Debate Excerpts: Lord Garnier vs Alex Chalk
View exchanges between Lord Garnier and Alex Chalk
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Sir Edward Garnier - Hansard - -

I agree with my hon. Friend. I have sent plenty of people to prison, some of them for very long periods of time. I wish that we were able to make sure that those who do not need to go to prison, or who need to be sent to another place, such as a mental hospital, could be dealt with in a more sensible, productive, efficient and effective way. The argument is not about whether criminals are good people and whether we should love them dearly and hug hoodies; it is about doing what is best for all of us and ensuring that the money raised through taxes—the money spent on the health service and education—is properly devoted and directed towards getting these people better so that they do not do it again. Most people who have their house burgled want to ensure that the person responsible is caught, stopped and dealt with but, secondly, they want to be sure that that person does not do it again. If all we do is feed the conveyer belt, we achieve nothing but a waste of money.

The crux of the problem that we face with prisons—it is not a new problem—is overcrowding. I wrote a paper called “Prisons with a Purpose,” having visited 65 of the 140 or so prisons, young offenders institutions and secure training units when I was shadow Minister for prisons between 2005 and 2009. It was abundantly clear then, as I suspect it is now, that our prison estate was woefully overcrowded. We cannot sensibly rehabilitate or reform prisoners, adequately protect the public, prepare prisoners for life outside and maintain a safe and secure environment within our prisons unless we deal with the problems of overcrowding. My right hon. Friend the Secretary of State and my hon. Friend the Member for East Surrey (Mr Gyimah), the Minister for prisons, are fully aware of that. They have been inside prisons and know what is going on, and they have to deal with the arithmetic of how to spend the money in the most sensible way, subject to the demands of the Treasury.

The task of the Secretary of State and the Minister is a difficult one. The aims that the Secretary of State has written into the Bill are good, but in six months or a year—or a suitable time period after the Bill has been enacted—I do not simply want a report from the Secretary of State or the chief inspector of prisons, welcome though such reports are; I want real, practical advances. It is one thing to write things in the Bill; it is quite another to ensure that they happen.

Most centrally, we must address the hideous problem of overcrowding because with overcrowding we get churn. A person who is sentenced to prison at Canterbury Crown court is sent that night to Canterbury prison.

Sir Edward Garnier (Harborough) (Con) - Hansard - -

I congratulate the right hon. Member for East Ham (Stephen Timms) on initiating the debate. I listened to him with great care and gratitude, because he spoke as a critical friend of the Serious Fraud Office. As he gently pointed out, when the current Prime Minister was Home Secretary, she was perhaps not a friend, even if she was critical, of the SFO. Possibly—who knows?—one reason I remained a Law Officer for two and a half years, but no longer, was because I fell out with the Home Secretary over the independence of the Serious Fraud Office.

There is a misunderstanding among politicians about the Roskill model and its value. However, before I go on further, I declare an interest—as must be obvious—in the SFO and all that it does. I also declare an interest in that, like my hon. Friend the Member for Cheltenham (Alex Chalk), the SFO instructs me from time to time as a member of the private Bar. One of the most recent cases that I have been instructed in was that of Rolls-Royce, which the right hon. Member for East Ham spoke about. Although I do not want to talk too much about my wonderful case load, I want to use the case of Rolls-Royce to illustrate the successful way in which the organisation deals with criminal activity at the corporate and most complex level.

It is a given, certainly among those who know anything about the Serious Fraud Office, that the Roskill model of having a joint investigating and prosecuting system in the organisation works. Although plenty of people criticise the SFO—as the right hon. Gentleman said fairly, it is not beyond criticism, and there are things to be said about the blockbuster system and so forth—it is remarkably successful, given the limited resources under which it has to operate.

