New Clause 25

Modern Slavery Bill – in a Public Bill Committee am 4:00 pm ar 14 Hydref 2014.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Quoted company’s duty to prepare strategic report: impact of supply chains on human rights

‘(1) That section 414C, Contents of strategic report, of the Companies Act 2006 be amended as follows.

(2) In subsection (7), paragraph (b)(iii), insert “, including the impact of the company’s supply chain of goods and services on them.”.—(Sir Andrew Stunell.)

This New Clause imposes on quoted companies a requirement to report on the impact of their supply chains on social, community and human rights issues in their annual strategic reports.

Brought up, and read the First time.

Photo of Andrew Stunell Andrew Stunell Democratiaid Rhyddfrydol, Hazel Grove

I beg to move, That the clause be read a Second time.

Photo of Mark Pritchard Mark Pritchard Ceidwadwyr, The Wrekin

With this it will be convenient to discuss the following:

New clause 32—Disclosure by companies of measures to eradicate modern slavery, human trafficking, forced labour and the worst forms of child labour from their supply chains—

‘(1) A company operating in the United Kingdom and having annual worldwide gross receipts exceeding £60,000,000 shall disclose its efforts to eradicate modern slavery, human trafficking, forced labour and the worst forms of child labour from its direct supply chains for tangible goods and services offered for sale.

(2) In (1) above, the “the worst forms of child labour” are those set out in Article 3 of the International Labour Organisation’s Convention No. 182.

(3) The disclosure in (1) above shall—

(a) be set out in that company’s annual report,

(b) be posted prominently on that company’s internet website, and

(c) disclose to what extent, if any, the company carries out each of the following—

(i) engages in verification of product supply chains to evaluate and address risks of modern slavery, human trafficking, forced labour and the worst forms of child labour;

(ii) conducts unannounced and verified audits and inspections of suppliers to evaluate supplier compliance with company standards for modern slavery, human trafficking, forced labour and the worst forms of child labour in supply chains;

(iii) requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding modern slavery, human trafficking, forced labour and the worst forms of child labour of the country or countries in which they are doing business;

(iv) maintains internal accountability standards, supply chain management and procurement systems, and procedures for employees or contractors failing to meet company’s standards regarding modern slavery, human trafficking, forced labour and the worst forms of child labour;

(v) provides company employees and management who have direct responsibility for supply chain management with training on slavery, human trafficking, forced labour and the worst forms of child labour with particular respect to mitigating risks within the supply chains of products; and

(vi) ensures that recruitment practices at all suppliers comply with the company’s standards for eliminating exploitative labour practices that contribute to modern slavery, human trafficking, forced labour and the worst forms of child labour, and

(d) specify whether the verifications, audits and inspections in (c) above were carried out by a person independent on the company.”

New clause 33—Ban on importation of products produced by slavery or forced labour—

‘(1) The Secretary of State shall have the power to ban the import at any point of entry to the United Kingdom of any good, ware, article, or product mined, produced or manufactured wholly or in part in any other country which has been found to have been produced by slavery, convict labour or/and forced labour or/and indentured labour, including child labour.

(2) The Secretary of State shall—

(a) prescribe such regulations as may be necessary for the enforcement of this provision by the relevant public authority and to investigate other products and supply chains related to the company or companies producing or importing a product banned under subsection (1),

(b) co-ordinate with the Treasury to issue guidance to HM Revenue and Customs, devolved authorities and any other relevant public authority in relation to the exercise by them of their powers and responsibilities under this Clause,

(c) have a duty to publish and maintain information on prohibited products including a publically available list of products banned under subsection (1), or

(d) manufactured in the circumstances described in subsection (1).

(3) The Secretary of State shall by regulations establish a process whereby a petition can be made by any person, public authority or organisation who has reason to believe that goods produced or sourced in the circumstances in subsection (1) are being or are likely to be imported into the UK to communicate these concerns to the relevant authority.

(4) A communication under subsection (3) shall contain—

(a) a full statement of reasons for the claim,

(b) a detailed description or example of the product, and

(c) all relevant information regarding the production of the good.”

This would allow for the banning of the import of any product produced by slavery, convict, forced or indentured labour, including child labour.

New clause 34—Legal liability for the beneficiaries of slavery—

‘(1) The Secretary of State shall within six months of this Act coming into force bring forward regulations to ensure that a person benefiting from an offence under section 1 or 2 of this Act committed by a third party shall have committed an offence where—

(a) the third party acted for that person’s benefit,

(b) their lack of supervision or control made possible the committing of the offence by the third party.

