House of Lords
Tuesday, 14 October 2014.
2.30 pm
Prayers—read by the Lord Bishop of Truro.
Thames Tideway Project: Contingent Guarantees
Question
2.37 pm
To ask Her Majesty’s Government why they have indicated the availability of contingent guarantees in support of Thames Water; and whether this complies with their policies on offshore financial instruments, governance and taxation.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con): My Lords, to be clear, the Government are not providing a contingent guarantee to Thames Water. The Thames tideway tunnel project will be financed and delivered by a competitively tendered infrastructure provider which is an entirely separate entity to Thames Water. Details of a contingent government support package for this entity, which complies with all relevant government policies, were announced in a Written Ministerial Statement on 5 June.
Lord Berkeley (Lab): My Lords, I am grateful to the Minister for that reply. Every week the Government tell us that they intend to outlaw aggressive taxation and leverage policies. The Minister says that Thames Water is not going to be in receipt of these funds but the Thames tideway tunnel project will be. Why are they allowing that to be financed in a tax haven while also promising it a government guarantee? Is there not a conflict of interest here somewhere?
Lord De Mauley: My Lords, I have comprehensively answered the noble Lord’s point about tax in earlier short debates on this subject. Perhaps we will come back to that later, but I will address his point about the appropriateness of offering a government support package. The contingencies covered by it are set out in the Written Ministerial Statement. It is common for Government to provide support of some kind to major infrastructure projects—for example, the PFI projects under the previous Government. The government support package here will cover low probability but high impact risks that the market could not take on at a reasonable cost to customers. The infrastructure provider will be incentivised not to call on it and it will exist only during the construction phase. The important thing to bear in mind is that the infrastructure provider will pay for the cover. Furthermore, the financing for the project is sought competitively to help minimise the cost—and that means the cost to customers.
Baroness Parminter (LD): My Lords, given the Government’s work with Infrastructure UK, Thames Water and Ofwat to identify the exceptional risks for which the contingent financial support has been offered, what measures have the Government asked to be put in place to minimise the likelihood of those risks and the resulting cost to the taxpayer?
Lord De Mauley: My Lords, the latter half of my noble friend’s question is quite difficult to answer at this stage. The Written Ministerial Statement referred to the contingencies covered by the support package. There are, for example, measures to deal with situations where claims exceed insurance cover, where economic or political events affect access to debt finance, where there are exceptional cost overruns and where the IP goes into special administration. It allows for discontinuation in certain circumstances and deals with how value for money for taxpayers is to be achieved. I can assure noble Lords that we have kept this to an absolute minimum to ensure a competitive process.
Lord West of Spithead (Lab): My Lords, will the Minister confirm that Thames Water has now put in place all the security measures that were required to ensure that water supplies cannot be easily contaminated or poisoned by terrorists?
Lord De Mauley: I cannot answer that specific question. I can say that it is Ofwat’s job to oversee exactly what each water company does, particularly Thames Water.
Lord Brooke of Sutton Mandeville (Con): Pursuant to the question asked by the noble Lord, Lord West, is my noble friend aware that on the Thursday of the occupation of the Iranian embassy rather more than 30 years ago, the chairman of Thames Water was rung up by an anonymous caller on that morning and asked whether, if he received instructions to cut off the water to any of his customers, he would accept that order implicitly? The chairman replied, “If it was the Iranian embassy, yes; if it was any other customer of ours, no”. In my view, he demonstrated considerable knowledge of the international scene.
Lord De Mauley: I know that we are always grateful to my noble friend for his grasp of history. He was there. On the question asked by the noble Lord, Lord West, it is important enough that I will write to him.
Lord Grantchester (Lab): My Lords, we have heard growing anxieties around certain facets of the water industry. Further to the specification and preparatory works notice regarding the Thames tideway tunnel recently published, will the Government look again at the value-for-money condition to provide better clarity concerning financial commitments for customers before agreeing contingent government support?
Lord De Mauley: My Lords, I agree 100% with the noble Lord that value for money for customers is absolutely key and is an absolute focus of the Government.
Housing: Private Rented Sector
Question
2.42 pm
Asked by Lord McKenzie of Luton
To ask Her Majesty’s Government what steps they will take to improve housing stability for those renting in the private sector, particularly families.
Lord McKenzie of Luton (Lab): My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I draw attention to my interest declared in the register.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon) (Con): My Lords, the Government are avoiding the excessive red tape which would push up rents and reduce supply. We have recently published a model tenancy agreement to encourage longer, family-friendly tenancies. Our £1 billion Build to Rent fund will deliver up to 10,000 new homes for private rent, and our housing guarantee schemes will attract long-term investors into the market to increase choice, quality and stability for renters. In responding to the Question, I, too, refer the House to my entry in the register of interests.
Lord McKenzie of Luton: My Lords, I thank the Minister for his reply. We know that the demographics of those renting privately has been changing, with more families and children in the sector. However, for many, it is not through choice: they are priced out of the private market and cannot secure a social home. We know that it is the most expensive type of tenure and that tenants are nine times more likely to move than in other sectors. Of course, this is especially disruptive to the education of children. While we note from the model tenancy agreement that the Government say that they now see the benefit of longer-term tenancies and some predictability on rent increases, why will they not legislate to give tenants the right to such tenancies? What would the Minister say to a family who want to stay put to have the peace of mind that children can continue at the same school but have been refused a longer-term tenancy on the lines of the Government’s model?
Lord Ahmad of Wimbledon: My Lords, first, on the final point, I totally agree with the noble Lord on the need for long-term tenancies to ensure the education of children. As a father of three, that is something to which I can relate personally. However, I take issue with the suggestion about the private rented sector in terms of cost. If we just examine some of the facts, private sector rents have actually fallen in real terms every single year through this Government in England, including in London. If you account for inflation, for example in London they have risen by 1.1%. Average rents are down in real terms: inflation was 1.6% for the year to March, while rents grew by just 1%.
On the issue of length of tenancies, while I hear the point made by the noble Lord that the length of tenancies could be increased through legislation, practice has shown that tenancy lengths have increased by 6%,
to about 3.8 years for an average tenancy, and 80% of private renters who have moved in the last three years ended their tenancy because they wished to move to another property.
Lord Morris of Handsworth (Lab): My Lords, will the Minister tell the House to what extent the bedroom tax contributes to families being made homeless?
Lord Ahmad of Wimbledon: Issues around the spare room subsidy are well documented. The important principle behind that particular policy which should not be forgotten was to ensure that more rooms and more housing could be made available to those who needed it. While that policy has caused some concern in certain areas, currently we are demonstrably seeing that the rooms that are being freed up are being utilised. We are seeing more rooms being made available to address the acute need and demand for housing.
Lord Shipley (LD): My Lords, the Minister referred to the success of Build to Rent, in that it will have built some 10,000 homes by 2015. Do the Government have any plans to extend Build to Rent? Have they given any thought to the creation of a housing investment bank, which could lend money and create more housing units in the private rented sector, thus giving greater foundations to those who are renting by enabling them to stay in their homes at rents that they can afford?
Lord Ahmad of Wimbledon: My noble friend raises an important point about expanding the rented sector. He is correct that our £1 billion Build to Rent fund will provide development phase finance to large-scale private rented sector developments, building up to 10,000 new homes. Eight round 1 projects are now in contract, worth £124 million and delivering more than 1,600 new homes for private rent. He also asked about other schemes and I have heard the suggestion that he put forward. The Government are currently supporting the housing guarantee schemes, which are now open for business and supporting up to £10 million-worth of investment in large-scale private rented projects and in additional affordable housing. For example, the delivery partner in our private rented housing debt guarantees has received a lot of strong interest. A £500 million European Investment Bank loan facility for affordable housing debt guarantees, which was announced on 7 January this year, has attracted eight borrowers. So there are a variety of schemes that the Government are supporting and promoting to ensure that we address this very important need.
The Lord Bishop of Rochester: My Lords, I am grateful to the Minister for his assurance that the Government are aware of the needs of families in relation to the length of tenure for tenancies. Is the Minister also cognisant of the needs of retired persons, where length and stability of tenancy are important not only for their well-being in old age but also for their contribution to the communities where they are living in a sustainable way?
Lord Ahmad of Wimbledon: The right reverend Prelate again raises an important point at the other end of the age spectrum, and the Government are very much cognisant of ensuring stability for residents and that their needs are met. One thing on which we are clear is our approach to the private rented sector, through landlords, through providing greater protection and a greater sense of professionalism for both landlords and agents. We are also helping provide an increased level of guidance to tackle any perceived rogue landlords and making more help available to tenants in this particular sector.
Baroness McIntosh of Hudnall (Lab): My Lords, I think some Members of your Lordships’ House were a little surprised by the figures that the Minister produced in relation to average rent increases, particularly in London. Will he tell the House where those statistics have come from and who produced them?
Lord Ahmad of Wimbledon: Our statistics come from a variety of sources, but I will write to the noble Baroness on that—
Lord Ahmad of Wimbledon: Noble Lords may laugh, but I have the figures in front of me which I quoted. The noble Baroness raises an important point about the verification of sources and I shall, of course, inform the House accordingly.
Lord Forsyth of Drumlean (Con): My Lords, is my noble friend satisfied with the asymmetric treatment of tax relief on mortgage interest for buy-to-let landlords, which has the effect of forcing up prices and thus giving them an advantage over private buyers and ultimately pushing up rents?
Lord Ahmad of Wimbledon: The Government have shown, through the various schemes which have been launched recently, our commitment to ensure that more people can engage with the property ladder. For example, a recent scheme that my noble friend may be aware of is that of rent to buy. Some £400 million is being made available to allow people to rent now and buy later. As he knows, we have also introduced the Help to Buy scheme, which is helping 53,000 new households. He made the important point that perhaps some people would be gaining more perceived benefits. He may well be satisfied with the point I would put to him: that through our initiatives the Government are demonstrably ensuring that the ability to purchase your first home is being made more widely available.
Money Laundering: UK Parliamentarians
Question
2.50 pm
To ask Her Majesty’s Government whether they will make representations about the inclusion of United Kingdom parliamentarians under the definition
of “Politically Exposed Persons” in the European Commission’s proposed fourth Money Laundering Directive.
The Commercial Secretary to the Treasury (Lord Deighton) (Con): My Lords, while UK parliamentarians are not currently considered to be “politically exposed persons”—or PEPs—domestically, revised global standards to which the UK is fully committed will require that they are treated as such. These global standards require enhanced due diligence and ongoing monitoring only when the business relationship is assessed as high risk. The UK will make representations when negotiating the fourth money laundering directive to ensure that it reflects these standards.
Lord Clement-Jones (LD): My Lords, I am afraid that my noble friend’s response is only partly reassuring. Even before the fourth directive has come in, many Members of this House and their relatives are being treated as PEPs. I myself and my son were unable to access an ATM and my brother was unable to exercise a joint power of attorney. What steps is the Treasury taking to show Members of Parliament in both Houses that in future they will not be treated in exactly the same way as a deposed dictator or a political pariah?
Lord Deighton: My Lords, the key here is in the approach of the banks in doing their due diligence appropriately. The main feature of these arrangements is that domestic PEPs should be assessed in terms of their level of risk, and in the main UK parliamentarians should be assessed as low risk and, frankly, treated in precisely the same way as any other customer. The problem is when banks do not apply the right kind of risk-based assessment and instead revert to inappropriate box-ticking approaches.
Lord Harris of Haringey (Lab): My Lords, perhaps the Minister will explain that to the clearing banks in this country. Perhaps he could explain why my daughter, who was then aged 12, was required to appear with her driving licence and a utility bill in her name in order to be allowed to have a savings account with no more than 40 quid in it.
