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1.45 pm

Mr. McFadden: It is certainly important that there should be an ongoing dialogue and that enforcing authorities can reflect their experience on the ground to the primary authority. I agree with the hon. Lady about that. She asked about exemptions, and if she will bear with me I shall come to them in a second.

The approach taken in the amendments would remove the primary authority’s right to give a decisive view on whether the enforcing authority should be able to proceed with an enforcement action. For that reason, we are not minded to accept them today. However, exceptions, situations where the enforcing authority does not have time and urgent situations are covered in clause 29, which states that the requirement need not apply

or where the application of clause 28, which the hon. Lady is trying to amend, “would be wholly disproportionate”. Built into the Bill is the understanding that there are situations in which an enforcement action will have to take place and the urgency or seriousness of a situation might mean that checking with the primary authority is not possible. If there is a difficulty, the LBRO is there to act as arbitrator and to consider objections by enforcing authorities. That is set out in schedule 4, which the hon. Lady also wants to amend.

This is not about every enforcement action but whether an enforcement action is consistent with the advice issued by the primary authority. I can see that the hon. Member for Hertford and Stortford is eager to rise to his feet again, so I shall give way to him.

Mr. Prisk: The Minister is very generous. It is important that when we legislate, the record is made clear. I understand the exemptions that the Minister cited—

but the critical question concerns a situation in which the interests of a local authority mean they want to use strong powers against a miscreant, such as someone in the licensed trade, and that is the clear will of that town, but those actions would go against the national guidance and the decision is overruled because of the primary authority’s decision. Does the Minister understand that there will be a sense in that area that the inhabitants’ democratic wishes will be undermined? I understand the factual arguments, all of which have merit, but the point is that there is a danger that there will be a deficit in the democratic process and people will feel that the system is ignoring their local concerns.

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Mr. McFadden: Schedule 4 sets out what can happen in a situation when there is a disagreement between an enforcing authority and a primary authority. An appeal could be made to the LBRO, which would then rule on the situation.

I wish finally to—

Mr. Bone: Will the Minister give way, if he is about to finish?

Mr. McFadden: Well, I have not finished, but okay.

Mr. Bone: I just want the Minister to acknowledge that this is a centralising measure. Whichever way we look at it, it takes power away from local authorities. Whether that power moves up to the quango or all the way up to Whitehall, it is centralised. The Minister might think that there are benefits to it, but will he please confirm that it is a centralising measure?

Mr. McFadden: It is a consistency measure. That is how I would characterise it.

Costs were another substantive issue raised in the debate, but hon. Members did not mention the fact that the capacity for the recovery of costs from businesses for the primary authority relationship is built into the Bill. We covered that in Committee when we discussed the submission that we received from Hertfordshire county council. Interestingly, despite the fact that it is in the Bill, businesses have still sought it in our discussions with them. They value the consistency that will be brought about by the changes that we are making. It is important to bear that in mind when considering the amendments and how the Bill as a whole will operate.

If the hon. Member for Solihull presses the amendment, the Government will not be able to accept it. I hope that she will withdraw it on the basis of my comments.

Lorely Burt: I am grateful to all the hon. Members who have spoken for helping to re-air the important matters raised by this group of amendments. I listened carefully to the Minister’s points, and some of his reassurances have gone a long way to making me feel more comfortable about the elements of the Bill that I mentioned. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40

Fixed monetary penalties: procedure

Lorely Burt: I beg to move amendment No. 10, page 18, line 16, at end insert

Madam Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 11, in clause 43, page 20, line 24, at end insert

No. 12, in clause 47, page 23, line 24, at end insert

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Lorely Burt: The amendments would defend an important principle for business. Amendment No. 10 would give businesses the option of electing for criminal trial rather than having a fixed monetary penalty imposed upon them. Amendment No. 11 would do the same in respect of discretionary requirements and amendment No. 12 would strengthen the existing right of appeal against a stop notice by similar recourse to a court.

I would be worried if companies could use amendment No. 12 as a loophole to delay the imposition of a stop notice, but the wording of clause 54(3) is that a stop notice “may”, and only may, be suspended pending appeal. I assume from that that if a claim were seen as a delaying tactic, the stop notice would not be suspended, in which case the amendment is needed. I would not wish to press an amendment that could be used as a delaying loophole, however, and I seek guidance from the Minister on that point.

