Economic Crime and Corporate Transparency Bill (Fifteenth sitting)

Tom Tugendhat Excerpts

Committee stage
Tuesday 22nd November 2022 Public Bill Committees

[The Chair]

With this it will be convenient to discuss that schedule 6 be the Sixth schedule to the Bill.

[The Minister for Security (Tom Tugendhat)]

It is a great privilege, as always, to be with you this morning, Mr Paisley, and to enjoy the possibility of conversing about the Proceeds of Crime Act 2002.

The clause introduces schedule 6 to the Bill, which amends the criminal confiscation powers contained in parts 2, 3 and 4 of the Proceeds of Crime Act 2002—known as POCA, not to me, but to some presumably—to make it easier for law enforcement agencies to seize, detain and recover cryptoassets in more circumstances than at present. Schedule 6 will amend the provisions in each of the three existing confiscation regimes that extend to England and Wales, Scotland, and Northern Ireland so that the measures apply in all parts of the United Kingdom. That is reflected in the three parts of schedule 6.

Key definitions in schedule 6, such as those of “cryptoasset” and “cryptoasset exchange provider”, are consistent with those used elsewhere in the Proceeds of Crime Act. The schedule includes powers to update those defined terms to ensure that the measures in the Bill can keep pace with the constantly evolving criminal use of cryptoassets, the rapidly changing nature of crypto technology as well as stay aligned with other legislation dealing with similar threats.

[Stephen Kinnock (Aberavon) (Lab)]

It is a great pleasure to serve under your chairship today, Mr Paisley. I take the opportunity to welcome the Minister to his place; I do not think that I have done so formally, although I might well have done informally. It is good to see him in his place.

I want to make some general comments about cryptocurrencies and about the clause and schedule 6. Broadly speaking, they have some positive aspects, but we also have some questions for the Minister, and I am sure that he will explain the position with his customary lucidity once I have sat down.

Cryptocurrencies and other digital assets are not new, but how they should be regulated is still very much an open question in the UK and internationally. The Government’s decision to expand the legal framework for asset recovery under the Proceeds of Crime Act is a positive development. For that to work, however, we need to be clear about what the legislation intends to achieve.

It is fair to say that the Government have sent mixed messages about their approach to regulating cryptoassets. On the one hand, they have acknowledged the need to tackle the use of cryptoassets for criminal purposes, hence the decision to extend the money laundering regulations to cryptoasset businesses, which has been under the supervision of the Financial Conduct Authority since January 2020. In the factsheet published alongside the Bill, the Government set out their view:

“Cryptoassets are now increasingly being used by criminals to move and launder the profits of various crimes including drugs, fraud, and money laundering. There is also an increased risk that cryptoassets are being exploited to raise and move funds for terrorist activities.”

On the other hand, earlier this year, the then Chancellor of the Exchequer, who is now the Prime Minister, said that it was his

“ambition to make the UK a global hub for cryptoasset technology”.

The then Economic Secretary to the Treasury echoed that, saying in a speech at the Innovate Finance global summit in April:

“If there is one message I want you to leave here today with, it is that the UK is open for business—open for crypto-businesses”;

and

“Because we want this country to be a global hub—the very best place in the world to start and scale crypto-companies.”

It concerns me that the Government do not seem to have made up their mind whether as a country we should value crypto firms and want to entice them to the UK, or whether we should recognise the ease with, and scale at which, criminal activity within crypto markets is allowed to happen and therefore should prioritise tightening regulation and enforcement by cracking down on the widespread use of such assets to defraud individuals and undermine our national security. Perhaps the Minister will shed some light on that strategic dilemma or ambiguity and on how the Government plan to reconcile those two apparently competing aims.

I do not want to pre-empt what the Minister will say, but I imagine that he will claim that it is possible to do both.

[Tom Tugendhat]

Indeed.

[Stephen Kinnock]

But is it not simply the case that we are not putting enough resources into the enforcement of laws and the policing of such markets? That is fundamental to achieving the regulatory aim of that side of the equation.

Crypto-expert Aidan Larkin recently told me how the US Government’s money laundering and asset recovery section brings in around $800 million a year in crypto-recovery alone, while the UK brings in close to nothing, because the UK Government fail to employ the handful of experts required simply to study the blockchains via things such as bitcoin analytics and to follow the illicit finance—“to follow the money”, as the saying goes. I cannot pretend to be an expert on the technical aspects of that, but it feels like a missed opportunity to go after illegal activity. We have surely reached a point in time when that could be self-funding, if we did it properly.

I am simply not convinced that the system for regulating cryptoassets is working as well as intended. Indeed, it is pretty telling that in response to written questions 86505 and 86504, which I tabled last week, the Minister admitted that none of the 200-plus crypto businesses operating without commission had been subject to any criminal or civil penalties.

As I mentioned, since January 2020 there has been a requirement for new businesses carrying on cryptoasset activity in the UK to register with the FCA. The requirement was extended to existing businesses the following year. The implementation of the register, however, has been beset by problems, not least of which is the fact that a very large number of the firms required to register have not done so. The FCA seems to have been unable to do much about that.

Only a couple of weeks ago, the Financial Times reported that only 16% of applications for registration have been approved by the FCA. The FCA has said that a large number of firms that failed to meet the conditions for registration have withdrawn their applications and that many of those appear to have carried on doing business without the requisite permission. Indeed, the FCA maintains a list of unauthorised cryptoasset businesses operating in the UK. As of last week, 245 firms were on that list. Will the Minister explain what is being done to prevent those 245 firms that operate outside the money laundering rules from scamming members of the public, facilitating money laundering or assisting the evasion of economic sanctions?

The Government have been aware for some time of problems involving the use of cryptoassets to defraud members of the public. In October 2018, the Government’s own Cryptoassets Taskforce published a report that identified advertising that misleads people deliberately, by overstating the potential gains from investing in such assets and downplaying the risks involved, as a significant problem for the Government to address. Only now, after four years, are new rules being introduced to expand the FCA’s remit to include consumer protection in relation to misleading financial promotions.

Despite that, however, a clear gap remains between the scale of criminal activity in the sector and the ability of the FCA and police forces to respond. In recent evidence provided to the Treasury Committee, Ian Taylor of the crypto trade body, CryptoUK, said that the recent collapse of high-profile crypto exchanges such as FTX could have been prevented had a stronger regulatory system been in place. Multiple witnesses testified to the Committee that, without additional staff with the right expertise, the FCA was unlikely to be able to regulate the crypto sector effectively.

Let me turn to the substance of the clause and schedule 6. It is clearly necessary for the law to be brought up to date to reflect the use of digital assets for criminal purposes. The clause and schedule amend the Proceeds of Crime Act 2002, to extend to intangible assets the same confiscation powers that are already used to recover physical assets like cash. That is an important first step, but in many ways the Bill leaves open more questions than it answers.

For instance, the Bill provides new powers to seize cryptoasset-related items, but the definition of those items is incredibly vague, encompassing any item of property that may provide access to some kind of information that could be relevant to an effort to seize a cryptoasset. Given the broad scope of the powers, alongside the related provisions on the destruction of confiscated property, we need more information from the Minister about how the powers are likely to be used in practice.

[Alison Thewliss (Glasgow Central) (SNP)]

I agree very much with what has been said from the Labour Front Bench. I ask the Minister about the interaction between this Bill and all the other Bills that are considering crypto at the moment, including the Online Safety Bill, which addresses some aspects of people being exposed online to financial crime. The Treasury Committee report on economic crime pushed quite strongly on having an aspect on economic crime in the Online Safety Bill, because it is important that people are not scammed online. To me and to many others, crypto seems very much a place where people do get scammed and lose all their money.

I draw the Committee’s attention to an interview by Henry Mance in the Financial Times yesterday with Stephen Diehl, who is very cynical about the crypto industry and its ability to rip people off. We have to be incredibly careful about the areas we are getting into; we are legislating for something that is moving very quickly. Given the number of Government amendment that will be made to the schedules in this part of the Bill, we need to think carefully about what we are putting in and whether it is suitable for seizing assets and for protecting people against crypto-related fraud more widely.

My other point is about expertise. I have talked an awful lot about the Government having expertise in various areas on the enforcement side, because if there is no expertise in enforcement, the laws that we are considering will just not be enforced. In our evidence session, Andy Gould said:

“We have been investigating cryptocurrency since 2015 or 2016. One of my sergeants has just been offered 200 grand to go to the private sector. We cannot compete with that. That is probably the biggest risk that we face within this area at the moment.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 24, Q37.]

If the money is not there in policing to retain the expertise to prosecute crypto crimes and to make sure that the legislation works in practice, rather than just on paper, the Government will be very much behind the curve.

I add my hesitation on the messages the Government are giving out on regulating and encouraging and on cracking down on a sector that has the potential, as we have seen with the collapse last week, of losing an awful lot of people their money and of making some people an awful lot of money out of those who have lost it.

[Tom Tugendhat]

If I may, I will just give a quick explanation of what crypto is because there seems to be some misunderstanding. Crypto is both a technology and a financial instrument. The financial instrument element is only part of it. Allowing for crypto technology is basically allowing for mathematics. Passing laws against crypto is like passing laws against mathematics—we can try, but it is not going to work.

What the now Prime Minister was talking about was encouraging the mathematics, the algorithms and the technology to develop in this country to create the kind of industry and the kind of infrastructure that would allow the technological use of algorithms for the transfer, sometimes of wealth, sometimes of knowledge, sometimes of contractual obligations. That is what blockchain fundamentally is.

On top of the blockchain, there are various forms of currency. There are bitcoins, which are proof of work, and then there is ethereum, which is proof of stake. These are different kinds of technologies and different ways in which cryptoassets use the blockchains and the technology that has underwritten them.

Having regulation for the currency is not the same as having regulation for the underlying mathematics. We would not say that we have regulation for the economist in the same way that we have regulation for the bank—they are different things. The Government are doing the right thing. We recognise that there is technology, and supporting it; we recognise that there are financial instruments, and are looking to work with others to make sure that those financial instruments are regulated in a sensible way. Now, that is difficult: I will be honest. It is difficult because the technology and its use are changing remarkably. The hon. Member for Aberavon spoke about FTX. As he may know, other companies such as Celsius and Gemini have stopped trading in various different ways, as well. It is not just about one instrument. It is certainly arguable that FTX got into difficulties for reasons other than lack of regulation.

The hon. Member’s point about advertising is extremely valid. There is a real challenge. That is different—it does not quite relate to this element of the Bill. We are seeing increasing amounts of financial advertising online in different ways. I do not know how many members of the Committee have Instagram accounts, but the number of Instagram messages I get advertising foreign exchange trading is frankly bizarre.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

No one else gets those!

[Tom Tugendhat]

I do not want to know what they advertise to the right hon. Gentleman. They don’t do it by pigeon.

The reality is that there are different ways in which people are trying to hack and attack, to steal from individuals in our country and around the world. That is why the work we are doing on the Joint Fraud Taskforce, which met yesterday, and on many other aspects of regulation, such as the Online Safety Bill, which the hon. Member for Glasgow Central quite rightly spoke about, is so important. The FCA has moved forward on many of those areas, in a sensible way, to balance the need of the technology to advance with the protection of society. It is certainly true that many people have lost a lot in recent weeks and months. I do not think anybody was under any great illusion, though, that cryptocurrencies were not a high-risk item, to put it politely. Anything worth about $1 10 years ago and $60,000 a few years later is probably not a stable currency. It may be many things, but it is probably not stable. It is now worth about $10,000 or so—

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

Thirteen.

--- Later in debate ---

[Tom Tugendhat]

So, $13,000. That certainly speaks to the level of volatility. It has been up and down like a yo-yo in between times, so it is not exactly as though anybody would have been recommended it as an investment vehicle. I understand the hon. Lady’s points about online safety and fraud, and she is completely correct, but that is being addressed in different aspects of Government policy. What the Bill does is make sure that those assets that are held in cryptocurrency can be seized, as other assets can. It is certainly true that they are held in different ways, as the gentleman who is going through the waste dump in Wales is discovering. That means that seizing the assets needs a certain ambiguity in the legislation in order to keep it updated for the future. The Government have made a sensible series of suggestions to balance that need for advancing the technology and protecting consumers.

[Stephen Kinnock]

The Minister is being very generous. On that point about seizing the assets, will the Minister comment on the feedback that Aidan Larkin, an expert in this area, gave me, which is that in the United States money laundering and asset recovery measures bring in about $800 million per year? He says that we do not employ enough people doing block chain analytics. We are missing a big opportunity to generate revenue for the Exchequer.

[Tom Tugendhat]

I am delighted that the hon. Gentleman will now be supporting this element of the Bill, because that is exactly what it is for.

[Stephen Kinnock]

I thank the Minister for sitting down even before I had intervened.

[Tom Tugendhat]

I thought I had finished.

[Stephen Kinnock]

It seems that this is an issue around resourcing and having the people in place—the handful of experts that we need to study the blockchains. Will the Minister assure the Committee that that resourcing will be provided?

[Tom Tugendhat]

I can assure the hon. Gentleman that the National Crime Agency, working alongside partners in places such as GCHQ, has enormous amounts of technology to look at cryptoassets in various different ways. The Bill—which I am delighted to hear the hon. Gentleman supports so enthusiastically—will indeed give the powers that he looks for.

Question put and agreed to.

Clause 141 accordingly ordered to stand part of the Bill.

Schedule 6 agreed to.

Clause 142

Cryptoassets: civil recovery

[Tom Tugendhat]

I beg to move amendment 121, in clause 142, page 125, line 18, at end insert—

“(2) It also contains related amendments.”.

This amendment provides for Schedule 7 (cryptoassets: civil recovery) to contain related amendments.

[The Chair]

With this it will be convenient to discuss Government amendments 51 to 64, 156, 157, 65 to 67 and 158 to 161.

[Tom Tugendhat]

This is a series of small wording and technical amendments that make no substantial changes to schedule 7, but simply ensure clarity and maintain consistency in the Bill’s drafting.

[Stephen Kinnock]

The use of enhanced powers to seize and detain digital assets, as set out in schedule 6, will be subject to a court order. Clause 142 and schedule 7 and the related Government amendments extend civil recovery powers, which may be used in the absence of a criminal conviction, to a range of organisations including the National Crime Agency, His Majesty’s Revenue and Customs and the Serious Fraud Office, in addition to police forces. It would be helpful if the Minister could explain how the Government will ensure that these enforcement powers will be used effectively in a way that avoids duplication of effort and ensures that there is a clear division of responsibilities of the different agencies. As I have said before, numerous additional powers are provided for in the Bill that require further clarification.

--- Later in debate ---

[Stephen Kinnock]

I have no substantial comment on the Government amendments. I should have made that clear. As the Minister says, these are technical amendments that do not have a huge amount of consequence.

I return to the issue of powers provided for in the Bill that require further clarification. I would be particularly grateful if the Minister could explain how the provisions enabling a digital asset to be converted into its equivalent value in cash might be used in practice.

In my view, there are other important issues in this area, which the Bill fails to address. I would be grateful if the Minister could set out what plans, if any, the Government have to update the asset confiscation powers we have been discussing and to extend the scope of the money laundering regulations to reflect technological developments such as non-fungible tokens and the use of digital works of art as a means of disguising illicit financial transactions.

[Tom Tugendhat]

I was rather under the impression that we had not voted on the amendment.

[The Chair]

We are not voting yet—we will be coming to a vote in a moment. It is for you to now conclude the debate.

[Tom Tugendhat]

It feels a bit sentence first, verdict afterwards, but all right.

[The Chair]

We have been doing it for thousands of years. Don’t worry—you will get used to it.

--- Later in debate ---

[Tom Tugendhat]

What clause 142 and schedule 7 does—

[The Chair]

Order. We are on amendment 121.

[Tom Tugendhat]

I have nothing further to add on that.

Amendment 121 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

That schedule 7 be the Seventh schedule to the Bill.

Government new clause 23—Cryptoassets: terrorism.

Government new schedule 1—Cryptoassets: terrorism.

I call the Minister to speak to clause 142 stand part, although that might seem a bit déjà vu for some folk now.

[Tom Tugendhat]

It is unusual to have the Opposition argument before the ministerial one—

[Stephen Kinnock]

I apologise for jumping the gun, but I thought we had already debated the group.

[Tom Tugendhat]

I am delighted to have had the position set out so clearly.

Perhaps it would be helpful if I answered some of the hon. Gentleman’s questions. The reality is that this part of the Bill is to allow law enforcement agencies to search for physical items linked to cryptoassets. As I said in answer to an earlier point, many of the assets are held in different ways. Therefore, seizing physical assets in order to link to cryptoassets is often necessary.

To use the proposed powers, officers will need reasonable grounds to suspect that the cryptoassets have been obtained through unlawful conduct or are intended for use in unlawful conduct. The powers to search for and detain assets are supplemented by powers to ultimately forfeit the cryptoassets where a magistrates court, or a sheriff court in Scotland, can be satisfied that they have been obtained through, or are intended for use in, unlawful conduct. The powers to seize or freeze and ultimately recover cryptoassets may be used irrespective of whether the asset holder has been convicted of a criminal offence. They are, therefore, an important tool for disrupting criminal activity.

Government new clause 23 and new schedule 1—which we have just heard the Opposition debate—mirror in counter-terrorist legislation the civil recovery powers in schedule 7 to the Bill by introducing new provisions into the Anti-terrorism, Crime and Security Act 2001 and the Terrorism Act 2000. That addresses a gap in existing counter-terrorism legislation and ensures that the UK’s world-leading counter-terrorism framework keeps pace with modern technology.

The creation of cryptoasset-specific civil forfeiture powers in both the Proceeds of Crime Act and counter-terrorism legislation will, importantly, mitigate the risk posed by those who cannot be prosecuted under the criminal system, but who use their proceeds stored as cryptoassets to perpetrate further criminality. Key definitions in the measures inserted by schedule 7 and new schedule 1 are in line with existing legislation and with schedule 6 to the Bill. Similarly, they include powers to update the defined terms and adapt the process for forfeiture of frozen cryptoassets, if needed. With that, I believe I have answered the Opposition’s questions before they were even asked.

[Stephen Kinnock]

The Opposition are concerned about enforcement. As the Minister and I have agreed throughout the debate, and as his ministerial colleague has frequently said, legislation without implementation is not worth the paper it is written on. There is little point in us passing a law that cannot or will not be enforced effectively. I am, and the Opposition are, genuinely concerned about the real risk in the proposals, partly because so much detail has yet to be made clear, but mostly because of the huge gap between what we expect of law enforcement and what resources the Government are prepared to put in.

As I said about the FCA, even the most basic requirement for cryptoasset firms to register is starting to appear unworkable. Will the Minister explain, if we cannot even get such businesses to register, how on earth will we ever be able to identify which ones are breaking the law, much less impose any penalties? I look forward to his clarification.

[Tom Tugendhat]

I am pleased that the hon. Gentleman is so supportive of the work of the NCA, because it, GCHQ and others have been working extremely hard on identifying the movement of cryptoassets around not just the UK, but wider areas and jurisdictions. That is enormously important for the element of seizure to which he is referring.

It is also important that the conversion powers that the hon. Gentleman spoke about are understood for what they are. A few moments ago, the hon. Member for Glasgow Central asked about market volatility. That is true at any point, including at moments of seizure. Therefore, in order to avoid market volatility at moments of seizure—particularly when assets have been taken, converted to crypto in order to be moved abroad and then seized—having control of those assets means that one needs to put them into cash in order to have a recoverable asset, so this provision is extremely sensible.

The new powers are modelled on existing powers that many law enforcement agencies use to disrupt criminal and terrorist networks. They exercise proportionality and investigatory powers that are absolutely necessary, and no more.

Question put and agreed to.

Clause 142, as amended, accordingly ordered to stand part of the Bill.

Schedule 7

Cryptoassets: civil recovery

Amendments made: 51, in schedule 7, page 206, line 42, leave out “Chapter” and insert “Part”.

This amendment makes a minor technical correction to inserted section 303Z42 of the Proceeds of Crime Act 2002, which relates to the procedure for applying for the forfeiture of cryptoassets.

Amendment 52, in schedule 7, page 206, leave out lines 45 to 47 and insert—

“(3) Where an application is made under section 303Z41 in relation to cryptoassets held in a crypto wallet that is subject to a crypto wallet freezing order—

(a) subsections (4) and (5) apply, and

(b) the crypto wallet freezing order is to continue to have effect until the time referred to in subsection (4)(b) or (5).”

This amendment amends inserted section 303Z42 of the Proceeds of Crime Act 2002 to provide that a crypto wallet freezing order continues to have effect until the end of any forfeiture proceedings started in respect of cryptoassets held in a crypto wallet that is subject to such a freezing order.

Amendment 53, in schedule 7, page 207, line 12, leave out “(4)” and insert “(4)(b)”.

This amendment is consequential on Amendment 52.

Amendment 54, in schedule 7, page 211, line 24, leave out from “applies” to end of line 28 and insert “—

(a) the magistrates’ court or sheriff decides—

(i) to make an order under section 303Z41(4) in relation to some but not all of the cryptoassets to which the application related, or

(ii) not to make an order under section 303Z41(4), or

(b) if the application is transferred in accordance with section 303Z45(1), the High Court or Court of Session decides—

(i) to make an order under section 303Z45(3) in relation to some but not all of the cryptoassets to which the application related, or

(ii) not to make an order under section 303Z45(3).”

This amendment provides that an application under inserted section 303Z46 of the Proceeds of Crime Act 2002 (continuation of crypto wallet freezing order pending appeal) may be made in circumstances where a forfeiture application under section 303Z41 of that Act is transferred in accordance with section 303Z45 of that Act to be heard by the High Court or the Court of Session.

Amendment 55, in schedule 7, page 211, line 31, leave out “(1)(a) or (b)” and insert “(1)”.

This amendment is consequential on Amendment 54.

Amendment 56, in schedule 7, page 211, line 37, leave out “under section 303Z47” and insert

“(whether under section 303Z47 or otherwise)”.

This amendment is consequential on Amendment 54.

Amendment 57, in schedule 7, page 211, line 39, leave out “(1)(a) or (b)” and insert “(1)”.

This amendment is consequential on Amendment 54.

Amendment 58, in schedule 7, page 213, line 2, leave out “with the approval of” and insert

“if the officer is a senior officer or is authorised to do so by”.

This amendment amends inserted section 303Z48 of the Proceeds of Crime Act 2002 to provide that an enforcement officer may destroy forfeited cryptoassets only if the officer is a senior officer or is authorised to do so by a senior officer.

Amendment 59, in schedule 7, page 214, line 44, after “may” insert “, subject to subsection (7A),”.

This amendment and Amendments 60 and 62 amend inserted section 303Z51 of the Proceeds of Crime Act 2002 to provide that cryptoassets may not be released under that section while forfeiture proceedings are ongoing in respect of those cryptoassets.

Amendment 60, in schedule 7, page 215, line 8, after “may” insert “, subject to subsection (7A),”.

See Amendment 59.

Amendment 61, in schedule 7, page 215, line 24, at end insert “or”.

This amendment makes a minor technical correction to the release condition in inserted section 303Z51(7) of the Proceeds of Crime Act 2002.

Amendment 62, in schedule 7, page 215, line 29, at end insert—

“(7A) If an application under section 303Z41 is made for the forfeiture of the cryptoassets, the cryptoassets are not to be released under this section until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.”

See Amendment 59.

Amendment 63, in schedule 7, page 226, line 18, after “cryptoassets” insert—

“, or of property which they represent,”.

This amendment amends inserted section 303Z63 of the Proceeds of Crime Act 2002 (converted cryptoassets: victims and other owners) to provide that the condition in subsection (5)(a) of that section is met where the applicant was deprived of cryptoassets or of property which those cryptoassets represent.

Amendment 64, in schedule 7, page 227, leave out lines 1 to 5 and insert—

“(a) if the conditions in this Chapter for the detention of the converted cryptoassets are no longer met, or”.

This amendment amends the release condition in inserted section 303Z63(8) of the Proceeds of Crime Act 2002 (converted cryptoassets: victims and other owners) to provide that the release condition is met where the court is satisfied that the conditions in Chapter 3F of Part 5 of that Act for detention of the converted cryptoassets are no longer met.

Amendment 156, in schedule 7, page 230, line 22, at end insert—

“Amendments to the Proceeds of Crime Act 2002

1A In section 2C(3A) of the Proceeds of Crime Act 2002 (prosecuting authorities), for ‘or 303Z19’ substitute ‘, 303Z19, 303Z53 or 303Z65’.

1B (1) Part 2 of the Proceeds of Crime Act 2002 (confiscation: England and Wales) is amended as follows.

(2) In section 7 (recoverable amount)—

(a) in subsection (4)(c), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z41(4), 303Z45(3) or 303Z60(4)’;

(b) in subsection (4)(d), after ‘303Q(1)’ insert ‘or 303Z44(1)’.

(3) In section 82 (free property)—

(a) in subsection (2)—

(i) in paragraph (ea), for ‘or 10Z2(3)’ substitute ‘, 10Z2(3), 10Z7AG(1), 10Z7BB(2), 10Z7CA(3), 10Z7CE(3) or 10Z7DG(3)’;

(ii) in paragraph (f), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z32(1), 303Z37(2), 303Z41(4), 303Z45(3) or 303Z60(4)’;

(b) in subsection (3)—

(i) after paragraph (b) insert—

(ii) in paragraph (c), after ‘303Q(1)’ insert ‘or 303Z44(1)’;

(iii) after paragraph (e) insert—

(iv) in paragraph (f), after ‘10I(1)’ insert ‘or 10Z7CD(1)’.

1C (1) Part 3 of the Proceeds of Crime Act 2002 (confiscation: Scotland) is amended as follows.

(2) In section 93 (recoverable amount)—

(a) in subsection (4)(c), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z41(4), 303Z45(3) or 303Z60(4)’;

(b) in subsection (4)(d), after ‘303Q(1)’ insert ‘or 303Z44(1)’.

(3) In section 148 (free property)—

(a) in subsection (2)—

(i) in paragraph (ea), for ‘or 10Z2(3)’ substitute ‘, 10Z2(3), 10Z7AG(1), 10Z7BB(2), 10Z7CA(3), 10Z7CE(3) or 10Z7DG(3)’;

(ii) in paragraph (f), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z32(1), 303Z37(2), 303Z41(4), 303Z45(3) or 303Z60(4)’;

(b) in subsection (3)—

(i) after paragraph (b) insert—

(ii) in paragraph (c), after ‘303Q(1)’ insert ‘or 303Z44(1)’;

(iii) after paragraph (e) insert—

(iv) in paragraph (f), after ‘10I(1)’ insert ‘or 10Z7CD(1)’.

1D (1) Part 4 of the Proceeds of Crime Act 2002 (confiscation: Northern Ireland) is amended as follows.

(2) In section 157 (recoverable amount)—

(a) in subsection (4)(c), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z41(4), 303Z45(3) or 303Z60(4)’;

(b) in subsection (4)(d), after ‘303Q(1)’ insert ‘or 303Z44(1)’.

(3) In section 230 (free property)—

(a) in subsection (2)—

(i) in paragraph (ea), for ‘or 10Z2(3)’ substitute ‘, 10Z2(3), 10Z7AG(1), 10Z7BB(2), 10Z7CA(3), 10Z7CE(3) or 10Z7DG(3)’;

(ii) in paragraph (f), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z32(1), 303Z37(2), 303Z41(4), 303Z45(3) or 303Z60(4)’;

(b) in subsection (3)—

(i) after paragraph (b) insert—

(ii) in paragraph (c), after ‘303Q(1)’ insert ‘or 303Z44(1)’;

(iii) after paragraph (e) insert—

(iv) in paragraph (f), after ‘10I(1)’ insert ‘or 10Z7CD(1)’.”

This amendment contains consequential and other amendments to Parts 1 to 4 of the Proceeds of Crime Act 2002 in relation to the civil recovery of cryptoassets.

Amendment 157, in schedule 7, page 230, line 24, at end insert—

“(1A) In section 278 (limit on recovery)—

(a) in subsection (7)(a), for ‘or 303Z14’ substitute ‘, 303Z14, 303Z41, 303Z45 or 303Z60’;

(b) after subsection (7A) insert—

‘(7B) If—

(a) an order is made under section 303Z44 instead of an order being made under section 303Z41 for the forfeiture of recoverable property, and

(b) the enforcement authority subsequently seeks a recovery order in respect of related property,

the order under section 303Z44 is to be treated for the purposes of this section as if it were a recovery order obtained by the enforcement authority in respect of the property that was the forfeitable property in relation to the order under section 303Z44.’”

This amendment contains a consequential amendment to section 278 of the Proceeds of Crime Act 2002 in relation to forfeited cryptoassets.

Amendment 65, in schedule 7, page 231, line 3, after “may” insert “, subject to subsection (7A),”.

This amendment and Amendments 66 and 67 amend inserted section 303Z17A of the Proceeds of Crime Act 2002 to provide that money may not be released under that section while forfeiture proceedings are ongoing in respect of the money.

Amendment 66, in schedule 7, page 231, line 13, after “may” insert “, subject to subsection (7A),”.

See Amendment 65.

Amendment 67, in schedule 7, page 231, leave out lines 25 to 36 and insert—

“(7) The release condition is met—

(a) in relation to money held in a frozen account, if the conditions for making an order under section 303Z3 in relation to the money are no longer met, or

(b) in relation to money held in a frozen account which is subject to an application for forfeiture under section 303Z14, if the court or sheriff decides not to make an order under that section in relation to the money.

(7A) Money is not to be released under this section—

(a) if an account forfeiture notice under section 303Z9 is given in respect of the money, until any proceedings in pursuance of the notice (including any proceedings on appeal) are concluded;

(b) if an application for its forfeiture under section 303Z14 is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.”

See Amendment 65. This amendment also replaces the release condition in inserted section 303Z17A(7) of the Proceeds of Crime Act 2002 to include changes for consistency with equivalent provisions in Part 5 of that Act.

Amendment 158, in schedule 7, page 235, line 5, at end insert—

“(20A) In section 386 (production orders: supplementary), in subsection (3)(b), for ‘or a frozen funds investigation’ substitute ‘, a frozen funds investigation or a cryptoasset investigation’.”

This amendment contains a consequential amendment to section 386 of the Proceeds of Crime Act 2002 in relation to production orders and cryptoasset investigations.

Amendment 159, in schedule 7, page 236, line 11, at end insert—

“(30) In section 416 (other interpretative provisions), in subsection (1), after the entry for ‘confiscation investigation’ insert—

‘cryptoasset investigation: section 341(3D)’.”

This amendment contains a consequential amendment to section 416 of the Proceeds of Crime Act 2002 in relation to the meaning of “cryptoasset investigation” in Part 8 of that Act.

Amendment 160, in schedule 7, page 236, line 11, at end insert—

“3A In section 438 of the Proceeds of Crime Act 2002 (disclosure of information by certain authorities), in subsection (1)(f), for ‘or 3B’ substitute ‘, 3B, 3C, 3D, 3E or 3F’.

3B In section 441 of the Proceeds of Crime Act 2002 (disclosure of information by Lord Advocate and by Scottish Ministers)—

(a) in subsection (1), for ‘or 3A’ substitute ‘, 3A, 3C or 3F’;

(b) in subsection (2)(g), for ‘or 3B’ substitute ‘, 3B, 3C, 3D, 3E or 3F’.

3C In section 450 of the Proceeds of Crime Act 2002 (pseudonyms: Scotland), in subsection (1)(a), for ‘or a frozen funds investigation’ substitute ‘, a frozen funds investigation or a cryptoasset investigation’.

3D In section 453A of the Proceeds of Crime Act 2002 (certain offences in relation to financial investigators), in subsection (5), at the end of paragraph (dc) (before the ‘or’) insert—

‘(dd) section 303Z21 (powers to search for cryptoasset-related items);

(de) section 303Z26 (powers to seize cryptoasset-related items);

(df) section 303Z27 (powers to detain cryptoasset-related items);’.”

This amendment contains consequential amendments to Parts 10 and 12 of the Proceeds of Crime Act 2002. The amendments relate to the disclosure of information obtained during cryptoasset investigations, the use of pseudonyms during such investigations and offences against accredited financial investigators exercising powers in connection with such investigations.

Amendment 161, in schedule 7, page 236, line 21, at end insert—

“Amendments to the Civil Jurisdiction and Judgments Act 1982

5 (1) Section 18 of the Civil Jurisdiction and Judgments Act 1982 (enforcement of UK judgments in other parts of UK) is amended as follows.

(2) In subsection (2)(g), for ‘or a frozen funds investigation’ substitute ‘, a frozen funds investigation or a cryptoasset investigation’.

(3) In subsection (4ZB)—

(a) after paragraph (b) insert—

‘(ba) a crypto wallet freezing order made under section 303Z37 of that Act;

(bb) an order for the forfeiture of cryptoassets made under section 303Z41 or 303Z45 of that Act;’;

(b) after paragraph (d) insert—

‘(da) a crypto wallet freezing order made under paragraph 10Z7BB of that Schedule;

(db) an order for the forfeiture of cryptoassets made under paragraph 10Z7CA or 10Z7CE of that Schedule.’

(4) In subsection (5)(d)(i)—

(a) after ‘(a)’ insert ‘, (ba)’;

(b) for ‘or (c)’ substitute ‘, (c) or (da)’.”—(Tom Tugendhat.)

This amendment amends the Civil Jurisdiction and Judgments Act 1982 to include provision about the enforcement of certain cryptoasset-related orders in different parts of the UK.

Schedule 7, as amended, agreed to.

Clause 143

Money laundering: exiting and paying away exemptions

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 144 stand part.

[Tom Tugendhat]

In a most unusual role, I shall start this time. Clauses 143 and 144 expand the types of case in which businesses can deal with clients’ property without first having to submit a defence against money laundering suspicious activity report—a so-called DAML. The changes will reduce nugatory regulatory burdens on businesses and help focus private sector and law enforcement resources on proactive, high-value activity, while removing disproportionate delays to businesses and customers.

A DAML effectively freezes a transaction until the UK Financial Intelligence Unit in the National Crime Agency—the UKFIU—decides to provide consent for the transaction to go ahead. Alternatively, the UKFIU could refuse it and pursue further investigation. If the UKFIU does not respond within seven working days, the business can assume that they have consent and proceed with the transaction. That means businesses regularly waiting seven working days before being able to proceed with a transaction. Businesses cannot inform customers that the delay is due to a DAML, as doing so may amount to a criminal offence.

The volume of DAMLs submitted by businesses to the UKFIU rose by 80% to 62,341 in the last year that data was available, which is creating a disproportionate burden on staff in the regulated sector, as well as in the NCA and wider law enforcement. The clauses will ensure that we are taking action to handle those rising volumes and that the DAML reporting system is used proportionally.

The exemption created by clause 143 will apply when a business in the anti-money laundering regulated sector ends a relationship with a customer and pays away any money or property suspected to be the proceeds of criminal conduct. The clause enables the business to pay back money or property under the value of £1,000 without first submitting a defence against money laundering suspicious activity report to the UKFIU and without committing a money laundering offence.

DAMLs below £1,000 are of limited value to law enforcement. That is because £1,000 is the minimum amount for law enforcement to pursue an account freezing order under the civil recovery provisions, and because of the need to prioritise higher volume cases. As a result, DAMLs below £1,000 are rarely refused consent by the UKFIU, but they place a burden on reporters to submit.

The exemption created by clause 144 will apply when a person carrying out business in the anti-money laundering regulated sector suspects that only part of their customer’s property is the proceeds of criminal conduct. The clause enables the business to allow the customer access to their property without the business committing one of the principal money laundering offences or first submitting a defence against money laundering suspicious activity report. This is provided that the conditions of the exemption are met, including the condition that, as a minimum, the value of the suspected criminal property in the account is withheld when allowing a customer access to their funds.

--- Later in debate ---

[Stephen Kinnock]

According to the Government’s impact assessment, the purpose of clauses 143 and 144, which expand the scope of exemptions from money laundering offences, is to reduce the number of ineffective defence against money laundering reports submitted to the NCA’s financial intelligence unit. It is worth bearing in mind that the purpose of the reporting system is to enable regulated firms to notify the FIU when they are asked by a client to make a financial transaction that may amount to a money laundering offence. The FIU has seven days to review the report, and if it turns out that there is a connection to money laundering, it can ensure that appropriate enforcement action is taken.

The reports can, and often do, serve as a valuable means of identifying criminal activity. The Government’s wish to reduce the number of DAML reports is understandable, but we must not throw the baby out with the bathwater. It is important for the Minister to explain to the Committee how those measures are sufficiently targeted that they reduce the number of unnecessary or unhelpful reports without causing a similar reduction in reports that might help to identify serious crime.

Clauses 143 and 144 provide exemptions from money laundering offences for certain transactions involving property worth less than £1,000, and in cases where some but not all of a client’s assets may involve criminal funds. I would be grateful if the Minister would explain the Government’s reasoning in setting the relevant thresholds at the specific levels provided for in those clauses.

I want to touch on a couple of broader points. The Government are right that the SARs process is in need of considerable reform. There are many steps the Government could take to improve the quality of reporting in addition to the measures set out in those clauses. For instance, the Solicitors Regulation Authority published a report last month in which it noted that, in two thirds of the reports it reviewed, the firms making the report did not include the glossary codes that enable the NCA to triage reports effectively and ensure an appropriate enforcement response. Additionally, the SRA found that as many as a quarter of the DAML reports it reviewed failed even to describe the criminal conduct that was suspected. Those findings are clear evidence that many law firms do not have an adequate level of understanding of the laws they are expected to help enforce. The same may well be true in other regulated sectors.

Will the Minister set out what steps the Government are taking to ensure that regulated firms have a better understanding of their obligations under the law, and how official guidance might be improved to help firms to submit better quality reports? I point out that significant improvements could be made to the speed and efficiency of the SARs process by making use of new and emerging technologies. If the FIU could use more cutting-edge software applications and algorithms to help identify the most serious crimes, it would go a long way towards addressing the problems that the Government seek to tackle. Perhaps the Minister might comment on the Government’s work in that area.

[Tom Tugendhat]

I am delighted to respond to that. The rising volume of DAMLs being submitted has already had an impact on effectiveness. That is welcome, in that businesses are taking their responsibilities extremely seriously, and the UKFIU is responding appropriately when it receives them. Although, as the hon. Member quite rightly says, technology can help, the reality is that there is still an awful lot of work to be done. That is why these provisions are so reasonable.

The provisions are reasonable because property or criminal funds worth less than £1,000 are already exempt from asset seizures in different circumstances. It makes absolute sense to have a restriction on that in the Bill and apply the same threshold to allow the UKFIU to target, as much as possible, those serious money laundering accusations and investigations appropriately—and, indeed, to arrest more criminals.

[Stephen Kinnock]

I thank the Minister for that response. Would he care to comment on the feedback from the Solicitors Regulation Authority, which points particularly at the fact that many of the firms doing the reports were not including key information such as glossary codes and sometimes did not even describe the criminal conduct that they suspected? Is there something more that could be done so that the information at source was in a better state? Does he think that the feedback from the SRA could be a good basis on which to achieve that?

