House of Commons - Public Administration

Select Committee on Public Administration Second Report

4 The legal framework

42. As already noted, it is the Honours (Sale of Abuses) Act 1925 (hereafter referred to as the 1925 Act) which criminalises the sale of honours or peerages. We have previously stated that we would review this law as it affects public life and corruption based on the lessons we could learn from the police investigation once it had concluded.[36] The unspoken question was whether an Act which was now over eighty years old, and under which only one successful prosecution had ever been brought, should still be on the Statute Book in its original form.

43. A caveat is needed, that an Act cannot reasonably be judged by one case alone. Professor Justin Fisher told us that:

He gave us the example of the legislation which debars political parties from taking out advertisements through broadcast media. Calling it "one of the finest pieces of legislation on our statute book", he noted that the fact that there have been no prosecutions under that piece of legislation did not make it a bad piece of legislation, as it had successfully set the boundaries of what constituted acceptable behaviour.[38]

44. We accept Professor Fisher's point. Nonetheless, there are questions which arise out of this individual case which do, at the very least, cast doubt on the continued usefulness of the 1925 Act. We comment on these below.

The CPS decision and the 1925 Act

45. Section 1 of the 1925 Act creates two offences:

(1) If any person accepts or obtains or agrees to accept or attempts to obtain from any person, for himself or for any other person, or for any purpose, any gift, money or valuable consideration as an inducement or reward for procuring or assisting or endeavouring to procure the grant of a dignity or title of honour to any person, or otherwise in connection with such a grant, he shall be guilty of an offence.

(2) If any person gives, or agrees or proposes to give, or offers to any person any gift, money or valuable consideration as an inducement or reward for procuring or assisting or endeavouring to procure the grant of a dignity or title of honour to any person, or otherwise in connection with such a grant, he shall be guilty of an offence.

The penalties under this Act are imprisonment for a term not exceeding two years, or an unlimited fine, or both.

THE EVIDENTIAL TEST FOR PROSECUTION

46. The explanatory note from the Crown Prosecution Service helpfully expresses the offences under the 1925 Act in slightly plainer English:

An offence is committed if :

an unambiguous offer of a gift, etc, in exchange for an honour, is either made or solicited by one person to or from another, even if that other person refuses either to accept or to make such an offer; or

one person agrees with another to make/accept a gift, etc, specifically in exchange for an honour.[

This seems very clear. We note that nowhere in the CPS explanatory note do they dispute that loans can be considered to be a "gift, money or valuable consideration". We support this implicit assessment.

47. The CPS go on to explain that without a complaint concerning the first of the two options above, namely, an unambiguous offer, they concentrated on seeking evidence of an agreement between two people:

agreement

We understand this argument. An offer is hard to investigate if nobody admits to having made, received or witnessed one. An agreement is more likely to leave evidence, such as a donor subsequently being put forward as a nominee for a peerage.

48. The CPS go on to state that:

For a case to proceed, the prosecution must have a realistic prospect of being able to prove that the two people agreed that the gift, etc, was in exchange for an honour. Such an agreement might be proved either by direct evidence, or by inferences that can be drawn from the circumstances of the case. Such inferences must be so strong as to overwhelm any other, innocent, inferences that might be drawn from the same circumstances.

Not having seen the evidence, we must accept the assertion that there is no direct evidence of an agreement. In that case, as the CPS say, the case must rely on circumstantial evidence, which must be very strong to meet the criminal standard.

49. Chris Sallon QC explained to us why this placed a high evidential burden on the prosecution:

50. Mr Sallon then went on to explain how this was especially difficult to prove if the CPS would have to rely on circumstantial evidence, as in this case:

Some of these elements were clearly present in this case, based on evidence that was in the public domain before the police investigation even began. However, the inferences drawn from this circumstantial evidence need to be strong enough to overwhelm the possibility of alternative explanations for the behaviour, as Mr Sallon went on to explain:

51. It was on the inability to discount alternative explanations that the grounds for prosecutions fell down. The eventual decision of the CPS not to prosecute anyone under the 1925 Act was based on the following analysis:

It is the case that each of those who lent or donated money to the Labour Party and who have been interviewed during the course of the investigation has denied that any improper agreement was made, as have all those concerned within the Labour Party and in Downing Street. There is furthermore substantial and reliable evidence that there were proper reasons for the inclusion of all those whose names appeared on the 2005 working peers list, or drafts of that list: that each was a credible candidate for a peerage, irrespective of any financial assistance that they had given, or might give, to the Labour Party.

