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Part 2 establishes a statutory framework to deliver increased certainty and consistency of treatment for businesses that operate across local authority boundaries. By granting these businesses the right to refer a primary authority to inform how that business should be regulated—that is particularly relevant to businesses that operate across a number of local authority areas—part 3 will give regulators access to a suite of more flexible and proportionate civil sanctions to promote better compliance with relevant regulations. That measure has been welcomed by many leading business organisations. Part 4 will bring increased accountability and effectiveness to the way in which regulators work in practice. It is not enough simply to count the number of regulations on the statute book: the way in which regulation works in practice is extremely important for this agenda, and the focus will be on the removal of unnecessary burdens.
The measures will better protect the public, boost business confidence and bring increased clarity and consistency to the work of local authorities and national regulators. Together, they will help build a more open, simpler and coherent regulatory enforcement system which is transparent, professional, and proportionate; which does not criminalise inadvertent or minor breaches of regulatory requirements; and which does what my hon. Friend the Member for Stafford (Mr. Kidney) said, and tackles rogue traders more effectively.
May I set out in a little more detail what the measures do? Part 1 establishes the LBRO. Local authority professionals play a critical role in the enforcement of UK regulation, and those services are rightly proud of the support and advice that they provide to help businesses comply with the law. For example, Cambridgeshire trading standards has built an award-winning partnership with local businesses that continues dramatically to reduce the sale of age-restricted goods such as alcohol to children. Local authority enforcement officers operate within a complex system, with hundreds of local authorities interpreting and enforcing regulations set by Government Departments and regulators.
Part 1 will create a new statutory public corporation—the local better regulation office—to work with all parts of the system to help local authorities carry out their regulatory functions effectively and in line with better regulation principles. We have already established the LBRO as a company, and the Bill will give it statutory form, with the powers and duties that it needs to take its work forward. That includes a power to give guidance to local authorities on better regulation matters, to which those authorities will be required to have regard, as well as a right to advise Ministers and make proposals about the framework that central Government set for the work of local authorities in practice.
Judy Mallaber (Amber Valley) (Lab):
The day before yesterday, the Select Committee on Regulatory Reform took evidence from LACORS—Local Authorities Co-ordinators of Regulatory Services—which made the precise point that the LBRO should not just tell people what to do but should provide guidance and assistance, and should offer a mechanism for taking its concerns to the heart of Government Departments.
Does such a role and relationship mirror what my hon. Friend hopes will be developed?
Mr. McFadden: It is certainly the case that the LBRO’s functions include advice to central Government as well as to local authorities. It has rightly been argued that the powers that the LBRO will enjoy must be balanced by sufficient safeguards to protect local authority interests. The Bill includes a number of measures to achieve that, particularly in respect of the LBRO’s ability to issue directions to local authorities. That is subject to the strict requirement for consultation and, where more than one local authority is involved, for parliamentary approval.
Part 1 will make a major change to the way in which central and local government can work together on this agenda, and it will deliver real and lasting benefits to organisations, business and consumers. Part 2 deals with the primary authority principle, which is important, as some nationwide firms deal with up to 400 local authorities. The Hampton review highlighted the impact of inconsistencies in the different approaches adopted by local authorities to regulatory compliance and enforcement for businesses whose operations extend across more than one local authority area. Whatever business says about regulations, one thing that it wants is clarity. Conflicting advice and inconsistent enforcement can militate against clarity and increase business uncertainty and risk. For example, a challenge to the way in which a food product is labelled in just one local authority could mean the business concerned having to revise its entire policy throughout the country, with significant costs.
An attempt has been made to deal with that problem through the principle of home and lead authority schemes. That has gone some way towards resolving the issues, but such schemes are still informal and voluntary, and are not always open to those businesses that urgently need them. Part 2 will therefore provide a framework to guarantee more consistent regulatory treatment of businesses that operate across multiple local authority boundaries. The primary authority principle enshrined in the Bill will ensure that where a business and a local authority have committed time and effort to developing a productive advisory relationship, there should be a presumption that advice given to that business will hold good throughout the country, except where there are good reasons for local variation.
