Oral evidence: Draft Modern Slavery Bill, HC [1019], Thursday 6 February 2014

Oral evidence, 6 February 2014.

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.

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.

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.

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.

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.

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.

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.

Lord Warner

Would you point our secretariat in that direction?

Dr Balch

Yes; I can give them a name and contact details.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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—

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.

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.

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.

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.

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.

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.

Baroness Hanham

Following on from that, where would you place the commissioner?

Dr Balch

The commissioner probably has to report to the Home Secretary.

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—

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.

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.

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.

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