My Lords, I am grateful to the noble Baroness for allowing us to debate this important issue. Whistleblowers play a valuable role in society by bringing wrongdoing to light that could otherwise go unchallenged. Individuals should be able to report malpractice in the workplace without fear of reprisal; and employers should be prepared to work with staff to resolve concerns, particularly by means of effective internal procedures.
The Employment Rights Act 1996, as amended by the Public Interest Disclosure Act 1998 and subsequently, provides employment protection for workers in all sectors who have blown the whistle. It enables them to seek redress if they are dismissed or suffer detriment at the hands of the employer because they have made a “protected disclosure” about wrongdoing that they have witnessed at work. To qualify for the protections, a worker must generally make their disclosure either
to their employer or the relevant “prescribed person”. “Prescribed persons”’ are typically regulatory bodies for the sector in which the whistleblower works or the type of wrongdoing involved.
I assure noble Lords that, over recent years, the Government have taken steps to support a cultural change in relation to whistleblowing in all sectors, including financial services. A number of statutory and non-statutory improvements have been made. This includes guidance for whistleblowers on how in practice to make disclosures while preserving their employment protections; and guidance for employers including a non-statutory code of practice which we will review this year. We have fulfilled the commitment to keep the prescribed persons list up to date with annual reviews, and we now have guidance in place for prescribed persons. The next update will require prescribed persons to report annually on the number of whistleblowing disclosures they have received and broadly the action that resulted.
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Amendment 71 takes a creative approach to these issues: seeking to establish a new “Office of the Whistleblower”—as my noble friend Lord Faulks said, effectively a whole new department. The Government believe that the right body to investigate the concerns of a whistleblower is the body that regulates the issue about which concerns are being raised. That body is in the best position to see the disclosure in context—for example, to judge the seriousness of the allegations and to make connections with any related investigations under way—and to consider whether some regulatory action is appropriate to prevent occurrence.
The FCA is a prescribed person in relation to the sector that it regulates. It actively promotes the whistleblowing framework to employees and employers in this sector so that prospective whistleblowers know where to turn and firms have appropriate internal whistleblowing policies in place. Other prescribed persons related to financial services include the Bank of England, the Serious Fraud Office, the Financial Reporting Council and the Prudential Regulation Authority. To each of them, whistleblowers will be one of several sources of information and intelligence about potential malpractice in support of their regulatory activities. The Government are not therefore persuaded that we need a new “Office of the Whistleblower”, either to facilitate whistleblowing or to give directions on record-keeping and monitor compliance.
The amendment would also introduce a power to award compensation to any worker voluntarily providing information on wrongdoing to organisations in the financial sector. The Government’s call for evidence on the whistleblowing framework in 2013 looked into the question of financial incentives. Any financial rewards for whistleblowing could create a perverse incentive and suspicion about the motivation for whistleblowing. We do not think that money is actually the main motivator for genuine whistleblowers. The FCA and the Prudential Regulation Authority published research on financial incentives for whistleblowers in July 2014. The research showed that introducing financial incentives would be unlikely to increase the number or quality of the disclosures received.
The noble Baroness also talked about the UK’s response on compensation being a moral hazard and that people are just doing their jobs. The Government appreciate the risks that people take when they choose to make disclosures in the public interest. That is why they have legal protection against dismissal or detriment at the hands of their employer with the possibility of unlimited compensation, whether or not the information provided to the regulator actually results in enforcement action. Under the UK system, compensation is linked to the loss actually suffered by the whistleblower.
I hope that noble Lords and the noble Baroness are reassured that the Government are taking action to address barriers to people coming forward to whistleblow, and she will feel able to withdraw her amendment.