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Grand Committee

Wednesday, 30 January 2008.

The Committee met at fifteen minutes to four.

[The Deputy Chairman of Committees (BARONESS FOOKES) in the Chair.]

Regulatory Enforcement and Sanctions Bill [HL]

(Fourth Day)

The Deputy Chairman of Committees (Baroness Fookes): I make the usual reminder that if there is a Division in the Chamber, the Committee will adjourn immediately and will resume again after 10 minutes.

Clause 34 [Power to make orders providing for civil sanctions]:

Lord Lyell of Markyate moved Amendment No. 104:

The noble and learned Lord said: The amendment would leave out Clause 34(1)(b), which relates to the power over discretionary requirements and variable penalties. I speak also to Clause 34 stand part; Amendment No. 109 to leave out Clause 35(3), which removes the system away from the ordinary prosecuting process of the CPS, the police, the Procurator Fiscal and Northern Ireland equivalents; and Amendment No. 136, which deals with Clause 40(3)(a), to leave out the power to give fixed monetary penalties. I speak, too, to Clause 40 stand part.

These are all probing amendments, but they probe a very important question. Their purpose is to invite the Minister, who stands alone, unlike Horatius guarding the bridge, to look with favour on the matters that I am about to address. Will the Government think again about the whole question of whether it is really right to oust the jurisdiction of the ordinary courts and hand immense prosecuting powers to officials?

In July, the Prime Minister said that a major purpose of his Government was to hand back executive powers. This Bill in a sense does the opposite, as it transfers enormous powers in the whole field of regulation away from supervision by the independent courts and puts them into the hands of officials—some civil servants and some other public officials. These powers include the power for quite junior officials to impose fixed penalties for comparatively minor criminal offences, as they now are, under some hundreds of statutes and statutory instruments listed in the Bill. On top of that, they include the power of more senior officials—at least I assume that they are more senior—to impose variable monetary penalties as well as to make some discretionary requirements. These discretionary requirements—the stock orders and compensation orders and so on—have certain merit, and I should like to keep that merit in play. However, the monetary penalties are of a large amount and may be very large indeed.



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Professor Macrory, on whose generally excellent work this Bill is based, none the less takes a view that there is what he describes as a “compliance deficit”. That is not an expression that one would immediately jump for, but he means that there is not as much compliance as there ought to be. He thinks that some penalties are too small. For example, he criticises as too small the penalty of £4 million imposed on one public utility in relation to a very serious health and safety incident in which four people were killed. He may or may not be right about whether that was the correct penalty, but I would submit to the Government that it is the kind of matter—although it may be an extreme example—that should be dealt with by the courts, not one that should be dished out by an official with an appeal only to a first-tier or other type of independent tribunal.

The point is that they are criminal penalties and we already have a very satisfactory system whereby these matters go to the magistrates’ courts or the Crown Court with all the procedural and legal protections that have grown up carefully over the centuries and recent decades, to which our citizens are entitled. That system is criticised by Professor Macrory, but I shall come back to that, because the real criticism lies much more with the prosecuting authorities than with the courts. The magistrates are well capable of selecting the correct penalty provided that they are given the proper information by the prosecutors as to the background circumstances, the amount of money that might be saved, the incentives for wrongdoing and so on. Provided that the courts are given that, magistrates are well capable, in my experience, of giving appropriate and often condign penalties—and that happens no less in the Crown Court.

What the Bill will do, via what the Delegated Powers Committee has rightly described as an unprecedented use of statutory instruments—because this Bill really is a mountain of statutory instruments—is to seek to create a parallel system of justice, entirely run by officials, with its only safeguard being an ultimate right of appeal, if the subject can afford it, to an independent and expert tribunal, which is sometimes described as a first-tier tribunal. In the first instance, the Bill proposes that these powers should be exercised by officials acting on behalf of the 28 “designated regulators” listed in Schedule 5.

