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Proceeds of crime (criminal lifestyle)
‘(1) Section 75 of the Proceeds of Crime Act 2002 (c. 29) (criminal lifestyle) is amended as follows.
(2) In subsection (2)(c), for “six months” substitute “three years”.
(3) In subsection (3)(a)—
(a) for “in the proceedings” substitute “prior to the proceedings”, and
(b) after “benefited”, insert “, and each of those offences was committed after 24th March 2003”.
(4) In subsection (3)(b)—
(a) for “two separate occasions” substitute “three separate occasions”, and
(b) after “benefited”, insert “, and at least one of those offences was committed after 24th March 2003 and before the date of any of the offences under section 6(2) of this Act”.
(5) In subsection (4) for “£5,000” substitute “£20,000”.—[Mr. Hogg.]
This is the last occasion that I rise to my feet in this debate. Therefore, may I begin by thanking you, Mr. Benton, for the way that you have chaired this Committee, and may I, through you, thank Mr. Bercow, who has also been a very good Chairman of this Committee? I also thank the Public Bill Office for the assistance that I have received. As you will have seen, Mr. Benton, I have drafted a huge number of amendments. The fact that they were in order and comprehensible owes a great deal to the Public Bill Office, to which I am very grateful.
I thank the two Ministers present—and the former Minister with responsibility for such matters, the hon. Member for Bradford, South (Mr. Sutcliffe)—for the courteous way in which they have responded. They know that there is a lot of this Bill that I do not agree with, in particular part 1. I shall be voting against it on Third Reading for that reason, whatever my right hon. and hon. Friends do. May I also thank my hon. Friends? It is always a pleasure to work with colleagues. We do not always agree, but I always enjoy working with my hon. Friends.
Having said all that, I shall come to new clause 10. I am bound to say that I am about to make the most boring speech that you have probably heard in this Committee, Mr. Benton. The only thing that I would say in its defence is that it will be brief, but dull it is—dull and technical.
I would like to make some preliminary points as I approach the task of addressing new clause 10. First, I do not expect the Minister to accept what I have drafted, nor indeed do I intend to put the new clause or the amendment to the vote. My purpose is simply to point out that we have put into legislation measures capable of causing injustice, and to point out that the fact that the injustice is being done to those who are proven criminals in no sense prevents it from being an injustice. One can do injustice to criminals, and we need to keep that well in mind. The problem, of course, is that one often closes one’s mind to that injustice, because the people involved are proven criminals.
My purpose in moving the new clause is to interest the Home Office—or is it now the Ministry of Justice?—in what I believe to be an injustice, and also perhaps to get the Law Commission, in time, to examine this matter. My interest in this issue was stimulated by a professional case that I was involved with just a few weeks ago. I do not expect members of this Committee to be familiar with the relevant legislation. I make no complaint about that—nor was I, until I became involved in that case.
I will briefly tell the Committee the facts of the case, which are necessary for the understanding of the new clause. I was involved in the case on behalf of a police officer who, rather surprisingly, was allowed to work part-time as an estate agent. I am bound to say that I find that quite remarkable. He did so with the authority of the Metropolitan police commission. He was working two days a week as a detective and the rest of the time he was an estate agent—very rum indeed. He was an estate agent who owned a lot of property, in respect of which he received a great deal of rent, most of it in cash. So this was a very surprising situation indeed.
In any event, he was convicted, on his own plea, of mortgage frauds, in respect of which he had gained some £70,000. The offences were committed over about 12 months, there were six relevant counts, and the conviction was on a plea of guilty. My client was sentenced to a term of imprisonment of about three years. I emphasise that the term of imprisonment was the punishment. It should be distinguished in kind from confiscation, which is intended to be not punishment but the removal of ill-gotten gains. It is important to keep it in mind that confiscation is not intended to be an additional penalty.
I want to focus on the confiscation proceedings, which are the subject of the new clause. The net worth of the officer after conviction was about £500,000, once account had been taken of his debts, particularly mortgage debts; because of the Proceeds of Crime Act 2002, it is very likely that although his benefit from the fraud was £70,000, he will be ordered to forfeit all his net worth. In other words, following a conviction for an offence in which he obtained £70,000, the probability is that he will lose all his net worth of £500,000. The confiscation proceedings have not yet been dealt with, but that is the likely outcome. That is the result of the legislation, which is very complex.
There are lots of ifs, buts and provisos, but for simplicity and brevity I will touch on just a few bits of the relevant legislation, the 2002 Act, which was modelled on the preceding drug trafficking legislation. Incidentally, I think the criteria used ought to be different but in many respects they are the same.
