Proceeds of Crime Bill

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Mr. Grieve: Does the hon. Gentleman agree that the logic of the Minister's earlier intervention was that even secured creditors should be ignored for the purposes of the compensation system? If that is the attitude that the Minister wishes to take, there is no logical reason why secured creditors should have an advantage over unsecured creditors. In terms of equity and fairness, no logical distinction exists.

Norman Baker: The Minister will doubtless pick up on that point when he responds.

Mr. Hawkins: The Minister's intervention does not undermine the points made by Opposition Members and Labour Members because once the legislation is in operation, the state will have seized all of the assets concerned. As the hon. Member for Lewes rightly said, it is therefore a question of how they are distributed. Will not Labour Members be the first to complain about the far-too-wide scope of the Bill if they are besieged in their surgeries by constituents saying, ``Why should Gordon Brown keep all this money when my business is going bust and I am entirely innocent?''

Norman Baker: It will be difficult for any Member of Parliament to deal with a situation in which an innocent third party, who was a law-abiding citizen going about his or her business and working hard, was suddenly put out of business or suffered a calamitous consequence because of something that had nothing to do with them.

Mr. Ian Davidson (Glasgow, Pollok): To clarify, does the hon. Gentleman accept that it is not intended that the money will be retained by Gordon Brown, but that it will be recycled and spent in constituencies such as mine? As I suggested that very thing on Second Reading, I hope that it will be spent in my constituency first. It is a question of whether the money should be kept for the benefit of the criminal, or spent for the benefit of the poor people of my area.

Norman Baker: Gordon Brown is used as a synonym for Government. He will doubtless be a channel through which funds will flow from criminals. He will be a kind of accessory after the fact—receiving money from criminals and distributing it widely like a latter-day Robin Hood to constituencies such as Glasgow, Pollok and, indeed, Lewes, which has been hit terribly by floods, and should receive money from the Government, which has not happened so far.

Irrespective of that, innocent third parties will suffer as a consequence of this legislation. The more effective the legislation is at catching people, the more innocent third parties who will suffer. The Government have a duty to recognise that, and to find a formulation that protects those third parties as far as possible. The amendment, which the Minister does not like, would at least allow such people to appeal to a central fund. There may be other ways forward. However, the Minister has a responsibility not only to catch those who have ill-gotten proceeds of crime, which we all support, but to help those who are affected unintentionally.

Mr. Davidson: The hon. Member for Lewes said that Gordon Brown was to be used as a synonym for Government. That is not universally accepted—

The Chairman: Order. I let the hon. Member for Lewes get away with it because he is new, but the hon. Member for Glasgow, Pollok must know that Members are referred to by constituency.

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Mr. Davidson: I was merely using the term that the hon. Member for Lewes used to describe the Chancellor—and that synonym is not accepted even on the street where Gordon Brown lives.

I turn to the question of how the matter will be dealt with in practice. A practical difficulty is involved, but having listened to Opposition Members, I do not believe that they have been willing to take it on board. Drug dealers, in particular, deal overwhelmingly in cash and will have already hidden whatever can be hidden. If they are aware that they are the subject of an investigation, they have every incentive not to pay a bill in any circumstances, as they know that all their assets may be gathered up by the Government for compensation. If the electricity, gas, council tax, joiner's, butcher's and candlestick maker's bill will all be met from the same amount, they have no incentive not to spend wildly. Indeed, they have a positive incentive to spend wildly, because if they believe that they are the subject of an investigation that is likely to find them guilty—they will know what evidence is likely to be available—they will be best advised to have a good time before they go away for several years. In such circumstances, the Government would effectively be subsidising their extravagance in the period leading up to their conviction. A moral hazard is involved that it would be inappropriate for us to accept.

I accept that a problem is involved. Are there any mechanisms in the Bill, or has the Minister thought of any, whereby a more speedy alteration to the legal position might be introduced in the event of a problem? Every year, the Chancellor introduces in the Budget legislation that changes various measures. I am not sure whether any of the Bill's financial provisions could be dealt with in that way. We need to be able to close loopholes and fine-tune without having to go through the procedure involved in introducing a revisionary Bill.

Mr. Grieve: Committee stages of Bills are strange. I tabled what was designed as a probing amendment not because I had received briefing material from a pressure group or outside organisation but because, reading through the clause, I was struck by how considerable—I have rather overused the word ``draconian'' and will avoid it—or heavy the consequences could be in certain circumstances for innocent third parties. I tabled the amendment not because I was interested to find out whether it would completely fit the Bill—I accept that it probably does not, and I listened carefully to the Minister's argument that practical issues are likely to be involved.

I was slightly surprised at Ministers' reaction. The amendment was, if ever an amendment was, designed to explore an aspect that I consider to be neutral in its impact on the operation of the Bill. It seems to have attracted a level of opprobrium and a knee-jerk reaction from the Government that I find surprising. It is almost as though it stung them in some way.

The hon. Member for Glasgow, Pollok, who has given some thought to our suggestion, made a point about criminals spending wildly if they believe that their assets will be seized. As the Bill stands, I am sure that criminals will spend wildly before their assets are seized. A feature of the matter is that we cannot make criminals who spend wildly prior to the seizure of their assets magic back the money that has gone. They operate a cash economy and if they decide to go out to have expensive restaurant meals in the last week before the guillotine comes down on them—

Mr. Davidson: That is a new proposal.