(2) Regulations under subsection (1) shall not be made unless a draft has been laid before and approved by both Houses of Parliament.”

This new clause requires the Secretary of State to bring forward measures along the lines set out in EU Directive 2011/36/EU on preventing trafficking in human beings.

New clause 36—Duty on large UK companies to report efforts to eradicate modern slavery and forced labour—

‘(1) The Secretary of State must, not later than 5 October 2015—

(a) make regulations under section 416(4) of the Companies Act 2006 (c. 46) requiring the directors’ report of a company to contain such information as may be specified in the regulations about modern slavery and forced labour in the supply chain for which the company is responsible, or

(b) lay before Parliament a report explaining why no such regulations have been made.

(2) Regulations made under section (1)(a) must be in force in relation to quoted companies by 6 January 2016 and in relation to large private companies as the Secretary of State believes to be appropriate by 2 January 2018.

(3) Subsection (1)(a) is complied with if regulations are made containing provision in relation to the company’s reporting of work in the following areas—

(a) verification and evaluation of supply chains to address the risks of modern slavery and forced labour;

(b) auditing of suppliers;

(c) certification of goods and services purchased from suppliers;

(d) accountability for modern slavery issues within the company; and

(e) staff training and qualification.

(4) No regulations made under this section shall apply to small companies as defined by section 381 of the Companies Act 2006 (c. 46).”

Photo of Andrew Stunell Andrew Stunell Democratiaid Rhyddfrydol, Hazel Grove

I had supposed that this sitting would be a long and difficult one, but things have moved on. I congratulate the Minister on what I know has been some hard and detailed work in the intestines of the Government to get the right answer to emerge. I believe it now has.

Nevertheless, when the draft Bill was produced and when the Bill came before us, protection of the supply chain was the most obvious and glaring omission. I raised that with the Minister on Second Reading and have done so on a number of occasions since. Ministers were playing their cards so close to their chests that I began to get the impression that they did not have any cards at all; I therefore tabled new clause 25, which I think is quite elegant. I can say that because I did not really devise it: it was offered to me by the right hon. Member for Birkenhead (Mr Field), chair of our Joint Committee, who pointed out that it would be possible to make a simple and straightforward amendment to the Companies Act 2006. Earlier in our proceedings, I suggested that that could be done in seven words; since the Public Bill Office got to it, it has become 14 words, but it is still a simple and straightforward amendment to that Act.

I will not make a meal of things by pressing the new clause, because we have received a helpful letter from the Minister that makes it clear that the Government intend to bring forward on Report proposals that, if they can be taken at face value, go as far as I wanted to and have set out in the new clause. Indeed, I think—other Members can speak for their own new clauses—those proposals substantially encompass all the thinking on bringing the supply chain into the compass of the Bill in its various versions in the group of new clauses.

The evidence that the Joint Committee took was clear: all responsible companies want a legislative framework in which all businesses work. Without that, the problem for good firms with an ethical outlook that want to protect their reputations is that they carry the costs of ensuring a clean supply chain, whereas those without such an ethical approach and which are not concerned about their reputations do not bother and thus can run their business at a further discount. Having a framework for action in the Bill would mean that no one could plead ignorance; they will not have an excuse if things come to light subsequently. No one can shelter. That is what the provisions seek to achieve in different ways.

There is the question of what size of company should be included. My new clause is titled: “Quoted company’s duty to prepare strategic report”. I should say that that wording is there courtesy of the Public Bill Office and all I propose is to amend a section of the Companies Act 2006 that applies only to quoted companies. The companies that would be covered by my new clause are those quoted and listed on the London stock exchange.

New clause 32, in the same group, would have a boundary of £60 million of turnover and the Government’s letter refers only to businesses “above a certain size”. I hope that the Minister, in responding to my new clause and the debate, will give a hint about what that size might be. Clearly, I would want that to go to the lowest level that is realistic and sensible.

I have had a tip off that my hon. Friend the Member for Congleton has a view about small businesses, and I am respectful of that. Obviously we do not want to place unrealistic burdens on them. However, when we were taking evidence in the Joint Committee from around the world on the operation of supply chain legislation, we heard from a small business producing dairy products in Somerset. It said that it had been required by the state of California to declare itself free to supply to a business trading in California. Although the reach of this starts with large companies, it does get down to very small companies and quite properly so; we would not want a small company in Bangladesh to be excused its having slaves simply because it was small.

