Joint Committee on Draft Modern Slavery Bill
Oral evidence: Draft Modern Slavery Bill, HC [1019], Thursday 6 February 2014
Ordered by the House of Commons to be published on 6 February 2014.
Members present: Mr Frank Field (Chairman), Baroness Butler-Sloss, The Lord Bishop of Derby, Baroness Doocey, Baroness Hanham, Baroness Kennedy of Cradley, Lord McColl of Dulwich, Lord Warner, Fiona Bruce, Michael Connarty, Fiona Mactaggart, Mrs Caroline Spelman and Sir Andrew Stunell
Questions [341-399]
Witnesses: David Arkless, Founder and Chairman, Arklight Consulting Ltd, and Matt Crossman, Ethical Researcher, Rathbone Investment Management, examined.
Chairman: Welcome to the Joint Committee. Please would each of you identify yourselves for the record?
David Arkless: I am David Arkless of Arklight Consulting.
Matt Crossman: I am Matt Crossman of Rathbone Investment Management.
Q341 Michael Connarty: In your submission, Rathbone Investment Management suggested that the Government have to provide what you call a “legislative lead” to business. Why do you need legislation when supply chains are in control of businesses in their own contracts?
Matt Crossman: It is important to recognise the role of an investor in this question. We are looking to companies to manage strategic risks and we are looking at the way they manage those risks across our portfolios. Contracts are bi-party, with two people looking to apportion responsibilities; those are private contracts. We are looking for an assessment of wider risk in supply chains. Contracts will take you so far, but as an investor there is not that level of transparency for me to be able to assess whether that company is managing those contractual relations well enough. We are looking for something slightly more than lots of sets of private contracts and individual conversations.
Q342 Michael Connarty: We are trying to amend an already major Bill and getting in new clauses within the time scale may be difficult. David and Matt, if you had to recommend only two clauses on supply chains for inclusion in the Bill, what would you include? What would those two vital clauses be?
David Arkless: Could you list the clauses so I can choose? Sorry. Forgive me. Where I come from, having been through this process with the Government in a couple of countries, including the United States, I would say absolute 100% conformity to supply chain verification would be No. 1, mandated on every company that turns over more than £50 million a year in this country, whether they are a UK or a foreign company. That is it.
Q343 Michael Connarty: One clause would do?
David Arkless: One clause is fine for me.
Matt Crossman: I would echo that sentiment. A requirement for disclosure on supply chain risk and verification for companies that are of an appropriate size, so it is not an additional burden, would be my No. 1. For No. 2, I think the proposal for a nominated board member to oversee these issues is vital as well. Unless you have the culture at the company looking to manage these strategic risks, you are in danger of developing a box-ticking culture. My No. 2 would be nominated board level responsibility.
Q344 Michael Connarty: My second question is to David; Matt might want to come in, but I am thinking about your own experience of this, David, which you told us about when you came to the all-party group. You have spoken about a groundswell of support for the Act to combat modern slavery from FTSE-100 companies. Would legislation on supply chains be welcomed by business?
David Arkless: I think you would get a mixed response. Organisations that have any single understanding of what the problem is would say, as the Americans say, “We need to get ahead of the curve and do something, whether there is legislation or not.” I have found that in other countries a little stimulus, by having the correct structured legislation in place, makes everyone a huge supporter and very enthusiastic. What I am asking for here is to give them a little stimulus that says, “This isn’t only good for our society, it is not only good to solve an issue or a problem, and it is not only good for your employees to be engaged on these issues and understand what your core values are; it is also great for your return on investment because we can show you that by doing the right thing, you also make more money.” I always find that is an attractive comment and is received well by corporations and investors.
Q345 Michael Connarty: Do you think that groundswell is replicated by subcontractors and their sub-subcontractors? I know you have had quite a bit experience of this two and three-tier enthusiasm.
David Arkless: I spent a quarter of a century as president of the world’s largest employer. When we introduced this after the Athens ethical principles were first signed—we were the first corporate signatory—I had the mistaken view that I could verify our supply chain to three levels within a year. It took me seven years to verify two levels. After one level we had 176,000 suppliers; with two levels it was 2.2 million; and with three levels it was 17.8 million potential suppliers where we had to get some kind of process in place that we were convinced was right.
Without doubt their uniform reaction was, “Oh no, not another procurement requirement on us that we’ve got to go through.” However, what we tried to do was what I tried to do with other corporations, which is to persuade them, “This is not just good for what we are trying to address here—modern day slavery, abuse of workers or the use of women and children as commodities—but this is great for your return on investment, and, by the way, we will not choose you as a supplier unless you verify.” That gives a huge incentive to suppliers to do the right thing.
Q346 Michael Connarty: I know you have wide experience of this. The idea is to take action, not just compel people to audit and recognise. Can you provide any examples of what the best companies are doing to combat modern slavery that might be added to the Bill in a small clause about what action they should take?
David Arkless: Some of the most advanced ones are the ones we have worked with in the US—the big global American corporations—where they have said there are two issues. One is that we want to exhibit and demonstrate that we are not using human beings as a commodity anywhere in our supply chain. The second one is to change both their accounting and human resource policies to say, “If you work for us, if you are an employee of this company with the great values that we have, it is against our value-set for you or us or anyone you know to abuse a human being, and especially abuse a human being in this way. For instance, you are a businessman flying to Bangkok and you are in a hotel; it is against our values for you to use women, children and boys as a commodity.” Some big corporations that I know and that I work with, like Coca-Cola, Hewlett Packard, Microsoft and Manpower Group, have done that. There are two things: checking your supply chain to make sure there is no abuse in it, enforced labour or modern day slavery. Believe me, it is stunning when you go out there and talk to a large American car company that says, “We don’t need to do this. We have checked our supply chain,” and you just download a few pictures of wage slaves in Brazilian charcoal pits two steps back in their supply chain. It really shocks corporations.
There is an understanding that big corporations and small and medium-sized companies—who need to be treated, in my opinion, in a very different way—really want to do something, but it is twofold: it is the supply chain and it is the behaviour and values of employees in the company. The best ones address both of those.
Q347 Chairman: Matt, can I put this to you? Rathbone holds huge investments for companies. Do you sense any groundswell of support on this issue from companies that use Rathbone for their investments?
Matt Crossman: Privately, in the conversations I have in my everyday work life, I am looking to assess the quality of a company’s environmental, social and governance risk management. I have been doing that for the past 10 years. The quality of conversations I have with the biggest companies, the likes of Unilever and the big supermarkets, is becoming ever more sophisticated and ever more suitable to the growing task of managing complex global supply chains.
I certainly see among the most engaged and the most progressive that they completely see managing strategic supply chain risk as something they should be doing purely for the bottom line. Certainly recently, the recognition from these companies is that their efforts have not quite been fully valued, because there is the free rider problem—companies who use the same suppliers and get the benefit of the suppliers they are using improving their systems, but who do nothing to encourage that process. The biggest companies that I have relationships with want the playing field to be level; they want to see some sort of recognition that their management of these risks is added to the bottom line.