52. Many commentators noted the apparent disparity between the CPS assessment that each of the candidates was a credible candidate, and the House of Lords Appointments Commission's assessment that none of them passed its credibility test. However, the task of the CPS is different from that of HoLAC. The Appointments Commission was looking to satisfy itself beyond doubt that the candidates were credible, which it was unable to do—so they opted for a policy of "if in doubt, keep them out". The CPS had the reverse task, to demonstrate beyond doubt that the candidates were not credible, and this too was not possible. Seen in this context, the two bodies' assessments are not incompatible.

An impossible test to pass?

The decision to investigate

53. It is clear that the framing of the 1925 Act makes it extremely difficult, barring any direct evidence of explicit agreements, to put together a case which the CPS would be willing to prosecute. Indeed, such was the challenging nature of the evidential test set out by the CPS after their decision not to prosecute that it invites the question whether the CPS might have been able to advise the police earlier that their investigation was unlikely to bear fruit. The CPS's Carmen Dowd told us that this would not have been possible:

A case of this nature cannot be looked at in a piecemeal fashion. There are lots of pieces of evidence in any case that, when put together, look very different from when they sit alone, and so it was not until the investigation had been concluded that we sat and looked at all of the evidence and made our decision.[

54. The Cabinet Secretary suggested that the right time to have thought about the likelihood of conviction was in fact before the police investigation began:

55. It is clear that Assistant Commissioner Yates did give consideration as to whether it was right to start an investigation based on the complaints he had received. When he gave evidence before us, he read out words he had written on 21 March 2006, before commencing the investigation:

We went on to discuss with Mr Yates at some length whether he could have foreseen at the start of the investigation that, in the absence of any explicit agreement, any evidence he might unearth would be unlikely to meet the 1925 Act's very high evidential test. He was insistent that, given that he had a prima facie case, and that there were inferences that evidence might be available, the right thing to do was to seek that evidence and to continue seeking if that evidence was not immediately forthcoming as "you never know what you are going to find out".[49]

56. The Metropolitan Police were not entirely without experience of investigations of alleged breaches of this particular law. Mr Yates has furnished us with details of a previous case, that of Mr Derek Lord (or Laud):

This was based on an investigation by the 'Observer' newspaper into an individual connected to the Conservative Party who was alleged to be 'endeavouring to procure' honours for two named individuals using his contacts within the Conservative Party who were at that time in power. The newspaper passed all the material gathered to the MPS who conducted an investigation.

It is interesting that in this case too the investigation took well over a year, and yet did not lead to any charges. Mr Yates tells us that there is no record of any other such allegations being made to the Metropolitan Police, although we do not know for certain that allegations have not been made to other UK police forces.

57. There is a legitimate role for the police in investigating allegations that honours or peerages have been sold. Criminal offences serve no purpose if allegations that they have been committed cannot be investigated.

58. In order to avoid any possibility of prejudicing any prosecutions, we agreed to pause our original inquiry. This was on the understanding that, given the nature of the evidential test, the police investigation would be relatively brief. The fact that it turned out not to be brief meant that we were unable to carry out our inquiry in the way that we had originally intended to. In retrospect, it is not clear that the inability of a parliamentary committee to examine in public serious allegations of misconduct has served the public interest.

HISTORICAL AND HYPOTHETICAL PROSECUTIONS

59. Moving from the particular to the hypothetical, we have considered whether there are any plausible circumstances in which a conviction might now be secured under the 1925 Act. The observations already cited from the CPS and from Chris Sallon QC indicated that the evidential test was nearly impossible to pass based on circumstantial evidence alone, but Assistant Commissioner Yates suggested otherwise:

Let me give you an example what I would think, and Mr Perry [David Perry QC, independent counsel for the CPS] might say, "Nonsense." An overwhelming inference would be, for example, somebody lending a political party £10 million and getting an honour and never having a record of public service or political contacts in whatever form. That, I would say, from an investigator's perspective, could be construed as an overwhelming inference.[

Mr Perry did not say "nonsense" to this suggestion. Instead, he told us that there were circumstances in this as in any other fields where prosecutions could be brought based on a mosaic of evidence—although he did not furnish an example.[52] Lord Hurd concurred, observing that "clearly you could write a novel in which this happened".[53]

60. Mr Perry also elaborated helpfully on what had been deliberately excluded from the 1925 Act:

61. The circumstances of the only successful prosecution under the 1925 Act, that of Maundy Gregory in 1933, are illuminating. Maundy Gregory worked as an honours broker under Conservative, Liberal and Coalition governments, securing funds for their parties and significant profits for himself. As Prime Minister, David Lloyd George established a general tariff for titles, with knighthoods costing £10-12,000 and baronetcies £40,000, which Gregory enforced and from which he took commission. In this period titles were given to ex-convicts, including one man convicted of trading with the enemy in the First World War, and un-discharged bankrupts.

