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Brian Cotter: I am particularly pleased to speak after the right hon. Member for Suffolk, Coastal (Mr. Gummer), who offered some good thinking and reasonable points, not least of which is that we have a duty in the House this afternoon to address the fact that we decide what we do in the circumstances that we see in front of us. He was right to make the point that circumstances do not always remain the same. Climates can change, and therefore changes can happen subtly. To use a different example, times have changed in relation to the way in which we must now face up to the
 
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threat of terrorism. Times can also change in other sorts of ways: future Governments could be less understanding and reasonable than the Minister is.

I will not stray on to whether my constituents think differently from me about various issues, as I could get myself into trouble, not having thought about it beforehand. The right hon. Member for Suffolk, Coastal is right to make those points, however. Certainly, "reasonably believe" would define more clearly where we should go than "think".

On this occasion, the hon. Member for Sutton Coldfield (Mr. Mitchell), as on many other occasions, has made some reasonable points, particularly with this set of amendments. We are appealing for reason from the Government on the basis that that must be applied in so many areas of investigation. It is right to argue that the new rights being granted open up the possibility of inspectors' abuse of power. The Bill would put only the barest limits on inspectors' rights to demand entry to domestic premises where they believe relevant company documents or information may be kept. The DTI inspectors will no longer have to have a search warrant under the Bill and will instead rely on authorisation from the Secretary of State. It is a concern that that permission will be granted virtually automatically once an investigation has begun. Investigators will be able to enter premises to obtain material merely if they "think", as has been said, that there are problems ahead.

Without labouring the point too much, it is key that we hear from the Minister. On this occasion, it is not unreasonable to ask the Minister to address the issue of the difference between "thinking" and "reasonably believing".

I agreed less strongly with some of the arguments advanced by the hon. Member for Sutton Coldfield than with others. We Liberal Democrats need to hear what the Minister thinks. Certainly we would be minded to support some key amendments. Amendments Nos. 17 and 18, for instance, deal with the prevention of inspectors gathering information about a business from disclosing it to unauthorised individuals. The Government have always conceded that information acquired by an accompanying person needs to be treated in a way that is consistent with the treatment of information obtained by an investigator or inspector. I should like the Minister to clarify the position.

As I said at the outset and as others have said, we must ensure that what we decide does not infringe people's liberties, and provides a balance between the need to investigate and the need to respect those liberties.

Mr. Richard Page (South-West Hertfordshire) (Con): I did not intend to speak, but I was provoked by what my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) said about what amounted, in my view, to the number of angels that could dance on the head of a pin.

As one with a degree of experience of running small businesses and knowing exactly what goes on, I think that we are deluding ourselves. Whether the Secretary of State "thinks" or—with respect to my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell)—"appears" to have "good reason" could almost be described as a massive irrelevance. The Secretary of State will not "think" in any of these cases. All that will
 
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happen is that a series of regulations, rules and items of guidance will be conveyed down to the inspectors, who will take that material as their authority to proceed.

We can fiddle around with this part of the Bill as much as we like, but—my hon. Friend the Member for Sutton Coldfield touched on this briefly—it is the wording of regulations that will mean something. Removing the protection that was there—the requirement for court orders—and descending to the "thinks" argument merely means directing the regulations towards the inspectors to give them the necessary authority.

I listened with great interest to my right hon. Friend the Member for Suffolk, Coastal, who demonstrated his theological training with considerable skill and expertise. I enjoyed his speech, but it seemed to me massively irrelevant to the practicalities. I think we shall only be able to judge how the system will work when we see the rules and regulations, and see what authority is given to inspectors. That is the only way in which we shall know how companies will be treated when the inspector knocks at the door.

Jacqui Smith: Let me put the provisions in context. The statistics are fairly familiar by now, but they bear repeating. Some 5,000 complaints or referrals are received by the DTI's companies investigation branch each year. Following a thorough vetting process, only 5 per cent. of those result in investigations affecting around 300 companies—300 out of some 1.8 million registered companies, or less than 0.04 per cent.