[Tom Tugendhat]

I am sure that having data at source in as clean and fluent a fashion as possible, so that it is complete and allows investigation, is absolutely essential. I am sure that solicitors will feel the responsibility to do that. I am grateful to the hon. Gentleman for raising that point.

Question put and agreed to.

Clause 143 accordingly ordered to stand part of the Bill.

Clause 144 ordered to stand part of the Bill.

Clause 145

Information orders: money laundering

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 146 stand part.

[Tom Tugendhat]

Clause 145 amends the existing information order power in the Proceeds of Crime Act 2002 to bolster the UKFIU intelligence-gathering powers. Clause 146 addresses a gap in counter-terrorism legislation by mirroring those in the Terrorism Act 2000. The clauses will align the UKFIU more closely with the international standards of the Financial Action Task Force, known as FATF—including to me, actually—and enable greater collaboration with international financial intelligence units. That aids public safety in the UK and overseas, and furthers the UK’s efforts to combat illicit financial flows entering the UK economy.

FATF is the international body devoted to developing and promoting policies to combat money laundering and terrorist financing. As a member, the UK agrees to promote FATF’s anti-money laundering standards, which are expressed in the form of recommendations. FATF, the global money laundering and terrorist financing watchdog, evaluated the UK in 2018 and rated it only “partially compliant”. That rating was affected by the UKFIU’s limited ability to conduct operational strategic analysis in cases where a business has not already submitted a suspicious activity report.

Clause 145 amends the existing information order power by removing the requirement for a preceding suspicious activity report, or SAR, before an application can be made to a magistrates or sheriff court. Clause 146 mirrors that for counter-terrorism legislation. The information order will compel business in the anti-money laundering regulated and terrorist financing regulated sectors to provide information about a customer or client. That information will enable the UKFIU to conduct its operational strategic analysis functions by proactively gathering financial intelligence rather than relying on the reporting sector to have submitted information already. Further, the clauses will enable the UKFIU to better assist international counterparts to gather information, for example, relating to sanctions evasion and maximising the effort to prevent terrorist finances from entering the UK’s economy.

The information sought under an information order is designed for intelligence purposes only. To ensure the power is used appropriately, a code of practice must be made by the Secretary of State. The person making the application must have had regard to the code of practice when applying to the court for an information order. The measure has been developed collaboratively with the UKFIU.

[Stephen Kinnock]

I thank the Minister for including the provisions in the Bill, which should make it easier for the NCA to access the information that it needs to gather intelligence and conduct analysis of the range of threats that we face from money laundering and terrorist financing. The provisions in the clauses should also help to ensure that the UK is able to provide more effective assistance to law enforcement bodies in other countries in response to requests for information.

Given that so much economic crime is inherently an issue that cuts across international borders, it is absolutely right for the Government to do all that they can to enforce the law within our own borders and to help Governments in our partner countries overseas to do the same.

Question put and agreed to.

Clause 145 accordingly ordered to stand part of the Bill.

Clause 146 ordered to stand part of the Bill.

Clause 147

Enhanced due diligence: designation of high-risk countries

Question proposed, That the clause stand part of the Bill.

[Tom Tugendhat]

The clause amends the Sanctions and Anti-Money Laundering Act 2018 to allow the Treasury to directly publish and amend the UK’s high-risk third countries list on gov.uk.

Under the 2017 money laundering regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. High-risk third countries are those identified by the Financial Action Task Force as having poor controls and significant shortcomings in their anti-money laundering and counter-terrorist financing regimes.

Currently, a statutory instrument needs to be laid several times a year to update the UK’s list each time the FATF’s own list is amended. The clause will allow for more rapid updates to the list, helping the UK to be even more responsive to evolving money laundering threats by ensuring that risks are communicated and mitigated by the regulated sector as soon as possible. By removing the need to introduce legislation for each update, the change will also ease pressures on ministerial and parliamentary time, thereby responding to Parliament’s call to streamline the process—very much like this Committee.

[Stephen Kinnock]

Clause 147 raises a number of concerns for us, which I hope the Minister will be able to address. It aims to change the procedure for updating the Treasury’s list of countries designated as high risk due to serious deficiencies in their anti-money laundering and counter-terrorist financing systems, which was established by the Sanctions and Anti-Money Laundering Act 2018. The clause will enable the Treasury to update the list directly, without the need for regulations, in effect removing the opportunity for Parliament to scrutinise any changes to the list.

During the passage of the 2018 Act, there was cross-party consensus on the need for any UK list of designated high-risk countries to reflect international standards, primarily by mirroring the lists maintained by the Financial Action Task Force. The problem with clause 147 is that it appears to enable the Treasury to make any future updates to the UK list, even in ways that diverge from the FATF lists, without any opportunity for Parliament to scrutinise or debate the proposals. Given the zeal for deregulation that we have often seen from the current Government, it takes no great stretch of the imagination to foresee a situation in which the Treasury determines that the FATF lists are unduly stringent and that certain countries and territories should be removed from the UK’s list of high-risk countries, even in cases where issues identified by the FATF remain unresolved.

Looking at the relevant impact assessment, it seems that the intention is to enable Ministers to update the list “more swiftly” when needed, thus making the UK’s list more “responsive” to emerging developments than is possible under the current system. But even if the aim is reasonable, the methods are questionable. For one thing, the 2018 Act stipulates that regulations updating the list of high-risk countries are subject to the affirmative procedure, under which Parliament is given the opportunity to retrospectively review changes that have already been made by the time the regulations are published. Together with the fact that updates are generally needed no more frequently than once every three months, this does not seem to place an undue burden on Ministers.

The changes made by clause 147 do not seem proportionate to any identifiable problem with the current system. The Opposition therefore strongly encourage the Minister and his colleagues to revisit the clause, on the basis that a convincing case for the need to remove Parliament’s oversight of this process has not been made.

--- Later in debate ---

[Tom Tugendhat]

The idea of a kleptocrats list is an interesting one. It is not one I have heard before. If the right hon. Lady will forgive me, I will look into it and respond to her in writing; I have not thought about the matter, so I will have to give it some thought.

The list of high-risk third countries is based on the FATF list, which, as the hon. Member for Aberavon knows, has provided the basis for all the statutory instruments that have passed with no objection or issue. This measure will not save much ministerial time, if any at all, but it will save parliamentary time. Given how hard-pressed Parliament is to debate so many issues, I think it is a reasonable provision. Given the alignment between the UK regime and the international FATF standards, that seems to be a pretty standard change.

On the question of debating other areas, there is often cause to debate other countries’ inclusion or exclusion from such lists, and the Treasury, the Foreign Office and other Departments and organisations often have views. I am not sure this is the Bill in which to do that; this Bill is simply about correcting a slight bump in the road and speeding up the process.

[The Chair]

I call Neil Kinnock—I beg your pardon, Stephen. People used to do that to me and they always got it wrong.

[Stephen Kinnock]

Don’t worry, Mr Paisley—we could probably exchange notes on that at great length.

I thank the Minister for those points. I recall his time as chair of the Foreign Affairs Committee, when he pushed relentlessly and convincingly for parliamentary scrutiny of a whole range of key issues and decisions. Given that parliamentary scrutiny was built into the 2018 Act, it seems difficult to justify its deliberate removal from the process by this Bill. It seems like it would be good to have those guard rails in place to avoid the risk of somebody in the Treasury deciding at some point that big decisions should be made without any parliamentary scrutiny at all. Does he not agree that this is a real missed opportunity?

[Tom Tugendhat]

No, I do not. I always found that when I wanted to get parliamentary scrutiny as Chair of a Committee, I managed to find ways to do that—often through debates, in which the hon. Gentleman was a wonderful speaker—and to change Government policy by using not only Parliament, but the media and other forms of pressure. There is a difference between seeking to change Government policy on various aspects of areas that should really be considered as wider policy, and seeking to implement these changes, which are, let us be honest, rather technical and not issues of major parliamentary debate.

Question put and agreed to.

Clause 147 accordingly ordered to stand part of the Bill.

Clause 148

Direct disclosures of information: no breach of obligation of confidence

[Tom Tugendhat]

I beg to move amendment 122, in clause 148, page 136, leave out lines 22 and 23 and insert—

“(1) The protections set out in subsection (1A) apply in relation to a disclosure made by a person (‘A’) to another person (‘B’) if—”.

This amendment and Amendments 125 and 135 provide that disclosures mentioned in clause 148(1) do not give rise to any civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 123 to 135.

Clause stand part.

Government amendments 136 to 142.

Amendment 167, in clause 149, page 138, line 8, at end insert—

“(vi) a firm or individual carrying on statutory audit work or local audit work,

(vii) an individual appointed to act as an insolvency practitioner,

(viii) a firm or sole practitioner providing to other persons accountancy services, or providing material aid, or assistance or advice, in connection with the tax affairs of other persons, or

(ix) an auditor, external accountant or insolvency practitioner as defined in Section 11 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.”

This amendment includes accountants in various roles in the indirect information sharing provisions set out in clause 149, allowing them to pass on information regarding suspicious activity.

Government amendments 143 to 152.

Clauses 149 to 152 stand part.

Government amendments 153 to 155.

Clause 153 stand part.

That schedule 8 be the Eighth schedule to the Bill.

[Tom Tugendhat]

Large amounts of financial data flow through the United Kingdom every hour. The majority relate to entirely legitimate and proper activity; however, a small proportion involve criminal activity. As hon. Members heard from several witnesses to the Committee, the sharing of information regarding criminal activity between businesses is currently constrained by duties of confidentiality. These clauses and the associated Government amendments address that constraint.

Clause 148 enables direct disclosure of information between two businesses in the anti-money laundering regulated sector for the purposes of preventing, investigating and detecting economic crime, without a breach of their obligation of confidence to their customers.

[Kevin Hollinrake]

Hear, hear.

[Tom Tugendhat]

I am glad to have support from further down the Treasury Bench.

To request information, a business must have reason to believe that the other business holds information that will, or may, assist in carrying out its relevant actions. Relevant actions include deciding whether further customer due diligence is needed, restricting access to products, or terminating a business relationship with the customer as a result of the additional information obtained.

Amendments 122 to 135 amend clause 148 to expand the provisions to offer protection from civil liability owed by the person sharing information to the person to whom the disclosure relates. As the Committee heard when UK Finance gave evidence, the banking sector maintains that without greater protection, information is unlikely to be shared, as doing so creates limited benefit in comparison with the risk of potential protracted and expensive litigation from customers. Greater use of the provisions will make it harder for criminals to exploit UK businesses. We have listened to the sector and tabled these amendments.

Clause 149 enables indirect information sharing by certain businesses via a third-party intermediary, on a similar basis to elements of clause 148. A business may share information about a current or former customer whom they have already decided to take action against due to an economic crime risk—or who would have been subject to that decision were they still a customer—either by terminating a business relationship or by refusing or restricting access to a product or service. The business must be satisfied that sharing the customer’s information will assist other businesses in carrying out their relevant actions. As with clause 148, the Government have tabled amendments 136 to 141 and 143 to 151 to disapply civil liability for a person who discloses such information.

Government amendments 142, 152 and 155 extend the scope of the indirect information-sharing provisions to cover large and very large accountancy and legal businesses. The benefit of bringing those businesses within the scope of the provision is that those firms have experience of dealing with high-risk clients. Criminals are known to exploit the information gaps that currently exist between businesses in these sectors, and encouraging further information sharing creates greater opportunities to prevent economic crime.

Clauses 148 and 149 do not disapply any liabilities arising under data protection legislation. The hon. Member for Feltham and Heston tabled amendment 167, which would expand clause 148 to include the accountancy sector. I hope that she is reassured that the Government amendments that I have just described achieve that objective.

Government amendments 153 and 154 make express provision for aiding, abetting, counselling and procuring in the definition of economic crime. Schedule 8 sets out the offences that are included in the definition of economic crime for the purposes of direct and indirect disclosures of information, the Law Society’s fining powers, and the objectives of regulators of legal services. The schedule is divided into common-law and statutory offences. No new offences are created by the Bill; the schedule has been included because there is no existing relevant definition of economic crime. The schedule is essential to provide clarity and certainty about the meaning of economic crime, in order for individuals, regulators and businesses to use the disclosure of information provisions effectively and to properly apply the new measures relating to legal services.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Paisley, and to speak to this rather large group. I thank the Minister for his comments, which I find reassuring. I will deliver my own remarks for the record, but his comments, particularly on our amendment 167, were helpful.

This important group of clauses and amendments relates to supporting disclosures to prevent, detect or investigate economic crime. The Minister is absolutely right about the concerns—raised by UK Finance specifically—that the clauses go a considerable way to addressing.

Clause 148 concerns direct disclosure of information and, as the Minister outlined, disapplies the duty of confidentiality owed by a business where the business making the disclosure knows the identity of the recipient and certain conditions—broadly outlined in subsection (1)—are met. The explanatory notes contain the example of a bank that identifies a transaction that it believes is irregular and wants further information from another party—perhaps more information on the identity of the payer or more clarity on the source of the funds. We understand why such information might be wanted and the importance of being able to get such clarity. In effect, clause 148, along with clause 149, about which I will say a few words separately, removes the civil liability for an institution in sharing that information with another entity for the purposes of detecting and preventing economic crime.

Given the concerns about the difficulties with information sharing, and the resistance that there has been to sharing information because of lack of clarity about the law or about where liability lies under data protection rules, these measures are welcome. They have perhaps taken longer to be introduced than we would have liked, but they are certainly welcome, and we hope that they will increase the detection of economic crime and reduce moves by those involved in it to seek to use our institutions to launder and hide money.

Although I welcome the removal of barriers to information sharing, I wonder whether the clauses give regulated sectors or actors so-called safe harbour as comprehensively as they might. Helena Wood of the Royal United Services Institute said in her evidence to the Committee:

“Although the provisions in the Bill will go some way towards increasing private-to-private information sharing and, in particular, the risk appetite in the banking sector, they really do not keep pace with the global standard. What we would like in the next economic crime plan”—

I think we are all hoping to see that soon; shortly is the word used in this Committee—

“is something much more ambitious. In many ways, I would say that while it is welcome, the Bill is a slight missed opportunity with regard to information sharing, given that it really does not push forward to this big data analytics model that others are moving towards.” ––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 27 October 2022; c. 90, Q170.]

--- Later in debate ---

Clause 153 defines other terms used in clauses 148 and 149 regarding information sharing, including a definition of “economic crime”, which refers to acts that constitute offences, as listed in schedule 8. I would be grateful for the Minister’s response to the few points that I have made about this group of clauses and amendments.

[Tom Tugendhat]

I am sorry to hear that the hon. Lady was considered a risk to public safety, a danger or a threat to the nation in any way. She is none of those things; she is a highly valued Member of this House and a friend to many of us. I can only imagine the unwisdom of whoever it was who decided to terminate a relationship with her. I hope that the decision is being reviewed and that the person is now enjoying a holiday on the Falkland Islands.

It is worth pointing out that the comparisons that this has with other jurisdictions should be looked at carefully. Not every jurisdiction has the same application of the ECHR, GDPR or various other constraints on sharing information and protecting privacy that the UK has. In the Netherlands, the transaction monitoring scheme has so far involved only the sharing of business data, so there are various different ways in which these applications are not exactly applicable. It is worth pointing out that, under the provisions, an individual’s right to a basic bank account, as established by the Payment Accounts Regulations 2015, is unaffected.

That means that affected individuals will be able to continue to access basic accounts, providing their account is not being used or has not been used for criminal activity, or that maintaining the account would breach any other legal obligations under the money laundering regulations. Moreover, the clause stipulates that before information is shared about a customer, the sharer must have taken action against the customer, or would have if they were still a customer. As a result, no one will have information shared unless the bank has already decided to take action against them or would have decided to do so.

We do not foresee a significant increase in the number of new individuals being denied access to services. Certainly, the hon. Lady’s comments about her constituent should be viewed in that context. However, if there are individual cases that she feels that I—or, indeed, my hon. Friend the Member for Thirsk and Malton—can help with, I would be very happy to look at them, as I am sure my hon. Friend would be as well.

The forms of redress that the hon. Lady raises are important. That is where going through the Information Commissioner’s Office or the Financial Ombudsman Service, depending on the nature of the complaint, is important. She raised many other questions, and although I will not be able to get to them right now, I will be happy to write to her on some of those individual items.

[Seema Malhotra]

I thank the Minister for his comments. If he is happy to write to me, I would be grateful for that. Can I clarify whether that will also cover some of the questions I raised about the expected timing of sharing information and the procedures for those who may have been caught up inadvertently? Procedurally, we need to understand how they can be dealt with. Rather than Ministers having to deal with individual cases, we want a mechanism that will make the system work fairly.

[Tom Tugendhat]

The hon. Member is making a perfectly reasonable point. I agree, and I will write to her about those timings so they are clearly on the record and we understand what is being asked and what the expected timeframes are.

It is also worth saying that the warning condition is more active because a business has already taken or would have taken a decision where a person is a customer. That is different from the request condition, where it is sharing in response to a specific request. The two are not quite identical, but I hope that answers the hon. Lady’s questions. I will write to her shortly.

Amendment 122 agreed to.

Amendments made: 123, in clause 148, page 136, line 24, leave out ‘to which’ and substitute ‘in circumstances where’.

This amendment and Amendments 124, 126, 127, 128 and 130 extend the power to expand the kinds of business in relation to which the provision can apply, so that it can describe attributes of the person as well as the business.

Amendment 124, in clause 148, page 136, line 25, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 123.

Amendment 125, in clause 148, page 136, line 31, at end insert—

‘(1A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by A, or

(b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 122.

Amendment 126, in clause 148, page 136, line 32, leave out ‘to’.

See Member’s explanatory statement for Amendment 123.

Amendment 127, in clause 148, page 136, line 33, after ‘(a)’ insert ‘where the business carried on is’.

See Member’s explanatory statement for Amendment 123.

Amendment 128, in clause 148, page 136, line 34, leave out ‘business of a description prescribed’ and insert ‘in circumstances prescribed, in relation to the business or the person carrying it on,’.

See Member’s explanatory statement for Amendment 123.

Amendment 129, in clause 148, page 137, line 12, leave out ‘A’ and insert ‘The protections set out in subsection (7A) apply in relation to a’.

This amendment and Amendments 131, 133 and 135 provide that the disclosures mentioned in clause 148(7) do not give rise to any civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

Amendment 130, in clause 148, page 137, line 12, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 123.

Amendment 131, in clause 148, page 137, line 14, leave out from ‘request’ to ‘R’ in line 15 and insert ‘if’.

See Member’s explanatory statement for Amendment 129.

Amendment 132, in clause 148, page 137, line 16, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 123.

Amendment 133, in clause 148, page 137, line 19, at end insert—

‘(7A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by R, or

(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 129.

Amendment 134, in clause 148, page 137, line 22, leave out from ‘applies,’ to the end of line 23 and insert ‘does not—

(a) give rise to a breach of any obligation of confidence owed by them, or

(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.

This is subject to subsection (9).’

This amendment and Amendment 135 provide that use of information disclosed under clause 148(7) to enable a clause 148(1) disclosure to be made does not give rise to any a civil liability, on the part of the person making use of the information, to the person to whom the information relates. There is an exception for liabilities under the data protection legislation.

Amendment 135, in clause 148, page 137, line 25, after ‘contravene’ insert ‘, or prevents any civil liability arising under,’.—(Tom Tugendhat.)

See Member’s explanatory statement for Amendments 122, 129 and 134.

Clause 148, as amended, ordered to stand part of the Bill.

Clause 149

Indirect disclosure of information: no breach of obligation of confidence

Amendments made: 136, in clause 149, page 137, leave out lines 27 to 29 and insert—

‘(1) The protections set out in subsection (2A) apply in relation to a disclosure made by a person (“A”) to another person (“B”) if—’.

This amendment and Amendments 139 and 151 provide that the disclosures mentioned in clause 149(1) do not give rise to a civil liability on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

Amendment 137, in clause 149, page 137, line 30, leave out ‘to which’ and substitute ‘in circumstances where’.

This amendment and Amendments 138, 140, 141, 142, 144 and 147 extend clause 149 disclosures so they apply in relation to persons with a large or very large UK revenue who carry on legal or accountancy services in the regulated sector.

Amendment 138, in clause 149, page 137, line 39, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 137.

Amendment 139, in clause 149, page 138, line 1, at end insert—

‘(2A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by A, or

(b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 136.

Amendment 140, in clause 149, page 138, line 2, leave out ‘to’.

See Member’s explanatory statement for Amendment 137.

Amendment 141, in clause 149, page 138, line 3, after ‘(a)’ insert ‘where the business carried on is’.

See Member’s explanatory statement for Amendment 137.

Amendment 142, in clause 149, page 138, line 8, leave out from ‘provider,’ to ‘by regulations’ in line 9 and insert—

‘(aa) where—

(i) the business carried on is business in the regulated sector within paragraph 1(1)(l) or (n) of Schedule 9 to the Proceeds of Crime Act 2002 (accountancy or legal services), and

(ii) the UK revenue of the person carrying on the business is large or very large for the relevant financial year (see subsection (10)), and

(b) in circumstances prescribed, in relation to the business or the person carrying it on,’.

See Member’s explanatory statement for Amendment 137.

Amendment 143, in clause 149, page 138, line 11, leave out from ‘to B,’ to end of line 14 and insert

‘the protections set out in subsection (5A) apply in relation to a further disclosure of that information made by B to another person (“C”) if—’.

This amendment and Amendments 145 and 151 provide that the disclosures mentioned in clause 149(4) do not give rise to a civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relate. There is an exception for liabilities under the data protection legislation.

Amendment 144, in clause 149, page 138, line 15, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 137.

Amendment 145, in clause 149, page 138, line 18, at end insert—

‘(5A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by B, or

(b) give rise to any civil liability, on the part of B, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 143.

Amendment 146, in clause 149, page 138, line 22, leave out ‘A’ and insert

‘The protections set out in subsection (7A) apply in relation to a’.

This amendment and Amendments 148, 149 and 151 provide that the disclosures mentioned in clause 149(7) do not give rise to a civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

Amendment 147, in clause 149, page 138, line 22, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 137.

Amendment 148, in clause 149, page 138, line 24, leave out from ‘person’ to ‘at’ in line 25 and insert ‘if’.

See Member’s explanatory statement for Amendment 146.

Amendment 149, in clause 149, page 138, line 28, at end insert—

‘(7A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by R, or

(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 146.

Amendment 150, in clause 149, page 138, line 31, leave out from ‘applies,’ to end of line 32 and insert ‘does not—

(a) give rise to a breach of any obligation of confidence owed by them, or

(b) give rise to any civil liability, on their part, to the person to whom the disclosed information relates.

This is subject to subsection (9).’

This amendment and Amendment 151 provide that the use of information disclosure under clause 149(7) for the purposes of making a disclosure under clause 149(1) does not give rise to a civil liability, on the part of the person making use of the information, to the person to whom the information relates. There is an exception for liabilities under the data protection legislation.

Amendment 151, in clause 149, page 138, line 34, after ‘contravene’ insert ‘, or prevents any civil liability arising under,’.

See Member’s explanatory statements for Amendments 136, 143, 146 and 150.

Amendment 152, in clause 149, page 138, line 34, at end insert—

‘(10) In subsection (3)(aa) “relevant financial year”—

(a) for the purposes of subsection (1)(a), means the financial year immediately preceding that in which the disclosure by A is made;

(b) for the purposes of subsection (4)(a), means the financial year immediately preceding that in which the disclosure to C is made.

And, for the purposes of subsection (3)(aa), the question of whether a person’s UK revenue is large or very large for a particular financial year is to be determined in accordance with sections 55 to 57 of the Finance Act 2022 (calculation of UK revenue for the economic crime (anti-money laundering) levy).’—(Tom Tugendhat.)

This amendment include a definition of “relevant financial year” and explains how to determine if a person’s UK revenue is large or very large for the purposes of the new provision added by Amendment 142.

Clause 149, as amended, ordered to stand part of the Bill.

Clauses 150 to 152 ordered to stand part of the Bill.

Clause 153

Other defined terms in sections 148 to 151

Amendments made: 153, in clause 153, page 140, line 19, at end insert—

“(ba) constitutes aiding, abetting, counselling or procuring the commission of a listed offence, or”.

The amendment makes express provision about aiding, abetting, counselling and procuring in the definition of economic crime.

Amendment 154, in clause 153, page 140, line 21, after “(b)” insert “or (ba)”.

This amendment is consequential on Amendment 153.

Amendment 155, in clause 153, page 140, line 34, at end insert—

““financial year” means a period of 12 months ending with 31 March;”.—(Tom Tugendhat.)

This amendment adds a definition of “financial year” and is consequential on Amendment 152.

Clause 153, as amended, ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 154

Law Society: powers to fine in cases relating to economic crime

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 155 stand part.

Government new clause 47—Scottish Solicitors’ Discipline Tribunal: powers to fine in cases relating to economic crime.

[Tom Tugendhat]

His Majesty’s Government’s national risk assessment for 2020 assessed the legal services sector as being at high risk of exposure to money laundering. The crisis in Ukraine has highlighted that the sector is exposed to further-reaching risks, such as sanctions breaches. The Bill therefore contains measures that strengthen the legal sector’s response to economic crime.

Clause 154 removes the statutory limit on the Solicitors Regulation Authority’s financial penalty powers for disciplinary matters related to economic crime, as delegated by the Law Society. Currently, the SRA can direct a solicitor or traditional law firm to pay a penalty up to £25,000. The limit is set out in primary legislation and can be amended only by an order made by the Lord Chancellor. This measure will remove the need for the Lord Chancellor to make an order, thereby ensuring greater flexibility to, if required, amend penalty limits for disciplinary matters relating to economic crime.

New clause 47 gives the Scottish Solicitors’ Discipline Tribunal parity with England and Wales in respect of the fining powers available to it for economic crime-related solicitor misconduct. Currently, the SSDT may impose a maximum fine of £10,000. In comparison, the equivalent tribunal in England and Wales—the Solicitors Disciplinary Tribunal—has the power to impose an unlimited financial penalty. This change will provide the SSDT with fining powers that act as a proportionate deterrent against breaches of the rules and legislation related to economic crime, including offences linked to money laundering, terrorist financing and sanctions. The exercise of this power will be subject to the oversight of the Court of Session to ensure that the SSDT acts in an effective and proportionate way. The changes sought in clause 154 and new clause 47 are needed to ensure that the SRA and the SSDT have the enforcement tools required in the context of economic crime compliance.

Clause 155 enshrines in legislation the duty of legal services regulators to promote the prevention and detection of economic crime. Our legal sector is internationally renowned for its high standards of excellence and professional conduct. The vast majority of the sector is compliant with its economic crime duties. However, it is crucial that regulators have the right tools to effectively promote and monitor compliance. The clause puts it beyond doubt that it is the duty of legal services regulators to take appropriate action to ensure that their regulated communities comply with economic crime rules. It will give frontline regulators a clear basis for any supervision or enforcement action they may carry out to uphold the economic crime regime.

--- Later in debate ---

[Alison Thewliss]

My understanding is that the Law Society of Scotland has no particular objections to the amendments.

[Tom Tugendhat]

The hon. Member is asking about various of the different fining elements. Clearly, the fines discussion is a matter for the individual cases, and would be determined on a case-by-case basis, but I think that removing the cap, which, in modern terms, is actually relatively low—certainly, when compared with financial abuses and other forms of regulation—is entirely reasonable.

The Solicitors Regulation Authority does not, in any way, have any power to strike off a suspended solicitor, so the SDT remains an extremely important part of the disciplinary process. There are various different aspects at play here, but the proposals make good sense and are reasonable. I will happily write to the hon. Member on the issue he raised separately and come back to him about it later.

[Stephen Kinnock]

I thank the Minister for that clarification, and I am grateful for his offer to write with further details. On the point about using the Bill to prevent economic crime with respect to providers of legal services, but not for any other sector covered by the money laundering regulation, would he care to shed more light on the rationale for that decision?

[Tom Tugendhat]

The other sectors are already covered by the money laundering regulation. That element is focusing on legal services because that was a lacuna in the law.

[Stephen Kinnock]

I thank the Minister for that clarification. There is a broader scope to economic crime, not just a specific focus on money laundering, and that covers a wider range of aspects of economic crime, although there is an explicit objective in the Bill that it is limited to providers of legal services. I wonder why that broader scope will not be applied beyond the money laundering concerns.

[Tom Tugendhat]

The changes are being made and the new clause is important for exactly the reasons the hon. Gentleman has highlighted. The new clause will remove an obstacle with respect to the SRA exercising its judgment and punishing appropriately those who might be committing any number of different crimes, which I hope they will not be doing. The measure will give us a provision to enable us to deal with that. The reality is that much of the money laundering regulation has already been covered, along with different aspects of financial services. The proposals specifically address legal services and particular aspects. They are an important addition, and I am happy to support them.

Question put and agreed to.

Clause 154 accordingly ordered to stand part of the Bill.

Clauses 155 to 157 ordered to stand part of the Bill.

Clause 158

Power to make consequential provision

Question proposed, That the clause stand part of the Bill.

[Tom Tugendhat]

I would have been pleased to speak to any of those clauses.

[The Chair]

The Minister did not indicate that he wanted to do so.

[Tom Tugendhat]

Let us go with clause 158, Mr Paisley.

[The Chair]

To be clear, we are debating clause 158 stand part.

--- Later in debate ---

[Tom Tugendhat]

Indeed, and I am delighted to be called to speak to it.

The clause provides the Secretary of State with the power to make consequential amendments that arise from the Bill. The power is necessary to ensure that other provisions on the statute book properly reflect and refer to the provisions in the Bill once it is enacted and to ensure that there are no legislative inconsistencies. If regulations are made under the clause that do not amend primary legislation, they will be subject to the negative resolution procedure. If regulations are made under the clause that amend primary legislation, they will be subject to the affirmative resolution procedure. This, I hope, will provide the appropriate parliamentary scrutiny.

[Seema Malhotra]

I thank the Minister for his comments. May I clarify the process, Mr Paisley? In previous sittings, during each clause stand part debate the Minister has been called followed by the Opposition spokesperson. Perhaps that has had some variation, but it would be helpful to understand whether we need to do anything differently.

--- Later in debate ---

[Dame Margaret Hodge]

We have raised a number of amendments to the Bill during the course of consideration in Committee, many of which I consider to be technical and things that would improve the processes. All those amendments so far have been rejected. I wonder whether, rather than bringing us back at a later stage as the clause proposes, the Minister would undertake, together with his ministerial colleague, to look again at some of those amendments, which are really just practical, pragmatic amendments, with a view to bringing them back. Would he bring them back on Report?

[Tom Tugendhat]

I will answer the second question first, if I may. I am absolutely certain that my hon. Friend the Member for Thirsk and Malton and I will look with great interest at the suggestions that the right hon. Lady has made. As she knows, we share many similar ambitions. We will have a look at those suggestions with officials. Certainly, there are some that we think could improve the Bill—I do not think there is any great debate about that—and I will make sure that we keep her informed. Her contribution and help, not just today and on the Bill, have been enormous, and I pay enormous tribute to the work that she has done over many years in fighting money laundering and different forms of economic crime.

On this specific power, the hon. Member for Feltham and Heston raises a very important point, which is that the clause does give large consequential provision to the Government to change aspects of the Bill. I understand the concerns that she raises. The nature of the Bill, however, is that it has quite a consequential impact on other elements of legislation, as she herself has highlighted. Therefore there are knock-on elements that will no doubt require minor redrafting and changes at various different points as the Bill goes into law. I am afraid that is slightly the nature of these operations, as she understands extremely well. That is what this power is for.

It is worth saying that any significant or substantial changes that really do change the intent of the Bill should be brought back in primary legislation, because this is clearly a provision in order to enable the Bill to operate, not to change the intent that this House gives it.

[Seema Malhotra]

I thank the Minister for his comment, which puts that clarification on the record for successive generations of those who will sit in his seat—perhaps he will be promoted to higher office. It is important that that comment is on record, because we have to create legislation for not just today but tomorrow.

--- Later in debate ---

Regulations

[Tom Tugendhat]

I beg to move amendment 43, in clause 159, page 144, line 21, at end insert—

“(ba) regulations under section (registration of qualifying Scottish partnerships), unless they are regulations under that section that only make provision that corresponds or is similar to provision made or capable of being made by a statutory instrument that is itself subject to annulment in pursuance of a resolution of either House of Parliament;”.

This provides for regulations under NC22 to be subject to the affirmative procedure unless they only make provision corresponding or similar to provision make by a statutory instrument that is itself subject to the negative procedure.

[The Chair]

With this it will be convenient to discuss Government new clause 22—Registration of qualifying Scottish partnerships.

[Tom Tugendhat]

Clause 159 provides that regulations made under the Bill are to be made by statutory instrument. The clause also sets outs the parliamentary procedure for how regulations under the Bill should be made, including situations in which legislation must be subject to the affirmative resolution procedure or the negative resolution procedure. The clause is a standard provision to enable regulations to give the intended effect to the measures in the Bill. It is necessary to ensure appropriate parliamentary scrutiny of such regulations.

[Seema Malhotra]

Clause 159 provides that regulations under the Bill are to be made by statutory instrument. To a large extent, we have had clarification that any subsequent changes will be made through the affirmative procedure in Parliament, enabling greater scrutiny and transparency over the Bill’s implementation. I am not sure if there is a list anywhere of all the regulation-making powers that have been specified in the Bill. I feel like there is probably a summary somewhere of all of those powers, and whether any are subject to the negative procedure. I think that would be a helpful review for the Committee to have.

New clause 22 allows regulations to be made about the registration of certain Scottish partnerships, and to apply law related to companies or limited partnerships. It will allow the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 to be amended or replaced in relation to those partnerships. We welcome the inclusion of amendment 43 alongside the new clause, which provides for regulations under new clause 22 to be subject to the affirmative procedure, unless they make provisions corresponding to provisions made by statutory instruments that are subject to the negative procedure. In light of my previous comments, I think it is healthy for us to clarify and have a clear summary of which are affirmative and which are negative, and the safeguards around them. That would ensure the transparency of regulation making subsequent to the passing of the Bill.

[Alison Thewliss]

I am glad to see any loopholes getting closed, even if the amendment is sneaking in at the end of the Bill. It is good to see it. As I have said at many points in Committee, enforcement needs to be laid down on all these things, because at the moment all things to do with Scottish partnerships are not being enforced. People are not being fined for not complying with the regulations. I hope that it will result in some tightening up and some fines being issued—and, if required, in some people being jailed for not complying with the regulations as set out.

[Tom Tugendhat]

My hon. Friend the Under-Secretary has spoken to a lot of the issues, so I will just list clauses covered by the affirmative resolutions briefly—the others will be negative. That will include regulations under clauses 33, 35, 140(1), 141 and schedule 6, on powers to amend certain definitions relating to cryptoassets, clause 142 and schedule 7, on powers to amend certain definitions relating to cryptoassets and then clauses 143, 148, 149, 153 and 158. I am happy to write to the hon. Lady so that she has those details.

Amendment 43 agreed to.

Clause 159, as amended, ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Scott Mann.)

National Security Bill

Tom Tugendhat Excerpts

Report stage
Wednesday 16th November 2022 Commons Chamber

[The Minister for Security (Tom Tugendhat)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

New clause 1—Offence of failing to declare participation in arrangement required to be registered.—

“(1) A person who carries out an activity, or arranges for an activity to be carried out, in the United Kingdom pursuant to—

(a) a foreign activity arrangement required to be registered under section 61(1), or

(b) a foreign influence arrangement required to be registered under section 64(1)

must declare that they are party to the arrangement, when making a communication to those in section 65(2)(a)(i) to (vi).

(2) A person who breaches the requirement in subsection (1) commits an offence.”

This new clause makes it an offence for a person to engage in activity pursuant to a foreign activity or foreign influence arrangement which is required to be registered, if the person does not declare that they are party to the arrangement when communicating with those in section 65(2)(a)(i) to (vi).

New clause 2—ffence of carrying out activities under a foreign activity arrangements: Disqualification from Parliament—

“(1) A person who is a Member of the House of Commons or the House of Lords commits an offence if—

(a) the person carries out an activity, or arranges for an activity to be carried out, in the United Kingdom pursuant to a foreign activity arrangement, and

(b) the persons knows, or ought reasonably to know, that they are acting under the direction of a specified person.

(2) A person who is found guilty of an offence under subsection (1), and is a Member of the House of Commons, is disqualified from membership of the House of Commons.

(3) A person who is found guilty of an offence under subsection (1), and is a Member of the House of Lords, is disqualified from sitting or voting in the House of Lords, and sitting or voting in a committee of the House of Lords or a joint committee of both Houses.

(4) In this section, “foreign activity arrangement” has the same meaning as in section 61(2).”

This new clause would automatically disbar Members of the House of Commons and Lords who are found guilty of engaging in an activity pursuant to a foreign activity arrangement, where the person knows, or ought reasonably to know, that they are acting under the direction of a specified person.

New clause 3—Reviews of Parts 1, 4 and 5—

‘(1) The operation of Parts 1, 4 and 5 of this Act must be reviewed by a person, or people, appointed by the Secretary of State.

(2) The operation of Part 4 must be reviewed by the person appointed by the Secretary of State under section 36(1) of the Terrorism Act 2006.

(3) The operation of Parts 1 and 5 must be reviewed by either—

(a) the person appointed by the Secretary of State under section 36(1) of the Terrorism Act 2006, or

(b) a different person appointed by the Secretary of State.

(4) Reviews under this section must be carried out in respect of—

(a) the 12-month period beginning with the day on which any section in this Part comes into force, and

(b) each subsequent 12-month period.

(5) Each review under subsection (1) must be completed as soon as reasonably practicable after the period to which it relates.

(6) The person or people mentioned in subsections (2) and (3) must send to the Secretary of State a report on the outcome of each review carried out under subsection (1) as soon as reasonably practicable after completion of the review.

(7) On receiving a report under subsection (6), the Secretary of State must lay a copy of it before Parliament.

(8) Section 36(6) of the Terrorism Act 2006 shall be read such that the “expenses” and “allowances” mentioned therein may include the discharge by the person or people of their functions under this section.’

New clause 4—Reporting on disinformation originating from foreign powers—

“(1) The Secretary of State must appoint a person or body to review the extent of disinformation originating from foreign powers which presents a threat, or potential threat, to national security.

(2) A review under subsection (1) must include an assessment of the extent of foreign interference in elections.

(3) A review under subsection (1) may include—

(a) examining the number and scale of offences committed, and estimating the number and scale of instances where an offence is suspected to have been committed, under—

(i) section 13, where Condition C is met, and

(ii) section 14,

and,

(b) any other matters the person or body considers relevant to the matters mentioned in subsections (1) and (2).

(4) The person or body appointed under subsection (1) may be the Intelligence and Security Committee of Parliament, or another person or body the Secretary of State considers appropriate.

