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These regulators are saying that the Government want us to hire more people to go out into businesses and intervene, saying, “You’re not doing that quite right—here is a fine; here is a sanction.” That will do enormous damage to small businesses. The signal that the Government are sending out is that they do not care about small business. The Bill is great for big businesses, which can look after themselves. Things will be clearer for them, but small businesses are the engine and driving
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force of our economy and they will be terribly disappointed. They will not do anything about it, of course: I am afraid that the truth is that they will pay up and just say, “Here we go again. This Labour Government are interfering and imposing more penalties on us.”

I am sure that the problem that I am describing is an unintended consequence, but the least that the Minister could do now is to recognise that the hon. Member for Solihull (Lorely Burt) is making a fair and reasonable argument, and accept the amendments. If he does not do so, I urge her to press them to a Division.

Mr. McFadden: The previous group of amendments touched on the question of consistency, which is one of the Bill’s major concerns. I do not know whether the hon. Member for Solihull (Lorely Burt) intended it, but the current group of amendments touches on the Bill’s other main concern—inflexibility in the current system.

In my remarks on the first group of amendments, I referred to the Hampton report. I shall now refer to the Macrory report, which was about the inflexibility of a one-club-fits-all approach to regulatory enforcement and proposed that regulators should have a greater variety of enforcement options. That proposal has been supported by many business voices, including the British Chambers of Commerce. That organisation represents the views of many small businesses in this country, and it said that variable monetary penalties should be available to regulators as part of a mixed system, as a variable line would allow the regulator to operate flexibly and proportionately. In addition, the Institute of Directors welcomed the proposition that a wider range of penalties would mean less use of criminal sanctions and less time and money spent on court procedures. The Bill’s regulatory impact assessment estimates that the savings to be made from fewer court appearances could amount to £88 million.

Mr. Bone: I rolled around with laughter when I saw that. Do the Government really think that the Bill will lead to £88 million of savings? That is cloud cuckoo land.

Mr. McFadden: That may be the hon. Gentleman’s opinion, but the purpose of the Bill is to prevent, by means of a more proportionate and variable system of regulatory enforcement, the very businesses that he is worried about from being dragged through the courts continually.

Lorely Burt: No one objects to having a wider range of sanctions or wants companies to be dragged through the courts unwillingly. However, the point is that, on the rare occasion when a company elects to go for court action, it should have the right to be able to defend its reputation in that way.

Mr. McFadden: The amendments focus on that precise point. I said in Committee that the new sanctions are an alternative to criminal prosecution. Before determining whether to pursue a prosecution or impose a sanction, the regulator will have to undertake a thorough and rigorous investigation, at the end of which a determination
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of whether a person has committed an offence will be made. The regulator would then decide the most appropriate course of action.

Mr. Prisk: We understand that the regulator will have that choice, and rightly so. The point is that the accused—the regulated—should also be able to make a choice. No one disputes that there needs to be a range of tools in the regulator’s tool box, but we believe that the person being regulated should have similar options. As it stands, the Bill does not make that available to them. Why not?

2.15 pm

Mr. McFadden: The hon. Gentleman has made that point several times. If he will allow me to make a little progress, I shall deal with the question of who should choose which road we go down in this sort of situation.

The Macrory report found that criminal prosecution should be reserved for those cases that really merit it. We believe that the choice between civil and criminal sanctions should remain at the discretion of the regulator. The Bill contains a number of important safeguards in that respect. Before a regulator can impose a fixed monetary penalty of the kind discussed by the hon. Member for Wellingborough (Mr. Bone), or a discretionary requirement, it will have to be satisfied beyond reasonable doubt that a criminal offence has been committed. The regulator must then serve a notice of intent and allow the business to make representations and organise a defence.

The hon. Member for Hertford and Stortford (Mr. Prisk) noted that, as was discussed at length in Committee, the proposed sanctions can be appealed to an impartial, independent and expert tribunal. That gives business an important safeguard against a regulator who applies a penalty incorrectly.

The hon. Member for Solihull raised the issue of a business’s reputation. It is part of the core of her argument, and I understand that we do not want businesses to suffer reputational damage unnecessarily. I agree with the hon. Member for Hertford and Stortford that that is increasingly important in the business world, and for very good reason. However, I draw the attention of the hon. Member for Solihull to clause 65, which requires the regulators

Clause 65(3) specifically exempts from that requirement those cases that have been overturned on appeal. That means that, when a tribunal finds in a business’s favour, a mechanism will be in place to ensure that that business’s reputation does not suffer harm.

