Stephen Kinnock
MP for Aberafan Maesteg · Labour · United Kingdom
“I thank the shadow Secretary of State for her kind words and look forward to our exchanges across the Dispatch Box. I am ready to engage with her on getting the maximum benefits for the people of Wales.”
“I thank the right hon. Lady and look forward to working with her. My understanding is that there were challenges around the helicopter capability. Decisions were taken by Natural Resources Wales some time ago to change the way that the tendering for helicopter capability works. We certainly need to look at that.”
“I thank my right hon. Friend for his question. Like him, I pay tribute to all those involved in the collective and heroic response to the wildfires.”
“I thank the right hon. Lady for her question. Many of the ideas coming forward for devolving power right across our United Kingdom, beyond Cardiff Bay and Holyrood, are very exciting, and I look forward to exploring them with her.”
“Just to be clear, this is not about staying out of the issue; it is about respecting the devolution settlement, but being prepared to work constructively where we can in partnership with the Welsh Government. The hon.”
“I know about and welcome the right hon. Gentleman’s strong connections to Wales. I recognise the connectivity benefits that WSMR’s proposal could deliver, particularly for passengers in Wales and the west midlands.”
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“Finally, it would be helpful if the Minister explained the rationale for the decision to set out, in this Bill, an explicit objective to prevent economic crime for providers of legal services, but not for other sectors covered by the money laundering regulations. The impact assessment sheds limited light on the Government’s thinking in this area, so any additional detail that the Minister could provide today would be welcome.”
“Can the Minister also set out the Government’s reasoning in lifting the cap on the SRA’s fining powers, with specific regard to the objections raised by the Solicitors Disciplinary Tribunal, and other stakeholders, around the transparency of the process? Clause 155 would amend the Legal Services Act 2007 to set an additional objective for regulators in the legal sector to prevent economic crime. Given the objections that have been raised in the sector relating to clause 154, I would be grateful if the Minister provided further details of any consultation between his Department and providers of legal services, as well as the Legal Services Board, on this proposal.”
“In summarising its concern, the tribunal argued that the diminution in the transparency of decision making and detailed reason would be in neither the public’s nor the profession’s interest. It should be noted that those objections were raised, not in response to the proposed changes set out in this Bill, but in the context of the increase in the maximum level of financial penalties that the SRA may impose from £2,000 to £25,000, which came into effect in July. That change in itself begs a number of questions. In particular, can the Minister explain how many and what proportion of the fines imposed by the SRA since July have been at the £25,000 maximum? Could it not be argued that the Government have not provided enough time for the effectiveness of recent changes to be adequately assessed?”
“Specifically, a number of serious concerns were expressed by the Solicitors Disciplinary Tribunal when the SRA consulted on planned increases to its powers to impose fines. The tribunal argued that the SRA’s powers should be limited to imposing relatively low penalties for minor technical or administrative errors. It argued that increasing the maximum level of fines that the SRA could impose would erode transparency by preventing cases of serious misconduct from coming before a public hearing, which could also remove the scope for a detailed, publicly accessible explanation of any penalties, as is generally provided by the tribunal’s decisions under the current system.”
“Clause 154 would lift the current statutory cap on the penalties that may be imposed by the Solicitors Regulation Authority, as delegated by the Law Society, for breaches of the law on economic crime. I am sure that Members on both sides will welcome the change if, as the Government argue in their impact assessment, it increases the deterrent effect of the financial penalties that may be levied for disciplinary matters. Although the Government provide limited evidence to support that claim, it is at least a reasonably logical conclusion. However, the proposals raise a number of questions, principally around the degree to which clauses 154 and 155 reflect the input received from the sector in response to consultation earlier this year.”
“I thank the Minister for that clarification, and I am grateful for his offer to write with further details. On the point about using the Bill to prevent economic crime with respect to providers of legal services, but not for any other sector covered by the money laundering regulation, would he care to shed more light on the rationale for that decision?”
“I thank the Minister for that clarification. There is a broader scope to economic crime, not just a specific focus on money laundering, and that covers a wider range of aspects of economic crime, although there is an explicit objective in the Bill that it is limited to providers of legal services. I wonder why that broader scope will not be applied beyond the money laundering concerns.”
