Clause 320 - Interpretation

Proceeds of Crime Bill – in a Public Bill Committee am 5:30 pm ar 15 Ionawr 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath 5:30, 15 Ionawr 2002

I beg to move amendment No. 484, in page 185, line 13, at end insert—

'(1A) Nothing in this section may be construed to permit investigation of matters which do not constitute offences within the United Kingdom.'.

My hon. Friends and I tabled the amendment because of a debate—indeed, more than one debate—that we had not long before Christmas. The Minister will recall it well. The Opposition expressed grave concerns about the Government's proposals for the so-called European Union arrest warrant. In the light of the concern expressed not only by Opposition Members but by the media—extensively, in some quarters—it is important that we do not allow matters that are not offences under UK law to form the basis for instant arrests on the order of a foreign court.

I would be out of order if I tried to repeat our extensive debates on the EU arrest warrant. Nevertheless, we want it made clear in the Bill that we are not including things that are not offences in British law. We are suspicious that the Government constantly follow a European agenda to extend the purview of the law. I am only sorry that my hon. Friend the Member for Henley (Mr. Johnson) is not in Committee at present, because he certainly waxed lyrical in the debates on the European Union arrest warrant in European Standing Committee B, as the Minister will recall.

It is thus left to me to make the case that in the light of subsection (1)(a) and (b), it would be helpful to add:

''Nothing in this section may be construed to permit investigation of matters which do not constitute offences within the United Kingdom.''

I shall listen with interest to what the Minister has to say. I hope that he will put on the record the fact that he does not want the Bill to be a further extension of the arguments that he advanced during our debates on the EU arrest warrant.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I can reveal to the hon. Gentleman that the reason why my speaking note is so long is that there are about three different versions of it, depending

on what on earth he is trying to get at. Obviously, my officials do not have the same mindset that some of us are only too well aware of, with the fear of foreigners and foreign jurisprudence, particularly when it comes to Europe. Such matters invade all the aspects of some of the issues that certain hon. Members feel obliged to raise in all corners of this place.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

The only thing that surprises me is that the Minister, having gone through all the problems that the Government had when they did not produce the right documents, should have seen immediately when the amendment was tabled precisely what we were getting at. Never mind his officials, he should have worked that out.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Nobody else in Committee knows what the hon. Gentleman is talking about. I certainly do not feel obliged to explain it.

Amendment No. 484 would insert a new provision in the Bill that would make it clear that nothing under clause 320 could be taken to authorise the investigation of matters not constituting offences within the United Kingdom. The clause is about the interpretation of part 6. Subsection (1) defines criminal conduct for the purposes of clause 311 and for the purposes of the definition of criminal property under clause 320.

Under clause 311, criminal conduct is relevant to the gateway criterion to be satisfied in order for the director to exercise his income tax, capital gains tax and corporation tax functions. He must have reasonable grounds to suspect that there is a tax obligation arising from the criminal conduct. The definition of criminal property under clause 320 is relevant to the gateway criterion. I am talking about criminal activity and the British tax system. The hon. Member for Surrey Heath will be hugely pleased to hear that if criminality has occurred in another European country, that does not preclude us from using the powers under the Bill. I am sure that he would want that to be the case.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I am grateful to the Minister for part of what he said. We would not want to avoid the United Kingdom authorities having the right to deal with matters that are properly regarded as criminal under our courts. I do not want to bore Committee members, but he will remember our extensive debate when we discussed the EU arrest warrant about generic terms being used in the European directive that is the background to the warrant proposals. That encompasses phrases that are not known under United Kingdom law. I am not wildly suspicious of foreigners as the Minister accused me of being, but I want to have the same certainty under our law as we have always had traditionally, and not vague terms. If I recall correctly, one of them was something like ''xenophobia'', while another was ''swindling'', or some such generic term. Swindling might incorporate specific offences, but in this country we have always fought against the inclusion of generic, sweeping terms and concentrated on specific offences. We and our courts are comfortable with that, and I feel strongly that we should retain it.

