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House of Lords

Wednesday, 2 July 2014.

3 pm

Prayers—read by the Lord Bishop of Oxford.

Sri Lanka


3.07 pm

Asked by Lord Sheikh

To ask Her Majesty’s Government what assessment they have made of the current action to resolve the dispute between the government of Sri Lanka and the Tamil community.

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con): My Lords, we consistently urge the Sri Lankan Government to make progress on reconciliation and a political settlement between communities. We note that the 2013 Northern Provincial Council elections established a new Chief Minister for the heavily populated Tamil region. The Sri Lankan Government must ensure that all provincial councils can carry out their roles effectively. We encourage Sri Lanka to engage with the UN internal investigation into alleged violations of international law as a contribution to reconciliation.

Lord Sheikh (Con): My Lords, I thank my noble friend for that Answer. What is Her Majesty’s Government’s assessment of the positive actions taken by the Sri Lankan Government in implementing the recommendations of the Lessons Learnt and Reconciliation Commission, particularly in regard to demining, the resettlement and rehabilitation of Tamils, infrastructure development and steps taken to improve the education and health of people in Northern and Eastern Provinces? As Sri Lanka and the United Kingdom are founder members of the Commonwealth, will Her Majesty’s Government help in utilising the framework of the Commonwealth to establish a domestic truth and reconciliation commission to address the alleged human rights violations in the country?

Baroness Warsi: I thank my noble friend for his question. Of course, we have welcomed progress made, including on infrastructure development and demining, but we remain concerned that the Sri Lankan Government’s national plan of action to implement the recommendations only partially covered the full range of recommendations and that, in turn, action taken by the Sri Lankan Government only partially corresponds to some of those recommendations. We agree with the UN High Commissioner for Human Rights that the Sri Lankan Government have not established a credible independent domestic investigation into allegations of violations of international law on both sides of the military conflict, and that this is fundamentally a question of political will. This is despite the UK and others calling for such an investigation since 2009. As a result, the UN Human Rights Council has passed a resolution that establishes an international investigation, which we strongly support.

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Lord Bach (Lab): My Lords, the setting up of the United Nations investigative team is very good, if rather belated, news. However, there are reports that the Sri Lankan Government are refusing to co-operate with the investigation. Will the Minister comment on that? The recent deaths of three Sri Lankan Muslims and one Tamil at the hands of the Buddhist nationalist group Bodu Bala Sena is a worrying development. What representations are Her Majesty’s Government making to the Sri Lankan Government about this particular outrage?

Baroness Warsi: We have encouraged the Sri Lankan Government to co-operate with the UN human rights commissioner’s international investigation, and we have seen some of the statements that have come out of Sri Lanka which suggest that the position is otherwise. However, we believe that the UN’s independent investigation has a strong team. As the noble Lord will be aware, people such as Martti Ahtisaari, Silvia Cartwright and Asma Jahangir—the phenomenal human rights campaigner in Pakistan—have been appointed to this investigating committee. We hope that, despite the Sri Lankan Government’s not co-operating, the committee will produce a good and strong international investigation. As for the recent tensions, of course we are concerned about the actions of Bodu Bala Sena. Our representatives at the British High Commission in Sri Lanka met with the group last year to raise our concerns in relation to the anti-Muslim violence. But they have met also, in relation to other minorities, with the Sri Lankan Government.

Lord Hannay of Chiswick (CB): Will the Minister, who has just brought the attention of the House to the very high-level names who have been put in charge of this inquiry, agree that our Government should make clear to the Sri Lankan Government that their refusal to deal with this inquiry is not acceptable; that the people who have now been appointed to it are very objective and very experienced people; and that we hope that they will reconsider their position? Is that point being made clear?

Baroness Warsi: We will continue to make that point throughout the investigation. It is in Sri Lanka’s interests to co-operate fully. The reason we find ourselves in this position is that the internal investigations did not do what they said they would do. This is an opportunity for Sri Lanka to truly meet its commitment to reconciliation.

Lord Wills (Lab): My Lords, in justifying the Government’s attendance at the Commonwealth Heads of Government Meeting last November in Colombo, the noble Baroness said:

“We will deliver an incredibly tough message to the Sri Lankan Government that they need to make concrete progress on human rights, reconciliation and political settlement”.—[Official Report, 22/10/13; col. 888.]

In view of the lack of progress that has just been noted on all sides of the House, does the noble Baroness think that, with hindsight, an even tougher message might have been delivered if the Government had not turned up at that Commonwealth Heads of Government Meeting, and there might have been more progress?

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Baroness Warsi: I have a lot of respect for the noble Lord, but I fundamentally disagree with everything he said. It was right for the Prime Minister to attend the Commonwealth Heads of Government Meeting. It was right to make those tough messages be heard in-country in Sri Lanka. It was right for the Prime Minister to visit regions in Sri Lanka and make his point. It was right that, because of that visit, we built the international momentum which resulted in the Human Rights Council resolution.

Baroness Brinton (LD): My Lords, may I return to the violence in Aluthgama? I am very grateful for my noble friend’s earlier answer, but I wonder if there has been any progress on arrests for this particularly horrible violence—which resulted not just in three dead and 80 injured but in a mosque and virtually every property of Muslims in that town being torched. While it is good that President Rajapaksa has promised to rebuild damaged property with his support, I think that the community would much prefer to hear that the perpetrators have been caught and what the Government will do to prevent such violence in the future.

Baroness Warsi: I note what the noble Baroness says. The violence in Aluthgama and Beruwala was deeply concerning, and she is right: there were not only fatalities but a huge amount of further damage. Of course we welcome the Sri Lankan Government’s assurances that they will investigate the attacks and prosecute those responsible. I am not sure what the latest situation is, but if there is any up-to-date information, I will certainly write to her.

Lord Naseby (Con): My Lords, I declare an interest as chairman of the All-Party Group on Sri Lanka. Does my noble friend recognise that the imposition by the United Nations of an inquiry on a sovereign state—an imposition engineered by the US and supported by the UK—would not be likely to be well received in any country, particularly a country which has a democratically elected Government across all the ethnic groups? The vast majority of Sri Lankans supported the defeat of the Tamil Tigers. I urge my noble friend to think again and to encourage her Government to push the Sri Lankans on a one-to-one basis and to set aside a forced inquiry from the UN.

Baroness Warsi: I hear what my noble friend says, but this conflict ended in May 2009, which is more than five years ago. The internal inquiry reported in March 2011. The Sri Lankans have had enough time to deal with this matter if they had showed the political will internally to do so. They have not dealt with it, which is why we have taken this matter to the international forum.

Benefit Cap


3.16 pm

Asked by Lord Fink

To ask Her Majesty’s Government how many people have moved from benefits into work as a result of being subject to, or being warned that they might be subject to, the benefit cap.

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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con): Jobcentre Plus worked with potentially capped claimants from April 2012. By November the next year, 19,000 claimants in potentially capped and capped households moved into work, although we do not know to what extent those were additional moves or normal claimant churn. Since the cap was live, more than 5,700 households—around 40% of those who were capped but are no longer capped—are now exempt from the cap due to moving into work and claiming working tax credits.

Lord Fink (Con): My Lords, I thank my noble friend the Minister for that comprehensive Answer, but will he confirm—

Noble Lords: He is reading.

Lord Fink: Will he confirm that, for people who are potentially subject to the cap, work always pays? Are there any leading indicators of behavioural changes in people who are potentially subject to the cap?

Lord Freud: There are two ways in which the cap works to incentivise people to go to work. One is that people who qualify for working tax credit are exempt from it, but there is another way, in that anyone doing even small amounts of work will be capped by a lesser amount because it serves to reduce the level of the cap and effectively allows them to keep their earnings. Clearly, one always has to be very careful to distinguish causation from correlation, but in a survey conducted by MORI a quarter of capped claimants said that they had looked for work because of the cap and 45% said that they would look for work in the next 12 months because of it.

Lord German (LD): My Lords, the dignity of work is probably the best way in which people can escape from the cap. However, the figures to which my noble friend has just referred indicate only a trend in the direction of travel. From the figures which the DWP is now collecting, will the Minister have formed a view by the end of this coming recess as to the whole period? Will he know many people have moved into work and whether the trend that we have seen in the initial figures has been carried through, so that we can say that this initiative has really borne fruit into work?

Lord Freud: The cap is doing quite a lot of things. It has an influence on the people who are capped but it also sends out a message. The total number of people who have been capped at one time or another stands at just over 42,000; the current number is just over 27,000. A substantial proportion of those who have moved out of the cap, which they might do for various reasons, have gone into work and taken working tax credit. Others will have taken advantage of the effect that I have just referred to, whereby doing even small amounts of work reduces their cap.

Lord Foulkes of Cumnock (Lab): Would the Minister contemplate for a while how people struggling to survive on benefits will view an aggressive Question being asked by someone who donated £2.62 million to the Conservative Party?

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Lord Freud: Well, my Lords, my job at the Dispatch Box is to answer questions from all Peers. I hope that I have established a track record in answering questions with as much properly sourced information as I possibly can.

Baroness Wheatcroft (Con): Very often, those who are out of work are suffering from other problems as well, often drink or drug addiction or a very poor education. Can the Minister say what is being done to help with those issues?

Lord Freud: One of the things that we are doing is reforming the whole of the welfare system in order to find out the barriers to going to work that people have and helping to address them. In the particular case of the introduction of the benefit cap, we had an enormous initiative to work with those individuals through Jobcentre Plus. We wrote to them, talked to them and provided intensive employment support. We worked with local authorities to help them with budgeting, housing and childcare. In this particular case we worked hard, and that seems to be an effective set of interventions.

Baroness Sherlock (Lab): My Lords, how much has been spent on discretionary housing payments to those affected by the benefit cap and what impact has that had on the planned savings from the policy? So, for 2013-14, how much was spent on discretionary payments, to what extent has that reduced the savings for central government and what impact has it had on local government?

Lord Freud: The department pays out a lump sum of discretionary housing payments that local authorities apply to the various policies that they are tackling. There is a specific amount, £110 million, that goes to this particular policy although actually, when you look at the analysis of how local authorities attribute the spend, it is rather less than the amount attributed to the benefit cap. The total AME savings set against that are £225 million. As I said, the importance of this policy is that it sends out a message about the direction of travel, which is that the way to get people out of poverty so that they have proper support is to get them into work.

Baroness Farrington of Ribbleton (Lab): My Lords, the Minister complimented himself on always trying to answer the question. Of those people that he has referred to, how many of them have gone into full-time employment on a living wage? Will the Minister, who has refused to consider studying those people who go to food banks to survive, have a meeting with the right reverend Prelates, who know more than he does because of their involvement in food banks, about the very people that he is not counting?

Lord Freud: My Lords, we do not collect information on the living wage within the working tax credits. We have a policy in universal credit to ensure that people have enough to live on however much they work, which is a transformation. I am pleased to say that I am in regular dialogue with the Archbishop on this matter, particularly with regard to the initiative that he is running, and which we are talking to him about, of supporting the credit union movement.

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Syria: Sexual Violence


3.24 pm

Asked by Baroness Jenkin of Kennington

To ask Her Majesty’s Government what is their assessment of the alleged sexual violence crimes committed against Syrian civilians in Syria.

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con): My Lords, as reported by the UN commission of inquiry and others, rape, sexual violence and sexual torture have been carried out by regime forces against men, women and children as part of a widespread and systematic attack on the civilian population. We are deeply and increasingly concerned about sexual exploitation of displaced people. The UK is committed to supporting victims of these crimes, as well as supporting efforts to document sexual violence and other atrocities.

Baroness Jenkin of Kennington (Con): My Lords, I thank my noble friend for the Answer. Would she join me in congratulating the Foreign Office and particularly the Foreign Secretary—so ably assisted by Angelina Jolie—on the success of the recent global summit on sexual violence in conflict, which has done so much to raise the profile of these dreadful crimes? Would she also confirm that the Foreign Office, DfID and the international community will do what they can to collect evidence and testimony from the surviving victims of sexual violence in the conflict so that, when this terrible war finally ends, the perpetrators can be prosecuted and brought to justice?

Baroness Warsi: I will join her—and I am sure the whole House will join me—in congratulating the Foreign Secretary on an incredibly successful summit on ending sexual violence in conflict. Those taking part came from 155 countries and included 1,700 delegates, 79 Ministers, victims’ groups, NGOs and international organisations. On the documentation and collection of evidence of sexual violence, my noble friend will be pleased to note that some of the projects we are funding in Syria are around the documentation and collection of evidence, so that those who commit these crimes will one day be brought to justice.

Lord Sharkey (LD): My Lords, all crimes of sexual violence in conflict need to be within reach of international law, but the recent global summit that has just been referred to notes that the exercise of universal jurisdiction for crimes currently applies only to international conflicts. What steps can the Government take to extend this universal jurisdiction to the type of conflict we now see in Syria, Iraq and far too many other places?