Lord Deighton: I absolutely accept the criticisms that are made where banks behave disproportionately. It happens too often and we should work with them to fix that. I will certainly undertake to look at the revised guidance that will be coming out as part of these arrangements to ensure that the banks take a proper, risk-based approach which is sensitive to the real risks involved in these transactions. I would encourage Members to follow up with their banks when there is a problem. It is appropriate to complain to the Financial Ombudsman Service, which is a facility that we have in place. I took the liberty of looking at the number of complaints about PEPs received by the financial ombudsman. I think that there were around 50 in 2013 and 30 this year out of a total of half a million complaints. However, I encourage Members to pursue their interests.
Lord Wright of Richmond (CB): My Lords, is the Minister aware, although I rather doubt whether he is, that my two sons coincidentally tried to open bank accounts in Singapore and in New York? In both cases they were asked who their father was, and on discovering that I was a Member of this House, were both refused accounts.
Lord Deighton: It is always difficult for me to comment on individual cases. I think that Members are making their points very clearly, with a variety of illustrations that I absolutely take on board. I will certainly follow up with the banks domestically through the Joint Money Laundering Steering Group, which provides the guidance. We are trying to strike a balance that makes it impossible for corrupt politicians, terrorists and criminals to go about their business but which leaves the rest of us unimpeded to go about our lives in a normal way.
Lord Flight (Con): My Lords, the position of Members of this House and of the Commons is far worse than the Minister suspects. Some 150,000 people are rated as PEPs in this country, covering virtually all Members of this House and the House of Commons, including all spouses and all children. Wearing a hat as a banker I would add that, worst of all, banks are required to look at every transaction in the account of a PEP, both in and out, to satisfy themselves that they are proper transactions. The world of PEPs is by no means limited to just those who someone thinks are high risk. It covers virtually everybody and is completely out of control.
Lord Deighton: My noble friend is correct that the PEP definition includes close family members and business associates. I go back to the original point that it is not within the banks’ responsibility to look at every transaction of a domestic PEP; they should be assessing whether that PEP is high risk. If the PEP is not high risk, the banks should treat them like every other customer. That is where we need to focus our efforts to correct this problem.
Lord Soley (Lab): My Lords, I do not think that the Minister has taken on board the full range of problems, as other companies also put an unreasonable interpretation on this requirement. I am far from convinced that the way it has operated has at any time been useful in stopping money laundering, and we need to take a much harder look at it. It would be far better to look at other methods of checking for money laundering than simply asking for a person’s occupation and then declaring that they may therefore be a risk.
Lord Deighton: First, my Lords, I need to make the point that having an effective, comprehensive, international campaign against money laundering is a critical weapon for us, and we are taking leadership in this area. I absolutely accept that the implementation domestically needs to be significantly refined. As I have already said, I will work with the FCA and the industry bodies to ensure that we have a more proportionate application of the rules.
Baroness O’Cathain (Con): My Lords—
Lord Levene of Portsoken (CB): My Lords—
The Lord Privy Seal (Baroness Stowell of Beeston) (Con): My Lords, if we can be brief we will hear from the Cross Benches and then from the Liberal Democrats.
Lord Levene of Portsoken: My Lords, the Minister started his remarks by saying that those of us in this House should have little to worry about. I have to say, from personal experience of having an account in France to look after the small needs of the home that I own there, that one is treated as if it were the Spanish Inquisition. They really do not want to know any differently. Can the Minister give an assurance to the House that he will convey to his colleagues in Europe that these rules are meant to be applied reasonably and not draconically?
Lord Deighton: I can confirm that that will be precisely the message in the final negotiations on the fourth money laundering directive.
Lord Razzall: My Lords, I am sure that the Minister will accept that his answers have not entirely reassured Members of this House who are treated as politically exposed persons. Perhaps he can explain to me and to many of my colleagues who are not members of the Government: what is it that we might do, or what might be done to us, that makes us politically exposed people?
Lord Deighton: The thing to remember is that although the intention behind this approach is to catch potentially corrupt public officials around the world, defining someone as a PEP is not an end in itself—it is merely a trigger point at which an assessment should be made of the individual’s business and whether it is high risk. It is that assessment of whether it is high risk that is not working well enough at the moment.
Lord Davies of Oldham (Lab): My Lords, is it not clear that the House is struggling with two concepts: on the one side, that the Minister might be right; and on the other, that something good might come out of Europe? On this occasion, both things obtain.
Lord Deighton: I am not sure that there is a particular answer to that. I think that I have been extremely clear about what we are trying to accomplish. I accept where the challenges are and I accept that we need to do a lot of work with the banks on the implementation of the rules to make sure that they are proportionate.
ISIL
Question
3 pm
To ask Her Majesty’s Government what additional measures they are suggesting to allied states to prevent ISIL occupying further territory in Syria and Iraq.
The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con): My Lords, we are working closely with allies to deliver a sustained, comprehensive strategy to degrade and defeat ISIL. We welcome the recent decisions of Canada, the
Netherlands, Belgium and Denmark to join air strikes against ISIL. The Foreign Secretary continues to emphasise to our counterparts the need collectively to squeeze ISIL’s finances, to provide appropriate support to moderate forces in Iraq and Syria, and to work for an inclusive Government in Baghdad and political transition in Syria.
Lord Avebury (LD): My Lords, we are about to witness genocide, with the Daesh terrorists slaughtering thousands of Kurds in the besieged city of Kobani. Cannot the coalition airdrop military and humanitarian supplies to the defenders, as it has done in Iraq? If the Turks cannot help us by allowing use of airbases, as was suggested by Susan Rice yesterday, could they not at least allow the coalition to place observers on the border, so that the air strikes that we are mounting against ISIS in Kobani can be directed by observers on the ground?
Baroness Anelay of St Johns: My noble friend points to a situation in Kobani which deeply concern us all. Naturally, we are watching developments very closely. Turkey is already playing an important role in our coalition effort against ISIL, particularly through its humanitarian support in the region—my noble friend referred to that work, which I am sure will continue and intensify. Turkey is also assisting in providing support to the Syrian moderate opposition. Therefore we welcome Turkey’s support for the air strikes in Syria and Iraq, and the President of Turkey’s affirmation that he and his country are willing to play their part in the military campaign. My noble friend is right to press us to look further at how we might discuss with Turkey where that direction of help may develop. I am grateful to him for raising those issues today.
Lord Anderson of Swansea (Lab): My Lords, the Foreign Secretary told the Telegraph yesterday that there was a legal basis for air strikes in Syria—not just in Iraq, where there is no doubt—but as there is no Security Council resolution and no question of self-defence, on what doctrine of international law do the Government depend?
Baroness Anelay of St Johns: My Lords, with regard to Iraq, the position was set out clearly in the recall of Parliament, and my noble friend the Leader of the House repeated that. With regard to Syria, there are arguments that there is a legal basis in international law; namely, where there is a humanitarian disaster, action may have to be taken. What I can say clearly is exactly what the Prime Minister and the Leader of this House have said; that is, if we get to a position where it is felt appropriate to move to further engagement and if there is a knowledge ahead, a premeditation, of taking further action, then nothing will be done unless the Government return to Parliament to have that matter considered.
Lord Alton of Liverpool (CB): My Lords, in her reply, the Minister mentioned the importance of an inclusive Government in Baghdad. Given the number of Sunni Muslims who have been antagonised by the kinds of policies that have been pursued in the past, can she say what more is being done to prevent them
becoming a fertile breeding ground for IS? Will she say a word also about the position of the Yazidis, Christian minorities and others, who are without adequate accommodation as the winter months now approach?
Baroness Anelay of St Johns: My Lords, there are two different strands there; I will refer to the humanitarian effort first. Clearly, as winter draws in fast, the humanitarian effort has to be directed at preventing people from dying of hypothermia. It is a most serious matter. I know that DfID has clearly worked hard on that, and, I understand, so have our partners. I discussed those matters with the president of the International Committee of the Red Cross when I was in Geneva last month. With regard to the way in which minorities have suffered in the existing crisis, it is clear that life in the whole area for Christians and other minorities is deeply distressing. We certainly discussed repeatedly with the Government of Iraq how that might be resolved. I can say to the noble Lord, Lord Alton, that when Foreign Office Ministers visit the region, they always meet the Christian communities to discuss their concerns. My honourable friend Mr Ellwood, in his visit at the end of August, specifically raised the persecution of Christians with the then Foreign Minister Zebari and other senior officials. It is something that we take very seriously.
The Archbishop of Canterbury: My Lords, I thank the noble Baroness for her last answer, which was very reassuring. However, given that the terrible events in Iraq and Syria are the result of a global phenomenon of ideology, what steps are the Government taking to support other areas such as Nigeria, Kenya, Somalia, Pakistan and Sudan where similar problems need to be either prevented, mitigated or contained?
Baroness Anelay of St Johns: My Lords, this is a matter that I discussed this very morning with a group set up by my noble friend Lady Warsi at the Foreign Office. She did most important work; the group is considering freedom of religion or belief. I can say firmly not only that this is one of the six priorities for this Government, but, as when my noble friend Lady Warsi led on this, it is a personal priority for me to ensure that throughout government and throughout our discussions, we consider exactly those points. It is not just a matter of looking at one area but of considering how a breaking down of religion or belief around the world can undermine the very societies in which people need to have security.
Leader of the House of Lords Bill [HL]
First Reading
3.07 pm
A Bill to amend the Ministerial and other Salaries Act 1975 in order to increase the maximum number of salaries payable to Secretaries of State; and to make provision about the Leader of the House of Lords.
The Bill was introduced by Lord Forsyth of Drumlean, read a first time and ordered to be printed.
Deputy Chairmen of Committees
Membership Motion
3.08 pm
Moved by The Chairman of Committees
That Lord Taylor of Holbeach be appointed a member of the panel of Deputy Chairmen of Committees, in place of Baroness Anelay of St Johns.
Select Committees
Membership Motion
3.08 pm
Moved by The Chairman of Committees
That Lord Taylor of Holbeach be appointed a member of the following Committees, in place of Baroness Anelay of St Johns: Administration and Works, Privileges and Conduct, Procedure and Selection.
Arctic Committee
Membership Motion
3.09 pm
Moved by The Chairman of Committees
That Baroness Neville-Jones be appointed a member of the Select Committee in place of Lord Ashton of Hyde, resigned.
Serious Crime Bill [HL]
Report (1st Day)
3.09 pm
Clause 2: Provision of information
1: Clause 2, page 3, line 3, at end insert—
“( ) After that section insert—
“18A Provision of information as to defendant’s interest in property
(1) This section applies if the court—
(a) is considering whether to make a determination under section 10A of the extent of the defendant’s interest in any property, or
(b) is deciding what determination to make (if the court has decided to make a determination under that section).
In this section “interested person” means a person (other than the defendant) who the court thinks is or may be a person holding an interest in the property.
(2) For the purpose of obtaining information to help it in carrying out its functions under section 10A the court may at any time order an interested person to give it information specified in the order.
(3) An order under this section may require all or a specified part of the information to be given in a specified manner and before a specified date.
(4) If an interested person fails without reasonable excuse to comply with an order under this section the court may draw such inference as it believes is appropriate.
(5) Subsection (4) does not affect any power of the court to deal with the person in respect of a failure to comply with an order under this section.
(6) If the prosecutor accepts to any extent an allegation made by an interested person—
(a) in giving information required by an order under this section, or
(b) in any other statement given to the court in relation to any matter relevant to a determination under section 10A,
the court may treat the acceptance as conclusive of the matters to which it relates.
(7) For the purposes of this section an allegation may be accepted in a manner ordered by the court.
(8) If the court makes an order under this section it may at any time vary it by making another one.
(9) No information given by a person under this section is admissible in evidence in proceedings against that person for an offence.””
The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con):My Lords, in Committee there was a helpful debate on the provisions in Clauses 1 to 4, which relate to third-party interests in assets subject to a confiscation order. There was general agreement that the current arrangements for considering third-party interests are not sufficiently robust, allowing defendants to drag out and frustrate the enforcement of confiscation orders. The Bill addresses this by bringing forward the determination of third-party interests from the enforcement stage to the confiscation hearing and conferring new powers on the court to make binding determinations as to the extent of any third-party interests.
