SUBMISSION BY NATIONAL CONSUMER COUNCIL(RESB 02)
The National Consumer Council (NCC) welcomes measures in the Regulatory Enforcement and Sanctions Bill which give added strength to the work of regulators. Measures designed to improve the consistency and coherence of local authority regulatory services (LARS) are also welcome if they succeed in ensuring that consumers are protected adequately in the market place wherever they live.
The Bill has been improved during its passage through the House of Lords. In particular, the Government has made the following amendments which NCC called for:
· The process of cooperation between enforcing and primary authorities is disapplied where enforcement action is urgently required to avoid a significant risk of serious harm to human health or the environment (including the health of animals or plants) or the financial interests of consumers.
· Regulators must publish, from time to time, reports specifying the cases in which one of the new civil sanctions under Part 3 of the Bill has been imposed.
We are disturbed that to date the Government has presented the Bill largely in terms of its benefits to business. However, the provisions in the Bill are aimed at local and national regulators whose principal role is to protect the safety and financial interests of consumers. Despite the positive changes described above, we continue to have major concerns about a number of key provisions in the Bill which we believe will hinder the ability of regulators to protect consumers effectively. The focus of our campaigning efforts on this Bill is to put consumers at the centre of the reforms.
We outline our remaining areas of concern below in the order they appear in the Bill.
Key areas of concern
Part 1 - Local Better Regulation Office
Membership of LBRO (Schedule 1)
If the LBRO is to succeed, it will need to be attuned to the experiences of those its work is ultimately designed to benefit. The Bill should set out a non-exhaustive list of the range of knowledge and experience that people sitting on the LBRO Board should be able to contribute, including consumer affairs. The government rejected an amendment on the grounds that there are too many stakeholders to achieve a representative board. However, the work of the LBRO will have greatest impact on local government, business and consumers and we consider that these stakeholder groups should be guaranteed a voice in its decision-making structures.
Enforcement priorities (Clause 11)
Reflecting our comments above on membership of LBRO, subsection (3) should include a non-exhaustive list of categories of persons, including consumer groups, which must be consulted when LBRO decides enforcement priorities. While the Government indicated during debates that it would consider this best practice, we would prefer to see this requirement on the face of the Bill.
Part 2 - Coordination of regulatory enforcement
We support the intention to improve consistency of local enforcement, but we remain unconvinced that the proposals in their current form will work satisfactorily in practice. The process seems to be overly-bureaucratic and there are provisions which may unduly delay or inhibit altogether legitimate enforcement action.
Enforcement action (Clause 28)
We are concerned the scope of this clause is defined too broadly. At Second Reading, the Minister suggested the provisions kick-in where "significant enforcement action is proposed", however subsection (5) suggests it relates to any action aimed at securing compliance unless the Secretary of State specifies otherwise by order. We would prefer an approach which sets out on the face of the Bill boundaries - such as seriousness of offence or type of enforcement action - above which notification by the enforcing authority to the primary authority is triggered. There is a danger that fairly trivial or noncontroversial enforcement matters will get swept up in cooperation arrangements, which involve lengthy processes and information exchange requirements that are disproportionate to the circumstances of the case.
Enforcement action: references to LBRO (Schedule 4)
We are extremely disturbed that the Bill gives businesses a pre-emptive right of appeal against proposed enforcement actions by enforcing authorities, even where the primary authority is in concurrence with the enforcing authority. As far as we know, such a procedure is without precedent in the consumer protection field and we fear that it is vulnerable to abuse by companies who will use legal processes to delay legitimate enforcement activity. Indeed, the prospect of protracted and expensive legal wrangling with better-resourced businesses could deter enforcement authorities from taking action which is necessary to protect consumers.
We are also concerned that the scope of LBRO's powers to arbitrate is too wide. Since LBRO may determine whether advice or guidance is "correct" or "properly given", this may involve interpretation of substantive consumer law, which arguably is properly the preserve of the courts.