Mr. Prisk: The Minister is courteous, but has still not answered the point. All of what he has described is fine, but it comes after the event—that is, after an allegation has been made, the fine issued and the sanction imposed. The regulated business still does not have the option to have its day in court. That is the point at issue: we are well aware that there will be opportunities to seek redress after the event, but that may be too late for some businesses. Why is a provision giving regulated businesses the option to go to court not included in the Bill?

Mr. McFadden: The hon. Gentleman has asked about that issue several times. As I say, the variable penalties are an alternative to criminal prosecution. A business faced with a penalty might spin out the process to see
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what happened, and then appeal at the end of the process for a different type of judgment altogether. There is a power of appeal to an independent tribunal, which safeguards the rights of the business; that is very important. However, under the Bill, it is the regulator who should make the judgment about which road to go down.

Mr. Bone: Will the hon. Gentleman give way?

Mr. McFadden: I will in a moment. I want to come on to the point that the hon. Member for Solihull made about stop notices. The amendment could have serious consequences resulting from the withdrawal of a stop notice served by a regulator. Such notices would be imposed only in strictly controlled circumstances, where there is a significant risk of serious harm to human health, the environment, the financial interest of consumers and so on. If there had been serious environmental damage, it would not be appropriate for a business to be able to opt for a prosecution instead, as the serious harm specified in the stop notice could then continue or even grow. That illustrates why the choice for which the hon. Member for Hertford and Stortford is arguing could be damaging to the public interest and consumer interest.

Mr. Siôn Simon (Birmingham, Erdington) (Lab): I did not serve on the Committee and I have not followed these matters as closely as Opposition Front Benchers, but I have a general interest in the subject. Surely it is not terribly unusual, counter-intuitive or unreasonable for the regulator to lead and guide the process of deciding what the route the sanction procedure will take, given that the issues concerned must be controversial, or things would not have reached that point.

Mr. McFadden: My hon. Friend is absolutely right. The issue arose in Committee, where my hon. Friend the Member for Glasgow, North (Ann McKechin), said that

Allowing a person to choose whether or not they are prosecuted would go against that understanding.

Mr. Bone rose—

Mr. McFadden: I shall give way one more time.

Mr. Bone: The Minister has been exceptionally gracious, and has entered into the debate, but we now see the division between the two sides of the House. The Government’s view is that the regulator is the important organisation, and has the right to impose from the centre a decision to apply a sanction or hold a trial. There is no reference to the reputation of the business. If the case goes to court, and the business has an independent hearing before the judiciary, the business is clearly stating, for everyone to see, that it does not believe that what the regulator says is right. In 50 per cent. of cases—or more, if one believes what one reads in Government documents—it will win. This is just a matter of justice. A by-election is being fought this
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week on the issue of justice. Is not the provision yet another example of draconian centralisation by the Government?

Mr. McFadden: The hon. Gentleman tempts me to go into the reasons for the by-election, but I will resist the temptation. My hon. Friend the Member for Birmingham, Erdington (Mr. Simon) is correct: it is not appropriate for a regulator to make the judgment. There is a power of appeal to an independent tribunal. That is an important safeguard for the reputation of a business that is wrongly accused. On that note—

Mr. Prisk rose—

Mr. McFadden: I wish to come to a conclusion. On that note, we hope that the hon. Member for Solihull will withdraw the amendment.

Lorely Burt: I have listened carefully to the points that the Minister made. Regrettably, I feel just as strongly—probably more strongly—about the issue of justice that is involved as I did when we started the debate, so with the greatest of respect, I will not withdraw the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 119, Noes 218.
Division No. 262]
[2.23 pm


