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Dr. Howells: I have a great deal of time for Mr. Ian Byatt--his name is not Wyatt--because he has been a good regulator. Is the hon. Gentleman aware that we removed the water clauses from the Bill some time ago?
Mr. Bruce: The Minister knows very well that I am fully aware that the Government removed those clauses, but, despite all their powers, the Government and their spin doctors were incapable of silencing Ian Byatt. I am sure that the Minister would have been pleased if I had not read out the quotation of a long-standing regulator for whom the Minister has just expressed great respect. I hope that he will mark those words, and to make sure that he does so, I shall read them again. Mr. Byatt said:
- I find the bill over-complicated because it is over-prescriptive. Nothing is left to good sense.
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That is as great a condemnation as we have heard of the Bill from any source. Ian Byatt is not playing a party political card; he is simply expressing his experience of being a regulator.
Mr. Deputy Speaker: Order. The amendments refer specifically to fixed penalties.
Mr. Bruce: This sentence will, when I have finished it, directly relate to that matter. All those powers are enforceable by virtue of the fines. The Minister for the Environment stated:
- The Secretary of State for Trade and Industry will be able to require electricity supply companies to generate a proportion of electricity from renewable sources. This will be enforceable by the regulator using his general enforcement powers, including the power to impose monetary penalties.
When trying to persuade companies to fulfil certain criteria by giving them incentives, we have never before backed that policy by having unlimited fines for companies that fail to meet those criteria. That is unreasonable. I understand why, Mr. Deputy Speaker, you jumped to your feet, believing that the powers that I was describing could not be related to fines. That shows how ridiculous it is for the Government to enforce those powers by imposing fines.
Although the Government may sincerely believe that prescription achieves what might be described as socially desirable ends, the evidence would suggest that those ends can be achieved, and have been achieved, without prescription, through the very fact of competition in the utilities.
The amendments are sensible and simply seek to ensure that the Government will be reasonable in imposing the fines, as they have said they will be, and that the fines will be capped. The Minister may want to impose the 10 per cent. cap used in the Competition Act. We tabled several amendments about that in Committee, but when the Bill is on Report, we have to table a different amendment that has not been discussed in Committee. The exact level of the cap can be negotiated, perhaps in the other place.
We need certainty from the Government. Certainty is almost more important than the capping level itself because it will enable people to calculate the additional cost of regulation in working out financing. As my hon. Friend the Member for Poole (Mr. Syms) pointed out, financing is an important issue. The Government might like to give way to the Opposition on this issue. We have all worked hard on the Bill, and we deserve to achieve the certainty for which the industry is asking.
Dr. Howells: I thank hon. Members for their contributions. We have heard interesting statements, but I do not include in that the rather patronising comments of the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), who believes that he is the only person with insight into how business works. He was a tax adviser at one time, and tax advisers no doubt have their part to play in making the wheels of business turn.
The hon. Member for South Dorset (Mr. Bruce) made a thoughtful contribution, as ever. Unlike the hon. Member for Bognor Regis and Littlehampton, he recognises that companies that try to enter the gas and electricity markets understand very well that they must try to comply with licence requirements. If companies do not comply, they will face penalties; if they do comply, penalties will not apply. If they commit a breach, the penalty is limited to that which is reasonable in all the circumstances of the case. Companies can make a challenge through the courts if they believe that the penalty is not reasonable; the courts can quash unreasonable penalties, or substitute lesser penalties.
The picture painted by the hon. Member for Bognor Regis and Littlehampton is one of companies quaking in terror at the thought of what might happen--that is how he sees the relationship between the industry and the Government, but it is not the picture that we see. As he said in Committee, he sometimes acts as the conduit for the views of the more paranoid sections of the Confederation of British Industry and the Institute of Directors--and he revels in that role.
The Government do not believe that the amendment will improve the Bill. As I pointed out in Committee, the most important protection for licensed utilities is that any penalty imposed must be reasonable in all the circumstances of the case. The hon. Gentleman was kind enough to quote me saying that.
