Regulatory Enforcement and Sanctions Bill [Lords]

---

The Committee consisted of the following Members:

Chairmen: † Mr. Christopher Chope, Mr. Eric Martlew

† Baron, Mr. John (Billericay) (Con)

† Burt, Lorely (Solihull) (LD)

† Dorries, Mrs. Nadine (Mid-Bedfordshire) (Con)

Drew, Mr. David (Stroud) (Lab/Co-op)

† Kidney, Mr. David (Stafford) (Lab)

† Lilley, Mr. Peter (Hitchin and Harpenden) (Con)

† McCarthy-Fry, Sarah (Portsmouth, North) (Lab/Co-op)

† McFadden, Mr. Pat (Minister for Employment Relations and Postal Affairs)

† McGovern, Mr. Jim (Dundee, West) (Lab)

† McKechin, Ann (Glasgow, North) (Lab)

† Main, Anne (St. Albans) (Con)

† Mallaber, Judy (Amber Valley) (Lab)

† Prisk, Mr. Mark (Hertford and Stortford) (Con)

† Prosser, Gwyn (Dover) (Lab)

† Seabeck, Alison (Plymouth, Devonport) (Lab)

Teather, Sarah (Brent, East) (LD)

Celia Blacklock, Chris Shaw, Committee Clerks

† attended the Committee

Column number: 43

Public Bill Committee

Tuesday 17 June 2008

(Afternoon)

[Mr. Christopher Chope in the Chair]

Regulatory Enforcement and Sanctions Bill [Lords]

Written evidence to be reported to the House

RESB 01 Hertfordshire County Council

Clause 26

Nomination of primary authorities

Amendment proposed [this day]: No. 16, in clause 26, page 13, line 3, at end insert—

‘(c) the regulated person gives 3 months notice that it wishes to terminate the nomination’.—[Mr. Prisk.]

4 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I was coming to the conclusion of my remarks on amendment No. 16 at the end of the previous sitting. Essentially, as the hon. Member for Solihull said, those remarks deal with whether the relationship can be forced. That is at the heart of the question.

There are a number of safeguards in clause 26 regarding the primary authority relationship. It mentions, for example, that the Local Better Regulation Office may only nominate a local authority if

“the authority and the regulated person have agreed in writing”

or when

“the regulated person has requested LBRO to make a nomination under section 25(1)...and LBRO considers the authority suitable for nomination”.

We want to give LBRO powers on such matters, partly because we think that there could be unfairness if many authorities simply opt out of the responsibilities that go with primary authority status, and if that work is being done by only one or two authorities. In the vast majority of cases, the relationship will be voluntary—after all, arranging such a relationship will be preferable to forcing it—but we want to give LBRO the power.

Under the amendment, if a business can simply opt out unilaterally, the danger, from a regulatory point of view, is that it could shop around, perhaps looking for its version of the right answer to a particular regulatory question. We do not think that a situation in which the relationship is forced should be the norm, but we do think that, as a backstop, it is important that LBRO can bring two parties together, rather than allowing a continual opting out of the primary authority relationship for a business in a multi-site—

Mr. Mark Prisk (Hertford and Stortford) (Con): Will the Minister say, from a practical point of view, what steps a business should follow if it decides or feels that it needs to terminate or revoke the nomination of the primary authority?

Column number: 44

Mr. McFadden: We spoke in this morning’s sitting about a situation in which one supermarket chain takes over another. The business could go to LBRO and say, for example, “We have been taken over by another group in another part of the country, so we think that the primary authority should no longer be local authority A, but local authority B.” That would be a perfectly rational thing to do. One would hope that LBRO would look kindly on such a situation. There are mechanisms whereby, for completely rational reasons, a business can say that it wants the primary authority to be changed. A similar circumstance could arise if a business moved its headquarters or principal centre of operations from north to south, for example. It would make sense for such a business to have a different primary authority relationship.