As part of this process, Clause 2 creates a requirement for the prosecutor to detail any known third-party interest in property associated with the defendant in their statement of information. That includes any interests that the defendant may have in companies, trusts, bank accounts and property. The defendant will then be under a duty to respond to every allegation in the prosecutor’s statement for which information has been supplied and the extent to which each allegation is accepted. Where an allegation is disputed, the defendant must provide full details of any matters relied on.
That is a very wide-ranging power, and the court may order the provision of any information from the prosecutor or the defendant that it believes it requires. The court may then use that information to make a determination at the confiscation stage as to the defendant’s interest in property. In making such a determination, the court will, by extension, also be ruling on the extent of any third-party interests in the relevant assets.
As my noble friend Lord Taylor said in Committee, there was general welcome for the provisions, but the noble Baroness, Lady Smith, questioned whether more
could be done to address the problem. Having reflected on the debate, we agree that there is one further step that can usefully be taken further to enhance the court’s powers. Amendments 1 and 14 now provide the court with the power to order an interested person, such as someone making a claim against the defendant’s property, to provide the court with any information that the court believes necessary to determine the defendant’s interest in the property.
Conferring such a power on the courts will further strengthen the provisions to tackle bogus third-party claims. It is unlikely to be necessary for a court to order an individual with a legitimate claim to provide information—it is in that person’s interest to do so on their own initiative. The amendments are, however, aimed at individuals who are attempting to make spurious claims on behalf of—in all likelihood, in collusion with—a defendant to protect an asset from confiscation. Those individuals are unlikely to want to co-operate with the court by providing a witness statement unless compelled to do so. If a person fails without reasonable cause to comply with an order to provide information to a court, it may draw such inference as it believes is appropriate. Thus, for example, if a third party fails to provide information substantiating their alleged interest in property that the prosecution believes is wholly owned by the defendant, the court will be able to draw the conclusion that the property in question is indeed 100% owned by the defendant.
I trust that the House will agree that that represents a sensible addition to the court’s powers to ensure that the effective and timely enforcement of confiscation orders is not deflected by spurious third-party claims.
I will respond to Amendment 4, which is grouped, once the House has had the opportunity to hear from the noble Baroness, Lady Smith. For the time being, I beg to move Amendment 1.
3.15 pm
Lord Warner (Lab): My Lords, I support my noble friend’s amendment. I apologise to the House for not being able to participate in the earlier stages of the Bill. I am doing so now mainly as a result of my membership of the Joint Committee on the draft Modern Slavery Bill, which will be coming to this House later in the Session. The Minister may recall that the Joint Committee made a number of recommendations to improve asset recovery, given what I might describe as the lacklustre performance in this area under the 2002 Proceeds of Crime Act, which was heavily criticised by the Public Accounts Committee.
In the Government’s response to the Joint Committee’s report, they said that the regime in the 2002 Act would be strengthened through this Bill and that they would use what they called,
“a range of non-legislative proposals to improve performance”.
They committed to implementing most of the committee’s legislative recommendations through a combination of this Bill and the Modern Slavery Bill. I have some concerns that the Bill before us does not really cut the mustard in terms of protecting proceeds of crime for the benefit of victims under the Modern Slavery Bill. I do not want a situation where, when this House gets to the Modern Slavery Bill, we are told that we have not done all we should under the Serious Crime Bill.
The key issue for the Joint Committee was the ability of the police, prosecutors and the courts to move swiftly to ensure that there were some assets to confiscate on securing a conviction. This means that when the police are about to act, they have to enable prosecutors to go to the court to try to freeze assets, not only to secure proceeds but to prevent those assets being used for criminal purposes. It is far from clear in the Bill how this is to be achieved. Can the Minister point me in the direction of provisions that effectively allow this early intervention to safeguard assets for confiscation? What work has been undertaken on the non-legislative means, especially with the police and prosecutors, to ensure that the previous practices are put to one side and that their behaviour and conduct are changing more in line with the need to confiscate such assets? What confidence can we have, when we come to consider the Modern Slavery Bill, that the Bill before us has been toughened up sufficiently to improve the prospects of securing the proceeds of crime for the benefit of victims?
Can the Minister also explain why he thinks that the government amendment on third party goes far enough to secure control over third-party holdings of criminal assets? Asking people who are sophisticated criminals to provide information about the transfer of assets to them is hardly likely to produce much in the way of assets for victims. Why cannot the police and prosecutors seek restraint on suspicion of asset transfers or shared use at a much earlier stage in the proceedings? I accept that the transfer of assets abroad poses more difficult jurisdictional issues, but should we not be raising this issue while this Bill is before the House, rather than waiting for the Modern Slavery Bill? Many of us who were on the Joint Committee will assuredly be raising these issues if we do not think that the committee’s report has had an adequate response.
To sum up, I suggest that the Bill leaves too many questions unanswered about a more credible system for restraining the disposal of criminal assets before conviction. That is why my noble friend’s amendment is so helpful; I think it helps the Government off a hook. The Home Secretary has made it clear that the Modern Slavery Bill is a flagship Bill for her, so I do not think that she will be desperately pleased if we get to the consideration of that Bill and find that we have blundered over these provisions when we get there.
Baroness Smith of Basildon (Lab): My Lords, perhaps I should have spoken to my Amendment 4 before the noble Lord, Lord Warner, but I first want to welcome the noble Lord, Lord Bates, to his new position. I know that it is not easy taking over in the middle of a Bill. I congratulate him on the amendments that he has brought forward and on some of the measures mentioned in his comments. I know he listened to the comments that we made in Committee. We spend a lot of time on Home Office matters in your Lordships’ House, and I am sure that we shall spend many happy hours debating this Bill and others.
We debated this issue at some length in Committee because nothing can be more important in this area than ensuring that proceeds of crime legislation is properly enforced. As I said at the time, we support
many of the measures in the Bill, but we want to encourage the Government to use this opportunity to make the Bill as effective as it can possibly be. I shall not go into the detail of what we raised and discussed in Committee, other to say that the systems as a whole, including confiscation orders and restraint orders, are not working as well as they should. I think that was the point being made by my noble friend Lord Warner. We are not really recovering enough of criminals’ ill gotten gains. We can do better.
The noble Lord, Lord Bates, will be aware that in Committee my noble friend Lord Rosser and I went into a number of reasons why we feel the system is so ineffective and how it could be improved. These are some of the areas. The evidential threshold for freezing the subjects’ assets is very high and the cost to the CPS can be prohibitive. As we have heard, criminals often move their money overseas. There are those who try to move their money once they know that they are under investigation, and there are sophisticated criminals working here who have complex labyrinths of companies and transactions to try to hide the money. Moreover, confiscation orders are often an afterthought and the penalties for non-payments are not enough of a deterrent. Recoverable assets, including the third-party interests, are not identified early enough. There is a lack of leadership and strong incentives for the agencies involved in applying for and enforcing confiscation orders and, as we have heard, it is incredibly difficult to recover assets from overseas.
At the time, we tabled a number of amendments to address those specific areas. They were probing amendments, as we wanted to try to stimulate the debate and make some progress but also to prioritise those issues on which we felt serious progress could be made in the Bill. I say to the noble Lord, Lord Bates, that at the time I was disappointed by the answers from the noble Lord, Lord Taylor, as the then Minister. I felt that he was not really willing to engage to find ways to improve the Bill. I am delighted by the noble Lord’s comments today that I was at least partially wrong—if not entirely, unfortunately—because the Government have considered one of our amendments and I am pleased to see some amendments put down before us today.
At this stage of the Bill, we did not want to retable a whole raft of amendments that we felt could be helpful but there is still an opportunity to improve matters here. We could do better than what we have here and there is an opportunity to consider further some of the points we raised in Committee. Our amendment is a single amendment, which asks for a wider consultation to be undertaken on a number of ways in which we can improve the system as a whole. We have taken advice on this and spoken to those who are practitioners, have been involved and have given advice. There are things we could do better to really make a difference, so while we support many of the measures here and appreciate the amendment, we could be more effective. The fact that the Government have already taken on some of our suggestions indicates that room for progress remains.
I shall not go into detail on those matters that we have discussed previously but I want to focus on three areas that we think the consultation could take note of and improve. The first is the importance of early disclosure of third-party interests. The value of the money that is eventually confiscated is eroded when people other than the defendant crop up and say, “Actually, that property being confiscated is mine, or partly mine, and not the defendant’s”. Sometimes that will be genuine; equally, it is not unknown for it to be a ploy drummed up by the defendant. The practitioners have told us that this happens because the confiscation process is so lengthy and strung out that it ends up giving criminals plenty of time to be inventive in looking at ways to drum up bogus claims. It is very quick to tell the truth but it takes much longer to be imaginative.
At the moment, third-party claims are not addressed at the confiscation stage in the Crown Court. They get heard afterwards, at a different stage, in the High Court. The Bill seeks to address this by ending the split jurisdiction between the Crown and High Courts. Under the Bill, third-party claims will be determined by the Crown Court at confiscation stage. Clauses 1 to 4 introduce requirements for prosecutors to set out any known details of third-party interests in the statement of information that they provide to the court and for the defendant to detail any known third-party claims in response to the prosecutor’s statement. The court then has the power to determine the extent of any third-party interests in the defendant’s property, prior to making the confiscation order. It is good that that determination will be binding but we went further in our amendments in Committee, one of which suggested giving the court the power to order the defendant to provide information at any time under an order and details of any third-party interests in property.
The Government took that on board and we welcome the amendment the Minister has spoken to. Where a third party unreasonably fails to comply with the order, the court will be able to draw the appropriate inference. In our amendment we suggested a specific time delay of 21 days, but there is no time in the government amendment. What would be the time period here before the court can draw any inference from not providing that information? Will it be set out in secondary legislation or by order, and will they also have to notify the prosecutor of any change in circumstances—which is something we also suggested at the time.
I also assume that there will not be a reciprocal duty on the prosecutor and that the details of the investigation will not have to be disclosed to the defendant, but it would be helpful if that could be confirmed or if the Minister could tell me if I have misunderstood and if that is incorrect.
I also want to check whether the Minister has given any further thought to providing such a power to the court at the restraint stage. When I spoke in Committee, I quoted the impact assessment, which said:
“In many cases third party claims are made at a relatively late stage in proceedings and are deliberately used to frustrate confiscation investigations”.
In Committee, the noble Lord, Lord Taylor, said that it was not appropriate to bring the determination of third-party interests back to restraint stage. The reason he gave was that not all defendants were made subject to a restraint order and not all restraint orders lead to confiscation orders. That is an entirely valid point and we accept that. That is why it would be helpful for the further consultation that we are proposing to work through those points—which are important, crucial and very valid—to make sure that assets are not dissipated before we are even able to do anything about it.
The second point made in Committee which could make a lot of difference is the costs to the CPS of seeking to obtain a restraint order. One of the issues raised with us by practitioners is that when an application is unsuccessful, the prosecution is liable for the legal costs of the defendant. The CPS is undergoing cuts of 27% to its budget over the course of this Parliament. Obviously prosecutors want to minimise any risk of what could be an expensive failure. In Committee, the noble Lord, Lord Taylor, told us that it would not apply in most cases because the orders are obtained ex parte. That is correct, but we have looked into this further and, of course, not all orders are obtained ex parte. If an order is obtained ex parte, it is more likely to be appealed and significant costs can be racked up on appeal.
The amendments that we tabled in Committee suggested that defendants should be able to recover costs at legal aid rates only when an application requires an individual who has succeeded in setting aside a restraint order to pay his or her own costs. But if the alternative is to put the cost risk on to the prosecutor, there will be an inevitable dampening effect on the appetite for large-scale restraining orders, which is clearly not in the public interest. If I recall correctly, the noble Lord, Lord Taylor, said in Committee that the Government would look into this and draw it to the attention of the Ministry of Justice. Has there been any further thinking on this issue? What was the response from the Ministry of Justice?
