House of Commons Hansard Debates for 19 Feb 1990

Mr. Butterfill : I should be the last person to wish public expenditure to be increased unnecessarily. However, this explanatory note could have been much clearer and longer so as to assist hon. Members in their examination of the order.

Part I, paragraph 2, of the schedule refers to

"functions of following persons in assisting overseas regulatory authorities".

Will the Minister clarify that my understanding of the paragraph is correct? I thought that it enabled the Secretary of State to rule that information would not be made available to a member of the public if it should properly be withheld to allow the investigation of fraud by an overseas regulatory authority.

It is an important power. If that is what the paragraph means, I support it. If that is not what it means, I believe that such a power should be included in the legislation. International fraud is becoming more common. The United Kingdom's financial services market is free and is extremely valuable to this country. It earns for the United Kingdom a vast amount of money in the form of invisible earnings, and I should be the last to want to lose them.

The corollary to an international market is that, with modern communications and modern means of data transmission, fraud is that much easier to perpetrate and that much more difficult to detect. Serious international fraud can be defeated only if the regulatory authorities in the countries concerned can co-operate in defeating it. I hope that that is what is intended by the paragraph, and that the order will give effect to that intention.

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On part II of the schedule, like my hon. Friend the Member for Epping Forest (Mr. Norris) I am somewhat puzzled about paragraph 3, which extends the previous entry for

"rules, guidance, arrangements or restrictions"

and substitutes for that

"rules, statements of principle, regulations, codes of practice, guidance, arrangements or practices".

I am not sure--nor will many other hon. Members be--why that extension needs to be made, what its practical effect on the denial of access will be and why those activities need to be protected as that section purports to protect them.

Paragraph 5, which was mentioned by the hon. Member for Kingston upon Hull, West (Mr. Randall), deals with the exemption of advertisements. Am I correct in assuming that it relates to the section of the Financial Services Act which regulates advertisements so that they do not mislead the public and improperly induce people to make investments? If that were the case, it would be entirely proper for investigations into the exemption of advertisements to proceed in a way that did not alert those being investigated. But it is not entirely clear to me, and I suspect that it may not be entirely clear to other hon. Members here this evening, so it would be most helpful if my hon. Friend could explain that in more detail. Having asked some specific questions about the effect of the order, let me say a few words about the general philosophical approach which has been mentioned by hon. Members on all sides of the House this evening. As always, there is a conflict between the need to protect the public from fraud and misfeasance and plain incompetence on the part of certain authorities and the need to give the individual the right to access held about him on any givem file. We need to draw a very fine line.

Hon. Members who have spoken this evening, including my hon. Friend the Member for Epping Forest and certainly Opposition Members, would go a lot further than I would. If we are talking about freedom of information, which has been the subject of much of our debate, I urge some caution. It is not always in the public interest for all information to be disclosed.

If we want to see the effects of a full right to information, we need only look at what happens in the United States, where everything in the process of government is open to public scrutiny. The effect is a politicised civil service. When the President of the United States and the Administration change, the new President changes the civil service, because he cannot do otherwise than have with him his political allies. That would be the regrettable effect if the right to information were pursued to its ultimate conclusion in Britain. Without wishing to flatter those in Whitehall who may be listening to the debate, one of the great assets of the British constitution is the impartiality of the Civil Service and the knowledge that civil servants may give advice to Ministers in confidence and protect their professional position as independent and impartial advisers to Government. We have the balance right in requiring the Government to account to the House for their actions and not to require civil servants to account for their actions. But I fear that what has been proposed this evening, particularly by the Opposition, could have that effect, and I genuinely believe that it would be a sad day for British democracy if that were to happen.

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I am also concerned about the general tenor of some of the speeches from the Opposition. Opposition Members said that the right of an individual to inspect any file that may be held on him, for whatever purpose, is more important than some of the purposes in the order before the House. I cannot accept that. Section 30 of the Data Protection Act 1984 states that its purpose is to protect the "public against financial loss due to dishonesty, incompetence or malpractice by persons concerned in the provision of banking, insurance, investment or other financial services or in the management of companies or to the conduct of discharged or undischarged bankrupts."