A court must make a confiscation order when a person is convicted of an offence and the court is satisfied that the defendant has a criminal lifestyle. That is the effect of section 6 of the 2002 Act. To start with, the court has to determine the benefit that the defendant has gained from his criminal lifestyle and a process is embarked upon. It means, in effect, that the value of all the benefits that the defendant has received over a period of six years is to be deemed as benefit except to the extent that he can show that he has obtained them honestly. One takes an overall figure of the total benefit that he has received during the relevant six-year period, discounts those that he can show he has come by honestly, and the benefit that is left is regarded as the relevant amount. If the defendant has net assets that are the same or less than the benefits, he will be deemed to forfeit the lot.
There are two reasons to fear the injustice. First, one asks rhetorically what is a criminal lifestyle, a definition of which is to be found in section 75 of the 2002 Act. It is not the only criterion, but it includes the following: if in one set of proceedings the defendant was convicted of three or more offences from which he has benefited or, alternatively or additionally, if over a relevant six years he has been convicted on at least two separate occasions of an offence from which he has benefited. If either of those two situations applies, he is deemed to have had a criminal lifestyle and the confiscation procedure grinds into operation.
The court will then examine the defendant’s financial dealings over the previous six years and he will be deemed to have benefited from all the revenue and benefits that he has received over that period except those that he can show he came by legitimately. If his net worth is the same or less than the deemed benefit, the entire net worth will be forfeited.
The injustice arises in the following respects. First, the presumptions arise on a very inadequate basis. In my client’s case, they arose from the fact that on a plea of guilty he was convicted of more than three offences committed over a l2-month period. That was sufficient to establish a criminal lifestyle. His gain from those offences was valued at about £70,000. However, because of the deeming provisions of the 2002 Act, the value of the benefits, assessed over a six-year period, was over £1 million, which he could not immediately explain. Because the net worth of the benefits is some £500,000, he is liable to lose the lot. It is not right that the presumption should come into play on such a fragile basis. Three offences over a 12-month period should not give rise to a rebuttable presumption that his income over six years was gained from illegal activity, nor, in such circumstances, should the court be able to oblige him to forfeit a sum that is substantially in excess of the proven gain from the offences for which he was convicted. Also, as a matter of natural justice, the process should not be triggered by a conviction for three or more offences on one indictment, when the defendant in question has no previous conviction that would have put him on notice as to the risk of confiscation. My new clause takes express notice of that.
Those of us who are on pay-as-you-earn—all of us here are—or who are in receipt of regular dividend income, or who have to account to the Revenue for the value added tax on all fees received, as I do as a part-time barrister, have no great difficulty in establishing the sources of our income and we have relevant documents to prove it. However, we will see that another potential cause of injustice arises if we put ourselves in the position of someone in the cash economy. The cash economy can involve income either on a large or a small scale; that person could be a plumber—that might be on a large scale these days, but historically speaking it has been fairly modest—or it could be someone like my client, who was receiving enormous sums of money in rent from tenants. Within the cash economy, it is quite difficult to prove sources of income comprehensively and satisfactorily to the court, with the burden of proof resting on the defendant. Therefore, while I suspect that my client’s sources of income were in many respects lawful, he will be hard pushed to show that they are so. As a result, he will find that the court confiscates much more than it should, as a consequence of the legislation that we have put in place.
I acknowledge that my client is a proven criminal; I do not doubt that for a moment. He pleaded guilty and there may be other crimes to his name, for all I know. I also accept that he was not prepared to pay tax that he ought to have paid, and that is another factor that no doubt comes into play. However, I have the strong impression that, because of the way we have framed the legislation, and in particular because we have used the model of the Drug Trafficking Act 1994 to catch many other offences, including mortgage fraud, we will require people to pay much more by way of confiscation than is proper, and certainly much more than the benefit that they have received from their unlawful activity.
I return to my original point, that confiscation is not intended to be an additional penalty; it is intended only to remove ill-gotten gains. That is in part to protect the public, and also because it offends the public that criminals should retain their ill-gotten gains. We are at risk of doing much more than removing those gains, however. The purpose of the new clause and the amendment is to highlight that point, and to try to get some sensible argument and discussion of whether we have gone too far. In other words, it is to stimulate debate. I would be quite content if it has that effect. I am not seeking actually to change the law on this occasion and I shall not, for these purposes, be pressing the new clause.
I rise briefly to thank and to pay tribute to the work of my right hon. and learned Friend the Member for Sleaford and North Hykeham, in relation not only to the new clause, but to the other amendments that he has brought forward during the Committee debates, and to his contributions in support of the arguments that we have advanced. He has made an interesting, well-considered point that was well argued and well explained, as one would have expected based on his contributions throughout. He raises an interesting point, designed, as he says, to provoke debate. He has certainly done that today in highlighting this issue and moving this new clause. We shall see how the matter progresses, and I shall note with interest the Minister’s response to his detailed legal arguments and the way in which he set them out.