The third point concerning deficiencies in the system is that we seek further consideration on the enforcement of orders against assets located abroad. This is perhaps one of the most important issues in the whole proceeds of crime debate. Practitioners tell us that this is one of the key problems that they face. Criminals hide their ill-gotten gains overseas. In an FOI response to the shadow Attorney-General’s office, the Serious Fraud Office revealed that £37 million of its £106 million of unpaid confiscation orders is thought to be located overseas.
Criminals are pretty savvy. When they have substantial assets, they often seek to put them where the UK authorities are least likely, and will find it hardest, to recover them. That usually means a jurisdiction with which the UK has no standing mutual co-operation agreements. Even where that is not the case, without mutual recognition of confiscation orders in the jurisdiction where the assets have been hidden, those charged with enforcing the orders effectively have to relitigate the issue abroad. It is hard, it is slow and it is not very effective. There are countries that want to
co-operate with us to return criminal assets, but the process by which they would have to do so is quite difficult and drawn out, and they may not have much experience or expertise in doing so.
There is an example on page 5 of the fact sheet that is quite useful in illustrating that. So we have included in the consultation proposal a legal obligation to repatriate liquid assets subject to a restraint or confiscation order that have been removed overseas. When we tabled this in Committee, the noble Lord, Lord Taylor, said that the Proceeds of Crime Act already allows the court to make any order that it believes is appropriate for the purpose of ensuring that the restraint order is effective. But it is not being effective; time and again the issue is the ability to enforce any order.
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If there is going to be any significant progress, we need to improve the way—perhaps we should look at different strategies or structures—in which we co-operate with overseas jurisdictions. First, we want them to be well disposed to us in order that they will want to co-operate and look again at the processes. One of the problems of their not being co-operative—and again this is revealed in Parliamentary Answers from the Home Office to the shadow Attorney-General—is that despite UK courts freezing more than £200 million at the request of overseas jurisdictions, not a single penny of this has been repatriated to the country asking for the money. So we are asking other countries to do for us something that we are not very good at doing for them.
Since 2010, only two bilateral agreements have been signed with overseas jurisdictions to ensure co-operation on mutual legal assistance. So the UK is seen as being slow to respond to requests for mutual legal assistance, if it responds at all. The UKCA, the part of the Home Office that receives the requests, was restructured in 2007 following criticism from lawyers and the Financial Action Task Force on Money Laundering that it was slow to respond to requests. Jeremy Carver, a lawyer and senior adviser to Transparency International UK, has been quoted as saying that little has changed since he told a House of Commons Select Committee in 2001 that other countries “dread” having to make a request to the UKCA. Our ability to get other countries to co-operate with us is being made all the more difficult because we are not good at co-operating with them.
The former head of SOCA’s financial intelligence unit said:
“When an investigation is initiated from the victim country and monies are suspected to be in the UK, the requests go out through all the proper channels, but there’s no great keenness to comply … The mindset is that we’ll just be giving ourselves a headache … This could be abused by a corrupt official as the chances of them losing their assets in the UK are getting slimmer”.
Clearly, we need to do much more to have far better reciprocity at international level.
We raised this issue in Committee, though not in such detail, and responses from the then Minister were a bit disappointing. That is why we have tabled the amendment in the way that we have: to have a consultation look specifically at the three points that I have made.
A mutual recognition that would remove the need to relitigate in other countries would save time and money, and has the potential to significantly improve results.
The Minister has started really well in his new position because he has already conceded on one of the points that we raised in Committee. I hope that he will look at this issue and accept our amendment. I am sorry that I have spoken for rather longer than I normally would. We propose the amendment in a cross-party spirit of wanting this legislation to succeed. If we are really going to tackle organised and serious crime, we can do so only if we are able effectively to seize the proceeds of crime.
Baroness Hamwee (LD): My Lords, I, too, welcome my noble friend to his position. It must have come as quite a facer in the middle of his holiday to be told what a workload he was going to be coming back to.
Before I come to Amendment 4, I would like to say a word about part of the wording of Amendment 1 and indeed Amendment 14—and this point crops up elsewhere. I suspect that we are looking at a bit of modernised style, because we are told to have in mind the concept of the court “thinking”. There are a number of places now where the court “thinks”. We are quite used to words like “considers”. The Minister himself, in introducing the amendment, used the term “believes”, but one might “suppose”, “imagine” or “suspect”—one could go on for quite a long time.
I am a little concerned that we should be cautious about using modernised language without being very clear about what it means, particularly when similar concepts have been introduced in other legislation using different, and perhaps more “old-fashioned”, words. English is a rich language, and its richness covers a lot of subtleties. I just wanted to get that off my chest because I might come back to it on other legislation.
However, most of the debate so far—and we will hear more—is about the effectiveness of the restraint and confiscation regime. I share the outrage of other noble Lords about criminals salting away the proceeds of their crime. We used to discuss it quite a lot in the context of legal aid: that there were recipients of legal aid who were suspected of having a good deal of cash if only one could find it. Now, in the context of the Modern Slavery Bill, as the noble Baroness said, we could do better.
I hesitate to support the amendment going into legislation. The changes which it appears that we are all agreed should be made to the regime will barely have been in force before April 2015, which is the proposed end of the consultation period. Of course we should be assessing and evaluating the impact of the changes made by the Bill—in themselves, in the wider context and continually—to the confiscation regime. We should be prepared to make changes. Is it sensible to have a consultation running in parallel with the introduction of some alterations? Indeed, are we always talking about legislation that needs changing or about practice? I suspect that quite a lot of the problems are in the area of practice.
The noble Lord, Lord Taylor of Holbeach, explained in Committee that a couple of the proposals were, in the Government’s view, unnecessary; I do not want to anticipate what my noble friend will say. Indeed, as the noble Baroness reminded the House, on the recovery of costs, the noble Lord said that the Government would consider capping legal aid rates. However, without for a moment wishing to suggest that the concerns regarding the application of the Modern Slavery Bill are not important—they are immensely important—it seems that without the amendment there is nothing to preclude both consultation about the application of the provisions of that Bill and the bringing forward of more legislation. Conversely, consultation does not solve the issues which have been raised during the passage of the Modern Slavery Bill—which, like other noble Lords, I am very keen to see being effective.
Baroness Butler-Sloss (CB): My Lords, the Proceeds of Crime Act has been inadequately applied. There is no doubt that it could be better dealt with. As far as they go, the Minister’s amendments are to be supported—but they by no means go far enough. As a member of the Joint Committee on the Modern Slavery Bill, I strongly support the speech of the noble Lord, Lord Warner. However, it goes further than that. The Modern Slavery Bill is an important part of getting the proceeds of crime, but all of us in this House want to see criminals dispossessed of their assets. The Proceeds of Crime Act and all of the amendments go further than the Modern Slavery Bill. We do need something.
I am not entirely certain, having listened to the noble Baroness, Lady Hamwee, that we need it in Amendment 4, but we certainly need either this amendment or a very strong undertaking from the Government that—side by side with implementing the government amendments to the Bill—they will consult. If there was a strong commitment to consultation before the Modern Slavery Bill comes in—bearing in mind that it is much broader than the Modern Slavery Bill—I would be content with that. However, if the Government are not going to give a strong commitment, I would find myself supporting Amendment 4.
Lord Bates: My Lords, first, I thank the noble Baroness and also my noble friend for their warm welcome to me in this role. I will do my very best to try to ensure that I answer as fully as possible the very serious points which they made.
I will commence with the points raised by the noble Lord, Lord Warner, and to some extent the points raised by the noble and learned Baroness, Lady Butler-Sloss, in relation to the Modern Slavery Bill. As these Bills were drafted and conceived, and as they move through the legislative process, they are seen very much as two parts of an attempt to address the problem of human trafficking and the gangs that seek to profit from that. They also seek to ensure that those gangs are unable to hide away the funds which they amass from the misery they afflict on others. On that we are absolutely united. I would also say to the noble Lord, Lord Warner, that we set out a number of points in a detailed letter which was drafted and sent to his noble friend the noble Baroness, Lady Smith of
Basildon, on 7 October. A copy has been placed in the Library but it might be helpful, as part of my response to the debate, if I place some of the remarks from it on the record in this House.
In responding to Amendment 4, let me first say that we share the objective underpinning this amendment— namely, to further strengthen the effectiveness of the asset recovery regime provided for in the Proceeds of Crime Act. It is also worth noting at this point that, under this Government, more than £746 million of criminal assets have been seized through all four current methods of recovery, which in itself is a record amount. I know it is not getting anywhere near to addressing the full scale of the problem but it shows that the law enforcement of the courts is having some effect. Of course we want to do even better. One of the aims of the Government’s serious and organised crime strategy is to crack down on those who do not pay their confiscation orders. As part of this, the criminal finances improvement plan aims to look at ways to improve the recovery of the proceeds of crime.
The amendment calls for consultation on ways to strengthen the legal framework as set out in the Proceeds of Crime Act. Part 1 of this Bill is the product of just such a consultation. It already includes significant reforms to the asset recovery regime. I do not for a moment suggest that these provisions are the last word in terms of changes to POCA—if I may use that acronym for the Proceeds of Crime Act. We remain open to further constructive suggestions, which was very much what the noble Baroness asked us to do. We remain open to suggestions and to having a constructive dialogue over what improvements can be made with, among others, the National Crime Agency, police forces, the Crown Prosecution Service and Her Majesty’s Courts and Tribunals Service.
Let me turn to the specific proposals contained in Amendment 4. First, the amendment calls for a change in the test for securing a restraint order. Clause 11 already reduces the legal test for obtaining such an order from “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct to “reasonable grounds to suspect”. This was a point that the noble Lord, Lord Warner, also touched upon. That will enable restraint orders to be secured earlier in an investigation. We remain at this stage unpersuaded of the case for removing the requirement to show that there is a real risk that the defendant will dissipate his or her assets. Such a test goes to the heart of the purpose of a restraint order. If there was no such risk, there would be nothing to be gained from seeking a restraint order.
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Moreover, we believe that it would be extremely difficult for a defendant to prove a negative to a court—namely, that they do not intend to dissipate their assets. In contrast, an investigator is able to show by the steps an individual is taking that they have the ability and intention to dissipate. Furthermore, we should not lose sight of the fact that a restraint order is generally obtained from a court in the individual’s absence, before they are arrested, and so they would not be afforded the opportunity to prove that they
have no intention of dissipating. Indeed, in the letter to the noble Baroness of 7 October to which I referred earlier, I made the point that often when the restraint order is applied for, the individuals are not aware. If there is a requirement to place an additional responsibility to come forward at that stage, there is of course a risk that that might alert people to the fact that an investigation is under way.
On the noble Baroness’s second proposal, we agree in principle that any reimbursement of the defendant’s costs that arise from a restraint hearing should be capped at legal aid rates. New primary legislation will not be required to effect this change, as provision could be made under the Criminal Procedure Rules. We have consulted the CPS on this issue already, as any change to the rates would need to be applied even-handedly to them when recovering costs. We now intend to consult the Criminal Procedure Rule Committee on this matter.
The amendment next calls for the court to have the power to require a defendant to disclose any interests in realisable property. Clause 2 of the Bill already provides that the prosecutor and defendant must detail any known third-party interest in property linked to the defendant. That information will be used by the court to consider whether to make a determination as to the defendant’s interest in property. As I have already explained, Amendment 1 will empower the court to require a third party to provide any information it believes is necessary to assist it in making such a determination. Taken together, these provisions will enable the Crown Court to deal with claims from third parties at the same time as it makes the confiscation order. Those changes to POCA ensure that all assets and claims against them may be considered thoroughly in one court hearing, and earlier in the process than is currently the case.
