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These notes refer to the Regulatory Enforcement and Sanctions Bill [HL] as brought from the House of Lords on 29th April 2008 [Bill 103]
REGULATORY ENFORCEMENT AND SANCTIONS BILL [HL]
1. These explanatory notes relate to the Regulatory Enforcement and Sanctions Bill as brought from the House of Lords on 29th April 2008. They have been prepared by the Department for Business, Enterprise, and Regulatory Reform in order to assist the reader in understanding the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. Therefore, where a clause or part of a clause does not seem to require any explanation or comment, none is given.
3. The Regulatory Enforcement and Sanctions Bill will primarily implement the key recommendations contained in the following reports and papers:
Bill 103EN 54/3
4. The Hampton Review set out a vision for a risk-based approach to regulation and included a set of principles for regulatory inspection and enforcement, based on risk and proportionality, as well as a major streamlining of regulatory structures. The Government has committed to implementing the Hampton Review agenda and intends this Bill to be a further element in delivering that agenda. The Government's intention to legislate in this area was heralded in the 2005 Pre-Budget Report.
5. The Bill comprises four key parts: Part 1 provides for the establishment of a statutory corporation known as the Local Better Regulation Office ("LBRO") and makes provision about its objectives and functions; Part 2 makes provision for more consistent and co-ordinated regulatory enforcement by local authorities; Part 3 provides for the introduction of a new expanded framework for regulatory sanctions by enabling Ministers to confer new civil sanctioning powers on regulators in relation to specific offences; and Part 4 provides for the introduction of a duty on regulators not to impose or maintain unnecessary burdens.
6. The Hampton Review found that the diffuse structure of local authority regulatory enforcement increases uncertainty and administrative burdens for business. Unco-ordinated action means that businesses receive unnecessary inspections and conflicting advice, while a lack of communication amongst local authorities results in duplication of effort. Part 1 intends to address these issues by establishing LBRO with the objective of securing that local authorities exercise their relevant functions in a manner that is effective, does not give rise to unnecessary burdens and that complies with the Better Regulation Commission's Principles of Good Regulation. Those principles are that regulatory activities should be carried out in a way which is transparent, accountable, proportionate, and consistent and should be targeted only at cases in which action is needed. Part 2 and Schedule 4 of the Bill promote co-ordination amongst local authorities by making provision regarding communication between local authorities and conflict resolution by LBRO.
7. The Macrory Review made recommendations aimed at ensuring that regulators have access to a flexible set of sanctioning tools that are consistent with the risk-based approach to enforcement outlined in the Hampton Review. Currently, many regulators are heavily reliant on criminal prosecution as the main sanction should industry or individuals fail to comply with regulatory requirements. Professor Macrory's recommendations included that:
8. Part 3 of the Bill responds to the Macrory Review recommendations by enabling Ministers to confer on regulators sanctioning powers as follows:
9. The sanctioning powers may be conferred by Ministers in respect of particular criminal offences on specified regulators or those who enforce offences contained in any enactment listed in Schedule 6 and those who enforce offences in secondary legislation made under enactments listed in Schedule 7. The Bill sets out some minimum requirements for implementation of the new sanctions.
10. Part 4 creates a duty that requires regulators to review their functions, not to impose unnecessary burdens, and unless disproportionate or impracticable, to remove burdens that are found to be unnecessary. Regulators that are subject to the duty must report on progress annually. The duty applies to five regulators listed in clause 73. Ministers may apply the duty to other regulators by order.