One of the key things we are trying do as investment communities is have the conversation with business to try and make sure that they are partners in this process. The feedback we are getting is that, if you involve them in the process, they are very keen for this level of legislation.
Q348 Chairman: Have any of them yet said, “We hear there is a Modern Slavery Bill coming down the tracks. Can you talk to us about that?” Or are you saying, “This is coming down the track, and we want to talk to you”?
Matt Crossman: About 50:50, I would say, in terms of the calls I have had.
Chairman: Both.
Matt Crossman: A lot of the global companies that are listed in London also have listed businesses in California. A couple of companies have come to me and said, “What is going on with this Modern Slavery Bill because we are already compliant with the California Bill?” There has been that side of things. The others have wanted to make sure that any legislation that came was pro-business and involving them as partners in the process. I am having an ongoing conversation at the moment with the companies I am in touch with.
Q349 The Lord Bishop of Derby: A number of people are lobbying us to say that the California Bill is a very good model. It has clearly got the issue out into the ether, and companies are talking about it. Do either of you have any comments about its actual effectiveness in this area? It would be helpful if from your wisdom you could give us a steer on that.
Matt Crossman: In a sense, it has only been in full implementation since 2012, so we are in the very early days. There are two comments I would make on that particular question. First, in one particular sector it has had an impact already, and that is in the consumer electronics sector. It is anecdotal evidence, but my feeling from talking to those companies is that the ones based in California—particularly Apple—have become a lot more engaged on the issue of human rights in the supply chain than they were before 2010. Our colleagues in the US have been involved in good conversations with them to try and engage them in the process. That would be one good example of a sector that has really woken up to its risk in this area. The California Bill has been part of spurring that process on.
The second element is that this light-touch pro-business regulation puts the onus back on stakeholders to be active engagers in the companies. In a sense, it is up to me and my colleagues to assess the quality of those responses and then drive the agenda forward. In a sense, that is all I am asking for in the UK. We need that nudge to the rest of the sector that David mentioned to make sure that the actual risk is being assessed across the whole supply chain.
We have seen examples in California of benchmarking companies on their assessments. There is a website which lists all the companies that have submitted a response. That is great for investors like me and for stakeholders to then rate the quality of those responses. There is a recognition that the ball is then in our court to make the most of whatever legislation there is, however light touch it might be.
David Arkless: A quick comment on the California Act: nice try, guys, but it’s typically Californian, which means there are lots of options in terms of going left or right, opting out or going on to the website and saying, “The only reason we can’t do this is whatever.” I absolutely agree with Matt; it is a directional push with regard to Government intent in a state, which is like a huge country, as you very well know, to say, “Get your act in order. Get on board with this, or else we are going to take this to be much more prescriptive in future.” That is why I like it. It is typically soft and mushy as a piece of legislation, but it is the right directional push.
Q350 The Lord Bishop of Derby: Could we aim with this legislation to improve on it—to do anything tougher or sharper to push it along a bit quicker—or do you think that is the right level you have to start at, in terms of legislation?
Matt Crossman: I certainly would not go anywhere lower or less than the California Bill. It is important to recognise that the California Bill was the result of a long period of negotiation; quite a lot of requirements were taken out and that is where we ended up. Walking before we run is quite a good way of approaching this. As I mentioned to Michael earlier, I think that the additional requirement for a nominated director to have directorial responsibility for the issues would be a useful addition to the kind of requirements that have been talked about for this element of the Bill.
Q351 The Lord Bishop of Derby: David, do you see any way of improving what they are doing or pushing it quicker, or not?
David Arkless: As a business person who ran global corporations, I really hate the notion of being told what to do, as long as I am doing the correct thing to start with. I do love the idea of taking this from where, for instance, 15 years ago the environment movements were, when everybody started to learn about emissions and whatever else. We are almost 15 years behind in this movement, because there is not the huge global awareness and there is not the understanding in the street or in certain Governments of what the problem or issue is. If we include something on supply chain verification in this Act, I would highly encourage something light touch, which just says, “It is our intention that you get your act in order, corporations.” If you lead by the nose, eventually you will get a huge groundswell of support.
Many of the great corporations and limited companies that are based in this country, in the FTSE—the top ones—are already doing this because they know it is good for their brand. They know it is good not to get caught out abusing children in a Bangladeshi supply factory. They know all of this. What I am trying to do in encouraging this is to say, “Let’s get all of the companies that really don’t have awareness of this to be aware that this country has a Government that says, ‘We are concerned about this.’” We want to transfer, transmit and communicate what the problem is and encourage every company that has employees to communicate to them what the issue is, and then to do the right thing. I think the directional nudge that Matt talked about is the right way to go.
Q352 Michael Connarty: You mentioned, Matt, the idea of having someone responsible for this. Many companies already have a compliance director. Are you talking about adding a person or making that the specific duty of a compliance officer or director?
Matt Crossman: I am talking about having a nominated person, at board level, in the management structure of the company, setting the vision. We need to go beyond compliance at this point. Most existing large companies worth their salt will have some form of nominated compliance officer with this level of responsibility. It is going to the heart of the culture of the company and making sure it is discussed at board level.
David Arkless: I would add that the only way to go to the heart of the culture of a company is to make the CEO responsible. Then you can be sure that they will nominate somebody highly competent to make sure that the CEO is not made to look a fool in public. That is the best way to work.
Q353 Lord Warner: We have talked a lot about the California Act. Can we come back to some of the UK legislation? What has been recommended to us are basically two different models for supply chain legislation. The first is under the Companies Act, which would be including a reporting requirement on directors on human rights issues. The second is due diligence requirements under the Bribery Act. Does either of these take your fancy? Do you think they are better than California? Should they be added to California? What are your views on using those types of provisions in current legislation?
Matt Crossman: My view on provisions in the Companies Act is that it is fantastic to see the principle that non-financial information and transparency matters to stakeholders and shareholders. It is great to see that principle come into the Companies Act. It was a shame not to see that come in as part of operating a financial review that expressed it in terms of strategic risk and value-adding in the company.
As far as I understand, there are already moves under the Government’s efforts to implement the UN guiding principles on business and human rights to have some amendment or clarification of the Companies Act section on directors’ reporting duties to specifically include human rights. I would see TISC legislation as helpful, additional effective implementation of that already established legislative principle. It would be much clearer for companies and it would set much more helpful boundaries in terms of helping them meet their reporting requirements.
Q354 Lord Warner: What about due diligence?
Matt Crossman: I am afraid the Bribery Act is not an area of my expertise. I would prefer to give written submissions on that question.
David Arkless: I have always found that, in achieving an objective in the commercial world, you are often faced with the potential of confusing business processes that lie within different responsibility areas. I have also found, in advising 20 major Governments around the world on labour and social issues, that the same kind of process is evident in the use of legislation or governance to fix any particular problem.