The fourth issue raised by the noble Baroness’s amendment concerns the court’s powers to compel a defendant to return to the UK realisable liquid assets held overseas, and she is right to express that concern. Again, a number of provisions in the Bill address this issue. Clause 7 makes provision for compliance orders. Those will allow the court to impose any restrictions, prohibitions or requirements it believes appropriate to ensure that the defendant pays a confiscation order and that the order is effective. Any compliance order will be made at the time a confiscation order is granted. A compliance order will be capable of being used by the court to order the defendant to return assets to the UK from overseas. Breach of such an order will be a contempt of court. The Act already confers on the Crown Court the power to make such order as it believes is appropriate for the purposes of ensuring that a restraint order is effective. A restraint order can be obtained at a significantly earlier stage; for example, before the defendant has been charged. The requirement to compel a defendant to return property to the UK is therefore already available under a restraint order.
Finally, the amendment seeks ways to improve international co-operation in the recovery of the proceeds of crime. This was one of the issues specifically addressed in the serious and organised crime strategy. The UK is engaging with key countries to encourage and improve
international co-operation in asset recovery, which we accept has historically been very poor. We have already engaged with Spain, China and the United Arab Emirates, and will be working with the FCO and the CPS to negotiate further agreements and understanding with other key countries, including Romania, South Africa and Ghana. These agreements will relate to asset sharing. The long-standing international position is that the country that enforces an overseas order in its jurisdiction gets to keep the confiscated assets. There is now a move towards sharing recovered assets, particularly where there are identifiable victims who need to be compensated. We have recently had the first successful case involving the repatriation of assets totalling just over £300,000 to the UK with the assistance of the United Arab Emirates.
I believe that the tools for international recovery already provide for successful co-operation between the UK and our overseas counterparts. However, as I have already acknowledged, the tools have historically been underused, both here and overseas. This has undoubtedly improved in the last year or two, but more could be done to encourage the use of these powers. The bilateral agreements that we have recently concluded and are seeking to negotiate with priority countries should have the effect of improving co-operation overseas. In addition, the CPS is seeking to post five dedicated asset recovery advisers overseas, starting with Spain and the UAE. The CPS will provide targeted assistance to international colleagues from the UK or through its network of overseas advisers where asset recovery advisers are not deployed.
The UK has, last month, signed the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism of 2005—the Warsaw convention. This will assist the UK in obtaining asset- sharing agreements and in encouraging other jurisdictions to recognise UK civil recovery.
I hope that I have been able to demonstrate to the noble Baroness, and indeed to the House as a whole, that we have taken seriously the suggestions she has made for further improving asset recovery. As I have indicated, the Bill already directly addresses some of the issues raised by the amendment and we are now actively pursuing her suggestion in relation to the capping of legal costs.
I turn to the points raised by my noble friend Lady Hamwee in defence of the English language, in which she has such expertise and ability. She asked about the use of the word “thinks” in the context of the court in subsection (1) of new Section 18A. The words “thinks” and “believes” are used interchangeably throughout the Proceeds of Crime Act. For example, in Section 49(4)(f) the court may authorise the receiver to take any other steps the court thinks appropriate. In the context of new Section 18A of POCA, where a court is required to make a decision, we do not consider that there is any meaningful difference between “thinks” and “believes”. In subsection (4) of new Section 18A, the word “believes” is used for the sake of consistency with the existing Section 18(4). In subsection (1) of the
new section, we have used “thinks” as it seems to us to be the more natural word to use there; it would arguably look slightly odd to say,
“believes is or may be a person holding an interest in the property”.
I hope this reassures my noble friend that the wording of new Section 18A is clear and conveys the appropriate meaning.
The noble Baroness asked specifically how long people would have to respond to a compliance order. As regards an order made under new Section 18A, the specified time would be the time specified in the order by the court in the process which is set out, so that could vary from case to case. Obviously, the court will take due cognisance of the risks which might be involved in delaying the recovery of the assets which are identified.
I am conscious that this has been a lengthy response, but this is a very substantive amendment which raises a number of issues and I wanted to get my response to them on the record in order to help the House further.
Lord Warner: My Lords, before the Minister sits down, I have a question for him about his answer to me on restraint orders and third parties, which left me extremely puzzled. If he does not have the answer today, perhaps he could write to me. As I understood what he said—and I do not, in any way, disagree with it—restraint orders may well be taken certainly before someone is charged and possibly before they are arrested, because the investigation may give the police and the prosecution reason to believe that the people have considerable assets which may disappear at the point of arrest. However, as I understood him, he then said that it made no sense to make that restraint order deal with dissipation of assets to a third party. If the person does not know that the restraint order has been taken out because they have not been arrested or charged, what is to stop the courts including a provision about dissipation of assets which the person may have or subsequently engage in dissipation of? If the chap or woman does not know they have actually got a restraint order on them, I cannot see at the moment why it should not be drawn more widely to cover dissipation at the point when restraint is introduced. However, the Minister seemed to be saying that was not possible. If I have got it wrong, he can answer me now; if I have not, could he explain what the Home Office lore is on why that does not make sense?
Lord Bates: I will, of course, take very seriously what the noble Lord said. I do not think that was exactly what I said, but I will check the record and clarify it if necessary. The point I was making was that if it was necessary to identify third-party interests at the restraint stage, which Amendment 4 seeks to do, that might alert people who are not unconnected to the person of interest that an investigation is under way. This might damage the prospects of bringing a successful prosecution. I was seeking to make a point of argument rather than a point of law or lore. However, I will read the record and clarify this, if need be, for the noble Lord.
Clause 6: Confiscation and victim surcharge orders
2: Clause 6, page 5, line 30, leave out “after “other than”” and insert “from “an order under section 130” to the end”
Baroness Williams of Trafford (Con): My Lords, I can be relatively brief with this group of essentially minor and technical amendments to Part 1 of the Bill. Amendment 2 is consequential upon the provisions in the Criminal Justice and Courts Bill in respect of the new criminal courts charge, which will recover some of the trial costs from offenders. This amendment will ensure that, although the court takes no account of any confiscation order when imposing a criminal courts charge, payment of a confiscation order will take precedence over payment of the new charge.
Amendment 51 inserts into Schedule 4 a consequential amendment to Section 22 of the Proceeds of Crime Act, arising from the provisions in Clause 6. That clause provides that priority will be given to the payment of a victim surcharge order where a defendant has insufficient funds to pay both a confiscation order and a victim surcharge order. This amendment to Section 22 of POCA will ensure that a victim surcharge order is taken into account by a court when it is reconsidering the available amount payable under an existing confiscation order. Amendment 52 makes the equivalent change to Section 107 of POCA which relates to Scotland.
Amendments 3 and 15 are to Clause 7 and the equivalent provision for Northern Ireland in Clause 29. These clauses amend POCA to provide the court with the power to make any order it considers appropriate for ensuring that a confiscation order is effective. Such a compliance order may, among other things, impose a travel ban on the defendant. Clauses 7 and 29 provide for a right of appeal to the Court of Appeal by the prosecutor against a decision by the Crown Court not to make a compliance order, and by the prosecutor or person affected by a compliance order against the decision to make a compliance order. However, as currently drafted, these clauses do not provide for any right of appeal against a decision of the Crown Court to vary or discharge a compliance order. This is at odds with the existing provision in respect of the variation and discharge of a restraint order. These amendments remedy the inconsistency.
At the request of the Department of Justice in Northern Ireland, Amendment 16 amends Clause 30. This clause empowers the Crown Court to discharge a confiscation order where the defendant has died and it is not possible or reasonable to seek payment of the order from the defendant’s estate—for example, where there are no assets remaining in the estate. In England and Wales, an application to the Crown Court will be made by the designated officer for a magistrates’ court. The Department of Justice in Northern Ireland has advised us that, in Northern Ireland, the prosecutor would be best placed to make any application to discharge an order and not the chief clerk. This amendment makes the necessary adjustment to Clause 30 to this end.
Finally, Amendment 54 corrects a drafting error in Section 185 of POCA. I beg to move.
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Clause 7: Orders for securing compliance with confiscation order
5: After Clause 15, insert the following new Clause—
“Orders for securing compliance with confiscation order
After section 97A of the Proceeds of Crime Act 2002 (inserted by section (2)) insert—
15“97B Orders for securing compliance with confiscation order
(1) This section applies where the court makes a confiscation order.
(2) The court may make such order in relation to the accused as it believes is appropriate for the purpose of ensuring that the confiscation order is effective (a “compliance order”).
(3) The court must consider whether to make a compliance order—
(a) on the making of the confiscation order, and
(b) if it does not make a compliance order then, at any later time (while the confiscation order is still in effect) on the application of the prosecutor.
(4) In considering whether to make a compliance order, the court must, in particular, consider whether any restriction or prohibition on the accused’s travel outside the United Kingdom ought to be imposed for the purpose mentioned in subsection (2).
(5) The court may discharge or vary a compliance order on an application made by—
(a) the prosecutor;
(b) the accused.
(6) For the purposes of any appeal or review, a compliance order is a sentence.
“97C Breach of compliance order
(1) This section applies where—
(a) a compliance order has been made in relation to an accused, and
(b) it appears to the court that the accused has failed to comply with the compliance order.
(a) issue a warrant for the accused’s arrest, or
(b) issue a citation to the accused requiring the accused to appear before the court.
(3) If the accused fails to appear as required by a citation issued under subsection (2)(b), the court may issue a warrant for the arrest of the accused.
(4) The unified citation provisions (as defined in section 307(1) of the Procedure Act) apply in relation to a citation under subsection (2)(b).
(5) The court must, before considering the alleged failure—
(a) provide the accused with written details of the alleged failure,
(b) inform the accused that the accused is entitled to be legally represented, and
(c) inform the accused that no answer need be given to the allegation before the accused—
(i) has been given an opportunity to take legal advice, or
(ii) has indicated that the accused does not wish to take legal advice.
(6) If the court is satisfied that the accused has failed without reasonable excuse to comply with the compliance order, the court may—
(a) impose on the accused a fine not exceeding level 3 on the standard scale,
(b) revoke the compliance order and impose on the accused a sentence of imprisonment for a term not exceeding 3 months,
(c) vary the compliance order, or
(d) both impose a fine under paragraph (a) and vary the order under paragraph (c).
(7) The court may vary the compliance order if the court is satisfied—
(a) that the accused has failed to comply with the order,
(b) that the accused had a reasonable excuse for the failure, and
(c) that, having regard to the circumstances which have arisen since the order was imposed, it is in the interests of justice to vary the order.
(8) Evidence of one witness is sufficient for the purpose of establishing that an accused has failed without reasonable excuse to comply with a compliance order.
“97D Appeals against variation or discharge of compliance orders
The prosecutor or the accused may appeal against a decision of the court under section 97B(5)—
(a) to vary or refuse to vary a compliance order, or
(b) to discharge or refuse to discharge a compliance order.””
Lord Bates: My Lords, these amendments follow up the debate in Committee on the new offence of participating in the activities of an organised crime group. Noble Lords will recall that in response to various amendments tabled at that stage by my noble friend Lady Hamwee and the noble Baroness, Lady Smith, my noble friend Lord Taylor undertook to consider further the potential for the offence to capture the naive or unwitting participant.
I am pleased to say that discussions between Home Office officials and the Law Society, the Institute of Chartered Accountants in England and Wales and the Local Government Association have continued over the summer. As a result of those deliberations, I have tabled Amendment 20, which is similar but not identical to Amendment 21 put forward by the noble Baroness, Lady Smith. Both amendments would change the “reasonable cause to suspect” limb of the mental element of the offence. In Committee, noble Lords were concerned—
Baroness Williams of Trafford: My Lords, we are considering the third group of amendments, rather than the fifth, and I should move Amendment 5, as that is my role. I apologise to my noble friend Lord Bates.
Strengthening the proceeds of crime legislation is a priority for the Scottish Government, as it is for the UK Government. Maximising recovery of moneys through the route of criminal confiscation is a major part of this. Chapter 2 of Part 1 already replicates for Scotland a number of the changes made by the Bill to the confiscation regime in England and Wales. At the request of the Scottish Government, it is now proposed to replicate a number of further provisions—namely, those in Clauses 7, 9, 10 and 12. In each case, the England and Wales provisions are subject to appropriate modifications and adaptations to take account of Scots law and any policy refinements determined by Scottish Ministers.
