§ Order for Second Reading read.3.41 pm
§ The Minister for Police, Courts and Drugs (Mr. John Denham)
I beg to move, That the Bill be now read a Second time.
The last Bill that I introduced on Second Reading, the Football Disorder (Amendment) Bill, completed its Committee stage in less than one full Committee sitting. I very much doubt that we shall have so much good fortune with this Bill, which has more than 400 clauses, but it is a very important measure.
The Bill is about taking the profit out of crime. The proceeds of crime have a corrosive effect on society and our economy. The wealth is flaunted and the message seems to be that crime pays. Such wealth is offensive to our hard-working and law-abiding constituents and establishes harmful role models for our young people. Moreover, businesses whose profits are inflated by criminal proceeds can gain an unfair advantage over honest competitors. The proceeds of crime also provide the working capital for future criminal enterprise. Recovering the money is therefore essential for crime reduction.
Traditionally, however, the criminal justice system has been much better at convicting criminals than at depriving them of their wealth. Far too many defendants pass through the criminal justice system with little or no effort being made to deprive them of the benefit that they have derived from their crimes. The Bill says that people should not be able to enjoy the proceeds of criminal activity. They should not enjoy the trappings of wealth when that wealth is built on the misery of victims or activities that damage and exploit society.
Organised crime is big business and the sums involved are huge. The value of drugs seized last year exceeded £735 million, and the value of illegal drugs transactions has been estimated at up to £1.5 billion annually. Cigarette smuggling annually costs the Exchequer almost £3 billion and loose tobacco smuggling about £900 million. The assets derived from organised crime represent about 2 per cent. of the United Kingdom's gross domestic product. Globally, the profits of some drug cartels are comparable to those of some of the world's major companies.
Like legitimate business, organised crime sets out to maximise profits and minimise risk. It forms strategic alliances. It continually diversifies into different commodities and services, depending on the market. The criminals concerned are cash-rich, and it is easier for them to dispose of the proceeds of their crime by investing in other criminal enterprises than to invest them in the conventional way. None the less, some of them use dirty money to buy and run legitimate businesses. They employ bankers, lawyers and accountants and they operate across international borders.
I believe that with this Bill, we shall be able to cut into the profits that are made from crime and increase the risk to those who indulge in criminal activities. We have to follow the commodity, as we do when we set out to seize drugs. We need to target people, as we do when we go after persistent offenders in the criminal community. We also need, however, to follow the money. The police and customs experts believe that following the money is an 758 effective route in identifying major criminals, disrupting criminal organisations and, of course, relieving crooks of the proceeds of their crimes.
Money laundering is consistently given prominence in the annual threat assessment of the National Criminal Intelligence Service. That is why customs and the National Crime Squad now consider the financial aspects in every criminal investigation and why the detention and seizure of drug-related cash at the border is now a top enforcement activity for customs.
§ Mrs. Helen Clark (Peterborough)
I understand that it has been hard in the past for police to define where laundered money has come from—from crime, drugs or indeed terrorism. Can my right hon. Friend assure me that the Bill will remove that anomaly?
§ Mr. Denham
Certainly it is our intention to remove a number of anomalies that have prevented effective measures to recover the proceeds of crime. The different treatment of different types of criminal offence, including drug trafficking and money laundering, is one of the problems that it is designed to tackle.
The Government's view of the importance of tackling crime through its finances is one that is increasingly shared in other countries, leading other Governments to review their own laws on dealing with the proceeds of crime. To go further, which is the aim of the Bill, we need to put in place an effective legal framework and legal powers. The Bill will do that, and I shall explain its role and structure presently.
This important Bill needs to be supported by other action. First, resources and a new priority for financial investigation and the recovery of criminal assets are needed. That is why we have ensured that more than £45 million will be available in the current settlement period to strengthen asset recovery arrangements and we have recently announced funding for 86 additional financial investigators for the police service in England and Wales.
Secondly, we need expertise. The work is complex and it needs skilled people, more financial investigators trained to common high standards and prosecutors and judges equipped to deal with difficult cases. We are preparing for that now. We have recently announced the appointment of a development manager to plan a new centre of excellence in financial investigation, and to help us begin delivering improved training in advance of legislation.
Thirdly, we need international co-operation. Criminals use national boundaries to protect both themselves and their money. The United Kingdom is in the forefront of moves to establish common standards on money laundering and arrangements for cross-border co-operation in the European Union, the G8, the United Nations and the Financial Action Task Force. Improvements made by the Bill will apply to the recovery of money generated by crime overseas as they will to domestic crime.
There are major developments in the financial sector itself. The Financial Services and Markets Act 2000 established the Financial Services Authority as the single regulatory body for financial business in the United Kingdom. Earlier this year, the FSA published a hard-hitting report on allegations that UK banks had laundered funds on behalf of General Abacha, the former 759 President of Nigeria, and his family and associates. The report made it clear that 15 of 23 banks identified had significant weaknesses in their anti-money laundering controls.
Under its existing powers, the FSA was able to order immediate action to rectify the deficiencies, but when the Financial Services and Markets Act 2000 comes fully into force on 30 November, the authority will acquire tough new powers to make rules on money laundering, penalise breaches and mount criminal prosecutions, and it has stated publicly that those powers will be rigorously applied.
The Government have set a target of doubling receipts from the proceeds of crime by 2004. In real money, that is a target of just under £60 million. The Government and the law enforcement and prosecution agencies have drawn up a strategy for achieving this, which we will publish shortly.
The increased focus on asset recovery must be accompanied by a comprehensive updating of the legislation. I shall set out what we see as the problems in the current legislation. The confiscation and forfeiture powers and the money laundering offences are set out in the Drug Trafficking Act 1994 and the Criminal Justice Act 1988, as amended by the Proceeds of Crime Act 1995. Frankly, the legislation has failed to keep pace with the increasingly sophisticated measures used for hiding and laundering criminal assets.
For a start, the separate treatment of drug trafficking and other criminal activity makes the legislation ineffective against today's versatile criminal entrepreneurs. When dealing with criminal groups, it is often in practice impossible to distinguish between the proceeds of their drug trafficking and those of other activities. The courts have called for the abolition of this distinction in the criminal law on money laundering.
Secondly, to prosecute money laundering and confiscate criminal proceeds, it is necessary to find them. The law at present does not give the police and customs enough help; a search warrant on its own is of little use if they do not know where to search. With modern technology, money can be transferred from one bank account to another at the touch of a button. We need new investigative powers to facilitate the tracing of assets.
Thirdly, even if investigators find the assets, they have no powers to freeze them. Restraint orders, which prohibit defendants and their associates from disposing of assets, are not available until the defendant is about to be charged. That is far too late. By that time, the defendant will often have realised that he or she is under investigation and will have placed their assets beyond reach. Moreover, the restraint procedures themselves are costly and inaccessible, which is why last year fewer than 300 such orders were made.
The complexity of the confiscation system deters the courts and the practitioners. The system produces only about 1,200 confiscation orders each year, compared with over 65,000 defendants found guilty of offences in the Crown court, most of which are for acquisitive crime.
§ Mr. David Kidney (Stafford)
I fully support the Bill, but the Home Office commentary says that there will be 760 protection for innocent third parties. Does that mean that the investigative and restraint procedures will be time-limited?
§ Mr. Denham
It is difficult to impose specific time limits. That is a matter for the court's discretion. The court has a wide power to vary the discharge of any restraint order if there is an application by the person affected by it. If a court were dissatisfied by the progress of an investigation, it would be able to discharge the restraint order. However, to put a time limit in the Bill would not be the right way forward.
§ Mr. Douglas Hogg (Sleaford and North Hykeham)
On third parties, where a legitimate bill is owed—to a builder. say—and cannot be paid because there is a freezing order on the assets of a suspected person, who will protect the interests of the innocent third party, namely the builder? Is there some mechanism whereby the builder can get protection and at least some of the money that he is owed in good faith?
§ Mr. Denham
There is provision for the freeing up of assets to enable the continuation of the conduct of legitimate business. The right hon. and learned Gentleman makes a not unreasonable point, but the provision that he seeks will be available to the court under those circumstances.
In addition to there being relatively few confiscation orders, they are poorly enforced. Each year, receipts amount to only 40 to 50 per cent. of the value of orders made. Enforcement procedures need to be strengthened.
The institutional arrangements of the criminal justice system are stacked against asset recovery. The police and prosecution agencies have historically focused—understandably, perhaps—on detecting and prosecuting the criminal. Magistrates courts find it difficult to give priority to confiscation orders in their enforcement of a wider range of court orders and sentences.
There is a further problem. Except where drug or terrorist cash is discovered at the border, current legislation provides no means of recovering criminal proceeds other than after a conviction. However, many major criminal figures have become untouchable by criminal prosecution. They organise or finance the criminal activity of others and profit from the results, but remain remote from the commission of particular crimes. That often makes it impossible for law enforcement authorities to build a case against them.
Criminal proceedings may be impossible for other reasons, for example where the suspect is abroad and cannot be extradited, or where the suspect has died. In many of these cases, law enforcement has compelling evidence that assets were derived from unlawful activity, and this is often supplemented by evidence that property has been concealed and that no legitimate explanation for the property exists.
The law enforcement agencies regularly encounter cases such as those I have outlined, and a survey last year identified 400 individuals or groups with estimated combined assets of £440 million who potentially fell into this category.
I emphasise that the prosecution of criminals must always take priority, and will continue to do so. However, I do not believe that it is acceptable that ownership of the 761 proceeds of crime should remain immune from any form of legal challenge where criminal proceedings are not available.
§ Mr. David Tredinnick (Bosworth)
Will not the test of the Bill be the word "potential"? Have the Government thought through carefully how to overcome the degree of potentiality when it comes to assets? Although it might be easy to estimate the amount of assets involved in a case, has the Minister any plans to define and clarify the word "potential" in that context when the Bill is being considered in Committee?
§ Mr. Denham
Given that the Bill has more than 430 clauses, I am sure that the Standing Committee will have many opportunities to scrutinise many aspects of the Bill. However, as I shall make clear in a moment, the civil recovery of the proceeds of crime will take place by civil test, but in the courts. The civil test has degrees or scales of weight, and we expect that the recovery of the proceeds of crime will be a matter near the upper end of the civil test. We must remember that we are talking not about an executive or administrative process but about a court-based process. That process will be at the heart of what we are doing, but the Bill sets out in some detail the legal framework through which we can seek to recover the proceeds of crime.
§ Mr. Norman Baker (Lewes)
Will the Minister explain the Government's thinking with regard to a person who has been subject to a criminal prosecution and acquitted? Will it still be permissible or appropriate for civil proceedings to be taken against the assets of a person in that situation?
§ Mr. Denham
Certainly, there could be circumstances in 'which such action could be appropriate because the action will concern the property, not the individual. Civil recovery is a matter not of finding a person guilty of a crime but of recovering the proceeds of crime, if that can be established to the satisfaction of the courts and according to the tests laid out in the Bill. It is clearly conceivable, therefore, that there could be circumstances in which a person's assets could be recovered even though his conviction on a specific offence had failed.
There is no moral right to enjoy the proceeds of crime. Given the corrosive effect that retention of such assets can have on society, and the vital importance for crime reduction and public morale of preventing their use to finance new criminal activity, the absence of any remedy represents a gap in the legislation that it is increasingly important to fill.
I shall briefly run through the Bill's main sections.
First, the Bill will establish the Assets Recovery Agency, which will share the confiscation functions of the law enforcement and prosecution authorities. In a criminal case, those authorities will be able to ask the agency to handle the financial investigation and confiscation aspects, while they concentrate on the criminal investigation and proceedings.
Secondly, the agency will have sole authority to operate the civil recovery and taxation functions that the Bill creates. I shall return to those functions in a moment.
Thirdly, the agency will train and accredit financial investigators, who will then be able to apply their skills in their own organisations.
762 Finally, the agency's director will advise the Secretary of State on matters relating to asset recovery. The director will play a leading role in the development and implementation of the asset recovery strategy.
The agency will operate in England, Wales and Northern Ireland, and in Scotland for its taxation functions. It will be a champion for and raise the profile of asset recovery.
The Bill will remove obstacles faced by the authorities when they try to trace or freeze a suspect's assets and to obtain a confiscation order after conviction. The power to restrain the suspect's assets will be made more accessible. Restraint orders will be available at an earlier stage, from the start of the criminal investigation, and applications will be heard by the Crown court instead of the High Court.
Confiscation powers will be extended. A single conviction for drug trafficking, money laundering or any of a list of other offences to be specified by order by the Home Secretary will trigger the assumptions procedure. Under that procedure, the court will assume that all the defendant's assets are derived from criminal activity unless he can show to the contrary. Multiple convictions and offences committed over an extended period will also attract the assumptions procedure—that is, the convicted defendant will he treated as having a criminal lifestyle.
§ Mr. Edward Garnier (Harborough)
Under clause 11, four assumptions are set out. Am I right in assuming that all four have to be made by the court if it is to move on? I guess that they are to be based on statements of information, covered in clause 17. Does the prosecutor or the director have to give the grounds for his belief or merely make a bald statement that he believes such and such? I am puzzled as to how this mechanism will work.
§ Mr. Denham
The test is objective and factual, based on the nature of the offences of which the defendant has been found guilty. I do not have clause 11 in front of me, but certain offences, such as money laundering and drug trafficking, attract an automatic assumption. I think that it is a question of four offences over six years or an offence committed over an extended period of time. We have tried to make the test for the courts objective rather than subjective.
§ Mr. Garnier
The Minister is not doing himself justice. Perhaps he could have a look at clause 11 and come back to me later in his remarks, because I am not sure that he has answered my point. I do not expect him to know the detail of the Bill off by heart, even though it is his Bill, but perhaps he could take instructions from his officials during the afternoon and then advise the House.
§ Mr. Denham
I am grateful to the hon. and learned Gentleman for his advice on how to handle this part of the Bill. If there are any outstanding points, the Under-Secretary of State for the Home Department, my hon. Friend the Member for Coventry, North-East (Mr. Ainsworth) can deal with them in the winding-up speech.
We have clearly set out the tests that we wish to be applied. Their application will be mandatory, on application from the director of the Assets Recovery 763 Agency. If any further ambiguity remains, I will ask my hon. Friend to return to it during the winding-up speech. It may, of course, come up during the debate.
§ Mr. Oliver Letwin (West Dorset)
I apologise for detaining the Minister, but I hope that he will ask the Under-Secretary to take advice on this point. It seems clear from subsections (1) and (7) of clause 11 that all four assumptions must be made except where an exception is specifically registered by the court. They are not tests but wide-ranging assumptions about what has gone on or is purported to have gone on. This is not a detail; it is highly material and we need an explicit answer.
§ Mr. Denham
I should be happy to clarify the point if necessary in the course of the debate, although I believe that the hon. Gentleman and I may be slightly at cross-purposes about the nature of the tests that then require the courts to apply the assumptions. Perhaps I may make progress, but if the opportunity arises to develop the point further I shall be happy to do so.
In the circumstances that I have set out—multiple applications, offences committed over an extended period, convictions for drug trafficking or money laundering or any of a list of other offences to be specified by the Home Secretary—the convicted defendant will be treated as having a criminal lifestyle. The assumption will then be that all the defendant's assets are derived from criminal activity unless he can show to the contrary. I believe that the use of assumptions in such cases is justified and a vital ingredient of the legislation. Their use has been upheld by the European Court of Human Rights as well as the Court of Appeal and Privy Council.
The procedure will not be available if the court considers that applying the assumption would give rise to a serious risk of injustice and the assumption will of course be rebuttable by the convicted defendant's demonstrating the legitimate origin of his assets.
Part 5 empowers the director of the agency to sue people in the High Court for the recovery of property that is derived from unlawful activity. That is a civil action to which civil rules and procedures will apply. In Scotland, Scottish Ministers will be responsible for civil recovery.
Civil recovery gets to the heart of the problem of criminal assets which currently remain beyond reach when criminal proceedings are not available.
§ Mr. Ian Davidson (Glasgow, Pollok)
I seek clarification of the way in which the process will operate. As I understand it, the Government wish to seize the assets of criminals, and lawyers wish to help the criminals to keep those assets. Let us assume that there is a process of search and certain assets are recovered, identified and seized. What will happen if other assets, which have successfully been hidden by lawyers and accountants on behalf of the criminal, are subsequently discovered? Will the Government be able to pursue those also or is it a one-shot gun, which gives only one chance to identify and seize the assets?
§ Mr. Denham
With the safeguard that assets must be the proceeds of crime, it will be possible to revisit, should further assets be identified as proceeds of crime. However, there is a distinction between the confiscation 764 procedure on conviction and civil recovery. In the conviction-based approach, the assumption could be said to be that the assets are the product of criminal activity. On the civil side, the search is for those assets that are the proceeds of crime, which of course would include property that had been bought using cash that had been obtained by converting the proceeds of crime into cash. However, the broad answer to my hon. Friend's question is yes.
The director will have access to civil investigation powers. Where necessary, and if the court is satisfied that he has a good arguable case, he will be able to seek an interim receiving order that freezes the property pending the outcome of the case and places it under the control of a court-appointed receiver.
Civil recovery will not seek to establish guilt or innocence but will focus on whether particular property is or represents the proceeds of crime. Civil recovery will not be an alternative to prosecution, which will remain the preferred course wherever possible. The law enforcement and prosecution authorities will apply their normal evidential and public interest tests in deciding whether to pursue criminal proceedings. They will refer cases to the director for possible civil recovery only where prosecution is not available.
The scheme contains substantial safeguards. The burden of proof will be on the director. The civil standard of proof will apply, but the court will be able to require a high standard in practice, as is usual where allegations of unlawful conduct are made in civil proceedings. There will be a financial threshold below which proceedings will not be initiated and we expect to set that at not less than £10,000. Civil legal aid will be available, subject to appropriate tests, and where the director loses the court will be able to order him to compensate respondents for any financial loss that they have incurred. Any victim who has been unlawfully deprived of the property will be able to join the proceedings and the court will give their claim priority over the director's. There is substantial and detailed protection for people who show that they purchased property in good faith for full value and without notice of its tainted origins, and for other innocent interests. Similar schemes operate successfully in Ireland and the USA, and the Australian Government have recently introduced a Bill that includes such a scheme.
§ Mr. Letwin
I am doubly grateful to the Minister for his courtesy in giving way, but will he explain whether the Government think that the serious default provision in that compensation scheme will be effective?
§ Mr. Denham
Yes, we do. There has to be a scheme for those who are seriously wronged by the way in which the director goes about his business. The detail of how the scheme is intended to operate and the tests that will be applied are matters that will be considered in detail in Committee. We have given some care and thought to getting the matter right, and I look forward to discussing it further in detail, but it is important that the scheme exists as one of the protections under part 5.
Part 5 also provides for the forfeiture of cash in magistrates court proceedings. Under the Drug Trafficking Act 1994, provision already exists for the seizure and forfeiture of cash discovered at the border and suspected to be the proceeds of, or intended for use in, 765 drug trafficking. In 1999–2000, £4.4 million was forfeited in the magistrates courts under that procedure, but it is available only in relation to drug trafficking and cash discovered at external borders. Those restrictions are no longer defensible, so we propose that the police and customs should be empowered to seize cash that they reasonably suspect to be derived from, or intended for use in, crime, and to seek its recovery in civil proceedings. That power will apply to cash discovered anywhere in the United Kingdom.
To ensure that the powers can be exercised effectively, the law enforcement authorities will need to be able to search for suspect cash, where they believe that it is being carried by an individual or that it is on premises where they are lawfully present, so the Bill will establish a new search power for that purpose, with appropriate and substantial checks and safeguards. Like the existing cash forfeiture scheme, that power will only be available where a substantial sum of cash is discovered, perhaps similar to the existing minimum threshold of £10,000.
Part 6 will give the director taxation powers. Experience here and abroad has shown that taxation is a powerful tool for recovering criminal assets. Criminals and their associates are often unknown to the tax authorities and would be liable to heavy payments if their tax position were examined. Of course, current tax law does not exempt income and gains from tax liability simply because they are derived from an illegal business. So if the director concludes that civil recovery proceedings are not viable or should not be pursued, but has reasonable grounds to suspect a person of having received income or gains derived from unlawful activity, he will be able to assess the person's tax position and, if necessary, issue a tax demand.
The director will, with one exception, apply normal Inland Revenue rules and policies. The exception is that, unlike the Inland Revenue, the director will be able to raise an income tax assessment where he cannot identify the source from which the income has derived. Taxpayers dealt with by the director will have an avenue of appeal to the special commissioners and of complaint to the Parliamentary Commissioner for Administration. The director will be required to treat tax information with the same confidentiality as the Revenue.
Neither part 5 nor part 6 will have any impact on the ordinary taxpayer, who will continue to be dealt with by the Inland Revenue. Evasion of tax payable on legitimate income or gains will not fall within the purview of the director.
Under the Bill, the distinction between the offence of laundering drug proceeds and the offence of laundering other criminal proceeds will be removed. The need under present law for the prosecution to prove whether the proceeds derive from drug or non-drug offences is one reason for the small number of prosecutions brought. It will be an offence for a person working in regulated sectors such as banking to fail to report money laundering. The offence will be committed if the defendant had reasonable grounds to know or suspect that money laundering was taking place, but the court will be required 766 to take account of whether a defendant complied with industry guidelines. Under the Bill, those guidelines will need to be endorsed by the Treasury.
§ Mr. Tom Harris (Glasgow, Cathcart)
My right hon. Friend mentioned the provisions in relation to bankers. He may be aware that, earlier this year, the Government introduced the Financial Investigations (Northern Ireland) Order 2001 to combat money laundering in Northern Ireland, and that article 6 created a power to issue a general solicitors circular under which solicitors are obliged to provide limited information about clients who are under investigation. Can he confirm that a similar provision will be included in the Bill?
§ Mr. Denham
As it stands, the Bill applies to the regulated sector of the financial services industry. However, as some right hon. and hon. Members know, a European directive is going through the system which may change the boundaries of the regulated sector. If it does, it will be necessary to consider whether the legislation requires any changes.
At the moment, the law makes it too easy for people to turn a blind eye to money laundering. The prosecution must prove that the defendant knew or suspected that there was money laundering. It is reasonable to expect people working in professions such as banking and handling high-value business to work to certain standards of competence and vigilance.
Part 8 provides powers for tracing and investigating suspected criminal assets. That will include a new customer information order requiring banks to inform the investigator if they hold an account for a person under investigation, and an account-monitoring order requiring banks to inform the investigator of movements of such an account over a period.
Civilian staff working for the police and customs services will for the first time have access to investigation powers, provided that they have been accredited as financial investigators by the agency. That will make it easier for police and customs to expand their financial investigation capacity. The Home Secretary will have power by order to list other law enforcement agencies and departments whose accredited financial investigators are to have access to the investigation powers.
The Bill also makes provision to extend investigation powers to the director of the new agency. The director will not have a law enforcement role, so will not carry out money-laundering investigations. He will, however. have access to the investigative powers for the purpose of carrying out either a confiscation or a civil recovery investigation. The additional power of a disclosure order, which is not provided for other agencies, will be available to the director, under which the director will be able to require persons to answer questions and provide information. That power is based on a similar power to that of the director of the Serious Fraud Office.
The Bill is innovative and strengthens the law substantially. I know that it will be the subject of much detailed scrutiny in Committee, and I am sure that many points of principle and substance will be raised in this debate. However, the Bill is fair and proportionate to the problem that it addresses—a major one for our society and our economy. The Bill forms part of a wider strategy. It will be backed by resources and expertise. Importantly, 767 the recovered assets fund, which we established earlier this month, will enable us to plough back a significant proportion of the receipts that the Bill generates into the fight against crime and the use of measures in the local community. That will help step up the battle against crime and to reduce crime. I commend the Bill to the House.
§ Mr. Oliver Letwin (West Dorset)
We on the Conservative Benches share the Government's desire to deprive people who profit hugely from very evil acts, but who cannot directly be related to some of those evil acts, of the ill-gotten gains on which they subsist. I suspect that that is common ground among members of all parties, and certainly between the Government and ourselves. For that reason, I shall not recommend that my hon. Friends oppose the Bill.
However, some of the provisions of at least two parts of this immense Bill—parts 2 and 5—give rise to serious concerns about the balance between the state and the individual, and about civil liberties. I shall explain in a moment why it is evident from the Minister's comments that the Bill has not wholly been absorbed by the Government Front-Bench team. Therefore, before I recommend that my hon. Friends vote for the Bill on Third Reading, we will need to be convinced in Committee that those concerns have been adequately handled.
The Minister, reading from a script all too familiar to those of us who are used to Whitehall briefings, described the contents of part 2 but did not give its flavour. The Minister and I first encountered: one another on the Standing Committee that considered the Social Security Bill in 1997. Although I have a high regard for him and his sense of balance between the state and the individual, I am not convinced that the Bill's flavour has been conveyed to him, let alone to the House.
The purpose of part 2 is to allow the confiscation in criminal proceedings of property from prospectively evil individuals, but that is not how it is structured. Clauses 6(2)(c) and 70(1) are based on what can only be described as an Al Capone method. The House will recall that when Al Capone was rightly being pursued by the law enforcement agencies in Chicago, it proved impossible to secure a conviction for the many appalling murders that he committed. A successful effort was made instead to entrap him for tax evasion; broadly the same method is envisaged in part 2.
Clauses 6(2)(c) and 70(1) allow the process of confiscation to be triggered by a summary offence, such as the absence of a tachograph in a cab. So if our prospective villain owns a cab that does not contain a tachograph and is convicted of that offence in a magistrates court, clauses 6(2)(c) and 70(1) can be used to trigger the process leading to confiscation. The Minister might not believe me, but he needs to attend to the details. The Bill might not reflect his intentions, but it is how it is. I do not want to overstate the case. It is not true that that conviction alone would suffice to bring about confiscation, but it could trigger the process. That is an 768 important consideration. As I describe the rest of the process, I hope that the House will remember that it can originate from a minor event that has nothing to do with a serious criminal action.
The next stage in the process is, I think, unknown to English law hitherto, and we have not had time to investigate how far it is known in other jurisdictions. The departure from English law should have merited a considerable description in the Minister's speech. The court has to decide whether the person—in this case, the individual responsible for the tachograph offence—also has a criminal lifestyle. That is the key feature of part 2. According to clauses 6(4) and 75(2)(c), a criminal lifestyle has the remarkable feature—I do not know whether the Minister was fully aware of what he accurately said—of consisting of any set of offences defined without limit by the Secretary of State in regulations that we have not seen.
We are dealing with a process that can be triggered by a minor summary offence that leads to an individual being reported to a Crown court by a prosecutor for an investigation into the possibility of confiscation. The court has to decide whether that person has engaged in a criminal lifestyle, which is defined without limit by the Secretary of State in regulations that we have not seen. [Interruption.] That is worrying.
§ Mr. Denham
Keen though he is to patronise me this afternoon, I do not think that the hon. Gentleman should persist in articulating such a distorted view of the procedure. First, in any case the prosecutor or the director of the new agency would have to decide whether to pursue the matter. Secondly, it is clear that the court must not make an assumption if it is shown to be incorrect or if there would be a serious risk of injustice if the assumption were made. That is an important part of the process, to which the hon. Gentleman does not appear to want to draw the House's attention.
§ Mr. Letwin
I apologise for the patronising tone—I meant my comments to be an outright attack. I was trying to be polite, but it seems to have been a gross error.