11. Part 5 of the Bill contains supplemental and general provisions.
12. The Bill extends to England and Wales, Scotland and Northern Ireland.
TERRITORIAL APPLICATION: WALES
13. All Parts of the Bill apply in Wales in respect of both reserved and devolved matters.
14. Part 1 gives powers to the Welsh Ministers in areas where they have functions that are broadly comparable to those granted to UK Ministers with regard to LBRO's operations. Any extension of LBRO's scope, by adding enactments to Schedule 3 or adding matters to clause 4(3), will require the consent of the Welsh Ministers if the extension relates to local authorities in Wales in respect of a Welsh ministerial matter (clause 4(6) and (7)). Clause 7 ensures that, where LBRO gives directions to a local authority in Wales with regard to Welsh ministerial matters, it will need to have the consent of the Welsh Ministers. Under clause 10, LBRO may give advice or make proposals to Welsh Ministers regarding the way in which local authorities in Wales exercise their regulatory functions in relation to any Welsh ministerial matter. Clause 11(1) (b) allows LBRO to issue a list of enforcement priorities for Welsh local authorities subject to approval by the Welsh Ministers. Clause 16 of the Bill provides that Welsh Ministers may give LBRO guidance and directions as to the exercise of its functions in relation to any matter in respect of which the Welsh Ministers exercise functions. Any orders made by the Secretary of State under clauses 28 and 29 are subject to the consent of the Welsh Ministers. Schedule 1 requires the Secretary of State to consult the Welsh Ministers before making LBRO board appointments; it also allows the Welsh Ministers to make grants to LBRO of such amounts as they think fit.
15. Under Part 3, clause 36 provides that the powers given to Ministers of the Crown in the Bill may also be used by the Welsh Ministers where the provision in question relates to a Welsh Ministerial matter. Under clause 57, Ministers of the Crown must consult with Welsh Ministers before making an order under the Bill that will affect the sanctioning of an offence that applies in or relates to Wales. They must obtain their consent before making an order which relates to a Welsh Ministerial matter.
16. Under Part 4, clause 73 provides that, where the regulatory functions included in subsection (2) are exercisable in Wales, they shall not include Welsh Ministerial matters; and powers given to Ministers of the Crown in this Part can also be used by Welsh Ministers for regulatory functions which relate to a Welsh Ministerial matter.
TERRITORIAL APPLICATION: SCOTLAND
17. LBRO's functions under Part 1 of the Bill do not apply in Scotland. Parts 2 to 4 apply in Scotland but only in respect of reserved matters.
18. Because the Sewel Convention provides that Westminster will not normally legislate with regard to devolved maters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought.
TERRITORIAL APPLICATION: NORTHERN IRELAND
19. LBRO's functions under Part 1 of the Bill do not apply in Northern Ireland. Parts 2 to 4 apply in Northern Ireland but not in respect of transferred matters.
PART 1: LOCAL BETTER REGULATION OFFICE
Establishment of LBRO
Clause 1: LBRO
20. Clause 1 establishes the corporate body to be known as the Local Better Regulation Office (LBRO).
21. Subsection (3) gives effect to Schedule 1, which makes further provision about LBRO's constitution as well as other matters relating to its proceedings, accounts etc.
Clause 2: Dissolution of the LBRO company
22. There is a non-departmental public body named the Local Better Regulation Office (the "LBRO company"), constituted as a private company limited by guarantee. When Part 1 comes into force, clause 2 will effect the dissolution of the LBRO company, and the transfer of the functions, staff and property of the LBRO company to a new statutory corporation. Subsection (3) gives effect to Schedule 2, which provides for the automatic transfer of staff, property, rights, and liabilities from the LBRO company to LBRO. The transfers of property and staff take place immediately before the dissolution of the LBRO company.
23. Paragraphs 1 and 2 of Schedule 2 provides that the transfer of staff, property, rights and liabilities from the LBRO company to LBRO should be treated as if it were a transfer of an undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply. Paragraphs 4 to 6 ensure continuity, so that things done by the LBRO company immediately before it is dissolved have effect as if done by LBRO. For example, if the LBRO company were to initiate a consultation with persons who are affected by a particular type of trading standards regulations with a view to improving the effectiveness of enforcement, the consultation would be deemed to have satisfied the requirements of clause 6(4), which requires LBRO to consult before giving guidance to local authorities.
Clause 3: "Local Authority"
24. Clause 3 defines "local authority" for the purposes of Part 1 of the Bill.
Clause 4: "Relevant function"
25. Clause 4 defines "relevant function" for the purposes of Part 1 of the Bill by reference to the list of enactments at Schedule 3, the instruments made under those enactments, and the enactments made under section 2(2) of the European Communities Act 1972 that relate to the matters listed in subsection (3), being:
26. Subsection (4) enables the Secretary of State to amend the list of enactments in Schedule 3 and the list of matters in subsection (3), subject to affirmative resolution procedure in Parliament (see clause 20). Under subsection (6), where such amendments include matters which are Welsh ministerial matters, this will be subject to the consent of the Welsh Ministers.
