§ Order for Second Reading read.5.16 pm
§ The Secretary of State for the Home Department (Mr. Kenneth Clarke)
I beg to move, That the Bill be now read a Second time.
I hope that this Criminal Justice Bill may arouse a little less controversy than the measure on which the House has just divided. It covers a comparatively narrow range of issues—but they are important, and I hope that, in principle, the Bill will command widespread support.
The Bill focuses on a relatively modern phenomenon: financial or so-called white collar crime. Financial crime and fraud are as criminal and as big a menace to society as theft, robbery and burglary. They need to be dealt with as effectively and as severely as other crime. But the increasing sophistication of modern financial markets and modern fraudsters means that the law has to be strengthened and kept up to date in a sophisticated way to eliminate loopholes and remove technical defences. For that reason, the Bill is technical and, I am afraid, complex. It includes measures on insider dealing, on banking and on money laundering. The Bill will substantially increase the powers available to our enforcement authorities to bring fraudsters and insider dealers to justice.
A vital section of the Bill, to which I attach the utmost importance, is the part that tackles the profits of drug trafficking. We need to strengthen our law yet further against money laundering by and on behalf of drug traffickers. The substantial success of our enforcement agencies against the drug trade must be backed by laws which prevent the people detected and convicted from ever enjoying the profits of their trade. We shall be proposing that ultimately the Bill will deal with terrorist finances. Those are extremely serious crimes and I hope that all hon. Members will agree that we need to tackle them with vigour and determination.
The Bill is not a measure that will open up issues of political division or principle within the House. I believe that its aims will attract near-universal approval. I might almost hope—perhaps optimistically—for a little praise for the Government for their prompt action. Recent experiences of Criminal Justices Bills will remind the House, however, that in this sphere it is important to get the detail right.
§ Mr. Donald Anderson (Swansea, East)
I should like to ask about the intriguing matter that the Bill will deal with terrorism in due course. Will that mean the confiscation of assets and will it be an amendment to the prevention of terrorism Act? Why was such an amendment not introduced in the House of Lords and why was such provision not in the Bill when it commenced its passage?
§ Mr. Clarke
I agree that it is a good point. However, an amendment to an aspect of the law different from that in the first draft of the Bill is required. The time has come to improve the Bill and to extend its provisions to cover confiscation for terrorist offences. From what the hon.
858 Member for Swansea, East (Mr. Anderson) has said, I gather that he will welcome those amendments when they are presented.
§ Mr. Graham Riddick (Colne Valley)
Will the Home Secretary be able to use the Bill to rectify two of the mistakes in the Criminal Justice Act 1991—unit fines and the inability of courts to take previous offences into account? Will my right hon. and learned Friend assure the House that there are no little details in the Bill which will make it more difficult to convict criminals? That was the effective result of the previous measure.
§ Mr. Clarke
The matters to which my hon. Friend refers are outside the scope of the Bill. I entirely share his concern about the way in which the provisions of the 1991 Act are working in practice. At the moment we are anxiously looking at the way in which the unit fines system works. I share the view of the Magistrates Association that in principle unit fines are right. However, we know that in practice they are producing some odd results, perhaps partly because of the way in which the rules to implement the Act have been drawn up and partly because some magistrates courts are not familiar with their powers.
My hon. Friend the Minister of State who will reply to the debate is personally taking charge of the current review of unit fines. He and I hope that we may be able to get the system to work as closely as possible to the way in which it was intended without the need for more primary legislation. However, we shall introduce primary legislation if that is necessary. I share some of my hon. Friend's concerns about other provisions of the 1991 Act which may not be working out as they were originally intended.
The 1991 Act followed a long process of consultation with the magistrates and the judiciary and others, but now the magistracy and the judiciary are expressing discontent in a way that certainly strikes a chord with me. We shall look at the matter again. If primary legislation is required we shall have to present another Bill. All hon. Members will accept that such matters must be tackled with care because we do not want rushed provisions that will go wrong. As soon as parliamentary time allows, I shall introduce such primary legislation as is called for.
My hon. Friend the Member for Colne Valley (Mr. Riddick) underlines my point that the House should scrutinise the Bill with special care to make sure that we get the law right and strengthen it against money laundering, financial fraud and other offences with which the Bill is designed to deal.
§ Mr. Robert Maclennan (Caithness and Sutherland)
I should like to put some questions to the Minister before he moves to the more technical parts of the Bill. He says that we should not move too quickly in such difficult areas. Why did the Government move so quickly and consult so inadequately about the drafting of the Bill? For example, the stock exchange was provided with draft clauses at the end of July and was expected to supply answers by the end of August, which is a curious month for consultation in the stock exchange. There was no consultation at all with the CBI. That does not seem to be the right way to embark upon producing the measures that the Government hope to see.
§ Mr. Clarke
There has been enormous consultation on the part of the Bill that deals with insider trading and that 859 consultation will continue. I shall deal with that when I come to the relevant part of the Bill. That matter is being handled by my hon. Friend the Economic Secretary to the Treasury who is in his place. He and his Department have been consulted and have submitted draft clauses.
We shall continue to consult, and if we are satisfied that further amendment is required to make the position clear and satisfactory to the legitimate interests of the stock exchange and others, we shall consult on further draft clauses. This part of the Bill is being taken forward with considerable care. It is essential that we do not do anything that will damage the ordinary, legitimate activity of the City, which is so vital to the country's economy. As I have said, we shall consult for as long and as widely as is necessary in the same way as we have consulted carefully so far.
§ Mr. Barry Jones (Alyn and Deeside)
The Home Secretary spoke about drugs and in that context part II of the Bill is important. I should like to mention the effective work of the north Wales police in drugs-related crimes at the port of Holyhead and perhaps even on the English border. If the Minister wishes to crack this problem he must ensure that there are more police. I would like an assurance that he will look carefully, seriously and urgently at the request by the north Wales police for 54 policemen on their establishment. Will he please do that?
§ Mr. Clarke
That is an extremely ingenious request. I agree that the police and the Customs and Excise have been successful in the seizure of drugs and the prosecution of those who are responsible for trafficking. That is not a function of having more and more policemen but of ever-improving intelligence and effectiveness in deploying the specialist squads that are required. As the hon. Gentleman knows, there are more suitable occasions for discussing police manpower and deployment. We have an excellent record on increasing police manpower. It expanded enormously over the 1980s and it is obvious that continued improvements in the way that manpower is deployed is more important than bids each year from police forces.
I propose in the police reforms that the north Wales police and every other force will not have to come to the Home Secretary each year to ask him to decide how many police should be deployed in each county force. I propose much more discretion for chief constables and a strengthened police authority. They will decide how best to deploy the resources that are within the ability of the economy to afford. However, those are matters for another day.
§ Mr. David Ashby (Liecestershire, North-West)
My right hon. and learned Friend spoke about a review of the unit fines system. People, magistrates and judges are incensed by the fact that a middle income man exceeding the speed limit on a motorway at 2 o'clock in the morning will suffer a more severe financial penalty than most drug traffickers. People are not asking for a review of unit fines. They want them abolished and previous powers restored.
§ Mr. Clarke
I do not agree with my hon. Friend. I have said that I do not like the way in which the unit fines system works. That is why my hon. Friend the Minister of State is again urgently addressing the matter. In principle, courts have always related fines to the ability of the offender to pay. That must continue so that a 860 comparatively prosperous offender who can afford it will pay a large sum for a speeding offence and a not very well-off thief will pay no more because he may not have the means. However, for a thief and certainly for a drug offender, fines may not be the appropriate penalty: custodial sentences of some kind may be called for.
We are addressing the anomalies that appear to be occurring in practice so that we retain the sensible provision that a financial penalty, when appropriate, should reflect the ability of the offender to pay without some of the absurdities that have occurred. Some of those absurdities were self-inflicted by people without means who did not fill out the form and were fined the maximum amount. Some magistrates do not take any action against people who have not filled in the form but impose the maximum fine. I hope that such hiccups can be eliminated in practice. Meanwhile, we need to look again at the rules.
§ Mr. Phil Gallie (Ayr)
The Minister was asked about recruiting more police but that is pointless unless they are backed by the actions of sheriffs and judges in Scotland, for example. The public perceive inconsistencies in sentencing but nobody seems to review the performance of sheriffs and judges and, no doubt, magistrates in England. Perhaps my right hon. and learned Friend will bear that in mind.
§ Mr. Clarke
My right hon. and noble Friend the Lord Chancellor is responsible for the judiciary. No Minister ever comments on the sentence in any individual case.
We give the powers to the courts, and we expect the courts to make full and proper use of those powers. I should stress that it is not part of the Government's policy to inhibit the courts in the proper exercise of their powers. If the Criminal Justice Act 1991 is impeding in some way what the judiciary feel is their public duty, we will rapidly address that and remedy it as soon as we can. In the end, it is a matter for the judiciary to impose the right sentence based on the facts of a particular case. Parliament is here to indicate the range of penalties we think are suitable and give them the powers that they need. I hope that, in Scotland and south of the border, the powers are used.
§ Mr. Clarke
I must get on. I cannot allow a second question about the police in north Wales. I have been generous enough already, and I would now like to turn to the detail of the Bill.
The House must return—although it may not be willing to do so—to the legal detail. The objects are worthy; the text requires some explanation. I hope to guide the debate by setting out some of the detail as clearly as possible.
Part I of the Bill fills some gaps in our courts' jurisdiction to try offences of fraud and dishonesty with a significant foreign element. It enacts, with some modifications, the recommendations of the Law Commission's 1989 report on the subject. Part I applies only to England and Wales; Scotland and Northern Ireland have their own legal systems, and this part will not apply there. Part I is a largely technical adjustment of existing legal rules, and remains rather daunting reading. It may help if I try to set out briefly the existing legal position and how part I will change it.
The courts in England and Wales exercise a "territorial" jurisdiction, which means, with very few 861 exceptions, that they are only able to try people for crimes committed in England and Wales. Part I retains this important principle, but is designed to change the rules by which the courts decide whether or not an offence has been committed in these two countries. That is not as straightforward a matter as it might at first appear. As the Law Commission explained in its report:The planning, preparation and execution of the many operations which are involved in a complicated swindle frequently takes place in several different countries. Under the present law none of the participants can be prosecuted here unless the last event which makes up the underlying crime occurs in England or Wales. Moreover, in cases in which those concerned are detected before they have completed their purpose, it is unlikely that they will be prosecuted in the country where they plan to reap the benefit, and because the underlying crime was not complete here they cannot be tried in England and Wales. In the result, they will in all probability not be convicted anywhere".I will try to give a more day-to-day example. Let us imagine that a criminal in London places an advertisement in The Times inviting people to invest in a non-existent factory in Japan by paying money into a Tokyo bank account. A victim responds to the advertisement, and instructs his bank to transfer money to Tokyo. When the criminal retrieves his money, he has no need at all to flee to South America—unless he wishes to escape from our winter weather, or has some other purpose—because as things stand he has committed no offence under English law and cannot be prosecuted here. That is because the last element of the crime—obtaining of the proceeds in Tokyo—did not occur here. So, if the victim can be induced to part with his money outside this country, then our courts will not have jurisdiction.
This gap in jurisdiction was largely theoretical in the past but it has become more and more real with the advent of new technology, which has made the transfer of money around the globe an easy and everyday—or, rather, every-minute—activity. We want the law to keep up with the fraudsters, if not ahead of them. So this Bill will provide that, in a case such as I have outlined—where a fraud has a significant connection with this country—our courts will have jurisdiction, whether or not the final element of the crime occurred here.
The substantive fraud and dishonesty offences to which this change will apply are listed in clause 1, and are called group A offences. Experience tells us these are the sort of offences committed by the international criminals at whom this measure is aimed. If the list needs amending in future to catch up with developments in the criminal world, The Secretary of State is given the power by clause 1 to add offences to the list or to delete them, subject to Parliament's approval.
Part I will also catch those who fully intend to defraud others but, through no merit of their own, fail to do so. In the case I gave earlier, the criminal would still be guilty of an offence here even if the police had spotted his advertisement and arrested him before anyone had lost their money.
Clauses 5 and 6 fill another gap in our law by giving our courts jurisdiction over incitements, conspiracies and attempts in this country which are aimed at the commission of the equivalent of a group A offence abroad; there needs to be an equivalent offence in the country 862 concerned. So, for example, people who plot in this country to defraud victims in Japan will in future be guilty of an offence here and be triable by our courts.
§ Mr. Ashby
The example my right hon. and learned Friend gives is one of obtaining property by deception in the United Kingdom. There are many cases of this sort and it is the Attorney-General's reference No. 2 of, I believe, 1986 that part 1 is intended to cover. What worries me is whether my right hon. and learned Friend can assure the House that potential defendants will not be put in double jeopardy by being tried abroad—because most of the crime will be tried abroad—and, if they are aquitted abroad, retried over here, or vice versa. It would be a gross injustice if people were to be put in double jeopardy and be tried several times around Europe for offences committed inter-state. Will my right hon. and learned Friend give an assurance that that will not happen?
§ Mr. Clarke
With great respect to my hon. Friend, I am not sure that it is as clear as he believes it is that the example I give is of an offence in this country. I would incline to the view that it is not. Although I accept that there are conflicting authorities, they are probably sufficiently in conflict for no one to be prosecuted. I think there is little chance of double jeopardy in that particular case unless a person was foolish enough to go to Japan, because it is not necessary to go there to get the proceeds.
We are making it clear that someone in this country who commits a crime the last element of which takes effect in Tokyo is committing an offence here so long as a relevant part of the offence was committed in England. I think that is a valuable clarification of the law.
I quite accept, however, that my hon. Friend has a good point about double jeopardy. We do not want international crime to be dealt with in such a way that people keep being tried in different countries for the same offence. I will be happy to address that point again, or others will in Committee.
We need safeguards, but I think we can assume that in practice prosecuting authorities around the world will not normally keep prosecuting the same person for the same offence as he foolishly moves around the world going from jurisdiction to jurisdiction to collect the full total of his just deserts. I will give more thought to that point and, if necessary, address it in Committee.
Parts II and III of the Bill deal with money laundering and the confiscation of the proceeds of crime. I am glad to say that these parts received most attention in the debates in another place. I think this is the most important part of the Bill as far as the general public is concerned. We can and must have many serious discussions about the causes of crime; debates about the changing nature of society and the restoration of values are important but rarely come to definite or immediately practical conclusions.
The most straightforward specific cause of crime—which is most tangibly within the reach of government, the authorities and the public to tackle—is the abuse of drugs and the illegal traffic in drugs. Police, Customs, the courts and the public must be helped to maintain a relentless fight against drug trafficking; but the trade is immensely, fabulously lucrative, and the best policing efforts will be in vain if the profits are not attacked and retrieved by the courts of every country affected.
One of the main purposes of my visit to Latin America last year was to discuss with Governments menaced by 863 hugely wealthy drug organisations how we might strengthen international action against that ill-gotten wealth. Britain is in the forefront of countries that have ratified the Vienna convention, legislated against money laundering and got under way with the seizure and confiscation of criminal gains, but we must go further. I am determined that Britain should have one of the most effective—and just—sets of legal provisions in the world to take the fight to where it damages drug trafficking most—the removal of the vast profits which inspire and finance the individual traffic.
Part II will amend and strengthen the confiscation procedures in the Drug Trafficking Offences Act 1986.
§ Sir John Wheeler (Westminster, North)
Will my right hon. and learned Friend confirm that these measures and all the other measures that this House has enacted in recent years are effective only if the basis of the intelligence information which the police and Customs authorities receive in the United Kingdom is well organised? Will my right hon. and learned Friend refer to the increasing success of our drug liaison officers overseas and to the way that they channel back intelligence which is used by the regional crime squads, Customs and the police? Is it not that—not necessarily the number of police and Customs officers—which makes their work effective? Does my right hon. and learned Friend agree that it is the effectiveness of the information that is received and how it is made use of that will make the measure that we propose to enact today successful?
§ Mr. Clarke
I agree entirely with my hon. Friend. His question relates to the detection of drug trafficking in particular but also to intelligence about where the assets are going. Intelligence is the key to any success with drug trafficking or terrorism. Our drug liaison officers around the world are extremely courageous and invaluable people, and they have had enormous success. Our activities in that area are as good as those of any other country. They probably rival those of the United States Drug Enforcement Agency, although that agency enjoys vast resources, compared with ours. The organisation and effectiveness of the individuals who specialise in this work matters far more than just pouring in huge numbers of people to do routine work. Organisation and effectiveness are how one makes progress. That is why we have made substantial progress in recent years.
§ Mr. Tam Dalyell (Linlithgow)
Personally I welcome very much the fact that the British Home Secretary went to South America to discuss this problem on the spot and to see for himself, but what has come out of his visit and what is the strategy for persuading the hard-pressed Governments of countries such as Colombia and Peru to do something, however willing they may be, about an acute terrorist problem for them?
§ Mr. Clarke
If I may confine myself to Colombia, we provide considerable material assistance to the Government of Colombia, who are fighting courageously against very powerful drugs cartels which threaten their ability to govern their country. The Government of Colombia are on the right side in this struggle and they are making good progress. We are contributing very much to the training of their most effective police units, which operate in the jungles and search for the coca itself and the laboratories. We are also giving valuable assistance in 864 developing their criminal justice system. They are therefore setting up a much more effective system for prosecuting and bringing to justice those whom they arrest. Since I went to Colombia, we have given further material support to the Colombian Government for that purpose.
I discussed also with the Colombian Government how we could take further forward bilateral agreements with them on the confiscation of the assets of drug traffickers. The trade is often organised by a combination of Colombian and British criminals, working in international organisations. I hope that we shall make progress on that front, too. We are actively working with the Colombian Government. It is important that we, from our end, as well as the other European countries and the United States, work with the Colombians against something which is just as much a threat to Colombia as it is to ourselves and which needs to be tackled at international level.
Part II will make its contribution to the Bill by strengthening yet further the procedures that were introduced in the 1986 Act. Hon. Members will recall that when it was introduced the 1986 Act was described by some people as draconian, but its measures were necessary and justified. The 1986 Act was intended to remove the profit motive by allowing the confiscation of all the trafficker's proceeds from drug trafficking, following conviction. The Act was also intended to ensure that the profits from drug trafficking could not be recycled to fund yet more trafficking. That Act needs to be strengthened.
This part of the Bill—clauses 7 to 15—is largely based on the report of the Home Office working group on confiscation, which was published in May 1991 for consultation. That group was established in response to the report of the Home Affairs Select Committee on drug trafficking and related serious crime, published in November 1989. The Home Office working group found that the 1986 Act had worked reasonably well, but it identified a number of important practical difficulties in its operation.
I do not propose to go through each clause in detail. Instead, I shall draw the attention of the House to those provisions which I consider to be the most important.
Clause 7 will end the uncertainty that has arisen in the courts over the standard of proof applicable in confiscation hearings. It makes it clear that the standard applicable is the civil standard—and its probability. This was, I believe, the intention when the 1986 Act was passed, but it was not made clear on the face of the legislation. Clause 7 also relieves the court from following the confiscation procedures in the 1986 Act each time that it convicts a drug trafficker.
Confiscation will take place only when notice is served on the court by the prosecutor, or at the court's discretion. This will filter out those cases in which there is obviously little or no benefit, or no realisable property. This does not mean that we are softening our approach to drug traffickers. The minor cases that do not attract a confiscation hearing under the new arrangements will continue to be dealt with severely by means of fines and forfeiture orders, as well as by imprisonment.
Clauses 12 and 14 will allow the court to confiscate proceeds in circumstances where that is not possible at present. Clause 12 will allow the prosecutor to return to the court within six years of a conviction for drug trafficking to seek a revaluation of the offender's benefit from drug trafficking, where further benefit has 865 subsequently come to light. Clause 14 will enable a confiscation order to be made, even if a convicted trafficker dies or absconds. Confiscation will also be possible where a defendant absconds before conviction. We have included safeguards, such as rights of audience for third parties at confiscation hearings and compensation where an absconder returns and is actually acquitted.
Part II also contains the primary legislation necessary to implement a European Community directive on money laundering, following the proposals set out in a Treasury consultation paper last May. The United Kingdom was closely involved in the drafting of this directive. Since it draws heavily upon the 1988 United Nations convention on drug trafficking and money laundering, which the United Kingdom ratified in June 1991, very little legislation is necessary.