I cannot see how we can afford to deny the public the protection that may be needed in the investigation of those activities simply because it may prejudice the rights of one citizen to obtain access to data held on him. Once again, I call in aid the Barlow Clowes case, which is directly relevant to this debate.

Mr. Randall : I thought that we had had a considerable discourse on the need to have a balance between access to information and the need at times to restrict access to information so that investigations can take place.

Mr. Butterfill : The hon. Gentleman said that, but I differ from him on where he would strike that balance. The hon. Gentleman was erring on the side of protecting the right of the individual to have access to information instead of erring on the side of the investigation of fraud and malpractices which I believe is more important.

Mr. Randall : With respect, the hon. Gentleman is drawing the wrong conclusion, and I said nothing that could lead him to reach that conclusion. My point was that none of us in the House tonight can assess whether the Government have gone too far in compiling the list of restrictions. I do not know whether they have, and I challenge whether the hon. Gentleman knows. I believe that the Government may have erred on the side of secrecy simply because that is the general ethos of British society and certainly the position in Whitehall.

Mr. Butterfill : The hon. Gentleman compounds my suspicions about his approach to the issue. He suggests that the Government would err on the side of secrecy when we are investigating matters of the utmost gravity for the protection of the public. I would not apologise for that. If it is necessary to protect the public from fraud and swindlers--I do not suggest that the hon. Gentleman would ever be a swindler's friend, by any stretch of the imagination--the balance should lie with the protection of the public as a whole rather than with the protection of a single individual. The protection of the public as a whole must, by definition, be more important than the right of a single individual, however important the rights of that individual may be.

If there is any doubt about the issue, we must always protect the public as a whole, although on occasion that may work to the detriment of the individual. That may be the price that we have to pay in a democracy for adequate protection, particularly when we are dealing with people who are capable of perpetrating vast frauds and swindles on an international scale. That protection is very important when we are dealing with extremely sophisticated operators who can switch money all over the world at the press of a computer key, and when it is extraordinarily difficult for the police in any one country to investigate anything in any depth.

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If we are to defeat that type of international fraud and crime and protect the public in this country and elsewhere--that is the implication of the order--we must err on the side of caution. That may mean that the rights of one individual may occasionally be prejudiced. I would sooner do that than risk thousands of people being swindled.

Once again, I refer to hundreds of my constituents who invested in Barlow Clowes. That case is relevant to the debate, because it involved another overseas regulator. The major losses did not occur with investments in this country, but with overseas investments. The Swiss companies involved were supposedly registered in Geneva, but it turned out that they were not registered at all. They did not even exist legally in Switzerland, yet my constituents sent money to box numbers in Geneva. I think that they were extraordinarily gullible and ill-advised, but they were advised by people in this country whom they thought were reputable. Money was also sent to Gibraltar. We must examine the ability of international regulators to co- operate with one another to defeat such fraud. Without a measure such as this, that will be totally impossible.

I repeat that, if a balance is to be struck between the protection of an individual and the protection of the public as a whole, we must err on the side of caution.

Mr. Cohen : Opposition Members agree that big fraudsters must be investigated and brought before the courts. However, the hon. Gentleman's argument is the same as that in favour of making all police records exempt, being subject access exemptions under the Data Protection Act 1984. The trouble is that there is no way of rectifying an abuse if incorrect information is placed on a person's file and he is subsequently badly treated. He cannot appeal. There must be an opportunity to set up appeal procedures. The Data Protection Registrar is like an ombudsman in these

cases--investigating but keeping strict confidentiality. That would not interfere with investigations into potential big crime, but it would protect the individual. Why can we not have both?

Mr. Butterfill : The hon. Gentleman's remarks worry me slightly. He is saying that we should not exempt police records or the records kept by regulators, for fear that that might prejudice an individual's right to know what information is being held about him. If such an investigation relates to a major fraud, which may be an international fraud, that is the price that society must pay if we are to be protected against that activity. There is no alternative to that protection. Therefore, I shall support the order.