Andrew Miller: My hon. Friend is making an important point about the outcomes of the Hampton review. Is there a parallel in the Bill to address the needs of consumers, where scams are operated that cross boundaries? He mentioned Cambridge, whose city council was incredibly helpful to me when I was pursuing a case that crossed boundaries. However, both the council and Cambridgeshire police authority faced problems because of current law. Does the Bill address that aspect, too?
Mr. McFadden: That aspect is addressed by the consumer law review, which is led by my hon. Friend the Under-Secretary of State. Part of the function of that review is precisely to support the kind of agenda that my hon. Friend mentions.
Mr. Kidney: Will my hon. Friend clarify one point about the primary authority? I am familiar with the way one local authority takes the lead when a business has many outlets throughout the country—usually it is the authority that hosts the head office of the company or the main point of business. Is that the approach being taken or is it likely that businesses will be able to choose their regulator? The latter could give rise to the worry that businesses might choose the softest authority to be the lead.
Mr. McFadden: There would have to be a good reason for a local authority to serve as the primary authority. There is also a mechanism in the Bill for an enforcing authority, as distinct from a primary authority, to appeal to the LBRO, if it thinks that the primary authority has made a mistake or that what might be called a sweetheart deal has been made between the primary authority and the company in question.
Mark Pritchard (The Wrekin) (Con): I am grateful to the Minister, a fellow midlands MP, for giving way. Although I endorse the sentiment of the Bill, is the fact that the Government have had to bring it before the House not an admission of failure, not least as the CBI has said that £55 billion-worth of regulation has been placed on British business since Labour came to power? In a sense, it is ironic that today we are regulating to deregulate.
Mr. McFadden: The Bill is certainly not an admission of failure. The regulatory reform agenda in the UK is widely admired. The country remains a great place to invest and this year the World Bank’s “Doing Business” survey placed the UK second in the EU and sixth in the world for the best business conditions.
Anne Moffat (East Lothian) (Lab): My hon. Friend spoke earlier about continuity, clarity and relationships, which are important. He is right that the Bill is not a failure. However, I have a concern about the protection of employees and the relationship between the ombudsman and the new statutory body. Would that be a joined-up relationship?
Mr. McFadden: I know that my hon. Friend cares deeply about the protection of employees; and, as the Minister responsible for employment relations, so do I. I assure her that we will do nothing in the legislation that militates against proper and decent conditions for employees.
Judy Mallaber: In relation to the question that the hon. Member for The Wrekin (Mark Pritchard) has just asked, when the Regulatory Reform Committee took evidence from the Environment Agency yesterday, I asked which other European countries we could take a lead from, because we are visiting three next week to look into their regulatory reform procedures. One of our key regulators said that, if anything, we were in advance of other countries, as the Minister just indicated.
Mr. McFadden:
It is beginning to sound like I could have done with being at yesterday’s sitting of the Regulatory Reform Committee. I certainly endorse the
idea that Britain is a leading force in that agenda throughout the world. As we know, success in today’s economy is increasingly driven by better informed customers, empowered employees and enlightened companies that value their reputation across the world. To continue to create jobs and wealth for our country, UK businesses must be able to compete in that environment.
One of the other features that the Hampton report highlighted was businesses’ frequent complaint of being undercut by rogue traders who flout regulatory rules. As a result, the Government asked Professor Richard Macrory to review the regulators’ enforcement regimes. Professor Macrory found that most regulators were over-reliant on the single weapon of criminal prosecution, which he found was a potentially disproportionate response to cases where there is no real wilfulness or intent on behalf of the business concerned and, paradoxically, led to a compliance deficit, whereby breaches of regulation go unpunished because a regulator lacks alternative methods of enforcement.
To address that deficit, part 3 will introduce new civil sanctions the better to target rogue traders and deal more appropriately with well-meaning businesses that find that they have contravened regulations in one form or another. The Bill enables Ministers by order to select options from a range of new civil sanctions. They include: discretionary requirements to allow the regulator to require the business to take steps to put right a situation that has followed from a breach of regulation; and monetary penalties, so that regulators can impose financial sanctions, if appropriate, at various levels.