Three new or extended criminal offences are created in the money laundering area: first, failure to report knowledge or suspicion of money laundering gained in the course of employment; secondly, acquiring, possessing or using the proceeds of drug trafficking for less than adequate consideration, in the knowledge that they are such proceeds; and, thirdly, prejudicing an investigation into money laundering by tipping off a third party.
Part III deals with the confiscation of the proceeds of crime in general. The effect is that a number of the changes made to the Drug Trafficking Offences Act in part II, which I have just described, are read across to other organised crime in part III, by amending the general confiscation provisions in part VI of the Criminal Justice Act 1988.
This is an extremely significant change. We are extending the existing and most of the new drugs money laundering offences to crime in general. Until now, it has not been an offence to launder the proceeds of any crime other than drug trafficking and, in certain restricted circumstances, terrorism. That allowed a suspected money launderer to say that the money he was dealing with came from pornography or serious fraud rather than from drug trafficking and enabled the suspect to avoid being convicted of money laundering. I am sure that hon. Members will agree that that was absurd and indefensible. I am pleased to say that the banking and financial communities have given their full support to these new measures, which extend the money laundering provisions to most organised crime. Ministers are extremely grateful for their help.
I am also glad to be able to announce to the House that the Government intend to introduce in this House amendments to the Bill in Committee to reproduce, in the terrorism legislation, many of the changes being made in part II of the Bill to the confiscation and money laundering provisions contained in the Drug Trafficking Offences Act 1986. Part III does not, as at present drafted, apply to the proceeds of terrorist offences because they are not covered by part VI of the Criminal Justice Act 1988. However, the Government regard tackling terrorist funds as an equally high priority.
The United Kingdom was the first country to introduce legislative measures against terrorist finances. These measures have given the police an additional and 866 invaluable tool, which has enabled them to tackle the funds themselves and to obtain information on the movements and activities of the terrorists.
Finance remains the lifeblood of terrorist organisations. Such organisations and those who handle money on their behalf have become increasingly sophisticated in the way in which they raise and launder money. Disrupting the fund-raising efforts of terrorists and confiscating their resources and the proceeds of activities should be as important a new tool against terrorism as it should be against drug trafficking and other serious organised crime. I am sure that the House will agree that it is only right that the measures that are taken against terrorists' finances should, as far as is possible, match those taken against drug proceeds. Personally, I hold both forms of crime in the same profound contempt.
§ Mr. Tony Blair (Sedgefield)
As I understand it, once someone has been convicted of drug trafficking, the proceeds, whether or not they are related to that specific offence, can be confiscated. Will the same apply to terrorism and other offences?
§ Mr. Clarke
Some confiscation powers are already available under the prevention of terrorism legislation. In Committee, we shall table amendments to cover the new provisions on laundering, but first we must decide which of the provisions on drug trafficking should be read across to terrorists' finances. That will enable us to consider the total amount that has been raised and how far the assumptions which are an important part of the drug trafficking provisions should apply. We shall table amendments that, as far as is sensible, reflect the drug trafficking money laundering provisions.
§ Mr. Donald Anderson
Are the provisions on confiscation and on money laundering, which I believe stem partly from an EC directive, in place in other EC countries, because what the Home Secretary is saying makes the degree of co-operation at EC level under the third pillar of Maastricht even more important? It would be helpful to know at some stage whether these provisions and those on terrorism operate in other EC countries.
§ Mr. Clarke
All EC countries are making the changes to their domestic law necessary to apply the directive. The United Kingdom was at the forefront of countries pressing for a directive, because measures against drug trafficking and terrorism are not effective unless they apply throughout the European Community. Without notice, I am not sure how many countries have completed the legislative steps. I believe that the United Kingdom is ahead of others, but we are all slightly beyond the date by which we are meant to have implemented the directive. My hon. Friend the Minister of State may be able to give a more specific reply, but I am sure that there is no hesitation within the Community and that all 12 countries will fall in line with the highly desirable directive.
Part IV is, strictly speaking, the Treasury part of the Bill, which is why my hon. Friend the Economic Secretary is on the Bench. It amends and restates the law on insider dealing and in so doing implements the EC directive on the subject. Hon. Members will, I hope, agree that insider dealing is crime. Securities markets play a vital role in financing companies, on which our prosperity ultimately depends. Markets also hold a large proportion of people's savings invested directly or on their behalf by institutions.
867 If those markets are to operate smoothly, they must inspire the confidence of investors, and an essential element of confidence is fairness. Insider dealing, if unchecked, destroys that confidence, which is why the Government made insider dealing illegal in 1980.
We believe in the benefits of having an EC directive on insider dealing, and Britain again played a leading role in negotiating the directive. With effective legislation in place across the Community, investors will be able to invest more confidently across Europe and to take advantage of the opportunities provided by the single market. The directive's detailed provisions will greatly assist in the pursuit of insiders who seek to cover their tracks by dealing across borders.
§ Mr. Clarke
Off the cuff, subject to correction by my hon. Friend the Minister of State in his reply, it must be. Part I will cover a range of international crime and if insider trading is being conducted across borders, the same rules as set out in part I will apply. If my off-the-cuff response is incorrect I shall ensure that a correction——
§ Mr. Clarke
The hon. Gentleman points out that it is not a category A offence. He has had an opportunity to look it up, but he may be wrong. A more considered reply will be given later. The Economic Secretary is also taking the opportunity to look at this part of the legislation, for which he is directly responsible.
Nevertheless, the desirability of moving on insider trading is accepted by all of us and the Bill extends our legislation on insider trading to areas of conduct covered by the directive that are not currently illegal but are generally accepted as being wrong. I want to make quite clear to the House the Government's determination to ensure that legitimate business practices will not be jeopardised. I know that some fears have been expressed in the City and elsewhere, but nothing in the Bill will prevent the sort of contact between companies and investors that properly takes, place today. The Bill will not require changes to the legitimate practices of investment analysis or mean modifying underwriting arrangements.
Indeed, much of the new legislation is similar to existing law. It will continue to be an offence for an insider who possesses inside information or someone who has obtained inside information from an insider—in deference to views expressed in another place I will, as far as possible, avoid describing that someone as a "tippee", which is a particularly poisonous addition to the English language—to take advantage of the information by dealing in securities to make a profit or avoid a loss. It will continue to be an offence for an insider or tippee to encourage someone else to undertake such dealing and for them to disclose inside information.
The definition of inside information is little changed from our present legislation. It includes information that relates to particular securities or to a particular issuer or issuers of securities, but not to securities generally or issuers of securities generally. The information must also be specific or precise, not have been made public, and be such that, if made public, it would have a significant effect 868 on the price of securities. But unlike existing legislation, which applies only to companies securities, the new legislation will apply to all listed securities. It will apply to gilts and local authority stock and all securities traded on exchanges throughout the Community rather than just those that operate in this country.
Under the Bill, any individual with direct access to inside information will be an insider; they will no longer have to be connected with a company, as the present law requires. The Government believe that this change, which reflects the directive, is desirable because it is possible for someone to have direct access to price-sensitive information without being connected with a company.
The range of circumstances in which insider trading is prohibited will be widened. The Bill's prohibitions apply to all transactions which involve a professional intermediary, whether on or off market. The move from the trading floor to screen-based trading has made the market much more difficult to define than when legislation was passed in 1980. The new legislation seeks to treat the market in terms of those transactions that are likely to contribute to the price formation process for a security. As a result, the new legislation will apply to dealings in Eurobonds, which are generally listed within the Community but traded off market.
There are two further ancillary offences in addition to dealing—disclosing inside information to someone else and encouraging someone else to deal.
However, I should make it clear that innocent activity will not be penalised. Conduct will not amount to a criminal offence unless a person knows that the information he possesses is inside information and that he has the information as an insider or directly or indirectly from an insider. For example, someone who deals while in possession of information that he believes to be in the public domain will not fall within the ambit of the legislation even if his or her belief turns out to be misplaced. There will be no offence where someone did not intend to use inside information to make a profit or to avoid a loss because he would not be "taking advantage" of the information. There are various exemptions and limitations to ensure that the legislation does not impact
As for penalties, the Government made it clear in 1980 in their response to the Select Committee on Trade and Industry's report on company investigations that we proposed to retain the criminal law as the primary means for punishing insider dealers. Accordingly, the Bill carries forward the penalties that apply under our existing law, which are up to seven years' imprisonment with a fine.
The Bill's insider dealing provisions are the result of considerable discussion between the Treasury, practitioners in the City and representatives of industry in general. The hon. Member for Caithness and Sutherland (Mr. Maclennan) complained, but there has been consultation on the broad principles of the legislation and on an initial draft of the clauses in the summer, and consultation has continued since the Bill was introduced in another place.
As I have already said, the Government are aware that there is still a wish for greater certainty about the effect of the legislation. We have listened to the representations made and will continue to do so, and we shall make further amendments where we are convinced of the case for so doing.
§ Mr. Donald Anderson
Why has the existing legislation on insider dealing been so ineffective? During the past five years, there have been 30 prosecutions but only 13 convictions.
§ Mr. Clarke
I do not think that those figures are wholly accurate. They are in the right ball park but they are not spot on. There have been convictions. The total number of convictions is not the only measure by which to judge the effectiveness of such a provision. I am sure that the provision has a considerable deterrent effect on what would otherwise be trading of below acceptable standards in securities, which is treated as a serious criminal offence in this country.
We have played a part in introducing the fresh directive, which is giving rise to the need to strengthen and extend the law. It is extremely important for London's reputation as a financial centre that our standards are as high as any others. We must make it clear that those who make improper use of insider information will be treated as criminals, brought before the courts and prosecuted. If the hon. Member for Swansea, East (Mr. Anderson) believes that the existing legislation is not sufficiently effective, I am sure that he will welcome the Bill, which seeks to make the law more effective and extend its scope.
§ Mr. Maclennan
What the Home Secretary says about the deterrent effect of the legislation may be true; it is hard to prove. However, he will be aware that there is widespread and genuine concern, expressed most notably by Lord Alexander of Weedon on Second Reading in another place, that many cases of alleged insider dealing, which have been brought to the attention of the Department of Trade and Industry by the stock exchange, among other authorities, have not led to effective prosecution. There are serious questions about enforcement in cases where there is significant evidence.
In preparing this legislation, has the Home Secretary considered whether there is a need for parallel self-regulatory measures for the City or other institutions in order to provide a civil remedy to back up the effectiveness of the criminal remedy?
§ Mr. Clarke
Concern has been expressed in both directions. Some people in the City are worried about the ordinary, legitimate practices of investment analysts and others being threatened. We can reassure those who have such fears and will continue to do so during the consultation process. Others are worried that we do not always enforce the law as strictly as we might, enforcement being in the hands of the Director of Public Prosecutions or, more often in practice, the Secretary of State for Trade and Industry. However, cases are brought.
Sadly, it is the case that we must first get the drafting right so that the law can be enforced effectively. That is why we shall continue to consult Lord Alexander and anyone else who wishes to give his views. Secondly, there must be some self-regulatory provisions. There is a role for the stock exchange and the City generally to ensure that the criminal law is paralleled by proper self-regulation by those responsible for the markets. People such as Lord Alexander and other leading lights in the City will be anxious to ensure that self-regulatory activity also exists.
Finally, part V of the Bill contains various minor measures. I do not need to trouble the House with them except to mention clause 43. It extends the jurisdiction of United Kingdom courts where a fraudster takes part in or 870 organises here fraud against the European Community budget in other Community countries. It will ensure that the United Kingdom is and is seen to be taking positive action against Community fraud, and will help to allay the legitimate fears expressed in both Houses.
The Bill deals with a number of serious mischiefs which I hope that all hon. Members will condemn. It makes a number of changes that will not harm legitimate business or threaten the law-abiding, but it will greatly improve our ability to investigate and prosecute a wide range of financial crimes. I know from earlier interventions that hon. Members are concerned about various criminal justice issues. They may be disappointed about the scope of the Bill which started life in another place last October. They may feel that it does not go wide enough to tackle all their concerns, but there will be other opportunities—I hope before too long, if I have my way—for us to consider many of them.
Although there are some pressing problems outside the scope of the Bill, that would in no way detract from its importance. We are dealing with very serious crime. The Bill will significantly strengthen the ability of the enforcement authorities and the courts to deal effectively with white collar crime and will do so in ways that I hope all hon. Members will be able to support. I commend the Bill to the House.
§ 6.6 pm
§ Mr. Tony Blair (Sedgefield)
As the Home Secretary said, the Bill spans a disparate set of issues, but they have in common a concern for the growing internationalisation of crime. The impact of modern communications, travel, computer technology and cross-frontier trading has given renewed scope to organised criminal activity. It is essential that the law keeps pace and that old common law rules—or, indeed, old statute—which are right for one era do not continue unamended or unchanged when plainly wrong or inadequate for another.
There is no disagreement about the general purpose of the Bill, although there is some disquiet about the drafting of some parts and the content of specific provisions. They may be archetypal matters for the Committee stage and for those who will have the pleasure of participating in that stage, but they are also important matters to be raised on Second Reading. I begin with the issue of drugs and drug trafficking, which I believe will be of paramount concern to hon. Members and the public.
There is no doubt that drugs are a dangerous menace to our society. There is increasing evidence of a rise in the number of drug addicts, of a link between drugs and crime, the prevalence of drug trafficking and, perhaps most alarming of all, the number of young people even of school age who are being drawn into early experimentation with and use of drugs.
I do not think that anyone, whether working with drug abusers or in drug enforcement, believes that the problem is diminishing. It is not. It is growing, and the greatest danger of all is complacency in the face of the threat that drug abuse poses to our country. The figures for the latest year for which they are available show, for example, that the number of addicts notified to the Home Office rose by some 17 per cent. and that that followed a 20 per cent. increase the previous year. The number of new addicts has risen by a similar number. Although the numbers of seizures of course reflect success by our drug enforcement 871 agencies, in 10 years they have risen more than threefold, and seizures of heroin have increased by more than 200 per cent. Even making allowances for changes in procedures and greater success by the drug agencies, those figures should cause concern.
The number of persons found guilty of drug offences has risen almost threefold in 10 years. Again, the most worrying feature is the rise in the number of young drug offenders. The number of offenders under the age of 17 has risen tenfold in as many years, and the number of those between 17 and 21 has risen fourfold over a decade. Offenders under 21 represent 40 per cent. of offenders but 80 per cent. of the latest yearly increase in offending.
Anybody who knows the King's Cross area in London, as do hon. Members who pass through it on their way to their constituencies, will know of the appalling drug problems that have recently been highlighted by the Independent on Sunday and other newspapers. There have been about seven deaths from drug-related causes in the space of nine days. The police in those areas and in many other parts of our inner cities do their best in extremely difficult circumstances. My hon. Friends the Members for Holborn and St. Pancras (Mr. Dobson), and for Islington, South and Finsbury (Mr. Smith) have campaigned long and hard on the problems of King's Cross, and have raised the issue specifically with the Home Secretary. I hope that he will respond. positively.
The drugs problem is increasing, yet Government policy in other areas, not only in the Home Office sphere, is withdrawing some of the most vital support needed in the fight against drug abuse. For example, until the end of last month, the. Department for Education had 100 drug advisory posts, but it has now ceased to fund them and says that it is up to local authorities to do so. The plain fact is that in present circumstances local authorities wit not have the resources to fill the gap. That means that those posts, which perform a great role in educating our young people about the dangers of drugs, will no longer exist. It cannot be sensible to pass legislation that, rightly, bears down on those trafficking in drugs, yet at the same time to allow other Government Departments to make decisions in other areas that run entirely counter to the fight against drugs.
Exactly the same could be said about cuts in the youth service. Three quarters of those involved in that service expect to make cuts this year, and the urban programme faces similar problems. There are cuts in residential provision for drug addicts and abusers.
A pamphlet recently published by the trade unions representing people working in Customs and Excise estimated that, as a result of changes in funding, about 400 Customs officers engaged in the war against drugs would be lost. I do not know whether that estimate is correct; I hope that the Minister who replies will deal with the question. Again, it would be bizarre if we attempted to deal with people who had been caught committing drugs offences and had been convicted if in other areas we were taking steps that undermined the fight that we should all support.
Although the number of drug trafficking offenders has declined in proportion to the number of drug offences overall, there is no doubt that drug trafficking into the United Kingdom is increasing. The value of drugs seized by the Customs and Excise has multiplied by a factor of about 20 over the past few years. The United States estimates that drug seizures account for about 10 per cent. 872 of the drugs destined for the United States market. If we apply the same criterion to our seizures, we find that drugs with a street value of as much as £2,000 million enter the United Kingdom every year.
The report on "Drug Trafficking and Related Serious Crime" published by the Home Affairs Select Committee a few years ago said:The National Drugs Intelligence Co-ordinator … estimated that there is at least £1,800 million derived from drug trafficking in the United Kingdom. In its written memorandum, the NDIU noted that such vast amounts of money circulating within the legitimate banking system may have a destabilising effect on smaller financial institutions. The NDIC also indicated that, despite the Drug Trafficking Offences Act 1986, the United Kingdom continued to be a major centre for money laundering. Indeed, he said that the United Kingdom was regarded by the United States, Canada and some others as an offshore banking systemOn the basis of that report and of the evidence that we have accumulated, there is no doubt that we must fight the drugs problem at both a national and an international level.
I was interested to hear the Home Secretary make a point arising from his visit to South America. Reading the many detailed background papers, I came across the bilateral confiscation agreements made between our country and other countries whereby we can confiscate the proceeds of drug trafficking via arrangements made with other countries to facilitate that process. Clearly that is most important in helping to crack down on people engaged in drug trafficking. I noticed that absent from the list of countries with which we have such agreements were the names of countries such as Colombia, Thailand, Afghanistan and Peru. When the Minister winds up, perhaps he will tell us whether any progress has been made towards concluding agreements with those countries. It seems important that some of the main drug trafficking centres should have reciprocal arrangements such as those that have worked well in other areas.
At this stage I raise the problem caused by drug traffickers' use of Nigerians, especially Nigerian women, as drug couriers to enter this country. Apparently, large numbers of poor Nigerians, especially women, receive long gaol sentences here. I understand that a recent survey revealed that all the children taken into care by the London borough of Hillingdon, in which Heathrow lies, are Nigerian. That is an immense problem, to which the right hon. Member for Westminster, North (Sir J. Wheeler), as chairman of the all-party penal affairs group, drew attention last year.
I should be obliged if the right hon. Gentleman would comment on the concern that, although, for obvious reasons, the sentences are long, they are not having any deterrent effect. Can he tell us what arrangements are being made to bring home to people in Nigeria the consequences of undertaking such actions, and the need to clamp down on that drug trafficking route?
Like the Home Secretary, I feel that, whether we like it or not, it is correct to deal with the detailed provisions of the Bill. We supported the Drug Trafficking Offences Act 1986, and we support the basic thrust of the Bill. Some of the changes that it makes are welcome, but some raise serious issues of principle that it is right at least to canvass on Second Reading. As has been said by hon. Members on both sides of the House, that is especially right in view of the problems that have arisen as a result of the Criminal Justice Act 1991. We should take special care to ensure that the Bill is well drafted.
873 The 1986 Act allowed the police to obtain information about a suspect's affairs and to restrain the removal of his assets before trial—that is rather like a criminal form of a Mareva injunction. The court was given the power to make an order after conviction confiscating the entire proceeds of drug trafficking from the offence for which the person has been convicted and also from other drug trafficking. The court was also given the power to assume that the assets of an offender, certainly for up to six years before the proceedings, were the proceeds of trafficking unless the defendant proved otherwise.
Those powers in the 1986 Act have been described as draconian. Clearly they are draconian; they were meant to be. Draconian powers are fully justified because of the appalling evil that they are designed to counter. It is clear that confiscation orders have been of considerable use. Perhaps the Minister will give us the precise figures when he winds up, but I believe that about 1,000 such orders have been used in the past year. None the less, because of the nature of those powers, it is important to consider them carefully and ensure that they are drafted and used properly.
The debate in another place has been of great benefit in preparing for this debate. The discussions were of high quality and went into great detail, and they raised a number of points which deserve investigation.
