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UK Bribery Act: Alive, but perhaps not kicking

 

On Wednesday the Government released guidance notes for the Bribery Act. This is terrific news.

We now have a Bribery Act and it will be coming into force on July 1. It is the first update to the UK’s anti-bribery legislation for over 100 years. We at the Global Poverty Project welcome the government’s announcement and we thank you for campaigning with us to have the guidance notes released.

In our campaign to have the guidance notes published over 300 of you sent emails to the Justice Secretary and No 10. They have listened.

Despite this positive outcome we nevertheless hold grave misgivings regarding the guidance notes.

According to the Justice Secretary the reason for the delay was due to the Evening Standard stirring him into action. As a result of this last minute lobbying from business groups, the guidance notes go far beyond a simple watering down of the Act. In fact the guidelines undermine both the spirit and intent of the Act which, after all, was originally passed under an all party consensus in November last year.

So here’s the result.

Originally the Act introduced two new offences. First, it became illegal to bribe a foreign public official. Second, a company would be guilty of bribery where it failed to prevent bribery occurring on its behalf.

Both of these crimes have now been completely undermined by the guidance notes. They open a huge loophole that allows companies to use subsidiaries to pay bribes to foreign public officials.

In addition, the guidance also exempts foreign companies listed on the London Stock Exchange from the remit of the Act. As long as they ‘carry on their business’ elsewhere, they won’t be covered by the Bribery Act. This is in direct contradiction to the Act.

According to Ken Clarke, ‘without changing the substance of the act’ the new guidelines represent a common-sense approach to tackling bribery. That’s the copout. He hasn’t had to change the substance to undermine and change the intended meaning of the Act.

Indeed, we now have a situation where the government’s guidance notes – their view of what the Act means in practice – contravenes a plain reading of the Act. It’s a capitulation to business interests and their intense lobbying campaign. It’s no surprise then to see the Confederation of Business Industry, the self-declared ‘voice of business’, welcome this ‘much-improved’ guidance.

Lobbying from vested interests and business groups has now undermined an Act that would have placed the UK as a leader in the global fight against corruption.

Lobbying from vested interests and business groups has undermined the democratic process. Just last year the Act was passed with a cross-party consensus. And more than that, the Act was passed just before the election in April. That’s right – moments before the parties were about to begin competing they came together recognising the need for a strong, broadly focused Act to fight corruption and defend British businesses that want to operate to a fair, ethical standard.

And it was passed following an extensive consultation with the business sector to begin with.

It’s no surprise to see the response from our friends at Transparency International and Global Witness. They both consider the Government’s guidance to be a white flag to last-minute lobbying - the result of which has opened up numerous loopholes in the Act.

Neither of them mince their words.

According to the Executive Director of Transparency International Chandrashekhar Krishnan the guidance notes are deplorable reading more ‘like a guide on how to evade the act’.

Global Witness is equally enraged considering the guidance notes to be a reprehensible cave in by the Government.

But it’s not all over yet.

Fortunately, Ken Clarke isn’t responsible for enforcing the Act.

In fact that role falls to the Serious Fraud Office (SFO). The SFO is an independent government department responsible for fighting major fraud and corruption in the financial system. In other words, they’re responsible for enforcing the Act against the companies that have been courting Ken Clarke.

Led by their Director Richard Alderman, they take a different view to the Ministry of Justice on the Bribery Act. They see it the way it should be seen.

According to Richard Alderman the SFO isn’t concerned with an ‘over-technical’ interpretation of the new law. Rather, the SFO views itself as having a wide jurisdiction to enforce the Act and ensure that ethical UK businesses are not disadvantaged by unscrupulous competitors.

And that’s what this is about.

Ultimately, we at the Global Poverty Project want to see UK businesses succeed on the basis of their high ethical standards. We recognise that business has a crucial role to play in the fight against corruption and we want our businesses to be world leaders in this. Corruption perpetuates and exacerbates poverty. It is a cancer and it requires all of us – individuals, governments and businesses – working together to combat it and end extreme poverty.
 

Bribery Act - Just days away?

 

Over the weekend the Telegraph reported that the Bribery Act’s guidance notes are just days away from being released. Under pressure from the US government and the Organisation for Economic Co-operation and Development the government is now expected to publish the guidance notes by the end of this week.

Whilst we’re happy to finally hear that the guidance notes are to be published, the government’s delay has been highly worrying. Passed under an all party consensus under Labour and receiving Royal Assent in April last year, the Bribery Act is long overdue.

