shame that the Liberal Democrats obviously did not consider it important enough to join us for this debate, but I am glad that the other two noble Lords have. The national minimum wage and national living wage have increased every year since their introductions. The regulations mean that, on 1 April, full-time workers on the national living wage will earn over £5,000 more than they did in 2015, when it was introduced.

Everyone will note that, once again, the Government’s impact assessment has received a green fit-for-purpose rating from the Regulatory Policy Committee, which is just as well because I am the Minister responsible for that committee. The impact assessment estimates around 2.5 million low-paid workers will benefit from the minimum wage increase. We estimate there will be a total wage benefit to workers of about £1.3 billion. The total cost to employers for implementing the LPC’s recommended rate is estimated at £1.6 million. This marks a 42% increase in the national living wage since the policy was first announced in 2015. Of course, younger workers will also get more money from the increases to the national minimum wage.

I turn to the points raised by the noble Lord, Lord Davies. The Government of course consider the expert and independent advice of the Low Pay Commission when setting these rates. We reward workers with the highest possible minimum wage, while considering the impact on the economy and, of course, the affordability for businesses. The Low Pay Commission draws on economic, labour market and pay analysis, independent research and stakeholder evidence. The key distinction between the Low Pay Commission rates and the other rates, such as the Living Wage Foundation’s voluntary living wage, is that the Low Pay Commission has to consider the impact on businesses and the economy.

I turn to the next point that the noble Lord, Lord Davies, raised on pensions. From April, the full yearly basic state pension will have increased by over £2,300 in cash terms since 2010. The overall trend in the percentage of pensioners living in poverty is a dramatic fall over the recent decade. There are 200,000 fewer pensioners in absolute poverty, both before and after housing costs, than there were in 2009-10. The Low Pay Commission considers all aspect of low pay when making its recommendations for minimum wage rates.

I move on to points made by the noble Baroness, Lady Jones. In response to the points about the Low Pay Commission considering the change in the cost of living, we consider the expert and independent advice of the commission when setting the rates. The LPC’s remit is for the national living wage to reach two-thirds of median earnings by 2024, subject to wider economic conditions. Since its introduction, the national living wage has grown more than twice as fast as consumer prices. This year’s increase will be the largest ever in cash terms and will help to protect the income of 2 million low-paid workers against the cost of living. In April, a full-time worker on the national living wage will see their annual earnings rise, as I said, by over £1,000. I also said in my introduction that we will shortly publish this year’s remit for the Low Pay Commission, which will once again continue to consider a wide range of stakeholder and academic evidence.

On the point made by the noble Baroness about social care, we are incredibly proud of all the work that our health and social care staff do and recognise their extraordinary commitment. The 1.5 million people who make up the paid social care workforce provide an invaluable service to the nation—and did so especially during the pandemic. The noble Baroness will be aware that we recently brought forward our strategy for the adult social care workforce in the People at the Heart of Care: Adult Social Care Reform White Paper. That was backed by at least £500 million to develop and support the adult social care workforce over the next three years. This historic investment will enable a fivefold increase in public spending on the skills and training of our direct care workers and their registered managers. This will include hundreds of thousands of training places, certifications for care workers and the professional development of the regulated workforce. It will help support our commitment to ensure that those who receive care are provided with choice, control and support to live independent lives, that they receive outstanding quality and tailored care, and that people find social care fair and accessible.

Since the introduction of the national living wage in 2016, care worker pay has also increased at a faster rate than ever. So I hope that the noble Baroness will accept that we remain committed to supporting worker protections through this crucial policy and to ensuring clarity for businesses on how the policy will develop over the next few years. We will also run a communications campaign alongside the uprating, thereby helping workers to check their pay and supporting businesses to make the necessary changes. We will also continue to monitor the labour market closely over the coming months. We will continue to prioritise enforcement of the minimum wage through HMRC’s ongoing work and the naming scheme, where we will continue to name employers who have underpaid their staff. We named 208 employers on 9 December 2021, including some of the UK’s biggest household names. To date, we have named more than 2,500 employers.

As the noble Baroness also mentioned, the Minister for Small Business, my colleague Paul Scully, confirmed in the House of Commons that we will bring forward regulations to remove the exemption from minimum wage legislation for so-called live-in domestic workers such as au pairs. This change will newly extend this right to them, ensuring that those workers receive the wages that they deserve and that we thereby do our bit to help tackle exploitation.

I again thank the Low Pay Commission and its staff for gathering the extensive evidence and providing well-reasoned recommendations. It gives me pleasure to commend these regulations to the House.

Motion agreed.