Oral evidence

Taken before the Joint Committee on the Draft Corruption Bill on Tuesday 20 May 2003

Members present:

Mr Edward Garnier Campbell-Savours, L
Mr John MacDougall Carlisle of Bucklow, L
Mr Mark Oaten Scott of Needham Market, B
Mr Richard Shepherd Slynn of Hadley, L (Chairman)
Dr Desmond Turner Waddington, L
Whitaker, B

__________

Memorandum submitted by Mr Bob McKittrick

Examination of Witness

Witness: MR BOB McKITTRICK, President, Institute of Structural Engineers, examined.

Q130  Chairman: Mr McKittrick, thank you very much for the written evidence that you sent us and also for coming today to elaborate on anything you want to add and answer questions which members of the Committee might want to put to you. You are President of the Institute of Structural Engineers.

Mr McKittrick: That is correct.

Q131  Chairman: What other positions do you hold?

Mr McKittrick: I am a main Board director with an international firm of consulting civil and structural engineers and it is in that role that I understand what happens. I decided that this move of mine to try and start ridding the construction industry of corruption should happen under an umbrella of the professional bodies because then people may be prepared to stand up and be counted, whereas, as individual firms, they almost certainly would not want to do that.

Q132  Chairman: Yes, you have made your position very clear in your statement. You say that corruption is the biggest evil in society, in the profession and in the industry at large and that your professional body should take it seriously. You also say that, "the World Bank has identified corruption as the single greatest obstacle to economic and social development.' "Obviously in your view there is a great deal of corruption. Is that mainly in British companies, is it mainly in this country or is it in British companies operating abroad?

Mr McKittrick: It tends to be British companies operating abroad, operating for aid agencies, people like the World Bank, the Asian Development Bank, the African Development Bank and so forth, not, as far as I can see, with DfID, our own aid agency. As far as I can see, any jobs led by DfID do not have corruption in them. The jobs also led by the EU have corruption in them as well.

Q133  Chairman: You mentioned them in your statement. What about the position of private industry in this country, operating only as structural engineers or builders in this country?

Mr McKittrick: It depends how one defines corruption. For instance, if a contractor puts in a bid for work knowing that there is a flaw in the contract conditions and will be able to make money out of that in the future, one could say that is corruption, so it is a very wide word, a very grey area. When does one bottle of whisky becoming two become corruption? There is also the problem that many people have of entertainment, the problems that I have personally had a number of years ago on a public project where we managed with the contractor, with the client to settle the financial aspects of the job very quickly. That was for the benefit of government, for the benefit of the contractor, the benefit of everybody, but one can say, "No, no, you should have let that drag on for ten years, have great amounts of litigation, bring in lawyers and spend huge amounts of money to settle it". Whether one defines that as corruption or not is difficult to say.

Q134  Chairman: I think I would find it helpful, and I am sure other members of the committee would, if you would illustrate the sort of corruption which you say is rife, firstly, in companies operating outside England and, secondly, the sort of corruption which you regard as the most usual, most commonplace in companies operating only in this country.

Mr McKittrick: Companies operating overseas are bidding for work from aid agencies, so it may well be, for instance, that an aid agency either gives money to a country, let's say India, for example, or it is a loan to India which has to be repaid, and that may well be for a study to do with new ports in India, so there may be a three-year study to decide whether these ports should be privatised. There will be, say, a tender list of six consultants from around the world which will be bidding for that and normally there will only be one, possibly two, British consultants in the short-list. In order to try to win the work, one has got to associate normally with an Indian sub-consultant that you know from a network, and sometimes it is in a new part of India because the different states are quite different, so you know from a network the sort of sub-consultant you take on. That sub-consultant negotiates with you a fee for providing a service. The value one gets from that fee is not necessarily totally related to the amount of work they do and questions are not asked, so what generally happens is that the sub-consultant will use a certain amount of that money paid over to facilitate either winning the contract or, having won it, to "grease the wheels", as they say, to make sure that the money passes through, and that is generally how it would happen. It would happen to any extent and I think I quote in my evidence an Eastern bloc country where there was an aid project, around US$1 million, and the sub-consultant told the main consultant, "Provided you go in at US$996,000, the job is yours, but, by the way, 15 per cent of that has got to go straight to the minister for transport in that particular country", so it happens that way. Sometimes it is very explicit, sometimes it is not quite so explicit and sometimes it goes through the food chain.

Q135  Chairman: Does this sort of corruption you are talking about mostly consist of cash passing from one hand to another or does it consist mainly of a quid pro quo arrangement with some other benefits or contracts?

Mr McKittrick: The arrangement of other benefits is small fish compared to the cash. Often in some of the aid jobs there is technology transfer, and that is very good, and you bring teams of people from Vietnam, from India, from wherever over to the UK to enable them to pick up on that. The difficulty with that is that you start off thinking that you are only bringing the chief engineer, whoever, but his wife, his partner, his whoever comes too and of course it would be super to provide some ballet dresses for the kids when they go back to their own country, and all sorts of things can creep into this business of bringing people over for technology transfer, so there are many, many ways that it happens.