Andrew Miller: Clause 71 says that “civil sanction”, for example,
“means a fixed monetary penalty”.
However, I cannot see—perhaps my hon. Friend can guide me—on what scale that would be.
Mr. McFadden: There could be various scales, because there is also the capacity for variable monetary penalties, which is an important part of the regime. In addition, there can be enforcement undertakings that present a fundamental change to the traditional relationship between the regulators and businesses. In certain circumstances, such undertakings would allow the business to volunteer alternative ways of making good the harm arising from the breach in question.
Mr. McFadden: For the third time, I am happy to give way.
Mr. Bone: I am extremely grateful to the Minister, as we are talking about an important measure. He is making a logical case, but I have not been able to find out how many fewer prosecutions will occur because of the new regulations. Does he know whether prosecutions will be reduced by, say, a half or 10 per cent.? What research have the Government done in that area?
Mr. McFadden: We have conducted an impact assessment on the savings to business, which I shall come to. There could still be prosecutions for more serious offences, but the number of prosecutions will depend on the number and nature of any offences committed.
Some have suggested that the provisions will oust the jurisdiction of the criminal courts. The provisions in part 3 provide an alternative to criminal prosecution, but prosecution will remain the right course of action for the more serious breaches of regulation. We do not want to criminalise well-meaning businesses unnecessarily, but we of course reserve that option for the more serious and consistent offenders.
Mark Pritchard: On the point about quantifying these issues, in Prime Minister’s Question Time, the Prime Minister indicated his support for the private Member’s Bill promoted by the hon. Member for Ellesmere Port and Neston (Andrew Miller) on agency and temporary workers. Will the Minister take this opportunity to put on record and quantify the cost to British industry of the Prime Minister’s comments today?
Mr. McFadden: We will publish any cost estimates and other information on that in due course. I do not want to get drawn into too long a debate on this issue, but, as in other fields, we have tried to achieve a method of meeting our goal while retaining the flexibility on which the country’s high employment record has been built. That will be our intention going forward.
I was talking about prosecution. It is true that the courts will play an ongoing role with the most serious offenders. It has been suggested that, through the variable menu of enforcement actions, regulators will somehow be acting as judge and jury, with no checks on their powers, but I assure the House that that is not the case. The Bill contains a number of essential safeguards. It makes it clear that a Minister can confer powers on regulators only if the Minister is satisfied that they are capable of exercising those powers in compliance with better regulation principles. Before regulators can impose monetary penalties or discretionary requirements, they must be satisfied beyond reasonable doubt that an offence has been committed. Businesses can make representations and objections before sanctions can be imposed, and, most importantly, there is a right of appeal to an independent and expert tribunal. Furthermore, regulators that misuse their powers could risk the suspension of such powers.
We have worked hard to ensure that the regime of variable sanctions can work appropriately, and we believe that its operation could bring significant savings to business. The Engineering Employers Federation says, on this point:
“EEF supports the principle of alternative penalties for regulatory offences as a mechanism for reducing demands on court time, speeding up the process of enforcement and sanctioning, and reducing the costs associated with this for businesses.”
Mr. Graham Stuart (Beverley and Holderness) (Con):
Notwithstanding that quotation, there is a lot of disquiet within industry that many such fines might be slapped on to businesses. The Minister said that
regulators will not act as judge and jury, but then proved that that is exactly what they will be by saying that affected businesses will be able to appeal afterwards. That will not stop the initial effect. The truth is that before going to an expensive and administratively challenging appeal, businesses could be subject to overuse of the regulations. There are concerns.
Mr. McFadden: The hon. Gentleman contradicts himself. He says that regulators will act as judge and jury despite the fact that there will be an appeal to an independent tribunal; the very fact that there is an appeal process shows that that is not the case. This is not the first time that civil sanctions have been used; indeed, I have looked up some precedents. The last time that the hon. Gentleman’s party was in power, Companies House introduced a regime of civil sanctions for the late filing of accounts, and I am pleased to tell him that it increased compliance. There is a precedent, and it was introduced when his party was in power.
