Regulatory Enforcement and Sanctions Bill [Lords]

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Lorely Burt: I find part 4 somewhat confusing. It was not originally part of the Bill, and seems to have been tagged on at the end without any consultation—indeed, after the consultation period. I wonder if that is reflected in some of the potential for duplication we have seen. Although I accept that it is vital that not one unnecessary burden is imposed on business, I am almost tempted to wonder why this part is necessary. What is it saying that is not implied or embedded elsewhere in the Bill? Is the duty not to impose unnecessary regulatory burdens so good and so important that—a bit like “New York, New York”—it has to be said twice?
In relation to the comments of the hon. Member for Hertford and Stortford about mechanisms and how the system would work, other than what exists, what would this part of the Bill impose on LBROs or others to fulfil the requirement not to impose unnecessary regulatory burdens? The Government have set the target of a 25 per cent. reduction in unnecessary burdens by 2012, but they have achieved only 6 per cent. so far, so I am sure that additional help would be extremely welcome. However, what do these provisions bring to the Bill?
Mr. McFadden: The hon. Member for Hertford and Stortford asked about a few matters on which I hope to give him some satisfaction. He asked about business input into the level of burdens or whether burdens can be removed. As the hon. Member for Solihull said, the Government have a specific target to meet.
I shall come to the burdens barometer of the British Chambers of Commerce in a moment, but to rewind on the Government’s position, several years ago, we set about the task of measuring the administrative burden on UK business and setting a target to reduce it. The job description for regulators has become part of the job description for Whitehall Departments. Each year, simplification plans are produced. The hon. Lady referred to them and I confirm that so far we are on track to meet them, although I cannot predict the future with certainty—no one can. However, the plans involve a serious exercise that has focused minds in Whitehall. We talked a moment ago about regulatory budgets. The duty is not a regulatory budget, but it is related in the sense that it asks Departments to think about the overall impact of what they do and the stock that is focused on, and to find ways of simplifying and easing matters for business.
The hon. Member for Hertford and Stortford asked about business input. I refer him and other hon. Members to the website, If he or a business feel that a particular regulation has become outdated or unnecessary, they can ask for it to be looked at to see if it can be removed. That action would not be giving the business a promise that the regulation would disappear like a puff of smoke, but it would force the Department to consider the matter. There is certainly capacity in the overall regulatory set-up for business voices to be heard.
Mr. Prisk: There may indeed be existing channels, but there is no requirement related to the clause by which the regulators shall specifically talk to or involve the business community. Can the Minister confirm that?
Mr. McFadden: At the end, the clause confirms that the regulator will carry out that judgment. We have covered a couple of times in our debates on the Bill the matter of whether it can be entirely down to the regulated to make that judgment. I am sure that, as part of the annual process that we are setting out in the clause, any sensible regulator will discuss the regulatory burdens with those on whom those burdens are imposed. If a business feels that a regulator is interpreting policies in a way that imposes unnecessary burdens, it is entitled to raise the matter with the regulator. An annual review will help to promote that kind of dialogue between regulators and business. However, I do not see a need to write that into the legislation: I think the review will result in that.
However, I want to take the hon. Gentleman up on the British Chambers of Commerce survey, which has been cited a lot in our debates. We have not had too much party divide during our deliberations on the Bill, but the Government would see some of the things that have been cited as burdens in the BCC list not as burdens but as marks of a civilised society and an economy with proper rules. Instances in the list refer to disabled access to public transport, but I do not see that as a burden on business.
Judy Mallaber: Does my hon. Friend agree that the problem with the barometer is that it mixes up a burden with a legitimate policy objective that can be discussed and argued about? It does not confine itself to genuinely administrative areas, such as when one of the objectives is not being implemented in the most sensible way to avoid a burden on business. For example, an objective could require someone to fill out three forms, when one or none would do. That is what the barometer should be identifying, as is the case with a number of the European countries that the Regulatory Reform Committee visited within the last couple of weeks.
Mr. McFadden: My hon. Friend is absolutely right. There is a completely legitimate discussion to be had, and a legitimate case to be made, about the administrative burdens of the total sum of regulation. However, given the way that the Government have set up their review, that would be a separate discussion from policy outcomes. My hon. Friend’s description of the BCC list is absolutely right, because it mixes up the two things. We can probably all have an argument about one person’s burden being another person’s legitimate policy outcome, but in my view that is the weakness in the BCC list.
What do we mean when we talk about unnecessary burdens? They are burdens that are disproportionate to the regulator’s policy objective; in other words, they go further than is necessary to achieve the objective. They are targeted at situations where action is not required to achieve that objective, or are imposed in circumstances in which it would be possible to achieve the outcome in a less burdensome way.
We are not trying to set up a duty that interferes with the operational independence of the regulators; we are talking about the way in which they carry out those functions. That is why part 4 is a useful part of the Bill.
Mr. Prisk rose—
Mr. McFadden: I was about to sit down, but I am happy to give way.
Mr. Prisk: I shall intervene only briefly, and I will not stretch your patience, Mr. Chope, with an in-depth exposition of the British Chambers of Commerce barometer, except to say—in response to the Minister’s comment—that where a cost is incurred on, for example, the pay roll of a business, it is legitimate for that to be noted as a cost, however legitimate the policy may be.
My question to the Minister goes to the heart of the debate. If it is not explicit in the clause, will he join me in urging business that where they identify unnecessary burdens, with this new duty in place, they should make their concerns directly known to the regulators involved, so that there can be a genuine partnership in the process? Does he share that view? Will he join me in making that encouragement to the business community?
Mr. McFadden: Let me put it in my own way. First, there are existing avenues, as I have discussed, as well as a serious Government process to reduce administrative burdens, in which business has a completely legitimate voice. Secondly, the duty in clause 72 for an annual review of unnecessary burdens will entail regulators discussing those burdens with business.
Question put and agreed to.
Clause 72 ordered to stand part of the Bill.

