Regulatory Enforcement and Sanctions Bill [Lords]


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Clause 69

Payment of penalties into Consolidated Fund etc
Question proposed, That the clause stand part of the Bill.
1.15 pm
Mr. McFadden: The clause is about the payment of penalties. Again, we touch on previous debates; we have often mentioned the analogy of parking, imperfect though it is. The accusation is sometimes made that parking fines are used as a revenue-raising mechanism. The clause makes it clear that money received through the issue of a fixed or variable penalty, including late payments or interest charges, must be paid into the relevant Consolidated Fund. Subsection (2) defines those funds.
Professor Macrory recommended that there should be no perverse financial incentive for regulators to favour a particular sanction. In our discussions about the various new powers available to regulators under the Bill, I have said several times that we are trying to avoid perverse incentives to use one route rather than another. The payment of penalties into the Consolidated Fund is important. The clause ensures that and acts as a safeguard against the kind of incentives that we want to avoid.
Question put and agreed to.
Clause 69 ordered to stand part of the Bill.

Clause 70

Disclosure of information
Question proposed, That the clause stand part of the Bill.
Mr. Prisk: I wonder whether I might test the Minister. I allude to a debate initiated by the hon. Member for Stafford. How confident is the Minister that the clause is secure from legal challenge? I think not only of the Data Protection Act 1998 or the Regulation of Investigatory Powers Act 2000 but of human rights legislation. I know that Ministers always have to sign such things off, and it would be helpful to know how confident he is about that.
Would he also tell us how confident the public can be that the disclosure of information by the criminal justice system to the regulators enabled under the clause will at all times be appropriate, confidential and secure? We are all aware of recent mishaps with various forms of data—I am sure that the Minister has his laptop firmly attached, unlike a Cabinet Minister recently. The loss of 25 million benefit records and the dreadful and unfortunate errors with other data concern people, so it is important that the public can be confident that these matters will be handled in an appropriate and confidential way.
Mr. McFadden: This is a gateway clause that allows the passing of information from the criminal justice system to regulators. It is necessary because those who work in the criminal justice system may come across breaches that are properly dealt with by the kind of civil penalties provided for under the Bill. The clause allows them to pass information about those breaches or potential breaches to the relevant regulator. Such gateway clauses are not unprecedented. For example, the Enterprise Act 2002 has a similar provision. When making an order under part 3, the Minister concerned will assess the situation to ensure, as far as is possible in the circumstances, that it is compliant with the European convention on human rights.
If it helps the Committee, I have some more facts about the clause. Information may be disclosed only if the regulator has an enforcement function in relation to a criminal offence, and for the purposes of the regulator exercising one of the new powers. Subsection (2) provides that the information that can be disclosed could include information collected before this provision comes into force. Subsection (3) provides that disclosure of information is
“not to be taken to breach any restriction of information”.
However, subsection (4) does not authorise the sharing of information in contravention of the Data Protection Act 1998 or part 1 of the Regulation of Investigatory Powers Act 2000. The hon. Gentleman is right to say that one must be careful with any clause that mentions information sharing and the public have legitimate concerns in that area.
Equally, it is also in the public’s interest for breaches of the law in the regulatory field to be properly investigated. If we relate the clause to the wider purpose of the Bill and part 3 in particular, that purpose is to give regulators a new suite of powers in order to regulate more effectively than they can at present with the one-club option of criminal prosecution. It seems correct to allow for the passing of information from the people concerned with one route, the criminal justice system, to those who, by virtue of the Bill, will be responsible for enforcing the new civil penalties. Information powers should always be treated with care, but clause 70 gives the regulatory system an advantage in ensuring that where there are breaches, the information goes to those who are responsible for enforcing the law and gives them the information necessary to do so.
Question put and agreed to.
Clause 70 ordered to stand part of the Bill.
Clause 71 ordered to stand part of the Bill.