The Bill makes some significant changes to the 1986 Act. At present, confiscation proceedings are mandatory; they will now be permissive if the prosecution wants them to be so. If the prosecution declines, the court has the power to order them. Under clause 8, as the Home Secretary said, the court can determine sentence before confiscation, rather than, as now, having to complete confiscation before sentence.
The clause introduces two further changes which have aroused some controversy and at which it is worth our while to look for a moment. First, the clause changes the standard of proof for the confiscation of property from drug traffickers from the criminal to the civil standard—in other words, from "beyond reasonable doubt" to "on the balance of probabilities". Secondly, it obliges the court, rather than simply permitting it, to make statutory assumptions about the defendant's assets. Whatever assets a defendant has, the assumption is that they are the proceeds of drug trafficking.
There are now, therefore, a number of fairly unusual features in the procedure for confiscation. That was the point of my intervention in the Home Secretary's speech and I may return to the matter in a moment. We should examine the justification for those features.
First, the proceeds that can be confiscated under the 1986 Act and under the Bill are not just those that are the product of the particular offence for which the person is being tried, but all proceeds from drug trafficking, whether a criminal trial has taken place or not. Secondly, to prove that such assets are the proceeds of drug trafficking requires only a civil standard of proof. Thirdly, the court is obliged to assume that those assets are the proceeds of trafficking unless the defendant shows otherwise.
As I read the decision of the Court of Appeal in the case of Redbourne, the effect of the assumptions not being disproved is that they stand as facts. In other words, the confiscation applies to all drug trafficking irrespective of 874 the particular offence, and the court is entitled—indeed obliged—to assume, unless it is proved otherwise, that all the property of the defendant is the proceeds of drug trafficking.
That point caused some concern in the other place. If the issue of the standard of proof is taken in isolation, it could be argued that the recovery of proceeds from drug trafficking going wider than the particular offence is almost akin to a civil suit for fraud, for example, and that, therefore, a civil standard of proof is not unreasonable. However, the accumulation of a lower standard of proof plus the assumptions that go a long way towards establishing proof and their mandatory nature somewhat restrict the ability of the court to take into account all the factors that it wishes to take into account.
Whatever people think about the Criminal Justice Act 1991, the real problem with it is that it imposes far too much of a straitjacket on the court in relation to sentencing. We should at least be careful, especially in relation to the mandatory nature of the assumptions, in deciding whether it is necessary to go that far. There is no evidence of which I am aware that courts have been hesitant about assuming that the assets of a defendant are the proceeds of drug trafficking. In the absence of any concern that courts have been reluctant to apply the provisions, that point is at least worth looking at.
I am not sure whether the Home Secretary dealt with this point. The proceeds of other offences, such as armed robbery or organised crime other than drug trafficking, carry no such assumptions and only the proceeds of a specified crime can be confiscated. Drug trafficking is treated differently from armed robbery and from other organised crime. I am not sure whether the Home Secretary wants terrorist offences to fit into the category of drug trafficking or of armed robbery. In any event, there is a clear disparity in the way in which such offences are treated. No doubt the Minister of State will tell us the reason for that. It may be that experience shows, for example, that the life styles of drug dealers are so bound up with drugs that it is reasonable to apply different procedures. If we are making that distinction, it is right that we should justify it properly.
Clause 18 deals with money laundering. Under the clause, a person is now to be guilty of an offence if "he knows, or suspects" that another is money laundering, and if he learns that fact in the course of his work and then fails to disclose it. I assume that that is an attempt to comply with article 7 of the European directive of June 1991, because the directive uses the words "know or suspect" in relation to money laundering.
It has been said in the other place that to make someone guilty of a criminal offence merely because he suspects that somebody is guilty of money laundering rather than because he believes it or knows it places too low a burden on the prosecution. I should like the Minister to deal with two points on that. First, will he confirm that a subjective test will be applied under the legislation? In other words, will the prosecution have to prove beyond reasonable doubt that the accused suspected that money laundering had taken place and not merely that it was reasonable for him to do so or that he had grounds for doing so? Will the prosecution have to prove that he possessed that subjective state of mind at the time?
Secondly, and perhaps more importantly than anything else, the provision will make a great deal of difference to the way in which banks and other financial institutions 875 operate. It will impose a fairly high degree of awareness on bank officials arid others about the nature of the money with which they are dealing, and about its possible sources and the uses to which it will be put. It is right that we do that, but we should understand that there will have to be great changes in the ways in which those financial institutions operate. If there are not, quite lowly officials within the banking system may find themselves responsible in circumstances in which the real failure is the failure of higher management to give them proper training, to instruct them on the right things to look for and to ensure that they are able properly to keep track of the money with which they are dealing.
A report that repays reading if one can afford it—fortunately, I did not have to afford it—is the Touche Ross report on money laundering and risk which contains the results of a recent survey. The facts revealed are fairly shocking. First, it is estimated that the total sales—this is a truly staggering figure—of cannabis, heroin and cocaine in the United States and in Europe in 1989—more than three years ago—were more than $120 billion, of which $85 billion was laundered. If the Home Affairs Select Committee is right in believing that much of the laundering takes place in this country, that is reason enough for strong legislation.
The report then says that there were low levels of awareness and that fewer than 50 per cent. of stockbrokers or life insurance companies had educated staff on the prevention of money laundering or introduced specific controls. The report says that there is a clear need for financial institutions to establish proper practical guidance so that money laundering is spotted at an early stage.
It has come to my attention that the number of disclosures of money laundering following this legislation is estimated to triple from about 5,000 a year to as many as 15,000. I hope that the Minister will deal with the issue of resources, because such disclosures will require much more investigation and possibly more tricky investigation, as even a suspicion will have to be reported. It is clear that anyone in a halfway responsible position in a financial institution will make it absolutely clear that at the first opportunity he will draw to the attention of his superiors his suspicion that such activities may be taking place.
The Home Secretary dealt with the problems of the jurisdiction of the courts. I make one particular point about that. It is obvious at the moment that, if the last act necessary for the completion of an offence takes place in this country, the courts have jurisdiction. If it does not, they do not. The central change is that under the Bill, if any relevant act—that is, any act necessary to prove a conviction—takes place here, the courts will have jurisdiction. That follows in part from the recommendations of the Law Commission in April 1989.
We live at a time when large sums of money are controlled by international fraudsters and it is surely right, and in accordance with the principles of comity of nations, that, if any part of the action takes place here, there is jurisdiction. I gather that the Bill was substantially amended in the House of Lords, and I pay tribute to the work of Baroness Mallalieu in ensuring that the provisions were considerably tightened up.
Finally, let me deal with the issue of insider dealing. Let us be clear that everyone wants to root out insider dealing: it destroys the integrity of the market and undermines confidence in share transactions. There is no doubt that the present law—or, perhaps more accurately, the present 876 system—of investigating and prosecuting insider dealing leaves much to be desired. I understand that, over the past five years, the stock exchange has drawn the Department's attention to more than 100 cases of suspected insider dealing. There have been some 33 prosecutions—the Minister will no doubt tell us the exact figure—only about 16 of which have been successful.
In the other place, Lord Alexander suggested that there should be a City regulatory authority to exercise a parallel jurisdiction—to force, for example, the disgorging of profits or a penalty or redress—running alongside the criminal law. I hope that the Minister will comment on that. My hon. Friend the Member for Edinburgh, Central (Mr. Darling), who speaks for the Opposition on such matters, thinks that that is worth investigating. As he has rightly said, the overall regulatory system may be so inadequate at present that any attempt to run a parallel system alongside the criminal law may fail. Once again, however, the objectives are in danger of being damaged by inadequate drafting.
The Home Secretary said that this part of the Bill made few changes to the law. I think that the changes that it makes are quite significant, and they have certainly given rise to concern. In place of the present 1985 Act definition of insider information as information not generally known to people dealing in the relevant securities, there is a new definition of insider information, which includes information whichhas not been made public".That is a much broader definition. That may be right and, again, it follows the wording of article 1 of the 1989 European Council directive. But what is public and what is not will be pretty difficult to define.
§ The Economic Secretary to the Treasury (Mr. Anthony Nelson)
I refer the hon. Gentleman to section 10 of the Company Securities (Insider Dealing) Act 1985, which is broadly similar to what is included in the Bill. It starts from a different place in working up compliance with the directive, but broadly the effect is the same—so it should be business as usual.
§ Mr. Blair
With great respect, I am not entirely sure that that deals with the point. The critical definition concerns the nature of the information itself. At the moment, insider information is defined as information that is not generally known by those who deal in the relevant securities. Under the new definition, insider information is simply information thathas not been made public".That immediately gives rise to the question of what "making public" means. In other words, what constitutes publication will determine what are the necessary elements of an offence.
I am not sure that section 10 of the 1985 Act deals with that point, although that can no doubt be considered in Committee. Concern has been expressed among analysts, fund managers and others that the provision could inhibit entirely proper dealing. A brief has been prepared by Clifford Chance, among other leading solicitors' firms which operate in the field. It is worth taking such concern seriously, and I hope that the Minister will do precisely that.
The definition of dealing is to be broadened so as to include those who do not receive information direct from an insider. This is a somewhat technical point, but the defence under section 3(2) of the 1985 Act allows the use 877 of market information about a given transaction when that information is being used for the purposes of completing a transaction. That is most obvious in takeover activity. Under the Bill, however, market information can be used, but only when it is "reasonable … to deal" in that information. Concern has been expressed that the term "reasonable to deal" is so broad that it could give rise to uncertainty as to whether a criminal offence was being committed. I understand that the Treasury has said that it will issue guidelines on that point. The Confederation of British Industry and others have said that the guidelines should be statutory. I should have thought that, if we are constructing a criminal offence, the more that is in the statute itself rather than the guidelines, the better.
The provisions are technical and complex but, as the Home Secretary said, they are also important—and fundamental to the fight against drug abuse. In all these matters, a common thread emerges: crime is rising rapidly. In each area covered by the Bill, enormous problems of detection and prosecution occur. Ultimately, a criminal justice system means not just effective laws and effective enforcement but strong policies of prevention. The war against drugs and drug abuse means tackling demand as well as supply. The rooting out of insider dealing needs a culture of honesty and openness in the City as well as rules that forbid such dealing.
The Bill is one part of the fight against drug abuse and malpractice—and that fight is only one element in the fight against all types of criminal activity. The scale of crime in Britain today is a scandal. It weakens our ability to function successfully as a society and it destroys the quality of life for many innocent and law-abiding people. For the reasons that I have given, we shall not oppose the Bill on Second Reading, but we give the Government notice that, in the coming months, we shall grasp every opportunity to harry them for their failure to act against that scandalous level of crime, to bring forward coherent policies to combat it, and to treat crime as seriously as the people of the country they govern.
§ Mr. Tim Rathbone (Lewes)
First, I add my congratulations to the Home Office team—and to my right hon. and learned Friend the Home Secretary, in particular—on this further effort by the Government to tackle the horrible problems of drug misuse. It is worth reminding ourselves that the Bill flows from the Drug Trafficking Offences Act 1986, which, in establishing new crimes, giving the police and Customs and Excise substantially increased investigatory powers and establishing regional drug squads, not only represented an incredibly important step forward in this country but gave other countries a lead in the fight against drug misuse. I welcome the Bill.
My right hon. and learned Friend the referred to the way in which the Bill introduces a civil standard of proof—the balance of probability—rather than the criminal standard of "beyond all reasonable doubt". I seek an assurance that that will enable the police and prosecutors to get the top men—the big boys. So often, as the hon. Member for Sedgefield (Mr. Blair) said, legislation has been used to capture the carriers and the traffickers—the small people—while the big boys have seemed to get away with it. I hope that that change, and the fact that the courts 878 will gain powers to confiscate further proceeds which may come to light after the initial confiscation order has been granted, will enhance the probability of pursuing and taking the proceeds away from the big organisers of big crime.
In particular, I welcome the new offence created for failing to report knowledge or suspicion of drug money laundering gained in the course of a trade or profession and the other elements which bear on drug money laundering. The clearing banks have taken great strides in establishing methods of policing drug money laundering within their own banks and between themselves. I should like to be reassured that those banks can incorporate into their established procedures the rules which will apply under the Bill.
Will the Minister reassure the House about how the present law is being applied by other financial institutions such as building societies, stock markets, insurance companies and accountancy companies or partnerships? If there is any doubt about whether the present law is being applied sufficiently, I hope that the Bill will give added impetus to organisations involved in financial services to do better in future.
Under the terms of the Bill, certain funds to combat drug trafficking and extradition will be placed on a statutory basis. I wonder what that means. How much funding is involved and to what will it be applied? With regard to funding and organisation, I also wonder how the operation of the new law might be affected detrimentally by changes in the organisation, funding or operation of police forces in this country. That may be a slight tangent, but it is so pertinent to the application of the Bill that it would be good to have some reassurance from Home Office Ministers that nothing which might conceivably affect the organisation of our police forces will affect the efficacy of this good legislation.
§ Sir John Wheeler
My hon. Friend has raised an important issue which was covered in previous reports by the Select Committee on Home Affairs. Will he take into account the fact that this month marks the anniversary of the establishment of the national criminal intelligence service, which was designed to meet my hon. Friend's point? It was designed to provide for better investigation of serious and organised crimes—80 per cent. of its work now relates to drug-related crime—and, through that service, the regional crime squads and the drugs wings of those squads co-ordinate the work of local police forces. My hon. Friend may feel that that meets the concern that he has expressed.
§ Mr. Rathbone
My right hon. Friend the Member for Westminster, North (Sir J. Wheeler) has gone into greater detail in relation to the point that I was making. I hope that none of what he referred to will be jeopardised. Similarly, I hope that the European extension of that into Europol, which was a British Government initiative, will not be jeopardised and will lead to the application of the same methods of intelligence-gathering on a continent-wide basis that we have applied on a national basis in this country.
What plans do the Government have to establish even closer liaison in future with other European countries and, on a bilateral basis with countries elsewhere in the world, to persuade them to adopt legislation similar to this Bill, which falls so well within United Nations conventions, 879 within the Vienna convention and, in European terms, within European Community directives? Until other countries apply the same kind of laws that we have been developing in this country to control drug misuse and drug trafficking, much of our activity will unfortunately come to naught. I pay tribute to the Government's international initiatives in that sphere over the years. The British Government can, with justification, hold their head high with regard to the control of drug misuse.
However, the Bill has missed the opportunity to require confiscated moneys to be applied in order further to tackle drug misuse problems in this country. Moneys seized abroad through international co-operation can be used in this country for further funding of drug seizure and policing methods when foreign Governments pay that money to this country. Those moneys amount to a sizeable sum of £3 million or £4 million.
It is an anomaly, however that, at the end of 1991, the most recent year for which figures are available, some £35 million was available entirely within our own control, but the Treasury got its hands on that money—I am glad that my hon. Friend the Economic Secretary to the Treasury is on the Front Bench to hear this—and it was not used specifically to further the efforts of the police and their hard work in terms of containing this hideous problem.
My final point was touched on by the hon. Member for Sedgefield, and I believe that it should also be stressed from the Conservative Benches. The Bill is admirable and should be welcomed. Sadly, however, other parts of the Government are not marching to the same tune. In that regard, I mention specifically the Department of Health, which has unfortunately removed the ring fencing of funding for drug and alcohol treatment centres. They are in jeopardy, no matter what my colleagues or Ministers might say.
In addition, the Department for Education has done away with health education co-ordinators. They are perhaps the most important element of Government activity in tackling drug misuse because it is at that level—in schools and talking to young people—that we reduce the demand which fuels all the other problems of trafficking, money laundering and criminality associated with that which the Bill is designed to tackle. I commend my colleagues for introducing the Bill.
§ Mr. Donald Anderson (Swansea, East)
I commend the work of the hon. Member for Lewes (Mr. Rathbone) in this country and in various international forums in heightening the awareness of the House and of the public about drug abuse. I echo what he said about the very important point made by my hon. Friend the Member for Sedgefield (Mr. Blair), that we must see drug enforcement and other matters within the context of overall Government policy.
If we are to be concerned properly about drug money laundering and drug abuse, we must also consider prevention. On a right hand and left hand basis, I hope that those in government who are concerned with the criminal law will also consider what the Department of Health and the Department for Education are doing in terms of weakening the supports that prevent young people from entering drug abuse. We cannot consider one side of the problem without the other. In this area, and in other areas, my hon. Friend the Member for Sedgefield has 880 enunciated the proper principle of being tough on crime and the causes of crime. That same principle can be applied well to this matter.
I suppose that the first response of practitioners and members of the public to a Criminal Justice Bill is, "Oh, not again." There is not a lot of time for catching breath and perhaps consolidating. That is especially true in the light of experience with the Criminal Justice Act 1991. Many experienced magistrates are resigning over the question of the unit fines and a general unhappiness about the way in which prosecutions are hampered by the failure fully to take into account the antecedents of a defendant. Given the relatively small amount of parliamentary time which is at the disposal of the Home Office, it would have been ideal for the Government to use this existing vehicle. Clearly, mistakes were made in the 1991 Act. Would it not be possible, even now, for the Government to use the existing vehicle to remedy some of the deficiencies which have arisen as a result of the operation of the 1991 Act?
As a commentary on the lack of time of the Home Office, I say only in passing that the Home Secretary will be aware of the vexed question of Sunday trading, where the Government are seemingly resigned to allowing law breakers to continue their law breaking for at least another year and to do nothing about it. That is something which could equally be dealt with by the Government by adopting an existing vehicle—the Shops (Amendment) Bill which was introduced by my hon. Friend the Member for Ogmore (Mr. Powell). That is a suggestion which I proffer in good faith to a Government who, undoubtedly—especially after Maastricht—are looking for ways to cut down parliamentary time for Government legislation. My hon. Friend's Bill is a means so to do.
As the Home Secretary said, the Bill is complex and technical. It is to be welcomed in its broad thrust because it updates, closes loopholes and seeks to bring existing legislation into line with matters which have been revealed as a result of experience. The Bill is largely the result of expert discussion, whether at the European Community level, the Home Office working party level or the Law Commission level. The Bill has already been extensively covered in the other place.
Therefore, we are left with picking what is left on the bones, as it were, and drawing attention to some of the deficiencies. One of those deficiencies is the failure to amend the Prevention of Terrorism (Temporary Provisions) Act 1989 in accordance with the provisions of this Bill. I am glad that the Minister is taking that on board, albeit belatedly.
As my hon. Friend the Member for Sedgefield said, we can make no reasonable points about part I, which relates to jurisdiction. The point about the danger of double jeopardy needs to be tackled by the Government. Parts II and III, which relate to the confiscation of the proceeds of crime and money laundering, are more relevant. They raise the question of civil liberties and where one must draw the balance. All hon. Members recognise the scourge of the drug trade and the way in which so many innocent lives, especially among young people, are blighted by the activities of 'godfathers' who are frequently beyond the reach of jurisdiction. In our search for justice against those godfathers and the couriers, whether they be from Nigeria or wherever, we should not lose sight of basic civil liberties, the standard of proof and suspicion—not knowing and believing, as in section 22 of the Theft Act 1968. Those matters need to be examined carefully.
881 There is a feeling of unease about certain provisions in the Bill. Some people believe that the balance—as a result of the Government's zeal, understandably, successfully to prosecute more people—may be tilted too far and that some basic civil liberties may be overridden in the process. It is not necessary for me to cover the specific points of concern. I have no problem with putting the assets of the drug dealers in jeopardy for a further six years after conviction. That is proper. It is clear that many drug dealers are able to hide their assets by sophisticated methods. It is proper that a term be placed on that, and six years seems to be reasonable. Nor am I worried about the civil standard with regard to confiscation, although I wish that this was at the top of the civil standard of proof set out by way of guideline.
I am concerned about clause 13, relating to double sentence. There is a certain sense of unfairness that, although a person has served a sentence rather than the goods having been confiscated, the possibility of confiscation still stands. That is wrong in principle. I was not convinced by the explanation given in the other place. Perhaps the Minister can tell us whether there is a precedent in criminal law for such a draconian provision in clause 13.
I have already referred to the question of knowledge or suspicion under clause 16 and it is not necessary for me to dwell on that. I understand that the Minister will refer later to part IV, which relates to insider dealing. We understand the need to comply with an EC directive, which appears to be the motive behind the inclusion of part IV in the Bill. I simply ask about the extent to which Britain had a substantial say in the drafting of the various definitions. Several practitioners are concerned that, in our attempt to implement the directive, we have made less specific some of the terms which are used in our domestic legislation. The Minister will know the terms which are included. I wonder to what extent we have diluted what we thought was the proper practice as a result of the need to compromise at the EC level.