My hon. Friend the Member for Cities of London and Westminster (Mr. Field) has concerns on behalf of businesses in his constituency in that regard, and I know that the City of London was worried about the use of such generic terms in relation to the EU arrest warrant proposals. That led, in part, to some of the great media interest in the matter, to which we shall return on future occasions on the Floor of the House, as the Home Secretary has given an undertaking that primary legislation will be introduced in that regard. At this stage, however, I am happy with the Minister's reassurance that we are dealing with UK tax law only. Anyone who has concerns in the future will no doubt be able to rely on the record of what he has said in Hansard.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

Committee members who have read about my background in this week's edition of The House Magazine in which I was the featured Member of Parliament—in the absence of my hon. Friend the Member for Henley, I can say that that publication is almost as exciting as The Spectator—will know that my mother is German. Not all Conservatives are wild anti-Europeans. Equally, and rightly, we are concerned about the potential effect of the EU arrest warrant. My hon. Friend the Member for Surrey Heath made points aptly in that regard. We may not need a fully fledged amendment, but the words of the Minister would suffice.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

What on earth does the amendment have to do with the European arrest warrant?

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I suspect that it was one of those late-night or early-morning amendments that were tabled to try to confuse the Minister or, dare I say it, to cause his civil servants to have even more grey hairs. I am surprised that there are only three versions—I was expecting considerably more permutations on which the Minister would have to speak.

It is legitimate to ensure, at least, that if the EU arrest warrant were extended in relation to a raft of new offences, only offences that were criminal offences in the UK would be included, even if they had been committed abroad. That would be sensible. The Minister has provided a certain amount of comfort to my hon. Friend, who will no doubt have the final say on the matter.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I certainly welcome the contribution of my hon. Friend, who has reinforced our concerns. Although I would emphasise that the amendment relates directly to the EU arrest warrant, it was not simply an exercise in trying to cause more grey hairs for the Minister's civil servants. In the light of his reassurance, however, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I beg to move amendment No. 485, in page 185, line 20, leave out from 'indirectly)' to end of line 22.

Subsection (4) states:

''Property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and it is immaterial—

(a) who carried out the conduct;

(b) who benefited from it.''

The amendment would remove the words,

''it is immaterial—

(a) who carried out the conduct

(b) who benefited from it.''

Two issues arise from that. First, the words appear to be otiose. I do not understand what they add to the clause. On the face of it, the clause is understandable, straightforward and comprehensible without their inclusion. What would be the effect of their removal?

The second issue goes a little further, and I would like enlightenment on it. Clearly, the trigger for the director's involvement is criminal conduct, which we discussed earlier. However, I infer that persons possessing property must have committed criminal conduct in relation to that property before they could be taxed on it. The mere fact of possessing property that has a criminal origin does not mean necessarily that one has committed an offence that would make one liable to taxation. That must be the case.

Both the wording of the clause and the definition of criminal property are curious. The Minister may be able to explain all that to me without difficulty. Are persons in possession of criminal property liable to taxation only if it is their personal benefit, or if they have committed, or are suspected of committing, a criminal offence in relation to it? I would be grateful for clarification on that, because otherwise the basis of clause 311 seems to unravel and we are dealing with a wider matter than the suspected criminal conduct of an individual.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department 5:45, 15 Ionawr 2002

The amendment would change the definition in the clause of when property is criminal property. The definition is relevant only to clauses 315 and 316, which make provision for the director's role in cases in which inheritance tax is payable, because the term is not used elsewhere in part 6.

Under the current definition, property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit in whole or in part and whether directly or indirectly. Subsection (4) puts it beyond doubt that it is irrelevant who carried out the conduct and who benefited from it. It is, in effect, the same provision that is applied in clause 311 to the income and gains covered by that clause, but adapted to the language of inheritance tax.

The revised definition would remove the reference to its being immaterial who carried out the conduct and who benefited from it. It would not, however—the hon. Gentleman is right—remove the reference to a person's indirect benefit from criminal conduct.

It is not clear that removing the reference would necessarily prevent the director from exercising his inheritance tax functions in cases in which the person who is taxed did not commit the criminal conduct. However, an undesirable element of doubt could arise if the suggested text were deleted.

We intend for the director to be able to exercise his taxation function in any case in which he has reasonable grounds to suspect that the criminal conduct or criminal property test is satisfied. The director will determine whether that would contribute to the reduction of crime in particular circumstances. In cases in which the person liable to be taxed is not suspected of involvement in criminal activities, it is unlikely that the director would, in most cases, exercise his taxation functions. In those circumstances, I ask the hon. Gentleman to withdraw the amendment.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I am grateful to the Minister. He has helped to clarify the matter. I am also grateful for confirmation that deleting half of subsection (4) would not make a big difference.