Clause 72

Duty not to impose or maintain unnecessary burdens
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: The clause brings us to part 4 of the Bill. To use a lay term, I would summarise part 4 by saying that it is related to an aspect of the job description of regulators. This part of the Bill was significantly improved as a result of discussion and amendment in the other place and it gives us two important clauses, beginning with clause 72. I am sure that we would all agree that part of the job description of regulators—not the whole of it—should be, as the clause states, that they exercise their functions in a manner that does not impose unnecessary burdens or maintain burdens that the regulator considers to have become unnecessary. The point about the regulator making the judgment is one of the changes that have been made as we have moved along the line in debating the clause.
In overview, the clause is about helping to ensure that regulators do not impose or maintain unnecessary burdens. Subsection (2) provides that where the duty has been imposed, unnecessary burdens need not be removed where it would be impracticable or disproportionate to do so. The sense of proportion is important because it is something that has been added. We could find a situation where a burden had been identified by a regulator as being unnecessary but the act of removing it would be completely disproportionate to the burden that it was placing on the regulated bodies. Subsection (2) allows that question of proportion to be taken into account.
In following this duty, the Government do not intend that regulators should divert resources from their core functions in a way that compromises their effectiveness. As I said, this is part of the job description of regulators; it is not in any sense the whole job description. In considering unnecessary burdens, we expect that regulators should be able to target their resources more effectively, therefore enhancing regulatory outcomes. Subsections (3) to (6) require a regulator to whom the duty has been applied to publish a statement as soon as is reasonably practicable, setting out what they propose to do in the following 12 months. Statements must then be published annually, so the clause asks regulators to keep a constant eye on the question of unnecessary burdens. That is important because in the regulatory field we often talk about the need for a culture change, and the provision whereby the issue will be considered annually is intended to embed that approach.
Mr. Prisk: In the light of the duty and the knowledge that the Government intend to establish regulatory budgets, how does the Minister see the two policies interweaving? I can see a connection, but it would be helpful to understand how that will work. There is a new duty not to have unnecessary burdens, and he has just spoken about wanting to encourage regulators to use their resources appropriately. How does that fit into a regulatory budget environment?
Mr. McFadden: The hon. Gentleman is right to suggest that regulatory budgets are much discussed and have significant potential in this field. They will focus people’s minds not only on what is coming in, but on what could be taken out. I think that that would help in a regulatory budget environment, because there would be a duty on regulators constantly to have an eye on the stock, as it were, as well as the flow. I do not see a contradiction between the two elements; in fact, I think that they go well together.
The power is an important addition to the suite of provisions that are designed to embed this agenda within the group of regulators operating in this country. I stress that it is not new or unheard of; it is similar to the duty in the Communications Act 2003 that requires Ofcom to keep its functions under review, with a view to ensuring that unnecessary burdens are not imposed or maintained.
The clause also provides an avenue for implementing the recommendation by the House of Lords Select Committee on Regulators in its recent report, “UK Economic Regulators”, that
“economic regulators be statutorily required to facilitate the competitiveness of UK firms by...removing regulatory burdens from firms wherever possible.”
The clause is in line with that recommendation.
Mr. Prisk: I welcome the Minister’s remarks. Indeed, I welcome what is in effect a new duty to keep the regulatory function under review and for regulators of the various hues that we have been considering under this legislation not to impose an unnecessary regulatory burden. It is fair to say that the clause has changed quite remarkably from the original drafts that I saw in early forms of the Bill that were considered in the other place. I commend the other place for the work that it did.
I also welcome the recognition of the need to remove such burdens, which is noted in subsection (2). However, I note that the regulator, whoever that may be in any circumstance, will still be left to decide, first, what is or is not, in their view, burdensome, and secondly, whether its removal would be impracticable or disproportionate. The requirement to publish an explanatory statement is fine in itself, but I am disappointed that notably lacking is a clear statement, a requirement—I did not hear this in the Minister’s remarks—for direct consultation and/or involvement of business in determining whether a regulatory burden is unnecessary.
This is a missed opportunity, if I may say so. I hope that the Minister will correct that in replying to the debate. I suspect that to rely on regulators regulating themselves is not likely to deliver the significant change that we would all like in this area. Understandably, given the general circumstances politically, Ministers are talking a great deal about wanting to listen to business and to reduce the regulatory burden—heaven knows, with the state of the economy, that is long overdue—yet they have missed this opportunity to do so. Often it is the regulated, not the regulator, who is best able to judge what is an unnecessary or disproportionate burden. The Minister will probably retort that, by using the Hampton principles, here embedded in the Bill, the regulators will be able to make that assessment. However, to fail to enable business to affect the decisions is a serious omission.
1.30 pm
I am particularly concerned for small businesses. Both sides of the House agree that regulations have a disproportionate impact on the smallest businesses. The Federation of Small Businesses tells us that the average small business spends seven hours a week complying with Government red tape and regulation. Given that there are 4.4 million small businesses in the UK, that is an extraordinary waste of what could be highly productive time.
Judy Mallaber (Amber Valley) (Lab): Does the hon. Gentleman agree that if we consult businesses, which is what I think he is suggesting, we have to be careful that the business does not put forward as unnecessary regulation something that is a regulation for a good purpose? Something that may seem a burden on a business could have a proper protective or administrative purpose. I have difficulty seeing why we should just leave it to that business. We must also be careful that we do not start to put too much burden of regulation on the regulator, otherwise we will find ourselves with mirrors on mirrors—potentially more administrative burdens.
Mr. Prisk: I understand the hon. Lady’s point. She is right that it would not be appropriate for the regulated to decide what regulations there should be. My concern is that the regulated, rather than the regulator, should be able to be involved—indeed, expressly—in looking at where the problems are. They should be able to say, “We are having a real problem with this particular regulation.” It should be expressly stated. That, I think, is the omission.
The hon. Lady is right that the decision must inevitably rest with the regulator. My concern is about the omission of an explicit mechanism or trigger to ensure that business understands that it has a part to play in an important duty being put forward by the Government. Perhaps such a provision will be set out in response to the debate, in the statements that the Minister may be writing as we speak. Can he tell us what consideration he and his officials have given to the inclusion in the clause of a provision that the regulators should respond to business concerns about regulation? What considerations have they made? Has the Minister held any meetings with the business community, to discuss the clause and how business might aid the process of rooting out unnecessary burdens?
Members of the Committee will be familiar—I know you are, Mr. Chope—with the British Chambers of Commerce burdens barometer. We could debate the strengths and weaknesses of any methodology of judging, but the British Chambers of Commerce is well placed to do so.
Judy Mallaber: Does the hon. Gentleman accept that many people think that the business barometer is absolute nonsense and makes no sense whatever? That view was expressed to the Regulatory Reform Committee, of which I am a member, by many organisations. The barometer is not a tool that has a great deal of respect.
Mr. Prisk: I am sure that is the hon. Lady’s view, but I suspect that it is not the view of the British Chambers of Commerce. It is not my view. It is important that we have a clear, itemised list of what the burden of regulation is. The barometer has shown that the burden of regulation has increased by £65 billion over the past 11 years— £10 billion in the past 12 months—so there is clearly a problem. We can argue over one item or another, but the principle is the same.
To conclude, why does the clause not reflect the clear interest and concerns of business? Why is there no guidance from the Minister to show that business can participate, and is welcome to do so, in trying to identify unnecessary burdens of regulation? I hope that his response will lift the cloud of uncertainty and demonstrate that business has a part to play. I look forward with eager anticipation to his remarks.
 
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