The Minister is about one quarter right—just to continue the patronising tone—
§ The Minister of State, Scotland Office (Mr. George Foulkes)
You will be giving him marks out of 10 next.
§ Mr. Letwin
I shall do so shortly, but they will not be high.
The Minister is right to say that the court is required by the Bill to act in a manner that seeks to prevent injustice—I am sure that any English court would act in such a manner in any case. However, the court also has to engage in statutory construction—it has to look at the legislation and the regulations produced by the Secretary of State. The Bill specifically allows the Secretary of State to define in regulations anything that he chooses—the House has not seen the proposed regulations—as a basis for a criminal lifestyle. As the Bill contains no other definition than the definition that includes the provision. for the Secretary of State to produce such regulations, no court will know what to do if it does not happen to like the Secretary of State's choices, because they will be the definitions in the regulations. Therefore, I fear that the Minister is three quarters wrong.
769 Things get worse, because once the court has decided that the individual hypothetically first convicted of a tachograph offence also has a criminal lifestyle—perhaps because he has fallen foul of items in the regulations that we have not seen—the court then has to make assumptions.
§ Mr. Stephen McCabe (Birmingham, Hall Green)
Is the hon. Gentleman's difficulty that he has such a sacred regard for the value of money that he is unable to recognise tainted money? Is that why Conservative Members did not recognise that Asil Nadir had a criminal lifestyle?
§ Mr. Letwin
No, I have a sacred regard for the preservation of the rights of innocent individuals in the face of the state, and I suspect that the hon. Gentleman and the rest of the House share that regard. In our joint earnest desire to pursue criminals, we should not throw overboard the entire structure of our common law and traditions, which were created to protect innocent individuals against an overmighty state. I should have thought that that was common ground between Members on both sides of the House. The question is whether the Bill adequately achieves that balance. My argument is that in the parts that I am discussing, the Bill does not, as yet, do so.
§ Mr. Denham
The hon. Gentleman is confused. He persistently talks about innocent individuals, but the parts of the Bill to which he refers deal with people who have been convicted. To alleviate my confusion, it would be helpful if the hon. Gentleman stated from which crimes he thinks individuals should be able to retain the proceeds. He clearly has in mind a series of crimes in respect of which individuals should be free from any threat of recovery, and I should be interested to hear his list.
§ Mr. Letwin
I beg the Minister to calm himself a little and attend to the problem that he is creating. I believe that if he thinks about it, he will not want to do what he is here doing.
We are not talking about the proceeds of particular crimes. The point about the assumptions under clause 11—which the Minister muddled up hopelessly—is that they ask the court to look not at the proceeds of the crime of which the individual has been convicted, nor at the proceeds of the crimes specified in the regulations, but at the entirety of the assets gained by that individual over a six-year period.
If the individual has committed a tachograph offence and has committed three offences specified in regulations that we have not seen, it does not automatically follow—we should not allow ourselves to be dragged into prejudging the matter—that that individual should be arraigned for all of his proceeds over six years. To make that connection, the person in question has to be a villain. The question is whether we have a structure that will adequately differentiate between villains and people who are merely believed by the prosecutor to be villains.
The assumptions in question are not tests. They are assumptions that the court is to be asked to make, and the broad assumption is that if the person has a criminal lifestyle everything that he gained over the preceding six years is part of that criminal lifestyle.
§ The Parliamentary Under -Secretary of State for the Home Department (Mr. Bob Ainsworth)
It must be the proceeds of crime.
§ Mr. Letwin
If the hon. Gentleman attends to clause 11, he will find that it does not have to be shown that the items in question are the proceeds of crime. It merely needs to be shown that they are in the hands of someone who has a criminal lifestyle—a critical distinction. I am astonished to be having this debate with the Minister.
§ Mr. Ainsworth
There are two relevant provisions: first, that the recoverable items are the proceeds of crime and, secondly, that there is no risk of injustice. Does the hon. Gentleman accept that both defences would be acceptable?
§ Mr. Letwin
I will be happy to eat my words if I am wrong, but I think that the recovery of which the Minister speaks in the first part of his remarks refers to part 5 and not part 2.
§ Mr. Letwin
If I am wrong about that, I apologise. I would like to see the relevant provision.
I have already accepted that courts will try to achieve justice, but they are guided by what is in the law and in regulations. If a court is told that someone has a criminal lifestyle and that they have committed three offences specified in the regulations, it will so decide. It will not have discretion to do otherwise.
The matter goes further. The authorities have a duty to confiscate not merely items that are in the hands of the person who has been shown to have a criminal lifestyle. Others who bought the items—perhaps honestly; perhaps at a discount store—could be brought within the provisions of clauses 41 to 46. As the Law Society has forcefully stated, their assets could be confiscated, too.
It is true that there is provision for compensation if, at the end of the process, the effort by the public prosecutor fails. However, when I asked the Minister about the serious default provisions, it became clear that he was not aware that compensation can be obtained only if the persons or authorities pursuing the matter have engaged in a serious default. They do not need merely to have gone wrong. [Interruption.] If the Minister knows that, I am astonished that he is as relaxed about it as he is.
An innocent third party who has bought something from someone against whom a rather rickety chain of actions has been taken, and that action has failed, could find themselves unable to obtain compensation for having been bankrupted because there was not a serious default, in the legal sense of the term, by the authorities that made the mistake and prosecuted. If that is not an imbalance between state and individual, I do not know what is.
I think that there is a serious practical problem. I apologise for adopting a tone that has riled the Minister. The Bill is the great work of the Home Office—it has 440 clauses, and I do not know how long it took to write instructions and draft the Bill, probably for the previous set of Ministers—yet relatively little attention has been paid to whether the fine balance between the individual and the state is being maintained. Notwithstanding the banter between us now, I hope that in Committee we can 771 go through these issues seriously to try to iron out some of the difficulties. Let us try to tighten the rules so that part 2 permits the confiscation of assets from real villains without exposing us to the risk that innocent individuals may be harmed quite unfairly. I feel confident that the Bill as drafted will expose us to that risk.
§ Mr. Davidson
Is the hon. Gentleman aware that when he speaks of the fine balance between the state and the individual he creates the impression that he and his party are soft on crime and are more interested in the civil liberties of drug dealers and criminals than in helping the Government to defend communities such as my own, which suffers considerably from the curse of drugs and criminals who, for a long period, have been virtually untouchable? If he is serious about supporting the general thrust of the Government's actions, could he not concentrate more on ways in which he could be helpful, rather than simply nit-pick and make derogatory remarks about the Minister?
§ Mr. Letwin
The hon. Gentleman and I differ about the purpose of this place. I do not think that it is a congratulations society for Ministers or Governments; its purpose is to ensure that we enact good law. We shall not have that if, in the justified pursuit of appalling villains who have destroyed thousands, probably millions, of lives around the country, we allow ourselves to be inveigled into establishing law that permits the state wrongly to pursue innocent individuals. I should have thought that that was common ground. I am genuinely surprised, as I thought that when those things were pointed out, Government Members would reflect on them, allow us to debate them in Committee and try to correct them. I had no intention of making a political onslaught; if I had, I would have adopted a different tone of voice.
Before turning to part 5, I want to mention a practical difficulty. I beg Ministers and Government Members not to regard this as a political attack, as my intention is serious. The practical difficulty arises from an item much loved by Ministers—the European convention on human rights, especially article 6(2). I do not maintain that the fact that there might be an incompatibility between the Bill and the convention means that the Bill is wrong and the convention right. That is not necessarily the position of Conservative Members, but the convention is in existence and, under the Human Rights Act 1998, Ministers have legislated for its incorporation in our legislation. A possible incompatibility is therefore a practical consideration. I know that the Home Secretary has signed the declaration that the Bill is compatible with the convention and I am sure that he has taken serious advice about that. I do not want to overstate my case, as he may well turn out to be right, but I wish to raise the matter because we shall need a clear exposition in Committee. An investigation must be conducted by the Joint Committee on Human Rights to ensure that none of us can pass legislation that is rapidly invalidated by the judges.
Article 6(2) of the ECHR states that everyone charged with a criminal offence shall be presumed innocent. That is a cardinal article of the ECHR. The exchange between my hon. and learned Friend the Member for Harborough (Mr. Garnier) and the Minister was important, because the presumption in clause 11 is that the court must make an assumption, as the Under-Secretary himself acknowledged, 772 that the party involved is, so to speak, guilty; all of his assets, as the Under-Secretary confirmed from a sedentary position, are assumed to come from criminal activity. That is the only way in which the articulation in clause 11 can work. It is obviously wrong to confiscate the assets of someone with a criminal lifestyle, unless they have come from criminal activity. Clause 11 assumes that the person involved has gained his assets through criminal activity; that is a presumption of guilt, as the Under-Secretary confirmed when he said that the individual can rebut that. I agree; of course he can. However, guilt is presumed if an individual is allowed to rebut the charge and demonstrate his innocence. That is a very different pattern of activity from that envisaged by article 6(2). I suspect that legal advice to the Home Office put a lot of weight on the difference between criminal proceedings and ancillary proceedings under clause 11. I am not a lawyer, but I believe that there is a jurisprudential trail, which shows that difference to be not incompatible with article 6(2).
That is to say, I believe that there is a jurisprudential trail in which judges have decided that, in ancillary proceedings rather than criminal proceedings, it is reasonable in some cases to presume guilt. However, it may be rather difficult to put that amount of weight on that difference in the context of an action which seeks to deprive an individual of six years' worth of his entire assets, so we need to know whether the measure is compatible.
§ Mr. Garnier
Is not the force of my hon. Friend's argument all the greater when one considers that convention jurisprudence looks to the effect of the confiscation order and treats a confiscation order, whether it comes about through civil or criminal proceedings, as criminal? It is a penalty. My hon. Friend's point therefore needs to be dealt with rather more cogently than it is currently being dealt with by the Minister.
§ Mr. Letwin
That is a good point from a distinguished lawyer, unlike myself. If the case is as my hon. and learned Friend describes, the position is probably worse than I painted it. In any event, there is no substitute for the Joint Committee on Human Rights considering the matter carefully. None of us would wish to carry the Bill through Committee and discover that clause 11 invalidates the entire procedure.
§ Mr. Denham
Can the hon. Gentleman clarify his view of the use of assumptions in recovery proceedings under the existing legislation, which I believe was enacted under a Conservative Government, and his view of the fact that three challenges to the use of those assumptions under the European convention on human rights have all failed? He speaks as though neither assumptions nor tests of the ECHR have been a point at issue in the past. Indeed they have, and the finding was in favour of the use of assumptions.
§ Mr. Letwin
There is a difference between evidential assumptions and probity assumptions. In the present case, the assumption is not about evidence. The assumption is that there is a train of activity for which no proof needs to be adduced. It never needs to be shown by the prosecution that the six years' worth of assets were acquired illegally. There is not so much an assumption as a leap of faith.
773 I repeat: these are matters of legal fact. To our minds, although perhaps not to Ministers', whether the measure is compatible with the European convention on human rights is not a cast-iron argument for or against this part of the Bill. In practice, it needs to be compatible in order to be effective. That is clearly common ground. All that I am doing is to raise the point, which needs investigation by the Joint Committee, which I should have thought would also be common ground.
§ Stephen Hesford (Wirral, West)
I am struggling to understand the hon. Gentleman's point, and I may not be alone in that. For my benefit, if no one else's, can he say whether he has taken advice from the shadow Attorney-General on the matter? If he has, that might explain why we are getting into such a mess.
§ Mr. Letwin
I find it pretty surprising that Labour Members think that a point raised by three major outside bodies—Justice, Liberty and the Law Society—should be the subject of political banter. We are discussing the liberties of the subject and the effectiveness of legislation that is intended to cure a great social evil. That should not be the subject of banter.
§ Mr. Bill Tynan (Hamilton, South)
Will the hon. Gentleman comment on the case of Phillips v. the United Kingdom, in which Phillips alleged that the statutory assumption made against him in relation to his financial situation for the previous six years had violated article 6(2) of the convention? Will the hon. Gentleman comment on the fact that the European Court of Human Rights did not uphold that allegation?
§ Mr. Letwin
I have already tried to make the distinction between evidential assumptions and probity assumptions. I do not know why we are labouring the point. [Interruption.] The Minister of State, Scotland Office says from a sedentary position that I am labouring it. All I am doing is recommending that the matter be examined by a Joint Select Committee that was established by the Government under legislation on which the Government insisted. That seems reasonable.
§ Mr. Denham
I am not sure whether the hon. Gentleman knows that the same assumptions are made under existing statute in the case of those convicted of drug dealing. He seems to be under the misapprehension that some fundamentally new principle is being introduced. If there was some confusion in the earlier discussion, it was, I think, because we did not understand what the Minister did not understand.
Is the hon. Gentleman aware that the principle is already enshrined in legislation? The Bill undoubtedly broadens its application—that, after all, is the point of it—but will the hon. Gentleman acknowledge at least that the central principle already exists?
§ Mr. Letwin
It depends on what is meant by the central principle. It is true that if someone is convicted of a heinous offence—in this case, drug dealing—the assumption is made. What we are talking about here is someone who, prospectively, has been convicted of a 774 tachograph offence, been reported to a Crown court and then been found guilty of offences specified in regulations that we have not seen, which may have nothing to do with the matters in hand. That is a critical difference, and I cannot understand why it is not evident to Labour Members. If the measure is referred to a Joint Select Committee, however, we shall see whether it considers it to be compatible. I should have thought Ministers would have agreed to do that by now.
Let me turn, at last, to pan 5. I apologise for this, but we have rather more fundamental doubts about part 5 than about part 2. The overall aroma surrounding the agency that it establishes is remarkably similar to that of an agency well known to every Member, as we have all had to deal with the effects of it over the years. I remind Members that it was supported by every one of us, in all parts of the House—yes, I mean the Child Support Agency.
When the Bill creating the agency went through the House, no one squeaked. We have all since regretted that, have we not? It seems to me reasonable for us to say things about this agency, which has a remarkably similar role in some respects although in others it is very different, that at least mean we have a serious debate about it. That, surely, will be common ground.
Under part 5, we are setting up an agency that will have to act if, under clause 248(1), the agency "thinks"—not "reasonably judges"; and nothing in the clause forces it to take a series of steps to ensure that it has been duly diligent—that a person holds unlawfully gained property. This is a remarkable part of the Bill. The first step, or link in the chain, has parallels with the Al Capone case in part 2. There is a very wide—consciously wide, I assume—definition allowing the agency, if it has the merest thought that someone has unlawfully gained property, to institute proceedings.
What is much worse, however, or at any rate much more questionable, is that under clause 246(3)—the Minister was very clear about this—what the agency will then need to show in court is not that, beyond all reasonable doubt, there has been conduct which is unlawful, but that on the balance of probabilities such conduct has taken place.
§ Mr. Letwin
As the Minister says—he is keeping up a running commentary from a sedentary position—that is the whole point of part 5 as it is currently constructed.
The hon. Member for Lewes (Norman Baker) asked the Minister a very acute question.
§ Mr. Letwin
He did not get a straight answer; that was the problem.
When asked whether someone could be acquitted of an offence and then have his assets seized because, on a lesser test—the balance of probability test—the court had found in favour of the recovery agency, the Minister said, as I think the record will show, that someone could be acquitted of a specific offence and nevertheless be pursued on the lesser case. However, someone could be innocent of every offence. Someone could be wholly innocent according to the standards of proof required in 775 criminal law, yet be subject to pursuit on the balance of probabilities. That is a significant point. Thinking that someone is in possession of unlawfully gained property, the agency will have the power, and indeed the duty, to take that person, possibly after acquittal of any charge, to court and to recover their property on the balance of probability.
§ Mr. Ian Lucas (Wrexham)
Does the hon. Gentleman accept that part 5 relates to civil proceedings, not criminal proceedings, and proceeds upon the civil standard of proof? Therefore, we are talking not about convictions and the criminal standard of proof, but about the civil standard of proof. In those circumstances, it may be entirely appropriate that someone be acquitted on the criminal standard, yet still be held responsible under a civil standard of proof, repaying money that was ill gotten—the proceeds of crime.
§ Mr. Letwin
I am grateful to the hon. Gentleman. I was about to say—in fact, I said the first two words of the sentence—that I accept it will be argued that it is a civil proceeding and that the balance of probabilities is therefore an appropriate test. That is the argument in favour of the clause. However, the state is not another person in any ordinary sense. The state is not in the position of someone who has been adversely affected in a commercial transaction, for example. The state is in a very special position in relation to the individual.
When civil proceedings are to be taken, there are huge inhibitions on individuals' pursuing one another through the courts. Some of us believe some of the time that those inhibitions may even be too great. They may prove insuperable in cases where people should have the right to pursue the matter through the civil courts.
It is the agency's sole duty to find this money. If I remember the figure correctly, the agency is being given £45 million a year by the Minister to pursue it. That should be sufficient for about 300 executives, assuming two thirds of the payments of the agency are on salaries and that the salary cost of an executive and associated staff is about £100,000—[Interruption.] If it is not 300, we need to look at the efficiency of the agency, but let us leave that aside. The agency should have about 300 staff.
Those 300 staff, or however many the Minister can squeeze out of the inefficiencies of the bureaucracy of this country, will be charged solely with pursuing people, will have all the money at their disposal and all the other law enforcement agencies on their side. Pursuing someone whom it thinks has unlawful property who has been acquitted of any offence, it can show on the balance of probabilities that that person's property should be forfeit. I do not say that this is a compelling argument by itself, but if the hon. Member for Wrexham (Ian Lucas) cannot see a difference between that and normal civil proceedings between two individuals, I do not share his view of the relationship between state and individual.
What we are doing is taking civil proceedings and moving them into a quasi-criminal context. That is a huge and important shift. We are not doing it on the basis of allowing the ordinary proceedings of the state to occur, or of allowing the Director of Public Prosecutions or the Inland Revenue to take on a special role. Given the experience with the Child Support Agency, we are creating an agency that has the sole purpose of making the provision effective.
776 I grant that what Ministers are trying to achieve is a noble thing. They are trying to enable the agency to pursue people who are evil. They are trying to get their profits. I accept entirely the Minister's opening remarks about altering the risk-reward balance of crime. Of course, that is common ground between us, but I beg Labour Members to attend to the question: have we not begun to alter the balance between individual and state to an extent that may give rise to serious concerns later?
§ Mr. Kidney
Will the hon. Gentleman allow me to correct his comments en passant about the agency? The £45 million is for its setting up and operational costs from now until 2004, so it will not pay for 300 staff. However, the estimate is that there will be 100 staff.
§ Mr. Letwin
I am grateful to the hon. Gentleman. If that is the case, I made a mistake—[Interruption.] It is undoubtedly the case that, like other human beings, I do make mistakes. If there are to be only 100 staff, there will be fewer people doing the pursuing. I am sure that the hon. Gentleman is right that if that is the figure up to 2004—that was not clear from the Minister's remarks—100 staff would be about right if one divides by three.
§ Mr. Letwin
I assume that there will be a difference because I cannot imagine that Ministers would have gone to the bother of creating an agency if there were not. Ministers have presumably created a separate agency because they believe that in using its powers, which they have established by taking the trouble to produce an enormous Bill, it will be more effective. We welcome that. It follows, however, that the danger to civil liberties will be greater. That which is more effective is more to be concerned about. I am simply arguing that we have to achieve an adequate balance between effectiveness and the protection of liberties.
§ Mr. Bob Ainsworth
I do not know whether the hon. Gentleman is making his case deliberately or whether he is genuinely confused, as he was over the money that the agency will have and the staff that it will be able to employ. Does he accept that the agency will not be pursuing criminal matters against individuals, but will be pursuing the proceeds of crime under civil litigation? It will not be obliged to act if it thinks that somebody has committed a criminal offence. It will have to take into account regulations under the European convention on human rights and will have to report to Parliament. Guidance will be issued about how it should conduct its business. It will pursue the proceeds of crime on behalf of the citizens of this country. Is the hon. Gentleman saying that that is wrong in principle?
§ Mr. Letwin
No, I am not saying that it is wrong in principle. It is not wrong in principle that the proceeds of crime should be pursued. It is right in principle. The question is how it will affect people's rights. When Maitland said that freedom lies at the interstices of the law, he was never more right than in a case like this.
777 The Minister said that the agency will not be obliged to act simply because it thinks that someone has committed a criminal offence. Clause 248(1) states:Proceedings for a recovery order may be taken by the enforcement authority in the High Court against any person who the authority thinks holds recoverable property.I accept that there is not a duty to pursue everybody, but the agency has a duty to act and the power to act if it "thinks" that someone holds recoverable property. That is a wide scope of power. The Minister is chuntering about the ECHR. I accept that the agency will be constrained by the ECHR, by the prospect of judicial review and by much else. Why then could not the clause be more tightly drafted? Why not incorporate references to those sorts of things? United Kingdom legislation is riddled with clauses about reasonableness, so why is it not here in this instance?
Part 5 of the Bill involves a series of issues, as does part 2, but this is probably more serious, and we need to consider them in detail in Committee. I am not arguing—[Interruption.] To respond to the Minister's further sedentary intervention, I have been speaking for 40 minutes because I have replied to about 15 interventions from Labour Members.
The Bill needs to be considered carefully in Committee, particularly parts 2 and 5. If we can cure the problems there, we will support the Bill. If we cannot, we will not support the Bill. I hope that in seeking to cure these problems we will have co-operation rather than adversarial banter from Ministers.
§ Tony Worthington (Clydebank and Milngavie)
I welcome the Bill. In fact, it is overdue because it seeks to increase the powers against money laundering, which is a great social evil. It was disappointing that the hon. Member for West Dorset (Mr. Letwin) spent no time at all speaking about the enemy that we all must overcome, but seemed instead to be concerned simply about the defence. Although the defence is an important issue, let us spell out what the Bill is seeking to tackle.
I have some reservations about the Bill, and I seek some reassurances from the Minister. One of my concerns is that we are told that the Treasury, perhaps in another Bill, is to take further action on money laundering and terrorism because of the events of 11 September, so we are not seeing the whole picture in our consideration of this Bill. Many of my comments and questions are related to the links between this Bill and what the Treasury may eventually do.
My first question is whether we have genuinely joined-up government. How are we to judge this important measure when other important activity is to follow it? I do not accept the argument that the financial and anti-crime measures required to combat terrorism are separate from the measures needed to combat other types of crime such as the drugs trade. For example, the income that bin Laden allegedly obtains from the drug trade will be tackled by this Bill.
The provisions of this brand-new Bill were judged to be necessary and adequate before the events of 11 September, but subsequently they have been judged by 778 some to be inadequate. Some people believe that extra provisions are necessary. I should like to have Ministers' thoughts on that issue. The events of 11 September were simply horrific, but the Bill should have sought before that date to achieve the objective of recovering money from criminals and terrorists.
I should also like to know how the House feels about addressing money laundering. I am gratified by the large number of hon. Members present, because such issues do not usually attract so many. The Bill was mentioned in the Queen's Speech, but I do not remember it being mentioned by anyone, other than Ministers, in the debate on the Loyal Address. The House will react to the events of 11 September and to the need for money-laundering measures, and we shall consider the Bill tonight and in Committee, but that response is inadequate to deal with the complexities raised by this type of issue.
The House should consider establishing a body such as a Joint Select Committee, which may have to operate for years, to consider action on money-laundering issues and to ensure that our procedures are up to scratch. We have allowed our relevant procedures to become completely inadequate through lack of parliamentary scrutiny.
I am strengthened in that view by the statement of the incoming president of the Financial Action Task Force, which is seen as the key international body on the issue, who believes that that organisation will need a serious overhaul to tackle the financial flows from terrorism. I do not believe this, and perhaps the Minister will be able to convince me that it is true, but according to the Financial Times, the Financial Action Task Force—that key body—has a staff of five and an annual budget of just over £500,000. How is it possible for the body that is supposed to lead the world in tackling money laundering to operate with such resources?
I approach these issues from the viewpoint of the Select Committee on International Development, which in the previous Session produced a report on corruption that certainly changed my views on the issue. We conducted an inquiry on that because we had been convinced that it was a major obstacle to development in poorer countries. We believed that if there was corruption in those countries, the developed world would not invest in them. However, our focus increasingly shifted as we continued our inquiry, and we began to realise just how important it was for us to tighten up our own act if we were to help the developing world succeed in the fight against corruption.
Let us consider the most celebrated example. We invited the Nigerian Government to tell us what they had found when they came to office and needed to clear up the country. They, in turn, asked us what we were doing to help them get back the money that had been looted from the country. According to last year's Department for International Development report, we put about £15 million of bilateral aid into Nigeria. However, the Nigerian Government are trying to find £4 billion that the Abacha family took out of Nigeria and invested in the outside world. For every £1 that we put in to cure poverty, one Nigerian family took out £200. That is the scale of the problem.
There is not only a severe shortage of investment in Nigeria and other sub-Saharan countries but their own wealth is, albeit illicitly, invested in countries such as ours. We have to tackle money laundering for many reasons, and the problem of international development is 779 one of them. All the evidence, as the International Development Committee concluded, is that London is attractive to money launderers and is used by them.
The current approach does not do enough to recognise the importance of tackling money laundering, and that makes the City of London extremely vulnerable. We must protect its good name. When the Nigerian Government asked us to freeze the Abacha assets, we could not do it. Governments famous for their transparency—Switzerland, Liechtenstein—managed to freeze Abacha accounts, but it was only this month, two or three years later, that the courts in London said that the accounts should be frozen. The British Government said that they could freeze only when charges had been laid, but the evidence could be obtained only when the assets had been frozen.
I want assurances from the Government that that problem has been seriously tackled and that we will be proactive. All my life, Nigerian regimes such as those of Abubakar, Babangida and Abacha have been famed for their corruption—Nigeria was in Transparency International's league table of corrupt regimes—but we could not be proactive. We did not have the means whereby we could step in. Will that now change?
To take a contemporary example, the Prime Minister told us that Afghanistan was the source of 90 per cent. of the heroin on Britain's streets. What proactive steps were taken? What investigations have been undertaken to deal with the situation? To take another example, it was announced a few weeks ago that there were to be new regulations for bureaux de change. Apparently, we are the only country in the European Union that has not regulated them, even though the newspapers inform us that 65 per cent. of their trade involves money that is being laundered. How long has this been going on? How long has it been known?
In 1996, the Financial Action Task Force, the key international body, of which we are a member, said that bureaux de change are an important link in the money-laundering chain, since it is difficult to trace the origin of the money once it has gone through them. It recommended that they should be dealt with in the same way as banks. Why are the Government responding only now? I seek an assurance that every one of the 40 recommendations made by the FATF in 1996 is now being acted on.
Other countries in Europe—countries not famed for being at the forefront of financial management—have acted. On 3 December 1998, the Government of Zimbabwe acted on the matter and, in December 2000, the Bank of Zambia did likewise. Many hon. Members will have received a newsletter from the Sri Lankan high commissioner pointing out that in the view of the Sri Lankan Government, bureaux de change in this country have been responsible for years for financing the activities of the Tamil Tigers. There has been knowledge about the activities of some bureaux de change. Why did we not act? This is an area of great concern upon which we must act seriously to protect the City of London.
The Select Committee was very critical of the lack of resources in the Home Office for dealing with cases such as Abacha, including the case in which the Government of Pakistan wanted inquiries about money to be brought back to that country. Jeremy Carver, a distinguished member of Clifford Chance—the largest legal firm in the 780 world—said that there was a real problem in the Home Office in that things went into it and did not appear to come out. In terms of action on money laundering, he described the Home Office as "a swamp". Will some of the extra resources go to the Home Office to make sure that the swamp is cleared, so that there will be prompt action on money laundering next time the Nigerian or Pakistani Government ask for it?
