My Lords, the noble Lord tempts me to go further and I am grateful to him for doing that. I can promise him a full response: whether it is a helpful response will be something that noble Lords will be able to judge at the end. It is quite a large group and there are some new developments and new amendments there about which I want to put some remarks on the record.
I am conscious that on this area, we have had a long journey. I remember a debate initiated by the noble Baroness, Lady Kennedy, on supply chains last year. At that time, when I was answering, we did not even have the politics of the Bill in place, so that was an addition. Of course, as is always the case, one goes back and says to colleagues in government, “If you can just do this, I am sure that that will meet the concerns”, and then, after huffing and puffing, we came forward with Part 6. I totally understand that people want to start making amendments and expounding on that. The noble Earl, Lord Sandwich, is saying that these are relatively small elements but we will consider that as we move through.
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I am grateful to the noble Lord, Lord Alton, for mentioning the helpful meeting that we had on transparency of supply chains provision. We had a two-way meeting on 10 February and on 12 February I wrote to the noble Baroness, Lady Royall, outlining the supply chains consultation which is now under way. That backdrop of voluntarily moving a few more steps rather than being dragged down the road is a good thing.
Perhaps I may say in my contextual remarks that the message has to be received by business that the Government’s approach is that we want it to comply. We do not want to legislate to the nth degree on this but there is a settled will out there that this evil has existed for too long. It is one of the basements in the supply chains of our major companies that we have not visited and the view is now that a light needs to be shone strongly in this area. Of course we wish companies to see that it is in their enlightened self-interest so to do, but the clear message from the Government is that we are watching this and if progress is not made at the required rate, and if it is not taken as seriously as we intend, future Governments will reserve the right to act further to ensure that the issue is tackled appropriately.
Our transparency in supply chains provision is designed to drive real changes in business behaviour by spurring all large businesses to directly address the issue of
modern slavery in their supply chains and to compete to demonstrate the most proactive approach. For these changes to be implemented it is crucial that the most senior managers are involved. Government Amendment 97 achieves that aim. It ensures that the most senior people in a business—which I remember the noble Lord, Lord Alton, speaking passionately about in Committee—must take direct responsibility for these statements. For companies, the provision is modelled on the Companies Act and requires that the board approves the statement and that it is signed by a director. There are equivalent provisions for other types of businesses such as partnerships.
In that element there is a crucial role not only for Governments but for the pension funds and the big institutional investors to leverage their weight with boards at AGMs to ensure that this is taken seriously and referred to. We are talking here about a minimum standard but we would like to see people go further. I know that a number of Peers and experts outside government have raised this issue. The amendment will mean that transparency is an issue for the most senior leaders in a business and not only a part of the corporate social responsibility department’s activities.
I have listened carefully to the desire to set out in more detail what companies should include in their statements, to the extent that doing so could make these disclosures easier to write for businesses and easier to assess and compare for the public. That is why government Amendment 97 gives a clear indication to businesses in the Bill about what they should consider including in an effective statement. The amendment introduces a list of six areas of activity that a business may include information about in its slavery and human trafficking statements. The areas include a business’s modern slavery policies, due diligence, risk management, training and key performance indicators used to assess the effectiveness of the action taken. In drawing up this list we have considered our existing engagement with business, international examples such as the legislation in California—which I accept has its shortcomings—and forthcoming legislation such as the 2016 European directive on non-financial reporting. As such, we are confident that the areas of reporting outlined reflect existing best practice and will dovetail well with existing and future commitments. Providing this list on the face of the Bill will help businesses to comply with our provision, by providing a starting point as to what they might include. It will also make it easier for the public to assess and compare company statements, because there will be a clear guide in legislation, setting out what a statement could include.
It is important that companies should still be able to report in a different way if they choose, so this approach remains flexible for those businesses for whom this list of areas may not be appropriate or relevant, or who are trying innovative new approaches to tackling modern slavery. The amendment would make our provision more effective in improving business behaviour, while not imposing a rigid checklist on all businesses. However, we may end up with what the noble and learned Baroness, Lady Butler-Sloss, referred to regarding corporations in California which offer just a perfunctory statement on their website. It is
clear to me that any criteria—any comparator—must enable people to compare those who have not complied by not listing their statements, those who are effectively saying, “We are not taking any action”, and a list of those people who are taking steps and where those references are.
