Financial incentives should be introduced for whistleblowers if we really want to encourage them
The Public Interest Disclosure Act 1998 was well-intentioned and noble in its aims. It was introduced as a private member’s bill with strong cross-party support plus the support of industry and the professions in light of disasters and scandals such as Piper Alpha, the Clapham rail crash, BCCI and Barings Bank.
Evidence given to regulators and at public enquiries in the late 1980s and 1990s showed that in these cases workers had often known about the risks, but had either failed to speak out or had been ignored. The act aimed to encourage a culture of openness, recognising that prevention is better than cure. Whistleblowing would henceforth occur within the organisation, although protection was also provided for whistleblowing externally. It was thought that workers would be more likely to blow the whistle if they could recover compensation in the event they were dismissed or otherwise prejudiced for speaking out.
It would be unfair to call the act a failure. It was a step forward, even if it was brought into disrepute due, for example, to the loophole that, until recent reform, allowed claims to be brought where the wrongdoing was a private matter and not of any public interest at all.
However, the ambition of the act – to ensure future scandals were avoided by bringing about positive cultural change – has not been achieved. It seems the number of scandals has only increased. In recent years the news has been dominated by reports of serious malpractice in the City and financial services, the NHS, police, media, and even Parliament itself.
In truth, the legal protection for whistleblowers is far from perfect. The recent amendment protecting them from reprisals by colleagues was a step in the right direction, but gaps remain. For example, pending a Supreme Court appeal LLP members and partners are not covered.
The greater problem, however, is that the law merely seeks to protect whistleblowers via the right to claim uncapped compensation for financial losses. Experience has shown that protection alone is not enough.
It was therefore intriguing to read in the new Serious and Organised Crime Strategy that the Ministry of Justice and the Home Office will consider the case for incentivising whistleblowing, “including the provision of financial incentives to support whistleblowing in cases of fraud, bribery and corruption”. This will include examination of lessons that can be learned from the success of qui tam provisions in the US, for example under the False Claims Act, allowing those with knowledge of fraud against the government to bring claims on its behalf and receive a percentage of any damages. Presumably, it will also include consideration of the whistleblower bounty programmes in the US.
There are understandable concerns about some aspects of the US system, not least surrounding the sheer scale of payments in a few well-publicised cases, but offering sensible financial incentives for genuine whistleblowers deserves serious consideration.
Protecting whistleblowers is one thing, but encouraging them is quite another. To do this, financial rewards of one sort or another should be introduced