I would highly recommend that, if we have a problem, which is pretty evident, and which is why an Act is being discussed and debated right now, we converge the different legislative processes and the different responsibility areas to say that, in order to fix this problem, we need to take due diligence, financial oversight and governance and focus it into one area of responsibility that says, “Here is our interface with the Government and the policing authorities on this issue of responsibility to prevent modern day slavery.” I highly recommend converging, or taking from a number of places—not just the two areas that you mentioned. A number of governance processes need to be put into one place to solve the problem. Unless you focus, you will not solve the problem, in my opinion.
Q355 Lord Warner: Going lower down than legislation and turning to the UK corporate governance code, do you think there is more we should be doing in that particular code to deal with supply chain transparency?
David Arkless: In terms of corporate governance under UK law, I think the legislation right now and the demands upon corporations and companies are adequate. I do not think we need to strengthen the support and requirement within the achievement of our objective area by strengthening that particular process in governance. That is fine, and I think you would get a huge backlash from companies in this country if you imposed even more oversight requirements in that particular area.
Q356 Lord McColl of Dulwich: Are schemes of ethical auditing an effective way of mapping and monitoring supply chains? Would pressure from NGOs, such as Walk Free’s proposal—a global corporate risk index—be a more effective way of shaming companies?
David Arkless: I think they are an additional way of getting more groundswell of support for doing the right thing. Let us be clear. This is not going to be solved by a new piece of legislation. There is only one way to resolve the issue of modern day slavery, and that is to have governmental, not-for-profit, NGO and international organisations and corporate organisations all focused on resolving the problem in a bilateral and multilateral way, working together. I absolutely agree that we should have ways of third-party verification or oversight from not-for-profit organisations, but I think it should be done in a way that is now proving to be very successful in lots of cause-driven areas around the world, which is for Governments, corporations and not-for-profits to work together on an issue, rather than saying, “We’re going to be the not-for-profit oversight police on this specific issue.” I would highly recommend the integration of verification and certification on a global basis in this area.
Matt Crossman: Voluntary efforts or external efforts from NGOs have been around for quite a while in various forms and guises. It is great that the Walk Free Foundation has recently been so well funded and can help us get the data we need on this issue. As an investor, I still want a company to think strategically about its supply chain and to think how it might be reducing its vulnerability to supply chain shocks and increasing the strength of its supply chain to respond to those shocks, ultimately adding to the bottom line. There is something about the TISC requirement that puts the ball into the risk management arena. It could lead companies to see it as an opportunity to develop a competitive advantage, not just another external NGO compliance CSR issue. Fundamentally as an investor that is what I want to see. I want to see reduced risk in my portfolios; I want to see people developing competitive advantage. Supply chains are the secret weapon in terms of developing that competitive advantage.
Chairman: Michael gave us a seminar before we started this morning. He made this point, which I think Walk Free’s report minimises. On that report, Britain comes out brilliantly with a minimal number of slaves. Michael’s point to us—hence the importance of your contributions—was that almost certainly most of our slavery is offshore, hence the importance of looking at the supply chain. I think that Walk Free needs to get on to looking at countries and digging into that huge army of slaves elsewhere, to take the responsibility that both of you have been making clear. What you were saying, Matt, was highly relevant.
Q357 Mrs Spelman: I think we are confusing two things. Walk Free has a global index of slavery by country, which of course shows that the majority of the 30 million slaves around the world are not here but in the very populous countries of India, Pakistan, Nigeria and so on. The corporate risk index, which does not yet exist, elicited some concern from some of the best practice companies in America that you referred to—Microsoft and Manpower—that it risked the shaming approach, whereas they felt that some reward would be a better system to incentivise the stimulus idea you talked about. Surely, if it is a corporate risk index, the reward lies in being at the bottom of the risk index—low risk, wherever you turn up in the index—because that is your reward for having been thorough. Is that how you see it working?
David Arkless: There are two things within this whole area. One is the naming and shaming—the ranking game. Forget it. One slave in one company or one person abused in one country is enough. Forget the ranking. I understand why people like rankings. People at the bottom are going to go, “Oh, we want to get higher up the ranking.” That is not the way to do it. If you listen to his industry and talk to big financial organisations globally, if corporations do the right thing, check their supply chain and demonstrate that they do it, they may just be willing—places like Moody’s and others—to give you one little extra point on your credit rating; and for every point you get on your credit rating—bazinga!— $100 million more in terms of return on invested capital per year. On the ranking/rating thing, I say it is a disgrace if we have one person, so why does a ranking matter? As long as we can identify that we have people that are being abused, we have to do something about it.
The way to get corporations on board is to prove to them that this is good for their business, through employee engagement, and secondly, that big financial institutions and banks are willing to say, “We think you are a great company because you do the right things and you will get a better return on invested capital through better employee engagement; therefore we will increase your credit rating by a tiny one point.” That is worth £100 million, which more than pays for the whole cost of implementing any supply chain verification process in any corporation in the world. That would be my approach.
Matt Crossman: As an investor supporter of a lot of the biggest voluntary corporate benchmarking and ranking indices in a lot of sectors, I am going to support them. They are useful for trying to promote a social good, as opposed to deal with a social problem. I have seen really effective examples of corporate benchmarking in the development of low-carbon buildings and homes in the UK in the NextGeneration builders index. Probably the most successful recently has been on the issue of access to health care in the developing world—the access to medicine index, where Glaxo has consistently come top. Recently three or four other big companies have upped their game in terms of researching developing country diseases, just to try and get up to the top of these rankings. They do work when you are trying to incentivise new efforts to deal with a social good. I do not think it is very suitable for this particular issue. It is dealing with a negative issue, and it would mean the danger that you just get more corporate box-ticking on what is actually an issue of strategic risk management for companies.
Q358 Lord Warner: This is a question for Matt. As a newcomer to this area, I am quite interested in the role of investors. There is quite a knowledge base about which countries are high risk in terms of servitude, if your supply chain involves them. Are investors likely to move to a position where the top 10 of undesirables—if I may put it that way—in terms of their exploitation of labour would be ringing alarm bells for you as an investor and you would be saying to companies, “Look, guys, if you have a supply chain which is using this country, you had better start poking around in it”? Is that where investors could go?
Matt Crossman: And in fact are going. We are signatories to the UN principles for responsible investment, a UN-guided process that helps encourage investors to look at the ways in which environmental, social and governance issues might affect company valuations of invested companies. I have been part of collaborative engagements on a wide variety of human rights issues which ask exactly those questions of the invested companies that we are part of, particularly, recently, around the issue of bribery and corruption.
We come up with research. We risk-assess various trends within the investment management world and then overlay them with our holdings. We say, “We have a real risk, say, in the engineering sector; they’ve got an exposure to the supply chain in this area.” When we get access to the companies, we raise those issues directly with them. Certainly the investment community would find the level of transparency provided by TISC really useful in their asset allocation modelling and portfolio risk modelling. It gives you an indication of what bad news might be round the corner.