(5) A review must be carried out under this section in respect of—

(a) the 12-month period beginning with the day on which section 13 comes into force, and

(b) each subsequent 12-month period.

(6) Each review under this section must be completed as soon as reasonably practicable after the period to which it relates.

(7) The person or body must send to the Secretary of State a report on the outcome of each review carried out under this section as soon as reasonably practicable after completion of the review.

(8) On receiving a report under subsection (7), the Secretary of State must lay a copy of it before Parliament.

(9) The Secretary of State may pay to the person or body—

(a) expenses incurred in carrying out the functions of the reviewer under this section, and

(b) such allowances as the Secretary of State determines, except where financial provision is already made to the person or body for the discharge of the person or body’s functions, of which this section may form part.”

New clause 5—Proceedings relating to safety or interests of the United Kingdom—

“(1) This section applies where a court is considering proceedings under Part 1 of this Act, where the proceedings involve the safety or interests of the United Kingdom.

(2) In proceedings to which this section applies, the court must take account of how the interests of the Secretary of State or of the Government of the United Kingdom may differ from the interests of the United Kingdom, in order to satisfy itself that the interests of the United Kingdom have been appropriately identified and considered.”

New clause 6—Ministerial conduct—

“(1) This section applies in relation to any Minister of the Crown who engages with, or intends to engage with, or ought reasonably to know that they are about to engage with, a person who is a part of a foreign intelligence service.

(2) A Minister of the Crown may only engage with such a person if either of the following conditions are met—

(a) a senior civil servant is formally present at or party to the engagement, and a formal record of the engagement has been made by the senior civil servant; or

(b) a senior civil servant is not formally present at or party to the engagement, and a formal record of the engagement has not been made by a senior civil servant, but the written consent of the Prime Minister has been sought by the Minister of the Crown, and has been granted and formally recorded in writing.

(3) In this section “engagement” includes meeting in person or via electronic means, and corresponding in writing or via electronic means.”

New clause 7—Requirement to inform public of prohibited places—

“The Secretary of State must by regulations make provision so as to ensure that the public are given sufficient notice—

(a) that a location is a prohibited place within the meaning of section 7;

(b) of the circumstances in which an offence may be committed under sections 4 to 6 in respect of that prohibited place.”

This new clause would place an obligation on the Secretary of State to make regulations providing for the public to be given notice of prohibited places and the conduct which would amount to a criminal offence in relation to them.

New clause 11—Home Office review of the Tier 1 (Investor) visa scheme—

“Within two weeks of the passage of this Act, the Secretary of State must publish any findings of the Home Office review of the Tier 1 (Investor) visa scheme which relate to foreign influence activity.”

New clause 12—Report on actions taken in response to the ISC report on Russia—

“Within six months of the passage of this Act, the Secretary of State must lay before Parliament a report on the effect of the action taken by the Government in response to the recommendations of the report of the Intelligence and Security Committee of Parliament on Russia (HC 632 of Session 2019–21).”

New clause 13—Ministerial appointments: official advice—

“(1) The Cabinet Secretary must publish a memorandum in respect of any ministerial appointments made by the Prime Minister, where advice or concerns were communicated to the Prime Minister by civil servants that the appointment may be counter to the safety or interests of the United Kingdom.

(2) A memorandum under this section must set out that advice or concerns were communicated to the Prime Minister by civil servants, and in respect of which ministerial appointments.

(3) A memorandum under this section may not include details of the advice or concerns, where the Cabinet Secretary considers that inclusion of those details may be prejudicial to the safety or interests of the United Kingdom.”

New clause 14—Report requirement: Protecting democratic institutions and processes—

“(1) The Secretary of State must lay before Parliament a report, as soon as practicable after the end of—

(a) the period of 12 months beginning with the day on which this Act is passed, and

(b) every subsequent 12-month period,

on his assessment of the impact sections 13 and 14 of this Act have had on protecting the integrity of the UK’s democratic processes.

(2) In this section “democratic processes” includes local democracy.”

Amendment 116, in clause 1, page 1, line 10, after “safety or” insert “critical”.

This amendment seeks to clarify the tests to be met before the offence of obtaining or disclosing protected information is committed.

Amendment 17, page 1, line 15, after “article” insert “with a Government Security Classification of Secret or Top Secret”.

This amendment would confine the offence of obtaining or disclosing protected information to information that has been classified as secret or top secret (rather than to all information access to which is restricted in any way).

Amendment 18, in clause 2, page 2, line 18, at end insert “(ca) the person’s conduct is prejudicial to the safety or interests of the United Kingdom, and”.

This amendment would narrow the scope of the offence of obtaining or disclosing trade secrets so that it applies only to trade secrets that would prejudice the safety or interests of the UK.

Amendment 117, page 3, line 1 , after “national” insert “, a UK resident, or a person in the employment of a UK person as defined in paragraphs (b) or (c)”.

Government amendments 40 to 42.

Amendment 19, in clause 3, page 3, line 32, after “Kingdom” insert “which are prejudicial to the safety or interests of the United Kingdom”.

This amendment would narrow the scope of the offence of assisting a foreign intelligence service in respect of activities within the UK so that it applies only to assistance that would prejudice the safety or interests of the UK (rather than to assistance of any kind).

Government amendment 43.

Amendment 119, page 4, line 7, at end insert—

“(aa) with the knowledge and consent of the UK security and intelligence services,”.

This amendment would clarify that activities undertaken with the knowledge and consent of the UK security and intelligence services would not constitute a criminal offence under this clause alone.

Amendment 120, in clause 4, page 5, line 17, at end insert—

“(7) No offence is committed under (1) if the conduct is for the purposes of protest, unless the conduct is prejudicial to the safety of the United Kingdom.”.

This amendment would restrict the circumstances in which access to a prohibited place for the purposes of protest would amount to an offence under this clause.

Amendment 20, in clause 5, page 5, line 25, at end insert—

“(ba) the conduct is prejudicial to the safety or interests of the United Kingdom,”.

This amendment would confine the offence of unauthorised entry etc to a prohibited place so that it applies only to entry etc that is prejudicial to the safety or interests of the UK.

Amendment 133, page 5, line 33, leave out “includes” and insert “may, depending on the circumstances, include”.

This amendment would mean taking a photograph or other recording of a prohibited place was not automatically a criminal offence of inspecting that place, but would depend on the circumstances.

Amendment 21, in clause 6, page 6, line 17, leave out paragraph (c).

This amendment would remove the power of the police to order a person to leave an area “adjacent to” a prohibited place.

Amendment 22, page 6, line 28, after “(2)” insert “, (a)”.

This amendment is consequential on Amendment 23.

Amendment 23, page 6, line 30, after “Kingdom” insert “, and (b) without prior authorisation by an officer of at least the rank of Inspector, unless obtaining that authorisation is not reasonably practicable”.

This amendment would impose a requirement that a police officer obtains authorisation from a more senior officer before exercising powers under clause 6.

Amendment 24, page 6, line 32 at end insert “which was necessary to protect the safety or interests of the United Kingdom and proportionate to that aim.”

This amendment would narrow the offence of failing to comply with an order made by a police constable in relation to a prohibited place so that it applies only to an order that was necessary and proportionate to protecting the safety or interests of the UK.

Amendment 25, in clause 7, page 6, line 37, after “means” insert “a place, entry to which could pose a risk to the safety or interests of the United Kingdom, and which is”

This amendment would narrow the definition of prohibited place so that it applies only to locations relevant to the safety and interests of the United Kingdom (rather than any Ministry of Defence land).

Government amendments 44 and 45.

Amendment 121, in clause 8, page 8, line 21, leave out “or interests”.

This amendment would restrict the power to designate additional prohibited places by regulation to where it was necessary to protect the safety of the United Kingdom.

Amendment 26, in clause 11, page 10, line 8, leave out paragraph (c).

Government amendments 46 and 47.

Amendment 14, page 20, line 35, leave out clause 27

Government amendments 48 and 49.

Amendment 124, in clause 28, page 21, line 23, at end insert—

“(2A) However, the conduct in question, or a course of conduct of which it forms part, is not to be treated as carried out for or on behalf of a foreign power if financial or other assistance of a foreign power under (2)(c) is provided otherwise than specifically for the conduct or course of conduct.”

This amendment ensures that organisations that receive funding from foreign powers are not guilty of offences under this act if that funding was not for the conduct or course of conduct that would otherwise amount to the offence.

Amendment 30, in clause 30, page 22, line 40, leave out paragraph (c).

This amendment would narrow the definition of foreign power threat activity to remove giving support and assistance (including that unrelated to espionage activity) to a person known or believed to be involved in offences under the Bill (but would retain conduct which facilitates or is intended to facilitate such offending).

Government amendment 50.

Amendment 118, in clause 31, page 23, line 25, at end insert—

““critical interests of the United Kingdom” include security and intelligence, defence, international relations, law and order, public health and economic interests;”.

This amendment seeks to clarify the tests to be met before the offence of obtaining or disclosing protected information is committed.

Amendment 125, in clause 37, page 26, line 25, leave out “reasonably believes” and insert “believes on the balance of probabilities”.

This amendment would apply the usual civil standard of proof in relation to decision to impose Prevention and Investigation Measures.

Amendment 126, in clause 38, page 27, line 35, leave out “four” and insert “two”.

This amendment would mean the Secretary of State could seek to extend a part 2 notice on two occasions rather than four.

Amendment 31, in clause 43, page 30, line 21, leave out from beginning to “before” in line 22 and insert “The chief officer of the appropriate police force must confirm to the Secretary of State that the condition in subsection (2) is satisfied before”.

This amendment, together with amendments 16 to 18, would require the Secretary of State to receive confirmation from the police that prosecution is not realistic before imposing a PIM, rather than requiring only a consultation on the subject.

Amendment 33, page 30, line 28, leave out “The matter is whether there is” and insert “The condition is that there is not”.

Amendment 34, page 31, line 14, leave out “responding to consultation” and insert “providing confirmation”.

Amendment 32, page 31, line 26, leave out “(1) or”.

Amendment 35, in clause 53, page 38, line 13, leave out “this Part” and insert “Part 1 and Part 2”.

This amendment would extend the review function of the Independent Reviewer to cover Part 1 of the Bill in addition to Part 2.

Amendment 3, in clause 58, page 41, line 8, at end insert—

“(2) Within three months of the passing of this Act, the Secretary of State must publish a statement setting out how the Secretary of State intends to exercise the power under this section. The statement must include a list of illustrative examples of the kinds of contracts or other arrangements this power relates to.”

Government amendments 61 and 62.

Amendment 130, in clause 61, page 43, line 19, after “P” insert “, whether directly or through intermediaries”.

This amendment would make clear that those making a foreign activity arrangement via intermediaries, would be required to register the arrangement.

Government motion to transfer subsection (2) of clause 61.

Government amendments 63 to 65.

Government motion to divide clause 61.

Government amendments 66 to 74.

Government motion to transfer subsection (2) of clause 64.

Government amendments 75 to 83.

Government motion to divide clause 64.

Government amendments 84 to 94.

Amendment 15, in clause 68, page 48, line 20, leave out paragraph (b).

Amendment 16, page 48, line 25, leave out paragraph (b).

Government amendments 95 to 101.

Amendment 131, in clause 70, page 51, line 10, at end insert—

“(3A) The information required of the person to whom an information notice is given must be limited to information the Secretary of State deems reasonably necessary to ensure the person is complying with the requirements of this Part.”

This amendment would place restrictions on the type of information the Secretary of State can require under clause 70.

Government amendments 102 to 108.

Amendment 1, in clause 75, page 53, line 39, at end insert—

“(h) an offence under section [Offence of failing to declare participation in arrangement required to be registered] committed in relation to a foreign activity arrangement required to be registered under section 61(1).”.

This amendment is consequential on NC1.

Government amendment 109.

Amendment 2, page 54, line 23, at end insert—

“(h) an offence under section [Offence of failing to declare participation in arrangement required to be registered] committed in relation to a foreign influence arrangement required to be registered under section 64(1) .”.

This amendment is consequential on NC1.

Government amendments 110 to 112.

Amendment 8, Page 56, line 4, leave out Clause 79.

Amendment 9, Page 56, line 26, leave out Clause 80.

Amendment 36, in clause 80, page 56, line 31, at end insert—

“(ba) the court is satisfied that any damages awarded to the claimant in those proceedings are likely to be used for the purposes of terrorism,”.

This amendment would remove the duty on the court to consider reducing damages in clause 58, unless the court considered the damages were likely to be used for the purposes of terrorism.

Government amendments 51 to 53.

Amendment 37, page 57, line 18, at end insert “or which it would award under section 8 of that Act had the claim been brought under it.”.

This amendment would prevent the reduction of damages in claims that could have been brought as a human rights claim under the HRA 1998 but were in fact brought on other grounds.

Amendment 10, page 57, line 30, leave out clause 81.

Amendment 11, page 58, line 5, leave out clause 82.

Amendment 12, Page 59, line 10, leave out clause 83.

Amendment 38, Page 59, line 14, leave out clause 84.

This amendment, together with Amendment 39, would remove the proposed limits on access to legal aid for persons with a conviction for a terrorism offence and the consequential power to make information requests related to those limits.

Amendment 5, in clause 84, page 59, line 29, leave out “F” and insert “G”.

Amendment 6, page 60, line 11, at end insert—

“(7A) Condition G is met where the offender is seeking legal aid for the purposes of—

(a) pursuing a civil order, where the purpose of the order is to protect a victim of domestic abuse, or

(b) participating in family court proceedings, and where the offender is a victim of domestic abuse.”.

Amendment 7, page 61, line 6, at end insert—

“”domestic abuse” has the same meaning as in the Domestic Abuse Act 2021;”

Amendment 39, page 61, line 15, leave out clause 85.

See explanatory statement for Amendment 38.

Government amendment 113.

Government new schedule 1—Control of a person by a foreign power.

Government new schedule 2—Exemptions.

Amendment 128, schedule 3, page 88, line 31, leave out sub-paragraph (4).

This amendment would prevent a disclosure order from having effect where disclosure is protected by an enactment.

Amendment 129, schedule 4, page 94, line 29, leave out sub-sub-paragraph (b), and insert—

“(b) there are reasonable grounds for believing that information which may be provided in compliance with a requirement imposed under the order is likely to be of substantial value, whether by itself or with other information, to the investigation; and

(c) there are reasonable grounds for believing that it is in the public interest for the information to be provided, having regard to the benefit likely to accrue to the investigation if the information is obtained.”

This amendment would require the court to be satisfied of the same tests for customer information notices as set out in relation to disclosure orders in Schedule 3.

Government amendment 54.

Amendment 4, schedule 6, page 100, line 19, at end insert—

“(1A) A place designated by the Secretary of State under sub-paragraph (1) must be subject to an independent inspection by—

(a) Her Majesty’s Inspectorate of Constabulary, or

(b) a different person or body appointed by the Secretary of State.”.

Government amendment 55.

Amendment 27, page 104, line 12, leave out sub-paragraphs (4) and (5).

This amendment would prevent it being permissible to delay informing a named person of an individual’s detention under clause 21, or that individual consulting a solicitor, for the purposes of asset recovery.

Amendment 123, page 112, line 13, leave out from “if” to the end of line 20, and insert “the person has previously been convicted of an offence under this Act.”

This amendment would restrict the circumstances in which fingerprints and samples from someone detained under clause 25 could be retained indefinitely, instead of the usual 3 years under paragraph 20(5) of Schedule 2.

Government amendments 56 and 57.

Amendment 28, page 124, line 13, leave out sub-sub-paragraphs (b) and (c).

This amendment would prevent it being permissible to postpone reviews of detention without warrant on the basis that the review officer is unavailable or, for any other reason, the review is not practicable.

Amendment 127, schedule 7, page 144, line 17, leave out paragraph 12.

This amendment would remove the power for the Secretary of State to impose participation in polygraph sessions as part of provisions in relation to Prevention and Investigation Measures.

Government amendments 58 and 59.

Amendment 13, page 175, line 1, leave out Schedule 13.

Amendment 132, schedule 13, page 176, line 29, leave out “there is a real risk that”.

This amendment would ensure the court was satisfied on the balance of probabilities that damages were to be used for terrorism purposes before frozen funds could be forfeited entirely.

Government amendment 60.

[Tom Tugendhat]

It is a pleasure to stand before the House today to introduce not just new clause 9, but many other new clauses that I and many others in this House have argued for at different times and in different places.

[Chris Bryant (Rhondda) (Lab)]

Plus a few others.

[Tom Tugendhat]

Plus a few others. So it is a great pleasure to be here today.

May I also place on record my enormous thanks to two right hon. Members—the hon. Member for Garston and Halewood (Maria Eagle) will smile as I say this—who have done so much to get us to this position today? I refer to my right hon. Friends the Members for East Hampshire (Damian Hinds) and for Stevenage (Stephen McPartland), who have been extremely generous with their time and thoughts, including in private with me as well, in making sure that I am able to answer as many of her questions as I can, although somehow she has exceeded even their magisterial intellect. I am grateful that they have got us to this place, because this Bill is essential for the future defence of our nation.

The reason for that is because, of course, the world has changed. The reality is that national security in this country has changed and evolved in recent years, and the Darwinian challenge between the hunter and the hunted has led us to a position where we need to update not just our techniques, which can be done in private, but sadly our laws, which rightly must be debated in public.

I think we all agree with the core aims of the Bill. The first is to give our law enforcement and intelligence agencies the tools they need to tackle harmful activities in the United Kingdom carried out by, or on behalf of, foreign powers. However, to do that we also need to increase the transparency around those who seek to influence the politics and institutions of the United Kingdom through the foreign influence registration scheme. That is a very welcome addition. I know that many Members here, including those who have been on the Foreign Affairs Committee for the past five years, have called for it at various different points. The Bill has, at its heart, the protection of the national security of this great country that we all serve.

[Mr Kevan Jones (North Durham) (Lab)]

rose—

[Tom Tugendhat]

On that, I will give way—not for the last time, I am sure—to the right hon. Member.

[Mr Kevan Jones]

The Minister talks about Darwinian change, but evolution takes a long time. Many things in the Bill have been kicking around for at least six or seven years, and that includes the issue around the foreign influence registration scheme, which was only put in the Bill at Committee stage after it was omitted on Second Reading; even now, there are amendments to it. Is the Minister satisfied that the Bill—in terms of the major changes that it will achieve—will fulfil its purpose and that it has been properly scrutinised in this House?

[Tom Tugendhat]

What I am so pleased about with this Bill is that it introduces so many ideas that the right hon. Gentleman and I have discussed in private over many years when I was in a similar position to him—scrutinising a Government. The Bill introduces some of those ideas that, yes, he is right to say, seem to have been introduced quickly, but the reality, as he knows very well, is that they have been discussed slowly. Many aspects of the Bill not only date six or seven years into the past, but update aspects that date a lot further back. Sadly, some of our national security legislation is better placed to hunt those who would send secret notes on pigeons back to Germany than to hunt those sending secret messages through the internet. This is updating quite a lot of laws that date all the way back to the first world war. I am very glad that we are doing it, and I am very glad that the right hon. Gentleman’s scrutiny in the Bill Committee has been so rigorous and so onerous.

[Sir John Hayes (South Holland and The Deepings) (Con)]

My right hon. Friend is right that this is an important step. In particular, he is right about the foreign influence registration scheme, which has long been called for, including by the Intelligence and Security Committee, of which I am a member. He will also know that, because we have yet to discuss that in any detail, there may be confusion about the primary and secondary tiers—in other words, those things that are designated as being of more profound importance than these other things. Would it be helpful if he were to write to the ISC, setting out how he thinks they would work in practice, given that we understand that the secondary tier will be introduced by secondary legislation?

[Tom Tugendhat]

My right hon. Friend is right. I would be very happy to write to him. I can summarise it now by saying that the primary tier is that connected to political activity. Anybody from any foreign country who wishes to influence this House, this Parliament, any Members here, or indeed any political outcome, would be looking at the primary tier. That is the basic level, and it involves a registration on a website so that we can all know who has taken payment for what—which piper has been paid and by whom.

The enhanced registration is different and requires registration for a wider range of activities, but those depend on the specific foreign power and, indeed, the entity or operation within it. That is a different matter, and that will be down to the Secretary of State looking at what is reasonably necessary in order to protect the safety and interests of the United Kingdom—that is the enhanced tier, as we are calling it. That is the summary, but I will be happy to write to the ISC.

[Chris Bryant]

The Minister said that once somebody has registered on a website, we will all be able to see it. That may be true if we knew that that was where we had to look to check whether somebody coming in through the door, sending us a letter or inviting us to dinner as an MP was actually somebody who was working for a foreign power. Would it not be far more sensible, once somebody has registered, to require them to declare to any Minister, MP or Member of the House of Lords that that is what they were doing, so that there is a degree of protection for this House?

[Tom Tugendhat]

The hon. Member makes a very good point: there are many areas in which the individual concerned should certainly be doing the responsible thing and advertising it. The basis of this has to be a balance, so requiring people to register is, I think, a very good start. We need to take forward some of the recommendations that the hon. Member has made and the thoughts he has expressed, because he is absolutely right that transparency in all things is important.

[Stewart Hosie (Dundee East) (SNP)]

The Minister has accurately described what the two different tiers of the FIRS scheme will do, but it is difficult to understand why the registration of harmful activity outside of political influencing, such as covertly acting as an intelligence officer, only applies to a foreign power that is set out in secondary legislation. Surely, if that activity is wrong, it is wrong whether the country is on an as-yet-undefined list or not.

[Tom Tugendhat]

I think the right hon. Member will find that espionage is illegal in the United Kingdom, whoever is carrying it out.

[Dr Julian Lewis (New Forest East) (Con)]

Will the Minister give way?

[Tom Tugendhat]

I will.

[Dr Lewis]

The Minister is very forbearing, and I am glad of the opportunity to warmly congratulate him on his appointment and thank him for the positive way in which he has been reaching out to the ISC.

On the question of the second tier, there appears to be some sort of discrimination between countries that are friendly and those that are hostile, and—unless I misunderstand the Bill—only the hostile ones are going to appear in the secondary designation. If that is the case, could it not lead to some anomalous situations when diplomatic relations improve with a country, so we take it off the second tier, or they worsen and we put it on? There is bound to be a time lag in that sort of thing, so how practical is the second tier scheme as it is currently constituted?

[Tom Tugendhat]

My right hon. Friend makes a valid point. The challenge that we have, as he knows very well, is how we balance the responsibility to inform and how wide we go. I have spoken about this issue with my right hon. Friend in the past, and his judgment on this is something I have always valued, so it has always been very important to me that we share a view on it. However, I think we all agree that where a foreign power is seeking to influence our political life in the broadest sense, we should know about it, whoever is exercising that influence.

I take my right hon. Friend’s point about enhanced registration. Sadly, there is inherently a delay between the way that life changes and the response of Government —that is the reality of existence—but it is important for us to recognise that some countries and entities do require enhanced awareness. That is why it is important for us to have an extra tier.

[Maria Eagle (Garston and Halewood) (Lab)]

Will the Minister give way on that point?

[Tom Tugendhat]

This will be the last time I give way for now.

[Maria Eagle]

I am grateful to the Minister for giving way. He has talked about the challenges and the enhanced part of the scheme. Will it not be a challenge to use the scheme in practice, because he has to put the country concerned into secondary legislation? Is that not going to be diplomatically very difficult to do? Is the reality not that the complex way in which the Government have set out the scheme, with little scrutiny possible from either this Chamber or Committees, means that in practice it is not going to be used at all?

[Tom Tugendhat]

I think the hon. Lady knows me well enough to know that, having been sanctioned by three countries now, it is unlikely that I will be reticent in identifying those that I think are threats to the United Kingdom.

[Chris Bryant]

The right hon. Gentleman might not be in the job.

[Tom Tugendhat]

I am very confident that others will also be bold on His Majesty’s behalf. Whoever is fortunate enough to be representing His Majesty in the Home Office will be able to conduct those offices in the good fashion that people expect. [Interruption.] I will move on.

The core of the Bill is, of course, national security and our intelligence services, building on the work they have done to enable us to grow in confidence and prosperity. They have provided the security apparatus that allows freedom beneath and around it. That is an extraordinary luxury and a blessing that this country has been able to enjoy for many years and generations because of the courage and intellect of so many people. They require tools to conduct those tasks, and I am delighted that the Bill will sharpen some of those tools.

--- Later in debate ---

[Mr Kevan Jones]

As my hon. Friend the Member for Garston and Halewood (Maria Eagle) said, we had four Ministers in the Bill Committee. Yes, the Minister has listened, but nothing in the Bill has changed. It is still a mess, and that goes back to the fundamental point about not including the Security Service Act 1989 in the reform that is needed. Let me tell the Minister now: the lack of scrutiny in this House means that the Bill will be absolutely torn to shreds in the other place.

[Tom Tugendhat]

The right hon. Gentleman will not be surprised to hear that we disagree on that element, but it has been a great pleasure to work on the Bill with him and with many others in the Chamber, and to hear their comments and criticisms. There are many other supplementary areas that I would like to work on in different places at different times, but the Bill answers the essential need that we have now, which is to update our national security legislation to keep the country safe and defend our people, and to ensure that those who have the courage, integrity and wisdom to keep us all safe have the tools at their disposal to do so.

[Several hon. Members rose—]

--- Later in debate ---

[Joanna Cherry (Edinburgh South West) (SNP)]

I was here to speak to new clause 7 and amendments 17 to 28 and 30 to 39, but there is not enough time for me to do so. That is most regrettable, given the importance of the Bill.

I am here not in my personal capacity but as Chair of the Joint Committee on Human Rights. Our duty is to scrutinise legislation to check its human rights compliance, and we have done that. I remind Members that the Joint Committee is a cross-party Committee with half its members from the House of Commons and half from the House of Lords. That is just as well, because it will be in the House of Lords that our amendments get the attention that I believe they deserve. Although I am not really a fan of the House of Lords as an unelected Chamber, I am very much a fan of second Chambers. Nevertheless, it is regrettable that such a small amount of time has been afforded to us today to debate this important Bill, which we believe has significant human rights implications. Given the short time available to me, I shall make some general comments; as I say, I hope that our detailed amendments will get the attention they deserve in the House of Lords.

We broadly welcome the attempt to modernise espionage offences, but we have some concerns about the Bill’s provisions. The Bill is a step forward and many of its provisions are broadly in line with the recommendations of the Law Commission’s recent review, but there are risks that some of the provisions are drawn far too widely and could criminalise behaviour that does not constitute a threat to national security. We think that other provisions would interfere unnecessarily and disproportionately with rights to freedom of expression and association and the right to protest, and that they may regrettably have a disproportionate impact on certain communities in the United Kingdom, particularly if new police powers are not exercised with restraint.

The provisions on prevention and investigation measures, which were not included in the Law Commission’s review, also engage the right to a fair trial, the right to liberty and security and the right to a private and family life in a way that gives the Joint Committee cause for concern. We are also very concerned about the restrictions on the grant of legal aid and on the awarding of damages to those who have been involved in terrorism. They risk impeding access to basic rights and legal protections, as other Members have elaborated on. We have therefore suggested that the Bill be amended in a number of ways but, as I say, there is not sufficient time for me to address any of the amendments in any meaningful way.

Let me say one other thing before I sit down. The Bill does not address issues relating to the unauthorised disclosure of information—sometimes known as leaks—despite it being a significant part of the Law Commission’s review. The commission set out clearly the ways in which the existing law engages and potentially breaches the UK’s human rights commitments under the European convention on human rights, and suggested ways in which law might be changed to overcome such issues. Although the Joint Committee appreciates that this is in many ways a complex and controversial area of law, we hope that that is not going to result in inaction, and encourage the Government to consult on legislative provisions as soon as possible.

We believe that reform of the Official Secrets Act 1989 is needed to ensure adequate respect for free speech. That is why I added my name to new clause 8, tabled by the right hon. Member for North Durham (Mr Jones), which I very much regret we are not able to debate today. Put shortly, we need a public interest defence in this country.

[Tom Tugendhat]

This has been a very full discussion involving many people. Although I sympathise with those who have quite rightly made the point that we could always have more time for these debates, the truth is that we had a lot of time in the Bill Committee and we are going to have to do much more work on this subject as its various elements evolve with the technology and the challenge. The truth is that if we had had this debate five, 10 or 15 years ago, we would have been debating different subjects, different nations and different elements of technology that have evolved into the threat that we sadly face today. Although I recognise that many hon. Members have understandably raised the number of hours and days that we have had today and in the past few weeks, the Government have listened and adapted the Bill to many aspects that have been raised in different ways.

[Chris Bryant]

One thing that the Government have certainly had plenty of time to get ready is the tier 1 visa report, as promised by five Home Secretaries. When will the Minister publish it?

[Tom Tugendhat]

It will not surprise the hon. Gentleman to know that one of the first things I did on arrival at the Home Office was to ask for it to be prepared for publication. I will come back to him with it, I hope, urgently—I will let him know.

Many different points have been raised. I pay enormous tribute to my many right hon. and hon. Friends who have spoken and to those who have approached the Bill with the diligence and seriousness that the subject demands, particularly the hon. Members for Halifax (Holly Lynch) and for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald), who have been extremely supportive critics and have been challenging in the right spirit. I am glad to say that those discussions have resulted in most of the Bill going through in the way that was intended, and that those challenges and changes have improved it.

I accept that there are some differences of opinion. On areas such as the Serious Crime Act and the changes to statutory requirements, I believe that the Government are right because the exercise of the functions of an officer of the state are exactly what should be the limiting functions of their powers. That is why this reform makes sense, although my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright) raised some important points and challenges that we will have to look at.

My right hon. and learned Friend also asked about damages and whether they followed in the way that he described, and I agree that they do. The point is that we should neither make it harder or more applicable to have damages, nor prevent it where judges seek the discretion to do so. Where they have that discretion, they may continue to do it, but we are asking them to look and consider the situation in which those damages arose to make sure that they are truly applicable. It is merely a review policy, rather than a block. That is an important element of the Bill; judges may already have that power but this measure merely puts it on the statute book.

Much of the debate has focused on whistleblowers and the public interest defence, and the way in which various people could argue that they are acting in the interests of the wider polity in raising different objections. This is a hugely important area and I understand that many hon. Members have raised different points. The head of MI5, the heads of various agencies and many others who have engaged on it have been absolutely clear on this point, however, because we need to make sure that we are not introducing any defence that forces the Government to reveal the damage that has been done in order to provide a defence.

The reality is that forcing the publication of damages may indeed be further damaging to the initial offence. That is why although I take the point about the public interest defence, which is a wider question for the whole of Government and the whole country, and I take the point about whistleblowers, which is again a wider question and not specific to the Bill, I am afraid that I hold with the head of MI5 and others who have been extremely clear on this point.

[Mr Kevan Jones]

With the greatest respect, that is a weak argument, because there can always be closed hearings on national security grounds. I say to the Minister that this issue will not go away—the courts are deciding it anyway. I would sooner state a protection in law than leave it to the whims of a jury, which is what we have now.

[Tom Tugendhat]

I have a great trust in our jury system, and I know the right hon. Member does, too.

[Mr Jones]

I haven’t actually.

[Tom Tugendhat]

Oh, he does not. I do have trust in our jury system and I do have trust in the Great British people to make decisions appropriately. One of the decisions sometimes made by juries is to strike out a case because they disagree with it. I am afraid that is simply one of those—

[Mary Robinson (Cheadle) (Con)]

The public interest defence has been mentioned on several occasions throughout this debate. Notwithstanding the strictures of national security and of this Bill, it is important that people have a reliable route that they can take when they want to expose wrongdoing. Does my right hon. Friend consider that an office of the whistleblower might be such a route? I know the public interest defence is very likely to come forward again.

[Tom Tugendhat]

My hon. Friend is absolutely right to raise that. It is not specific to this Bill, but it is something that many of us have been considering for a while. I certainly agree that wider consideration is important in ensuring that those who have legitimate grievances and objections to what they may have been asked to do have a valid route for raising such questions.

I will go through a few of the other points very quickly. My right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and my hon. Friend the Member for Burnley (Antony Higginbotham) raised the point about legal services, and they were absolutely right to do so. Let me be quite clear that this is about privileged legal co-operation. Therefore, that privilege should be exempt—it should absolutely be exempt—so that those who have access to legal rights should be able to exercise them without the state’s intervention. That is essential to the rule of law and, indeed, to the protection of human rights in our country.

I should also make it quite clear that the Government have heard very clearly the points made about civil legal aid. These will be receiving very serious consideration in the coming days, and I look forward to updating the House in due course on where that goes to.

I briefly thank for their insights my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) and my hon. Friend the Member for Milton Keynes North (Ben Everitt) on the Government side, and of course my very dear friend, the hon. Member for Barnsley Central (Dan Jarvis). Although we disagree, again, he remains a very close friend, and I look forward to discussing more of these issues with him in the future. I shall leave it at that.

Question put and agreed to.

New clause 9 accordingly read a Second time, and added to the Bill.

New clause 3

Reviews of Parts 1, 4 and 5

‘(1) The operation of Parts 1, 4 and 5 of this Act must be reviewed by a person, or people, appointed by the Secretary of State.

(2) The operation of Part 4 must be reviewed by the person appointed by the Secretary of State under section 36(1) of the Terrorism Act 2006.

(3) The operation of Parts 1 and 5 must be reviewed by either—

(a) the person appointed by the Secretary of State under section 36(1) of the Terrorism Act 2006, or

(b) a different person appointed by the Secretary of State.

(4) Reviews under this section must be carried out in respect of—

(a) the 12-month period beginning with the day on which any section in this Part comes into force, and

(b) each subsequent 12-month period.

(5) Each review under subsection (1) must be completed as soon as reasonably practicable after the period to which it relates.

(6) The person or people mentioned in subsections (2) and (3) must send to the Secretary of State a report on the outcome of each review carried out under subsection (1) as soon as reasonably practicable after completion of the review.

(7) On receiving a report under subsection (6), the Secretary of State must lay a copy of it before Parliament.

(8) Section 36(6) of the Terrorism Act 2006 shall be read such that the “expenses” and “allowances” mentioned therein may include the discharge by the person or people of their functions under this section.’—(Holly Lynch.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Tom Tugendhat]

I beg to move, That the Bill be now read the Third time.

It remains for me to thank enormously my right hon. Friends the Members for East Hampshire (Damian Hinds) and for Stevenage (Stephen McPartland), who did so much to get the Bill to the right place; my right hon. Friend the Home Secretary, who has very graciously left me to get on with this; and all the Members who have been so helpful.

My great thanks go to the intelligence and law enforcement agencies in particular. Their extraordinary courage and skill have earned more than my admiration, respect and gratitude for many, many years, but never more so than in the last few weeks, in which I have been privileged to serve them.

It is worth pointing out very quickly one or two elements of the Bill that I have not yet had the chance to touch on. Let me make it absolutely clear that there is no possibility—no way, no desire, no intent—that any area in this Bill, or in any other that this Government would pass, would in any way diminish the unqualified right not to be tortured. That is an absolute right that this Government and, I know, other Governments, would all hold to. I should be absolutely clear that not only is there is no desire in this House for that to change, but there is no such desire in any of the services and agencies with which I have had the privilege of discussing it.

What our Government, our agencies and those who hold office in our name all know very well is that they are defending our rights and freedoms when they defend the rule of law. They are absolutely championing the values and liberties that matter to us. In the Bill, we are evolving from trying to stop spectaculars such as the tragedies that hit on 9/11 to employing spectrometers—finer points of detection—to try to ensure that we eliminate risks that come in different ways. That is why I am so grateful to them all for the advice and help they have offered to ensure that the Bill is structured as it is.

I should make it quite clear that the Bill has opened up an area in which we will need to go further and in which I am glad the Prime Minister has asked me to go further: the defence of democracy. Our democracy in this country has sadly been under attack for too long. We are not alone; we know that our friends in other parts of the country and other parts of the world have faced similar attacks and similar areas of influence. I am delighted that the taskforce that the Prime Minister has asked me to lead will get on with its work very shortly, updating the integrated review and helping to ensure that this country is ready for the changes in the threats that we face so that the ultimate sovereignty of our people—the right to choose—is guaranteed and defended long into the future. That means that we have to set up not just powers to empower those agents who work in our name, but the guardrails to defend that right.

I am very glad that the Bill includes such provisions as the requirement for the Attorney General’s consent—the Advocate General’s in certain cases—to make sure that none of the powers is abused in any way. I am delighted that we have got that in the right place, because we know, sadly, that abuse is always possible.

I will end with the words of Ken McCallum, the director general of MI5, who today was very supportive of not only the Bill but many of the measures that his service has been carrying out. He has been inspirational in his leadership of his service and his defence of the United Kingdom, so I am delighted by his welcome for the foreign influence registration scheme, describing it as

“a modern power designed to tackle a modern threat”.

He is absolutely right, and the scheme is essential. For those reasons, I am grateful for the support we have had from the hon. Members for Halifax (Holly Lynch) and for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald), and other Members across the House.

--- Later in debate ---

[Madam Deputy Speaker]

I thank the hon. Lady and the right hon. Lady for their points of order. Obviously I do not know the background to this case, but I can see that it is a very serious issue. Government Ministers are present and I think the Minister for Security may wish to intervene.

[The Minister for Security (Tom Tugendhat)]

Further to that point of order, Madam Deputy Speaker. I am sure that I speak for the Immigration Minister and the Policing Minister when I say that they will both look into it very carefully. I am sure they will return to answer these questions.

National Security

Tom Tugendhat Excerpts

Tuesday 1st November 2022 Commons Chamber

[The Minister for Security (Tom Tugendhat)]

Thank you, Madam Deputy Speaker, for being here for both my first and second outings at the Dispatch Box. I am extremely grateful that Mr Speaker granted the statement and that it follows the urgent question. Again, I pay tribute to my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who took over the chairmanship of the Foreign Affairs Committee from me, not only for the urgent question but for her work over many years in standing up for our freedoms.

I would like to make a statement on national security and safeguarding our democracy. In this new era of global competition, we face constant and concerted efforts to undermine our country and our institutions. A range of actors, including foreign states, are trying to weaken us, to challenge us and to exploit us. We are not alone. It is the burden of liberty shared by democracies around the world. The evidence of that is clear and, sadly, indisputable. Dictatorships are trying to write new rules for a new world. Russia’s illegal war in Ukraine is a terrible example of the growing threat from hostile states to our security. Russia is attacking not just a free people but a free world.

Our integrated review, published last year, makes clear the threat that we are facing. This is not a simple clash of armour but a clash of ideas. Across our society, we are seeing the challenge grow and evolve to pose a strategic threat to the security and prosperity of our nation for many years to come. A generation ago, we had the answer: our technology and our wallets were greater than theirs. Today, technological integration has deepened connections and opened doors into areas of our lives that we once thought closed. Now, as our markets integrate, we need to think about the future of our industry and innovation. Our economic security guarantees our economic sovereignty just as our democratic security guarantees our freedom.