This is a very important Bill because the resources involved are considerable. The most recent book on the subject was written by someone called Peter Lilley—not the right hon. Member for Hitchin and Harpenden (Mr. Lilley). He talked about the importance of the UK as a major laundering centre, stating that Russian and eastern European crime groups favoured London properties and were active in the vice trade, the London metal market, the art world and financial fraud. Hong Kong and Chinese triads and Turkish and Kurdish gangs were active, he said, adding that there was increasing evidence of Colombian groups using Heathrow airport as a gateway to mainland Europe; Nigerian criminal gangs were also active here.
The Bill is much needed and it will receive good scrutiny in Committee. However, I hope that we will not only deal with money laundering through this Bill, but take a continuing interest in it because, directly or indirectly, it is important to everybody in this country.
§ Mr. Norman Baker (Lewes)
This is a welcome Bill. It is a sensible measure that closes loopholes and makes the law more effective in tackling crime—an objective that all of us will share. That is why the Liberal Democrats will support the Bill tonight if there is a Division.
That is not to say that there are not a number of details about which we have concerns and legitimately want to raise issues. I will refer to some briefly now and look forward to discussing them in detail in Committee. I hope that we can proceed on the basis of all-party support. Some hon. Members were a little harsh about the Conservative spokesman, the hon. Member for West Dorset (Mr. Letwin), who has now disappeared from the Chamber. He tried to be constructive—he may have been a little wrong on one or two issues—but he made a thoughtful speech. I hope that we will not have unnecessary confrontation on the Bill, either tonight or in Committee.
It is right that, as a nation and as a Parliament, we turn our attention to the financial aspects of crime. As the Government have said, some two-thirds of crime is motivated by profit. It follows that if we can significantly depress the likelihood of financial gain, the incentive to commit crime in the first place will be reduced. A precedent will be set for those thinking of following suit: the role models will be less attractive if there are no financial benefits to enjoy at the end. We must take away the status symbols—the fast cars, the luxurious swimming pools, the affluent lifestyle—that are so often built on foundations of crime, corruption and misery.
Incidentally, that may present a problem for the head of the asset confiscation unit that the Government propose. Judging by the experience in the United States and Ireland, that person may have difficulty in offloading casinos, racehorses and lap-dancing clubs. There is a limited market for those assets, but I am sure that the person concerned will do their best to ensure that they are sold off and the proceeds used for proper purposes.
781 It is good to see the Government tackling the big fish in this way. It is easy to concentrate on what I would call simple criminals—the ones who rob banks and commit traditional crimes, who are often from the poorer elements of society—while more sophisticated criminals are allowed to get away with it. Such is the wealth and status that those criminals accumulate, and so extensive is their knowledge of the law, that they often become pillars of society, enjoying a respectability that is built on a foundation of corruption.
§ Norman Baker
I do not think that that is true, but you never know.
Criminals want respectability. Parliament should work to deny them that respectability, and to take it away from those who already have it. Hon. Members should work together to make sure that that happens, and that the Bill and the House send out the message that crime really does not pay.
The Bill will also prevent criminals from funding further criminal activities. I was struck that the brief from the Under-Secretary of State, the hon. Member for Coventry, North-East (Mr. Ainsworth), stated that, in the period 1990–2000, confiscation orders worth £20.5 million were made against drug traffickers. The brief rightly says that that is equivalent to 1,000 kg of heroin. We all know the links between drug money and crime. The National Crime Squad has said that 1 kg of heroin is equivalent to stolen property worth £220,000, or the proceeds of 220 burglaries. Therefore, it is not simply a matter of pulling in criminals or those using money for improper purposes: we must also protect the population at large from the consequences of that activity.
The Bill's detailed powers will allow better tracing and securing of assets, and they include the power to seize suspect cash. It is right to close the loophole that allows some cash but not other cash to be seized. The Bill will also allow restraint orders to be made available at the start of an investigation, rather than at a later stage. That is worthy of support in principle, as these days assets can be moved out of reach, quickly and without much effort, by pressing a button or clicking a mouse. We need to even up the battle between the law enforcement authorities and the criminals, as the latter may have gained the edge in recent years.
The Bill also facilitates criminal confiscation, by establishing a new basis that covers all crimes. Again, that will affect the most versatile criminals, whose fiefdoms cross the boundaries between crimes involving, for example, drugs, prostitution or tobacco smuggling. The civil recovery scheme, as set out by the Minister in his introductory remarks, will make it easier to track down those criminals, to bring them to justice and to seize their assets.
The Bill also contains new taxation arrangements. Who can disagree that it is right in principle that undeclared or otherwise inexplicable income should be taxed? That seems to me uncontroversial. Other hon. Members have noted also that the provision will strengthen existing money-laundering arrangements.
782 I have one or two questions for the Minister. First, there is now a range of options for dealing with people and their assets. They include criminal prosecution, civil action to recover assets from people who have not been convicted of a crime, and the taxation of assets. Will the Minister clarify whether that range of options amounts to a strict hierarchy that will be applied? I see that the Minister is nodding. My colleague Jim Wallace, the Scottish Justice Minister, has said that prosecution of criminals must always take priority, and that it will continue to do so, adding:Civil recovery and taxation will not be soft options. They will only be used where prosecution and civil recovery respectively are not viable."—[Scottish Parliament Official Report, 24 October 2001; c. 3249–50.]I am pleased that the Minister endorses the hierarchy identified by the Scottish Parliament.
How will it be decided which avenue to pursue? There will have to be an assessment of whether criminal proceedings can be sustained. I guess that the normal test will apply, but sometimes such decisions are borderline. Can two avenues be pursued simultaneously or, if criminal proceedings have been started, will that prevent civil proceedings from taking place until the criminal proceedings have concluded? Can two such procedures take place in parallel, and do the Government regard that as a good or a bad idea? Some clarification would be helpful.
I understand from my Scottish colleagues that in Scotland both criminal and civil proceedings are initiated by the Lord Advocate, but in England initiation proceedings will be divided between the Crown Prosecution Service and the director of the Assets Recovery Agency. What mechanism will exist between the two bodies in England to ensure that appropriate action is taken at the appropriate level and that there is no overlap? Will the Minister also confirm that no conflicting action will be taken?
In an earlier intervention, I referred to a person who has been subject to criminal proceedings and has been acquitted. The Minister said in response that such a person could be subject to civil action. That was a clear answer, for which I am grateful. I understand that the test for criminal proceedings is different from the one which applies to civil proceedings. That is clearly set out in the legislation. To the person in the street, however, it may look rather odd if someone who has been subject to high-profile criminal proceedings has been acquitted and then the same information is used for a further action against that person, which may or may not be successful. If it is not successful, taxation action can presumably be taken. That will look a little odd unless there is a very good explanation for it. There is a potential problem here, at least in presentational terms. I draw it to the Minister's attention as I know that the Government are interested in presentational points.
§ Norman Baker
My hon. Friend says, "Surely not." Perhaps I am wrong and the Government are not interested in spin after all.
I am concerned that the new arrangements could effectively be akin to plea bargaining. Despite evidence against someone for dangerous driving, for example, 783 it may be decided that a prosecution cannot be guaranteed to be successful. Under those circumstances, a guilty plea would be agreed for the lesser charge of driving without due care and attention. If criminal proceedings might not be successful and assets can be returned or accumulated as a consequence of civil action, there might be a mechanism to guarantee—perhaps with the agreement of the person who holds the assets—that criminal proceedings will not go ahead. It is important to clarify that because that could be a dangerous road to go down—fewer criminal proceedings could take place if lesser actions were guaranteed to be successful. I am keen to understand the Government's thinking on that.
The shadow Home Secretary, the hon. Member for West Dorset, who is not yet back in the Chamber, referred to the important point about third parties. Those who are aware of the legislation will doubtless seek to ensure that even at the initial stage they take action to prevent their assets from being frozen. They may seek to transfer assets elsewhere—to another member of the family or to bank accounts in countries where the Government's writ does not apply. If there is no agreement between the two nations, the Government will not be able to retrieve the assets. How will the Government ensure that the law is not circumvented by such manoeuvres at that early stage.
Innocent third parties could be affected by assets being frozen. What about innocent family members, who may not be aware of illegal or improper activities undertaken by another family member or by a business partner? What about someone whose income may result from someone else's criminal activity but who has been at arm's length and unaware of that activity? Why should they be penalised in those circumstances? How will the Government seek to establish motives, and what safeguards will exist to protect innocent third parties without weakening the proper measures taken against those against whom the Government wish to proceed?
§ Mr. McCabe
I am interested in the hon. Gentleman's argument, but I was intrigued by the reference to innocent third parties. Could a member of a family who is benefiting from clearly ill-gotten gains be described as an innocent third party? Is that the hon. Gentleman's view?
§ Norman Baker
It is, because it is a question of motive. For example, a third party who has benefited without any knowledge that illegal activities have been taking place may have decided to take a course of action that involves a financial commitment based on what they believe to be sound money only to find themselves very exposed as a consequence of action taken to recover that money.
§ Mr. Dominic Grieve (Beaconsfield)
Does the hon. Gentleman also agree that part 2 might give rise to the following extraordinary state of affairs? Let us suppose that a confiscation order was eventually set aside. Although innocent third parties from whom assets had been removed might recover those assets, the consequential losses that could flow to them from that removal would be recoverable only in the case of a serious default in having brought the proceedings in the first place.
§ Norman Baker
That is a valid point for discussion, which was raised in the Law Society briefing. It is 784 possible that assets will be frozen, and that innocent third parties—not builders, as in the example raised by the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg)—against whom action is taken that eventually proves unsuccessful, could in the meantime lose significant amounts of money as a consequence of the inability to use those assets, and, in extreme circumstances, go bankrupt. I am keen to know what safeguards are in place and what compensation will be available if action of a very serious nature is taken against an individual that subsequently turns out to be unjustified, or if the action taken in the courts is not upheld. That is bound to happen, and I have not heard a Minister deal with that point today.
Heavy weapons are being used in the Bill. I do not oppose the use of those heavy weapons because we are dealing with a sophisticated and difficult enemy, but heavy weapons need a stout remedy if they are improperly applied. We have not heard much about that today and I hope that the Minister will pick up that issue at the end of the debate.
What is the impact on the rights of a person who is accused, or whose assets are under investigation and have been frozen, to use those assets while they are frozen? Obviously they cannot be used for that person's financial gain, but can the person who holds those assets, or held the assets before they were frozen, gain access to them? If those assets concern company records, will it be possible to consult them for the purposes of financial dealings, or will they be off limits? If the latter, what happens to the people employed by that company? They, too, will be subject to possible unwanted consequences.
I shall not deal at length with retrospectivity, but I want to return to the subject in Committee. The Government appear to be moving closer and closer to the use of retrospective legislation, which as a principle is not welcome. Not too long ago, the Home Secretary suggested that he would introduce retrospective legislation to deal with hoax telephone callers. The legislation provided for a six-month penalty, which he proposed to increase to seven years retrospectively. It was wholly unnecessary to do it in that way. I suggest that, had the matter been that urgent, he could have obtained agreement from all parties in the House to railroad the legislation through Parliament in a day or less. The Government's increasing tendency to accept that retrospective legislation is justified represents a dangerous step, so I hope that we shall have a chance to consider that issue in Committee and to determine whether it is justified and consistent with human rights legislation—a point made by several people who have written to us.
As a member of the Joint Committee on Human Rights I feel that it is important to have an opportunity to consider whether the Home Secretary's statement, which appears on the Bill's cover, that it is compatible with the European convention, is justified. In fact, it would be helpful to see the advice that enabled the Home Secretary to take that decision. I hope that the Government will publish that advice, so that we can see why he has reached that conclusion.
Lastly, there is an opportunity, perhaps even a need, to tighten up the organisational approach to such issues. A number of bodies are now involved in law enforcement—such as the police, the National Criminal Intelligence Service, Interpol, Europol, Customs and Excise, the Inland Revenue and now the Assets Recovery 785 Agency—and although each has a specific brief, they could overlap, perhaps like concentric circles, and we should perhaps take the opportunity provided by the Bill to discover whether there is a chance to rationalise how those bodies interact with one another to ensure that no unnecessary duplication or contradiction occurs. We might even consider a common force for borders, for example.
None of that diminishes the support that my colleagues and I are very happy to give, in principle, to the Bill. We want the Bill to be as robust as possible. We think that it contains some very good provisions, but we want it to be as fair as possible, and I am confident that we can propose amendments in Committee that will help to achieve that aim.
§ Mr. John MacDougall (Central Fife)
May I say how grateful I am to the House for allowing me to make my maiden speech this evening? I feel particularly honoured and privileged to be a Member of the House and especially to represent my constituency. I am interested in the Bill, and I shall explain how it could represent a positive aspect of life in Fife and to my constituents in particular.
I have to say, however, that it is not the happiest of times to make a maiden speech in the House. Only yesterday, I visited a local company in Glenrothes, which is in my constituency, to be confronted with the fact that four of its employees had been killed during the atrocities of 11 September in New York, in that deliberate, callous and calculated attack on innocent people. Of course, my condolences go to those people and their families.
The people of Fife and I welcome the spirit of the Bill, which is intended to tackle drug trafficking. Of course, drug trafficking had a big influence on the terrorists' ability to carry out that atrocity, but let us not forget that many young people are continually getting caught up in the drugs culture and are losing their lives because of drugs. I shall allude to how we can continue to educate young people to discourage them from entering the drugs culture, but at the same time let us not forget the loss of life caused by terrorism.
My predecessor as Member of Parliament for Central Fife, Henry McLeish, was clearly a tireless, dedicated and committed Member of Parliament. He was well respected in the constituency. I thank him for all his dedication and hard work; I hope that I can carry on his good work.
Most hon. Members may or may not find this interesting, but I seem destined to follow my predecessor in many ways. When he left Fife regional council, I became its leader and held that position for nine years. Lo and behold, he went to the Scottish Parliament and here I am following him again. It is important to point out that there was no design or plan behind that action. I reassure hon. Members and, more importantly, Henry McLeish that I have no ambition other than to serve the people of my constituency in this House. I look forward to that challenge, which is quite a sufficient one.
Members who are not familiar with my constituency might not know that it lies between the city of Dundee, which is divided by the River Tay, and the city of Edinburgh, which is divided by the River Forth. It is 786 within the ancient kingdom of Fife. It is a very proud and passionate part of Scotland and, indeed, the United Kingdom. It has been and is home to many famous people—none more famous to hon. Members than my right hon. Friend the Chancellor of the Exchequer, in whose capable hands the economy rests.
I should like to tell the House something about the traditions and heritage of my constituency. As a former coal mining area, it is steeped in the history of that proud industry. Like so many coal mining areas, it suffered greatly from the industry's quick demise. Unfortunately, with that came high unemployment. Despite the Government's best efforts since taking office, which have been appreciated, they have managed only to reduce rather than make a severe impact on the very high figure. I assure the House that, in hoping to create the necessary opportunities, particularly for young people in the area, I will do everything on behalf of my constituents to tackle that problem.
With high unemployment comes the great influence of drugs—hence I felt it important to speak in this debate, and I appreciate the opportunity to do so. With high unemployment and a drugs culture comes a high incidence of crime. An average heroin addict, I am advised, requires about £30,000 a year to feed their habit. To someone who is unemployed but requires £30,000. there is only one way to acquire such resources. Therefore, not surprisingly, drugs, unemployment and crime rise similarly. My constituency suffers badly from the scourge of the drugs industry, so there is little doubt that the Bill will be welcomed in principle by my constituents as a means of beginning the process of tackling such challenges.
My hon. Friend the Member for Lewes (Norman Baker) quoted the interesting and enlightening figures of £220,000 and 220 burglaries. I picked up from the Bill that the value added by illegal drugs transactions amounts to an amazing 1 per cent. of gross domestic product. I also noticed that the confiscation figure for 1999–2000 was £25 million, which is startling. Clearly, if such efforts can be intensified, we can make a greater impact on the drugs culture.
The challenges that we face in Fife require the Bill's provisions, although we have already done much to support the principles behind it. We have considered the rehabilitation process and introduced methods to discourage young people from entering the drugs culture—through education and by offering support services in the community. I should like to give the House two good examples of that.
The Fife youth drugs team deals with 14 to 16-year-olds who have committed offences and are involved in drugs. The initiative is a partnership between Fife council and Fife constabulary. We are rightly proud of the strategic benefits of that multi-agency approach, to which the Bill refers. Working in that way can produce results.
The second example is the drug treatment testing order, as established in the Crime and Disorder Act 1998. It is a partnership between the health service and social services and, importantly, has strict criteria attached to it. People who are caught up in drugs have the option of rehabilitation and random testing instead of immediately being taken through the prosecution process. Not only does that help to keep them out of the prosecution system 787 and to reform them, but it rightly helps to release services, which otherwise would be overburdened, to provide a much needed back-up. We are proud of that.
The ability to use the orders has allowed us to produce figures, and they are given strict consideration. There have been 78 orders since July and 273 referrals, which shows that they can make a difference. Unfortunately, there has been a 100 per cent. increase in new drug users in Fife among 15 to 24-year-olds. I believe that there is an increasing awareness that help is available. That gives us a better chance to influence young people at an earlier age and make a difference by preventing them from being drawn into the serious drug culture.
According to reports to the services that we set up, heroin is the main drug used, although cannabis is the most widely used drug by people aged between 13 and 21. The problem for the support services is that my constituency is predominantly rural. Trying to offer a wide range of services to rural communities—other hon. Members may suffer from the same difficulty—is challenging. Nevertheless, we all appreciate that drugs have a wide-ranging impact. They do not affect simply the user, but everyone in the community—next-door neighbours, sons, daughters, employees and, unfortunately, school chums. Many people are affected by drugs.
I emphasise—this is reflected in the Bill—that strategic working produces great benefits. I have witnessed that happening in a small way in Fife. I should like to share my experiences with other hon. Members during my time here and, I hope, gain from their experiences so that we can make an even greater difference.
I am grateful for the opportunity to make my maiden speech. In offering support, many hon. Members reassured me that it is not a daunting experience. I can assure everyone that it is. Each and every hon. Member remembers that, but no one wanted to tell me. The support is appreciated and I look forward to serving in the House. I also look forward more proudly and passionately to serving my constituents in Central Fife.
§ Mr. Andrew Mitchell (Sutton Coldfield)
It is a great pleasure to follow the hon. Member for Central Fife (Mr. MacDougall), who made an excellent maiden speech. He told us about his constituency and, in particular. that Fife was an ancient kingdom. I empathise with him. Sutton Coldfield is a royal town, so we have something in common. He spoke about the ramifications of the dreadful events of 11 September and the fact that they had been visited on his constituency. He mentioned the menace of drugs and said, with expertise and wisdom, how we should ensure that young people in particular do not enter the drugs culture.
The hon. Gentleman spoke eloquently about his predecessor, who was greatly respected in the House and a friend of many of us. At one point, he wondered whether the House would find his speech interesting. I can assure him on behalf of everyone present that we certainly found what he said interesting. We look forward to his future contributions to our proceedings. The only reservation that I would put to him is that he referred to the Liberal Front-Bench spokesman as his hon. Friend. He will discover that the one thing that unites his party and mine is the belief that the Liberals are not our hon. Friends.
788 I should at this stage declare an indirect interest, which will of course appear in the Register of Members' Interests. I am a director of Lazard and some of its subsidiaries, although my role is minor. Lazard is not a retail bank, so the interest is indirect.
The Bill is important and I am glad that it commands general support throughout the House. It builds on the approach adopted in the 1990s by the Government of which I was a member. I hope that Ministers will listen with care to the words uttered by my hon. Friend the shadow Home Secretary, as his speech was an important one. He strove to support the Government, but made several important points that will have to be discussed in Committee. The words that should have caused a tremor to run down the spines of Ministers was his likening the new agency to the Child Support Agency. The Minister of State, Scotland Office will recall that I had ministerial responsibility for that agency from 1995 to 1997, when I left the House. The Government should pay heed to my hon. Friend's comments on that point.
The Bill consolidates and reforms existing money-laundering provisions to create a single regime for offenders. That is an extremely important development. When in 1997 I returned to the City, having lost my seat, I was struck by the change in attitudes that had occurred, especially the vast amount of new regulations that had been introduced. It is not generally known that people who want to work in the City have to take an examination, which I found challenging. Although I cannot recall every tenet of what I learned for that examination, I do remember that the maximum penalty for being involved in money laundering is 14 years in jail. There has been a huge change in the way in which the regulatory framework and the administrative back-up that accompanies it is implemented in the City.
I apologise in advance to both Front-Bench teams for the fact that a long-standing and unbreakable commitment might result in my being a few minutes late for the winding-up speeches. I have only three points to make, and I hope that they will be helpful.
The first relates loosely to clause 324, which deals with the offence of failing to disclose. Previously, the terms applied to drugs and terrorism offences, but they are now to apply to money laundering. My understanding is that if a relatively junior employee of, for example, a finance house turns out to be a rotten apple and is caught offending, the financial institution as a whole will be held to have committed an offence—notwithstanding the fact that it has its own rule book and has made substantial compliance efforts.
It strikes me as hard to impose criminal liability on people who should have known what was going on but did not. It is especially hard, given that the new regulatory regime—I pay tribute to the Government for having listened carefully to practitioners before N2—under civil law is not yet even up and running. It will not be operational until 1 December. Under the Bill, people will be punished and in some cases jailed under criminal procedures when the new, carefully crafted civil procedures, which were debated at length by Parliament, have yet to be introduced. In his opening remarks, the Minister dismissed that point, but I urge him to consider it in Committee.
789 Substantial powers are now vested in the Financial Services Authority. I have great faith in Sir Howard Davies, who is a fine public servant, but we must hope that his successors will wield what is a very big stick sensibly in their regulatory tasks.
§ Mr. Kidney
On the widening of the duty of those engaged in financial services to report suspicious transactions, I understand the concern that is being expressed about the change from an objective to a subjective test. However, did not the hon. Gentleman go a little too far in saying that a company could comply with all its procedures and still be convicted? Does not the Bill specifically state that following industry guidelines is a defence against such an allegation?
§ Mr. Mitchell
I hope that the hon. Gentleman is right, but that is not my understanding of the effect of the clause; nor is it the understanding of many in the City.
There is clearly a significant problem with money laundering, but no one seems to have the faintest idea how substantive it is. There is a danger in implementing or crafting a solution to a problem that is unquantified. How great a menace is money laundering? How successful are we in seeking to combat it? How does it happen? Where does it happen? Is London good, bad or indifferent in its attack on money laundering? Should not we define the problem first?
When we open a bank account, we are required to send, among other things, our passport or a number of other documents. It is an enormously burdensome and bureaucratic procedure. If it helps the process, it is necessary and we are right to do it. However, has anyone established whether it helps? Bureaucrats have mushroomed, along with departments that police us all and internal auditors. Is 90 per cent. of all this a complete waste of time? We do not know. It would be interesting to have an answer. Perhaps the Minister will be able to help us when he replies.
I know that the FSA is worried about hedge funds. It believes that they could be vehicles for money laundering. They represent the fastest growth area of investment management, and by definition they are global. They are colossal businesses. They deal with individuals rather than institutional money, and they are clearly not so well regulated as other sectors of the industry. Hedge funds are the nerve ends of capitalism, but do the authorities have any idea of the extent to which money laundering is taking place? We must not set in place a solution to an unquantified problem.
My final point was touched upon by the hon. Member for Lewes (Norman Baker), who spoke from the Liberal Democrat Front Bench. Whatever we do in Britain or in British territories overseas will be ineffective unless it is replicated elsewhere. There is no point in blocking the fox holes in London if the foxes reappear in another jurisdiction. The European Union has a major part to play. It may warm the cockles of the heart of the shadow Attorney-General, my hon. Friend the Member for Stone (Mr. Cash), if I note that this is an area where, as with macro-environmental issues, there is a role for the EU. These issues need to be dealt with on a supranational basis.
790 This is an example where the EU would not be interfering in the minutiae of national life, but would be doing a great service to the financial community world wide. It would be policing its own member states and influencing other states. For example, there is much concern about how the Swiss deal with money laundering. There was a headline in a newspaper on 19 September stating that the Swiss were to take another look at money-laundering regulations following a scathing report. There had been recent press coverage of money-laundering links between Swiss banks with hidden funds for Helmut Kohl, Sani Abacha and Slobodan Milosevic. The Swiss Minister of Finance, Kaspar Villiger, was recently quoted as saying that banking secrecy is no protection for criminals. I beg to disagree with him.
It is hard to come to a conclusion other than that the Swiss reputation for banking excellence is all too often based almost exclusively on its secrecy rules. As recently as 14 July, a journalist on The Guardian investigated the issue. He found that it took 20 minutes to hide his cash in a Swiss bank account. I pass over the advertisement which I believe appeared in The Economist for a job in a Swiss bank as "Head of money laundering". I presume that that was a misprint. In any event, that underlines the concern about these matters.
I conclude where I started. The Bill is an important measure and I hope that it will benefit from a bipartisan approach. I hope also that, in taking major powers to tackle significant problems, we can retain a degree of humour and common sense between those on the two Front Benches to enable us to get things right.
§ Mr. Ian Davidson (Glasgow, Pollok)
I never envisaged speaking in the Chamber on an occasion when the Conservatives would be seen as the party of civil liberties, although they were only the party of civil liberties for the wealthy with no noticeable means of support. Nevertheless, it is a welcome step forward. However, it is clear that they operate in a different world from the rest of us. If someone has managed to buy a big house and has a business and several flash cars but no visible source of income, it is not usually assumed in my community that the money has merely been inherited but that it has come from somewhere else. That is the difference between us.
I was fascinated by the shadow Home Secretary. It is on such occasions that I think, "Thank you, God." His speech portrays Conservatives as the friends of criminals. They are more interested in the one or two who might be dragged through a court unnecessarily than in protecting working-class communities such as the one that I represent from criminals, including drug dealers, who prey upon them.
§ Mr. Grieve
I am interested in the hon. Gentleman's remarks about assumptions. He will know that in part 2 there are assumptions. Assumptions are to be made in Scotland as in England and Wales. Is he aware that in Scotland the courts are allowed not to make assumptions, whereas under the Bill courts in England and Wales will have to make them? Is he saying that the parts of the Bill that have been drafted for Scotland, a part of which he represents, should be changed so that there are mandatory assumptions there as well as in England and Wales?
§ Mr. Davidson
Yes, I am in favour of that change and of that assumption. It is an inappropriate anomaly.
791 I return to the remarks of the hon. Member for West Dorset (Mr. Letwin). It is a fair bet that our positions will change ere long. I suspect that I will be a Government Back Bencher for longer than he will be an Opposition Front Bencher. I am prepared to offer odds of 3:1 that he will not last until next Christmas. However, I digress.
It is clear that the Tories are soft on this area of crime. I was struck by the extent to which they were indulging in nit-picking rather than agreeing strongly with the Government about taking broad sweeping action against those who benefit from crime. The communities that we represent would be much happier if they thought that in principle there was unanimity in the House; we could then have some disagreements about implementing that principle. I am not certain that the Tories are committed to the principle of chasing down the gains of criminals.