Q136  Chairman: You said at one stage, "No questions asked", and I understand the context in which you said that, but suppose somebody knows that there is a bribery or corruption going on, but is not himself involved. In practical terms, in real terms, can he do anything about it in your industry?

Mr McKittrick: Yes, he can say, "You are not going to bid". He can say, "You are not going to get involved in the work", and you then start to face a difficult situation. Do you shut down half of your business? Do you put staff out of work? These issues come forth and this is one of the reasons why I said that this thing cannot be only Britain, it cannot be only Europe, but it has to be worldwide because if we stop it, the Italians, the Germans, the French and the others will just carry on doing it and this is the problem that I face when I speak to people day in, day out. They say, "Forget it. Unless they all stop, there is no way", and that is one of the reasons, I think, that if we are ever going to make progress on this, there has to be an amnesty of some sort, like there has been with guns. People can put up their hands and say, "Okay, within three years, I'm going to be clean", and woe betide them if they are not clean. Without some form of amnesty and without being Europe and worldwide, I do not think there is a chance.

Q137  Chairman: You stress very strongly in your statement as President the need for somebody to do something about this in the industry. Are there codes of practice in the industry?

Mr McKittrick: Yes, there are. There are ethical codes.

Q138  Chairman: Dealing with corruption?

Mr McKittrick: Yes, there are indeed. There is a body called FIDIC, which is the world body of consulting engineering, and they have got a lovely code, in theory, but, in practice, it does not work. Now, only this day last week, we had in my institution a meeting of five or six fairly large professional institutions from the UK. I invited 21 or 22 of them and we managed to get five or six together. We had a meeting which was quite revealing and I am looking now probably to October time to try and have a conference of some sort which will then enjoin others because I hope by embarrassing those who did not turn up, they will turn up the next time and start to talk sense.

Q139  Chairman: These codes and recommendations, are they effective? Are they enforced by companies?

Mr McKittrick: Well, they are carrots, but there are no sticks.

Q140  Baroness Whitaker: Are you familiar, Mr McKittrick, with the concept of approved codes of practice? You have probably come across it in Health and Safety at Work or construction regulations where the code is fixed into the law so that it really is heavy guidance and if you do not follow the guidance, you are prima facie in breach of the law. Do you think that could have any place, say, in setting out how to deal with commission, corporate hospitality, that kind of thing?

Mr McKittrick: I think where it would come in is with one of the issues we touched on last week at the meeting we had. We all like to be quality-assured and to get the stamp. We all like to be the one for Investors in People. Maybe one way through this is to have people who are registered as clean because I always say that there is only one thing worse than not being quality-assured, and that is being quality-assured, but slipping up and losing your qualification. If we were able to get some sort of stamp that people were clean, and woe betide you if you lost it because having that would say you were clean, something of that nature, I think, might help.

Q141  Baroness Whitaker: Do you see that as government-accredited or by your own professional institution?

Mr McKittrick: There are so many professional institutions in construction, in aeronautics, in the military, in armaments, across the whole spectrum, I think it would need to be national government-led in some way.

Q142  Chairman: But leaving aside the Bill and how effective that is, what can industry do about this, or are you a lone ranger here? Are there a lot of other people campaigning against this sort of thing?

Mr McKittrick: Well, up until a few weeks ago my head was above the parapet and now my whole body is above the parapet. There are many, many, many people with whom I speak who say, "Don't be ridiculous. You can't stop this. It is endemic". There are many who say that it is endemic and it happens because governments overseas do not pay adequate salaries. Well, start paying bigger salaries. Start doing things which prevent corruption. The big issue is that all of the aid agencies now link their funding to poverty alleviation and 15 to 20 per cent of the money going into these jobs is getting ripped out by scurrilous people and we are not dealing with nearly as much poverty as we should be through aid work.

Q143  Lord Campbell-Savours: In your brief, you say, "I have invited the presidents and secretaries from 23 major professional institutions".

Mr McKittrick: Correct.

Q144  Lord Campbell-Savours: "All have expressed an interest, but in the event most have been unable to attend". Are they sending you a message?

Mr McKittrick: Yes.

Q145  Lord Campbell-Savours: What is it?

Mr McKittrick: One was or I thought one was sending a message, the biggest institution which has got 79,000 members, of which I happen to be a Fellow as well a Fellow of the Institute of Structural Engineers, who were meeting yesterday and they now understand, they are highly embarrassed and they are going to attend the next meeting. It is slowly, slowly, catchy monkey, I think. I think we have just got to keep working away at it and keep convincing people and those who do not want to be convinced will be the outsiders, and that is the way I think we can probably move forward, but this is only construction, only a very small part.

Q146  Lord Campbell-Savours: Your efforts are most laudable, but let's take what happens in China. We know that public officials earn less than the average taxi driver or man on the local market, running major organisations. I am just testing this and I would like to see what the answer is. In the real world, people are going out to countries like that and the only way they can attract the people who are getting only 5 or 10 a week is if they make up their salary on the basis of these sorts of commissions. Do you not find it very difficult to argue with the contractor who then says, "Look, we are faced with real world conditions and we have got to respond in some way"?