Q359 Baroness Butler-Sloss: Our Chairman chaired a preliminary investigation—an evidence review—which we have incorporated into our Select Committee. The Ethical Trading Initiative told the evidence review that a lot of decisions in companies in relation to supply chains would be the responsibility of a variety of people and not just one person, obviously. I appreciate that you, David, said that the CEO should be responsible, but how do you achieve that? Would a non-executive director be the sort of person who might have responsibility? That was suggested to us.
David Arkless: If I imagine that I am not now retired and back in my family company, but back in a big corporation, and I was made responsible if I was CEO there, I know exactly what I would do. The implementation process would be very straightforward. I would indeed appoint as my partner one of my main board directors, but it would tend to be someone in the procurement or financial area. I would hold them personally responsible on pain of death, to implement the great, absolutely free—
Fiona Mactaggart: I don’t think you’re allowed to kill them.
David Arkless: Of course you are. This is the corporate world.
Chairman: Where killing comes in many forms.
David Arkless: The responsibility for implementation through the procurement and financial functions is fairly easily implemented today because over the last six or seven years we have worked with great companies, like Microsoft and others, to produce free software that can be loaded into multi-numbers of platforms that can both train employees and do it freely; and, secondly, put a supply chain verification process in place that is free and easily implemented that can get the answers back to the person that I as CEO make responsible.
The reason I say it should be the CEO is because I know big corporations. If it is not the CEO’s responsibility it will get given to HR, and a financial function is the last thing we want to be in HR. It has to be the CEO that says, “On my score card with my shareholders every year, I need to be able to assure them that in our supply chain we are dealing correctly with individuals, and actually making more money because we treat people correctly.” That is what I want somebody to say.
Q360 Baroness Butler-Sloss: I want to ask a completely separate question. The Joseph Rowntree Foundation in its report raised an issue of citizens, particularly auditors, being in the main precluded from reporting possible cases of exploitative practices to regulators or the police by confidentiality agreements. What do we do about that?
David Arkless: With regard to breaches of human rights, there should be no protection whatsoever to any party that prohibits the transmission of fair, open and correct information. I want to make that clear. There should be nowhere to hide when we are dealing with human rights.
Matt Crossman: This goes back to your first point about how you incentivise the actual people who make the decisions—the procurement manager in Bangladesh who has a slight troubling feeling that this may or may not be the right kind of thing. How do you incentivise him to stick his head above the parapet and go one level up to his manager to complain about an issue? That is why it has to come from the top. In all the companies we are talking about there are really well meaning and engaged people who want to do the right thing in their jobs. We need to create the incentives for them to be recognised for doing that within their jobs.
Partially, it comes down to whether the CEO, or the director or the manager that you would appoint, David, has an incentive financially to manage these issues. Is this part of his score card? Zooming out to the wider human rights agenda, we have seen progressive companies like Royal Dutch Shell integrating environmental and social management issues into their corporate performance score cards. Something like 20% of their executive pay is dependent on their managing these risks well. It is not just a box-ticking thing; it is a recognition that in that sector, if you manage those risks well, you are enhancing your licence to operate and therefore will get more business. The same kind of thinking really could be applied to this area.
Q361 Sir Andrew Stunell: For those who may want to resist change, use of the words “proportionality” and “proportionate” is very good. I heard you say, David, that corporations do not want to be trodden on by new legislation. We have some guidelines—UN guidelines and the Equality and Human Rights Commission and so on. What is your perception of how good companies are at the moment, first, in their awareness of that and, secondly, their automatic compliance with it?
Matt Crossman: Specifically on the guiding principles?
Q362 Sir Andrew Stunell: Perhaps on this issue as a whole—the voluntary code, the voluntary approach. David in particular spoke against that, but at the same time we need to get the balance right between the compulsory and the voluntary. We are going to talk to a lot of people about this Bill who are going to say, “We will only go as far as is proportionate.” I want you to take me along that proportionate line.
Matt Crossman: The important point to make on the guiding principles is that business was involved as a partner in their development and implementation, as were investors such as ourselves. You really do have a useful framework there for driving the debate at a very high level.
I have already said that voluntary efforts on this particular issue—supply chain transparency, incidents of bonded labour and other human rights issues—have taken us as far as they are going to go. We have a good level of compliance for a good level of companies, but there is a remnant reluctant to go. As an investor I want to see that remnant pushed ever so slightly further.
There is a really good example of how voluntary and regulatory efforts that are light touch can work together, and that is in the area of carbon emissions. We were part of the investor coalition which, back in 2003 or 2004, started requesting this strategic risk information of companies. We had about 500 companies come back. By 2010, we had 3,000 companies globally reporting on it. This was almost the new normal—to report on the strategic risk—at which point Government came in and legislated and said, “All companies are going to have to disclose their carbon emissions.” This is a good example of how it can work. You have to see in the same context efforts on supply chain transparency and human rights management. It has been going on for at least as long as I have been working in the industry. I think they have taken it as far as they are going to go. We need to go one step into the regulatory area to ensure the kind of mass compliance and mass thinking about the issue, but, crucially, we need to retain the ability of companies to innovate, be creative and solve these problems themselves.
In terms of your proportionality question, I think the level of legislation proposed is proportional to the risk and to the idea of wanting to bring companies along with us. It is not a binary thing between absolute corporate freedom and unbelievably heavy-handed regulation. We are just one step on the other side of mandatory regulation. That would be my view.
Q363 Sir Andrew Stunell: Could you point to any particular UK-based company that you think is doing it as you would want to see it through the current system or driven by their own values, as the case may be?
Matt Crossman: There are some fantastic examples of companies managing their supply chain risk well. Two names come immediately to mind for me. Marks and Spencer has integrated well into a much wider sustainability strategy, which is about delivering positive benefit to the bottom line. The other one would be Unilever. They have excellent policy structures but also a really strong culture on this.
David Arkless: I hate the idea of full, binding and permanent legislation that never changes. I would love the idea of letting the system settle at the level of the correct proportionality for the issue it is dealing with. In my opinion, having seen Governments around the world, and the difference between the good ones, the highly competitive ones and the others, the way to do that is one simple thing: turning good policy into practice. If you go along that continuum of turning good policy into practice, the best way to deal with corporations is to say, “This might be coming down the line. We’d like you to do this now because we believe this is the correct thing to do with human beings. However, if we find within a period of time that we have not achieved the groundswelling effect on this particular issue, we’ll be back and then something bad is going to happen.”
It is like the old thing in history with all of the great conflicts. Somebody said either, “There will be war,” or “There will not be war.” Those pronouncements achieved very different approaches to the conflicts that happened afterwards. What I say is, make the issue aware to everyone, and say “This Government and you all believe this issue must be resolved. It is a modern human right for this not to happen. We would like you as corporations to prove to us that you are addressing this issue, and that your employees and you are aware of it.” Then say, “If you don’t, this legislation is not finished.” That would be my way of getting the correct proportionality in the system. You will find out where the water stops rising once you have implemented that process.
Q364 Sir Andrew Stunell: Can I go to a different area? You will know that there is an Anti-Slavery Commissioner proposed in the Bill. What do you see as being the role of that person in relation to the business community?