“His Department’s guidance says that entities that claim to have no beneficial owner should provide information without a “managing officer”, but that term is not defined in the guidance. Can the Minister shed some light on this? Clause 135 makes what appear to be minor technical changes to the wording of documentation to be held as part of the register. To the extent that those changes help ensure that the information on the register is giving as complete and as accurate a picture of companies beneficial ownership as possible, the changes are welcomed by the Opposition.”
“What steps is the Minister taking to ensure that everyone who is expected to register is at least made aware of the requirement in time for them to apply ahead of the 31 January deadline? Will the Minister also confirm what additional resources, if any, have been made available to Companies House to support the introduction of the register? How many staff are now working to support its implementation? What preparations are the Government making to deal with companies that fail to comply before the deadline? Specifically, how will Companies House identify such companies and work quickly to impose the financial and criminal penalties that the Government have provided for? Will the Minister explain how the Government plan to deal with companies whose beneficial ownership cannot be verified?”
“But the answer to that question is in fact clear: the failure of the Government to enact the new law until the situation became urgent due to the war in Ukraine meant that the regulations and statutory guidance were sloppily drafted without consultation, leaving the entire framework riddled with holes and shrouded in uncertainty. I hope the Minister will take the opportunity we have today to clarify some of the issues. Companies House has written to entities to inform them that they need to register, but the data used to contact them came from the Land Registry. That data is, in many cases, out of date. What assessment have the Government made of the accuracy of the contact information provided by the Land Registry?”
“Members might have reasonably expected the number to be somewhere in the region of 16,000, or half of the 32,000 total required. Imagine my surprise and disappointment when the Minister replied to my written question saying that, in fact, only 3,214 entities had registered as of last week; in other words, just 10% of those required. If progress were to continue at such a sluggish rate, the register would not be completed until 2025. I therefore ask the Minister whether he has a magic wand, and whether he intends to use it to ensure that the remaining 90% of companies comply with the registration requirement in the next three months. I will also ask the Minister what he thinks is the reason for the astonishingly low number of registrations to date.”
“Before addressing the substance of the clauses, it is worth taking stock of what progress has been made in setting up the register and, more importantly, what more needs to be done. According to Government figures, some 32,000 overseas companies are required to register with Companies House by 31 January. Between them, those companies own almost 100,000 properties in the UK. It was the Minister himself, in his previous incarnation as a Back Bencher, who argued forcefully back in March for the transition period during which those 32,000 companies would be required to register to be limited to six months. Now that we have reached the halfway point in the process, I asked the Minister in written questions how many companies have now registered.”
“After years of kicking the can down the road, it took the Russian invasion of Ukraine to jolt the Government into action. The first of this year’s economic crime Bills, now the Economic Crime (Transparency and Enforcement) Act, provided the legislative basis for the register of overseas entities, which at long last went live on 1 August. As much as I welcome the fact that the register is now up and running, it remains very much a work in progress. The legislation passed earlier this year was rushed through on an expedited timetable, with just two weeks of debate. The need to amend what was clearly a hastily drafted law is reflected in the changes set out in clauses 135 to 140.”
“It is a pleasure to serve under your chairmanship, Ms Elliott. I want to make a few general points about registers of beneficial ownership and have a number of questions for the Minister, as a preamble to commenting on clause 135 specifically. Registers of beneficial ownership are not, of course, a new concept. We have had one for UK companies, namely the people of significant control register, since 2016. In that year, David Cameron made what would turn out to be the first of many promises to introduce a register of overseas owners of UK property, meaning that for the first time “foreign companies that already hold or want to buy property in the UK will be forced to reveal who really owns them”. Yet here we are, six and a half years and four Prime Ministers later, still discussing how to implement the register.”
“On that point about staffing, I think the Minister’s point is that there will be a last-minute rush. Is he confident that the current staffing levels are sufficient to cope with that last-minute rush—that surge?”
“I thank the Minister for that. Does he have any thoughts on the interface between the Land Registry and the register of beneficial owners? It appears that a lot of the information on the Land Registry is seriously outdated. What steps are being taken to address that challenge, and does he see a risk in the communication between them?”
“The Committee will be grateful for any reassurances that the Minister can provide, especially on what preparations are being made to ensure that offences are identified and prosecuted as swiftly as possible, because he has repeatedly said that legislation without robust implementation is not worth the paper it is written on.”