Clause 73

Functions to which section 72 applies
Question proposed, That the clause stand part of the Bill.
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Mr. McFadden: If clause 72 is about regulators’ job description, clause 73 is about their functions and the particular regulators to which the duty will apply. It has been said by some that a ministerial order made under powers conferred in clause 73 could interfere with regulators’ independence. As I just said, this is not about regulators’ independence; it is about how their functions are carried out. Some regulators requested that they be named in the Bill. They are named in subsection (2), paragraphs (a) to (e): the Gas and Electricity Markets Authority, the Office of Fair Trading, the Office of Rail Regulation, the Postal Services Commission and the Water Services Regulation Authority. Subsection (2) applies the duty to those regulators.
We have included the power in the Bill rather than simply applying the duty to all regulators to allow flexibility in both the extent and the timing of the duty’s applications. The power to apply the duty in a territorial sense is set out in subsections (3), (4) and (5). Subsection (6) requires the Minister to consult the regulator and other appropriate bodies before seeking to apply the duty, subsection (7) allows the order to make consequential amendments and subsections (8) to (11) specify other procedural requirements. The Committee might want to note that an order applying the duty is subject to the affirmative procedure. The clause concerns the functions that we have discussed, which are set out in subsection (1), and the regulators to whom the new duty will apply.
Question put and agreed to.
Clause 73 ordered to stand part of the Bill.
Clauses 74 to 76 ordered to stand part of the Bill.

Clause 77

Short title
Mr. McFadden: I beg to move amendment No. 48, in clause 77, page 37, line 30, leave out subsection (2).
The amendment will remove the privilege amendment made in another place. It is a technical change, but an important one. As hon. Members are aware, the financial powers of the other place are restricted by the rights and privileges of the House and by the Parliament Acts. As the Bill originated in the other place and contains financial powers, a privilege amendment was added to it before its introduction in this House to ensure that the House’s financial privileges were not infringed.
This technical amendment is therefore necessary to remove the privilege amendment, which provided that nothing in the Bill should impose or vary any charge on the people or public funds. It is as much about parliamentary rules as it is about the Bill itself, but it is nevertheless necessary.
Mr. Prisk: Let no one say that we do not learn something in these Committees—I confess to a possible moment of excitement when we saw a Government amendment suddenly lurch forward at the last minute. We were on clause 48 and on Tuesday my office went into full excitement mode—even more than usual—but, lo and behold, it is a technical amendment and does not afford us the opportunity to scrutinise the Minister at great length. It is entirely sensible and so, with a slight hint of disappointment, I will not oppose it.
Amendment agreed to.
Clause 77, as amended, ordered to stand part of the Bill.