I refer to my earlier point that, clearly, the current provisions are not working adequately. I am a veteran of the discussions which resulted in the Companies Act 1981. At that time, the Government were wary of having any insider dealing provisions. They claimed that it was better to rely on self-regulation, although manifestly self-regulation was not working. Clearly, there were problems as a result of that self-regulation in obtaining evidence.
The position for the past five years—the source of the figures is column 748 in the Official Report of 13 January 1993—is that there were 30 prosecutions and only 13 convictions. If those who embark on prosecutions adopt the normal 50 per cent. rule—is there a more than 50 per cent. chance of succeeding in a prosecution?—clearly, they are failing. They are making judgments which have not been proved adequate in practice, and they are failing when more than half of the prosecutions on which they have embarked have failed.
Is it the view of the prosecuting authorities that the difficulties in obtaining prosecutions derive from a feeling on the part of juries that insider dealing is fair game and something which perhaps should not be within the ambit of the criminal law, or are there fundamental problems in terms of definition which prevent prosecutions from being 882 successful? Presumably there must be research into why the prosecutions are failing. After all, the motive behind part IV is to implement an EC directive and not necessarily to improve the quality of our domestic legislation.
§ Mr. Nelson
As the hon. Gentleman and the hon. Member for Sedgefield (Mr. Blair) have talked about numbers of cases, it might be helpful if I were to try to clarify the matter. I understand that 28 prosecutions have been brought and that there have been 17 convictions. Of the 43 people who were involved, 22 were found guilty. The rate of conviction is rather higher than the figure or figures that the hon. Gentleman quoted. In such cases it is difficult always to secure the information that is necessary to mount a conviction. That is why my right hon. and learned Friend the Home Secretary was so right to point to the deterrence aspects as well as the prospects of mounting a successful prosecution.
It is entirely proper that the Director of Public Prosecutions and the Secretary of State for Trade and Industry, who have the right to bring the cases that we are discussing, should be satisfied before, at public expense and in the light of all the other factors that are involved, such cases are mounted. The performance has been credible and along the lines of the average for fraud cases. The Bill's provisions should make the performance even more successful in future.
§ Mr. Anderson
If the rate of conviction is somewhat higher than that which the written answer suggests, it is still only just above the hurdle of the 50 per cent. rule. Given the expensive nature of these cases, that is something that the Government need carefully to examine.
We are talking about an amendment to our domestic law that perhaps the Government would not have wanted. It is an amendment which derives directly from our need to implement an EC directive. I say rather mischievously in passing that I hope that such provisions will be implemented fully and in a draconian way in Italy as well as in the United Kingdom.
There has been a series of Criminal Justice Bills, and the one before us is clearly to be welcomed. There are points of detail that need to be examined. We face the constant problem of catching up with modern, technical developments and others and responding to the sophistication of criminals. In so far as it goes, the Bill is welcome in that respect.
§ 7.2 pm
§ Mr. Bernard Jenkin (Colchester, North)
First, I declare an interest. I am a paid adviser of the Legal and General Group plc, which has interests in part IV of the Bill, both as a quoted company on the stock exchange and as an investment management business. I am pleased that I do not have to declare any other interest. Notably, I am not a lawyer. I rose to speak with some trepidation, however, before tangling with the able and qualified lawyers who have already involved themselves in the debate.
I shall commence by lamenting what is not in the Bill. I join my hon. Friend the Member for Leicestershire, North-West (Mr. Ashby), who in an intervention in the speech of my right hon. and learned Friend the Home Secretary lamented the fact that we are not dealing with the problem of sentencing by way of unit fines, which were introduced in the Criminal Justice Act 1991.
883 We are creating something of a nightmare for the 29,000 lay magistrates and there is a crisis of morale. In my constituency we are feeling the effects of the problem quite severely. The most offensive part of the 1991 Act has been described by Lord Justice Taylor as an "ill-fitting straitjacket" on the sentencing policies of individual courts. I shall detain the House for a short while by quoting from the leader which appeared in The Times on 23 March. Part of it reads:The problems which have afflicted the Criminal Justice Act in its first six months illustrate the difference between sensible guidelines and rigid prescription. It is right that courts should be firmly directed in their sentencing. But the scales of justice cannot be reduced to an algorithm. The responsibility of magistrates to import local knowledge and expertise to the judicial process must be preserved. Rigidity and obscurity are no recipe for justice.I am sure that my right hon. and learned Friend the Home Secretary has already taken those points on board.
I also lament the fact that we are not able to deal with juvenile offenders in our consideration of the Bill. I can vouch for the fact that juvenile offending is a major problem in my constituency. The local police could name the 20 or 30 juvenile offenders with whom they have to deal time and time again. It is clear that we must deal with the problem as quickly as possible. The difficulties experienced in reforming these offenders may be acute, but it is not fair on the victims of their crimes that they are allowed to roam the streets because the detention policies hitherto tried have not been successful.
Apart from those caveats, I give a broad welcome to the Bill. It is directed primarily to financial crime, which is every bit as heinous and damages the victims every bit as badly as ordinary crimes. We tend to become preoccupied, as I was when making my earlier comments, with crimes which have a direct effect on individuals in a visual or graphic way, but financial crime has its own victims and causes its own misery. I give a strong welcome to the practical alterations to the law which turn on matters of jurisdiction and the proceeds of criminal conduct. I strongly welcome the proposed improvements to the law on drug trafficking.
I wish to focus especially on part IV, which is concerned with insider dealing. My central concern is that there appears not to be a full understanding of how institutions and quoted companies seek to smooth the market, to avoid volatility in the stock market, to give confidence to the market. I wish to focus on how the market works now and the threat that the Bill might present to the way in which the market works currently.
The concerns which I intend to articulate have been raised by a wide range of people and organisations. I shall refer briefly to but a few. First, there is the Investor Relations Society. There is the Hundred Group of Finance Directors, which is a club for the finance directors of the top 100 quoted companies in the United Kingdom. The group states:the ambiguities implicit in the drafting of the Bill … are so serious that it appears to us that the legislation will hinder legitimate business activities and market practices.The Association of British Insurers wrote to me as follows:We are particularly concerned, as major in vesting institutions, that the provisions will unduly inhibit shareholder-company communications and restrict the ability of companies to raise capital.The CBI states that itbelieves that the current provisions of the Bill, if unamended, will seriously hinder the development of open lines of communication between companies and investors.884 The Institute of Directors has also written to me. It states:The IOD's Law Committee, whose membership comprises a wide range of business, professional and academic expertise, was unanimous that the Bill, as drafted, was, in spite of the Treasury's clearly expressed intention to the contrary, capable of casting doubt on the legality of directors effecting normal commercial corporate transactions. It could, accordingly, create substantial difficulty, uncertainty and unfair exposure to criminal penalties for directors of industrial and commercial companies.The British Bankers Association has also written to me, as have many other organisations which are respected by the Government, I believe, and whose opinions we should take account of when considering these matters.
A survey conducted by a firm of solicitors—Fishburn, Hedges, Boys and Williams—last September among 50 investing institutions found that 62 per cent. of fund managers believed that the new legislation would damage the quality of their service to clients by stemming the flow of information and hampering their ability to analyse companies. Furthermore, it was clear that institutions think that the Government's proposals will create more problems than they will solve. Far from cracking down on insider dealing, they will restrict the communication on which all investors rely.
The fundamental flaw in the Bill is an apparent lack of understanding of how the market operates. In common, I am sure, with virtually all right hon. and hon. Members, I am in favour of strong and clear insider dealing legislation. As my right hon. Friend the Secretary of State said, such legislation is necessary for the market to operate effectively and so that investors may have confidence that the market reflects the true value of quoted companies.
There are two sides to the operation of the market. There are the stockbrokers on the sell side, who seek to sell securities to investors, and there are institutional and individual investors on the buy side. Institutions account for the major part of the buy side, with individual investors forming a very small proportion of today's market.
There are perhaps a dozen standard forms of communication between quoted companies and the market. I shall list the six main ones. Published and half-year results are price-sensitive information. When they are made known to the market, they are made known publicly and there is no ambiguity as to their status. Other information will be given to brokers in a standard form and is counted as publicly available information.
Specific announcements might be made at press conferences. If the market is informed by brokers that profits have been forecast as X but that the company is fully aware that profits will be half X, the company may issue a profits warning, to make clear to the market what will be its likely profits, so that the market is fully informed and can effectively reflect that information in the company's share price.
The less public channels of information are more under threat from the Bill. I refer to meetings with buy-side analysts at which brokers' analysts are met on a one-to-one basis or in groups in order better to inform them of a company's nature and position. The purpose is to divulge not price-sensitive or inside information but facts which could improve the brokers' understanding of the company, which will necessarily affect their view of it.
There are also one-to-one presentations to large shareholders. This is an essential and growing practice in the City. They enable the City to gain a better understanding of British industry and vice versa— 885 something towards which Governments have been working for years. It is an important part of the communication process between industry and the City. There is also communication with small shareholders.
The last three practices relate not to public information but to legitimate information. If, for example, a company's published results prove to be very bad, investors and intermediate institutions are entitled to know of the problem which caused the fall in profits and the action that the company is taking to put the matter right. Such information will help to inform the share price. That is about giving the company the opportunity to explain its stance on key issues.
The objective of a responsible quoted company is to optimise its share price. I do not mean by that that it should try to bolster its share price at every opportunity because that would not be conducive to an optimum share price. Companies which attempt to bolster their share price at every opportunity tend to receive a low rating in the market, because the market does not necessarily attach the same importance to everything said by such a company as it would to a company which takes more care over the way it communicates with its shareholders.
The optimum share price is the best share price in view of all germane information and the state of the company. That means giving investors confidence that the price in the market is a fair reflection of the company's real value—that the brokers' profit forecasts are not wildly out. That avoids shock movement in share prices, which provides the biggest opportunities for insider dealers to make a quick and illegal profit.
§ Mr. Peter Ainsworth (Surrey, East)
Does my hon. Friend agree that meetings of the kind that he described and the practices that he mentioned are vital to the smooth running of the capital markets and to the provision of capital to publicly quoted companies? It is most important that shareholders and corporate management should know and understand each other and should talk to each other regularly on a basis of confidence.
§ Mr. Jenkin
My hon. Friend is right to draw attention to the ability of companies to raise additional capital. They can do that only if there is general confidence in the value of their share price and if that information in the public domain is accurate and up to date. If brokers had information completely different from that in the public domain, the market could not operate effectively. If brokers were happy to behave in such a way, confidence in a particular stock would be seriously damaged, which ultimately would be in no one's interest. My hon. Friend highlights the important point that there is a different nut which will be caught by the sledgehammer nature of the Bill's wider definitions.
The process of conveying information, maintaining investors' confidence and ensuring a realistic share price must be safeguarded. The potential for damage could lead to more volatile prices, which would be bad for the confidence of investors and would lead to more surprises entering the public domain more frequently. That would increase the likelihood of sharp share price movements, which would be to the advantage only of those who dip in 886 and out of the market for short-term gain. It would not be to the advantage of long-term investors seeking to secure the funds of policyholders or of the companies themselves.
§ Mr. Nelson
It is not my intention to keep bobbing up and down throughout the debate but as this is the part of the Bill with which I am most concerned, perhaps my hon. Friend will allow me to comment.
Under present legislation, unpublished price-sensitive information cannot be disclosed at such meetings—just as in the future information which has not been made public, which is specific and precise, and which is likely to have a significant effect on the share price, cannot be disclosed at such meetings. I share with my hon. Friend his view of the importance of meetings between companies and their institutional investors and of occasional meetings with analysts. Nothing in the Bill should be used to interrupt those important relations and established means of analysts going about their business—and it is certainly not the Government's intention that any of the Bill's provisions should be used in that way.
§ Mr. Jenkin
I am extremely grateful to my hon. Friend for clarifying so clearly the Government's intention, which is as I have always understood it. I am sure that most investing institutions and organisations to whose representatives I have spoken also believe that to be the Government's intention.
One problem, which is more a Committee matter than a Second Reading matter, is that the Bill will make it illegal for someone with inside information to encourage another person to deal in shares even if that other person is not told the information. That means that a director could, simply by having a meeting with a broker, without passing over inside information, make the broker an insider, causing the broker to go off-market, perhaps until the next results are published. In view of my hon. Friend's assurances, I am sure that that matter can be clarified in Committee.
I was greatly encouraged by the fact that my right hon. Friend the Home Secretary said that amendments to clarify the issue—perhaps clarification is all that is needed—will be brought forward in Committee. With that caveat, therefore, I commend the Bill to the House.
§ Mr. Robert Maclennan (Caithness and Sutherland)
The Bill's aim—to improve the ability of the criminal justice system to tackle white collar financial crime, including fraud, money laundering and insider dealing—is something to which all hon. Members would subscribe.
The hon. Member for Colchester, North (Mr. Jenkin) has performed a valuable service in highlighting some of the concerns that have been widely expressed about whether the Bill, no doubt inadvertently, will catch desirable activities and increase uncertainties in a way that does nothing to advance its purpose of diminishing white collar crime.
It is not entirely satisfactory to leave such matters to be dealt with in Committee. That may be the conventional way in which Parliament deals with them, but we have a procedure—a pre-legislative Committee procedure which would have been apt to take on board exactly the kind of points with which the hon. Gentleman so eloquently dealt.
The hon. Gentleman was right to list the number of institutions and groups of people who have expressed 887 concern. Parliament would have been helped if it had had an opportunity to hear those concerns expressed in a way that could have been provided if the matter had been considered at the right time.
I say that particularly because a considerable number of complaints have been made about the consultative process in the Bill's preparation. I drew that to the attention of the Secretary of State in the course of his opening speech, so I do not wish to labour the point now. However, the consultation before the Bill was published was not as extensive as it should have been.
It would be a good idea for the Home Office to take on board the strictures of the Hansard Society for Parliamentary Government's commission on the legislative process—a body on which I served along with Mr. Michael Latham, who used to be a distinguished Member of the House, and the hon. Member for Great Grimsby (Mr. Mitchell)—which drew attention to the widespread dissatisfaction with the consultative procedures, particularly on technical Bills, in order to avoid the kind of difficulties of which we have heard. That is not a party point.
However, the purpose of today's debate is not to draw attention to those concerns which will no doubt be returned to in Committee, but rather to deal with the broad principles behind the Bill. I think that the hon. Member for Colchester, North and others would agree that, whatever their concerns may be, and however abstruse and complex white collar crimes may be, such crimes are real and damaging. They are damaging to our marketing institutions and to individuals. The Maxwell pensioners and those who invested in Barlow Clowes know that they were not victimless crimes.
Many hon. Members are personally aware of the horrific expansion in drug trafficking and its appalling consequences. I shall not repeat matters on which the hon. Member for Sedgefield (Mr. Blair) touched beyond reiterating my concern, and that of my right hon. and hon. Friends, aboul the continuing increase in drug trafficking in Britain. Notwithstanding evidence of the increasing success of Customs and Excise in pulling in drugs—I understand that the value of drugs seized in 1980 was some 10 million and in the latest recorded year for which I have figures, 1991, the street value was £200 million—as the hon. Member for Sedgefield rightly said, we do not know what percentage of the total trade that constitutes. If, as has been alleged, it is about 10 per cent. of that trade, we still have an horrifically large problem with which to deal and so must take whatever measures we can to reduce the profitability of the venture, and that is clearly what the Bill intends.
Like the hon. Member for Colchester, North, I want to deal more with the question of the effectiveness of white collar financial crimes—the part of the Bill that covers insider dealing—and my general concern about our apparent difficulties in tackling complex fraud in Britain. We were helpfully given the precise and up-to-date figures by the Economic Secretary in an intervention and they show that, of the cases referred, a small proportion have resulted in convictions.
I made the immediate concession to the Home Secretary that the deterrent effect of our existing law on insider dealing in particular is incalculable and no doubt great. But it is a matter of concern that we find it so difficult to make charges stick. I want later to make some suggestions about how we might improve that position.
888 In general, my right hon. and hon. Friends welcome moves to provide the criminal justice system with the means to apprehend and convict those who commit such offences, but we have some doubts about whether the Bill will do a great deal to enhance the effectiveness of our attack on the problems.
I welcome the proposals on extra-territorial jurisdiction. By way of an anecdotal aside, I can tell the House that as long ago as 1967 I introduced a private Member's Bill, the Toyko Convention Bill, which was enacted. It was designed to give extra-territorial jurisdiction to our courts for crimes committed on board aircraft to take account of changing technolgy and the greater frequency with which crimes were being committed on aircraft over which no one had jurisdiction. That principle must obviously be extended so that, as technology and trading across screens develops, we can apply new criminal sanctions. There will be many changes, and frequent Criminal Justice Bills will inevitably be needed to take account of such developments.
I suspect that we shall not have to deal with new technology or a change in perception of the seriousness of the offence of insider dealing. As long ago as the early 1970s, the Takeover Panel outlawed insider dealing for takeovers in its non-statutory code. A number of attempts have been made since then to provide a statutory basis for the effective treatment of such offences by our courts. However, the volume of legislation on the subject is testimony to the ineffectiveness of each piece of legislation that we have introduced, not to the development of technology.
It is appropriate to draw to the Government's attention the Bar Council's thinking on the broad issue of fraud trials. I well remember a debate in the House a few years ago on the report of the Roskill commission. I think that there were 12 participants in the debate, almost all of whom—if my memory serves me right—were lawyers. Eleven of them spoke against the Government's proposal that serious fraud trials should proceed without the benefit of a jury, using instead specialist judges with specialist assessors. In the face of that overwhelming opposition to the principle of the Roskill commission's main recommendation, the Government did not proceed with the proposal, and they were right not to do so.
The proposal has been referred to from time to time and perhaps it will be considered again by the Royal Commission on Criminal Justice. Nothing that I have heard has suggested to me that the House was wrong then to recommend that we stick with jury trials in complex fraud cases. However, the Bar Council is right to advocate certain procedural changes in such cases—not least cases of alleged insider dealing covered by the Bill—that would enable the system to operate more effectively and fairly, and help juries to tackle the problems of dealing with complex fraud. The Bar Council's working group identified the central problem as the complexity of the cases relating to offences such as those covered by the Bill. The group stated that the complexity resulted from the increasingly sophisticated nature of the crimes that take place in the context of the global. electronic financial marketplace.
The Bill does not deal with such problems, which is a pity, as it provided an opportunity to do so. The Minister of State, Lord Ferrers, dealt with some of the anxieties mentioned earlier, but he did not make any proposals to deal with the procedural difficulties. There are no easy or 889 quick solutions, but there are ways to assist juries in cases such as the Blue Arrow trial. In that trial, the jury members were expected to wade through a mass of minutiae in pursuit of important information. The Court of Appeal ultimately ruled that the case had become unmanageable, and consequently none of the convictions could be said to be safe.
One way of helping the jury to stay on top of the case would be to introduce special court procedures to clarify the issues and identify the relevant information before, and perhaps even during, a trial. Those procedures would be in addition to, but not instead of, normal trial procedures. There is no need to create a professional or semiprofessional tribunal without a jury, only a need to find ways of managing the information more efficiently.
It would be interesting to hear the Government's view on what Lord Alexander of Weedon advocated in his speech on Second Reading, to which the hon. Member for Sedgefield (Mr. Blair) referred. It seems that some of 'the cases that the stock exchange drew to the attention of the Department of Trade and Industry might have been susceptible to examination, and proceedings might have been initiated that would have resulted in the disgorging of illegally obtained profits. Some compensation and redress might have been given to some of the victims of improper white collar crimes if the proposals advocated by Lord Alexander were adopted. Therefore, it would be of interest to know the Government's thoughts. I cannot imagine that it is a matter on which one would have a doctrinal view.
There is scope for extending the role of the judge in requiring coherent and relevant case statements from the defence, and for encouraging more extensive agreement in complex fraud cases between the defence and prosecution over the facts by means of a timetable procedure. That would enable the separate issues of the case to be dealt with in a rational and efficient manner. It would be much less confusing for the jury and would consume less court time. The jury could be presented with the relevant documents and summaries as each stage of the trial occurred rather than at the beginning of the trial in accordance with the timetable that had been drawn up. The presentation and summing up of the cases for the prosecution and defence should also be accompanied by written summaries to be used by the jury.