“Particularly welcome is the additional provision in clause 137 for an aggravated offence in cases where an intent to mislead can be proven, as is the extension of the changes to the reporting requirements in relation to payments to foreign Governments under clause 147. The threat of criminal convictions, with custodial sentences of up to two years, sends a strong message that fraudulent activities must not and cannot be tolerated. Of course, in these clauses, as elsewhere in the Bill, the jury will be out on whether the changes will have any meaningful impact on economic crime until we can be sure that compliance with the law is robustly monitored and that non-compliance will be punished to the fullest extent of the law.”
“The changes will replace the existing false statement offence with a two-tier approach that will provide a range of options for dealing with overseas entities that either fail to provide information about beneficial ownership upon request or respond with false or misleading information. The basic offence, which will not require evidence that a false statement had been made knowingly or recklessly, should provide a strong incentive for companies to be as rigorous as possible in ensuring that any information they provide is completely accurate. Of course, the financial penalties for such an offence will need to be set at a level sufficient to impose a significant cost on non-compliant companies. Will the Minister therefore comment on how he will ensure that penalties are set at a rate commensurate with achieving that objective?”
“It is a pleasure to serve under your chairship, Sir Christopher. Compared with clause 135, clauses 136, 137 and 157 are more substantial. In drafting them, the Government appear to have accepted that the existing law in relation to false statement offences is too narrow to serve either as an effective deterrent or as a useful tool for law enforcement. Clause 136 removes the requirement to prove that false information had been submitted knowingly and recklessly. That is a very high bar for prosecutors to clear, and the introduction of a broader set of criteria for these offences is therefore welcome.”
“I thank the Minister for that clarification. Does he have any broader assurances around enforcement and implementation? It would be useful to get a sense of what institutional or organisational capability he envisages, and of whether that is in line with what the Bill is trying to achieve.”
“I thank the Minister for those assurances. I have no further comments. Question put and agreed to. Clause 136 accordingly ordered to stand part of the Bill. Clause 137 ordered to stand part of the Bill. Clause 138 Meaning of “service address” Question proposed, That the clause stand part of the Bill.”
“While we will not go back on all that and re-litigate those lengthy arguments, and while we will not oppose the clause, I put on the record that the Opposition do not believe that the Bill goes as far as it could and should have to prevent the fraudulent or unauthorised use of addresses. I am sure that we will come back to that on Report. Question put and agreed to . Clause 138 accordingly ordered to stand part of the Bill . Clause 139 Meaning of “registered overseas entity” in land registration legislation Question proposed, That the clause stand part of the Bill.”
“Clause 138 is another relatively minor change to the definition of a company’s service address, and it brings the definition used for the purposes of the overseas entities register into line with the language in the Companies Act. That language, the Committee will recall, defines a service address as a place where documents may be served to someone. We have already debated the potential problems of relying on such a definition in the context of amendments in which the Opposition sought to restrict and clarify what counts as an appropriate address for a company to register.”
“The clause makes some relatively minor changes to the language on the requirement to provide information requested by the registrar. The effect is to extend the existing restrictions on the ability of an overseas entity to deal with property it owns, such as by selling it, in order to apply the restrictions to companies that fail to comply with the registrar’s requests for information. The change is sensible and pragmatic, and the Opposition support it. Question put and agreed to. Clause 139 accordingly ordered to stand part of the Bill . Clause 140 Power to apply Part 1 amendments to register of overseas entities Question proposed, That the clause stand part of the Bill.”
“Those are also sensible and pragmatic changes, which the Opposition are happy to support. Question put and agreed to . Clause 140 accordingly ordered to stand part of the Bill . Ordered, That further consideration be now adjourned. — (Scott Mann.)”
“The clause provides for certain changes to be made to the Companies Act via regulations using Henry VIII powers, where necessary, to bring the Act into line with the provisions in part 1 of the Bill. The Government’s use of Henry VIII powers to change primary legislation has generated some criticism in other contexts, but the provision that the Government have made in this clause for the relevant regulations to be subject to the affirmative procedure represents a welcome commitment to parliamentary scrutiny on their part. Finally, the Government’s new clauses 19 and 20 have been tabled to ensure that the provisions on resolving inconsistencies in the register and on removing material from it are applied to overseas entities on the same basis as to other registered companies.”
