Clause
37“Regulator” Question
proposed, That the clause stand part of the
Bill.
Mr.
McFadden: With your permission, Mr. Chope,
perhaps my comments can refer to clause 37 and touch on clause 38, as
both clauses are
definitional.
The
Chairman: For people to follow the debate, it is much
easier to deal with the Bill clause by clause, which is what we said at
the beginning of our proceedings that we shall
do.
Mr.
McFadden: I take your guidance, Mr.
Chope. Clause
37 defines the terms “regulator” and “designated
regulator”. The regulator is a person specified under schedule
5. That lists a number of national regulators to which the powers will
refer, many of which are familiar to members of the Committee.
Subsection (3) makes it clear what is not included, such as the Crown
Prosecution Service, the police and so on because those organisations
retain a role in respect of criminal prosecutions that are
an alternative to the sanction regimes that we are discussing now. The
clause defines the regulators to which the powers would
apply. Question
put and agreed
to. Clause
37 ordered to stand part of the
Bill. Schedules
5 and 6 agreed
to.
Clause
38“Relevant
offence” Question
proposed, That the clause stand part of the
Bill.
Mr.
McFadden: The clause describes the relevant offences that
we are talking about in respect of a designated regulator. The Bill
confers powers on the regulators set out under schedule 5 to have
access to the new sanctions for relevant offences under schedule 6,
which is why the two parts come together to define both the regulators
and the offences to which we are
referring. Question
put and agreed
to. Clause
38 ordered to stand part of the
Bill.
Clause
39Fixed
monetary
penalties Question
proposed, That the clause stand part of the
Bill.
Mr.
McFadden: The clause sets out the first of what could be
called a suite of powers and sanctions and is specifically about fixed
monetary penalties. Fixed monetary penalties will provide regulators
with an effective tool, enabling them to deal quickly with low-level
examples of non-compliance, rather than pursuing a costly criminal
prosecution. Perhaps here more than anywhere, we see the stark contrast
between what might be done under the new regime and the policy
available under the current one.
Fixed
monetary penalties are aimed at factually simple cases of
non-compliance, which may or may not involve culpable conduct. For
example, they could be used for strict liability offences, where it is
not necessary to show intention to commit the offence, but they should
benefit both regulators and business. They should also help to address
the compliance deficit identified by Professor Macrory. That is
important—one of the points that Professor Macrory made in his
report was that not only was the system inflexible, but by having only
one main tool to ensure compliance, there was actually a compliance
deficit. Low-level non-compliance was either not being prosecuted or,
in some high-level non-compliance cases, it was resulting in a fine
that did not match the crime involved. It was not only a case of
inflexibility; it was about not producing the desired results on
compliance.
Judy
Mallaber: Can my hon. Friend assist me by explaining what
kind of offences he is talking about? In the company where I used to
work, I remember that our administrator was always hugely affected by
the advertisement from Companies House which stated
that if accounts and orders about who was on the management committee
were not returned on time, there would be a £2,000 fine. No one
was sent to jail, but it was remarkable having that advertisement
there—knowing that there might be a charge of £2,000 was
certainly an incentive to get it done. Is that the sort of example that
the Minister is talking about?
Mr.
McFadden: It is a very good example. The previous
Government introduced such penalties and civil sanctions for late
filing, exercised by Companies House. That came up on Second Reading
and, if I am right, rates of compliance following the introduction of
those penalties went up. In 1991, the compliance rate was 86 per cent.
In 1992 it immediately increased to 92 per cent., and it continued to
increase to a level of 96 per cent. It shows that the previous
Government were correct to introduce civil penalties in those cases. My
hon. Friend is right that it is a good example, which I believe can be
built on in some of the areas that we are talking about.
Turning to
the clause, subsection (2) requires that regulators may only impose a
fixed monetary penalty when
“satisfied
beyond reasonable
doubt”— that
is an important point referring to the criminal standard of
proof—
“that the person
has committed the relevant
offence.” Subsection
(3) states that the amount of the penalty will be specified by the
order made by the Minister. For example, the level of the fixed
monetary penalty could differ according to whether the person liable is
an individual or a body corporate. Subsection (4) caps the level of
fixed monetary penalty at the maximum fine that would have been
available for that offence if it had been tried summarily in the
magistrates court. That is usually £5,000. There are other
safeguards in clauses 40 and 41 for persons upon whom the fixed
monetary penalties are imposed.
The clause
sets out the basic regime for fixed monetary penalties. It is one of a
number of sanctions that Professor Macrory recommended. We believe
that, if enacted, it will be an important addition to what regulators
can do to ensure compliance. It is also, importantly, an addition with
safeguards built in for those who are subject to these
procedures.
Mr.
Prisk: I welcome the Minister’s remarks. I confess
that for a moment, when he said the previous Government, I was not sure
whether he meant that led by Mr. Blair or the previous
Conservative Government, but I think that by the look on his face he
meant the Conservative Government. I am happy to confirm that he
concurs.
There is a
strong role for this kind of penalty. The Minister is absolutely right
to say that built into the clause, thankfully, are some sensible
safeguards. In subsection (2) we have the important principle,
“beyond reasonable doubt”. Although hon. Members will
realise that that is usually a criminal matter, it sets the bar high.
The other point is that subsection (4), as he rightly said, puts into
place the cap, which is also an important principle.
In summary,
there are problems with the related system, but the principle of these
penalties can and does work, as the hon. Member for Amber Valley
referred to in her own example. And they do, the evidence suggests,
help drive the compliance rates up in a reasonable way. So the principle
of fixed monetary penalties has some merit. The two particular limits
or restraints give me confidence and therefore the clause is to be
welcomed in principle. Lorely
Burt: I agree with everyone who has spoken on this issue.