The wider issues still trouble me slightly. Let me take an example. I find it difficult to think of concrete examples for part 6, although I always try to apply my mind to the Bill in that way. Let us imagine a godfather figure who has large quantities of assets that are suspected to have been acquired as a result of criminal conduct. He dies and the inheritance tax falls due on his estate. There is no difficulty in that example because the suspected criminal conduct is that of the person who is dead, and it is his estate that falls liable to taxation. However, he may have made inter vivos gifts that would fall into the hands of another person, who would be expected to declare any gift to the Revenue if it was taxable. That person may not be suspected of any criminal conduct. I hope that the Minister understands my point.

When we discussed clause 311, it was emphasised that we were talking about the director intervening when an interest had accrued

''as a result of the person's or another's criminal conduct''.

Those were the only circumstances in which he could intervene and take over the board's functions. Clause 320(4) introduces the concept of criminal property that may be in the possession of someone who has not committed any criminal conduct. That is why I was interested to probe the issue. It seemed a departure from the principle set out in clause 311.

The Minister has partially reassured me on the issue, but—and I emphasise that I do not know the answer to my question—I remain slightly perplexed about the example of, for instance, an inter vivos gift. Money might pass to a person who has not committed any criminal conduct, and it might be thought that the money should be taxed. Even if the money were not declared to the Board of Inland Revenue, it would still be the board's responsibility, because the director's responsibilities do not impinge on breaches of tax law, as the Minister explained. The responsibilities relate only to breaches of the wider criminal law, in which he may intervene.

I am sorry if that is muddling to the Minister. In fact, it is muddling to me. His officials seem to have cottoned on to that. I wonder whether ''criminal property'' constitutes a distinct category. People who are not suspected of any criminal conduct may be taxed. That is the best way that I can put the matter to the Minister, who seems to have received a message

from someone who may have understood what I am trying to say.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I am convinced that the hon. Gentleman never sleeps. I am fascinated by the pleasure that he gets when he is satisfied that he is right about the way in which the Bill works, and about whatever it is that he stumbled across at 2 o'clock yesterday morning, or over the weekend.

If a person has not been involved in criminality, the director will not as a matter of routine become involved. The issue will involve his taxation powers only when it has passed down the hierarchy, having been passed to him because some criminal activity had been pursued. He will be involved only if various investigations have been undertaken as to whether criminal confiscation or civil recovery can be used, and whether a tax liability has been avoided. That is self-evident.

Part of the director's function is to reduce crime. We do not want to punch a hole in the director's abilities, and there is therefore no intention of departing from the principle in clause 311, whether it involves inheritance tax, income tax or another tax liability. The person who is taxed needs to be shown to have committed the criminality. I do not know whether the hon. Gentleman is confusing himself; he is to some extent confusing me. I do not believe that I shall have satisfied him on all the issues that he raised.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I am very grateful to the Minister, who has substantially answered my question. It was always my understanding that the wording of clause 311 governs the whole of part 6: it identifies when the director can take over Inland Revenue functions. I merely highlight that there might be an inconsistency in the wording of clause 311 in the case of an inter vivos transfer of assets within the seven-year period to a person who has not committed a criminal offence but whom the director wants to investigate for taxation purposes. In such circumstances, the wording of clause 311 might preclude his doing so. That is my late-night anxiety. I have shared it with him; it can now be his anxiety to share with his officials. I shall not trouble the Committee further.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I seem to have satisfied the hon. Gentleman without realising it.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I shall be very interested to discover whether the Minister subsequently writes to me about the matter. Whatever the outcome, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I beg to move amendment No. 283, in page 185, line 23, leave out 'or a pecuniary advantage'.

Photo of Mr Bill O'Brien Mr Bill O'Brien Llafur, Normanton

With this it will be convenient to take Government amendments Nos. 284 to 288.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The amendments change the definition of property in parts 6 and 7 in order to make it clear how a pecuniary advantage constitutes benefit from criminal conduct. They bring consistency to the way in which pecuniary advantage is dealt with under the Bill and ensure that parts 6 and 7 apply to a pecuniary advantage that has been obtained through

criminal conduct in the same way as to other criminal property. Without the amendments, it might be argued that the definition of criminal property in parts 6 and 7 does not apply to pecuniary advantage. That would mean that assets obtained through evasion of excise duty, for example, would not be liable to inheritance tax under part 6 and that it would not constitute an offence under part 7 to launder such assets. That would create a serious loophole in the Bill. I hope that that explains why the amendments are necessary.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