New Clause 2

‘This Act and any order made under it shall by virtue of this section cease to have effect on 1st January 2014.’.—[Mr. Prisk.]
Brought up, and read the First time.
Mr. Prisk: I beg to move, That the clause be read a Second time.
Having concluded the clauses, we come to the new clauses. New clause 2 is very important because, as you will have seen, Mr. Chope, it is a sunset clause. As we have discussed, the scope of the Bill is quite significant—technical, yes, but significant none the less. It creates an entirely new local regulatory system and an entirely new non-departmental public body, albeit there is a company in shadow at present. It provides extensive powers of sanction and enforcement, involving not one single regulator but 27; and not one piece of legislation but over 140 different laws. The Bill permits the Secretary of State to make, by order, important changes to both the current and the proposed system of local regulation. That means, I hope, that in all local authority areas we, as Members of this House, will see the potential for improvement in the regulatory environment. However, those changes will affect all our constituents.
In the other place, my noble Friends were able to secure some important concessions, not least that of a three-year review under clause 17 that covers only the LBRO. Given that the LBRO is not, as we have debated, directly accountable to this House, it was right to seek that review. However, clause 17 and the review contained therein does not apply to the whole Bill and that is why it is important to insert the means to debate whether this legislation should persist after a five-year period.
New clause 2 offers a number of important advantages to us as a House. It enables us to assess the whole Act and look at how it has worked in practice. The Minister has understandably looked at the different parts of the Bill in detailed consideration during our deliberations today. However, we can all see that the sanctions regime, the operation of primary authorities and the LBRO’s new and interesting range of powers will not only work in themselves, but will work together. It is difficult to know what the end result will be—it is untried and untested and we cannot be certain about it. The LBRO is not a long-established, familiar organisation that we can judge on its performance, powers and role.
The new clause would allow us to look in particular at the range of sanctions and their impact, especially on small businesses. It would help to focus—this is an important benefit, which the Minister referred to earlier—all the regulators’ minds on their performance not only in the coming year but over the next five years. They would know that we reserve and have the power to scrutinise the legislation in full. The insertion of a sunset clause is not a cheap excuse for getting rid of a piece of legislation without due thought. It would enable the House to ensure that the law of the land is working. The legislation provides significant changes for our constituents.
Rightly, the Government have said that they want to get serious about regulation and reducing the regulatory burden, which I welcome. The new clause provides an opportunity for them to turn that promise into practice.
Lorely Burt: I welcome the prospect of a sunset clause. Earlier in the proceedings, I got a bit excited when I interpreted the three-year review of the LBRO as a sunset clause. On new clause 3, I would suggest that six and a half years is too long a period, but I would welcome a sunset clause proposal. Based on costs of £4.5 million per annum, we would have spent £29 million before the clause would be invoked. That is too much and too long a prospect. A three-year sunset clause would be extremely welcome, and I would also welcome the Minister’s views on how we might go about imposing such a clause not only on this Bill, but on other Government Bills.
Mr. McFadden: Let me begin by saying that sunset clauses are perfectly legitimate issues to raise. They are not always inappropriate by any means, and they have been added to a number of Bills, so, on a basic level, it is legitimate to consider them. However, in relation to a Bill such as this, such a clause is unwise, and I shall set out my reasons for so thinking.
The Bill intends to change the regulatory environment to deal with two significant problems, as we have said. The first problem is an inconsistency in the manner in which regulations are applied around the country, which is essentially dealt with in parts 1 and 2. The second problem is the inflexibility in the penalty regime, which is dealt with in part 3.
For example, uncertainty about the continued existence of LBRO would make it difficult for it to carry authority and trust. Businesses would think twice about entering into primary authority relationships. We have debated how important those are in ensuring consistency and clarity for businesses a lot in the past few days. If businesses thought that the legal basis for the relationship would be abolished after five years, they would think twice about investing time, and indeed money, in them—there is a cost recovery provision. Would they know that the advice that they had received would hold good in future? That could be a problem. Local authorities would also have a reduced incentive to comply with the guidance of a body that Parliament has said has a time-limited life.
On part 3, for example, when we think about the penalties that we have discussed in some depth, as we approached the sunset point regulators might stop issuing sanctions because their capacity to do so was coming to an end, and they would rely again on the one-club policy of criminal prosecution that the Bill tries to get away from. Regulators would have little incentive to take up these powers, in the knowledge that they would be withdrawn after a period of time.
2 pm
A review clause is different. It states that we will look at how the system is operating, but it does not say that it will come to an end, as a sunset clause does. Regulators adopting the powers in 2010 would find themselves in the position of having to submit to a review clause after three years, an exercise with doubtful effects in view of the fact that if the new clause became part of the Bill, Parliament would have legislated for the whole regime to go out of existence two years later anyway. For a number of reasons, that is unwise.
A similar clause was debated in the other place too. I am not against review; it is a perfectly sensible thing to do and it is built into the Bill, but that is different from the automatic ending entailed in a sunset clause.
We have had a lot of representations on this issue. If I may detain the Committee with a few of the quotes on the issue, it may give an idea of the strength of feeling about consistency and clarity. The Federation of Small Businesses said:
“The FSB...has invested a great deal of time and effort in pushing for the establishment of the LBRO. It would be sad to see a sunset clause applied to the LBRO as this would severely impact on its ability to function in the interest of 4.5 million small businesses.”
Going from small business to a larger national chain, Boots said,
“the LBRO benefits of the Bill will be lost with the result that industry will be left still dealing with the inconsistencies that Government promised would be addressed by this new approach to regulatory coordination.”
Sainsbury’s said:
“The introduction of the sunset clause will, we believe, make the role of the LBRO more difficult and potentially prejudice its ability to bring about the change which is required.”
There are other comments here and I could go on, but I shall not quote all of them. Finally, the CBI said:
“Sunset clauses in principle are a good tool to ensure that regulations are fit for purpose and deliver their objectives. But we feel that the specific addition of a sunset clause would not materially add value in the case of the RES Bill... such an amendment could reduce the LBRO’s ability to implement its goal of improving the quality of local authority enforcement.”
So I think we can see a broad opposition to the new clause, both among organisations representing small business and some well-known big businesses. For those reasons, I hope that the hon. Gentleman will not press the new clause.
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