Baroness Warsi: My noble friend makes an important point and I will certainly take it back. He will accept that this is a journey; these challenges have been with us for many decades, if not longer. One of the main purposes of the summit was to agree an international protocol on the documentation of sexual violence in

2 July 2014 : Column 1717

conflict, to build political momentum, to fund more groups dealing with survivors and to encourage individual countries to develop country plans so they can take responsibility for these crimes within their own states. However, I will certainly take back the further idea given by my noble friend.

Baroness Uddin (Non-Afl): My Lords, what specific support is being provided by registered NGOs currently working in Syria? The Minister mentioned some general points about the recent summit. Would she agree that it was regrettable to just highlight the problem of sexual violence in conflict and not also put forward ideas about how to address and support the women who have been raped before, including the 300,000 women—I spoke about them on a previous occasion—who were raped in Bangladesh? When will they get justice?

Baroness Warsi: I can give the noble Baroness details of the specific projects she asks about. Two projects are being funded to improve the capacity to document crimes of sexual violence. We are also giving cash assistance to help female refugees in Jordan and providing livelihood support to women so they can earn for themselves and not be placed in vulnerable situations. We are providing reproductive health services and financial support to vulnerable Syrian women who are thought to be at risk of being coerced into marriage, to help reduce their risk of exploitation. We are taking a whole series of measures, but I go back to the point that the summit was also about giving survivors an opportunity to be heard and to deal with the culture of silence that has existed around the issue. That in itself was incredibly important. A range of work has been developed from the summit around making sure we have the action in place to stop this heinous crime.

The Lord Bishop of Oxford: My Lords, given that discussion of sexual violence is always a very sensitive subject in any culture, will the Minister give assurance that the Preventing Sexual Violence Initiative team that is working in Syria will draw in responsible, enlightened religious leaders to combat the stigma that is so often associated with these awful crimes? This can prevent the kind of recriminations and rejection by communities and families that can result from them.

Baroness Warsi: The right reverend Prelate makes an incredibly important point. Faith as part of the solution to dealing with sexual violence was an important element of the summit, and we hosted two very successful fringe events. One involved a coalition mainly of church leaders, called We Will Speak Out. The other was at ministerial level where we hosted Sheikh Bin Bayyah, the Archbishop of Canterbury and the Archbishop of Westminster, Cardinal Vincent Nichols, and discussed the way in which we can get faith communities to be the first point of support in both providing protection and changing the culture that perpetuates the culture of impunity.

Baroness Kinnock of Holyhead (Lab): My Lords, what was the Government’s response to the call from the United Nations for a further 100,000 resettlement places for the victims of the terrible turmoil she described

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in Syria? When the UK has promised to prioritise help for survivors of torture and victims of violence, is the Minister satisfied with the fact that as of 24 June only 50 refugees have arrived in the UK?

Baroness Warsi: My Lords, the noble Baroness makes an incredibly important point. The instinct of any of us when we hear these individuals’ stories is to provide a place of shelter, but I think the noble Baroness will acknowledge that since 6.4 million people have been internally displaced and 2.8 million are now refugees in neighbouring countries, there is no way that we could resettle all of them. We must make sure that we work with the most vulnerable and provide a settlement opportunity for them. First and foremost, politicians must continue to work for a political solution, because it cannot be that these people remain displaced and it must be that one day they are allowed to return to their own homes.

European Commission: Portfolios


3.31 pm

Asked by Baroness Morgan of Ely

To ask Her Majesty’s Government, following the nomination of Jean-Claude Juncker as President of the European Commission, which portfolio they are seeking to secure for their nominee as Commissioner.

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi): My Lords, Commission portfolios will be allocated by the Commission President designate to those persons nominated by member states and agreed by common accord in the Council. This will happen after the confirmation of the Commission President designate by the European Parliament. The Government are interested in an economic portfolio.

Baroness Morgan of Ely (Lab): My Lords, after the Prime Minister’s abject failure in stopping Juncker becoming the European Commission President, will the Minister explain whether the Prime Minister has a better negotiating strategy in mind to secure a decent and substantial portfolio for the British nominee as commissioner? Will the Minister give an assurance that both Houses of Parliament will have the opportunity to question the nominee before the European Parliament has an opportunity to do so?

Baroness Warsi: I think the noble Baroness will have to accept that the UK took a principled stance on an incredibly important matter. It was the right of the European Council to nominate the President of the Commission. All three main political parties, including her party and, indeed, its leadership, supported the Prime Minister’s position, and it was right that the Prime Minister stood up for the principle of the European Council retaining its treaty-given role.

In relation to appearances before the UK Parliament, of course parliamentary committees are free to invite whomsoever they choose to give evidence before them, including the UK Commissioner and other Commissioners. It would be for them to respond to those invitations.

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Baroness Falkner of Margravine (LD): Given what my noble friend said about the importance of an economic portfolio, does she agree that the important thing for the Prime Minister to do is to find someone who is a heavy-weight, has good judgment and substance, irrespective of whether he or she is from Parliament or from outside of Parliament, and that he must particularly put aside considerations about by-elections and other partisan matters because, if Britain needs a strong batter for the internal market or trade, this is the time that it needs it?

Baroness Warsi: Where there are so many issues at stake, it is important that we nominate a strong candidate. My noble friend will be delighted to know that the Prime Minister has a strong line-up of strong candidates.

Lord Kinnock (Lab): Is the Minister aware that, while a member state Government may certainly express enthusiasm for the appointment of one their nationals to a particular Commission post, the reality is that each Commissioner has a treaty obligation to,

“solemnly undertake”—

A noble Lord: Reading!

Lord Kinnock: Yes, it is because I want to be accurate, which may be a virtue not universal on the other side of the House. The commissioner has a treaty obligation to,

“solemnly undertake … in the performance of my tasks, neither to seek nor to take instructions from any Government or from any other institution, body, office or entity … I formally note the undertaking of each Member State to respect this principle and not to seek to influence Members of the Commission in the performance of their tasks”.

Since it is clear that no partisan advantage can be gained or allowed from a particular Commission portfolio, will the Government stop trying to give the impression to the British public that there is such a means available to Her Majesty’s Government?

Baroness Warsi: The noble Lord gives important advice, and I am sure that he gave similar advice to Prime Ministers when Labour was in power, when it nominated Commissioners and made sure that they did not have any form of partisan interest when they went to the European Union. He can rest assured that whichever Commissioner goes on behalf of the coalition Government will act in the same incredibly impeccable manner that Commissioners have in the past.

Lord Tebbit (Con): My Lords, will my noble friend remind the House of the oath which is taken by a privy counsellor, that he or she will always uphold the interests of Her Majesty against all foreign interests? Will she not agree that, unfortunately, it would be quite wrong to appoint a privy counsellor to a job where he would have to swear the exact opposite, as the noble Lord, Lord Kinnock, has just described?

Baroness Warsi: Because I am a privy counsellor and have sworn that oath, I have to be incredibly careful as to how I answer that question. Fundamentally, it is because of the great expertise in this House that I love being here.

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Lord Low of Dalston (CB): My Lords, can the noble Baroness say whether she thinks it would be useful for Prime Ministers to receive training in recruitment, diplomacy and negotiation skills?

Baroness Warsi: I understand the point that the noble Lord is trying to make. However, we all have to accept that the Prime Minister stood up for UK interests and was responsive to what we all heard—or should have heard—at the recent European elections, which is that the people of the European Union, across the European Union, want change.

Lord Clinton-Davis (Lab): Would it not be appropriate for the Prime Minister to be rather less abrasive and rather more constructive as regards the EU institutions? Insults get us nowhere at all, particularly when significant jobs are being sought for incumbent or future Commissioners. Is that not the most important issue facing the Government at the moment?

Baroness Warsi: The Prime Minister has a good record of delivering for the United Kingdom, whether on the Budget, on Ukraine or on red tape. We can be confident that he is the right Prime Minister, delivering for Britain at the right time.

Banking Act 2009 (Banking Group Companies) Order 2014

Banking Act 2009 (Exclusion of Investment Firms of a Specified Description) Order 2014

Banking Act 2009 (Restriction of Partial Property Transfers) (Recognised Central Counterparties) Order 2014

Banking Act 2009 (Third Party Compensation Arrangements for Partial Property Transfers) (Amendment) Regulations 2014

Motions to Approve

3.37 pm

Moved by Lord Newby

That the draft orders and regulations laid before the House on 5 and 9 June be approved.

Relevant document: 2nd Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.

Motions agreed.

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Health Care and Associated Professions (Indemnity Arrangements) Order 2014

Motion to Approve

3.38 pm

Moved by Baroness Jolly

That the draft order laid before the House on 6 May be approved.

Relevant document: 1st Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.

Motion agreed.

Anonymous Registration (Northern Ireland) (No. 2) Order 2014

Donations to Candidates (Anonymous Registration) Regulations 2014

European Parliamentary Elections (Anonymous Registration) (Northern Ireland) Regulations 2014

Northern Ireland Assembly (Elections) (Amendment) Order 2014

Representation of the People (Northern Ireland) (Amendment) Regulations 2014

Motions to Approve

3.38 pm

Moved by Baroness Randerson

That the draft orders and regulations laid before the House on 4 June be approved.

Relevant document: 2nd Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.

Motions agreed.

Serious Crime Bill [HL]

Serious Crime Bill [HL] Committee 2nd Report from the Delegated Powers Committee

Committee (1st Day)

3.39 pm

Relevant document: 2nd Report from the Delegated Powers Committee

Clause 1: Determination of extent of defendant’s interest in property

Debate on whether Clause 1 should stand part of the Bill.

2 July 2014 : Column 1722

Baroness Smith of Basildon (Lab): I shall also speak to Clause 2 stand part and Amendment 8, which says that there should be a consultation on whether the court can require full disclosure from a suspect of his or her assets and liabilities. Amendment 13, to Clause 11, provides the court with the power when making a restraint order to require the defendant to provide specific information, particularly concerning his and any third-party interests in property. Amendment 14, also to Clause 11, has a similar intent.

As I said at Second Reading, we support many of the measures in the Bill because they address the issues that we agree should be addressed. The role of this Committee is now to examine whether the proposals brought forward in the Bill fully address the problems that have arisen and become evident, or if more can be done to tackle the specific problem of improving enforcement. As I said then, nothing brings the law into disrepute more than poor enforcement of a law. I know that the Minister agrees with me on that point.

It is relevant here to say something about the background and to set the clauses and amendments in context. In 2002, the then Labour Government introduced the Proceeds of Crime Act with new powers for the police, prosecutors and courts to freeze and confiscate the assets of criminals. It was innovative and ground-breaking, providing a wide range of civil and criminal recovery methods, but the use of the legislation and the changes over time have revealed its limitations. Improvements can be made.

The National Audit Office has issued a highly critical report on confiscation orders. It found that only 26p in every £100 of criminal profits was ever confiscated and that the total amount of outstanding debt on confiscation orders is £1.46 billion, a shocking level. In addition, the cost of recovering these ill gotten gains is very high. The estimate from the National Audit Office is that investigation, prosecution and enforcement costs 76p in every pound collected. The value to the Government is just £31 million and just 2% of offenders paid in full. The amount collected and the number of confiscation orders and restraint orders has fallen in recent years, as identified by the National Audit Office report. There is now a seriously worrying trend with the number of orders falling and the outstanding amount of debt increasing. It is clear that some criminals are running rings around the system and making a mockery of what we want to see, which is that crime does not pay.

Another factor in addressing the issue is the age of austerity, although I dislike the phrase. Police and prosecutors are finding it tough. They are having difficulties with resources and need to make greater use of the proceeds of crime as a source of income. We need to examine the reasons why the system has become so ineffective. The reasons are varied—there is no one particular reason—but it is clear that the evidential threshold for freezing a suspect’s assets is very high; criminals often move their money overseas; confiscation orders can be an afterthought; and the penalties for non-payments are not enough of a deterrent. It is also clear that there is a lack of leadership and a lack of strong incentives for the agencies involved in applying for and enforcing confiscation orders.

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Are the measures proposed adequate and the best we can do to address this problem or can we be more effective? We have tabled a number of amendments to address these issues. The reason for tabling clause stand part debates—as the Minister knows, since I discussed this with him—is to allow for a slightly wider debate. We consider that there is room for improvement in the Bill and the Minister may be able to provide the reassurances we seek. This first group of amendments regards third-party claims. I stress that they are all probing amendments. As I say, although we have tabled clause stand part debates, we are clearly not opposed to Clauses 1 and 2. If the Bill goes far enough on third-party claims, will the Government go far enough to ensure early disclosure? There are three further amendments on the same theme, but slightly different. I hope that through these amendments we can probe the issue in debate and get a response from the Minister on the substance and ideas, rather than on the specific wording. We are not wedded to any particular form of words—it is the issues that we would like to discuss further.

3.45 pm

We understand that the restraint process has to be quick and efficient, but it is also important to tackle bogus claims and anything that might frustrate efforts to recover the money early on in the process. At this point we are probing, but we may return to some specific amendments in later stages of the Bill, depending on the outcome of the responses in today’s debate from the Minister.