I support the broad general objectives of the Bill and my concern is not about those. In this crowded and sophisticated island, as in all sophisticated modern societies, a significant degree of regulation is required. The suggestion is that it may be better done through a measure of instruction or guidance from what is called the “Local Better Regulation Office” in the Bill—it is really a national or central better regulation office that seeks to regulate people better locally, which I suppose is the reason for the use of the word “local”. I strongly support the requirement also expressed in the Bill that the regulation should be transparent, accountable, proportionate and consistent. Those are important principles, but there is a danger that they become buzzwords. I suggest that the transparency of the present system is probably a good deal greater than what is proposed.



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I believe that the courts, when given the proper material, would work even better than they do today. The Bill could operate perfectly well using properly our existing court structures that people know and trust. No one likes to be taken to court, but our system of magistrates and Crown Courts is understood and respected. It is also transparent. Hearings are held in public and are reported in the newspapers. If the lower court goes wrong, it is accountable to a more senior court. The penalties are proportionate. For example, the magistrates can give a penalty of anything from an absolute or conditional discharge, up to the maximum penalty that the courts allow. That is also the case in the Crown Court, where fines are frequently unlimited. The courts are also on the whole consistent and much effort is taken through sentencing guidelines and through the Magistrates’ Association, as well as through a substantial amount of government legislation, to see that this is so. I believe that the new system is much less transparent and does not seem to be proportionate. Can the Minister explain—no doubt those behind him will help—how it is said to be accountable?

The fixed penalty system that is proposed seems to come largely out of the blue to the alleged wrongdoer. One hopes that in practice he would get a letter of warning beforehand, but it certainly is not required. If the wrongdoer accepts the penalty, there is no court hearing and there is no guilty plea. Reading the background material, I get some impression that it might be publicised on a website, and it may be that the press will look at that website, but the degree of publicity and transparency is, I suggest, a lot less than the well-tried magistrates’ courts.

It is said in the background documents that one of the things that businesses dislike, which is given as a reason for the Bill, is the thought that their misdemeanours will be exposed in court. Is that a bad thing? Is it wrong that if someone is selling substandard meat or breaking trading standards regulations, we, the public, should not be able to know? I declare an interest, as I was a barrister for 40 years. I grew up with the Trade Descriptions Act 1968 and carried out in the divisional court a number of the follow-ons of Tesco v Nattrass. If Tesco gets it wrong, is it not right that the burghers of Hemel Hempstead should know about it?

How can the fixed penalty system be proportionate? Can the Minister explain a little further how it works? My understanding is that statutory instruments will either set out a single, one-size-fits-all penalty, or may make the penalty relevant to the number of days that the wrongdoing has occurred, or the amount of food that was sold that was wrong, or something of that sort. Basically, there is not the flexible penalty that is available to the courts. Can the Minister give some examples of what level it is likely to be set at in a sample of different types of offence? How will it take account of, for example, the circumstances of the offender? Is it right that a small business or an individual should pay the same penalty as a huge and powerful corporation? If that is not intended, perhaps it could be more fully explained. It certainly was not clear to me from reading Professor Macrory, but perhaps I missed something.



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As the Minister knows, this matter was carefully considered by the House of Lords Select Committee on the Constitution. I have in front of me its reply. On 4 December 2007, the Select Committee published its report on the Bill. The committee says, in heavy type:

that same word “unprecedented” was used by the Delegated Powers and Regulatory Reform Committee—

Referring to our constitutional history, the report says:

It continues,

The report also criticises the failure of the Bill to meet the minimum requirements of procedural fairness. Fixed monetary penalties can be imposed without any requirement for a notice of intent or an opportunity to make representations before the penalty is imposed. The committee continues:

4 pm

I ask the Minister to provide us, either in Committee or prior to Report, with some further information about this unprecedented scale. How many local authorities and other officials will exercise this power? My impression is that it will be exercised by all local authorities—I think that there are about 400, but the noble Lord, Lord Borrie, the Minister and others will know better than me—and by many officials in each, so that the figure for officials exercising these powers will run into the thousands. How many cases are these local authorities currently bringing? I have put down Parliamentary Questions for Written Answer, as I mentioned to the Minister a few days ago, to the nine different departments responsible for the 28 authorities in Schedule 5, to ask, in respect of each of those designated regulators, how many prosecutions they have brought and how many convictions they have obtained.