The advanced technologies that our rivals have spent time and money developing have levelled the field and made us more vulnerable. Britain has been on the frontline of the defence of liberty for generations. Our agencies and businesses have faced the reality of this danger for decades. Our Parliament and our politics are now no different. Whether as Ministers or shadow Ministers, on Committee or when leading a campaign, this is about every party and every Member of the House. We have all heard of the attempts of unfriendly states to influence our politics in recent years and of the actions that the security officers of the House have had to take to defend us. They are not working alone. I want to put on record my admiration and gratitude to those who work hard to keep us safe in the House and around the country, because while others are on the frontline of our nation, those of us privileged to be elected—at every level and in every community—are on the frontline of our democracy.

I am here to make it clear that the Government are, and always will be, here to protect our freedoms, and none is more precious than the freedom of our nation to determine its own future. That is, after all, what democracy is about. It is the debate in towns and villages—in person and online—of free people in a free country searching for answers to the problems that we all face. As all of us know, it does not always go our way, but it is the freedom to choose that we all defend. We are taking action to address these threats.

Just as our counter-terrorism legislation in the early 2000s updated the necessary legal powers that our police and security services needed to tackle the growing threat of terrorism, we are enhancing our ability to defend against hostile states and those acting on their behalf. The National Security Bill, which is currently before the House, will give us the powers we need today for the threats that we face now. It will be the most significant piece of legislation to tackle the incursion of state-based threats to our nation in a century. Those actors threaten not just life but our way of life. We have to work even harder to protect and uphold our freedom and the institutions that defend it. From establishing our Defending Democracy programme in 2019 to the continuous work by the National Cyber Security Centre, we have sought to address that, but we must do more. That is why I can announce to the House that the Prime Minister has asked me to lead a taskforce to drive forward work to defend the democratic integrity of our country. The taskforce will work with Parliament, Departments, the security and intelligence agencies, the devolved Administrations and the private sector. It will work to better protect the freedoms and institutions we hold dear—institutions such as this very House.

The taskforce will look at the full range of threats facing our democratic institutions, including the physical threat to Members of this Parliament and those elected to serve across the country, so tragically brought home by the murder of our dear friends Sir David Amess last year and Jo Cox in 2016, and the support on offer through Operation Bridger and by the police. The work of this Taskforce will report into the National Security Council and more details will be set out in the update of the integrated review.

This is not just a taskforce for this Government. It will be cross-departmental and inter-agency, and I will be inviting cross-party co-operation, because, as I have said, this is not just about Ministers in office, civil servants or advisers across Whitehall. This work is for all of us in this House and those who have asked us to represent their interests. The Government have robust systems in place to protect against cyber threats. We are vigilant in ensuring that these are up to date and meet the challenges of the modern world. The National Cyber Security Centre, Government and parliamentary security offer all Members specific advice on protecting personal data and managing online profiles, as well as best practice guidance. I am grateful to Mr Speaker for agreeing to write to all parliamentarians on that important issue.

Finally, it is important to end by underlining that tackling these threats means providing the protection that defends our democratic institutions and the liberties that we cherish so dearly, because the point of security is not to lock us down but to liberate. My job as Security Minister of this great United Kingdom is to give us all the security to live our lives freely, and to debate and choose our future, guarded by the laws and freedoms of our nation. That is my guiding principle. I commend this statement to the House.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the shadow Home Secretary, Yvette Cooper.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

I welcome the statement from the Minister for Security. I know this is an issue that he personally takes very seriously. It is the first job of every Government to defend our national security from hostile states who wish to do our country harm and who strain every sinew to do so with the most sophisticated technology and resources, and from malign actors and extremists, both here and abroad, who want to do us harm and undermine both our democracy and everything we stand for. We pay tribute to the remarkable work of our intelligence and security services who work so hard to keep us safe.

I welcome the Minister’s announcement. We will support the taskforce and its work to defend democracy against a wide range of threats. I welcome the work on physical threats. We remember with great sadness our lost friends Jo Cox and David Amess. Can the Minister clarify that the taskforce will work on how to protect all our democratic institutions against foreign interference? Will it look at cyber-security and, in particular, the way the Government have been operating? While I welcome the seriousness of the statement and the seriousness with which the Minister has delivered it, he will know that it is a far cry from the way successive Cabinet Ministers have responded, and from the lack of seriousness and the carelessness and complacency that we have seen on some of these cyber-security issues.

Conservative Ministers were all warned in guidance after the 2019 election:

“You should not use your personal devices, email and communications applications for Government business at any classification”.

Yet many of them at the highest level ignored it. If we take the last Prime Minister but one, who left office just a few months ago, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) took a trip without officials at the height of the Skripal crisis to a villa in Italy described by locals as the “Russian mountain” where he met ex-KGB agent Alexander Lebedev. He did not declare it to Foreign Office officials on his return and says he does not remember what was discussed. He had a guest with him, but he travelled home alone and has never said who the guest was. He reportedly took his phone with the same number that he still did not change even when he became Prime Minister and sent private messages on it. If this is a new era of defending democracy and security, can the Minister tell us whether the former Prime Minister took his personal phone with him on his Italy party weekend? Who was his guest and what action is now being taken to prevent that kind of thing ever happening again?

Can the Minister tell us, too, whether that Prime Minister’s successor, the next Foreign Secretary and Prime Minister, the right hon. Member for South West Norfolk (Elizabeth Truss) used her private phone for Government business, including contacting other international leaders? If she did, what is being done to prevent that ever happening again?

There are now questions about the current Prime Minister: he reappointed to the Cabinet as the Minister without Portfolio the right hon. Member for South Staffordshire (Sir Gavin Williamson), who was sacked after a leak investigation over Huawei; and he reappointed the Home Secretary, the right hon. and learned Member for Fareham (Suella Braverman), just six days after she was sacked over a security lapse and who yesterday admitted she had used her personal email not just once but six times in the space of 43 days, all apparently because she could not make her Government IT work properly or did not have it with her. That is not adequate. And we still do not have any answer to the serious allegations about potential leaks when the Home Secretary was Attorney General, which include a briefing to The Daily Telegraph in January about an injunction that the Attorney General was seeking against the BBC in a security service case, which was then used in court to argue against the injunction. Again, if this is a new era, can the Security Minister give us a categoric response as to whether the Home Secretary when she was Attorney General—or her adviser—was involved in that leak?

The Minister will know, too, that there have been briefings and stories around with national security implications. Does he agree how incredibly unhelpful it is to our security services to have national security issues briefed in a way that appears to be about putting party interest before the national interest, and that it does not serve democracy if all these issues are not taken seriously by the person most in charge of defending our national security—the Prime Minister, followed by the Home Secretary he appoints?

Yes, we will support the Minister’s taskforce, but he will need to show us that there is some kind of grip at the heart of this Government on attitudes towards security. When we have one Prime Minister who puts security at risk to go to Italy for a party, another who allegedly used a personal phone for contacting Government Ministers, and a third who is defending his predecessors and reappointing as Home Secretary someone described on the Government’s own Back Benches as “leaky”, that undermines our national security. Our national security is too important for this kind of chaos, so what will the Minister do to ensure that the Government get a grip?

[Tom Tugendhat]

I thank the shadow Home Secretary for her very kind comments on joining the taskforce and assisting with it, because this is clearly not just a matter for the Government. As she correctly set forward, all of us in this House have responsibilities and the potential to be influenced in different ways. That is why so much of the legislation going through, on which the hon. Member for Halifax (Holly Lynch) is being incredibly co-operative, such as the foreign influence registration scheme legislation, will help us to address many of those challenges. The right hon. Lady will also be aware that the National Security Bill, of which the Opposition have been so supportive in so many areas, will be important in enabling us to challenge some of these different issues.

The right hon. Lady is absolutely right to highlight the fact that we all have such responsibility. Sadly, this is not just a UK matter. Sadly, it is not even a single Government or a single party matter. The reality is that we have seen the intrusion or attempted intrusion into different aspects of all our communications at different points over many, many years. This issue has grown in importance.

I am not going to comment on individual cases, because as the right hon. Lady rightly said, that would be absolutely unhelpful. It would be completely wrong of me to use, for any private party advantage, comments on anything that the agencies have told me in private. She herself has been extremely gracious in accepting briefings on Privy Council terms, and she has, completely correctly, guarded the privacy of them. I know that she has responded to those in exactly the appropriate way, so I place on record my enormous thanks to her for her extreme co-operation in what is fundamentally a matter of national security.

I will bring forward further proposals on the taskforce and would welcome the right hon. Lady’s thoughts, because there is an awful lot that we must do together. Sadly, the next few years are likely to be more challenging than the last. The indications are not great, as she knows. We need to work together. This is not about one party or one Government; it is about defending the British people’s right to choose their future democratically and freely, without the influence of foreign states.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the Chair of the Intelligence and Security Committee, Dr Julian Lewis.

[Dr Julian Lewis (New Forest East) (Con)]

May I start by apologising to you, Madam Deputy Speaker, and to the House for the fact that I will not be able to stay for the remainder of the statement, as I would normally wish to do?

I congratulate my right hon. Friend again on his new responsibilities. I remind him that, in 2013, extensive new legislation gave considerably greater powers to the intelligence and security agencies. In return for that, an understanding was reached—and there was a memorandum of understanding—between the Prime Minister and the Intelligence and Security Committee that we would have oversight of the various agencies that had improved and increased powers; and that, as the situation changes, we would continue to have oversight of new organisations of the sort that he is announcing today. Will he confirm that the elements of the taskforce’s activities that involve, for scrutiny, access to classified information will fall under the purview of the Intelligence and Security Committee; and that he will break the bad practice that was brought in by the last but one Prime Minister of farming such matters out to ordinary parliamentary Select Committees, which, with the best will in the world, cannot conduct the scrutiny properly because they lack the secure facilities and suitably cleared staff?

[Tom Tugendhat]

I thank the Chair of the Intelligence and Security Committee, who knows well the importance that I place on Committees. I merely challenge him on one small aspect: there is no such thing as an ordinary Committee in this House. All of them are select and are selected by the House for the purposes that they have been asked to investigate. I make absolutely clear my commitment to work with his Committee and the Committees of others, as relevant, to ensure that the necessary democratic oversight of Government is complete.

[Madam Deputy Speaker]

I call the SNP spokesman, Stuart C. McDonald.

--- Later in debate ---

[Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)]

I thank the Minister for his statement. Like him and the shadow Home Secretary, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), I pay tribute to all those working so hard to protect us.

We all wish the Minister well in his work to strengthen national security and we will work constructively with him to that end. In principle, a taskforce is welcome; the devil will be in the detail and the proof in the pudding. For example, will he tell us more about the timescale and how its membership will be appointed, and will he say more about the participation of devolved Governments in it?

Although we acknowledge that the Minister takes national security incredibly seriously, he will appreciate that lots of questions are still outstanding about his colleagues. As we heard, the former Prime Minister and Foreign Secretary had her phone hacked, apparently revealing highly sensitive discussions and information. Her predecessor had his phone number freely available online for 15 years, and had a meeting with a former KGB agent without officials. A Home Secretary has resigned in recent days over her use of personal phones and emails for official business, only to be reappointed within days. Recent High Court papers suggested that “government by WhatsApp” was the norm. A taskforce is all well and good, but those questions must be answered.

I appreciate that the Minister cannot say much at the Dispatch Box about the hacking of the former Prime Minister’s phone, but can he reassure us that steps are being taken to ensure that nothing similar happens again? Does he agree that there should be some form of inquiry into that incident and will he commit to full co-operation with that? Will he say whether government by WhatsApp is still considered appropriate? Will he confirm the status of the documents that the Home Secretary sent to her private email?

Finally, what steps is the Minister taking to reassure our international partners? We know that they take a dim view of the security mess at the heart of the Government. Frankly, how can we expect them to share anything with us when too many of his colleagues appear to be playing fast and loose with what they are told?

[Tom Tugendhat]

I thank the Scottish National party spokesman for his co-operative tone in regard to how we will work together on this issue. I will set out details and be in touch with the devolved Governments and Administrations to make sure that their views are fully taken into account and that the important different needs of different devolved areas are respected and play fully into the taskforce.

It is essential that we recognise that, sadly, this is not simply a matter for the United Kingdom. The reality is that the points that the hon. Gentleman made also apply to friends and partners around the world. We have seen very significant reports of intrusion and intervention into electronic communications in other countries. Sadly, that includes France, where President Macron set out his issues with Russian hostile activity at the time of the general election only a few years ago; and there are other such reports in other jurisdictions.

We are working together with friends and partners on this issue, because the reality is that the defence of democracy does not stop at the United Kingdom coast but continues in depth when we work with partners and allies. We will only be safe when we support others to guarantee their freedoms so that ours are even more secure.

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

First and foremost, there is no question that in the Government and even in Parliament we have become incredibly sloppy about any idea of security. The carrying of telephones—just switched off—into meetings is a security risk, because they can be switched back on and used as microphones. We know that. I have seen Government Ministers carrying telephones into meetings in their back pocket. That should be stopped. All those phones should be taken off them. We can do many things, and GCHQ is very clear about the penetration of our enemies into our space.

My main point is that in all of this—the Minister is reviewing the integrated review—why in heaven’s name was China not seen as a threat when we did the original review? This is about everything it does, such as the trashing of Hong Kong, the Uyghurs, taking over the South China seas and the attacks on people like me and others, including the Minister, as sanctionees. Will he make sure, first of all, that we lift China back into that bracket as a threat, treat them as a threat and do not excuse it? For those of us who are sanctioned, it would be marvellous if the Foreign Office or even Parliament were capable of giving us any advice about what happens to our families when they have to travel. I find it remarkable that when we ask them that question, we have no idea of what limitations that poses on us, even today.

[Tom Tugendhat]

I thank my right hon. Friend for his comments. He is absolutely right to cite the fact that China has become a long-term strategic threat. I am afraid that I cannot answer on why it was not raised before; I have only just joined the Government, as he knows.

The question of security is so important for all of us. The National Cyber Security Centre and Parliament’s security office have been extremely open in helping any Member, Minister, shadow Minister, official or staffer who seeks advice on that matter. I pay enormous tribute to the security officer for her work and the way in which she has assisted many of us at different points to realise the threats that are against us and how to best protect ourselves.

Let me make this commitment absolutely clear: there is no defence of democracy without defending every Member of the House. Whichever party we are from and whichever cause we champion, we are here because free people chose us to be here. It is our responsibility to make sure that that freedom endures in the work and in the voices that we hold.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I again welcome the right hon. Gentleman to his post and the commitment that he is showing to try to get together a cross-party approach to his taskforce. National security is absolutely crucial. It is the job not just of the Government, but of each and every one of us in this House—in the Opposition and on the Government Benches—to take that seriously. Will the Minister bring updates on the work of the taskforce to the House so that we can scrutinise its work? Also, what level of information will Members be provided with given the sensitivity of some of the subjects that he will look at?

[Tom Tugendhat]

I thank the hon. Gentleman for his entirely correct assessment that this is not just about the Government. Actually, it is not just about this House, but about many of the businesses that support us in various ways and many of the businesses that we are privileged to represent in the communities that we are lucky enough to serve. I absolutely agree that this is a matter for all of us.

I also pay tribute to the hon. Gentleman for the tone in which he has approached the issue, because the reality is that I will have to bring—in fact, will willingly bring—reports back to the House, but some of them may be caveated. They may not include some details that Members would quite understandably ask for, but which may not be appropriate for wider reading, for reasons that the hon. Gentleman understands and has already expressed. I assure him that I will ensure that this House is able, in the appropriate way, to scrutinise the work that I conduct on behalf of our people and our country.

[John Redwood (Wokingham) (Con)]

What urgent action will the Government take so that we grow more of our own food, produce more of our own oil and gas, and refill our depleted reservoirs? Having more domestic supply of the basics is now fundamental to national security, given the obvious threats from Russia and others.

[Tom Tugendhat]

I will not comment on the details of the taskforce, but I think I can safely say that that is a little beyond even what I was hoping for. I will not go into details, except to say that my right hon. Friend is absolutely right: the reality is that supply chains in our country and around the world have changed as covid has influenced different issues, and sadly the nature of the decoupling that some states have sought to pursue has changed the way in which we must consider our own security.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

One area of Government policy that I suggest would benefit from the fresh eyes of the Minister is the need for a whistleblower defence under the National Security Bill. The Minister may be aware that an amendment will be moved on Report; it might facilitate the Bill’s passage if he met me and other hon. Members behind the amendment before then.

[Tom Tugendhat]

The right hon. Gentleman makes his point extremely clearly. He knows that the new Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), is responsible for the Bill alongside me and has his own views on the subject. No doubt my hon. Friend will be extremely willing to meet the right hon. Gentleman. If not, I shall.

[Vicky Ford (Chelmsford) (Con)]

I welcome my right hon. Friend to his place; he is a great champion of freedom and his taskforce is an excellent idea. To protect our democracy, it is vital that we protect those who work in our democratic institutions, especially all Members of this House, from misinformation, cyber-attacks and online attacks. It is also vital that we continue to work with other countries, because it is only by working together that we can champion democracy and let democracy prevail. Does my right hon. Friend agree?

[Tom Tugendhat]

I pay enormous tribute to my right hon. Friend, whose work in the Foreign, Commonwealth and Development Office was incredibly important in championing democracy and freedom around the world. Indeed, some of her work that was not always celebrated was in championing journalism. One thing we should recognise fully is that democracy does not work without a free press: I know that I am going to regret these words, but what they write and how they write it are as much a part of our democratic institutions as the words that we use in this Chamber. Making sure that our press is free and without influence is as important to democracy as making sure that we are, too.

[Dan Jarvis (Barnsley Central) (Lab)]

I warmly welcome the Minister to his important new role. He and I have spent many years safeguarding the security of information; these are matters that I know he takes very seriously, and I wish him well in the role.

Because I know the Minister takes these matters so seriously, I want to return briefly to the shadow Home Secretary’s point about the importance of doing the right thing and the importance of personal conduct. In addition to the measures that the Minister has outlined to the House today, there is an absolute requirement for a vigilant mindset among all Members of this House, but most critically among Ministers, who need to show leadership in the area. Does he agree that when it comes to matters of national security, everyone—everyone—must adhere to the protective regime or be deprived of access and removed from their position if necessary? Those are the rules, and everyone should follow them at all times.

[Tom Tugendhat]

May I take a moment to pay enormous tribute to my friend? We met in Helmand about 16 years ago, when he was commanding a unit that I was sent to check up on. Well, he is checking up on me now—and he is quite right to hold me to account for my words, as I was sent to hold him to account for his actions back then. He is absolutely right. I know that his bedtime reading is the US army field manual: the first words are “Every day, do one thing to improve your defensive position.”

[Aaron Bell (Newcastle-under-Lyme) (Con)]

I welcome my right hon. Friend to his place. It was a pleasure to serve with him on the National Security Bill Committee. I also welcome the taskforce that he has set out.

Last week, a number of us went with the armed forces parliamentary scheme to Shrivenham, where we not only heard from some of the leading experts in cyber in our armed forces, but saw the new Defence Cyber Academy, which was announced only a few weeks ago by the Defence Secretary. Will the Minister work with our armed forces on cyber to protect British companies and our institutions from Russian and Chinese cyber-attacks that put our national security at risk?

--- Later in debate ---

[Tom Tugendhat]

I thank my hon. Friend for his kind words and for his work on the Bill Committee; he has been an absolute stalwart on the issue and has been a very dear friend for a lot longer. I also pay tribute to the armed forces parliamentary scheme and its work to make Members of this House aware of the various ways in which the armed forces play such a vital role in our national life. My hon. Friend’s comments on cyber awareness are absolutely correct, and I agree with every word.

[Gavin Robinson (Belfast East) (DUP)]

As the Democratic Unionist party spokesman for home affairs, may I express my personal delight at seeing the Minister in his place? I hope that when he is constructing this welcome taskforce, he will recognise that our recent history and our contemporary position in Northern Ireland mean that we have a contribution to make.

The Minister and I were elected at the same time. Since then, we have had the strategic defence and security review, the modernising defence programme, the national security capability review and the integrated review, which formed part of his statement. There are two common threads in those four exercises: the threats get bigger, but the budget remains the same. Does he have an assurance at this stage that if the taskforce brings forward a new programme of work to address emerging threats, it will have the associated budget to tackle them?

[Tom Tugendhat]

I thank the hon. Gentleman for his kind words. As he will know, not only is the voice of Ulster heard very clearly in the integrated review, but it actually holds the pen. It is a pleasure to commit to working with him and others across the United Kingdom to make sure that voices are heard. On resources, we are in the early stages: at the moment we are setting out how we can work together better, but there is an awful lot still to do.

[Dr Ben Spencer (Runnymede and Weybridge) (Con)]

I thank my right hon. Friend for his statement and warmly welcome him to his place.

In the same way that the UK took a leading role in international collaboration against the Russian invasion of Ukraine, is it taking a leading role in international collaboration against cyber-attacks by hostile actors?

[Tom Tugendhat]

My hon. Friend is quite right to talk about international co-operation, because this is not something that we can do alone. Our partners around the world are absolutely integral to our defence. Through agencies such as GCHQ and wider work through the National Cyber Security Centre, the United Kingdom has regularly been leading different forms of engagement and different ways of co-operation. My hon. Friend has my absolute commitment that that will continue and grow, because the way we extend the UK’s influence and defend ourselves is by making sure that our friends and allies are safe, too.

[Derek Twigg (Halton) (Lab)]

I welcome the Minister to his post and welcome the taskforce. While I have no reason to doubt his integrity or commitment to security, I am a little disappointed that although the shadow Home Secretary and my hon. Friend the Member for Barnsley Central (Dan Jarvis) both raised the issue of the Government’s integrity with respect to security, he has not addressed it. I thought he might have taken that opportunity, given the situation with Ministers’ email use and the security issues surrounding it. We know that mobile phones and other phones are being used, we have seen the former Prime Minister going off to meet an ex-KGB agent, and there is an issue about Russian money in the Conservative party. I thought that the Minister would address the question of how we can have confidence that he and the Government will put things right to ensure that they take security within the Government seriously.

The question that I want to ask the Minister is very simple. Given that the focus has rightly been on Russia and China, on what is happening in Ukraine—obviously—and on energy security, may I suggest that it is important for us not to lose sight of the fact that we need to keep on top of the issue of how we combat terrorism? It seems to have been left on the back burner recently, but we need to know and feel more comfortable about what the Government intend to do to protect the country from terrorism.

[Tom Tugendhat]

I thank the hon. Gentleman for what he has said. He is absolutely right. There is, sadly, no let-up in the concern about terrorism, and we know that the fact that we do not hear of incidents does not mean they were not prevented by our fantastic agencies in various different ways. The experience that I think must be the most sobering I have had for a long time was walking into my present role and hearing an update on the threats that we face every day, and the different ways in which our fantastic agencies and the officers who serve them have been conducting themselves in order to protect us. They are absolutely the best of us, and we are blessed and honoured to have them working for us and serving our state.

As for the hon. Gentleman’s other points, he will forgive me if I do not go into details. He knows why that is. As the shadow Home Secretary correctly said, it would be inappropriate to discuss operational matters for party advantage.

[Simon Fell (Barrow and Furness) (Con)]

As the chair of the all-party parliamentary group on cyber security, I welcome my right hon. Friend’s statement. I am sure he is well aware of the importance of disinformation and misinformation and the harm that it is causing to our country at the moment, whether by undermining our democracy or by spreading conspiracy theories. But if he is in any doubt about that, I recommend to him the BBC series “Death by Conspiracy?”, which shows how our constituents are being hurt, and even dying, as a result of the sharing of disinformation by, often, foreign actors.

With that in mind, will my right hon. Friend agree, within the taskforce, to look at the role of legal but harmful content and keep it under review? Will he also ensure that we look at the Computer Misuse Act 1990 and its possible reform? Some of the people who are working hard daily to keep us and our businesses safe are currently under threat of legal action just through doing their jobs.

[Tom Tugendhat]

I thank my hon. Friend for his work on the all-party parliamentary group. He is to right to highlight the threat of disinformation and, indeed, the way in which cyber is being used against us. I am not entirely sure whether it was flattery or mere coincidence that as soon as I took this job, the BBC ran a series of programmes called “The Capture” in which the Security Minister—rather better-looking than me—had managed to annoy a certain hostile power of which we have been speaking this afternoon, and was subject to a number of cyber-attacks. I very much hope it was coincidence, not prediction.

[Mr Kevan Jones (North Durham) (Lab)]

As a member of the Intelligence and Security Committee, I welcome the announcement of the Minister’s taskforce. Some of the issues he has raised were highlighted in our Russia report of 2020. I heard his commitment to the Chair of the ISC to work with him closely, but may I just say to him that, like the rest of us, he is—to use a Robin Day phrase—a here today, gone tomorrow politician? We need this taskforce’s scrutiny to be embedded in the memorandum of understanding between the Committee and the Government, because otherwise—this point was raised by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne)—it will be impossible for much of the taskforce’s work to be scrutinised in this place.

[Tom Tugendhat]

The right hon. Gentleman is right to suggest that institutions and structures are what guard us against the “here today, gone tomorrow” whims of politicians, and that setting up such structures is the way we keep ourselves safe. Indeed, the best of our institutions have endured for hundreds of years in order to guarantee those freedoms. The right hon. Gentleman can be absolutely assured that I will be looking at ways in which we can embed such structures to ensure that we keep ourselves safe.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I congratulate the Minister and welcome him to his new role. May I ask him to answer a serious and simple question? He has made great play of cyber-security and the need for us to be technologically aware of threats. If he was made aware that a civil servant or Government employee had been sacked for sharing Government documents in personal email accounts or devices, would he sanction that person’s re-employment, even if they had apologised?

[Tom Tugendhat]

One of the reasons I have always enjoyed debating with the hon. Member is the fact that he finds new ways of asking old questions. I was delighted to hear the question, but I am afraid I am going to return to my old answer, which is that I will not comment on ongoing cases.

[Hilary Benn (Leeds Central) (Lab)]

When it was reported in the press that the former Foreign Secretary’s phone had been hacked, the former head of MI6 said that Ministers needed to be properly educated about the use of their telephones. If we are absolutely honest—and the point has been made already today—all of us need to be properly educated about not just the use of our phones, but the use of our emails. Does the Minister agree that perhaps it is now time for us to move to a more proactive approach with Members, to ensure not only that we have the excellent advice that is available but that people are looking to make sure that we are following that advice? If the House authorities decide to go down that road, will he ensure that people with all the expertise available to him will be able to attend to give us practical advice about everything we ought to be doing to keep our part in our democracy safe?

[Tom Tugendhat]

The right hon. Gentleman has made an extremely valid point. I can assure him that any requests from parliamentary security and the excellent lead that we have in the person who currently holds the role will be looked at with extreme willingness. Any request to defend our democracy by those of us who have been privileged to be elected to this House, or indeed those who have been privileged to be elected to others, will be taken extremely seriously. The same, by the way, applies to academic freedom and to many other institutions. They are absolutely fundamental to the liberties of our country.

[Andy Slaughter (Hammersmith) (Lab)]

In her resignation letter, the Home Secretary said:

“As soon as I realised my mistake, I rapidly reported this on official channels, and informed the Cabinet Secretary.”

Nothing in that statement is correct, according to the Home Secretary’s own account when she wrote to the Chair of the Home Affairs Committee yesterday. She waited several hours, she was confronted rather than volunteering information, and she finally reported her breach of security not to the Cabinet Secretary but to her special adviser. If we are being charitable, there is a conflict between the Home Secretary’s versions of events, and surely that merits an independent investigation if we are to have confidence in the person who is primarily responsible for our national security.

[Tom Tugendhat]

The hon. Gentleman has made his points, and the Home Secretary answered yesterday.

[Clive Efford (Eltham) (Lab)]

But the Minister is aware that there are questions about whether the Home Secretary has full security clearance. Can he give the House an assurance that she has that clearance and, if not, what are the implications for national security?

[Tom Tugendhat]

All members of the King’s Privy Council have access to the information that is necessary to conduct their tasks.

[Madam Deputy Speaker (Dame Eleanor Laing)]

And now, in his traditional place, Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

Thank you, Madam Deputy Speaker. A taskforce for all the United Kingdom of Great Britain and Northern Ireland has to be excellent news, and I welcome it.

The Northern Ireland protocol is stirring up tensions in Northern Ireland. What steps will the Minister and the Government take to deal with the people who chant in support of the IRA—the same IRA, the same fifth columnists, who want to destroy our United Kingdom of Great Britain and Northern Ireland, and who carried out the indiscriminate murder campaign of pure evil with which they devastated Northern Ireland during the troubles—and what steps have been taken to ensure support for the Police Service of Northern Ireland at all times to combat the very real threat of terrorism from republicans or, indeed, from any mindset in Northern Ireland?

[Tom Tugendhat]

I thank the hon. Gentleman for his second question today; I hope I will be privileged to take many more. He can be assured that all security policy will include the whole of the United Kingdom, and that I will be absolutely committed to working with the PSNI and numerous other police forces.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Just before I conclude the proceedings on the statement, let me say, as Chairman of the Consultative Panel on Parliamentary Security, that I wish to add my thanks to the Minister for what he has said today, and for the work to which he has dedicated himself so enthusiastically.

Overseas Chinese Police Stations in UK: Legal Status

Tom Tugendhat Excerpts

Tuesday 1st November 2022 Commons Chamber

[Mr Speaker]

I welcome the Minister to the Dispatch Box for the first time.

[The Minister for Security (Tom Tugendhat)]

Thank you, Mr Speaker. It is a great pleasure to be here on my first outing at the Dispatch Box to speak about something that, as the House will know, I take extremely seriously. Reports of undeclared police stations in the United Kingdom are, of course, extremely concerning and will be taken seriously. Any foreign country operating on United Kingdom soil must abide by UK law. I have discussed this matter with the police and I am assured that they are investigating allegations of unlawful activity. It would be inappropriate for me to comment further on operational matters.

I will take the opportunity, however, to reassure the House of the Government’s resolve to take the matter seriously. I will also shortly make a statement to the House on safeguarding our democracy. The protection of people in the United Kingdom is of the utmost importance. Any attempt to illegally repatriate any individual will not be tolerated. This egregious activity is part of a wider trend of authoritarian Governments perpetrating transnational repression in an effort to silence their critics overseas and undermine democracy and the rule of law. For example, we have been aware for some time of efforts to interfere in our academic freedoms and university sector, and we have been taking steps to protect our institutions.

This Government are committed to tackling the challenge of transnational repression wherever it originates. It would be unacceptable for any foreign Government to feel able to operate in that way in the United Kingdom, and it must be stopped. The Home Office works closely with Departments across Whitehall and with devolved Administrations to ensure that our national security is protected and that, in particular, those who have chosen to settle here are free to engage in our democratic society without fear of the regimes that they have tried to leave behind.

Through our excellent police forces and the agencies that work with them, we take a proactive approach to protecting individuals and communities from all manner of threats. Where we identify individuals who may be at heightened risk, we are front-footed in deploying protective security guidance and other measures where necessary. I pay tribute to my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and particularly my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who has taken over the best job in Parliament as Chair of the Foreign Affairs Committee. They have worked tirelessly on this issue, including with our close international partners.

The upcoming National Security Bill will strengthen our legal powers to deal with transnational repression. Coercion, harassment or intimidation linked to a foreign power that interfere with the freedoms of individuals will be criminalised under the new foreign interference offence in the Bill. Existing criminal offences against a person, such as assault, may also have sentences increased using the state threats aggravating factor in the Bill where they are undertaken for, on behalf of or with the intention to benefit a foreign power. The Bill will introduce a new foreign influence registration scheme, for which many hon. Members have campaigned, including my hon. Friend the Member for Rutland and Melton. That will provide greater transparency around foreign interference in our society.

It is clear, however, that we can and must do more. I have therefore asked officials to step up the work to ensure that our approach to transnational repression is robust, and I have asked our Department to review our approach to transnational repression as a matter of urgency. I will provide an update on that work to the House in due course.

[Alicia Kearns]

I thank Mr Speaker for granting this urgent question. I take this opportunity to welcome my right hon. Friend to his place and say how reassured I am to have someone of his expertise leading on this important area for our national security.

There are troubling reports of a widespread network of Chinese police stations operating worldwide, including three in our country in Croydon, Hendon and Glasgow. Publicly, those stations are harmless administrative centres for Chinese nationals, but reports suggest that they are actually used to hunt down dissidents and alleged Chinese criminals. The Chinese Government have admitted their existence, so I have some questions for the Minister. What is the legal basis for their operations on UK soil? Are Chinese officials involved in their administration? I welcome that the Minister has tasked an investigation, but will he commit to update the House on it in due course?

Finally, the British national overseas scheme was world leading, but we have a duty to protect those who come here and seek refuge on our soil. Does he agree that, following the Chinese consul general’s attack on a Hongkonger only a couple of weeks ago, we are playing a dangerous game in sacrificing our sovereignty and the safety of not just British nationals, but refugees at the altar of not wanting to upset an authoritarian state?

[Tom Tugendhat]

I again pay tribute to the work that my hon. Friend has done over recent weeks, in particular, and years in alerting this House and the country to the threats that we have faced from authoritarian regimes around the world. I pay particular tribute to her leadership of the China Research Group, on which I was honoured to work with her before.

The reports that my hon. Friend mentions are not exclusive to this country. Sadly, we have seen authoritarian states exercising repressive tendencies abroad and seeking to extradite, or indeed inveigle, citizens of their own country back to their homeland to extract punishment. That is simply unacceptable. The protections of the UK state need to apply to all those in the United Kingdom and it is absolutely essential that those protections are afforded to all. That is why I am working, and will work further, with the police and agencies to ensure that we are on top of this offence and that, should evidence be shown and proof be given, action will be taken.

I also thank my hon. Friend enormously for her comments about the British national overseas scheme. She is right that that was not only world leading but essential for protecting British nationals in the face of an authoritarian dictatorship, and that those who come here under the scheme should be afforded the same protections, rights and dignity as all British nationals everywhere.

[Holly Lynch (Halifax) (Lab)]

I, too, welcome the Minister to the Dispatch Box. I am grateful to the hon. Member for Rutland and Melton (Alicia Kearns) for securing the urgent question. As we have heard, the Safeguard Defenders report alleges that the Chinese Communist party has set up parallel policing mechanisms around the world. The report identifies three such stations in Hendon, Glasgow and Croydon that purport to offer services for Chinese nationals abroad. There have been multiple reports, however, that those stations are cracking down on Chinese political dissidents, including Hong Kong ex-pats and Uyghur refugees.

According to the Committee for Freedom in Hong Kong Foundation, people from Hong Kong relocating to the UK are being

“followed, harassed, attacked and intimidated”

by operatives based at the Glasgow station. The recent unacceptable conduct that we witnessed outside the Chinese consulate in Manchester makes it clear that we have to act to safeguard those in the UK from increasingly belligerent measures being undertaken by those acting on behalf of the Chinese state.

With the Minister’s predecessor, the right hon. Member for Stevenage (Stephen McPartland), we discussed in the National Security Bill Committee that the harassment of dissidents was becoming an increasing concern. What assessment have the Government made of these stations and what action have they taken to disrupt these damaging activities? The foreign influence registration scheme is long overdue, as he and others have said, so can he put on record exactly when it will be introduced?

The Government previously stated that the Home Office and the Department for Levelling Up, Housing and Communities have drawn up plans to protect those arriving from Hong Kong from surveillance and harassment. Can the Minister elaborate on what those provisions are? The rule of law and freedom of expression are fundamental principles in our democracy and we must act to make it clear to any overseas regime that only UK police forces undertake policing in this country—with absolutely no exceptions.

[Tom Tugendhat]

I thank the hon. Lady for the tone with which she has approached not just the urgent question but the National Security Bill Committee, and for the openness and frankness with which she has enabled us to work on a truly cross-party basis on what is fundamentally a national security question for our whole country. I am extremely grateful for the way she has addressed these questions.

The Safeguard Defenders report that the hon. Lady cites certainly raises some very serious concerns. Those are being looked into. Of course, it would not be the first time an authoritarian dictatorship had claimed powers that it does not have, so we are looking into the assessment and, as I say, we will come back to the House with a report when and if action needs to be taken.

On FIRS, the hon. Lady is absolutely right that this is a matter that many of us have raised on numerous occasions. As soon as the National Security Bill is through the House—as she is well aware, that will, I hope, be very soon—those powers will be able to be used to defend not just this country but Members of this House against the intimidation or influence of those who seek to lobby or influence, masking the fact that they are doing so for a foreign state.

On protections, the hon. Lady is, again, absolutely right. The reality is that there is no police force in this country that has jurisdiction except the police forces of the United Kingdom. She is absolutely right that no foreign force should have abilities to influence, detain, hold or pressurise citizens of our country, except those that are agreed to by law.

[Dr Julian Lewis (New Forest East) (Con)]

I welcome my right hon. Friend to his new post and congratulate him on it. Is he able to explain the criteria under which a so-called diplomat found guilty of a criminal assault would be declared persona non grata? On our concern about unofficial foreign police forces in our country, how safe should Hong Kong students feel in UK universities, given the amount of physical and especially financial penetration of those universities by communist Chinese entities?

[Tom Tugendhat]

May I thank the Chairman of the Intelligence and Security Committee for his kind words and emphasise my keenness to work with his Committee and Members across the House to make sure that we address this subject together? His question about diplomats is, I am afraid, one for the Foreign Office, but he can be absolutely assured that information arising from any inquiry or assessment by the Home Office or by police forces or agencies will feed straight into the Foreign Office for its evaluation.

As for Hongkongers in UK universities, my right hon. Friend will know that, in a former incarnation, I may have been responsible for the publication of a Foreign Affairs Committee report in 2019 that highlighted the threat that some face in universities. He can be absolutely assured that that has not left my desk.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the SNP spokesman, Stuart C. McDonald.

[Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)]

I, too, congratulate the hon. Member for Rutland and Melton (Alicia Kearns) on securing this important urgent question, and I welcome the Minister to his place.

These are really alarming and incredibly serious allegations, which, as the Minister says, have to be properly investigated. Indeed, the suggested international scale of these activities across 30 countries on five continents is actually pretty shocking. Given the international perspective, what discussions are the Minister and his counterparts having with colleagues in the EU and beyond about how they can co-ordinate on this matter?

What steps can the Minister say have been taken to ensure that law enforcement and security services have the skills and resources to tackle the matter? This seems a recent and different challenge for them. Will he say a little more about the co-ordination with devolved Governments who have responsibility for policing?

The Minister expressed confidence that the powers in the National Security Bill, which we have debated at some length, will be sufficient to tackle this type of alleged activity. Will he express a willingness to use those powers if these allegations are made out?

Finally, does the Minister agree that, while our attention is rightly focused on the bad actors seeking to control and coerce Chinese residents, BNOs and others, it is all the more important that we remember and support the many other groups, businesses and individuals who do positive work in supporting their communities to contribute to our society?

[Tom Tugendhat]

I thank the hon. Member for the tone with which he has addressed these questions. This is truly a United Kingdom issue, and the way to address them is for the United Kingdom to work together.

