Clause 12

Employment Bill [Lords] – in a Public Bill Committee am 5:00 pm ar 14 Hydref 2008.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Powers to investigate criminal offences

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I beg to move amendment No. 16, in clause 12, page 14, line 9, leave out subsection (1).

This amendment has a similar rationale as that of amendment No. 15 in that it concerns the balance between enforcement powers and the freedoms of business. As the Minister said, it is tied in with clause 11. This is a probing amendment to seek clarification of the clause and its proposed effect.

HMRC has extensive powers as a result of the amalgamation of the Inland Revenue and Her Majesty’s Customs and Excise, not least those under the Police and Criminal Evidence Act 1984, which were provided for HMRC’s fiscal functions by the Finance Act 2007. I agree with my noble Friend Baroness Wilcox and reiterate  her concern that there must be a real need for the massive extension of investigative powers proposed in the clause. More concerning perhaps is that it could represent the proverbial thin end of the wedge. I would not wish to hamper HMRC’s good work in enforcing the national minimum wage, but I am hesitant about freely handing it a hammer to smash a nut when it may have a perfect adequate nutcracker in its box of tools.

I would be interested to hear from the Minister what tools the clause provides to HMRC that it does not already possess, and in what circumstances it may feel it necessary to use them. For example, in what circumstance do the Government envisage HMRC using the investigative powers? Will they be used for all offences, or just for indictable offences? My understanding is that the clause is permissible only on the basis that the offence is now indictable, but will the Minister confirm that that is so?

Given the discussion in the other place about the scarcity of indictable offences, which the Minister confirmed during our previous debate on clause 11 stand part, we must ask whether the powers are necessary given the resulting reduction in civil liberties? In other words, the clause 12 power is dependent on clause 11, which has not been proved to be necessary. I am as yet unconvinced that HMRC has found itself in a situation in which those new proposed powers were necessary, and I should be grateful if the Minister would point me to specific evidence of that need.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

It is important that HMRC has the power effectively to investigate allegations that offences have been committed under the National Minimum Wage Act 1998, and particularly the more serious offences of systematically refusing or locally neglecting to pay the national minimum wage. As I have said several times on this group of clauses, we should remember that we have to deal with the fact that vulnerable workers are often reluctant to come forward.

The intention behind the clause, and the reason why we oppose the amendment suggested by the hon. Gentleman is that HMRC investigators are currently hampered in obtaining evidence of offences to the requisite standard, as we do not have the necessary powers on search and, to a lesser degree, the production of evidence. Investigators therefore have to rely on worker testimony to prosecute employers.

I have referred before to the Government’s vulnerable workers forum, which has been meeting over the past year. It has heard from representatives of business, trade unions, citizens advice, enforcement agencies and so on. Time and again we have heard of workers being reluctant to come forward because they fear that they could lose their jobs, albeit low-paid jobs, often leaving them with a marginal existence.

Based on investigations, we know that securing worker testimony can be difficult, as workers can face intimidation and threats, and sometimes the loss of employment. HMRC has been forced to abandon some potential prosecutions as a result of such factors. The hon. Gentleman asked how many. Between 2005 and 2007, HMRC identified 17 cases in which the lack of powers of the kind outlined in clause 12 hindered its investigations of non-payment of the minimum wage.

We cannot have it both ways. We cannot say that the enforcement effort to date has resulted in too few prosecutions and that it is not tough enough, and then say that we are not convinced that we need tougher powers. None the less, HMRC is able to identify cases in which, if it had had those powers, it believes that it could have gone further.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

Would the Minister tell the Committee, for interest, the geographical spread of those prosecutions?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I do not have that information, but I shall look into the matter to see whether I can enlighten the hon. Gentleman later in the Committee’s deliberations.

Clause 12 remedies the situation by enabling HMRC to use the investigation powers available to it under part II of the Police and Criminal Evidence Act 1984, as it can with other HMRC responsibilities. Those powers would enable HMRC to require the production of, or to search premises for, documents of substantial evidential value to an investigation. I emphasise that those powers will be granted to HMRC only if the courts agree that documents of substantial evidential value are likely to be obtained and that such an order is necessary and proportionate in the circumstances.