I was appalled by the remarks of the hon. Member for Sutton Coldfield (Mr. Mitchell), who seemed to speak for about 10 minutes on vested interests. His speech was all about defending our banking system and the value that flows from that. We should understand that there are people in British banking who are crooks. They have benefited from crime for a considerable period. Some of us have travelled to other jurisdictions, where we are told that Britain is good at telling them how they should improve their systems. However, they say the City is the dirtiest washing machine in the world in terms of the amount of illicit money that goes through it. Looking at the recent Abacha case in Nigeria, it is clear that ill-gotten gains acquired by that family and several others were welcomed by bankers in London with open arms because they made money out of them. We should not take too pusillanimous an attitude when dealing with that. There is a crisis in communities such as mine, and if a bit of rough justice is meted out to wealthy people, so be it. If that makes me appear new Labour to my colleagues, I am prepared to bear that burden.
The Bill is not perfect, and I wish to raise some points with Ministers so that they can pursue them. I am concerned that there is insufficient capability under the Bill to allow the system—the law—to pursue the relatives or friends of criminals who have had assets transferred into their names. It is common to find that a house cannot be seized because it is owned by someone's wife, son or daughter who has no identifiable means of support or income. Again, that is a difference between the Conservatives and me; I do not assume that it is an inheritance or a legacy from a long-lost aunt. In many cases, the dogs in the street know that it is the gains of crime. The individuals involved might not have committed criminal acts but, none the less, they are benefiting. We need to know that those assets will be pursued.
§ Mr. Grieve
The hon. Gentleman has completely misunderstood the point made by the Opposition about relatives. We are not concerned about the ability to recover assets from relatives who acquired them from criminals in the knowledge of their criminality or, indeed, recovering them from people who have acquired them and have simply got them. However, if people have obtained assets innocently and their removal will create serious 792 prejudice against them, when they are innocent of any wrongdoing or knowledge of wrongdoing, am I to understand that the hon. Gentleman feels that that is just an instance of being unable to make an omelette without breaking eggs? That would be a nice Stalinist precept, to pick up what he said earlier.
§ Mr. Davidson
Thank you, God. I must tell the hon. Gentleman that Stalin dealt with things more roughly; he did not simply break eggs. Then again, perhaps the hon. Gentleman had a sheltered upbringing.
I was not referring to the Opposition, but the hon. Gentleman has made a helpful point. If someone suddenly receives from his father, who has no visible means of support, an enormous sum of money, and does so entirely innocently, the natural assumption is that he would consider where it had come from. The hon. Gentleman and I obviously live in different worlds. Most people in my constituency, if they suddenly received an enormous gift from someone they knew, would start to wonder where it came from. I do not assume innocence in that regard. However, if the hon. Gentleman has some money to spare, I would be happy to see him afterwards in the bar or the venue of his choice.
§ Mr. Davidson
May I carry on, as I want to make a couple of points?
Those who assist criminals are as bad as, or worse than, the criminals themselves; I refer to lawyers, accountants and bankers. Many criminals in the west of Scotland, whence I come and which I represent, would be unable to conceal their assets but for the professional help that they receive. Those individuals—accountants and lawyers—are clearly known to the police and other lawyers, which raises several issues. Not only is there the question of the inability of the Law Society and other professional associations to police their own members, but the penalties are insufficiently severe to act as a deterrent. I hope that the Bill's provisions will be applied vigorously to identify lawyers, bankers and accountants involved in concealing assets, punish them severely and send a message to others. For far too long, the only people punished for drug dealing have been people from communities such as mine at the very bottom of the tree; those who are much higher up get off scot-free. That is not fair, and not what a Labour Government should be doing.
We will apply different legislation to terrorism, drugs and crime; they will be treated as three separate issues. It has already been said that there are spillovers and tie-ins linking the three, and there are a couple of instances in the Bill where the distinction between crime and drugs is made too strongly. Perhaps there is an opportunity for loopholes to be exploited, contrary to the purpose of the Bill. I hope that Ministers will look at that.
I also seek clarification of the extent of the mechanism by which there will be an opportunity to review the Bill's operation to close loopholes, as the Chancellor does with the Budget every year when he closes tax evasion and avoidance loopholes, and deals with similar misbehaviour. We do not want to decide issues here on the assumption that they mean one thing, only for them to be reinterpreted by the courts in a way that we do not wish; we want the opportunity to step back and sort matters out without going through the full range of parliamentary procedures.
793 On the question of law and lawyers, may I mention judges? We are perhaps giving them too much discretion at several points in the Bill. They are unlikely to be as unsympathetic to the prosperous as we would wish them to be. They are frequently harsh on the little men and women but let off the prosperous. It is inappropriate for me to give examples in case they sue me when I get out. [HON. MEMBERS: "Go on."] No, I will not be tempted. There ought to be an assumption that assets will be confiscated except in exceptional circumstances; it should not be merely an option available to the court.
I agreed with the hon. Member for Sutton Coldfield about overseas boltholes. As he said, it is no good stopping up boltholes in this country if places such as Guernsey, Jersey, the Isle of Man and other communities that are basically parasitic on Britain's financial community can be boltholes for people to hide ill-gotten gains. Much of the work done by the Financial Action Tax Force with overseas territories, the Organisation for Economic Co-operation and Development and the G8 is helpful, but I am concerned that it does not go far enough. The same standards need to be applied across the world; if boltholes and weaknesses are discovered in certain places, the money will flow there. I agree with the hon. Gentleman's point about hedge funds and the like.
§ Mr. David Heath (Somerton and Frome)
The hon. Gentleman is making an important point about British overseas territories and the Crown dependencies. Very often, people abroad simply do not understand why the United Kingdom's jurisdiction does not seem to apply to them; people can do what they want in them, yet we are responsible for them in international law. We cannot have treaties with them, so we need equally strong legislation in the British overseas territories and the Crown dependencies.
§ Mr. Davidson
I am satisfied that we are making great progress on that; Bermuda, which I know well, has cleaned up its act considerably.
To follow precedent, I should have started by saying that my hon. Friend the Member for Central Fife (Mr. MacDougall) is a wonderful man and made an excellent speech. May I say so now? He is undoubtedly one of the good guys in politics and will make a great contribution to the House, as he already has to local government. I would say more wonderful things about him, but I hope that he will excuse me for rushing on to a point about incentives.
If money is to be seized, may I have some of it, on the basis that my constituency is one of those where the ill-gotten gains of drug dealing are generated? It seems reasonable that the proceeds should not disappear into the maw of the Treasury, but be hypothecated so that they go back into communities such as mine, to show that the system works on their behalf. As I raised the point, may I be guaranteed that my constituency will be among the first to receive some of that money?
§ Mr. Howard Flight (Arundel and South Downs)
I congratulate the hon. Member for Central Fife (Mr. MacDougall) on his useful grass-roots comments on fighting drug crime.
794 The main part of the Bill sets up the Assets Recovery Agency and the various new mechanisms for the recovery of the proceeds of crime through both civil and criminal proceedings. All hon. Members must support that in principle. The mechanisms to date have not worked well. It is wrong in principle that there should be an incentive for people to benefit from crime and, even if they are caught and sent to prison, to come back and live comfortably on the proceeds. It must therefore be right to tighten up the law in this area.
It was wrong for some hon. Members to belittle the comments on human rights made by my hon. Friend the Member for West Dorset (Mr. Letwin). As many outside professional bodies have pointed out, there are aspects of the Bill which may not be satisfactory from a human rights point of view. I hope that those will be addressed in detail in Committee.
The Crown Prosecution Service, the Assets Recovery Agency to be established by the Bill, the National Criminal Intelligence Service and the Financial Services Authority will all—dare I say it—have their snouts in the trough of the money recovered through the proposed initiatives. The particular roles of each body, as my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell) pointed out, and the costs should be examined and possibly simplified.
From conversations with members of the Crown Prosecution Service about whether it is justifiable to introduce legislation that could lead to injustice, it seems that the view of those responsible for catching crooks and finding drug money is that it does not matter too much that the law may lead to injustice. They want it so that they can go for the real crooks and argue that it will never be their intention to use the law against innocent staff or unreasonably. That is probably a fairly held view, but it sits slightly uncomfortably with the principle of Anglo-Saxon law—"the law's the law." It is not to be used only when it suits people; it is to be obeyed by everybody.
There are concerns that with the use of the civil courts to confiscate assets, people could be found not "guilty" but "probably guilty". That would trespass across the barriers of our tradition that a person is innocent until proven guilty, rather than guilty until proven innocent. The Law Society and others have pointed out that third-party businesses could be caught in the Bill's net. An independent trader could go bankrupt as a result of having assets restrained as part of a larger investigation over a protracted period. Although it is not very likely, no one would want such an injustice to occur.
On money laundering, I welcome the regulation of exchange bureaux. I have long thought it extraordinary that they were not properly regulated, although they were obvious targets for money laundering. I am somewhat concerned about the new criminal offence of failure to disclose suspicions that another person is engaged in money laundering. It is one thing to report knowledge; it is another thing to report a suspicion, but as others have pointed out, reasonable grounds for suspicion are subjective.
I should declare an indirect interest. As the register records, I am still chairman of the investment management business which I built up over 20 years. The requirements that apply to such a business are slightly different from those that apply to banking, but one of the positive aspects has been working with the police. 795 They come in with videos and teach the on-line staff what to look for. That should remind the House that it is not grandees who might suffer injustice, but ordinary junior on-line staff. When money flows through, they are the people at the coal face who must look for evidence of money laundering and who in future will have to look properly for terrorist funds. Do the Government intend to include in the Bill, through amendments in Committee, their proposals relating to terrorist finance, or will those be the subject of a separate Bill?
§ Mr. Connarty
I respect the hon. Gentleman's disclosure that he has some knowledge of the industry. If someone came into his business with a large sum, would he investigate where the person got it, or would he just take the money and invest it for them? If he was unhappy with the answers given, would he consider bringing in the authorities, or would he say to the person, "Take your money elsewhere. I don't want to be involved with it and I don't mind where you got it"? If the matter is not drawn to the attention of the authorities at the level of his business, how will the authorities ever have a chance of getting on to such people?
§ Mr. Flight
I thank the hon. Gentleman for his question. First, if someone came in with a large sum in cash, one would immediately report him. Failure to report is a criminal offence for which one could go to jail. Secondly, if a potential new client says, "I want you to manage some funds for me," one has to check where the funds come from, check the person's identity and get references. There is a lengthy procedure to establish the propriety of that individual. If people are investing in unit trusts, there are procedures similar to banking procedures to check that the money has come from a proper bank and who the potential investors are.
There are already at retail, so to speak, and at higher level quite demanding procedures to identify money laundering. One of the reasons why the rules have been tightened up is that some banks have no doubt been lazy. That accusation is directed at London and even more so at the United States. There are other countries where nothing at all has come to light, not so much in British dependencies, as we have heard, as in the whole of Latin America, Africa and Asia. I suspect that the proceeds of drugs are largely ending up not in bank accounts in North America or London but in assets in certain other parts of the world. That problem has not yet been effectively addressed.
§ Mr. Connarty
The hon. Gentleman's answer raises my estimation of his integrity. My question was whether, if someone's response to his questions did not satisfy him, he would report that person to the authorities, and whether he thought that anyone else in his position should do the same?
§ Mr. Flight
Absolutely yes. It is already an offence not to do so. If someone cannot answer questions in a way that allays any suspicion that they may have been involved in money laundering, it is an offence under the Proceeds of Crime Act 1995 not to report that individual.
Clause 325 is the "tipping off" clause and is extremely important. The practical collaboration between people in the financial services industry and the police is just as important as the law. When the Bank of Credit and 796 Commerce International—BCCI—applied to the UK for a banking licence, the licence was granted, but ironically, when it applied to Guernsey, the application was turned down. The Guernsey Financial Secretary had contacted the international police authorities immediately, and had been advised that the organisation had a bad name. He therefore refused to grant it a licence.
Banks need to know what businesses to look out for, and potentially even which individuals to look out for. They need to be able to open the books if inquiries follow. Such collaboration needs the backing of the law: neither banks nor investigating authorities can act illegally. I feel that there is scope for much more practical collaboration, and I welcome measures to increase the investigative powers of the police, but I fear that some parts of the Bill could be detrimental to co-operation that is already crucial and will become even more important in the pursuit of terrorist money.
Clause 325, incidentally, contains a drafting error, of which the Government may be aware. It refers to a "disclosure", in the context of a disclosure to a third person who is not a constable or an authorised person, but it does not actually say that: it also uses the term "disclosure" in a different sense from making a disclosure to a constable. That needs to be tightened up.
The Minister probably knows of the practical issues raised by the Institute of Chartered Accountants in relation to the money-laundering provisions. I am sure that they will be considered in more detail in Committee.
It is crucial for efforts to combat money laundering to be focused, and not sidetracked to other agendas. Allusion has been made to unfair treatment as between smaller and larger countries. Some activities of the Organisation for Economic Co-operation and Development were sidetracked into what was seen as the pursuit of unfair tax competition, and the establishment of sanctions against smaller countries, mostly in the West Indies, at a time when there were arguably far greater "unfair tax advantages" in Holland and in certain American states.
I am pleased that, in May, the United States Financial Secretary reversed US policy on that front. He did not want the pursuit of money laundering and terrorist funds to be sidetracked into other political agendas. The Bill currently going through Congress, while encouraging the use of sanctions to pursue terrorist money, makes it clear that they should not be used to further political objectives such as tax harmonisation. I trust that when we get around to producing measures for the pursuit of terrorist funds we will take the same stance.
It is strange that the initiative on money laundering never took account of the problem of terrorist funds where clean money is used for filthy ends, concentrating purely on dirty money being made clean. The aspects are different: they will require different focuses and different codes of conduct if those in the finance industry are to pick up what is needed and report it duly to the right authorities.
The Bill, especially if there is practical collaboration, has the potential to tighten things up here; but we must then ensure that they are tightened up elsewhere in the world. There will be fewer problems, potentially, as a result of the tightening up that is already proceeding in the United States and is due to begin in continental Europe, which is ahead of us in some respects; but we must face the issue of how to tighten up in other parts of 797 the world if we are not to drive a problem that has been intermittent here into territories where there is little or no scope for policing.
§ Stephen Hesford (Wirral, West)
At the risk of incurring the wrath of my hon. Friend the Member for Glasgow, Pollok (Mr. Davidson), I must confess that before entering the House I spent 16 years practising at the criminal Bar. The only saving grace is that sitting between my hon. Friend and me is another lawyer, my hon. Friend the Member for Wrexham (Ian Lucas), who I am sure will come to my aid if necessary.
I have another confession that may upset my hon. Friend the Member for Glasgow, Pollok, who seems to have survived the first. I strongly agree with the tone and the sentiment of his speech. I want to help the system to help his and my constituents, who bear the brunt of the war against drugs.
I have practised in Manchester. I know that other Members have practised there too, and will know of cases such as those with which I have dealt. A nine-year-old on Moss Side would be delivering heroin on his BMX bike; a 12 to 16-year-old would be either forcing or cajoling him to do it. They would be armed with automatic weapons: there would be gangland warfare, with boys shooting each other. Sadly, I represented a number of those kids, and I do not believe that one of them is alive now. That is the limit to which the drug problem can take us.
Behind such tragedies were the Mr. Bigs. They lived in another part of Manchester, in the big houses to which my hon. Friend the Member for Glasgow, Pollok referred, with no other visible means of support. I would back any legislation intended to disrupt that chain of human misery, and I believe the Bill is intended to do precisely that.
I confessed to the shadow Home Secretary in an intervention that I was mystified about the source of his thinking. A White Paper was published in March, and there was heavy consultation on it. I see that his colleague, the hon. Member for Beaconsfield (Mr. Grieve), is now deep in conversation, but I hope that we shall be told in the winding-up speech whether any of the pedantic little points made by the shadow Home Secretary filtered through during that consultation. As I think he admitted in the end, they are really points for the Committee stage rather than for a debate on the principle of a Bill. It is a shame that there cannot be a more positive approach to such important legislation. I welcome the approach of the Liberal Democrats, woolly though it was, as usual.
§ Mr. Grieve
I note that, like me, the hon. Gentleman is a practising member of the Bar. Does he really think it pedantic to highlight areas in which, if the Bill does not work as it is intended to work, it will cause grave injustice? Are such points merely pedantic rather than points of general principle?
§ Stephen Hesford
If there is a point to be made, it should be made in Committee; but, with respect, I do not agree that a point was being made.
I merely ask Opposition Members to reflect on whether they warmly welcome the Bill. I suspect that some do, but I hope that we shall hear a more positive announcement in 798 the winding-up speech. I want to know why they support a Bill to protect the communities that Labour Members want to protect.
In many ways, the Bill is a consolidating measure. It is complex—it has more than 400 clauses—so it is not surprising if there are some errors of drafting, but, again, this is not the time or place to discuss them. The debate is more about the principle.
Drug trafficking is an evil. It is a black economy. My hon. Friend the Member for Central Fife (Mr. MacDougall) said that it accounts for 1 per cent. of GDP. My understanding is that it accounts for 2 per cent. It is a disgrace if, in a civilised country in the 21st century, we cannot get our hands on that money and put it to better use. That is what the Bill is about.
§ Mr. Grieve
The hon. Gentleman will obviously be familiar with the way in which the Drug Trafficking Offences Act 1986 has worked. One of the things of which he is likely to be aware, as I have been in practice, is that over the years the amounts that have been assessed for confiscation have consistently turned out to be higher than the assets available for seizure. Does anything in the Bill make that less or more likely to happen? If the Bill is to work, we will have to make assessments that lead to the money being seized, rather than, as has happened under the Drug Trafficking Offences Act, less and less money being taken year by year.
§ Stephen Hesford
I do not want to get bogged down, but in my experience the procedure under the Drug Trafficking Offences Act was cumbersome. No one really believed in it. This Bill has been introduced not only to consolidate measures, but to make the procedure work better. I welcome that, and I hope that the hon. Gentleman does so too. Rather than just nit-picking, Conservative Members should look forward to procedures coming into operation that will make the principle work better in practice in our courts.
The Bill will change the culture. The culture of court life, if I may put it that way, must change in two ways. The judicial culture must change. Often, half the judiciary were not interested in chasing assets, and the other half—the hon. Gentleman, in a sense, made the point—were ham-fisted in doing so. They overkilled the case and brought the procedure into disrepute.
More important, there must be a change in culture among defendants. I mainly defended when I was at the Bar. I can probably count on one hand the defendants who genuinely thought that their assets were at risk; many brought a soul-destroying smugness to the court process. I want to see the smile wiped off their faces. If the Bill, in changing the culture of the court, gets anywhere near doing that it will perform a major service.
Part 1 sets up the Assets Recovery Agency. I welcome that, but I ask my hon. Friend the Minister to deal with the following point either in his winding-up speech or in due course. The aim of the procedure is to make the recovery of criminal assets work better, but I worry whether agencies will speak to each other sufficiently clearly that they will know which one is doing what. I understand from the outline in the Bill that not only the director but the Director of Public Prosecutions, Customs and Excise and the Crown Prosecution Service can make an application. There should be clear demarcation about 799 who will make the application. The director may be the best person to do so, but in practice smaller cases may be devolved to the other agencies. I see the Minister nodding. That is helpful, but there is a potential problem: cases may fall between two stools. Otherwise, I welcome part 1.
Part 2 deals with confiscation. One of the key things is the timing of the application. Clauses 4 and 7 make an important change: confiscation orders can now be made at the beginning of the process—I welcome that emphasis—rather than at the end. That is a significant change in focus.
Some of the wording in the Bill is novel in terms of criminal legislation that I am used to dealing with, but that is not a criticism. It may be a welcome change, but I raise a question about the phrase "criminal lifestyle", which may be slightly problematic. Perhaps the concept of criminal lifestyle needs tightening. Otherwise, I welcome the principle of including the phrase "criminal lifestyle" in the Bill.
I welcome clause 29, which deals with the absconding unconvicted offender who sees the writing on the wall and, along with his assets, disappears to the "Costa del Crime". If it is properly administered, clause 29 will be a major bonus.
§ Mr. Grieve
I am sorry to take the hon. Gentleman back a moment, but I noted with care his comments about criminal lifestyle. Would he care to amplify what gives him cause for concern? It is defined under "Interpretation" in clause 75. Is the interpretation causing him concern or some other matter?
§ Stephen Hesford
It is a new concept. My concern is a general one. If we are going to introduce a new concept, let us get the thing nailed down so that it works. That is the point that I am making. I hope that that helps the House. Clause 41, which deals with restraint orders, will be particularly significant.
Part 5 deals with civil recovery of proceeds and brings us into line with jurisdictions such as the United States of America and Australia. The United States has particular expertise in going after drug cartels. If it can set up a civil recovery of proceeds procedure, it is no bad thing that we should go down the same route.
I welcome the redefinition of money-laundering offences in part 7. As other right hon. and hon. Members said, it simplifies the system, which must be a good thing in terms of getting Mr. Big.
If the Bill does work—I believe that it will if we get it right—it will change the culture and it will enable criminal proceeds to be recycled, to the benefit of us all. I look forward to that.
§ Mr. Mark Field (Cities of London and Westminster)
I suppose we should be grateful that the Government have deigned to engage Parliament in its much heralded war against terrorism. After all, judging by the stream of policy announcements made by the Home Office to favoured newspapers in recent weeks, a stranger to House procedures might conclude that the Minister for Police, Courts and Drugs and the Home Secretary had unfettered authority over domestic affairs.
First, we have seen the nonsense of proposals for compulsory identity cards for all. It was then unilaterally announced that there will he a seven-year sentence for 800 anthrax hoaxers, and 10 days ago it was decided that incitement to religious hatred would be made a criminal offence. Perhaps this debate, and I hope others in the future, will be a timely reminder to the Home Office that we live in a parliamentary democracy.
I may be one of only 166 Members of the official Opposition, but I am certain that the people of Cities of London and Westminster sent me to this place to stand up for the ancient freedoms of the people of this country and to hold this increasingly illiberal and intolerant Government to account. [Interruption.] Hon. Members may laugh. I realise that, whatever I say today, this Bill will almost certainly become law in some form or other, but I hope that there will be careful scrutiny in Committee. I know that in the years ahead, I shall look back upon my contribution to this debate with a sense of honour, whereas I suspect that many Labour Members will feel a sense of shame when they realise how they have allowed themselves to so cravenly approve many of the measures.
I should remind the House that this legislation was originally published as long ago as March and was intended to prevent criminals from laundering the proceeds of their offences.
§ Mr. Field
No, I want to get on.
The now apparently indispensable measures that target the financiers of terror were added only as an afterthought. Last week's press release—this goes back to a point made by the hon. Member for Wirral, West (Stephen Hesford)—made it clear that the Government intend this legislation to deprive international drug barons of their ill-gotten gains. Apparently, the top five Mr. Bigs at large have illicitly amassed some £204 million in assets. On that basis, one might ask what objection any reasonable person would have to these measures.
As ever with this Government, the devil is in the detail. The proposed scope of this Bill goes considerably beyond the handful of multi-millionaire crime bosses. In effect, it allows the State virtually a free rein to investigate the financial affairs of each and every one of us, placing the burden upon the individual to explain his every economic action.
Politicians have an overriding responsibility, especially during times of international crisis, to resist taking a populist approach to appease the understandable public demand for swift action against crime. After the appalling terrorist outrages of 11 September, I entirely understand the temptation facing the Government to introduce a whole raft of new laws—part of this was drafted post-11 September—to pacify a nerve-racked population. That temptation should be firmly resisted. Equally, amid the current uncertainty surrounding our military action on foreign soil, I can appreciate the fact that the Government find themselves under intense pressure to be seen to be doing something on the home front.
I represent an inner-city seat in the centre of the capital and I accept, as I think we all do, that we will have to grow accustomed to wider surveillance of certain groups of people in our country. That may involve tougher laws on money laundering and other things. However, it does not justify the wholesale erosion of our liberties that is heralded by the Bill.
801 The traditional values of freedom and tolerance, which were referred to by my hon. Friend the Member for West Dorset (Mr. Letwin), have underpinned our open society. 'The implicit attack upon the presumption of innocence that is contained in the Bill will go a considerable way to dismantling those democratic freedoms, which so many of us hold close to our heart.
My party recognises the importance of fostering the values of individual responsibility and self-determination in our fellow countrymen. Many of those coming to our country from abroad do so from nations where all authority flows from a centralised state and where all too little reliance is placed on individuals having the freedom to live their life free from the demands of officialdom.
The Bill proposes to confiscate the assets of people who may have been convicted of no crime at all. As many hon. Members have said, the mechanism of the Assets Recovery Agency involves the introduction of the use of presumptions about a person's past conduct as a "criminal lifestyle". On that basis alone, an individual's assets may be confiscated on the grounds that it can safely be presumed that they must be the proceeds of crime. The presumption of innocence, which is at the centre of the rule of law, is thus replaced by the notion that the police and other authorities "know" that the accused is guilty.
Worse still, the Bill introduces into English law the entirely novel concept of "unaccountable wealth". If you or I, Mr. Deputy Speaker, cannot explain the source of our income, the state will apparently have the authority to confiscate assets, either directly or by means of punitive taxation. As if those presumptions were not bad enough—we must remember that this applies to people who may not have been convicted of anything—the ability to remove people's assets will be on the basis not of the criminal test of proof "beyond reasonable doubt", but on the civil test of the "balance of probabilities". In essence, a criminal sanction will be imposed without the normal safeguards.
As has been mentioned by a number of Labour Members, these provisions were originally directed specifically at the proceeds of drug-related crime. However, we must look carefully because, as was made clear by my hon. Friend the Member for West Dorset, the civil forfeiture regime has been extended to apply to all offences.
I have the privilege of representing Cities of London and Westminster and, as had been mentioned by my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell), I must report to the House that there has been considerable disquiet in the financial services community as to the likely effect of the money-laundering provisions in part 7 of the Bill. Although this may stretch the incredulity of the hon. Member for Glasgow, Pollok (Mr. Davidson), under the current regulations, bankers, lawyers and accountants are already under an obligation to report to the police any suspicions they may have about someone's financial assets. That was made clear by my hon. Friend the Member for Arundel and South Downs (Mr. Flight). Indeed, failure to do so amounts to an offence under various money-laundering regulations. However, the courts still have to prove beyond reasonable doubt that a financial intermediary knew of or suspected money laundering.
802 These provisions, particularly clause 324, severely dilute the burden of proof. In future, a prosecution will be upheld if a judge determines that a professional adviser should objectively have had reasonable grounds for suspecting that another person was engaged in money laundering. It strikes me that that goes to the very heart of the client-professional adviser relationship. Such relationships should be based upon mutual trust, yet these regulations put an almost impossible burden on the very scrupulous and ethical professional whom the police should be trying to engage in co-operation over the most serious and flagrant instances of criminal wrongdoing. Instead, as soon as a lawyer or accountant passes on suspicions to police—he will be guilty of an offence if he fails to do so even when there are merely reasonable grounds for suspecting that money laundering has taken place—professional ethics will prevent him from continuing to deal with that client's affairs and he will not be able to alert the client to the fact that he has made a report to the police.
As well as eroding the sense of trust that underpins any professional relationship, it is fair to say that in the sphere of financial services the Bill will create a community of informants. It will undermine the essence of professional relationships and will involve bureaucratic procedure that will not come cheap. As my hon. Friend the Member for Sutton Coldfield pointed out, all organisations in the financial services industry will now face the enormous cost of employing an army of compliance officers and other internal regulators. That flies in the face of the City's attempts to remain highly competitive in the fast-moving global market of financial services and adds a further significant layer of regulation—there has been a significant amount of regulation recently—at a point in the economic cycle when the City is already under intense pressure over profit margins.
