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Financial Crime: Legislation

My Lords, I should start with a sort of disclaimer. This is, I think, my 53rd year full-time in the law as a solicitor—although I am not doing very much these days. Like a previous speaker, I have to say that, in the whole of that time, no one has offered me a bribe—I feel a bit resentful of that—and only twice have I been asked to do something corrupt by a client. I suspect that there is no other jurisdiction in the wide world where someone of my longevity could say that, and I have spent a lot of that time in the commercial world. However, let us not kid ourselves: standards of probity and integrity are falling with a rapidity that should give us all cause for pause and alarm. If you look at the statistics of crime, you see that the incidence of financial fraud is on the increase in all respects in all quarters of our society and none is exempt. There is no way of denying that corruption is highly infectious. It is a bit like spiritual dry rot. Once you have crossed the threshold of corruption, it is very difficult to go back and very easy to go forward. Nor should we overlook or consign to the past, as Mr Diamond wants us to do, the astonishing events of the past two or three years in the City—in effect, the partial collapse of the banking system, which would have collapsed totally but for the putting-into-the-pool of trillions of pounds of funds from here, from America and elsewhere. At the root of that—again, let us not deceive ourselves—was an increased level of straightforward corruption: insider dealing, concert parties rigging the markets long enough to get in and out and make a killing, and so on. I have practised more than 40 years in the City of London. Anyone who you know well who is deeply involved in the City will privately tell you that it is unfortunately true that corruption is on the increase everywhere. The more globalised the market becomes, and the greater the diversity of nationalities, with little common cultural cohesion, the more the corruption spreads. That is why this debate, for which I thank my noble friend Lady Williams, is of such importance. I shall touch briefly on the role of legislation, because ““the United Kingdom’s record on legislation”” is in the title of the debate. Legislation can be an impediment to integrity. Too much of it plays into the hands of the smart boys, the lawyers and the accountants. For people who are involved in the different aspects of the City, it reduces their sense of their own moral autonomy, their own ability to distinguish right from wrong and to do good rather than bad. You have only to look at the statistics. We legislate between 200 per cent and 400 per cent more than any legislature in the democratic world. Forty per cent of our tax legislation is anti-avoidance. If you were to stuff all our tax legislation into a single volume, you would not be able to carry it. For example, the Charities Bill, a consolidation Bill, which has just had its First Reading in this House, is longer than the entirety of the legislation of 1905—charities, for God’s sake. There is no substitute for individual moral integrity, and I have to say that the huge corporations are not great encouragers of that. I have some proposals. I entirely agree with what the noble Lord, Lord Haskel, said in relation to the Bill just introduced in the other place by Caroline Lucas. If companies domiciled or paying tax here had to disclose year by year where else they were operating, what the turnover was, how many employees they had there and what tax they paid, it would be a huge disincentive to the ludicrous exploitation of tax havens. Let us look at Barclays. It has admitted to some 150 subsidiaries in tax havens—I think that the true figure is more than 300—and that is true of so many organisations. There is no morality or sense of fairness in corporate tax-paying in so many instances. So let us have that. Let us have principles-based tax law, because we are disappearing out of sight with trying to block one loophole after another. I accept that there are difficulties about principles-based tax legislation in terms of certainty, but with the support for and confidence in our courts that people have, it would be a far preferable solution to the problem of tax. Next, I suggest that any contractor with any state agency should not be allowed to bid for a contract unless they have a clean tax record over the previous five years. Lastly, we cannot hope to deal with corruption, bribery and all the rest of it unless we have the people to do the job. The Serious Fraud Office has only around 300 staff and I am told by someone in there that it is losing some of its best people right now. The Inland Revenue is scheduled to lose 40 per cent of its entire staff over the next three years. What sense can that make if we are trying to implement the laws we have? The failure to implement tax legislation in particular is devastating. On official estimates, we lost £42 billion of tax that should been paid last year for want of the people to enforce the law.