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Public Bill Committee Debates

Draft Serious Organised Crime and Police Act 2005 (Amendment of Section 76(3)) Order 2007

The Committee consisted of the following Members:

Chairman: Mrs. Janet Dean
Blunt, Mr. Crispin (Reigate) (Con)
Browne, Mr. Jeremy (Taunton) (LD)
Campbell, Mr. Alan (Lord Commissioner of Her Majesty's Treasury)
Carswell, Mr. Douglas (Harwich) (Con)
Coaker, Mr. Vernon (Parliamentary Under-Secretary of State for the Home Department)
Cox, Mr. Geoffrey (Torridge and West Devon) (Con)
Davies, David T.C. (Monmouth) (Con)
Drew, Mr. David (Stroud) (Lab/Co-op)
Gwynne, Andrew (Denton and Reddish) (Lab)
Herbert, Nick (Arundel and South Downs) (Con)
Hunter, Mark (Cheadle) (LD)
Keen, Alan (Feltham and Heston) (Lab/Co-op)
Mallaber, Judy (Amber Valley) (Lab)
Mole, Chris (Ipswich) (Lab)
Thornberry, Emily (Islington, South and Finsbury) (Lab)
Turner, Dr. Desmond (Brighton, Kemptown) (Lab)
Wright, David (Telford) (Lab)
Mark Oxborough, Committee Clerk
† attended the Committee

Second Delegated Legislation Committee

Wednesday 18 April 2007

[Mrs. Janet Dean in the Chair]

Draft Serious Organised Crime and Police Act 2005 (Amendment of Section 76(3)) Order 2007