It is a good principle to have penalties. We have had a lot of
discussions about metaphorical parking tickets. I just want to make one
point about fixed penalties. It is important that the penalty is
appropriate, just like in “The Mikado”: let the
punishment fit the crime. We should be wary of developing the mentality
whereby one fixed penalty for one small company might be just as
appropriate as a fixed penalty for a larger company. It is important to
bear that in mind.
I draw the
Minister’s attention to subsection (4)(b), that the relevant
offence
is “punishable
on summary conviction by a fine (whether or not it is also punishable
by a term of
imprisonment)”. He
referred earlier to the appeals system being through a tribunal. Does
he not think that if we are talking about penalties that have the
potential for someone to go to prison, we should have an appeals system
that, if the company so wishes, goes through the courts and not through
a tribunal?
Mr.
McFadden: To turn to what the hon. Lady has just said, the
company can appeal beyond the tribunal if it wishes to continue the
appeal, but the appeal is to the tribunal.
On the level
of fines, those are related to the offence, which is why we get the
limit that we do. Subsection (4) sets out that the limit applies where
the relevant offence is triable summarily and punishable on summary
conviction by a fine. These sanctions are an alternative to
prosecution; they are not the same as prosecution. Perhaps that might
set out the difference between a fine and criminal prosecution as the
hon. Lady outlines. The principle behind this is that the penalty
should fit the crime involved. One of the problems that Professor
Macrory identified was that only having criminal prosecutions as a
sanction for some of these lower-level offences did not actually result
in the compliance that we want to see. That is why a regime more akin
to what my hon. Friend the Member for Amber Valley set out with regard
to Companies House is something that we want to add to the
regulators’ options in such a
situation. 5.30
pm The
level of fixed monetary penalty is related to the offence. The amount
that we specified is in the order, and the regulator will simply file
the appropriate amount based on the characteristics of the offence and
the offender. In that sense, the punishment shall fit the crime.
Regulators can apply that important new option to the lower-level but
important offences that our constituents expect to see punished, but
that sometimes go unpunished under the current regime because the only
tool available is
prosecution. Question
put and agreed
to. Clause
39 ordered to stand part of the Bill.
Clause
40Fixed
monetary penalties:
procedure
Mr.
Prisk: I beg to move amendment No. 34, in
clause 40, page 18, line 15, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’.
The
Chairman: With this it will be convenient to discuss the
following amendments:
No. 35, in
clause 40, page 18, line 17, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’. No.
36, in
clause 40, page 18, line 20, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’. No.
37, in
clause 43, page 20, line 23, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’. No.
38, in
clause 43, page 20, line 26, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’. No.
39, in
clause 43, page 20, line 30, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’. No.
40, in
clause 43, page 20, line 31, after
‘regulator’, insert
‘or an independent person
appointed by the
LBRO’. No.
47, in
clause 40, page 19, line 9, at
end add— ‘(7) In this Act
“an independent person appointed by the LBRO” means a
person who is not, and has not been, an employee of the LBRO company or
a Crown servant and has, in the view of the LBRO, relevant
qualifications and
experience.’.
Mr.
Prisk: I spoke earlier of the potential injustice of a
regulator both issuing a notice of intent to find somebody and then
being the recipient of objections to that decision. Amendments Nos. 34
and 35 seek to correct that injustice by providing the option of having
an independent person hear those objections. Specifically, the
amendments would allow the LBRO to appoint that person, but they must
be independent of the regulator concerned and they must have the
relevant qualifications and experience. Although I think that parts of
the procedure have merits, other parts have problems and the amendments
will help by giving the accused—if we can use that phrase in
this context—the sense that they have an option to seek some
form of independent perspective on the matter rather than simply being
able to turn back only to the regulator who is trying to fine them in
the first place. I hope that the Minister will consider the matter with
care.
I imagine
that I address amendment No. 41 a little later on, Mr.
Chope.
Mr.
McFadden: The hon. Gentleman’s amendment proposes
the alternative that an independent person be appointed by the LBRO.
Does he, therefore, see the LBRO appointing someone to operate, say, in
the Environment Agency as a judge of whether a client of the
Environment Agency—if we may use that phrase
rather than the accused—has broken the law? How would the LBRO be
able to ensure that level of specific expertise in the Environment
Agency’s
remit?
Mr.
Prisk: The intervention is helpful because it gets to the
heart of whether the person involved has both ability and independence
from the original representation. My reading of clause 40 would be that
it would be quite appropriate for an independent person appointed by
the LBRO to be able to make reasonable judgment as to whether the
representations and objections made were appropriate. Therefore, it
would be right for the LBRO to appoint someone who has the capability
to do that. That is why the amendments do not simply say that we should
appoint an independent person, but would give the system the
opportunity to ensure that that person is appropriate and qualified. I
think the amendments allow for that, but I am happy to debate it in due
course. We will come to amendment No. 41 in a moment, but that is how I
believe the proposal would work.
We want to
ensure that the process is seen to be fair and reasonable. There is
nothing worse than a system that is generally appropriate being let
down by the perception of the client—to use the
Minister’s word rather than the word accused—that they
are facing a regulator who has already determined that they should be
fined and that objecting will therefore have no purpose.
My concern is
the small business that looks at this and thinks, “Hang on a
moment, I’ve just been served this notice. Where do I turn to
object? It’s the very people who will serve the notice back, so
I’m just going to pay the fine and get on with my life because
I’m not going to get a fair hearing.” That is my
concern.
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