Economic Crime and Corporate Transparency Bill

Lord Eatwell Excerpts

Consideration of Commons amendments
Monday 11th September 2023 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, I shall speak in favour of my Motion D. I am grateful to my noble friend the Minister for his ongoing dialogue with me as we grind to the end of this Bill: he has been patient and courteous, as ever. My problem is that the Government continue to say one thing and then do something different. Just to remind noble Lords, the reason I pressed my original amendment was that a gaping hole had opened up in this newly created register of overseas interests. It is barely a year old and we have more than 50,000 properties owned by an entity whose beneficial owners are withheld from public view. That is approaching one-third of all entries. It is rapidly becoming the default advice from cute law firms to their overseas clients to use a trust structure that is opaque.

In rejecting my original Commons amendment, the Government claimed refuge behind the principle of financial privilege. This is bizarre, if not worse, but in a spirit of collaboration I will not use the word that I had planned to use. The costs to Companies House of publishing trust information are estimated on the back of an illusory envelope at between £600,000 and £2.8 million—a figure supported by absolutely no methodology—but under the Bill, Companies House funding is going to rise exponentially. The current filing fee of £13 will rise to anywhere between £60 and £90 if the guidance we have been given is followed. Taking the bottom-end number, £60 means an increase of £47 a year times 4 million companies, or £188 million a year, against this odd figure of £600,000 to £2.8 million. Even if the higher filing fees deterred some company creation or dissolution for non-viable entities, the additional cost, frankly, is a rounding error. Indeed, if the Government were to approach this logically and calculated that as a transparency cost, it would be around about 70p per registered company per year, or about 1.25%.

I give this example only because I continually worry that I get very clear assurances from the Minister but the actions taken by the Government are rather different. I accept through gritted teeth that we cannot debate that amendment as I was blocked from tabling it. This leaves us with a much watered-down proposal to try to hold the Government to account to get on with the consultation they say they need to ensure that there are no legal challenges. The Government have accepted that they need to start straightaway, in this calendar year, but they do not yet accept the principle of my proposed new subsection (2) that the consultation includes the principle of public access to protected data on a bulk basis.

This sounds arcane, but it is crucial because currently HMRC is not providing the information when requested, and it can be requested only on a case-by-case basis. As I have shown, there are already more than 50,000 hidden owners where the public are being denied the information, so doing it individually is simply not practical. I have consistently said that those with a bona fide need for confidentiality should have it, but this would be a very small proportion of the 50,000.

On the terms of the consultation, there are a couple of elephant traps that the Government should be aware of. A few years ago, when the consultation was issued to tighten up the non-dom loopholes, the lawyers’ excuse for not tightening them up was that anyone who declared non-dom status should have a reasonable expectation that it should last in perpetuity. That sounds pretty sinister to me, but apparently that argument has already been rolled out to civil servants on the issue of more transparency with trusts. I warn the Minister to be alert because, as I understand it, civil servants have already expressed their compliance with this idea. I hope that we as politicians are still running the country, not the civil servants.

We have heard from my noble friend the Minister and he has given commitments, which I very much appreciate. However, I hope he understands why I am extremely nervous: what he says and what the Government do are not always totally aligned. I will take his words exactly as he says them, though, and I ask him to keep a very careful eye on this process over the next few months. I think he has learned enough about me to know that, for all my many weaknesses, one thing I am is dogged. We will keep a careful eye on this. On that basis, I will withdraw my amendment.

[Lord Eatwell (Lab)]

My Lords, I strongly support the amendment from the noble Lord, Lord Agnew. I do this as a former chair of the Jersey Financial Services Commission. In Jersey we made a major effort to increase the transparency of trust information so that beneficial ownership could be accurately identified. One of the inhibitions for cleaning up, if you like, the register in Jersey was the behaviour of the Government in the United Kingdom, and their persistent obfuscation of the way in which trusts were to be treated.

