Regulatory Enforcement and Sanctions Bill [Lords]

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Lorely Burt: I tabled an amendment to delete the clause, but although the amendments are something of a compromise in transferring the LBRO powers to the Secretary of State, I would be happy to support the hon. Member for Hertford and Stortford if he decided to press them to a Division. It is fair to say that none of us is happy with giving directive powers to non-elected bodies over elected bodies—in other words, over local authorities.
Clause 6 gives the LBRO the power to issue guidance to local authorities on the exercise of their regulatory functions. Local authorities are required to have regard to such guidance. In addition, every local authority has to have a published enforcement policy, and will be required to comply with the new statutory regulations compliance code, which requires them to exercise their regulatory functions in a clear, proportionate and transparent manner. We therefore believe that clause 7 is not necessary.
If a local authority does not pay due regard to the guidance issued by the LBRO, a range of mechanisms are already available to the LBRO, another local authority or a regulated person or entity in order to hold them to account for any failure. Those mechanisms include legal appeal mechanisms if the failure results in any form of enforcement action, and the corporate complaint procedures that every local authority is required to publish; and there is the independent local ombudsman.
Clause 7 was amended in the other place to add subsection (4), which requires directions that affect more than one local authority to be subject to the negative procedure; it also added subsection (5)(a), which requires the LBRO to consult the local authority that it intends to direct before issuing the direction. Under subsections (2) and (3), the LBRO must obtain the consent of the Secretary of State or Welsh Ministers before issuing a direction.
However, none of those safeguards alters the fact that, because local authorities have to have regard to LBRO guidance under clause 6, the possibility of issuing directions will arise only if authorities have good reason for acting differently. It is most likely to arise if the authority feels that the LBRO guidance runs counter to its statutory obligations. The power could therefore give rise to lengthy legal difficulties over whether its guidance can take precedence over an Act of Parliament.
Mr. McFadden: I begin by agreeing with the hon. Member for Hertford and Stortford that clauses 6 and 7 go together and are probably best seen in the same light. Our discussion takes me back to the first question that the hon. Gentleman asked this morning, which was whether I and the Government were confident that a relatively small organisation such as LBRO would have the teeth to do the job. That is what clause 7 is about.
One obviously believes that guidance will mostly be observed, but if not the question is whether there should be a power to issue directions in some circumstances. It is intended to be a backstop power that might be used, for example, where one or more local authorities persistently disregard a particular piece of guidance to the detriment of business or the general public.
The LBRO may use the power only with the consent of the Secretary of State or Welsh Ministers and after consultation with the local authorities to whom the direction is being given, any relevant regulator and such other persons as LBRO considers appropriate, including, for example, representatives of bodies such as the Trading Standards Institute or the Chartered Institute of Environmental Health. Where LBRO gives direction to two or more local authorities, ministerial consent must be given in an order. I believe that that provision came about partly as a result of the recommendations of the Delegated Powers and Regulatory Reform Committee, which was keen to ensure proper procedures for issuing such directions. There was considerable debate on the issue in another place. The clause has been amended to take account of those discussions, and I think that it has been improved by it.
The argument is that the powers are unprecedented and that there is a lack of democratic accountability in how they work. To give a bit of background, we started consulting on them last year. The consultation made it clear that a number of stakeholders were concerned to ensure that the body would have real teeth in carrying out its functions. We proposed the backstop power to be used in circumstances like the ones that I have outlined.
The hon. Member for Hertford and Stortford took issue with the comparison with the Food Standards Agency quoted in this debate. It is not an exact parallel, but it is the closest precedent. Under section 40 of the Food Safety Act 1990, the agency may give directions to a local authority to take steps to comply with a code of practice, much as the LBRO may require a local authority to comply with its guidance. It is also true, however, that the Food Standards Agency has extensive other powers to which LBRO will not have access: for example, the power to audit local authorities’ performance of their functions or even to take over the management of local authorities’ relevant functions directly at the request of the Secretary of State. I am not sure that what is proposed in the measures is a constitutional precedent that goes beyond what happened before. It is important and right that clause 7 should contain safeguards, partly in response to some of the concerns raised.
The use of the powers of direction is subject to the consent of the Secretary of State. The example quoted from the Food Standards Agency is weaker, as the Food Standards Agency must only consult the Secretary of State. That falls short of the strict requirement in the clause to secure the Secretary of State’s consent. LBRO, as I said, must also consult any local authority subject to directions, and parliamentary approval will be required where the directions affect more than one authority.
The amendments tabled by the hon. Member for Hertford and Stortford would transfer the power from LBRO directly into the hands of the Secretary of State. The issue is clearly one of democratic accountability and ensuring that LBRO gives directions to local authorities in a proper way. He believes that that should be done only by an elected person. We believe that the requirement in clause 7 for ministerial consent is an important democratic safeguard. Hopefully, it will have the effect that he wants, which is to secure democratic accountability in the exercise of the power. LBRO will be able to propose directions, but the decision to approve their use will rest firmly with Ministers. From the accountability point of view, the effect would, in the end, be the same because Ministers would effectively be responsible for any use of the directions. However, the amendments would make the provision work in quite a different way because transferring the power to direct into the Secretary of State’s hands would undermine LBRO’s position as the expert body on regulatory guidance, and would place the Secretary of State in a more active decision-making role. Although he might, of course, argue that it is open to LBRO to give advice to the Secretary of State on when or whether to direct, making the Secretary of State the decision maker would change the way in which LBRO’s role is perceived in practice. Doing so would ultimately undermine the provision, which is importantly and rightly surrounded by proper democratic safeguards.