62. Even during this peak period, the sale of honours was found offensive by the public and the press. In September 1927, the Banker (a newspaper) argued that many of those obtaining honours were "gross illiterate profiteers, doubtful in their reputations, vulgar in their lives…shovelled into the House of Lords, created baronets and knights, merely upon the strength of the money they had obtained in preying upon England in the most awful crisis of her affairs".[55] It was in this climate that the 1925 Act was passed, but even so Maundy Gregory was not prosecuted until 1933—most likely because the high profile of many of his clients afforded him protection.

63. Significantly, even in a case where the accused's guilt was plain, a whistleblower was required to secure the conviction. In December 1932 Gregory and his aide approached Lieutenant-Commander Edward Whaley Billyard-Leake, promising a knighthood in exchange for £12,000. On receipt of a letter from Gregory, Billyard-Leake handed it to the Treasury Solicitor and made a statement on his dealings with Gregory. He later gave evidence against him, and Gregory eventually pleaded guilty. Nonetheless, the police did not pursue charges against anyone who had bought an honour.

64. If the case against Maundy Gregory was much clearer than any subsequent case, it is also true that the sins of Maundy Gregory and of the Lloyd George era were very different from anything that is alleged to have happened in recent years. Nobody to our knowledge is claiming that there is a general tariff for any title, available indiscriminately to anybody who is willing to pay. While we deplore the possibility of individual honours or peerages being awarded on the basis of ability to pay, we must acknowledge that today's honours and Lords appointment systems are fundamentally different from those of the 1920s. There are checks and balances which ensure that never again could an honours broker live off the commission of the titles he sold.

65. Nonetheless, the behaviour of which Maundy Gregory and his clients were guilty in the 1920s is rightly still criminal even if the chances of successful prosecution are extremely low. Lord Hurd told us that the 1925 Act served a purpose as a longstop,[56] as "you could conceive of circumstances in which a prosecution could be brought."[57] We accept this point, and the already cited similar views of other witnesses.

66. The Honours (Prevention of Abuses) Act still serves a purpose as a long stop. It defines behaviour which was totally unacceptable in 1925, and is totally unacceptable now. The failure of the police to secure a prosecution in recent years is not necessarily a failure of the Act - we do not know that anything illegal took place. We would therefore resist any proposals that suggested the Act should be repealed in the absence of more comprehensive legislation coming forward.

67. It does appear, however, that the likelihood of securing prosecutions under the 1925 Act will always be very low even if peerages or honours are covertly traded. The behaviour which the Act criminalises is deliberately very limited. One effect of that limitation is that to secure a conviction in practice, the police would almost certainly have to catch someone red-handed. Given the nature of clandestine deals, this seems unlikely to happen. We must therefore look for ways to improve the law in this area.

Refining the 1925 Act

POTENTIAL NEW OFFENCES

68. We have seen that the 1925 Act deliberately delimits what is criminal behaviour and what is not. For example, it is not illegal to nominate someone for an honour or a peerage on the basis of past contributions to a party, as long as those contributions were not made on an explicit understanding that they would lead to any specific reward. While the House of Lords Appointments Commission might block anyone who was put forward to be a peer purely on the basis of past financial contributions, parties are free to nominate whom they like without setting out any reasons. Indeed, they could explicitly state that a particular nominee is being put forward for their past financial contributions. Put simply, it is not illegal for parties to appoint donors to the House of Lords purely on the basis that they have made donations in the past. Nor is it illegal to give cash in the hope of one day being honoured.

69. One option for reform would be to extend the types of behaviour which are considered criminal. Parliament could act to make it illegal to take into consideration past financial contributions when nominating someone for a peerage. However, it is not clear what that would achieve. It may not be a crime to nominate someone to the House of Lords based solely on a financial contribution to a party, but if a convincing case cannot be made that they are in any event a credible candidate, the Appointments Commission should prevent their nomination being passed to the Queen. If the Appointments Commission can be so established that people can have confidence that it will block the appointment of prospective peers whose main qualification is a financial contribution, then it matters less if parties nominate such people. If there can be a transparent nomination process, as we discuss in chapter 7, then the only people who will be hurt if the parties nominate under-qualified donors are the parties and the donors themselves.