David Arkless: I would see it being very similar to the ambassador role that was created by the US Department of State with the office of trafficking in persons. If you look at that role in the US, it plays an equal balance of awareness and communication through their ranking system. Again I am not the biggest fan of producing global country/corporate rankings; I am more about communicating the issue and then getting people to do the right thing. That particular office interfaces really regularly with large corporate organisations and organisations that believe something should be done about this issue. In fact, it works on joint projects with corporations. That model works pretty well.
The other thing that is important about the creation of a tsar, as I have heard some people talk about it, is that there is no point in being a tsar or a commissioner unless you report to somewhere that can actually do something about the issue that you are concerned with. The creation of another non-government organisation that sits as a commission is pointless. This commissioner or tsar—this is what I would do in a big corporation—has to report to somebody who can make decisions, help with implementation and absolutely govern the implementation process that the tsar or organisation puts in place. The creation of another committee and somebody to look after it—forget it. That is my opinion.
Matt Crossman: The key issue is getting companies to think about this as a strategic risk., If the Anti-Slavery Commissioner does have a role with business, it would be to provide companies that want to make efforts on this agenda with the kind of tools and support they need to do it. It needs to be a very supportive role in terms of providing guidance and a figurehead for the debate. Apart from that, the key issue is: let’s get companies thinking about this as a strategic risk. I am less concerned about the agenda of the Anti-Slavery Commissioner in this particular area.
Q365 Sir Andrew Stunell: To follow that through, do you see legislation as the vital ingredient, or having a person—a tsar or whoever—fronting the implementation of that?
David Arkless: In my 38 years of business I have found that, unless you make someone responsible for something, usually nothing happens. “It’s a great new thing that we have got in the company—but who is responsible again?” Then we get the corporate salute, which is, “He’s responsible,” and nothing happens. I think it is integral. My response is that it must be integrated; the two belong together—absolutely.
Q366 Sir Andrew Stunell: You definitely support having the Anti-Slavery Commissioner; you just want to make sure that that interaction with the corporate world is an appropriate and effective one.
David Arkless: Absolutely.
Q367 Michael Connarty: The Bill in the UK included services. In California it did not include services, so people like McDonald’s were not included in the Californian legislation, as they pointed out to me when I wrote to them about the position in our Bill. Do you think that it should be all companies, including services, or should it be manufacturing products?
David Arkless: All companies were created equal and should be subject to the same governance and opportunity in the market. Therefore, everybody should be in for this, or we should not do it.
Q368 Michael Connarty: Unfortunately Baroness Hanham has gone, but she raised the point that you are working on, David, I believe—small and medium enterprises,. It might be helpful to ask how far down the chain we can go to effect change. Is it too difficult?
David Arkless: It is not too difficult. We have to differentiate though. As Matt and I have both said, there has to be a limit of revenue or of size that we initially put into this Act. You can take this to small to medium-sized enterprises. In Washington state, the one on the other coast—the west coast—we started a new movement called Business to End Slavery and Trafficking, but it was directed at small to medium-sized enterprises. If you are a little Staples somewhere in Seattle, selling envelopes, staplers and whatever—is that why they are called Staples, by the way?—it is really tough to go, “How can I check my supply chain? I belong to this big company and I am a franchise.” For companies that did not hit the threshold of the California Act, we said, “We recommend that you do these things. Sign up for this code, talk to your employees, tell them how to recognise modern day slavery and, if they do, here is a process that we could get into to blow a whistle or help somebody improve a process with these newly immigrated, being abused people from Asia somewhere, that are being used in these restaurants all around Seattle.”
I think that every company can get involved with this, but we need to change the mix once we get below a certain volume and size. Small companies cannot verify a global supply chain; it is just nonsense. But what they can do is say, “We are as interested in this problem as everyone else, and in my local shop or my local McDonald’s I am going to make sure that my employees know exactly what is happening out there and we are going to do something about it.”
Chairman: Thank you very much, Matt and David. Our problem is to get something into the Bill, let alone cover the world. Everything has been really helpful. Thanks a lot.
Examination of Witness
Witness: Dr Alex Balch, Politics Department, University of Liverpool, examined.
Chairman: Welcome to the Joint Committee. Would you identify yourself for the record?
Dr Balch: My name is Dr Alex Balch.
Q369 Mrs Spelman: Dr Balch, you have been listening to the previous evidence so you will probably know what is coming. I am going to ask you the same question we just asked our previous witnesses. Do you see merit in legislating on transparency in supply chains? If you had to recommend only two clauses on supply chains, what would you include?
Dr Balch: I would like to preface my comments by mentioning that I was not sent any questions beforehand, so I have prepared in general.
In terms of transparency in supply chains, I have been working on a project that is looking specifically at applying the UN guiding principles—an EU-funded project.
I was initially very supportive of the transparency in supply chains idea. I researched the California legislation, but I feel it is only really a small part of the solution when it comes to businesses’ responsibility to do something in this area. I do not see a negative from having transparency in supply chains legislation, but I would not like to suggest that it is a solution in whole to the problem.
Q370 Mrs Spelman: Two nos is a yes, isn’t it? Is there merit in creating an agreed voluntary code of practice to support businesses in this area? Does it have to be either that or legislation, or can you have both that and legislation?
Dr Balch: Both, I would think. I have been involved in a few voluntary initiatives to help businesses to act against exploitation. The experience is mixed, because generally when you audit these voluntary initiatives you find there are loopholes for businesses that unfortunately do not comply. The best example I can think of is the Gangmasters Licensing Authority, which came after a voluntary code and found that all the companies that had signed up to the voluntary code required further inspection—re-inspection—because the previous voluntary code was not effective. You can have a voluntary code, but my hunch would be that it would have to be with the threat at least that a non-voluntary code would follow closely behind.
Q371 Fiona Mactaggart: You said that the Californian Act was okay but not sufficient, as I understand it. Tell us about its limitations.
Dr Balch: Everyone was excited in the policy community around trafficking when California made its legislation. I think it was the first legislation of that type. There is also some innovative seizure of assets going on in California, which is worth mentioning. They are good at doing that and hitting the traffickers where it hurts, in their pockets. In terms of the Transparency in Supply Chains Act, it only applies to companies of a rather large size and it only requires them to post something on their websites. In the final analysis, it is a start, but no more.
Q372 Fiona Mactaggart: If we were going to legislate on this issue—as you will be aware, the draft Bill does not include this issue at present—how should we address those limitations in any legislation in the UK?
Dr Balch: I think the previous witnesses were talking about incentivising business. There needs to be a bit of stick as well as carrot, and the GLA is a good example: in certain sectors there are risks; a voluntary code was installed but it was found to be inadequate, so a statutory body was then created with licensing powers and it discovered a large amount of exploitation that had gone unnoticed. There is a very obvious logic that that needs to be extended to other areas. Transparency in supply chains is one part of the solution, but really a stronger regulatory capacity is unavoidable.