As we’ve blogged, the Act has come under significant lobbying and criticism from the City of London, business groups, the London Stock Exchange and, not surprisingly the multinational chairman’s group whose members, according to the Guardian include BP, Shell, Diageo, Unilever and Vodafone. Indeed, John Cridland, the director-general of the Confederation of Business Industry, or as his biography describes himself, ‘the voice of business’ has argued that the Act is ‘not fit for purpose’.

What about the voice of those who suffer the cost and consequences of bribery?

Let’s not kid ourselves, bribery is real, serious and disastrous. It is fair that the government hears all sides concerned but it is of vital importance that all voices in the consultation period are heard.

That is what we, with you, have endeavoured to do. It is our goal to give a voice to those who believe that bribery, in all its forms, should be stamped out. It’s our government, and we deserve a say in how it operates and who it listens to.

And that is what the Bribery Act campaign is about. It’s us, ordinary everyday people, joining together to take a stand- to hold our leaders to account and to demand a better standard of accountable, ethical, governance. We don’t tolerate bribery in our personal lives so why should the government allow our businesses to operate in such a way?

With the Bribery Act, the Government has an opportunity to become a leader in the global effort against corruption. It’s an opportunity it shouldn’t waste.

That’s why we at the Global Poverty Project, along with our friends at Transparency International believe that the guidance notes, which form the basis of the Bribery Act, should be released without amendment and that the Act should be implemented as soon as possible.

That’s why over the past few months we’ve written blog articles, sent out numerous email campaigns, and worked closely with Transparency International in keeping a close watch on the government.

And now, we’re about to find out.

We will continue to keep you informed and updated as to the content of the guidance notes. We expect that with the release of the guidance notes the Government will demonstrate with action, and not words, its commitment to combating bribery and the corrosive effect it has on society, business and most importantly those who suffer its’ effects the most – the poor.

 

UK: Live Below the Line - Why 1 pound?

 

As our Live Below the Line campaign gains momentum and groups at schools, workplaces, universities and community groups around the country sign up to take the challenge – the Live Below the Line team wanted to explore the reason behind the £1 a day Line we’ve set for the challenge this May.

Live Below the Line is a challenge designed to provide people across the UK with a small insight into the challenges faced by the 1.4 billion people in our world trapped in the cycle of extreme poverty, and to raise funds for crucial anti-poverty initiatives creating change for those who need it most.

The challenge is set at £1 a day, because this is the current UK purchasing power equivalent of the World Bank’s International Extreme Poverty Line – the US$1.25 on which the world’s poorest people survive on every day – for all their food, health, transport, education and general living costs.

As Brits we could never begin to understand the lack of opportunity and constraint in living on this tiny amount, but by just trying to feed ourselves with the same amount, we can start to get a small understanding of the lack of choice and opportunity available to those trapped in the cycle of extreme poverty.

So – how do we figure out what the UK equivalent of the International US$1.25 a day figure is?

There are a few steps involved:

1. Understanding how the World Bank arrives at the US$1.25 a day figure.

The International Extreme Poverty Line was last set by the World Bank in 2005. They came up with the number by finding the purchasing power adjusted average national poverty line of the world’s 10 – 20 poorest countries.

That is, they created the line by analysing of what it means to live in poverty in the poorest nations of our world (as opposed to what it means to live in poverty across all nations).

International Extreme Poverty Line = Average of national poverty lines in world’s poorest nations.

The national poverty lines of the poorest countries are typically set using some version of the ‘cost of basic needs’ method. This generally involves:

  • Setting a ‘Food Poverty Line’ - established by pricing a food bundle that provides a minimum calorie intake required to survive,
  • Adding an allowance for non-food spending (typically obtained from data on the non-food spending of people near the food poverty line),
  • Then setting an ‘absolute’ Poverty Line – determined using the minimum value of consumption needed to be deemed ‘not poor’ in the world’s poorest countries.

National Poverty Lines = Cost of minimum calorie intake + equivalent non-food allowance

These National Poverty Lines try to establish a level of relative deprivation that defines what it means to be poor in the world’s poorest countries. The World Ban then averages and standardises these National Poverty Lines – using a method called ‘Purchasing Power Parity’ (PPP).

This is a method used to compare the value of products across countries, by taking into account the difference in domestic prices for the same goods. That is - how much of a country’s currency is needed in that country to buy what $1 would buy in the United States. Using this method, the World Bank was able to set an international Extreme Poverty Line taking into account the comparative welfare of the world’s poor in ‘real terms’, rather than exchange rate terms, which wouldn’t reflect the different cost of basic goods in relevant countries.

International figure = National figure, adjusted to reflect comparative cost of goods (PPP)

To learn more about Purchasing Power Parity and why it’s the best measure for comparative cost of living, see this World Bank document. Or, if you’d like to find out more about how the World Bank arrives at their US$1.25 a day figure, read this World Bank document, or the full report here.