Mr. Grieve: I thought that the proposal would commend itself to the hon. Gentleman. There was a tradition of decapitation using machinery in Scotland up to the 18th century, which we did not have down here. Perhaps the hon. Gentleman was thinking of that.

The Chairman: Order. The Minister of State and I took our magistrates oath together. We are well aware of who Baillie Deacon Brodie was.

Mr. Grieve: Thank you, Mr. McWilliam.

I understand that a criminal might try to spend money and could develop an artificial line of credit through which he could subsequently recoup it. I fully accept what the Minister said about the deviousness of the criminal fraternity, their use of accountants and the wonderful explanations that are given for money that they possess. I remember a criminal case in which we discovered £25,000 in banknotes in a cupboard, and the defendant produced a person in court to say that he owned the money and that the defendant was looking after it. I am alive to all that. However, it is possible, without excessive bureaucracy, for bona fide creditors to be identified and to show that they provided a service or goods. There would be overwhelming evidence—probably documentary—that that occurred, and witnesses to back that up. Such creditors would appear to be members of the community of proper standing rather than members of the criminal fraternity. They would find themselves out of pocket and their businesses seriously endangered even though they had provided the credit. They would watch while the money was removed and put into the state's hands.

The point was made that that happens under the regime of fines.

Mr. Ainsworth: Or confiscation.

Mr. Grieve: Yes, but we are creating a completely new regime.

Mr. Ainsworth: No.

Mr. Grieve: Well, we are, because the regime goes wider than the old regime and, above all, through assumptions, targets assets that are not necessarily directly related to the offences for which a person is convicted. It bears no relation at all to fines or criminal sanctions. One of our most interesting discussions concerned whether the regime is criminal or civil.

Stephen Hesford (Wirral, West): The hon. Gentleman seems to make a novel point of criminal law. If the available amount comes identifiably from the process of seizing a criminal's assets—drug money and the like—he seems to suggest that however unfortunate third parties may have encountered the former owner of the money, criminal money should, via the state, be returned and circulated to the so-called innocent third party, rather than confiscated. However, the money remains drug money.

The Chairman: May I give a yellow card here? I am seriously considering my position about the clause stand part debate because this debate has been extremely wide.

Mr. Grieve: I accept that we have developed something like a clause stand part debate, Mr. McWilliam, but that followed logically because we were discussing the nub of the matter. I certainly shall not press for another such debate on the clause, although I cannot, of course, speak for other hon. Members.

I admit to the hon. Gentleman that we are talking about a grey area. As I understand the nature of the confiscation proceedings, and because we reverse the burden of proof, I find it philosophically difficult to say that we are considering money that can be distinctly related to or identified with a particular criminal activity. The whole reason for creating such a wide scope is to target criminals' assets in general. Indeed, clause 6 refers to ``general criminal conduct'', which is a widely defined expression. That is why I think that we are moving into slightly uncharted territory, which I simply want to make as sensible as possible. I do not want to prevent that from happening. Indeed, I have never tabled an amendment to that effect. My party has always been in favour of the change, as I have. I am not just acting as a spokesman who does not believe in the party's point of view.

However, these are extensive powers. I cannot predict how things will work out in practice, but if the Government's intention is what I think it is, there are likely to be numerous proceedings, and large quantities of assets will be seized. In those circumstances, it is possible that a far wider category of innocent third parties will be hauled in and adversely affected by the procedures than hitherto.

What started 15 years ago as a very limited procedure may now be reaching its final expression as a very wide procedure. It is almost—I do not mean this critically—a form of parallel law enforcement. Picking up on what the hon. Member for Glasgow, Pollok said, we are saying to people, ``We can't get you on specific offences, but we can identify you. You've done all sorts of things that make you fall within the categories and you must justify your postion.'' When people cannot justify their position, away goes their money.

If the legislation works, large quantities of assets will go. I rejoice at that, but I am also concerned about the seemingly inevitable knock-on consequence that a far greater range of innocent third parties may be adversely affected. I have a simple philosophical question in those circumstances: should the state have priority or perhaps start thinking about having greater regard for the hardship that may be experienced by those third parties?

The Minister will accept that we are not talking about bankruptcy proceedings, in which there is inevitably insufficient money to meet the liabilities of the person concerned, so the unsecured creditors are bound to experience hardship, and things must be shared between them.

We are talking about a situation in which there may be ample assets, but they have gone into the hands of the state. I am sure that the state will have various good uses for them, but whether they will ever go to help the constituents of the hon. Member for Glasgow, Pollok, I do not know. It is a rather funny system that says that money will be distributed for public works of some description in his constituency, while at the same time all the local shopkeepers have gone out of business and no one is in a position to open new businesses there. Running a local business, particularly in areas with serious crime problems, is a hugely problematic undertaking. My experience relates only to central London, but I suspect that the situation is the same in his constituency.

I rather expected the Minister to stand up and say sympathetically, ``I understand what you're saying, and we might think about these problems, although I do not think that there is an easy solution.'' I would then have sat down happily, but the Government's response is disappointing.

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