Mr McKittrick: Yes, I do find it difficult and in my own business we have two very major joint ventures with Chinese local authorities. We work with Chinese companies. I have worked in Hong Kong for seven years and I know it fairly well. The Hong Kong Government had a body called ICAC, the Independent Commissioner Against Corruption, commonly known as "interfering with Chinese ancient customs"! That actually worked pretty well. That was a tight-knit society, five million people, all started through police corruption. They got it by the scruff of the neck and there were very heavy penalties. I had some staff in Hong Kong ----

Q147  Lord Campbell-Savours: Where salaries are on a completely different scale altogether in the public sector.

Mr McKittrick: They were not quite as different as you are saying. Some of the people who went down for corruption were inspectors who were pretty poorly paid people. China, yes, is a different kettle of fish. There are some very low-paid people relative to our standards, but not that low-paid relative to their own standards, but there are differences and one will never actually make a lot of money in China by putting ex-pats in. You have got to work with the Chinese and you have got to "Chinafy" your business there, otherwise you do not make it at all, so I do not think it is quite that desperate.

Q148  Lord Campbell-Savours: Well, we are talking about a country with 1.2 billion people, with gross under-payment in the public sector, and where, as I understand it, in many parts in China people in the public sector believe that this is the only way they can be remunerated. I am not saying it is right, but I am just saying that when these businessmen do not turn up at your conference, maybe they have got these conditions in mind.

Mr McKittrick: It is not only China, it is Pakistan, it is Sri Lanka, lots of the Asia-Pacific region, and south-east Asia is in exactly the same situation. Yes, I agree with what you are saying, but I do not condone it, and I am assuming that if we are hoping to bring in a law, if there are business people in this country bribing overseas officials, we will actually be able to do something about it.

Q149  Lord Campbell-Savours: But maybe the solution then is perhaps, and I just put it to you here, that it is a rising standard of living in these countries and in the public sector we are more likely to do away with these sorts of problems than perhaps by way of the approach that you are adopting. I just put that to you.

Mr McKittrick: You may be right. In other words, we keep trying to raise the standards and allow it to happen until the standards are raised adequately that corruption disappears.

Q150  Chairman: In this country if an employer or a managing director of a company discovers that someone has taken a bribe in his employment, what does he do about it?

Mr McKittrick: If he discovers that somebody within his own company has taken a bribe, it would be immediate dismissal, certainly in my own company.

Q151  Mr Oaten: Have you ever done that?

Mr McKittrick: We have not. It has happened once while I was working in Hong Kong to a member of staff who, we know, solicited a bribe from a contractor and he was immediately paid off.

Q152  Chairman: But are you aware of other companies who would sack somebody who had taken a bribe or does this just not happen?

Mr McKittrick: I am not aware of any of late. Bribery in the UK has come to the surface and been squashed. "Donnygate" seemed to sort itself out and lots of people went under, the Doncaster bribery issues. In my own company, I lost 70,000 to a person who worked in Doncaster who, it turned out, was corrupt. We have worked for directors of development companies who have had disqualification for seven years as directors because of corruption with English Partnerships. Yes, there are cases, but they are pretty few and far between.

Q153  Mr Garnier: I want later to talk about offsets, but do you think that planning gain is a form of corruption in this country, builders being required to build a primary school in exchange for being given planning permission?

Mr McKittrick: Well, one can say that government, both central and local, is actually corrupt itself in planning gain because by insisting in many cases that the developer puts in huge amounts of infrastructure, far in excess of what is needed for that particular development, it could be said that government and local government themselves are being corrupt.

Q154  Mr Garnier: Do you think that the Bill will deal with that or the law of England and Wales will deal with that?

Mr McKittrick: I think you can try and draft a Bill which is so wide that it becomes unwieldy that you never succeed.

Q155  Mr Garnier: Do you think that the fact that it is done in the open and on the record sucks the evil out of the transaction?

Mr McKittrick: I think it depends again. Planning gain is a pretty important one because of course if by planning gain you manage to employ more people and pay them better and they have then a better lifestyle through it, it becomes difficult to decide then whether it is really corruption or not.

Q156  Mr Garnier: Do you take a different view of someone in an overseas contract taking US$50,000 for doing a deal and keeping that quiet compared to everybody knowing that the contract manager in the Chinese organisation is on the take and that is effectively in the open? Is corruption only wrong when it is secret or is it wrong as a matter of principle?

Mr McKittrick: It has to be wrong as a matter of principle, it has to be. I do not think one can say that because it is open, it is okay and can be condoned.

Q157  Chairman: I get the impression, like you said earlier, that perhaps the atmosphere is such that employers do not want to do anything about it or do not do anything about it, except that you say that your company would stop it. However, across the board is the attitude a laissez-faire attitude or are employers keen to stamp this out?

Mr McKittrick: I think there is currently an appetite for doing something about it.

Q158  Lord Carlisle of Bucklow: Can I come in on the practicality of this. Accepting entirely the stance that you take and respecting the stance that you take, without international agreement, how is it achieved? Let's go back to your original example where you go for a contract in India which is being financed by the World Bank. You use a sub-consultant who openly tells you, publicly, that he can get you that contract, but 10 per cent of that contract is going to go into the pocket of an individual. Presumably, under this Bill, if you are on a telephone in this country and you say yes, you are committing an offence of corruption ----

Mr McKittrick: Agreed.