9.13 pm

Mr. Tam Dalyell (Linlithgow) : Opposition Members agree with much of what the hon. Member for Bournemouh, West (Mr. Butterfill) said about the international aspects of this subject. It is extremely complex and increasingly important. I asked the hon. Member for Romsey and Waterside (Mr. Colvin), who is piloting his Computer Misuse Bill through the House, whether I could be on the Committee that considers the Bill. I look forward to Wednesday mornings in Committee, because these matters are important.

In preparation for the debate on the computer hacking Bill, on 5 January I tabled several questions to the Home Office, giving it six and a half weeks to answer. I make no

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complaint about the nature of the answers, because it is a delicate matter. It pertains directly to assisting overseas regulatory authorities.

The first question that I tabled on 5 January for answer on 19 February was :

"To ask the Secretary of State for the Home Department if he will make it his policy to include provisions in his computer hacking Bill to promote safeguards to ensure that information stored in a DNA databank would not be open to misuse."

The Minister, who is at the Dispatch Box, replied :

"No. The Data Protection Act 1984"--

that is one of the Acts that we are discussing--

"already provides appropriate safeguards against misuse of personal data held on a computer database. These include a requirement that the data user must take security measures againt unathorised access."

It is one thing to say that the data user must take security measures, but it is easier said than done. Does the Home Office have any evidence that serious measures along those lines are being taken? I recall that the week before last, members of the all-party group for the retail trade went to a famous store, which I think should be nameless. The store managers were open about saying what mayhem had been created when the computer of just one store was illicitly entered. We need to take any possible measures that would stop that type of--

Madam Deputy Speaker : Order. The hon. Gentleman is preparing himself for other debates dealing with hacking. Will he look at the order that we are considering, and bring himself more into line with it?

Mr. Dalyell : My comments come under assisting "overseas regulatory authorities".

Madam Deputy Speaker : That is quite true, but I fear that the hon. Gentleman was moving considerably away from that. I have been listening carefully.

Mr. Dalyell : I shall come back, Madam Deputy Speaker.

The next question that I tabled was :

"To ask the Secretary of State for the Home Department what consideration he is giving to the use of DNA material unrelated to crime."

I should like to put it on the record that the reply was : "DNA testing has been used to establish relationship in immigration and paternity cases."

That work is excellent and wholly acceptable--and here we come to the "but" ; I do not intend to speak for anyone other than myself, and this is a personal view-- but I believe that authorities are entitled to use all the latest techniques of blood-testing in the fight against crime of any sort, and that includes fraud.

Mr. Stern : Will the hon. Gentleman give way?

Mr. Dalyell : I would rather not give way until the hon. Gentleman has heard precisely the nature of my argument and then I shall, of course, give way to him.

I also tabled the question :

"To ask the Secretary of State for the Home Department what proposals he has for a DNA data bank for use in the fight against serious crime ; what type of offences will be covered ; what type of sample will need to be taken ; and whether types of sample such as blood or hair-roots will be taken without the consent of the individual concerned."

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I know that therein lies the rub. I know how difficult this is, and I also know that some of my hon. Friends take a different view--

Mr. Stern : Will the hon. Gentleman give way on that point?

Mr. Dalyell : In a moment.

I also tabled the question :

"To ask the Secretary of State for the Home Department what is his policy towards legal powers to take samples, such as blood or hair-roots, in respect of screening people who there may be no reason to suspect of involvement in the offence."

There could be a whole range of offences, one of which could certainly be fraud. I give way now to the hon. Member for Bristol, North-West (Mr. Stern).

Mr. Stern : I am grateful to the hon. Gentleman for giving way. He has raised one "rub" as he calls it, about where the order might bite. However, there is another rub as well, and if I am lucky enough to catch your eye, Madam Deputy Speaker, I hope to expand on this later. The hon. Gentleman is referring to data in a DNA bank being used for the detection of crime. Does he agree that we also have to determine the nature of the state that is determining that crime? Does he agree that to supply information through the order to the regulatory authorities of, say, France, is completely different from supplying exactly the same information under exactly the same circumstances to the regulatory authorities of, for example, Romania before the recent revolution? We are empowering the authorities to decide on the nature of the regime, as well as the nature of the crime.