When I was shadow Attorney General in the lead-up to the 2010 election, I made quite a study of the way in which the Serious Fraud Office operated, not least because it was one of the most important aspects of our prosecuting system that came under the supervision of the Attorney General and the Solicitor General. When I got into office in 2010, it was clear that the comprehensive spending review that the new Government introduced would have a pretty direct and possibly damaging effect on the SFO’s ability to carry out its important work. That persuaded me that we needed to find other pragmatic ways of allowing the SFO to get on and catch villains, both human and corporate. I was particularly concerned that we were underperforming on—that we were inhibiting—the prosecution and conviction of corporate crime.

Of course we were, and still are, beset by the Victorian identification principle: in order for a company to be convicted of a crime, a directing mind of sufficient seniority has to be able to be identified in order to fix criminal liability on the company. That was fine in the 1860s, 1870s or the 1880s, when companies had a board of two or three and operated within a town or a county—or possibly even within the country as a whole—but the vast international conglomerates that there are now, with offices in several jurisdictions and boards, sub-boards, national and international boards, make it extremely difficult for the Serious Fraud Office to attach criminal liability for a crime to the company. Individual financial directors, country directors, or country managing directors can be prosecuted, as the SFO has—we have seen that happen in a number of the cases that the right hon. Gentleman referred to—but that has proved difficult when dealing with international companies that misconduct themselves.

That is why—this is a slight diversion, but an important one—this House and the Government should develop the “failure to prevent” model. Under section 7 of the Bribery Act 2010, it is a criminal offence for a company to fail to prevent bribery by one of its associated people or bodies. The first deferred prosecution agreement—in which I appeared, as it happened—dealt with the failure of a bank to prevent bribery by one, or a number, of its staff in Dar es Salaam in Tanzania. Under the terms of the deferred prosecution agreement, that brought in from the errant bank about US$25 million in costs and penalties.

As the right hon. Gentleman correctly identified, the Rolls-Royce case brought in something in excess of half a billion pounds sterling, which will be paid by that company over the next five years. Beyond the penalty, it will have to pay interest on the delayed payment. More importantly, as far as funding the Serious Fraud Office is concerned, part of the deferred prosecution agreement is that the respondent company pays the SFO’s costs, which, at the time of the announcement of the agreement before the President of the Queen’s Bench division, Sir Brian Leveson, 10 or so days ago, amounted to about £13 million. Sadly, that £13 million did not go into the Edward Garnier special holiday fund; it went into reimbursing the Serious Fraud Office for what was essentially the biggest investigation that it had ever done since its inception. That investigation required huge international co-operation with the United States Department of Justice and with investigators and prosecutors in a number of other jurisdictions—the criminal allegations against Rolls-Royce covered the company’s activities within seven jurisdictions.

While the Rolls-Royce matter was being brought to an end a fortnight or so ago in this country, it was also being brought to an end in the United States and in Brazil, where the company had to pay the authorities about $176 million and $25 million respectively. That illustrates how the Serious Fraud Office can be pragmatic, efficient and effective now that it has the deferred prosecution agreement model and can use its money wisely to bring international companies to book for international criminal conduct.

Sir Edward Garnier - Hansard - -

Yes. The DPA system is a new tool—there have been three DPA cases—but if the Serious Fraud Office is to carry out its international investigative work at the highest and most complex level, it will need a bigger budget. That was clear to me when I became Solicitor General in 2010 and it remains clear to me now. In 2010, as I understood it, the revenue budget was about £40 million and was set to go down over the course of the Parliament, under the comprehensive spending review, to something like £29 million.

When I went to the United States to discuss international corporate crime and learn from American prosecutors about the system for prosecuting corporate crime there, one of the federal prosecutors in Manhattan asked me how much our budget was. I said, “It’s about £40 million, going down to just under £30 million.” He laughed and said, “Is that just for one office?” I said, “No, it’s for the entire jurisdiction: England and Wales, and Northern Ireland”—unusually for a prosecuting agency in this country, the Serious Fraud Office covers England, Wales and Northern Ireland, but not Scotland. The American prosecutor found it unbelievable that one of the centres of the financial world had a serious fraud office that ran on that amount of money. He went on to joke that he spent more than that on flowers at home; I do not think that that was quite true, but I would not be at all surprised if he lived pretty well. Good luck to him.