Q159  Lord Carlisle of Bucklow: ---- because you are attempting to agree to confer an advantage.

Mr McKittrick: Yes.

Q160  Lord Carlisle of Bucklow: What is the position of the man who says it to you? He is doing it openly, so does he look upon it as corrupt or dishonest or does he look upon it as merely a part of business life in that part of the world?

Mr McKittrick: He looks on it as the situation and this is one of the problems.

Q161  Lord Carlisle of Bucklow: And he cannot be prosecuted under this Bill? Presumably not.

Mr McKittrick: No, because he is Indian or Indonesian or whatever.

Lord Carlisle of Bucklow: So he says back to your firm, "I am very sorry, but if you are not prepared to do that, I am afraid I will give it to another company which is prepared to agree to those terms", and you risk the contract.

Q162  Mr Shepherd: Can I reinforce that by putting it another way. I am an agent and I actually say up-front that in order to secure this contract, my agent's fee is 15 per cent. It is well known across business that of that 15 per cent, 12 per cent will go to whoever is dealing on the other side of the account. This Bill does not remotely address situations like that or do you think it does?

Mr McKittrick: I do not think it does.

Q163  Mr Shepherd: No, I see that. Now, the other thing is the cultural disposition of many countries where they always say in international fora or forums, and I remember this personally from being a student in Sierra Leone in the 1960s, that in order to get goods through the port, you had to provide a dash(?) and the rationale behind that from experienced old hands was that, you have to understand, these officials are paid nothing.

Mr McKittrick: Correct.

Q164  Mr Shepherd: The nature of the society, whether we regret it or not, is that the whole

firing down is done by the apportionment of rents or receipts on the part of the public purse. Now, the international organisations say that this is improper, the United Nations, et cetera, and we can see the effects of corruption, but I am not sure how this Bill reaches out and condemns practices in Saudi Arabia and elsewhere.

Chairman: Would you hold your answer. I would then like to turn over to looking at the draft Bill and how far it is going to be effective to deal with this sort of problem.

The Committee suspended from 5.29 pm to 5.49 pm for a division in the Commons.

Q165  Chairman: I am going to ask a number of related questions. Let's turn to the Bill for the moment. In your paper you say, "I do not consider that the proposed new Corruption Bill will have any effect on the current practices of corruption that take place in consultancy outside of the UK." Is it the same in respect of inside the UK or not?

Mr McKittrick: I am unaware of actual corruption within consultancy projects in the UK.

Q166  Chairman: We have been talking about corruption and you have given illustrations of a number of acts which you say amount to corruption. What is the essence of this? What are we really trying to hit when we are saying, "Let's have a crime of corruption"? What is corruption?

Mr McKittrick: Well, in my mind, if someone offers money in order to win work which they would not win otherwise, then that, to me, is a corrupt act.

Q167  Chairman: But that could be quite innocent, could it, if you leave it in that way?

Mr McKittrick: Tell me how.

Q168  Chairman: If you get a contract which you would not otherwise have got, there might be a lot of reasons why you get a contract which you would not otherwise have got which need not necessarily be corrupt.

Mr McKittrick: In this commercial world people talk about quality, they talk about all these other things, but the bottom, right-hand corner is all that matters in bids.

Q169  Chairman: But it has got something to do with the intent or the state of mind or not?

Mr McKittrick: No, it is all to do with lowest price.

Lord Waddington: But let's think about this for a moment. I can offer somebody money to get a service, which I am entitled to in law, my contractual right, and yet I offer him money because he has been very slow in delivering. Nobody would suggest that there is any moral obloquy in that, so surely when one is defining the offence of corruption, one has got to look for some sort of guilty mind, either an intention to do something wrong or a wish to make the recipient of the bribe act contrary to his duty, moral or legal. There has got to be something, otherwise you are going to condemn as corrupt, and I have used this illustration on many occasions, my paying a baggage handler at Heathrow 10 to get him to hurry up and find my bag behind the carousel, and nobody in his right mind would say that was a criminal offence, would they?

Q170  Chairman: Could I just add that if the definition would be that you pay money to get something which otherwise you would not have got, if you take it literally, presumably like going into a restaurant and paying the actual cost of the meal, you would not get it if you did not pay the money, so there is no corruption there. There must be some element of some intent, some state of mind.

Mr McKittrick: Maybe it is my Scottish upbringing and I use language in a different manner.

Q171  Baroness Whitaker: Is it something to do with subverting best value, value for money, by this process because the tender process is perverted because the successful tender is not the best value?

Mr McKittrick: The tender process generally on overseas work is what is called "two envelope". The quality envelopes are meant to be opened first and you choose the best quality. You then open the financial envelope of those of best quality, and if it is acceptable to you, you accept the job, they say. We know that does not happen. We know that there are many, many ways of distorting quality. You can easily change the quality of a bid if the money is not to your liking or somebody has not given an adequate amount of dash(?), so quality is so, so, so subjective. You cannot do quality in an objective manner and hence it enables people to manipulate who wins the job.