Mr. Dalyell : I am not sure that that is not unreasonable. I am not being led astray or leading anyone else astray. However, the hon. Gentleman raises an important point. There must be a value judgment of to whom the information should be given. Our European partners are our partners and, as the hon. Member for Bournemouth, West said, the measure has international implications.

The next question that I asked is also relevant. It was : "To ask the Secretary of State for the Home Department whether he will consult the Law Lords on the question which would arise if a doctor was asked to take a blood sample without consent, the question being how to obtain a sample from someone who refuses consent, and may physically resist having a sample taken, and on the question of the susceptibility of evidence obtained under duress by the courts ; and if he will make a statement.

The Under-Secretary of State replied :

"My right hon. and learned Friend is still considering the issues set out in the letter which my right hon. and noble Friend the Minister of State"--

that is the noble Lord Ferrers--

"sent to the hon. Member on 7 December."

It was an extremely interesting and perceptive letter. He continued :

"He is currently consulting the British Medical Association and the Association of Police Surgeons on the medical ethics of taking blood samples without consent from suspects in police detention and from convicted offenders. My right hon. and learned Friend will consider what further consultations are necessary in the light of their response. He has no plans to amend the law to enable the police to take blood or other samples from people who are not suspects or convicted offenders and who do not consent. The police are free to ask people to provide samples voluntarily."

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Although it may be inconvenient and awkward, if hon. Members ask questions such as I have asked on this subject, they should not sit on the fence and pretend that it is entirely up to the Government to come to conclusions.

This evening I have had an opportunity to put my two ha'po'rth into the argument. I have given the matter considerable

reflection--otherwise I should not have written the letters that prompted the letter of 7 December. I should not have asked those questions unless I had taken the view that it is pretty legitimate to use all techniques known to modern science, many of which are developing all the time, to pinpoint crime.

When does the Minister expect the discussions with the police surgeons and various other authorities to be finalised? I hope that when they are finalised, a hard line will be taken on the use of every available scientific, DNA and other technique. It is extremely cost-serving. If one takes that hard line, there is an argument for going ahead with one of the recommendations of Gordon Wasserman's committee, which was set up by the Home Office, that there should be an independent forensic unit to which those who get into trouble or who find themselves prosecuted could appeal.

I have argued elsewhere that the forensic unit might well be based at the university of Strathclyde-- [Laughter] --where distinguished work has been done on an academic base for the whole of the United Kingdom. I hear my hon. Friend the Member for Kingston upon Hull, West (Mr. Randall) laugh. If that work had been done in Hull, I should have said the same thing. But he is not my constituent and nor do I have many constituents--I could probably count them on the fingers of one hand--who work in the university of Strathclyde. I am an east-coast Scot, and east-coast Scots are different from west-coast Scots.

There is a strong argument for using every forensic technique available for this and other types of crime. After the discussions with the police authorities, I look forward to an announcement that the Government feel that every sort of technique should be available. I for one undertake to support and vote for any measure designed to take advantage of every scientific technique available, even if some of my colleagues, understandably, scream about civil liberties. Several Hon. Members rose--

Madam Deputy Speaker : Order. I ask hon. Members who wish to speak to look at the explanatory note and I remind them that this is a narrow debate. The order is consequential on the Companies Act 1989 and the Financial Services Act 1986. Comments must be pertinent to that. Otherwise, I shall rule hon. Members out of order.

9.25 pm

Mr. Michael Stern (Bristol, North-West) : I am grateful to you, Madam Deputy Speaker, for your comments. My remarks will be brief. It is a great pleasure to follow the hon. Member for Linlithgow (Mr. Dalyell) directly, and to take his argument a stage further. Instead of supporting him, as I do, by simply saying that all forensic and other techniques should be used in solving crime and apprehending offenders, I shall explore the nature of the crime that we are considering in deciding whether the techniques should be applied. I apologise to the House for the fact that some

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of my examples will come, not from my work in the House, but from work outside. I have a declared interest as a partner in a firm of chartered accountants, and the examples arise from my work there. The explanatory note contains four words which in principle are anodyne, but which in practice contain a dangerous extension of powers-- "assist overseas regulatory authorities". I entirely agree with my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) that when we are dealing with fraud in general and financial fraud in particular it is necessary to consider it on a worldwide basis. Recent fraudsters, as in the Barlow Clowes operation and the Dover plan, would not have been caught or brought to justice without international co-operation. We must applaud international co-operation.