Q373 Fiona Mactaggart: So you would think that any Bill that we might recommend would be more effective if we created a power to expand the GLA’s powers into other sectors if the transparency work implied that there were gaps in particular sectors. Is that what you are saying?
Dr Balch: All the different parts of the proposed Bill, and particularly the proposals of the inquiry that preceded the Bill, need to work together. The benefit of transparency in supply chains is really in large corporations which have complex supply chains. It is very useful there, but we know that the vast majority of severe exploitation takes place in very small companies, often working at the absolute limits of the law in every other aspect of their business operation, so they are not necessarily compliant with anything.
Yes, transparency in supply chains might highlight some of the issues in different sectors, but we need some sort of inspection and penalty regime to add stick to the carrot of incentivising businesses.
Q374 Lord Warner: You used a bit of a throwaway line about there having been some interesting confiscation of assets in California. Could you elaborate on that? Does that flow from the legislation or is it an eager beaver person there who is driving that?
Dr Balch: I think it was an eager beaver. I was present at a conference where the special district attorney in California spoke about his particular initiative to seize the assets of traffickers as a policy. We all know that there are powers to seize assets; it is just whether they are used. What they decided to do was to be very proactive in using them, and also very quick in using them, because another problem is the speed with which you seize assets because it is so easy to transfer money. I do not think it was a legislative initiative; it was a policy initiative.
Q375 Lord Warner: Would you point our secretariat in that direction?
Dr Balch: Yes; I can give them a name and contact details.
Q376 Baroness Hanham: I apologise for not being here when you first started. We were talking this morning about the mapping of supply chains and where the responsibility should lie. Do you think the mapping and the control of supply chains can be done only by the large corporations, or should it include the smaller companies further down the supply chain? Should the people holding the purse strings at the top have the full responsibility, or should there be a responsibility on the other companies who are further down? Following on from that, if you just go for the large companies, is it possible for them to audit properly everything that is going on below, when they may have an enormous number of companies feeding into their products?
Dr Balch: There are several challenges to auditing supply chains, which I think most companies that have tried to do it have realised, particularly those that then check that auditing. Next and Marks and Spencer have checked their auditing, and found problems in their supply chains, even though they had an auditing system in place.
On the first question about the responsibility, you cannot leave it to the very top because you will just get the sort of situation you have in the construction sector, which I have looked at previously in terms of immigration policy. You have very large companies with very few employees and with very clean noses. They can point to excellent processes and systems, and in a way they are removed from liability because of those processes and systems. What the research has found is that supply chain practices are evolving very quickly, and evolving beyond the reach of regulators. You have lengthening supply chains but also other complexities such as companies within companies, employment agencies within employment agencies and informal agencies within agencies. All of these have been a response to a regulatory initiative.
The main thing is to remain flexible and to be able to change according to the criminal activities that are taking place. Slavery has always existed; it has just evolved and changed over time. We need to constantly be aware that we are not going to solve the problem in one fell swoop. That is why I think this legislation could be very beneficial if it includes an ability to react to the latest research on supply chains.
Q377 Baroness Hanham: How would you legislate for that? What sort of clause could we put in that would define the fact that this is not just going to be left at the £100 million corporation level but is also a responsibility of the £10,000 turnover or whatever it is? There is a big differential in the cost and in the responsibility level.
Dr Balch: It already is a responsibility. We are talking about a criminal activity which is already prescribed as criminal. It is not really a case of creating a new crime as such; it is a case of just enforcing what rules we already have. If you speak to HMRC and other agencies, they will tell you that we have plenty of rules and laws about good practice; we just do not have the capacity to enforce them. It is about making those small companies aware that they are subject to the same rules as the large companies, and being able to put that into practice. As I said previously, that means increasing the regulatory capacity of the state.
Q378 Fiona Mactaggart: I am interested in the area that you are talking about because it is reflected in the Joseph Rowntree report—the thing about the propensity of informality to make British supply chains much more complex. It sounds to me as though you are saying that, in a way, the problem is not legislative; it is about enforcement. But we know how hard it is to enforce; it is expensive and beyond many police forces’ capacity. It is not a crime that gets reported easily because the victims often don’t even know they are victims.
Our job is to make proposals about legislation. We can add to it proposals about other action. How do you think we are going to do this flexible fleet-footed thing that you are talking about? I am not convinced that anyone knows the recipe.
Dr Balch: We know what we want at the end, but we don’t know how to get there. I think it is a cultural shift in the organisations that are charged with enforcing and regulating. If you think about the UK Border Agency, it is a shift in the culture of disbelief there, when it comes to immigration or immigrants. In the police, there needs to be a shift that includes a priority towards human trafficking and forced labour, and a cultural shift in all the other front-line responders in the sense of being aware of the problem.
There is an awareness-raising point which is obvious, but there is also an organisational culture point. You can have all the awareness raising and all the legislation you like, but, if the organisational culture is not ready to accept that the crime is taking place, you are going to struggle. I do not think you can legislate for that. You need legislation, but you need the leaders in those organisations to come on board. It is about partnerships and bringing organisations together to agree common priorities. The UK Human Trafficking Centre has had some success in doing that over the years. I would encourage organisations like that to take the lead, and to get the leaders of those organisations I mentioned to take responsibility for this particular problem.
Q379 Fiona Mactaggart: Imagine that you are the Human Trafficking Commissioner envisaged by this Bill. What would you do to make this happen in your first year of operation?
Dr Balch: The commissioner needs to have the weight of knowledge and evidence behind him or her to give credibility and authority. It is very important that some sort of research capacity is provided for that allows the commissioner to develop power through knowledge.
The obvious parallel I would think of would be the chief inspector of the UK Border Agency, who is allowed to shadow organisations, front-line responders, on operations to check that they are doing their jobs properly, and report where they are not. It is that sort of level of detail which I would like to see the commissioner being able to achieve—actually being able to shadow operations or even initiate operations in the key organisations, and report how they are, or are not, helping the fight against forced labour.
Q380 Michael Connarty: A lot of your focus, Alex, has been on the UK. Before you came in, we were talking about why we are doing this inquiry into transparency of supply chains. I said that if Wilberforce had abolished slavery in the UK, it would not have changed slavery in the world, so we had to abolish slavery in the world, but you seem to pour cold water on the idea that any transparency Bill will help; similarly, if you just got rid of all the bad practice in the major corporations in the UK—I do not know where you bought your jacket, or even where you buy your food—you would not know whether a product was in fact contaminated by human slavery, so the question is what do we do? But you dismissed that in the first question as not being relevant enough. This Bill is already big. It is not going to welcome changes, and it is not necessarily going to welcome punishment regulation, given the resistance to that from everybody who is basically behind this Bill from the Government’s side. I go back to the first question. Look outwith the UK: how do you effect change by changing the law in this country?