The amendment from the noble Lord, Lord Agnew, contains exactly the process that needs to be dealt with in a consultation. I understand the assurances he may have received and that he may feel it appropriate to withdraw his amendment, but I hope he proves as dogged as we know him to be in pursuing this. I assure him of my continuing support.

[Lord Faulks (Non-Afl)]

My Lords, I also support what the noble Lord, Lord Agnew, has said and done. I am very sorry that the Government did not accept the amendment in relation to trusts. It was entirely in keeping with the purpose of the Bill, and more specifically with the purpose of the introduction of the register of overseas entities.

Some of us have been advancing the cause of this register—some would say banging on about it—for some considerable time. I had the privilege of chairing the Joint Committee on a draft Bill. We recommended legislation as soon as possible. Unfortunately, it took the invasion of Ukraine for the Government to incorporate the necessary legislation into the last economic crime Bill.

During the taking of evidence by the committee in 2019, the need to avoid trusts being used to avoid the identification of the true owner of property was specifically brought to our attention. It then became part of our recommendations that the legislation, when it came before your Lordships’ House, should cater for this obvious loophole. The Government ignored the recommendation then and have now resisted the amendment passed by your Lordships’ House.

If there is concern about minors and keeping them ignorant about their status as beneficiaries, this could have been catered for by an appropriate provision. Instead, the Government, against whom the former Lord Chancellor voted in the other place on this issue, have resorted to “financial privilege” as a means of blocking the amendment.

Trust lawyers are going to be very busy, as foreign owners will set about frustrating the purpose of the register and the aspirations that we all share for this and related legislation. I hope the Government bear that in mind.

Economic Crime and Corporate Transparency Bill

Lord Eatwell Excerpts

Consideration of Commons amendments
Wednesday 18th October 2023 Lords Chamber

[Lord Wallace of Saltaire (LD)]

My Lords, I will talk a little about the role of the House as a revising Chamber and the legislative process. I am not an expert on the legalities of combating fraud, although I am well aware of the international dimensions of economic crime as someone who worked in the international sphere.

We have had a thorough committee process which was largely non-partisan; indeed, the way this House has treated the Bill has been almost entirely so. I have learned a great deal from a number of former Conservative Ministers and Cross-Benchers on the Bill, and I am interested to hear that two other former Conservative Ministers in the House of Commons supported the approach of these two Motions.

We are a revising Chamber, and the parliamentary process should be one in which reasoned amendments are taken into account by the Government and, where the Government are not entirely sure of their ground, compromises are made. The role of a Lords Minister is partly to act as a mediator between the reasoned arguments in this Chamber and the insistence of Cabinet Ministers that whatever they had thought of in the first place should absolutely go through unchanged. I have a strong memory of talking to Cabinet Ministers when I was a Lords Minister about why perhaps they might not wish to insist on their full original, because the reasoned arguments made in the Lords were sufficiently persuasive. That is the process that should be taken on. This is not an attempt to delay the Bill further: we are all committed to it going through. We are also committed to future-proofing it, so that it does not have to be amended, and to producing a Bill that commands as wide a consensus of support as possible.

I remind the Minister that we have not followed that for some Bills we have seen in recent Sessions. I am sure that he is well aware of the issue of party finance, which came up in the Elections Act and the National Security Act. He was sufficiently firm in resisting some of our arguments as to accuse me at one point of spreading rumours about a non-problem. I have now learned that the Leader of the Commons, Penny Mordaunt, has just written to the Security Minister to ask for the assistance of the intelligence agencies in investigating the origins of donations to political parties from foreign sources, so clearly there is now recognition within government that there is a real problem. There are other aspects of that Elections Act, particularly the insistence on a strategy statement from the Secretary of State, which the Government also appear to have had second thoughts on. Sadly, whoever become the next Government will have to introduce another elections Bill to put right some of the things that this House wished to amend but that the Government resisted.