I am not saying that the arrangements should be frozen for ever once they are established, but there should be circumstances in which LBRO can say, “This is the relationship that we want to put together.” Under the amendment that the hon. Gentleman has proposed, the business could continually withdraw from primary authority relationships simply by giving notice, without the kind of reason that I have described. The danger is that we could have regulatory shopping around for the best deal, as it were, which I do not think would serve the Bill’s purpose.

Ann McKechin (Glasgow, North) (Lab): Will the Minister confirm how the LBRO will determine the suitability of Scottish local authorities as primary local authorities, given that there is no specific requirement for the membership of the LBRO to contain anyone with a Scottish background, be that a member of the Scottish Government or a person from the Scottish local authority?

Mr. McFadden: By the same criteria as anywhere else. It would depend on whether the company, which operates in multiple areas, has headquarters in a particular Scottish local authority, or has its main operations in a Scottish area. It may also have operations in different parts of Scotland or across Scotland and England. The same principle would apply in all those cases. There is a clause in the Bill that sets out the territorial application on which we touched. Assuming that territorial application applies and that we are talking about functions that are reserved, then LBRO’s primary authority principle will operate in the same way in Scotland as elsewhere.

Mr. Prisk: The debate has been useful because it has helped to clarify an issue that is not very clear in the Bill. Clause 26(5)(b) refers to when LBRO “considers it appropriate”. The Minister has now made it clear that a number of avenues are available to businesses to enable them to terminate any particular relationship with a primary authority. That has been helpful. In some ways, it would have been better for it to have been explicit, but with that clarification, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 ordered to stand part of the Bill.

Clause 27

Advice and guidance

Question proposed, That the clause stand part of the Bill.

Column number: 45

Mr. McFadden: I shall be brief. The clause defines the core role of the primary authority as giving “advice and guidance” to the business for which it is the primary authority and to other local authorities regarding how they should regulate the business. Therefore, it is a three-way relationship between the business and what we are calling enforcing authorities in the Bill. This clause allows the primary authority to be the business’s first port of call for advice on enforcement issues with national implications and allows the primary authority to make recommendations about the handling of particular issues that arise in its work to other local authorities.

Under subsection (2), a business and its primary authority may make arrangements to manage their partnership. The Bill does not prescribe what should be included in such an arrangement, but it may include, for example, a memorandum of understanding setting out the rights and obligations of each party. When a business and a primary authority choose to make arrangements, the primary authority must have regard to guidance issued by LBRO. The clause sets out the advice and guidance function of primary authorities, which will be an important part of their work.

Mr. Prisk: I am grateful to the Minister for those initial remarks. As the Minister says, the clause sets out the advice and guidance elements of primary authorities, in particular their role to advise and guide regulated persons as well as other local authorities through the regulations set out in the schedules of the Bill. The Government’s explanatory notes shed a bit more light on the matter. They show that that would mean that a regulated person in the primary authority should make agreements “as they see fit”. That could raise the vexed question of how to strike a balance between improving regulatory practice to lower the regulatory burden on the one hand and ensuring consistency on the other. The Bill is trying to straddle that classic balance between achieving consistency and raising standards individually. What principles does the Minister think that the LBRO will follow to ensure that one business does not gain over its competitors from a less regulatory environment, and if an enforcing local authority fails to follow a primary authority’s guidance, what legal responsibility does it have to the business involved?

Mr. McFadden: On the issue of consistency, which is what this part of the Bill is all about, LBRO acts as an arbiter. For example, the enforcing authority might feel that the arrangements between the primary authority and the regulator—the hon. Gentleman quotes from Government guidance—are actually a bit of a sweetheart deal, as I think I mentioned this morning: that they have entered into a cosy arrangement with each other, with the effect that the enforcing authority does not believe that the regulations are being properly enforced.