The value of the property that ends up being confiscated can be eroded when people other than the defendant pop up to say that the property that has been confiscated belongs to them and not to the defendant. Sometimes that is going to be genuine, and we have to allow the process to let people make a claim, but the law has to provide for those cases whereby it is a ploy, drummed up by the defendant to avoid confiscation and to protect their ill gotten gains. I am told that one favourite ruse among criminals is to have their wives suddenly divorce them as soon as they are convicted so that the wife—or the temporarily ex-wife—can then assert a claim to be a separate owner of the property. The practitioners have told us that that happens because the confiscation process is so lengthy and strung out that it ends up giving criminals plenty of time to drum up such bogus claims. At the moment, third-party claims are not addressed at the confiscation point in the Crown Court; they are heard afterwards in a different court, the High Court. The Bill seeks to address that by ending the split jurisdiction between the Crown Court and the High Court. Under the Bill, third-party claims will now be determined by the Crown Court at confiscation stage.

Clauses 1 to 4 introduce a requirement for the prosecutor to set out any known details of third-party interest that the statement of information provides to the courts, and require the defendant to detail any known third-party claims in response to the prosecutor’s status. The court then has the power to determine the extent of third-party interest in the defendant’s property before making the confiscation order. Any such determination is binding.

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I am grateful to the Minister and his officials, because the fact sheets that accompany the Bill are extremely helpful. The fact sheet on this point says that it will,

“speed up the confiscation process, and help the enforcement stage to proceed more efficiently”.

But the impact assessment goes on to say:

“Engagement with partners involved in operations confirms that such claims delay proceedings and reduce the amount of funds available for confiscation”.

All that is true, and we welcome the measures that are being taken, but we question whether it goes far enough. Could we do more to address this problem? The impact assessment says:

“In many cases, third party claims are made at a relatively late stage in proceedings and are deliberately used to frustrate confiscation investigations”.

The idea is that the investigations of claims come later on and the procedures have to come to a halt or are delayed while an assessment is made of those claims. So why not bring that process forward and make that point, whereby people have to make a third-party claim even earlier in the process? We have said that we would bring forward determination of third-party claims from after the conviction to the restraint stage. That gives suspects less time to drum up bogus claims but enough time to make a genuine claim. Why not put the onus more firmly on the defendant rather than the prosecutor or the court? We could go further by requiring the alleged offenders, on having their assets frozen, to declare any third-party claims on the property within 21 days. The court would then be entitled to assume that any claims that come up after that time are bogus. That still protects the genuine third-party claimant, as obviously the defendant knows who has the legitimate claim on their assets.

Where serious criminality is alleged we could go further still, by requiring suspects to make full disclosure of their assets and the liabilities, and the location of those assets, with criminal penalties for making misleading statements. They would also have to notify prosecutors of any change in their circumstances. Criminal penalties would result if they were found to be knowingly wrong.

We envisage that happening without reciprocal disclosure by the prosecution. We also want to ensure that details of the investigation would not have to be disclosed to the defendant. This will, however, have to be subject to further consultation to ensure compatibility with the right relating to self-incrimination, and the ECHR.

That is what our amendments in this group, on third-party claims, seek to address. I am happy to concede that their wording may not be perfect. I hope that my explanation has clarified our intention and what we are trying to investigate. It would be helpful for us to know the Minister’s intentions and to find out whether he is open to further debate on these issues, as well as hearing from other noble Lords whether they would welcome such improvements in the Bill. For now, the amendments are probing, but we may wish to return to them on Report.

Lord Phillips of Sudbury (LD): My Lords, may I ask the noble Baroness whether subsection (2) of the proposed new clause will be adequate to force the person

2 July 2014 : Column 1725

concerned to reveal assets owned by a company that they own? Today, the classic way of avoiding liabilities is to have a series of companies that own each other, and I am anxious in case the wording would not require the person who is required to give information to provide information on all the companies in a string of corporations.

Baroness Smith of Basildon: I am not sure which amendment the noble Lord is referring to.

Lord Phillips of Sudbury: I beg the noble Baroness’s pardon. I am referring to Amendment 8, which would insert the proposed new clause entitled, “Restraint order: determination of extent of defendant’s property”. I mentioned in particular proposed new subsection (2), which would require the suspect to disclose,

“the full extent and location of his or her assets and liabilities”.

I am concerned that that would require someone to disclose only the fact that they have, for example, a company in the Netherlands Antilles, but not the fact that that company is owned by another company, and so on.

Baroness Smith of Basildon: My understanding is that it would require that information, because it asks for,

“his or her assets and liabilities”.

However, if there is any deficiency in the wording I would be happy to see an amendment tabled to make that point even clearer.

The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con): My Lords, I was expecting that we might have a longer debate on this issue—but it is good to see that there is much agreement about the need to strengthen the effectiveness of the Proceeds of Crime Act. It is good that the noble Baroness, Lady Smith of Basildon, shares the Government’s views on that necessity, and I welcome her speech.

As we have heard, Clauses 1 and 2, and Amendments 8, 13 and 14, all deal with the determination by a court of the extent of a defendant’s interest in named property. By extension, the provisions also deal with any third-party interests in the relevant property. The Serious and Organised Crime Strategy sets out a number of proposals to strengthen the Proceeds of Crime Act by, among other things, ensuring that criminal assets cannot be hidden with spouses, associates or other third parties.

Confiscation orders are the principal method used by law enforcement agencies for the recovery of the proceeds of crime. It is open to the defendant to pay off the order from whatever assets he or she has available. A confiscation order specifies the amount to be paid; it does not itemise particular assets that are to be forfeited. Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders. These claims also reduce the amount of money available for recovery, as the noble Baroness said. Of course, some of these claims may be perfectly legitimate but others will be spurious, designed simply to frustrate the confiscation process.

To tackle such abuses, which were clearly described by the noble Baroness, Lady Smith, and to help speed up the confiscation process, Clause 1 confers on the

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court a power to make a determination as to the extent of the defendant’s interest in particular property at the confiscation hearing. Currently, any claims on property are dealt with at the enforcement stage, which can complicate, lengthen and impede the confiscation process. Clause 2 augments the provisions in Clause 1 by introducing a requirement, as part of the confiscation process, for the prosecutor and defendant to detail any known third-party interest in property associated with the defendant in their statement of information and provision of information respectively.

Amendments 8, 13 and 14, tabled by the noble Baroness, seek to bring the determination of third-party interests forward in time even further to the commencement of a criminal investigation or to the point at which a restraint order is made. The amendments also seek to impose on the defendant the obligation to disclose the extent and location of their assets and any third-party interests in those assets. Under Amendment 8, a failure fully to comply would be a criminal offence.

To protect legitimate third-party interests, the provisions in the Bill afford third parties who have, or may have, an interest in the property the right to make representations to the court about the extent of their interest. The right to make representations also extends to the defendant. This will allow the court to consider the evidence presented, assess its credibility and come to a decision.

There are currently no express provisions for the court to deal with any third-party interests in any of the property that the court takes into account when determining the amount of a confiscation order. The legislation does, however, make provision for third parties to make representations where they have been affected by a restraint order. Third parties also have the right to make representations when an enforcement receiver is appointed by the court. Enabling a court to make a determination on a defendant’s interest in property at the earlier confiscation stage will strengthen the operation of the asset recovery process by closing loopholes in the Act that allow third parties to delay the confiscation process.

We do not consider that it is appropriate to bring the determination of third-party interests back to the restraint stage or, indeed, earlier, as is proposed in the noble Baroness’s amendments. Not all defendants will be made subject to a restraint order. For example, where a defendant owns only a house in the UK, it may not be cost-effective to apply for a restraint order when it can take time to sell a house. The relevant law enforcement agency would be made aware of any attempt to sell the property without the need for a restraint order.

Moreover, not all restraint orders lead to confiscation orders. If the subject of a restraint order is not convicted, the restraint order will be discharged. In such cases, it would be a wasteful use of limited judicial and prosecutorial resources to require the court to make a determination as to third-party interests in restrained property. It is for these reasons that the Bill provides for third-party claims to be considered at the confiscation hearing stage.

None the less, third parties may have an interest in restrained assets, and in such cases it would be appropriate for the court to be able to assess such claims—for

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example, if a third party contests a restraint order on the grounds that it is freezing property wholly owned by that person rather than by the defendant. Therefore, on the face of it Amendment 13 might be beneficial, in that it would confer a power for the court to order the defendant to provide information at any time under a restraint order.

Specifically, the court would be able to require the defendant to provide details of any third-party interests in property. However, this power is already available to the court under the existing restraint order provisions. The court can make any order it believes is appropriate to ensure that a restraint order is effective. This would include a power to order the defendant to provide information, including information concerning his or her and any third-party interest in property. It can be done at restraint order stage. Where a restraint order is not in place, a defendant can be made subject to the provisions of a disclosure order under the investigation powers that are in Part 8 of POCA. Such an order can be made at the start of a confiscation investigation and compel a defendant to answer questions or disclose information specified in the notice.

4 pm

I wholeheartedly agree that we need to improve the effectiveness of the way in which the confiscation regime addresses third-party interests. We believe that the provisions in the first four clauses of the Bill will make a material difference to the current arrangements and help guard against late claims frustrating and delaying the confiscation process. We believe that this allows the right balance in the efficient use of process.

Conversely, we do not believe that what is proposed in Amendments 8, 13 and 14 will be an advance on these provisions, bearing in mind the changes that the Bill will bring about, taken together with the existing powers in POCA. We will of course keep the matter under review. With that understanding, I invite the noble Baroness to support Clauses 1 and 2 of the Bill—she has made it clear that that is her intention—and, in due course, not to move her amendments.

Baroness Smith of Basildon: My Lords, I am grateful to the Minister for his explanation. However, I will also say that I am disappointed. I have sat in his place, albeit in the other place, and I know that he will have a folder that contains my amendments with bold print at the bottom that says “Resist”. We have all been there. However I had hoped that with this Bill, where there is such a large amount of agreement between us on the objectives that we seek, there might be a little chink that would allow the Minister to open the door a little and say that this is something that we can look at and discuss. These amendments are not proposed in order to oppose what the Minister has said, as I have made clear. I do not doubt that the proposals before us in the Bill are better than the current situation; they improve on it. But are they the best that we can do?

I will withdraw my amendments today, but I ask the Minister to reflect further. His impact assessment refers to the delay in the process of identifying third-party claims as one of the reasons that some criminals are able to maximise, shall we say, the assets that they can hold onto. I hope that between now and Report the

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Minister and his officials will reflect further on the points that I have made today and understand why I proposed them, which was merely and only to seek to do things, not just better, but as best we can.

Clause 1 agreed.

Clauses 2 and 3 agreed.

Clause 4: Enforcement receivers

Debate on whether Clause 4 should stand part of the Bill.

Baroness Hamwee (LD): My Lords, I am opposing the Question that this clause stand part of the Bill simply to probe. I hope that nothing I say will take the Minister by surprise. I would like to use this opportunity to thank him and his officials for the factsheets that we have had and, in particular, for the Keeling schedules. I discovered that in my pile of copies of statutes, I had a copy of the Proceeds of Crime Act 2002. I then rapidly discovered how out of date that print was, so the material that we have been sent is very useful indeed.

This debate is closely tied to the previous one—still on third parties’ interests. Clause 4 is about receivers, and proposes an addition to the Proceeds of Crime Act involving proposed new Section 10A of that Act, which is inserted by Clause 1 on determining the extent of an interest in property. Essentially, the purpose of this stand part debate is to ask who deals with what, and when. How would all this operate? Who determines whether and when there has been no,

“reasonable opportunity to make representations”,

or whether there would be,

“a serious risk of injustice”?

I am of course quoting from proposed new Section 51(8B) —whereas proposed new Section 10A(1) in Clause 1 provides that the court, not the receiver, determines the extend of a defendant’s interest,

“if it thinks it appropriate to do so”.

My request, therefore, to the Minister is simply for him to explain the procedure.

Lord Taylor of Holbeach: My Lords, it was kind of my noble friend Lady Hamwee to thank those who are supporting me at official level in the Bill; I am supported by a very fine team, and I am grateful. I am also grateful for the fact that a number of noble Lords have taken time to talk to me about the Bill. That has helped us all to get an understanding of a complex measure. Those Keeling measures are needed in order to have the faintest idea about what is going on. Noble Lords will therefore understand the complexity of the matter and why the excellence of my officials is important to me.

Clause 4 deals with the circumstances in which an individual affected by a determination of interest may make representations to the court appointing an enforcement receiver. A court can confer certain powers on an enforcement receiver, including the power to realise property. This power is accompanied by a requirement to allow persons with an interest in the property a reasonable opportunity to make representations to the court.

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As we discussed in the previous debate, the basic principle is that an appeal against a Section 10A determination as to the extent of the defendant’s interest in a property will be permitted only where the person was not given an opportunity to make representation to the judge who made the determination, or there is a serious risk of injustice. In cases where there is no receiver, the Court of Appeal will hear the appeal in the normal way. In cases where the court appoints a receiver, however, it is not bound by the determination and can hear representations. It is in effect hearing an appeal.