27. Under subsection (7), the Secretary of State may, by order, determine whether an enactment made under section 2(2) of the European Communities Act 1972 is made with respect to any of the matters listed in subsection (3). Under subsection (8) the Welsh Ministers must consent to any order made under subsection (7).
General functions of LBRO
Clause 5: Objective relating to general functions
28. Clause 5 sets out LBRO's objective. This is that LBRO must, when carrying out its general functions under clauses 6 to 10, seek to secure that local authorities exercise their relevant functions effectively, in a way that does not give rise to unnecessary burdens and in a way which conforms to the principles set out in subsection (2). These principles are the Better Regulation Commission's Principles of Good Regulation.
Clause 6: Guidance to local authorities
29. Under clause 6, LBRO has the function of giving guidance to local authorities as to how they should exercise their relevant functions. Guidance issued under clause 6 may be given to one or more local authorities and may relate to one or more relevant functions. This means that LBRO could, for example, give guidance to a single local authority about how often it should be carrying out inspections of premises of a certain type, or more general guidance relevant to all authorities on how to enforce specific pieces of legislation, or in respect of areas of regulation.
30. LBRO may also issue guidance relating to the way in which a local authority exercises its functions in a particular case. This means that LBRO could, for example, issue guidance to a local authority about the way in which it is enforcing trading standards rules in respect of a particular business. Local authorities are required to have regard to guidance issued by LBRO under this clause. Under subsection (6), LBRO may vary or revoke any guidance issued under this clause by issuing further guidance under this clause.
31. Before giving guidance, LBRO must consult: those persons whose activities are regulated by the exercise of the function, or persons representative of such persons (businesses and trade associations for example); local authorities in England and Wales, or such persons representative of local authorities in England and Wales (for example, the LGA and LACORS). LBRO must also consult any other persons it considers appropriate. These are likely to include businesses and other bodies that are subject to regulation, any relevant regulators, and relevant representative bodies such as the Trading Standards Institute or the Chartered Institute of Environmental Health.
Clause 7: Guidance to local authorities: enforcement
32. Clause 7 allows LBRO to give directions to a local authority to comply with any guidance that has been issued by it under clause 6, or guidance issued by another body (such as a national regulator), which relates to the exercise of a relevant function.
33. Before issuing a direction under clause 7, LBRO must consult the local authorities to whom the direction is being given; any relevant regulator; and any other persons that LBRO considers appropriate. Subsection (6) defines a relevant regulator as 'a person (other than a local authority in England and Wales) with regulatory functions which relate to the matter to which the direction relates'.
34. Subsection (2) requires LBRO to obtain the consent of the Secretary of State before issuing any direction under this clause. Any such direction to one or more local authorities in Wales in relation to a Welsh ministerial function is subject to the consent of the Welsh Ministers. Where LBRO issues a direction to two or more local authorities in England and Wales, consent by the Secretary of State or Welsh Ministers must be made by order, subject to the negative resolution procedure (see clause 20(2)).
35. Subsection (7) requires LBRO to publish any directions that it issues under this clause. Under subsection (8) LBRO may vary or revoke any guidance issued under this clause by issuing further guidance under this clause.
Clause 8: Financial support and assistance to local authorities
36. Clause 8 allows LBRO to provide financial support to local authorities in relation to the exercise of their relevant functions and to any other person for the purpose of assisting local authorities in the exercise of their relevant functions. It is expected that LBRO will use this function to support and promote best practice by local authority regulatory services.
Clause 9: Advice to Ministers of the Crown
37. Under subsection (1) LBRO can provide advice or make proposals to a Minister of the Crown in respect of the following matters: the way that local authorities exercise their relevant functions; the effectiveness of legislation or proposed legislation relating to the exercise of those functions; whether it would be appropriate for any other regulatory functions to be exercised by local authorities; and any other matter that relates to the way in which local authorities exercise their relevant functions. If a Minister requests advice or proposals on these matters from LBRO, then LBRO is obliged to provide such advice or make such proposals.
Clause 10: Advice to Welsh Ministers
38. Clause 10 confers an equivalent power and equivalent requirements on LBRO to those in clause 9 with regard to advising Welsh Ministers in relation to Welsh ministerial matters.