The hon. Member is absolutely right that there are wider dimensions, which include our friends and allies around the world. The Government have already been working with Governments around the world to make sure that we deal with the repression and oppression that we are seeing in different places. He will remember well the way in which the United Kingdom stood so clearly with the Government of Canada to call out the illegal detention of Michael Spavor and Michael Kovrig. I am delighted to say that that will continue.

The hon. Member is right that working with police forces across the United Kingdom—including Police Scotland, which does excellent work—is really important, but it is also important that they have access to the resources that we are able to bring as the United Kingdom. The agencies that do so much to support us all are essential.

I am grateful for the hon. Member’s kind words about the National Security Bill. His support on that Bill has been incredibly important and demonstrates that this truly is a cross-party, cross-nation effort to keep the whole of the United Kingdom safe. He can be absolutely assured that I will not hesitate to use the powers in the Bill should they be required.

The hon. Member’s question on the community is also really important. We need to make it absolutely clear that what we are resisting here is authoritarian Governments seeking to influence free people. We welcome people from across the world. We welcome people from communities that may be repressed at home but can be free here. It is essential that we champion those who can enjoy freedom here, and the Hongkongers are a clear demonstration that this Government and this country welcome those seeking freedom.

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I am grateful to Mr Speaker for granting the urgent question and I congratulate my hon. Friend the Member for Rutland and Melton (Alicia Kearns) on securing it.

I am pleased to see my right hon. Friend at the Dispatch Box; he should duck his shoulders, because he is responsible for none of what I am about to say. May I simply say that we are seeing a litany of general excuses from the Government, albeit not from him directly? A week ago, they had to be dragged to the House twice to talk about the punishment beating that was meted out in Manchester—no statement was offered—and now we have another UQ.

This business about these police stations has been well known and well documented for ages. Every other country that has them is now investigating with a view to getting rid of them—Canada, Chile, Germany, Ireland, Portugal, Spain, Sweden, the Netherlands and the USA are all about to kick them out—but we have still not undertaken a full investigation. Even in Scotland, the First Minister has decided to investigate the Glasgow site; we have done nothing about the two sites here in England.

I simply say to my right hon. Friend—with the best intentions, because he is sanctioned, like I am, by this brutal regime—that we have testimony from endless people, we have a Chinese Government who have set up these police stations, we have Confucius Institutes bullying Chinese students here, we have seen them beaten up on the streets in the UK, and we wonder very much whether they feel safe. Will he therefore take back to the Government, and to the Foreign Office, the message that it is high time they showed some strength and acted immediately to get rid of the diplomats responsible in Manchester, to investigate these police stations and kick them out, and to do the same with the Confucius Institutes? Otherwise, we look like we are dragging our feet compared with our neighbours.

[Tom Tugendhat]

I welcome the words of my fellow sanctionee. That is one of the few foreign accolades of which I think we are equally proud.

Let me make a few points. First, there is no delay in investigation in this country. I can assure my right hon. Friend that the assessment will be coming forward urgently. As he will well understand, I will be extremely keen to hear the result. May I also remind him of the Prime Minister’s pledge during the leadership race only a few months ago that Confucius Institutes pose a threat to civil liberties in many universities in the United Kingdom and he will be looking to close them?

I thank my right hon. Friend for his words about the Foreign, Commonwealth and Development Office. I am sure that Ministers from that Department will seek to make a statement, but I am sure they will be waiting for the reports that will be provided to them. He is absolutely right that there is no place for those who abuse their diplomatic privilege or the liberties of this country in order to oppress citizens here.

[Sarah Jones (Croydon Central) (Lab)]

I congratulate the hon. Member for Rutland and Melton (Alicia Kearns) on securing the urgent question. One of the alleged stations is in my constituency. I have to confess that when I first received emails about it from constituents I thought it was some kind of hoax. The address where the police station is supposed to be is that of a business that has written to me recently asking for a meeting, so, at first, I thought it could not possibly be true. It appears now that the reality is much more alarming.

I am grateful to the Minister for stating that he will come back to the House and tell us what his investigations have found, but I wonder whether he can give some reassurance to the people of Croydon—in particular the citizens from China and Hong Kong who live in my constituency—that they will be safe. Perhaps he might agree to meet me to talk about what may or may not be happening in the middle of my town.

[Tom Tugendhat]

The hon. Lady is absolutely right that a commitment to all citizens of the United Kingdom and all citizens in the United Kingdom is equally valid, wherever they come from and whichever community they are from. Of course I will make that commitment to meet her, and I will be delighted to hear more.

[Mr Robin Walker (Worcester) (Con)]

I congratulate my hon. Friend the Member for Rutland and Melton (Alicia Kearns) on securing this urgent question. I welcome my right hon. Friend the Minister to his position on the Front Bench and the fact that he says he takes this extremely seriously and that the police are investigating. I raised this issue in the House two weeks ago on behalf of a concerned constituent during a Foreign, Commonwealth and Development Office statement. Unfortunately, the follow-up from the FCDO was transferred to the Home Office, which then communicated to me that it did not intend to respond. Can my right hon. Friend therefore reassure my constituent that there will be a co-ordinated response across Government to what is basically an assault on British sovereignty, and may I suggest that he leads on that response?

[Tom Tugendhat]

I am delighted to offer that commitment.

[Stewart Malcolm McDonald (Glasgow South) (SNP)]

I congratulate the Chair of the Foreign Affairs Committee, the hon. Member for Rutland and Melton (Alicia Kearns), on bringing the former Chair of the FAC, the Minister, to the Dispatch Box on this issue, and I greatly welcome his appointment to Government. Although the stations are what has grabbed the headlines and attention of many, the broader issue, as has been mentioned, is the Chinese Communist party using all the instruments of its international architecture, including the Confucius Institutes, to harass, intimidate and track down people. Do the Government now intend to review any and all co-operation agreements they have with law enforcement bodies in China; I am not calling for them to be scrapped at this stage, but will they at least be reviewed, if they do exist? As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) mentioned from the Front Bench, the devolved Administrations have responsibility for policing but also for education. They need to have a seat at the table and be part of a broader strategy in unpicking this reliance on Chinese cash—let us be honest, that is what it is down to. Lastly, given FBI expertise in this area and the success in the US of closing down these stations and closing off opportunities to harass and intimidate people, have the Government at least been in touch with their counterparts in the FBI to tap into their expertise?

[Tom Tugendhat]

It is like an FAC reunion hearing the hon. Gentleman, my former Committee friend, making his points. He is right that the way we engage with authoritarian dictatorships and powers around the world is constantly under review, and, as he will understand, that is going to be of particular interest to me in my new role. He is also right that the devolved Administrations and Governments need an absolute commitment that they will be part of this conversation, and he knows that I will always work with every part of the United Kingdom and make sure that voices are heard and support is offered. I am committed to the defence of the whole of the United Kingdom. I am also committed to co-operating with foreign partners, and the hon. Gentleman rightly mentioned the FBI. We also work closely with Canada and Australia on many of these issues, and indeed with many European countries, who have been extremely good partners and very firm friends.

[Bob Seely (Isle of Wight) (Con)]

I add to the FAC reunion. I congratulate the Minister on his new role and my hon. Friend the Member for Rutland and Melton (Alicia Kearns) on securing the urgent question. Do any other states have similar ad hoc covert or overt police stations in the United Kingdom, and for how long have the Government known about these Chinese police stations in the UK? It is great that the Minister speaks tough on this, and I know he has talked about it at length as have many other members of the FAC, but to echo the words of my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and my hon. Friend the Member for Worcester (Mr Walker), we have had increasingly tough words for too long. What we have not had is a realistic and robust defence of our democratic values and democratic institutions, so can the Government now get real on this?

[Tom Tugendhat]

My hon. Friend is right that it has been alleged that other states have had connections in this regard, and that is being looked at. On the length of time question, I hope he will forgive me for not going into operational details, but he can be absolutely assured that that will prove part of the assessment. As to action, I merely urge him to wait a few moments as I will be making a statement very shortly that I hope will answer some of his questions.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I congratulate the hon. Member for Rutland and Melton (Alicia Kearns) on securing the urgent question and welcome the Minister to the Dispatch Box. I hope his appointment brings us into an era where Government actions match their rhetoric on this issue, because it simply is not good enough for us to rely on organisations like Safeguard Defenders to bring this to light. I hear what he says about the National Security Bill, and he knows he has support across the House on that, but what we have heard about is not something that requires new legislation; we could be tackling it now. We must look at Chinese influence of this sort in commerce and academia, because if the UK was doing this in China—if the boot was on the other foot—it would be a very different story.

[Tom Tugendhat]

The right hon. Gentleman makes a good point about reciprocal action. When the Prime Minister appointed me he was extremely clear on how he saw the role of security and what he saw as my responsibility, and the right hon. Gentleman can be assured that I take this extremely seriously. This is an issue that I have been vociferous about for a number of years, and I am very pleased to have the opportunity now to act.

[Jason McCartney (Colne Valley) (Con)]

I welcome my right hon. Friend to the Dispatch Box and congratulate the Chair of the FAC, my hon. Friend the Member for Rutland and Melton (Alicia Kearns), on raising this important issue. I want to return to the question of intimidation and threats on university campuses and assessments of any foreign state involvement in that. What guidance has been or will be issued to university vice-chancellors about the threats of these transnational oppressive actions?

[Tom Tugendhat]

My hon. Friend kindly refers to the FAC report of 2019. While I am not going to comment on actions taken towards universities—that is a matter for the Department for Education—the reality is that the communication between my office and that Department will only grow, as, sadly, these incidents appear to.

[Hilary Benn (Leeds Central) (Lab)]

I welcome the Minister to his place. Can he confirm that the three premises referred to today have at no time been notified to the Government under the Vienna convention on diplomatic relations? If not, will his investigation include looking into how the people working out of these places came to be given visas by the Home Office?

[Tom Tugendhat]

I can tell from the question that the right hon. Gentleman has had many years of experience in these matters, and he can be assured that those questions are already part of the assessment I will be bringing and will form part of the report that I will conclude.

[Christine Jardine (Edinburgh West) (LD)]

I also thank the Chair of the FAC, the hon. Member for Rutland and Melton (Alicia Kearns), and welcome the Minister to his place. My constituency is home to the Chinese consulate in Scotland. It is also in a city with a number of universities and a large Hong Kong Chinese population. There are concerns about the activities that we now learn are going on in this country. Can the Minister assure us that the consulate and its activities will be part of this security monitoring exercise?

[Tom Tugendhat]

The commitment I have made is clear: actions that are incompatible with diplomatic status will be considered. This will be focused on the areas that have been raised, but I assure the hon. Lady that if it leads elsewhere, it will lead elsewhere. I pay tribute to the various universities in Edinburgh for their commitment to freedom and for the way in which they have handled many other issues similar to this one.

[Geraint Davies (Swansea West) (Lab/Co-op)]

I also welcome the Minister and his statement. I have a good working relationship with the Chinese community in Swansea, who enjoy the peace and harmony afforded to them by the rights and protections that come from living in Britain. Will he assure me that, where Chinese nationals or others are detained in these police stations, their cases will be seen as akin to hostage taking, that the full force of British law will be focused on any breaches of our law—whether intimidation, harassment, bullying or illegal data collection and surveillance—and that we will continue to set examples to ensure that people are safe and known to be safe?

--- Later in debate ---

[Tom Tugendhat]

The rights of citizens in this country have been set out in law in various different ways for a little over 800 years. It is absolutely clear who has and who does not have the right to detain any citizen in this country. The law applies equally to all.

[Carol Monaghan (Glasgow North West) (SNP)]

I welcome the Minister to his place. As shocking as it is to hear about these police stations, we are aware that China’s reach goes beyond that. Many Chinese citizens living in our communities are here not permanently but for a short time—I talk in particular about the Chinese student community—and will go back to China. Will he detail the steps that he plans to take to ensure that those Chinese students can enjoy the same freedoms as we do in this country without fear of interference from their own Government?

[Tom Tugendhat]

The hon. Lady is absolutely right to celebrate those Chinese citizens who come here temporarily for study or for other reasons and to highlight that one of the reasons why they come is that our universities across these islands have a long history of academic freedom that allows debate, innovation and challenge that sees ideas flourish and bad ideas fail. It is essential that all students have those rights. That is why the report and assessment will look into how we approach these situations and ensure that all students and citizens, wherever they are from and whatever they are doing, are afforded the same protections, as they should be.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I refer hon. Members to my entry in the Register of Members’ Financial Interests and congratulate the hon. Member for Rutland and Melton (Alicia Kearns) on securing the urgent question. I also welcome the right hon. Gentleman to the Dispatch Box and the way in which he strongly reaffirmed that people on British soil will always be afforded the fullest protection of their rights and freedoms by the British state. We need to make it perfectly clear to China and others that only one law applies on these shores and it is the law of this land, which this Parliament and the devolved institutions have put in place. Does he think that the existence of these police stations is a breach of international law?

[Tom Tugendhat]

I entirely agree with the hon. Member about there being one law across this country. After all, that was the point of the common law and the reforms of hundreds of years ago that have seen liberty flourish and opportunity prosper in these islands. He will forgive me but, since I gave up the chairmanship of the Committee, I have forfeited the right to have personal opinions, but the Government have absolutely the commitment that he mentioned that all laws in this country will be voted for and allowed only by this House or the devolved Administrations, and that all citizens here and all those visiting will be under the same law.

[Jim Shannon (Strangford) (DUP)]

I congratulate the right hon. Member on his long-awaited elevation to Minister. It is genuinely, truly well deserved. Further to my business question last Thursday on the despicable actions taking place in Chinese buildings in the UK, while we all recognise the right of an embassy never to have foreign influence, will he confirm that our underlying moral duty is to ensure that torture is not carried out on any inch of our soil? In accepting that, what diplomatic and legal steps can be taken to prevent torture?

--- Later in debate ---

[Tom Tugendhat]

I thank the hon. Member for his kind words. The House had to wait a little while longer for me to speak from the Dispatch Box than it normally has to wait for him to ask a question to whoever is at the Dispatch Box. I am grateful that he is in his place for my first event.

The hon. Gentleman’s point about torture is incredibly important as that is one of the few completely unconditional rights that every citizen in the country has been afforded for many years. He is absolutely right that any accusations of torture or violations of human rights on these islands or in any way under the jurisdiction of the United Kingdom would be taken extremely seriously.

[Madam Deputy Speaker (Dame Eleanor Laing)]

That concludes proceedings on the urgent question. I would normally pause while people leave or come into the Chamber, but as I have before me the same dramatis personae for the next item of business, I will filibuster for a moment only to give the Minister a chance to pick up his bits of paper.

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Tom Tugendhat Excerpts

Thursday 27th October 2022 Public Bill Committees

[The Chair]

I am going to have to curb this and move on very briefly to Tom because we have to finish.

[The Minister for Security (Tom Tugendhat)]

Q This is a very brief question. What difference will this make to the solicitors’ profession as well? You will have noticed that there is not only a control of accountancy but an increase in penalty to solicitors’ regulations.

Angela Foyle: Neither of us is part of the Law Society so we cannot speak for them, but clearly, that was something that was thought to be necessary as a deterrent. Although I expect most of them are likely to be regulated by the Solicitors Regulation Authority for money laundering, rather than the Law Society. However, it must have been a gap that was thought to be necessary to fill. I really do not know, otherwise; I am speculating.

[The Chair]

Thank you very much. That brings us to the end of the time allotted for the Committee to ask questions. I thank our witnesses on behalf of the Committee for their evidence.

--- Later in debate ---

[Liam Byrne]

Q I want to pursue that point for a moment. In the interests of good governance, would it not make sense to strengthen some of the obligations on directors to include, for example, a duty to take steps to prevent corruption in their organisations? We have similar measures on corruption; we do not have similar measures on economic crime and fraud.

Peter Swabey: You have the directors’ duties under section 171 of the Companies Act and so on. Those are there, but it is difficult to identify exactly how those directors’ duties can be pursued against any defaulting director. For me, that is one of the challenges. Were you to introduce something extra on that, that would be a solution, but again you would need to look at how that could actually be enforced.

[Tom Tugendhat]

Q It is nice to see you, Mr Swabey. May I ask specifically about the governance aspect, which is your area? Accountability is fundamental to governance. You cannot hold people to account for things that they are not responsible for, or likewise the reverse. Will you touch a little on how you see that improving—not just the accountability in financial transparency, and all the anti-money laundering and various other aspects we have spoken about, but the ability to hold companies to account for other governance areas, whether those are corporate social responsibility, clean-up, environmental or many others?

Peter Swabey: The Bill deals with some very specific issues, which are not necessarily those. I think that the Bill would need to be broadened significantly were it going to get into things like sustainability, corporate social responsibility and so on.

[Tom Tugendhat]

Q You do not think that cleaning up Companies House, making people accountable, and understanding who they are and who knows what are important for governance?

Peter Swabey: No, I think that is very important for governance. What I was saying was that you were then talking about some of the other issues, such as corporate social responsibility, which are probably outwith the scope of the Bill as it stands.

[Tom Tugendhat]

Q I do not agree; let me push back on that. One of the things we have a problem with in the community that I am lucky enough to represent is dumping waste—fly-tipping—and it so happens that occasionally, it is done by companies that then disappear. I think the Bill helps to address that. Do you not?

Peter Swabey: Absolutely, yes.

[Tom Tugendhat]

Q So it does have some environmental effect.

Peter Swabey: Yes, you are right. I had not thought of that aspect of it—I was thinking in terms of the reporting that companies do—but yes, in terms of tracking down defaulting companies, I think it will help you.

[Tom Tugendhat]

Q Would you agree, then, that it may also support other areas of governance: the ability to oversee, for example, different areas of employment, human trafficking or whatever it might be, and to go through companies that set up and disappear far too quickly?

Peter Swabey: Yes, absolutely. Removing the ability for companies to go bust one day and reappear the next with a very similar name and very similar directors, but without all those tedious debts that they used to have, is one of the really important issues.

[Tom Tugendhat]

Exactly—phoenixing.

Peter Swabey: I think that is really important.

[Tom Tugendhat]

Q I am very glad you are supportive of that. I think this makes a huge difference; as you rightly say, it is one step on the journey, but it is still a huge difference from where we are.

I also wondered if you could talk a little bit about whether you think it is going to help with economic crime. Clearly, although I am not a BEIS Minister, one of my responsibilities is fraud. The presence and disappearance of corporate entities is, I am afraid, something that has caused more than its fair share of fraud. How do you think the Bill might be able to help with that?

Peter Swabey: I think the Bill will help with that by making it possible to have greater confidence in the directors who are responsible for those companies actually being real people. We were talking a little while ago about the ease with which you can set up a company, and the limited verification of directors that goes on. We have a verification process in the Bill that will help to ensure that those people are actually the people you believe them to be, and that there is an address where you can get hold of them and, particularly, where the forces of law enforcement can get hold of them should they need to. That is a real strength.

[Tom Tugendhat]

I am very grateful, not only for your evidence today, but for the work you do and the oversight you bring. It does make a huge difference, and I am very grateful indeed for it. Thank you.

[The Chair]

Thank you very much. If there are no further questions from Members, we will thank the witness for his evidence and move on to the next panel. Peter, thank you very much for your time; we greatly appreciate it.

I am going to suspend the sitting, because we have a little bit of time before the next evidence session, and the witness is not in the waiting room yet because she is giving evidence via Zoom.

--- Later in debate ---

[Seema Malhotra]

Q I want to come back on how we can take practical steps to tackle this. I think you mentioned the Foreign Policy Centre. Are there more specific measures we could take in the Bill?

Catherine Belton: In July, the MOJ forwarded anti-SLAPP legislation. Unfortunately, because of the chaos of the last couple of months, that has not really gone anywhere. That legislation could be attached, as is, to the Economic Crime and Corporate Transparency Bill. The Bill as drafted slightly toughens the criteria for claimants; they have to prove that there is a significant likelihood that they have a real claim. You should speak to the FPC to weigh whether it is worth pursuing their draft laws as a better model, or whether it is enough to use the one already drafted by the MOJ. They had extensive consultations on that, but now it looks like all the momentum has gone. It is astonishing to me that this is not being pursued as a priority, given the situation we are in. It is absolutely vital that we shine light on individuals who may be operating on behalf of Putin to undermine western support for Ukraine, and to undermine our resolve this winter as we face enormous cost of living hikes. It is really important.

[Tom Tugendhat]

Q Catherine, thank you very much for giving evidence to what must be your 20th or 30th Committee in the last 12 months. I am very grateful for the work you do. Could you tell us how you think the reforms to Companies House will improve oversight of listed finance? As you say, it is a building block.

Catherine Belton: You say that this is my 20th or 30th time giving evidence, but unfortunately, it is not. I have only spoken on SLAPPs before. I will leave the realm of Companies House reforms to people who are more expert on it than me.

[Tom Tugendhat]

Okay, thank you.

[The Chair]

If there are no further questions from Members, thank you very much, Catherine, for taking the time to speak to us.

Examination of Witness

Professor Jason Sharman gave evidence.

--- Later in debate ---

[The Chair]

Thank you. I move finally to Tom Tugendhat.

[Tom Tugendhat]

Q Professor, thank you very much indeed. I am grateful to you for reminding us that Magna Carta guarantees private property in various ways. Various legal jurisdictions, including the United States, Italy, the European convention on human rights, European property law and, indeed, many other jurisdictions around the world have all maintained and guaranteed it, which makes this so difficult. That said, do you agree that it is important to try to find out who owns what, so that we can at least take action where we have a legal ability to do so, and does this Bill help with that?

Professor Jason Sharman: Yes and yes. I think this is a modest positive step, but, given the track record of legislation, I would say that it has to be implemented. That is where the problem has been heretofore, and I can possibly anticipate that it may be the problem here, too. If you say, “You have to identify yourself as the owner of a company,” and you have entries in Companies House saying, “My name is XXX XXX,” and that does not get challenged, then more information is not necessarily better if that information is junk.

[Tom Tugendhat]

Q No, that is true, and that is why the work being done between Companies House and the agencies is so important—to ensure that Companies House goes from being a pinboard to being a regulator and a check. That is a very important move. It is not the same as the FCA or a regulator of that kind, but at least it is beginning to verify in terms of ID and so on. How much of a difference do you think the overseas territories and Crown dependencies verifications have already made?

Professor Jason Sharman: I mentioned briefly that some of my research, together with Mike Findley and Dan Nielson, has been to impersonate would-be money launderers and look to set up companies in various jurisdictions. It is much harder to set up companies, and the standards are much more rigorous, in the Cayman Islands, the British Virgin Islands and the Crown dependencies than in the UK. Of the UK jurisdictions, the UK is the easiest place to set one up, so I think the UK could learn a lot from its overseas territories and Crown dependencies. I noticed with interest that a couple of the other witnesses here said the same.

[Tom Tugendhat]

Q It is clear that there is a huge number of changes. You will know about the work that we have done in the past on the Foreign Affairs Committee and now in Government on trying to clean this up. This is something that, sadly, has lasted for the best part of 100 years, with no Government really making any effort to do anything about it until now. It is interesting that we are here again with a number of registrations, many of which were warned about in the 1970s, ’80s, ’90s, noughties and, now, the ’10s and ’20s. I am glad that we are doing something about it. Do you think that Companies House is going to be able to do that if it has the proper resources, or is it going to require other agencies as well?

Professor Jason Sharman: No, I do not think Companies House will be able to do it. Its main function is passive and archival; it is a library mainly. I think it is just not in its DNA to be otherwise. I think most of the solution for this is in the private sector. I am talking about properly regulated, supervised and audited corporate service providers. I co-authored a report 10 years ago with the World Bank called “The Puppet Masters”, and that was overwhelmingly the conclusion that we came to.

[Tom Tugendhat]

Q Would you say that the extra powers given to organisations such as the Solicitors Regulation Authority and its equivalent in Scotland are important to ensure that such regulators actually do have teeth? At the moment, as you will know, the fines form both of them are very low. This would, one hopes, connect to the work that we did in 2017 or 2018—I cannot remember exactly when—for the report “Moscow’s Gold”, where the Foreign Affairs Committee highlighted the role of enablers, not just regulators.

Professor Jason Sharman: I completely agree. I think, even more, that HMRC, as the regulator for corporate service providers, those enablers, has been completely missing in action. If there were one bit of the public sector that I would change, repurpose or fund, it would be to get HMRC to take its duty to regulate and penalise corporate service providers seriously. It has just been completely missing in action so far.

[Tom Tugendhat]

Thank you very much.

[The Chair]

If there are no further questions from Members, I want to thank the witness for his evidence. Professor Sharman, thank you very much for taking the time to come and speak to us.

Ordered, That further consideration be now adjourned. —(Nigel Huddleston.)

Economic Crime and Corporate Transparency Bill (Third sitting)

Tom Tugendhat Excerpts

Committee stage
Thursday 27th October 2022 Public Bill Committees

[The Chair]

I thank Members and those giving evidence for their flexibility in moving rooms, and I inform Members and those giving evidence that we will be in this room all day today. Could the witnesses please introduce themselves for the record?

Helena Wood: Hello, my name is Helena Wood. I am a senior research fellow at the Royal United Services Institute, where I lead the economic crime programme.

Duncan Hames: Hello, I am Duncan Hames. I am the director of policy at Transparency International UK.

[The Minister for Security (Tom Tugendhat)]

Forgive me, Ms Wood; my hearing is not very good. Can you speak straight into a microphone?

Helena Wood: Yes.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Q 170 Thank you very much for coming to give evidence today. I wanted to start by asking about the Bill’s reforms of information-sharing provisions—perhaps this is particularly to Ms Wood. In your view, do those provisions go far enough, and if not, do you have examples of where it is done better internationally? If information-sharing provisions are not improved, how much of a hindrance could it be to the effectiveness of the Bill?

Helena Wood: To place it in context, one of Britain’s great financial crime exports of recent years has been our joint money laundering information taskforce, which is one of the first public-private partnerships. That model has been replicated across the globe, with public-private partnerships now seen as a norm by the FATF, the international standard setter on tackling money laundering and terrorist financing. In one respect, we really have been a global leader in that regard. However, as with many British exports, we are now exporting that abroad and it is being copied and replicated at a speed and scale beyond what the UK is doing. Increasingly, we are seeing people moving from peer-to-peer information sharing towards a more collaborative data analytics model. I point to the models being set up in Holland and in Singapore as particularly groundbreaking in that regard.

Coming back to the provisions in the Bill, do they get us from where we are now on peer-to-peer information sharing, which is one thing, towards this world of collaborative data analytics, which we need to get to to really home in on financial crime? No, they do not. Although the provisions in the Bill will go some way towards increasing private-to-private information sharing and, in particular, the risk appetite in the banking sector, they really do not keep pace with the global standard.

What we would like in the next economic crime plan, which we hope to see this side of Christmas, is something that is much more ambitious. In many ways, I would say that while it is welcome, the Bill is a slight missed opportunity with regard to information sharing, given that it really does not push forward to this big data analytics model that others are moving towards.

--- Later in debate ---

[Dame Margaret Hodge (Barking) (Lab)]

Q I hope the Committee will look at our amendments on information sharing, the funding of enforcement agencies, shareholder information, Companies House checks and AML supervision; we tabled them in a spirit of improving the situation. I agree with all that.

I am going to ask about another issue, just to get it on the table. People engaged in the debate over dirty money are very anxious that we should move from just freezing the assets, particularly of the Russian Government and Russian oligarchs, to seizing the money so that we can use it—particularly for the reconstruction of Ukraine, when that war comes to an end. Can I have your views on that, starting with you, Duncan?

One final thing: a big thank you to both of you for the work your organisations do in exposing a lot of the problems and for the very positive attitude you have taken to establish solutions. Thank you to both of you, individually and to your organisations.

[Tom Tugendhat]

Hear, hear!

Duncan Hames: Thank you. I think it is important that we should continue to respect the rule of law and have a judicial basis for asset recovery. Too often, it is tempting to have a more administrative approach, and with that comes risks. It is very important that, as well as having the clarity of purpose to designate a whole substantial raft of individuals and entities for Russia sanctions, we have the determination to make those sanctions work.

We published some research just last month that found hundreds of millions of pounds’ worth of UK real estate that we were fairly sure was owned and controlled by individual entities that have been named under Russia sanctions. However, if you check on the Land Registry, there are not any of the typical markers to say that you cannot sell or transfer or trade this property. That is partly because of some of the very clever and complicated arrangements for their ownership, including using trusts.

In the work you are doing on the Bill, there is an opportunity to ensure that really important measures for global security, such as our Russian sanctions, actually work, bite and make it impossible for those who have moved large amounts of wealth out of Russia to continue to control it in the interests of their political sponsors.

Helena Wood: I could not agree more that we need to start moving from freeze to seize, but I echo Duncan’s sentiments that we must do so in a way that protects the very things we are trying to protect and do: the rule of law, due process and democracy. We should not push towards measures that effectively put in place a ministerial decree for confiscating individual assets and run roughshod over A1P1 principles.

That said, there is further we could go in UK legislation. Even with the advent of the much vaunted unexplained wealth order, our law enforcement agencies remain on the back foot. There is more we can do within the confines of European rights compliance-tested laws of reverse burden mechanisms to put law enforcement on the front foot.

Fundamentally, though, it is not going to be an easy fight to link those assets back to the criminality from which they once derived, given the difficulties of gaining evidence across borders. However, there are models we could replicate that have been tested for ECHR compliance, such as in Italy and Switzerland—I could name others. If the Committee will forgive me for trailing some forthcoming RUSI work, a paper is coming in November or December this year that sets out some recommendations of where part 5 of the Proceeds of Crime Act 2002 could replicate some of the principles of other regimes and push forward to at least put law enforcement on the front foot.

The other issue I would point to, which has already been partly legislated for, is cost protection for our law enforcement agencies. We have legislated for cost capping in cases involving UWOs, but they are not the right tool to use in all cases; I particularly point to the oligarchs, who do not fit under the definition of PEPs in UWO legislation. There is an argument for the Bill to potentially push for full cost capping of part 5 cases to increase the risk appetite of our law enforcement agencies to take those cases on in the first place.

[James Daly (Bury North) (Con)]

Q I want to go back to information sharing. My understanding of the Bill—please tell me if I am wrong—is that the clauses will allow

“direct sharing between two businesses in the AML regulated sector”

and

“indirect sharing through a third-party intermediary for businesses in the financial sector”.

That is what the Bill does. Putting it bluntly, what is wrong with that? What is the criticism of those aims and the things it allows businesses to do?

Helena Wood: Civil liability for confidentiality is one barrier. It is an important one, and removing it will hugely increase appetite, but it is not the only barrier. The boundaries within our data protection legislation are not explicitly clear; they are open to interpretation. We need more guidance, potentially from the Information Commissioner, to make clear what those boundaries are. We potentially need further clarification in the data protection legislation that is currently going through—

--- Later in debate ---

[The Chair]

For the final question I come to Tom Tugendhat.

[Tom Tugendhat]

Q Clearly, Liam’s point is entirely valid, but it is worth pointing out that that was a scandal in Estonia, which was very strongly dealt with by the Estonian Government. It is important to recognise that it is not just a UK issue. That being said, the Bill does open up an awful lot of information. Mr Hames, can you tell me how your organisation is going to use that information to start to address some of those issues?

Duncan Hames: Yes, happily. We are quite a small organisation, but this is about the power of putting information in the public domain. The report that we were describing earlier is a form of network analysis; that is the sort of thing you can do if open data is published, rather than information in PDFs, which are essentially photographs of old documents.

Whether it is organisations like ours, or investigative reporters such as the Organized Crime and Corruption Reporting Project, civil society has shown its potential to help uncover those crimes if there is information in the public domain. If we want a spirit of partnership, and if Government want the private sector to be its first line of defence, then it is really important that everyone is equipped with the tools that they need and that the company register is providing accurate information, which has been checked, that they can rely on.

[Tom Tugendhat]

Q Your point that this is a partnership is entirely correct. The Government have approached the issue in the way that we spoke about, you will remember, when I was doing a different job, as Chair of a different Committee. We spoke about the fact that the UK is a hub for so much of that crime for very obvious historical reasons, such as the depth of our capital markets, the use of the English language, the openness of our financial system and the importance of the rule of law. It is not simply a legal question—it is a cultural and a deep historic one as well.

Do you agree that those reforms begin that process and that fightback? Do they make a difference by scrubbing, as it were, the inside of the whitened sepulchre to ensure that we are exposing it to sunlight, so that organisations such as yours, the media, and many others around the world, will be able to identify where that money is going and from where it has come? This is also about jurisdictions overseas who are losing money through our system, not just about us who have to control it.

Duncan Hames: Yes, I agree. The Bill is beginning that. The challenge that we have is that it is six years ago that we last made reforms to Companies House, and I do not know when you are next going to get a chance to make further progress.

[Tom Tugendhat]

I have only just come into post.

Duncan Hames: It is hard, as we are often told, for legislative time to be found. So please make the most of the opportunity and take it as far as you can. It was only this summer that the US Treasury issued a money laundering alert about evasion of Russia sanctions. In that, they identified UK limited liability partnerships as part of the typology of the financial logistics for evading sanctions.

[Tom Tugendhat]

Q You will forgive me for recognising that there may be other jurisdictions closer to their home that are also involved in that.

Duncan Hames: But this is the jurisdiction that Members of our Parliament are responsible for.

[Tom Tugendhat]

Q We must get this right, but it is an international problem that we must all get right.

Helena Wood: May I come in on that particular point around Companies House reform? The point has been made by others giving evidence here this week and I will make it again until it sticks. Companies House reforms mean nothing if we do not resource Companies House properly. Using that secondary legislation to raise formation fees to £50, at least, is absolutely essential—

[Tom Tugendhat]

That is absolutely true, which is why the partnership that we have to put in place alongside agencies, NGOs and journalism, to make sure the application programming interfaces are open is so important.

[The Chair]

Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions.

I very much thank our witnesses, Helena Wood and Duncan Hames, for their time, and I thank Members for their questions. We now move on to the next session.

Examination of Witnesses

Chris Taggart and Elspeth Berry gave evidence.

--- Later in debate ---

[Seema Malhotra]

Q I have a couple of specific questions. First, do you think there should be any sort of limit on the number of companies or partnerships registered at one address? Secondly, should there be any sort of limit—perhaps one beyond which there needs to be an application to increase, under specific criteria— on the number of directorships that any one director can hold?

Chris Taggart: On the latter question first, I have been a director for some 20 years. The first time, someone sat me down and said, “This is what’s involved in being a director.” You think, “Wow, that’s kind of scary.” You have a fiduciary duty and you have to understand the company. If you are a director of 200 companies, I fail to see how you can perform that fiduciary duty, or those companies are, in some ways, just legal entities for some conduits for something. They are not actually in business; they are just conduits. I struggle when someone is a director of 200 companies: either those are just legal entities for some purpose other than as a normal company or they are not doing their job. It seems to me obvious that there is a challenge there. Whether that is a limit or whether that is actually holding directors much more personally liable for the wrongdoing of the companies, I do not know, but I think that there is something. There seems to be a contradiction there, fundamentally.

Elspeth Berry: I agree. I would have supported a cap on the number of directorships for exactly those reasons, in that I do not think a director can fulfil their duties if they have a lot of companies. However, if you are not going to have that, that certainly has to be a red flag for Companies House. It has to be a thing they will investigate and that they have the resources to investigate, which comes back to the problems that we identified earlier.

On the addresses, if you have a company service provider giving their address, it is quite possible you will have multiples and that might be okay if that is their business, they are doing it properly, they are AML regulated and all the rest of it. The problem is that we have seen in recent years that they are not. Again, that ought to be a red flag. In the limited partnership proposals, where you are trying to establish some real connection, economic or otherwise, with a particular jurisdiction within the UK or, at least, with the UK, that is one of the problems. One of the options on the list—they are all problematic—I personally thought that the principal place of business might be quite a good one, showing an actual connection, but I have been corrected in my beliefs by my journalist colleagues who say that almost all the wrongdoers were able to tick that box. I think it is a problem if you are saying that as long as somebody will pick up the mail here, that is okay. Again, that needs to be a red flag.

[Tom Tugendhat]

Q I am very interested in some of the identification elements that are raised. How much of a difference will the verified identification make to the identification of individuals?

Chris Taggart: There are two issues. I watched some of the previous witnesses and the things that came across were issues to do with identification and resourcing and I back up both of those things. On identification, allowing the corporate service providers to essentially say they have done something seems both a huge vector for misuse and also unnecessary. The technology allows us to look like we are using one company when we are signing up online and so on, but it is all authenticated with another company. They could be using Companies House back ends or banks’ back ends—we could have that authority and those standardised processes—and still you would appear to be transacting with a corporate service provider.

Having corporate service providers doing the identity verification seems like we have walked away from doing it properly. Once you allow corporate service providers to play a significant role, particularly on identity, I think we have a bit of a problem. Assuming that loophole is closed, this is really good, but it is still state of the art two, three or four years ago, and I think we need to start using digital identities. We need to make sure that, with somebody’s identity, they are not saying one thing on this hand and not saying another thing on that hand. Again, the unique identifiers—

[Tom Tugendhat]

Q Mr Taggart, you will be aware that there is wider debate about unique identifiers because it ties in personal privacy aspects in healthcare, insurance and, in fact, every part of your life. Every single country that has introduced them has had a privacy pay-off. That is one that you may or may not be willing to address, but it is not just simply a question of companies.

Chris Taggart: Absolutely, but I think there are technical ways of doing that. It does not have to be one ID that everyone can see—

[The Chair]

Order. I am very sorry. That brings us to the end of the time allotted for the Committee to ask questions. I am very grateful to our witnesses for giving evidence.

Examination of Witness

Graham Barrow gave evidence.

--- Later in debate ---

[James Daly]

Thank you, Graham.

[Tom Tugendhat]

Q Could you give some live examples as to how you would use various aspects of the powers in the Bill to improve your ability to track? Of course, we have spoken on numerous occasions about the partnership that we need. If I may say so, Graham, you are an extremely active tracker of companies, and, I would therefore say, one of the top of the class in the public-private partnership.

Graham Barrow: That is kind. You must understand that I am a private citizen, so I do not have access to huge swathes of information that I would love to be able to get hold of to give a much rounder view of that. Companies House, of course, does, so there are some interesting things that it will have, such as email addresses, IP addresses and credit card details.

There are some important provisos there. Do not allow people to pay for their enrolment through a pre-paid credit card. That would be a bad thing. Do not allow people to apply through a virtual private network—a VPN. That would be a bad thing. Do not allow people to apply through something like Proton Mail or an encrypted mail account. That would be a bad thing. What we need is transparency in all those things so that we can aggregate that data with, for example, data from His Majesty’s Revenue and Customs, voter roll data and other data, to get a much more rounded picture of people who are applying for company directorships.

Now, that only works here in the UK. It is worth bearing in mind that about 150,000 company incorporations every year emanate from outside the UK. That adds further difficulty. There were 50,000 applications from China last year, so that is clearly a problem. Incidentally, those numbers soared after China banned cryptocurrency at the end of September last year. There was an extremely easy to observe uptick in UK corporate registrations from Chinese individuals.