As interested third parties will generally have had an opportunity to make representations to the court prior to it making a determination of interest in property, the changes made by Clause 4 limit to certain circumstances the right of such parties to make further representations to the court appointing the receiver. As I have explained, it is not a right of appeal at large and does not allow representations to be made that are inconsistent with a determination, except under the two circumstances I described: first, when the affected party was not given a reasonable opportunity to make representations to the Crown Court before it made its determination; and, secondly, where the court considers that the determination would result in a serious risk of injustice to the person. These two circumstances mirror those in Clause 3, which set out the grounds under which the Court of Appeal may hear an appeal against a Section 10A determination.

So that we are in no doubt as to what it means, the “serious risk of injustice” will include an instance where an innocent third party with no links to criminality has an interest in a house that is to be sold to satisfy a confiscation order against a defendant. The innocent third party may have been out of the country when the determination was made and, consequently, had not received notification of the hearing. By contrast, it would not include instances where there has been an inconvenience to a third party—for example, if they had to move out of rented accommodation that was to be sold to satisfy a confiscation order. A serious injustice is not anticipated to be such a rare instance that it would be considered to be an exceptional circumstance. It will be a matter for judicial discretion, based on the facts of the individual case.

The clause enables an interested third party to make representations where their interest in the property came to light only after the Crown Court had made its original determination. Subject to the court’s consideration of any such representations, and to the outcome of any appeal, a determination made by the court is binding on the receiver. As I have said, in cases where there is no receiver appointed, any appeal will be dealt with by the Court of Appeal. This represents an equitable balance between the effective enforcement of confiscation orders and the important rights of third parties. On that basis, I beg to move that Clause 4 stand part of the Bill.

Baroness Hamwee: My Lords, that is very helpful. I commented to my noble friend when we discussed Part 1 that flow-charts might be quite useful. As he has described the sequence of events, it occurs to me

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that flow charts or some sort of fairly straightforward step-by-step explanation would be particularly helpful to third parties who get caught up in these proceedings. A defendant will be likely to have legal representation and advisers who can assist with what happens at what stage. A third party may suddenly find that he or she is affected and they ought to be able to find out what steps are available to make representations and how they should be made, without necessarily having to go to the expense of instructing lawyers themselves.

The right thing to do would be to make this user-friendly to people, about whom we should not assume any degree of guilt or their being reprehensible at all. I just use this opportunity to air that thought and of course I am not going to resist Clause 4.

Clause 4 agreed.

Clause 5 : Time for payment

Amendment 1

Moved by Baroness Hamwee

1: Clause 5, page 5, line 12, after “prosecutor” insert “and the defendant”

Baroness Hamwee: My Lords, the first amendment is an amendment to Clause 5, which will introduce a new Section 11 to POCA. The proposed new Section 11(8) provides for the prosecutor to have an opportunity to make representations regarding the time for payment. Clearly, the defendant must have an opportunity as well. I tabled the amendment simply to ask my noble friend whether he can explain when that opportunity would be, and whether he can say whether proposed new Section 11(8) concerns the prosecutor’s response to the defendant’s representations, which are covered elsewhere—in existing legislation if not in the Bill. I beg to move.

4.15 pm

Baroness Williams of Trafford (Con): My Lords, Clause 5 includes provisions designed to minimise delays in the confiscation process. This is achieved by amending Section 11 of POCA to make it crystal clear that the full amount that is ordered to be paid by the court must be paid on the day on which the order is made, unless the court is satisfied that the defendant is unable to do so, for example, because they need time to realise their property.

The maximum additional time allowed for a defendant to pay their confiscation orders has been reduced from 12 months to six. There will also be a further restriction on the length of an extension of the time to pay limiting it to more than is necessary, for example, to realise funds from a specific asset.

My noble friend has indicated that this amendment is designed to tease out whether the defendant has a right to make representations to the court about the time for payment. She has rightly pointed out the fact that the proposed new Section 11(8) expressly confers on the prosecutor the right to make representations, but no such express right is conferred on the defendant.

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I can assure my noble friend that the defendant will indeed be able to make representations to the court. However, in view of the way in which the process will operate, it is not necessary to provide for this in the legislation. As I have explained, the default position is that a confiscation order will be payable on the day that it is made. This is the current position. We do not believe that it is impractical. Certainly, for lower value orders, there is no reason why the defendant cannot visit the fines officer and discharge the confiscation order before leaving the court.

The court will not be expected to allow additional time for payment on its own motion. In practice, the court will only be in the position to consider making an order under proposed new Section 11(2) of POCA to extend the time given to the defendant to pay their order if the defendant has made representations to the effect that they need more time to pay their order or part of it. This will be done as part of the confiscation hearing.

Similarly, under proposed new Section 11(4) of POCA, it will be for the defendant to make an application to the court to extend the period allowed for payment. It is implicit in making such an application that the defendant will set out his or her arguments for being afforded more time to pay the confiscation order. New Section 11(8) is intended to ensure that the prosecutor has the right to respond to the case made by the defendant. Having heard the explanation, I trust that my noble friend will agree that the amendment is unnecessary.

Baroness Hamwee: My Lords, the noble Baroness will know that I was concerned about the very tight provisions of new Section 11. She has explained that the defendant will have an opportunity to make representations at the time. That is reassuring, because it is almost never possible to realise an asset on the day that an order is made and it is often not even possible to transfer money immediately. What she has said about the processes is helpful and I am grateful to her for her explanation of proposed new Section 11(8). I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Clause 5 agreed.

Clause 6 agreed.

Clause 7: Orders for securing compliance with confiscation order

Amendment 2

Moved by Lord Rosser

2: Clause 7, page 6, line 21, at end insert—

“(4A) In considering whether to make a compliance order the court must, in particular, consider whether any restriction or prohibition on the selling of property subject to the confiscation order and located overseas ought to be imposed for the purpose mentioned in subsection (2).

(4B) The court may attach penalties to a failure to comply with provisions made pursuant to subsection (4A).”

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Lord Rosser (Lab): The three amendments in this group are concerned with recovering money from overseas or in response to such requests from overseas jurisdictions. Many investigations into stolen assets parked in this country do not get off the ground because the Home Office routinely fails to respond, or is unable to respond, to requests for help from other countries. The Home Office has shown in Parliamentary Answers 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. Since 2010, it seems that only two bilateral agreements have been signed with overseas jurisdictions to ensure co-operation on mutual legal assistance.

Last year, the former head of the UK financial intelligence unit—part of the National Crime Agency—indicated that when an investigation was initiated from the victim country, and moneys were suspected to be in the UK, the request went out through all the proper channels but there was no great keenness to comply, as there was a mindset that we could just be giving ourselves a headache. Assuming that is a fair analysis, such an approach does not help foster greater reciprocity at international level and cannot help us in securing co-operation when we want it from overseas jurisdictions. The Minister may well contest this analysis, since it suggests there are somewhat different reasons for the problem from those given in the Government’s impact assessment.

It would be helpful if the Minister could provide information on the number of asset recovery requests received from foreign authorities over the past three years, how many have been referred to investigative bodies and how many cases are pending. The World Bank estimates that, each year, developing nations lose between $20 billion and $40 billion through corruption. Between 1994 and 2009 only $5 billion of stolen assets were recovered globally—which is apparently less than 2% of the lowest estimate of the amount stolen, according to an analysis by the World Bank and the United Nations Office on Drugs and Crime.

Amendment 22 in this group requires the Secretary of State to set up,

“an independent review of the effectiveness”,

of our mutual legal assistance arrangements,

“with overseas jurisdictions in cases concerning the proceeds of crime”,

since the figures that are available, the comments made by people who have been on the inside and, indeed, the rather different causes of the problem that are set out in the Government’s impact assessment all strongly suggest that everything is not well. Criminals here also seek to hide their ill gotten gains overseas, and a significant proportion of unpaid Serious Fraud Office confiscation orders are thought to relate to funds located overseas. Criminals put their assets where the UK authorities find it hardest to recover them, which usually means a jurisdiction with which we have no standing mutual co-operation arrangements. Even where this 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, which can be hard, slow and not very effective.

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In Clause 7, proposed new Section 13A provides that in every confiscation case the court will be required to consider making an order to ensure that a confiscation order is paid. In particular, it will have to consider placing a “restriction or prohibition” on the defendant’s overseas travel to prevent that defendant travelling abroad to dispose of his or her assets. Perhaps we ought to consider going further. At the moment, there is nothing the courts can do about people who sell overseas property funded through proceeds of crime because it is in another jurisdiction. We consider that a court should be in a position to fine or jail someone, possibly by making it a contempt of court, if he disposes of property based overseas that is subject to a freezing or confiscation order. Amendment 2 provides for Clause 7, on compliance orders, to be amended to that effect.

We also consider that there should be a consultation on introducing a legal obligation to repatriate liquid assets that are subject to a restraining or confiscation order and which appear to have been moved overseas. Amendment 21 in this group provides for a consultation along these lines. I hope the Minister will be able to give a helpful response to the amendments in this group, since we are at one in seeking to make sure that crime does not pay.

Lord Taylor of Holbeach: My Lords, Amendment 2 relates to compliance orders. Under the provisions in Clause 7, the court will be required to consider making, in every confiscation case, any order it considers appropriate to ensure that a confiscation order is paid. Under the new order, the court will be able to impose any restrictions, prohibitions or requirements it believes appropriate to ensure that a defendant pays a confiscation order and that the order is effective. A compliance order will normally be made at the time that a confiscation order is granted. If the court determines that a compliance order is not necessary at that confiscation hearing, the prosecutor will be able to apply for an order any time afterwards as long as the confiscation order remains unpaid. This type of order is not new to the Proceeds of Crime Act 2002, as the Act already confers on the Crown Court the power to make any,

“such order as it believes is appropriate for the purpose of ensuring that the restraint order is effective”.

Amendment 2 would require the court to consider attaching to a compliance order a restriction on selling overseas property that is the subject of a confiscation order. It is, however, already possible to impose such a restriction as part of a restraint order, as the noble Lord will understand from what I have just said. A restraint order can be obtained at a significantly earlier stage in an investigation—for example, before the defendant has been charged. Such a restriction may also be added to a compliance order where there is no restraint order in place. As such, it is not necessary to make express provision for the court to consider such restrictions or prohibitions. The court already has that discretion. It is worth adding that, once a confiscation order has been made, it may be necessary to sell property to enable the order to be paid off. In high-value cases, this may fall to a court-appointed receiver. In addition, not all defendants will have assets overseas so it would not be necessary to require the court to consider imposing such a restriction in every case.

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Amendment 21 seeks to confer on the court, when making a restraint or confiscation order, a power to require the defendant to repatriate liquid assets held abroad back to the UK. 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”,

as I have already said. That could include, for example, a requirement for liquid assets to be returned to the UK. Breach of the terms of a restraint order, including selling property that is frozen under the terms of the order, will be a contempt of court and, as such, punishable by a term of imprisonment of up to two years.

Finally, Amendment 22 calls for a review of mutual legal assistance. The movement of money and assets quickly across borders means that it is essential that the UK seeks the assistance of its international counterparts so that it can quickly freeze and recover the proceeds of crime, and it can likewise assist jurisdictions that ask the UK for assistance. Historically, international co-operation on asset recovery has been poor, as the noble Lord, Lord Rosser, said. We depend on other countries to enforce our orders on our behalf, but these orders may not be given priority. Some countries are witting or unwitting safe havens for criminal assets.

4.30 pm

Improving our performance is a key commitment in the cross-government serious and organised crime strategy. It is also a key objective in the criminal finances improvement plan, which was published on 19 June as part of the Government’s response to the Public Accounts Committee report on confiscation orders. Perhaps I may describe the process. The normal way that international asset recovery works is that the country that recovers the assets will retain those assets unless there is an asset-sharing mechanism in place. It is, however, open for countries to put arrangements in place to share recovered assets, either in a particular case or through overarching bilateral instruments. The UK is already a party to a number of multilateral and international agreements that contain asset-recovery and asset-sharing provisions. The UK does not require a formal international agreement to be able to co-operate with another country in respect of freezing, confiscating, sharing or repatriating the proceeds of crime. It does, however, have 37 bilateral mutual legal assistance agreements with other countries which include such provisions.

Since 2008-09, there have been no asset-sharing cases involving a payment by the Home Office to a foreign jurisdiction. There were approximately five cases in the period 2000 to 2005 in which the Home Office made asset-sharing payments to foreign jurisdictions, including the USA, the Netherlands and Austria. There have been at least 10 asset-sharing cases since 2008-09 in which a foreign jurisdiction has made payments to the Home Office. There are some current, ongoing cases which, if successful, will result in the UK’s sending a significant amount of money—perhaps up to £100 million in total—to Nigeria, the United States and Macau. These cases all relate to bribery and corruption.

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The Crown Prosecution Service has also posted asset-recovery advisers to priority jurisdictions—namely, Spain and the United Arab Emirates—who are due to assist in the recovery of overseas assets. It is anticipated there will be up to six advisers in total in identified priority countries. Work has also been carried out in the Ukraine and in Egypt. In line with the serious and organised crime strategy and the criminal finances improvement plan, the Home Office will continue to work with the Foreign and Commonwealth Office and the Crown Prosecution Service to sign further asset-sharing agreements with key priority countries for asset recovery. We will continue to assess priority countries for further enhanced co-operation.