Q172  Mr Garnier: What seems to be behind it? I do not want to be rude about this, and I am perhaps being not very sensitive and deliberately provocative, but what it seems to me is that you are trying to erect a Soviet-style controlled market.

Mr McKittrick: No.

Q173  Mr Garner: If a British company or an American company or a French company wants to do business in a particular market, good luck to it, you might say. If that requires them to pay the minister for engineering or energy a lot of money, good luck to them. That does not do anybody any damage other than the shareholders or profit line of that particular company. Why does your corruption in a foreign country affect the British public interest?

Mr McKittrick: Because you folk have decided to bring a draft Bill into Parliament or somebody has decided to bring a draft Bill in and I have been asked to give evidence about corruption. I have come and I have told you my views. I am not talking about setting up a closed-ring, Soviet-style something or other. I am simply telling you the way it happens in the real world out there. I happen to have been at the sharp end.

Q174  Chairman: Let's proceed on the basis of what you say corruption amounts to and come back to that debate to see whether there are any other elements. Our job is to say whether the Bill is going to be effective to deal with such corruption which at the end of the day we think exists either in this country or in British companies operating outside. You say that the Corruption Bill will not have any effect on the overseas position. What can we do to this Bill to make it better, more effective?

Mr McKittrick: I do not think it will have an effect unless it is pan-European, certainly pan-European, and probably across the whole world. If it were pan-European, there would be quite a strong chance because we do not tend to compete in our industry against too many Americans. It is the Swedes, the Germans, the Italians, the French, the Spaniards.

Q175  Mr Shepherd: The Japanese?

Mr McKittrick: On the very odd occasion it is against the Japanese, but they have got it pretty tightly stitched up. Unlike ourselves in DfID, their money still tends to follow the Japanese consultants, whereas DfID of course has untied the funding here.

Q176  Lord Campbell-Savours: Clare Short did it.

Mr McKittrick: Yes, indeed she untied it. I think you would go 90 per cent of the way if it were pan-European.

Q177  Chairman: That might make it better, but what about the actual techniques which this Bill is seeking to use?

Mr McKittrick: First of all, if it were written in plain English, it would help. It is absolutely awful. If a colleague of mine knew of somebody else or thought somebody else was corrupt and turned to this Bill in order to be able to phone the police and say, "Hang about, so and so is corrupt", they would not have a chance. They would just give up.

Q178  Chairman: Give me a couple of illustrations of what you say is just awful language.

Mr McKittrick: The whole thing, the fact that you have got to try to read guidance notes alongside the Bill, the fact that the Bill sometimes gives examples and at other times completely ignores examples. It talks of "person C and person A and boom, boom, boom, boom, boom", and there are some -----

Q179  Chairman: "Boom, boom, boom, boom, boom" is not going to be very intelligible. Give me an actual phrase which you say is awful language.

Mr McKittrick: If you let me read my paper, I will give you a phrase. "Clause 4(1)(a) [of the Bill] gives an example of doing something which confers an advantage", so if we go to 4(1)(a) of the actual Bill, "he does something (for example, makes a payment) or he omits to do something, which he has a right or duty to do", so it gives an example of doing something, ie, making a payment, but it does not then give an example of something which he omits to do.

Q180  Chairman: I can see that. What about another clause where you say the language is so awful that it cannot achieve anything?

Mr McKittrick: Clause 5(1) and (2), because they are not using examples and even looking at the guidance notes does not help -----

Q181  Chairman: Clause 5(1) and (2) you may say are complex, but is the language so unclear that it would not work?

Mr McKittrick: Yes, I think it is. I think the point is that if somebody has got to read it through heavily, use the guidance notes, they will probably just say, "Forget it!" Now, I did take it out because a friend convinced me to take it out because he said that if I put it in, you probably would not read it, but my initial feeling of this was that it would be made over-complex because possibly only lip-service was being paid to trying to rid the place of corruption, so I did take it out, but I will say it here, that I think it is over-complex and that, to my mind, is a very, very bad situation to have.

Q182  Chairman: Well, it may be tough on the person who cannot be quite sure what the language means, but apart from the complex language, the awful language, what else is wrong with this Bill? What other specific criticisms do you make?

Mr McKittrick: That it is inconsistent in giving examples. You cannot leave things as ----

Q183  Chairman: Forgive me, but does that mean, as you say in your paper, that in the one case they give an example and in another case they do not? Is that what you mean?

Mr McKittrick: Yes, indeed.

Q184  Chairman: Any other inconsistencies?

Mr McKittrick: I just find some of the wording really quite unclear. If we go to clause 9(1), "A person who obtains an advantage obtains it corruptly if - (a) he knows or believes that the person conferring it confers it corruptly, and (b) he gives his express or implied consent to obtaining it (in a case where he does not request it)", so the explanation goes into it a little bit where it starts talking about somebody wanting the job to be offered his son, her daughter or whatever, whatever, whatever, and it begins to go down that road, but when I am writing contracts in construction, in fact I am not allowed to have explanatory notes. It has to be clear within the contract, not within another set of non-contractual documents.

Q185  Lord Waddington: I think you make one statement with which hopefully we can all agree. You say that you believe that the Corruption Bill should be clear, simple and unambiguous.

Mr McKittrick: Correct.