Although it is right that the reporting requirement in the legislation that the Minister wants to put forward covers large companies of some compass or another, it is also important that we understand that, if that is to operate effectively, it will have to drive down not just to the second or third-tier sub-contractors, but much deeper. The hon. Member for Linlithgow and East Falkirk may remind us that a major multinational company may have more than a million businesses contributing to its supply chain, so these are not trivial operations.

I am conscious that the Minister has worked hard to produce a good and successful outcome. The shape is still a little hazy, but the direction of travel is absolutely right. I hope that she can reassure me on some of the points I have raised and give her badge a little polish for a successful outcome to what has been a difficult enterprise on her behalf.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs)

I would like to speak to new clause 36, which has been grouped with new clause 25. I agree with the right hon. Member for Hazel Grove about the supply chain being the most glaring omission in the Bill when it was first published. Like him, I am pleased that  the Minister has written to members of the Committee to indicate that the Government are minded to move on that. That was inevitable, because of the views expressed on Second Reading and when we had a short debate on supply chains earlier in Committee. There is a clear mood and appetite for something to be done.

Many people are concerned about the supply chain issue. We have heard about cheap clothing being produced in Bangladesh through forced labour or servitude, and in the summer there was the issue of the prawn fishermen in the exposé that The Guardian did, so we are all aware of the need to take action. Although most large UK-based retailers are implementing policies to tackle the issue, it is currently hard to measure tangible progress or for consumers to judge between companies, so it is right to introduce mandatory standards for reporting to force companies to adopt standard procedures and to create a level playing field, as the right hon. Member for Hazel Grove set out. As we heard, such measures have been introduced in California, and we know that it was supported by 84% of the UK public in a recent poll by Ipsos MORI.

Many large companies have called for legislation to create a level playing field, including the British Retail Consortium and the Ethical Trading Initiative, which has 81 corporate members. The many UK retailers that are acting are rightly complaining about competitors who are not acting in this area, and we need to do something about that. The issue is not simply about forcing companies to act, but helping them to act. Many companies that have given evidence on this issue emphasise how complex it is for UK companies to inspect their suppliers. They said it was sometimes cheaper to go for Fairtrade-certified products, because that reduced the burden on them to try and investigate suppliers many thousands of miles away.

This legislation is about changing market conditions and creating market incentives for the suppliers themselves to be shown to be fair. It would mean suppliers being able to show that they are meeting International Labour Organisation standards, backed up by kitemarking and an inspection regime. It is hard for UK companies to implement individually, but collective action could make it the norm. The Bribery Act 2010 has been heralded for reducing the burden on businesses by creating consistent standards and an industry to audit it. We should be aiming for similar success.

I welcome the Minister’s commitment to introduce measures on Report, but I think it is important to highlight in the short time that we have available this afternoon the minimum conditions that we would expect the Government’s amendment to meet in order for the Opposition to support such amendments on Report.

New clause 25 is a watered-down version of the recommendations of the Joint Bill Committee, which argued that any reporting should not be subject to stand-alone regulation, but should build on current reporting requirements through inclusion in companies’ annual reports. I have two reservations about the proposal. First, I am not convinced that adding the term “supply chain” to existing reporting on human rights will be specific enough to bring about the changes in market conditions that we need to facilitate better corporate behaviour. Clearly, modern slavery is a human rights issue—in this sense it is arguably already covered—but so are gender equality, land rights, water usage and so  on. Those are all worthwhile issues, but they risk making a report so vague that it does not change corporate behaviour or start changing the market conditions in the way envisaged.

Secondly, I am concerned about restricting the proposals to UK-quoted companies. That would exclude most retailers, including private listed companies such as Arcadia, which on the high street runs and owns Topshop, BHS and Dorothy Perkins. It also excludes businesses such as House of Fraser and companies listed abroad such as H&M, Aldi, Asda and Ikea. It ends up excluding the majority of the high street. It does not create the level playing field that British businesses have been asking for.

New clause 32, tabled by my hon. Friend the Member for Linlithgow and East Falkirk, who I am sure we will hear from in a moment and who has been a tireless campaigner on this issue for many years, addresses the two problems I have highlighted. The new clause would create stand-alone regulations on reporting. All firms with a worldwide turnover of over £60 million would be required to report on their efforts to eradicate slavery and the new clause is specific as to what the regulations must include. That closely mirrors the approach taken in Californian legislation and which is also being considered in Denmark and on a federal level in the USA. Its significant advantage is that if companies were complying in California, they would be complying here as well.