The hon. Member for Huntingdon asked whether the powers will be usable only for offences triable by indictment. I am happy to confirm that that is correct. As I said earlier, clause 11 relates to clause 12, and vice versa. The investigative powers in clause 12 could not be used if the national minimum wage offences were triable only as summary offences, as the Police and Criminal Evidence Act powers are available only for indictable offences. The powers in clause 12 would enable prosecutions for the most serious offences in the 1998 Act.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Is the Minister therefore convinced that the measure will not encourage more indictable offences, because people will want to use the new investigatory powers?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

The measure gives HMRC the power in circumstances in which, at the moment, they are frustrated, because they have to rely on witnesses who are reluctant to come forward. Obviously, the powers will be available only for indictable offences—I have made no secret of that and have said it several times. To some extent clauses 11 and 12 go together. Clause 12 will enable prosecutions for the more serious offences under the National Minimum Wage Act 1998, such as refusing or wilfully neglecting to pay the national minimum wage, without having to rely on vulnerable and reluctant witnesses.

The clauses that we are discussing are all about looking at minimum wage enforcement and asking, “Have we got the balance right?” Our view is that the system needs strengthening. I stress again what I told the hon. Member for Northampton, South: I believe that most employers are decent and that they want to abide by their obligations, but I also agree with the CBI that a strong enforcement system is in the interests of both good business and vulnerable workers. When developing the proposals in the Bill, our view was that, although the minimum wage has been a great success,  the time is right to toughen up the enforcement regime. Clauses 10, 11 and 12 do that. I therefore do not agree with the amendment.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Let me first thank the Minister for his comprehensive response to my points. We are moving from a lax system—everyone agrees on that—that does not work especially well, to a tougher regime. No one has a problem with moving to a tougher or better regime, but the question is whether we have retained proportionality, because of the level to which we are increasing the powers. I have voiced the Opposition’s doubts on that.

It could be that because the powers of investigation in the clause are triggered only by an indictable offence, we move from a lax regime that brings no prosecutions, to an extremely harsh regime, rather than to a system that brings more prosecutions for non-indictable offences, say. The enforcement authorities would have to go for an indictable offence to get the investigatory powers, and I can understand why businesses are concerned that we are going from one end of the spectrum to the other.

That is as far as I wish to take the matter at this stage, but on the basis that we are going to think further about the measure, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I did not take part in the last discussion but I listened carefully to all the points that were made. The Liberal Democrats are minded to support the Government on the clause. It is important to give HMRC the teeth to complete prosecutions when appropriate. At the same time, we understand that HMRC might become over zealous. However, given its record, I would suggest that that is not likely. We are therefore happy to support the Government.

Photo of Brian Binley Brian Binley Ceidwadwyr, Northampton South

I can understand what the Minister has said on the clause, but to help with the policing of this measure and the minimum wage, the understanding of business is an important part of the process and allows the Inland Revenue and other bodies to do their job correctly. I would want the Inland Revenue to take that into account in its codes of practice, because the last thing we want—I am sure that the Minister would agree—is an over-zealous approach to the issue, which would do harm to the general involvement of business. We do not want business becoming protective in this respect. I simply ask the Minister to seek an understanding of that by the powers that be, who are given increased powers by the clause.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee 5:15, 14 Hydref 2008

Part of the reason for the measures is the criticism that the system is not zealous enough. We are told to be more zealous but asked not to be too zealous. Our overall judgment is that the system needs strengthening. HMRC has done a good job in recovering arrears for workers—it recovers £3 million to £4 million a year—and we should not lose sight of that in a discussion on strengthening the system.

However, we would not be introducing the measures if we thought that the current system was perfect. We do want to strengthen it. I am sure that HMRC will have heard what the hon. Gentleman said about taking care in applying the proposals. I repeat what I said: in future, the vast majority of cases of non-payment will be dealt with by a civil process and the application of the new penalty procedure. I do not believe that that will involve any more than a small minority of cases.

I also think that signals from Parliament are important, and the signal that we are sending by legislating along these lines is that this is not a voluntary option but the law of the land. We are strengthening the penalty regime, and it will be possible to take the worst and most persistent offenders not just to the magistrates court but to the Crown court, where the potential fine is unlimited.

Question put and agreed to.

Clause 12 ordered to stand part of the Bill.