Dr Balch: I think you can try and change the rest of the world through transparency in supply chains. I am not sure how much effect you are going to have without a partnership with those countries. Take for example Bangladesh and the sort of conditions that workers are under there. Can a Transparency in Supply Chains Act turn around the way Bangladeshi workers are treated? As I said at the beginning, it is one part of a solution, but I do not see it as a complete solution. An Anti-Slavery Commissioner could help here by having partnerships with the governance of the supply sources—the source countries where there are problems. This is a diplomatic effort in a sense, because we do not have the power to change employment relations in other countries directly. Our best bet is to provide a good example in this country of how we deal with supply chains and workers, and how we respect human rights. We will obviously expect our companies that operate abroad to also respect human rights abroad, but the best place to start is at home.
Q381 Mrs Spelman: I would tackle your scepticism with a real-life example. In respect of the abuse of child labour in west Africa, an American chocolate manufacturer switched sourcing from west Africa to central America upon learning the risk that her company was exposed to. We do not know what the west African Governments thought about the loss of business, but surely that is evidence that there will be an impact on source countries?
Dr Balch: Absolutely I think there will be an impact; I just do not think we can pretend that we have the power in this legislation to change the global slavery problem. We can make an impact, as you said, but the greatest opportunity is to make an impact in the UK and to provide an example for the rest of the world to follow.
Q382 Mrs Spelman: If you think that a country like ours, and perhaps one or two others, like America and Australia, seeking to eradicate this from their own countries, their own shores and their own companies headquartered in their country supply chains is not going to work really effectively, what do you think about a multilateral organisation like the UN doing something new and different to tackle it? Do you think that is another way of dealing with it?
Dr Balch: The UN has plenty of initiatives—
Mrs Spelman: The guiding principles.
Dr Balch: We have the guiding principles, we have the Palermo protocols and we have the UNODC. We have plenty of examples of the United Nations having an impact, and I absolutely welcome those. My scepticism is not pessimism or negativism; it is purely realism. The UN has done great things, and the Government in the UK have welcomed the guiding principles. That could be a very good source of collaboration with other countries, but we should not forget that in the guiding principles it is not just about business; it is about the partnership with business and the state. It is the state’s responsibility to protect, as well as the business responsibility to respect.
Q383 Baroness Kennedy of Cradley: In your report, you identified gaps in the existing scheme of regulation and enforcement. Can you elaborate on that? What do you think is missing and, therefore, what could be included in the Bill?
Dr Balch: What we have seen and what my research has shown is a sector by sector approach to developing regulation in the UK, which has its benefits and also its disadvantages. We have seen certain sectors that are very well regulated and other sectors that have been left to one side. The gaps are because we have a complex system, where we do not have one over-arching regulator that looks at employment conditions. We have the Health and Safety Executive, which now has a rather diminished inspectorate; we have the Minimum Wage Compliance Unit, which does good work but again has limited resources; we have the GLA, which has a sector-specific remit. The Hampton report in the early 2000s demonstrated this. We have hundreds and hundreds of agencies that inspect businesses, so when they talk about the burden I have some sympathy, because a number of different inspecting regimes are imposed on business. My argument would be that they are not co-ordinated enough, and in some cases not strong enough, to change the conditions for workers.
Q384 Baroness Kennedy of Cradley: If you were starting again, would you come up with one agency and one point of contact that fulfilled all of these functions?
Dr Balch: Yes. There is a good argument for pulling together some of these inspectorates or agencies that inspect the workplace, and giving that inspectorate a set of principles. I have spoken to people in Belgium who have this idea of “decent work” or “dignity at work.” They have a labour inspectorate that has that as one of its criteria. That would seem a fairly straightforward and obvious way to proceed. You would reduce complexity, but not at the expense of resource or capacity; and you would provide some clarity, so that it is not the case that in one sector you can be paid much less and have much worse conditions than in another sector.
Q385 Baroness Doocey: In your report you rely on ILO definitions of forced labour rather than statute or common law. Do you believe that legislation on forced labour needs to change in any way?
Dr Balch: Since section 71 of the Coroners and Justice Act was passed, I do not think so. I think that is a fairly comprehensive definition. The problem is a lack of case law to allow judges to fully appreciate the contours of exploitation, and where exploitation crosses the line. That is a question for lawyers, not for politics lecturers. I believe it is very early days when it comes to that legislation.
It is always surprising when people find out that it was in 2010 that the first law on forced labour was actually put on the books in the UK. Only three or four years after that, we are still learning where exploitation becomes a criminal matter. The ILO is an excellent resource because they have been working on this for nearly 100 years. They incorporate business and unions. They have a fairly open consultative process and they specialise in exactly this topic. It is worth taking some of their knowledge and applying it.
Q386 Baroness Doocey: Could I ask you a more general question? I get the impression—it is just an impression—from your answers so far that you do not believe that the Bill is strong enough, but I am not entirely clear what you think needs to be done to strengthen it. Could you outline what your key things would be?
Chairman: Alex, you wrote something—I cannot remember where—where in a sense you dismissed the Bill and said it did not deal with root causes. In answer to Dee’s question, can you tell us how this Bill would deal with root causes?
Dr Balch: Yes. We know how the Bill has developed, and some of the NGO and think-tank reports that led up to the Bill. They often had a focus on what was happening here—it being a shock that there is slavery in the UK and that we need to do something about it. I did not see enough, from my point of view, of why it is still happening in the UK and what are the reasons why the environment exists that allows that criminal exploitation.
Q387 Chairman: So the answer to that is what, Alex?
Dr Balch: In my view, you need greater connectedness between the different branches of Government. That means including business and immigration regulation in this Bill. For instance, in my opinion there have been opportunities missed with the review of regulation of business. There was a review of regulation of business not long ago, and a great opportunity—I thought—to consider exploitation was missed. Again, with immigration—
Q388 Chairman: We might well have missed that, but we are on this Bill. Can you answer Dee’s question and my question?
Baroness Doocey: What would you add to the Bill?
Dr Balch: I would add a requirement for other legislative processes to include an impact assessment on how these laws would impact on the incidence and prevalence of slavery in the UK.
Q389 Chairman: How would that deal with root causes though, Alex?
Dr Balch: For example, if a piece of legislation was initiated on immigration to try to achieve one set of objectives, it might have unintended consequences in this area, which are perhaps overlooked because there is no requirement to consider what the impact would be on slavery.
Q390 Chairman: I can see that point; it is a really sensible suggestion to have a requirement for an impact statement. But how do we in this Bill deal with what you charge us with not dealing with—the root causes? What are the root causes and how do we deal with them?
Dr Balch: I do not think you can fit everything into a Bill. My impression is that this Bill is trying to consolidate legislation, which is a worthy objective. It also mentions other initiatives such as the trafficking prevention orders, victim protection and transparency in supply chains, although I think it has not actually included legislation on transparency.
I am not saying that this is a bad thing. It is an excellent start. My impression was that secondary legislation would be possible afterwards and that supporting legislation would also be possible afterwards. What we need to do is change the culture, the environment and the context within which slavery can occur. I do not think you achieve that through legislation, but that is not to belittle this Bill, which raises awareness; it simplifies, consolidates and allows for that culture shift to subsequently take place. I do not see that as a criticism of the Bill. I do not think the Bill is attempting that.