Q186  Lord Waddington: And you say that applying that test, you reckon that the Bill fails.

Mr McKittrick: I reckon it does on that aspect, yes, I do.

Q187  Lord Waddington: And you do actually make another criticism of the Bill in 4.2 that you object very strongly to the idea of the Bill criminalising certain behaviour, but the authorities indicating that in certain circumstances, although the Bill criminalised that behaviour, discretion would be exercised and no prosecution would be brought.

Mr McKittrick: Indeed.

Q188  Lord Waddington: So are you, therefore, saying that where the Bill appears at first blush to criminalise conduct which should not be criminalised, you would like to see specific exemptions in the Bill spelling out clearly where it would not be right to prosecute rather than leaving a discretion? Is that what you are saying? Can I put it another way. You have already agreed that you could under this Bill find somebody being prosecuted for the payment of money quite openly which nobody would consider corrupt. Is the way around it not, therefore, to spell out in the Bill, having made the general prohibition, specific exemptions?

Mr McKittrick: I am not sure I actually said that. You gave me the example earlier of 10 ----

Q189  Lord Waddington: I will give you an example and I gave you one already. What if a person knows that he is entitled to get a service when he gets to a foreign country, but is led to believe that he is not going to get that service unless he pays a small sum of money - should there be a threshold?

Mr McKittrick: I think there should be a threshold.

Q190  Chairman: What would you make the threshold?

Mr McKittrick: Well, the Chancellor has made a threshold in terms of tax breaks for entertaining staff within business, and I think he raised it from 70 to 150.

Q191  Lord Carlisle of Bucklow: Is that 150 for any function?

Mr McKittrick: No, it is within any one year. I think, therefore, you may be able to connect a gift from somebody to the financial figure below which would be taken as accepted and would not be corrupt. I think that would probably help if there were some specifics of that nature.

Q192  Mr Oaten: I want to go back to one thing which I think you said earlier on which is that if this were to work, there would need to be a period of years for adjustment in business. Amnesty is one thing, I guess, where you have everyone just being open about it, but, for example, a five-year transitional period so that there were no prosecutions in that period, but people were working towards knowing that in five years' time there would be prosecutions, would that be something which you think might help make this work in practice?

Mr McKittrick: I think it would be probably the only way we could manage to convince people that there was a way ahead, that people could plan to ----

Q193  Mr Oaten: Is five years the kind of figure you would envisage?

Mr McKittrick: I think five years is probably a fair one because a lot of overseas contracts are for several years and hence you would be saying to somebody, "Don't get involved in new jobs from here on in, but we can accept that those which are running need to run their course".

Q194  Mr Shepherd: I am sorry, but I am still uncertain how any audit trail would throw up a commissioned agent who acts on behalf of a British company abroad and takes 15 per cent commission, and it is declared and all the rest of it. If a British company maintains that that is the commercial going rate in Saudi Arabia or wherever it is, but in fact 12 per cent of that is paid to individuals the other side, that, we know, is corrupt, but from the British company's point of view or the German company's point of view or the Italian company's point of view, they are doing what has been a traditional, normal transaction. They have a commissioned agent who is working on their behalf to take over their contracts. How do we identify that and in what language would you express in the Bill the impropriety of this?

Mr McKittrick: The slight difference with the Middle East is that generally the agents do actually facilitate, they do some consultancy, they have some consultants working with them and they are doing something for it. I think that stage is probably the least of our worries. If you look at last week's Times, Brown & Root, a major firm, need I mention the guy's name, they have admitted paying 2.6 million ten days ago to Nigeria, and that is the same Brown & Root which the American, Dick Cheney, was Chairman of. Now, we have a problem and not in Europe. That is a big job for them in the UK and I am now asking them what is meant there, so we have it happening here and that was picked up by an audit trail. Their auditor picked that up, it was not somebody else. They have agreed and it was a Nigerian who suggested to the auditor that he look deeper into the books, but that was picked up through an audit trail.

Q195  Chairman: The division prevented you from answering Mr Shepherd's earlier question. Is there anything you want to add on the question he put just before we broke?

Mr McKittrick: The Middle East one is exceedingly difficult because it is recognised by Middle Eastern governments, and it is accepted by most governments around the world, that there will be an agreed figure of agency fees. I do not have an answer to that one, I am afraid.

Q196  Chairman: One possibility to make the Bill more precise might be, as I think you yourself were indicating, to have some exemptions with a threshold for facilitation payments, as we have just mentioned. Would it, in your view, be better to approach the whole topic differently, so instead of drafting a general crime of corruption, they have a list of specific crimes? It has been suggested to us that trading in influence could be a separate crime, that misfeasance in a public office could be a separate crime, and you could go on adding different crimes to those like fraud and bribery which exist already. Would you approach it in that way rather than in this general way?

Mr McKittrick: I really do not know because I do not know the breadth of what has come up. I know what happens in my own industry and profession.

Q197  Chairman: I am thinking about somebody like you who is very concerned about corruption on the ground. What is the best way of tackling it if this is not the best way?