“Has the Department done any work at all to assess what losses in Government revenue might result from those changes? Can the Minister guarantee that any reductions in funding for skills training will be made up from elsewhere in the budget? Finally, if the Government are trying to support the growth of UK businesses, that is certainly welcome, but what has happened to the commitment to invest in skills training, so that growing businesses do not have to recruit from overseas? Have the Government just given up on those objectives? I look forward to the Minister’s response.”
“What was the rationale for providing exemptions under the scale-up and global mobility schemes, but not for other skills-based routes? The explanatory note states that the reason no impact assessment was made is that “no, or no significant, impact on the private, voluntary or public sector is foreseen.” How can that possibly be, given how low the threshold is that I mentioned earlier? Given the Government’s previous commitment to using revenue from the skills charge to invest in skills training for the UK workforce, and their previous estimate that the charge would raise £100 million in its first year, what on earth leads the Minister to believe that reducing the number of employers who have to pay the charge will have no significant impact?”
“It would have been helpful if an impact assessment had been published alongside the regulations. The scale-up route exemption could have far-reaching consequences. To qualify for the scale-up licence, a business simply has to show that it has increased either its profits or staff headcount by 20% on average each year for the past three years, and that it had more than 10 staff working for it at the beginning of that first year. How many businesses is that expected to draw in? It could be a really large number, could it not? Since no such impact assessment has been provided, will the Minister answer the following questions? What exactly is the purpose of providing those exemptions, and what are the Government hoping to achieve in their overall immigration policy and strategy?”
“Member for Uxbridge and South Ruislip (Boris Johnson) when he was Prime Minister, and the skills charge, while still in place, does not appear to be delivering its intended results, as is illustrated by this statutory instrument. The regulations would exempt some sponsoring employers from having to pay the skills charge for migrant workers under the scale-up route, as well as some intra-corporate transferees. That implies that the Government are aiming to make it easier to recruit overseas workers, which is the exact opposite of what Ministers claimed was the purpose of introducing the skills charge. Does the Minister recognise this contradiction? Perhaps she could say whether this is a deliberate policy U-turn or just the result of incompetence.”
“Five years ago, when the first set of regulations on the immigration skills charge were made, the Government were clear about its intended purposes. Introducing the charge would, we were told, incentivise employers to invest in training and upskilling the resident workforce, thus reducing reliance on migrant workers. The skills charge would essentially be a tax on the recruitment of foreign workers, and the proceeds would be reinvested in skills training via the Department for Education. There was a related change: the resident labour market test would make it necessary for employers recruiting from overseas to demonstrate that they had first tried to recruit from within the UK. That test was scrapped by the right hon.”
“We recognise that if we simply turn off the tap of migrant labour without putting in place appropriate workforce structures, training and recruitment strategies, our public services will deteriorate and our businesses will struggle to meet our wider economic ambition to make, buy and sell more in Britain. As a result, more jobs could well disappear overseas. There would be other consequences; we cannot continue with the situation in the farming sector. In the past year, 30,000 pigs have been slaughtered and £60 million of crops have been burned. We recognise that we need to attract talent to help us to drive growth, but we are clear that when businesses are supported in recruiting from abroad, that should come with a commitment to increasing UK-based recruitment and training, so that we reduce long-term dependency on overseas labour.”
“We are clear that there will be no return to the freedom of movement that there was when we were in the EU, but we will build on and make much-needed improvements to the points-based system that is in place. Our long-term ambition is to ensure that all businesses in every sector, and indeed our public services, recruit and train more home-grown talent to fill vacancies before looking overseas. For instance, we need to train up more home-grown doctors; hence our shadow Health Secretary’s commitment to doubling the number of clinical placements, and to setting out a five-to-10-year workforce plan for the NHS in due course.”
“We are not opposed, in principle, to recognising that in specific areas of our economy, removing the red tape involved in bringing in overseas workers can benefit Britain, but we are opposed to the Government lurching from one extreme to the other, using dog-whistle, anti-immigration rhetoric one day and throwing the doors wide open the next. The Labour party is taking a more balanced, nuanced approach by ensuring that immigration works for our economy and communities. We support the principle of a points-based system for migrant workers. It was, of course, the Labour Government of 2008 that introduced the points-based system for immigration from outside the European Union.”
