Regulatory Enforcement and Sanctions Bill [Lords]

[back to previous text]

Clause 37

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 39

Fixed 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 40

Fixed 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.
The Chairman: Yes.
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.
Previous Contents Continue
House of Commons 
home page Parliament home page House of 
Lords home page search page enquiries ordering index

©Parliamentary copyright 2008
Prepared 18 June 2008