Apart from the advice and guidance function of LBRO, it also has an arbiter function, and that takes us back to some of this morning’s debates about advice and direction. In those circumstances, the enforcing authority can appeal to LBRO to look at the situation and see whether the regulations are being properly enforced, or whether the primary authority relationship is not conducive to better regulation with regard to the public interest in the area that the enforcing authority

Column number: 46

represents. That arbitration role of LBRO is important. It is something that is not enforced as it might be under the current regime, which is another reason for establishing the body.

Question put and agreed to.

Clause 27 ordered to stand part of the Bill.

Clause 28

Enforcement action

Mr. Prisk: I beg to move amendment No. 12, in clause 28, page 13, line 24, leave out from ‘is’ to ‘it’ in line 25 and insert

‘inappropriate and that compliance could be secured by an alternative enforcement action’.

The Chairman: With this it will be convenient to discuss the following amendments: No. 13, in clause 28, page 13, line 26, after second ‘the’, insert ‘originally proposed’.

No. 14, in clause 28, page 13, line 27, at end insert

‘and to take the alternative enforcement action mentioned above’.

No. 31, in clause 28, page 14, line 13, leave out paragraph (b).

Mr. Prisk: I will discuss amendment No. 31 in a moment, as it is distinct. The first three amendments seek to return greater flexibility of power to primary authorities—something that was in the Government’s first draft of the Bill. There are three amendments to subsection (2) on page 13, and rather than deal with them individually, to aid members of the Committee I will read how the new subsection would read once amended, so that the picture can be seen in its entirety:

“If a primary authority determines within the relevant period that the proposed enforcement action is inappropriate and that compliance could be secured by alternative enforcement action, it may within that period direct the enforcing authority not to take the originally proposed action and to take the alternative enforcement action mentioned above.”

That would be the net effect of the three amendments, although I stress that they are probing amendments and seek to understand the subsection.

As currently drafted, the clause is much narrower than in the original Bill as presented to the other place. As such, it limits the primary authority to intervening by preventing one form of action by an enforcing authority. The amendments, which have the support of the British Retail Consortium, seek to re-establish a wider remit so that where better alternative actions exist, the primary authority can direct the enforcing authority to implement them. That would enable the primary authority to act more positively, and not be negative in its activities.

I fully accept that the wording that I used is not perfect—that is my error and not that of the Clerks. However, I wish to consider the practical issues and perhaps the Minister could focus particularly on why the Government decided to change the original wording. Secondly, does the Minister recognise that more flexible powers would better enable primary authorities to fulfil their role? That is the heart of the amendments.

Column number: 47

Amendment No. 31 relates to subsection (9) on page 14. It defines the relevant period within which a primary authority must decide whether enforcement actions can or cannot proceed. Subsection (9)(a) specifies that that might be

“the period of five working days”,

which for most companies is a normal working week. It means that during that time the business is in limbo about whether it will face a sanction, fine or whatever. In business, time is money and that is particularly the case for small businesses who may be affected by such legislation. The matter should be hanging over them for as short a period as is reasonably possible.

Subsection (9)(a) is good, because five working days is perfectly reasonable and sensible. My problem is that paragraph (b) then states that “relevant period” can mean

“such longer period beginning with that day as LBRO may direct.”

Why does the Minister believe that the LBRO should need any longer than five working days? That would cause difficulties for smaller businesses. Rather than the major organisations with large legal departments, this concerns the smallest family businesses that have only two or three people who are just trying to get on with their job. They have a personal sanction and are waiting to know what will happen. Is not five days enough? I look forward to the Minister’s response.

4.15 pm

Lorely Burt (Solihull) (LD): The area of greatest discomfort for me is that the clause will bestow on one local authority the power of veto over another authority’s enforcement decisions. That not only is undemocratic, but gives the primary authority de facto powers of legal interpretation that are the proper function of the courts. The amendments and the new clause that I have tabled would remove that veto and leave it to a court rather than a primary authority to decide whether enforcement action was unjustified in the light of advice given to a company by the primary authority. I should be grateful if the Minister would try to give some reassurance and a little more information on that matter.

---

Prepared 18 June 2008