“It is a pleasure to serve under your chairship, Ms Fovargue. We are somewhat surprised that the Government are introducing this statutory instrument, because it appears to utterly contradict the Home Secretary’s stated objective of reducing immigration. She seems to recognise that the public have been expecting net migration to decrease post Brexit, but as the latest migration figures indicate, this year’s net migration is set to pass 300,000, matching the highs seen in the year of the EU referendum. Today, however, we see attempts by the Government to increase migration even further by creating a further exemption from the immigration skills for sponsored workers on the scale-up route, as well as for EU national intra-corporate transferees who take the route of getting a global business mobility visa for senior or specialist workers.”
“I thank the Minister for giving way. My intervention is absolutely related to the regulations. I asked why there was no impact assessment. For the record, will she confirm that she does not think that there should be one, because she does not believe that the regulations could have a significant impact on the labour market? On cost, we are clearly reducing the number of employers that will pay the surcharge, so the changes will not increase revenue to the Exchequer as she says they will; they will do precisely the opposite. What will the cost to the Exchequer be? If there is to be no impact assessment, may I urge her to agree to keep the impact of this legislation under review, and will the Government make a statement on it within 12 months, so we can assess its impact on opportunities for our home-grown talent?”
“I beg to move amendment 115, in clause 89, page 68, line 40, at end insert— “(3B) Prior to making any changes to the level of fees payable to the registrar, the Secretary of State must— (a) consult with the registrar on the proposed changes; and (b) set out in writing what the basis is for the proposed changes, with reference to subsection (2) above.”.”
“Friend the Member for Barking, would add a further requirement on the Government to review and report on the case for measures to ensure that any future revenue from fees can be retained by Companies House for reinvestment in its work to police and enforce our laws against economic crime, under its remit as set out in the Bill and elsewhere. Again, this is a common-sense proposal that we should all welcome. It should not continue to be the default position that either all or a large part of any fees payable to Companies House go straight to the Treasury, with no guarantee that there will be any reinvestment into efforts to tackle economic crime. New clause 40 would make an important contribution by addressing that problem. I look forward to hearing the Minister’s response.”
“Friend the Member for Feltham and Heston and I are pleased to add our names to the proposed new clause, which we believe is a necessary and proportionate solution to the problem at hand. It should be pointed out that the figure of £100 has not been plucked out of thin air. It is useful to return to the report that I mentioned by the Treasury Committee, of which the Minister was a member at the time. It concluded that a £100 fee for company formation would not deter genuine entrepreneurs, and would raise significant additional funding for Companies House and the fight against economic crime. It would be helpful if the Minister could confirm whether that remains his view. If he has changed his mind, he may wish to say a little about the basis on which he has done so. New clause 40, also tabled by my right hon.”
“I recall in particular the testimony of Nick Van Benschoten of UK Finance, who pointed out that the UK’s £12 fee puts it in closer alignment with countries such as Benin and Turkmenistan than with comparably well-developed economies in Europe and North America, where fees roughly in the range of £50 to £100 are the general rule. New clause 25, tabled by Scottish National party Members, suggests a minimum fee of £50. That would certainly be a good start, but the Bill could and should go further. New clause 33, tabled by my right hon. Friend the Member for Barking, would require a fee of at least £100 to be charged for company formation, with annual increases based on inflation. On behalf of the official Opposition, my hon.”
“It should go without saying that fees should not be set at such low rates that we become a magnet for dodgy business dealings by criminals in search of the weakest possible regulatory environment; but it is not by any means clear that we can trust the Government’s wisdom in determining appropriate fees. A clearer, stronger set of criteria for such decisions should be incorporated into the Bill. Amendment 115 provides what we hope is a useful way forward. Turning to new clauses 25, 33 and 40, there are strong arguments in favour of setting a specific level of fee as a baseline for any future changes. We should all be in agreement by now that the current fee—it is just £12 to register a company—is far lower than it should be. Certainly, that was the message from the many expert witnesses who gave evidence to the Committee last month.”