So far I have received two replies, but there may be more in the post. The Department for Transport says that the Civil Aviation Authority, from 2004 to date,

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carried out 89 prosecutions and obtained 86 convictions. The Office of Rail Regulation, coupled with Her Majesty’s Rail Inspectorate and the CPS on somebody’s behalf, have, since 2004, carried out 37 prosecutions and obtained 36 convictions. It would also be helpful if the Minister could indicate to us in how many such cases there were pleas of guilty. It sounds, given that high conviction rate, as though there were a lot of guilty pleas; it does not sound like a difficult process to carry out.

How many more penalties is it anticipated will be imposed when, if the Bill goes through unamended, every one of the thousands of officials involved has the power simply to impose either fixed or variable penalties? In how many cases is it anticipated that these will be appealed to the independent tribunal? This is likely to be a time-consuming and costly business. It may all right for large corporations, but for small and medium-sized businesses and individuals, it may be a great burden. I remind the Committee that, unless you have costs awarded against you, the courts are there, they exist, are well established and are free. That is a great advantage.

I look forward to the Minister’s answer on these numbers, but draw attention to some information which I have obtained from reading the background documentation to the Bill, particularly the interesting final report of Professor Macrory of November 2006, Regulatory Justice: Making Sanctions Effective. This tells uson page 40, footnote 39, that, in an unspecified period—but I assume it was the most recent year; 2005-06—15,369 cases were heard in the magistrate’s courts, and a further 76 in the Crown Courts. But page 17 suggests that it was 24,000 plus a further 11,000, some of which were cautions and some prosecutions.

How these are broken down between all the different regulators is unclear, but page 21 gives some further information. For example, the Environment Agency carried out 887 prosecutions and obtained 876 convictions, with an average penalty of £5,007. For the Health and Safety Executive, the figures were 1,267 prosecutions and 999 convictions, with an average penalty of £6,855, excluding some of the very high penalties that were obtained. For the British Potato Council, there were 246 prosecutions, but only 28 convictions, and the average penalty was £488—I notice that the British Potato Council has not received the accolade of an appearance in Schedule 5. For Companies House, there were 5,867 prosecutions and 2,944 convictions, but the average penalty was not available. The FSA carried out six prosecutions and obtained six convictions with an average penalty of £75,500. Could the Minister clarify whether they were prosecutions in the courts since the FSA has already had powers for some years somewhat similar to those that are proposed to be extended to these other agencies in the Bill? The Pesticides Safety Directorate did three prosecutions and obtained one conviction with a penalty of £1,800, and the Food Standards Agency brought 570 prosecutions and obtained 458 convictions, but the average penalty was not available. Are these figures complete? In relation to broadly food standards matters, I would have thought that trading standards officers up and down the country probably brought many more cases, but it may be that they fall into a different category.



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In the context of the above figures, I shall ask the Minister some questions about practical problems for officials under the new system. We are told that the Bill and statutory instruments will require an official imposing a fixed monetary penalty to be satisfied before he does so to the criminal standard of proof that the offender is guilty. That is a strange concept. The Minister will probably be aware that under the code for Crown prosecutors, if a Crown prosecutor wishes to bring a prosecution a much more practical standard is required; in other words, the prosecutor must be satisfied that there is a realistic prospect of conviction, which means that it is more likely than not—some people say 51 per cent likely—that a prosecution will be obtained.

Viscount Colville of Culross: Conviction.

Lord Lyell of Markyate: I can see that in some cases it may be quite easy to say that you are sure that there is guilt. If the offender is carrying out an activity—for example, waste disposal—and does not hold the necessary licence, there may be no defence, although there may be issues about whether he was carrying out the activity, which might be more difficult. The only question that remains, although it is an important one, is whether it is in the public interest to prosecute. It looks as though the Environment Agency, which obtained a 99 per cent conviction rate in the figures I read out, probably brought a lot of cases where it was obvious that there was guilt and that the official could easily have made the necessary judgment. But what about the Health and Safety Executive? There, out of 1,267 cases, 268 seem to have been acquitted. The penalties were quite high—an average of £6,855—so they would have been variable monetary penalties, I assume. But given that, on average, one fifth of cases were being lost, how could an official be confident that they were all guilty in the first place, which is the requirement under the legislation? Likewise, the Food Standards Agency, which failed to get a conviction in 25 per cent of its cases and, even more so, Companies House, which failed to convict in 2,944 cases out of 5,867. It may be that there is an explanation, but these are pertinent questions and we would be grateful to have the explanation.