To sum up, we recognise the importance of international co-operation in the area of criminal finances, as in others. As on the domestic front, there is more we can do to enhance the effectiveness of current arrangements, including improved levels of co-operation with overseas jurisdictions. This, as I have said, is one of the issues being addressed by the criminal finances board, which is chaired by my colleague Mrs Karen Bradley.

I hope that I have shown that I have some sympathy with the intention behind these amendments, having afforded the Committee a valuable opportunity to debate these issues, which I consider to be important. They have given us the opportunity of discussing something which is not frequently discussed in this House. I invite the noble Lord to withdraw this amendment.

Lord Rosser: I thank the Minister for his reply on this group of amendments. As I understand it, the Minister was saying that, as far as Amendments 2 and 21 are concerned, the current legislation already gives the power to do what is set out in those amendments—at least, I think that was the thrust of the Minister’s reply. Obviously, at least if I have understood the essence of his reply, I just wish to leave the matter in the context that clearly I will wish to read in Hansardthe details of the Minister’s response.

On his response to the last issue, on mutual legal assistance, I am sure that the Minister will understand if I say that I will want to read it, since he gave some statistics and information on the current situation. I shall read that with interest when Hansard appears.

Lord Taylor of Holbeach: The noble Lord asked me some questions about numbers, which I did not have to hand in my papers. I am willing to see whether I can find further information which I can give him, because I agree that it is an area where a modest improvement in performance could lead to considerable improvement in the amount of money that we recover.

Lord Rosser: I am grateful to the Minister for those comments. I suppose that part of the reason for my saying that I would want to see the detail of the figures that he gave was to see whether he had in fact responded to the questions that I asked, but if he, too, is going to look at that, and if there are parts to which he did not respond on which he will write to me, I will be grateful. In view of that, I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

2 July 2014 : Column 1736

Amendment 3

Moved by Lord Harris of Haringey

3: Clause 7, page 7, line 3, at end insert—

“13C Application of assets arising from the proceeds of crime to investigating, prosecuting or enforcement authorities

Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be applied equally to the investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”

Lord Harris of Haringey (Lab): My Lords, aren’t we doing well? When was the last time that we got through the first seven clauses of a Home Office Bill within an hour of starting Committee stage? The Minister must be doing something right on this occasion.

However, I will try to improve our batting average now. At Second Reading, I declared my interest as chair of the National Trading Standards Board. In that capacity, I was invited four months ago by Yeading Junior School to attend an assembly that was based around lesson plans which had been funded by the Proceeds of Crime Act. The lesson plans were produced by the Illegal Money Lending Team for England, based in Birmingham, which my board funds. They were designed to teach junior school children how to use their money, how to save, how they should avoid debt and, above all, how they and their families should avoid loan sharks.

The Minister’s right honourable friend the Secretary of State for Education, with whom I know his department has a continuing feud, would no doubt be delighted to discover that those nine and 10 year-olds put on a play that included a section on avoiding loan sharks conducted entirely in Latin—which is not something that I thought many children in the London Borough of Hillingdon were used to speaking. None the less, it was an interesting performance; it was not, I hasten to add, a core part of the lesson plans produced by the Illegal Money Lending Team.

The point about the initiative was that it inspired young children to learn about the dangers of them and their families being ensnared by loan sharks. The funding for it had been provided by POCA moneys taken from loan sharks who had been convicted in the courts. It is an example of some of the community work that the Illegal Money Lending Team supports through funds confiscated from loan sharks, but it also demonstrates the value that can be gained from the Proceeds of Crime Act 2002.

It is clearly a valuable and important mechanism, and I think that all noble Lords who have spoken in Committee today share a desire to see it strengthened. It is good, because it hits criminals where it hurts most: in their pocket. They are often less concerned about the formal penalties that they might incur than the fact that their ill gotten gains will be taken from them.

The Minister has told us how the Bill will make it more difficult for criminals to evade confiscation. That is all to the good and welcome—although, as we have heard, there are possibilities for making the provisions stronger and no doubt we will continue to pursue them as the Bill proceeds. This amendment would ensure that a greater share of the assets recovered from offenders

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was reinvested in the communities and neighbourhoods affected by their criminal activities and that those funds should be put towards preventing crime and addressing its consequences.

At Second Reading the Minister said that there would be a review of ARIS, which on this occasion is the asset recovery incentive scheme rather than a foreign terrorist organisation with a similar name,

“to ensure that it works to support front-line agencies”.—[

Official Report

, 16/6/14; col. 697.]

When the Minister responds, I hope that we will have some clarification from the Government about the terms of the review and whether they will consider placing ARIS on a formal legislative basis and allow local authorities in particular—although the same arguments apply to the police—in their role both as investigating authorities but also as prosecuting authorities to receive a greater share of the proceeds of crime. The most likely use of these funds is that they would be applied within local government to funding accredited financial investigators in trading standards and community crime prevention projects. They could also support community crime prevention projects that had proved very successful.

The amendment would place ARIS on a formal legislative basis and would allow local authorities in their roles as both investigating and often prosecuting authorities to receive potentially more than 50% in the division of the proceeds of crime, which could then be applied to crime prevention. The most common use of the incentive payments that local authorities receive is to fund the posts of accredited financial investigators. The reason that these are important is that they make a very significant contribution to the work of trading standards. They enhance investigations by providing intelligence support. They undertake the money-laundering investigations and ensure that the proceeds of crime are recovered through confiscation and cash forfeiture.

There are a number of examples of the positive work that accredited financial investigators do. This includes dealing with landlords who have illegally converted properties into houses of multiple occupancy and then rented them to vulnerable members of the community. I believe that the London Borough of Hounslow prosecuted a case such as this in 2010, which resulted in a confiscation order of £180,000. There are also examples where one of these accredited financial investigators has had an essential role in identifying the victims, resulting in them being compensated. What often happens in these cases is that a lot of material is seized but it requires detailed financial investigation to track down where the moneys have come from and who has actually been defrauded by the fraudsters concerned. A major case was undertaken by Cambridgeshire County Council involving rogue traders, which resulted in the successful prosecution of 15 defendants, who between them received combined prison sentences of 40 years and were served with a £250,000 compensation order—all of which was then paid to the victims who had been defrauded of their life savings.

The reason why the incentivisation scheme is so important—here I am talking about local authorities but exactly the same arguments apply to the police—is that it enables them to fund the specialist resource to

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pursue some of the financial aspects. It means that the financial investigation can be integrated into the rest of the investigation right at the beginning. That is much more cost-effective than pursuing it at the end of the investigation to see whether assets can be saved. It also means that there is much more depth in the investigation that takes place. It is important to see if the provisions can be strengthened in that way.

The London Borough of Enfield has used the money that it has obtained from the Prevention of Crime Act scheme since 2011 to fund a specific post. That has had a series of impacts: it has allowed it to undertake the first prosecution nationally for money laundering against an illegal poker den, where the defendant was sentenced to 15 months, and to provide financial evidence in a case against a trader convicted of operating a fraudulent HGV training school, resulting in a 44-month conviction following a month-long trial. There is a series of examples of where the presence right at the beginning of an accredited financial investigator has enabled the local authority to pursue the case in much more depth and enable it to go forward.

4.45 pm

In some instances, it may be critical in ensuring that the issue progresses. There was an example where confiscation perhaps influenced the authority’s decision to proceed in a complex prosecution. The London Borough of Hillingdon—no connection to Yeading Junior School—conducted a complex prosecution of SAS Fire and Security Systems. Following a three-month trial, the company and its three directors were successfully prosecuted for trading standards offences. The authority’s legal bill was in the region of £400,000—a substantial sum to an individual local authority. However, the defendants agreed to pay this, along with a £1 million confiscation order, following a financial investigation which was conducted by the accredited financial investigator funded in this way. Without the local authority having the certainty of recovering those costs, this case would not have gone forward in the way it did.

I am grateful to the Minister for telling us that this work is proceeding and that the review is taking place. However, what is it going to cover? The processes are not straightforward. When an order is made, the court must separately determine the value of the benefit the defendant received from criminal conduct and the available assets. The order value is the lower of the two amounts, so if a defendant is deemed to have benefited by £200,000 from selling counterfeit goods but only has assets of £10,000, only £10,000 can be confiscated. It is therefore critically important to get to the bottom of what has happened to the criminal proceeds, as part of the investigation. It is not just about getting a conviction but about getting that extra resource out.

This is still not a simple process, because the local authority cannot know when it is going to receive the resources. There is often quite a long delay after the court makes an order before anything happens. The Home Office—no doubt as its contribution to reducing the weight of bureaucracy on local authorities—requires very complicated returns to be filled in regularly, describing exactly how the confiscation moneys have been used. Are those the kind of issues that will be looked at as part of the review?

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There is a string of issues here. It is extremely important that the incentivisation scheme is put on a statutory basis. I am sure that the Minister agrees about the importance of the scheme. Given the very good use that local authorities are able to put this money to, it would make great sense for the proportion to be potentially higher. I hope that the Minister will be able to tell us exactly how the review is taking place, what its objectives are and when we might hear the outcome. I beg to move.

Lord Deben (Con): My Lords, I will insert a single sentence here, although it may be rather a long one. I am afraid that my noble friend may have great difficulty in doing what the noble Lord suggests because he will come into conflict with a deep and entirely erroneous Treasury view about hypothecation. For all my political life, I have fought the battle for hypothecation, which is the only way we will get people to accept a whole range of things in future.

It was extremely successfully done on the landfill tax, but the money was then stolen by the incoming Government, who did not understand. The Treasury had hated it in the first place; it had been forced through by the then Chancellor of the Exchequer, my right honourable friend Kenneth Clarke. Immediately after he went, the Treasury mandarins got the money back again because they do not like someone else deciding how the money shall be spent. I beg my noble friend to stand firm against that wholly unacceptable attitude.

The Pope was right, in the 1920s, when he talked about subsidiarity being the basis of democracy. He was, of course, attacking fascism and communism. I am afraid that bureaucratism is just as damaging in always trying to concentrate decisions about how money shall be spent in the hands of the Treasury. I think that the more people who make decisions about how it shall be spent, the more we will be able to make democracy work. Obviously, there have to be restrictions and some overall view, but I hope that my noble friend will take this opportunity to fight like a tiger for an essential part of any sensible democracy: hypothecation. Hypothecation should be a tick rather than a cross when something such as this is put forward.

Baroness Hamwee:My Lords, I wonder whether Hansard will be able to resist its usual refusal to let us put lots of “ands” and “buts” in very long sentences.

I have been trying to think of something to say in Latin to the noble Lord, but my A-level Latin is too long ago for me to be able to do it. However, he is probably asking your Lordships the sort of question to which we should answer yes. I remember that from the very early days of my Latin education.

I am certainly on the yes part of the spectrum of answers to this, in principle. I think a large part of the problem is what I unkindly call “turf wars” between the MoJ and the Home Office about who should have the money when the proceeds are recovered. I realise it is more complicated than that.

On the wording of the amendment, I wonder whether it is possible to identify the communities and neighbourhoods affected in an effective and straightforward manner, if at all. For instance, on the proceeds of crime of someone high up in an organised crime organisation dealing

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with drugs, can you pin down the communities and neighbourhoods affected in the way suggested? I am very attracted to money going towards crime prevention and assisting those who are affected by crime, but I am just not quite sure about this provision. However, the questions the noble Lord asked the Minister about ARIS and the wider questions about how the proceeds of crime when recovered are applied are very important.

Lord Phillips of Sudbury: My Lords, on the face of it, this is a beguiling amendment, not least because of the way the noble Lord, Lord Harris of Haringey, moved it by giving an example of helping a primary school understand a bit more about the way our complicated world works. There is no one in this House who defers more than me to the need for this country and this Parliament to help our citizens have a better idea of what it is to be a citizen in our barbarically complicated society.

I concur with my noble friend Lady Hamwee, and I think there is perhaps another problem with the wording of the amendment in that it simply talks about,

“reinvestment in the communities and neighbourhoods affected”,

which seems as wide as the Atlantic Ocean and gives no reinvestment guidance about what, why or wherefore.

I have a deeper problem with the amendment. We heard the noble Lord, Lord Rosser, give the example of $20 billion to $40 billion that should be recovered from frauds in developing countries and is not. We heard other examples from my noble friend Lord Taylor of Holbeach of the abject failure of our current laws to achieve their purpose. I am not in favour of doing anything to diminish the resources available to the prosecutorial authorities for seeking to make more as regards compliance with the manifold laws we already have. It is a sort of scandal that we go on passing law after law with the most perfect of purposes, but then fail utterly to give those charged with implementing those laws the wherewithal to do that.

My noble friend Lord Taylor of Holbeach talked with some satisfaction of six advisers. I have to tell him that when you are up against the big, bad guys, a team of six will look rather small, and he is talking about six to cover the whole landscape. Therefore my reservation about the amendment is simply that if its effect is to reduce at all the current grotesquely inadequate resources that go toward compliance, I am afraid that I am not for it.