Finally, the 28 day period that the LBRO is allowed to arbitrate is too long. This should be considerably shortened so that consumers are not disadvantaged by undue delay to enforcement action taking place.
Enforcement action: exclusions (Clause 29)
We are pleased that the Government has now introduced exclusions to the enforcement action procedure, where action is required 'urgently to avoid a significant risk of serious harm to human health or the environment... or the financial interests of consumers'. However, we are concerned that this test is set too high. The words 'significant' and 'serious' can be interpreted differently and are difficult to prove. In the course of debates on the Legal Services Act, the Government rejected the use of these words for exactly this reason, so we are surprised that it is taking this approach now. The requirement on regulators to follow the better regulation principles, in addition to the availability of appeal and the threat of judicial review, should be sufficient on their own to prevent regulators from using the exclusions mechanism inappropriately.
Part 3 - Civil sanctions
We shared the finding of the Macrory Review that the existing penalties system is not adequate to ensure business compliance and strongly support the introduction of all the sanctions in the Bill to modernise and widen the sanctioning toolkit.
Designated regulators (Schedule 5)
Some major regulators, such as Ofgem, Ofwat and Postcomm, are excluded from the list of regulators in Schedule 5. The Government has said that they are happy, based on advice from the regulators concerned, that these organisations already have sufficient powers to carry out their functions.
The Macrory report found that the current penalties regime is inflexible and regulators needed access to a wider range of sanctions. There is not an exact match between these three regulators' existing powers and the powers proposed in Part 3 of the Bill. Further, fixed monetary penalties and restorative justice (in the context of regulators) are new concepts introduced in this Bill. These regulators would also be excluded from the new requirement in Clause 65 to publish details of enforcement action. It is not clear why powers deemed suitable for regulators, such as Ofcom, which already has a wide sanctioning toolkit, are considered unsuitable or unnecessary for similar regulators.
Further, the legislation is enabling in the sense that the regulators in Schedule 5 do not automatically receive the sanctioning powers, but have to go through an application process which is triggered by them. Second, and related to this, the Bill does not contain a power to add to the list of designated regulators, so these regulators cannot simply have a change of heart if they wanted them in future.
Stop notices (Clause 46)
Echoing our comments on Clause 29, we are concerned that the test that regulators must prove before issuing a stop notice - 'significant risk of causing serious harm' - is set too high.
Procedure for granting sanctioning powers to regulators (Clauses 60 and 61)
We agree regulators should demonstrate they are enforcing in a Hampton-like manner before being granted new sanctioning powers, however we consider the procedural requirements for consultation and affirmative resolution to be too onerous.
Publication of enforcement action (Clause 65)
We are delighted that regulators are now required to publish details of their enforcement actions. We are concerned that subsection (4) gives regulators too wide a scope to refuse to publish enforcement action on the grounds that to do so would be 'inappropriate'. It should be made clear that this exclusion from normal requirements should apply in exceptional circumstances only.
Part 4 - Regulatory burdens
We welcome amendments to Part 4 of the Bill, which make clear that responsibility for deciding if a regulatory burden is unnecessary lies with the regulator. Further, the provisions now apply to a limited range of regulators.
Despite these changes, our view remains that this section of the Bill is unnecessary, as the requirement on regulators to conform to the principles of good regulation should be sufficient to safeguard against unnecessary regulatory burdens. Further, we are concerned that this provision may be used by business organisations to put unreasonable pressure on regulators to remove essential consumer protection measures. Whether or not a piece of regulation designed to protect consumers is necessary is likely to be hotly contested by organisations representing consumer and business interests. Further, it would give third parties too much control over the regulatory agenda and distract regulators from working on their key priorities.
About the National Consumer Council (NCC)
The NCC makes a practical difference to the lives of consumers around the UK, using its insight into consumer needs to advocate change. We work with public service providers, businesses and regulators, and our relationship with the Department of Trade and Industry - our main funder - gives us a strong connection within government. We conduct rigorous research and policy analysis to investigate key consumer issues, and use this to influence organisations and people that make change happen. Check www.ncc.org.uk for our latest news.