There may be an issue for the EU. What would it say about new clause 25 applying to companies that were not established in the UK? Would there be an issue of barriers to trade? Will the Minister comment? My bigger reservation about the new clause, however, relates to enforcement. The measure would apply to a huge number of firms—approximately 4 million UK-registered companies, as well as many international companies. Simply checking whether these firms had produced a report would be an enormous undertaking, before even considering the quality of the report.

Given the issue of enforcement, the new clause would essentially allow each company to decide how to interpret the reporting requirements. Most companies can find enough good practice to list in a report, but without a proper enforcement process there is nothing in the amendment to make companies report objectively, not just on their successes but also on the challenges they face. There is some evidence that this is what has happened in California.

Finally, I turn to the new clause in my name and those of my hon. Friends. Our new clause 36 is similar to the Joint Bill Committee’s proposal. It is closely based on section 85 of the Climate Change Act 2008. It does not bring in the regulation directly; rather, it requires the Secretary of State to bring in regulation using an existing enabling power within the Companies Act 2006. It makes clear that the regulations would need to have five elements, matching Californian law. Our new clause would make it explicit that the proposals must cover both, but would allow for a longer lead-in time for privately-listed companies, to make allowance for the fact that they generally have less onerous narrative reporting requirements. Our new clause is still restricted to UK companies, but it is important to note that most foreign-listed companies will operate in the UK via a  UK-registered subsidiary. For example, our new clause would cover Ikea and Amazon, both of which operate through UK-registered subsidiaries with turnovers of hundreds of millions of pounds.

Our new clause has the three elements that we need from any Government proposal on Report. First, it will have to apply to all large companies—if possible, based on worldwide turnover; if not, then restricted to the UK. Secondly, it will have to bring in specific regulations on slavery and forced labour within the supply chain to match or improve on the requirements of the Californian legislation. Thirdly, there will have to be a clear way of enforcing those regulations. That is what we will be looking for on Report from the Government amendments.

Photo of Chloe Smith Chloe Smith Ceidwadwyr, Norwich North 4:15, 14 Hydref 2014

I shall be brief, as we have to cover a couple of other new clauses this afternoon as well. I sincerely welcome the Minister’s commitment to this amendment on Report. As she said in her letter that arrived yesterday, the Government have been committed from the start to encouraging businesses to take action on modern slavery and it has simply been a question of how. Today, we can refer to those points of how and I look forward to her comments on that very shortly.

I spoke in the first sitting of this Bill Committee about awareness. Coming, as I do, from Norfolk, I mentioned the agricultural sector and how all involved—the workers of today and, we hope, the workers of tomorrow—can benefit from a sector that is ethical and known to be ethical. In this context, information is king. Consumers want it, so that they can buy in confidence, with greater transparency and, as the Minister said, with the confidence that they are not inadvertently supporting terrible crimes.

We live in a world of new, different and ambitious activism, which I welcome. I strongly support the way that my generation, in particular, uses new methods to achieve aims that are not usually in the ambit of formal politics. What we are confronting today is no threat to those who want competitive and free economic prosperity. Greater information will allow more activist and consumer choice, will support competition and quality for the consumer and, of course, support the ethical rights for workers which we all seek. It also supports businesses that want a level playing field. My right hon. Friend the Member for Hazel Grove put the point very well about how the supply chain will, of course, trickle down from large businesses to small businesses. He is absolutely right, and I have no doubt that we will come to that on Report.

We have here the ability to start marking out the good ethical practice expected from large firms and how those firms already using that ethical practice can continue to compete properly, with nothing to fear. We also have the opportunity for good law. I make a final point to the Minister: good law stretches across Departments and across times of different regulations. I have confidence that she will not be afraid to improve regulations that have previously been laid. She may even be courageous enough to take on the Department responsible for the Companies Act 2006, which she mentioned in her letter. As she says, there is debate about whether the wording of that legislation covers modern slavery in supply chains. Another Minister apparently said that it does, but a draftsperson did not  ensure that the Bill actually covers it. I am sure that is resolvable, and I am sure that she will have that work on her plate in the next few weeks before Report. I wholeheartedly welcome the fact that we have reached this point after a full debate on many issues, and I am confident that this measure will be among those that speak most to all those people outside the Committee who want us to take this kind of action.