I make those suggestions tentatively, and they are not intended as a panacea for the ills of our criminal justice system in relation to white collar crime. However, they are intended to address a problem that the Bill touches on but to which it does not adequately face up. They would provide a valuable step towards giving courts the means by which to try such cases effectively, fairly and efficiently. That is necessary if we are to deter transgressions by those who could bring our markets into disrepute and cause great damage to our commerce and to the profits that the City brings to our country.
Without such a step, I fear that the Bill may be no more effective than some of its predecessors in eliminating the profitability of large-scale white collar crime. I hope that we shall not need yet another Bill in a few years to tackle these matters. Amendments to the criminal law procedure along the lines that I have suggested would give existing law a better chance to work.
§ Mr. Edward Garnier (Harborough)
This is the third time in the past year that I have had the pleasure of following the hon. Member for Caithness and Sutherland (Mr. Maclennan). As on those occasions, he has made a considered contribution. It is also a pleasure to participate in a debate that has been largely uncontroversial. All hon. Members seem to support the thrust of the Bill. The Tokyo Conventions Act has been mentioned. I assure the hon. Member for Caithness and Sutherland that in the Market Harborough Conservative club we talk of little else.
I shall concentrate on part II of the Bill and especially on the clauses dealing with the burden of proof and related matters. Clause 7(1) amends section 1(1) of the Drug Trafficking Offences Act 1986. The amendment will be such that the requirement of the court to determine whether a convicted person has benefited from drug trafficking is no longer mandatory. That will allow the determination to be made at the request of the prosecutor or at the behest of the court on the court's motion.
That provision will dispense with courts wasting time and the money of the police and prosecution service making determinations in cases where the amount of the benefit is so small as to be not worth the investigation. A better use of police and court resources is to be commended, not least at a time when the Government's resources are limited and when we are concerned about the amount being spent on legal aid.
Clause 7(2) inserts a new subsection in the 1986 Act, subsection (7A), which states:The standard of proof required to determine …
- (a) whethr a person has benefited from drug trafficking, or
- (b) the amount to be recovered …shall be that applicable in civil proceedings.From now on it is clear that the trial judge making the determination will work on the balance of probabilities at that stage of the proceedings. He will have to be satisfied that an allegation or fact is more likely than not.
I understand that a judge is currently entitled to make assumptions under section 2(2) and (3) of the 1986 Act when arriving at a decision. No standard of proof arises when the judge is deciding whether the assumption should be made. When the assumption is made, the burden falls on the defendant to rebut it on the civil standard. I understand that that follows from the judgment of the Court of Appeal in Crown v. Redbourne to which the hon. Member for Sedgefield (Mr. Blair) referred.
Hand in hand with those amendments under clause 7 is clause 9 which requires the court to make the assumptions about property and expenditure which are set out in the Drug Trafficking Offences Act unless they are shown to be incorrect in the defendant's case or the court is satisfied that there would be a serious risk of injustice if they were made. If the court decides not to make the assumptions, it must state its reasons. It is an admirable advance that a court should be required by statute to give reasons for reaching a conclusion.
Clause 9 amends section 2 of the 1986 Act. Section 2(2) of that Act states what the court "may" do to determine whether a defendant has benefited from drug trafficking. The word "may" is replaced by "shall". Clause 9 inserts at the end of subsection (2):The court shall not make any required assumption if—891 The required assumptions are set out in subsection (3) of the 1986 Act, but I shall not rehearse them. Despite the concerns of those who spoke against the 1986 Act that these were draconian measures, it now seems that the hon. Member for Sedgefield has recognised their value. I am sure that criminal practitioners, of whom I am not one, will also recognise the value of the Bill's amendments to the 1986 Act.
- (a) that assumption is shown to be incorrect in the defendant's case …".
Clause 8 adds to section 1 of the 1986 Act a provision allowing the determining court to postpone its investigation for up to six months until relevant information has been obtained. That application can be made by the prosecution or by the defence or by the court on its own motion. It deals with the problem which can arise under section 1 of the 1986 Act when no confiscation order is made at the original determination on the mistaken assumption that the defendant had no realisable assets but when some are subsequently discovered. I understand that previously a court had only 28 days to vary its decision. Now it has a considerably longer time in which to right that injustice.
Clause 12 allows the court to vary an order to take account of increased values of assets. That is an especially welcome addition to the criminal law. It would be manifestly unjust if someone convicted of drug trafficking were able to benefit from the increase in house prices, Iand values or the value of any other proceeds that he had acquired as a result of drug trafficking but which were not available to be seized by the court at the time of the determination. I welcome that aspect of the Bill.
Clause 16 continues the fight against drug trafficking and those who benefit from it by making it an offence knowingly to acquire, possess or use another's proceeds from drug trafficking. It is easy to build up an empire and pass it on to one's friends and relations who will benefit from the proceeds of illegal acts. Anyone who knowingly benefits from such a gift or who acquires, possesses or uses another's proceeds will be liable on indictment to a sentence of 14 years' imprisonment. That also underlines the determination of the House and the Government to get to the root of drug trafficking—to hit the drug barons and their friends in their pockets.
I also commend clause 10, which tightens the pleading procedure on determination. The court will be enabled to inform the prosecutor that he must set out his statement of case. The defendant must respond to it within a given time. That procedure will save time, eliminate unnecessary controversy and save money, which is particularly short at this time.
The Bill is a further arrow in our armoury in the war against drugs. We already have the Misuse of Drugs Act 1971, the Criminal Justice (Scotland) Act 1987, which contains similar confiscatory powers in regard to Scotland, and the Criminal Justice (International Co-operation) Act 1990, which contains measures designed to facilitate the task of detecting drug traffickers and confiscating proceeds. It creates the offence of manufacturing or supplying substances while knowing or suspecting that they are to be used in the unlawful production of controlled drugs. The Bill, which I hope will shortly become an Act, adds to that armoury.
As my right hon. Friend the Member for Westminster, North (Sir J. Wheeler) says, we have the valuable work of the drug liaison officers abroad, with their intelligence, which is vital if all this is to work.
892 Given the lateness of the hour and the number of hon. Members who wish to speak, I will conclude my remarks. I invite the House to pass the Bill as soon as possible, not only because it is an earnest of our desire to stamp out the blight of drug dealing in our society, but because it is what the people of this country require us to do as swiftly as possible.
§ Mr. Mike O'Brien (Warwickshire, North)
The doubling of crime since 1979 and the increased pressure on the police and the courts mean that the criminal law needs to be strengthened. Therefore, in broad terms, the Bill is welcome.
Drug use is obviously a major cause of crime. Those who traffic in drugs and create a demand for the product are as responsible for the muggings, burglaries and deaths caused by drug users seeking money for their next fix, as the drug users themselves. Many criminals would not offend, but for the need to pay the pusher and the trafficker who supply the drugs. It is necessary to have tough and effective laws on drug trafficking and on the laundering of the proceeds of crime. The Bill goes some way towards that. The greater powers that it gives the courts are, in many ways, justified because of the size of the threat confronting us.
I want to deal not particularly with drug trafficking but with insider dealing, although some of the points that I raise will be relevant to drug trafficking.
The statistics on the success or otherwise of prosecutions in insider dealing cases show how difficult it is to secure a conviction. In the peak year of 1989–90, 10 cases were taken to the courts, involving the prosecution of 14 defendants, four convictions and nine acquittals. I assume that the Fisher case, the Coren and Greenwood case and the Guinness case account for some of those, although not all.
The statistics were disputed by the Economic Secretary to the Treasury. The statistics provided by the House of Commons Library suggest—and I note what the hon. Gentleman said—that until 13 January 1993, of the 104 cases reported by the stock exchange to the DTI, 21 were prosecuted, involving a total of 33 individuals and resulting in 16 convictions. That suggests that the complexity of the law, coupled with the complexity of the issues involved, makes it very difficult for those accused of insider dealing to be convicted.
In the late 1980s, I was involved in an insider dealing case as a defence lawyer. In that case two acquittals were secured. I noted the complexity and amount of information with which we had to deal. The evidence took over a year to assemble, and weeks to read and analyse. Meetings with counsels were complex and virtually interminable.
§ Mr. O'Brien
Yes, they were certainly expensive.
In that case, the defence succeeded on a legal submission at the start of the trial. We had a whole series of legal points in the case which highlighted what we felt to be the inadequate way in which the legislation was drafted and its lack of clarity. I am sure that the defendants would have been aquitted in any event, but the Act was clearly lacking.
893 The Bill makes a number of welcome changes, but I fear that it does not take sufficient account of the need to clarify insider dealing legislation, and that we may need to revisit this area again in the near future.
The need to clarify both the way in which evidence is presented to juries and the legislation itself is very important. Unfortunately, I do not think that the Bill will do the trick.
One of the criticisms of the Bill, both in another place and by my hon. Friend the Member for Swansea, East (Mr. Anderson), was that the legislation shifts the burden of proof in particular areas. It is an important criticism, and it is right that burdens should not be unnecessarily placed upon defendants. However, it is also important that cases are decided fairly, and the requirement for a fair and just trial means that a jury should understand the process of the trial and the relevant factors involved in making a finding of guilt or innocence. My concern is that cases of insider dealing are too complex and, where they are linked to factual and documentary material which is also complex, the job of a jury in such cases is extremely difficult.
There is a proposal from some sources of replacing trial by jury with trial by a judge and assessors for particularly complex cases involving dishonest dealings. I am reluctant to go down that route because it is a slippery slope and undermines the right of an individual to trial by jury in criminal cases; but, if we are successfully to try cases by jury, it is essential to simplify the number of issues involved, which requires the use of legal presumptions such as those in the Bill.
Although such presumptions may shift the burden of proof towards the defendant, they can have merit in these particular types of case. For example, under clause 37 the defendant must show that he did not expect the receiver of the information to deal. This replaces the previous and inadequate legislation which required proof of knowledge of the intention to deal, which was sometimes difficult to prove. Although in the Bill there appears to be some element of "guilty until proved innocent"—or at least proved innocent on the balance of the argument—these provisions will in many cases lead, because of the simplification of the trial process for the jury, to a fairer and more just verdict. They simplify the process and, by and large, do not place unnecessary burdens upon defendants.
One area that the Bill does not cover is the removal of the right of silence in insider dealing cases. That was part of earlier legislation. Having sat through two days of interviews conducted under those rules, and looking at the convictions resulting from the interviews, I would say that hopes suggested by the police and by some Conservative Members that removing the right to silence in other types of case might improve the rate of conviction may not be justified, particularly in complex cases such as insider dealing.
I have grave doubts that the interviews take place in a proper manner. Certainly, my experience was that documents of very considerable complexity, which were extremely difficult to follow, were presented to a defendant who was asked to deal with questions relating to share dealings which had taken place two years before. He had had no opportunity to go through those documents. If we 894 are to deny the right of silence to defendants in complex cases, advance notice of areas of questioning and documentation should always be given. I hope that the Minister will look at that issue when the Bill is considered in Committee and that those who seek to undermine the right to silence will weigh in the balance the view that the proposal may not achieve its aim and could lead to additional injustice.
My main regret relates to what the Bill does not do rather than to what it does do. It provided the chance to undo the damage done by the Criminal Justice Act 1991. It is clear that insider dealing and cases involving drug trafficking will be affected by the sentencing restrictions imposed by sections 1(2)(a) and 29. They are cases which typically may have multiple count indictments or sample count indictments. It seems to me that the legislation that needs to be dealt with today is the Criminal Justice Act 1991. In its failure to do that, the Bill is massively inadequate.
When the 1991 Act was passed, the Government made it clear that the purpose of that measure was to reduce the number of people in prison. Its effect, however, is that persistent offenders with lots of previous convictions find that the court is restricted in its ability to take their record into account when sentencing. Some persistent offenders therefore get away with offences for which they should go to prison. It is frustrating for police officers and the public to see criminals arrested and brought before the courts and then to find that the courts are forced by the Criminal Justice Act 1991 to let them off.
Due to the enactment of that legislation the Government's law and order policy has lost all credibility; crime has doubled during their period of office and the 1991 Act is among the most ludicrous pieces of legislation ever to hit the statute book. By means of that Act, the Conservatives have added to their long list of citizens charters the citizens charter for criminals. The Act gives criminals more rights than they have ever had before and makes their lives easier than they have ever been before.
I welcome to some extent what the Home Secretary said about looking again at the 1991 Act, but that will take time, during which criminals who deserve to go to prison will not be sent to prison. While the Home Secretary consults, debates and prevaricates, other victims will suffer. There needs to be a sense of urgency about dealing with the Criminal Justice Act 1991. I hope shortly to put before the House of Commons a ten-minute Bill on the issue, which I trust that the Home Secretary and the Conservative party will be able to support.
I welcome, in broad terms, what the Bill does. As the Home Secretary said, it is right that it should be considered in detail in Committee so that the problems caused by its predecessor can be avoided. I am sure that we shall all be most vociferous in tabling the amendments that we think are necessary.
§ 8.2 pm
§ Mr. Peter Ainsworth (Surrey, East)
It is true that the Bill is unlikely to make headline news in the popular press. My right hon. and learned Friend the Home Secretary made that clear in his opening remarks. None the less, it is a most important Bill, for it provides a variety of additional safeguards against white collar crime. There is no qualitative difference between this type of crime and any other. It is absolutely right that we should be 895 assiduous in tracking down and punishing criminals who may wear white collars and sit in offices but who are, none the less, common criminals. Therefore, I particularly welcome the provisions of the Bill which make life significantly tougher for those who engage in serious international fraud, money laundering and its attendant terrorist associations and, of course, the evil practice of drug trafficking.
In common with other hon. Members, I intend to focus on part IV, which deals with insider dealing. I ought immediately to declare an interest. I began my professional career as an investment analyst in the City. Subsequently, I moved into corporate finance with S. G. Warburg Group plc, for which I act as a paid consultant. I am also a non-executive director of a public company.
Insider dealing has been famously described as a victimless crime, but in my view it is nothing of the kind. Insider dealing, put simply, is a form of cheating. One set of victims, therefore, consists of those who are cheated upon. By implication, these are other shareholders and other market professionals; it is widely accepted that larger and more active City institutions—for example, those handling large pension portfolios—are likely to suffer the most. But the other principal victim of insider dealing is the City itself. If cheating were to become widespread, the market would quickly fall into disrepute, and confidence in London, as one of the world's major financial centres, would suffer.
I hope that my hon. Friend the Economic Secretary is in no doubt about the importance that the City as a whole attaches to his efforts to make insider dealing legislation more effective. I am sure that he has the support of the City and the House in those efforts. But for legislation to be effective, it must first be absolutely clear. As the workings of the existing laws regulating the financial markets have from time to time in practice suggested, we are dealing with an extremely complex set of issues that do not readily lend themselves to legislation. There is a need to proceed with very great caution if the ability of the City to continue with its proper function of transmitting important information to investors and the public is not to be impaired.
Reference has already been made in the debate to the fact that during the Second Reading debate of the Bill in another place considerable concern was expressed that no final decision should be taken as to the detailed contents of the Bill without the fullest possible consultation with the City institutions and investment banks, upon whose daily business it impinges. It is a source of great encouragement that such consultation has now taken place. Here I differ from the hon. Member for Caithness and Sutherland (Mr. Maclennan).
I know that my hon. Friend the Economic Secretary has given full consideration to the large number of detailed points that have arisen from the consultation that has taken place since last autumn and from the consultation that continues to take place. I echo the view of my right hon. and learned Friend the Home Secretary that one of the major improvements that has taken place since last autumn is that the word "tippee" has not found a permanent place in the text of the Bill. I only hope that it was removed in time for it not to have found a permanent place in the English language. Perhaps I should not have mentioned it.
As the Bill stands today, a number of outstanding concerns remain. I do not intend, the House will be 896 relieved to hear, to list all of them this evening. The proper place for their consideration will be in Committee when I hope that my hon. Friend the Economic Secretary will consider carefully ways in which the present wording of the legislation can be clarified. Only this afternoon my right hon. and learned Friend made it clear that he is ready to look carefully at suitable amendments that may be tabled to deal with these concerns. I was also glad to hear him say that he himself intended to table some amendments. He may be assured that the progress of such amendments will be studied with the greatest of care and attention by those who carry on legitimate securities business in the City.
Repeated assurances have been given that there is no intention, by means of the Bill, to make illegal business practices that currently are legitimate. My right hon. and learned Friend reiterated that point clearly today, as did my hon. Friend the Economic Secretary. I very much welcome what they said. I do not for a minute doubt that they mean what they say, but the trouble is that those reassurances are not yet reflected in the Bill. As it is drafted, there is a distinct risk that some of the provisions in part IV will have precisely the effect of creating uncertainty over the legitimacy of currently accepted practices. That is perhaps mainly because a lack of clarity will make it too risky for present practices to continue.
Hon. Members have referred to the deterrent effect of the present insider dealing legislation. This, I believe, is very real. Reputable City institutions and financial service organisations are understandably most anxious to avoid any breach of the law, and their concern to be in no doubt about how the law will work, stems, perhaps, from that very anxiety.
I should like to highlight three key areas in which there appear to be particular problems. The first relates to stock market investment analysts—a subject that is very close to my heart. My hon. Friend the Minister will know that it is the role of analysts to obtain through research information about companies and sectors that can be used, usually in in-house publications, to provide fund managers with a basis for taking investment decisions. The key point it issue, which has been referred to in the debate, is that, to avoid prejudice to the role of analysts, it would be most helpful if my hon. Friend the Minister reconsidered the words "made public" in clause 33, which are somewhat unclear.
The issue has been widely discussed, but it is worth noting that the recital to the European Community directive, which the Bill implements, uses the words "publicly available", which is rather clearer and which seems to offer a preferable alternative with less risk of misinterpretation. It is an alternative favoured by the City, by the many organisations that were mentioned by my hon. Friend the Member for Colchester, North (Mr. Jenkin), by the British Merchant Banking and Securities Houses Association and, perhaps most important, by the finance directors of public companies, who liaise with investment analysts.
Fund managers are not always required to pay close attention to all analysts—indeed, in my experience, the views of a number of analysts are regarded as a counter-indicator of what is likely to occur—but the reputation of a few analysts in certain sectors is such that their views are capable of moving the market in relevant shares. It is necessary, therefore, for the Bill to make it 897 absolutely clear that an influential analyst does not become an insider by virtue of the fact that he or she has reached a conclusion about the merits of a share.
Under the Bill, it appears that, if an analyst is fortunate enough to have such a high reputation that the disclosure of his or her views on a share might move the market, because those views are price-sensitive and have not been made public the analyst would not be allowed to express those views to a client, if to do so would encourage the client to deal in a share. I am sure that my hon. Friend the Economic Secretary would not want such a situation to develop.
There is a real danger that the well-intentioned measures in part IV could so impede the flow of reasonable information between companies, about which my hon. Friend the Member for Colchester, North spoke so eloquently, that they could reverse the trend to corporate glasnost, which has been a feature of recent years and which has led to a freeing up of information on which to base investment decisions. We surely do not wish to encourage a return to the corporate secrecy of the bad old days, when one had to be a member of the chairman's club or golf club to know anything meaningful about what was going on in a company.
I hope that my hon. Friend the Minister will reconsider the way in which the Bill might apply to vendor placings and secondary share underwritings. This is technical stuff, but it is important to the smooth functioning of the City and the capital markets. It is unclear whether normal, perfectly legitimate practices associated with secondary underwritings and vendor placings will continue to be permitted under the Bill. Vendor placings are a frequently used method of financing acquisitions, and a good example of a secondary underwriting that might be close to my hon. Friend's heart is the forthcoming disposal by the Government of a further tranche of shares in British Telecom. It would be most unfortunate, to say the least, if there were any uncertainty about the legitimacy of the means by which this disposal or any other secondary underwriting might logically and appropriately take place.
I understand that it has been suggested during the consultations that vendor and secondary placings would be protected by the defence in clause 32(2) that persons taking part would not be intending to secure a profit by reason of the fact that the securities are price-affected, but as such people are inevitably engaged in business with a view to securing a profit, and as the nature of many of the transactions in question will be likely to affect the price, this does not seem to be a particularly robust defence. I therefore hope that my hon. Friend the Minister will be able to introduce a more precise and dependable protection for those who carry out a role that is integral to the raising of corporate capital.