70. Another possible extension of prohibited behaviour would be to ban people from making political contributions in the hope that they will be nominated for an honour or peerage. It is, however, legitimate for rich individuals to donate large sums of money to political parties, so long as they do not do so in the expectation of any reward. What is rightly regarded as reprehensible is the idea that donors are seeking, and getting, something in return for their donation. It is impossible to legislate for motivations. However, while it would be desirable to prevent people from even trying to buy favour, it makes more sense to ensure that even if they do try, they cannot succeed. This must be the objective of any reform.

71. Having established that it is deeply unlikely that a circumstantial case could be put together which convinced a jury that an explicit agreement had been made, the other theoretical possibility is to make it easier to prosecute implicit agreements or offers. Implicit agreements to exchange money for reward are odious; but they are also by their very nature likely to be impossible to prove to the criminal standard. Lord Hurd told us that he suspected we would be hard pressed to draft in legislative form a criminal offence that covered an implicit agreement.[58] Dr Meg Russell of University College London agreed:

Dr Michael Pinto-Duschinsky, of Brunel University, agreed with this analysis,[60] as did his colleague Professor Fisher:

72. It is hard to see what would be gained from seeking to criminalise any additional forms of behaviour beyond those already caught by the 1925 Act. An offence of giving money in the un-stated hope of some reward would never be possible to prove. It is already illegal implicitly to agree an exchange of cash for honours or peerages; the difficulty lies in the low likelihood of proof. If the police cannot find evidence of an unambiguous agreement, we can hardly make an offence out of an ambiguous one.

CHANGING THE BURDEN OF PROOF

73. If it is too difficult to secure convictions under the current offences, and there are no sensible new offences to create, the remaining possibility is to make some change to the burden of proof to make it easier to secure convictions under the current offences. Chris Sallon QC has advised us that the obvious way to do this would be to reverse the burden of proof so that it falls on the defendant:

The primary problem in establishing any corrupt activity is proving to the requisite standard the intentions of and agreements between the relevant parties. In the "Cash for Honours" investigation, it was clear that some of those who had made significant loans to the Party were subsequently recommended for honours. The primary problem with the potential prosecution of those involved was showing the necessary intention and agreement …

The offence of corruption is inherently clandestine. Acts of corruption rarely take place in the presence of witnesses and evidence is rarely recorded. Considered in this context, it is difficult to argue with the conclusion … that the presumption of corruption in the 1916 Act [Prevention of Corruption Act 1916] should be extended throughout the law of corruption.[

74. Under such a presumption, Mr Sallon tells us that the prosecution would merely have to demonstrate (albeit to the criminal standard of "beyond reasonable doubt") that "some money, gift or consideration was provided to a public body", and that "the person providing it (or the person whose agent provided it) was holding or seeking to obtain an advantage" from that public body. No proof of an agreement between two parties would be needed. The defendants would then have to convince a jury that their innocent explanation was more plausible than any suggestion of corruption.[63] We note Mr Sallon's suggestion that this reversal of the burden of proof could apply to all accusations of corruption and not just to offences around the sale of honours and peerages.

75. However, Mr Sallon also noted that expanding the presumption of corruption would be an infringement of the presumption of innocence guaranteed in Article 6 (2) of the European Convention of Human Rights. Such an infringement can be justified in certain circumstances, and Mr Sallon gave us an argument which could be used, including the fact that the 1916 Act does not appear to have been challenged. However, his personal opinion was that this argument was not as strong as the counterargument that private sector corruption, in the form of criminal fraud, is regularly prosecuted without the benefit of the presumption of guilt. This suggested to him that "the phenomenon of under-prosecution on the part of the CPS [with regard to all forms of corruption in the public sector] might be accounted for by underlying and more sensitive problems than to genuine evidential difficulties". For these reasons, his opinion was that a more robust presumption of corruption would be unlikely to be considered as Human Rights Act compliant.[64]

76. Our witness from the legal sphere, David Perry QC, while avowing that he was not sure he possessed the appropriate expertise to comment, seemed to agree with Mr Sallon's analysis:

One of the matters which was mooted with me before today was, whether there should be an attempt to impose a burden of proof on the defence … what I would say in relation to that is that any such suggestion would first of all involve political and moral questions, given the pre-eminence of our law to the presumption of innocence, and although Parliament would have primary responsibility for deciding where the appropriate balance would lie, it would have to do so taking into account and giving proper weight to human rights considerations and the overriding need to ensure that any person charged with a criminal offence has a fair trial.