Lord Bourne of Aberystwyth (Con): My Lords, I, too, will speak, albeit briefly, with some words of caution about this amendment. I do not think anybody could resist the seductive arguments put forward by the noble Lord, Lord Harris of Haringey, on the need to fund programmes. However, at present the asset recovery incentivisation scheme allows agencies to get back 50% of what they recover from the Home Office. That scheme is flexible in its application, and allows the money to be spent to drive up asset recovery and, where appropriate—those words are important—to fund local crime-fighting priorities for the benefit of the community. I know that the intention of the noble Lord was entirely benevolent and helpful; his example of Latin-teaching in Hillingdon as a sort of cheerleader for the Secretary of State for Education demonstrated that. However, the words “where appropriate” are extremely important.

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If one looks at the wording of the noble Lord’s amendment, it is prescriptive. It provides for a three-way split of the proceeds for reinvestment in the communities and neighbourhoods affected by the relevant criminal action. There are no ifs, no buts, and no discretion. Sometimes that would work, and sometimes not. My noble friend Lady Hamwee referred to a situation relating to drugs where it would not. However, that is also true, in spades, of something like insider dealing. That is and should be a crime, but there is no classic victim in the personal sense. The victim, if anything, is the Stock Exchange or the City of London. Under this amendment, we might find that the noble Lord is funding the livery companies or Mansion House. I am sure that he does not intend that, but there is a danger with the way in which the amendment is phrased.

Therefore I have great sympathy with what he seeks to do. However, given that a review is being conducted at the moment, the appropriate thing is to wait to see what that review throws up. I also look forward to hearing what the Minister says about that review. Then would be the time to look at this to see how we can get more money used in crime-fighting rather than by means of something as prescriptive as is the wording of this amendment, which has no discretion at all.

Baroness Smith of Basildon: My Lords, I have noticed, in debates on Home Office legislation, that my noble friend Lord Harris of Haringey seems to attract adjectives. In the previous Bill we looked at he was described by the Minister as being “mischievous”, and today the noble Lord, Lord Phillips, described him as “beguiling” and the noble Lord, Lord Bourne, described him as “seductive”. I dread to think where we will go as the debate continues.

The issues the noble Lord raises are interesting and go to the heart of transparency on this issue, which is about how we want to engage the public and for them to understand what happens to money brought in by the Government. The noble Lord, Lord Deben, made an interesting point on hypothecation, which comes down to trust. The public want to know not just where their taxes go but what happens to money that is brought into the Government.

I was struck by my noble friend Lord Harris’s examples from the education sector. I was not aware of those examples; I do not know whether the Minister was aware before taking the Bill forward. If neither he nor I were aware, were his officials aware? Who does know what happens? This amendment does us a great service, serving to remind us that we have a duty to make this clear to the public. If we are trying to engage them in support of legislation that involves confiscation, fines, et cetera, there is an obligation on Governments and on Parliament to ensure that the public are aware of where that money goes. I hope that the Minister will take some of those comments on board and that it is something that we can return to, in terms of a wider public understanding of what happens to the money and how it is used for the public benefit. That comes to the heart of the points made by the noble Lord, Lord Deben, and by the amendment of my noble friend Lord Harris of Haringey.

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5 pm

Lord Taylor of Holbeach: I have been trying to think of a nice adjective to describe the noble Lord, Lord Harris of Haringey. I know that he did not really like me calling him mischievous. However, this amendment has been very worth while because it has enabled the House to discuss this matter. The noble Baroness is absolutely right; along with other noble Lords, I was not particularly aware of the working of this mechanism, so it has been useful to have this debate. The description the noble Lord, Lord Harris, gave of how the system works is absolutely right; it is dealt with under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme.

The objective of the scheme is to provide law enforcement agencies with incentives to boost asset recovery as a contribution to reducing crime and delivering justice by giving them a direct stake in the proceeds they generate from that work. The speech by the noble Lord, Lord Deben, was very useful; I do not care whether his sentences are short or long, they are of high value. It was an extremely interesting contribution, as were the contributions of all noble Lords, including that of my noble friend Lord Phillips of Sudbury. They were very much to the point, because making the most of the potential of this money is really important. The scheme is a non-statutory mechanism which has advantages for returning to law enforcement, prosecution agencies and the courts a proportion of the assets they recover. Public bodies with the functions of an investigator, a prosecutor or an enforcement authority can use the powers within POCA to recover criminal assets and can become part of the scheme thereby.

It is also important to remember that the scheme does not just apply to money recovered under confiscation orders but also, as the noble Lord demonstrated, to assets recovered through the other routes to recover assets provided for in the Proceeds of Crime Act, such as the seizure and forfeiture of cash, the civil recovery scheme and the taxation of criminal proceeds. Under the existing scheme, for assets recovered by means of a confiscation order, the Home Office retains 50% of the recovery receipts and returns the remainder to investigation agencies, which receive an 18.75% share of the receipts, prosecution agencies, which also receive an 18.75% share of the receipts, and enforcement agencies—in most cases this is the Courts Service—which receive a 12.5% share of the receipts. For cases where cash has been forfeited under the cash seizure powers in the Proceeds of Crime Act, the Home Office retains 50% of the receipts and the investigative agency—in the majority of cases this is the police, but it is not always so—retains the other 50%.

The use to which each agency decides to put the money received under the scheme is a matter for that agency. Because amounts received through asset recovery are unpredictable, and given that it depends on the nature of the cases dealt with by each agency each year, we have not laid down any specific guidance on the use of such money. However, we have previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance. I sense that noble Lords would feel that that is the right thing

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to do. The noble Baroness, Lady Smith, made clear her support for the needs for resources to drive up performance. My noble friend Lord Phillips of Sudbury felt that that was a primary objective for this money. But also, when appropriate, it can fund local crime-fighting priorities on behalf of the benefit of the community.

The Home Office has monitored the scheme annually since its inception. The results of that monitoring show that more than 90% of money distributed through the scheme is reinvested in asset recovery work, such as the recruitment of financial investigators. If we get more money, we will be able to have more investigators—and I think that everybody can see that this vicious circle could be a virtuous circle, if we implement it correctly. As the noble Lord, Lord Harris, said, these investigators carry out the recovery work, and there is a balance that can be spent on police operations and community projects. Some examples of the community work that has been paid for include alcohol awareness and crime reduction projects, mentoring programmes and assistance for elderly and vulnerable people. The noble Lord, Lord Harris, gave a classic example of community work in the confiscation of money. His own field case, which he also mentioned, is a very good example.

Over the past three years, more than £238 million has been returned to front-line agencies. However, we believe that the proposed changes that are being made in the Bill will ensure that agencies are able to apply for and enforce more orders more successfully. This in turn should lead to more funds being received by front-line agencies through the scheme. The share of the money that is retained by the Home Office forms part of the department’s core budget line and, as such, is put towards the delivery of front-line services through mechanisms such as police grant.

One key objective of the Government’s criminal finances improvement plan, which was published on 19 June, is to ensure that the Asset Recovery Incentivisation Scheme works effectively for front-line agencies. It is with that in mind that the review has been set up, and we intend to complete it by the end of the year. I hope that it will please noble Lords to note that the emerging findings from the review will be presented to the board in September, so if this Bill takes its normal course we should be able to update the House on Report on how that review is going.

The noble Lord asked about the terms of the review. The whole purpose is to investigate the process and see how we can make it better. It is being developed with the aim of ensuring that the scheme works effectively for all agencies charged with asset recovery responsibilities. All will be involved. For example, the Local Government Association will be a consultee within the process, with anyone else who is currently involved in the asset recovery process.

I was asked—or rather, challenged, “Is it appropriate to leave an organisation for distributing money on this non-statutory basis, or should we consider a statutory alternative?.” I think that the debate has shown that there are ways of making the process work well without a statutory basis. But of course, that is the sort of thing that any review should properly consider.

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I hope that the noble Lord, Lord Harris, will be generous and withdraw his amendment. We in our turn are grateful to him for giving us the opportunity of describing the working of ARIS, and the review that we have in mind.

Lord Harris of Haringey: I am grateful to the Minister for that response. I am also grateful to the other noble Lords who have contributed to this short debate, especially the noble Lord, Lord Deben, for his comments on hypothecation. I have always appreciated—although this may be a difficult thing for someone with his religious commitment to hear—that he is something of a heretic in such matters. His is a heresy that I share, in terms of making things happen, and in the belief that a bit of hypothecation can sometimes mean that we achieve results all over the place.

Some of the points that have been made require a moment’s clarification. I do not think that the identification of neighbourhoods, which the noble Baroness, Lady Hamwee, mentioned, is necessarily a problem. As the Minister has made clear, 90% of the money distributed through the incentivisation scheme is ploughed back into financial investigators; the noble Lord, Lord Phillips, also made that point. Only a small proportion goes beyond there, and the authorities concerned, whether they are local authorities or the police, make good use of it. I was involved with the board of the Safer London Foundation, which made very good use of the Proceeds of Crime Act moneys that the police received, in connection with local community projects around London. The authorities concerned spend a great deal of time in deciding what is and is not an appropriate use of those resources.

The important point behind the amendment is the need to think carefully about how we maximise the money recovered, and I hope the review will do that. I know that the Minister is part of a wing of the Government that is committed to the reduction of taxes, but in this context there is, essentially, a 50% tax, because the money goes into either the Home Office or the Treasury, depending on the precise route—although I rather suspect that the Home Office does not “feel” the money that comes back to it, because it all disappears into the Treasury and goes through into the main funding of the Home Office.

If 50% of the money is retained by the Home Office or the Treasury, there may be little incentive for the agencies concerned to pursue complicated financial investigations that are not essential to achieving a conviction but are additional to achieving a conviction. If the proportion distributed through the incentivisation scheme were higher, substantially more money might be recovered, because people would be incentivised, and would say, “This really is worth investing those resources in”. The Home Office and the Treasury might then find that they got more resources rather than less. I hope that the review will consider these issues, and I look forward to hearing—perhaps by Report—about its developing findings. On that basis I am happy to beg leave to withdraw the amendment.

Amendment 3 withdrawn.

Clause 7 agreed.

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5.15 pm

Amendment 4

Moved by Baroness Smith of Basildon

4: After Clause 7, insert the following new Clause—

“Confiscation orders: consultation

(1) The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders.

(2) A consultation under subsection (1) must, in particular, seek views on the following matters—

(a) whether the court, when making a confiscation order, should be able to compel a suspect to return to the United Kingdom any realisable liquid assets overseas;

(b) whether to provide the court with the power to fine or imprison a defendant who sells property subject to a confiscation;

(c) whether to provide the court with the power, when making an order, to require the defendant to disclose any interests, including third party interests, in realisable property.

(3) The Secretary of State must report to both Houses of Parliament on the outcome of the consultation under subsection (1) no later than 31 December 2014.”

Baroness Smith of Basildon: My Lords, in moving Amendment 4, I wish to speak also to Amendments 9, 11 and 12. Amendments 4 and 9 are similar: both require a consultation on ways to strengthen confiscation orders and restraint orders respectively. Amendment 11 addresses the disposal of assets. At present, one of the conditions of obtaining a restraint order is for the prosecution to show that there is a real risk that the defendant will dissipate his or her assets. These amendments would remove this requirement. As regards Amendment 12, although restraint orders are ex parte, many defendants then appeal against the orders and incur significant defence costs. If they win the appeal, their costs are reimbursed by the state. However, these can be high and can act as a disincentive for prosecutors to get a restraint order in the first place. Our amendments propose that any costs recoverable by the defendant would have to be capped at legal aid rates. These amendments seek to strengthen the confiscation and restraint orders. All these issues are linked. Indeed, I think that all the issues we are debating today around the proceeds of crime are linked, but this matter is at the very core of the process.

In its report, the National Audit Office said that the confiscation of criminal assets is “just not working at the moment”. Amyas Morse, the head of the National Audit Office, also said that,

“The use of confiscation orders to deny criminals the proceeds of their crimes is not proving to be value for money … nor … a credible deterrent to crime”.

That is a pretty sorry state of affairs and one which this Bill and the debates we are having in your Lordships’ House should seek to address. Whatever the reasons for that situation, those criticisms place a duty on your Lordships’ House to address the problem, to see whether legislative changes are needed and to question whether the law as it stands is being effectively and properly enforced, as the noble Lord, Lord Phillips, who is no longer in his place, said a moment ago. When criminals get to keep £99.74 in every £100, there is clearly a significant problem and it is right that this should be addressed and we support the Government on that.

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In 2012-13, 6,392 confiscation orders were made, seeking the return of £318 million from a total pot, as it were, of £1.6 billion that had been illegally acquired. Eventually, only about £133 million was recovered and, although there are still some outstanding debts, the amount recovered will not rise significantly above that figure. I am curious and concerned about that issue. I hope that the Minister will comment on that and give an assurance that this issue has not been deprioritised by the Government. I hope that the Minister will also comment on the reasons why we have seen a slight reduction in the number of confiscation orders, which compounds the problem of getting money off the criminals once the orders have been issued. As I said, in 2012-13, only 6,392 orders were made, down slightly from 6,431, whereas we might have expected to see an increase in that figure.

