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“the power to be investigator, prosecutor, judge, jury and sentencer”.—[ Official Report, House of Lords, 28 April 2008; Vol. 701, c. 26.]
That is a matter of great concern. The combination of wide powers being granted to a large number of unaccountable regulators for a long list of offences could be both disproportionate and unnecessary.
Mr. Thomas: I appreciate the anxiety expressed in the other place by the former Attorney-General about the possibility of regulators’ behaving in the way that the hon. Gentleman has described, but will he acknowledge the existence of an important additional protection? When a business has been investigated and there are concerns about its performance, it can appeal to an independent tribunal. Is that not an important safeguard?
Mr. Djanogly: I think that it is important, and I also concede that this measure does not exactly constitute the Henry VIII abolition of Parliament-type clause that we saw in the “Leg and Reg” Bill which became the Legislative and Regulatory Reform Act 2006. However, we still have worries about the extent to which it will be applied. We are also worried about associated constitutional reforms that would give an all-powerful role to unelected bodies.
Mr. Bone: It is a fact that anyone who has ever run a small business and been faced with a regulatory fine, however wrong that fine is, has not the energy, the time or the money to appeal against it.
Mr. Djanogly: That is a good point with which we agree, and which was picked up by the CBI, which has said that there
“should be the opportunity for independent review before a penalty notice is issued.”
The British Retail Consortium regards the sanctions as “unacceptable”, while the Forum of Private Business, in its response to the pre-legislative consultation, attacked the Government for trying to present the
measure as a “simplification” and said that it regarded this part of the Bill as a “deal-breaker”. Interestingly, the BRC also condemns the introduction of administrative penalties, believing that they would undermine the risk-based approach to regulation. If enforcement simply means handing out the equivalent of parking fines, how will that encourage better regulatory practice?
What is clear is that this part of the Bill could put small businesses at a significant disadvantage yet again. Whereas medium and larger businesses will be quite able to pursue the tribunal and appeals processes, most small firms will have neither the time nor the wherewithal. Ordinary people such as owners of small shops, farmers and drivers of vehicles are likely to feel compelled just to pay up and get on with trying to run their businesses and earn a living, rather than allowing their time to be taken up with such procedures. If we get these measures wrong, they could be deeply resented by many thousands of small businesses and sole traders across the country.
Part 4 creates a power allowing Ministers to require regulators not to impose or maintain unnecessary regulatory burdens. It would seem to be well intentioned, but I have been made aware of concerns expressed by the National Consumer Council, not least that there is a potential for this explicit and overriding measure to restrain the ability of regulators to protect consumers. We shall seek to explore that further in Committee.
The stated aims of Ministers are welcome, but we have heard all this before, and we remain to be convinced that the Bill will achieve those aims in its current form. We have other fears as well. We heard today of the Government’s announcement of their intentions in relation to the Temporary and Agency Workers (Equal Treatment) Bill, which was the result of what I would describe as a classic “beer and sandwiches in Downing street” operation. I have still not seen the proposals, apart from what the papers have said, and I have since discovered that the same applies to many organisations. Given that the CBI has said that the regulation could cost British industry up to 250,000 jobs, I consider the absence of a ministerial statement and the Minister’s failure to mention the matter during the debate to be cause for grave concern.
Mr. Djanogly: I shall continue, if the Minister will allow me, because this is an important issue. We are talking today about the Government’s attitude to regulation.
Andrew Miller: It is the wrong context.
Mr. Djanogly: No, it is not. We are talking about changing the cultural values of Government, local government and other public bodies in regard to regulation. If those cultural values are to switch to beer and sandwiches at No. 10 Downing street in order to wrap up regulation, I am gravely concerned about how the Bill will deliver anything like what the Government are proposing.
Mr. Djanogly: I give way to the hon. Member for Ellesmere Port and Neston (Andrew Miller).
Andrew Miller: The 250,000 figure that the hon. Gentleman cited does not relate to yesterday’s announcement, and is any event based on a speculative view similar to that which was expressed when Labour introduced the minimum wage. The view proved to be false then, and it will be shown to be false now.
Mr. Djanogly: As the hon. Gentleman is well aware, the figure relates to his very own private Member’s Bill, on which the Government will presumably base their further reforms.
Mr. Djanogly: I will now give way to the Minister.
Mr. McFadden: I thank the hon. Gentleman for finally giving way. Does he accept that the CBI’s estimate of job losses related to the private Member’s Bill introduced by my hon. Friend, and not to the agreement that it negotiated and to which it signed up yesterday? Does he accept that those are two different things?