I do not envisage that the proposed power would be exercised often. However, it should be in the Bill in case a company feels that it has been wrongly treated and its reputation is at stake. We could make the analogy of an old lady who is accused of stealing a loaf of bread. One could argue that it is a trivial matter and that she should pay the fine or accept the warning and get on with her life, but the size of the offence is not what is important to the old lady. What is important is her reputation. A company’s reputation can be just as important.

Mr. Prisk: The hon. Lady is making an excellent point. It is important to bear in mind that the term “regulated person” in the Bill has a wider connotation than just a business, including someone who is self-employed. It potentially covers a wider group than just the corporate world. I am sure that all Members, particularly those who were unable to be part of the Committee, would wish to know that. Does she agree about that wider resonance, which makes her example very good?

Lorely Burt: I am grateful to the hon. Gentleman for that intervention, and I certainly agree. Perhaps the Minister will wish to elaborate on that.

Mr. Bone: Just before the hon. Lady finishes, I wish to add to the point about the reality of what will happen in business. I have run both a plc and a family business, and I know what will happen if the regulator says to a family business, “You’ve got to pay this amount of money.” Even though the owner of the business knows that they are in the right, they will pay that money rather than go to court. It will therefore be much easier for the regulator to dish out fines. That will be a real hardship for small businesses.

Lorely Burt: The hon. Gentleman makes a very good point. As well as the question about the relative value of a summary fine to a small and a large business, concern has been raised about whether certain organisations that are reluctant to put their house in order might regard a summary fine as par for the course, just as some might collect parking fines. We must trust the operation of the Bill and trust the enforcement authorities to ensure that any penalties that they issue are proportionate to the size of the business.

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Reputation is hugely important, whether for a small local business or a large corporation. It can be translated into direct business, and for that reason I shall seek a Division on amendment No. 10 and, depending on the Minister’s advice, on amendment No. 12.

Mr. Prisk: I begin, again, by commending the hon. Member for Solihull (Lorely Burt) for tabling the amendments. They relate to part 3 of the Bill and the ability of regulators—plural in this case, not a single regulator—to apply civil sanctions, which in plain English means fines for the most part, instead of seeking redress through the criminal justice system. We strongly support the amendments.

We recognise that if they are managed carefully, there is a good argument for civil sanctions when businesses transgress. A fine can sometimes be more appropriate than seeking prosecution for a criminal offence. However, there were serious concerns when the Government originally proposed to allow the revenue from those fines to remain with the regulator concerned. I am pleased to say that the Bill was amended in Committee so that instead of money remaining with the regulator, which could create an undue inducement, it will go to the general Consolidated Fund. The amendments address a different, but related and important, concern that was discussed briefly in Committee.

2 pm

I turn to the proposals for fixed monetary penalties. I should point out that there are also discretionary penalties in the Bill, but here we are looking at the fixed monetary penalties. The proposals do not allow for an accused person or business—I make that distinction carefully—to defend themselves prior to appeal. Nor do they require a regulator to prove to an independent party that the accused is indeed guilty. In short, the regulator, as the Bill stands, can investigate the issue, prosecute the matter and pass sentence through the civil process, and an accused business can only then appeal to clear its name—to put it in the jargon.

In business, as the hon. Member for Solihull rightly highlighted, reputation is vital. That is especially the case in the modern era—in what we might describe as a more socially and environmentally responsible age. Consumers are very much aware that they can withdraw their custom or sell their shares, and that if a fine has been issued that catches the public eye, it can have an immediate impact on the operation and, indeed, the success or otherwise of that business.

As the Bill stands, a notice to fine can be issued. Of course, in this day and age of 24-hour, instant media, there will then be the public assumption of guilt. We are all familiar with those instances where an announcement is made about a particular situation with a company, and perhaps three months later, after a long and tedious process, it is found that the allegation was not quite accurate or true, or that somebody else was at fault. By then, however, it is not a headline—it is on page 37, in “Corrections”. Nevertheless, the damage has been done. We can all think of different instances. Perhaps an oil company has had an allegation against it about a dangerous leak. Here, I am not thinking merely of oilfields but, in the context of this Bill, the contaminant in the fuel at a petrol filling station possibly leaking into the local water system. We can all think of food hygiene examples.
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A business whose very trade survives on its reputation as an establishment of high quality could be severely damaged if a fine were submitted and guilt was assumed from that fine.