2.30 pm
The Parliamentary Under-Secretary of State for the Home Department (Mr. Vernon Coaker): I beg to move,
That the Committee has considered the draft Serious Organised Crime and Police Act 2005 (Amendment of Section 76(3)) Order 2007.
Good afternoon, Mrs. Dean. I am pleased to be here this afternoon and look forward to serving under your chairmanship. I also take this opportunity to welcome all members of the Committee on this glorious afternoon.
The Government’s aim is to make the UK the least desirable place for organised criminals to operate in. We have set up the Serious Organised Crime Agency, which is the enforcement agency dedicated to, and responsible for, tackling serious and organised crime and to reducing the harm that it causes. We gave SOCA and the other law enforcement agencies new powers and tools in the Serious Organised Crime and Police Act 2005, and in the Serious Crime Bill we aim to give SOCA and its law enforcement partners other disruption tools with which to prevent crime.
SOCA’s approach to the lifetime management of organised crime offenders is taking shape through, for example, the use of the new financial reporting orders in the 2005 Act, which monitor the finances of convicted criminals. The order adds to the list of qualifying offences that may attract a financial reporting order.
As I have said, the reporting orders were introduced in the 2005 Act and are available to a court when it sentences or otherwise deals with an offender for a qualifying offence. Under an order, offenders can be obliged to provide reports to law enforcement agencies on a regular basis for a maximum of 20 years. The reports might, for example, be about income, assets and expenditure. A reporting order can require offenders to report on all their bank accounts, credit cards and other financial services. They are applied for in the cases of criminals convicted of a qualifying offence whom law enforcement agencies believe pose a long-term threat. The issuing court has to be satisfied that the risk of a person committing another qualifying offence is sufficiently high to justify an order.
The orders impose a burden on convicted offenders and force transparency, making them less likely to engage in crime. In the event that a person returns to crime, the reports from the financial reporting orders would provide useful information for law enforcement. Failure to comply with an order or providing false or misleading information in a report are offences. The orders have proved to be successful tools of offender management since their introduction last April. A total of 10 orders have been made in connection with SOCA cases, and two have been made in connection with Her Majesty’s Revenue and Customs.
Certain offences under the Fraud Act 2006 and what are known as lifestyle offences as specified in schedule 2 to the Proceeds of Crime Act 2002 can attract a financial reporting order. The offences come under 10 different headings and include drug and people trafficking and blackmail. SOCA and HMRC have identified other serious offences that carry the risk of reoffending, but which do not currently qualify for the imposition of financial reporting orders. Those offences are set out in the draft order and include money laundering, revenue offences, bribery and corruption. With that, I commend the draft order to the Committee.
2.34 pm
Nick Herbert (Arundel and South Downs) (Con): Thank you, Mrs. Dean. I am grateful for the Minister’s explanation of the draft order, and I promise not to detain the Committee for long. However, I think that the way in which this kind of matter is discussed is unsatisfactory.
Some serious issues arise out of the orders. The Minister need not fear; we think that it is perfectly sensible, prima facie, to extend the range of offences to which financial reporting orders might apply. The problem is that we have so little information about how they have worked. It is clear that there have not been many of them—just nine have been applied by SOCA. It would be helpful for us, as the Committee that is required to consider whether it is wise to extend the power to monitor people’s future activities, to be able to assess how effective those nine orders have been. Civil liberties organisations pointed out at the time of the original legislation that the power is, in some respects, draconian.
The purpose of the financial reporting orders is to prevent reoffending, so it would be helpful to know whether any of the people who have received them has reoffended. Has any of them been arrested or are charges pending in relation to potential reoffending? Secondly, are we sure that the penalties relating to financial reporting orders for the proposed extended list of offences are adequate? The increased penalty for failure to comply with an order will still be less than a year. That does not seem to be a particularly significant penalty for offences relating to fraud and corruption that might involve many millions of pounds. How effective are the penalties, and how effective have the orders been so far?
Finally, is it not also unsatisfactory that the orders are applied by SOCA but we know nothing about the operation of that agency? It has been in existence for a year, and it has a nebulous set of targets on disrupting crime. Presumably an annual report will be presented to Parliament. Given the large number of concerns that have been raised about SOCA, will the Minister tell us whether it will be possible to have a debate on the future operation of the agency in Government time? Unless we can have such a debate, it will be difficult for us to judge whether financial reporting orders are effective and whether the agency has been successful in pursuing them.
2.38 pm
Mr. Jeremy Browne (Taunton) (LD): Thank you, Mrs. Dean, for calling me to make a brief contribution. May I start by making a point that I am sure will be echoed by everybody? We all agree on the overall objectives of the measure—there is cross-party consensus on tackling as effectively as possible the effects of acquisitive financial crime. Few things are more likely to irk, irritate and upset decent, law-abiding citizens than seeing people who have profited from crime lording it over the community in which they live.
I should like to make a few points in a constructive spirit and shall be interested in the Minister’s responses. What caused the omissions that are to be rectified by this Committee? It seems reasonable to ask what changes in Home Office thinking have caused Ministers and others to conclude that the remit of the measures is insufficient and that further progress has to be made. What does the Minister anticipate will be the effect of today’s order? We have just heard from the Conservative spokesman that so far the effect has been limited, certainly in terms of the number of cases in which the measures have been applied. Does the Minister expect that to change dramatically as a result of the changes that we are considering?
The second matter that I am keen to raise is the Home Office thinking on the maximum year limits. I do not know whether there is a particular rationale for the 20-year maximum in the case of a person convicted for life imprisonment—otherwise, the maximum is 15 years. Did the people advising the Minister think that those sounded like reasonable and rounded figures, or has greater analysis been put into that policy? There is also the six-month jail term, which the Conservative Front-Bench spokesman touched on. Is that regarded as a sufficiently high maximum sentence to be a deterrent? It may be so, but I would be interested to know on what basis that figure was reached.