We are dealing with fraud that takes place in the context of our western European society and values. There are other frauds, or frauds as they would be defined elsewhere in the world, which are not so clearly pigeonholed. For example, how will the powers provided in amending the data protection regulations in the light of the Companies Act 1989 be applied where a person appears to have committed a detailed and marked offence against the exchange control regulations of an African country? That will cause considerable moral problems to Opposition Members. Many African countries maintain and impose severe penalties of imprisonment for breaches of their exchange control regulations.

South Africa, for example, has one of the most vicious exchange control regimes in the world. Do we intend to give powers to the Data Protection Registrar to shop someone who has broken the South African exchange control regulations? Many people in that country are desperate to get out, but they are held there by the force and the threat of force implied in the South African exchange control regulations.

In case the House believes that such stringent regulations are peculiar to South Africa, I should say that Nigeria operates similarly strict exchange control regulations. People equally fear being shopped by other regulatory authorities for breaking those Nigerian regulations. I have dealt with refugees from both those countries ; those who have broken the respective exchange control regulations have a strong fear of violence.

Mr. Jeremy Hanley (Richmond and Barnes) : My hon. Friend has mentioned a most tricky point--irregularities in a regime that most of us regard as repressive and in need of reform. Does he agree, however, that we might be forced by necessity to co-operate in certain actions on behalf of the regulators of a country, be it South Africa or any other, if we are to receive reciprocal assistance from that country in our search for malefactors who are residents or national of this country and who have taken investors' funds to South Africa or elsewhere? Therefore, it might be necessary to co-operate with the undesirables to achieve the greater end.

Mr. Stern : I accept that. My hon. Friend has raised something about which the order says nothing, when it should.

If we are seeking to co-operate with, for example, South Africa to search out and to bring to justice a fraudster currently living in Europe, I accept that we shall get such

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co-operation from South Africa only if we offer reciprocal co-operation to enable that regime to bring to justice a fraudster who originates in South Africa.

There is a distinction to be drawn, however, which is not drawn in the order. Although I should be happy to see regulations permitting us to co- operate with the South African regime on matters of fraud, I would not want our regulations to permit the British authorities to co-operate with that regime on matters relating to exchange control. South Africa possesses such control, whereas we, as a result of Government action, do not.

I am looking for some assurance not only about the Data Protection Registrar's entitlement to assist overseas regulatory authorities against the apparent wishes of the individual, but about how the registrar will be able to discriminate between one particular type of offence and another. We should consider, as a matter of civil liberty, whether we should give such undisclosed powers to the registrar so that, without reference to Parliament, he can discriminate in such cases.

Mr. Hanley : Perhaps I am wrong, but I felt that the power was granted to the Secretary of State and, through him, to the Data Protection Registrar. Ultimately, it is the Secretary of State who must sanction the decision. The registrar, worthy and honourable though he is, would need to refer for guidance in such cases to the Secretary of State.

Mr. Stern : My hon. Friend is quite correct, but in an open society can we not go further? Are we not entitled to look to the Secretary of State to declare to the House when he has exercised these blanket powers of discrimination which the order offers him? I should be grateful for some reassurance from my hon. Friend about exactly how--perhaps in the Data Protection Registrar's annual report or some other way--it might be possible for the Secretary of State to report to the House on how the powers should be used.

I quoted an example of repressive African regimes. I shall quote another example that is germane to the debate in the light of earlier references to the Barlow Clowes affair. There has recently been a belief among many overseas investors who have chosen to invest in this country through Gibraltar that the British authorities, in the light of the Barlow Clowes affair, have been attempting to hound them. I would be very worried indeed if, in passing this order, which contains the powers to assist overseas regulatory authorities, we gave the Secretary of State powers, through the Data Protection Registrar, to make undue inquiries of perfectly genuine investors who happen to use Gibraltar as a means of investing in this country. Many such investors feel that too much of that sort of thing has been going on already.