In 2002–03, following DTI investigations, 80 companies were wound up by the courts, 17 directors were disqualified and seven individuals were convicted of offences. Where appropriate, complaints were also referred to other regulators, such as the Financial Services Authority. The average investigation lasts about three months and there is a team of some 40 investigators.

4.30 pm

I make these points because, during the Bill's passage, and certainly today, I have heard some Members offer descriptions of the investigations provisions that might leave the uninformed listener with the impression that an army of investigators routinely conducts fishing expeditions into the affairs of many companies, the greater proportion of which should be left in peace to carry on with their legitimate business. The same listener might also have concluded that officials will be able to abuse their powers without fear of reprisal. If accurate, that would be very worrying, but as I said, those impressions are simply not the reality.

Mr. Greg Knight: Is an injustice less of an injustice if it happens to only a few people?

Jacqui Smith: Absolutely not, which is why I will respond in due course to all the issues that were raised, but I want first to set the context for the investigatory powers that we are considering. In citing their constituents' experience and so on, some Opposition Members have given the impression that we are talking about a mass investigation of lots of innocent companies. Some companies will have no case to answer; many will. It is of course right that those
 
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investigations be carried out in a proportionate manner, but the Bill's provisions will not change the basis on which they are carried out. This is not about casting our net more widely, nor is it about doing away with warrants in cases where they were previously needed, as the hon. Member for Weston-super-Mare (Brian Cotter) seemed to suggest. Nothing in the Bill would do away with the need for warrants in such cases, a point to which I shall return in more detail.

The provisions are about increasing the effectiveness of the investigations undertaken. We want to ensure that we uncover misconduct and that we do so quickly. Investigators will not be able to operate on a whim and the investigatory powers cannot be used without a sound basis for using them. The fact is that, rather than an army of individuals hounding innocent firms, a small team of trained individuals is conducting investigations in response to a small number of carefully vetted complaints and referrals to discover whether there is any substance to them. Of course, that team is also ensuring that all firms can carry out their business in the confidence that those with whom they do business are also behaving honestly and responsibly. Those of us who are investing our money in, or spending it with, such businesses can also share that confidence.

What investigators are doing is uncovering information. Such information might suggest that a criminal investigation is necessary, or that it would be in the public interest for the company to be wound up or its directors disqualified. Alternatively, such information could be referred to another, more appropriate regulator, such as a professional body. But the investigators are neither judge nor jury and they have no powers beyond those that enable them to obtain relevant information.

In setting the context for these powers, we also need to remember that limited liability offers companies significant benefits. However, not all companies operate honestly or within the law. If we are not effective in addressing abuse of the company form, real harm can be caused. Indeed, the greatest impact is often on customers, investors or suppliers. Such abuse also undermines trust in the corporate framework, so it is crucial that this process should operate properly.

Amendment No. 1 would add the phrase

"Where there appears to be good reason."

to the beginning of proposed new section 447(1) in clause 21. I assume that amendment No. 20 is an alternative, as it would add the words

"If he thinks there is a good reason to do so"

at the beginning of the same line. Neither in amendments Nos. 1 and 20 nor in a similar amendment in Committee has the hon. Member for Sutton Coldfield (Mr. Mitchell) attempted to define the phrase. However, he and other Conservative Members seem to believe that the amendments would somehow send a clear message about the test being set for the use of the powers, particularly for those who may be ignorant of the law. I am afraid that I disagree.

The amendments would offer a dangerous comfort blanket, because without definition, the phrase "good reason" may mean different things to different people.
 
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What appears good reason to a complainant may not be regarded as good reason by a company and it would leave open for the future a debate about whether the Secretary of State needs better grounds than administrative law would allow or, alternatively, whether she could act in a wider range of circumstances than such law would allow. That is what the drafters of legislation mean when they say that unnecessary words have a habit of turning septic.

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