§ Mr. Nelson
I assure my hon. Friend that I shall consider most carefully the thoughtful points that he has made, which is the advantage of the Committee stage. I draw his attention to part II of schedule 2, which provides exemptions for market makers, market information and price stabilisation, all of which are important aspects of what the professionals do in the market and should offer an exemption that measures up to many of the demands that were made in the consultation period. I shall carefully consider how much further the Government can go to 898 provide further reassurances that do not drive a coach and horses through the intentions of the directive or the Bill, but I hope that my hon. Friend will acknowledge that we have tried to go some way to meeting the points he has made.
§ Mr. Ainsworth
I am grateful to my hon. Friend for his remarks. I am aware of the exemptions to which he refers. I know that all involved are grateful that it has been possible to incorporate them in the Bill and I welcome him saying that he will carefully consider the points that I have been making.
My third and final point concerns the way in which the Bill extends the definition of inside information beyond individual companies to cover groups of companies engaged in similar or competing activities. I understand the problem that the Bill is intended to tackle, but I was not wholly convinced by an example that was provided last September by a Treasury spokesman, who said:If someone discovered that a company had closed down and then sold the shares of that company's competitor that would be insider dealing.Insider dealing it might be, but it is possible to argue that it would be an extremely bad investment decision as well.
Perhaps I might venture, for future reference, an alternative example of the problem. If somebody learned that a company was shortly to be bid for and on the basis of that inside information immediately bought shares in another company whose shares were likely to rise as a result of the bid, he would be guilty of insider dealing. It seems perfectly reasonable to try to stop such activity, but the present drafting of the Bill is so broad that it could impede the operation of transactions where it is necessary formally to make certain interested parties insiders. It would be extremely difficult for any fund manager to allow himself to be made an insider on a particular share for the purposes of effecting a specific transaction if the effect of so doing were to preclude him from dealing in any other shares in that sector.
As I have said, these are complex matters which do not lend themselves easily to legislation. However, if we are to legislate, it is important to get it absolutely right. As my hon. Friend the Economic Secretary will know, substantial time and money is already spent in the square mile to ensure compliance with existing complex statutory regulations. I sometimes fear that this is better news for lawyers than for shareholders.
My hon. Friend said that several of the outstanding concerns will be covered by guidance. I have no doubt that it will be a great help, but I am sure he will agree that it would be preferable if they could be dealt with in the legislation itself. Uncertainty is a great enemy of confidence, and confidence is vital to the efficient working of any market. My hon. Friend, whose efforts to stamp out insider dealing deserve wholehearted support, has said in that context that he is a great believer in fear. I am certain that he meant fear of the law, not fear of the unknown. I have every confidence that the immense amount of work that he and his officials in the Treasury have put into getting the legislation right will bear fruit as the Bill, which is very welcome in many respects, passes through Committee.
§ Mr. David Trimble (Upper Bann)
Many hon. Members have referred to the Criminal Justice Act 1991 and have especially criticised its provisions dealing with unit fines and related matters. I entirely endorse their criticism and I hope that, as well as conducting a review of the 1991 Act, the Home Secretary will get in touch with the Secretary of State for Northern Ireland who in the past few weeks published proposals to introduce into Northern Ireland legislation identical to the 1991 Act, the manifest failings of which are becoming daily more appparent.
The second preparatory comment relates to the speech by the hon. Member for Caithness and Sutherland (Mr. Maclennan), who spoke on behalf of the Liberal party, and to that of the hon. Member for Colchester, North (Mr. Jenkin), who complained about the lack of consultation. The hon. Member for Caithness and Sutherland in particular referred to the Hansard Committee report and said that its recommendation of the use of Special Standing Committees and pre-legislative Committee stages would be appropriate. Such procedure featured strongly in the recent Scottish White Paper as being appropriate for legislation which was not controversial in party political terms. That is precisely what this is. I should have thought that such procedure should be adopted for measures of this nature.
In dealing with part I of the Bill, which deals with extra-territorial jurisdiction and certain offences, the Home Secretary referred in passing to Scotland and Northern Ireland. He said that part I would not apply to them because the two territories have their own legal systems. That is inconsistent because certain provisions in the Bill—three clauses in part V and all of the clauses in part IV—will extend to Northern Ireland. Furthermore, the Bill authorises the making of a negative resolution Order in Council equivalent to most of the provisions in part III and some in part II.
Against that background it is strange that the Home Secretary does not consider it necessary to have an equivalent provision with regard to part I or even to say whether there is any intention to introduce legislation in Scotland or Northern Ireland equivalent to part I. Many of the provisions of parts II, III and IV apply to Scotland anyway. It makes the Bill look rather like a dog's dinner.
As usually happens in these cases, I wish to draw attention to the inadvisability of legislating for Northern Ireland by way of negative resolution Orders in Council which the Bill authorises. As hon. Members will know, the negative resolution Order in Council will not be debated anywhere in the House. By passing the Bill, we are authorising legislation by decree and not providing for discussion of it. There is clearly no intention to discuss the Northern Ireland provisions now being authorised because there is no representative of the Northern Ireland Office on the Government Front Bench, so there is no one to comment on the possible application in Northern Ireland of the provisions authorised to be made by negative resolution Order in Council.
In any event, proceeding by negative resolution Order in Council is inherently inefficient. Such orders will be made only after the legislation has completed its stages because the legislative draftsman in Northern Ireland takes the view that he cannot draft his Order in Council until the Bill i3 complete and all its provisions are known 900 —in other words, until it has received a Third Reading. That builds in a significant delay before the Order in Council is made.
The provisions authorised by negative resolution Order in Council relate to money laundering and the movement of proceeds of drug trafficking and other criminal offences. Of course, there may be movements from one jurisdiction to another and, in certain cases, there will be movement between Northern Ireland and other parts of the United Kingdom and vice versa. It therefore seems inappropriate that legislation is not coming into effect at the same time in all jurisdictions.
It is particularly inappropriate because the Bill makes provision for Scotland; for example, in clauses 17 and 19, which replicate for Scotland the provisions in clauses 16 and 18. It is the equivalent of clauses 16 and 18 which are to be made by negative resolution Order in Council. It does not make sense. There is an incoherence in the drafting of the Bill, which is inappropriate.
The provisions covering the proceeds of criminal conduct and the laundering of the proceeds of drug trafficking in particular are good ideas, and I was glad that the Home Secretary said that new clauses will be introduced in Committee to extend the provisions into anti-terrorism legislation. There will be provision in anti-terrorism legislation for the inhibition of money laundering and the confiscation of terrorist proceeds as well as criminal and drug proceeds.
That is especially appropriate as terrorist organisations in Northern Ireland to a significant extent now finance their activity through drug dealing. It is therefore not sensible to draw a distinction between laundering the proceeds of drug trafficking and laundering money used to finance terrorist activities. In any event, the laundering of money related to criminal activity is the same whether the criminal activity is defrauding people, trafficking in drugs or promoting terrorism.
The Home Secretary said that the intention was to provide a read-across from this legislation to antiterrorism legislation. I assume that he was referring to the Prevention of Terrorism Act. Some of the Bill's provisions reproduce some of those introduced in the Northern Ireland (Emergency Provisions) Act 1991. The read-across is from the EPA into the Bill and through to the PTA. I see that the Minister of State, Home Office, the hon. Member for Fylde (Mr. Jack) is nodding, so I have got the direction roughly correct.
It is good that the issue is being tackled. Some provisions dealing with the financing of terrorism were introduced into the Prevention of Terrorism (Temporary Provisions) Act 1989, nearly four years ago. I understand that they have been wholly ineffective, that no money has been recovered and that no proceedings have taken place. In reports on the PTA, Lord Colville described its powers as "unworkable", so I am glad that they are now being dealt with.
Provisions introduced into the Northern Ireland (Emergency Provisions) Act 1991 are being borrowed in this Bill. I understand that, as yet, nothing has been done under the EPA and that there has still been no successful recovery. That is not a good precedent. I understand from various sources that it is expected that some proceedings will shortly take place under the EPA. I hope that they will be successful, but it is not a good augury for the provisions before us that the EPA provisions have been on the statute book for two years without having produced results yet.
901 I hope that when the new clauses are introduced in Committee the opportunity will be taken to examine some inconsistencies that seem to me to exist between the clauses of the Bill and the provisions in the EPA from which I understand that they are derived. For example, the Secretary of State said that, in amending the Drug Trafficking Offences Act 1986, the Bill would make it clear that the civil rather than the criminal standard of proof applied, and would give the court discretion whether to make confiscation orders. However, unless I am mistaken, the EPA equivalent provision—section 47(I)—seems to imply a criminal standard, because it uses language such as:the court shall … if it is satisfied".That does not appear to give the court discretion whether to make confiscation orders, so there is an inconsistency.
The hon. Member for Sedgefield (Mr. Blair), who spoke for the Labour party, said that he was worried about the assumptions on which the Bill required the court to proceed when determining whether assets were the proceeds of drug trafficking. But the Bill qualifies those assumptions in two respects. Clause 9(3) says that the assumption can be rebutted ifthat assumption is shown to be incorrect in the defendant's case, orit would be unjust to make it.
Of those two qualifications only one—the first assumption, as to whether it would be incorrect to make the assumption on the facts—applies in section 51(1), the equivalent provision in the EPA. The second—whether making the assumption would lead to an injustice—does not apply. That inconsistency needs to be ironed out.
None the less, the Bill provides a good opportunity to introduce a single coherent code that would apply throughout the United Kingdom. That is necessary. At present we have an unsatisfactory state of affairs, with different codes in the Prevention of Terrorism Act, in the emergency provisions legislation and in the legislation on drug trafficking. The activity of money laundering is essentially the same, regardless of the nature of the crime, so we should have a single code.
We should also ensure that that code is as effective as possible in geographical terms. That partly reflects a desire that it should be effective throughout the British Isles, but it relates to other aspects too. How effective will the legislation be concerning applications relating to money laundered through, say, Gibraltar, the Cayman islands or other such places? That, too is a relevant consideration. I am not sure that our legislation is effective with regard to those territories at present. There is an option to transfer the provision to such places as the Channel Islands and the Isle of Man, but I am not sure whether it has been exercised. What about areas further afield which act as offshore banking centres for the United Kingdom, and through which money is laundered? We must make sure that we deal with them.
The Home Secretary dismissed certain matters in part V as minor, and mentioned only one clause in that part of the Bill. I shall refer to another clause in part V, which the Home Secretary did not mention—clause 44, headed, "Backing of warrants: safeguards." That brief phrase in the list of clauses conceals the fact that it deals with the thorny problem of extradition to and from the Republic of Ireland, specifically for terrorist offences.
902 That is a matter of considerable importance to us, and it should be important not only to those of us who represent Northern Ireland constituencies, but to all of us in the United Kingdom, especially in view of the terrorist campaign directed towards England and towards this capital, and directed from the Republic of Ireland and carried out by persons largely recruited there. That important matter is in the public eye because of events in the Republic of Ireland over the past few days—the arrests made there and the questions that have arisen concerning them and concerning extradition. Against that background it is slightly surprising that the Home Secretary saw fit completely to ignore clause 44.
Clause 44 makes provision for introducing into the present procedures—strictly speaking, those concern not extradition but the backing of warrants—what in extradition terms is called the speciality rule, the effect of which is to ensure that, if a person is transferred from the Republic of Ireland to the United Kingdom on certain warrants, he can be proceeded against in the courts here only for the offences in the original warrants.
At present, no speciality rule applies between the Republic of Ireland and the United Kingdom. That is because we operate a backing of warrants procedure rather than an extradition procedure. In extradition procedures it is normal to have a speciality rule.
The matter became controversial in 1991 with the Desmond Ellis case. Mr. Ellis was accused of being involved in conspiring to cause explosions in the United Kingdom, and was extradited from the Republic of Ireland to the United Kingdom for certain offences. The magistrates in England then proceeded to substitute different offences for the offences for which Mr. Ellis was originally transferred. That course of action was perfectly lawful and open to them in that case, but it provoked an outcry in the Irish Republic, whose Government behaved as if they thought that a speciality rule existed, or ought to exist. The upshot was that the Crown substituted the original offences. As hon. Members will know, Mr. Ellis was subsequently acquitted and transferred back to the Republic of Ireland.
The important point about that case was that it revealed that the Government of the Irish Republic considered that there was, or ought to be, a speciality rule governing the transfer of fugitive offenders from the Republic to the United Kingdom. They behaved as if assurances had been given by the United Kingdom Government that a speciality rule would be applied. Those assurances were not followed through by the magistrates in the Ellis case because, of course, magistrates and the courts are independent. But now we find legislation surfacing in the Bill to give legal effect to the assumption on which the Government of the Republic of Ireland proceeded. Clause 44 appears to have its origins in the protests made by the Government of the Irish Republic arising from the Ellis case in 1991. I should be interested to hear whether the Minister will comment on that assumption.
That raises the question: why have the Government decided to accede to what I presume to be the requests or demands of the Government of the Irish Republic to limit the range of offences for which fugitive offenders returned under the backing of warrants can be charged? Is there some particular reason? Have they come to some agreement with the Government of the Irish Republic? Has there been a deal?
903 When he considers that question, the Minister may like to reflect on a question that my hon. Friend the Member for Antrim, East (Mr. Beggs) asked the Prime Minister on 21 November 1991 if he wouldassure the House that there will be no further concessions to the Irish Republic in order to obtain the extradition of terrorist suspects to stand trial in the United Kingdom?The Prime Minister replied:we do not bargain … we do not do deals."—[Official Report, 21 November 1991; Vol. 199, c. 418–419.]Thus, the Prime Minister appeared to give the assurance in November 1991 that no further concessions would be made to the Government of the Republic of Ireland in order to obtain the return of fugitive offenders. Yet what is clause 44 if it is not a further concession to the Government of the Irish Republic in that connection? We must therefore ask what has happened between November 1991, when the Prime Minister assured us that no further concessions would be made, and today when we see the concessions in the Bill. Why have the Government done a U-turn? Has the Prime Minister done a U-turn, arid if so, why?
My hon. Friend the Member for Antrim, East asked whether there would be further deals. Perhaps there is no deal. Perhaps the Government are just making the concession without there being any undertaking in return. Perhaps the concession has been made in the fond hope that the Irish Republic will respond by facilitating the return of fugitive offenders. It reminds me of other agreements that have been made with the Government of the Irish Republic in the fond hope that they would do something in return for concessions. Those other agreements have proved barren of the product that was promised or expected. We wonder what will happen here.
It might have been better for the Government to have done a deal. Perhaps they should, as a result of this concession, have pressed the Irish Government to get rid of the Extradition Amendment Act 1987 which the Irish Government introduced to try to limit the effect of the European convention on the suppression of terrorism. Perhaps the Government should have made efforts to improve the European convention on the suppression of terrorism because it has been clearly demonstrated since 1987 that article 1 of that convention is not effective and draws invidious distinctions about matters such as whether a terrorist is using an automatic weapon or a bolt-action rifle. That can be crucial in deciding whether they can be returned under the convention.
Perhaps something could have been done to curtail the readiness with which district judges in the Irish Republic grant bail to fugitive offenders. Cases have been reported in the press in recent weeks which have drawn attention to that practice. Measures were introduced in the United Kingdom, especially in Northern Ireland, to ensure that magistrates cannot grant bail in cases of terrorist offences. Perhaps we should have put pressure on the Government of the Irish Republic to introduce equivalent legislation to curtail the propensity of their district judges, who are the equivalent of magistrates, to grant bail in such cases.
If we are taking the path of introducing a speciality rule into the backing of warrants, it might have been better to consider the procedure as a whole. A speciality rule is incompatible with the whole concept of backing warrants. The backing of warrants procedure was introduced in the middle of the 19th century to deal with transfers between one of Her Majesty's jurisdictions and another, especially 904 transfers of fugitive offenders from the colonies to England and vice versa. There was no need for extradition and there was no need to question the grounds on which a person was arraigned before the court, because all the courts were Her Majesty's courts. The backing of warrants procedure is an historical survival with regard to the Republic of Ireland, dating from the time when the Republic of Ireland was part of Her Majesty's dominions.
It might be better to have a proper extradition treaty. That would, of course, mean accepting not just the speciality rule, but the prima facie case rule. That would surely result in the Irish having to drop their Extradition Amendment Act 1987 which gives the opportunity for them to refuse to return fugitive terrorist offenders in certain circumstances. In any event, the primary question remains, of what lies behind the decision to introduce clause 44 and thus to negate the Prime Minister's assurance of November 1991.
§ Sir Ivan Lawrence (Burton)
My heart goes out to the hon. Member for Upper Bann (Mr. Trimble) and to his hon. Friends in Northern Ireland as they await with trepidation the introduction of the equivalent of a Criminal Justice Act 1992. At least he cannot complain that on this occasion Northern Ireland is being used as a guinea pig for this country, although if that legislation is imminent, Northern Ireland may be a guinea pig for the changes that we envisage as likely to occur. Like the hon. Gentleman, I welcome the fact that the money-laundering legislation is to be extended by my right hon. and learned Friend the Home Secretary and his team to the anti-terrorist legislation in Northern Ireland.
When I began practising at the criminal Bar more than 30 years ago, almost all big crime was armed robbery. Now the big crime is commercial—fraud and drugs-related crime. That has happened since the advent of the computer, of cheaper, more frequent and, therefore, more international travel, and of greater international commercial activity. More and more money is made from international and commercial white collar crime. More and more of our courts are preoccupied with such crime, as are the police, the Customs authorities and the lawyers. We now have the Serious Fraud Office, and a fortune is being spent on criminal legal aid in commercial and international crime.
It is vital that confidence in the City should be retained as the City faces competition from other centres. The Government are to be congratulated on promising continued action against international and commercial crime, and on introducing legislation which keeps up our national defences against a very rewarding form of lawlessness and a calculated and vile form of offending against the laws of states.
It is obvious from our debate that the legislation has a number of good features that we all welcome. It is sensible that we are filling in the gaps and correcting the anomalies which have appeared as the courts have dealt with white-collar crime. The guilty inevitably escape through such gaps either because they cannot be charged or because, once charged, they cannot be convicted. It must be sensible to extend jurisdiction to prosecute Britons who have not fulfilled the requirement for the last act in a chain of criminal offending to have been committed in Britain, 905 even though most of the other acts in the chain were committed here. The logic of the existing law defies contemplation.
I am especially pleased that we are paying regard to the work of the Law Commission. I have always thought and have often said here that although that body of fine legal brains labours in our interest, its work ends up as dusty tomes in piles which we seldom seem to implement. The more we implement its careful analysis of the defects of our legal system, the better it will be for all of us. I congratulate the Government on taking up the Law Commission's rendering of the foreign aspects of fraud and similar crimes.
The creation of new offences where the prosecuting authorities have previously found themselves powerless to prosecute on the evidence makes good sense. However, we must be a bit careful about the definitions of such offences and their defences. Under clause 18, it will be an offence not to disclose information if a person only suspects that another is engaged in drugs money laundering. The problem will not be, as the hon. Member for Sedgefield (Mr. Blair) suggested, that that will lower the standard of proof. The problem is likely to be that no jury will convict on suspicion alone, so prosecutions will be a complete and utter waste of time and money. We must have regard to that aspect when we lower the hurdles to a point at which common sense is unlikely to sustain any convictions.
I am not sure that I like the defence stated in clause 16(1). It says:It is a defence to a charge of committing an offence under this section that the person charged acquired the property for adequate consideration.Does that protect a barrister or a solicitor? How hard must a barrister work? How long must his speeches be? How long must he be in conference before it is considered by some objective body that his work has been adequate? I assure the House that in some cases I say nothing and I ask no questions. I make a very short speech at the end of the day. Are people to say, "That work was not adequate consideration"? Am I to be charged under clause 16?
I am unlikely—I hope—ever to be charged with any criminal offence, but my example serves to underline the fact that we are becoming somewhat lazy and slack about the way in which we define certain offences, and in that regard considerable alarm and concern has been expressed not only about that provision but about the provisions dealing with insider trading. There is still time to look at those provisions again and see whether we cannot improve them so that absurd situations cannot even be contemplated.