The Bill will start to address such a range of issues. I think it will be the first of many if we are really going to make our corporate environment safe and secure, and start tackling economic crime and the abuse.

[Tom Tugendhat]

Q I am very pleased to hear that. You are challenging me as Security Minister. You speak against cyber-security, which is an enormous element of the defences that we need for other areas of crime. I am sure you would not be recommending to anybody that they should never use VPNs or encrypted emails.

Graham Barrow: No. I am saying that for the purpose of registering a company in the UK, you should not be afforded that benefit.

[Tom Tugendhat]

I understand the distinction. I just wanted to make the point. As you can understand, it would raise other difficulties.

Graham Barrow: Absolutely.

[Tom Tugendhat]

Q I am very grateful for your input. I wonder whether you could say a little bit more on the issue of shell companies and how they are used. You will know very well the work of people like Oliver Bullough, Tom Keatinge and Luke Harding.

Graham Barrow: They are good friends.

[Tom Tugendhat]

They are brilliant. These people are quite literally on the frontline of our democracy, defending our freedom by defending our corporate integrities. Their work is extraordinary important. I would be grateful if you would say a little bit more about shell companies.

Graham Barrow: I count all those people as friends. Oliver and I exchange daily emails. We work very closely together. The last time we met was on a bus.

[Tom Tugendhat]

I should put on the record that he is a friend of mine as well.

[Dame Margaret Hodge]

Of lots of us around the table.

Graham Barrow: Shell companies are containers. Effectively, it is a container for assets. They are used in a whole variety of ways. They are used, clearly, as conduits for corrupt and criminal funds to be moved around the world. They are also used just as a container to access banking and do as I have just described—a one-off hit to get a bank account open and get an overdraft.

I have seen physical evidence of a company being incorporated to an address of somebody in Cardiff who knows nothing about it; on the same day, they open a bank account with one of our high street banks, and on the same day, they remove the automatic £8,000 overdraft that came with that bank account. Then they disappear, and of course it turns out that they were untraceable because none of the details they provided were real. That is a shell company, because that is not doing any normal commercial activity.

The Committee mentioned addresses earlier. I am sure some members of the Committee will know that there are addresses in central London that are home to 100,000 companies. That is clearly a matter of concern, particularly with the proportion of those companies that are registered from some of the more remote parts of the world—places you would struggle to find on a map—that concentrate at those addresses.

We need to be quite clear about the legitimate use of corporate service provider addresses. Some of our banks now provide that as a service. That is fine. There is one firm that offers this thing called a non-resident package, which should immediately make your ears prick up. Somebody from outside the country can register a business and be given the business bank account for a fixed fee. That bothers me hugely, because it makes me ask why.

The thing about shell companies is that they are not always easy to identify at the point of incorporation. We are getting very good at it, but it is still not an exact science. It is about lifetime analysis of a company’s behaviour, as well as some of the red flags that are raised at the point of incorporation.

[Tom Tugendhat]

Q Thank you very much indeed. The amount of data coming out suggests that this legislation may do something to inform people about things such as phoenixing, which you have mentioned. Clearly, there are many aspects to that and I am not going to pretend for a second that the Bill answers every single one—it does not—but it certainly goes some of the way towards ensuring that people can be better informed when they enter into future agreements. How would you say that the information alongside the verification assists you?

Graham Barrow: It probably does not assist me an awful lot, because I do not have access to a lot of the other data that particularly members of JMLIT, and other law enforcement and Government organisations, have access to. As a private citizen, I will not have access to that much more information. That is probably a good thing, because I am already drowning in information. For a man who is going to be 70 next birthday, it is not exactly the retirement that I had planned. In a way, I think the best thing I can do is help to inform and educate others so that as the Bill starts to generate that information, some of which I will not be privy to, I can at least help people to understand better how to analyse and aggregate that information to extract signals.

Ultimately, there will be too much information to do everything with, so it is about how we organise ourselves, particularly at the point of incorporation, so that instead of waiting for a problem and going back to see how it happened, we identify that problem in the process of being set up, and start proactively managing the people who are part of organised crime or corruption and are using or abusing Companies House to do that. We have never done that before, to the best of my knowledge, but we are now in a situation where we can start doing it.

[Dame Margaret Hodge]

Q I want to take you back to the work you did on Deutsche Bank. First, what additional powers did it lead you to think you needed? Secondly, how did the FCA respond—what was lacking or worked well there?

Graham Barrow: Dame Margaret, you ask me a tricky question because I worked at Deutsche Bank, and some of what I know is privileged and I cannot talk about it. In fact, my work in Deutsche Bank is what has led me to be sitting here, because it was while I was there working on the Russian mirror trades that I realised that two completely different firms had filed exactly the same set of accounts—identical accounts—signed by the same person. My rather naive reaction then was, “How on earth did this happen?” I know better now. That person’s name is in the public domain: it is Ali Moulaye. He is a dentist who currently lives in Belgium and has been written about frequently. I kind of discovered him, in a way. He has signed more than 10,000 sets of accounts on Companies House on behalf of at least 2,500 limited liability partnerships, a significant proportion of which have, sadly, been named as being involved in various laundromats.

One issue was that all those accounts were filed on paper and were then scanned in as an image, not as a machine-readable document. That is a really big disadvantage, because it prevents people such as me, or those with access to clever technology, from reading those documents into artificial intelligence engines and performing deeper analysis on them. It is a very difficult problem. It would be a wonderful thing—although I suspect quite labour intensive—to retrospectively digitise all those old PDFs, because there is a huge wealth of intelligence still residing in them that we truly do not understand. That is also very much true of limited partnerships, which still can only file on paper. The only way to incorporate a limited partnership is on a paper application. That makes reading the data on those registration forms extremely difficult, which is why lots of it has remained hidden for so long.

Draft Crime (International Co-operation) Act 2003 (Designation of Participating Countries) (England, Wales and Northern Ireland) Order 2022

Tom Tugendhat Excerpts

Wednesday 26th October 2022 General Committees

[The Minister for Security (Tom Tugendhat)]

The purpose of the draft statutory instrument is to designate Georgia, Liechtenstein, Luxembourg, the Republic of Moldova, Switzerland and Turkey as participating countries—that is, countries that have ratified the second additional protocol to the 1959 European convention on mutual assistance in criminal matters. Designation will allow us to co-operate with them on specific kinds of mutual legal assistance. The draft order only establishes an ability to provide or seek certain types of assistance to or from these countries; it does not create an obligation to do so. Incoming mutual legal assistance requests from designated participating countries will be reviewed in line with existing practice, which includes the undertaking of a human rights assessment. The details are set out in the explanatory memorandum. It is important to note that the draft instrument does not include Russia. Although Russia is a signatory of various agreements under the 1959 convention, we have chosen not to include it for obvious reasons.

The UK is committed to improving the provision of mutual legal assistance across borders. That will enhance the co-operation that the UK can offer to and seek from other countries. Clearly, mutual legal assistance is a key tool in fighting cross-border crime and in ensuring justice for British victims of crime.

--- Later in debate ---

[Tom Tugendhat]

It is a great pleasure to be under your chairmanship, Mr Efford. I am grateful for the shadow Minister’s kind words, and pleased that she is not facing a fifth, I think it would have been, opposite number. I will write on the frequency of the use of the provisions; they are quite well used, but I will give details in writing.

Question put and agreed to.

Draft Terrorism Act 2000 (Alterations to the Search Powers Code England and Wales and Scotland) Order 2022

Tom Tugendhat Excerpts

Wednesday 19th October 2022 General Committees

[The Minister for Security (Tom Tugendhat)]

I beg to move,

That the Committee has considered the draft Terrorism Act 2000 (Alterations to the Search Powers for England and Wales and Scotland) Order 2022.

It is a great pleasure, Ms Elliott, to be here under your chairmanship.

The draft order was laid before Parliament on 18 July. Following the horrific terrorist attack at Fishmongers’ Hall in November 2019, the then Home Secretary commissioned the Independent Reviewer of Terrorism Legislation, Jonathan Hall KC, to review the multi-agency public protection arrangements—commonly referred to as MAPPA—used to supervise terrorist and terrorism-risk offenders on licence in the community.

The Police, Crime, Sentencing and Courts Act 2022—hereafter referred to as the 2022 Act—established three new powers for counter-terrorism policing: a personal search power; a premises search power; and a power of urgent arrest. Those powers were established in response to recommendations made by Jonathan Hall KC, following his review of MAPPA. The draft order relates to the new power of personal search, the creation of which was also recommended by the tragedy at Fishmongers’ Hall and its prevention of future deaths report.

The personal search power was inserted into the Terrorism Act 2000—new section 43C—by the 2022 Act. The new search power came into force on 28 June this year. As set out by the Government during the passage of the 2022 Act, the new personal search power applies across the United Kingdom, enabling the police to stop and search terrorist and terrorism-connected offenders released on licence who are required to submit to the search by their licence conditions, should the Parole Board determine that such a condition is necessary. The officer conducting the stop and search must be satisfied that it is necessary to exercise the power for purposes connected with protecting members of the public from a risk of terrorism.

Section 47AA of the Terrorism Act 2000 imposes a requirement on the Secretary of State to prepare a code of practice containing guidance about the exercise of search powers that are conferred by the Act. In June this year, Parliament approved regulations laid by the Government that amended section 47AA so that it extends to cover the new personal search power inserted into the Terrorism Act by the 2022 Act. This created a requirement for the Secretary of State to prepare a revised code of practice that includes guidance on the exercise of the power conferred by new section 43C. We duly prepared a draft revised code of practice, and the draft order seeks Parliament’s approval to bring into force the revisions we have made to the existing code.

I shall now set out the nature of the revisions that the Government have made. The primary update to the code of practice is the incorporation of the new stop-and-search power provided for by section 43C of the Terrorism Act 2000. The revised code sets out important parameters that govern the use of the section 43C power and provides clarity for officers on the power’s scope. That includes providing guidance on the thresholds to be met before the section 43C power can be used, scenarios in which it might be appropriate for use, and the powers of seizure associated with the search power.

We have also set out clearly within the revised code the limitations on the clothing that someone can be required to remove when the section 43C power is exercised by the police. In keeping with existing stop-and-search powers, police officers exercising the section 43C power may not compel someone to remove any clothing in public except for an outer coat, a jacket or gloves, and an intimate search may not be authorised or carried out under the new power.

The new section 43C stop-and-search power has been created specifically to manage the risk posed by terrorist offenders on licence who are assessed to be high or very high risk to the public. The Government plan to collect data from police forces on the use of this targeted power, as we routinely do for other stop-and-search powers, and to make such data publicly available through future statistical publications.

Given that the existing version of the code was brought into force in 2012, the Government have also made other minor changes to ensure that it accurately reflects current practice, legislation terminology and organisational responsibilities. The updated code reflects the creation of police and crime commissioners and structural changes to other policing authorities, including the creation of authorities overseeing combined police areas. We have also updated organisational names. For example, we have replaced previous references to the Association of Chief Police Officers’ Counter Terrorism Coordination Centre with up-to-date references to the Counter Terrorism Policing National Operations Centre.

The revised code also includes a new paragraph that references the Children Act 2004, and its Scottish equivalent, to highlight the need for the police to ensure that, in the discharge of their functions, they recognise the need to safeguard and promote the welfare of all persons under the age of 18. Although it is not new policy, when revising the code the Government considered it important for such safeguarding duties to be made explicit. We have made other minor but necessary amendments, such as updating links and contact details within the code. Those include refreshing the web address where the most up-to-date version of the Government’s counter-terrorism strategy—known as Contest—can be found.

In the course of revising the code, the Home Office has consulted the Lord Advocate and other appropriate persons and organisations, including the Independent Reviewer of Terrorism Legislation, Counter Terrorism Policing and Police Scotland, all of whom are supportive of the approach. The revised code promotes the fundamental principles to be observed by the police, and helps to preserve the effectiveness of—and public confidence in—the use of police powers to stop and search under the Terrorism Act 2000.

--- Later in debate ---

[Tom Tugendhat]

I am grateful for the cross-party support for these important measures.

[Sir John Hayes (South Holland and The Deepings) (Con)]

Given the cross-party support that the Minister was just celebrating, would it be useful for the Home Secretary to write to chief constables to remind them of the importance of the new powers, and to ensure that they are up to date on how they might be applied? It could be helpful, in the circumstances, to reflect the general consensus.

[Tom Tugendhat]

I will definitely take that back to the Home Secretary; I am sure that she will be delighted to do that. I am sure chief constables will be aware that the measures have cross-party support, and therefore the support of the whole country.

Question put and agreed to.

National Security Bill (Thirteenth sitting)

Tom Tugendhat Excerpts

Committee stage
Tuesday 18th October 2022 Public Bill Committees

[The Chair]

Although that is an important matter for the ISC and for this Committee, it is not a point of order. The Minister and others, however, will have heard the right hon. Gentleman’s point, and will no doubt take it into consideration in the future.

New Clause 8

Disclosure orders

“Schedule (Disclosure orders) makes provision for disclosure orders.”—(Tom Tugendhat.)

This new clause introduces the new Schedule inserted by NS1.

Brought up, and read the First time.

[The Minister for Security (Tom Tugendhat)]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss Government new schedule 1—Disclosure orders.

[Tom Tugendhat]

Thank you very much for chairing this sitting, Mr Gray. It is a pleasure to be here under your chairmanship, and a great pleasure to introduce new clause 8 and new schedule 1, which introduce a suite of measures to allow law enforcement officers to apply to the courts for orders to gather information that will assist investigations into foreign power threat activity. As with the other police powers in the Bill, the Government have carefully considered relevant existing legislation, and looked to emulate it where it has proven effective in investigating other serious crimes. I will first speak more broadly about the need for the measures as a whole, before turning specifically to disclosure orders.

Most modern investigations include lines of inquiry into finances and other property, sometimes as a starting point and sometimes to enhance other leads. Financial investigations are often critical in developing evidence that is used in criminal proceedings where there is a financial element, by identifying and tracing criminal assets and uncovering the extent of criminal networks. Financial investigation has become increasingly important in criminal investigations in recent years.

In his recent letter to the Committee, the national lead for counter-terrorism policing, Matt Jukes, stated that it can be difficult for his officers to conduct effective investigations into state threats with the current powers and tools available, and that police would greatly benefit from the inclusion of financial investigative measures. The police have stated that these lines of inquiry are particularly important in state threats cases, where actors may be motivated by financial gain but also where they deploy sophisticated forms of tradecraft, meaning that their criminal conduct is even more difficult to uncover, disrupt and evidence than for other crimes. In many cases, financial and property investigations form an important part of establishing the link between the activity and the foreign power, particularly regarding investigations into obtaining material benefits from a foreign intelligence service.

Investigations into property and finances can take place in relation to any form of criminality, but Parliament has already recognised, in both terrorism legislation and the Proceeds of Crime Act 2002, that there are certain circumstances where it is appropriate for investigators to have access to broader investigatory powers. The Committee has also recognised, in particular during our debates on schedules 2 and 3, that state threats investigations are an area where it is appropriate for investigators to have access to enhanced powers. The addition of these new financial and property investigation powers in relation to foreign power threat activity will ensure that law enforcement has the tools it needs to effectively conduct state threats investigations, prevent and mitigate harmful activity and bring those responsible to justice.

The Committee will note that these new powers are available to National Crime Agency officers, reflecting the Government’s intention, as set out in the integrated review of defence and security, to ensure that the NCA has the capabilities that it needs and to pursue greater integration where there is an overlap between serious organised crime, terrorism and state threats.

I want to take this opportunity to inform the Committee that as we have finalised these provisions, we have identified other areas in the Bill where the drafting needs to be tailored to ensure that it is consistent regarding the availability of the powers to the NCA. These small amendments will be addressed on Report.

Turning to disclosure orders, as we have discussed in Committee, schedule 2 provides for a number of powers that law enforcement can use to obtain information in state threats investigations. Law enforcement investigators require disclosure orders for state threats investigations in order to access non-excluded material by compelling individuals or organisations to provide information to investigators. It is important to note that disclosure orders cannot compel someone to answer any question or provide information that is legally privileged, or to produce excluded material. Excluded material is defined under the Police and Criminal Evidence Act 1984 and includes personal records relating to physical or mental health obtained in the course of a trade or profession, human tissue held in confidence and taken for the purposes of diagnosis or medical treatment, and journalistic material held in confidence. If excluded material were required by investigators, a production order under schedule 2 would be required.

Much of the information that investigators seek under a disclosure order may be considered confidential in nature, such as payment details, but is not classed as excluded material. That may be required because the police have previously approached an organisation to ask for the non-excluded material to be provided, but the organisation has refused because it does not consider that it should disclose the information in the absence of a clear power of compulsion. It may be because the police are conducting a complex investigation involving several organisations that could require multiple requests for information over time. In such a scenario, which is likely to occur in state threats investigations, the police require a streamlined process whereby one order is available to cover separate requests for information from multiple organisations without creating an undue administrative burden on law enforcement, the courts or those who might receive such requests.

In the absence of a disclosure order, a schedule 2 production order, if applicable, would need to be made for every request for information, requiring a large amount of police resource as well as court time. Disclosure orders streamline this process and reduce the numbers of orders needed for requests for non-excluded material during an investigation. For example, if the police were conducting a state threats investigation into an individual and needed to access information from several airline companies regarding the suspect, the company may be willing to provide only basic customer information, such as the full name, without a formal court requirement. If the police required access to the suspect’s payment information used for a plane journey that is suspected of being related to state threat activity, the company may refuse to provide that information, even if investigators provided the company with reassurance that providing this information was in the interests of the prevention of crime. Executing a warrant on the company may be possible, but may not be an appropriate course of action by the police. In some cases, a production order under schedule 2 might be available, but that will not always be the case. Disclosure orders will provide a more proportionate and appropriate way of providing investigators with the information required.

In another example, the police may suspect that a person is purchasing a specialist piece of computer equipment to use in the commission of a state threats offence. The police suspect that the equipment has been purchased from one of a small number of possible companies. In that case, a single disclosure order could be sought, enabling the police to seek information from the companies in question, instead of the police needing to seek multiple production orders.

We recognise that these orders could enable the police to give a notice to a wide range of organisations. As such, senior authorisation is required within law enforcement before an application can be made to the courts. In addition to the requirement for senior authorisation, a disclosure can be made only in relation to an investigation into the identification of state threats property, which is defined as money or other property that could be used for the commission of foreign power threat activity, or the proceeds from such activity. This restriction to investigations into relevant property reflects the scope of the equivalent powers in terrorism and proceeds of crime legislation.

Furthermore, the judge must be satisfied that there are reasonable grounds for believing the information being sought would be of substantial value to the investigation, and for believing that it is in the public interest for the information to be provided, having regard to the benefit of the investigation. Disclosure orders provide for an effective and flexible means of obtaining information in a state threats investigation. Sitting alongside the powers of schedule 2, they would ensure that investigators have efficient and effective access to the information that they need to conduct their inquiries.

[Holly Lynch (Halifax) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Gray. I also welcome hon. Members back to the final day of the Committee. We welcome new schedules 1, 2 and 3, and hope that they will reflect the complex and evolving nature of state threats, and the significant technical and financial resources that provide the capability for sustained hostile activity.

For too long, our police and security services have had to use blunted tools in this regard, not designed to address adequately the challenges posed by modern day espionage. We are grateful to Counter Terrorism Policing for submitting written evidence to the Committee, and making its support for the new schedules 1, 2 and 3 very clear. Frankly, the Met provided far more in its written evidence on the rationale of these provisions than the explanatory notes accompanying the new schedules from the Government—a point made by my right hon. Friend the Member for North Durham.

The fairly non-existent explanatory notes are a constant challenge from this part of the Bill onwards, affecting later amendments, which is disappointing for all hon. Members trying to follow the detail closely. As the Minister said, Assistant Commissioner Matt Jukes said in his written evidence to the Committee:

“We have requested financial investigation powers to support our investigations in this space. To this end we have articulated a clear requirement to emulate various investigatory powers within the Terrorism Act which centre on financial investigations as well as examination of material which can be used for investigatory purposes. We are assured that these will be introduced by way of a forthcoming amendment. If so, this will further ensure that we have the tools required to successfully investigate and disrupt state threat activity.”

We welcome the new schedules, and now that the long overdue Economic Crime and Corporate Transparency Bill has been published, no doubt the new schedules are intended to work alongside some of the part 5 provisions in that legislation. Currently, terrorism disclosure orders can be made under schedule 5A of the Terrorism Act 2000. Counter Terrorism Policing has called for an explicit disclosure order for state threats, stating that it will help investigators benefit from a streamlined process, whereby one order is available to cover separate requests for information from multiple organisations, without the need to return to court. I want to push the Minister on oversight. I have made the case for an independent reviewer of all the new measures in the Bill. As those will be investigatory powers, will the Minister confirm that the investigatory powers commissioner will have responsibility for overseeing their use?

Turning to paragraphs 7 and 17 of new schedule 1, paragraph 7 outlines offences in relation to disclosure orders. Sub-paragraph (3) states that a person commits an offence if

“in purported compliance with a requirement imposed under a disclosure order, the person—

(a) makes a statement which the person knows to be false or misleading in a material particular, or

(b) recklessly makes a statement which is false or misleading in a material particular.”

By comparison, paragraph 17(1) states that a

“statement made by a person in response to a requirement imposed under a disclosure order may not be used in evidence against that person in criminal proceedings.”

I cannot quite square that off. I am keen to better understand why the information provided by a person under a disclosure order could not be used as evidence in criminal proceedings.

Before concluding, as I have said before, I accept that it is standard to refer to a police officer as “constable” in legislation, despite the fact that in doing so we are referring to police officers of any rank, not the rank of constable, which seems problematic. New schedule 1 is a prime example of where it gets messy. Paragraph 1(5) says that an appropriate officer for the purposes of these powers is either a constable or a National Crime Agency officer. It is not until paragraph 2(10) that the provision states that an appropriate officer must be a senior officer or authorised by a senior officer. Not until paragraph 9(4) does it confirm that “senior officer” must be a superintendent or above. Would it not be clearer to be explicit about the stipulated rank required to exercise certain powers at the earliest opportunity, instead of allowing for the ambiguity of the word “constable”? The last thing any of us want is for any ambiguity to be exploited by defence lawyers in the courts.

--- Later in debate ---

[Maria Eagle]

Sorry; it is in new schedule 1. That was my mistake, Mr Gray, and I apologise. I am not seeking to confuse proceedings any more; it is confusing enough to have to scrutinise the provision without an explanatory memorandum. That makes this kind of provision very difficult to scrutinise with any real sense. The point I wanted to make is about paragraph 3(4) of schedule 1, which says,

“A disclosure order has effect despite any restriction on the disclosure of information imposed by an enactment or otherwise.”

The words “by an enactment” seem to make it pretty clear that unless it excludes material, the provision is designed to enable the investigating authority to look at anything. Can the Minister give an example of what that aims to remedy? What lacuna is it aimed at preventing? We are talking about waving through a provision that allows a disclosure order to ignore another enactment, and that seems to me to be a large power.

The provision goes on to say, “or otherwise”, which is an absolute catch-all phrase. Can the Minister can explain why the provision is drafted so widely, as well as what kind of “otherwise” arrangement it seeks to get around and why? It seems to me to be extraordinarily wide. We might have seen the rationale for that in an explanatory memorandum, had there been one, but we do not have one to hand. Perhaps the Minister can tell us whether we will have an explanatory memorandum before the completion of the Commons stages of the Bill. I think that waving through extraordinarily wide arrangements is cause for concern if we are trying to scrutinise what the Government seek to do and why.

[Tom Tugendhat]

I thank hon. Members for their comments so far. I will first touch on the point that has been raised about the explanatory notes. I am told that it is normal procedure for that to be published before the Bill is introduced to the Lords—

[Mr Jones]

Not true!

[Tom Tugendhat]

I will bow to the superior knowledge of age and give way.

[Mr Jones]

That is complete nonsense. Usually, there are explanatory notes for amendments, so I do not know where that suggestion has come from.

[Tom Tugendhat]

I will be taking that up with officials later, and I will find out why that has been said.

[Mr Jones]

And stop making things up.

[Tom Tugendhat]

The right hon. Gentleman knows that I would never do such a thing. In response to the provision on oversight, we discussed in the last sitting that we are looking at different forms of oversight. While that has not yet been clarified, I will engage with the hon. Member for Halifax to ensure that we have a form of oversight that works, be that from one of the existing oversight bodies or from another body. There are various different arguments, so I will come back to the hon. Member on that.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East asked what the measures were based on. The Bill is based on the Terrorism Act 2000, but we also looked at the Proceeds of Crime Act 2002. We sought consistency in the schedules by using the so-called TACT and the Proceeds of Crime Act as their basis. It is important to note that Police Scotland has been involved in this endeavour and is content. It has been a very important part of the conversation.

The hon. Member for Halifax asked where these orders could come from. Police need to compel individuals or organisations to answer questions. Because of the different natures of potential production orders, they may involve not just a single individual, but multiple sources; that is why I mentioned multiple companies. In this case, one may be following a particular individual but not be certain which airline they travelled on. Therefore, this could include either multiple companies that may have produced a good or a service, or multiple agencies that have supplied it. That is where it comes from.

Question put and agreed to.

New clause 8 accordingly read a Second time, and added to the Bill.

New Clause 9

Customer information orders

“Schedule (Customer information orders) makes provision for customer information orders.”—(Tom Tugendhat.)

This new clause introduces the new Schedule inserted by NS2.

Brought up, and read the First time.

[The Chair]

With this it will be convenient to consider Government new schedule 2—Customer information orders.

[Tom Tugendhat]

I beg to move, That the clause be read a Second time.

New clause 9 and schedule 2 seek to insert customer information orders into the Bill as part of the suite of investigatory measures. Those who engage in state threats activity are highly trained individuals who have knowledge of tradecraft that can obfuscate their identity and real intentions.

For example, the tradecraft could be used to conceal transactions by creating secret bank accounts under false identities, or accounts registered to different addresses, in order to send or receive money for conducting activity. The operational objective of a customer information order is to enable an investigator to identify accounts and other account information in relation to state threats investigations. For example, this could be where a foreign agent is paying others to conduct state threats activity in the United Kingdom and police need to identify where the agent’s account is held, or it could be where a suspect is using a covert account under a false identity to receive funds to use for the purposes of state threats activity.

The customer information order is therefore intended for use as a tool of discovery during an investigation, often in the early stages. Once accounts have been identified through a customer information order, they could, where appropriate, be subject to further monitoring or investigation through a schedule 2 production order or an account monitoring order. Without customer information orders, accounts used by those conducting state threats activity may go unidentified, reducing investigative opportunities and, in turn, the ability for law enforcement to disrupt harmful activity and bring offenders to justice. We recognise that such orders could potentially require any financial institution to provide information about relevant customers. As such, senior authorisation is required within law enforcement before an application can be made to the courts.

We expect that, in practice, the powers will be used by police and NCA officers who have received relevant financial investigator training, and we are continuing to work with the police and NCA on creating the relevant guidance. Again, we have modelled the provisions on the terrorism equivalent and the measures used in the Proceeds of Crime Act 2002, and the consistency of these processes will ensure that law enforcement officers can make the most effective use of the powers. As I have set out, the customer information orders are another important investigative tool, opening new lines of inquiry and ensuring that law enforcement can run effective state threats investigations.

[Holly Lynch]

New clause 9 and new schedule 2 establish customer information orders, which authorise the police and NCA officers to obtain customer information from financial institutions. In its written submission to the Committee, for which we are all grateful, Counter Terrorism Policing has welcomed the provision, stating that it will

“enable investigators to identify accounts in relation to state threat investigations, or where an individual is using a covert account under a false identity to receive funds to use for the purposes of state threats.”

As the Minister outlined, the tool has been available to law enforcement for terrorism investigations thanks to schedule 6 to the Terrorism Act 2000, and it has been available for criminal investigations through the Proceeds of Crime Act. However, according to Counter Terrorism Policing, it has not been possible to use either Act in relation to state threats investigations, so we welcome the provision. It prompts the question of why we have not addressed this issue sooner.

Subsection (2) states that the judge may grant the order if they are satisfied that

“the order is sought for the purposes of an investigation into foreign power activity”,

and that

“the order will enhance the effectiveness of the investigation.”

We have spoken a lot about the value of an independent reviewer, and I welcome the substance of the Minister’s comments. It is worth keeping under review the threshold of a judge being satisfied that the order is sought for the purposes of investigation into foreign power activity. We cannot use these orders without good cause, but if we need them to be able to find evidence of foreign power activity, will investigators be able to satisfy a judge prior to that? It will be interesting to see how many applications are granted and rejected once we start to work with the orders. Aside from those points, I am happy with new schedule 2.

[Stuart C. McDonald]

I will make a couple of brief points. The broad thrust of the new schedule and the intention behind it seem absolutely fine, but I am interested in the tests that must be satisfied before an order is made. Under the previous schedule on disclosure orders, the judge has to be satisfied that there are reasonable grounds for suspicion, that there is substantial value in the information gained under the order and that the order would be in the public interest.

In contrast, here in new schedule 2, the judge has to be satisfied only that the order is sought for the purposes of an investigation and that it will enhance the effectiveness of that investigation. That seems a pretty low bar to allowing this pretty invasive procedure to be gone through. Why that choice of language? I guess it is modelled on the provisions that have been mentioned. I have probably not been as diligent as the shadow Minister has in doing my homework and tracking through the previous bits of legislation, and I will now do that. The information gained under these orders could be pretty intrusive, so we need to ensure we are not giving carte blanche to all sorts of intrusive investigations. I am a little bit concerned about the low level of test, compared with the test for disclosure orders.

My second, brief point is that paragraph 4 of the new schedule suggests that the person whose records are about to be trawled through can seek to vary or discharge the order. It is not clear to me how they would go about doing that, given that I suspect most orders will be made without any notice, and they can even be made by a judge in chambers. What assurance can we have that people will be able to challenge this potentially intrusive investigation?

[Tom Tugendhat]

The question as to why we have not addressed this sooner is a fair one. The UK’s investigation legislation is complex, as the hon. Member for Halifax knows only too well from the homework she has obviously done for our sittings. For example, in the Proceeds of Crime Act there are more than seven investigatory orders used in criminal and civil investigations. The consideration that has gone into this has naturally been complex, and it has required a lot of time and input. This Bill, as she knows very well, has been some years—and, indeed, some Ministers—in the making.

[Mr Jones]

More to come!

[Tom Tugendhat]

Let us see. The fact that there are no recorded uses of the information orders in TACT demonstrates how sparing the use of these provisions will be.

Question put and agreed to.

New clause 9 accordingly read a Second time, and added to the Bill.

New Clause 10

Account monitoring orders

‘Schedule (Account monitoring orders) makes provision for account monitoring orders’.—(Tom Tugendhat.)

Brought up, and read the First time.

[The Chair]

With this it will be convenient to consider Government new schedule 3—Account monitoring orders.

[Tom Tugendhat]

I beg to move, That the clause be read a Second time.

I turn to new clause 10 and schedule 3—

[The Chair]

New schedule 3.

[Tom Tugendhat]

My apologies; I meant new schedule 3. New clause 10 and new schedule 3 provide for account monitoring orders for certain investigations into state threats. Police need to be able to obtain information relating to accounts held by a suspect in real time in order to identify and act on disruptive opportunities related to state threats activity. An account monitoring order will require a financial institution to provide specified information in relation to an account—for example, details of all transactions passing through the account—for a specified period not exceeding 90 days.

--- Later in debate ---

[Mr Jones]

These are sensible proposals to give our law enforcement agencies the powers they require, but I would like clarification about definitions. The Minister referred to a bank, and it is clear that this is about monitoring bank accounts. The explanatory statement, expansive as it is—I think it is one line—says:

“These orders may require financial institutions to provide specified information relating to accounts.”

I want to clarify the definition of financial institution. If we go back 20 or 30 years, it was quite clear: we had bank accounts and financial products. Today, though, there is a complex environment of organisations that work and deal with financial accounts. For example, Bitcoin is now traded between organisations, some of which are covered by the Financial Conduct Authority and others not. I am trying to get some understanding of how widely this will go.

The other issue is about bank accounts that are not in the UK. I am particularly thinking about bank accounts in the overseas territories, and what happens there. We need clarification about the remit. The measure might work very simply with banks and other financial institutions, but in an ever-changing world we have a lot of organisations that deal with people’s “accounts” where they are not regulated.

[Tom Tugendhat]

The hon. Member for Halifax asks again about the term “constable”. She is right to ask, but that is not an oversight; it is accurate. There are different levels at which different officers are allowed to warrant things. As she rightly identifies, “constable” is the generic term, and then at various points different ranks of officer are required for different levels of authority. That is in line with the TACT powers. This area of authorisation is considered less intrusive, and that is why a lower-ranking officer is allowed to ask for it.

On financial institutions, the right hon. Member for North Durham identified that banking has changed somewhat since he and I had post office accounts in the early—I will leave that there. Schedule 3 uses the same definition as that used in paragraph 6 of schedule 6 of the Terrorism Act 2000; it is designed to align. The definition of financial institution in the Proceeds of Crime Act 2002 can be found in paragraph 1 of schedule 9. Account monitoring orders can be used as part of a broader set of purposes, such as civil recovery, and they are applicable to a broader range of financial institutions. Such breadth is unnecessary in respect of state threats, which is why that is slightly narrower, but the definition is there.

Obviously, these powers cannot be used to compel institutions overseas, so we are asking for co-operation from police forces.

[Mr Jones]

I appreciate that in terms of overseas bank accounts, but there has been a lot of controversy about individual using overseas territories. If the Minister does not know the answer, he can write to the Committee to clarify the point. I just want to see how far these orders could go in terms of their effect.

[Tom Tugendhat]

The right hon. Gentleman knows very well that overseas territories come under slightly different jurisdictions, whether they are Crown dependencies or overseas territories. It depends on the jurisdiction, but I will be happy to write to him.

Question put and agreed to.

New clause 10 accordingly read a Second time, and added to the Bill.

New Clause 11

Requirement to register foreign activity arrangements

‘(1) A person (“P”) who makes a foreign activity arrangement must register the arrangement with the Secretary of State before the end of the period of 10 days beginning with the day on which P makes the arrangement’

(2) A “foreign activity arrangement” is an arrangement with a specified person pursuant to which the specified person directs P—

(a) to carry out activities in the United Kingdom, or

(b) to arrange for activities to be carried out in the United Kingdom.

(3) “Specified person” means—

(a) a foreign power specified by the Secretary of State in regulations;

(b) a person, other than a foreign power, specified by the Secretary of State in regulations.

(4) The regulations may specify a person other than a foreign power only if—

(a) the person is not an individual, and

(b) the Secretary of State reasonably believes the person is controlled by a foreign power.

(5) A person is controlled by a foreign power if—

(a) the foreign power holds, directly or indirectly, more than 25% of the shares in the person,

(b) the foreign power holds, directly or indirectly, more than 25% of the voting rights in the person,

(c) the foreign power holds, directly or indirectly, the right to appoint or remove an officer of the person, or

(d) the foreign power has the right to direct or control the person’s activities (in whole or in part).

(6) In subsection (5) “officer”—

(a) in relation to a body corporate, means a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity;

(b) in relation to a partnership, means a partner or person purporting to act as a partner;

(c) in relation to an unincorporated association other than a partnership, means a person who is concerned in the management or control of the association or purports to act in the capacity of a person so concerned.

(7) The Secretary of State may make regulations specifying a foreign power or a person other than a foreign power only if the Secretary of State considers it reasonably necessary to do so to protect the safety or interests of the United Kingdom.

(8) The requirement in subsection (1) does not apply to a foreign power.

(9) Regulations specifying a foreign power or a person other than a foreign power may provide for subsection (1) to apply, with modifications specified in the regulations, in relation to a foreign activity arrangement made with the specified person before the regulations come into force.

(10) A person who fails to comply with subsection (1) commits an offence if the person—

(a) knows, or

(b) ought reasonably to know,

that the arrangement in question is a foreign activity arrangement.’—(Tom Tugendhat.)

NC11 to NC28 require certain arrangements with, and activities of, foreign powers and foreign persons to be registered. They are intended to form a new Part 2A, referred to in explanatory statements as the registration scheme. This new clause requires registration of arrangements with specified persons to carry out activities in the UK.

Brought up, and read the First time.

[Tom Tugendhat]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 12—Offence of carrying out activities under an unregistered foreign activity arrangement.

Government new clause 13—Requirement to register activities of specified persons.

[Tom Tugendhat]

New clauses 11, 12 and 13 are the first of a series of amendments relating to the foreign influence registration scheme announced by the Home Secretary on Second Reading. I will come to the new clauses shortly, but first I want to make some introductory remarks about the scheme itself.

In the 2020 Russia report of the Intelligence and Security Committee, it was recommended that future counter-state threats legislation should address the issue of those acting on behalf of a foreign power and seeking to obfuscate their links or relationship. The director general of MI5 strongly emphasised the importance of legislating to ensure that those acting covertly could be pursued through criminal means to make the operating environment harder for those who intend to disguise or obfuscate who they are acting for. The ISC’s report identified the need for stronger transparency legislation, akin to that in place in the United States—namely, the Foreign Agents Registration Act 1938, known as FARA.

FARA requires any person, regardless of nationality, to disclose to the Department of Justice where they represent the interests of foreign powers in a political or quasi-political capacity, as described by the report. It is a disclosure requirement that applies far beyond a situation in which a person acts for a foreign intelligence service, extending to activities undertaken for foreign powers as well as other entities and individuals.

Only four years ago, the Australian Parliament passed its contemporary equivalent to FARA, the Foreign Influence Transparency Scheme Act 2018. The Australian scheme requires the registration of political influence activities undertaken for, or on behalf of, a foreign power or other individuals or entities subject to foreign power control. Both schemes contain a range of exemptions, offences and enforcement powers to further shape and support enforcement of the scheme. Although not like-for-like schemes, they share the principle of tackling covert influence through greater transparency.

There is evidence of the value of these schemes. A submission from the Australian Attorney-General’s Department to an ongoing review of FITS, which commenced in August last year, describes the behavioural changes that it has seen as a result of the scheme’s implementation: some organisations and individuals have adopted better transparency practices, while others have seemingly ceased activities that would be registrable. Enforcement of the US’s FARA has increased in recent years. That has also resulted in behavioural change, as well as prosecutions for non-compliance, including of one very high-ranking former military officer.

I am delighted to be before the Committee today to talk through the proposed UK scheme. This is an important piece in our package of measures and is the area of legislation that calls on sectors to play their part in making it difficult for foreign powers to operate covertly in the United Kingdom. Similar to the position with the precedents that I have just described, its overarching aim is to deter foreign power use of covert arrangements, activities and proxies by requiring greater transparency around certain activities that they direct, as well as where those activities are directed or carried out by entities established overseas or subject to foreign power control.