Mr. Bone: My hon. Friend is making an extremely important point. Would he like to indicate the scale of the problem? In the supporting documentation, it is estimated that 14,600 of these notices will be issued each year. The small print says that 7,300 are likely to be wrong and withdrawn at the end of the process. That is a pretty hopeless point to start from.

Mr. Prisk: I am very grateful to my hon. Friend, who has rightly highlighted the scale of the problem and the fact that the Government anticipate at this point—before the legislation has become law—that roughly half those fines or sanctions will be mis-proven, so the damage will be considerable. We all know how quickly consumers can make the assumption that something is awry.

It would be unfair of me to rake over the coals of Northern Rock with Ministers for too long, but we can immediately see that in cases where concern is expressed through the national media, people will naturally fear for themselves and act promptly. In these days of 24-hour news and 15-minute news cycles, the potential problem in the first year—some 14,000 fines or sanctions being issued and half being rescinded later—poses a serious danger.

Of course, all that is the reason why businesses of whatever size are concerned. Indeed, I understand that the CBI supports these amendments. It argues in some of its submissions that

For some businesses, the risk of loss of reputation is therefore worse than opting for criminal proceedings, in which accusations must be proven and the standard of evidence is significantly higher. Clearly, many businesses will prefer to stick with the civil process, but the point of the amendments, as the hon. Lady said earlier, is to allow a minority who might prefer to use the criminal justice system to opt for that. They might choose to do so because they wish, quite naturally, to have the accusation proven against them rather than assumed, or because they believe that the higher standard of evidence is important. I therefore believe that these amendments would strengthen, rather than weaken, the principles behind the Bill.

It is not only the CBI that has expressed a wish to see these amendments tabled. The British Retail Consortium, for example, has throughout the Bill’s passage expressed serious worries about the whole of part 3 and particularly about the sanctions, which it believes are “unacceptable” as they stand. Turning to the smallest of businesses, the Forum of Private Business, for example, has said in submissions to this House that as drafted, these sanctions are “a deal-breaker.”

Given all that and the information provided by the hon. Member for Solihull, these are important improvements to the Bill. Given, too, that these civil sanctions are being introduced so that regulators have a choice, should not the regulated also have a choice as to which system is appropriate?

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Mr. Bone: It is a great pleasure to follow my hon. Friend the Member for Hertford and Stortford (Mr. Prisk), who made a number of powerful points that I would have made. I want to look at a practical instance but before doing so, I should perhaps declare that I am a member of the Institute of Chartered Accountants and a director of a small company; I refer the House to my entry in the Register of Members’ Interests.

In reality, if someone has a problem with a regulator, in most cases they will try to sort it out and reach a conclusion. Sometimes, the regulator is being stubborn and stupid and does not understand the business. Some of these comments refer to the Government. I do not know how they can come up with these measures—it seems that they do not understand business, particularly small businesses, at all. What would happen next if there were such a problem? The regulator would come and see me, for example, and if we could not sort it out, we would eventually go to court. Things would be unlikely to go that far, because I would work very hard to avoid that, as would the regulator.

However, what will happen if the Bill goes through unamended? At the moment, regulators have four types of enforcement procedures: warning letters, statutory notices, formal cautions and prosecutions. They will be extended to include fixed monetary penalties, variable monetary penalties, enforcement undertakings, discretionary notices and stop notices. In other words, we are extending enormously the powers of regulators to interfere with businesses.

A regulator will be able to come along and say, “Mr. Bone, you are not doing this right, and we are going to fine you.” As a small business, I would say, “Actually, I am doing it right”. However, I would not be able to afford the time, let alone the cost involved, to appeal, get involved or argue against the regulator, so I would simply pay up. That is what will happen. Throughout the country, hundreds if not thousands of busybodies will interfere with businesses that are running properly and successfully, because they know that they can impose a fine rather than proceeding to a prosecution, which they would not dare to do because they know that they would lose.

Mr. Prisk: My hon. Friend is absolutely right. It is perhaps worth drawing the House’s attention to schedule 5, which lists the regulators involved. He might be as shocked as I was when I first discovered this to learn that a minimum of 26 different regulators are involved, and more than 140 different pieces of legislation. Does he share my concern that this, while understandable in a minor context, is an enormous change in the balance of how these sanctions will work?

Mr. Bone: My hon. Friend makes an extremely important point, and it is clear that that is exactly what will happen.

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