Regulatory Enforcement and Sanctions Bill [Lords]


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Mr. Prisk: I understand the toxicology issues, and the Minister has made important statements today that have not been made before. Clearly, there will be certain circumstances in which those toxicology studies will not be available for some time beyond 14 days. Can the Minister tell us, and those who might be affected by the legislation, what will happen in those circumstances?
Mr. McFadden: As I said, the process cannot be limitless as that would place the business in an unfair situation. A judgment must be made and we feel that 14 days strikes the right balance between allowing the regulator to do whatever tests are necessary, and not putting the business under a cloud of uncertainty or even a continuing state of closure. This is a judgment about how one strikes that balance. The hon. Gentleman feels that seven days is right, but we feel that 14 would cover more situations and that is our judgment.
Mr. Prisk: This is a helpful debate. Presumably—to continue with the example we have been using—there would be no prohibition on the subsequent issuing by the regulatory authority in question of a stop notice, in the event of a subsequent leakage. Would there be an opportunity, therefore, if for example a delayed toxicology study were to be presented at 21 days, for the authority to issue a stop notice at that point?
Mr. McFadden: A stop notice could be issued twice, but as I have said it is an onerous sanction and not something that either the regulator or the business would want to go through repeatedly. The purpose of including an onerous option of that kind in the regulator’s toolkit is precisely to deal with those urgent and serious situations that we have discussed under clause 46, so the hon. Gentleman makes a fair point in saying that the process could be repeated, but we are trying to frame the stop notice procedure in such a way that problems will be dealt with by issuing one notice, dealing with the problem and moving on. That is the right way to tackle such a problem.
I am partly comforted by the Minister’s assurance—which I know will partly be coloured by later guidance to be issued by Ministers. We have clarified something that was not clear from the deliberations in the other place and made some welcome progress for businesses that have been concerned about the provision, several of which have contacted me directly. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lorely Burt: There is also my amendment.
The Chairman: I do not know whether the hon. Lady wanted to press her amendment, but she did not indicate that she did, and we take only the lead amendment in any grouping. All the others must be moved separately; otherwise they fall automatically.
Lorely Burt: No; I was inquiring only about seeking leave to withdraw it, so that is fine.
The Chairman: There is no need to withdraw an amendment that has not been proposed.
Clause 47 ordered to stand part of the Bill.

Clause 48

Stop notices: compensation
Mr. Prisk: I beg to move amendment No. 56, in clause 48, page 24, line 15, at end insert ‘and any subsequent appeal.’.
The amendment would improve the current wording of subsection (1) of the clause, which is about compensation in relation to stop notices. Subsection (1) states:
“Provision under section 46 conferring power on a regulator to serve a stop notice on a person must include provision for the regulator to compensate the person for loss suffered as the result of the service of the notice.”
We want to insert at the end of that subsection the phrase, “and any subsequent appeal”.
The provision is designed principally to enable small businesses in particular to appeal without fear that they will not be able to recover costs simply because they wanted to challenge the notice in the first place. The Minister agreed in previous debates that no one in the relevant circumstances should be deterred from making representations or appealing—knowing that they would then be out of pocket. It is an important principle, and the Minister agreed to it in a previous debate. I do not want to make this a long debate, so I simply ask the Minister whether he now accepts that principle, and if so, whether he will accept the amendment. It is fair that there should be no circumstances in which someone who wishes to make an appeal is deterred by the fact that they will be out of pocket as a result.
Mr. McFadden: I am happy to confirm our earlier exchange about accepting the principle that the hon. Gentleman outlined. I can also give him the good news that the amendment is unnecessary because the situation that he is talking about is covered. As he rightly said, the clause includes provision for the regulator to compensate a person for losses suffered as a result of the service of the notice. That would include any period during an appeal when the notice was still in force. I understand the sentiments behind what the hon. Gentleman is trying to do in the amendment, but the clause requires the regulator to put in place a scheme to compensate a person for a loss suffered as a result of the service of the notice. I am happy to confirm that that would include ongoing losses suffered during an appeal when the notice was still in force. The amendment would therefore add nothing to the arrangements covered in the Bill.
Mr. Prisk: I am fascinated. At least two lawyers from different organisations told me that there was a significant omission in the Bill and that it was important to have a provision to deal with that. In response to their comments, I felt that it was important to table the amendment. However, if the Minister is happy to confirm firmly on the record that there is a provision in the law, we have scored a goal without even starting the game. I am very happy if that is the case, not least because the Minister’s words are now firmly on the record. Although I suspect that we would all like the opportunity to divide the Committee to ensure that the issue is dealt with, there is no need. Therefore, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 48 ordered to stand part of the Bill.
Clause 49 ordered to stand part of the Bill.