Here we are with a Bill that has been improved and carefully scrutinised, and on which I, certainly, am persuaded by having listened at length and in succession to the arguments made by former Conservative Ministers wanting simply to improve the Bill to improve the fight against international fraud and economic crime.

Having been persuaded by that, I and the team on these Benches will recommend that Members of the Liberal Democrat group in the House support both the noble and learned Lord and the noble Lord in pressing their amendments, if they wish to do so, because we believe in a legislative process in which this House has a role to play, in carefully scrutinising and improving Bills, and making sure that when a Bill becomes an Act, it lasts for some time, because it commands a widespread consensus.

[Lord Eatwell (Lab)]

My Lords, I listened carefully to the case that the Minister advanced against these amendments. The core of that case seemed to be that the cost of a company actually responding to this legislation would make the company less efficient, and that it should be concentrating, as he said, on increasing its production and activities, and not be bothered with issues such as fraud, perhaps. What was peculiar about the Minister’s argument was that it was an argument which could be placed against any regulation whatever. It could be placed against the need, as has been commented already, to have seatbelts in cars. That increased the costs of production of the vehicle and, indeed, the cost of the vehicle. It could be argued that most financial regulation, which seeks to increase the stability and respectability of the financial system in this country, increases costs. Yes, it does, but the benefit far exceeds the cost.

If the Minister feels that the amendment of the noble and learned Lord, Lord Garnier, increases costs and damages production, why is he accepting it at all, even for larger companies? It seems to me that this is an empty argument. The Minister has not produced any data or argument for the cost-benefit trade-off on which he has rested his entire case. In fact, I think he has no case at all.

[Lord Coaker (Lab)]

My Lords, I start by echoing something that the noble Lord, Lord Wallace, said: overall, we all believe that this is a good Bill. It is a step forward, and we welcome the changes that the Government have made over a number of months to improve it, and that they have listened to the various points that have been made. It would be churlish not to say that to the Minister at the outset, but that does not alter the fact that the amendments tabled by the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Faulks, seek to address two omissions where, even at this late stage, the Government could act to further improve the Bill. I say to both that should they choose to test the opinion of the House, we certainly will support them in the Lobbies to do that.

I will not repeat the arguments. It was interesting; sometimes, when you are constrained by time, the argument distils down to its essence. I think that what the noble and learned Lord, Lord Garnier, said, supported by the noble Lords, Lord Agnew, Lord Eatwell and Lord Wallace, really summed it up with respect to his amendment. As he said, the failure to prevent bribery offence applies to everyone; there is no opt-out or exemption. The Government do not think that that is too burdensome for anyone. As he also said, no company is too small to be exempted from the failure to prevent tax evasion offence. But on this particular emphasis, the failure to prevent fraud, the Government come forward and say: “We need to protect a certain number of businesses”.

The noble and learned Lord, Lord Garnier, has moved amendment after amendment to try to come closer to the Government’s position. As the noble Lords, Lord Agnew and Lord Eatwell, have just said, if you took that to its extreme, you would impose no costs on business at all, and they used the seatbelt argument. So we are very happy to support the amendment of the noble and learned Lord, Lord Garnier, should he choose to test the opinion of the House.

I shall pick out one aspect of the amendment of the noble Lord, Lord Faulks. It was a feature of all our debates and discussions that we wanted law enforcement to take tougher action against those who committed fraud. We believed that the state could and should take more action, that the amount of money lost with respect to fraud was enormous and that we need to do something about it. What I picked out from what the noble Lord said was about reducing the possibility of action not being taken by law enforcement agencies because they were frightened of the possibility of costs —not on the merits of the case that they might seek to pursue but simply because they were frightened that they may incur costs. As such, both amendments are simple but important ones that would do what this House, and I believe the public, expect Parliament to do, which is to give as much power as possible within the Bill to tackle the problem of fraud, which is what we all want.