Afriyie, Adam
Ainsworth, Mr. Peter
Alexander, Danny
Amess, Mr. David
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baker, Norman
Barker, Gregory
Benyon, Mr. Richard
Bercow, John
Beresford, Sir Paul
Bone, Mr. Peter
Bottomley, Peter
Brady, Mr. Graham
Brake, Tom
Brokenshire, James
Browning, Angela
Bruce, rh Malcolm
Burns, Mr. Simon
Burstow, Mr. Paul
Burt, Alistair
Burt, Lorely
Butterfill, Sir John
Campbell, rh Sir Menzies
Clark, Greg
Clarke, rh Mr. Kenneth
Clifton-Brown, Mr. Geoffrey
Cormack, Sir Patrick
Cox, Mr. Geoffrey
Crabb, Mr. Stephen
Davies, Mr. Dai
Davies, Philip
Duddridge, James
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Fallon, Mr. Michael
Foster, Mr. Don
Garnier, Mr. Edward
Gibb, Mr. Nick
Gidley, Sandra
Goldsworthy, Julia
Gray, Mr. James
Greening, Justine
Hancock, Mr. Mike
Harvey, Nick
Hayes, Mr. John
Heath, Mr. David
Heathcoat-Amory, rh Mr. David
Herbert, Nick
Hollobone, Mr. Philip
Holmes, Paul
Horam, Mr. John
Howarth, David
Howell, John
Hunter, Mark
Hurd, Mr. Nick
Keetch, Mr. Paul
Knight, rh Mr. Greg
Lait, Mrs. Jacqui
Lamb, Norman
Lancaster, Mr. Mark
Laws, Mr. David
Letwin, rh Mr. Oliver
Lewis, Dr. Julian
Liddell-Grainger, Mr. Ian
Lilley, rh Mr. Peter
Loughton, Tim
Luff, Peter
Mackay, rh Mr. Andrew
Main, Anne
Malins, Mr. Humfrey
May, rh Mrs. Theresa
Miller, Mrs. Maria
Mitchell, Mr. Andrew
Moore, Mr. Michael
Moss, Mr. Malcolm

Murrison, Dr. Andrew
Neill, Robert
Newmark, Mr. Brooks
Öpik, Lembit
Ottaway, Richard
Paterson, Mr. Owen
Penrose, John
Price, Adam
Prisk, Mr. Mark
Rifkind, rh Sir Malcolm
Robertson, Mr. Laurence
Rosindell, Andrew
Ruffley, Mr. David
Scott, Mr. Lee
Selous, Andrew
Shapps, Grant
Shepherd, Mr. Richard
Smith, Sir Robert
Soames, Mr. Nicholas
Spicer, Sir Michael
Stanley, rh Sir John
Stuart, Mr. Graham
Stunell, Andrew
Swayne, Mr. Desmond
Syms, Mr. Robert
Thurso, John
Tredinnick, David
Turner, Mr. Andrew
Tyrie, Mr. Andrew
Viggers, Sir Peter
Villiers, Mrs. Theresa
Walker, Mr. Charles
Wallace, Mr. Ben
Watkinson, Angela
Whittingdale, Mr. John
Wiggin, Bill
Willetts, Mr. David
Williams, Stephen
Willott, Jenny
Wilshire, Mr. David
Winterton, Ann
Young, rh Sir George
Tellers for the Ayes:

John Hemming and
Bob Russell

Ainger, Nick
Alexander, rh Mr. Douglas
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Atkins, Charlotte
Austin, John
Bailey, Mr. Adrian
Baird, Vera
Balls, rh Ed
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Beckett, rh Margaret
Bell, Sir Stuart
Benton, Mr. Joe
Berry, Roger
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, rh Mr. Nicholas
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, rh Andy
Butler, Ms Dawn
Byrne, Mr. Liam
Campbell, Mr. Alan
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clarke, rh Mr. Charles
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Cooper, rh Yvette
Cousins, Jim
Creagh, Mary
Cunningham, Mr. Jim
Curtis-Thomas, Mrs. Claire
Davies, Mr. Quentin
Dean, Mrs. Janet
Denham, rh Mr. John
Dhanda, Mr. Parmjit
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Ennis, Jeff
Etherington, Bill
Farrelly, Paul
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flint, rh Caroline
Flynn, Paul
Foster, Mr. Michael (Worcester)
Gardiner, Barry
George, rh Mr. Bruce
Gerrard, Mr. Neil
Gilroy, Linda
Goggins, Paul
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Healey, John
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon

Hoey, Kate
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Illsley, Mr. Eric
Irranca-Davies, Huw
Jackson, Glenda
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Martyn
Keeley, Barbara
Keen, Alan
Keen, Ann
Kelly, rh Ruth
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kilfoyle, Mr. Peter
Ladyman, Dr. Stephen
Lammy, Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Lewis, Mr. Ivan
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
Mactaggart, Fiona
Mahmood, Mr. Khalid
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
McAvoy, rh Mr. Thomas
McCafferty, Chris
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McFadden, Mr. Pat
McGovern, Mr. Jim
McIsaac, Shona
McNulty, rh Mr. Tony
Meale, Mr. Alan
Michael, rh Alun
Miliband, rh Edward
Moffat, Anne
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Morden, Jessica
Mullin, Mr. Chris
Munn, Meg
Murphy, rh Mr. Paul
Naysmith, Dr. Doug
Norris, Dan
O'Brien, Mr. Mike
Olner, Mr. Bill
Owen, Albert
Palmer, Dr. Nick
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Primarolo, rh Dawn
Prosser, Gwyn
Reed, Mr. Andy
Reed, Mr. Jamie
Riordan, Mrs. Linda
Rooney, Mr. Terry
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, rh Joan
Salter, Martin
Sharma, Mr. Virendra
Shaw, Jonathan
Sheridan, Jim
Simon, Mr. Siôn
Singh, Mr. Marsha
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Snelgrove, Anne
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Stoate, Dr. Howard
Sutcliffe, Mr. Gerry
Taylor, Ms Dari
Thornberry, Emily
Timms, rh Mr. Stephen
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Turner, Dr. Desmond
Twigg, Derek
Ussher, Kitty
Vis, Dr. Rudi
Walley, Joan
Ward, Claire
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, Mrs. Betty
Wills, Mr. Michael
Wilson, Phil
Winnick, Mr. David
Winterton, rh Ms Rosie
Woodward, rh Mr. Shaun
Wright, David
Wright, Dr. Tony
Tellers for the Noes:

Mr. Bob Blizzard and
Steve McCabe
Question accordingly negatived.
10 July 2008 : Column 1595

10 July 2008 : Column 1596

Order for Third Reading read.

10 July 2008 : Column 1597
2.35 pm

Mr. McFadden: I beg to move, That the Bill be now read the Third time.

As I noted throughout our discussions on Second Reading and in Committee, the Bill seeks to equip regulators with the right tools and duties to address the many different circumstances in which they are expected to enforce regulation in practice.

In our debate this afternoon on the amendments, we debated two major issues that the Bill is intended to address: inconsistency and inflexibility in the regulatory system. The five principles of good regulation feature prominently in the Bill: consistency, transparency, targeting, proportionality and regulators’ accountability.

The background to the Bill is that in 2005 Philip Hampton reported to the Government on the burdens that arise from the enforcement of regulations. His report made it clear that better regulation is a matter not purely of policy making and legislation or of making policy better in the first instance, but of ensuring the right framework for the enforcement and upholding of regulations. This requires a system that provides effective enforcement by front-line professionals and the flexible use of sanctions to deal with non-compliance in ways appropriate to each case. Introducing the Bill on Second Reading in the other place, my colleague Lord Jones of Birmingham paid tribute to the expertise that stakeholders had brought to the Bill’s development, and I echo his comments. Local authorities and their representatives, the national regulators and business all contributed to its development.

The Hampton report set out a vision of a regulatory enforcement system in which honest businesses, doing their best to comply with the law, and regulators, seeking to protect the public as effectively as possible, move from a traditional adversarial relationship and work together to secure compliance with regulations intended to protect all our interests.

I believe that the Bill has, for the most part, been developed in the same spirit, and we are grateful for the input of business regulators, local authorities and all who helped to guide the process. I thank the hon. Members for Hertford and Stortford (Mr. Prisk), and for Solihull (Lorely Burt) and other hon. Members for their contributions, courtesy and understanding in Committee. The hon. Member for Hertford and Stortford probed and pressed, with some skill and some courtesy, for which I am grateful.

The debate addressed a number of important issues and offered us the chance to consider the safeguards that are rightly attached to many of the Bill’s powers. Its tone reflected the fact that before arriving here the Bill benefited from close and detailed scrutiny in the other place, where a number of amendments were made. Those included additional protections on how the local better regulation office would work in practice with local authorities, additional safeguards on the use of the alternative regulatory sanctions set out in part 3 and some refinements of part 4 in respect of how regulators would work, ensuring that there should be no unintended consequences.

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