However, this is not about just the number of orders; the most crucial point is compliance with the orders. I welcome the fact that there are now moves afoot to remedy this situation, close some of the loopholes and strengthen compliance with confiscation orders. However, I made a similar point in the earlier debate on third-party claims—namely, given the scale of the problem we are facing, can we not think bigger about this and try to do better? In our previous debate, the Minister said that the situation had improved. However, I put it to him that, if we are looking to improve matters, we should do the best we can, seek to be as strong as we can and close any loopholes.

I wish to address a number of issues. The first is the time limits for payments. The Proceeds of Crime Act currently provides that a confiscation order is payable immediately upon the making of the order unless a defendant can show that there are exceptional circumstances why this should not be the case, in which case they are given up to 12 months to pay, as we heard earlier. We recently highlighted the problems with this blanket approach. Some assets—this was referred to in an earlier debate and the Minister reaffirmed this—for example, money in bank accounts, are much easier to realise than other assets, which simply increases the likelihood of the defendant distributing or hiding their assets.

We are grateful to the Government for taking those points on board and for proposing action on this matter. Clause 5 now makes it clear that the full amount ordered to be paid must be paid on the day on which the order is made unless the court is satisfied that the defendant is unable to do so and includes a restriction on the circumstances under which an extension can be granted. That is welcome and there was a helpful explanation on that earlier. We also welcome the fact that Clause 7 requires the court to consider making an order that it considers appropriate to ensure that the confiscation order is paid. As discussed earlier, this includes placing a ban on overseas travel.

However, we want to probe other ways in which confiscation orders can be strengthened. Our amendment calls for a consultation on this. I hope that the noble Lord will be more sympathetic towards our proposals, given that we are proposing consultation. The areas that we would like to look at concern whether the court should be able to compel a suspect to return to the UK any realisable asset that is located overseas, to

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jail or fine someone who sells property that is subject to a confiscation order or to require a defendant to disclose any interests in property. Of course some of this touches on issues that have already been discussed. We would also welcome discussions on other ways to improve the orders; the noble Lord, Lord Phillips, earlier raised the issue of an individual’s assets being owned by a company that owns a company that owns a company, so that they are hidden in a labyrinth of financial dealings.

One way of strengthening the system generally is to strengthen restraint orders. The effect of a restraint or freezing order is to freeze the assets of a defendant, so preventing them from dissipating all or some of their assets before a confiscation order is made. Investigators and prosecutors agree that this is the most critical stage of the process. Early freezing of assets, at the outset of an investigation, minimises the risk that assets will be dissipated or disposed of. However, according to the National Audit Office, the number of restraint orders secured by prosecutors is falling sharply. I quote from the NAO report:

“Only 1,368 restraint orders were imposed in 2012-13, down 27 per cent from 1,878 in 2010-11. Many stakeholders believe opportunities for successful restraints are being missed and that the Crown Prosecution Service is too cautious in applying for restraint orders”.

The report also outlines that:

“Throughout the criminal justice system there is insufficient awareness of proceeds of crime and its potential impact. Within law enforcement and prosecution agencies, few officers and staff have good understanding about proceeds of crime legislation. In many cases effective powers, such as restraint orders, are applied late or not used at all, and specialist financial investigators are introduced to cases when audit trails have already run cold”.

Given that such orders can be applied for as soon as a criminal investigation is started, that would seem to address the problem. However, the current test is too high, because it must be shown that there is reasonable cause to believe that a defendant has benefited from his or her criminal conduct and that there is a risk that assets may be dissipated. Earlier this year, we called for the threshold needed to gain a restraint order to be lowered, with the onus to be placed on the suspect to show why assets should not be restrained, rather than on the investigating agency.

We therefore welcome the fact that Clause 11 reduces the test from “reasonable cause to believe” to “reasonable grounds to suspect” that a defendant has benefited from their criminality, which aligns it with the test for an arrest under the Police and Criminal Evidence Act 1984. The Bill also provides that a restraint order can be kept in place against a defendant for a reasonable period between the quashing of a conviction and the start of the proceedings for a retrial, and it closes the loophole that the restraint order is removed while the retrial proceedings are commenced, during which time the defendant’s assets are at risk of being dissipated.

However, the amendment that we have tabled today goes further than this, as we think that it should be up to the defendant, not the prosecution, to establish that there is no risk of dissipation. Alison Saunders from the CPS referred to this in her evidence to the Public Accounts Committee, saying that it was,

“quite a high test to look at”.

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Another issue, of course, is the cost to the CPS. One of the key things raised to us by practitioners is that when an application is unsuccessful—particularly on appeal, as the original is often ex parte—the prosecution is liable for the legal costs of the defendant. Given that the CPS is undergoing cuts of 27% to its budget during the course of this Parliament, prosecutors understandably want to minimise the risk of expensive failure. Alison Saunders alluded to this also in her evidence. We have therefore tabled other amendments that do the same thing. Because they are probing amendments, we are not wedded to the wording but the intent is to try to tackle the disincentive. We are suggesting that a defendant should be able to recover costs only at a legal aid rate. It may be that that is covered by the LASPO Act but we wanted to raise this issue because it has often been raised with us. We are aware that there is a problem, and there is a way of dealing with this. Of course, there is unfairness in requiring an individual who has succeeded in setting aside a restraint order to pay his or her costs, but the alternative is to put all the cost risk on to the prosecutor. Capping costs at legal aid levels, as happens in other cases, could help lessen the disincentive to tackling large-scale restraint orders.

It would be helpful if the Minister could give a view on that. I hope that he will not just refer to his notes and resist the amendments because the whole purpose of Committee—I hope he understands the tone with which we have approached this—is not just to do better but to do the best we can. If he cannot accept these amendments, I hope that he will take them away and perhaps discuss this issue further with us, so we do not continue a situation in which we are unable to get at assets because they have been taken out of the country or removed and defendants do not come forward to say what their assets are. There is a way to deal with this and I hope the Minister can respond positively to these amendments. I beg to move.

Lord Dear (CB): My Lords, I rise to re-emphasise the wording of subsection (1) of the amendment:

“The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders”.

For many years, and bearing in mind my previous service in the police and my contact with it since, I have been concerned that the prosecution authorities generally do not pursue property that is the subject of crime nearly as rigorously as they should. That has gone on for years, although all the agencies concerned will deny it. It is a fact, however. I could produce evidence from recent personal experience but will not weary the Committee with that, other than to say that the police have always been, and still are, judged on reducing crime and gaining convictions. The CPS is also judged on its ability to gain convictions. It is not judged, by and large, on its ability to chase back money and other property.

I simply endorse the main thrust of subsection (1) of the amendment. There must be ways in which the efficiency of those two organisations can be enhanced, not by rewarding them—although rewards are involved, I suppose, particularly in the reapplication of assets that we have been discussing—but simply by recognising that efficiency is not just detecting crime or getting convictions but also recovering property and money.

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When all is said and done, in the upper echelons of crime, in particular, the criminals are in it for the money. If the money is not chased, it is eventually there for them to use later when they come out of prison, or when they have paid off the fine or whatever else. This is a plea to underline the wording of subsection (1) of the amendment, which I endorse.

Lord Taylor of Holbeach: My Lords, this has been a short but very useful debate. I am pleased that the noble Baroness has reiterated that her objective in tabling these amendments has been to seek ways in which we can improve the effectiveness of recovery and confiscation of money. The noble Lord, Lord Dear, graphically described how important that is. It is perhaps true that there has been little focus by those who should be undertaking this task. There are two reasons why this mission is important: first, because money has frequently been taken from society and should be returned to it; and, secondly, if this money remains in the hands of criminals they will have every incentive to carry on with criminality as a way of life, and all the costs that it brings. That lies behind where we are on this. All these amendments are concerned with improving effectiveness, and I think that the whole Committee would support that notion. In dealing with these amendments I hope to show that the measures proposed in the Bill will address the issues that the noble Baroness raised. I am grateful to her for bringing them forward. Indeed, it is quite proper that we should consider their effectiveness.

5.30 pm

Amendment 4 proposes that the Secretary of State should conduct a consultation on ways to,

“strengthen and improve the effectiveness of confiscation orders”,

and seek views on three areas in particular. I can wholeheartedly support the underlying intention of this and the other amendments. Of course we all want to improve the effectiveness of confiscation and restraint orders. Indeed, that is the driving force behind Part 1 of the Bill. However, I remind the Committee that more criminal assets have been seized than ever before. It is worth repeating the statistics that I cited on Second Reading. Some £746 million of assets have been seized since 2010—a record amount. More than £2.5 billion of assets have been frozen, denying criminals access to those resources. Some £93 million has been returned to the victims of crime. Although those are substantial sums, there is a requirement on us all to do better still, for the reasons that noble Lords gave.

To that end, Part 1 will ensure that criminal assets are seized more quickly; the noble Baroness has emphasised the importance of that. Our proposal will close loopholes that criminals exploit to get round confiscation and crack down on offenders who try to avoid paying the money that they owe. To achieve those outcomes, Part 1 makes a number of significant changes to the asset recovery regime. I hope that noble Lords will excuse me if I repeat them. The changes increase prison sentences for failing to pay confiscation orders. They ensure that criminal assets cannot be hidden with spouses, associates and other third parties by requiring a defendant to provide details of third-party

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claims at an earlier stage. They require courts to consider imposing an overseas travel ban for the purpose of ensuring that the confiscation order is effective. They enable assets to be restrained more quickly and earlier in investigations by reducing the legal test, which I will talk about later. They reduce the defendant’s time to pay confiscation orders, and they extend investigative powers so that they are able to trace assets once a confiscation order is made.

All those changes are important but they should not be seen in isolation. The noble Baroness is right to draw attention to the fact that the existing legislation and POCA, as amended by the Bill, need to be effectively enforced. The noble Lord, Lord Dear, said that enforcement is vital if we are to use POCA effectively in our fight against crime. We are determined that more is done, now and in the future, to ensure that confiscation orders are fully satisfied. In addition to the reforms to POCA contained in the Bill, we are working with law enforcement agencies on prioritising enforcement activity. The National Crime Agency, the Serious Fraud Office and the Crown Prosecution Service are working together to enforce priority orders. We are also in the early stages of seeking greater private sector involvement in the enforcement of unpaid orders.

The Minister for Modern Slavery and Organised Crime, my colleague Karen Bradley, now chairs the Criminal Finances Board, which supervises the ongoing performance of asset recovery overseas and the work undertaken under the criminal finances improvement plan. The plan focuses on the 11 highest-priority areas that need to be addressed to increase performance. The criminal finances improvement plan has an objective to maximise the use of financial investigative techniques in all areas of serious and organised crime. We are looking to improve communications around the use of these powers so that there is greater awareness and confidence in their use. The noble Baroness drew attention to the fact that they are not being sufficiently used.

I turn to the specifics of Amendment 4. It proposes three changes to the confiscation regime, which are already reflected in some of the other amendments before us today. The first is whether the court, when making a confiscation order, should be able to compel a suspect to return any realisable asset to the UK. As I have said before, this is unnecessary as the power is already available under the existing restraint order provisions. A court may make any order it believes is appropriate to ensure that a restraint order is effective. Clause 7 extends this power so as to enable the court to make any order it believes appropriate to ensure that a confiscation order is effective by removing the proceeds of crime from a defendant.

The second proposal is to consult on whether to provide the court with the power to fine or jail a defendant who sells property subject to a confiscation order. Any breach of a compliance order under Clause 7 will be a contempt of court, as I have said in response to previous amendments. It will therefore be punishable by a fine of up to two years’ imprisonment.

The third proposal is to consult on whether to provide the court with the power, when making a confiscation order, to require the defendant to disclose

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any interests, including third party interests, in realisable property. We have already debated these provisions in Clauses 1 to 4 of the Bill, which are directed exactly to this end.

I turn to the issue of restraint orders. These are made in order to preserve property and to prevent a person charged with, or being investigated in relation to, criminal conduct from dissipating or hiding it before a confiscation order is made against them. The property will then be available to help satisfy any such confiscation order. The current test for obtaining a restraint order—and this is important—is that there is,

“reasonable cause to believe that the alleged offender has benefited from his criminal conduct”.

Case law and general operational experience have shown, however, that at the earliest stages of a criminal investigation it can be very difficult to show “belief”, as there will be little firm evidence at that time. Delaying restraint until there is sufficient evidence to meet the “reasonable cause to believe” test gives persons subject to a criminal investigation an opportunity to dissipate or hide assets. Clause 11 is intended to close this loophole by lowering the test for making a restraint order from there being a “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct to there being “reasonable grounds to suspect” that the alleged offender has benefited from his criminal conduct. We believe that this reduction in the test will allow restraint orders to be successfully applied for at an earlier stage of the investigation.