Mr. Djanogly: The Minister is right in so far as the Government’s beer-and-sandwiches deal is separate from the private Member’s Bill that was pulled today. However, he should tell the full story, and reveal that the CBI described his deal as the “least worst option”. We need to get to the bottom of the extent to which it is the worst option. The House has not been told what will be the impact on British business of his proposed deal with the unions, and he should tell us that at the earliest opportunity. The private Member’s Bill was never about defending workers from exploitation, as the hon. Member for Ellesmere Port and Neston announced at Prime Minister’s questions earlier today. That is covered by existing legislation, and it will also be covered by the Employment Bill, which the Government are separately bringing before the House.
What we have opposed and will continue to oppose is a one-size-fits-all straitjacket of regulations that will destroy the flexibility that is key to the British workplace. Given that more than 90 per cent. of businesses are small and that large sections of the Bill could make things worse for them, we do not believe that the net effect of this Bill will necessarily be good for business. Therefore, although we will not oppose the Bill today, if it becomes clear in Committee that our concerns are justified, we will have no hesitation in voicing our opposition at the appropriate stage.
1.50 pm
Sarah Teather (Brent, East) (LD): As I was listening to the previous speeches, I could not help thinking that this is perhaps the first time I have debated something other than post offices with the Minister. Therefore, this must be a moment of light relief from his usual diet of at least six post office Adjournment debates a week.
As the Minister said in his opening remarks, this Bill was born out of the recommendations of two reviews. The Hampton review focused on the need for regulation to be risk-based and proportionate and looked at the scope for reducing regulatory burdens on business, and it identified the need for better co-ordination between regulators and for less duplication.
Of the two reviews, the Macrory review, if fully implemented, will probably have the greater impact on the practice of regulators. It recognised that much current enforcement is not effective in changing the behaviour of businesses and recommended a shift to the use of civil sanctions, including fixed penalty notices, as well as many more innovative ideas such as restorative justice and new criminal sanctions.
Inasmuch as the Bill recommends greater co- ordination between regulators and the use of civil sanctions as a quicker means, in certain circumstances, of changing the behaviour of businesses than lengthy processes through courts, I and my party will support it. We support the premise of the Bill; we are signed up to the intention behind it, and we will support it on Second Reading. However, we still have doubts about whether all the detail in the Bill will result in the changes of behaviour that the Minister hopes for, whether some of the sanctions proposed will increase or decrease the regulatory burdens on business, and whether there is adequate understanding of the role of local authorities in the prescriptions for the regulator. We will want to explore such matters in Committee—some for clarification alone, and some for amendment.
I recognise, however, that the Bill did change during its passage through the other place, which is welcome. The requirement for criminal levels of proof before making civil sanctions is a good step, as is the decision to set out in the Bill a requirement for an appeals procedure, although its full implications need to be further explored in Committee. The agreement that the Minister should satisfy himself that a regulator is essentially Hampton-compliant before it can receive any further penalty powers is also broadly to be welcomed, although I would like to explore in Committee how that Hampton-compliance is to be assessed.
Most welcome, however, was the acceptance of a need for a review of the LBRO’s operation after three years. I hope that this change signals the Government’s conversion to the principle of sunset clauses. For some time the Liberal Democrats have argued that one of the most effective ways of ensuring that we do not increase the regulatory burden on business without clear benefits would be to have a sunset clause on new regulations, whereby each new regulation came back to the House to be approved and we decided whether the regulation needed to be in place now or whether its time had passed.
The key principle of good legislation is that it should be easy to enact. Those being regulated need to understand why they are being implored to behave in one way or another, and they need easily to be able to find out whether they are operating within the law.
Mark Pritchard:
The hon. Lady touches on the important issue of burdens and costs of regulation on business. Does she accept that currently the majority of new regulation in the UK comes from Europe? If so,
why does her party insist on slavishly following European directives instead of standing up for British business? Her party would also sign up to the euro, which would create restrictions in monetary and fiscal policy.
Sarah Teather: I do despair of the Conservatives; they manage to get Europe into every possible debate. I am not going to get into a lengthy debate about it now, as I want to talk about the Bill. This is a Second Reading debate and I will deal with the Bill. I will not get drawn into wider discussions, as I suspect that if I were to do so I would be ruled out of order. Mr. Deputy Speaker is already looking at me far from approvingly.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. Let me reassure the hon. Lady that other hon. Members might be ruled out of order if we start to steer off course, but she need not worry too much.
Sarah Teather: Thank you, Mr. Deputy Speaker.
I was making a point about the tension between the need to have legislation that protects consumers and the need to ensure that it does not overburden businesses. I recognise that it is always extremely difficult to strike that balance. Businesses constantly ask for less regulation, but it can be difficult to identify a specific measure that we want to remove. That, I argue, is why we need sunset clauses, which are one of the simplest ways of ensuring that regulations on business are appropriate and proportionate.
Regulations must also be enforced. Consumers, the public and law-abiding businesses must have confidence in the system and know that competitors that flout the law will be dealt with properly and will not gain a commercial advantage. The key to this is speed. The Macrory review identified the fact that enforcement action that is possible only through a lengthy legal route is a blunt instrument for dealing with many minor offences, and, similarly, that its length and complexity is often a disincentive to regulators using their full powers.
