The government must restore balance to the Serious Fraud Office’s funding if it is to continue to command public confidence, writes Stephen Timms MP
The Serious Fraud Office began work in 1988. It has a vital task, and is doing a good job. But the way it is funded needs reform.
The SFO is unique amongst British law enforcement agencies. A string of failed City of London fraud cases in the 1970s and 80s badly undermined public confidence, so the fraud trials committee was set up under the chairmanship of Lord Roskill. At the conclusion of its work in 1985, he proposed a new body which would both investigate and prosecute serious fraud cases. The SFO was set up on that basis, and the model helps make the United Kingdom one of only four nations recognised as ‘active enforcers’ of the Organisation for Economic Cooperation’s anti-bribery convention.
In the four years leading up to 2015-16, the SFO had a case conviction rate of 81 per cent. Since then, it has achieved the first individual prosecutions for LIBOR rigging, and the landmark deferred prosecution agreement with Rolls Royce. That resulted in a £671m fine, equivalent to the company’s entire annual operating profits. It is clearly making an impact.
However, it has its detractors. Theresa May, as home secretary, tried twice to bring it under the control of the National Crime Agency she was setting up. Fortunately, she did not succeed. But care needs to be taken to ensure that it is continuing to do the best possible job.
SFO funding comprises ‘core costs’ and ‘blockbuster’ funding. The latter is allocated on a case-by-case basis, when a case is likely to cost more than five per cent of the core annual SFO budget – that is, more than £1.5 million. The SFO has to apply to the Treasury for blockbuster funding. The basis on which applications are approved or denied is not clear.
Over time, while the SFO’s total budget has not changed much, funding has shifted away from ‘core’ and towards ‘blockbuster’. In 2008, core funding was £52m. In 2015-16 it was only £33.8m. In the last three complete financial years, blockbuster funding has been £24m, £24.5m, and £28m respectively.
This means a large proportion of SFO staff are temporary, brought in for a particular case and laid off when the case is over. In March 2016, 106 of the 510 staff were agency staff; another 35 were on fixed-term contracts. Is this a good way to run an organisation like the SFO?
Her Majesty’s Crown Prosecution Service thinks not. Their 2016 report says: ‘The blockbuster funding model is not representing value for money and it prevents the SFO building future capability and capacity … Temporary and contract staff are often more expensive than permanent staff and managing surge capacity is a constant drain on Human Resources.’
Expertise is lost when cases conclude, and managing such instability has other costs. The SFO is the only one of the five law officer’s departments with fewer than 50 per cent of women employees. It has less than half the proportion of disabled people working for it than the Civil Service as a whole.
Lack of transparency is also a growing problem. Because the SFO has to ask the Treasury for additional funding on a case-by-case basis, through an opaque process, it is impossible to show that decisions about which cases to prosecute are being made independently of politicians. Making core funding a larger proportion of the SFO budget would help.
The SFO model has important strengths for tackling serious fraud. But they are being undermined by overreliance on case-by-case funding decisions from the Treasury. Balance needs to be restored, so that core funding covers again an adequate proportion of its costs.
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Stephen Timms is member of parliament for East Ham and chair of the parliamentary Labour party’s backbench work and pensions committee. He tweets @StephenCTimms
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Photo: SFO