Amendment 99 is consequential on Amendment 97. I shall also be moving Amendment 109. This reflects a recommendation of the Delegated Powers and Regulatory Reform Committee and enhances parliamentary scrutiny over the detail of the transparency in supply chains provision. It ensures that the regulations introduced to define turnover, when first introduced, would be subject to the affirmative procedure, and therefore to votes in this House and another place. This would ensure that Parliament can consider the proposed definition alongside the regulations to set the turnover threshold, which are already subject to the affirmative procedure.
I am aware that my noble friend Lady Hamwee asked some specific questions on the issue of turnover, which we have talked about. Part of that will be an element of the consultation. Another element will be, of course, that for calculating the threshold in terms of UK law there is a well accepted version as to where group corporate accounts are registered for the purposes of tax. One would expect that understanding of what constitutes a turnover for the purposes of threshold could be included in those regulations and linked effectively across government with other elements.
The noble Baroness, Lady Young, make an excellent point about public sector transparency. My noble friend Lady Hamwee put it very succinctly when she said that it must be do as we do, not do as we say. I think that we get that message. Are we there yet? Probably not absolutely, but in the Modern Slavery Strategy there is a section on page 58 on public sector resilience. Because of the hour, I will not read it into the record, but I commend points 6.29, 6.30 and 6.31 to colleagues. In addition, the Home Office is drafting a clause for our standard terms and conditions on preventing modern slavery and supply chains for all new suppliers. We are seeking to roll out an evaluation question for all new suppliers and guidance for all suppliers across government. That is an essential part of the cross-government strategy. It is absolutely right that we cannot legislate to tell private corporations what they should be doing and not do it ourselves. The numbers are very significant, as the noble Baroness, Lady Young, mentioned.
Amendment 94 seeks to define what level of turnover a business should meet for this transparency provision to apply, and to align that level with the Companies Act 2006. Determining which businesses this provision applies to is clearly an important point of detail, and I am grateful to the noble Baroness for raising it. I am confident that the right approach to such an important issue is to consult thoroughly before making a decision, which is why we embarked on the consultation that I have talked about.
Amendment 94A would specify that the definition of turnover, which will be set out in regulations, may include the turnover of a company’s subsidiaries and franchisees. I support the principle that large companies
with huge turnovers should not be able to avoid the provision simply because of the way they are structured. However, this amendment is not necessary to achieve this aim. The power in the Bill is a broad one and so already enables us to include subsidiaries and franchisees in the calculation of an organisation’s total turnover. Indeed, we have been clear in our consultation that we intend to ensure that subsidiaries in a group are included when calculating turnover of a parent company. I am glad the issue of franchisees has been raised today. We will consider the contributions made carefully when defining turnover in our regulations. Our approach will always be guided by the principle that those companies with the resources and purchasing power to take action should be covered, and we will consider the issue of franchises in this light.
Amendment 97A would amend government Amendment 97 to specify that an organisation’s statement must cover the listed areas of information to the extent that doing so is necessary to understand the adequacy of the steps the business has taken. I would like to be clear that, under our provision as it stands, businesses must disclose any steps that they have taken to ensure that their business and supply chains are slavery-free. Therefore, if they have taken any steps that fall within the areas of the information listed in Amendment 97, they will be required to disclose those steps. This subsequent amendment is not therefore needed to ensure that we secure that level of transparency.
In addition, I would have some reservations about using the word “adequacy” in this context. For this provision to work effectively on the ground, it is vital that businesses can understand it. The simplest way is for the duty on businesses to be to report what steps they are taking to ensure that slavery and trafficking are not taking place. Asking companies to make complex decisions about what is “reasonably necessary” to judge the “adequacy” of steps taken could add an unhelpful level of uncertainty.
We want to make sure that even businesses that take extensive action and produce detailed statements are constantly striving to make further improvements. This, rightly, is a focus of my noble friend Lady Mobarik, who brings a great deal of expertise in this area from her background in business. She thoroughly understands this issue, and we have had some helpful conversations about it. This is about creating proper transparency, so that businesses feel under constant pressure to do more. I am confident that our current proposal is the best way to achieve that.