I realise that we are dealing with many issues, but I shall concentrate on the money-laundering provisions. There are some serious practical considerations that suggest that some of the money-laundering provisions might be unlikely to be effective against terrorists. There is a key difference between terrorism and organised crime such as that involving drug barons. Drug barons usually try to obtain their funds illegally and seek to use the banking system to conceal that fact whereas, by contrast, terrorists often acquire their funds by entirely legitimate means.
Osama bin Laden, for example, is the son of a wealthy industrialist and built up a considerable fortune not only by means of political donation but by engaging in large-scale Government contracts. There is little to suggest that the funding of his sophisticated network of international terrorism would necessarily fall foul of the Bill's money-laundering provisions.
It seems that the likely effect of many of the Bill's provisions would be to add a significant regulatory burden to our financial services industry. It would also work to dissuade potential depositors from using City of London institutions and would shroud our entire financial sector in an atmosphere of mutual distrust. It would do that while failing to have a serious impact on the funding of global terrorism.
Contrary to what the Government tell us, none of the provisions will make Britain a remotely safer place: international terrorism will continue to evade with ease the money-laundering provisions and many of the Bill's 803 other provisions. I believe also that the most prolific drug barons will continue to find the wherewithal to escape the clutches of state control.
Like many Opposition Members, I have been instinctively suspicious of many of the often self-serving arguments of civil libertarians. However much the Home Office likes to try to persuade us that this Bill which it now seeks to rush through Parliament will curtail only the legal rights of terrorists, drugs barons and their associates, I implore hon. Members on both sides of the House to consider carefully before approving this barrage of ill-thought-through and draconian measures.
One should remember that when a state adopts draconian powers against strangers today, it will use them against friends tomorrow and against oneself the day after that. In a world in which the influence of lawyers seems to be ever more intrusive—
§ Mr. Field
Perhaps I should make it clear that I too am a former lawyer. All that, however, was some years ago.
In a world in which lawyers' influence seems to be ever more intrusive, it is easy to be dismissive of a highbrow defence of the rule of law. However, it is especially in times of such national crisis that the rights of the individual must be defended with particular vigour.
§ Mr. Stephen McCabe (Birmingham, Hall Green)
It is a clear comment on our parliamentary democracy that I have the good fortune to follow the hon. Member for Cities of London and Westminster (Mr. Field). Although the two of us ostensibly agree on the Government's proposals in the Bill, it would be hard for anyone listening to his comments and then mine to make that connection. I make it clear from the outset that I welcome the Bill, and that I am on the side of the little person who has suffered too much at the hands of the criminal Mr. Bigs who have been getting away with it. The Bill is all about addressing that issue, and that is what we should be concerned about.
I do not know what it is like in Cities of London and Westminster—that inner-city constituency—but one thing that we have to contend with in my constituency is people selling heroin to primary school children at the school gates. They are changing the price of heroin so that it approximates to the price of school dinners to draw children into their net. I want those who are gaining from that marketing activity—the Mr. Bigs who are behind it—to lose their comfortable lifestyle.
As for those who can take over council housing tower blocks and run them as private establishments—they use a panoply of equipment usually associated with security firms for their own intimidatory purposes to operate their drugs markets—I want their equipment confiscated and their ill-gotten gains taken from them. I also want the pubs in Birmingham where people conduct drug deals in full view of the public, using mobile telephones to contact their business masters, to be prevented from carrying on 804 that trade. I want every penny that those people and their masters gain from that trade to be taken off them. That is not an unreasonable ambition.
There are other examples in our society that show how people have benefited from illegal activities to enhance their own lifestyle. Anyone who is not familiar with Northern Ireland need only drive round the Holywood area to see the lovely lifestyles maintained by some people to realise why there may be no incentive in certain quarters to ensure that the peace process succeeds. We should try to tackle those who illegally maintain such a lifestyle.
Other hon. Members will have shared my horror when, last year, a container was opened to reveal the bodies of unfortunate people who had been promised a new life but suffocated in their attempt to reach this country. Had they survived they would have been sold into a life of slavery and prostitution. We talk about illegal asylum seekers and the problem of human traffickers, but the truth is that a market and huge financial incentives drive that trade. Some people make enormous profits at the expense of those unfortunate folk. I believe that we are justified in taking any action that we can to ensure that we take that money off them.
The Bill is largely a consolidation measure and parts of it should not surprise anyone. Some earlier remarks, such as some of those of my hon. Friend the Member for Wirral, West (Stephen Hesford), were lost on me as they seemed to be dealing with practices that have already been implemented. It seemed a pointless use of the time available. Nevertheless, there are one or two legitimate concerns about how the provisions will operate in practice. We can make it clear that we support the Bill's fundamental principle of going after those who enjoy a lifestyle that is far too good at the expense of others while questioning how the legislation will operate in practice.
Although I am not sure that I want to associate myself with the hon. Member for West Dorset (Mr. Letwin), and I am sure that he would not want to associate himself with me, he drew an interesting analogy between the Child Support Agency and the Assets Recovery Agency. He is not the only Member to have had that thought. I ask my hon. Friend the Minister to consider precisely how the ARA will operate. Does it have as a target the recovery of £60 million by 2004? If it does, can we be certain that it will recover that sum by going after those whom we really intend to catch in the legislation, and that we will not get the soft-touch response for which the CSA was validly criticised in its early days? I ask for his reassurance on that point.
I am also interested in how the agency director will perform his or her functions. Although I am clear that I want the director to have those powers, I do not want him or her to be able to go on fishing trips. Some years ago, when John Stalker, then deputy chief constable of Manchester, was under intense investigation, various such fishing trips were undoubtedly conducted into the business activities of some of his friends and associates, resulting in untold damage. Although I am clear that the agency that we are establishing and its director will not have such powers under the Bill, these provisions will outlive many of us. I am anxious that we make it clear that the agency and its director should not be used for such purposes.
805 The hon. Member for Lewes (Norman Baker) and others mentioned the trade-off between the civil and the criminal route. We have had assurances that the criminal route will be pursued first, and of course that is what I want to hear, but we have not always been entirely satisfied with the performance of the Crown Prosecution Service. Will there be monitoring of which cases take which route, so that we can be clear that there is no temptation to go for the softer option because it seems too difficult to pursue the criminal route?
People will be delighted to know that we are taking away ill-gotten gains, but recovering money is no substitute for justice, which we should pursue first and foremost.
§ Mr. Grieve
The hon. Gentleman is making a thoughtful contribution. Does he think that there should be a target at all? Is a £60 million target appropriate, or should not we simply ask the agency to do its very best to recover assets? Arbitrary targets may have been one of the reasons why the CSA got into so much difficulty.
§ Mr. McCabe
I do not mind if the Government have a target based on a notion of how much money is available, but I do not want the agency to be tied to that target, in which case the way in which it is achieved might be an issue of dispute.
§ Mr. Bob Ainsworth
To clear up any confusion, the £60 million target is for the asset recovery strategy, which is already being introduced. It is not a target for the agency, which we will expect to target those at the top end to get the highest returns. It will not be tied to the £60 million target in any way.
§ Mr. McCabe
I am extremely grateful for that clarification.
I am conscious that previous Department of Trade and Industry inquiries have been alleged to have undermined subsequent prosecutions. Can we be certain that the director's powers to compel an individual to supply information and produce documents will not undermine a prosecution because the defence will be able to argue that the individual was forced to produce information under duress?
The hon. Member for Lewes seemed to insist that there would be innocent parties, and I do not doubt that, but my point is that when someone who has taken advantage of and exploited countless people decides to use the ill-gotten gains to pay for school fees, skiing holidays and finishing schools—perhaps through some carefully arranged legacy—I regard the child in those circumstances not as an innocent party but as a beneficiary who is gaining at the expense of people who have suffered a far greater hardship. I am not as concerned as some Opposition Members are to protect the interests of such so-called innocent parties. If one gains in that way, one has to accept that what has been got by unfair means can be taken away just as quickly. I see no problem with that.
To return to a hobby-horse of mine, would clause 11 enable us to recover proceeds from those whose lifestyle has been partly financed by fraudulently obtaining libel damages?
§ 7.5 pm
§ Mr. Michael Weir (Angus)
The SNP-Plaid Cymru group fully supports the thrust of the Bill. The system being established seems to he similar to the Criminal Assets Bureau in the Republic of Ireland, which I understand has seized assets worth £6.5 million in the past three years. By contrast, under the current legislation, confiscations in Scotland have amounted to £1.7 million since April 1999.
It is interesting to note that the vast majority of those confiscations—68 out of 81—have been for drug offences. As the hon. Members for Central Fife (Mr. MacDougall) and for Glasgow, Pollok (Mr. Davidson) so eloquently stated, drugs are a major menace in all our constituencies, be they rural or urban. The Bill will go a long way towards tackling the problem of assets acquired by drug barons.
We welcome the fact that the Scottish Executive will be the enforcement agency in Scotland, although I have some doubts about the role of the Lord Advocate. We call on both the Scottish Executive and the UK Government to use funds realised under the legislation as additional resources for tackling crime, and for combating drug use in particular. It would not only be justice but poetic justice if the assets of those involved in that vile trade were used to reduce it.
Some have expressed concern about human rights. I, too, have some doubts about the human rights aspects of certain parts of the Bill. As another recent escapee from the legal profession, I raise the matter because I am concerned that we should not get into the situation that arose in Scotland after the passing of the Scotland Act 1998 and the incorporation of the European convention into Scots law. We had severe problems with temporary sheriffs, road traffic cameras and various other matters. We want to get the legislation right so that the people against whom it is targeted are caught and dealt with quickly. We must not leave loopholes that can be exploited.
I have a particular concern about disclosure orders and the role of the Lord Advocate. A person made subject to a disclosure order may be liable to self-incrimination, which might jeopardise the chance of a fair trial. As I understand the Bill, the Lord Advocate will be involved both in the criminal prosecution, should there be one, and in the civil recovery proceedings.
If the Crown Office believed that someone was using assets gained from crime to set up an apparently legitimate business but did not have sufficient evidence to gain a criminal conviction, it could serve a disclosure notice in the name of the Lord Advocate under clause 379 to obtain information for the civil recovery action. However, supposing that during that action information was disclosed that would warrant a criminal prosecution, would there not be a problem with the Lord Advocate being involved in both proceedings? That could create a problem under article 6 of the European convention on human rights. Some thought should go into the separation of the two roles.
The problem will not arise in England, where the Assets Recovery Agency will deal with the civil aspect while the Crown Prosecution Service will deal with the criminal aspect.
§ Mr. Harris
My understanding is that the unit in the Scottish Executive that will be entirely responsible for civil recovery will be answerable exclusively to the First Minister and not to the Lord Advocate.
§ Mr. Weir
My understanding was that it would be dealt with through the Crown Office and the Lord Advocate. If the hon. Gentleman is right, there may not be such a problem. However, if the matter is under the remit of the Crown Office, there may be a problem. In the Bill, there is provision for a separate director for Northern Ireland, and some thought should he given to the situation in Scotland.
§ Mr. Foulkes
I am grateful for the opportunity to make a standing, rather than sedentary, intervention in the debate. The First Minister will designate the Lord Advocate as the appropriate person to pursue these matters, but he will be acting as a Minister and not as a Law Officer. The hon. Gentleman will know that Lords Advocate in the past have had to separate these two roles, and have done so pretty well under different Administrations. Also, information obtained in relation to civil proceedings would not normally be disclosed in criminal actions. I hope that those two points reassure the hon. Gentleman.
§ Mr. Weir
I am grateful to the Minister, although some thought still has to go into this matter. Given the previous problems with the human rights provisions, we do not want the Bill to get bogged down.
I wish to refer to clause 94, which is central to the confiscation process and lays down the conditions that the court must take into account in dealing with confiscation. However, it does not make the prosecutor bring before the court at that point the statement of information that is necessary under the subsequent clauses that deal with the situation where matters have to be reopened at a later date. This matter has been referred to by the Law Society of Scotland, and perhaps the provision could be brought forward to an earlier date so that all information is before the court before there is a decision to proceed.
I wish to refer also to the question of funding. The Minister talked about £45 million being set aside for the proposed Assets Recovery Agency. However, I note that the agency will not operate in Scotland, apart from on Inland Revenue matters. I hope that sufficient funding will be available in Scotland to enable the Bill to proceed. That may ultimately be a matter for the Scottish Executive, but I ask Ministers to raise the matter with the Treasury to ensure that the proposal does not fall foul of the problems of underfunding. This is not a matter that should be taken lightly.
The hon. Member for Wirral, West (Stephen Hesford) talked about drug traffickers in Liverpool. [HON. MEMBERS: "Manchester."] I apologise; I am getting my English cities mixed up. One of my colleagues in the Scottish Parliament highlighted the case of a person convicted in Scotland of heroin dealing who was sentenced to 18 years' imprisonment and made the subject of a confiscation order under the present law, which is largely to be re-enacted under the Bill. This person was reputed to be worth some £4 million but, after a brief court hearing, was reported to have punched the air with delight when he was ordered to pay just £32,000.
808 It was said at the time that the Crown Office had just two full-time staff dealing with the seizure of criminal assets and that it had neither the time nor the resources to get to the bottom of that person's finances. As has been made clear today, the finances of those involved in serious crime, particularly drug-related matters, can be complex, and sufficient funding is needed to investigate them.
Under clause 109, there is a power to reopen the matter within six years if new information comes to the attention of the prosecutor. I have to ask what chance there is realistically of matters being reinvestigated in the future if there are insufficient resources to undertake the original investigation. Funding is crucial in this matter.
Why does clause 94 give the power to make a confiscation order against someone who has been given an absolute discharge? I find it difficult to imagine a situation where a court would grant an absolute discharge and then seek to impose a confiscation order. I appreciate that the provisions on criminal lifestyle may have a bearing on that.
§ Mr. Grieve
The hon. Gentleman touches on an interesting point. My understanding is that, in English law—and, I suspect, in Scots law—an absolute discharge is normally given in circumstances where a person is held to be blameless, though technically guilty, of an offence. It is being used here as a device to introduce that person into the confiscatory mechanism. Does the hon. Gentleman think that that is correct in principle?
§ Mr. Weir
In terms of Scots law, the hon. Gentleman is slightly wrong as to whether the person is blameless. The point about an absolute discharge is that a person is guilty of the crime, but that it does not count as a criminal conviction; that is not quite the same thing. I cannot imagine anyone convicted of crimes who is given such a discharge then being subject to a confiscation order.
§ Mr. Davidson
Can the hon. Gentleman not envisage circumstances in which a strong prosecution case collapsed because of a mistake, because time had run out or because the evidence had been collected wrongly, but in which the accused was clearly as guilty as sin and was able to get away with it? Should the accused be allowed to keep their ill-gotten gains? I hope that that is not the position of the Scottish National party.
§ Mr. Weir
That was not the point I was making. The hon. Gentleman misunderstands what an absolute discharge is. The point is that a person is convicted of a crime, but the court decides that it was of such a minor nature, or that there were such special circumstances, that it does not count as a criminal conviction. In the circumstances that the hon. Gentleman sets out, there will still be civil recovery. I would have no qualms about that; the whole point of the proposal is to deal with such circumstances. The hon. Gentleman spoke earlier about problems with drugs in Pollok. Had he been here when I started my speech, he would have heard me say that that is a problem throughout Scotland, in urban and rural areas.
I support the Bill wholeheartedly, but I am anxious that we should not get bogged down in legal technicalities and allow people involved in serious drug offences or other serious crimes to get out on technicalities.
§ Mr. Russell Brown (Dumfries)
I congratulate my hon. Friend the Member for Central Fife (Mr. MacDougall) on his maiden speech. I am sure that, like his predecessor, he will serve his constituents in this place to the best of his ability, and that that ability will be much to the benefit of everyone in his constituency.
Crime, especially organised crime, has the potential to affect each and every one of us, whether in this place or in our communities. We all have experience of constituents coming to our constituency offices to complain bitterly about dubious individuals who live in the same neighbourhood and seem to have a more than reasonable lifestyle. Often, we hear, "Who says that crime does not pay?" or, "Don't tell me that honesty is the best policy." Such statements have a hollow ring to them and people leave our constituency offices extremely upset and angry because of what is happening in their communities.
I very much support the Bill. At long last, we can take forward what can only be described as a battle against organised crime and the criminals who perpetrate it. Right across the country, decent, honest and law-abiding citizens will be delighted that we are looking to tackle head-on those whose only motive is profit. That profit, and its provenance, is immaterial to criminals. It does not matter to them that they are involved in pushing drugs or trafficking in them, in smuggling goods or in dealing with illegal immigrants, as long as money is collected and paid to them so that they can boost their bank balances and improve their already excellent lifestyles. The misery suffered every day by individuals, families and communities is the last thought on the minds of the people coining the cash.
Much of the publicity surrounding the Bill has centred on drugs and drug barons, and all of us have a fair idea of the impact of drugs on modern society. Some would call drugs modern society's scourge, and would say that we have to live with them and battle against them. My hon. Friend the Member for Wirral, West (Stephen Hesford) described what goes on in his constituency, and his was a true portrayal of what is happening across the country. The only difference between what happens on council estates and on private residential estates is that violence is present on the council estates.
Neighbours complain about drug pushers and suppliers, and their lives are turned upside down by the disturbance and disruption caused by cars coming and going all evening, early and late, and all through the night. People who push and supply drugs have an altogether different lifestyle. They sleep through the day and conduct and transact business in the evenings. The culprits party all night, as a constituent of mine—an elderly gentleman of nearly 80—told me recently. He said that he and his wife were at breaking point. His wife could no longer leave their house, but had to go to bed in the day to try to get some sleep. This constituent visited me three times and, on the third occasion, he told me that his doctor had prescribed Valium because what was going on had left him such a wreck. The woman next door to this constituent was making lots of money. She was not interested in him or any other neighbour.
To a degree, I blame the local authority: the police have tried their best to clamp down on the trouble, but the local authority's housing department has not helped at all. The result is a terrible environment for our children. I have 810 been told that children on the estate that I have described leave their respective families' flats at 8 o'clock in the morning to visit drug suppliers. They then return to their families for breakfast—if they get breakfast at all. We do not want young children to be brought up in such an environment in our society.
Drugs and drug abuse create all sorts of misery. I worked in a drugs initiative group in my constituency for a short time, and I recall a police officer telling us one evening about how witnesses of drug abuse in the family undergo something that resembles bereavement. I am sure that all hon. Members know that bereavement is difficult to overcome, but watching a household member who is heavily into drugs is like watching that person die. Not much can be done to help: families try to pull together, but what they suffer is almost the same as bereavement. We have to try to prevent the spread of drugs through our communities.
Other hon. Members have spoken about figures and statistics. Those statistics give a true picture of the misery that 1 kg of heroin can cause on the street, and what it costs people, families and communities.
I was fortunate enough to hold an Adjournment debate 11 months ago on the smuggling of tobacco and alcohol. I said that the problem went beyond those visitors to the continent who purchase an extra 200 cigarettes or bottle of spirits, or the people—business men and women, or lorry drivers, for example—who carry back a small amount of goods for friends or relatives. The problem has to do with bootlegging—the process by which tobacco and alcohol products are purchased on a large scale in countries with lower tax rates, and then illegally sold to people, distributors and retailers in the UK. The white van trade, as it is called, appears to account for about 25 per cent. of smuggled goods.
I said earlier that criminal activity can affect all of us. By its nature, bootlegging can lead to the closure of those small corner shops that are so much needed in many rural constituencies. Criminals generate profit by cornering the market, and local people lose the convenience of having a shop in their villages.
It is reassuring to see that the Bill contains a range of measures to assist police and courts with the confiscation of the proceeds of crime. The establishment of the Assets Recovery Agency is to be welcomed, and the agency's mechanisms will prove helpful in providing the expertise necessary to carry out investigations and confiscate criminal assets.
The agency will have powers, similar to those granted to the police, to investigate, freeze and confiscate. That, too, is welcome, but the agency will have to pull together the work of investigators, accountants and lawyers. In that regard, I do not envy those in the agency charged with securing the co-operation of accountants and lawyers. When I hear hon. Members condemn each other for having been either an accountant or a lawyer in a previous life, I worry about what they think of one another.
In the past, it was all too easy for criminals to move assets when they came under pressure from the law, but the Bill will allow assets to be frozen at the beginning of an investigation, rather than when a person has been charged. I am pleased about that, although I know that some hon. Members are worried about the provision. However, we need to be bold in order to move matters forward. Banks will also be obliged to report the accounts of people under investigation to the police and customs.
811 Other provisions in the Bill include the power to seize substantial sums of cash derived from crime, or intended for use in crime. That money can then be forfeited in civil proceedings in magistrates courts. I see nothing wrong with that, nor with a civil recovery scheme that will give the Assets Recovery Agency the power to sue people in the High Court to recover property derived from crime. In my view, there is nothing wrong either in tackling the tax position of convicted criminals by giving the Assets Recovery Agency the power to assess a person's tax position and issue what I hope would be a substantial tax demand.
My hon. Friend the Member for Glasgow, Pollok (Mr. Davidson) made the plea that money should be returned to communities that have suffered at the hands of despicable criminals. I sincerely hope that my hon. Friend the Under-Secretary will clarify the matter. I believe that the Bill provides that money confiscated from criminals can be used again in our communities.
Many people in our communities see what is going on around them. They know that something is desperately wrong when a person who seems to be unemployed and living on benefit runs around in several cars, all of which have personalised number plates. That person may have a large American camper van at his door, and may also own a boat. There is something sadly wrong with that. I am sure that the Bill will improve our communities, and I shall very much support it during its progress through the House.
§ Mr. George Osborne (Tatton)
I wish to make a couple of general observations about the Bill, the principle of which I support, before moving on to specific concerns about a number of clauses, particularly those relating to the controversial new powers of civil forfeiture.
I begin by taking issue with something that the Home Secretary said in his speech to the Labour party conference at the beginning of the month. He said that it was not lawyers and judges who secured the liberty and freedom of our people; it was political action bringing about change. He expanded on the theme the next day in an article in The Times, saying:Freedom springs not from abstract legal process but from political action. After all, British democracy was not created by lawyers and judges.I hold no brief for lawyers—I think that I am about the only speaker so far who has not been a lawyer, although my wife was once. However, I believe that the Home Secretary profoundly misunderstands our history and the development of our freedoms. We in Britain were proud of our constitution before we were proud of our democracy. Our constitution was formed as much from the steady development of our common law by our courts as by the political actions of politicians in this House and elsewhere. The essence of the constitution is that the actions of the state are subject to the rule of law. The freedoms of each one of us, as my hon. Friend the Member for West Dorset (Mr. Letwin) reminded us, occur at the interstices of the laws.
Primary among those freedoms is the freedom to live without fear of arbitrary arrest and imprisonment. It has been enshrined in common law for centuries and is known as habeas corpus. Equally important is the freedom to hold property. I take issue with some Labour Members 812 who talk as though that freedom applies only to the very rich. For people who own their own council flat or have a small building society savings account, the freedom to hold property is very important. It is a bulwark between the power of the state and the freedom of the individual. That is why we should treat with care and examine with caution any Bill—particularly one as complex as this—which threatens the institution of property.
The Cabinet Office report which led to the Bill refers toa significant extension of the powers available to the State".Our freedoms are not absolute, and it is the difficult duty of any Government to attempt to balance the competing freedom of the individual with the freedom of society to live free from the fear of crime. According to the Cabinet Office report:There is a careful balance to be struck between the civil rights of the individual and the need to ensure that the State has the tools to protect society by tackling crime effectively.The mere mention of civil rights has Ministers reaching for their revolvers, but, unfashionable though it is to say it, I think that civil liberties are important and need constant protection. There are always good reasons why one civil liberty should be undermined, why another should be eroded and why a problem can be resolved by a change to yet another. Civil liberties need constant protection and there are always good reasons for undermining them. That is why we must be constantly on our guard.
Is the threat to our society from organised crime or money laundering such that it warrants a restriction of the rights of the individual? If we accept that the threat warrants it, do the powers in the Bill go beyond what is necessary to achieve our objectives? I accept that the threat to our society and our security from large-scale crime, drug dealing, organised crime and money laundering is very real. I pay tribute to the hon. Members for Wirral, West (Stephen Hesford), for Central Fife (Mr. MacDougall), who made his maiden speech, and for Dumfries (Mr. Brown). They all spoke movingly about the problems that drugs cause in their constituency, as they do in mine. I do not pretend that mine is a deprived inner-city area, but drugs are nevertheless a major concern for my constituents. Drugs pose a very real threat, and we lack the means to tackle it effectively. We also lack the means to tackle the way in which terrorist organisations are funded, as they rely largely on the proceeds of organised crime.
Fighting the crimes which corrode our society and starving terrorists of funds must include getting hold of the huge sums that people earn. Being caught must not simply be a career hazard for a criminal—it must destroy his career. We must find a way of reaching those whom the Minister for Police, Courts and Drugs described in his opening speech as the untouchables. The Home Office estimates that about 400 criminal bosses are sitting on profits of £440 million, half of which is held by only 39 people.
Despite a succession of confiscation laws passed by Governments of both parties, it is clear that the laws are not working. The Bill passes the first test that I set it. There is a significant threat to our society from large-scale crime. One way of tackling that is by getting at the profits of the criminals, and we lack the means. That justifies restricting the individual's right to hold property.
Whether the Bill passes the second test is another matter. Are the new powers that the state proposes to take upon itself necessary, or do they go beyond what is 813 required? Many of the Bill's provisions are necessary. The creation of a national Assets Recovery Agency is clearly necessary when individual police forces lack the expertise or, I suggest, the will to pursue complex financial forfeiture actions. It also makes sense to unify the various money-laundering offences, although I note what my hon. Friends the Members for Sutton Coldfield (Mr. Mitchell), for Arundel and South Downs (Mr. Flight) and for Cities of London and Westminster (Mr. Field) said about that.
At the heart of the Bill is the change to the existing criminal confiscation regime and the creation of the new civil power of forfeiture. Pressure groups such as Liberty and Justice have criticised both as unacceptable erosions of the liberties of the individual. They object to the so-called reverse burden system that puts the requirement on persons convicted of a certain number of offences to prove that their assets are not the earnings of a criminal lifestyle. Some of my colleagues may disagree with me on this, but I have no problem on civil liberty grounds about the clauses that strengthen the criminal confiscation regime. There is a huge distinction between people who have been convicted of a criminal offence in a court of law and people who have not.
My hon. Friend the Member for West Dorset made the point that we do not know what these offences are and I hope that during the Bill's passage we will be given some idea of the nature and seriousness of the offences under discussion. However, I assume that they will be fairly serious. When a person commits a serious criminal act and it is proved beyond reasonable doubt in a courtroom that they have done so, they have in my view forfeited many of the liberties that the rest of us enjoy. The consequences include the possibility of being locked up in prison and losing the assets that they have earned through their criminal activity.
Why does clause 75 restrict criminal confiscation orders, except in the case of drug crimes, to persons who have been convicted of a number of offences? If they have been convicted of one offence, they need to be convicted of the same offence on two separate occasions in the past six years or of four offences on the same occasion. Surely being convicted of one serious offence such as arms trafficking or the trade of prostitution should be enough to call into question a person's lifestyle and the legality of their assets. If Ministers are right to say that we are dealing with criminal untouchables, requiring the police to catch those people red handed not just once but several times seems to undermine the whole point of the Bill.