There is good sense in giving the courts powers to confiscate assets where the trafficker has died or absconded. Why should his successor enjoy ill-gotten gains? There is sense in giving the courts power to confiscate further proceeds when they come to light after the trial, within the sensible limit of six years. Why should the trafficker benefit in later years from his ill-gotten gains?
The success of the policy of confiscating the ill-gotten gains of serious criminals—which started with the Drug Trafficking Offences Act 1986 and was extended to other serious crimes in 1988, following a pledge at the general election—has been obvious from the fact that some £35 million has been removed from offenders. That policy may even—we cannot be sure—have deterred some from 906 committing such crimes. However, £35 million is not a very substantial sum to flow from the many cases in which such proceeds have been traced. It is estimated that, in the United Kingdom alone, some £2.5 billion has come from drug trafficking in the past few years. Much more needs to be done to ensure that ill-gotten gains are removed from offenders. In so far as the Bill does that, it is to be welcomed.
The reduction of time waste on petty offences that has been achieved by giving the Crown prosecution service and the Serious Fraud Office the power to filter out small sums will be sensible and will liberate resources for more important work.
Once a criminal has been convicted by the prosecution discharging to a jury's satisfaction the burden of proof applicable in criminal offences, I see nothing at all wrong with the burden changing to require the convicted prisoner to show on the balance of probabilities that his assets are not the proceeds of crime. As the courts were confused by the wording of the 1986 Act—perhaps I should say, the absence of wording—it is wholly sensible to make the original intention clear.
I would go further. Too much of the expenditure on legal aid comes from the payment of very substantial sums to lawyers defending villains in enormous money-laundering and commercial fraud cases. I have often suggested—no one in authority has ever listened to me—that before legal aid is given in such cases we should ask the accused to accept that his assets will be specifically investigated on the balance of probabilities by a state investigator. We should tell him that if he wants legal aid he must declare all his interests and assets. I can assure my hon. Friends that many such persons will say, "No, thank you—I am not asking for legal aid." They will not apply, trials will be shorter, and 'not guilty' pleas will turn into `guilty' pleas.
These days, with very long trials involving a number of defendants, there is absolutely no reason why people should not take their chance and sit in the dock for months on end while their lawyers are being paid substantial fees—in the hope that, ultimately, something may go wrong with the trial or that the jury may say, "This poor fellow has been sitting there and nothing much has happened; we want to acquit somebody, so we shall acquit him." That costs the taxpayer an immense sum of money, but we can stop it if we threaten to investigate the total assets and income of any person who applies for legal aid in respect of a serious trial of that kind. I recall that I warned the Home Secretary of the time about previous convictions when we discussed the Criminal Justice Bill in 1991. No one listened. Perhaps some day someone will.
§ Mr. Tim Devlin (Stockton, South)
Does my hon. and learned Friend agree that it is rather shocking that we should have missed the opportunity presented by the Bill to correct anomalies thrown up by the 1991 Act? Two questions—concerning sentencing matters and unit fines—have been a sharp focus of concern and should be dealt with as quickly as possible in a Criminal Justice Bill. Yet neither of them is addressed in the current Bill. Will it be possible for us to table reasoned amendments in Committee to deal with some of the problems?
§ Sir Ivan Lawrence
Had my hon. Friend the. Member for Stockton, South (Mr. Devlin) been able to tear himself away from his many other important and urgent 907 engagements, he would have heard that point made, and answered, many times during the debate. It is outside the scope of the long title of the present Bill to deal with that problem. My right hon. and learned Friend the Home Secretary has said and I welcome it—that primary legislation is not necessary to correct the unit fine fiasco.
As I have been rather unkind to my hon. Friend the Member for Stockton, South—who is an assiduous attender of all debates on this subject and who no doubt had excellent reasons for his absence on this occasion—I should perhaps make the point on his side that the faults of the operation of the earlier Act were already clear when the present Bill was drafted and at the time of its Second Reading in the House of Lords in November 1992. Magistrates, solicitors and judges were already writing to us about the problem, and it is not all that difficult to suggest a solution. It is therefore a valid criticism that we did not broaden the long title of the Bill at the right time and take the opportunity to get on with what we shall undoubtedly do.
I am also pleased that we are dealing with the wholly unsatisfactory situation whereby a court cannot pass a sentence until a confiscation order has been made. Sometimes delays between the sentence and the confiscation order are very long and expensive. There will again be a saving in legal aid when leading counsel, junior counsel, solicitors, old uncle Tom Cobbleigh and all do not have to appear months later to deal with the second part of the trial.
In the other place, the Opposition got worked up about the fact that a prison sentence in default of a confiscation order will no longer wipe out the debt. They seemed to think it monstrous that someone should be punished twice. I do not understand that anger. Crime is not a game. The rules must be fair to protect the innocent and prevent excessive sentences, but there is no reason why money that is ill gotten should ever be held on to—even if a person is serving a prison sentence. I am pleased that good sense has taken hold of the Opposition—particularly the hon. Member for Sedgefield—on that point.
The changes in the law on insider dealing are also sensible and welcome. There is no logical reason why insider dealing with company securities should be illegal while insider dealing with debt securities, such as gilts and local authority stock, should be perfectly legal. I have already commented on the need for improvements in definition in that respect. There is also no logical reason why insider dealing on the stock exchange as an on-market activity should be illegal while transactions conducted elsewhere on a computer are legal. The world has changed and the stock exchange is no longer the only place where such transactions are exclusively made. It is obviously sensible that we should wake up to that.
There is every reason why we should bring our law into line with that of our colleagues in the European Community, so long as they do what they undertake to do and so long as we operate on a level playing field in dealing with our commercial criminals. We shall have to watch that one, too, because there are signs that from time to time our colleagues in the European Community do not do what they undertake to do and leave us looking rather Charlie-like as the only side rigorously fulfilling its obligations.
There is every reason why insider dealers who operate across international borders should not be protected, and provisions in that respect are welcome. The need to 908 maintain international respect for the City of London is very important, because there is so much more competition and because the string of unfortunate experiences over the past few years may have dented that respect. One hopes, therefore, that the anti-fraud measures and the adoption of the banking directives, upon which I shall resist the temptation to address the House, will be very good for the reputation of the City. Those provisions are also very welcome.
Apart from the one or two measures upon which I have commented, I have only two criticisms of the Bill. I dealt with one of those when I responded to my hon. Friend the Member for Stockton, South. He tells me that he was not present in the Chamber because he, like so many of his and our constituents, was burgled. It is important that my hon. Friend the Minister should bear that in mind as we debate a Criminal Justice Bill.
My second criticism relates to clause 1 subsections (4) and (5). I hope that those provisions are never called into effect and that they are never repeated in other statutes. If we give Ministers powers to invent criminal offences without recourse to Parliament, simply through orders, we are going down a very dangerous road.
On balance, the Bill is very useful. I am pleased that the Government are keeping up the relentless campaign against lawlessness, and particularly against the appalling, sickening, drug-related lawlessness. The British people would expect no less. I am also pleased that the measures attract the support of Opposition Members, because the fight against crime should never be a party political matter. I am sorry only that the hon. Member for Sedgefield said, when he began his speech, that there would be no Division at 10 pm as that precipitated a dash to the doors and too few hon. Members have been present in the Chamber to listen to what I think has been a most interesting debate.
§ 9.2 pm
§ Mr. Tam Dalyell (Linlithgow)
After the Home Secretary courteously gave way to me when I asked him about South America and in particular about Colombia and Peru, he gave a very convincing answer about his work and that of his Home Office officials in Colombia. I thoroughly support that. May I perhaps have a letter from him about Peru? I do not blame him for not answering that, but it is a very important subject.
I wish to refer simply to clause 17 and the issues that arise from it. It is one of the Scottish clauses. In particular, I refer to a letter to the Leader of the House from David Johnston on 5 February 1993 in which he states:I understand you are considering problems associated with the Parliamentary device of introducing a report which to all intents and purposes can't be challenged (Hansard 28 January 1993: column 1160).A criminal inquiry is one thing; what purports to be a criminal inquiry in substance is another. I was one of two people who declined to go before the Nimmo-Smith/Friel committee because I did not understand what a criminal inquiry in substance was. Either a proceeding is a criminal inquiry, or it is not. If it is not, there are different rules.
My instinct was thoroughly justified, as things turned out, in not submitting myself and necessarily confidential information to Mr. Nimmo-Smith and Mr. Friel in the light of subsequent events and the fiasco which surrounded an interview that purported to be from The Daily Telegraph. How people conducting what are supposed to 909 be, in substance, criminal inquiries can as a regular habit talk to journalists while they are undertaking those inquiries is absolutely mind boggling.
The letter says:As Leader of the House, I think you ought to know I have challenged a particular aspect of the Report of the Lord Advocate's Inquiry into allegations of a conspiracy to pervert the course of justice. Doubtless others may wish to challenge areas where they have first hand knowledge.In areas of the Nimmo-Smith inquiry where I have first-hand knowledge, it is very wide of the mark. I must report that there are police in my area who are seething with indignation that they are in the position of not being able to answer something which was put to the House by the unopposed return procedure in circumstances which were an abuse of that procedure.
For the sake of time, I refer to a letter dated 4 February from David Johnston to the Lord Advocate:At 17.12 of last week's report of the Lord Advocate's Inquiry it is claimed that I misheard John Simpson in Snatchers Bar.The implication was my professional incompetence led to a Member of Parliament being misled and, in turn, causing him to mislead the Lord President.I told Mr. Nimmo-Smith and Mr. Friel that I was so surprised by what Simpson told me in Snatchers that I suggested to Alan Muir at The Sun that it would be worth his while phoning Simpson in the bar and speaking to him.To cut a long story short, that happened. It also happened that—as I understand is its custom—The Sun tape recorded a conversation. That tape recording absolutely destroys paragraphs 17.12 and 17.13 of the Nimmo-Smith report:Simpson: Well maybe. I don't think he will be now but …Muir: No?"—
§ Madam Deputy Speaker (Dame Janet Fookes)
Order. I am sorry to interrupt the hon. Gentleman, but he seems to be going wide of the Bill which is under consideration. He may make a passing reference to that matter, but he seems to be dwelling on it in some detail.
§ Mr. Dalyell
Other hon. Members have gone very wide: I have sat through the whole debate. I shall simply limit my comments to one matter:Muir: No? Right. Well, thank you very much Mr. Simpson.Simpson: Well, remember that if you mention my name, I'll sue you.Muir: … there is no problem …Simpson: But there's … you know you're on the right track …Muir: Yeh.Simpson: There's a lot of things about this one that stink to high heaven.Muir: Mmm.Simpson: I mean, I am a totally, utterly straightforward person …Muir: MmSimpson: … and always have been and there's a lot of things about this case that stink to high heaven.Of course, I am obedient to the Chair. I put down a formal question to the effect that this whole correspondence should be put in the Library of the House of Commons. That was refused by the Scottish Office Minister who was operating for the Lord Advocate. I wish to register the fact that that is a profoundly unsatisfactory procedure.
910 On 10 February, a letter came from the Crown Office. As the House will be aware, in carrying out their inquiry and making their report, Mr. Nimmo-Smith and Mr. Friel—
§ Sir Ivan Lawrence
On a point of order, Madam Deputy Speaker. There are hon. Members who wish to participate in this debate on the Bill. Time is short, and the hon. Gentleman must know that he can raise this matter on the Adjournment.
§ Mr. Dalyell
The hon. and learned Gentleman has had his turn; he has already spoken for 20 minutes.
§ Madam Deputy Speaker
Order. I have told the hon. Member for Linlithgow (Mr. Dalyell) that he is going wide of this Second Reading. I now ask him to deal with the Bill as it stands rather than dwell on specific points which he has made in some detail.
§ Mr. Dalyell
There are few hon. Members as unsuccinct and verbose as the QC, the hon. and learned Member for Burton (Sir I. Lawrence). Apparently, as QCs become more senior, they think that they can become more verbose. He took up time.
§ Madam Deputy Speaker
Order. It is not a matter of what another hon. Member thinks. I am saying from the Chair that I have given the hon. Member for Linlithgow sufficient scope. He has made his point and I cannot allow him to dwell on it. He must return to the main factors that are set out in the Bill.
§ Mr. Dalyell
Against the background of clause 17, I believe that what happened in Scotland—what is generally called Fettesgate—is a shame-making event in our legal history. I speak on behalf of police officers who have been unable to defend themselves given what the Scottish Crown Office has done.
As I know that other hon. Members wish to speak, I shall, of course, obey you, Madam Deputy Speaker. I shall leave it at that at 9.10 pm.
§ Mr. Michael Stephen (Shoreham)
This is a technical Bill; for the most part it makes and amends lawyers' law. Much can and will, no doubt, be said in Committee about the details of it and the way in which it might operate. That being so, I shall not enter upon that discussion this evening.
It is no doubt important to clarify the issue of jurisdiction over offences having a foreign element, to deal with technical issues concerning confiscation orders and to tighten the rules applying to dealing on the stock market. I am sorry, however, that the limited parliamentary time that is available to the Home Office will not be spent on dealing with the more pressing concerns of all our constituents in the field of law and order; for example, the problem of the Police and Criminal Evidence Act 1984 which has turned our policemen into clerks when they should be out on the beat protecting the public.
Also, as has been said many times in the debate, it is important to tackle the already notorious section 29 of the Criminal Justice Act 1991, which together with section 1 effectively prevents the courts from having regard to the 911 criminal record of a convicted person. I well understand that a convicted person can be said to have paid the penalty for the offences of which he was convicted, but society is entitled to say to him, "That may be so, but if you do it again you will be punished more severely."
We should be dealing also with the scandals caused by what I regard as the ill-conceived system of unit fines. I hope that we shall also soon spend time constructing a legal framework for the excellent proposals of my right hon. and learned Friend the Home Secretary to provide secure education for persistent juvenile offenders. Perhaps we might also find some legislative time to get on with my own private Member's Bill which would reform the law on bail so as to protect our constituents against persistent offenders who commit offences while on bail.
Part I of the Bill before us today would give the courts of England and Wales jurisdiction to try cases of fraud and related offences where there is a foreign element that prevents a prosecution under the law as it stands. I join other hon. Members in congratulating the Law Commission on its excellent work in this area. There are indeed absurdities, as highlighted by the case of Rex v. Harden.
I shall give a hypothetical example. If two Londoners happened to be in France for a short time and one persuaded the other to part with property by deception in France, that offence could not be tried in the United Kingdom. It is right that that anomaly should be rectified. On the other hand, if two Frenchmen happened to be in England for a short time and the same circumstances arose, the English courts would have jurisdiction. I believe that the English courts should have the power to decline jurisdiction in such a case. The prosecution of crime is an expensive business, and I see no reason why the English courts should try cases that have no real or substantial connection with this country.
The English courts should also have power to decline jurisdiction where there would be any question of double jeopardy for someone who has already suffered criminal process in another country for the same offence. No doubt the law and practice of extradition in this country will be carefully examined to ensure that that does not happen.
Part III deals with the confiscation of the proceeds of criminal activity. I welcome the fact that confiscation will apply to the proceeds not only of drug trafficking but of other serious crimes. I have no difficulty with the civil standard of proof when applied to confiscation. It is right that the criminal standard—proof beyond reasonable doubt—should apply to the question whether or not the accused person is guilty of the offence with which he has been charged. The Bill makes no attempt to shift or to change that burden of proof in any way.
Having secured a conviction, we proceed to the question whether assets derived from criminal activity should be confiscated. I have no difficulty with the civil standard in that process. Anyone who does not like that standard has a simple remedy—do not commit crime.
There are many causes of crime. One is profit. It is much easier to engage in some forms of criminal activity than to work for a living., as we and our constituents have to do. We must take every opportunity to take the profit out of crime. One particular form of criminal activity not mentioned in the Bill but of the same genre is pornography—a multi-million pound business about which I spoke at some length in the House on 10 July last year.
912 The problem there is securing a conviction under the Obscene Publications Act 1959. If a conviction cannot be secured, the Bill's provisions will not apply. The case concerning the book "Juliet" by the Marquis de Sade gives a clear indication that the 1959 Act is wholly defective, because if a conviction cannot be secured on the basis of that book, one cannot be secured in respect of any publication that is alleged to be obscene. We must therefore change the definition of obscenity under the 1959 Act. Meanwhile, we must confiscate the pornographic material—not the proceeds of crime as under this Bill—under section 3 of the 1959 Act, and the civil standard would also apply there. It is right that the civil standard of proof should apply where the confiscation of pornographic material is in question.
We should not be afraid either to take the action which we have in other areas of criminal law—to employ private contractors to seek out offending material, bring it before magistrates, and secure confiscation orders—with the costs to be paid by the pornographers under an award of costs by the court.
Clause 26 gives me cause for some concern, which is shared by my hon. and learned Friend the Member for Burton (Sir I. Lawrence) and the hon. Member for Sedgefield (Mr. Blair). It is wrong that a person should be convicted of a criminal offence simply on the basis that he suspects that someone might have been engaged in crime. The very least that the prosecutor should be prepared to prove is that the defendant believed that another person had been engaged in crime.
Clause 27 and other clauses provide maximum penalties. Clause 27 provides a penalty of 14 years' imprisonment, but why do we bother to specify maximum penalties in Acts of Parliament when it is clear from the cases that the courts do not come near to imposing them fully? The House must make it clear that, when it specifies 14 years' imprisonment as the maximum penalty for an offence, that is the sentence that the House expects to be imposed for the most serious examples of the crime in question.
§ Mr. Garnier
Does my hon. Friend understand the difference between a mandatory sentence and a maximum sentence?
§ Mr. Stephen
Of course I do. What I am saying is that the penalty imposed for serious examples of a particular offence often comes nowhere near the maximum penalty that Parliament laid down for it.
§ Dame Elaine Kellett-Bowman (Lancaster)
Does my hon. Friend think that the matter is assisted somewhat by the fact that the prosecution can now appeal against too lenient a sentence? It has certainly helped in some rape cases.
§ Mr. Stephen
I do. I wrote an article which was published in 1986 which, together with the efforts of a great many other people, resulted in section 36 of the Criminal Justice Act 1988 which gave the Court of Appeal that power.
One issue of serious concern to our constituents in the case of offences with which the Bill is concerned and other offences generally is the right of silence, to which reference was made earlier.
913 Under section 2 of the Criminal Justice Act 1987, a person suspected of serious fraud can be required by the Serious Fraud Office to answer questions. Failure to do so may result in criminal penalties.
A person suspected of evading income tax has no right of silence. He must prove that he does not owe the tax that he is alleged to owe. A person suspected of drinking and driving does not have a right of silence. He must give a specimen or pay the full penalty. But a person accused of armed robbery, rape, burglary or murder has the right simply to sit back, arms folded, and say, "Prove it if you can." We must therefore change the law so that the jury can take fully into account a failure to speak in circumstances where an honest man should have spoken.
I have some concerns with part IV which seeks to regulate dealings in stocks and shares. White collar crime is just as reprehensible as blue collar crime and must be punished accordingly. I have no personal interest in the City, but it grew to pre-eminence and contributed vast sums of money to our national revenues from invisible earnings, as it still does, without the burden of the complex regulations that Parliament has visited upon it in recent years.
It is easy to point to consumer benefits. We must, when we consider legislation of this kind, have regard to consumer costs, because the costs of compliance in the City are high. It may well be that our limited resources for fighting crime might be better employed elsewhere.
This is a useful technical Bill which is of great interest to lawyers and accountants, but of marginal concern to our constituents. It needs some discussion in Committee, but I hope that it will pass quickly through the House without taking much more parliamentary time, so that we can concentrate on criminal law matters which are of much greater concern to all the British people.
§ Mr. Alun Michael (Cardiff, South and Penarth)
I agree with the hon. Member for Shoreham (Mr. Stephen) that the Bill is of limited and marginal interest. It deserves half a cheer. It has been welcomed for what it tries to do but hon. Members have reflected its inadequacy and lack of precision and the Government's failure to demonstrate a real interest in putting right the criminal justice system.
Hon. Members have put forward the complaints of their constituents and the police about the Government's failure to deal adequately with the criminal justice system and have complained about the enormous problems that result. Like the dog that did not bark, the main problem with the Bill is what it fails to do.