Amendments 5 and 6 broadly replicate the provisions in Clause 7 to enable the courts to make a compliance order imposing overseas travel bans and other restrictions and requirements on an accused person, for the purposes of ensuring that a confiscation order is effective. Unlike in England and Wales, it will not be possible to make a compliance order against a third party. Amendment 7 replicates the provisions in Clause 9, which ensure that individuals who abscond before conviction, but are then convicted in their absence, may be subject to confiscation.
Amendment 8, which replicates subsections (1) and (2) of Clause 10, increases the maximum default sentences where offenders fail to pay confiscation orders in respect of amounts over £500,000. There are no changes to the early release arrangements in Scotland. Amendment 8 also provides that, where a confiscation order was made by a court in England and Wales, or in Northern Ireland, but it falls to be enforced in Scotland, the courts in Scotland, when sentencing the defendant for non-payment of the order, would apply the default sentences set elsewhere in Part I of the Bill, rather than the sentences applicable for non-payment of a fine.
Amendment 9 replicates the provisions in Clause 12 to ensure that a restraint order may be maintained following the quashing of a conviction and pending the outcome of a retrial.
Amendments 10 to 13 point in the opposite direction. Rather than adding new Scottish provisions to the Bill, they would remove Clauses 19, 20, 22 and 23. Those clauses, which were included in the Bill at the request of the Scottish Government, sought to make it an offence to breach a prohibitory property order or an interim administration order. These orders are designed to prevent a person from dissipating identified assets through the course of a civil recovery investigation. As such, they are analogous to restraint orders under the criminal confiscation regime. Under the existing civil recovery regime, the focus of these orders is on applying prohibitions on dissipating property rather than on the owners of, or those who control, the property in question.
After further consideration and discussion with operational stakeholders, the Scottish Government have concluded that the introduction of these offences
would result in a loss of flexibility in the civil recovery regime and have therefore asked for the relevant clauses to be removed from the Bill. Breach of these orders will continue, as now, to be dealt with through contempt of court proceedings.
The other amendments in this group are either consequential on the amendments that I have already described or make other technical amendments to the Scottish confiscation regime in Part 3 of POCA. I beg to move.
6: After Clause 15, insert the following new Clause—
“Compliance orders: appeals by prosecutor
(1) The Criminal Procedure (Scotland) Act 1995 is amended as follows.
(2) In section 108 (Lord Advocate’s right of appeal in solemn proceedings)—
(a) in subsection (1), after paragraph (cc) insert—
“(cd) a decision under section 97B(2) of the Proceeds of Crime Act 2002 to make or not to make a compliance order;”;
(b) in subsection (2)(b)—
(i) in sub-paragraph (ii), for “or (cc)” substitute “, (cc) or (cd)”;
(ii) in sub-paragraph (iii), after “paragraph” insert “(cd) or”.
(3) In section 175 (right of appeal in summary proceedings)—
(a) in subsection (4), after paragraph (cc) insert—
“(cd) a decision under section 97B(2) of the Proceeds of Crime Act 2002 to make or not to make a compliance order;”;
(b) in subsection (4A)(b)—
(i) in sub-paragraph (ii), for “or (cc)” substitute “, (cc) or (cd)”;
(ii) in sub-paragraph (iii), after “paragraph” insert “(cd) or”.”
7: After Clause 15, insert the following new Clause—
“Accused persons unlawfully at large
(1) In section 111 of the Proceeds of Crime Act 2002 (conviction or other disposal of accused), in subsection (1), for “after” substitute “and, either before or after he became unlawfully at large”.
(2) For subsection (4) of that section substitute—
“(4) Once the accused has ceased to be unlawfully at large—
(a) section 104 has effect as if subsection (1) read—
(a) in a case where section 111 applies the court did not proceed under section 92,
(b) before the end of the period of six years starting with the day when the accused ceased to be unlawfully at large, the prosecutor applies to the court to proceed under section 92, and
(c) the court thinks it is appropriate for it to do so.”;
(b) section 105 has effect as if subsection (3) read—
(3) The second condition is that—
(a) before the end of the period of six years starting with the day when the accused ceased to be unlawfully at large, the prosecutor applies to the court to reconsider whether the accused has benefited from his general or particular criminal conduct (as the case may be), and
(b) the court thinks it is appropriate for it to do so.”;
(c) section 106 has effect as if subsection (1) read—
(a) a court has made a confiscation order,
(b) the prosecutor believes that if the court were to find the amount of the accused’s benefit in pursuance of this section it would exceed the relevant amount,
(c) before the end of the period of six years starting with the day when the accused ceased to be unlawfully at large, the prosecutor applies to the court to proceed under this section, and
(d) the court thinks it is appropriate for it to do so.”;
(d) the modifications set out in subsection (3)(a) to (d) of this section do not apply to proceedings that take place by virtue of section 104, 105 or 106 (as applied by this subsection).”
(3) In section 112 of that Act (accused neither convicted nor acquitted), in subsection (1)(c), for “two years” substitute “three months”.
(4) For subsection (4) of that section substitute—
“(4) Once the accused has ceased to be unlawfully at large—
(a) section 106 has effect as if subsection (1) read—
(a) a court has made a confiscation order,
(b) the prosecutor believes that if the court were to find the amount of the accused’s benefit in pursuance of this section it would exceed the relevant amount,
(c) before the end of the period of six years starting with the day when the accused ceased to be unlawfully at large, the prosecutor applies to the court to proceed under this section, and
(d) the court thinks it is appropriate for it to do so.”;
(b) the modifications set out in subsection (3)(a) to (d) of this section do not apply to proceedings that take place by virtue of section 106 (as applied by this subsection).””
Clause 16: Enforcement of confiscation orders
8: Clause 16, page 13, line 23, at end insert—
“(b) after subsection (2) insert—
“(2A) In its application in relation to confiscation orders, subsection (2) of section 219 of the Procedure Act is to be read as if for the Table in that subsection there were substituted the following Table—
| Amount to be Paid under Compensation Order | Maximum Period of Imprisonment |
(2B) The Scottish Ministers may by order —
(a) amend section 219(2) of the Procedure Act (as applied by this section) so as to provide for minimum periods of imprisonment in respect of amounts ordered to be paid under a confiscation order;
(b) amend the Table in subsection (2A) so as to remove, alter or replace any entry (including an entry inserted by virtue of paragraph (a) of this subsection) or to add any entry;
(c) apply (with or without modifications) any provision of the Procedure Act relating to enforcement of fines in consequence of exercising the power in paragraph (a) or (b) (including modifying any such provision in its application in relation to confiscation orders by virtue of this section).
(2C) In its application in relation to a confiscation order under Part 2 of this Act, subsection (8) of section 222 of the Procedure Act is to be read as if, in relation to a transfer of fine order under section 90 of the Magistrates’ Courts Act 1980, for “139 of the Powers of Criminal Courts (Sentencing) Act 2000” there were substituted “35(2A) of the Proceeds of Crime Act 2002”.
(2D) In its application in relation to a confiscation order under Part 4 of this Act, subsection (8) of section 222 of the Procedure Act is to be read as if—
(a) before the words “section 90” there were inserted “section 35 of the Criminal Justice Act (Northern Ireland) 1945,”;
(b) in relation to a transfer of fine order under section 35 of that Act, for “139 of the Powers of Criminal Courts (Sentencing) Act 2000” there were substituted “185(2A) of the Proceeds of Crime Act 2002”.”
( ) In section 459 of that Act (orders and regulations)—
(a) after subsection (3) insert—
“(3A) Subsection (3) does not apply to the power of the Scottish Ministers to make an order under section 118(2B).”;
(b) in subsection (5)(a), after “section” insert “118(2B),”;
(c) in subsection (6)(b), after “section” insert “118(2B),”.
( ) In section 219 of the Criminal Procedure (Scotland) Act 1995 (fines: periods of imprisonment for non-payment), in subsection (8)(b), after “section 118(2)” insert “, (2A) and (2B)”.”
9: After Clause 17, insert the following new Clause—
“Continuation of restraint order after conviction quashed or verdict set aside
(1) In section 121 of the Proceeds of Crime Act 2002 (application, recall and variation), after subsection (8) insert—
“(8A) The duty in subsection (8) to recall a restraint order on the conclusion of proceedings does not apply where—
(a) the proceedings are concluded by reason of—
(i) an accused’s conviction for an offence being quashed under section 118(1)(c) of the Procedure Act, or
(ii) the setting aside of the verdict against the accused under section 183(1)(d) of the Procedure Act,
(b) the restraint order is in force at the time when the conviction is quashed or the verdict set aside (as the case may be), and
(c) the High Court of Justiciary has granted authority under section 118(1)(c) or 183(1)(d) of the Procedure Act to bring a new prosecution or the prosecutor has requested that the court grant such authority.
(8B) But the court must recall the restraint order—
(a) if the High Court of Justiciary refuses a request to grant authority under section 118(1)(c) or 183(1)(d) of the Procedure Act to bring a new prosecution,
(b) if the High Court of Justiciary has granted authority under section 118(1)(c) or 183(1)(d) of the Procedure Act to bring a new prosecution but no proceedings are commenced by the expiry of the time mentioned in section 119(5) or 185(5) of that Act (as the case may be), or
(c) otherwise, on the conclusion of the proceedings in the new prosecution of the accused under section 119 or 185 of the Procedure Act.””
Clause 19: Notification of making etc of prohibitory property orders
Clause 20: Offences relating to prohibitory property orders
Clause 22: Notification of making etc of interim administration orders
Clause 23: Offences relating to interim administration orders
Clause 25: Provision of information
14: Clause 25, page 20, line 43, at end insert—
“( ) After that section insert—
“168A Provision of information as to defendant’s interest in property
(1) This section applies if the court—
(a) is considering whether to make a determination under section 160A of the extent of the defendant’s interest in any property, or
(b) is deciding what determination to make (if the court has decided to make a determination under that section).
In this section “interested person” means a person (other than the defendant) who the court thinks is or may be a person holding an interest in the property.
(2) For the purpose of obtaining information to help it in carrying out its functions under section 160A the court may at any time order an interested person to give it information specified in the order.
(3) An order under this section may require all or a specified part of the information to be given in a specified manner and before a specified date.
(4) If an interested person fails without reasonable excuse to comply with an order under this section the court may draw such inference as it believes is appropriate.
(5) Subsection (4) does not affect any power of the court to deal with the person in respect of a failure to comply with an order under this section.
(6) If the prosecutor accepts to any extent an allegation made by an interested person—
(a) in giving information required by an order under this section, or
(b) in any other statement given to the court in relation to any matter relevant to a determination under section 160A,
the court may treat the acceptance as conclusive of the matters to which it relates.
(7) For the purposes of this section an allegation may be accepted in a manner ordered by the court.
(8) If the court makes an order under this section it may at any time vary it by making another one.
(9) No information given by a person under this section is admissible in evidence in proceedings against that person for an offence.””
Clause 29: Orders for securing compliance with confiscation order
Clause 30: Variation or discharge
Clause 40: Unauthorised acts causing, or creating risk of, serious damage
Baroness Williams of Trafford: My Lords, as we noted in Committee, the tentacles of cybercrime can now stretch across the globe. A perpetrator, sitting in their bedroom in London, could be hacking into a computer anywhere in the world, or, located outside the UK, a British national could be causing serious damage to their host country or in our own. The new offence provided for in Clause 40 acknowledges this reality and captures the serious damage that cybercriminals can cause in any country.
Clause 40 goes on to define a reference to country as including a reference to: a territory; any place in, or part or region of, a country or territory; and the territorial sea adjacent to any country or territory. My noble friend Lady Hamwee moved an amendment in Committee to seek further clarity on the last of these three points, which gave rise to an interesting debate on how best to capture damage caused outside territorial waters.