“Through amendment 115, the Opposition seek to fill some of the gaps left open by the Bill by introducing an explicit requirement for the Secretary of State to consult with the registrar before changing fees. It would also require the Secretary of State to set out explicitly in writing the justification for any changes to the functions and workload of Companies House. The amendment would provide a stronger statement of the necessity of setting fees at a level commensurate with the actual day-to-day needs of Companies House in carrying out its responsibilities under this and other relevant legislation.”
“It is striking that the Bill does not address the question of fees payable to Companies House until clause 89. Even then, the clause sets out what costs may be taken into account in setting future fees, but avoids the next logical question of what an appropriate fee might be. Like so many fundamental details of how the legislation will work when in force, that has been left up to regulations that will be made at some indeterminate point in the future. It does not seem unreasonable to expect, or at least hope for, more detailed provisions on the subject in the Bill. Clause 89 refers to the need for future regulations setting new fee levels to reflect the expanded responsibilities of Companies House under the Bill and other recent legislation. That is welcome as far as it goes, but unfortunately it does not go far enough.”
“For evidence of what appears to be emerging cross-party consensus on the necessity for higher fees, we need look no further than the exceptionally thoughtful and balanced report on economic crime published by the Treasury Committee in February this year, which stated: “The low costs of company formation, and of other Companies House fees (such as filing fees), present little barrier to those who wish to set up large numbers of companies for dubious purposes…The Government should…review…Companies House fees to bring them closer to international standards.” As a member of the Treasury Committee at the time of the report’s publication, the Minister presumably agreed with that statement back in February. I see no good reason why the position would have changed since then.”
“Not only is there the increased workload that the Bill will create for Companies House, but it has been abundantly clear for some time that the fees charged for registration are ludicrously low. The Minister is aware that it is undeniably too cheap, quick and easy to form a new company in the UK; there is minimal to non-existent verification or oversight.”
“Not only is there unlikely to be additional Treasury funding for Companies House, but it appears there may even be cuts. Given the repeated warnings from the Chancellor to expect “eye-watering” decisions on public spending in this week’s fiscal statement, it seems unlikely, to say the least, that Companies House can expect a financial settlement that is even remotely commensurate with its obligations under the Bill. If the Minister could provide any reassurance to the contrary, it would certainly be welcomed by the Opposition—but we are not holding our breath. In the absence of more resources from the Treasury, we are left with just one option, which is for Companies House to generate more income from registration fees. The case for higher fees is compelling.”
“The reforms to Companies House set out in part 1 of the Bill represent “its biggest upgrade in 170 years”. Again, I am quoting the Government’s own words. It is still the case today that if someone goes to the official Companies House website to search the register, they find a disclaimer stating: “Companies House does not verify the accuracy of the information filed”. Of course, one of the most important goals of the Bill is to change that, through new requirements on Companies House to verify the accuracy of new filings, and to continuously monitor and update records; but despite that fundamental shift in the scale and scope of its responsibilities, there is nothing in the most recent corporate plan for Companies House, published in July this year, on increasing either its budget or workforce in the light of those changes.”
“In fact, some of the most compelling arguments for greater resourcing for economic crime enforcement have been made by the Minister himself. Just over four months ago, he joined my right hon. Friend the Member for Barking in leading a debate on this issue. The motion for that debate pointed out that “law enforcement agencies are significantly under-resourced to deal with the scale of the problem”. In speaking to the motion, the Minister pointed out: “We know that roughly 40% of our crime is economic crime, yet only 0.8% of our resources in man hours are dedicated to tackling economic crime, so there is a huge disparity.” —[ Official Report , 7 July 2022; Vol. 717, c. 1042.] Those figures are striking, and it should alarm Committee members that the Bill is likely to widen that disparity even further.”
“It is a pleasure to serve under your chairship, Mr Robertson. I rise to introduce amendment 115. When considering any piece of legislation that creates new criminal offences, one of the most important questions we have to ask is how confident we can be that the offences will be adequately policed and enforced. The question is particularly relevant in our deliberations on this Bill, because there is such a wealth of evidence that the laws we already have on economic crime are not being enforced as rigorously as we would hope. The reason is clear: the chronic under-resourcing of the various law enforcement bodies in recent years—or, to put it another way, under this Government. I am sure that the Minister needs no convincing on this point.”