Amendment 98 would require a statement to be sent to the Independent Anti-slavery Commissioner, and Amendment 98A would specifically require the Anti-slavery Commissioner to maintain a website for businesses to upload their slavery and human trafficking statements. There are some issues about compatibility, and I appreciate the desire to see these statements collected in one place so that they are easily accessible and comparable. If we are to have real transparency and harness public pressure effectively, it is vital that these statements are easy to find. That is one of the reasons why, if a business has a website, a link to the statement must be prominently displayed on the business’s page.
Leaving aside for the moment the Independent Anti-slavery Commissioner-designate’s conversation with the noble and learned Baroness, Lady Butler-Sloss, and the meeting that will doubtless shortly occur with the noble Lord, Lord Rosser, there might be a third answer on that. I am sure that he, like of all us, is willing and keen to accept the principle that the statements ought to be put in one place and made easily searchable and identifiable. However, the question is who will do that and whether the resource will be there to enable them to do it. That is a good thing.
We are holding a two-day tech-camp event on transparency in supply chains in early March that will bring together technology companies, business and NGOs to consider how new technology can help with transparency in supply chains. I do not know whether I am able to say this from the Box, but the officials are not looking in my direction, so I will take a chance: it would seem to me that any noble Lords who would be interested in attending that tech camp looking at the current cutting edge of technology and providing answers to this would be very welcome to come along. I would be very interested in attending it myself.
I am confident that we will find an efficient way of enhancing access to slavery and trafficking statements. This might—but would not necessarily—involve the commissioner. I do not want to pre-judge what the best role for the Government or the commissioner is. It may be that the commissioner decides that he can operate most effectively to help businesses prevent modern slavery offences in their supply chains by encouraging good practice at a more strategic level, rather than at an operational level by collecting the data. Amendment 98A would also oblige those businesses required to produce directors’ reports each year to include a fair summary of their slavery and human trafficking statements and provide a link to their statements in their directors’ reports.
We have been careful in designing this provision not to link the measure to the Companies Act, which applies to a specific set of listed companies. Our provision applies more broadly to businesses operating in the UK. We are keen to create a level playing field between all the businesses that our provision applies to, rather than require some to do more than others. In addition, I have brought forward an amendment to require a director to sign these statements on behalf of all directors following approval by the board, or senior members of a partnership. Therefore, we have already taken steps to ensure that the most senior management in a company takes responsibility for their statements and their actions. I think this is the most effective and least burdensome means of achieving this level of responsibility, which we all want.
Amendment 99A would give more organisations and individuals, including the Independent Anti-slavery Commissioner, the power to bring proceedings for an injunction against companies who fail to comply with this provision. It would also make commercial organisations and every director or partner of a company criminally liable if their business failed to comply. Obviously, we all want to make sure that companies take this issue extremely seriously but I do not think
that this kind of stricter enforcement is the right approach. This policy is all about harnessing competition and public pressure to drive improvements in the long term. It is not about businesses meeting minimum requirements in the short term. That long-term element was underscored by the welcome contribution of the right reverend Prelate the Bishop of Derby.
We are seeking to limit the burden on business to what is necessary to achieve our aims. If a business fails to disclose under this section, there are already two effective forms of redress. First, this would be a clear indication that a major business does not take modern slavery seriously—which I am sure would be of interest to their shareholders, the media and to civil society, as well as to Members of your Lordships’ House. Consumers, investors, civil society and the press will rightly bring pressure to bear. Secondly, under this Bill the Secretary of State is provided with the power to seek an injunction to require the business to comply. If the business fails to comply with an injunction, it will be in contempt of court, which of course has very substantial penalties attached to it.
I took on board the point that was raised about a possible three-year review—I think it was the noble Lord, Lord Alton, who mentioned a triennial review. I think we can go one better than that: it would be a very good section to have in the annual report of the designate Independent Anti-slavery Commissioner. Of course, he is independent and therefore one would hope that—through osmosis—he would see that we might find it helpful to have that in his report. Certainly, it is something we need to monitor very carefully indeed. In that spirit, I hope that noble Lords may feel reassured, particularly the noble Baroness, Lady Young, and that she will withdraw her amendment.