Following that debate, we have given further consideration to the position of installations such as oil rigs, ships and so on that are located outside the territorial waters of any country. Although I acknowledge that this scenario is extremely unlikely, it is not clear that the offence as currently drafted would capture an attack that caused serious damage to the human welfare of those living and working on such an installation, or to the surrounding environment.
To provide greater clarity on this point, therefore, Amendment 17 replaces the reference to damage to human welfare in any country with a reference to damage to human welfare in any place. Amendment 18 similarly replaces the reference to damage to the environment in any country with a reference to damage to the environment of any place.
Once these changes are made, there is no longer any need to extend the meaning of “country” to include its territorial seas. References to damage to the economy or national security of any country will remain, as either the economy or national security of a country has been damaged or it has not. In these cases, it is not necessary to include territorial seas within the definition of a country, so Amendment 19 removes this reference. I am most grateful to my noble friend for raising this issue and I beg to move.
Baroness Hamwee: My Lords, I am grateful to both my noble friends on the Front Bench.
Clause 44: Offence of participating in activities of organised crime group
20: Clause 44, page 34, line 19, leave out “has reasonable cause to suspect” and insert “reasonably suspects”
Lord Bates: My Lords, my apologies to the House for the slight mix-up in the order. It is one of the things that happen when you take people out of the Whips’ Office and put them in a departmental office—they forget their day job. We were sharply reminded of it and I am grateful to noble Lords for their patience.
These amendments follow up the debate in Committee on the new offence of participating in the activities of an organised crime group. Noble Lords will recall that, in response to various amendments tabled at that stage by my noble friend Lady Hamwee and the noble Baroness, Lady Smith, my noble friend Lord Taylor undertook to consider further the potential for the offence to capture the naive or unwitting participant. I am pleased to say that discussions between Home Office officials and the Law Society, the Institute of Chartered Accountants in England and Wales and the Local Government Association continued over the summer. As a result of those deliberations, I have tabled Amendment 20, which is similar but not identical to Amendment 21 put forward by the noble Baroness, Lady Smith. Both these amendments would change the “reasonable cause to suspect” limb of the mental element of the offence. In Committee, noble Lords were concerned that “reasonable cause to suspect”, as an objective test, could capture the unwitting or naive and that there might be instances where the “reasonable cause to suspect” became clear only with the benefit of hindsight.
In providing for a threshold of “suspects” without qualification, Amendment 21 certainly deals with the concerns about inadvertently capturing the naive or unwitting. By definition, these individuals will genuinely not have suspected, when they took part in the relevant activities, that they were participating in organised criminal activities, even if they had reasonable grounds to do so. But this threshold might also capture the paranoid who suspected that their conduct was contributing to the activities of an organised crime group, despite the fact that there were no reasonable grounds for such suspicion. Amendment 20 therefore also requires the suspicion to be reasonable. This adds an objective test—there were reasonable grounds for the suspicion—to the subjective test that the individual genuinely suspected, and it requires both to be met for the offence to have been committed. It therefore provides some further additional protection against overcriminalisation. The approach in Amendment 20 has been welcomed by the stakeholders whom we consulted over the summer.
I will respond to the other amendments in this group once the House has had an opportunity to hear from the noble Baroness, Lady Smith, and my noble friend Lady Hamwee. For now, I beg to move.
Baroness Smith of Basildon: My Lords, I can certainly forgive a technical hitch when we are given a welcome substantive response. I am grateful to the Minister, because he has taken away the points that we raised in Committee and has brought forward proposals that will make the Bill more workable. It was always our concern, which the noble Lord, Lord Taylor, said he would reflect on, that those who were not criminals but who were caught up in criminal activities for which they were not responsible could be affected by the clause. It could also act as a deterrent to people to report crimes in which they had become unwittingly involved because they could themselves be prosecuted, so I think that this is a major step forward. We have tabled our Amendment 21, but I think that the Minister has addressed the points that we have raised. We also needed to consider whether there was a case for an additional defence. I think that the Minister is saying that it is not necessary, because the change in the mens rea from suspicion to “reasonably suspects” is enough. It would be helpful if he would clarify that. However, this is a positive move from the Government, which makes the Bill more workable, and we are grateful to the noble Lord for taking on board the points that we made.
4.15 pm
Baroness Hamwee: I welcome the Government’s response to this. My amendment seeks further clarity on the provision in Clause 44(8) which makes it,
“a defence … to prove that the person’s participation was necessary for a purpose related to the prevention or detection of crime”.
“Necessary” is narrow, which is right, but a,
“purpose related to the prevention or detection of crime”,
seems to me very wide. The example that came to mind at the previous stage was undercover policing, which is a contentious activity, although we heard from a report in the last day or two some good news on how it is conducted.
I am still puzzled about whether the phrase,
“participation … for a purpose related to”,
“necessary for … the prevention or detection of crime”,
takes it beyond something that is acceptable. My amendment invites my noble friend to amplify the provision, if he is able to do so.
Lord Bates: I am grateful for the welcome that the amendment has received. I am mindful of the two questions, which I shall do my best to address. In response to the noble Baroness, Lady Smith, the Bill already provides for a defence when the,
“participation was necessary for a purpose related to the prevention or detection of crime”.
We considered that that, together with raising the threshold for the offence to “reasonably suspects” and a requirement for any prosecution to be in the public interest, provided that additional safeguard. We therefore concluded that the general defence of acting reasonably is unlikely in practice to add any additional protection from overcriminalisation of this offence. However, in the light of particular concerns expressed about the
position of the regulated sector specifically, we looked again at the need for a bespoke defence for the regulated sector.
Two aspects of the Proceeds of Crime Act have been raised in this context. The first relates to the obligation that members of the regulated sector have to report money-laundering carried out by another. This aspect is addressed in Amendment 22, which would provide a partial defence that would apply to a member of a regulated sector who took part in activities that he did not know or suspect to be criminal activities as part of an organised crime group. We believe that the additional dimension is there and that it provides a further protection for those who are involved in financial services. I am sure that is why the Law Society, the Institute of Chartered Accountants in England and Wales and the Local Government Association have welcomed the amendment as far as it goes.
On the point raised by the noble Baroness, Lady Hamwee, I covered that in the previous answer to the noble Baroness, Lady Smith, but I will come back to her with more detail in writing if necessary. I beg to move.
Amendments 21 to 24 not moved.
Schedule 1: Amendments of Serious Crime Act 2007: Scotland
Lord Mackay of Drumadoon (CB): My Lords, I intend to speak also to other amendments in my name, namely Amendments 26, 27 and 28. Amendment 25 is directed at paragraph 2(2) of Schedule 1. It seeks to replace “involved in” with “convicted of”, so that new Section 1(1A) would read:
“The appropriate court in Scotland may make an order if … it is satisfied that a person has been convicted of serious crime (whether in Scotland or elsewhere): and … it has reasonable grounds to believe that the order would protect the public by preventing, restricting or disrupting involvement by the person in serious crime is Scotland”.
I resist the temptation to enter the debate on whether “think” means “believe” by noticing that the “satisfied” appears in this provision.
New Section 1(5) of the Serious Crime Act 2007, which is also to be found on page 55 of the Bill, will provide that the term “appropriate court” means in Scotland the Court of Session or sheriff. As many of your Lordships will be aware, the Court of Session is the supreme civil court within Scotland. It handles civil business as opposed to handling criminal proceedings. As far as my understanding and experience go, it is not a normal part of its judicial role to make a formal ruling that an individual has committed a serious offence in Scotland. The prosecution and conviction of a person on a charge of serious crime has to take
place in a criminal court, either the High Court of Justiciary or a sheriff sitting in exercise of the criminal jurisdiction that a sheriff court has. That distinction is applicable to all aspects of new Section 2A, which is at the foot of page 55, which states:
“For the purposes of this Part, a person has been involved in serious crime in Scotland if he … has committed a serious offence in Scotland; … has facilitated the commission by another person of a serious offence in Scotland; or … has conducted himself in a way that was likely to facilitate the commission by himself or another person of a serious offence in Scotland”.
These are all issues which, to my mind, involve alleged criminality.
If a Court of Session judge sitting in a civil court were to be involved as an “appropriate court” for the purposes of these provisions, a sheriff sitting in the sheriff court as an “appropriate court” would reasonably also be expected to be assessed as exercising the sheriff court’s civil jurisdiction. I would be grateful if the Minister could confirm that those inferences have been correctly drawn.
Thus, the terms of the additional provisions set out on this page of the Bill would allow certain judges sitting in the civil courts in Scotland to impose a serious crime prevention order in Scotland on a person who had not been convicted in criminal proceedings of any serious crime committed in Scotland or, for that matter, elsewhere.
The Law Society of Scotland has been interested in this matter for some time. Having discussed the matter with it and seen the representations that it made in response to some consultations carried out by the Scottish Ministers, I submit that the provisions relating to the roles of the “appropriate court” are inadequate. It is suggested that the judge in such a court has to be satisfied that the person in respect of whom the order is sought has been involved in serious crime. That, they maintain, should be in the criminal court.
In addition to that concern, the position of the Law Society of Scotland in this matter is that the making of a serious crime prevention order in Scotland should be based on a pre-existing conviction of a serious crime, not just on allegations that fall to be considered once the matter comes before a judge. That position is based on the consequences for a person if they are made subject to a serious crime protection order. I do not intend to go into this in huge detail, but it is perfectly obvious—looking at the provisions of the Serious Crime Act 2007—that such an order has considerable implications for a person on whom it is placed. That means that any debate in court in proceedings leading up to the making of such an order has to be such that will ensure that all aspects of the allegations made against the person who is being threatened with the imposition of an order, and equally any explanations from the person concerned, are brought before the court for its consideration.
Obviously, this is based on provisions that have applied in England for some years. The background to it, I understand, is that Scottish Ministers issued a consultation paper in September 2013 entitled Serious Crime Prevention Orders in Scotland.The consultation paper explained that Ministers wanted to consider the effectiveness of serious crime prevention orders elsewhere in the United Kingdom as part of their policy for
disrupting the activities of serious organised crime. As part of that policy, they sought to tighten the existing legislation and introduce new legislation in Scotland to make it harder for serious crime groups to operate. The Law Society of Scotland launched a response to the consultation paper. Among a number of submissions it made was one saying that a serious crime prevention order should only be made by a court in Scotland following a conviction for an offence of the person in question falling within one or a number of serious categories of crime.
After the Scottish Ministers received the various responses to their consultation paper, they announced that they would give further consideration to the options available for introducing serious crime prevention orders in Scotland. The route that the Scottish Ministers have followed has involved their requesting the United Kingdom Government to legislate to extend the provisions of Part 1 of the Serious Crime Act 2007 to Scotland. The Scottish Ministers, however, have never fully explained in public their reasons for rejecting the Law Society’s submission that no order should be granted unless the person to whom it relates has been convicted of a serious offence. The Law Society remains of the view that no order should be made unless the Lord Advocate or the police force have sought it in respect of a person to whom a conviction has already adhered. Given the restrictive nature of such orders, the Law Society remains of the view that it is unreasonable to impose such an order when an alleged offence remains unproven.
The Law Society understands that in England there have been no cases in which orders have been pronounced without a conviction against the subject of the order. They are referred to as stand-alone orders. It is fully accepted that there are not likely to be many of them were the provisions to be applied in Scotland, but if they were, in the Law Society’s opinion, they would clearly amount to an unreasonable restriction in the absence of a suitable foundation for them.
I therefore hope that the Minister will be able to accept Amendment 25 as representing the views of a very important body within the justice system in Scotland, which finds some support when one looks at the terms of Schedule 1 in its present form. Amendments 26 to 28 are there because of the content of page 55 of the Bill. If Amendment 25 is accepted, they would be of relevance. If it is refused, they become superfluous as a consequence of that decision.
In conclusion, I hope that the Minister can accept the amendments. If he can, that will be very welcome; equally, if he is unable to do so, it would be helpful if he could explain the approach that the Government have adopted to the various points raised.