The point about trying to stimulate debate on some of the issues is important. From what I have seen, both in power and in opposition in various guises on councils, one might stimulate debate and a year or two or three later, lo and behold, somebody somewhere takes notice. Victory is not immediate, but it does sometimes arrive.
In its four years of operation, the Proceeds of Crime Act 2002 has resulted in the recovery of a considerable amount of criminal wealth. A record £125 million was recovered in the past financial year. That represents a substantial year-on-year increase and a fivefold increase over the previous five years. That is a significant success, but we do not want to rest on our laurels. We want to double the annual recovery to £250 million by 2010. Confiscation following criminal conviction is a core part of our efforts to deprive criminals of their ill-gotten gains. The new clause, as the right hon. and learned Gentleman points out, seeks to dilute the provisions that provide important tools to ensure that that occurs.
Under the 2002 Act, a court assumes that a defendant who has a criminal lifestyle funds his entire wealth by crime. Consequently, the value of the defendant’s assets is available to be reckoned into a confiscation order. The alternative is for only the direct gain from the offence of which the defendant was convicted to be available for confiscation. As the right hon. and learned Gentleman pointed out, criminal lifestyle is defined in several different ways. Some defendants are found guilty of specific offences, such as people trafficking and money laundering. Other criteria, based on the number and pattern of prosecutions, tend to show that a defendant is a career criminal.
The new clause would amend the qualifying criteria. It provides that an offence needs to have occurred over three years rather than six months. It would also alter the test for deciding whether a person has engaged in conduct that forms part of a course of criminal activity defined in section 75(3)(a) of the 2002 Act. First, the conviction of three or more other offences would have to have occurred prior to the proceedings on which a confiscation order was considered.
I thank the right hon. and learned Gentleman for his further helpful clarification of his point.
Secondly, at least one of the offences would have to have been committed in the period between 24 March 2003 and the date on which the offence giving rise to the confiscation order was committed. There is also an existing safeguard in that the criminal lifestyle test is met only if, in addition to meeting the tests that I have set out, the defendant has benefited to a certain monetary value. The new clause seeks to raise the threshold from £5,000 to £20,000.
Experience of the operation of the 2002 Act is that although the criminal lifestyle provisions have been in force for four years, there has been no opposition to their operation. Similar provisions operated in previous confiscation legislation. The operation of the provisions has not, to our knowledge, been challenged in the courts.
I am convinced that the tests set out are already high enough, and that only a career criminal could qualify as having a criminal lifestyle. It is also significant that even if a defendant was deemed to have such a lifestyle, he would have the opportunity to show the court evidence that his assets and property were not the proceeds of crime. They would then not be subject to confiscation. Furthermore, the courts have discretion on whether to include the value of assets if there is a serious risk of injustice.
I draw the attention of the right hon. and learned Gentleman and the Committee to section 10(6) of the 2002 Act, which specifically states that the court can ignore the value of assets if it believes that not doing so could result in a serious injustice. It is also significant that the courts are bound by the Human Rights Act to dispose of their duties in a way that complies with the defendant’s rights under the European convention of human rights. Again, I am unaware of any human rights challenges having been brought under that provision.
The benefit figure of £5,000 is significant enough to catch career criminals. I am confident that the concept of the criminal lifestyle and the operation of those provisions in court are not draconian. However, I am grateful to the right hon. and learned Gentleman for the new clause, as it causes us to think again and to justify the legislation continually. He said that he would not press the new clause, but I am grateful to him for giving me the opportunity to reply to the debate.
I am grateful to the Minister for his reply. I would be grateful if it caused his officials to ponder—and perhaps to take account of the views of the judges.
I shall make two points. First, on career criminals, I do not think the Minister is right. In the end, it comes down to definitions. In my client’s case, the offences covered 12 months or thereabouts, and although there were a number of counts there was only one indictment. I would be inclined not to regard a person who committed offences over a 12-month period as a career criminal. I would take a different view if we were dealing with a man who had committed offences over two, three or four years. That would be different, but my case dealt with a range of offences, quite narrow in compass, within a certain time frame. One needs to consider whether the provision catches people who are not career criminals. That is my view.
Secondly—it is a small point about section 10(6) of the 2002 Act—there is a settled authority on the matter. The courts are not entitled to disregard the process, or indeed the sums, simply on the basis that is unfair. Once they have embarked upon the process, it has to grind through. They cannot simply say that the overall effect is unfair and not do anything.
I hope that we will give further thought to the matter. I recognise that people like my client are not the immediate source of compassion or sympathy. We are dealing with proven criminals. However, injustice can be done even to proven criminals and it is the business of this House to try not to do so. I beg to ask leave to withdraw the motion.