Regulatory Enforcement and Sanctions Bill [Lords]

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Mr. Prisk: This has been a helpful debate. I accept that a number of the orders principally relate to technical matters. As the Minister highlighted, the orders in parts 1 and 3 are subject to the positive resolution. However, that is not the case here. I considered the issue with some care and looked at the matter in terms of schedule 4. Enforcement action is quite an extensive part of the Bill in relation to the way it reaches the operations of the LBRO. That is particularly the case in those areas where the actions of the LBRO will impinge upon the businesses concerned—the regulated person, as it were.
My problem is that the LBRO itself is not accountable to us. Therefore it is important that we strengthen our ability to scrutinise the Government’s actions wherever else we can. Although I accept that, for the most part, the principal purpose of the orders for this part is technical, the enforcement action is nevertheless important. If I might refer to the metaphor used by the Minister, enforcement action will be the teeth that are often seen and, indeed, felt by the regulated persons. It is therefore important that we have the opportunity—no more than that—to debate these matters in an appropriate fashion. Although I understand the assurances of the Minister and do not always think it is appropriate to pursue the positive resolution on technical matters, on this occasion it is. I therefore seek to press the amendment to a Division.
Question put, That the amendment be made:—
The Committee divided: Ayes 5, Noes 8.
Division No. 3]
Burt, Lorely
Dorries, Mrs. Nadine
Lilley, rh Mr. Peter
Main, Anne
Prisk, Mr. Mark
Kidney, Mr. David
McCarthy-Fry, Sarah
McFadden, Mr. Pat
McGovern, Mr. Jim
McKechin, Ann
Mallaber, Judy
Prosser, Gwyn
Seabeck, Alison
Question accordingly negatived.
Clause 34 ordered to stand part of the Bill.
Clause 35 ordered to stand part of the Bill.
5 pm