At this stage, it is right that I should publicly recognise that, following Committee on the Bill, I had a very useful meeting with the noble Lord, Lord Taylor of Holbeach, for which I was very grateful, as was the Law Society when it was advised what had taken place. I beg to move.
4.30 pm
Baroness Williams of Trafford: My Lords, before I address the specific points raised by the noble and learned Lord, Lord Mackay, it might assist the House
if I provide a little background to Schedule 1. The provisions to extend the serious crime prevention order to Scotland have been included in the Bill at the request of the Scottish Government. The main policy driver for this in Scotland is the implementation of the serious and organised crime strategy,
Letting Our Communities Flourish
, in which the Scottish Government have committed to tackle serious and organised crime and to disrupt and dismantle organised crime groups. That is a priority for both the Scottish and the UK Governments. Clause 45 of and Schedule 1 to the Bill will extend the serious crime prevention order regime to Scotland and provide an additional power for law enforcement agencies to minimise the harm that serious organised criminals do to communities in Scotland.
A serious crime prevention order is a civil order that is used to protect the public by preventing, restricting or disrupting a person’s involvement in a serious crime. It is not intended to operate as a punishment. Serious crime prevention orders have operated successfully in England, Wales and Northern Ireland since 2008. When the Serious Crime Act 2007 was going through Parliament, the then Scottish Government decided to consider the effectiveness of serious crime prevention orders elsewhere in the UK before deciding whether those orders should be introduced in Scotland. It is a measure of confidence in the value of the orders that the Scottish Government have now concluded, following consultation last year, that the provisions in Part 1 of the Serious Crime Act 2007 should extend to Scotland.
As the noble and learned Lord made clear, the intention of these amendments is that the serious crime prevention orders should only be made by a court following conviction for an offence. I hope that I can allay the concerns of the noble and learned Lord by reassuring him that there will be a robust framework of safeguards for the use of SCPOs—as they are called—in the civil courts.
The class of applicant authorities will be restricted. Only the Lord Advocate will be able to make applications for civil or criminal SCPOs in Scotland. This reflects the current position in England, Wales and Northern Ireland, where only prosecutors may apply for an SCPO. It is not the case, as suggested in the Law Society of Scotland’s briefing paper, that the police will be able to apply for stand-alone SCPOs. I hope the fact that the Lord Advocate will act as a gatekeeper in this regard will provide some comfort for the noble and learned Lord, as he is a former holder of the office.
When considering an application for an SCPO, the court will need to be satisfied that the respondent has been involved in serious crime and believe that imposing an order would protect the public. Courts will impose an SCPO only when it is a necessary and proportionate response. There will also be a right of appeal against the imposition of an order. Furthermore, third parties will have the right to be represented at SCPO hearings if a decision concerning the order is likely to have a significant adverse effect on them.
It is also worth noting here that, since the 2007 Act came into force, no stand-alone order has been imposed in the rest of the UK in the absence of a criminal conviction. That said, we are working with the CPS to
make better use of this preventive tool in future, including by seeking stand-alone orders in appropriate cases. I stress that, although these orders are civil, their overriding aim is to protect the public from harm.
The noble and learned Lord made a point about stand-alone orders in the more junior sheriff courts. In Scotland, a sheriff court may consider both civil and criminal cases. For criminal cases, on indictment a sheriff court may consider all crimes except murder, treason, rape and breach of duty by a magistrate. Stand-alone orders may also be considered in the Court of Session. It will be for the Lord Advocate to decide in which court to make the application. If a sheriff court sitting in its criminal capacity has the power to impose an SCPO, it is logical that it should have the same power when sitting in its civil capacity.
Schedule 1 seeks to replicate what is already in existence in England, Wales and Northern Ireland. Other than allowing for different legal systems, there are no real differences in how the regimes will operate. I very much hope that I have been able to reassure the noble and learned Lord, Lord Mackay, that the safeguards that will be in place will ensure that SCPOs will be imposed by Scotland’s civil courts only where it is necessary and proportionate to protect the public from the harm caused by serious crime. In the light of those assurances, I hope that the noble and learned Lord will be content to withdraw his amendment.
Lord Mackay of Drumadoon: I am very grateful to the Minister for her clear and helpful response to my question on the reasons for the Government’s position. In the light of that position and in the absence of any support from anyone else in your Lordships’ House, these four amendments are coming to a rather abrupt end. Speaking more seriously about it, I have little doubt that what the Minister has said today will be of use to those in Scotland who will come to implement the provisions in this Bill. In these circumstances, I beg leave to withdraw the amendment.
Amendments 26 to 28 not moved.
Baroness Williams of Trafford: My Lords, the four amendments in this group are minor, technical and drafting amendments to the provisions in respect of serious crime prevention orders. I do not propose to go through them in detail, but I would of course be happy to do so if it would assist the House. In the mean time, I beg to move.
31: Schedule 1, page 66, line 26, at end insert—
“( ) in subsection (1), for “, the Treasury or the Scottish Ministers” substitute “or the Treasury”;”
Clause 49: Serious crime prevention orders and financial reporting etc
Clause 56: Notice to be given where substances seized
33: Clause 56, page 42, line 34, leave out from “notice” to end of line 35 and insert—
“(a) to the person from whom the substance was seized, and
(b) if the officer thinks that the substance may belong to a different person, to that person.”
Baroness Williams of Trafford: My Lords, we now turn to the amendments relating to Clause 65—no, we do not. I am sorry but I had what is completely the wrong speaking note and I apologise to your Lordships.
During debate in Committee, I agreed to consider further an amendment put forward by my noble friend Lady Hamwee to what was then Clause 56—it is now Clause 59. Where a substance suspected of being used as a drug-cutting agent has been seized and the court makes an order authorising the continued retention of the substance, Clause 59(7) requires the relevant police or customs officer to notify a person entitled to the substance of that fact, if they were not represented at the court hearing. My noble friend queried why such notice should not also be given to the person from whom the substance was seized, if different from the person entitled to the substance.
I am grateful to my noble friend for raising a pertinent point. On further consideration, we agreed that her suggested amendment would strengthen the provisions in the Bill by helping to minimise any impact on the legitimate trade. Amendment 35 to Clause 59 therefore extends the notice provision in that clause. A similar point also arises in relation to Clauses 56 and 61, which also require notice to be given to a person entitled to the seized substance. Amendments 33, 34 and 36 therefore make equivalent changes to these clauses, while Amendments 37 and 38 to Clause 64 make consequential amendments to the
definition of “entitled”. Once again, I am grateful to my noble friend for raising the point and I beg to move.
Baroness Hamwee: My Lords, again, I give my thanks to my noble friend.
Clause 59: Continued retention or return of seized substances
35: Clause 59, page 44, leave out line 21 and insert “to the person from whom the substance was seized and, if the officer thinks that the substance may belong to a different person, to that person.”
Clause 61: Appeal against decision under section 60
36: Clause 61, page 45, line 35, leave out from second “to” to end of line 36 and insert “the person from whom the substance was seized and, if the officer thinks that the substance may belong to a different person, to that person.”
38: Clause 64, page 48, line 24, at end insert—
“(2A) The persons “entitled” to a substance for the purposes of this Part are—
(a) the person from whom it was seized;
(b) (if different) any person to whom it belongs.”
Clause 65: Child cruelty offence
39: Clause 65, page 48, line 40, at end insert—
(a) after “ill-treats” insert “(whether physically or otherwise)”;
(b) after “ill-treated” insert “(whether physically or otherwise)”.”
Lord Bates: My Lords, we now turn to the amendments relating to Clause 65, which clarifies and updates the law on child cruelty in Section 1 of the Children and Young Persons Act 1933. We had an informed debate on Clause 65 in Committee, during which a range of issues were raised in relation to Section 1 of the 1933 Act. In responding to that debate, my noble friend Lord Taylor undertook to reflect further on some of those issues over the summer. Having done so, we propose to make two further changes to Section 1.
The first is to clarify that the behaviour necessary to establish the ill treatment limb of the offence can be non-physical. In Committee the noble and learned Baroness, Lady Butler-Sloss, argued that as well as clarifying that the offence can be committed where the consequences of the behaviour in question are psychological, as Clause 65 already does, further amendments should be made to clarify that the offence can be committed by way of non-physical—for example, emotional—ill treatment and neglect. The Government’s view is that a failure to provide for a child’s emotional needs is beyond the neglect element of the offence, as a result of the House of Lords judgment in R v Sheppard. However, we consider that the ill treatment limb of the offence can relate to non-physical cruelty and Amendment 39 makes this explicit.
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Amendment 40 updates subsection (2B) of Section 1 of the 1933 Act. That subsection makes specific provision about the liability for the child cruelty offence in circumstances where the child under the age of three is suffocated while in bed with a drunken person. Although there was no detailed discussion on this issue in Committee, the amendment of the noble and learned Baroness sought to repeal this subsection. Following discussions with the police and the Crown Prosecution Service, we believe that this provision continues to have some utility. Accordingly, we propose to modernise rather than simply repeal it. Amendment 40 will extend the provision to cover circumstances where the person is under the influence of prohibited drugs. The amendment also deals with the reference to the suffocation occurring in a bed, so that the provision also covers circumstances where the infant dies by suffocation while lying next to a person aged 16 or over,
“on any kind of furniture or surface being used … for the purpose of sleeping”.
These changes will address the specific concerns expressed by campaigners about Section 1(2B) being too limited. I should make it clear that Section 1(2B) does not
create a separate offence but is a deeming provision—that is, if the circumstances described are proved by the prosecution, then the defendant is automatically held to have neglected the child under three in a manner likely to cause injury to its health, as required by Section 1(1), without the need for those ingredients of the offence to be proved individually.
Of course, taking a legitimately prescribed or over-the-counter medicine may make you drowsy. While it is not advisable then to sleep with a child, we are not convinced that if the child then dies, doing so should be deemed to amount to neglect. It should be clear, however, that it is not acceptable for anyone who illicitly consumes controlled drugs—as with alcohol—to then share a bed or sleeping place with a baby who is in their care.
The amended deeming provision applies only to the case of taking prohibited drugs, which are defined as illegally possessed controlled drugs under the Misuse of Drugs Act 1971. For the amended deeming provision to apply in the case of drugs, a person must have been in unlawful possession of a controlled drug immediately prior to taking it. They must also have been under the influence of that controlled drug when they went to bed or other place to sleep. In our view, the term “under the influence” of a prohibited drug generally means that a drug must have made a material difference to the person’s day-to-day functioning.
Finally, Amendment 56 to Clause 71 will ensure that the changes to the law on child cruelty are not retrospective. I hope that noble Lords will agree that these are sensible changes that, when taken with existing provisions in Clause 65, will ensure that Section 1 of the 1933 Act continues to be fit for purpose, which I know was the concern of Members of your Lordships’ House. I will respond at the end of the debate to Amendments 41 and 41A, also in this group, having heard the contributions of my noble friend Lady Walmsley, the noble Lord, Lord Ponsonby, and others. I beg to move.
Baroness Walmsley (LD): My Lords, I wish to speak to Amendment 41 in my name in this group. I welcome Clause 65 and the Government’s amendments to it, but I have tabled this further amendment, the purpose of which is twofold. First, it would delete the limitation in Section 1(1) of the 1933 Act that only people with responsibility for a child or a young person can be prosecuted for child abuse. This means that anyone could be prosecuted for such offences—for example, clergy, pastors, friends, relatives, neighbours or lodgers—not just parents or people acting in loco parentis. It is unclear to me why Section 1 was ever limited in this way. I ask the Government to explain why, particularly since we have seen in the recent Rotherham scandal how many children are abused by people who are not responsible for them. Secondly, it would clarify the meaning of “ill-treats” in order to make it clear that any allegation, by word or deed, that a child is possessed by an evil spirit or has harmful supernatural powers is unlawful because it amounts to serious emotional abuse of the child.