2. Translating the international figure for the UK context.

To figure out the UK equivalent of this figure, the first thing we need to do is translate it for the UK context.

Using the same method as the World Bank used to translate its domestic poverty figures to an International Extreme Poverty Line, we use Purchasing Power Parity to convert the International Extreme Poverty Line back to a domestic line.

UK equivalent = US$1.25 x Purchasing Power Parity for UK

World Bank figures tell us that in 2005 (When the World Bank’s International Extreme Poverty Line was set), for every US$1 spent, Brits needed to spend £0.65GBP to buy the equivalent things. This means that the UK equivalent of the US$1.25 figure is £0.8125GBP.

3. Factoring in inflation since this figure was set

As the World Bank’s figure was set in 2005, we need to bring it up to current figures, accounting for inflation and changes in the value of goods – such as food.

Using Bank of England figures, we can see that since 2005 the price of goods has increased by 16.5% to 2010 (when we last got updated figures), which means we need 16.5% more money to buy the same things as we could buy for £0.8125GBP in 2005 – or GBP£0.9465.

Current figure = 2005 World Bank figure x Inflation

Therefore the UK equivalent of the International Extreme Poverty Line of US$1.25 is 95p. Allowing for inflation in 2011 (which is estimated at 4%) and rounding up, we're calling it £1. This means that someone living in extreme poverty survives on the equivalent of a about £1 in the UK.

Bribery Act Update - Facilitation Payments

 

Recently The Telegraph reported that the government has bowed to business pressure and the interests from the City of London in weakening the Bribery Act. According to a ‘leading lawyer’ interviewed by the Telegraph who has seen the guidance a ‘lot of what is in there will be welcomed by business’.

This is troubling.

The new guidance being prepared allows companies to avoid prosecution for some ’facilitation payments’.

So what is a facilitation payment and why should we care?
A facilitation payment is a payment made to an official to perform a function they would normally carry out as part of their job. It’s ‘grease’ money that speeds up a bureaucrat’s decision.

Examples of facilitation payments include the following:

  • Granting a permit, licence or other official document that qualifies a person to do business
  • Processing government papers such as a visa or work permit
  • Providing police protection or mail collection or delivery

It might seem like it’s not that serious - that facilitation payments are necessary to ‘get the job done’. But they are a real problem.

Indeed the OECD considers facilitation payments to have a ‘corrosive’ effect on sustainable economic development and the rule of law recommended that Member countries, including the UK should review their ‘policies and approach’ in order to effectively combat the phenomenon.

Currently, business groups argue that it is impossible to do business without making facilitation payments. Yet, facilitation payments are already illegal under current UK laws so the Act does not create a new bribery offence.

At the very least, it’s expected that the guidance notes will acknowledge that these payments are a problem that cannot be eradicated overnight.

But that can’t be used as an excuse for inaction. Already, a large majority of the 38 countries that are party to the OECD Convention ban facilitation payments, and those that legally ‘permit’ them usually only do so in specific or exceptional circumstances.

Furthermore, because they’re illegal in many countries, many companies already outlaw them entirely.

Indeed, it’s not just NGO’s and development organisations that are calling for the full implementation of the Bribery Act as originally passed. Investor groups recognise the benefits that the implementation of the Bribery Act provide.

The International Corporate Governance Network is arguing that any dilution of the act would be ‘bad’ for Britain’s reputation. Representing institutional investors across 50 countries with a total wealth portfolio of $12 trillion dollars - or more than twice the size of China’s economy - ICGN argued that it was in the interest of global investors and UK industry ‘that there is a clear and enforceable anti-bribery law in the UK’.
It’s time that the government becomes serious in its commitment to combating corruption.

Appointed last June, Ken Clarke’s role is to be the UK’s international anti-corruption champion. When they announced the position No 10 declared that it demonstrated their commitment to ‘transparency and accountability’.

Ken Clarke, went so far as to describe his role as sending out:

‘… a clear message that the UK coalition government will not tolerate bribery or corruption and that we will work together to stamp out these practices across the board.’

It’s time for the government to start listening to it’s own ‘message’. Corruption is a serious problem and watering down the Bribery Act will not curb it’s corrosive effect on those who already suffer the most – the poor.

To be kept up to date on the latest on the Bribery Act and other corruption issues, join our Justice campaign below.

Live Below the Line - could you?

 

Join thousands of others living below the line this May.

If you're in Australia, signup here, or in the US, here.

Posted by Guy Kirkpatrick in What Can I Do? for column GPP - United Kingdom on Mar 7th 2011, 07:46