On the costs and benefits of the measures, taken together, we estimate that the overall benefits for business could be up to £200 million through better enforcement, lower legal costs and the variety of enforcement actions.
Judy Mallaber: Will my hon. Friend discuss with local authority organisations their ability to use the civil courts and to have representation in them to ensure that they are able to take cases through those procedures rather than just through the criminal courts? I know that they still have concerns about their ability to get an audience in the civil courts and about costs. I do not know the details of those issues, but will he discuss them further with those organisations?
Mr. McFadden: I am always happy to discuss such matters with local authorities.
Part 4 will create a power for Ministers to apply a duty to regulators requiring that they keep their functions under review and do not impose or maintain unnecessary burdens. It is envisaged that the power will be used where the duty will help to promote better regulation and a more accountable approach. Where the duty has been applied to a regulator, the regulator would need to report on the action taken.
I am grateful to the regulators who participated in our informal consultation on this part of the Bill. They emphasised that action to remove burdens must be proportionate, and that the benefits delivered must outweighs the costs. The duty therefore requires the removal of unnecessary burdens where it is practicable and proportionate to do so, and aims to deliver more robust enforcement of regulations. There is no intention to remove the protections that Parliament considers to be necessary, or to bog down regulators in a process of review that has been generated by frivolous complaints. Nor is the duty intended to apply in response to a particular decision by regulators in the competition field—for example, in such a way as to undermine decisions in competition cases. In most cases, a statutory instrument will be needed to apply
the duty, which will be subject to the affirmative procedure. We know that that is a strong parliamentary safeguard.
Provisions on this issue were refined in the other place, and the five regulators named in the Bill asked to be included in order to emphasise that the duty in no way compromises their independence. Therefore, this part of the Bill will ensure that the enforcement of regulatory protections supports the best possible framework to enable British business to compete and succeed in today’s global environment.
I draw my marks to a close by paying tribute to the hard work and expertise of those involved in scrutinising the draft Bill. The Bill has been improved as a result of that scrutiny, and the work that has already taken place to get the provisions right, which has involved businesses, the enforcement community and national and local regulators, provides a strong base for future implementation and enforcement.
The Bill contains an ambitious package of measures that will help to boost business competitiveness and productivity in this country. That will help to maintain our position, which the World Bank has stressed, as a great country in which to do business and to invest. It will also help to create a modern, flexible and robust regulatory system that will secure the better protection for citizens that we all want. It will deliver proportionate regulation and will boost certainty and competitiveness for the honest businesses that are creating wealth day in and day out in our country. All those aspects are essential to ensure that we have a dynamic economy.
Anne Moffat: Will my hon. Friend give way?
Mr. McFadden: I am drawing my remarks to a close, but I have been generous today, so I shall not stop now.
Anne Moffat: Thank you, Mr. Speaker. My hon. Friend has been very generous, but this is only my second intervention; some folk have been in about 14 times. I will thank you for it, but I will not apologise for it. Could you give an example of some of the mergers of national regulators? Who will be responsible for them? Will it be the new statutory body? Will it be you? Who will it be?
Mr. Speaker: Order. For the record, I will not be giving the hon. Lady any advice, but perhaps the Minister will.
Anne Moffat: I was thanking you anyway, Mr. Speaker.
Mr. McFadden: My hon. Friend is right to say that there has been a number of mergers of national regulators. We believe that the proposed process will provide greater focus, and we are determined to carry it through. The Bill is concerned not so much with mergers of national regulators as with how they operate and carry out their duties. The four parts of the Bill are designed to improve that operation and to create the right system for the future.
I conclude simply by saying that the Bill will boost certainty and competitiveness, and improve the accountability of regulators, which are essential to our economy and to the quality of life in this country. On that note, I commend the Bill to the House.
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