Mr McKittrick: I think the best way probably is putting financial limits on what is acceptable and, beyond that, absolutely nothing is acceptable, so as not to have grey areas and to have a complete watershed. "Facilitation" is a horrid word, it is a very difficult one to decide how far one would go. We have talked of what might be the amount of somebody accepting an invite to Henley or whatever, but that is quite different from being able to determine a limit on a facilitation payment. That is another issue.

Q198  Lord Waddington: I know this is a terribly difficult question, but what, in your mind, makes a payment corrupt? Is it deceit? Is it betrayal of trust? Is it the clandestine nature of the transaction? Is it the failure to disclose to your principal what you are up to or the failure of the recipient to tell his principal what he is up to? There must be something, some moral element in this surely to differentiate the sort of payment to the baggage handler that I mentioned earlier and the sort of payment you are obviously worried about, and rightly worried about, the prevalence of under-hand payments to agents overseas to win business which otherwise you would not get. I am just wondering what is the moral element in your mind which differentiates one from the another? Is it dishonesty?

Mr McKittrick: It is pulling the wool over your competitors' eyes, which is part of it. It is taking work away from somebody who is better suited to doing that work by paying a bribe so that the client is suffering and the country into which the money is going is suffering because it is not getting the best value, the appropriate value if someone else is siphoning money off.

Q199  Lord Carlisle of Bucklow: To get something which you otherwise would not have got?

Mr McKittrick: Well, that is the phrase I tried to use earlier, but somebody picked me up on it, but it is. It is denying the end user of getting the best value for money because if there was bribery on 150,000 in a million, that means that the end user is aiming to achieve that 150,000. They are probably quite good value at 150,000, but they have lost 150,000.

Q200  Dr Turner: I have difficulty here. It seems to me that if this Bill were to be effective, if it were to eliminate the sort of corruption that you are talking about and basically buying foreign contracts with commissions, if it were to be effective, it would stop British companies, but it would not stop anyone else's companies, so that would then put British companies at an unfair disadvantage, so how do you get around that one?

Mr McKittrick: This is why I say it has to be wider. We are actually involved in something called Europe.

Q201  Chairman: So it has got to be a pan-world thing.

Mr McKittrick: As I said earlier, I think if it were pan-Europe, it would probably take out 90 per cent of it. It would then have to go a further step and become pan-world, but without it being pan-Europe, forget it.

Chairman: But we can only pass legislation here which is going to affect the criminal law in the United Kingdom at the moment. What you are asking may well come with the new area of justice being developed. We have got your point on pan-Europe and we have got your point on what you see as the essence of it and we will have to consider that.

Q202  Lord Campbell-Savours: You have just said that if we cannot have it pan-Europe, we should forget it. Forget what - the whole legislation? Is that your case?

Mr McKittrick: Yes, I just do not see what it is going to do.

Lord Campbell-Savours: And you are speaking on behalf of your industry.

Q203  Richard Shepherd: You do not mean that entirely. British national law will still prevail in respect of British transactions within the United Kingdom.

Mr McKittrick: Yes, indeed.

Q204  Chairman: We have got to consider this Bill in relation to things which happen here and things which happen to British companies and subsidiaries abroad. Are you saying that there should be different provisions, as it were, tighter provisions dealing with British companies operating abroad than there would be in this country or would you accept that the definition has to be the same?

Mr McKittrick: I think it has to be the same and I think all that will happen if this Bill goes through is that corruption will be driven even further underground.

Q205  Lord Carlisle of Bucklow: It seems to me that you cannot achieve what you want unless one has an agreement which goes wider than the borders of this country and it is not unique. There is the Bill we have just taken through recently, I am trying to think of the name, you, Chairman, were on the committee as well, the one dealing with terrorism where there was a European agreement that each country would implement a Bill in their own country. You would have to go back, would you not, to get some European agreement that a Bill on these terms on corruption would be taken through the individual national parliaments of the individual countries?

Mr McKittrick: And there are many new ones coming in from the old Eastern bloc and there are big, big issues there, huge issues.

Q206  Baroness Scott of Needham Market: Clauses 6 and 7, on their definitions of exemptions, rely on being able to make a clear distinction between the principal and the public. In practical terms, given that the distinction is more blurred than it used to be, is this a useful one in terms of defence or can you see problems?

Mr McKittrick: I think again there has to be a definition which can be adhered to for the principal, for the agent, for the public and so forth, and I do not think that comes through adequately. I think it leaves it a little bit, well, not a little bit, it leaves it confusing.

Q207  Baroness Scott of Needham Market: So there could be two problems. One is with drafting the Bill and that goes back to the earlier point about whether it is understandable, and second is whether or not there are practical issues on the ground, that the demarcation lines between public and private are not as clear as they used to be.

Mr McKittrick: Maybe you could help me. What happens to the guidance notes within the Bill? Do the guidance notes get published with the Bill?

Q208  Baroness Whitaker: No, they are just notes to help Parliament as it goes through.

Mr McKittrick: If the guidance notes tried to define "principal", so on and so on, but if you come to this as Joe Citizen reading it, I do not think it is going to do anything.

Q209  Baroness Scott of Needham Market: So presumably then, and I should not put words into your mouth, but smaller companies particularly who are operating in this field could find it very difficult if they were not able to afford banks of lawyers to know whether or not they were in breach?