Clause 50

Enforcement undertakings
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: Clause 50 takes us on to a slightly different issue from that of stop notices, which we have been discussing so far this morning. It comes at the issue of regulatory compliance from a slightly different angle. The clauses and amendments that we have discussed so far have dealt with the options available to a regulator to ensure compliance, and stop notices are part of that. Clause 50, however, offers an option to the regulated, rather than just the regulator.
The clause enables a Minister to make an order allowing a regulator to accept enforcement undertakings offered by a person or business subject to regulation. An enforcement undertaking is an undertaking or promise by a person or business to take certain actions. It is not something that can be imposed by the regulator, but an option that is available to a business that is found to be in contravention of the regulations. The clause takes forward a key recommendation of the review by Professor Richard Macrory and allows businesses to volunteer action to put right any harm that has been done.
“must be...action to secure that the offence does not continue or recur...action to secure that the position is, so far as possible, restored to what it would have been if the offence had not been committed...action (including the payment of a sum of money) to benefit any person affected by the offence, or...action of a prescribed description.”
9.30 am
Mr. Prisk: Can the Minister confirm that, while the test of reasonableness is clearly set out in subsection (1), the principle of reasonableness would also be incorporated in the case of an action of securing a position that is to restore what would have been, had the offence not been committed?
Mr. McFadden: The regulator will have to judge, after an enforcement undertaking has been offered and if it has been accepted, that it has been complied with. The regulator must make a judgment. As I said, subsection (3) sets out the types of things that we are talking about. Subsection (4) provides that if an enforcement undertaking is accepted, the person may not be prosecuted for the offence, or have a fixed monetary penalty or discretionary requirement imposed on them, unless they fail or are deemed to have failed to comply with the undertakings.
We are saying that if a business, in the course of such an investigation, says, “These are the actions that we wish to take in order to put this matter right”, and it has come forward in such a way, it should benefit from doing so. There should be an incentive to do so, rather than its being placed in a situation where the option is available but if the business exercises it, it gets no benefit, because it is equally liable to all the other penalties that we have been talking about.
That is in a situation where there is compliance, but—a significant but—where a person fails to comply with their undertaking, the regulator will be able to prosecute the person for the original offence or impose a fixed monetary penalty or discretionary requirement. Subsection (5) enables the Minister to include further provision in the order, such as the procedure for entering into the enforcement undertaking, publication of the details, certification by the regulator that that has been complied with, and so on.
There is not a right of appeal against the enforcement undertaking itself, given that that is something volunteered by the person and not imposed on them by the regulator. We believe in allowing enforcement undertakings. We can envisage a reputable, well-intentioned business coming forward to exercise that option. The lack of compliance may be completely inadvertent. It may be that it did not know that it was not compliant, but it is something that it is more than happy to put right. That could be an important option available. It is something that was encouraged by Professor Macrory and is another important addition to the Bill.
Question put and agreed to.
Clause 50 ordered to stand part of the Bill.
Clause 51 ordered to stand part of the Bill.

Clause 52

Monetary penalties
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: I rise because clause 52 relates to a debate that we had earlier. The hon. Member for Hertford and Stortford asked about discounts, to which the clause relates. It might be helpful to the Committee if I outline what is covered here.
Clause 52 deals with the enforcement of monetary penalties. The clause allows the order made by the Minister under this part of the Bill to make provision for discounts for early payment of a monetary penalty and for the payment of interest as a financial penalty for late payment of the original penalty. However, the total amount of any late payment must not exceed the total amount of the penalty imposed—there is a limit on that.
I hesitate to use the parking fine analogy because the situations that these clauses deal with are significantly more important and on a greater scale, but the principle of early payment in such situations is one that we are all familiar with from that context. The Government believe that early payment discounts can be a helpful incentive to encourage businesses to comply promptly with fixed monetary penalties. Late payment penalties could provide a useful enforcement tool for regulators. We had a discussion the other day about the Companies House precedent and the potential for penalties for late filing. The Government also believe that if financial penalties are to be effective, there needs to be an enforcement process. Subsection (2) provides for the enforcement of unpaid penalties and any interest or late payment charges through the civil courts. It allows the order to create a more streamlined process accompanied by treating the penalty as if it were payable under a court order. In practice, that would mean that the regulator could skip the initial stages of registering a claim for the unpaid sum in the courts and then proceed more swiftly to enforcement action. The principle is one that we are familiar with: incentives to pay early and penalties for paying late.
Mr. Prisk: I do not have a huge objection to the idea of early payment discounts, but the discount should not be so deep that it skews the system, such that many small businesses feel they should just pay up and move on. The danger is that the system would start to become imbalanced. The Minister has indicated previously, however, that businesses would not be at any disadvantage financially should they seek to challenge or make objections. My principal concern is to ensure that if someone wishes to challenge and question what has happened, they are able to do so and are not at any financial disadvantage.
Mr. McFadden: I absolutely understand the point that the hon. Gentleman is making and I agree with him about not being at a disadvantage if one pursues the processes that are outlined in the Bill. We had an exchange on this subject a few moments ago. He was keen to say to me that I had clarified what had not been clear in the Lords. I should make it clear that this is not a new change in the Bill; it is how the tribunal system will work under section 29 of the Tribunals, Courts and Enforcement Act 2007, which created first-tier tribunals. The tribunal has the power to award
“The costs of and incidental to”
any proceedings before it. That covers the point that the hon. Gentleman is making but it is not an addition to the Bill; it is actually already in place in that Act, which created the tribunals to which the appeals will be made.
 
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