Photo of Michael Connarty Michael Connarty Llafur, Linlithgow and East Falkirk

I entirely agree with the hon. Member for Norwich North. This is the signal that people have been looking for from our deliberations over the last few years. I want to congratulate a few people. First, I congratulate the Minister; I honestly believe that my speech should start with those thanks. Having visited various Government Departments with ex-Ministers from this Government and our Labour Government to lobby on this issue, I know how difficult it was to get anyone to take responsibility or challenge what I call “dark forces” surrounding the Prime Minister, who did not make him understand that, if he took this on honestly, it was a win for his Government. We had some delay in getting the original directive even tabled for legislation, and we then had great difficulty getting people to accept that we could not extend the work of Wilberforce unless the Bill had an international effect. It was not enough to deal with our problems by legislating for penalties against those carrying out slavery in our own country; it had to extend well beyond that. Any of us who worked with Anthony Steen in the previous Parliament—he has since set up the Human Trafficking Foundation—knew that this was the case.

The second person I would like to thank is my hon. Friend the Member for Slough—I hope she is not too embarrassed. My family live in Australia and they talk about the bush bashers who went out and drove the roads into the outback to allow people to exploit the country’s wealth. She, for me, has been the trailblazer in this. I came along with my private Member’s Bill, following a trail that had been blazed, through the thorns of Government, with a clear path to follow. Anything that we have done has been done, in a sense, with the Minister listening, and with other people who were there before.

Recently, so many people have been mentioned, including by my right hon. Friend the Member for Delyn, on a different clause. I have correspondence from a conglomerate that is already being set up to contribute, hopefully, to the Minister’s consultations, and to the outcome. It includes the Catholic Fund for Overseas Development, Amnesty International, CORE, Traidcraft, the Dalit Freedom Network, Quakers, the anti-slavery foundation Unseen UK, Focus on Labour Exploitation, the Evangelical Alliance, and War on Want. They all wrote to me in the past week to say why we need an amendment on supply chains in the Bill.

The organisations set out the problem:

“Forced labour and slavery is big business. The International Labour Organisation estimates the illicit profit at US$150 billion a year. Over the last decade, voluntary measures have proved inadequate for tackling the scale of modern slavery in our supply chains.”

We might expect an organisation that was involved in supporting the ten-minute rule Bill of my hon. Friend the Member for Slough and my private Member’s Bill to take that approach and the document continues:

“Civil society groups believe that legislation on supply chain transparency is urgently needed.”

How to achieve this? They come up with the solution in new clause 32 and say that the provisions should cover

“all companies operating in the UK with worldwide gross receipts of more than £60 million” and that if there is reference to the Companies Act it must be clear that the approach being used is not the California one, but that

“the new requirement must clearly relate to the Directors’ report and not the Strategic Report” of the company. That is done by a PR person and not anyone with any responsibility for it.

Under the heading of effectiveness and enforcement, they say:

“We want an amendment which will work in practice, encouraging responsible businesses and making sure that companies which have not considered this issue before put time and resources into an approach that works.”

I would say that all along my clause and my approach—and that of the people who have supported the efforts of the past couple of years—is a kite mark. It is not a punishment or enforcement clause that threatens companies. It gives them a chance, as in California, to proudly say, “We have audited and reported, and we have found problems and sorted them out.”

I have mentioned all those organisations that have been involved. We had some difficulty during the consideration of the private Member’s Bill, involving people in the trade, who had been involved in the Ethical Trading Initiative—18,000 companies signing a voluntary code, which they expected their suppliers to sign to say they were not using slave labour. On 19 June I had a letter from the Ethical Trading Initiative, after a number of meetings and discussions, saying that it believed smart legislation that ensured a level playing field would go a long way to avoid the race to the bottom in labour standards and respect for human rights. It then set out its position. The first thing on the list was very interesting, because it was quite a move. It said that the Ethical Trading Initiative does not believe that voluntary initiatives alone will be enough to ensure that all companies take the necessary steps to eradicate slavery from their supply chains. That is a big shift from the discussion that took place four years before. If the Ethical Trading Initiative had reached that position earlier, it might in fact have helped me to get my private Member’s Bill through.

Since then, a letter has been sent to the Prime Minister, dated 29 August, from the Ethical Trading Initiative. It is in the name of Peter McAllister, the chief executive,

“on behalf of the majority of our tripartite members”.

It is also signed by Helen Dickinson, the director general of the British Retail Consortium, on behalf of a number of her member companies. If hon. Members think there were quite a number of charities in the list I read out, they may want to look at the list of those companies, which includes the Co-operative, Debenhams, Fyffes—the banana people—HWW, Jaeger, the John Lewis Partnership, Kingfisher, Marshalls, Mothercare, M&Co, Matrix APA, Men’s Warehouse, BBS, Natural Stone, New Look, Pentland Brands, N Brown Group, Next, Oxfam, Primark,  Traidcraft, Tesco, Shop Direct and William Lamb. It also contains the TUC, which will help my right hon. Friend the Member for Delyn to see that there is synergy.