Mr. Bruce: Will the Minister give way?
Dr. Howells: Yes--it is always a pleasure to give way to the hon. Gentleman.
Mr. Bruce: The Minister is trying the soft-soap, soft-words approach. Our question is a simple one. In the recently passed Competition Act, the Government decided to set a limit on penalties of 10 per cent. of turnover. Why is it appropriate to have such a limit in that legislation, but not in this Bill?
8.30 pm
Dr. Howells: The simple answer is that the two were entirely different Bills and they will, I hope, be entirely different Acts. As the hon. Gentleman well knows, because he follows these matters attentively, the Competition Act was closely modelled on the European model, which sets a cap of 10 per cent. of turnover on the penalty that can be imposed. However, the Utilities Bill has different requirements.
The authority will have to produce and consult on a statement of policy on the imposition of penalties and it must have regard to that statement when imposing a penalty. The authority will have to take certain steps, including holding public consultation, before finalising the imposition of a penalty. The company concerned will be able to challenge in the courts both the imposition and the amount of any penalty, as well as the payment schedule determined by the authority. The amendment would introduce a further limitation on those powers, by specifically limiting to 5 per cent. of turnover any penalty imposed. As the hon. Member for South Dorset says, that would not even align the maximum penalty with the limit
under the Competition Act, which is set at 10 per cent. of turnover--the figure that appeared in the Opposition's amendment tabled in Committee.In some cases, a penalty of 5 per cent. of turnover or less might be reasonable, when all of the circumstances of the case have been taken into account. However, in cases involving more serious contraventions, such a penalty might not be appropriate. In proposing a maximum penalty of 5 per cent. of turnover, do the Opposition intend to prevent the authority from imposing a penalty that is reasonable in all the circumstances of a case in which a penalty of more than 5 per cent. of turnover would be reasonable? Are they saying that, in no circumstances--even if price fixing and other serious market distortions have resulted in millions of consumers being ripped off--should companies be fined more than 5 per cent. of turnover?
Why do the Conservatives do such things? I know that they loathe the very idea of a regulator having the power to do anything other than slap a company's wrists. Indeed, that was all that regulators could do until we passed the Competition Act. If the hon. Member for Bognor Regis and Littlehampton believes that serious market distortions occur from time to time--cartels are formed, price-fixing arrangements made, complex monopolies operated--surely he accepts that the regulators should have more power to step in. Regulators should be able to warn companies at first, if necessary; then, in cases of serious breach, they should be able to hit the companies extremely hard with a fine that will ensure that such a breach never occurs again.
Mr. Gibb: The Minister has raised two points. First, there is no warning: that is what happened under the regulatory regime that is being replaced. Now, fines can be imposed for past transgressions, with no warning--the fact of their having happened will be sufficient justification, regardless of whether they were deliberate, inadvertent or the result of negligence. Secondly, I should be happy to listen to any proposal for a limit other than 5 per cent. Our amendment in Committee proposed a 10 per cent. limit; we proposed 5 per cent. so that the issue could be debated again on Report. If the Minister has some other figure, we shall listen. The point is, we need a limit--it is the lack of a limit that creates a regulatory risk.
Dr. Howells: The proposed limit was 10 per cent. in Committee, it is 5 per cent. on Report, and it could be 2.5 per cent. tomorrow. The point is that, for the reasons that I have given, the Government will not set a limit. We believe that a limit could impose serious constraint on the effectiveness of the powers of regulators, and that would be at odds with the Government's objective of protecting the interests of consumers. Furthermore, the Government believe that a limit is unnecessary.
The Government consider that the financial penalty provisions give a real measure of protection to consumers and the companies concerned, and that they will provide genuine benefits for consumers and for companies that strive to adhere to their obligations rather than taking short cuts. The amendments would undermine that.
I urge the hon. Member for Bognor Regis and Littlehampton to withdraw the amendment and not to press the other amendment. Should he seek to divide the House, I urge hon. Members to vote against the amendment.
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