Clause 36

Power to make orders providing for civil sanctions
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: If you will permit me, Mr. Chope, I will go slightly wider than may be appropriate and pause for a moment to talk about part 3. This takes us into the second significant area identified by Hampton in his report. The first area was inconsistency, and we talked about that a lot in parts 1 and 2 regarding the establishment of LBRO and the primary authority principle that we were debating.
We now turn to Hampton’s other significant criticism of the regulatory regime—inflexibility. This part of the Bill begins to address that issue, and gives greater flexibility to regulators in terms of the sanctions that they can impose. Some of those sanctions are monetary, some involve corrective actions or instructions for corrective measures to be taken, but they all address the issue of inflexibility and the disproportionate nature of having a one-club policy to enforcement—that of criminal prosecution.
Hampton’s work was built on by Professor Richard Macrory who, if memory serves me, published his report in November 2006. Macrory recommended a number of the different sanctions outlined in part 3, which acknowledges and introduces different powers, including fixed penalties, available monetary penalties, stop notices and so on. We will help ensure that rogue traders—or, as it says in my speaking note, “rouge traders”—will not continue to receive an unfair advantage by failing to adhere to the law, and we will increase confidence further in the regulatory regime.
The proposals have been welcomed by bodies including the Engineering Employers Federation, the Federation of Small Businesses, local authority enforcers and the Institute of Directors. There is widespread support for more flexibility in the system and clause 36 specifically allows a Minister of the Crown or a Welsh Minister to make an order providing for those new civil sanctioning powers as an alternative to criminal prosecution.
As I have said, the sanctions will provide regulators with more proportionate, flexible and effective ways of targeting regulatory non-compliance. Before making an order, the Minister must be satisfied that the regulator will exercise such powers in a manner that is in line with the principles of good regulation—we talked about that this morning—in a way that is transparent, accountable, proportional, consistent and targeted and used only in cases where action is needed. The Minister must seek the approval of the Panel for Regulatory Accountability, whose terms of reference include ensuring that the burden of regulation on business is kept to a minimum. That process is set out on pages 28 and 29 of a guide to the Bill published by my Department.
The Bill also requires the Minister to consult before making an order, and subjects it to affirmative resolution procedure. That means that the relevant parliamentary processes will apply to that order. Part 3 is an important part of the Bill. It addresses the issue of inconsistency, it gives greater flexibility to the regulators and it ensures that we will tackle these rouge traders.
Mr. Prisk: I welcome some of the remarks that the Minister has made. He has identified that this clause seeks to provide powers to make orders providing for civil sanctions, but it then proceeds to do so right across the whole of the part. To follow his remarks, which edge slightly beyond clause 36, without testing your patience, Mr. Chope—I am sure that you will guide me should I stray too far—he is right to say that this part of the Bill, which provides many of the order-making powers, introduces a wide range of sanctions. We have fixed monetary penalties, discretionary stop notices and other enforcement actions. Those are provided not just for a single regulator, but for 26 different regulators, as well as all the local committees, so probably 30 bodies. Those include the Financial Services Authority, the Charity Commission, the Health and Safety Executive, the Football Licensing Authority and even the Human Fertilisation and Embryology Authority—so a really wide range of regulatory bodies.
Legally, the sanctions according to schedule 6, which I am sure we will come to in due course, apply to no fewer than 142 separate laws. Almost every aspect of our constituents’ lives will be covered by this: from housing to jobs, from animal welfare to protecting our children, from disability discrimination to Sunday trading. All of those statutes are listed in the Bill and are affected by the new range of sanctions that we are considering in the clause.
Most notably, the sanctions, which are often fines, will be imposed without recourse to the courts. The Opposition do not oppose civil penalties as a matter of principle, but we believe they are most appropriate for minor offences such as parking or speeding. The danger is that we may end up with the regulators handing out the equivalent of parking fines, which may prove rather attractive to them. That is bad for business and it undermines what we have debated so far—the concept of a risk-based approach to regulation as set out in parts 1 and 2.
Many business organisations are concerned. The Minister said that there was wide support. Let me joust briefly with two or three proponents on this side of the argument; he has mentioned two or three on his side. The British Retail Consortium is very concerned. It regards the section as “unacceptable”. The Forum of Private Business regards it as a deal breaker. The CBI says that
“business is still concerned that introducing more administrative fines will foster a ‘parking ticket’ mentality amongst inspectors, which will fundamentally change the existing relationship between inspectors and businesses”.
Let us be candid with one another: there are mixed views rather than a body of opinion that is wholly on one side or the other.
Lorely Burt: While the hon. Gentleman is talking about a parking ticket mentality among inspectors, does he agree that a parking ticket of £70 might be nothing to someone who has a good income—such as a Member of Parliament, dare I say it—but to a pensioner a parking ticket is a huge imposition? I certainly could not use the example of a Member of Parliament as regards changing behaviour, but a lot of people can disregard parking tickets and treat them as part of doing business, whereas for other people they make a big difference.
The Chairman: That was a long intervention. This Bill is not about parking tickets.
Mr. Prisk: My allusion—
Lorely Burt: A metaphor.
Mr. Prisk: It was a metaphor rather than an allusion. The metaphor was to illustrate not that we were talking about real parking tickets, but that we are talking about the danger that simply handing out fines or sanctions is not the way in which compliance is achieved. Obviously, the principles of Hampton and Macrory, upon which the Bill is based, are anxious that we do not go down that path. It is that mentality that the hon. Lady was referring to.
On Second Reading and in earlier debates, Ministers have been keen to say, “Ah, but there is an independent tribunal process”—an appeal process is available. There is, but it is just that, an appeal process. In other words, that process only happens after the sanction or the fine has been handed out. To use the criminal law equivalent, that only happens after the accused has been found guilty. There is, therefore, no opportunity for an innocent person to defend themselves until appeal. That is the crux of the concern.
The orders set out in the clause, which relate to the rest of part 3, are important. If the clause related to just one regulator or one piece of legislation, it might not be regarded as such a significant incursion. However, we are talking about over 27 different regulators, with 142 different pieces of legislation. It is therefore a huge shift in the law. Whatever the Minister’s original intentions, the clause has the potential to result in a significant reduction in our civil liberties. It is worth remembering that a regulated person—someone who could receive such a sanction or fine—is not just a business, but a person. Hon. Members may wish to reflect on that and what impact that might have on, say, a shop worker, who might suddenly find that those 27 regulators and 142 different pieces of legislation might well relate to them. That is worth bearing in mind.
My party and I have serious reservations about this part of the Bill. We understand the benefits of, as the Minister rightly says, not simply relying on one, crude, one-size-fits-all criminal approach and we understand that there is a good argument for the civil procedure, but our worry is about a wide range of powers for a wide range of regulators. Therefore, as we go through this and subsequent clauses, I hope that the Minister will be able to demonstrate why the approach is both right in principle and appropriate in practice.
Mr. McFadden: I shall try to answer some of the specific points without going into a Second Reading debate on part 3 of the Bill.
The hon. Gentleman raised two points, the first being about a parking ticket mentality and whether that would be encouraged—although I have said that we are not talking about parking tickets as such. There are safeguards against that developing too easily. Regulators will have to be satisfied to the criminal standard of proof—beyond reasonable doubt—that a person has committed an offence before a regulator can impose a fixed monetary penalty. The person will be able to make representations to the regulator before the sanction can be imposed. The hon. Gentleman was somewhat dismissive of the right to appeal against the sanctions to an independent tribunal, but it is there, in the Bill, and is an important safeguard against an abuse of the powers by a regulator. Also, regulators will not directly benefit from penalties, as any moneys gathered as a result will be paid into the consolidated funds. We are not setting up a money-making scheme for regulators.
The hon. Gentleman talked about businesses being concerned about judge, jury and so on all being one. In the end, we must make a judgment about whether we want to have a regime that includes such sanctions in addition to the traditional route of criminal prosecution. Criminal prosecution has been used until now—or often not used, because of various issues. It can be a disproportionate response to many instances of non-compliance, and we believe that regulators need access to a range of more flexible sanctions.
5.15 pm
As Professor Macrory said, civil sanctions are an established part of the enforcement landscape. A number of regulators already have the power to impose them. It is not a new constitutional departure. It will give the regulators listed under the schedules to which he referred the capacity to use the sanctions as they do not use them at the moment, but the principle of them is not new. The powers will be conferred on regulators only if the Minister is satisfied that they will act in accordance with better regulation principles. We have talked a lot about them today when using the powers, so I shall not repeat that now.
Businesses will have an opportunity to make their case against the imposition of the sanction. They can make representations and objections, and have the right of appeal to an independent tribunal. We will argue the case further in respect of the individual amendments that we shall discuss, but we must make a judgment about whether we shall implement Professor Macrory’s recommendations and vary the mix of sanctions available under the regulatory regime. We have decided to do so, and that is what this part of the Bill does.
Question put and agreed to.
Clause 36 ordered to stand part of the Bill.
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