I shall ask the Minister about compliance with the European Convention on Human Rights. The noble Lord, Lord Jones of Birmingham, stated that in his view the provisions of the Bill were compatible with the convention. Department lawyers have no doubt rightfully considered this question. In the light of the Select Committee’s questioning of the procedural fairness, will the Minister help the Committee as to how the scheme of the Bill, which makes public officials investigator, prosecutor, judge and sentencer in their own case, meets the requirements of Article 6 of the convention? Article 6 provides that:

It goes on:



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This Bill seems to require the official to presume him guilty. Thirdly, it states that:

prompt information of the nature of the case, adequate time to prepare his defence, legal assistance if he needs it, and the power to examine witnesses and bring witnesses of his own—I am paraphrasing slightly.

I anticipate that the Minister will give a similar answer to the one the noble Lord gave to the Select Committee when he kindly wrote to it on 18 December 2007—I have the letter here. He relied on the existence of the tribunal—but it is an elaborate and cumbersome process and it only comes at a very late stage. It would be helpful to the Committee to see the legal arguments. I am not asking to see the Law Officers’ opinions, but to see at least set out with reasonable coherence the legal arguments which back the opinion of the noble Lord, Lord Jones of Birmingham, so that we may understand this more fully.

In my view, it is responsible criticism that these statements are made by Ministers on fairly flimsy grounds. In my time in the other place during the passage of the football hooligans Bill, I remember that in the course of about an hour during one of the Committee stage sittings—it was a Committee of the whole House—provision after provision was cast aside as soon as it was pointed out that they were flagrant breaches of the convention.

I return to my main theme. I apologise for speaking at some length, but I would hope that my further amendments will go very quickly. This brings me back to my argument under the clause stand part debates on Clauses 34 and 40, which is to ask the Government to think again about this whole substitute system of justice. My worry is that the proposed scheme will have two great faults. It will encourage a lot of tick-box prosecutions or fixed penalties with targets being imposed on officials to demonstrate enforcement activity. This is unlikely to be light touch. In other cases, where representations are made, the procedure is quite elaborate. As the Minister said in his letter of 18 December to the Select Committee, the regulator will need to set out its case against the person subject to the sanction in the penalty notice. That person has an opportunity to challenge that case by way of an internal review. The subject may raise objections and defences to the case against him. The regulator is obliged to withdraw the notice if he is satisfied that a person has a defence to the offence. If the regulator does not withdraw the notice, it must give reasons for its decision. All this will be subject to the scrutiny of an independent tribunal by way of appeal.

Does that mean that you start an appeal as a convicted person to seek to prove your innocence, or is it the other way around? Is the independent tribunal going to be told what the penalty was in the first place, or will it come to the matter de novo as a matter of fairness?

My fundamental question is: is the proposed system really better than the existing one? If it is decided to prosecute in the tick-box cases, there will probably be pleas of guilty or acceptance of the penalty. Too many

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of these cases may well be oppressive. They are attached, for reasons one can well understand, to provisions which state that if you have not paid within 14 days, the fine goes up from £100 to £150; and if you have not paid within another 28 days, it goes up to X hundred; and that after that the matter goes to the county court for enforcement. Big corporations can cope with these things, but for citizens they can be quite frightening.

I declare an interest. From time to time, I forget to pay the congestion charge and over Christmas I lost the letter telling me that I have failed to do so. One finds the blood pressure rising a little when one sees how the penalty can escalate in quite a short period. This measure proposes the scheme not just for motoring matters—no one can ever be sympathetic with a motorist—but for hundreds and thousands of people up and down the country in the whole regulatory area. Is this the kind of country in which we wish to live?

4.15 pm

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