A harsher criminal confiscation regime would also make less necessary the one part of the Bill that I find it difficult to accept—the proposed new power of civil confiscation. It allows the state, for the first time, to seize the property of people who have never been convicted beyond reasonable doubt of a criminal offence in a court of law but who merely, on the balance of probabilities, are deemed likely to have taken part in unlawful activities. That gives the state major new powers of a totally unfettered kind, the full nature of which is spelled out in the explanatory notes.
Of clause 245 the explanatory notes say:This is an entirely new right of action … Cases where criminal proceedings have not been brought would include cases where there are insufficient grounds for prosecution".814 Of clause 246 they say:The criminal standard of proof, under which matters must be proved beyond reasonable doubt, does not … apply".Of clause 247 they say thatit is not necessary to show that property was obtained through a particular kind of unlawful conduct, so long as it can be shown to have been obtained through unlawful conduct of one kind or another.In other words, the Bill is giving massive legal force to the old lament of the policeman: "We know he did it; we just can't prove it." Indeed, the hon. Member for Glasgow, Pollok (Mr. Davidson) echoed that lament when he said, "They got off but they are guilty as sin."
I believe that the Bill undermines the very foundation of our freedoms, which is that people are innocent until they are proved guilty, that the state cannot merely seize the property of the individual but must establish that the individual has forfeited his liberties under the rule of law. The way that we do that in our society—the way we have always done it—is to take individuals to court, establish beyond reasonable doubt that they are guilty, preferably to a jury of their peers, and prove that they have committed a criminal offence.
The new power of civil forfeiture is born of an understandable frustration at our inability to pin things on certain individuals, but it is a sloppy and dangerous short cut to improving our criminal law.
§ Mr. John Butterfill (Bournemouth, West)
My hon. Friend suggests that trial should preferably be by jury. Does he accept that in many cases of the type that we are discussing, concerning money laundering and major fraud, juries are absolutely incapable of understanding what is put before them? I am afraid that there are too many examples of that already.
§ Mr. Osborne
I am grateful to my hon. Friend. He makes a good point about juries in complex financial fraud cases. The central point that I am making is that, regardless of whether it is a complex fraud case and regardless of whether there is a jury, a criminal conviction still has to be established beyond reasonable doubt. What is proposed in the legislation would change that and allow a court to bring a civil forfeiture action, which is simply on the balance of probabilities.
§ Stephen Hesford
Perhaps the hon. Gentleman missed the snippet in my speech in which I said that this procedure was common practice in the United States. Is he saying that that sophisticated democracy has got it wrong?
§ Mr. Osborne
I am not familiar with the regime in the United States, but I will take the hon. Gentleman at his word. In the United States there are of course very powerful other protections for the civil liberties of the individual, such as an enshrined Bill of Rights that is enforced by a Supreme Court, and it is a very different system from the system under which we live, which is a common law developed over hundreds of years and which protects our liberties under the law.
I finish by referring back to the Cabinet Office report, which asks a pertinent question. It asks who seriously believes that the police will waste their time putting together complex criminal charges against these people 815 when they know that they can pursue a much easier civil route. Therefore, far from bringing the so-called untouchables within our grasp, the new powers will make them more untouchable—more untouchable by the criminal law. Although I support much of the Bill, I will need a lot of persuading by Ministers to convince me that I should support the draconian new powers of civil forfeiture.
§ Mr. Deputy Speaker (Sir Alan Haselhurst)
Order. Nine hon. Members are seeking to catch my eye. If each hon. Member who is called takes their full allocation, only six hon. Members will be successful. I hope that the mathematics will be understood by everyone present in the House.
§ Mr. Tom Watson (West Bromwich, East)
Thank you, Mr. Deputy Speaker, for allowing me to contribute, sooner than I had anticipated, to a debate on an issue of paramount importance to my constituents. Over the summer recess and during the general election campaign, they told me on the doorstep that crime was their No. 1 concern. They wanted the Government to deal with the drug industry, which permeates many families across the black country. As my hon. Friend the Member for Dumfries (Mr. Brown) said, they know that, for too many people in Britain, crime does pay, and they expect Parliament to put an end to it. I hope that the Bill will go a long way to meet their concerns.
The recent British crime survey figures, which showed crime falling by 12 per cent. last year, were welcomed in the west midlands, but people recognise that there is still a long way to go. If the Government are going to be tough on crime, they must be tough on the dirty money that funds and motivates crime.
My hon. Friend the Member for Glasgow, Pollok (Mr. Davidson) said that many hon. Members live in a different world from their constituents. For many people in my constituency, organised crime is a strange faraway world that they feel does not relate to them, but it has a strong impact on everyday lives in many communities in Britain.
The hon. Member for Lewes (Norman Baker) vividly outlined how £1 million taken from a drug baron can take 50 kg of heroin off the streets of Britain, and yet, with all the new technologies—the mobile phone drug markets, the complex series of dealers—the Mr. Bigs at the end of the supply chain often evade capture. Yet we all know who these people are. On 18 October, the Sandwell edition of the Express and Star reported that Britain's five biggest drug barons were collectively worth £200 million. The Bill will allow us to tackle the Mr. Bigs of Britain; everyone in the House should welcome that.
The hon. Member for Tatton (Mr. Osborne) expressed his frustration that, for far too long, the police and the courts had not placed a high enough priority on the recovery of criminal assets. When we consider that the proceeds of crime account for 2 per cent. of gross domestic product, we realise that the scale of the problem is so great that we must collectively tackle it.
My hon. Friend the Member for Clydebank and Milngavie (Tony Worthington) spoke about the money-laundering industry surrounding General Abacha, worth 816 $4 billion alone. However, in 1999 in the United Kingdom, the value of receipts from confiscation orders was only £25 million—a tiny proportion of the overall gains made by criminal gangs. In addition, when drug trafficking convictions are secured, confiscation orders are issued in only one in five cases.
The Home Affairs Committee recommended in 1995 that the Home Office working group on confiscation should continue to keep legislation under constant review. That working group called for a more radical analysis of the case for extending the UK's existing, limited powers for confiscation without a criminal conviction. I congratulate the Government on responding to those recommendations.
I believe that the Bill recognises the scale of the challenges ahead. I welcome the creation of the new Assets Recovery Agency, because if we are to unravel the labyrinthine complexities of the dirty money audit trails, we shall need specialists to do so. As we found with the bin Laden network, Governments must act much earlier to freeze criminal assets before the dirty money disappears. The Bill rightly allows that to happen.
I believe that we have all recognised the responsibility that banks have to their communities to report any suspected dirty money transactions. The hon. Member for Arundel and South Downs (Mr. Flight) raised a pertinent point when he expressed his concerns for finance industry workers. I know that the finance union UNIFI is concerned about the possible implications of clause 324 in respect ofreasonable grounds for knowing or suspectingthat a transaction is being made with criminal money. I hope that the Minister will be able to allay the fears of its 160,000 members and persuade them that the law will target hotshot City financiers—like the hon. Member for Cities of London and Westminster (Mr. Field)—who are the accomplices of the criminal gangs, not the front-line staff who work in the banks.
I hope that, as many hon. Members have said, we can send a clear message to civil liberties organisations, especially Liberty, that decent, hard-working people should have the right to live in a society free from the fear of crime and the menace that the drug cartels hold over our communities. We all need to make it clear that honest, hard-working, law-abiding citizens have nothing to fear from the Bill. The shadow Home Secretary may have a problem with certain smaller aspects of the Bill, but most people know who the people involved are.
I welcome the Government's commitment to double the value of recovered assets by 2004, and I hope that the Minister will set far more ambitious targets for the Assets Recovery Agency. The £45 million already pledged for asset recovery and the extra money for the new squad of financial investigators will go a long way to achieve those targets. The investigators will pit their wits against criminal masterminds who move money and assets around the globe, but with their success they will help to break the cycle of crime by cutting the cash that supplies funds for yet more criminal activity.
In conclusion, this is a good Bill. It will go a long way to disrupt the drug supply chains; it will take out crooked accountants; and it will undermine the financial base on which criminal gangs get their ill-gotten gains.
§ Mr. Alistair Carmichael (Orkney and Shetland)
We on the Liberal Democrat Benches also welcome the Bill, and perhaps with more enthusiasm than some hon. Members on this side of the House. I am quite impressed by the way in which the very limited role of the provisions on profit confiscation will be expanded. It is important that we recognise the interrelation of different sorts of crimes. Crimes relating to drugs offences, money-laundering offences or whatever do not exist on their own; there is a clear and intricate interrelation between the various different species of crime. It is very important for the credibility of the wider criminal justice system that that is recognised and that legislation such as the Bill is put on to the statute book.
Several hon. Members have spoken about the impact of drugs in their constituencies. As I have already said, the important thing about the Bill is that it will take confiscation beyond drugs. However, my constituency is about as different as one could hope to find from those represented by the hon. Members for Glasgow, Pollok (Mr. Davidson) and for Wirral, West (Stephen Hesford). It is occasionally thought that we do not have a drugs problem in the northern isles, but I assure the House that, although we may not be as far down the road as some urban constituencies, we are very much on that road and we look with horror to see what awaits us unless something is done. I therefore welcome the Bill as part of an overall package.
Hon. Members will be aware that many of the Scottish provisions in the Bill are the result of a Sewel motion passed by the Scottish Parliament. In passing, I would say that a mechanism must be devised to incorporate more effective accountability, or the involvement of Ministers in the Scottish Executive, when that happens. Some of the concerns expressed by my hon. Friend the Member for Lewes (Norman Baker) about the rights and position of innocent third parties could quite easily be assuaged if answers on the availability of legal aid could be given, but they are obviously not presently available to hon. Members. I simply put that down as a marker for future modernisation of the procedures.
§ Mr. Foulkes
The hon. Gentleman makes a valid point, but I assure him that officials from the Scottish Executive have been involved at every stage in the Bill's drafting, and they will be involved during the Committee stage. I intend to serve on the Committee, as will many of my colleagues on both sides of the House who represent Scottish constituencies, so that we can ensure that the Scottish interests are properly considered. Last Wednesday, I attended the debate on the Sewel motion in the Scottish Parliament and found it very helpful to our consideration.
§ Mr. Carmichael
I am obliged to the Minister for that reassurance. He may be aware that, by virtue of politics and geography, I have perhaps better access to Ministers in the Scottish Executive, especially in relation to justice matters, than many hon. Members, but that is my good fortune, and to leave such matters to that sort of accident is less than desirable.
I should like to say a few words about innocent third parties. Several Labour Members—in particular, the hon. Member for Glasgow, Pollok—spoke about people who 818 have no visible means of support. Of course, that is a very legitimate point, but a number of other people who will fall foul of such proceedings have some visible means of support. They may be engaged in a cash-rich business, such as construction, or perhaps a security firm, which gives them a veneer or facade of respectability, beneath which there is a rather more murky picture. Some people can be properly called innocent victims in such circumstances.
A very lengthy fraud prosecution might well take the police 18 months or two years to investigate and a further year or 18 months to be dealt with by the procurator fiscal and perhaps another year as successive advocate-deputes kick the case on to one another in the High Court, finding a good reason not to proceed with it. If the proposed restraint orders were used at the start of such cases, which may well happen, innocent parties might be deprived of their legitimate enjoyment of their property for a prolonged time. I wonder whether the Minister could assure me in replying to the debate that if it ultimately transpires that someone has been deprived of the enjoyment of his or her property in that way, the Crown will be liable for damages as a result of wrongful diligence. It seems that a strong parallel can be drawn between the existing law of interdict and the proposed law on restraint orders.
The other danger to innocent third parties comes from the interaction of the confiscation provisions and the law on bankruptcy and corporate insolvency. I understand that, under profits confiscation orders, the property will be removed from the estate of a possible sequestrated person before the estate is determined, so those who have a legitimate claim on a proportion of a bankrupted person's estate will find that they are significantly worse off. Those people may have entered into a contract with the person who was the subject of the confiscation order. I wonder how much consideration has been given to people in those circumstances.
My final nagging doubt relates to the provision of search powers. I am no great fan of legislation that reintroduces powers that already exist, and there is a danger that we shall do so under the Bill. All the powers given to the police under it already exist under section 14 of the Criminal Procedure (Scotland) Act 1995. That is a live concern for the efficient and effective operation of the law on search because many hon. Members will be aware that there has been considerable conflict in the past between the law of search under the Criminal Justice (Scotland) Act 1980 and section 23 of the Misuse of Drugs Act 1971. Why are the search powers in the Bill necessary?
Finally, as my hon. Friend the Member for Lewes said, a clear hierarchy of confiscation procedures can be followed, such as those on conviction, on civil recovery and on taxation. I hope that that will be followed stringently. Indeed, it would be beneficial to require the Lord Advocate to give his consent before the director can take taxation actions in Scotland. That would preserve the Lord Advocate's position as the primary actor in the first and second instances. In many ways, those are quibbles that can no doubt be resolved in Committee, but tonight my Liberal Democrat colleagues and I are more than happy to support the Government.
§ Mr. Ian Lucas (Wrexham)
I am pleased to follow the hon. Member for Orkney and Shetland (Mr. Carmichael). Orkney is my favourite holiday destination and I urge all hon. Members to go there as soon as possible.
I speak as yet another lawyer, albeit happily retired, so I hope that I can bring some valuable insights to the debate. I have practised as a defence criminal solicitor and also been involved in the regulation of financial services in a firm. It is important that we consider the Bill closely and that we strike the correct balance in dealing with such matters. It is most important, however, that we put this Bill in context.
It is difficult to overstate the effect of illegal, addictive drugs on our society. They are the predominant source of crime; they prevent people from making a positive contribution to society's well-being; they create misery for those who take drugs and for their families. The response by successive Governments to the problem has to date been strong on rhetoric but, I regret, largely ineffective. I am afraid that there is little doubt that the problem of drugs in our society has got worse, not better over the past 20 years.
It is in that context that, in passing, I welcome last week's announcement that the classification of cannabis under the Misuse of Drugs Act 1971 is to be reconsidered. I also welcome the Bill, because it seems to be part of a shift of emphasis towards the specific targeting of those who treat drugs as some kind of legitimate business. Whether those people are traffickers or launderers, they must get the message that the trade is a sick one, that it devastates those who are affected by it and that we as a society will no longer put up with it.
As I mentioned, I had some experience of drugs in the criminal courts. I worked as a solicitor, often with juvenile offenders, on Merseyside and in north-east Wales in the late 1980s and early 1990s. Much of the crime was committed to feed heroin addiction. The use of cannabis was not a factor in the commission of theft, burglary or robbery. The use of heroin was the major factor. In many cases, without heroin there would have been no crime. Without the crime, people's fear would have lessened and the community would have been stronger and happier. The connection really was that simple.
Seeing a 14-year-old who is a victim of heroin addiction is a formative experience. I represented one 14-year-old who had committed 24 dwelling-house burglaries. Twenty-four people suffered the life-changing experience of feeling threatened in their own homes. The child concerned had no moral sense; he lived only to feed his habit. His family, who were so supportive in court, mattered to him only in so far as they gave him money. Often, he stole from them. He cared nothing for the hurt that that caused his mother, and less for the fear of victims remote from him—the people whose homes he had burgled.
It struck me then how often I represented the victims of heroin addiction and how seldom I represented those who profited from trade in the drug. Those traders seemed almost immune from prosecution—able to build their wealth by exploiting the young heroin addicts who were their customers. Their further victims were the people whose houses were burgled. There seemed to be no strategy to get such traders. Large-scale traffickers and launderers were never the specific targets of the law. 820 I welcome the Bill as a clear statement that such people are now in our sights and that concentrated action will be taken against them. They are as big a threat to society as any individual drug addict.
As I said, later in my legal career, I was a supervising officer under the Financial Services and Markets Act 2000. As Conservative Members will accept, that was an onerous burden. Frankly, it was a pain in the neck; it involved constant form filling, much supervision of a financial adviser who worked for me and many interviews with people from the regulating authority, but it was necessary. Weighing that against the effect of heroin on our society is not difficult. The effect of the trade in heroin is so profound that it demands the far-reaching measures in the Bill.
I welcome the concern for civil liberties expressed by Conservative Members, although I am surprised that they seem to adhere to that topic only when discussing lawyers, accountants and bankers.
§ Mr. Grieve
The hon. Gentleman clearly has not listened, and certainly not to the comments of my hon. Friend the Member for West Dorset (Mr. Letwin). He highlighted not the money-laundering provisions, on which there may be little disagreement, but the draconian and wide-reaching legislation that could affect those who, far from being lawyers and accountants, are rather vulnerable members of society.
§ Ian Lucas
I must move on.
We must make it clear that profit from the crime of trade in heroin is so intolerable that we are determined to seek to eliminate it. The mandatory nature of the confiscation procedures proposed is essential. It sends a clear message that there will be no profit from crime. The piecemeal measures taken in the past few years, though welcome, have diluted the message that Parliament must send to the traffickers: "You will be pursued."
The creation of the Assets Recovery Agency is a bold step, expressing the importance of acting against those who profit from crime. We regularly hear press reports of the astronomical amounts made in the criminal drugs industry. I agree that we must set ambitious targets for the sums to be recovered from traffickers. We must find the most experienced and committed staff for the agency. We must monitor the agency to ensure that targets are met and that there is a regime so effective that those who are convicted of profiting from crime surrender all that profit. I would also like the money recovered to be used 821 exclusively to compensate victims. It should also be used to treat offenders who become victims themselves through the use of drugs.
The creation of a structured basis on which to build action against those who profit from the proceeds of crime is long overdue. It provides the opportunity to proceed against criminals in a systematic and consistent manner within the rule of law. As a former lawyer, I recognise the importance of fairness in procedures and the establishment of guilt before legal action seizing property is authorised, but we must recognise the truth that our present policy against crime profiteers has been ineffective, that a new regime is needed, and that that regime must be rigorous to achieve its aims. The House should take it from me that there is no satisfaction in representing in our criminal justice system the heroin addict who repeatedly offends and is repeatedly caught. There is even less satisfaction in knowing that so-called respectable people in our society are making money from the wrecked lives of their victims.
The Bill strikes the right balance between the rights of society and those of the individual. We must make the criminal realise that he will not retain the profit of his trade if he is convicted; that the days of the drug baron serving a prison sentence and thereafter enjoying the proceeds of his crimes are gone. We must get the message through to these people that their trade is despicable, that they are the target of this legislation and that we are determined that they will be caught and made to pay.
§ 8.8 pm
§ Mr. David Cameron (Witney)
I start from the simple proposition that when a Government introduce a Bill of such size and scale, they must prove why it is so necessary. That is doubly true when liberty is being curtailed. There is no doubt that the Bill curtails liberty in some ways. The briefing that we have all received from Liberty and the Law Society made that point clear.
It is a pleasure to follow the hon. Member for Wrexham (Ian Lucas), although he was rather unfair to those of us on the Conservative Benches when he said that we defended only the civil liberties of bankers, lawyers and rich people. I made a speech two weeks ago in the debate about football hooliganism. I do not want a reputation for defending football hooligans one week and bankers, lawyers and drug addicts—or whatever he said—the next. If one cares about liberty and the rights of the individual as against the state, one sometimes may appear to be defending odd groups of people. Actually, one is defending a principle.
I accept that there is compelling proof—my hon. Friend the Member for Tatton (Mr. Osborne) made this point well—that some legislation is necessary. First, the figures provide clear evidence that only a small number of confiscation orders have been served. In 1998, there were 7,000 drug convictions, but less than 18 per cent. of them resulted in a confiscation order. Those figures probably underestimate the true scale of the problem because only the more serious drug offences make it to the courts. One would hope for a much higher percentage. The Minister was convincing on that.
The second reason for legislating is that there is a piecemeal approach to legislation and the bodies responsible for recovering the proceeds of crime. We have 822 the central confiscation branch within the Crown Prosecution Service, which has just 10 people working in it and a budget of £1 million, and the asset forfeiture unit which is part of Customs and Excise, with a staff of just 13 and a budget of about £1 million. It is easy to get the feeling of a higgledy-piggledy organisation of different bodies that are responsible for recovering the proceeds of crime. Clearly not enough is being done, which is why Conservative Members, including my hon. Friend the Member for Tatton and I, welcome a Bill and measures being taken.
The third reason to legislate is the importance of deterrence. Conservative Members very much believe in deterrence. We want people to be frightened of being caught and punished. It is a powerful deterrent if people not only lose their liberty when they are sent to prison, but fear losing their money. We all remember the beginning of "Porridge" when the voice-over says, "Norman Stanley Fletcher, you seem to view prison as an occupational hazard." Many criminals—drug dealers in particular—view prison as an occupational hazard because they know that when they get out they do not need to have another occupation owing to their ill-gotten gains.
No one more than I wants drug dealers—many Labour Members spoke movingly on this subject—stripped of the proceeds of their crimes. Friends of mine have had their lives ruined by heroin. I want heroin dealers to lose their cars, houses and money. When they are convicted, I want them to suffer in the same way as their victims. I do not know, Madam Deputy Speaker, whether you, like me, are a fan of "The Sopranos", but in that magnificent American television series a mafia boss poses as a waste management executive. He has an incredibly lavish lifestyle—an enormous house, a swimming pool and dozens of cars. We want the smiles wiped from such people's faces when their assets are removed once they are convicted, as they should be. That is why we support the concept behind the Bill. There is proof that a Bill is needed, but many Opposition Members want to know whether it goes too far: has the performance and innovation unit got a little carried away?
I am not sure that the Minister completely addressed that concern. When liberty is being removed, we want to believe that he has a grip on every detail and clause that will affect us. We want to feel that pulsing through his veins, but I am not sure that I did. I shall listen carefully to the Under-Secretary's response.
I welcome certain aspects of the Bill. The concept of an Assets Recovery Agency is right. If the agency has clear goals and the resources that Ministers intend to give it, and if it is accountable and publishes its results in reports, it can do better than existing organisations. I also welcome the idea of tidying up current law. That is important because there are anomalies. It is clear that drug trafficking confiscation laws should be extended to all types of crime. At the moment criminals can plead guilty to non-drug offences, because that enables them to protect the money that they have made from drug deals.
In addition, I welcome many of the new powers mentioned by Labour Members. We want a robust response. However, I have three concerns and a warning of what worries me in the future. My first concern relates to the new process of civil forfeiture. I understand the 823 frustration at the fact that it is difficult to get the level of proof that is needed. As it says in the briefing document, one aim is topermit recovery of criminal assets where a criminal conviction has not been possible.The problem is simple: we are discussing a civil offence; it will be part of the civil process, and the civil law burden of proof will apply—which is, as we all know, lower than the burden of proof for a criminal offence. As a result, will there not be a danger of miscarriages of justice, especially when we consider—my hon. Friend the Member for West Dorset (Mr. Letwin) put this well—the scale of the Assets Recovery Agency compared with the scale of the individual? I want to hear more about the safeguards that will prevent miscarriages of justice when there is a lower burden of proof.
Many hon. Members have received the Liberty briefing document. Sometimes when we talk about civil liberties they are too obscure and do not appear real. Liberty states:Imagine you have been given money by a secret admirer, or left money in someone's will and you decide to buy a new car and have a holiday and spend money for the first time in your life. This lavish lifestyle comes to the attention of the police because your bank reports the 'unexpected' payments to them. Under the proposed new law the police will be able to sue you in the civil courts and in reality (if not in the law) the onus will be on you to prove that the money does not come from the proceeds of crime.That can happen to anyone, not just drug dealers and criminals. Such considerations sometimes have to be brought to life.
My second concern relates to the role of the Assets Recovery Agency. I welcome clarification if I am wrong, but it seems that it is to be both investigating and prosecuting. The power of prosecution was removed from the police and given to the CPS because it was thought that there was a conflict if a body both investigated and prosecuted.
My third concern relates to the confiscation orders set out in part 2. My hon. Friend the Member for West Dorset made this point clearly. The judge of a good speech is how many notes get passed from the box to the Minister, and a veritable relay went on at that stage. Notes passed like batons. [Interruption.] I have experience of passing the notes, and I was going to say that it is sad when they do not fly thick and fast when one is speaking.
My hon. Friend made the point, which is clearly set out in the explanatory notes, that the confiscation orders can be triggered by minor offences. The notes state:a confiscation order may be made following any conviction in the Crown Court or the magistrates' court.I am glad to see that notes are flying thick and fast as I enter the fertile territory that my hon. Friend opened up so brilliantly. We need that concern addressed.
§ Mr. Grieve
I shall try to pre-empt the note. My hon. Friend may agree by way of qualifier that one has to show that there has been a benefit under those convictions, rather than just punching someone in the face, or a pecuniary advantage. However, what constitutes a pecuniary advantage is an interesting matter for speculation.
§ Mr. Cameron
As ever, that is the advantage of having lawyers and non-lawyers present. I am one of the few Conservative Members who is not a lawyer, and it is 824 possible to combine a feeling about the general principles with the razor sharp mind of my hon. Friend, who can get to grips with such problems.
Let me end with a warning. It is interesting that on the front of the Bill the Secretary of State has signalled that he is content that it will be acceptable under the European convention on human rights. Many hon. Members will have read about the McIntosh case, in which the court of criminal appeal in Edinburgh ruled that the confiscation of the assets of convicted drug traffickers contravened article 6(2) of the convention because they were built up in the years before the criminal conviction.
We want to hear Ministers say that they really believe that the Bill, with all its clauses and all the subjects it covers, is judge proof, and that it will not be struck down under judicial review. The Bill has more than 400 clauses and we will spend hours debating it in the Chamber and in Committee; it will be a waste of time and bring the House into disrepute if the legislation is quickly struck. down because the legal advice on which it is based was not correct. My brief experience at the Home Office tells me that if officials warn a Minister that there is a danger—a small danger—that a measure will be struck down under the European convention on human rights, that cloud no bigger than a man's hand will assuredly grow larger, until the measure has become history because a judge has spoken.
There will be a lot of discussion about the European convention on human rights in the coming weeks, especially in connection with the forthcoming terrorism legislation. We have to get the Proceeds of Crime Bill right.
§ Norman Baker
The hon. Gentleman has, rightly, spoken at length about civil liberties and the Bill's impact on human rights legislation. May I take it that he and his colleagues now recognise the value of the Human Rights Act 1998?
§ Mr. Cameron
No, that does not necessarily follow. I tend to agree with the Home Secretary, whom my hon. Friend the Member for Tatton quoted. The right hon. Gentleman has said that our liberties are based predominantly on the actions of Parliament, and that Parliament has done the job of defending our rights. Although I supported the principle of the European convention on human rights, I think that the way in which we signed up to it and the Government wrote it into our law via the Human Rights Act has resulted in the Government and Parliament sometimes being unable to do things that all reasonable people accept are the right things to do.
I suspect that we will find that the same restrictions apply to the terrorism legislation that is soon to be introduced. I do not want to stray from the subject of the debate, but it is worth noting that just the other day the Home Secretary admitted to the Select Committee on Home Affairs that in dealing with terrorism he would like to have available to him both deportation and detention, but that because of the convention and the Act he will not have the option of deportation available to him; instead, he will have to rely on detention. Sometimes we tie our hands too tightly. I do not agree with the hon. Member for Lewes (Norman Baker) on that point.
Finally, I issue a warning about the European convention and the Human Rights Act. I plead with the Government not to dig a hole for themselves. They may 825 find that not only the Proceeds of Crime Bill but other Bills will be caught up on those hooks. They must leave themselves some flexibility, because it might be that they want to take action, with the support of the Opposition, that is not possible under the convention or the Act. We must get that issue sorted out before passing Bills on the scale of the one before the House tonight.