Q391 Baroness Butler-Sloss: But you were knocking the Bill. You were criticising it before you came here. Now you are telling us that, as far as it goes, it is okay.
Dr Balch: Yes.
Q392 Baroness Butler-Sloss: But you are also saying that it needs to go further. Tell us in a practical way what should go into the Bill? What you have been telling us is not what could actually be in legislation. Tell us what should be in the legislation.
Dr Balch: I would extend the GLA to the sectors that it is not currently regulating. I would add statutory requirements to support victims of these crimes beyond the 45 days currently allowed. I would put the national referral mechanism on a more statutory footing in order to improve and broaden its scope beyond just those who are identified as victims of trafficking, to include this new modern slavery definition. I would include some legislation on transparency in supply chains. But I would also like to see a large package of non-legislative policies.
Q393 Baroness Butler-Sloss: On the question of what should go in the Bill, does that complete your list?
Dr Balch: No. I think I would include for the commissioner a slightly more defined independence, but also a slightly more defined resource and capacity to challenge, inspect and investigate, to give it more teeth to hold to account the rest of the Government.
Q394 Baroness Hanham: Following on from that, where would you place the commissioner?
Dr Balch: The commissioner probably has to report to the Home Secretary.
Q395 Baroness Hanham: Report or be part of?
Dr Balch: This is a difficult question for someone—
Baroness Hanham: I appreciate it is not easy.
Dr Balch: This probably is not the answer you want, but I think a lot of it will come down to the actual personality who gets the job, because—
Q396 Baroness Hanham: We will not be able to do that with legislation. We have to state where the responsibility is, or to whom the commissioner has responsibility, and, by and large, what he or she has responsibility for.
Dr Balch: For me, the chief power that the commissioner is going to have will be the power to embarrass the Government by demonstrating where things have not gone right. That is why I mentioned research capacity—the ability to develop knowledge. We know that knowledge is lacking in this area. There is very little research. The capacity currently in the Home Office for the trafficking unit is quite small. This reminds me a bit of the situation with immigration policy about 10 years ago: there was no research taking place in the Home Office on immigration. We need to increase the power for the commissioner to develop its own research base, and to challenge and push forward the agenda. It is about agenda setting, it is about research and it is about knowledge.
Q397 Fiona Mactaggart: You say that their job is perhaps to embarrass the Home Office, but one of the things we have been talking about today is companies and fields which are not anything to do with the Home Office. If it is somebody who is part of the Home Office network, are they going to be able to embarrass companies? Are they going to be able to influence BIS, DEFRA or whatever? What is the risk there?
Dr Balch: That is why I mentioned that there needs to be a connection with different branches of Government—business, immigration and so on. We already have that with the interdepartmental ministerial group, but it has now been decided that that is inadequate. Having a combination of different Departments all looking at this in a committee does not necessarily give the clarity of a single individual—the commissioner—which has been called for over many years. It was even in part of the Council of Europe convention that we needed a rapporteur. I think we need to look at international experience. We need to think about the rapporteurs in other countries and how well they have operated.
Q398 Lord Warner: Can I bring us back to the supply chain for a moment? We are wrestling with a Bill that we would like to be able to make stronger and more effective, and we have two months to do it, so we are going to have to concentrate not on what might be marvellous in 20 years’ time, but on how we produce practical amendments to the Bill that are likely to do some good in the near future.
Against that context, let us get back to the supply chain. I take it from your answer about the GLA being extended to other sectors that you would like supply chains to be looked at in terms of a wide range of sectors, not just excluding areas like services, which is the position in California. Within that, one of the points made very strongly by Joseph Rowntree is that the auditing function has to be powerful. If you are going to have some kind of auditing function, it needs to be effective. One of the criticisms that was made there was that confidentiality agreements made the auditing function far less effective because people’s findings did not see the light of day. How would you like to see this Bill amended to try and make some of the stuff that is around in murky corners see the light of day, using this legislation to do that?
Dr Balch: As I understand it, the proposed transparency in supply chains Act of last year or the year before was not exactly the same as the Californian legislation, because it did include services. In a sense there is a ready-made bit of legislation that could be incorporated. I do not understand why it was not in the draft Bill in the first place. As I said, I have my scepticism about whether it is going to solve everything, but it seems a very elementary first step. I do not see any argument for excluding different types of companies from it, and I do not see any reason why the Government should not be able to force disclosure of auditing. I think that could be included. I suppose the business lobby would be resistant, but that is for Parliament to argue out. I do not see why there should be any exclusions and I do not see why there should be anything but full disclosure.
Q399 Michael Connarty: This has been very interesting, Alex. I sit in the Parliamentary Office of Science and Technology. I read a book they referred me to called “The Geek Manifesto,” which said we should have evidence-based policy instead of policy-based evidence. Departments often react to the world as it is, not having time to research the evidence before making legislation. We are trying to do that here, so it has been useful.
You said, “Have the Bill,” but the reality is that we did not get the Bill because the Government did not want the Bill. Therefore we are trying to put something into this Act, and I am sure it was music to Fiona’s ears to hear you talk about secondary legislation capacity, because I think lots of the regulation will have to be done outwith the Bill. We need a couple of clauses to link it to that process.
On transparency, I know you have thought about it, and you said that the Government should be able to compel businesses to report honestly on their supply chains. What you heard earlier, if you were listening to what some of the people from the business world said, was that they see it as a huge energy capacity if we can incentivise and enthuse the business community to do this. I have to say, having done a lot of work before we put that Bill together, that I agree with them. There is a huge capacity in terms of entrepreneurship—
Chairman: Michael, your question?
Michael Connarty: The question is how do we do that? You are saying we should try to put clauses in containing compulsion and, if we don’t get them, tough. Is there something else you can offer that would give us any comfort—that there should be not an exhortation, but an enouragement to report in the Bill? Do you think that would be useless or pointless?
Dr Balch: We can look at previous examples of where we have been able to persuade businesses to be more open and honest about problems in their supply chains—for example, retailers in the supermarket sector. There, we have seen the ability of brand awareness and brand damage to compel the leaders in that industry to commit to, what would seem to some, stricter regulation. Yes, you have an incentive. The incentive to supermarkets was to reduce the risk to their brands. The problem you have is that the brand risk is not as clear in all sectors.
I have been working with the hotel sector. Believe it or not, even though brands are very important in the hotel sector, a problem in one brand-named hotel does not seem to stop people using the other brand-named hotels, or that same brand name in a different city. You have to go sector by sector. We have a sector-by-sector regulatory system, and different risks and different incentives in those sectors. What works in one area will not necessarily work in another.
That is not a very easy answer but it is the reality on the ground. What works for the supermarkets is not necessarily going to work for the major contractors in the construction sector. While we have a sector-by-sector regulatory system, we perhaps need to look at the leadership in those sectors—the peak organisations, the employers’ groups—and bring them on board. It is a challenge and a big task, but I think it is the way forward.
Chairman: Thank you very much, Alex. That was really good.
Oral evidence: [Draft Modern Slavery Bill] 25