The point about that is that it came from the lobbying organisations that I mentioned that suggested a different clause to mine. It was a much harder clause, including penalties, with a provision asking the Government to set in train a penalty system if people do not comply within nine months. I have not included that in proposed new clause 32 because I do not want it to be about penalties but about persuasion. I do not want it to be just about amending a few words in the Companies Act.

George Arbuthnott of The Sunday Times has received an award for his campaigning on Britain’s secret slaves. He quoted a Home Office source describing the requirement as “a world-leading measure”. If it is a world-leading measure it has to be as good as or even better than the Californian legislation. I was buoyed by the news that the Minister had put this letter together. However, when I read the letter it gave no indication of form or structure or how minimal or maximal it will be. I do hope it lives up to that Home Office boast.

Along with the people of this country, I hate politicians who say they will be world leading and what we get is a damp squib and a failure to live up to their own boast. I hope this is not an empty boast and that we get an amendment on Report that is as good as the Californian legislation.

Photo of Fiona Bruce Fiona Bruce Ceidwadwyr, Congleton 4:30, 14 Hydref 2014

I will be very brief. I share colleagues’ concerns about enforced slavery in companies’ supply chains. I welcome the Minister’s letter of 13 October to the Chairs of the Committee that she will look at bringing forward amendments on Report, so that businesses above a certain size are required to disclose what they have done to ensure there is no modern slavery in their supply chains.

The right hon. Member for Hazel Grove introduced that note of caution on my behalf regarding businesses above a certain size. It is important to ensure that the size of the company does not mean that innocent business people are caught inadvertently when they do not have the capacity to monitor sufficiently, as bigger businesses can, their supply chains. Monitoring requires some capacity. That was made clear to the Joint Committee. We heard that major companies tend to employ ethical auditors to accredit their supply chains, that codes of practice in corporations are typically done by their corporate social responsibility people and that regulations end up being handled by general counsel.

There are about 4,000 businesses in my constituency and all but a handful are small and medium-sized enterprises. I doubt any one of those has an ethical auditor, a CSR group or general counsel. I simply want to highlight that, while we all want to see this ethical way of working for retailers, through the supply chain inspections, we should bear in mind that even the Joint Committee that was so enthusiastic about that did talk about proportionate legislative action. It talked of proportionate and industry-supported initial steps relating to quoted companies. I hope we will all be mindful of that when we enthusiastically welcome the Minister’s amendments at a later stage.

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury)

I rise to speak to two proposed new clauses in my name and also to endorse points made by other members of the Committee about the importance of ensuring that the scope of the Bill properly and competently extends to the supply chain. I would support new clause 25 in so far as it goes. I am not sure that it goes anywhere like far enough. I know that, after my hon. Friend the Member for Slough had an unusual indulgence of minimalism earlier today, we perhaps seem to be in a minimalist mode in which we are all at pains to point out how modest our various amendments and new clauses are in comparison with what otherwise might be advocated. However, although I accept the economy of the wording and the legal change for which the right hon. Member for Hazel Grove commends new clause 25, I do not believe that it goes far enough. It would be a significant and practical step, but, as has been stated by the shadow Minister and others, more is needed.

In particular, I endorse what my hon. Friend the Member for Linlithgow and East Falkirk said about the long-standing work of my hon. Friend the Member for Slough in respect of supply chain issues; I speak as someone who lent my name both to her private Member’s Bill and to that of my hon. Friend, but I know that they have done all the heavy lifting. That work sometimes takes a long time to bear fruit. We are seeing fruit in the lobbying and activity around this Bill and, of course, in the Minister’s very welcome letter. I welcome the fact that the Government have moved from a position where they saw no place for addressing supply chain questions in this legislation to acknowledging that the legislation would not be complete or fully competent without addressing the issue. Of course, we have to wait and see just how complete and competent the means by which the Government are prepared to address the issue in their own amendments are. I believe that the amendments before us give us some strength in that regard.