§ John Robertson (Glasgow, Anniesland)
I am delighted to have the chance to participate in the debate. I did not receive the Law Society briefing; that is probably because I am not a lawyer, but I am sure that the House will not hold that against me.
For too long, we have paid insufficient attention to the financial aspects of crime. Let us not forget that the motivation for many crimes is money: it is estimated that profit is the ultimate goal of 70 per cent. of all recorded crime. Last year, total assets of organised crime were estimated to be £18 billion—that is, 2 per cent. of gross domestic product.
As the hon. Member for Tatton (Mr. Osborne) said, half the £440 million in profits held by 400 crime bosses are in the hands of only 39 big bosses. Crime barons whose assets are not stripped are often responsible for generating further crime. Assets left in the hands of the perpetrators of crime can be used to fund further criminal activity, which leads to an impenetrable cycle of crime that devastates communities such as that in my constituency, which has one of the highest rates of drug crime in Scotland.
I am pleased that the Government are addressing the issue through legislation. Many criminals regard prison as an "occupational hazard", as the hon. Member for Witney (Mr. Cameron) said, and use the money made from their activities either as a nest egg awaiting their release from prison, or to keep their businesses going outside and ensure that their loved ones and families are well looked after while they are inside. Although no one wants innocent family members to suffer, people cannot benefit or be seen to benefit from crime.
Arrest and conviction alone are not enough to reduce crime significantly, as they can leave criminals free to run or return to their illegal enterprises. Legislation to strip criminals of their working capital has been widely welcomed by police forces throughout the country. I commend the principles of the Bill. All the responses that I have seen agree with the Bill, which is designed to strengthen and extend existing legislation on confiscation and recovery of the proceeds of crime. The hon. Member for West Dorset (Mr. Letwin) appears to have in mind the case of Al Capone—pronounced by most normal people with a silent "e"—but that is hardly surprising, given that his party robbed the country for 18 years. Many criminals—some of them members of the Conservative party—have evaded prosecution because of loopholes in current legislation.
§ Mr. Nick Hawkins (Surrey Heath)
The hon. Gentleman said that all the responses that he has seen have welcomed the Bill. Has he read the responses of organisations such as Justice and Liberty? We Conservatives have become 826 accustomed to hearing Labour Members talking about the importance of civil liberties, so I would be surprised to hear that he had not seen those organisations' responses.
§ John Robertson
The hon. Gentleman obviously did not listen to the start of my speech, when I said that I had not received them, attributing that to my not being a member of the Law Society or having any connection with it.
Given that many criminals have evaded prosecution, I seek clarification on several points to ensure that the loopholes will be closed. Clause 67 deals with the seizure of money and applies to money held in bank or building society accounts, and clause 42 deals with the use of restraint orders in the early part of an investigation. Both clauses have been widely welcomed. In the past, people who became aware of police interest attempted to arrange the disposal of their assets. The Bill rectifies that—or at least it should. However, we must also consider cases in which the perpetrators of crime have already used the names of associates to register property, or have signed over assets to friends and family to avoid seizure. Unfortunately, such practices can be extremely difficult to prove.
Like many hon. Members, I want the Bill to contain clear safeguards to protect innocent third parties who, by association, might be unfairly targeted and have legitimate financial assets confiscated. The Human Rights Act 1998—mentioned by many Conservative Members who have taken the road to Damascus—enables individuals more easily to challenge decisions of the police should the latter fail to adhere to the standards laid down in the European convention on human rights. It is crucial, therefore, that the rights of third parties to claim lawful ownership of property under dispute be closely observed by law and enforcement officers.
Concerns have been raised about access to bank records held in. Scotland. Financial institutions based in Scotland operate accounts on behalf of other banks. Access to these accounts is required quite frequently. However, orders issued by the Crown court in England are not valid. Access can be gained only by means of an order obtained in Scotland from the sheriff via the procurator fiscal.
This process can be extremely time consuming and bureaucratic. It can often result in the line of inquiry not being followed up. It is therefore necessary that, under any new legislation, production orders issued in England should be valid in Scotland, and vice versa.
Concerns have also been raised about how the legislation will apply to Scottish law. I hope that the Minister will keep in contact with his counterpart on the Scottish Executive—he has already said that he will, so perhaps I need say no more about that.
Concerns have also been raised about the provision of funding for the new legislation. Detective Superintendent Langdon of Merseyside police has said:Whilst not taking issue with the merit of the Bill, the financial implications are likely to be significant. Although, obviously, the Bill cannot stipulate the funding issues I would seek assurance that the costs are properly identified and some element of Government funding be applied to secure a seamless transition.The Association of Chief Police Officers in Scotland has also raised this issue. It has said that, with the new legislation, there will be ramifications for the Scottish police services and for police forces throughout the 827 country, especially in relation to sufficient resourcing to make an impact upon the wealth of those involved in criminal activities. It points out also that the new legislation will still require the police to report cases of potential asset confiscation, but the crucial difference is that the Bill will introduce asset confiscation which could proceed to civil proof, and there are likely to be occasions when police intelligence will form part of the Crown case. I am sure that that aspect of the Bill will be carefully managed.
It is vital to ensure that financial investigators are fully and properly trained in all areas of the new legislation, as breach of process could lead to claims for compensation. I seek assurance that funding and training will be carefully considered. The Bill is important and a landmark in the fight against crime and the criminals who plague our communities. The Government should be commended for introducing it.
§ Mr. Bill Tynan (Hamilton, South)
I congratulate my hon. Friend the Member for Central. Fife (Mr. MacDougall) on his well-constructed and thoughtful maiden speech. I look forward to many more of his contributions.
The Bill will play an invaluable role in the fight against organised crime. I understand that some may regard it as controversial in regard to civil liberties, but I think that we should see it as an opportunity to strengthen and assist the police, customs officers and other agencies in their war against serious crime. The proposals contained within the Bill will remove the constraints that have seriously inhibited the effectiveness of previous legislative changes. The change in emphasis from merely law enforcement to targeting the profits that criminals and their associates make from crime is particularly welcome, and is one that all hon. Members should support.
In my short contribution, I shall remind hon. Members why the Bill is necessary. Those who will be subject to the proposed legislation have a devastating effect on our communities. It is widely acknowledged that the proceeds from past criminal activity fund the relentless upward spiral of profits from organised crime. I believe that the Bill will strike at the heart of the problem. It will target those who enjoy a lavish lifestyle from the proceeds of drug dealing and money laundering.
More often than not, the criminals who are apprehended are the small fry. They are those who, for various reasons, have become victims and have been forced into a life of crime. They are often expendable and easily replaced. They take the fall for those who appear to the public to be untouchable and above the law.
The law has not thoroughly and systematically addressed the issue of the proceeds of crime. For example, the Home Office has stated that during 1999–2000 only £49 million was recovered from criminals through existing powers. In 1995, it was estimated that £400 million could be recovered. That demonstrates the scale of the task. That is why I welcome the fact that the Bill forms part of a wider Government programme to reach the so-called untouchables—those who profit by leeching on the misery of others.
We have an opportunity to correct the failures of previous legislation. The Bill includes substantial and effective measures to do that. I especially welcome the allocation of resources for the creation of an action 828 programme that will create specialist training for law enforcement and prosecution agencies. I applaud the development of a multi-agency strategic approach to improve performance in the pursuit of all proceeds of crime. The failures of the past are of deep concern and it is crucial that proper training and accreditation of the proposed financial investigators and other agencies takes place as soon as possible.
In support of the proposal, we need only refer to recent history. Unfortunately, there are numerous examples of drug trials that have collapsed. There are other examples of such cases that have been lost on appeal owing to the errors of the police, the Crown Prosecution Service or customs investigators. I shall give an example which is pertinent to many people who have expressed concern about civil liberties. An article entitled "Drugs in Britain: Special Report", which appeared in The Guardian on Friday 9 June 2000, stated:Customs and Excise could be stripped of its power to prosecute after official inquiry reports into the collapse of Britain's biggest drug cases uncover a litany of incompetence and chaos that led to 'two of Britain's biggest gangsters' walking free.Although the retired judge, Gerald Butler, who carried out the inquiry, said that almost everybody involved had some input into what went wrong, his recommendations made clear that the judge who threw out the case against both men had been mistaken.His report cleared the customs officers involved of accusations that they acted illegally in their undercover bugging operations, faked evidence or lied under oath …But the report, published yesterday, identified incompetence in the customs prosecution and said that the official authority for their bugging operations was based on 'hopelessly defective documentation' and that the records on all their bugging operations at the time were chaotic.The collapse of the case left the taxpayer with a £50 million bill".Two individuals were cleared of smuggling £34 million-worth of cocaine into Britain. The report continued:At the time of their arrest in 1995, customs hailed a spectacular raid on the yacht, The Frugal, at Pevensey Bay, East Sussex, as part of Operation Stealer, as 'the best knock ever'.The two ring leaders were jailed for 24 years each.But the case turned sour when the appeal court judge, Mr Justice Turner, threw it out on the grounds that the prosecution had wrongly withheld the information that the suspects' hotel rooms had been bugged without official authority.Judge Butler said:A lot of people are to blame. I cannot point the finger at any one person or group of people. Things went wrong from the off and they never recovered. Almost everyone had some input in what went wrong.That clearly demonstrates the need to look carefully at the way in which we apply the Bill's provisions so as to make sure that such incidents cannot happen again. The training that will be given will, I hope, eradicate the problem in future.
In July 2000, The Guardian reported that an individual accused of involvement in a £50,000 cannabis ring in Scotland was freed because a deadline had expired, amazingly, because a judge could not be found to try the case.
§ Mr. Tynan
I am sorry, I want to make progress.
The Bill would permit the assets of those criminals who, for whatever reason, escape prosecution, to be frozen and seized. While a botched criminal investigation 829 may enable them to remain free, it would not safeguard their ill-gotten gains. It is abhorrent to everyone that they flaunt their success with lavish lifestyles, flashy cars, large houses, expensive clothes and often substantial business interests. They sometimes become unacceptable role models for our young. Confiscating their illegal funds will strip away the belief that crime pays and will highlight to impressionable young people the fact that those criminals will pay the price for the misery that they create in communities throughout the United Kingdom.
I remind those who express doubts and concern about civil liberties of the many young men and women in our constituencies whose lives and families have been torn apart by the tragedy of drug addiction. Young people are actively targeted by the dealers in death, even at primary school, as has been said tonight. During the by-election at which I was elected in 1999, South Lanarkshire experienced its 100th drug death. A young woman who had been at school with my youngest daughter, who is 25, was found dead in a Hamilton flat, another victim of the drug barons. In 1997, there were 22 drug-related deaths in Lanarkshire; by 1999, that had risen to 27. In 2000, drug users in South Lanarkshire were 17 per cent. more likely than users in Scotland as a whole to be using heroin as their main drug. That situation is repeated across the country every day. The trend must be reversed and the Bill can play an important part in that.
I believe that, given the opportunity, the community can identify the drug dealers in its midst. One need only look at the successful national campaign run by the Daily Record in Scotland. By enlisting the help of the people, the newspaper was able to name and shame those who peddle drugs. If the Bill is successful, we can gain the confidence of the people in every community in the UK and enlist their help in targeting the drug dealers and money launderers. The Hamilton Advertiser also plays an important role in its opposition to drug dealers. It recently ran a hotline in conjunction with the local police, which was extremely successful.
Recent history is littered with examples of criminals who have escaped the law. The Bill is, among other things, an excellent example of the fact that UK-wide legislation is necessary to combat organised crime. I applaud the action of the Scottish Executive in ceding some of its authority to Westminster in this matter to ensure that criminals have nowhere to hide. The Bill is tailored to Scottish law and contains some elements that are unique to Scotland. The fact that my hon. Friend the Minister of State, Scotland Office is helping to pilot the Bill through the House emphasises the importance attached by the Government to the Scottish aspects of the Bill, as do the 110 clauses relating directly to Scotland.
The fight against crime is one that we cannot afford to lose, and the Bill will be an invaluable new weapon in our anti-crime armoury. The beauty of it is that it will target not just the criminal minnows, but the gangland bosses and the criminal bigwigs, who will sleep less easily in their opulent residences tonight because the Bill sends out a clear message that crime does not pay.
§ Mr. Miss Julie Kirkbride (Bromsgrove)
I am grateful to be called to speak, as I acknowledge that I have not been in the Chamber for the entire debate. [Interruption.] The 830 Minister of State, Scotland Office, who is a very nice man, asks why not. With my new-found domestic responsibilities, I find spending the entire day listening to a Second Reading debate in the Chamber a little more difficult than I did previously.
I associate myself with some of the remarks of the hon. Member for Hamilton, South (Mr. Tynan) in his impassioned speech about the reasons why it is necessary to attack the drug traffickers and the profits that they make out of innocent people, especially innocent young people. The hon. Gentleman is right to say that the reason behind the Bill, which we can all support, is to go after the Mr. Bigs—the criminals who somehow manage to get away with it and in so doing scar the lives of the constituents not only of Labour Members, but of all of us. Those whose lives have been scarred will certainly welcome the measures that the Government are taking tonight.
The purpose of the Opposition's argument is to sound a note of caution. Although we all endorse the aspirations behind the Bill, there are some obstacles and difficulties, which were eloquently outlined by my hon. Friend the Member for West Dorset (Mr. Letwin), the shadow Home Secretary. I should tell the Under-Secretary of State for the Home Department, the hon. Member for Coventry, North-East (Mr. Ainsworth), that my hon. Friend is a very clever man and he would be well advised to listen to the points that he raises. [Interruption.] The Minister may also be a very clever man, but on our Benches, my hon. Friend the Member for West Dorset is considered somewhat superior, even in these intellectual circles, and he raised some pertinent points. No doubt the Minister's civil servants will be busily trying to answer some of them and putting the Minister right in Committee. We look forward to that debate.
We all recognise that the criminal justice system sometimes lets us down. As the hon. Member for Hamilton, South said, people who are clearly guilty sometimes manage to escape justice. We hope that the measures before us will tackle that abuse. We want to see such people behind bars where they deserve to be and deprived of their liberty. If they cannot be deprived of their liberty, we can at least deprive them of their lifestyle, their assets and their wicked daily business. We recognise the Government's aims in that respect, and hope that they succeed in catching the Mr. Bigs who have not been caught by the criminal justice system, but who may be caught by the provisions of the Bill.
We all live in the real world, however, and, as constituency Members, we have seen good intentions go down the wrong hole. Perhaps I am mixing my metaphors. What I mean is that, having set out to catch the Mr. Bigs—those who really deserve to be treated to measures such as this because all else has failed—we sometimes catch people whom we did not intend to be subject to such draconian measures.
My hon. Friend the Member for West Dorset mentioned the Child Support Agency, and the circumstances are, indeed, potentially comparable. When we launched the CSA, we all thought that it would catch absent parents who paid nothing towards their children's support. One of the reasons why it became so controversial was that it did not, and still does not, catch those parents; it catches parents who pay something, who then object to what they consider to be the CSA's exorbitant demands for extra payment.
831 We want the Bill to catch Mr. Big, but whether it will catch Mr. Big we do not know. What we do not want it to do is catch those who in this sense are innocent: those who, having committed a tachograph offence, are suddenly brought into a system which, although civil, is backed by serious instruments of the law and find themselves in a position they never thought possible.
As I know from many of my constituents—I am glad to say that I do not know it from personal experience—those involved in civil proceedings end up paying the legal bills. The Minister shakes his head; I hope that that means that all costs will be paid if people are found not guilty. That would certainly be welcome, because, owing to the powers that have been conferred, people might otherwise be affected because their affairs had precipitated an investigation later found to be unreasonable.
§ Mr. Bob Ainsworth
I can confirm that we intend to allow civil legal aid for people to defend themselves, rather than allowing them to use the proceeds of crime.
§ Miss Kirkbride
I am glad to hear it. I assume that if such people are found not guilty of using the proceeds of crime to support their lifestyles, compensation will be provided. If that is the case, I am glad to learn that innocent people brought into the system—for reasons that I endorse, in terms of what the Minister seeks to do—will not be caught up in litigation that could literally bankrupt them.
§ Mr. Grieve
My hon. Friend makes an important point. Does she agree that if the system is such that those who are not eligible for legal aid, and who succeed in resisting civil proceedings, are left with a substantial bill—many litigants are in such circumstances, even when their costs are paid by the other side—that constitutes a rather strange and arbitrary punishment, given that the proceedings will have been initiated by the state?
§ Miss Kirkbride
That, too, is an important point, which may be pursued in Committee.
I think we are encouraged by what the Minister has said, but I know from my postbag that the Inland Revenue—which, as we know, has fairly draconian powers—has on occasion become involved in circumstances in which no case is proved at the end of the day, but the person concerned has spent a great deal on ensuring that he or she is found innocent. Although those costs may be paid, an opportunity cost will be involved in the fighting of an action that may turn out to have been conducted in an entirely unfair way.
§ Mr. Ainsworth
We are perhaps in danger of a genuine misunderstanding. In cases of civil recovery under part 5 where property is being pursued, compensation will be available if the case proves to be ill founded and falls. That is not exactly the same as the confiscation provisions in part 2, so those issues will be dealt with. That will act as a deterrent to the agency pursuing ill-founded cases.
§ Miss Kirkbride
I confess to being a little unsure now exactly what the Minister has in mind. I think I remember his saying in his previous intervention that there will be civil legal aid, so that all litigation will be paid for, but in addition I think he is saying that if the litigation is 832 vexatious, there will be compensation for the time and effort involved in the case, so there will be no material cost for people who are innocent of the charges.
§ Mr. Ainsworth
Under part 5 on civil recovery, where people are eligible for legal aid, civil legal aid will be made available. Where they are not, litigation will not have to be shown to be vexatious. If they are incorrectly pursued by the agency in civil litigation, they will be entitled to compensation for that pursuance.
§ Miss Kirkbride
I am grateful to the Minister for seeking to clarify the matter. I think that the implication is that, if those people are very wealthy, they will have to pay for their own litigation because they will not be eligible for legal aid, but they will be compensated afterwards if the action is deemed to have been inappropriate. Clearly, these are important matters and will be pursued further in Committee. Nevertheless, the Minister's clarification is welcome. This is a very technical Bill and it is important that we all fully understand the nature of what is being considered.
I recognise that other hon. Members wish to speak, so I do not wish to continue my remarks any further. The only thing that it would be fair to say is that I have been somewhat offended by some of the remarks from Labour Members, who have suggested that, in seeking to raise questions about what the Government propose to do, we are trying to help or to protect people who are criminals, or to protect rich friends. Those remarks were wholly inappropriate.
It is our duty to raise questions about the Government's actions. I should have thought that the Government, in the particular circumstances in which they now find themselves, would be self-confident enough to respond to our concerns—as the Minister has—in the spirit in which they have been raised, and not, as some Labour Back Benchers have done, wrongly impugning our motives.
§ Mr. Tom Harris (Glasgow, Cathcart)
I remind the House exactly what the debate is about. It is not about civil liberties. It is not about legal manoeuvring or nit-picking. It is about saving our communities—it is that important.
The scale of the problem cannot be overestimated. There cannot be a single hon. Member whose constituency has not been affected by the drugs menace. In Castlemilk and other parts of my constituency, drug dealers, drug users, money launderers and protection racketeers have tried to make life a misery for the vast majority of my constituents. Let us remember that when crime hits, it hits the poorest areas worst. The wealthier people are, the easier it is to insulate themselves against the effects of crime.
The tentacles of organised crime reach into every part of every community. The Mr. Bigs, as we tend to call them, are the worst kind of leeches imaginable. I hesitate to call them Mr. Bigs—that label is far too positive. They feed on the weakest and most vulnerable in society and are directly responsible for the misery of ordinary, good, hard-working people.
Those creatures can be identified in two ways. One is through their criminal lifestyle, to which the Bill refers. I take as an example the town in which I grew up in 833 Ayrshire. It has been turned upside down by the activities of drug dealers over the past 20 years. I have to confess that some of the culprits are contemporaries of mine. They park their flashy, sophisticated and expensive cars outside the Department of Social Security while they sign on. I say that not out of envy, but to make a serious point. The culture of envy can take hold, particularly among younger men who see such people as some sort of role model or something to which to aspire. The Bill aims to fight that.
The other way of identifying these people is simply to ask someone. There are many people in Castlemilk who, off the top of their heads, could name two or three drug dealers who live locally. They could identify the firms that have been set up to act as cover for such activities and to launder the money. It is worrying that those people have the confidence and arrogance to know that they are largely immune from the powers of the enforcing authorities. They make no effort to cover their activities.
One reason why they are so secure in the belief that they will hold on to their fortunes can be seen on the Home Office internet site, which has been set up specifically to announce this Bill. It says:Current legislation is inadequate. We need to remove criminals' assets if we are to dismantle and disrupt their organisations.Quite right too. Two lines later it says:In the last five years confiscation orders have been raised in an average of only 20 per cent. of drugs cases and just 0.3 per cent. of other crime cases.That statistic alone would justify the setting up of the Assets Recovery Agency, but it raises concerns in my mind. If existing laws are not used to their limit, can we be confident that the new law will be used to its full extent? I hope that the Minister will refer to that in his winding-up speech.
I understand that, as the hon. Member for Angus (Mr. Weir) said earlier, the agency's remit does not extend to Scotland. There will be a dedicated unit in the Scottish Executive, and it is not for the House to speculate on how that will be funded or organised. As an elected Member from Scotland, I would expect it to be just as determined to provide an effective service to the people of Scotland as its counterpart in England and Wales.
It is fair to say that the public are at best unconvinced and at worst cynical when Governments of any colour say that a Bill will change the face of society or stop criminals benefiting from crime. It has been a long time since the first such measures were introduced, and their results have not met expectations. That is why I strongly welcome the Bill. For the first time it provides a level playing field, which has previously been tilted in favour of the criminal fraternity.
I said that there can be a problem with people looking for role models, particularly in deprived areas, where second and sometimes third generation unemployment has meant that the traditional male role model of the hard-working father has been replaced by wide boys and villains. The Bill recognises that.
If we are to combat the seductive image of the successful criminal, successful action against them must be accompanied by publicity. That sounds like a trite point, but I hope that when the Bill is enacted there will be high-profile confiscations. In that way, whenever some 834 jumped-up young thug gets his Ferrari, his yacht or even his home confiscated, it will be obvious to the local community that has paid for those benefits that he has got his come-uppance. Even if he is not sent to jail, people will see that he will not be able to live in the style that he has been used to.
The most contentious part of the Bill is that dealing with civil recovery. The Government have certainly established, and I agree, that the civil recovery provision does not seem to conflict with the European convention on human rights. I hope that that view will be borne out if the provision is challenged in court. The civil recovery clause is the one clause in the Bill that I wholeheartedly welcome. My plea to Ministers is to ensure that when the Bill is enacted we use the civil recovery clause frequently and enthusiastically. If we do not do so, those who are expecting great things from the Bill will be very disappointed in both the legislation and the Government.
Every hon. Member understands the difficulties that the authorities face in prosecuting those who are so powerful and wealthy that they do not even have to dirty their hands by doing their own dirty work. The drugs barons are sometimes three or four times removed from the dealer on the street, pulling the dealer's strings; so rarely do we see those evil people behind bars.
I accept that we have to be careful with civil liberties. The priority of the House and of the Government, however, should be to protect not the civil liberties of drugs barons but the civil right of young people to live free from the threat of drugs, of older people to be able to walk along the street without threat and of us all to feel secure in our home. Currently, we are all being denied those rights.
I have previously raised the issue of money laundering in Northern Ireland, and, earlier this year, the Government introduced the Financial Investigations (Northern Ireland) Order 2001. In our debate on that order, the Opposition spokesman, the hon. Member for Solihull (Mr. Taylor), expressed neither support for nor opposition to the order. I had hoped to hear today that Conservative Members had come off the fence and now support the order. I do not want to make party political capital out of the issue but. bearing in mind what we have heard in this debate, I am disappointed that the Bill will not have cross-party support, as it would have benefited the legislation.
§ Mr. Grieve
I shall reiterate the position. The official Opposition have indicated that we support the intentions behind the legislation. Consequently, we shall not vote against it today. We have also highlighted issues about which we have very substantial concerns that we want to be addressed in Committee. We shall do that in a spirit of complete co-operation. Indeed, I very much hope that the Committee will serve as a model for how such Committees should operate in that regard.
§ Mr. Harris
I accept the hon. Gentleman's remarks, but earlier in the debate the hon. Member for Cities of London and Westminster (Mr. Field) said that Labour Members might eventually regret the speeches that we made in this debate. Although I accept that not one Conservative Member would consider himself to be soft on crime, any drug lord who read this debate would find no small comfort from the tone and content of some of the speeches made today by Conservative Members.
835 In the Committee's debate on the statutory instrument, the hon. Member for Montgomeryshire (Lembit Öpik)—who is not in the Chamber—mentioned George Orwell and "Nineteen Eighty-Four". I often find that comparisons with Orwell's dystopia are at best inappropriate and at worst over the top. Any Government who are determined to crack down on crime are accused of introducing a police state. When closed circuit television is extended, some people believe that we are in a police state. When people talk about identity cards, which I support, other people say that we are heading towards a police state.
Undoubtedly there are those who will read the Bill and see not a new means of combating crime but a threat to civil liberties. I do not believe that, 50 years ago, when "Nineteen Eighty-Four" was written, Orwell could have foreseen the state of society today or the type of champions league criminals who are comprehensively crippling our society. It is a sad day when such severe action is necessary, but necessary it is, and I think that that is justification enough for it.
The Bill will apply to Scotland, England, Wales and Northern Ireland. As a Scottish Member I welcome the opportunity to speak in a debate on such legislation, and I pay tribute to the Scottish Parliament for moving a motion last week to allow us to do so. I am glad that the hon. Member for Angus (Mr. Weir) is in the Chamber because I understand that, although they supported the civil motion, Scottish National party Members of the Scottish Parliament were unhappy that such a motion had been moved as it denied the Scottish Parliament itself an opportunity to legislate. I do not want to make a party political point about this, but it is more important to enact the Bill than to worry about where it is debated. I do not believe that an Act of Parliament needs a tartan cover to be effective.
My constituents and people throughout the country want nothing less than the total dismantling of organised crime networks. They want those responsible for money laundering, protection racketeering and drug trafficking behind bars and deprived of the trappings of wealth.
The Bill continues the good work done by previous Governments and it deserves the support of the whole House.
§ 9.5 pm
§ Mr. Mark Lazarowicz (Edinburgh, North and Leith)
I, too, welcome the proposals in the Bill. They will be welcomed by the public, who want tough action to prevent drug dealers and others who prey on human weakness and misery from profiting from their nefarious activities. The measures also hit at the right target: those who make vast profits from drug dealing, rather than the user. Like my hon. Friend the Member for Wrexham (Ian Lucas), I warmly welcome the Home Secretary's announcement last week on the reclassification of cannabis. That announcement and today's proceedings represent a sensible focusing of drugs policy on what should be our real targets.
§ Mr. Grieve
I accept that there may be arguments on both sides, but one of the consequences of reclassification is that the maximum sentence that can be imposed on the Mr. Bigs who engage in substantial dealing in and 836 importation of cannabis will be reduced to five years. Does the hon. Gentleman consider that compatible with the aims of the Bill?
§ Mr. Lazarowicz
The Bill rightly hits at the financial gains made by such individuals.