I have seen example of that in my own constituency. Neasden goods yard is within a densely populated residential area. A number of companies operate from the site in waste transfer, handling paper and construction materials. Complaints about dust and environmental pollution, and the antisocial behaviour of lorry drivers using the site, go back at least a decade. One operator in particular, Alloyde II, consistently flouted the advice and guidance given to it by inspectors from the council and the Environment Agency and flouted the conditions of its licence. At one stage in 2006, pollution levels from the site far exceeded safety limits on more than 90 days of the year—and that was only part of the way through the year. But the story of enforcement action against the company was a frustrating one for local residents. The council and the Environment Agency for a long time seemed to be incapable of working together to solve the problem, with each offloading the blame on to the other, until eventually a political change in the council administration led to the issue becoming a priority and the council put pressure on the EA to deal with it. Inspectors from both the council and the EA seemed incapable of co-ordinating their action, and the only
real route for the EA to follow was a lengthy legal battle to revoke the company’s licence. At each stage, the company appealed, allowing it to continue operating and so continue to cause misery to the people of Neasden and Dudden Hill.
In retrospect, I wonder whether early co-ordination between the council and the EA and a hefty rapid fine might have resolved this issue for residents. It was certainly worth Alloyde’s while to continue to take its chance that regulation would take a long time to come to fruition and close it down, because it was able to make profits in the mean time. It seemed to local residents that money was one of the only things the company understood.
I tell this story because although much of the focus of the debate has been on the need for regulators to work together to minimise unnecessary burdens on business, there is another reason why they need to work together: to ensure that enforcement action is effective against irresponsible businesses who consistently flout the law. In Committee, I shall judge this Bill on the extent to which it will deliver both those things and not just one.
That is not the only issue I want to explore in Committee. The Minister mentioned the potential for variable penalties and I would like to explore the scale of that in Committee. There is a danger with small fixed notices becoming a levy that large businesses are prepared to pay to go on flouting the law. There is also a danger of catching other businesses that, as the hon. Member for Huntingdon (Mr. Djanogly) said, might innocently break the rules. For small businesses, the impact may be disproportionate: a small shop that makes a mistake storing food is not in the same league as a large laboratory tipping biological waste into a local reservoir.
The Minister mentioned the precedents for civil sanctions. The obvious precedent is the Financial Services Authority, which has long since had powers to fine companies that breach market rules. The size of the penalty depends on certain factors, including the track record of the business, its size and the impact on it. We need to explore that further in Committee. It is essential that the focus of the sanctions in the Bill is on changing the behaviour of businesses and not on a tick-box, parking-fine mentality. The Bill must be about protecting consumers, the public and the reputation of business at large, not about meeting targets.
Some other recommendations of the Macrory review that might be worth considering are not mentioned in the Bill—for example, recommendations about the use of restorative justice. Macrory believes that restorative justice models have the potential for good long-term outcomes, both for victims and offenders, have the benefit of being flexible and are focused on reducing the harm caused. That principle is very much in keeping with the Hampton review and the claimed focus of the Bill. Will the Government introduce pilots in this area, as Macrory recommended? Will they commit to doing so? If not, why not?
Other innovative recommendations in Macrory’s review include criminal sanctions such as the use of publicity orders. Macrory cites the case of the Federal Supreme Court, which sentenced the American Caster Corporation for dumping deteriorating drums of solvents by way of a publicity order. The corporation
was required to take out an advert in the Los Angeles Times, at a cost to itself, publicising its breach, and the action that it intended to take to remedy the problem. Has the Minister considered using such measures? Does the Bill provide the flexibility to do that? What assessment has he made of that recommendation?
Finally, I come to two further issues that we will want to explore in Committee. We will want to seek reassurances from the Government that the Bill will not be unworkable for local authorities, which are chiefly responsible for implementing it. It is essential that those giving guidance to local authorities understand the practice of such bodies and their limitations. That was very much the focus of a number of Labour Back Benchers’ interventions on the Minister. It is also important that the need to co-ordinate the activities of companies operating in more than one area does not prevent local authorities from setting their own priorities in respect of democratic choice. I share the concerns of the hon. Member for Huntingdon about the power to turn guidance into direction and about how the primary authority system will work in practice. Such matters need clarifying in Committee.
We are also concerned that the detail of stop notices in the Bill will give undue flexibility to regulators to decide whether to pursue action at the expense of business, which, if not guilty, could lose two weeks of business while the regulator decides what action to take. We need to explore further in Committee whether there are more flexible ways of implementing this provision. We recognise that good work has been done on this Bill in the other place to improve it, and we will support the Bill today, but we feel that more can be done to make it a clearer and more effective tool to improve regulatory practice in this country.
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