Will the Minister also touch on a couple of other points in his reply? On the effectiveness of the procedures, it would be interesting to know—again, this was touched on earlier—how much money has been recovered and whether there has been an analysis of how many people have been deterred, or of how much money these measures may recover in the future. Are there any such estimates? It would be interesting to know. In other words, is this gesture politics? I do not necessarily mean that in a pejorative sense: are we trying to send out a signal or are these deeply practical measures that the Minister anticipates will lead to a significant financial clawback from criminals?
Finally, can I take up the wording of the order with the Minister? The order lists a range of offences that will be considered. Will he reassure the Committee that those definitions have been thought through in a way that is not likely to cause difficulty down the line? For example, section 15 of the Terrorism Act 2000 makes fundraising for the purposes of terrorism an offence. Now, I am as keen as anyone to deter terrorism and fundraising to support terrorism, but I have clear memories from growing up of the active fundraising that went on by organisations such as Noraid in the United States on behalf of the IRA. Now, that might have been on behalf of groups associated with or affiliated to the IRA, and that might have occurred in the United States to a greater extent than it did here in the United Kingdom, but we are entering difficult territory, where the very people regarded as terrorists when the fundraising was taking place are now having meetings with the leader of the Democratic Unionist party and the Prime Minister.
David T.C. Davies (Monmouth) (Con): Does the hon. Gentleman agree that, regardless of what is now taking place, we would have been quite right to take action at that time against anyone raising money for Noraid—money that was used to fund terrorism and to kill British soldiers?
The Chairman: Order. That goes wide of the order.
Mr. Browne: To be brief, while I am grateful for that intervention, I genuinely did not wish to convey that opposite sense at all. I totally accept the point made by the hon. Member for Monmouth, but my point is that some matters are not always as straightforward as meets the eye. Some organisations may have a range of different purposes, aims and ambitions, one of which may be construed as supportive of terrorism while others may not. So, it may sometimes be harder to implement these measures than to draft proposals for them in Committees such as ours. I share the same objective as the hon. Member for Monmouth, the Minister and everyone else in the Committee of trying to tackle terrorism. Again, I am interested in whether the Minister thinks that these measures are defined tightly enough in practical terms to achieve the objective that we all share.
In conclusion, I am extremely sympathetic to the point made by the Conservative spokesman about the need to look more widely at SOCA and its effectiveness and remit. We are looking at a small part of the equation here, and the House would benefit from an opportunity to look at the wider picture. However, subject to satisfactory answers to the questions that I have tried to raise this afternoon, I think that these measures will find support on both sides of the Committee.
2.44 pm
Mr. Geoffrey Cox (Torridge and West Devon) (Con): Thank you, Mrs Dean. I shall be short, but I want to take the opportunity to ask the Minister a number of questions about this proposed order. The truth is that it will achieve a major extension of the financial reporting power. It is not surprising that there have been only nine orders, when the legislation to which they apply has been in force for only 12 months or so.
The offences covered by the order extend across a vast range of the criminal law. The explanatory memorandum states that the offences will be
“usually investigated by the Serious Organised Crime Agency and HM Revenue and Customs.”
That might be true, but it is by no means necessarily so. The offences cited include, for example, section 17 of the Theft Act 1968. That offence is charged by almost every criminal investigation department in any police station in the country on a regular basis, and it covers some extremely minor offences—the alteration of a train ticket is an offence under section 17, as is the alteration of an invoice for accounting purposes and for the purpose of maintaining any records of a business.
The list includes an offence under section 35 of the Tax Credits Act 2002, which could involve a very small account of money. Similarly, people have been charged with cheating the public revenue in cases in which only a few hundred pounds were at stake. Fairly trivial offences relating to value added tax can also be charged under that provision.
I understand that the court must be satisfied that there is a substantial risk of reoffending before it makes an order, which is obviously important. However, should there not be a threshold of gravity across which the Crown should pass before an order of this draconian nature can be imposed? Can it seriously be said that the Crown should be entitled to apply for a financial reporting order against, for example, somebody who altered an invoice for the purposes of his small business and was convicted of false accounting under section 17 of the 1968 Act?
I hope that the Minister will reassure me, but aside from the condition that the court has to be satisfied that there is a sufficiently high risk of the defendant committing similar offences and that usually the offences will be prosecuted by HMRC, I have not seen in the legislation anything that limits the gravity or triviality of the offence and defines it for the purposes of a court order. My concern is that the provision extends across a vast range of offences. I fully accept that some offences, such as fundraising for terrorism, are serious, but some of the listed offences are minor, if not trivial, transgressions. It would be quite wrong if the order were used to capture the financial affairs for many years of a citizen who had transgressed the law in a relatively minor way.
I ask the Minister whether there should not be a threshold of seriousness over which the court should have to pass before imposing such an order. It is not enough to say only that such prosecutions are carried out by SOCA or by HMRC, because they are not. Conspiracy to defraud, for example, is frequently charged by the Crown Prosecution Service in standard circumstances where it is felt that a statutory offence will not suffice. There was a famous case two years ago involving the Jubilee line, which was charged by the British Transport police, so prosecutions are not confined to SOCA and Revenue and Customs.
I should like to ask the Minister what provision the order makes to deal with the point at which financial reporting orders will apply. The instrument will come into force on the day after it is made, but will it apply to those persons who have just been charged or whose cases are pending in the courts? The Minister has been good enough to assure the Committee that the order is compatible with the European convention on human rights, but, as it will affect the sentencing process, it is at least arguable that those who have been charged or who have committed offences prior to the coming into force of the order would have a case that its retrospective application to them would be incompatible with article 7 of the convention. I ask the Minister to clarify his understanding of the order’s applicability to cases that are pending before the courts in which charges have already been laid. How can the order be compatible with the convention in such circumstances?