Put simply, where a foreign state deploys its influence in the UK, either directly or through third parties, that will now be subject to registration and more transparent. I must stress that the scheme’s requirements are not identical to those of the United States and Australian schemes. Although we have worked with our US and Australian colleagues to understand the lessons learned from implementation of their schemes, our scheme’s requirements reflect our own experience and the threats that we face.

The overarching aim of the scheme is to be delivered through two separate objectives and requirements. The first is to strengthen the resilience of the United Kingdom’s political system against covert foreign influence. Openness and transparency are vital to the functioning of our democracy. Where covert influence is deployed by foreign powers, directly or through third parties, it undermines the integrity of our politics and institutions. The scheme will therefore require the registration of political influence activities where they are to be undertaken within the United Kingdom at the direction of any foreign power or foreign entity, or by a foreign entity itself. I will refer to these obligations as the “primary registration requirements”.

Certain registered information will be made available to the public via a scheme website, similar to the position with the schemes of our Australian and US partners. This requirement is deliberately state and sector agnostic, as the source of foreign influence should be transparent no matter where it originates or manifests. The only exceptions, which I will come to, are where exemptions are necessary to protect existing obligations.

The second objective is to provide greater assurance around the activities of specified foreign powers or entities. The scheme contains a power to specify a foreign power, part of a foreign power, or an entity—such as a company or organisation—subject to foreign power control, where the Secretary of State considers it necessary to protect the safety or interests of the United Kingdom. It would require a person acting within the United Kingdom at the direction of a specified power or entity to register with the scheme. It would also require a specified entity to register activities to be undertaken within the UK with the scheme. I will refer to this as the “enhanced registration requirement”. Its use will be limited and subject to parliamentary approval.

These requirements will apply to certain arrangements and activities, regardless of the nationality of those carrying out the activity, and will be enforced through a range of offences and penalties, as well as powers to request information.

I also want to tell the Committee about the scheme’s exemptions, which are as follows.

[Stewart Hosie (Dundee East) (SNP)]

Before the Minister tells us about the exemptions, it would be helpful to know how the enhanced registration—let us call it tier 2 —will actually work. So far, we are in the dark. The basic registration seems eminently sensible, but what will the procedure be to specify a country, entity or person to whom enhanced registration will apply? How will it work? We need to know that before we find out who might not be expected to register in that way.

[Tom Tugendhat]

The right hon. Gentleman will see that I have a number of pages of text that I will be coming to. If he will forgive me, I will explain all these elements as we get to them.

The scheme’s exemptions are as follows: individuals to whom privileges and immunities apply in international law, as provided by, for example, the Vienna convention on diplomatic and consular relations; legal services, as well as information subject to legal professional privilege; domestic and international news publishers, including confidential journalistic material and sources; and arrangements to which the UK Government are party.

The scheme has also been designed to uphold the letter and spirit of the Belfast/Good Friday agreement. To that end, any arrangement with Ireland, or with a body incorporated or associated under the laws of Ireland, will be exempt from registration, as are activities to be carried out by such entities. That will avoid interference with the rights of citizens of Northern Ireland who identify as Irish, as well as the activities of cross-border entities and institutions.

I want to close my opening remarks—that is right; we are just starting—by mentioning George Brandis, the former Attorney General for Australia who was responsible for passing the Australian scheme. He was recently reported as commenting on the announcement of the UK scheme:

“This ought not to be in the cockpit of political controversy in the U.K. It ought to be something, because it is necessary for the protection of the national interest, that commands bipartisan support.”

That is certainly the sentiment that I have taken from Second Reading and our deliberations in Committee so far, and I look forward to working with all sides to ensure the requirements are effective and proportionate.

With that, I turn to the group of new clauses relating to the enhanced registration requirement. Each of the new clauses is substantive and so, after setting out the benefits of the enhanced requirement, I will take each in turn. The enhanced registration requirement will provide greater scrutiny of the activities of specified foreign powers or entities while deterring the use of covert arrangements. I describe it as “enhanced” because it creates wider requirements to register than the primary registration requirement, which we will come to later. That is proportionate to the aim of this part of the scheme: to provide greater assurance around the activities of specified foreign powers or entities.

The enhanced registration requirement will provide three principal benefits. First, it will provide the Government and the public with a greater understanding of the scale and extent of activity being undertaken for specified foreign powers and entities within the United Kingdom. Secondly, the offences and penalties for non-compliance will increase the risks to those who seek to engage in covert activities for foreign powers, either directly or through specified entities. Finally, the requirement offers potential for earlier disruption of state threats activity, where there is evidence of a covert arrangement between a person and a specified foreign power or entity but it is not yet feasible to bring charges for a more serious state threats offence.

[Mr Jones]

Will the Minister give way?

[Tom Tugendhat]

I will, very briefly, but the right hon. Gentleman may find that the point is covered—

[Mr Jones]

If the Minister wants to come here and just read his speech to us, that is fine, but that is not what scrutiny is. I am fully supportive of the proposals under tier 1, but I find it difficult to understand how tier 2 will work in practice. Putting countries or companies on the list will cause huge diplomatic incidents. Let us say we put Huawei on the list, for example; I am sure there would be fallout from that. As well-meaning as tier 2 is, practically, I do not think it will ever be used.

[Tom Tugendhat]

The right hon. Gentleman and I have had many debates on the nature of different foreign influence in the seven years that I have been here. We have discussed many different companies and countries in various ways. I know he shares my absolute passion for protecting the United Kingdom from foreign influence and knows the difficulty that that causes in diplomatic areas. He appreciates better than almost anyone how difficult it is sometimes to match the economic needs and requirements of the United Kingdom with the need to protect ourselves from foreign influence. He is right that this will cause difficulty. There is no getting around the fact that making a decision on the enhanced tier will have diplomatic repercussions. But the reality is that if we do not make those decisions, the implications for our economy and domestic security will be very high.

The right hon. Gentleman is absolutely right that there are companies that some of us have stood up to and made a point of identifying as actors for a foreign state—he mentions Huawei; there are others—and which are in many ways difficult examples. I am not going to say whether Huawei would or would not be subject to the enhanced tier, as we have not looked at any determinations on that, but it is quite clear that there are some countries—Russia is a good example today—that would absolutely require the enhanced tier. Different elements of Russian business would no doubt fall within it.

[Mr Jones]

Yes, but the Minister knows that there are many countries in the world that, although they are not comparable with Russia, would also cause economic harm but are not in the higher tier. Would it not be better to have a broader scheme that mirrored tier 1, with tight definitions of what needs to be registered, and apply it to all countries? We would then give ourselves protection and avoid the diplomatic pitfalls every time we wanted to follow this process.

[Tom Tugendhat]

People have to register under tier 1 anyway. That will be a public scheme that already identifies many areas. Tier 2 will make sure that there is an enhanced aspect that allows us to be clear what exactly is going on, rather than relying on a general identification. That is an important distinction.

[Maria Eagle]

Is my understanding correct that tier 1 is about capturing arrangements and activity undertaken for the purpose of influencing a political event or decision, but that the second tier will capture all other behaviour beyond political influencing, such as acting as a foreign intelligence officer? Is it correct that the scheme as set out at present is aimed at making everyone apply at the lowest level—the political influencing level—but that only more serious incidents will be dealt with by designating individual countries or companies? We are going to immediately run into the difficulty of upsetting diplomatically any person, company or country that is designated for more serious activity.

[Tom Tugendhat]

The hon. Lady is not noted for her shyness. I am surprised that she feels that the diplomatic repercussions of designating a company or country should dissuade the UK Government from defending themselves. I know she does not think that, and I know the right hon. Member for North Durham does not think that.

The different schedules identify the different natures of influence being used. As the hon. Lady rightly identifies, schedule 1 is about political influence. As I think we all appreciate in this House, that should be public. Those who seek to influence anyone in this House or anyone else by political means, whether through lobbying or in different ways, should identify on whose behalf they are doing so. I do not think that is a very contentious provision.

[Maria Eagle]

indicated assent.

[Tom Tugendhat]

I am glad to see the hon. Lady nodding. The second point is the enhanced scheme. That is where influence may come in different ways, where co-operation and interaction with different businesses that pose a particular and distinct threat may be required. That is why—we will come to this later—the political register will be public and the second register will be private, but the identification of those who are required to be registered will of course have to be public and there will be a political and a diplomatic decision that will go with that.

[Mr Jones]

I sympathise with what the Government are trying to do, and I think my hon. Friend the Member for Garston and Halewood does too, but I am never in favour of putting things on the statute book that look tough but that, frankly, will never be used. There must be a more direct way of doing this—a broader measure that applies to all countries, which is then used against relevant countries. My fear is that the measure as it is written at the moment looks tough but will not be usable.

[Tom Tugendhat]

The right hon. Gentleman raises a fair point, but I simply do not believe that if he were in my position, he would not use the powers. I would use them, and I am sure he would use them in a situation where they were required. I know that he has never shrunk from a fight or diplomatic argument, but I think that this is important. The problem is that if the enhanced power were to be used for every nation, the volume of data produced would be enormous and the imposition on companies would be huge.

[Mr Jones]

I agree with the Minister, but he has a problem. He and I have dealt with the Foreign Office and other diplomatic entities over many years: he knows that the pressure that the power will come under, and the competing arguments against security, will make it unusable.

[Tom Tugendhat]

I do not accept that, so I think we will have to end this discussion with an agreement to disagree.

[Mr Jones]

Not for the first time.

[Tom Tugendhat]

Indeed. But I entirely respect the right hon. Gentleman’s position, and I do understand the point he is making.

New clause 11 will require Ministers—specifically, the Secretary of State—to be willing to engage in a strong discussion with other Departments that rely on investment or, indeed, diplomatic leverage. Yes, I am afraid that is a balance that the Government have to make; the right hon. Gentleman is absolutely right to identify it, but I simply do not accept that that means the power will not be used. It is true that the power will be constrained, but that does not mean that it will be unused—Ministers who see the threats before them will be willing to use the powers that they have. We will no doubt continue this discussion later.

New clause 11 will provide three principal benefits. The first is that it will provide the Government and public with a greater understanding of the scale and extent of activity being undertaken for specified foreign powers and entities within the United Kingdom.

[Stewart Hosie]

The Minister explained just a few moments ago that the tier 1 registrations would be public but the tier 2 enhanced registrations would be private. I am not sure how he can argue that the tier 2 enhanced registration would give the public much more confidence if it is a secret.

[Tom Tugendhat]

The nature of the registration will not be a secret, but who has had to register will be kept private at the moment. I am already keeping this matter under discussion, so I am glad that the hon. Gentleman sympathises with my concerns. He and I are fully aware that journalism is a very powerful force in many of these areas.

[Mr Jones]

This baffles me, as it does the hon. Member for Dundee East. Tier 2 registration will not be private, will it? The order will have to be moved to put them on the list in the first place. Everyone will know, so what is the problem with providing transparency? I do not think you can have two tiers with different levels of transparency.

[Tom Tugendhat]

Let me clarify. Whoever is identified as being on the enhanced tier will be identified publicly. It is those companies that may be co-operating; at the moment, there is a discussion as to whether that should be public or private. The reason for that discussion is that some companies will be co-operating and we may feel that we wish to see that co-operation continue, even though we wish to have the compliance and registration so that we know who is doing what. The argument is that the Government should have the ability to have that information.

[Mr Jones]

If I am the CEO of a company and the Government put my company on the list, surely that will get out anyway. I would have to report it to my shareholders or board, so I am not sure about the benefits of keeping it a secret.

[Tom Tugendhat]

Forgive me, but I think the right hon. Gentleman has got this slightly the wrong way round. By definition, the company that would be identified would be a foreign company, not a UK company.

[Mr Jones]

Yes, but if I headed a French company—I am not suggesting that we use this power against the French for one minute—and had shareholders, surely I would have to tell them, and report at board meetings, that I had been on the list. It will get out anyway, so what is the point of keeping it quiet?

[Tom Tugendhat]

We are clearly speaking at cross purposes. The state that is on the enhanced register would be public. The company would be public. Those UK companies that are registering may not be. The right hon. Gentleman has it the wrong way round.

[Mr Jones]

I don’t think I have.

--- Later in debate ---

[Tom Tugendhat]

Okay. I am going to carry on, but I am very happy to continue this discussion on a later occasion.

New clause 11 will provide three principal benefits. First, it will give the Government and the public greater understanding of the scale and extent of the activity. Secondly, the offences and penalties for non-compliance will increase the risk to those who seek to engage in covert activities for foreign powers, either directly or through specified entities. Finally, it offers potential for earlier disruption of state threat activity where there is evidence of a covert arrangement between a person and specified foreign power or entity but it is not yet feasible to bring charges for a more serious state threat offence.

I want to be clear that we expect use of the enhanced registration requirement to be limited. It is an additional tool of assurance to bolster the package of measures within the wider Bill. The power to specify a foreign power or entity will be available to the Secretary of State when the Secretary of State considers it reasonably necessary to do so to protect the safety or interests of the United Kingdom. It will be subject to the affirmative procedure.

It is also vital to stress that the use of this requirement should not be taken to imply that every national of a specified foreign power or person associated with a specified foreign entity is to be mistrusted. The message here is quite the opposite: any person who complies with the obligation to declare an arrangement with a specified foreign power or entity is contributing to the safety and security of the United Kingdom by being open and transparent about that arrangement.

Although I am sure that members of the Committee will be keen to understand which foreign powers will be in scope of the enhanced registration requirement, I am sure they appreciate that it would be premature—if not damaging—to make undertakings on that at this stage. The Government will decide when the scheme is ready to be brought into force. For now, I will cover each amendment.

New clause 11 is the requirement to register foreign activity arrangements. A foreign activity arrangement is where activity is to be carried out, or arranged to be carried out, within the United Kingdom at the direction of a specified foreign power, part of a foreign power or an entity subject to foreign power control. The requirements could apply to any activities, but subsection (9) provides for this to be modified through regulations where necessary.

I wish to bring four key points to Members’ attention. First, I want to reflect on what we mean by a person required to register in this context under subsection (1). A person can be an individual, regardless of their nationality, or an entity. However, if a company or organisation is being directed by a foreign power or entity, the company or organisation would be responsible for registering the arrangement, not its individual employees.

We will shortly discuss new clause 13, which includes a requirement for specified entities to register their own activities. That is important because it makes clear our intention that an employee of a specified entity cannot be considered as being in a registrable arrangement with that entity. The approach was taken in response to sector feedback during our public consultation as a means of reducing the potential registration burden on companies and other organisations that may have many employees all engaged in the same activities.

Importantly, subsection (8) clarifies that there is no requirement for a foreign power itself to register. The scheme intends to increase assurance and transparency of activities being carried out for a foreign power where the involvement of that power might otherwise not be apparent.

[Stewart Hosie]

In new clause 11(1), “A person (‘P’)” might, as the Minister said, be an individual, an entity or a business. This is not at all clear. Is this the UK individual, entity or business or is it the overseas individual, entity or business that is directing a UK citizen? Is it a combination of the two?

[Tom Tugendhat]

Let me be completely clear, because subsection (8) makes it completely clear: there is no requirement for a foreign power itself to register. We cannot compel foreign powers or entities to register; this is a compulsion on UK entities or individuals.

The scheme intends to increase assurance and transparency to activities being carried out for a foreign power, where the involvement of that foreign power might otherwise not be apparent. As such, we would not expect other Governments to register with the scheme in respect of activity that they themselves are undertaking. As the later “interpretation” clause will make clear, that includes any person acting in the capacity of an office holder, employee or other member of staff of the foreign power, or a person whom the Secretary of State reasonably considers to be exercising such functions.

This scheme has been designed to avoid interference with our obligations under international law regarding the diplomatic and consular relations between countries, as well as the need to protect routine Government-to-Government engagement—the official visits of officials, military and other agencies of a state, for example.

Secondly, subsection (2) sets out the definition of “arrangement”, which requires there to be direction from a specified foreign power or entity to a person. That element of direction is important because it envisages a power relationship between the specified foreign power or entity and the person. The specified foreign power or entity has told the person to carry out the activity, or arranged for it to be carried out. While in practice it is entirely likely for a direction to be delivered in the language of a request, the context of the relationship between the specified foreign power or entity and the person being directed will ultimately determine whether it falls within scope.

[Stuart C. McDonald]

What happens if an intermediary is involved? What if a designated state power says to someone locally, “You arrange for these activities”, rather than saying to someone in the United Kingdom, “I want you to undertake these activities”? That falls within the terms of the new clause. That intermediary then instructs people in the United Kingdom to undertake activities. Does that not mean there is a gap in the clause and that people in the UK undertaking those activities would not have to register anything? It would be almost impossible to enforce against that intermediary requirement to register. Is there not a potential problem there?

[Tom Tugendhat]

My understanding is that—in fact, I will come back to that when I sum up, because the hon. Gentleman has raised an interesting point.

We consider a power relationship to include, for example, where the specified foreign power or entity has formally contracted a person’s support for an activity, or where it is paying a person to deliver a service. It could also include a situation where a specified entity is making a request of its subsidiary—again, the direction might be in the language of a request, but the power relationship would make it a direction. Where such formal structures are not established, a direction should include where a person is requested to act, but through the promise of compensation or coercion—for example, future payment, benefit or favourable treatment.

To be clear, though, it would not be enough for a specified foreign power or entity to simply provide funding in support of an activity—through subsidy or donation, for example. Nor could a generic request from a specified foreign power or entity be considered a “direction”—a request made through a public communication to a large distribution or mailing list, for example.

A power relationship, whether formal or informal, is necessary to ensure that unilateral activity on the part of the person is not within scope and nor is activity that is part of a collaboration and absent a power relationship. We shall set out in guidance what we intend by a direction so that it is clear to the public and to the courts what arrangements are registrable.

An arrangement also captures where a person is to arrange for activity to be carried out at the direction of a specified foreign power or entity, as well as where the person is to carry out the activity themselves. That is to ensure that a person in a direct arrangement with a specified foreign power or entity cannot avoid registration by simply contracting out the activity to a third party, creating a degree of separation between the specified foreign power or entity and the ultimate person who will carry out the activity.

Thirdly, I turn to the definition of “control”, where a specified entity is said to be subject to foreign power control. It is important that we capture the commonly used practice of foreign powers channelling state threat activity through private entities. To capture this effectively we have defined “control” under subsection (5) as being where a foreign power holds, be it directly or indirectly, more than 25% of the shares or voting rights of the entity, or the foreign power can appoint or remove officers of the entity.

Control can also be demonstrated where the foreign power has the right to direct or control the entity’s activities, allowing the Secretary of State flexibility if foreign powers exercise other significant forms of control that fall below those thresholds. The more than 25% threshold is in line with existing legislation on substantial control over an entity.

[Mr Jones]

I appreciate that it is difficult to identify control, but how would we get around the situation of a Russian oligarch who is clearly under the influence of the Kremlin, but whose company is owned through myriad different offshore companies? Would it have to be proven that the ultimate beneficiary was that individual to fall under this legislation? Those people, and even states, are very clever and hide who ultimately controls that company.

--- Later in debate ---

[Tom Tugendhat]

The right hon. Gentleman is identifying a problem that we have had with foreign ownership of companies for a very long time. That is why the Economic Crime and Corporate Transparency Bill is very important, because the ownership of companies is something that has been a challenge and he is correct to identify it. This Bill addresses certain elements of that control, but he is right that it does not address the totality, although it provides an important brick in the wall that we are building. That is why the Economic Crime and Corporate Transparency Bill and the companies registration are important.

[Mr Jones]

So, really, what we are enacting in this legislation will have to be dovetailed with the Economic Crime and Corporate Transparency Bill. The issue around Scottish limited partnerships has been quite controversial. Is the Minister saying that when the two come together, they will form the toolkit to tackle these individuals?

[Tom Tugendhat]

The right hon. Gentleman knows that there is not a single tool to deal with every task. The Bill will certainly help with a lot of things that already exist; the Economic Crime and Corporate Transparency Bill will add to it, and no doubt, in future years, different Governments will add further tools.

May I finally come to my fourth point? [Interruption.] I hear the hon. Member for Birmingham, Yardley chuntering. I will briefly summarise the procedural element of the new clause. The requirement is to register a foreign activity arrangement within 10 days of its being made, or otherwise before the activity is carried out. That is important because it may not be obvious to the Government under whose direction the person is acting. The prior registration of arrangements offers some opportunity for the Government to be informed before an activity pursuant to a foreign activity arrangement takes place. It also offers an opportunity to enforce the requirements of the scheme prior to an attempt to carry out covert influence activity.

Subsection (10) makes clear that an offence is committed if a person fails to comply with the requirement to register, and knows—or ought reasonably to know—that the arrangement is a foreign activity arrangement We will discuss the proposed range of offences shortly.

The offences relating to the other part of the scheme—where the registration of political influence activities are concerned—come with a higher bar for the prosecution to meet. Given the likely attention that the measure will receive if a foreign power, part of a foreign power or an entity subject to foreign power control is specified through regulations under subsections (3) and (4), a person should not be capable of avoiding prosecution by claiming they were unaware of the requirement to register. That said, we are mindful that a person who is unwittingly acting for a specified foreign power or entity should not be criminalised. That is why the test is such: a person can be prosecuted only if they ought reasonably to know that they were acting for a specified foreign power or entity.

New clause 12 makes it an offence to carry out activities, or arrange for an activity to be carried out, in the UK pursuant to a foreign activity arrangement that has not been registered. The requirement to register a foreign activity arrangement, which is an arrangement with a specified foreign power, part of a foreign power or entity subject to foreign power, applies to the person who is party to that arrangement—in such a case, that is the person directed by the specified person.

In practice, many other people could be involved in the activity or activities pursuant to that arrangement. For example, if the person party to an arrangement with a specified foreign power is a company, multiple employees could be all engaged in registerable activities within the UK under the arrangement. While I have already explained that the responsibility for registration would rest with the company in this example, and that that is necessary to avoid the burden of each individual employee being required to register separately, the effect of the new clause is to make it an offence to carry out an activity, or arrange for the activity to be carried out, pursuant to a registerable arrangement that has not been registered.

There are two main justifications for the offence. First, it will reduce the likelihood that activities pursuant to an unregistered arrangement with a specified person will be carried out, supporting the overall aims of the scheme. It makes it clear that all individuals have a role to play in ensuring that the requirements of the scheme have been complied with. Where there is doubt that an organisation or company has registered its arrangement with a specified person, it is a good outcome if its employees take necessary steps to clarify that their registerable activities are covered by registration.

--- Later in debate ---

[Mr Jones]

How does the Minister define “foreign power control”? What would be the evidential test? I have heard him argue, for example, that all Chinese companies are ultimately under the control of the Chinese Communist party. Is that the evidential test? Or to take the Russian example, would the evidential test be a company being owned by an oligarch who is close to Putin? Clearly, if the Chinese Communist party wants to control a Chinese company, it can. Would that be the threshold at which a company would be caught by the measures?

[Tom Tugendhat]

The right hon. Gentleman is right to ask. Control over an entity means 25% of a shareholding—that is one thing that we have already identified—or it could also be formal mechanisms within the company, including voting power or other forms of control. Some foreign powers enact legislation to oblige entities to comply with their security services or intelligence agencies—the right hon. Gentleman knows what I am referring to—giving them a right to exercise an element of control over those entities outside formal governance structures.

[Stewart Hosie]

Further to the point made by the right hon. Member for North Durham, the control criteria could be indirect control of more than quarter of the stock, indirect control of more than a quarter of the voting rights, or an indirect ability to appoint or remove an officer of the entity. That is dreadfully subjective. Unless the criteria are really nailed down, people could absolutely fall foul of the measures without knowing that they are being controlled in any way.

[Tom Tugendhat]

I do not think that is the case. The hon. Gentleman should realise that foreign control of any kind is under the general provision of the so-called ordinary provision, while the enhanced provision would be specifically identified, so individuals required to register under the enhanced provision would be aware that they are contracting within an organisation or entity that falls under it. All those contracting with a foreign entity will know that they have to register under the ordinary provision, so the legislation covers both cases.

[Mr Jones]

That does not clear things up for me. I have mentioned China. I am sure if I googled long enough I would find a speech that the Minister has given where he suggests that all Chinese companies are controlled by the Chinese Government, if they wish to have foreign influence. There is clear, direct evidence about doing business in Russia—it is not the law, but there is coercion regarding the individuals around Putin. If we are saying that the Chinese Communist party can control most companies, is the Minister saying that all those companies will have to register?

[Tom Tugendhat]

The right hon. Gentleman knows very well that what we express in private and what we say from the Dispatch Box cannot always be absolutely aligned. I am not going to identify every single Chinese company in one go. He knows that there are different elements of control. The Companies Act 2006 sets out the nature of those different elements.

[Mr Jones]

I am sure the Minister will get some China hawks on the Back Benches of the Conservative party arguing that all Chinese companies should have to be registered under the scheme. I think the measure needs some clarification before it goes any further. There are also certain individuals that the Minister’s party has taken money off who very clearly have connections with the Kremlin and who control companies in this country through front people; the ownership is actually individuals who we would not want to be associated with.

[Tom Tugendhat]

The right hon. Gentleman knows very well my own views on foreign influence on political parties. Sadly, we have seen such influence in all political parties, where parties or members of political parties have unwisely, sometimes rashly and often extremely foolishly, taken money off Chinese, Russian or other individuals. That is completely wrong and I know he and I share complete revulsion at it. I am very glad that we are sorting some of that situation out. It is a problem that the whole of the United Kingdom and many other political parties around the world have to face. We need to deal with it, and that is what the Bill is doing.

New clause 13 is the second aspect of the enhanced registration requirement. It will require the registration of activities to be carried out within the United Kingdom by a specified person. The first aspect of the enhanced measure, which we dealt with earlier, was the registration of arrangements with a specified person. Although arrangements are important, we recognise that activities within the United Kingdom will be carried out by the specified person themselves and not just those they direct. I should be clear: “specified person” in the context of the requirement can only be a specified entity subject to the foreign power control. I have already explained that foreign powers themselves are not required to register under the foreign influence registration scheme. We are therefore proposing that the specified entity subject to foreign power control, for example a company or organisation, be required to register its activities within the United Kingdom before they are carried out. An offence would be committed where the specified entity had failed to register its activity and it knew or ought reasonably to know that the activity in question was not registered.

To ensure that the requirement is practical and proportionate, the requirement to register is to be fulfilled by the entity and not its individual employees. Although we recognise that an employee is also capable of being directed by its employer to engage in the same registerable activities, we considered it disproportionate to require each individual to register in such a scenario. There would also be practical difficulties, not just in administration but also in consistency. If each individual employee were required to register the same activity, that increases the likelihood that the information provided is materially different and possibly even contradictory.

Finally, hon. Members may wonder why, compared with the requirement to register an arrangement, there is no 10-day period within which the registration must be made. The requirement to register an arrangement within such a period is necessary, as it may not be immediately clear that a person is acting at the direction of a specified person, as the person receiving the direction is separate to the specified person directing the activity. Where the specified person—the entity subject to foreign power control—is acting itself, it should already be clear and it is therefore enough that the registration takes place before the activities are carried out.

I want to finish my remarks by reiterating that if we did not include that requirement there would be a clear gap. A person who is separate from the specified entity, for example a different organisation, would be required to register an arrangement that involves being directed to act in the United Kingdom, but there would be no requirement for the specified entity itself to register its own activities. Leaving such a gap would not make sense in the context of countering state threats. I also want to stress again that we intend the use of the enhanced measure to be limited. It is there as an additional tool of assurance and its use will be subject to parliamentary approval through affirmative procedure. I ask the Committee to support the clauses.

[The Chair]

Before we move on to the debate, may I raise a matter to the Committee that has been brought to my attention? The 1922 Committee elections for Select Committees happen at 2 o’clock this afternoon, which is an obvious clash with the meeting of this Committee. I understand that it would be possible for the Minister to move an amendment to the sitting time this afternoon to 2.15, if he wished to do so. Any objection from any member of the Committee would of course make that fall. Before we enter a discussion—although I would rather not discuss it too long—would the Minister be prepared to move that the Committee should sit at 2.15?

[Tom Tugendhat]

I would be prepared to move that, if the Committee were supportive.

[Maria Eagle]

Would it be possible to extend the sitting by 15 minutes, so that no time is lost? If we were to do that, I would have no objection.

--- Later in debate ---

[Mr Jones]

My hon. Friend makes an interesting point. That is why I do not think the provision will be used in practice. That is the problem and, as I have said, I am never in favour of putting such provisions on the statute book. A more narrowly defined set of criteria applied to all countries would be better than the complicated system that we have here.

The other point is about transparency. Clearly, the public record for tier 1 will be there—it is published. Why the second tier should be done differently, I do not know. The information is going to get out anyway. It is not going to be a great surprise if a company is on this list. If I was running a company and was suddenly put on the register, I would not tell people that—I would not tell the investors and shareholders. I do not understand why the Government are treating the second tier differently from the first tier.

[Tom Tugendhat]

May I interrupt with a point of fact? Any company that is designated under the highest tier will be public by definition. That element will be public. It is the UK element that is having to register. The right hon. Gentleman gave an example of a completely spurious French company, which would of course never be on the enhanced list, as we are such good allies with the French. That company would be publicly declared. That is not the bit that is being kept out of the publication. It is the UK element registering it.

National Security Bill (Eleventh sitting)

Tom Tugendhat Excerpts

Committee stage
Thursday 8th September 2022 Public Bill Committees

[The Chair]

May I ask the Minister to respond?

[The Minister for Security (Tom Tugendhat)]

This is the first time that I have spoken on behalf of Her Majesty’s Government. It is an enormous privilege to be here. I realise that I enter this process—this lion’s den—at a moment when other lions have been through the Bill a few times before—there are an awful lot of Christians in this Committee and only one lion.

Before I say anything further, I pay enormous tribute to the Bill team, who have been phenomenal. The very fact that this has continued at all in such a professional way—

[Maria Eagle]

It hasn’t!

[Tom Tugendhat]

It has. That is because they have held it together and been a phenomenal asset to the Home Office. I am grateful to them.

On the various points that have been made, the hon. Member—

[Mr Jones]

Right honourable.

[Tom Tugendhat]

My apologies: the right hon. Gentleman. He is quite right. He asked some questions, as did the hon. Member for Garston and Halewood, or the right hon. Member for Garston and Halewood—

[Maria Eagle]

Right first time.

[Tom Tugendhat]

I will endeavour to find out what the reason is. You will understand, Ms Ali, that I was not appraised of this situation. I have spent rather a long time reading the Bill in the past 36 hours and not so much time asking about the movements of former Ministers.

On the point made by the right hon. Members for North Durham and for Dundee East about time, I will endeavour to do what I can to ensure that we have time available. Let us see how we go today. If time is needed, I will talk to the Whips team about it.

[The Chair]

The Minister has addressed the key points. I have nothing further to add in response to the point of order, so we will now begin our proceedings.

Clause 41

Variation of measures

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider the following:

Clauses 42 to 44 stand part.

That schedule 6 be the Sixth schedule to the Bill.

[Tom Tugendhat]

As the comparable sections in the terrorism prevention and investigation measures legislation make clear, clauses 41 to 44 are technical elements that improve the regime and make it work in practice. Clause 41 mirrors TPIMs by making provision for the measures imposed to be varied while they are in force. That will allow changes to be made to the restrictions where necessary, in response to changes in the individual’s personal or family circumstances or to the assessment of the risk they pose. Those provisions will be important in ensuring that the regime is able to respond dynamically and flexibly to changing circumstances, and that the individual is able to live as normal a life as is possible without posing a threat to the British people.

The provisions will also be important to securing the effective operational management of state threats prevention and investigation measures. Critically, the underlying requirement that the measures imposed must always be necessary and proportionate remains, and that is explicitly the case for any variation that has the effect of strengthening the measures imposed.

[Holly Lynch (Halifax) (Lab)]

It is a pleasure to serve under you as Chair once again, Ms Ali. They say a week is a long time in politics: never has that been truer than this week. I am very pleased to see the Minister in his place, but—for the second time over the course of this Committee—not quite as pleased as the hon. Member for North Cornwall that he once again has a Minister in place. I welcome the Minister to his role; as others have said, he is the fourth Minister we have had over the course of this Bill. We welcome the opportunity to continue to work together, now that we can make some vital progress on this really important piece of legislation. I also look forward to working with him on this policy area beyond just the legislation that is in front of us.

Turning to the detail of this group of clauses, clause 41 makes provision for the measures imposed under a part 2 notice to be varied in a number of different circumstances, as the Minister has outlined. Subsection (2) makes it possible for the Secretary of State to vary a relocation measure in a part 2 notice if considered necessary

“for reasons connected with the efficient and effective use of resources in relation to the individual”.

We are satisfied with those measures, and recognise the necessity of the remaining provisions in the clause.

Clause 42 provides a power for the Secretary of State to revoke a part 2 notice at any time by serving a revocation notice, whether or not in response to a request by the individual. The Secretary of State may exercise that power where they consider it is no longer necessary for the part 2 notice and the measures imposed under it to remain in force. The explanatory notes say that

“although the measures may no longer be necessary at the time that the Part 2 notice is revoked (for example because the individual has been detained in prison), they may subsequently become necessary again (when the same individual is released from prison, perhaps following an unsuccessful prosecution for a criminal offence).”

As I have said before, the assumed prosecution rate for state threats in the Home Office impact assessment is just 33%, so I am concerned that we might need that level of flexibility, depending on the circumstances.

Subsection (6)(a) of the clause also provides a power for the Secretary of State to revive for a period of a year a notice that has previously expired without being extended, without the need for evidence of new state threat activity. Surely if a person continues to be a threat, the notice should not be allowed to expire; alternatively, if the notice has been allowed to expire because the person is no longer deemed a threat, reviving a notice without any new information surely could not be justified. On that basis, I would be keen to hear any further rationale for the provisions in subsection (6)(a).

When considering the revocation of part 2 notices, it is also worth considering what Jonathan Hall QC described as the “TPIM Catch-22” in his annual report on the terrorism equivalent of these part 2 measures:

“On the one hand, in order to test whether an individual would revert to terrorism-related activity in the absence of TPIM measures, there may be no alternative but to reduce or remove measures; for example, by allowing an individual to associate or move more freely.

“On the other hand, association and movement measures have been imposed precisely to counter the risk of terrorist-related activity. In the absence of evidence of risk reduction, to do so might put members of the public at risk of harm.”

It is not easy to step down from STPIMs once they have been imposed and there is a clock ticking on the restrictions imposed on a suspect, so what efforts are we making to establish best practice on this, so that clauses 41 and 42 can be deployed as effectively as possible?

Clauses 43 and 44, also in this group, make provision for circumstances in which a part 2 notice is “quashed” or directed to be revoked as a result of court proceedings, and schedule 6 rightly provides other circumstances in which an individual who is convicted of an offence under clause 50 has a right of appeal against that conviction.

Other than the points we have raised, we are satisfied that these measures strike an appropriate balance.

--- Later in debate ---

[Tom Tugendhat]

Let me answer some of the questions that have just come up. The hon. Member for Halifax and the right hon. Member for East Dunbartonshire, if I am correct—

[Stewart Hosie]

Dundee East.

[Tom Tugendhat]

Forgive me; the right hon. Member for Dundee East. They have raised some interesting points. The first is on the notice to be revived without new evidence of a lapse. The reason for that variation is to allow for prison sentencing. Should an individual find themselves being sentenced for a crime in the middle of an STPIM, that allows the STPIM to be paused for the purpose of imprisonment and revived afterwards, without having to go through the whole process again. The purpose is practical, rather than that of having a massive legal effect. Therefore, I believe it is entirely proportionate with the requirements of security.

[Stewart Hosie]

That seems a slightly illogical formulation. If the prison sentence is substantially longer than the maximum the STPIM could provide for, it seems preposterous that the remainder of the STPIM’s time would be added to the end of a sentence once it was fully discharged. That does not appear to be fully thought through.

--- Later in debate ---

[Tom Tugendhat]

Perhaps the hon. Member will appreciate that not everybody who spends time in prison will do so for the offence for which the STPIM might have been applied. It is perfectly possible that somebody might spend six months in prison for something completely unconnected—a driving offence, a minor theft, or whatever—and therefore a pause would be entirely in keeping with that. The STPIM is about controlling different people’s ability to move and communicate, in which circumstances prison would simply not be a relevant application because the prison sentence effectively supersedes the controls that would have been put in place. In that sense, it is merely a way of recognising that, in certain circumstances, different applications would apply.

Clause 39 requires police to keep under review criminal investigations. STPIMs are a civil measure to protect against national security threats when a criminal prosecution is not possible. They are not overlapping; they are compatible and, indeed, complementary.

Question put and agreed to.

Clause 41 accordingly ordered to stand part of the Bill.

Clauses 42 to 44 ordered to stand part of the Bill.

Schedule 6 agreed to.

Clause 45

Appeals

Question proposed, That the clause stand part of the Bill.

[Tom Tugendhat]

The clause set out the rights of appeal of a person subject to an STPIM notice and the function of the court on considering such an appeal. Those rights of appeal are in addition to the automatic review of each case and ensure that the individual subject to a notice is able to appeal against all relevant decisions taken by the Secretary of State using the powers contained in the Bill—for example, to extend or revive a notice, to vary the measures or to refuse an application for measures to be varied.

In determining an appeal brought under the clause, the court must apply judicial review principles. That is a particularly intense level of scrutiny and will ensure that the Secretary of State’s decisions are subject to independent consideration. Clause 45 makes clear the powers of the court on considering an appeal, which include to quash the extension or revival of the notice or the measures within, or to give directions to the Secretary of State for the revocation of the notice or in relation to the variation of the measures specified in the notice. As I have said already, a key feature of the Bill is the extensive and multi-layered approach to judicial oversight, which will ensure that the courts can be involved at every stage of the process, and that every decision of the Secretary of State can be reviewed by the judiciary and can be overturned if the court so decides.

To recap, there is an initial permission stage before measures are imposed. There is then the automatic full review of the decision to impose measures, and there are the extensive rights of appeal contained in the clause. Taken together, those provide important safeguards.

--- Later in debate ---

[Mr Jones]

I warmly welcome the Minister to his position. He and I go back a long way: when I was a Minister in the Ministry of Defence, he was a bright, fresh young officer, and I think we both have fond memories of our time working together. One of the dangers he faces is being appointed to a position that he knows a lot about. That is always a downer for any Minister and strikes fear into the civil service. I wish him well, and he will do a good job.

Throughout the entire Bill, there should be an ability for the individual to have recourse to appeal. That is not because I am somehow soft on terrorism or on the individuals we are dealing with. It is because we must have a system whereby, when the state takes hard measures to limit someone’s freedom, they need the counterbalance of the ability to appeal. That is why I welcome the measures. My problem with the Bill is that, although this measure is present in this part of the Bill, there are no safeguards in other parts of the Bill. Those types of appeal mechanisms balance state power and the individual.