Function relating to enforcement priorities
Clause 11: Enforcement priorities
39. Subsections (1) and (2) require LBRO to prepare and publish a list specifying the matters in relation to which local authorities in England or Wales should give priority when allocating resources. In essence, LBRO is required to review and revise the list of national enforcement priorities for local authority regulatory services published in the Rogers Review of Local Authority Enforcement Priorities in March 2007. Examples of the matters which LBRO might include in its list of priorities might be: (i) air quality and the regulation of pollution from factories and homes; (ii) alcohol, entertainment and enforcement of late night licensing; and (iii) trade description, trade marking and doorstep selling. Local authorities in England or Wales are required to have regard to the list of priorities when deciding what level of resources to allocate to which relevant function.
40. Subsections (3) and (4) require that LBRO should consult such persons as it considers appropriate before publishing the list and that it should publish details of any representations made to it as a result of consultation undertaken prior to publishing the list.
41. Subsection (5) requires LBRO to secure the consent of the Secretary of State before publishing a list of those matters to which local authorities in England should give priority. Subsection (6) requires LBRO to consult the Secretary of State and secure the consent of the Welsh Ministers before publishing a list of those matters to which local authorities in Wales should give priority.
42. Under subsection (7), LBRO must review the list published under this clause from time to time, or if requested to do so by the Secretary of State, or in the case of a list specifying matters to which Welsh local authorities should give priority, if requested to do so by Welsh Ministers.
Matters relating to the exercise of LBRO's functions
Clause 12: Relationship with other regulators
43. Clause 12 requires LBRO and five named regulators to enter into memoranda of understanding with each other as a basis for co-operation and co-ordinating their work together. Subsection (2) lists the regulators with whom LBRO must enter into a memorandum of understanding, namely: the Environment Agency, the Food Standards Agency, the Gambling Commission, the Health and Safety Executive, and the Office of Fair Trading. The Government considers it particularly important that LBRO enter into memoranda of understanding with these five regulators as they all have functions that overlap with areas in which LBRO has functions.
Clause 13: Duty not to impose burdens etc
44. Subsection (1) requires LBRO to secure that the exercise of its functions does not impose burdens, which are unnecessary or maintain burdens that have become unnecessary. Subsection (2) specifies that unnecessary burdens need not be removed where to do so would be impracticable or disproportionate.
45. Subsection (3) requires LBRO to secure that it exercises its functions in a way that is transparent, accountable, proportionate, and consistent, and that it targets its activities only at cases where action is needed. These are the Better Regulation Commission's Principles of Good Regulation.
Clause 14: Ancillary powers
46. Clause 14 confers on LBRO the power to do anything that it thinks necessary or expedient for the purpose of, or in connection with, the exercise of its functions.
Ministerial powers in relation to LBRO
Clause 15: Guidance or directions by the Secretary of State
47. Subsection (1) confers on the Secretary of State the power to give LBRO guidance or directions as to the exercise of its functions. Subsection (4) requires LBRO to have regard to the guidance and to comply with any directions made under this clause.
48. Before giving guidance or directions, the Secretary of State must consult LBRO and such other persons as are likely to be affected by the guidance or directions, or persons representative of such persons. Guidance or directions must be published and a copy laid before Parliament.
49. Subsection (7) prohibits the Secretary of State from issuing a direction to LBRO requiring it to direct two or more local authorities to comply with guidance it has given under clause 6 or guidance issued by another national body (such as a national regulator).
Clause 16: Guidance or directions by Welsh Ministers
50. Clause 16 creates an equivalent power to that set out in clause 15 for Welsh Ministers in relation to Welsh ministerial matters. Under subsection (3), a copy of the guidance or directions must be laid before the National Assembly for Wales.
Supplementary and general
Clause 17: Review of LBRO
51. Clause 17 requires the Secretary of State to review LBRO's discharge of its functions as soon as is practicable after the end of the period of three years beginning on the day on which this clause enters into force.
52. Subsection (3) requires that the review consider whether LBRO is discharging its functions effectively and efficiently and the extent to which, in discharging its functions in clauses 6 to 10, it has achieved the objective in clause 5.
53. The Secretary of State must, in conducting a review under this clause, consult with the Welsh Ministers and such other persons as he considers to be appropriate.
54. Under subsection (5), the Secretary of State must publish the results of any review carried out under this section. Under subsection (6) the Secretary of State must lay a copy of any review carried out under this clause before Parliament and the National Assembly for Wales.
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