When I read the words in the Bill as originally drafted, I was reminded of debates and changes in the law that would have been discussed in the House at the same time as my hon. Friend the Member for Beaconsfield and I started our careers at the Bar. They related to some of the offences under the Theft Act 1978, as my hon. Friend will remember—it was probably before the hon. Member for Wellingborough was called to the Bar—and whether it was necessary to amend the Act to remove phrases such as ''pecuniary advantage'', which had been redefined by case law. All kinds of new formulations were introduced through revisions to that Act in subsequent legislation.

I went through that thought process when I saw the original draft of the Bill. The Minister is now proposing to take those words out again: he claims that if he does not amend the Government's original draft, other serious problems will arise. He says that taking out those words has implications with regard to whether certain activities are regarded as offences in parts of the Bill that we have yet to reach. I do not understand the logic of that.

Perhaps the Minister will receive a briefing that says that, ''If pressed''—ministerial briefings often provide extra arguments for such a contingency. I eagerly await his response, because I am not persuaded by his argument on the matter: I do not see that it follows that if those words are left in, problems will arise in part 7.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department 6:00, 15 Ionawr 2002

I am sorry, but I do not understand what the hon. Gentleman is concerned about. The changes are obvious, and even if my explanation is unsatisfactory, I have nothing further to add.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Let me explain to the Minister where I am coming from, as it is possible that I misunderstood his explanation.

Subsection (5) states:

''A person benefits from conduct if he obtains property or a pecuniary advantage as a result of or in connection with the conduct.''

That is clear: everything seems to follow naturally and logically. However, it appears that the Minister is now saying that, unless ''or a pecuniary advantage'' is taken out, problems will arise in a part of the Bill that we have yet to reach. I do not understand that.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Is the hon. Gentleman ignoring the changes in the other amendments? Proposed new subsection (5A) states:

''If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or

in connection with the conduct a sum of money equal to the value of the pecuniary advantage.''.

There is not only an omission from the Bill but an addition to it. He is suggesting that we are simply removing the words, but that is not the case.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I am not suggesting that. Perhaps this is where the misunderstanding arises. I am saying that proposed new subsection (5A) is more confusing than the original draft of the two subsections in question.

Government amendment No. 284, which proposes new subsection (5A), is confusing and circular. However, if the Minister does not accept my point, he will no doubt press for his revised wording.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

He will.

Amendment agreed to.

Amendments made: No. 284, in page 185, line 24, at end insert—

'(5A) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.'.

No. 285, in page 185, line 28, leave out 'or pecuniary advantage'.—[Mr. Bob Ainsworth.]

Question proposed, That the clause, as amended, stand part of the Bill.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I hope that the Minister will forgive me, but while my hon. Friend was dealing with the subsequent amendment, I read part 6 again, and I concluded that I now understand why subsection (4) is worded in the way that it is. I think that the Minister has been properly advised, and the misunderstanding under which he and I were perhaps both labouring might have been due to the fact that, at the start of the

debate, the emphasis was on clause 311 and the circumstances of criminal conduct that could give rise to the intervention of the director. That made me think that the matter under discussion governed the totality of part 6, whereas it clearly governs only the question of income tax. The question of inheritance tax is discrete under clause 315. In those circumstances, criminal property can be much wider than the person who has committed criminal conduct. That means that individuals who have not committed a criminal offence may find themselves investigated under the inheritance tax provisions and taxed because they are in possession of property that is criminal property. I think that I have now understood the provision. I am sorry if I muddled the Minister. I will try discreetly after our sitting to ascertain whether I have got the matter right.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

Will the Minister explain the scope of subsection (1)? The definition of criminal conduct seems exceptionally wide. It seems that criminal conduct will include conduct that might be an offence in Scotland, say, but not in England. Furthermore, such conduct could be covered under the definition of criminal conduct if the conduct itself were committed in England, not in Scotland. Can he clarify that point?

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I doubt it. I will write to the hon. Gentleman about it.

Question put and agreed to.

Clause 320, as amended, ordered to stand part of the Bill.

Further consideration adjourned.—[Mrs. McGuire.]

Adjourned accordingly at seven minutes past Six o'clock till Thursday 17 January at five minutes to Nine o'clock.