I am too young to appreciate that offer.
It is ironic that notice of the Government’s intention to proceed with amendments to the Bill to legislate for deferred prosecution agreements should itself have been deferred until barely a week before today’s debate. It is quite unacceptable for material to be made available—indeed, its very existence to be revealed—only five days ago. I appreciate that this is by way of a Second Reading debate but Ministers must have formed the intention of bringing these measures forward months ago, presumably at a time when the expected debate on community sentencing had been scheduled to take place very soon after the end of the Summer Recess. I assume that the date was altered to accommodate the change of Lord Chancellor. It is reasonable to seek to accommodate Ministers in such circumstances but entirely unreasonable to make so little effort to accommodate Members of your Lordships’ House. For the record, can we know whether the new Lord Chancellor is to be in charge of this part of the Bill or whether Mr Clarke will be responsible for it in the time he now has to spare without an attachment to a portfolio? Can the Minister also say when the Explanatory Notes for this part of the Bill will be available to Members of your Lordships’ House?
It is not as if the Government’s proposals are unimportant, breaking new ground as they do, in our system of justice. I acknowledge immediately that consideration was given to and work undertaken around the issues raised in this belated addition to the Bill by the previous Government. Indeed, it might be argued that they are, in a way, an extension of the conditional cautions introduced by the previous Government, although, as my noble and learned friend Lord Goldsmith—who might claim paternity of that policy—has pointed out to me, they are at the other end of the offending scale.
We are, after all, apparently seeking to emulate the American system, under which what are often described as aggressive prosecutors drive hard bargains with offending corporations resulting in huge payments—five times as much, or sometimes much more than that, according to the impact statement, as is likely to be yielded under what we are now contemplating.
I confess to an initial reluctance to embrace a situation in which, in the area of economic crime—for that, as the Minister has made clear, is the area to
which the proposals are addressed—one class of defendants should have the opportunity of buying off a prosecution for a one-third discount or, to be more precise, an up to one-third discount, of the fine they might otherwise have to pay. The Committee will need to be convinced that such an approach is acceptable in all the circumstances, and the public will need to be convinced that we are not creating a privileged class of potential defendants without achieving a significant benefit, not only in cash terms but also in terms of corporate behaviour. Hugging a hoodie was never an attractive notion to many people. Hugging a bent bank or crooked company is even less likely to appeal.
Is not the reality that these proposals stem essentially from the failure of the Serious Fraud Office to tackle economic crime effectively? It brings few cases and, all too often, as in the recent Tchenguiz case, fails lamentably to prove them after devoting years to the task. That case evinced a warning from the High Court that the Serious Fraud Office did not have the,
“proper resources, both human and financial”,
to investigate it and, by implication, others like it.
The question arises as to whether Ministers believe that the SFO has the resources to do its job effectively, not least in the light of budget cuts already amounting to £7 million, or 19%, since 2009-10, and planned to fall by a further £3 million, or 7%, by 2015.
Noble Lords may be surprised to learn, as I was, that top salaries in the Serious Fraud Office are in the range of £70,000 to £80,000 per annum, roughly what an assistant solicitor in a City firm acting for corporate clients might expect to earn soon after qualifying.
Unsurprisingly, the SFO has tended to use civil recovery orders under the Proceeds of Crime Act, a process which has aroused the concern of the OECD, not least because such a procedure does not lead to a disclosure of the nature of the wrongdoing or the basis of the settlement. I appreciate that the Minister has made it clear that these proposals would, in the event of matters being concluded, lead to such a disclosure and also, presumably, the basis of the settlement. The whole scenario hitherto smacks of recent concerns about the manner in which Her Majesty’s Revenue and Customs have apparently settled claims on terms appearing too generous to some major companies.
Will the new proposals be better resourced than the present system under the SFO which is signally prone to failure, as it has proved? Will the relevant agencies have the,
“proper resources, both human and financial”
to emulate its American counterparts? Will the Government look again at the issue of vicarious liability for the dishonesty of corporate employees rather than relying on the present, if archaic, doctrine of the directing mind, under which there is no such liability on behalf of the corporation unless a director or senior manager is involved?
In their response to the consultation document the Government indicated that they would,
“limit the application of DPAs to economic crimes, but provide for the list of economic crimes for which a DPA is available to be amended”.
Will this be by regulation or primary legislation and, if the former, by the affirmative or negative procedure?
6.45 pm
We also have a major concern about the proposals to delegate to the Director of Public Prosecutions and the Director of the Serious Fraud Office the production of a code of practice for prosecutors on these agreements. Given the novelty of the process and the degree to which it departs from current practice in relation to serious crimes, surely there should be parliamentary oversight of any such code.
There is also the question of the penalties, which the Government appear content to leave to the Sentencing Council. In ordinary circumstances that would have been quite acceptable, but these are not ordinary circumstances. I repeat: we are embarking on a radical departure from our present system. Public confidence is unlikely to be engendered for such a change unless the financial parameters are made clear. For that matter, they are also relevant to the question of incentivising use of the system. Firms would have to know that they are liable to very large fines unless they compromise, when the discount would apply.
At the very least, the proposals about the penalties should be the subject of parliamentary debate, especially in the early years of the new approach. I leave open the question about whether they should be introduced by regulation and procedure but, at the very least, they should be subject to public debate. It will be essential to convince the public that companies are not going to be let off lightly by these new processes.
There is much to ponder and debate today, on recommittal and Report. For the moment I have to say, on behalf of the Opposition, that judgment is reserved.