I have two specific points on the process, which I support. How will the appeals be done in the court? Some of the information that the Secretary of State will rely on will be highly classified, so how will the process work? It will mean the disclosure of some information that we would not want disclosed in open court. I shall not rehearse the arguments on part 3, but it is clear that, if part 3 is retained, the individual will not have recourse to legal aid for an appeal. I am opposed to that. That is not because I am on the side of individuals who wish us harm, but we must ensure that we have a system that is robust in ensuring that justice is done, and people must not be arbitrarily detained or subject to those restrictions if they clearly have legitimate arguments against what the state is trying to apply.

[Tom Tugendhat]

Before I come to the right hon. Member for Dundee East’s words, I will just address the very generous tribute from the right hon. Member for North Durham. I remember that I used to call him sir; he never called me sir, and he still will not. I do not feel special in that; I do not think he has ever called anyone sir in his life. It was very kind of him.

On the question raised by the right hon. Member for Dundee East, clause 38 means that there has to be a review wherever a STPIM notice is imposed, which is in clause 35. The individual can attend the automatic review. I will come on to that element, because as the right hon. Member for North Durham rightly says, there is likely to be material that is extremely sensitive. That is why the procedure relates to what is already established with special advocates. The right hon. Member knows much more about Special Immigration Appeals Commission hearings, and the various ways in which advocates can have access to information that is relevant to a court but is not then shared with somebody for whom that would not be conducive. That is the way that the proceedings will work, and I think that provides the right balance between disclosure, justice and protection.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Clause 46

Jurisdiction in relation to decisions under this part

Question proposed, That the clause stand part of the Bill.

[Tom Tugendhat]

Members will be pleased that this is very brief. Clause 46 makes an important but largely technical provision. The purpose is to provide absolute clarity that the High Court is the appropriate forum for judicial proceedings arising from decisions relation to STPIMs, or in Scotland, the Outer House of the Court of Session. That is important given that such proceedings may rely on closed material, which we will come on to next.

Question put and agreed to.

Clause 46 accordingly ordered to stand part of the Bill.

Clause 47

Proceedings relating to measures

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider that schedule 7 be the Seventh schedule to the Bill.

[Tom Tugendhat]

Clause 47, and schedule 7, to which the clause gives effect, make further provision for court proceedings in relation to decisions taken under the Bill. I will spend slightly longer on those measures, given the important issue raised by some of the key aspects of those provisions.

Subsection (1) makes clear that an appeal against a court decision in STPIM proceedings may only be brought on a point of law. That limitation is appropriate. The court of first instance has the expertise in fact finding for national security determinations. It has developed expertise and a body of knowledge in an experienced judiciary who hear national security cases. That means it is right that the court of first instance, which has significant expertise, has the final determination on points of fact.

In such cases, it is therefore right to limit the right of appeal to a point of law, as higher courts will not have available the national security information or expertise to make a fair determination on the facts. The approach is reflected from the provisions in the Terrorism Prevention and Investigation Measures Act 2011, and the Special Immigration Appeals Commission.

Schedule 7 makes further provision relating to court proceedings under the Bill, including, in particular, powers to make rules of court about various matters. Critically for the operation of the scheme, the rules will make provision that court proceedings in relation to STPIMs will operate with both open and closed elements given the sensitivity of the evidence that will be a key component of why an individual cannot be prosecuted and why the use of a STPIM is necessary. It would fundamentally undermine the scheme if closed proceedings, where sensitive intelligence and national security arguments can be made, were not available. The individual, and his or her chosen legal representatives, can be present at the open hearings, and see all the material used in those hearings, but they cannot be present at the closed part of the proceedings or see the closed material.

--- Later in debate ---

[Mr Jones]

I think the Minister has explained that. I take the point made by the right hon. Member for Dundee East, but as I said earlier on, I think the rules are a sensible safeguard in terms of what we need. Frankly, with no access to legal aid they are for the birds, because no one will be able to use them. We will come on to that debate later.

I want to ask the Minister about the issue of juveniles, which is an increasing problem for our security services. For example, the “Extreme Right-Wing Terrorism” report that we just produced in the Intelligence and Security Committee found that, increasingly, those individuals are young people—some as young as 15. If we are going to apply the rules in some possible circumstances to those individuals, what are the protections for them? If the Minister does not know the answer, I am quite happy for him to write to explain the situation. We are perhaps fixated on thinking that this is about Islamic terrorists and grown-ups, but certainly according to the ISC report, very sadly, in many cases those who are now coming before the courts are minors.

[Tom Tugendhat]

Let me quickly answer the question on who is the appropriate advocate. That is somebody appointed by the Attorney General under schedule 7(10)(1). The person has to be an appropriate law officer, so a barrister or a solicitor. That is how it is determined.

On the question of genuine national security, I understand the point made by the right hon. Member for Dundee East. He will understand that this is a matter of concern for many of us who are devoted, as he knows I am, to the application of the rule of law and the access to justice that this country and many countries in Europe have secured over the past century. That is vital to the provision and protection of liberty in our country. I appreciate his point and the right to a fair trial is essential.

However, it is simply the reality of life in our world that sometimes we need to frame that justice within certain provisions to allow it to be real, and not to be silenced by the inability to bring together evidence that would otherwise protect British people. That means that we have to find ways of balancing it. That is why these court proceedings, which are less than ideal and not the ones that we would like to see, are sadly necessary because of the security restrictions that apply.

On the point made by the right hon. Member for North Durham, he knows that I spent some time in the past few decades hunting people who sought to do our country harm, and he is absolutely right. Sadly, it was not always the people who we see on the various TV shows. Very often, it was people who came at it from a very different angle. I therefore appreciate his point; I will look into it and come back to him.

Question put and agreed to.

Clause 47 accordingly ordered to stand part of the Bill.

Schedule 7 agreed to.

Clause 48

Reports on exercise of powers under this part

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 49 stand part.

New clause 2—Reviews of Parts 1, 3 and 4

“(1) The operation of Parts 1, 3 and 4 of this Act must be reviewed by a person, or people, appointed by the Secretary of State.

(2) The operation of Part 3 must be reviewed by the person appointed by the Secretary of State under section 36(1) of the Terrorism Act 2006.

(3) The operation of Parts 1 and 4 must be reviewed by either—

(a) the person appointed by the Secretary of State under section 36(1) of the Terrorism Act 2006, or

(b) a different person appointed by the Secretary of State.

(4) Reviews under this section must be carried out in respect of—

(a) the 12-month period beginning with the day on which any section in this Part comes into force, and

(b) each subsequent 12-month period.

(5) Each review under subsection (1) must be completed as soon as reasonably practicable after the period to which it relates.

(6) The person or people mentioned in subsections (2) and (3) must send to the Secretary of State a report on the outcome of each review carried out under subsection (1) as soon as reasonably practicable after completion of the review.

(7) On receiving a report under subsection (6), the Secretary of State must lay a copy of it before Parliament.

(8) Section 36(6) of the Terrorism Act 2006 shall be read such that the ‘expenses’ and ‘allowances’ mentioned therein may include the discharge by the person or people of their functions under this section.”

[Tom Tugendhat]

Clause 48 requires the Secretary of State to report to Parliament every quarter on the exercise of her powers under this part of the Bill. The Committee will recognise the parallel to similar measures in the TPIM Act 2011. Although details of the operation of the system and of particular cases will necessarily be sensitive and cannot be disclosed publicly, the clause acts as an additional safeguard by welcoming public scrutiny of the use of the regime and powers, and offers reassurance that crucial information about the operation of the regime will be public and kept up to date. Crucially, that information will include the extent of the Secretary of State’s use of her powers and the number of cases in which measures are imposed. It will also include details of court judgments handed down in the relevant period that relate to the use of those powers.

Clause 49 requires the Secretary of State to appoint an independent reviewer to review the operation of part 2 annually. First, the reviewer is required to undertake a review of the operation of the STPIM regime as soon as is reasonably practical at the end of each year, and a report on the outcome of the review must be sent to the Secretary of State as soon as is reasonably practical after the review has been completed. Then, the Secretary of State is obliged to lay the report before Parliament. That replicates the approach in TPIMs, for which the annual reports have been an effective way of examining the Government’s use of their powers.

The independence of the Independent Reviewer of Terrorism Legislation, combined with their unrestricted access to Government papers and intelligence, has led to real insight and informed reports that have aided the functioning and development of the TPIM regime. Using the same approach for STPIMs will ensure similarly robust scrutiny. Omitting the clause would undermine the level of oversight and transparency of the regime. I hope the Committee agrees that the provision is important for the effective operation of STPIMs.

New clause 2, tabled by the hon. Member for Halifax, proposes commitments to review annually the operations of parts 1, 3 and 4 of the Bill. I thank the hon. Lady for tabling the new clause and I understand the intention behind it. Appropriate oversight of national security functions—particularly the use of intrusive powers—is important. A range of oversight mechanisms are in operation and govern both the UK’s intelligence agencies and the police, which are the primary bodies that will utilise the new powers in the Bill.

As I have just mentioned in addressing clause 49, the Government have made a commitment to an independent reviewer of part 2 of the Bill. Although there may well be merit in extending oversight of the legislation beyond part 2, careful consideration must be given to how that is done. In some cases, it could create an undesired overlap of duplication of responsibility. The Committee discussed that earlier—a little bit before my time—in the context of the hon. Lady’s proposal for an independent body to monitor disinformation. There are further examples of potential duplication, such as the powers in clause 22, which are already the responsibility of the Investigatory Powers Commissioner.

The new clause also proposes that part 3 of the Bill be reviewed by the Independent Reviewer of Terrorism Legislation. As the Committee knows, part 3 contains measures to freeze civil damages awarded to claimants who are seen as representing a real risk of using their award to fund acts of terror, and measures to restrict access to civil legal aid for convicted terrorists. As a result, it is already in the remit of the Independent Reviewer of Terrorism Legislation to review those measures. An explicit commitment to oversight of part 3 of the Bill is therefore unnecessary and would duplicate the existing discretion of the Independent Reviewer of Terrorism Legislation to review and report on terrorism-related legislation.

With those points in mind, the Government cannot accept new clause 2 at this stage. Although I fully appreciate the purpose behind the new clause, I ask the hon. Lady to withdraw it for now. The Government take oversight of the Bill seriously, and we will consider the best way to approach it. I will be in touch with her about that.

[Holly Lynch]

I am grateful for the way the Minister has approached the new clause. I accept entirely the volume of work he has had to do in the past 24 to 36 hours.

We feel quite strongly about some of the proposals we are advocating for in new clause 2. There is an acceptance of the real value of the work undertaken by the independent reviewers right across the agencies that work with this type of legislation. We think we are largely doing the Government a favour in putting these proposals forward.

--- Later in debate ---

[Mr Jones]

The amendment from my hon. Friend the Member for Halifax is, as I said earlier, part of a broader piece about ensuring that we get the balance right between giving our security services, agencies and people the powers that I personally support, and providing proper scrutiny for the individual and for the operation of the Bill. That is the thing that has been missing from the Bill. Knowing Sir Brian Leveson, the Investigatory Powers Commissioner, I know that system works well in terms of warrantry and so on. If we are going to give powers to our agencies to do their job rightly, we have to ensure that they are robust and reviewed as things change.

I know the Minister is only a day or a bit into his job, so he might not be able to accept an amendment today, but I think this aspect needs to be looked at throughout the Bill. It was certainly raised with his predecessor, though I cannot remember if it was his immediate predecessor or the one before that.

My other point is to do with this issue of laying before Parliament. I support that, but the report will be very anodyne in terms of what it can provide in public, so I might look to the Intelligence and Security Committee. I am not looking for work for that Committee, but it has the ability to access material that cannot, for obvious reasons, be put in the public domain. The Minister will soon learn about the battles going on at the moment with parts of the Cabinet Office, Home Office and various other agencies about our role and access to material. We already get, for example, the independent commissioner’s report, but we have an ongoing row about our access to the annex, which we had in the past but for some reason are now not allowed to have. Given the role of Parliament and for its reassurance, will the Minister consider the ISC having access to the information that cannot be put in the public domain? That would be helpful. I accept that some people think the ISC just agrees with everything the agencies do, but it is another review body that can give assurance to the public and Parliament that the powers are proportionate.

We know that once we implement the Bill, we will learn and powers will change. I am not against Brian Leveson, the independent tribunals and the Investigatory Powers Commissioner—they do a fantastic job. They have helpfully pointed to some of the lessons that need to be learned, for example, from the terrorist attacks in London and Manchester. The ability of parliamentarians at least to ask the questions and have access to the information that cannot be put in the public domain would be an added layer of scrutiny, allowing the public to know at least that we have a full spectrum to ensure that such things are done proportionately and are working effectively.

[Tom Tugendhat]

I thank hon. Members for the tone of this discussion. I appreciate that scrutiny is important. This is about protecting not just the rights of individuals, but the agencies that are carrying out such important work on our behalf. Their heroism and courage on operations need to be protected, so that the agencies are not later found in legal difficulty in areas where they have acted not only with integrity but with enormous courage. I therefore appreciate the tone.

Briefly, I will touch on the question of scrutiny and laying before the House. I will make an absolute commitment to bring forward reports as soon as possible. I appreciate that there have been a few issues of late, which may have delayed things. I assure the hon. Member for Halifax that I will do my best to ensure that those timelines are reduced and are as sharp as possible. I absolutely appreciate her point. The issue of being laid before both Houses is made absolutely clear in the publication.

To touch on the question of who the commissioner might be, that has not been resolved as yet. I appreciate the hon. Lady’s point and there is merit on both sides of the argument, but either way, there is huge merit in ensuring that whoever is doing TPIMs has a very close connection with whomever is doing STPIMs. Whether that is a newly appointed individual or the extension of a role, I am happy to ensure that they work closely together.

[Holly Lynch]

We have been probing that during the passage of the Bill. Because that role is so crucial to the oversight that needs to follow the rest of the provisions in the legislation, can the Minister, as an absolute minimum, confirm that that person will be in post and that that issue will have been resolved by the time the Bill is enacted, so that that is not an ongoing question that starts to run into the legislation being enacted?

[Tom Tugendhat]

The hon. Member will be aware that I have been in post for only a few hours, so I will be cautious about making commitments that I cannot keep, but I can assure her that I will do my absolute damnedest to make sure that they are in post, because I can see exactly the point that she makes and I appreciate it. As I say, this is about protecting the rights not just of those who are subject to the provisions but of those carrying out the protection of our state and our nation.

Question put and agreed to.

Clause 48 accordingly ordered to stand part of the Bill.

Clause 49 ordered to stand part of the Bill.

Clause 50

Offence

Question proposed, That the clause stand part of the Bill.

[Tom Tugendhat]

The clause provides for a criminal offence of breaching a measure specified in a part 2 notice without reasonable excuse. This echoes, as do many of the provisions, a similar provision in the TPIM regime, and includes cases in which a person has permission from the Secretary of State to contravene a measure and does not adhere to the terms or conditions of that permission. For the sake of enforceability, it is vital that a part 2 notice is reinforced with effective penalties if the subject does not comply. Hence the maximum penalty on conviction is a custodial sentence not exceeding five years, unless the travel measure is breached, in which case the maximum sentence is 10 years.

[Holly Lynch]

The clause provides for an offence of contravening without reasonable excuse any measure specified in a part 2 notice. That, again, mirrors section 23 of the Terrorism Prevention and Investigation Measures Act 2011. According to the Government’s most recent transparency report, in December 2020 the total number of individuals who had been served a notice since TPIMs were introduced in 2011 was 24, so compliance is relatively high. But so are the stakes when someone breaches the terms of such measures.

According to the “Statistics on the operation of police powers under the Terrorism Act 2000 and subsequent legislation” quarterly report from the Home Office, the number of people who have been prosecuted and convicted under section 23 of the TPIM Act, meaning that they contravened an order, is 10. Like TPIMs, the primary function of STPIMs is to be able to control and monitor those who represent a serious threat to our national security but cannot yet be prosecuted. We have been assured that the primary function of an STPIM is to be able to manage a person while an investigation into a part 1 offence is established, rather than simply creating a situation where a prosecutable breach is highly likely.

We note the particular focus on travel in clause 50, and that under subsection (2) an individual who travels without permission loses any reasonable excuse defence. Given that we anticipate that there might be a higher number of foreign nationals and dual nationals in this cohort due to the state threat nature of the offences, it is possible that we might have higher numbers of requests to attend overseas births and deaths of family members and loved ones among the cohort. However, the risk of permitting that travel, which might mean a return to a very hostile state that we fear is sponsoring the individual’s activity, presents a massive challenge. To ensure there are robust decision-making processes around those considerations and to have good reporting and a review of those elements of the clause would be welcome additions.

[Stewart Hosie]

As the Minister said, the clause creates a criminal offence of contravening without a reasonable excuse a measure in a part 2 notice, but there is no defence of reasonable excuse if the subject leaves the UK when they are restricted from doing so. In normal circumstances, a breach of a part 2 notice would leave the individual subject to five years’ imprisonment on indictment, or 12 months’ imprisonment on a summary conviction in Scotland, but that becomes nine years’ imprisonment on indictment for a breach of a travel measure.

I wish simply to get to the bottom of why some of the breaches of a part 2 notice appear to be disproportionately harsh. The Minister said that much of this provision mirrors the provisions of TPIMs; does this bit—the doubling of the tariff for a breach of a travel measure—mirror the TPIMs provisions? If it does, how often was such a penalty imposed for such a breach under the existing provisions?

[Tom Tugendhat]

It is quite clear that any order given must have consequences if it is disobeyed—I do not think anyone in this room would disagree with that—and it is important that the penalties for disobedience against a lawfully given order must be proportionate. The penalties are proportionate, and it is normal to have an increased penalty for an aggravated offence, whatever that may be. In the circumstances, travelling abroad would be considered an aggravation and therefore have a greater penalty attached. That is entirely appropriate, so it is entirely reasonable to have that increased sentence.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clause 51

Powers of entry etc

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider that schedule 8 be the Eighth schedule to the Bill.

[Tom Tugendhat]

The clause gives effect to schedule 8, which provides the police with powers of search, entry, seizure and retention in a number of scenarios relating to STPIMs. For the sake of ease, I will cover the clause and the schedule together.

Before I go into the detail of the clause, I remind the Committee that STPIMs will be a tool of last resort. The Government will use every other tool at our disposal before resorting to such significant measures. Again, I remind the Committee that these measures mirror those in the TPIMs regime.

In order to effectively enforce the regime and check an individual is complying with the measures under their STPIM, the police will have the powers they need to enter premises, conduct necessary searches and seize and retain items as necessary. They will also be able to arrest the individual for a “breach of” offence if they fail to grant police access.

Schedule 8 provides powers to the police to enter and search premises without a warrant to locate an individual for the purpose of serving an STPIM notice or another specified notice on them; to search an individual or premises when serving an STPIM notice for the purpose of discovering anything that might breach any measures specified in the STPIM notice; to search premises on suspicion that an individual subject to an STPIM notice has absconded; and to search an individual subject to an STPIM notice for public safety purposes. It provides a power to police with a warrant to search an individual or premises to determine whether an individual is complying with the measures specified in the STPIM notice. There are also powers for a constable to seize and retain items found in the course of such searches.

I remind the Committee that the STPIM itself is kept under review and requires a court’s permission to impose the measure. That means that a court will have already agreed with the assessment of the Secretary of State that the individual meets the meet five conditions in clause 33, which the Committee has already agreed to. That means it is proportionate in terms of a national security determination for the police to be able to undertake the aforementioned activities without a warrant. The powers will be essential to managing and enforcing the measures imposed under STPIMs and, importantly, they provide the right balance between effective powers and safeguards for the rights of the individual.

[Holly Lynch]

I have a couple of queries on schedule 8, which provides powers of entry, search, seizure and retention in a number of scenarios relating to part 2 notices.

I have queried the use of the word “constable” in legislation before, but it seems to be standard. Paragraph 9(9) states:

“The warrant may be executed by any constable.”

Previous schedules specify certain ranks and specialisms, such as counter-terrorism officers, to undertake such duties. Are we satisfied that further stipulations on who may execute a warrant are not required?

Sub-paragraph (10) states that a warrant issued by a court to search the individual, the individual’s place of residence, or other premises specified by the warrant, expires after 28 days. That period feels a bit odd to me. We want officers to have the flexibility they need, but I cannot imagine a scenario in which they have grounds to apply for a warrant but then take more than 20 days after it is issued to execute it. I am grateful to counter-terrorism police for sharing a bit more about their operations and how these warrants are used, which has provided some reassurance on this front, but will the Minister confirm that a warrant cannot be executed more than once in the 28-day period?

[Stewart Hosie]

Clause 51 applies schedule 8, which makes provision about various powers of entry, search, seizure and retention—to enter and search premises for the purpose of personally serving, to search for items that breach the notice, and to search when there is a suspicion of absconding. A warrant is required to search people or premises for the purposes of determining whether an individual is complying with the measures specified in the notice, and the warrant is to be granted only if necessary.

However, some of the powers in paragraph 10 appear to be rather broad, allowing a person to be searched without a warrant to see whether they might be

“in possession of anything that could be used to threaten or harm any person”.

I am not quite sure what that means. Unlike in the case of other warrantless powers, there is no requirement even for suspicion that someone is likely to threaten or cause harm. What is the justification or the reason for that?

Paragraphs 11 and 12 contain very strong powers to retain certain items which are seized, with no time limit other than

“as long as is necessary in all the circumstances.”

There follows a non-exhaustive example of what could represent necessity, but necessary for what? Is there provision for a person to challenge the ongoing retention of property seized by police under these powers? Is there a model for this drafting that has been used elsewhere? If there is, and if a piece warrantless search and retention legislation exists, how frequently is such a measure used?

[Tom Tugendhat]

The hon. Member for Halifax asked about the use of the term “constable”. It is standard, and she will realise that mostly it will be counter-terrorist police who lead on STPIMs, and who the most appropriate person is will be reviewed by the operational commander. The use of the term “constable” and the equivalent ranks in other forces and relevant services is standard for these purposes.

The provision on when a warrant may be executed is operationally beneficial to those who may have reason to delay or have to wait for a window to open when action can be taken. I will not go into the potential operational requirements on any element, but clearly they will vary: in some circumstances, it will be appropriate to act immediately; in others, it may be necessary to wait.

The provision on retention for

“as long as is necessary”

is also standard, including in the Police and Criminal Evidence Act 1984. The Bill also contains provisions allowing people to apply to have property returned.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 52

Fingerprints and samples

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss that schedule 9 be the Ninth schedule to the Bill.

[Tom Tugendhat]

The clause will give effect to schedule 9, which makes provision for the taking and retention of biometric material from individuals subject to a part 2 notice. I will cover the clause with the schedule.

The biometric data retention provisions relating to state threats prevention and investigation measures are in line with those existing elsewhere in the statute book, including in TPIMs, which have been well established for more than 10 years. The schedule makes separate provisions for taking the fingerprints and samples of an individual subject to a specified prevention and investigation measure in England, Wales and Northern Ireland to that of Scotland. That ensures that provisions are in line with different police procedures and legislation.

constable may take biometric data, which could include physical data, from an individual subject to a part 2 notice. The individual will be informed of the reason for the fingerprints or sample being taken. Police can require an individual to attend a police station for the purpose of providing biometric data, and that material may be checked against other such material held under a variety of other powers. The schedule requires the destruction of relevant material, including fingerprints, DNA profiles or relevant physical data, unless there is a power to retain, which I shall come to.

The purpose of the provisions is to ensure the right balance between the protection of the public and individual civil liberties. Under paragraph (11), any samples taken from the individual must be destroyed as soon as a DNA profile has been derived from that sample or, if sooner, within six months of taking the sample. Paragraphs (8) and (9) contain powers to retain biometric data. Where there is no relevant previous conviction, fingerprints, DNA profiles and physical data may be retained for six months after the end of the relevant part 2 notice being in force.

Under paragraph (9), a national security determination can be made by a chief officer of police, enabling the police to retain for up to five years data relating to an individual who may pose an enduring national security threat. All national security determinations that can be reviewed must be reviewed by the biometrics commissioner, who has continued oversight of the retention and use of such data.

We recognise the importance of safeguarding individuals’ right to privacy, so paragraph (12) sets out the limitation of uses for any retained material taken from a person subject to a part 2 notice, which are in the interests of national security, for the purposes of investigation foreign power threat activity, for the purposes of a terrorism investigation, for the detection and prevention of crime, or in the interests of identification only.

[Holly Lynch]

I listened intently to the Minister. Schedule 9 makes provision for the taking and retention of fingerprints and non-intimate samples from individuals subject to a part 2 notice. Schedule 9, like schedule 3, is subject to several Government amendments. As the explanatory notes explain, fingerprints and non-intimate samples have the same meaning as that given in section 65 of PACE 1984. I would be grateful to the Minister for some clarity on that, which he may need to provide in writing. There is a lot going on in relation to biometrics in different parts of the Bill.

Paragraphs (6) to (11) make provision relating to the destruction and retention of material taken from individuals subject to a part 2 notice. The explanatory notes say that where an individual has no relevant previous convictions, fingerprints and DNA profiles may be kept for only six months after the part 2 notice ceases to be in force. Paragraph (11) goes on to state that, as provided in the Protection of Freedoms Act 2012, material taken under PACE, for example, or that is subject to the Terrorism Act 2000 or the Counter-Terrorism Act 2008, need not be destroyed if a chief office of police determines that it is necessary to retain that material for purposes of national security. Given that we are dealing almost exclusively with matters of national security in schedule 9, can we assume that the majority of biometric evidence taken from individuals subject to part 2 notices may be held indefinitely under this provision?

I am reliably informed that the biometric retention provisions in the Bill are designed to bring the powers into line with similar provisions in terrorism legislation. Schedule 9(8) deals with the retention of biometrics collected in the course of the service of a part 2 notice under the STPIM provisions. That provides us with a retention of six months prior to a national security determination being made, and is therefore in line with the provision under schedule 6 of the Terrorism Prevention and Investigation Measures Act 2011.

A separate provision for the retention of biometrics can be found in paragraph 22 of schedule 3. It provides for a retention period of three years for those detained under schedule 4 provisions, in line with biometrics collected under section 41 of the Terrorism Act 2000 and section 41 of the Counter-Terrorism Act 2008, which qualify terrorism offences.

Beyond the initial retention period, both provisions are capable of retention by way of a national security determination process. I have lost track—I do not know whether other Members have—of whether we are keeping biometrics for an initial six months, as schedule 9 seems to outline, or for three years, which is the case elsewhere in the Bill. I suspect the Minister is unable offer absolute clarity right now—although I have no doubt that the civil servants think it is absolutely crystal clear—but I would be grateful if he could outline, perhaps in writing, the rationale for the different provisions.

Government amendment 32 specifies that the chief constables of the Ministry of Defence police and the British Transport police, and the director general of the National Crime Agency, are added to paragraph 9(4) of schedule 9. The responsibilities of the Civil Nuclear Constabulary are different from those of other forces, but is the Minister certain that it does not need to be added to the list?

[Stewart Hosie]

I am aware that similar provisions were debated in relation to schedule 3, and concerns were raised then that the provisions may end up allowing the indefinite retention of the material of people who have accepted cautions—indeed, even youth cautions—meaning that they were never charged, never mind convicted. The Minister has not provided much of a justification for that, other than that he wants the legislation to mirror the provision in other Acts. He used the same argument in his introductory remarks.

That is not enough. Provisions on the ability to retain material indefinitely on whatever grounds must be justified in their own terms in this legislation. I know that the Minister is new to the job, so if he cannot do that now, he can write with that explanation, as the hon. Member for Halifax said. Notwithstanding the fact that we all want the maximum powers necessary to tackle the state threat and the terrorist threat, if his explanation is not compelling or convincing, the provisions will need to be revisited at a later stage.

[Tom Tugendhat]

I do appreciate that elements are being raised about which I will write to various Committee members, and I will follow up on areas that I have not covered in detail.

Although the operational use of biometrics remains the same across provisions, we are taking a different approach to the powers provided under STPIMs and the powers in schedule 3. That ensures the right balance and proportionality in tackling foreign state threat activity while protecting individuals’ right to privacy. Although there is the option to make a national security determination under both regimes, under our police powers the initial retention period is longer than for STPIMs to reflect the seriousness of an arrest made for suspected involvement in foreign power threat activity.

Following arrest for involvement in foreign power threat activity, an individual’s biometric data may be retained for three years, with the option of extending that, irrespective of whether there is no further action, or whether they are charged or acquitted. Certain national security offences under this Bill will be added to the list of qualifying offences in PACE to reflect the seriousness of the offence that justifies longer retention periods.

Question put and agreed to.

Clause 52 accordingly ordered to stand part of the Bill.

Schedule 9

Fingerprints and samples

Amendments made: 25, in schedule 9, page 133, line 1, leave out paragraph (f).

This amendment removes paragraph (f) from a list of provisions under which fingerprints, data and other samples may be taken. Paragraph (f) is not needed because its contents are already covered by paragraph (g).

Amendment 26, in schedule 9, page 133, line 9, at end insert—

“(ia) any of the fingerprints, data or samples obtained under paragraph 1 or 4 of Schedule 6 to the Terrorism Prevention and Investigation Measures Act 2011, or information derived from such a sample;”.

This amendment inserts a reference to the provisions of the Terrorism Prevention and Investigation Measures Act 2011 under which fingerprints, data or samples may be taken, so that fingerprints, data or samples obtained under paragraph 1 or 4 of Schedule 9 may be checked against fingerprints, data or samples taken under that Act.

Amendment 27, in schedule 9, page 133, line 13, leave out paragraph (k).

This amendment removes paragraph (k) from a list of provisions under which fingerprints, data and other samples may be taken. Paragraph (k) is not needed because its contents are already covered by paragraph (g).

Amendment 28, in schedule 9, page 133, line 30, after “paragraph 8” insert “, 8A”.

This amendment is consequential on Amendment 31.

Amendment 29, in schedule 9, page 134, line 4, at beginning insert—

“(Z1) This paragraph applies to paragraph 6 material taken from, or provided by, an individual who has no previous convictions or (in the case of England and Wales or Northern Ireland) only one exempt conviction.”

This amendment is consequential on Amendment 31.

Amendment 30, in schedule 9, page 134, line 4, leave out “Paragraph 6” and insert “The”.

This amendment is consequential on Amendment 29.

Amendment 31, in schedule 9, page 134, line 26, at end insert—

“8A (1) This paragraph applies to paragraph 6 material taken from, or provided by, an individual—

(a) who has been convicted of a recordable offence (other than a single exempt conviction) or of an offence in Scotland which is punishable by imprisonment, or

(b) who is so convicted before the end of the period within which the material may be retained by virtue of paragraph 8.

(2) The material may be retained indefinitely.

8B (1) For the purposes of paragraphs 8 and 8A an individual is to be treated as having been convicted of an offence if—

(a) in relation to a recordable offence in England and Wales or Northern Ireland—

(i) the individual has been given a caution or youth caution in respect of the offence which, at the time of the caution, the individual has admitted,

(ii) the individual has been found not guilty of the offence by reason of insanity, or

(iii) the individual has been found to be under a disability and to have done the act charged in respect of the offence,

(b) the individual, in relation to an offence in Scotland punishable by imprisonment, has accepted or has been deemed to accept—

(i) a conditional offer under section 302 of the Criminal Procedure (Scotland) Act 1995,

(ii) a compensation offer under section 302A of that Act,

(iii) a combined offer under section 302B of that Act, or

(iv) a work offer under section 303ZA of that Act,

(c) the individual, in relation to an offence in Scotland punishable by imprisonment, has been acquitted on account of the individual’s insanity at the time of the offence or (as the case may be) by virtue of section 51A of the Criminal Procedure (Scotland) Act 1995,

(d) a finding in respect of the individual has been made under section 55(2) of the Criminal Procedure (Scotland) Act 1995 in relation to an offence in Scotland punishable by imprisonment,

(e) the individual, having been given a fixed penalty notice under section 129(1) of the Antisocial Behaviour etc. (Scotland) Act 2004 in connection with an offence in Scotland punishable by imprisonment, has paid—

(i) the fixed penalty, or

(ii) (as the case may be) the sum which the individual is liable to pay by virtue of section 131(5) of that Act, or

(f) the individual, in relation to an offence in Scotland punishable by imprisonment, has been discharged absolutely by order under section 246(3) of the Criminal Procedure (Scotland) Act 1995.

(2) Paragraphs 8, 8A and this paragraph, so far as they relate to individuals convicted of an offence, have effect despite anything in the Rehabilitation of Offenders Act 1974 or the Rehabilitation of Offenders (Northern Ireland) Order 1978 (S.I. 1978/1908 (N.I. 27)).

(3) But a person is not to be treated as having been convicted of an offence if that conviction is a disregarded conviction or caution by virtue of section 92 or 101A of the Protection of Freedoms Act 2012.

(4) For the purposes of paragraphs 8 and 8A—

(a) an individual has no previous convictions if the individual has not previously been convicted—

(i) in England and Wales or Northern Ireland of a recordable offence, or

(ii) in Scotland of an offence which is punishable by imprisonment, and

(b) if the individual has previously been convicted of a recordable offence in England and Wales or Northern Ireland, the conviction is exempt if it is in respect of a recordable offence, other than a qualifying offence, committed when the individual was aged under 18.

(5) In sub-paragraph (4) ‘qualifying offence’—

(a) in relation to a conviction in respect of a recordable offence committed in England and Wales, has the meaning given by section 65A of the Police and Criminal Evidence Act 1984, and

(b) in relation to a conviction in respect of a recordable offence committed in Northern Ireland, has the meaning given by Article 53A of the Police and Criminal Evidence (Northern Ireland) Order 1989 (S.I. 1989/1341 (N.I. 12)).

(6) For the purposes of sub-paragraph (4)—

(a) a person is to be treated as having previously been convicted in England and Wales of a recordable offence if—

(i) the person has previously been convicted of an offence under the law of a country or territory outside the United Kingdom, and

(ii) the act constituting the offence would constitute a recordable offence under the law of England and Wales if done there (whether or not it constituted such an offence when the person was convicted);

(b) a person is to be treated as having previously been convicted in Northern Ireland of a recordable offence if—

(i) the person has previously been convicted of an offence under the law of a country or territory outside the United Kingdom, and

(ii) the act constituting the offence would constitute a recordable offence under the law of Northern Ireland if done there (whether or not it constituted such an offence when the person was convicted);

(c) a person is to be treated as having previously been convicted in Scotland of an offence which is punishable by imprisonment if—

(i) the person has previously been convicted of an offence under the law of a country or territory outside the United Kingdom, and

(ii) the act constituting the offence would constitute an offence punishable by imprisonment under the law of Scotland if done there (whether or not it constituted such an offence when the person was convicted);

(d) the reference in sub-paragraph (4)(b) to a qualifying offence includes a reference to an offence under the law of a country or territory outside the United Kingdom where the act constituting the offence would constitute a qualifying offence under the law of England and Wales if done there or (as the case may be) under the law of Northern Ireland if done there (whether or not it constituted such an offence when the person was convicted).

(7) For the purposes of paragraph 8, 8A or this paragraph—

(a) ‘offence’, in relation to any country or territory outside the United Kingdom, includes an act punishable under the law of that country or territory, however it is described;

(b) a person has in particular been convicted of an offence under the law of a country or territory outside the United Kingdom if—

(i) a court exercising jurisdiction under the law of that country or territory has made in respect of such an offence a finding equivalent to a finding that the person is not guilty by reason of insanity, or

(ii) such a court has made in respect of such an offence a finding equivalent to a finding that the person is under a disability and did the act charged against the person in respect of the offence.

(8) If an individual is convicted of more than one offence arising out of a single course of action, those convictions are to be treated as a single conviction for the purposes of calculating under paragraph 8 or 8A whether the individual has been convicted of one offence.”

This amendment and Amendment 36 make provision for the indefinite retention of fingerprints, data and other samples taken from a person who is or previously has been convicted of a specified offence.

Amendment 32, in schedule 9, page 134, line 40, at end insert—

“(d) the Chief Constable of the Ministry of Defence Police,

(e) the Chief Constable of the British Transport Police Force, or

(f) the Director General of the National Crime Agency.”

This amendment enables the Chief Constables of the Ministry of Defence Police and the British Transport Police Force and the Director General of the National Crime Agency to make a national security determination in relation to fingerprints, data and other samples.

Amendment 33, in schedule 9, page 135, line 32, after “8” insert “, 8A”.

This amendment is consequential on Amendment 31.

Amendment 34, in schedule 9, page 137, line 34, leave out paragraphs (h) to (j).

This amendment removes reference to the Royal Navy Police, the Royal Military Police and the Royal Air Force Police from the definition of “police force”. Those forces should not be included in that definition because members of those forces do not have the power to obtain fingerprints, data or other samples under Schedule 9.

Amendment 35, in schedule 9, page 137, leave out lines 38 to 40.

This amendment removes reference to the tri-service serious crime unit from the definition of “police force”. Members of that unit should not be included in that definition because they do not have the power to obtain fingerprints, data or other samples under Schedule 9.

Amendment 36, in schedule 9, page 137, line 40, at end insert—

“‘recordable offence’ has—

(a) in relation to a conviction in England and Wales, the meaning given by section 118(1) of the Police and Criminal Evidence Act 1984, and

(b) in relation to a conviction in Northern Ireland, the meaning given by Article 2(2) of the Police and Criminal Evidence (Northern Ireland) Order 1989 (S.I. 1989/1341 (N.I. 12));”.

See Amendment 31.

Amendment 37, in schedule 9, page 138, leave out lines 5 to 19 and insert—

“‘responsible chief officer of police’ means—

(a) in relation to fingerprints or samples taken by a constable of the Ministry of Defence Police, or a DNA profile derived from a sample so taken, the Chief Constable of the Ministry of Defence Police;

(b) in relation to fingerprints or samples taken by a constable of the British Transport Police Force, or a DNA profile derived from a sample so taken, the Chief Constable of the British Transport Police Force;

(c) otherwise—

(i) in relation to fingerprints or samples taken in England or Wales, or a DNA profile derived from a sample so taken, the chief officer of police for the relevant police area;

(ii) in relation to relevant physical data or samples taken or provided in Scotland, or a DNA profile derived from a sample so taken, the chief constable of the Police Service of Scotland;

(iii) in relation to fingerprints or samples taken in Northern Ireland, or a DNA profile derived from a sample so taken, the Chief Constable of the Police Service of Northern Ireland;”.

This amendment and Amendment 38 make provision identifying the responsible chief officer or police in relation to fingerprints or samples taken by a constable of the Ministry of Defence Police or the British Transport Police Force.

Amendment 38, in schedule 9, page 138, line 22, at end insert—

“(2) In the definition of ‘responsible chief officer of police’ in sub-paragraph (1), in paragraph (c)(i), ‘relevant police area’ means the police area—

(a) in which the material concerned was taken, or

(b) in the case of a DNA profile, in which the sample from which the DNA profile was derived was taken.”—(Tom Tugendhat.)

See Amendment 37.

Schedule 9, as amended, agreed to.

Ordered, That further consideration be now adjourned. —(Scott Mann.)