What I want the House to understand is that there is no perfect way to sort this out. The right hon. Member for East Ham is entirely right to say that there are uncertainties and, to some extent, an absence of transparency—or at least prospective transparency—in how the blockbuster system works. There is retrospective transparency, because the Justice Committee, Parliament, the National Audit Office and non-governmental organisations such as Transparency International—to pick one organisation at random—can delve into the SFO’s financial workings. I accept that although the blockbuster system works up to a point, it is not ideal, but the best is often the enemy of the good; I would rather the SFO could apply to the Treasury for blockbuster funding than its being constantly in danger of having its budget slashed and slashed again. The SFO is unusual and not very well known and therefore not terribly politically popular. Obviously its work is often private, because if its investigations are not conducted in privacy, the villains get away—I take the right hon. Gentleman’s point about that.

To assist the SFO in its complicated and difficult work, we need to think hard about how to nail corporate misconduct. Will we be brave enough to move to the American system of vicarious corporate liability, so that when an employee commits in the course of their work a crime that has a benefit for their company, the company should be liable in criminal law—just as it would be in civil law for the negligence of one of its drivers, for instance? If not, we will have to extend the failure-to-prevent model. The Criminal Finances Bill that is going through the House at the moment will enact a failure-to-prevent tax offence; I have tabled some amendments that would extend the list of failure-to-prevent offences to a far wider collection of financial crimes. My amendments will not be agreed to, but Parliament needs to debate the issue. I look forward to co-operating with the right hon. Gentleman, who not only has experience as a Treasury Minister but can no doubt see the City of London across the road from his constituency office. I hope that the question of developing the criminal law to meet the increased sophistication with which business is done internationally will be cross-party and non-partisan.

On the right hon. Gentleman’s point about staff, I agree that any form of threat to any organisation from the promise or threat of change is distracting and destabilising. Now that the SFO is doing good work and building on its record of success with LIBOR, with the three deferred prosecution agreements and with the cases against Barclays bank, GSK and others, the one thing that it does not need is to be subjected to further interference. That would be destabilising and cause the employment equivalent of planning blight. Imagine a bright young lawyer in a City firm who thinks that it might be good to go and work for the Serious Fraud Office for a while. It would be, and it is, but if they know that the Government want to pull up the pot plant every 20 minutes and have a look at the roots, the SFO is not going to seem like a very stable place to go and work.

I want to see people from the private sector—the big City firms that have expertise in dealing with corporate crime, mergers and acquisitions and the highly complicated banking law that is sometimes involved—coming to work for the SFO for two or three years. I also want permanent members of the SFO staff to go into the City firms and other banking organisations, so that there is proper cross-fertilisation. What I do not want is for the current Whitehall fascination with sticking things with nice initials into great pots of alphabet soup to destroy David Green’s valuable work or distract him from it. I am proud to say that he is a personal friend of mine; he and his organisation have a proud record of demonstrating to the Government that it is worth every penny it gets and that it ought to get yet more money, so that it can catch more and more villains.

The reputation of our country is to a large extent built upon our financial services industry. Our corporations that sustain that industry—be they banks, be they insurance companies, be they whatever—and the people who work in it need to know that if they step beyond the line of honesty and acceptable behaviour, there is an investigating prosecuting authority that will not only come and get them but will make sure that they are convicted. That is what our constituents want. They want a vibrant financial services industry, but they also want an honest one, which attracts business, taxation and employment to our constituencies, whether they are in East Ham or Harborough.

Mr Owen, thank you for your patience. I hope that my hon. and learned Friend the Solicitor General can give me the reassurance that the SFO is safe from interference and distraction, and that we can look forward to another period of success, and well-funded success, for this most impressive organisation.