The joke in Gibraltar at present is that, whereas a few years ago it was believed that, if this country sent gunboats to Gibraltar, they would be to assist Gibraltar against possible invasion from Spain, the belief in Gibraltar now, in view of the arguments over the airport, is that, if gunboats were sent to Gibraltar, they would be to repress the Gibraltar Government.

Mr. Hanley : Surely not.

Mr. Steen : That is the view that is currently held.

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There is considerable suspicion that the powers given in the order could be used with insufficient discretion, of which Parliament might not be apprised. That could happen unless some mechanism were built in to advise Parliament of the way in which those powers were so used.

There is one aspect in which the order does not go far enough. I accept that this is a problem generally with data protection legislation. The order applies only to data as defined in the Data Protection Act. There has been a growing belief in the House for a number of years that, as matters have moved on since the original Act, the definition of "data", and therefore the definition within the order, is inadequate.

We have had many debates in the House about, for example, medical records. They are probably the most personal and potentially most damaging record about any individual. They are not covered by the Act and, quite rightly, will not be covered by the Act under this order, because the order relates solely to financial matters. I wonder whether, in considering the order, we should look again at the extent to which financial information about an individual or company will be exempt from the order because it comes outwith the strict definition of data as laid down in the Act.

How many times have we heard of--and in our professional lives seen--the bank manager, at the end of an interview, write down, "This man is a con merchant"? That record is based on the opinion that the bank manager formed during the interview ; it will stay on a personal or company file and will not be open to regulation under the Act because it is not data--it is not in technically permanent form.

Mr. Hanley : Being a renowned chartered accountant, my hon. Friend may well remember the case in which a certain watch was seized by taxation officials because engraved on the back of it was a Swiss bank account number. The defence of those who owned the watch was that it was not data as defined under the Act. It was not a record : it was a watch with an engraving. The courts said that, because the watch was engraved with information, it could be regarded as a record. Does my hon. Friend therefore agree that perhaps the courts can take such matters into account as the need arises?

Mr. Stern : I should like to think that my hon. Friend was right. However, I have been advised that it is not yet open to the courts to extend the definition of data in that way. I would like reassurance from the Minister about whether such an extension of "data" could be made.

Mr. Waller : My hon. Friend is hitting on an important point by referring to the fact that we are discussing electronically recorded data protected under the Act. Does he agree, however, that, if we did not provide an exemption of the sort suggested in this order, computers could not be used in the pursuit of crime, because of the danger that recorded material could be made available to the subject of that pursuit? To pursue international or national crime efficiently, it is necessary and sensible to have exemptions of the sort that we are discussing.

Mr. Stern : My hon. Friend is right. I hope that neither he nor the House will take my remarks as suggesting any doubt of the need for an order of this sort. I merely maintain that any order of this sort must be drawn as

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tightly as possible, and applied with the greatest discretion. I hope that my hon. Friend the Minister will assure me that there will be mechanisms to ensure such discretion.

On the basis of experience, I must point out, finally, that orders of this nature change the reality in which they operate by their very passage. I remember that, some years ago, a similar order was passed by the United States Congress, laying down regulations for United States investors in Swiss banks. I came across this example because I was advising a Panamanian investor in the United Kingdom who happened to invest, perfectly legitimately, in a Swiss bank.

The Swiss banks wrote to all their customers telling them that the regulations had just been passed by Congress and that they would be obliged within six months under Swiss law to disclose certain information under the regulations, which were part of the US-Swiss convention. The banks strongly urged their customers to remove their accounts if they felt that they did not wish certain information, which they listed, to be disclosed to the US authorities. These letters were sent, couched in the strongest possible terms, to all customers, whatever the source of their funds and whether or not the banks knew that source.

Is not my hon. Friend the Minister concerned that, by giving additional powers to assist overseas regulatory authorities, he may be causing widespread ripples with the stone that he has cast into the pool tonight?

9.44 pm

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