77. For the sake of completeness we note there is also a hypothetical possibility that allegations of sale of honours could be tried on the balance of probabilities rather than to the criminal standard of being proven beyond reasonable doubt. This might increase the willingness of the police to investigate complaints and the likelihood of convictions. However, there are good reasons why criminal offences are generally tried at the criminal standard, not least of which is that to do otherwise is a potentially significant infringement of human rights. We do not see that the results of this particular crime are so significant as to warrant what would be a highly unusual departure from the criminal standard of proof.

78. The legal advice we have received is that it is probably not compatible with the European Convention on Human Rights, and hence with the Human Rights Act, to change the burden of proof for offences under the 1925 Act. While we must ensure that corrupt behaviour is effectively prevented or, failing that, effectively punished, this has to be balanced against the human rights of those accused. In this case, we do not believe the case for changing the burden of proof is sufficient to justify the human rights implications.

Reforming the general law of corruption

79. The discussion of the legal framework so far raises the interesting suggestion that the offences covered by the 1925 Act ought in any event to be covered by general laws against corruption in the public sector. There is nothing particularly special about the sale of honours—these acts are comparable to any other attempt to purchase influence or specific favours. It is not clear that for the acts of attempting to purchase an honour or a seat in the legislature there is any case for specific offences, methods of investigation or punishments which are different from those for public sector corruption in general.

80. Chris Sallon's paper raises interesting issues around the law of corruption which arose from this investigation. While some of these go beyond the matters which have been the subject of our inquiry, they are all nonetheless relevant, in that they lead him to believe that none of the current corruption laws could have been applied to the recent "cash for honours" case. It is a common opinion that the present law is in an unsatisfactory state. The statutory offences of corruption date from 1889, 1906 and 1916, and so are understandably out of date. They and the common law offences of bribery should be replaced by a modern statute. Such is the belief of the Law Commission and of a Joint Committee which scrutinised the Law Commission's draft Bill in 2003.[66] That Joint Committee was not entirely satisfied by the draft Bill, and invited it to be revised and re-entered into Parliament. After a further Government consultation which found no consensus on how to achieve reform, the Law Commission has been asked to look again at these matters, this time focused on the law of bribery, and to publish a revised draft Bill in autumn 2008. A consultation paper was published on 29 November 2007.[67]

81. Mr Sallon makes three suggestions of provisions a revised statute should include. His contention is that if these were applied, the need for the 1925 Act would disappear:

A rationalised definition of public body: this was potentially a problem with the recent police investigation as some of those involved were not civil servants. There is also a question of whether Members of Parliament should still be excluded from corruption laws. Mr Sallon suggests several ways of effecting such a change.
All corruption offences should have a common, modernised definition of "bribe": under some, including the 1925 Act, it would be possible for a defendant to advance a technical argument that a loan falls outside the relevant definitions.
A broader definition of what constitutes a corrupt act: definitions range from the very specific, such as under the 1925 Act, to the very wide, such as under the Prevention of Corruption Act 1906 which defines the corrupt act as "more favourable treatment".

We publish Mr Sallon's advice in full as an annex to this report.[68]

Conclusions

82. Consideration should be given to subsuming the specific law on abuses around honours and peerages into a new general Corruption Act. The need for such an Act is not disputed. The Law Commission is currently working on something along these lines, at least with regard to bribery. We recommend they should consider incorporating the behaviour outlawed by the 1925 Act in their new draft Bill, and give serious attention to the points raised in this part of our Report.

83. When a Bill is produced, we hope the Government will soon find time for it in the parliamentary schedule. The last Corruption Act was in 1916—a modern law is overdue. We would also suggest that this Committee or its Members should be invited to play some part in giving pre-legislative scrutiny to the draft Bill.

84. However, corruption in the public sector remains very rarely prosecuted, and it may always be difficult to secure convictions. Any attempt to bribe or to solicit bribes of any kind ought to be effectively punishable; but our first priority ought not to be refining the law to punish offenders. It must be preferable to take steps to prevent offences from being committed. In the case of preventing the sale of peerages, this should be approached through better regulation of political parties and their funding, and a better appointments process for the House of Lords. These issues are dealt with in the remainder of this report.

36 Public Administration Select Committee, Fourth Report of Session 2005-06, Propriety and Honours: Interim Findings, HC 1119, para 21 Back

37 Q 416 Back

38 As above Back

39 Crown Prosecution Service, CPS decision: "Cash For Honours" case, 20 July 2007, para 23 Back

40 As above, para 24 Back

41 As above, paras 25-27 Back

42 Annex, para 16 Back