Amendments 9, 11 and 12 deal with the risk of dissipation. I understand that the Joint Committee which undertook pre-legislative scrutiny of the draft Modern Slavery Bill recommended that the existing requirement to demonstrate risk of dissipation can be explicitly removed. We naturally gave this recommendation very careful consideration. The “risk of dissipation of assets” test is not included in the Proceeds of Crime Act itself but rather has developed over time through case law. Before responding to the Joint Committee’s recommendation, we consulted prosecutors on whether the removal of the “risk of dissipation” test would enable restraint orders to be made more quickly and easily. Prosecution agencies advised us that they do not believe that the test should be removed Indeed, they consider the test an important safeguard to ensure that restraint orders are only made in cases where they are necessary and appropriate. Given the rationale for restraint orders, it is difficult to see why it would be necessary to seek such an order in a case where there is not considered to be any risk of dissipation.

We consider that the amendments that we are making to the Bill to replace the reasonable belief test with a reasonable suspicion test will be sufficient to ensure that restraint orders are being made in all appropriate cases, while continuing to provide adequate protection to ensure that restraint orders are not used inappropriately. As we indicated in our response to the Joint Committee, we will keep the different tests for a restraint order under review and, should it be necessary, we will return to this issue afresh in the future.

Amendments 11 and 12 also address where the onus of proof should rest in relation to the “risk of dissipation” test. We should not lose sight of the fact that every person

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is entitled to the peaceful enjoyment of his or her possessions. At the pre-charge stage of an investigation, an individual has neither been charged nor found guilty of an offence. It is therefore essential that the onus of proof remains on the prosecutor at this early stage. The Government are all for toughening up the asset recovery regime—we have made that clear, and it is precisely what we are doing in the Bill. However, we need to keep the regime proportionate, maintaining a proper balance between depriving criminals of their ill gotten gains and protecting the rights of persons who, in the early stages of an investigation, have not yet been convicted of any offence.

Amendments 15 and 16 seek to limit the costs that the court can award to a defendant when an application for a restraint order is unsuccessful to legal aid rates, rather than the amount the subject of the unsuccessful application actually spent on his or her representation. First I would note that, in most cases, the subject of an unsuccessful application for a restraint order would be unlikely to incur any costs, as such applications would normally be ex parte, without the defendant or his or her legal representation being present. In those cases where the subject of the application for a restraint order is aware of it and represented in the proceedings, or where a restraint order is subsequently varied or discharged on the application of a person affected by the order, we are not minded to depart from the principle that costs should generally follow the event.

Prosecutors make significant numbers of restraint order applications before an individual has even been charged with an offence, let alone convicted of one. Prosecutors are advised that they should proceed with a restraint application only if they are satisfied that they have sufficient evidence to meet the evidential test that would enable the court to grant an order. It would be inappropriate if a person who has not been charged with or found guilty of an offence, but has had their assets erroneously frozen, were to be put substantially out of pocket for the legal costs of putting matters right and getting their assets unfrozen. I hope that noble Lords would agree with that.

Costs are currently determined according to the Criminal Procedure Rules. The noble Baroness has made an interesting suggestion about capping the reimbursement of costs to legal aid rates. It is one that I will certainly draw to the attention of my colleagues in the Ministry of Justice.

I appreciate that these amendments are designed to generate a debate about an important aspect of the effective confiscation of moneys generated through criminality. Were I to take them at face value, my response to the noble Baroness would be to say that we have already conducted a review and that this legislation is the result of that review. In conducting that review, we have consulted front-line professionals, so there is no need to consult them further, as these amendments would have us do.

I hope I have been able to go some way to persuade the noble Baroness that the Bill already includes important measures to improve the effectiveness of confiscation and restraint orders, and that she will be prepared to withdraw her amendment in the light of the arguments that I have made.

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5.45 pm

Baroness Smith of Basildon: My Lords, I am grateful to the Minister for taking the time to address, in order, the points I made—and perhaps some that I did not make. I think I was very clear that the initial restraint order hearing is ex parte. That is not what I was suggesting in terms of costs; it was the appeal, which can involve significant costs. Again, with regard to the test for restraint orders—“reasonable grounds to suspect” rather than “reasonable cause to believe”—I suggested that we were quite happy and supportive of the Minister in that. That is a later amendment, in the name of the noble Baroness, Lady Hamwee.

I will read Hansard carefully and look again at what the Minister said. I am disappointed that he seemed to be saying that he will not consider our amendments, other than the final one on capping, not because they are not worthwhile and not worth pursuing but because the Government are making improvements to the legislation. As the noble Lord, Lord Dear, said—I hope he will forgive me for saying that he speaks from experience on these matters; from the right end of the law, not the wrong end of the law, I hasten to add—there are cases where the law has not been enforced as effectively as we would like. The consultation the Minister spoke of—he rejected our suggestion of having further consultation on this issue—would help draw out some of the issues that the noble Lord, Lord Dear, and I addressed.

I repeat that we are not suggesting for one second that what the Government are proposing in the Bill does not improve the position. We are just saying that we think consideration should be given to improving it further—we could do better. We should do the best we can, not just aim for an improvement. It would be disappointing if the Minister was to leave this debate without thinking that he could reflect on the points we had made, to make the Bill as tight as it can be and ensure that those who gain from criminal activities are not allowed to keep as much of their ill gotten gains as they are at present.

I listened carefully to what the Minister said. I did not quite understand how some of it addressed the points I had raised. I will read Hansard carefully and make a decision on whether or not we wish to bring some of these matters back on Report for further consideration by your Lordships’ House. For now, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

Clause 8: Variation or discharge

Amendment 5

Moved by Baroness Hamwee

5: Clause 8, page 7, leave out lines 17 and 18

Baroness Hamwee: My Lords, this is a short point because it is just a short question. Amendment 5 is to Clause 8 and Amendment 26 is to Clause 28—the equivalent Northern Ireland provision. Amendment 5 seeks to leave out new Section 25A(2)(a) of POCA, which allows the court to discharge an order in the case of a deceased defendant where,

“it is not possible to recover anything from the estate”.

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My question is: is this not covered by new Section 25A(2)(b), which says that a discharge could be made where it is not,

“reasonable to make any attempt … to recover anything”?

It seems to me that if it is not possible to make an attempt, it certainly would not be reasonable. That is my question. I beg to move.

Baroness Williams of Trafford: My Lords, Clause 8 deals with the discharge of certain unpaid confiscation orders and applications to vary unpaid orders down in value. Despite the best efforts of law enforcement agencies, some confiscation orders are uncollectable and sit on the books of Her Majesty’s Courts and Tribunals Service, accruing interest at 8% a year.

Clause 8 provides that the court will be able to write off unpaid confiscation orders where the defendant has died and it is not possible or reasonable to seek payment of the order from the defendant’s estate: where, for example, there are no assets remaining in the estate. Clause 28 makes the same provision for Northern Ireland.

In Clauses 8 and 28 there are two cases where orders may be written off: first, where it is impossible to get any money out of the estate; and, secondly, where it is not reasonable to make any attempt or further attempt to get money out of the estate.

These amendments suggest removing the case for discharging orders where it is impossible to get any money at all out of the estate. My noble friend has indicated these amendments are essentially designed to probe what would be covered by a first set of circumstances for discharging an order that is not covered by a second set of circumstances.

My noble friend is correct to say that there is certainly a significant degree of overlap between the two. If there are no assets of any note in the estate, it would not be reasonable to make an attempt to recover moneys owing to discharge a confiscation order. Equally, it would not be possible to recover anything from the estate.

That said, I believe it is helpful to retain both cases. The first case where it is impossible to get any money at all out of the estate could be said to be a subset of the second case, where it is not reasonable to make any attempt or further attempt. However, there may be circumstances not covered by the second case. It is important that this clause should encompass all possible scenarios to ensure uncollectible orders may be discharged.

I hope that, in light of that explanation, my noble friend will be content to withdraw her amendment.

Baroness Hamwee: My Lords, I am not sure that I do understand that it would ever be reasonable to make an attempt to recover something where it is not possible to recover it. I am not going to make a fuss about it. However, when I hear about 8% a year, I think I need to review my investment strategy. I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Clause 8 agreed.

Clause 9 agreed.

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Clause 10: Default sentences

Amendment 6

Moved by Lord Rosser

6: Clause 10, page 9, line 39, leave out “£10 million” and insert “£1 million”

Lord Rosser: Under the Proceeds of Crime Act 2002, a default sentence of imprisonment can be imposed against a defendant if a confiscation order remains unpaid past its due date. Of course, as we know, this Bill increases the maximum default sentences where the confiscation order is for more than £500,000. Those increases are from five years to seven years for orders of more than £500,000 but no more than £1 million, and from 10 years to 14 years for orders of more than £1 million. The Bill also ends the automatic release at the halfway point of a default sentence for confiscation orders of more than £10 million.

These changes are being put forward by the Government because of the significant number of higher-value confiscation orders that go unpaid. Some would say that that is putting it far too mildly, because the amount collected by the police and the volume of the confiscation orders have fallen, yet there are still some £1.5 billion of outstanding orders because assets have been hidden. They have been moved away overseas, or they have been reduced by third-party claims. Only 18% of confiscation orders worth more than £1 million are recovered. A National Audit Office report has indicated that just 26p of every £100 of profit a criminal makes is confiscated. On top of this, the costs of recovering proceeds of crime are high, since investigation, prosecution and enforcement costs come to 76p out of every £1 collected.

In light of this, it is not clear why the Government are proposing only that automatic release at the halfway point of a default sentence should cease in respect of confiscation orders of more than £10 million. The Government’s own fact sheet on the Bill says that it is the higher-value orders that go unpaid. It is the Government who are proposing that orders in excess of £1 million should potentially attract the new maximum default sentence of 14 years. Having said that, since 1987 confiscation orders of £1 million or more have constituted well under 1% of such orders imposed by the courts.

The Government clearly believe that more time in prison for non-payment of a confiscation order is justified and will have some impact, since it is proposing, as I said, that the default sentences should be increased from five years to seven years for orders of more than £500,000 and up to £1 million and from 10 years to 14 years for orders of more than £1 million.

The current maximum default sentence is 10 years, which in practice means release on a tag at three years and without a tag at five years. Increasing the maximum for orders of more than £1 million from 10 years to 14 years will probably have some impact. It seems unlikely, however, that less than another 18 months at maximum in prison before being released on a tag will produce a significant shift in the attitude toward payment of a confiscation order of criminals with just under £10 million hidden away.

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The National Audit Office found that in 2012 only 2% of offenders paid in full once the default sentence was imposed. The NAO also found that there are currently 11 criminals who still have not paid their confiscation orders, which remain due to the Serious Fraud Office after they have served their default sentence. Criminals should not be able to gain by not paying back money obtained through their criminal activities by choosing to go to prison in the knowledge that the time they spend in prison will be cut short.

The National Audit Office report pointed out that the current system does not work when it said:

“The main sanctions for not paying orders, default prison sentences of up to 10 years and additional 8% interest on the amount owed, do not work”.

The Bill itself suggests a degree of uncertainty over the £10 million threshold for the ending of automatic release at the halfway point of a default sentence, since there is provision for a power to lower this £10 million threshold through secondary legislation. A further order-making power also allows for minimum default sentences to be introduced in the future—a point on which I will comment later.

So what is the Government’s argument for saying that £10 million is the right figure rather than either of the figures of £1 million or £500,000 in our two amendments—or, indeed, any other figure? The £1 million is in effect the figure at which the Government are proposing that a maximum default sentence of 14 years rather than 10 years should apply.

The Government’s impact assessment indicates that no longer having release at the halfway point of a default sentence for confiscation orders of more than £10 million would result in an increase in the prison population that would be minimal. I think the figure is 20, but it is minimal. What the impact assessment does not tell us is the projected increase in the size of the prison population if the figure were £1 million or £500,000 rather than the £10 million provided for in these two amendments. Indeed, it does not give us the figures for any other amount or what the impact would be on the prison population if early release in this situation were ended altogether.

No doubt the Minister will provide this figure in his reply or subsequently, particularly if a reason for the Government not wanting to see the figure lowered to £1 million or less is the impact this might have on the size of the prison population. I make two points on that issue. First, the Government have told us that their reforms of probation and the probation service will result in a reduction in reoffending, particularly among those serving sentences of 12 months or less, and thus a reduction in the prison population. Will the Minister say if this Government’s anticipated reduction would offset any increase arising from ending automatic release at the halfway point of a default sentence for confiscation orders of £500,000 or more, or £1 million or more?

Secondly, I ask the Minister if he believes that the prospect, with no automatic release at the halfway point, of having to serve up to 14 years in prison for not paying more than £500,000 or more than £1 million ordered by a court under a confiscation order of ill gotten criminal gains secured at someone else’s expense or at the expense of large numbers of people would in

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fact greatly enhance the likelihood of co-operation being forthcoming to secure the necessary assets. If he believes that, would that not only reduce the number of criminals preferring to serve their prison sentence rather than hand over their ill gotten gains but provide some additional income from which the cost of any resultant increase in the size of the prison population could be paid if that should prove to be the outcome?