Mr McKittrick: Probably.

Q210  Chairman: You were asked earlier about the offset contracts, and Mr Garnier asked you about that. The CBI suggested that offset contracts could be excluded altogether.

Mr McKittrick: When you say "offset contracts", what do you mean?

Q211  Chairman: Something done by a third party in addition to the actual provisions in the contract between the two main contracting parties. Do you think that there should be a specific defence here, that what somebody is doing is really providing a hospital or a school or whatever, and that should not count as a corrupt act?

Mr McKittrick: I do not have an opinion on that, to be honest. It is a very difficult area. There are so many facets to it as to how the whole business of these sort of contracts, PPPs, PFIs, everything else, how they operate. I get involved in a lot of them myself and I had not really thought that through before tonight and I would be giving an off-the-cuff answer.

Q212  Chairman: It is a very specialised situation.

Mr McKittrick: I really could not give a proper opinion on that.

Q213  Mr MacDougall: You said that the principle of this has already been well established, but one of the things you said is that the facilitation payments must be outlawed and yet we have talked about foreign practices in major economic climates throughout the world where they are indeed accepted. Do you not feel, therefore, that the practicality of actually allowing them to happen would give companies a better opportunity rather than trying to prevent facilitation payments where it might disadvantage competition.

Mr McKittrick: I think we have tried to talk about that this afternoon and I think that the debate convinces me that possibly the way ahead is to have some threshold of some sort for facilitation. It is always a slippery slope and I would not like to suggest at what level it should be. As I said in the paper, it certainly should not be a percentage because a percentage of a very large sum is a very large sum and, therefore, it would have to be an absolute figure if you were going to go down that line.

Q214  Dr Turner: Corporate hospitality and promotional expenditure: the CBI say they think that should be an acceptable business cost and should not be caught by this Bill. Does your Institute have any view on any limits that should be placed on corporate hospitality or promotional expenditure?

Mr McKittrick: It is not an area that we have discussed but, as I said earlier, again a threshold limit on that I think would be welcome.

Q215  Dr Turner: So you feel corporate hospitality, if it got out of hand, could turn into a level of corruption itself?

Mr McKittrick: Yes, look at Doncaster. There are plenty of examples around where corporate hospitality has been just simmering under there and used as an excuse. I would say at a pretty low level, it would be probably per event as opposed to per year or whatever, but it has to be an absolute figure.

Q216  Chairman: A threshold again?

Mr McKittrick: A threshold, it has to be.

Chairman: It would perhaps have to be different for every overseas company depending on ----

Q217  Dr Turner: Oil sheiks might want a bit more.

Mr McKittrick: Who knows?

Q218  Mr Shepherd: We are reading in the public press, etc., that Hollywood promotes its films, for instance, by these huge staged events which cost $10 million, $20 million. The inducement to the writers and the people that attend that is that they meet the stars and the return is that they are expected to flatter, only refer to and help promote the company. That seems to me termed a corrupt event in one sense because although no money changes hands, the scale of hospitality that is extended is intended to affect judgment or actually the way in which they perform.

Mr McKittrick: Without a doubt.

Q219  Mr Shepherd: Are we looking, therefore, that industry by industry there should be different rules?

Mr McKittrick: No, I do not think so. We are all Jock Tamson's bairns, as we say in Scotland. I think everybody should be equal.

Q220  Mr Shepherd: Barnum and Bailey's with a small West Midlands engineering company?

Mr McKittrick: We are all the same. I do not think it should be any different whether it is selling Tomahawk fighters, selling a little bit of consultancy or selling whatever. If there are going to be rules, there should be rules. As soon as you open these rules out you open them up to people finding ways around them. I would not, I tend to lead a pretty straight life.

Q221  Baroness Whitaker: I am not sure that we have covered the case of subsidiaries. I just wondered if you thought that British firms should take responsibility for the actions in respect of corruption by companies which are their subsidiaries overseas?

Mr McKittrick: Without a doubt it should be the holding company that takes ultimate responsibility. I have got to give parent company guarantees as the holding company of my subsidiaries, hence corruption happening in the subsidiary the holding company should not be able to walk away from it.

Q222  Baroness Whitaker: Should you be able to walk away? Are you responsible?

Mr McKittrick: If I am a director of a subsidiary and also a director of a holding company, I have got to take responsibility.

Q223  Baroness Whitaker: Yes. Joint ventures also?

Mr McKittrick: It depends whether they are jointly and severally bound. A joint venture is a very difficult phrase in our industry. People use "joint venture" loosely, they use "in association with" loosely. You need to go behind the fabric and see if there is a legal joint venture, a legal company.

Q224  Baroness Whitaker: So it is the degree of association that would confer the degree of responsibility?

Mr McKittrick: Correct.

Q225  Chairman: Is there anything that you would like to add or anything that we have not covered or anything you have not covered?

Mr McKittrick: I do not think so, I think we have covered a fair amount. Whether it has been of any use to you or not, I am not sure.

Chairman: Nobody will say that your paper was not clear or over-complex, it was extremely straightforward and clear. You made it very apparent which clauses you think would work and which would not. We are very grateful to you for coming. Thank you.