I want to speak to the two new clauses that I have proposed. They in many ways take the issue a bit further and are complementary to the other clauses and the wider case that has been made in respect of covering supply chain issues. Let me go back to the much-claimed epithet for this Bill—that it would be world-leading legislation. New clause 33, which would provide for powers to ban the import of products produced by slavery or forced labour, is, to my mind, something that should accompany proper supply chain legislation, not least because if we are going to legislate only for certain classes of companies and only for companies to satisfy themselves and then be open to questions from the media or customers as to whether they have duly satisfied themselves in relation to the circumstances of the sourcing or production of products that they are selling here, the question that arises is this. If we are prepared to see a consumer responsibility and a retailer responsibility, why do we see no state responsibility for controlling or policing these goods?

It might sound radical and far-fetched to have such a power in respect of importation where it becomes apparent to relevant authorities that products have been sourced, produced or moved using the sort of labour conditions that we believe this Bill is meant to outlaw and put an end to. However, my new clause 33 is based on legislation that has been in place in the United States for some 84 years. It is based very deliberately on the Tariff Act of 1930, which prohibits the importation of

“goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by…forced labor”.

That legislation provides that such products

“shall not be entitled to entry at any of the ports of the United States, and the importation thereof is hereby prohibited, and the Secretary of the Treasury is authorized and directed to prescribe such regulations as may be necessary for the enforcement of this provision.”.

There are ousters in respect of

“goods, wares, articles, or merchandise so mined, produced, or manufactured which are not mined, produced, or manufactured in such quantities in the United States as to meet the consumptive demands of the United States.”

There is a principle of public authority being able to intervene to ban the importation rather than just leaving it to market choices, speculation and judgments by producers, retailers or consumers. It is notable that, in that legislation, forced labour is defined as

“all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily.”.

It makes it clear that references to labour include

“forced or indentured child labor”.

We are talking about world-leading legislation. We have made the point in relation to other clauses and amendments: if the Bill is clearly lagging behind provisions that exist elsewhere, it is hard to see how it is world-leading. In relation to supply chains, we rightly talk about the Californian legislation but we need to remember that that legislation exists in the context of the wider US federal legislation, reflected in the Tariff Act of 1930, which I have tried to capture in new clause 33. New clause 33 tries to capture the essence of the code of federal regulations in the United States, which establishes the process whereby a petition can be made to the Department of Homeland Security, so that:

“Any person outside the Customs Service who has reason to believe that merchandise produced in the circumstances mentioned” in the relevant paragraph

“is being, or is likely to be, imported into the United States”.

I have made provision in new clause 33(3) for such a petition mechanism to be made so that it is a question not just of authorities having to survey what is happening, but of people with information and intelligence being able to instigate it.

New clause 34 is simply an attempt—this time looking not in the American, but in the European direction—to import the effect of the relevant EU directive into legislation. If we are going to be world-leading, we at least need to match existing EU directives and, I hope, surpass them.

Photo of Karen Bradley Karen Bradley The Parliamentary Under-Secretary of State for the Home Department

In the interests of time I will keep my remarks as short as possible, but I need to comment on what the Government are intending to do on Report. I am grateful to right hon. and hon. Members for tabling the new clauses that have enabled us to have the debate about the important issue of modern slavery in supply chains. Modern slavery is a terrible crime; it is an issue that the Home Secretary and I take extremely seriously and have been considering closely.

British businesses have a responsibility to satisfy themselves that those they do business with are not involved in modern slavery. Consumers should not be  put in a position in which they might inadvertently drive demand for slave labour around the world. Modern supply chains are global and complex but that is no excuse for inaction. We need an appropriate regulatory framework that encourages businesses to take action. Following my letter yesterday, Members will be aware that the Government intend to bring forward a disclosure requirement on Report. That is a big step forward. It also reflects my discussions with members of this Committee and the important evidence gathered by the pre-legislative scrutiny Committee.

I want to put on record how the Government reached the conclusion that a change in the law would be beneficial. Committee Members know that the Home Secretary and I have engaged directly with business and other experts about how best to encourage best practice in tackling modern slavery in supply chains. New legislation should not be introduced to regulate business without careful consideration. That is particularly the case given that this Government have already put legislation in place in this area. In October 2013 changes to the Companies Act came into force, so that listed companies are now required to include information on “social, community and human rights” issues in their strategic reports to,

“the extent necessary for an understanding of the development, performance or position of the company's business”,

which was a point that my hon. Friend the Member for Norwich North referred to. Given that modern slavery represents one of the most serious human rights abuses imaginable, we were and are still clear that this should include modern slavery.