The provisions in clause 7 are important to enable LBRO to achieve its objective, and sufficient safeguards are in place to ensure that LBRO uses its power to direct compliance with guidance in a responsible manner. The idea of direction has support from a number of groups. I shall quote one or two of them. For example, the British Retail Consortium said:
“In our view, the LBRO should be able to decide the strength of the guidance—i.e. it should decide whether authorities must comply; whether they should have regard to the guidance; or whether it is merely advisory.”
It is not just business groups that say such things; the National Consumer Council has said:
“Although we recognise the concerns of local authorities, we consider this measure is necessary to ensure that consumers do not experience a postcode lottery.”
The Trading Standards Institute has stated:
“TSI is necessary that LBRO has the power to direct local authorities that are at odds with central guidance in order to ensure a consistent regulatory environment.”
The CBI said.
“we would welcome moves to maintain the powers of the Local Better Regulation Office (LBRO). Business has been promised a better regulatory environment if regulators are awarded new powers. But this requires regulators to deliver on this, and we think it important that the LBRO is given the appropriate powers to ensure that local authorities do just this. Maintaining Clause 7 as currently drafted, which gives the LBRO powers of direction, would help achieve this”.
So, a significant number of voices are saying not just that there should be a power of direction, but that the LBRO should be the body using that power.
Judy Mallaber: My hon. Friend referred to the National Consumer Council. Will there be provision for consumer organisations to be consulted as part of the process, because that is not in the Bill? There has been concern that businesses get consulted but that the consumer’s voice does not get heard.
Mr. McFadden: That is certainly possible. I refer my hon. Friend to subsection (5), which states:
“Before giving a direction under this section LBRO must consult—
(a) the local authorities in England or Wales to whom the direction is to be given;
(b) any relevant regulator, and
(c) such other persons as LBRO considers appropriate.”
So, it is certainly open to the LBRO to consult the National Consumer Council—although I do not pretend that that is written in the Bill in every instance.
The powers do have some precedent in the example that has been quoted. I believe that business wants these powers and other organisations such as the Trading Standards Institute and the National Consumer Council have also said that they support them. The amendment would not provide a gain in terms of democratic accountability—that is a fair question to ask, but it is something that we have covered. The amendment might actually make that more difficult to operate, not in everyday situations, but on those occasions when guidance is not enough and it is necessary to exercise the teeth that we began today’s proceedings by calling for.
12 noon
Mr. Prisk: It has been a useful debate, but I am not convinced by the Minister’s arguments. He is right to say that the clause has been significantly improved. It was improved in the other place by the efforts of Members of that House and there are certain measures, which he has referred to, that have made it a better clause. However, there remains the question of a precedent. He has only been able to cite one example: the Food Standards Agency. As I have demonstrated, that agency seeks to direct the implementation of an Act, not of guidance, and that is an important difference. Unless he has three other good examples, I have not heard from him where this is not a precedent. We remain clear, therefore, that although the example that has been offered has some relevance, it is not directly the same, and that therefore a precedent has been established.
What about the question of teeth? The purpose of my amendment is not to remove the power to direct—it could be quite legitimately argued that that would remove the teeth. To continue the metaphor, and I shall probably stop it at that point, the teeth remain. I am concerned with how they are harnessed and the accountability. The clause already asks that where the LBRO seeks to make a direction, it goes to the Secretary of State. That does not solve the problem that although that body is accountable to the Minister, it is not accountable us in this House. I understand, therefore, that business will take the view that it does and I do not disagree with that view. Looking at how businesses responded to the Bill, I have a string of quotes here about their concerns about it. The CBI, which the Minister referred to, said on 21 May:
“This Bill requires business to take a leap of faith: it proposes that regulators be awarded additional powers to sanction business in exchange for the promise of a better regulatory environment.”
We could trade quotes as to who is in favour of which bit or whatever; the fundamental question is whether this power needs to be in the hands of an unaccountable non-departmental public body.
Question put, That the amendment be made:—
The Committee divided: Ayes 6, Noes 8.
Division No. 2]
Baron, Mr. John
Burt, Lorely
Dorries, Mrs. Nadine
Lilley, rh Mr. Peter
Main, Anne
Prisk, Mr. Mark
Drew, Mr. David
Kidney, Mr. David
McCarthy-Fry, Sarah
McFadden, Mr. Pat
McGovern, Mr. Jim
McKechin, Ann
Mallaber, Judy
Seabeck, Alison
Question accordingly negatived.
Clause 7 ordered to stand part of the Bill.
Clause 8 ordered to stand part of the Bill.
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