One criticism of the Bill is that it has proceeded so slowly to this stage. At the beginning of the debate the Home Secretary said that we should not move too quickly. I think that his comments were based on his experience of how things went wrong with the previous Criminal Justice Bill. He has certainly fulfilled that requirement as it has taken four months for the Bill to reach Second Reading. We are owed an explanation from the Minister of why the Bill has taken so long to reach this stage. Another criticism of the Bill is that it is too narrowly drawn. A third criticism is that it has not been adequately thought through.
When dealing with the problem of drugs and trafficking in drugs, we are confronting one of the major issues of our 914 society today. That point was rightly reflected in the introductory remarks by my hon. Friend the Member for Sedgefield (Mr. Blair). We certainly need to underline the fact that the Government are presently taking appalling risks, one of which is their failure to deal properly with drug misuse, because of the background of the HIV virus and the danger that that poses to many people in our society. Prevention must be properly addressed, but that is not happening. The problen of drugs in our society is one that needs a strategic and comprehensive approach. While the measures in the Bill are to be welcomed, they are a fragment of the provisions that the Government should be introducing.
Given the fact that everyone has referred to the Bill as comparatively narrow, it is ironic that the Home Secretary referred to it in his introductory remarks as a sort of first draft. The Committee that will consider the Bill has an important and onerous job in scrutinising and improving it. However, the Bill should reach Committee with some certainty and as a precise instrument that has been given careful and detailed consideration by Ministers as well as civil servants, following extensive consultation and expert advice. It should not be cast into Committee by the Home Secretary as his first thoughts on the subject. He should not pass major responsibility to his Minister of State to sort out the Bill in the aftermath of the Second Reading debate.
One of the Bill's major omissions, to which my hon. Friend the Member for Warwickshire, North (Mr. O'Brien) referred, as did hon. Members from both sides of the House, is its failure to deal with the Criminal Justice Act 1991 and its shortcomings. My hon. Friend's remarks were cutting and well justified, and I commend his initiative in giving the House the opportunity to put matters right in this Session with thoughtful amendment to the Bill. I look forward to the House being given the opportunity to consider the measure further.
The Home Secretary failed to heed the warnings of my hon. Friend the Member for Sedgefield last October. The provisions could have been included in the Bill. Although the hon. and learned Member for Burton (Sir I. Lawrence) and others rightly reflected that the Bill as it now stands, and its title, preclude such an amendment, it could have been allowed for initially. This is the second Criminal Justice Bill that has been too tightly drawn and has prevented the House from doing what it should, and making constructive amendments.
During the passage of the Criminal Justice Act 1991, I sought to introduce amendments to help with the prevention of crime and the diversion of young people into criminal activity. As the aim of the 1991 Act, as expressed by the Government, was to reduce the numbers in prison and in custody, one would have thought that measures to improve prevention would have been welcomed. But the Clerks had to advise that that Bill was so narrowly drawn—I think that they referred to it as having an extremely curious geography—that we were unable to make some of the constructive contributions that were and are needed by society. To our great regret, we shall have the same experience with this Bill because it is so narrowly drawn that only the two major issues that it addresses will be open to consideration and improvement in Committee.
I very much regret the inability to see the wood for the trees. It is becoming a tradition among Conservative Members to fail to consult, listen and understand their own legislation. I hope that a lesson has been learned. This 915 is the third Bill this Session that the Home Secretary has not read in advance of the debate. However, he had the grace to say that he was giving his junior Minister the task of sorting out the Bill in Committee. I suppose that that is at least a welcome step.
Two aspects of the 1991 Act should have been dealt with. One relates to the problems caused by Ministers seeking to interfere in matters that they do not understand. The first of those relates to the figures that the units apply and which have fettered the courts in reaching decisions. Secondly, they have removed discretion from magistrates who have traditionally exercised common sense. I have had experience in the previous system of recommendations for the local bench on motoring fines. The magistrates looked at the outcome of applying the bench's unit strategy and said, "Does this make sense?"
Common sense should be applied in the courts and the 1991 Act was mistaken in not respecting that. I hope that in considering the details of this legislation in Committee and more generally the Home Secretary and his colleagues will accept that courts should have the ability to exercise common sense in dispensing justice.
Another aspect is the ability to consider previous offences. It is important for courts to be able to deal with such offences without imposing a sentence that is totally out of proportion to the offence that is being considered. That is especially relevant to drug offences. A person who continually steals Mars bars is guilty of stealing only those, but the repetition of crimes involving drugs or violence is extremely serious and the court dealing with them needs to recognise the background to the offences.
The Home Secretary said that the intention in Committee is to deal with one omission: to amend the Bill to deal with terrorism. We certainly welcome that but such provisions should have been in the Bill in the first place. We are also worried that the issue has not been thought through. I hope that in his winding-up speech the Minister will deal with that. In dealing with crimes related to drugs, a court is also dealing with the proceeds from those crimes whereas in terrorist cases the proceeds from other offences are used to finance terrorism. That may involve drug trafficking, in which case it would be dealt with by the legislation.
How will the laundering of money to support terrorism be dealt with by the Bill when the offence that creates the relevant funds is highly unlikely to arise from a terrorist offence itself? It may arise from fraud, burglary or armed robbery. Will those offences give rise to the Bill's powers of seizure in relation to drugs? I hardly think so. Is the burden of proof in relation to such offences to be dealt with? Surely not, and in that case how do we tie the offence and the intention to use the proceeds for terrorism to court procedures that are clearly related to drug-related offences but are not clear in relation to the possible application of money for terrorist activities?
The Home Secretary spoke about the success of law enforcement agencies. In response to a question, he said that the quality of drug liaison officers was more important than pouring in staff and money to undertake routine tasks. That is a curious comment in view of the fact that the Bill creates a massive need for money and staff to undertake routine tasks.
I give the simple example of disclosure. Without resources, the provision to force more disclosures of suspect transactions that are referred to in clauses 18 and 26 will be counter-productive. We heard earlier that there 916 are currently about 5,000 disclosures and that in the Metropolitan police area they are dealt with by 21 officers. That has been found to be inadequate in terms of the pressure that is required to deal properly with the amount of information that becomes available.
The Bill will at least triple that amount of disclosure, by a fairly conservative estimate. It is clear that some of the information that will become available will be of lower quality, because it will have been triggered by suspicion rather than belief. We see and welcome the purpose behind the legislation, but there is also a need to boost morale in the police and other agencies by demonstrating that those bodies will have the resources to use it.
The complaint has been made that seized assets do not assist the fight against drug-related crime. Morale would certainly be helped if such assets were directed towards that fight, either through drug enforcement agencies—which, in America, are self-financing—or by preventing the market in drugs, which leads to the trafficking that the Bill aims to prevent.
Surely, Ministers should show not only that they will deal with drug trafficking, but that they intend—as Opposition Members have put it—to be tough on the causes of drug trafficking and drug misuse. It is difficult to see how that can happen, and how disclosure can assist the police materially, given the freeze in police numbers. The Home Secretary referred to the likelihood that the police will have greater freedom to deal with their own resources; one chief constable spoke to me, in a rather jaundiced way, of the freedom to work flexibly within resources that would undoubtedly become increasingly inadequate. That is the experience of recent years. The fact is that we need both the bravery and initiatives of officers in the front line, and the painstaking back-room work that needs time, staff and money—a need that the Bill will increase.
The Home Secretary and his colleagues must realise that the failure to recognise how all parts of the police service need to fit together and complement each other causes immense anger and frustration among police officers, and all who work with them and value their work. The privatisation of security services, with prisoners escaping or allowed to go free—today, a private security vehicle ran into a police car—would be laughable were it not so serious. The privatisation of parts of the police service, which the Home Secretary wants to bring about, would be an even more dangerous and mistaken step. Thank God it is not within the remit of the Bill; otherwise, the right hon. and learned Gentleman might be tempted to introduce it.
There is a need not only for the matter to be tidied up—we shall try to do that in Committee—but for the Government to recognise the strategic importance of providing the police with the resources, as well as the legal means, to deal with the serious problems that we face.
I pay tribute to the hon. Member for Lewes (Mr. Rathbone) for his work as chairman of the all-party group on drug misuse. He has referred to many of the problems, and a number of hon. Members have mentioned the undermining of residential facilities for drug misusers. Again, prevention is necessary. Although the Bill and its intention are welcome, they must be part of a range of measures to deal with drugs and similar difficulties.
I was interested to learn that the hon. and learned Member for Burton is not listened to by Ministers either, despite his willingness to provide advice on insider dealing from within the legal profession. Hon. Members on both 917 sides of the House have made it clear that the police and the community want the Government to take crime seriously—especially youth crime—and regret the failure of this narrow Bill to deal adequately with such issues.
My hon. Friend the Member for Sedgefield spoke eloquently of the development of drug use and addiction, and called for deterrents and the proper use of funds. I hope that the Minister will respond to that call. Let me remind him of the need to deal with couriers from Nigeria, thus saving the cost of imprisonment, child care and future personal and social services.
The hon. Member for Surrey, East (Mr. Ainsworth) said that he felt that there was no qualitative difference between white collar crime and other forms of crime. We need to be careful about suggesting that there are no distinctions to be drawn. Offences need to be pursued with the enthusiasm that is appropriate to the seriousness of the crime and its impact on society. In relation, however, to the financial aspects of the Bill, I point to the grave reservations that have been expressed by a number of bodies—in particular by the Hundred Group of Finance Directors on behalf of the largest quoted companies in the United Kingdom which have expressed major concerns over the proposed legislation on insider dealing. They have referred to ambiguities implicit in the drafting of the Bill which they believe are so serious as to result in the legislation hindering legitimate business activities and market practices.
I seek from the Minister now the granting of their request for the guidelines to be issued in time before the Bill is considered in Committee. I hope that the Minister will grant their request. Guidelines would have a serious bearing on the need for amendments to the Bill in its current form. When we dealt with the immigration measure that went through Parliament in 1988, the Home Office continually refused to recognise that draft orders were available but, curiously enough, those orders were published the day after the Bill had been considered by Parliament.
I ask the Minister to give the House an undertaking tonight that draft guidelines will be available before the Committee sits so that members of the Committee can be properly informed and can properly deal with the issues that have been raised in the debate by hon. Members on both sides when drawing attention to the shortcomings of the legislation.
Guidance notes are not enough for many aspects. Some cases have led to desperate difficulties. A finding of guilt can lead to heavy penalties and the loss of reputation. The ruining of a reputation can be extremely damaging. If someone transgresses seriously, it is right that that person should be punished, as the Bill intends should happen. It is also right that individuals should be protected by the legislation. It is important, therefore, in relation both to insider dealing and to disclosure, that there should be proper guidelines so that no individual is in any doubt about what he or she is required to do under the legislation.
It is also important that City and financial institutions should be in no doubt about what they are required to do and that there should be a proper framework for their employees. There should be proper recording of the 918 reporting of suspicion so that there is no danger that, by error, individuals put themselves in jeopardy under the law.
My hon. Friend the Member for Warwickshire, North made a thoughtful speech, based upon his experience. I hope that his direct courtroom experience, and also his experience when investigating a major case of insider dealing, will be taken into account by the Minister in Committee. We need to make use of that experience and expertise.
The Committee will need to consider changes to tighten up the Bill. We need clear guidelines for the training of staff. Staff working in the City must be protected. To be effective, the legislation needs to be clear.
The Bill has many failings, but the issues with which it deals are important. Therefore we shall seek to improve the Bill in Committee. We shall endeavour to assist the Minister who has been instructed by the Home Secretary to sort it out in Committee. If the Minister is willing to accept the help and advice that we offer, I am certain that the Bill will be a stronger and better measure when it returns to the House on Report.
§ The Minister of State, Home Office (Mr. Michael Jack)
This has been an interesting and wide-ranging debate. I congratulate all right hon. and hon. Members on their contributions. I was struck by the low-key appreciation for this measure from the hon. Member for Cardiff, South and Penarth (Mr. Michael) compared with the much greater appreciation of the hon. Member for Sedgefield (Mr. Blair). Perhaps a difference of opinion is opening up on the Opposition Front Bench.
The hon. Member for Cardiff, South and Penarth made particular reference to the provisions on insider dealing and asked whether we could make guidelines available before the Committee stage. My hon. Friend the Economic Secretary has assured me that, when the clauses are considered in Committee, some of the clarification that the hon. Gentleman seeks will be provided.
I was disappointed that the hon. Member for Cardiff, South and Penarth chose to make a few cheap comments about the proper attempts of my right hon. and learned Friend the Secretary of State to ensure that the police carry out their duties in the most effective manner and that they are doing the duties that they should be doing. There will be more time to debate that, but I am sorry that the hon. Gentleman had a go at those proper activities.
The hon. Member for Cardiff, South and Penarth asked about Nigerians who have been convicted of importing drugs into Britain. The length of sentence for such offences is a matter for the courts, but it does send out a deterrent signal. The hon. Member for Sedgefield asked whether we had done anything to transmit that information to Nigeria. We ran a poster campaign in west Africa and the Indian sub-continent, making clear the penalties for importing drugs illegally into Britain. That campaign will be renewed in the forthcoming year. The Nigerians display warnings at their airports. We have helped the Nigerian authorities by, for example, training their law enforcement officers, and we have offered assistance to deal with Nigeria's internal drug problems. It is a matter that we take seriously. I hope that those comments help the hon. Member for Cardiff, South and Penarth.
919 The hon. Member for Sedgefield set the tone for the debate by welcoming the Bill on behalf of the Opposition. That has been a common feature of all the speeches. There have been words of regret that, as my right hon and learned Friend the Home Secretary said, the Bill was not so drafted as to address the problems that many hon. Members have mentioned with the Criminal Justice Act 1991. My right hon. and learned Friend made our position clear: we have listened, we know what the problems are and, if necessary, changes will be made. I wanted to emphasise that.
The hon. Member for Sedgefield and other hon. Members rightly drew our attention to the size and scale of the drug problem. The Government spend some £500 million per year on the campaign against drugs and their preventive strategy, which shows how seriously we take the problem. The hon. Member for Sedgefield criticised the work of other Government Departments, such as by the Department of Education, but the national curriculum deals with substance misuse. Although specialist staff may not be available in all schools—it is up to each authority to decide whether to maintain that service—such information is available to children under the national curriculum. The Department of Health, too, in the way in which it conducted European drug prevention week, showed how it is contributing to the fight against drugs.
The hon. Member for Sedgefield rightly mentioned the work of the police in drug prevention. He mentioned King's Cross but, sadly, did not also mention the 250 arrests that were made in that operation. The activities of each force, the regional crime squads and the national criminal intelligence service show how all our law enforcement agencies are working together to combat the threat of drugs. Their efforts will be underpinned by the Bill. It is important to recognise that fact.
One of the issues raised in our debate was the Bill's impact on our financial institutions and how financial institutions outside the banks were reacting to the requirements. I draw the House's attention to the guidance notes for banks and building societies issued in December 1990 by the Bank of England. The notes make clear what the financial institutions should be doing not only to prepare themselves for this legislation but to make the working of the Drug Trafficking Offences Act 1986 effective.
The fact that about 11,000 reports of information arising from existing legislation have already reached the national criminal intelligence service shows that the financial institutions in this country are already responding to the challenge of the 1986 Act and will not have to change their procedures substantially to incorporate the requirements of the EC directive because it was anticipated in the guidance notes. There is no doubt that the point raised by the hon. Member for Sedgefield is well met by the notes, which I commend to the House.
The hon. Member for Sedgefield and others asked how we were dealing with south American countries in terms of bilateral arrangements to improve, for example, confiscation procedures. Work has been concluded on bilateral agreements with Argentina, Ecuador, Guyana, Mexico, Panama and Uruguay, and work continues with a range of other south American countries to reinforce our procedures in that respect. Much of the work was pioneered by my right hon. and learned Friend the Home Secretary on his trip to that part of the world—[Interruption.] I have to justify why he went. In addition, 920 through our work with the United Nations against drugs, we have given further material assistance especially to countries such as Colombia. We take seriously the attempt to extend the fight against drugs on an international basis.
The hon. Member for Sedgefield also spoke of the problems which he believed were connected with the use of assumptions in the Bill. The nature of money laundering, and of drug trafficking in particular, is a life style offence. It perhaps goes beyond the range of other types of criminal offence, which is why the assumptions—the use of which we make mandatory, as the Bill outlines—are a real and proper requirement, recognising the nature of drug trafficking itself. I think that the House generally agreed with that.
The hon. Member also questioned the effectiveness of existing confiscation arrangements. I should point out that by the end of 1991 3,420 confiscation orders had been made under the Drug Trafficking Offences Act 1986. That proves that the legislation is working, as does the fact that the amount of money which has now been confiscated, or which is the subject of confiscation orders, has risen to about £50 million.
The hon. Member for Sedgefield and others also mentioned clause 18 and the nature of the proof required when an offence may be connected with knowing of or suspecting money laundering. Although I understand the concerns expressed, I should point out that the criminal level of proof is still required to sustain such an accusation. Equally, we should bear in mind the fact that at that level the process could well include a large number of people in financial institutions. That means that the prosecution in such cases must be entirely sure of the facts in bringing such a charge. That shows a balance in the way the legislation is framed.
§ Sir Ivan Lawrence
The jury will be told that suspicion is never enough for a criminal offence, so for the jury to be told that they must be satisfied that they are sure that there was a suspicion will be so confusing as to make the provisions impractical nonsense.
§ Mr. Jack
I know what my hon. and learned Friend says on the subject, but that is a matter for the prosecutors in terms of sustaining the prosecution. Clearly they will know what the evidence is, and on what basis they are bringing the charges. As I have said, a high level of proof is required of the prosecution if the subjective offences are to be sustained. They were indeed the subject of considerable debate in another place.
The hon. Member for Upper Bann (Mr. Trimble) and others discussed the way in which the proposals will relate to Northern Ireland. Indeed, the powers to confiscate the proceeds acquired by people involved in terrorist-related activities are at present available only to the courts in Northern Ireland. We want to ensure that the money laundering and confiscatory arrangements are kept parallel—I nodded rather vigorously at the hon. Gentleman when he said as much. There must be a basis which extends throughout Great Britain for proposals on money laundering. Equally, as the hon. Gentleman said, both the Prevention of Terrorism Act and the Northern Ireland (Emergency Powers) Act will require modification to incorporate those arrangements. I hope that what I have said helps the hon. Gentleman.
The hon. Gentleman also mentioned clause 44, which effectively brings into our law what is already happening 921 between the Republic of Ireland and this country. The intention is entirely correct in terms of trying to ensure that the extradition arrangements work as effectively and smoothly as possible. I know that there are sensitivities on that matter and I have taken careful note of the hon. Gentleman's words.
The hon. Gentleman also asked about the differences between the effects of the Bill, especially part I, on the various parts of the United Kingdom. Those differences are the result of the different legal codes in Scotland, in Northern Ireland and in England and Wales. I gather that the Northern Ireland Office is considering the hon. Gentleman's second question—I want to assure him on that matter.
Many other hon. Members spoke about other matters, especially the insider dealing provisions. I shall try to deal generally with the questions raised, and in doing so I put on record a quotation from "Investor Relations: a guide for directors", produced by the stock exchange. That quotation puts in context some of the fears and concerns that have been expressed in all parts of the House, and illustrates how the existing advice already goes beyond the part of the Bill which relates to insider dealing:It is vital that no group of investors of market commentators be given privileged access to price-sensitive information. However, it can often be helpful to provide background information to brokers' analysts who play a key role in analysing published information given to the market, and to major investors or potential investors in the company. This might include both a restatement and elaboration of information already released and material on the company's products and processes which, while not price-sensitive, assists analysts or fund managers in their understanding of the nature of a company's business.That quotation underlines what my hon. Friend the Economic Secretary to the Treasury said about that part of the Bill representing "business as usual". My hon. Friend has been present throughout the debate and listened to hon. Members' comments, and I know that he will take them into account in the continuing work on the consultations that he, his officials and others are having with members of the financial community, in order to take on board and reflect some of the concerns that hon. Members have expressed in the debate.
Time prevents me from going into many of the other points raised. In the Government's view, this is a wholly benevolent Bill. It will strengthen the fight against drugs so as to ensure that we have the most effective regime to counter those who have sought to profit from money laundering and from drug trafficking. It will ensure that we deal with those people on equal terms with other members of the European Community and that we take our part in the international fight against drugs. I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).