Some concerns have been raised about the impact of the Bill on human rights. Such concerns should not be set aside lightly. I believe that most of them can be resolved satisfactorily in Committee. They must be resolved, not least to ensure that the legislation is watertight, as the hon. Member for Angus (Mr. Weir) so rightly said.
There are admittedly some significant new powers in the Bill: in particular, the powers of civil recovery of proceeds arising from unlawful conduct set out in part 5, but it is debatable whether even those represent such a fundamental innovation as some of the Bill's detractors suggest. There are, after all, some circumstances at present in which there can be forfeiture of criminal assets outside criminal proceedings. As the hon. Members who raised the point are no doubt aware, it has always been the case that property that someone has acquired from another by unlawful conduct can be recovered in the civil courts by its rightful owner satisfying the civil standard of proof.
The hon. Member for West Dorset (Mr. Letwin) rightly said that there is a difference between a dispute between two individuals and an isolated individual facing the full rigour of the state in the shape of a powerful Assets Recovery Agency or, in Scotland, the even more frightening shape of that awesome body of men and women, the Scottish Ministers. Of course the situation is not the same, but the picture of the weak individual against the strong state that some Opposition Members have tried to portray is not an accurate reflection of the real world.
The real issue is the neighbourhood drug dealer, the international criminal, the trafficker in illegal immigrants and the international terrorist network that can reach more than 60 countries, as we now know to our cost. Under existing legislation, it is our state, defending our public interest, that all too often faces an unequal fight against those organisations. I want our law enforcement agencies to have the ability to fight them on equal terms, which is what the Bill is about.
Of course, the possible effect of any measures on an individual's rights has to be considered against the benefit to society as a whole. In the real world, it is difficult to imagine a case in which a person with a genuine, lawful right to property would not be able to establish that right if challenged under the Bill. As my hon. Friend the Member for Wirral, West (Stephen Hesford) pointed out, legislation of this nature has existed for some time in the United States. It has also existed in countries such as Ireland and Italy. I would have thought that Opposition Members could highlight some actual examples of where such legislation has caused real difficulties.
Two hypothetical examples were given. The hon. Member for West Dorset referred to the example of a discount store. I am not sure whether he had in mind that the entire weight of the Assets Recovery Agency would seek to recover an electric kettle that someone had bought from a Sunday market. That is an example of a point that has no sensible validity in terms of opposing the Bill. I understand that the Bill's provisions to recover property 837 would apply only above a threshold of £10,000. I do not know in which store the hon. Gentleman does his discount shopping, but £10,000 is some list for a day's shopping.
The second such example came from the hon. Member for Witney (Mr. Cameron), who referred to a secret admirer leaving a legacy to a lucky individual. Such admirers may regularly benefit members of the Conservative party, but that one theoretical and rare example should not be set against a measure that will make the business of drug dealers, money launderers and the rest much more difficult.
What concerns me most is that the provisions of the Bill should be used. As the performance and innovation unit report that predated the Bill pointed out, even the existing powers have not been used to their full extent. That is why I welcome the proposals on the Assets Recovery Agency, which will operate in England and Wales. I also welcome the extra resources that are proposed to enable similar powers to be enforceable in Scotland. It is important that there is the closest possible co-operation between the Scottish unit and the Assets Recovery Agency to make sure that the big-time operators that the Bill wants to hit do not slip between the two jurisdictions. The Scottish unit may have some 10 staff. That seems to be a small resource for the work that it will have to undertake. I would welcome clarification from Ministers of how that co-operation can be made effective.
A second area of concern is the way in which, under current proposals, a court in Scotland will have only the discretionary power to make a confiscation order under part 3, whereas in England and Wales, under part 2, the court will, if the necessary conditions are met, be required to make the necessary order to seize assets.
The Law Society of Scotland welcomes that distinction. For my part, I do not see the justification for a regime in Scotland different from that in England and Wales. If there is evidence of gains from criminal conduct, I do not see why the courts should do other than deprive the person concerned of their ill-gotten gains. I urge the Government to consider making such action by the court mandatory, if the right circumstances are met, for Scotland as well as for England and Wales.
§ Mr. Carmichael
Should not the courts in England be given the discretion, rather than the courts in Scotland having it removed? Does the hon. Gentleman not accept that there could be severe cases where injustice will be done if courts are not given any discretion at all?
§ Mr. Lazarowicz
It is possible, but that would be wrong. My hon. Friend the Member for Wirral, West made the valuable point that part of the problem is the culture of the courts and prosecution services in making use of the measures. I am concerned that without such mandatory provisions, when the relevant conditions are met the culture may not result in the change in approach that is needed to tackle the problem.
Finally, I turn to the way in which the Bill has been introduced as a UK measure, even though it includes matters over which competence has been transferred to the Scottish Parliament. That is an excellent indication of how the Scottish Parliament and the UK Parliament can work together well in the interests of both Scotland and the rest of the UK. It is an excellent example of the new, devolved system of government working at its best.
§ Mr. Vera Baird (Redcar)
I can say with confidence that I am the last lawyer to speak in this debate and, perforce, I shall do so in headlines.
I welcome the Bill, as will the people of Redcar. As many hon. Members have said, it will give them protection from the predatory behaviour of drug dealers. However, I have huge reservations about the blunderbuss risk attached to the civil recovery procedure. I hope to be able to express some of those reservations at a more appropriate time in Standing Committee. The Bill is excellent, but it is rather heavy artillery.
I shall concentrate on a matter raised by a Conservative Member earlier in the debate. Clause 324(2)(b) would make it an offence if people in the regulated financial sector who had reasonable grounds to know or suspect that a person had been involved in money laundering did not report it. The problem is that the individual involved does not need to have known or suspected that another person was laundering money. He or she can be oblivious of the activity, but will, as the Bill is drafted, still be guilty of an offence by negligence. Such a person will be considered to be guilty of conduct that falls below the standard of a reasonable person.
That is almost unknown in the criminal law. Only in offences of manslaughter or public nuisance is it central to the liability that a person can negligently not notice that others are committing crimes. In this case, the crime is money laundering, and the penalty for negligently not noticing it or not reporting it is a maximum of five years. That is one of the most far-reaching and worrying aspects of what is otherwise a hugely well-intentioned Bill.
Finally, I, like other hon. Members who have contributed to the debate, am a member of the Joint Committee on Human Rights. We look forward to being able to deliberate more fully on this measure. We should be grateful to receive the rationale behind the advice that buttresses my right hon. Friend the Home Secretary's conviction that all the provisions in the Bill are compatible with the European convention on human rights. I suspect that the Joint Committee will have some concerns in that regard. I hope that those concerns, and the matters that I have raised this evening, will be received kindly by the Government.
§ Mr. Dominic Grieve (Beaconsfield)
My hon. Friend the Member for West Dorset (Mr. Letwin) made it clear at the outset that the Opposition support the aims of the Bill. We all want there to be in place a regime that ensures that criminals cannot enjoy the fruit of their criminality.
However, we would not be doing our job properly as the Opposition if we did not flag up the matters that concern us. It was suggested at one point in the debate that those matters should be left for the Standing Committee that will scrutinise the Bill. That is certainly the stage when matters will be considered in detail, but the seriousness of some of our anxieties is such that to omit to go into detail about them on Second Reading would be to fail to do them justice.
The debate has been thoughtful. Many hon. Members have contributed, and I apologise to those whom I neglect to mention, as I recognise that all who have spoken have made an individual contribution. It may be that, as the 839 House considers the details with which it must grapple, there is more common ground between the parties than some of the more intemperate remarks suggested. The hon. Member for Redcar (Vera Baird) encapsulated many of the points that we have been trying to make while, like us, welcoming the legislation.
I thank those of my hon. Friends who made important contributions to the debate. Some rightly concentrated on their areas of expertise, and it was pleasant to hear from the hon. Member for Redcar. She recognised that the points made by my hon. Friends the Members for Sutton Coldfield (Mr. Mitchell), for Arundel and South Downs (Mr. Flight) and for Cities of London and Westminster (Mr. Field) about money laundering and its effect on financial services, and the potentially draconian penalties that will be visited upon those who are seen to have been negligent, described a very unusual state of affairs. Any right-thinking person wishing to see justice done would wish subjective and objective tests to be approached carefully.
Similarly, my hon. Friends the Members for Bromsgrove (Miss Kirkbride), for Witney (Mr. Cameron) and for Tatton (Mr. Osborne) raised concerns about wider civil liberties issues to which I will return. Each one also indicated that there were aspects of the legislation that we can support.
Let me turn to the powerful contributions of Labour Back-Bench Members. The extent to which many represented communities that had been devastated by organised criminality was apparent. Conservative Members are not oblivious of the facts. It is sometimes suggested that we live in ivory towers of wealthy constituencies. However, in my constituency and the one adjoining it, represented by the hon. Member for Slough (Fiona Mactaggart), I believe that the street price of heroin is at its lowest. That affects my constituents in exactly the same way as it affects hers. It is apparent that the profits are colossal. That is why I am bound to flag up the fact, as I did earlier in response to a comment, that we are sending out mixed messages. We slash the penalties for dealing and importing cannabis, although there may be a reason for reducing them for possession, while seeking to confiscate the assets of the individuals involved. The House may wish to ponder on that point.
The hon. Member for Central Fife (Mr. MacDougall) made his maiden speech this evening. It was unusual in that, unlike so many others, the hon. Gentleman succeeded in bringing his maiden speech to bear upon the topic that we were considering. I have no doubt that the hon. Gentleman will make many more useful contributions in times to come.
Some of the contributions, such as that of the hon. Member for Glasgow, Pollok (Mr. Davidson), who is no longer in his place, highlighted the dangers that we run when populist demagoguery and emotion allow us to get carried away on serious issues. Of course, dealing with organised crime is of concern to all of us but we should not deal with it at the expense of throwing away safeguards for the civil liberties of individuals.
I want to address some questions to the Ministers. I shall start on the point that was flagged up—although the hon. Members for Glasgow, Pollok and for Edinburgh, North and Leith (Mr. Lazarowicz) thought it was useless—to the effect that the regime that the Government are seeking to introduce under the confiscatory mechanisms for Scotland is different to that for England 840 and Wales, in that greater discretion is given to the court on the making of assumptions in Scotland than is given here. We shall want to explore that matter carefully, because if the extra safeguard provided in Scotland, which in my judgment is very sensible, can properly be provided north of the border, I cannot see a good reason why it cannot be provided down here also, particularly as the contribution of Scottish MPs claiming what the benefits would be for their constituents was predominant in tonight's debate. I therefore very much hope that, as a starting point, the Under-Secretary of State for the Home Department, the hon. Member for Coventry, North-East (Mr. Ainsworth), will address that issue when he winds up the debate. It will certainly be addressed in Committee.
I can only say that I despaired when I discovered that the hon. Member for Glasgow, Pollok felt that the regime for Scotland was far too lax and that, in the phrase that I used to him but which he was really endorsing in return, he did not feel that it was possible to make omelettes without breaking eggs. I am sure that, if we turn ourselves into a tyrannical Government and regime, many criminals can be dealt with more expeditiously, but that does not turn us into a civil society, which is one of the things that differentiates us from tyrannies abroad.
While we are on the subject of tyrannies abroad, it may be worth turning to the issues in part 5. Conservative Members were seeking examples of ways in which individuals might find themselves prejudiced by the civil recovery procedures. I will turn to those procedures first because they are one of the areas that cause us most concern.
There is an underlying assumption in the civil recovery procedures. Under those procedures, individuals will be taken through a civil process intended to lead to the confiscation of their assets because, on the balance of probabilities, it has been deemed by the state agency that it thinks—"thinks" is the word—that those assets have been wrongly acquired.
In my experience as a barrister I have more than once come across individuals, particularly, interestingly enough, from ethnic minorities, who have been obliged to remove themselves from their country of origin, together with—I take this as an assumption, if I may use that word—their legitimately acquired assets, in circumstances that might well appear to be akin to those of an individual who might be engaged in crime. Indeed, in some cases, because of the tyrannical and confiscatory nature of the regimes that they were leaving, they had to engage in complex legal and financial shenanigans to achieve that, but it did not mean that those assets were wrongly acquired.
I shall put two points to the Minister. First, such individuals may, despite the fact that their assets were wholly legitimately acquired, have difficulty in showing their origin. Secondly—this may be the more important point, which we shall wish to revisit in Committee—we cannot get away from the fact that the system that we are devising will involve public hearings, as though it was ordinary civil litigation.
Doubtless those hearings will appeal to the prurient. A bit of schadenfreude always creeps in in these circumstances. It is always quite nice to see other people's finances being trotted out in the media, and I dare say that if it turns out that the person is a Mr. Big of the drug importation world, the revelations of the financial 841 transactions in which they engaged may be highly entertaining, and quite reassuring when finally they are potted and their money is taken away.
However, it is worth considering that in the process that we are trying to set up, one of the things that we must do is cater for those cases where the agency gets it wrong. We can guarantee to the Under-Secretary—I suspect that he will not even gainsay us—that in some circumstances the agency will get it wrong and only the court will rule against it.
In those circumstances, what will happen to people whose business and family finances have been trotted out in public, especially as the revelations may jeopardise other members of their family in foreign countries? What system will be devised then? If those circumstances occur, should we consider—we shall do so in Committee—whether to allow those subjected to it to elect for the confidentiality of chambers, even if the final judgment is given in open court? I simply flag up that practical issue, which the Government should consider.
I see that a certain amount of gossip is taking place. If any of the three eminent members of the Treasury Bench wishes to intervene, I should be happy to give way; otherwise I shall continue.
I turn now to some of the other issues that have been raised. Cash seizures were not greatly commented on during the debate, but the provisions on cash seizure are doubtless particularly useful because they will allow the immediate seizure of cash. Equally, they are particularly draconian because they will be used to remove assets from individuals, virtually on the knock on the front door. Under the Bill, that can be done on the administrative say-so of a police officer, although it will also be possible for a justice of the peace to do so. Again, I simply flag up to the Minister this issue of detail and principle: why will the judicial authorities be semi-excluded from the process? If they will be allowed to take part, why not simply delete from the legislation the power of a police officer in those circumstances?
We have also heard much about prejudice, which I touched on in referring to the mechanism in relation to the part 5 procedure. However, an issue that was touched on by several hon. Members will require some careful consideration—namely, to what extent will those administrative procedures prevent criminal trials from taking place subsequently? The Minister of State, Scotland Office shakes his head, but that is rather a good question. Information about such people may be exposed all over the pages of The Sun and the News of the World, so how can they subsequently be charged with a criminal offence, given that they have effectively been trawled through the courts and the information has been put into the public domain about activities that would not have emerged during their criminal trials? That important issue needs to be addressed, given that we do not wish, as one or two hon. Members have said, to create a system that reduces the effectiveness of being able to send people to prison under the criminal justice system.
We also need to consider the fact that previous efforts to seize assets of one kind or another have not worked. That fundamental issue should really be debated on Second Reading, rather than in Committee. The Child Support Agency was mentioned, but equally we have to 842 draw attention to the manner in which the total number of seizures under the existing rules has consistently declined ever since they were introduced. I do not welcome that, but it suggests at least that there may be a problem with how such confiscatory mechanisms work in practice.
Before we all start running down the road, waving our flags and banners and saying that we are pleased that the new system will lead to such wonderful results, I have to tell the Minister that he will have to satisfy the House and the Committee that, in practice, the provisions—especially those on the confiscatory rules, which, as Ministers have said several times, represent a consolidation measure—will be much more effective than the provisions that previously existed. If the Minister cannot satisfy us on that, the whole thrust of the legislation will be called into question.
It is easy for us in this House to be long on rhetoric, but we want to see the angels in the detail and not the devil. It would therefore be helpful if the Minister at least provided some indication in his winding-up speech of why he believes that the confiscatory mechanisms will work so much better than the present system.
I deal now with the confiscatory mechanisms that constitute the earlier parts of the Bill but which have been to an extent supplanted in the debate by anxieties over issues such as money laundering and part 5. There are some very odd things in the confiscatory provisions. Above all, they appear to centre on whether justice will be done either to people who are put through the process and exonerated or, most important, to third parties who are affected by the process and subsequently find that they are exonerated.
If somebody absconds and assumptions are made which are subsequently varied or rescinded, the court has power to award compensation if it thinks it just. However, if the full, normal procedure has taken place—notwithstanding the fact that subsequently the whole case may cave in—one is allowed to obtain compensation only in circumstances of serious default. I find the juxtaposition of those two things odd.
In such circumstances, the explanatory notes to the Bill strike me—frankly—as weird. They seem to say, "Oh well, as one was a very quick procedure, we feel that we should allow the just principle to apply, but as the other follows the normal criminal procedure, it should apply only in cases of serious default." I do not see why serious default should be the only ground for compensating people who suffer the adverse consequences of draconian legislation.
If the Government are confident that the people who are targeted will be found—if I may use that word; it is not the proper word in the circumstances—guilty or at least to be in default, why are they so concerned about paying full compensation in those circumstances? There is no justification for that. In so far as the provision may be a carry-over from earlier procedure, I strongly suggest to the Government that, given how much further and more extensively the net is being cast upon the waters, now is the time to change it. That is another example of an aspect that is fundamental to whether the Bill is acceptable. It will be considered in Committee, although it is right that we should flag it up at this stage.
I do not wish to take up more of the House's time. I hear one or two Members saying, "Hear, hear." We shall certainly seriously and as rapidly as possible consider 843 such matters in Committee, but let us not forget that we are dealing with a 444-clause Bill. It is longer than the Law of Property Act 1925. It is one of the largest pieces of legislation ever presented to the House in such a form. For a piece of semi-criminal legislation, that is in itself quite worrisome. It deserves close scrutiny. I repeat to the Minister what we have said before: we support the aims of the Bill, but that should not be an excuse for throwing away common sense and, above all, that should not be a reason for throwing away civil liberties.
§ The Parliamentary Under-Secretary of State for the Home Department (Mr. Bob Ainsworth)
It has been a good debate, as the hon. Member for Beaconsfield (Mr. Grieve) said. Some contributions were well informed. They showed great knowledge of the law, financial institutions and the consequences of criminality and drug trafficking. The maiden speech of my hon. Friend the Member for Central Fife (Mr. MacDougall) was one such speech, and several hon. Members congratulated him on his performance. The quality of those contributions was not surprising. However, the almost complete and astonishing role reversal by the Conservatives was surprising. I have rarely seen their Front-Bench spokesmen so agitated. I was especially surprised that they were so agitated about human rights and civil liberties.
Labour and Liberal Democrat Back Benchers usually raise and get concerned about such matters. To hear the Conservative Front-Bench spokesman so worried about them was surprising. Either there has been a Pauline conversion, or something else is going on. Their concerns ran through the opening speech of the hon. Member for West Dorset (Mr. Letwin) and the closing remarks of the hon. Member for Beaconsfield. They reached a crescendo with the speech on inner cities by the hon. Member for Cities of London and Westminster (Mr. Field).
It is the tone that is interesting, not what is said. Conservative Members are trying to tell us that they support the measures, yet they describe them as draconian and an affront to civil liberties. The hon. Member for Cities of London and Westminster got to the point of calling them evil and illiberal. With that support, we are entitled to ask exactly where Her Majesty's Opposition stand on this. Some of my hon. Friends on the Back Benches are right to ask about their motives.
§ Mr. Ainsworth
In a moment.
The measures include establishing an agency. There is legislation to recover the proceeds of crime, but it is piecemeal. This is the first time that an agency will be dedicated to such work. By comparison with the relative size of our economies, we recover a quarter of the proceeds of crime that the authorities in the United States recover and a 10th of that recovered in Ireland. The Bill consolidates legislation and creates the agency that is needed if we are to have an impact.
Some of my hon. Friends said that there is cynicism about the effectiveness of such measures. Unless legislation is coupled with a strategy that all agencies sign up to, in which they agree to work together, and with investment in the necessary expertise, we will not be able 844 to deliver on many people's expectations that we are as effective as other countries at recovering the proceeds of crime.
Confiscation is underused. Where it is used, it is underenforced. Existing legislation is disjointed and inaccessible. Confiscation is not new. I am surprised by Conservative concerns about it. Assumption is not a new concept. There is no reversal of the burden of proof. Confiscations will apply to people who have been convicted. In those circumstances, the defence against confiscation will be to prove that there are no proceeds of crime to confiscate, but only after conviction. The hon. Member for Beaconsfield is upset about the way serious default is used in the Bill, but we are talking about confiscation after criminal conviction, so I really do not understand why he is so exercised about that issue.
§ Mr. Grieve
I suggest that the Minister recalls the words of his hon. Friend the Member for Wirral, West (Stephen Hesford), who asked for clarification of the definition of "criminal lifestyle". That is where novelty arises. The issue is not being convicted of a crime, but being found to have a criminal lifestyle based on a series of what are potentially extremely minor offences that are statutorily determined via statutory instrument by the Secretary of State.
§ Mr. Ainsworth
I will not try to suggest that there are no important issues to be addressed. We will have to discuss them in Committee. I hope that, despite the rhetoric and the overall tone of today's debate, the hon. Gentleman will respond reasonably during the Committee's examination of the Bill. All we are trying to do in part 2 is streamline and consolidate the legislation. For reasons that have been adequately explored by my hon. Friends during the debate, we are insisting that, in appropriate circumstances, confiscation is considered and that assumptions are used so that we can end the underuse of the provisions.
On civil recovery, where there are substantial assets that are being used and enjoyed and where criminal conviction is not possible—the individual who committed a particular crime may be abroad, untraceable, or even dead—why should we not, on behalf of the citizens of this country, have the power and ability to sue for the forfeiture of that property? Why is that principle so wrong?
The hon. Member for Witney (Mr. Cameron) said that the agency would have the ability both to prosecute and to investigate, but that is not so. The agency will not be a prosecuting authority. These are civil matters; the agency will sue people in the courts. Yes, of course it needs the ability to investigate: in normal civil procedures, people have a case that they take to the court, and the agency will need to be able to discover the property and proceeds of crime involved if it is to be able to make its case; however, it will not be a prosecuting agency.
The hon. Member for Beaconsfield suggests that the agency will ride roughshod over people's civil liberties and that it will be able to take all sorts of action simply because it thinks that the action is appropriate. In fact, the agency will have to go to court and show a good, arguable case in the first instance. It will have to prove—yes, to the civil standard—that the property involved is the proceeds of crime. The individuals involved will not be 845 subject to the necessity of proving that their property is not the proceeds of crime—it will be the other way around. If the agency gets it wrong, it will be liable for costs and compensation. I do not know why he is getting so upset. I repeat, of course there are issues that need to be properly explored. We will do that in Committee.
The people who elect us expect our powers to investigate and tackle money laundering to be equal to the tasks in hand. As everyone knows, this country has some very large financial institutions, but in 1999 there were only 140 prosecutions in the UK for money laundering, whereas in Italy there were 538 and in the United States of America there were 2,034. Surely that shows that there is a need to increase our ability to take action against money laundering.
My hon. Friend the Member for Redcar (Vera Baird) expressed concerns about the level of proof that would be needed for the reporting of money laundering. Guidance will be issued in consultation with the industry, and that will apply only to the regulated sector. If that guidance is adhered to, that will be a defence. That may be some reassurance to her.
Some Members are worried about what they see as inadequacies in the strategy and in previous legislation. Legislation alone will not measure the need to take action. We need an entire strategy, and we have one. We need all the agencies to sign up to it, and they have. We need also investment in the expertise that is necessary to put the strategy into place. Some measures have already been implemented. Money has been allocated. There have been announcements of the initial bids against that money. We shall be able to announce the strategy in detail at the end of the month.
Scottish Members and the hon. Member for Beaconsfield referred to the differences between Scottish and English legislation. Many of my hon. Friends said that they might desire the measures that are available in England and Wales to be available also in Scotland. My hon. Friend the Minister of State, Scotland Office has talked to his colleagues on the Scottish Executive and others about the matter, and he will continue to do so. There is a different tradition in Scotland, and the Bill reflects that.
§ Mr. Carmichael
I wish to stiffen the Minister's resolve on that point. Does he agree that it is nonsensical to say that the proposed legislation is necessary to reinforce the credibility of the criminal justice system, and then to say, like the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz), that the courts are not to be trusted to execute the proposals?
§ Mr. Ainsworth
As I have said, the current measures have been under-used. It is appropriate to take action to ensure that they are not under-used in England and Wales. There is a different tradition in Scotland. There are different and devolved issues. The Scottish Executive have been fully involved in the development of policy, and their views are reflected in the Bill. If people want to make representations, we must provide the mechanism for them to do so. We are not opposed to that.
My hon. Friend the Member for Clydebank and Milngavie (Tony Worthington) talked about the Abacha case. We are introducing the capacity of restraint to the 846 start of the investigation. There was a potential problem. We are also introducing regulations that will affect bureaux de change, which will come into effect next month.
My hon. Friend complained about the performance of the Home Office in responding to foreign jurisdictions. New resources have been made available, which has led to a considerable improvement.
The hon. Member for Lewes (Norman Baker) raised many of the issues that were taken up by my hon. Friend the Member for Birmingham, Hall Green (Mr. McCabe), which included questions that go to the heart of concerns that people should have. There will be, as a necessity, a hierarchy of use for the measures and the way in which they are used in conjunction with criminal prosecution. We intend to set that out in guidance which will be available for the courts. Confiscation will be the normal route when a criminal prosecution is pursued, so civil recovery and cash forfeiture will not be an issue. When a case is pursued through the criminal courts, the confiscation route will be the first option for the forfeiture of the proceeds of crime. I hope that that satisfies the hon. Member for Lewes and my hon. Friend the Member for Birmingham, Hall Green. Only when prosecution is ruled out will other routes be pursued; the reasons for ruling it out will be part of the normal decisions taken by the prosecution agencies.
§ Norman Baker
Does that mean that there are no circumstances at all in which criminal proceedings will be parallel to civil proceedings to seize assets?
§ Mr. Ainsworth
Civil proceedings will not run parallel to confiscation proceedings or criminal proceedings. If there are criminal proceedings, confiscation proceedings could well be part of that. Civil proceedings will only be instituted when criminal proceedings are not felt to be available or appropriate.
The hon. Member for Lewes was anxious about innocent third parties; there were also concerns about whether legislative measures would be effective against tainted gifts. We think that we have got it right, but the matter will need to be examined in Committee. We need to be able to take effective measures so that the proceeds of crime cannot be hidden or salted away by an accomplice or relative, and can be pursued. Yet we also need to protect associated property, innocent third parties and people who have bought at value. We intend to do precisely that. As Members get into the detail of the Bill, they will see that we have managed to give protection to innocent third parties while, at the same time, introducing an effective measure to pursue the proceeds of crime and pretty clever individuals who attempt to hide them and put them beyond the reach of the authorities.
I thank my hon. Friend the Member for Central Fife who, in his maiden speech, supported the Bill, as did several other hon. Members. As a Home Office Minister, I became responsible for the legislation in June this year. Since then, we have examined all the measures in detail, and listened and responded to all those—[Interruption.]
§ Mr. Ainsworth
We made some changes in response to the consultation, but declined to make others. 847 We incorporated the extension of cash seizure promised during the general election. I am completely confident that the measures in the Bill are necessary and the safeguards adequate. To those in the House and elsewhere who disagree, and to people who doubt the justification of our proposals, I say quite simply that there is no justification for continuing with a legislative framework that allows people to retain the proceeds of crime to corrupt our financial institutions, compete unfairly with legitimate business and finance further crime. I therefore commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time.