Furthermore, in 2016, following transposition to UK law, an EU directive on non-financial reporting will come into force, which will strengthen the position further. So, in this changing legislative context, we wanted to make sure that any further legislative changes were of real value, and would not confuse existing arrangements.

In addition we have always been very clear, and remain so, that legislation and disclosure alone will not stamp out modern slavery in supply chains. Ultimately, that will require businesses to take practical action, which is why we are focusing on how we can best support and work with business to achieve that, not just focusing on legislative change, which is often a very blunt instrument.

On 11 July, the Home Secretary and I met with key British businesses to discuss what more we could do together to tackle this abhorrent crime. A number of practical issues were raised and my officials are now working with a smaller group to design practical guidance to help businesses take action on this issue. Therefore we have engaged with business while continuing to listen very closely to feedback from NGOs, campaigners and, of course, businesses themselves, about the current legislative situation. I am convinced that this was the right approach, and certainly this process of careful engagement and consideration has advanced our thinking on how best to tackle modern slavery in supply chains. I am extremely grateful and indebted to many Members of this Committee, who have continued to raise these  issues with me, and the Members of the pre-legislative scrutiny Committee who took important evidence on this issue.

I believe that we can now bring forward a simple but effective provision on Report that will require businesses to produce a disclosure each year setting out what they have done to eradicate modern slavery from their supply chain. Our initial thinking is that that will apply to larger companies. However, we want to get the threshold right. We intend to consult on the exact threshold to ensure that the final provision is fair, workable and robust and protects those small businesses that my hon. Friend the Member for Congleton talked about. The detail about the level of the threshold would then be set by secondary legislation, after careful consideration of the consultation results.

We also intend to produce statutory guidance to accompany this provision, setting out the kinds of information that might be included in a disclosure, so that companies understand and have the support they need to comply. We intend to consult on this guidance before it is finished. I hope all Members of the Committee will welcome the commitment to bring forward this important measure with similarities to the California Transparency in Supply Chains Act. However, because we have had the benefit of California's experience, I can confirm that in some respects our measure will go further. In particular, it will not be limited to businesses that provide goods for sale, so that companies providing services also will be caught by the disclosure obligation. I am also aware that the pre-legislative scrutiny Committee called for this kind of disclosure requirement to be created by amending the Companies Act. However, one of the key reasons that we have decided to introduce a stand-alone measure is that the Companies Act applies only to publicly listed companies, as the shadow Minister pointed out. Our measure will require all companies over a certain size to disclose what they are doing to ensure that there is no slavery in their supply chains.

I take the opportunity to thank all Committee members who have consistently campaigned on this issue and repeatedly raised its importance. The evidence taken by the pre-legislative scrutiny Committee from leading businesses that a provision along these lines would be a helpful and non-burdensome approach has been a significant factor in our thinking.

I pay tribute to the hon. Members for Slough and for Linlithgow and East Falkirk for their tireless campaigning on this issue and for introducing their Private Members’ Bills, which raised awareness about this subject. I thank the hon. Gentleman for his very kind comments in my direction—it would be churlish of me not to.

Modern slavery is a global crime. While this Bill must necessarily be focused on this country, businesses buy goods and services from all over the world, so we must use that buying power to lift people out of slavery all over the world. I have personal experience of visiting overseas territories in which we have concerns about human rights abuses. Making the point to them that businesses in their jurisdictions will not be able to trade with the UK if they do not start to comply with what we expect from the human rights point of view has been one of the most powerful tools in getting the message home; so I am very grateful for all the work that has been put into this.

Our proposed disclosure requirement will play a key role in driving businesses to take this issue seriously and to act to ensure that those they do business with have no part in modern slavery. Therefore, I hope that hon. and right hon. Members will feel able to withdraw their amendments and welcome the Government’s amendments on Report.

Photo of Andrew Stunell Andrew Stunell Democratiaid Rhyddfrydol, Hazel Grove 4:45, 14 Hydref 2014

I thank the Minister. Given that she has outlined a series of proposals that go beyond those in my new clause, it would be folly for me to do anything other than to withdraw it. I hope very much that the Government will deliver on all that she has promised. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Photo of Mark Pritchard Mark Pritchard Ceidwadwyr, The Wrekin

I have been given notice that Members wish to press new clauses 26, 27 and 28, which have already been debated, to a vote. We now come to new clause 26, and I call Diana Johnson to move it formally.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs)

May I just indicate that I do not wish to press new clauses 27 and 28?

Photo of Mark Pritchard Mark Pritchard Ceidwadwyr, The Wrekin

That is helpful. It gives us more time for other things.