Like my hon. Friend the Member for Arundel and South Downs, I believe that the order is a substantial extension of a draconian power. Although I support its general intention, I am concerned that the safeguards to protect the individual citizen from actions of the state that are disproportionate to the gravity of the crime and to the nature of the offending are not included in the legislation. I urge the Minister to consider the questions that I have raised and hope that he will be able to give me reassurances this afternoon. If not, I would be grateful if he would think about the questions and write to me later.
2.51 pm
The Parliamentary Under-Secretary of State for the Home Department (Mr. Vernon Coaker): I shall deal with some of the questions that have been raised. I thank members of the Committee for the important points that they have raised about the order.
In reply to the hon. Member for Arundel and South Downs, financial reporting orders are not mandatory and are not something that the court must apply. They may apply to somebody who has been convicted of a criminal offence or an offence that is included in the order. If the court believes that an individual convicted of a qualifying offence will commit one of the offences again in the future, it may decide to apply a financial reporting order. There will be no compulsion or requirement on the court to do that. It will be a matter for the court, having listened to all the evidence presented to it, to determine whether an order is appropriate.
Notwithstanding the comments of the hon. and learned Member for Torridge and West Devon, I believe that a reading of the list of offences shows that many of them are very serious indeed. I have complete confidence that, if the offence is not serious, the court will not apply a financial reporting order to the individual. In circumstances such as those that the hon. and learned Gentleman has rightly pointed out, if the court felt that the matter was trivial, it would not apply an order.
Mr. Cox: I hope that the Minister is right about that, but there is certainly no guidance in the legislation to suggest that there is any minimum threshold of gravity which the court would have to examine before applying an order. If there is no threshold, the danger is that relatively trivial offences, perhaps because they are committed by repeat offenders, would get orders attached to them. Is that the purpose of the legislation?
Mr. Coaker: The purpose of the legislation is to ensure that if somebody is convicted of one of the offences in the order, and the court believes that there is a likelihood of an offence being committed again in the future, the court can apply for a financial reporting order to try to prevent future serious crime. The hon. Gentleman is right to say that there is not a minimum threshold, but it is a matter for the discretion of the court, which will use its assessment of the danger that a particular individual may cause in the future to determine whether it uses a financial reporting order. It is a proportionate rather than draconian measure, because the decision to apply an order is judicial and not mandatory.
The hon. and learned Gentleman mentioned the effectiveness of penalties. Failure to comply with a reporting order could incur a penalty of imprisonment for up to one year and/or an unlimited fine. Of course, we will keep that under review, but we believe that it is consistent with other penalties and sanctions that are available to courts to deal with people who break the law. The point is that the Government are trying to ensure that we do not come to a point at which the law is broken. We want financial reporting orders to work so that people have to account for their assets and money. As the hon. Member for Taunton has said, we do not want a situation in which our constituents wonder how on earth someone lives on an amount of money or drives a certain type of car without any visible means of support. We are trying to set up a system by which people have to account for their assets. We believe that the orders are proportionate, but we will keep the matter under review.
To clarify the numbers, my understanding is that 10 orders have been issued in connection with SOCA cases and two in connection with HMRC cases, making a total of 12. The question of reoffending does not arise because, according to my understanding, the vast majority of the offenders involved in those cases are still in prison. Notwithstanding that, it is important to point out that we will ensure that we continue to review the effectiveness of the legislation as and when it is appropriate. I give the hon. Member for Arundel and South Downs the undertaking that we will make sure that the measure is effective, used properly and works well.
I also confirm to the hon. Member for Arundel and South Downs that there will be an annual report from SOCA, one of which will be published in the next few weeks—I do not recall exactly when. That will give hon. Members the opportunity to review the progress and success of the agency.
Nick Herbert: As hon. Members will be aware, the report has to made and presented to Parliament under the legislation. My question is whether time will be given to debate it. Given the significance of the agency and the kinds of orders—
The Chairman: Order. That matter is not connected to the draft order.
Mr. Coaker: I repeat that a report will be published in the next few weeks, and I am sure that we will have the opportunity to debate it, whether in Government time or otherwise.
In answer to a couple of points made by the hon. Member for Taunton, the reason why we are extending the original list of offences is purely and simply that law enforcement agencies said that it would be helpful to them if financial reporting orders were applicable to the other offences. In the light of the points made by the agencies given their experiences, it is eminently sensible to bring the draft order before the Committee and Parliament. The law enforcement agencies told us that the current list of offences is fine, but their experiences show that there are gaps, so they would like Her Majesty’s Government to consider an extension, which is why we have brought the draft order today.
On the definitions of terrorism or this or that, I can tell the hon. Gentleman that we consult with our lawyers and take advice from parliamentary counsel about using the appropriate language. As far as I am concerned, the language contained in the draft order is appropriate and consistent with other legislation.
Mr. Browne: I have a practical question on the issue raised by the hon. Member for Monmouth. Would Noraid-style fundraising, which took place in the 1980s, fall within the scope of the proposals if it took place now in the United Kingdom?
Mr. Coaker: That is an interesting question. I do not wish to mislead the hon. Gentleman, so I will have to write to him because I will need to look into the matter.
To answer a point made by the hon. and learned Member for Torridge and West Devon—I need to be careful here—the draft order will apply to anyone sentenced or otherwise dealt with after it comes into force, which includes those convicted and charged before the measure comes into force. As a reporting order is not a criminal penalty, the measure is compatible with article 7 of the ECHR. As the hon. and learned Gentleman knows, the fact that a reporting order is not a criminal sanction means that it does not change human rights legislation. I commend the draft order to the Committee.
Question put and agreed to.
That the Committee has considered the draft Serious Organised Crime and Police Act 2005 (Amendment of Section 76(3)) Order 2007.
Committee rose at one minute past Three o’clock.

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